SEC Stunned To Discover No One Wants To Pay To Be Surveilled

"Hey, pay for this thing you hate" is apparently not the best enforcement mechanism.
Author:
Publish date:
Updated on

A bunch of things have happened in the years since equities markets flash crashed. We learned that it was a Kansas mutual fund at fault, before learning later that it was actually a strange British guy living in his parents' flat. There were also some elections, and stocks went up. Now it's been seven years (can you believe it?) and one thing still hasn't changed: The SEC still hasn't really done anything.

SEC_CAT2

OK, the feds have done some stuff. But the big-ticket, we're-really-getting-serious-now response was the Consolidated Audit Trail, or CAT, a database proposed a few weeks after the flash crash that would gather together trading data from exchanges and dark pools far and wide and plop them into a colossal excel file that might not serve to prevent any future flash crashes but would at least allow us to point a fat finger at the correct culprit.

That effort has floundered. Which, given the SEC's initial proposal, might have been suspected. The original plan first envisioned that the nation's dozen-odd exchanges would put aside their usual pastime of constant bickering and agree on a structure that would suit them all. Then they'd have to collectively decide on a private-sector contractor to run the whole thing. This took seven years. And of course, the SEC would have to, like, approve its own plan. That took six years.

Now there's that whole money thing:

The long effort to make it easier to catch cheaters and diagnose the causes of mysterious crashes in the U.S. stock market just suffered another setback. The Securities and Exchange Commission is reviewing how exchanges plan to pay for the massive database, known as the Consolidated Audit Trail, with fees from brokers, banks and other traders. The decision came after financial firms complained that their concerns were ignored by the exchanges.

As it turns out, asking one group of self-interested businesses – exchanges – to set prices for another group of self-interested businesses – trading firms – stokes certain disagreements between these self-interested businesses. And it's hard to imagine anyone besides a few SEC enforcement staff really want to see this thing up-and-running to begin with. For market participants, there are numerous cons – increased surveillance, mandatory fees, compliance costs – and just one pro – namely, getting the SEC to stop pestering them to finish their homework.

So maybe we'll have a functioning CAT in time to assign blame when the 2020 Flash Crash comes around.

Wall Street Wins Round in Fight With Exchanges Over Audit System [BBG]

Related

News

Who Wants To Be Chair(wo)man Of The SEC? (Update)

Dealbook reports that Mary Schapiro has given official notice and come December 14th, she's out of there. Names being floated as possible successors are said to include Sallie Krawcheck and the SEC's director of enforcement, Robert Khuzami, but on the off-chance they're not interested, want to throw yours or a loved one's C.V. in the mix? Update: Apparently Obama plans to nominate Elisse Walter, an SEC commissioner and former FINRA VP, to take over. So you've probably got less of a shot at this point but anything can happen!

News

SEC Staffers Have Made Remarkable Progress Re: Learning What Constitutes Appropriate Use Of A Work Computer

If you had asked us two years or two months or two days ago if we thought that there would be a time in the near future when Securities and Exchange employees would not be getting reprimanded for watching porn on their work-issued computers, we would have said absolutely not. No judgment, but in our professional opinion, people do not go from, among other things: * Receiving "over 16,000 access denials for Internet websites classified by the Commission's Internet filter as either "Sex" or "Pornography" in a one-month period" * Accessing "Internet pornography and downloading pornographic images to his SEC computer during work hours so frequently that, on some days, he spent eight hours accessing Internet pornography...downloading so much pornography to his government computer that he exhausted the available space on the computer hard drive and downloaded pornography to CDs or DVDs that he accumulated in boxes in his office." * www.ladyboyx.com, www.ladyboyjuice.com, www.trannytit.com, and www.anal-sins.com ...to living a porn-free existence at l'office. Did we think they'd take baby steps toward that goal sure? But when you've tried to log on to your websites of choice, on average, 533 times a day, assuming weekends were worked, baby steps means getting yourself to a place where you can do a solid two hours of work each week without hitting up anal-sins.com. So you can imagine (and probably share in) our surprise to hear that, according to a probe by Interim Inspector General Jon Rymer re: "misuses of government resources," the worst offenses one office was charged with claiming they needed iPads to do their jobs when really they just wanted to watch movies on them at home and going to hacker conferences without encrypting the data on their computers. Granted, it doesn't look so great that the group that was running around with computers that didn't even have anti-virus programs on their computers was the one that "is responsible for ensuring exchanges are following a series of voluntary guidelines...concerning computer audits, security, and capacity" but still, no ladyboyjuice while on the job-- that's huge. In a 43-page investigative report that probed the misuse of government resources, SEC Interim Inspector General Jon Rymer discovered that an office within the SEC's Trading and Markets division spent over $1 million on unnecessary technology. The report also found that the staffers failed to protect their computers and devices from hackers, even as they were urging exchanges and clearing agencies to do just that. Although no breaches occurred, the staffers left sensitive stock exchange data exposed to potential cyber attacks because they failed to encrypt the devices or even install basic virus protection programs...On Friday Reuters reviewed a copy of the full report, which details an even broader array of problems, from misleading the SEC about the office's need to buy Apple Inc products, to cases in which staffers took iPads and laptops home and used them primarily for pursuits such as personal banking, surfing the Web and downloading music and movies. The report says the staff may have brought the unprotected laptops to a Black Hat convention where hacking experts discuss the latest trends. They also used them to tap into public wireless networks and brought the devices along with them during exchange inspections...The report also found that some people who worked in the office had little or no experience with exchange technical matters. SEC staffers used govn't computers for personal use - report [Reuters] Earlier: SEC Supervisor Surfed Tranny Porn To Cope With Stress Of The Job; SEC Official Who Surfed Tranny Porn To Deal With Stress Of The Job– Not Alone!;