SEC Issues Broad Concept Release on CAT Review

On April 16, the Securities and Exchange Commission (SEC) issued a concept release soliciting public comment on a comprehensive review of the Consolidated Audit Trail (CAT) and other audit trails and related data sources used in the regulation of US securities markets (the Concept Release). The Concept Release marks the most significant comprehensive reassessment of the CAT since the national market system plan governing it (the CAT NMS Plan) was approved in 2016, and it puts nearly every foundational aspect of the system squarely on the table.

A System Under Pressure

Regulators designed CAT to provide a comprehensive, cross-market view of order and trading activity in NMS and OTC equity securities. However, the system has grown far more expensive than anticipated. When the SEC approved the CAT NMS Plan in 2016, it estimated annual operating costs of roughly $55.8 million. By 2025, that figure had ballooned to over $248 million, driven by dramatic growth in trading volumes and message traffic.

The SEC and the self-regulatory organizations (SROs) have taken meaningful steps to rein in costs. A series of cost-saving amendments and exemptive relief orders reduced the 2026 CAT budget to approximately $156 million, but it is still nearly three times the original estimate. Those efforts, along with legal challenges to the CAT’s funding model (including the Eleventh Circuit’s July 2025 decision vacating the 2023 Funding Order)[1] and persistent concerns about privacy, civil liberties, and cybersecurity, have prompted the SEC to step back and ask harder questions.

What the Concept Release Covers

The Concept Release is broad, soliciting comment across nine major topic areas:

• Purpose. The CAT was originally justified as a necessary tool for cross-market surveillance, but regulators and industry participants have since questioned whether its costs are proportionate to its benefits. The Concept Release asks whether the CAT is necessary to fulfill the Commission’s and SROs’ statutory obligations, or whether existing audit trails and data sources could serve as adequate substitutes. 
• Structure and Governance. The CAT operates under the NMS plan governed by an Operating Committee on which each SRO holds a vote, a structure that critics argue gives affiliated exchange groups outsized influence over budgeting and design decisions. The Concept Release asks whether the CAT should continue to operate as an NMS plan, whether the Operating Committee’s voting structure should be reformed, and what role the CAT Advisory Committee should play. 
• Funding and Cost Management. The CAT’s funding model has been the subject of ongoing litigation, leaving the long-term cost allocation framework unresolved. The Concept Release asks whether the SEC should own and operate the CAT itself, funded through Congressional appropriations and whether the current model, based on executed equivalent share volumes, should be replaced. 
• Design and Scope. As CAT data volumes have grown exponentially, so have the processing, storage, and linkage costs associated with maintaining the system’s current architecture. The Concept Release asks whether two-sided reporting requirements should be narrowed, and whether reporting timelines, lifecycle linkage processes and data storage requirements should be further streamlined. 
• Previous Exemptive Relief. Over the past several years, the SEC has issued a series of exemptive relief orders addressing verbal floor activity, port-level settings, NIA electronic RFQ responses and representative order linkage. However, most of that relief remains temporary. The Concept Release asks whether those accommodations should be made permanent and codified in the CAT NMS Plan. 
• Potential Changes to Other Data Sources and Related Rules. The Electronic Blue Sheet (EBS) system predates the CAT by decades and, in the context of CAT’s development, has come to serve as the primary mechanism through which regulators access customer and account-level information that the CAT no longer collects. The Concept Release asks whether EBS should be retired, modified or replaced by a new request-and-response system designed to link CAT transactional data with customer and account information. Rule 13h-1 and Form 13H were designed to help the SEC quickly identify and surveil significant market participants, but their transaction reporting requirements were built on the EBS infrastructure and may be partially redundant with CAT data. The Concept Release asks whether those requirements should be amended or reduced, considering current CAT capabilities.
• Civil Liberties and Privacy. The CAT’s earlier collection of personally identifiable information drew criticism from civil liberties advocates, prompted legal challenges and raised questions about whether the system’s data collection practices are consistent with Fourth Amendment protections. The Concept Release asks whether the transmission of market data through the CAT or a new R&R System raises constitutional or privacy concerns that have not been adequately addressed. 
• Cybersecurity. The CAT’s central repository represents one of the largest concentrations of sensitive financial data in the world, and the EBS system has drawn criticism for transmitting personally identifiable information, including Social Security numbers, in plaintext. The Concept Release asks whether existing security controls, access restrictions and data retention policies are sufficient, and whether zero-trust architecture should be mandated.
• Transparency and Process of Comprehensive Review. The SEC’s comprehensive review of the CAT is itself a subject of the Concept Release. The Concept Release asks whether the SEC should supplement the public comment process with additional mechanisms, such as industry surveys, roundtable conferences, working groups or an independent third-party technology audit, to ensure that its review is informed by the full range of relevant expertise and perspective.

What Makes This Release Unusual

The concept release is a relatively common tool for soliciting early public input, but the scope and tenor of this one is striking. The SEC is not merely asking whether to tweak the CAT; rather, it is asking whether the CAT should exist in its current form at all. Questions include whether the SEC should “eliminate the CAT in favor of developing a different audit trail,” whether the SEC should own and operate the CAT directly, and whether the CAT NMS Plan structure should be abandoned entirely in favor of a direct SEC rulemaking approach. That framing reflects both the frustration that has built up among market participants over CAT costs and governance, and the broader deregulatory posture of the current SEC under Chairman Paul S. Atkins, who has publicly stated that the SEC “can-and must-do more” to reform the CAT.

Comment Period and Next Steps

The SEC has made clear that this Concept Release marks the beginning of a process, not its end. Its comprehensive review will inform future rulemaking, exemptive relief or other regulatory action. If your firm has views on any aspect of the CAT, whether on funding, governance, reporting obligations, the potential retirement of EBS, privacy considerations, or the future of the system itself, this is an opportunity to shape what comes next. The SEC is asking open-ended, fundamental questions. Well-developed comment letters from market participants carry weight. 

Comments are due on or before June 22, 2026, and may be submitted electronically at https://www.sec.gov/comments/s7-2026-12/concept-release-consolidated-audit-trail-other-audit-trails-data-sources or by email to rule-comments@sec.gov (referencing File No. S7-2026-12 in the subject line).

The SEC’s Concept Release is available here.