CAT Compliance with Microsoft and Cloudreach

On May 6, 2010, the United States stock market collapsed. 

In 5 minutes, the Dow dropped 600 points and investors, brokers, economists, and the SEC briefly panicked. Twenty minutes later, the market recovered and pulses slowed, but the impact of the Flash Crash was long-lasting. Nearly a decade later, experts remain unsure of what caused this sudden fall. Whether it was due to an inadvertent sell order, high frequency traders, large directional bets, or technical glitches, the aftermath of the Flash Crash left one thing certain—we need a system in place to understand why these dramatic market swings occur. 

In November 2016, the SEC approved regulations mandating the Consolidated Audit Trail (CAT). Designed to help the SEC track illegal and manipulative trades and identify the cause of significant trading value swings, CAT mandates that all broker / dealers submit a log of all created orders to a unified federal database of equity and options trades. Starting April 1, 2020, regulated entities will be required to submit their necessary information to the SEC no later than 8 A.M. ET on the following trading day. 

All reportable events must be submitted to CAT in a specific format that allows the regulatory agency to efficiently and accurately track an order from origination through routing and modification to cancellation or execution. While the initial implementation will begin this upcoming spring, the full CAT program will be phased in over the course of the next three years, with each phase adding new requirements.  

An Azure-Based Solution for CAT Compliance 

Microsoft and Cloudreach have partnered to create an Azure-powered submission network to simplify the CAT compliance process. This CAT Compliance as a Service (CCaaS) model equips broker / dealers with an off–the–shelf compliance solution for submitting their event logs to the CAT database. 

By ingesting, transforming, and transferring the necessary data through Microsoft Azure, organizations can reduce regulatory reporting needs and focus efforts on building value–added services rather than mandatory compliance processes. Cloudreach will build custom models for data transformation, validation, and submission. 

Microsoft Azure offers broker / dealers a comprehensive suite of tools for handling CAT data:  

• WebAPI to securely transfer raw data to Azure from the customer tenant 
• Event Hubs to process data and provide on-demand capacity based on data volume 
• Azure Data Factory to transform the ingested data to CAT specifications and transfer data to FINRA CAT using SFTP 
• Azure Blob Storage to store transformed data for a specified time period 

• Azure Data Explorer to explore transformed data for analytics and insights 
• Azure Key Vault to store required entitlements for FINRA CAT authentication 
• Azure Log Analytics to analyze any failure in transmitting data to FINRA CAT 
• Azure Active Directory to restrict access to the environment based on roles 

Microsoft’s Proactive Approach to Regulatory Compliance 

A part of Microsoft’s Center of Regulatory Excellence (CORE), this CCaaS model is the latest in Azure-powered innovation designed to help keep organizations secure, up-to-date, and compliant in the digital age. Built to scale with the needs of our partners, the CCaaS platform futureproofs any organization for the upcoming phases and impacts of this new regulation. CORE is committed to proactively addressing the impacts of regulations and maximizing strategic opportunities for our customers’ digital transformation. 

Click here to learn more about Microsoft Azure, and how your organization can better prepare for upcoming regulations.