AWS for Industries

Advanced Insights on the Consolidated Audit Trail

The Consolidated Audit Trail

In response to the May 2010 Flash Crash, the Securities and Exchange Commission (SEC) authorized the creation of a comprehensive financial database called the Consolidated Audit Trail (CAT). CAT is a central repository that receives and retains all US equity and options activity from broker-dealers and exchanges.

Back in May, we published a guest blog, “The Consolidated Audit Trail and the Cloud.” It details how AWS PrivateLink enables AWS broker-dealers to transfer CAT reportable data from their virtual private cloud (VPC) to the VPC of the Financial Industry Regulatory Authority (FINRA). AWS PrivateLink lets them do so in a secure manner, without traversing the public internet.

In this blog, we’ll discuss a method for analyzing the vast amounts of data involved with CAT reporting and exception handling. We’ll highlight CATalytics, a solution developed by AWS Consulting Partner, Risk Focus. Their open-source dashboard, built on AWS, allows users to resolve exceptions, answer queries, and identify the root cause of CAT-reporting issues.

The Challenge

The sheer volume and granularity of data involved with CAT creates challenges for broker-dealers to understand core issues and triage priorities. For example, a single parent order to buy 5,000 shares of a stock can be broken up into hundreds of child orders, some of which get routed to other executing brokers and exchanges.

These executing brokers and exchanges may then reroute the order to other venues if they can get a better price for the execution. CAT requires that the data submitted by the originating broker-dealer, as well as by the executing brokers and exchanges, be consistent. This requirement ensures full visibility into the lineage of the order and executions. If there are any inconsistencies in the data submitted between these various entities, FINRA will generate an exception for all parties involved.

To research a specific exception, the broker-dealer will need to pull numerous submission records for multiple events. For example, if FINRA can’t reconcile a particular routing decision, the broker-dealer may need to review the route event and investigate the order trail back to the time it originated. This cumbersome process doesn’t just impact a firm’s capacity to comply with regulatory obligations. It also impacts their capacity to scale and optimize teams, as well as to respond to counterparties in a timely fashion.

The Solution

The massive amount of data involved with CAT means that error resolution can sometimes take hours—or even days. Risk Focus’s CATalytics customizable dashboard lets broker-dealers view both the information they submitted to CAT and the exceptions generated by FINRA.

Built on Amazon QuickSight, it helps process, manage, and visualize the massive amounts of data involved in CAT reporting. As a result, CAT teams can not only reduce their investigation time to minutes, but also easily monitor ongoing CAT activity and processes. CATalytics features include:

  • Data Visualization – Create charts for key performance indicators (KPIs); interact with search results dynamically; view volume and error trends; and develop custom drilldown filters
  • Management Tools– Provide breach alerts; get RAG statuses; and perform fulfillment of CAT supervisory duties
  • Self-Service Tools– Run error correction and create JIRA requests

How CATalytics is used in an Organization

As CAT reporting impacts multiple teams across an organization, different end users will have different business requirements. CATalytics offers a versatile solution to meet the needs of various business units, including operations, compliance, and technology.

Operations teams look after the general health of CAT reporting, error resolution, and client queries from members and participants. CATalytics can be integrated with existing tools and processes (for example, JIRA) to assist operations teams with ongoing monitoring. The dashboard view allows them to quickly understand the impact of an error and identify relevant order and trade details from an order management system (OMS) or execution management system (EMS). CATalytics then compares that information to the records submitted to FINRA CAT and accelerates error resolution.

Compliance teams interact with regulators, exchanges, and other-broker dealers to address specific queries and issues. They’re also responsible for supervisory duties, such as internal reviews and controls for regulatory reporting submissions. CATalytics facilitates compliance teams researching and monitoring specific trade activity, in addition to generating specific reports to flag a breached error rate or a volume spike. It also offers custom reporting to facilitate supervisory duties. (For example, a review of a random subset of new orders to ensure reporting accuracy.)

Technology teams also benefit from CATalytics, which can alert them to late reporting and failed jobs.

Reference Architecture

As a fully serverless solution deployed on AWS, CATalytics ingests data from FINRA into the broker-dealer’s AWS environment via AWS PrivateLink. The data is stored in Amazon S3 and cataloged using AWS Glue. Amazon Athena is used as a query engine and Amazon QuickSight is employed for business intelligence and visualization. In addition, Amazon CloudWatch captures systems and operational information and displays it in the same integrated dashboard.
The cloud deployment of CATalytics provides the following benefits:

Simple integration of your CAT environment with cloud services in 4–8 weeks, depending on internal requirements and readiness

  • Cloud analytics and business-intelligence benefits
  • Serverless architecture with no infrastructure to manage
  • A pay-as-you-go model for all components
  • Security features, including data protection, network protection, logging, and auditing

Conclusion

Broker-dealers face a tremendous challenge when it comes to having full visibility into the trade and order lifecycle. CATalytics provides CAT teams with a customizable dashboard, allowing them to resolve issues from the convenience of their AWS environment. To learn more about how CATalytics can be customized to meet your business needs, visit RiskFocus.com/CATalytics.

Alex Rabaev

Alex Rabaev

Alex Rabaev is the Global Head of CAT Regulatory Reporting, Risk Focus. Alex brings expertise in regulatory compliance, Front to Back Office processes, data analytics, and a thorough understanding of operations, infrastructure, and risk management principles. Prior to Risk Focus, Alex led teams focusing on regulatory implementation, vendor solutions, and client experience at Goldman Sachs, Morgan Stanley, and Credit Suisse.