In late 2018, the U.S. Securities and Exchange Commission adopted Rule 613, Consolidated Audit Trail (“CAT”) National Market System (NMS) Plan. The stated objective of Rule 613 is to enhance the ability of regulators to track, monitor, and detect fraud and market manipulation.  In June 2020, the implementation of CAT required every exchange and industry member to collect and transmit certain detailed information to the CAT Processor regarding each quote, order, and execution related to National Market System (NMS) and Over-the-Counter (OTC) securities traded throughout U.S. markets.  Phase 2, known as CAT Customer and Account Information System (CAIS), requires customer account information including customer name, date of birth, addresses(s) and a translated identifier (TID – a masked form of every taxpayer identifier associated with the account) to be submitted to CAIS for accounts with orders in CAT reportable securities.

In 2023, the SEC approved a funding model to finance the costs associated with CAT. “CAT Fees” are assessed to broker-dealers and exchanges for executions in CAT reportable securities. Broker-dealers are assessed fees by CAT LLC and FINRA based on trades reported to a Trade Reporting Facility (TRF) under their Market Participant ID (MPID).  Hilltop Securities uses other broker-dealers for execution of orders in CAT reportable securities.  Those broker-dealers pass through to Hilltop Securities CAT Fees incurred in the execution of orders routed to them by Hilltop. CAT Fees are calculated per transaction at the current CAT LLC and FINRA rates and passed through to the end client as “Other Fees”.

More information regarding the rule and the implementation of the CAT can be found at www.sec.gov/divisions/marketreg/rule613-info or www.catnmsplan.com.