A long-delayed plan that's supposed to help U.S. regulators get to the bottom of what causes stock-market disruptions is getting a renewed push.
The Securities and Exchange Commission released a proposal for creating a massive repository to track billions of daily orders and quotes. The idea, which SEC commissioners voted to seek public comment on Wednesday, has been kicked around for at least five years.
Lawmakers have grown increasingly frustrated over the SEC's failure to finish what's known as the consolidated audit trail, particularly as market breakdowns erode investor confidence. While the most significant malfunction was the May 2010 flash crash for equities, as recently as Aug. 24 many stocks opened late on the New York Stock Exchange and experienced wild price swings.
Regulators say the audit trail could help them reconstruct market crises and quickly analyze data for equities and options markets across multiple exchanges and trading platforms. The SEC has estimated it would cost $4 billion to build and $2.1 billion annually to maintain.
Investigating Misconduct
It's meant to fill a blind spot for the agency, which has struggled to keep up with trading that's now mostly electronic and rapid-fire. The plan also will enable the regulator to "more efficiently identify and investigate potential misconduct in high-volume, technology driven markets," SEC Chair Mary Jo White said Wednesday at a meeting in Washington.
Under the plan prepared by exchanges and the Financial Industry Regulatory Authority, every trading firm and broker would have a unique identifier, so authorities can tie companies to specific transactions. Exchanges would be responsible for submitting data to the repository that lays out the date and time that orders and bids occur. The SEC, the exchanges and FINRA, a brokerage regulator funded by the finance industry, would have access to information in the database.
