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SEC wants new way to track trades

"It is like trying to put together a jigsaw puzzle, but only being able to see a small part of the final picture. To see the complete picture, regulators must have access to a robust and effective consolidated order and transaction tracking system."

--SEC Chairman Mary Schapiro

The SEC is taking another step in an effort to keep up with the rapidly expanding size of the financial markets.

Today, every exchange and Wall Street self-regulatory organization keeps its own database of trades, often with different standards for what information to record. That makes it very difficult for the SEC, in examining big market events like the May 6 plunge, to figure out what happened.

The agency will discuss Wednesday a proposal that exchanges and self-regulatory organizations create a central database of all trades in stocks and options across markets.

It's known as a consolidated audit trail. And it's more important than ever.

On May 6, regulators suspect that trading in Chicago a future linked to the stock market helped fuel the market volatility in New York.

The proposed order would require exchanges, the Financial Industry Regulatory Authority and other financial firms to come up with a plan to build a consolidated audit trail within three months and have it operational within a year. It would take two years for it to be fully effective.

By Zachary Goldfarb  |  May 26, 2010; 10:00 AM ET
Categories:  SEC  
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