- SEC approved CAT cutbacks to reduce operating costs, trimming 2025 expenses by $20–$27 million to roughly $169–$176 million.
- CAT’s costs ballooned from a projected $55M to $248M due to data growth and tech demands, disproportionately burdening retail traders.
- Critics warn looser reporting and data cuts may weaken fraud detection and raise privacy concerns despite cost savings.
WASHINGTON — In a move that could ease the financial squeeze on everyday stock traders, the Securities and Exchange Commission has greenlit a series of tweaks to its sprawling market monitoring system, slashing projected operating expenses by tens of millions of dollars.
The decision, announced late last month, comes amid years of backlash over the system’s skyrocketing price tag and questions about whether it’s delivering value for the investors it’s meant to protect.
At its core, the Consolidated Audit Trail — or CAT, as it’s known in regulatory circles — is essentially a massive digital ledger designed to track every step of stock and options trades across U.S. markets.
The FrankNez Media Daily Briefing newsletter provides all the news you need to start your day. Sign up here.
Imagine it as a supercharged breadcrumb trail: It logs details like who placed an order, how it got routed through brokers and exchanges, any changes along the way, and where it ultimately lands as a buy or sell.
Born out of the chaos of the 2010 Flash Crash, when regulators struggled to piece together what went wrong because data was scattered across fragmented systems, CAT was the SEC’s big fix.
The goal? Give watchdogs a clearer, faster view of market activity to spot fraud, manipulation, or glitches before they spiral.
But for all its promise, CAT hasn’t been what retail investors have hoped it would be. Launched in phases starting back in 2018, the system was supposed to hum along at an annual cost of no more than $55 million once fully up and running.
Reality hit harder. By late 2024, expenses had swelled past $248 million a year, fueled by exploding data volumes from booming retail trading during the pandemic and tech demands that outpaced early estimates.
That’s nearly five times what planners once penciled in, with technology alone eating up over 90% of the budget.
Retail Investors Are Made to Eat the Costs
Retail investors, the mom-and-pop crowd fueling apps like Robinhood and Webull, have felt the pinch.
These smaller players, who exploded onto the scene with commission-free trades and meme-stock frenzies, now face fees that hit them harder than big institutions.
Under a 2023 funding model — later tossed by a federal court — costs were pegged to “executed share volume,” meaning everyday traders with modest portfolios ended up subsidizing the high-frequency pros moving millions of shares.
Critics, including industry groups like the Securities Industry and Financial Markets Association (SIFMA), slammed it as unfair, arguing it jacks up trading costs at a time when barriers to entry should be dropping.
“The CAT operating costs projected for 2023 are approximately 5.2 times the cost projections in the original CAT NMS Plan,” one industry letter warned the SEC back then.
Delays piled on the pain. What was eyed for full rollout by 2020 kept slipping — first due to tech glitches, then COVID disruptions — leaving brokers shelling out millions in compliance prep without the promised oversight benefits.
By mid-2024, small firms were grumbling about the burden, with some warning it could drive them out of business altogether.
And privacy hawks weren’t quiet either: Lawmakers like Sen. John Kennedy (R-La.) called it a “stalking” tool in a 2023 op-ed, fretting over the collection of personal details like investor names and addresses — data that could leak in a breach and expose everyday folks to identity theft.
Even FINRA, the self-regulated watchdog, pushed for dialing back personal info requirements, saying the risks outweighed the gains for routine surveillance.
Changes Being Made to the CAT System
The tipping point came this summer. In July 2025, the U.S. Court of Appeals for the Eleventh Circuit struck down the SEC’s 2023 funding blueprint, ruling it bucked earlier rules by letting exchanges foist 100% of costs onto brokers without solid justification or fresh economic math.
The judges called out reliance on dusty 2016 cost guesses, ignoring how actual bills had quadrupled.
The ruling vacated the model and kicked it back to the agency, stalling fees and sparking fresh urgency.
Enter the SEC’s latest order, issued September 30, 2025. It hands “conditional exemptive relief” to the self-regulatory groups running CAT — think stock exchanges and FINRA — letting them skip some data-heavy chores without gutting the basics.
Among the cuts: No more automatic “lifecycle linkages” tying orders together unless regulators specifically ask; looser rules on fixing late reports; axing bells and whistles from an online query tool; and smarter archiving, like purging old files and using cheaper storage.
The payoff? An extra $20 million to $27 million shaved off 2025’s tab, dropping forecasts to around $169 million to $176 million — a far cry from the $248 million starting point.
But is this going to help investors fight off shady market manipulation tactics or simply hide them deeper?
Looser rules on fixing late reports means more laxed reporting, allowing missteps and possible fraud to go unnoticed, or unreported.
“This is just the start,” said SEC Chairman Paul S. Atkins in the announcement.
“Both the Commission and the participants that operate the CAT need to take very seriously their roles in reducing these seemingly endless cost increases. CAT must be more efficient and cost-effective.”
Jamie Selway, head of the SEC’s Division of Trading and Markets, echoed that, calling it “an overdue journey to reform and rationalize the CAT” and pledging more talks with industry players to squeeze out savings.
Wall Street Reacts
Wall Street’s reaction has been cautiously upbeat. SIFMA hailed the step as tackling “festering problems,” while InvestmentNews noted it could steady nerves after the court smackdown.
But not everyone’s popping champagne. Commissioner Caroline A. Crenshaw, in a February dissent on a related exemption, griped that dialing back data “undermines” CAT’s power to police bad actors, pointing to cases where it helped nail front-runners profiting off big trades.
This is the sentiment retail investors relate to the most.
And with a lawsuit from the New Civil Liberties Alliance still simmering — aiming to gut CAT over privacy beefs — the system’s future hangs in the balance.
For retail investors, it feels as if though their concerns are not being heard. As if the development is being masked through public celebration of lowering fees.
The truth is retail investors are more concerned with nothing being done about Wall Street powers that ‘pay’ our U.S. regulators to ‘play’ the game on their own terms. Where a major foul is simply corrected with a bribe to the referee.
Also Read: Short Sellers Now Lose Whopping $3.5bn As Robinhood Stock Soars
Donald
October 17, 2025WHAT about MMTLP and the FINRA FRAUD that was U3 HALTED almost 3yrs ago