The Securities and Exchange Commission voted to approve a national market system (NMS) plan to create a single, comprehensive database known as the consolidated audit trail (CAT) that will enable regulators to more efficiently and thoroughly track all trading activity in the U.S. equity and options markets.

”With the approval and ultimate implementation of CAT, the Commission’s regulatory capacity strongly embraces 21st century technology, enabling the Commission and the SROs to harness data and technology to more effectively oversee market participants,” said SEC Chair Mary Jo White.  ”Through the CAT, regulators will have more timely access to a comprehensive set of trading data, enabling us to more efficiently and effectively conduct research, reconstruct market events, monitor market behavior, and identify and investigate misconduct.”

The NMS plan details the methods by which SROs and broker-dealers will record and report information, including the identity of the customer, resulting in a range of data elements that together provide the complete lifecycle of all orders and transactions in the U.S. equity and options markets.

The NMS plan also sets forth how the data in the CAT will be maintained to ensure its accuracy, integrity and security.

But the plan came under immediate attack by the public interest group Better Markets.

“Despite some modest improvements, the final version of the CAT Plan approved by the SEC today will not protect investors or rid our capital markets of disruptive and manipulative practices,” said Lev Bagramian of Better Markets. “That is because it was designed by the very industry it is meant to oversee.  The end-product appears to reflect that dominant industry influence.”

“We’ll have to review all the details, but it seems that the SEC’s oversight role remains weak — the agency still faces limits on its ability to access and use the data; and from the moment they hit the on switch, the system will lag well behind industry technology and performance standards.  Also troubling are the provisions relating to upgrades to the system over time.  Enhancements are not scheduled or mandated, so we have no real assurance that the system will ever catch up and keep pace with our rapidly evolving equity markets.”

“We acknowledge the hard work of the SEC staff on this initiative and those who fought to make the CAT Plan as strong as it could be.  But as currently constructed, it won’t fulfill its promise as a game-changing weapon in the SEC’s fight to protect investors and maintain the integrity of the marketplace.”