September 26, 2014 / 7:09 PM / in 3 years

Exclusive: Plan for U.S. securities audit trail seen delayed again

The U.S. Securities and Exchange Commission logo adorns an office door at the SEC headquarters in Washington, June 24, 2011. REUTERS/Jonathan Ernst

NEW YORK (Reuters) - U.S. exchange officials are seeking more time to submit a plan for building a massive database for storing all equity and options transactions, a project designed to better monitor trading activity that took on urgency after the Flash Crash of 2010.

The exchanges and a regulatory body in charge of drawing up a final blueprint for building the Consolidated Audit Trail asked the Securities and Exchange Commission last week to extend the deadline of Sept. 30 to the end of the year, two sources said.

The SEC declined to comment. Another delay is unlikely to please regulators who already granted several extensions to the 18 U.S. stock and options exchanges, and the Financial Industry Regulatory Authority (FINRA), which are overseeing the process.

The SEC had planned to post for public comment the blueprint known as the “optimal solution” for building the audit trail after next week’s deadline and once approved, to give the exchanges and FINRA two months to select a winning bidder.

A delay may change the bidding process and further push out an already lengthy timeline by three to six months, the sources, who spoke on condition of anonymity, suggested. Implementation of the audit trail is expected to take three years once the plan and bidder have been chosen.

The exchanges and FINRA have requested the six remaining bidders to meet separately with the selection panel the week of Oct. 6 at the offices of Deloitte, which has helped coordinate meetings and tabulate information, two sources said.

The SEC approved a consolidated audit trail (CAT) in July 2012 after it took months to gather the necessary data to analyze the Flash Crash. On May 6, 2010, the Dow dropped about 1,000 points in a few minutes and then quickly recovered most of that decline.

The CAT will be the world’s largest depository of securities transactions, taking in an estimated 58 billion records of orders, executions and quotes every day, according to Deloitte.

The SEC once suggested the CAT would cost as much as $4 billion, but data storage prices have tumbled in recent years and one of the bidders has indicated that building and implementing the program over five years would cost less than $200 million.

The ability to analyze and store the vast amount of data once loomed as a technical hurdle, but no longer appears to do so, technical experts said. However, getting about 2,000 brokers onboard and the system running smoothly might pose headaches.

Reporting by Herbert Lash; Editing by Nick Zieminski

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