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NEW YORK A new stock and options trading database ordered by the U.S. Securities and Exchange Commission after the May 2010 flash crash will cost brokers and exchanges $50.7 million for the fiscal year ending Nov. 21, regulatory filings show.
The SEC approved the plan in November for the database, aimed at helping regulators police the increasingly fast, fragmented and complex markets. At the time, it was unclear how much it would cost the industry.
Broker-dealers will bear 75 percent of the costs of the new Consolidated Audit Trail (CAT), with stock and options exchanges, as well as alternative trading systems, footing the remaining 25 percent, according to the May 3 SEC filings by the exchanges and the Financial Industry Regulatory Authority.
The CAT will be a central database for all stock and options "message traffic," meaning every trade order, execution, modification and cancellation.
As such, brokers will pay based on the amount of message traffic they generate, from $101,004 per quarter for those generating more than 10 billion messages a month at the high end, to $66 per quarter for those with less than 1,000 messages a month at the low end. There are a total of nine tiers, the filings said.
Stock execution venues will be divided into two tiers, with those that execute more than 1 percent of industry volume paying $63,375 per quarter and those that execute less than 1 percent paying $38,820 per quarter.
Options execution venues with more than 1 percent of industry volume will pay $57,615 per quarter and those with less than 1 percent will pay $39,612 per quarter.
The CAT became a priority for the industry after the so-called flash crash in 2010 wiped out about $1 trillion from the stock market within minutes before an almost equally rapid rebound. It took regulators months to piece together the data needed to attempt to diagnose what caused the event.
The CAT will help regulators better track stock and options trading and has been likened to a Hubble Telescope for the securities markets.
The CAT funding model was designed to recover the costs of building and operating the database, as well as the buildup of a reserve equal to three months of fees, the filings said. Any surpluses would offset future fees.
The fees assume 1,631 order-routing broker dealers, 53 equity execution venues, and 15 options execution venues.
(Reporting by John McCrank; Editing by David Gregorio)