SEC Listens In: Verbal Trades Join Stock Market Audit Trail
Published Date: 6/20/2025
Notice
Summary
The SEC just approved new rules for stock market groups to better report certain spoken trades and activities happening on the trading floor and upstairs. This change affects big exchanges and trading organizations, helping them keep clearer records in the Consolidated Audit Trail. The update kicks in soon and aims to make trading more transparent without extra costs for the public.
Analyzed Economic Effects
4 provisions identified: 2 benefits, 2 costs, 0 mixed.
Upstairs verbal/chat activity excluded
The CAT NMS Plan amendment excludes certain "upstairs" activity from reporting to the Central Repository. Specifically, telephone discussions between an Industry Member and a client and unstructured electronic and verbal communications (for example, electronic chats and text messages) are not reportable under Section 6.3(d) of the Plan as approved in this order.
Floor verbal activity excluded until 2030
The Commission modified the amendment so that exclusions for floor broker verbal announcements of firm orders and market maker verbal announcements of firm quotes on exchange trading floors apply only "until July 31, 2030." That means those floor verbal activities are excluded from CAT reporting through July 31, 2030; reporting could be required after that date.
Industry cost estimates if reporting required
Industry commenters estimated that manually capturing and reporting the exempt verbal and manual activities could cost the industry more than $4.4 billion per year. For Participant reporting specifically, CAT LLC cited estimates of $64.35 million to $112.86 million per year plus a one-time $20 million to $30 million facility cost.
Regulatory surveillance lacks some verbal data
Because the amendment excludes the listed upstairs activities permanently and excludes floor verbal activity through July 31, 2030, regulators will not receive CAT reporting of those verbal and unstructured communications. The Commission acknowledged that reporting verbal floor activity could help identify certain rule violations, but approved the exclusions as modified.
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