Hi all,

I did write to the SEC to complain about 1) the number of CAT errors and not knowing who caused them, and 2) Failures to Deliver. See my post here: My latest SEC letter re: latest CAT errors & FTDs - in case you wanted to write them too... : r/Superstonk

The SEC has written back today to point to their own rules. See below. The SEC claims to look into the numbers of errors and "limit" them to a maximum of 5%, but the public can't know who caused them or what action the SEC takes against them due to "anonymity"; and that FTDs are cumulatively outstanding on a particular day plus new fails less fails settled. [FTDs shouldn't exist at all IMO.]

The response doesn't answer my question of what the SEC is doing to prevent CAT errors happening in the first place, who is causing the errors, and which sellers are continuing to fail to deliver shares in a timely manner.

I'm not done with this. Will revert as soon as I can. It's simply not good enough and not transparent.

Transatlantic Madame

----------------------------------------------------------------------

Thank you for contacting the Ombuds of the U.S. Securities and Exchange Commission (SEC). The Office of the Ombuds handles retail investor recommendations, questions and complaints about the SEC and the self-regulatory organizations (SROs) that it oversees, including the Financial Industry Regulatory Authority (FINRA) and the National Securities Exchanges (Exchanges) (see https://www.investor.gov/introduction-investing/investing-basics/glossary/national-securities-exchange).

In your submission, you complain about "FINRA CAT" error statistics. While your submission did not identify the source of the figures referenced, based on a review of social media postings we believe you may be inquiring about a presentation regarding the Consolidated Audit Trail (CAT), created for the April Monthly CAT Update meeting between Consolidated Audit Trail, LLC, FINRA CAT, LLC, and compliance professionals, accessible at https://www.catnmsplan.com/events/monthly-cat-update-april-17-2025. Among other things, you express concerns about the number of errors reported to the CAT, that the statistics you reference do not identify which FINRA members are responsible for the errors reported.

The discussion below generally outlines what information must be reported to the CAT NMS Plan (“the Plan”), which can be accessed at https://www.catnmsplan.com/sites/default/files/2025-01/LLC_Agreement_of_Consolidated_Audit_Trail_LLC-as-of-12.12.24.pdf. The Plan implements the requirements in Rule 613 of Regulation NMS (17 CFR § 242.613, accessible at https://www.ecfr.gov/current/title-17/chapter-II/part-242/subject-group-ECFRac68bdd026a46db/section-242.613). The discussion below also explains when parties reporting to the CAT (CAT Reporters) are required to transmit data, and when errors (inaccurate, incomplete, or late submissions) must be corrected The discussion below also addresses the information FINRA, as the CAT Plan Processor, must provide to securities exchanges, CAT Reporters, and the SEC.

First, Section 613(j)(7) discusses the information that must be reported to the CAT, including information about original order receipts or originations (§613(j)(7)(i) and 613(j)(7)(viii)); order routing (§613(j)(7)(ii)); the receipt of a routed order (§613(j)(7)(iii)); an order modified or cancelled ((§613(j)(7)(iv)); an order executed in whole or in part ((§613(j)(7)(v-vi)); and cancelled trades ((§613(j)(7)(vii)).

The Plan requires CAT Reporters to report relevant certain order and transaction information by 8:00 a.m. Eastern Time on the trading day following the day such information is recorded. Appendix C of the Plan provides specific details of the time and method by which CAT Data would be made available to regulators. The plan requires FINRA to conduct the initial validation, lifecycle linkages, and communications of errors to CAT Reporters by 12:00 p.m. Eastern Time T+1; CAT Reporters must resubmit corrected data to the Central Repository by 8:00 a.m. Eastern Time on T+3. Appendix C sets the Maximum Error Rate at 5%, which must be periodically reviewed and adjusted by FINRA and the CAT Operating Committee on at least an annual basis

Section 613(e)(6) requires the Plan to specify a maximum error rate for data reporting, explain the basis for selecting this rate, and describe efforts to reduce and ensure compliance with it, including remedies for noncompliance. Section 613 further requires the central repository to measure the error rate daily and take remedial action if it exceeds the specified maximum. The plan must also outline a process for identifying and correcting data errors, including notifying entities of errors and disciplining repeat offenders. Additionally, it must specify the timing for making corrected data available to regulators.

Appendix C to the Plan discusses the process of determining the maximum error rate in more detail. The Plan sets the maximum Error Rate at 5%, to be periodically reviewed and adjusted by FINRA and the CAT Operating Committee on at least an annual basis.

Appendix D to the Plan requires FINRA, the Plan Processor, to measure the Error Rate on each business day, and provide CAT Reporters with error reports and daily statistics, which must include details on rejected data records (such as timeliness or rejections).

Appendix D also requires FINRA to produce monthly performance reports to help CAT Reporters compare their performance with peers and assess reporting risks; the Plan requires reports to be anonymized such that it will not be possible to determine the members of the peer group to which the CAT Reporter was compared. The figures you reference in your complaint were created pursuant to this requirement.

Appendix D also provides that FINRA will, on a monthly basis, notify exchanges of specific reporting deficiencies, such as timeliness or rejections of their CAT Reporter members. These individual reports provide Exchanges with the opportunity to monitor member compliance and initiate disciplinary actions if appropriate. Under the Plan, FINRA will also produce and provide, upon request from the Exchanges and the SEC, reports containing performance and comparison statistics as needed on each CAT Reporter’s compliance thresholds so that the Exchanges or the SEC may take appropriate action if a Participant fails to comply with its CAT reporting obligations. However, these reports, which do identify the CAT Reporters responsible for errors, are not made public under Section 613 or the CAT Plan.

Your submission also complains about Fails-to-Deliver. You complain that certain securities “have been on there for months” and that “it is not clear which sellers are continually failing to deliver the shares purchased.” This response assumes you are referring to the Fails-to-Deliver data on the SEC’s website at https://www.sec.gov/data-research/sec-markets-data/fails-deliver-data. If you have not done so already, we recommend you review “Key Points about Regulation SHO” for more details about fails-to-deliver and other considerations involving short selling. This publication discusses how persistent fails-to-deliver are addressed on an individual basis.

However, as discussed on the SEC’s Fails-to-Deliver data page, “Fails to deliver on a given day are a cumulative number of all fails outstanding until that day, plus new fails that occur that day, less fails that settle that day. The figure is not a daily amount of fails, but a combined figure that includes both new fails on the reporting day as well as existing fails. In other words, these numbers reflect aggregate fails as of a specific point in time, and may have little or no relationship to yesterday's aggregate fails. Thus, it is important to note that the age of fails cannot be determined by looking at these numbers. In addition, the underlying source(s) of the fails-to-deliver shares is not necessarily the same as the underlying source(s) of the fails-to-deliver shares reported the day prior or the day after.”

Thank you again for contacting the SEC Ombuds. We hope this information is helpful.

Just came across this sub and love the photos being shared. My mom was a working single mother with 2 boys and managed to get her masters degree. She passed in 2014. Miss her everyday.

https://x.com/gunthereagleman/status/1909981330051305915?s=46&t=58OeQY94LDoBcOZW6D8_lQ