Citadel Securities, trade body sue US SEC over ‘consolidated audit trail’

Oct 17 (Reuters) – Citadel Securities and the American Securities Association, a trade group, announced on Tuesday that they are suing Wall Street’s top regulator over new rules on the funding of a comprehensive market data surveillance system.

The litigation, brought before the U.S. Court of Appeals for the 11th Circuit in Atlanta, escalates the investment industry’s battle with the U.S. Securities and Exchange Commission over the so-called Consolidated Audit Trail (CAT).

“The SEC has overstepped its statutory authority and failed to address investor and industry concerns, leaving us no choice but to litigate,” the ASA said in a statement.

The SEC last month adopted new rules aimed at splitting the cost for operating the new system among sellers, buyers and stock exchanges where they trade.

This drew objections from the investment industry, which complained its members could be left to pay an unfairly large share of the resulting cost.

An SEC spokesperson said the agency acted within the law.

“The Commission undertakes its regulatory responsibilities consistent with its authorities,” the spokesperson said.

The CAT is a repository of investor and transaction data meant to give regulators all-encompassing insight into U.S. market transactions.

The SEC mandated the CAT’s creation in 2012 as a response to the “flash crash” two years earlier, when a sudden plunge on major Wall Street indices temporarily erased nearly $1 trillion in market value.

Republican officials and industry representatives have said the system presents cybersecurity and privacy risks and is likely to pass undue costs on to investors.

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