On Monday the Financial Services Committee of the US House of Representatives made HR 4785: The American Customer Information Protection Act available for consideration on the House floor.
The bill, introduced by Rep. Bill Huizenga (MI-R), would prevent the Consolidated Audit Trail from accepting personally identifiable information except in regards to large traders.
Rep. Huizenga introduced the bill to the Financial Services Committee on January 12. The committee then voted 31-25 to advance the bill six days later.
"At this time, it has not been scheduled for a vote before the House," Brian Patrick, communications director for Rep. Huizenga, told Markets Media.
"Whoever is pushing this needs to be aware of the old saying: 'Beware what you wish for, you just might get it,'" said James Angel, a professor at the McDonough School of Business, Georgetown University.
By eliminating the PII component from the CAT, it would require the continuance of the Blue Sheets reporting regime, which the CAT was supposed to replace.
"If the bill passes, the CAT will not have the PII, which mean when the SEC wants to investigate a series of trades, it will have to go back to the old Blue Sheets," he said. "The industry would be saddled with the Blue Sheets system on top of CAT."
The CAT would need to have a workaround, such as adding a step when the SEC would want to make a Blue Sheet request that it sends out an electronic message to everyone with the message numbers it was tracking down.
"There are better ways to deal with privacy issues than an outright ban," said Angel.
He did not discount the cybersecurity concerns that fueled Huizenga's bill.
"The industry has been pretty good at protecting PII," said Angel. "Of all the data breaches that we heard about, they do not seem to be coming from the exchanges or depository, or SROs. That is not to say that a data breach would never happen, but of all the data leaks happening around the world, the SROs are near the bottom of my list of things that I worry about."
Any late date legislative changes to the CAT's mandate likely would push back the release of the CAT specifications, which the CAT NMS LLC has planned for mid-October.