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SEC may soften stance on U.S. trading database, SIFMA says

SIFMA, one of the industry's leading lobbying groups, is hopeful that regulators will soften their stance on how investor data is collected for the SEC’s far-reaching new market-surveillance system.

The SEC may agree to allow broker-dealers to submit client-trading information without revealing personal identifiers attached to each individual investor as the industry is requesting, SIFMA President Kenneth Bentsen told reporters Tuesday in New York.

The industry, along with stock and options exchanges, has resisted the SEC’s Consolidated Audit Trail surveillance system ― dubbed CAT ― in its current form, arguing that it raised cybersecurity issues. SIFMA supports the concept of the surveillance system while opposing the inclusion of detailed investor data in it, Bentsen said.

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One possible solution would be the use of unique identifiers for the data being gathered. That would enable regulators the oversight they’re seeking without exposing sensitive information to potential breaches, Bentsen said.

The SEC had rejected requests to delay the start of the program, and data from the exchanges started flowing into CAT last month. Brokers have to begin submitting their client trading data in November 2018. Information collected from 23 different organizations and accessible by 3,000 people from across those organizations will render it vulnerable to breaches, Bentsen said, while noting that SEC Chairman Jay Clayton has signaled his agreement with those concerns.

“People are coming to realize that,” Bentsen said. “Based upon Chairman Clayton’s comments before the Senate and the House testimony, I think he understands this as well.”

Bentsen said the industry will continue working with the SEC to find ways to use the surveillance system without including personally identifiable information in the database.