Exchanges Overhaul Costs for Trade Audit Trail
Published Date: 9/17/2025
Notice
Summary
Big stock market players like exchanges and regulators are teaming up to change how they pay for the Consolidated Audit Trail (CAT), a system that tracks stock trades. They’re proposing a new way to split costs and set fees, aiming to keep things fair and clear. This update could affect fees soon, so everyone involved should pay attention and share their thoughts!
Analyzed Economic Effects
6 provisions identified: 2 benefits, 3 costs, 1 mixed.
Participants barred from new pass-through fees
CAT LLC proposes adding a new paragraph to Section 11.3 stating that each Participant agrees not to establish a new fee for passing through its CAT fees. This change was filed September 5, 2025, in response to a July 25, 2025 Eleventh Circuit opinion about pass-through fees.
Who pays CAT fees: CAT Executing Brokers
Under the Funding Proposal, any Industry Member identified as the CAT Executing Broker for the buyer or seller in a transaction must pay CAT Fees and Historical CAT Assessments. The CAT Executing Broker is identified using fields in Participant transaction reports and FINRA TRF/ORF/ADF transaction data as described in the Participant Technical Specifications.
Budget reserve up to 25% of annual budget
CAT LLC proposes the annual budget include a reserve of up to 25% of the annual budget; surpluses above CAT costs including that reserve would be used to offset future fees. The reserve will be calculated excluding the reserve amount itself and would be included only if the Company does not already have a sufficient reserve.
Industry Members may still pass through fees to customers
The Funding Proposal does not address whether Industry Members may pass through their CAT fees to their customers, and CAT LLC notes many Industry Members have implemented processes to pass-through CAT fees to upstream broker-dealers and customers.
ATSs and OTC trades can be billed as executors
The Funding Proposal says that where an ATS is identified as the executing party (or contra-side) in FINRA TRF/ORF/ADF reports, the ATS would be treated as the CAT Executing Broker and would be subject to CAT fees. For over-the-counter trades reported to FINRA facilities, the executing and contra-executing MPIDs in those reports determine who is billed.
Fractional-share components excluded from CAT fees
The Funding Proposal states CAT fees will be calculated using the equity/order and option trade event reports and TRF/ORF/ADF events, which require whole-share quantities; therefore CAT fees would be calculated without reference to fractional shares or fractional-share components of executed orders (Participant Technical Specifications v4.2.0-r1, Aug. 22, 2025).
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