On January 23, 2026, the Securities and Exchange Commission issued an order granting permanent exemptive relief to participants in the National Market System Plan Governing the Consolidated Audit Trail. This relief exempts them from certain reporting requirements under section 6.4(d) of the CAT NMS Plan. Specifically, it applies to bids or offers in response to requests for quotes or other solicitations provided in standard electronic formats that are not immediately actionable, meaning further action is needed to execute a trade. The order removes conditions and time limits from prior temporary relief, recognizing the challenges in capturing and reporting this data. This development underscores the SEC's efforts to balance regulatory oversight with practical implementation in market surveillance.
Background on the Consolidated Audit Trail
The Consolidated Audit Trail, or CAT, stems from Rule 613 of Regulation NMS, adopted by the SEC on July 18, 2012. This rule mandated that national securities exchanges and associations, known as participants, develop a plan to create a comprehensive audit trail for trading data. The aim was to give regulators timely access to detailed information for analyzing market events, monitoring behavior, supporting decisions, and conducting surveillance. The CAT NMS Plan was approved on November 15, 2016, and it requires industry members to report specific order and trade data to a central repository.
Key players include the SEC as the approving authority and the participants, which encompass 27 entities such as major exchanges like Nasdaq, NYSE, and Cboe, along with the Financial Industry Regulatory Authority. Section 6.4(d) of the plan outlines what information must be reported and when, including certain responses to requests for quotes, or RFQs. RFQs are inquiries for pricing on securities, and responses can vary in format and actionability.
Details of the Exemptive Relief
The new order builds on a temporary exemption granted on May 20, 2024, which was set to expire on July 31, 2026. That prior order provided conditional relief from reporting non-immediately actionable electronic RFQ responses, or NIA Electronic RFQ Responses. These are bids or offers sent in formats like FIX that require additional steps to become executable.
Under the 2026 order, the relief is now permanent and unconditional. It applies only to responses that meet the definition of an 'order' under Rule 613(j)(8) and the CAT NMS Plan, which includes any order received or originated by exchange or association members, or any bid or offer. However, it excludes RFQ responses already required in earlier phases of CAT implementation, such as those reportable in Phase 2c for equities and Phase 2d for options, as per a 2020 phased reporting exemption. It also does not cover activity under section 6.3(g) of the plan, which already exempts certain verbal or unstructured communications until 2030.
The SEC invoked its authority under section 36(a)(1) of the Securities Exchange Act of 1934 and Rule 608(e) of Regulation NMS to issue this exemption. These provisions allow the Commission to grant relief if it serves the public interest, protects investors, maintains fair markets, and perfects the national market system.
Reasons for Granting Permanent Relief
The decision reflects ongoing challenges in implementing CAT reporting for NIA Electronic RFQ Responses. As noted in the order, both senders and receivers must determine how to capture and report this data, which is not currently formatted for CAT submission. Industry feedback highlighted these difficulties. For instance, a letter from the Financial Information Forum dated September 9, 2024, described the relief as 'necessary' for responses that cannot be executed immediately. Another from the same group on December 6, 2024, warned of 'costly manual processes' involved.
Additional comments, such as those from the Securities Industry and Financial Markets Association in June 2025, urged making temporary exemptions permanent. Some industry members argued that Rule 613 and the CAT NMS Plan do not mandate reporting these responses at all. The SEC concluded that the regulatory value of this data does not outweigh the collection costs and difficulties. Importantly, regulators can still monitor RFQ processes through subsequent executable orders and executions, which remain reportable.
This stance aligns with the SEC's broader evaluation of CAT development, where substantial resources have been invested, but certain elements like electronic RFQ reporting have proven particularly complex.
Comparison to Prior Relief and Legal Precedents
The 2026 order mirrors the 2024 temporary relief but eliminates conditions, such as the requirement for participants to submit an implementation plan by July 31, 2025. That plan would have needed to outline workflows and technical specifications for reporting. By removing these, the SEC acknowledges that permanent exemption is more appropriate than enforced implementation.
This action draws on precedents in SEC exemptive authority. For example, the 2020 phased reporting exemption allowed gradual CAT rollout to manage complexity. A 2025 order approved amendments exempting certain verbal and floor activities until 2030, reflecting a pattern of tailoring requirements to feasibility. The order also references public comments, ensuring diverse perspectives from industry groups like FIF and SIFMA, without endorsing any specific view.
Potential Implications
Short-term effects include reduced compliance burdens for industry members, potentially lowering costs and allowing focus on other CAT aspects. Regulators maintain oversight through reported executions, minimizing gaps in market surveillance.
Long-term, this could influence future CAT amendments, signaling the SEC's willingness to adapt rules based on practical feedback. Perspectives vary: proponents see it as pragmatic, easing innovation in electronic trading. Critics might argue it weakens the audit trail's comprehensiveness, though the order emphasizes that core goals remain intact. Broader political forces, such as evolving market structures and regulatory priorities, may shape how this relief integrates into ongoing NMS reforms.
In summary, this exemptive relief addresses a specific pain point in CAT implementation, promoting efficiency while preserving investor protections.
