Citadel Securities and the American Securities Association (ASA) have jointly filed a lawsuit against the U.S. Securities and Exchange Commission (SEC) in the U.S. Court of Appeals for the 11th Circuit in Atlanta.
This legal action marks a significant escalation in the ongoing dispute between the investment industry and the SEC regarding the implementation of new regulations for the Consolidated Audit Trail (CAT), a comprehensive market data surveillance system.
In their statement, the ASA asserted that the SEC has exceeded its statutory authority and neglected to address the concerns of both investors and the industry at large.
Consequently, they feel compelled to resort to litigation to resolve the matter.
The recent regulatory changes by the SEC involve distributing the expenses for operating the CAT system among sellers, buyers, and the stock exchanges where transactions occur.
This decision has drawn strong objections from the investment industry, which fears that its members could be burdened with an unfairly substantial portion of the associated costs.
In response to these allegations, an SEC spokesperson defended the agency’s actions, stating that they acted in accordance with their legal authority, and their regulatory responsibilities are consistently executed within those bounds.
The CAT itself serves as a repository of investor and transaction data, designed to provide regulators with comprehensive insights into U.S. market transactions.
Its creation was mandated by the SEC in 2012 as a response to the “flash crash” of 2010, during which a sudden and dramatic drop in major Wall Street indices temporarily wiped out nearly $1 trillion in market value.
Critics, including Republican officials and industry representatives, have expressed concerns about the CAT system.
They argue that it poses significant cybersecurity and privacy risks and is likely to impose unjustified financial burdens on investors.
This lawsuit reflects the growing tension between regulatory authorities and industry participants as they grapple with the complex task of enhancing market surveillance while addressing the various challenges and implications associated with the CAT.