SEC Opens Broad Review of the Consolidated Audit Trail, Signals Potential Structural Reforms

On April 16, 2026, the Securities and Exchange Commission issued a concept release soliciting public comment on the Consolidated Audit Trail (CAT) and related audit trails and data sources used in the oversight of U.S. securities markets. The release initiates what the Commission describes as a comprehensive review of the CAT’s purpose, structure, cost, and scope, and signals that more fundamental changes to the system may be under consideration.

The comment period will remain open for 60 days following publication in the Federal Register.

A Reassessment of a Foundational Market Surveillance Tool

The CAT has, since its inception, been one of the most significant and controversial components of the modern U.S. market structure. Designed to provide regulators with a consolidated view of order and trade activity across markets, it has also drawn sustained criticism relating to cost, governance, and data security.

The Commission’s concept release reflects a willingness to revisit those issues at a structural level.

Chairman Paul Atkins framed the effort as part of an ongoing reform initiative, noting that the Commission has already taken steps to reduce the CAT’s operational footprint. Over the past year, those efforts have included exemptive relief and amendments to the CAT’s national market system plan, resulting in a reduction of projected annual operating costs exceeding $100 million and the elimination of requirements to report personally identifiable information to the system.

The concept release, however, makes clear that these measures are not viewed as sufficient. The Commission is now seeking input on what it characterizes as “foundational and existential” aspects of the CAT.

Scope of the Concept Release

The Commission’s request for comment is expansive and addresses multiple dimensions of the CAT framework.

At a high level, the release invites input on:

• The regulatory purpose of the CAT and whether its current scope aligns with that purpose

• The design and data requirements of the system, including whether adjustments to its scope are warranted

• The structure and governance of the CAT, including the role of self-regulatory organizations and other stakeholders

• Funding mechanisms and cost allocation, including how the financial burden of the CAT should be distributed across market participants

• Cybersecurity, data protection, and broader privacy considerations associated with large-scale regulatory data collection

The release also explicitly seeks comment on how to balance regulatory objectives with privacy, confidentiality, and civil liberties concerns. That framing reflects a continued sensitivity to the scale and nature of the data collected through the CAT, even following the removal of personally identifiable information from required reporting.

The Role of Concept Releases

The Commission’s use of a concept release, rather than a proposed rule, is significant.

Concept releases are typically used at an earlier stage of the regulatory process, when the Commission is still evaluating policy direction rather than advancing a defined proposal. They are designed to surface a range of views, identify potential approaches, and test assumptions before formal rulemaking.

In this instance, the Commission has not advanced specific reforms. Instead, it has outlined a series of questions and potential areas of change, while inviting market participants and other stakeholders to provide input on both the issues identified and any additional considerations they believe should be addressed

Cost, Data, and Market Structure

The Commission’s decision to revisit the CAT comes against a broader backdrop of ongoing debate regarding the role of centralized data systems in securities regulation.

In prior analysis, we have noted that the evolution of U.S. market structure has increasingly depended on the availability of high-quality, consolidated data. At the same time, the aggregation of that data at scale introduces operational, economic, and policy challenges, particularly where the system imposes significant costs on market participants or raises concerns regarding data security and use.

The CAT sits at the center of that tension. It is both a critical regulatory tool and a complex, resource-intensive system that has required continuous refinement.

The Commission’s current review suggests that the next phase of that refinement may involve more fundamental questions regarding how much data is necessary, how it should be governed, and who should bear the associated costs.

Potential Implications

While the concept release does not propose specific changes, the breadth of the issues identified indicates that a wide range of outcomes is possible.

Potential areas of reform may include adjustments to reporting requirements, modifications to governance structures, changes to funding models, or further limitations on the types of data collected and retained. Any such changes would have implications for broker-dealers, exchanges, and other market participants that contribute to or rely on CAT data.

At the same time, the Commission’s emphasis on privacy and cybersecurity suggests that future reforms may continue to narrow the scope of sensitive information collected through the system or impose additional controls on its use.

Observations and Practical Considerations

The Commission’s decision to undertake a comprehensive review of the CAT reflects an acknowledgment that the system remains a work in progress. The concept release does not resolve the longstanding debates surrounding the CAT, but it reopens them in a structured way and invites direct engagement from the market.

For market participants, the immediate impact is procedural rather than substantive. The release initiates a comment process, not a change in requirements. That said, the scope of the review suggests that meaningful revisions to the CAT framework remain a possibility.

As with any concept release, the direction of any future rulemaking will depend in part on the feedback received. Firms with significant exposure to CAT reporting obligations or costs may wish to consider whether to participate in the comment process.

At the same time, the issues raised in the release, particularly those relating to cost allocation, governance, and data protection, are fact-specific and may affect firms differently depending on their role in the market. Accordingly, market participants should evaluate the potential impact of any future changes in consultation with counsel before taking action based on the developments described above.