The SEC is reworking the machinery that lets regulators reconstruct U.S. stock and options trading, and it may end up taking a far bigger role in running it.
- CAT overhaul: The SEC is reviewing how the Consolidated Audit Trail is funded, governed, and operated.
- Rule 613 rethink: The commission may rescind the rule that created CAT without shutting CAT itself down.
- Funding options: Congress or Section 31 transaction fees could be used to pay for it.
- Crypto spillover: Broader market-structure changes could matter for tokenized securities and onchain trading models.
The Consolidated Audit Trail, or CAT, is the surveillance database that records orders and trades across U.S. equity and options markets. It tracks the life of an order as it is routed, modified, executed, or canceled. For regulators, it is one of the main forensic records of what happened in the market. For everyone else, it is a reminder that the plumbing of finance is expensive, ugly, and absolutely central. The whole setup sits inside a broader audit trail framework that exists because markets without records are just casino smoke and fairy dust.
Now the SEC wants to pull that plumbing closer to home.
In an Aug. 10 letter to CAT Operating Committee Chair Robert Walley, SEC Chair Paul Atkins said staff should prepare recommendations on how CAT is funded, governed, and operated. The commission is looking at whether CAT expenses could be covered through congressional appropriations or Section 31 transaction fees, which the SEC can collect on certain securities trades. It is also considering whether stock exchanges, FINRA, and broker-dealers should send CAT data directly to the SEC or to an agency-appointed operator. The move builds on the broader SEC plans CAT takeover in sweeping market data reform reporting that first put the overhaul on the radar.
That is not a routine housekeeping tweak. It is a serious attempt to move CAT away from the awkward hybrid model it has lived under for years.
Atkins was blunt about the problems. He said the current arrangement has “persistent cost, governance, and funding issues, ” and added:
“One theme emerges from the comment file: investors and market participants want the Commission to take more responsibility for managing and funding this project, ”
The SEC says that view did not appear out of nowhere. Atkins pointed to the commission’s April 16 concept release, which sought public feedback on CAT and other audit trails and drew hundreds of responses. That release described a broader review of CAT’s effectiveness, costs, structure, scope, functionality, security, and privacy considerations. For a trade group perspective, the Concept Release on CAT and Other Audit Trails and Data drew plenty of industry pushback, because of course it did. No one volunteers to pay more for surveillance, especially when the bill lands in a regulatory mailbox.
CAT is not being proposed for the scrap heap. The better way to read this is that the SEC wants to keep the surveillance system, but change who holds the bag and who signs off on the bill.
That distinction matters because the commission is also considering a separate rulemaking that could rescind Rule 613 of Regulation NMS, the 2012 rule that required national securities exchanges and FINRA to submit a plan for building and maintaining CAT. Scrapping Rule 613 would not necessarily eliminate CAT or stop reporting. It would more likely strip away the old legal scaffolding and leave the database standing under a new one. The statutory hook for the system is laid out in 17 CFR § 242.613, which is the sort of regulation you only appreciate when you need a 40-page footnote to explain why the market needs a giant record of its own behavior.
The SEC has already been trimming CAT’s scope. According to the SEC’s April 16 concept release, a Commission-approved amendment on January 13, 2026 removed customer and account-level information from required CAT collection. The same release also notes that such information is now accessible only through the EBS system or manual requests. The commission has also reduced annual operating expenses through amendments and exemptions, and it ended the requirement to report personally identifiable information to CAT.
That is a meaningful shift from the original ambition of “collect everything and sort it out later.” Regulators still want a strong audit trail. They just no longer seem eager to store more sensitive personal data than they need to. A rare moment of common sense, one might say, before the lawyers and consultants show up with their clipboards.
The timeline is slow, which is fitting for a project built on bureaucracy, market plumbing, and acronyms. The SEC expects any handover to remain unfinished until at least late 2027. So this is not a dramatic overnight seizure of control. It is a multiyear rewrite that will run through staff work, public comment, and likely plenty of internal wrangling.
Why crypto should care
CAT itself is not a blockchain system. It is a traditional market-surveillance database. But the same SEC that is reviewing CAT is also reconsidering core market-structure rules that could affect tokenized securities and other crypto-adjacent trading models.
In June, the SEC Proposes Major Amendments to Regulation NMS, Rescinding Rules 611 and 610(e) of Regulation NMS. Rule 611, the trade-through rule, generally requires trading centers to avoid executing at a worse price when a better protected quote is available on another venue. Rule 610(e) deals with locked and crossed quotations. Those rules make sense in a highly interconnected equity market, but they can create compliance friction when applied to newer trading structures.
Galaxy Digital research head Alex Thorn has said automated market makers may struggle to comply with Rule 611. That concern is worth taking seriously. Automated market makers, or AMMs, are the liquidity mechanisms used in decentralized finance that route trades through pools and pricing formulas rather than traditional order books. They are not built like old-school exchanges, and trying to force them into a legacy quote-protection framework can get messy fast.
This is where tokenized securities may eventually get pulled into the picture. Tokenized stocks and other blockchain-based representations of traditional securities may need market infrastructure that fits more cleanly with onchain trading. If the SEC loosens some of the older execution rules, that could reduce friction. It could also make the system less hostile to new rails.
But let’s not get carried away. A rule change is not magic dust. Tokenized securities still face custody, settlement, broker-dealer, exchange, and surveillance problems. They also face the very unsexy question regulators always ask when the excitement dies down: who is responsible when something breaks?
That is why the CAT overhaul and the Regulation NMS review belong in the same conversation. CAT is surveillance infrastructure. Regulation NMS governs how trades are executed. Together, they shape how much of today’s market can be monitored, how much can be reformed, and how much room new systems have to operate without tripping over rules written for a different era.
A bigger market-structure reset
The SEC’s recent moves point to something broader than one database fix. In July, crypto.news reported on three proposals in the SEC’s 2026 regulatory agenda involving crypto offerings, broker-dealers, and market structure. One project looked at exemptions and safe harbors for crypto asset offerings. Another examined broker-dealer financial responsibility and recordkeeping requirements, including possible amendments to Rules 15c3-1, 15c3-3, 17a-3, and 17a-4. A third focused on crypto trading on national securities exchanges and alternative trading systems. That broader push has also fed into coverage like SEC Targets Tokenized Securities as SEC-CFTC Crypto Turf, where the jurisdictional knife fight gets its usual amount of regulatory theater.
That does not mean the SEC has suddenly become a crypto cheerleader. It means crypto is being dragged into the same rulemaking machinery that governs traditional markets. Sometimes that is progress. Sometimes it is the regulatory equivalent of being invited to dinner and then handed a stack of compliance forms.
Atkins also said in July that the SEC was prepared to use its existing authority if Congress did not complete the CLARITY Act. That political backdrop matters, even if CAT does not depend on that bill. The commission is clearly not waiting around for Congress to tidy up every jurisdictional fight before it starts reshaping market structure on its own.
There is also an internal debate at the SEC over how much surveillance is enough. Commissioner Caroline Crenshaw, for example, has criticized earlier efforts to narrow CAT data collection. Her 2025 statement was titled “Declawing the CAT: Statement on Consolidated Audit Trail”, which tells you exactly where she stood on weakening the system. On the other side of the ledger, the commission has also heard long-running complaints about cost, privacy, and cybersecurity.
That tension is the real story here. Regulators want visibility into market abuse. Market participants want lower costs and less data sprawl. Privacy advocates do not want a giant centralized repository of sensitive market information becoming a honeypot. And crypto builders watching from the sidelines are asking whether the old market architecture can be modernized without being smothered in process.
The answer is probably yes, but not cleanly. The SEC may centralize more control over CAT, trim the old rulebook, and push more responsibility onto the agency itself. That could improve accountability. It could also just replace one cumbersome structure with a slightly more official cumbersome structure. Bureaucracy loves a renovation project, especially when the invoice can be routed through a different desk.
Key questions and takeaways
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What is CAT supposed to do?
CAT records orders and trades across U.S. equity and options markets so regulators can reconstruct trading activity and investigate abuse. -
Is the SEC trying to shut CAT down?
No. The SEC is reviewing CAT’s funding and governance, and it may rescind Rule 613 without ending the database or market-firm reporting. -
How could CAT be funded under the new plan?
The SEC says it will examine congressional appropriations and Section 31 transaction fees as possible funding sources. -
Why should crypto users care?
Because changes to Regulation NMS and other market-structure rules could affect tokenized securities, broker-dealer compliance, and the way onchain trading models fit into existing markets. The SEC-CFTC fight over tokenized assets also keeps this squarely in the crypto crosshairs, not some dusty corner of equity trivia. -
Does this make tokenized stocks easy to launch?
No. Even if some execution rules become less rigid, custody, settlement finality, classification, and surveillance remain major hurdles.
The SEC’s CAT push is not flashy, and that is exactly why it matters. The people who control market infrastructure usually do not show up as heroes on a price chart, but they shape who can trade, how trades are tracked, and how much room new systems get before the old guard slams the door.
That is where the real fight is: control, accountability, privacy, and whether the market’s plumbing should keep looking like a patchwork relic from a different century.
For readers tracking the intersection of crypto and legacy finance, recent coverage like NYSE Tokenized Securities Claim Unverified as SEC Reaffirms and Injective Says It Filed for SEC Transfer Agent Registration shows why this won’t stay confined to boring back-office plumbing. If tokenized markets are going to matter, they will have to survive contact with the people who love forms almost as much as they love enforcement.
Further reading
For readers who want the regulatory basics behind all this market-record machinery, one quick reference is below.
