What is the SEC Rule 613 CAT?

The SEC Rule 613 Compliance Audit Trail (CAT) NMS requires anyone trading on the National Market System (NMS) to report all transactions (quotes and orders) with an accuracy within 50 milliseconds for FINRA Industry Members and 100 microseconds for FINRA Participants, forensically traceable to the National Institute of Standards and Technology (NIST) time standard. FINRA CAT Alert 2020-02 further specifies these latest standards: 

• Participant’s (i.e. exchanges) self-reporting threshold of clock sync standards: 100 µs for at least 1 second
• Industry Member’s self-reporting threshold of large drift from clock sync standards: twice the 50 ms standard which is 100 ms (and 2 seconds for manual order events)
• Industry Member’s self-reporting threshold of persistent drift from clock sync standards: 10 times in one rolling 24 hour period at any time a compliance system is recording a time sync event of a CAT-reported timestamp on a given device or server
• Clarification of which systems report, and when, and how to report

Time synchronization log and timestamping data for CAT repository are retrieved from a mix of GPS/GNSS-sourced global navigation satellite systems time and NTP/PTP network time on each trading machine, with any offset forensically traceable to UTC/NIST time standard. To conduct these transactions, specific infrastructure, connectivity and software must be implemented to comply accordingly.

The FINRA Industry Members’ rules pertain to any broker-dealer and financial firm that trades with FINRA-regulated Participants, national securities exchanges, and receives, originates and/or handles orders in NMS Securities, which includes NMS stocks and Listed Options and/or OTC Equity Securities.

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