What Is FINRA CAT and Why It Matters

EDISON, N.J. - July 10, 2025 - PRLog -- In the complex world of capital markets, regulatory compliance is critical — and one of the most transformative initiatives in this space is the FINRA CAT, or Consolidated Audit Trail. Created to increase transparency and improve regulatory oversight, FINRA CAT represents the largest and most detailed market surveillance system ever built in the U.S.

Let's break down what FINRA CAT is, why it exists, and how broker-dealers can meet their compliance obligations effectively.

What Is FINRA CAT?
FINRA CAT (Consolidated Audit Trail) is a centralized database that captures order and trade lifecycle events for all National Market System (NMS) securities across U.S. markets. It was introduced by the Financial Industry Regulatory Authority (FINRA) in collaboration with the SEC to ensure better monitoring of market activity and protect investors.

This system collects billions of records daily, linking all phases of an order — from origination to execution — across multiple venues and systems.

Objectives of the FINRA CAT
The FINRA CAT was developed with the following key objectives:

Market Transparency: To track and reconstruct market events and identify manipulative trading behaviors.

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Regulatory Efficiency: To help regulators detect and respond to market abuse and systemic risks faster.
Investor Protection: To improve surveillance and support fair trading environments.
Data Accuracy: To unify the audit trail process with standardized reporting.
Who Must Comply with FINRA CAT?
All U.S.-registered broker-dealers that handle orders in NMS securities, including equities and options, are required to report to the FINRA CAT system. This includes:
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Clearing firms
Introducing brokers
Proprietary trading firms
Alternative Trading Systems (ATS)
Missing CAT reporting deadlines or submitting inaccurate data can lead to penalties, so proactive compliance is critical.