To Whom It May Concern:

We appreciate the opportunity to provide input to assist the Securities and Exchange Commission in its comprehensive review of the Consolidated Audit Trail (CAT). The Cato Institute is a public policy research organization dedicated to the principles of individual liberty, limited government, free markets, and peace, and the Center for Monetary and Financial Alternatives focuses on identifying, studying, and promoting alternatives to centralized, bureaucratic, and discretionary monetary and financial regulatory systems. The opinions we express here are our own.

This administration’s proposal to review and reform the CAT after years of bloat and ineffective policy is a welcome development. We encourage the Securities and Exchange Commission (henceforth, the Commission) to pursue reform of the CAT, but it is important not to get lost in the weeds of tweaking the system. The Commission must eliminate the CAT.

The CAT Is Not Necessary

The concept release rests on the premise that the CAT is necessary for cross-market surveillance and enforcement. But the CAT fails a test of necessity. Regulators reconstructed the 2010 Flash Crash — the event cited as the CAT’s primary justification — before the CAT existed, using data sources available at the time to catch the responsible parties.