Once the exchanges and Finra present a national plan to establish an audit trail, it will be subject to SEC approval before being implemented. The agency estimated in its 2010 proposal that the exchange and brokerage industry would need to spend $4 billion to set up the central repository and develop related systems. Annual ongoing costs would be $2.1 billion.
Finra and Nasdaq OMX Group Inc., the operator of Nasdaq Stock Market, each told the SEC last year that they could be the technology provider for the audit trail. Finra gave the SEC a blueprint in April 2011 for the process it would use to build the record-keeping system on top of its current order audit trail system, or OATS. Implementing the system for equities would cost no more than $125 million, Finra said, not including the cost of integrating options, bonds, swaps and other products.
Nasdaq Comments
Nasdaq OMX told the SEC in a November 2011 letter not to "lower its expectations" by turning to a system such as OATS that doesn't meet the agency's needs. The exchange operator said it could build the system the SEC envisions. The exchanges and Finra will be responsible for selecting the technology provider or plan processor that would operate the repository for the audit trail data, the SEC said in 2010.
Jamie Selway, head of liquidity management at Investment Technology Group Inc., a New York-based brokerage, said it's likely that governance of the national plan won't be spelled out at the SEC meeting. The issue is important to brokers who want a say in how the system that compiles their data will use or handle the information. The technology provider for the system won't be selected either, he said.
"We're not expecting finality," Selway said in a telephone interview. "It's a pretty good piece of policy that we should have had a long time ago."