A divided Securities and Exchange Commission on Wednesday adopted a rule designed to bolster its surveillance of the equities markets by establishing a central database that stores every trade order, execution and cancellation. The rule will bring the SEC one step closer to having a consolidated audit trail to better police for market manipulation and insider trading, though the new database will not be operational in the near term.
The rule would give US exchanges 270 days to jointly submit a plan for establishing a consolidated audit trail. The exchanges and the Financial Industry Regulatory Authority (FINRA), as well as their broker members, would be required to provide detailed information to the database.
The exchanges' plan will be subject to SEC approval. If approved, the parties would need to start reporting data within one year.
Though the SEC's five commissioners all supported the concept of a consolidated audit trail, not everyone agreed on Wednesday with how the final rule was drafted.
The rule was approved on a 3-2 vote, with Democrats Luis Aguilar and Elisse Walter voting no amid concerns it gives exchanges too much flexibility.
"I believe that the rule should not require that all the SROs (self-regulatory organisations) jointly submit a single plan. Rather, the rule should provide the commission with the ability to consider a fulsome discussion of competing solutions," Aguilar said.