How important is transparency in markets? It's not a front-of-mind thought for most investors as they place a trade — a sign that confidence in market integrity is high. But what if a lawsuit had the power to shut down a key tool in the regulatory kit to scrutinise the entire stock market?
That’s the worry of Tyler Gellasch, chief executive of the investor advocate group Healthy Markets Association, who is concerned about two challenges to the legitimacy of what is known as CAT, or Consolidated Audit Trail.
In a nutshell, CAT is a regulator’s dream, tracking all orders and trades in listed equities and options. This allows the Securities and Exchange Commission to see who trades what in the US stock market, in real time. Conceived in the wake of the 2010 flash crash when regulators struggled to pinpoint the cause of a shock $1tn market plunge, it has gone online in stages, becoming fully operational in 2024. Fans compare it to the Hubble Telescope.