The SEC is now tracking your stock trades by your Social Security Number. It shares the data with 3,000 outside agencies.
What’s in Your Portfolio?
In 2012 the SEC approved a new rule requiring a Consolidated Audit Trail to Monitor and Analyze Trading Activity.
“A consolidated audit trail that accurately tracks orders throughout their lifecycle and identifies the broker-dealers handling them will provide us with an unprecedented ability to effectively oversee the markets we regulate,” said SEC Chairman Mary Schapiro.
The new rule becomes effective 60 days after its publication in the Federal Register. SROs are required to submit the NMS plan to the Commission within 270 days of the rule’s publication in the Federal Register. Once the Commission approves the NMS plan, the SROs are required to report the required data to the central repository within one year, and members of the SROs are required to report within two years. Certain small broker-dealers will have up to three years to report the data.
The SEC is Now a Spy Agency
This ruling was in response to a 2010 flash crash and quietly sat for years. The SEC is now following through.
Please note The SEC Wants to Spy on Your Portfolio
The scope of the Consolidated Audit Trail, or CAT, a regulation the SEC issued in 2016 but implemented only recently, is breathtaking and unprecedented. In the words of the SEC press release, the regulation instructs regulated financial institutions to identify “every order, cancellation, modification and trade execution for all exchange-listed equities and options across all U.S. markets.”
The SEC issued this rule in response to the 2010 “flash crash,” ostensibly to surveil markets. If the CAT stopped at that, it would have been a useful tool to protect markets from fraud and manipulation. But the commission decided to collect American investors’ personally identifiable information, such as account and Social Security numbers, and share it. The CAT data will be available to self-regulatory organizations, such as stock and options exchanges, and about 3,000 outside contractors as well as to the SEC itself.
We also share SEC Commissioner Hester Peirce’s concern that hackers may try to exploit the CAT “for their nefarious ends.” The urgency of this threat is clear from the repeated cyberattacks on numerous U.S. government institutions in recent years by hackers backed by China, Russia and North Korea.
We expressed these concerns to the SEC for years and have been ignored, but some in Congress share our objections. Rep. Barry Loudermilk and Sen. John Kennedy recently introduced legislation to stop the unconstitutional collection of U.S. investors’ personal information by the CAT. We hope other lawmakers will follow their lead. Regardless of political party, safeguarding Americans’ privacy should be ample reason to take action.
Hackers Paradise
Consider a 2022 Statement by SEC Commissioner Hester Peirce.
With respect to liberty, I plead with my fellow Americans to care about your financial privacy. Why should the government, without any indication of wrongdoing on your part, follow you around the securities markets to monitor every order you place and every trade you make? With respect to security, I plead with my fellow regulators to rethink the wisdom of creating a massive database of information that hackers may try to exploit for their nefarious ends. Given these concerns, my preference would be to see the project placed in the SEC’s catacombs—dead and buried forever.
Given that the data will be available to 3,000 outside contractors, it will soon be a hacker’s paradise, if it isn’t already.
Actually, it won’t even need to be hacked, all it takes is one nefarious outside contractor.
I thought the CAT NMS plan was already updated to remove any un-masked sensitive information like SS #, account #, and dates of birth from being in the CAT database?
link to catnmsplan.com
Never forget – “What’s good for General Motors is good for America.”
When do we determine that we have too much government? Is it a winner that the USA is a dying country? Freedom is non existent.
Eventually, everyone will work for the government and there will not be anyone left to complain that the government is not a good thing.
Dang, he bought VTSAX for 15 years, even when Mish was making a recession call! Now he’s retired!
almost 20 years ago, i had a state securities investigator show up un announced at my home office for my money management company. the rude bastard started questioning some of my foreign holdings in countries amerika was not friendly with. i told the wanker it was none of his business. he backed down. btw, he looked like a real sleaze ball. when he rang the bell i thought he was looking to sell me magazines or something. amerikans are bootlickers. i always tell my pals to think like italians. who hide 1/3 of their gdp from taxes and system. for centuries. amerikans are dumb and naive and rats.
The forces of totalitarianism are strong and unashamed, stalking the oblivious sheep, beckoning like a good shepherd, but leading to the slaughter.
Beware.
3000 agencies? What in the world is the SEC doing? Selling our information to outside entities? The number of agencies listed is absurd.
Without knowing the full info, my concern is that order flow might be made public to brokerages, thus eliminating revenues for commission free brokerages to bolster business for the SEC boys club, big bank brokerages.
I remember trading my first time in ’08, with “discount” $10 trades, less than $20K and market swings of 5% intraday, brokers made a killin’ off me, I was stuck holding overnight to avoid the PDT rule and forced to pay overnight margin rates, which “protects” small investors when the markets were falling overnight.
Yup, the SEC’s here to protect us, yes, they are.
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SEC rules have always protected the small investors from making money.
Occasionally a few trades slip through, but not for want of trying to prevent them.
To reiterate what I just replied to Doug with above –
My guess is the banking cartel is trying to eliminate profits for these new retail brokerages that offer free trades in exchange for order flow sales by eliminating the value of order flow and forcing retail to pay their brokerages.
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Of course they would like to eliminate competitors but that doesn’t mean they can.
I thoroughly appreciate your level-headed approach in your comments in this forum to avoid the foil-hats.
That said, after 2008, knowing the SEC is comprised of bankers either on their way back to a bank job, or just arriving from a bank, atop what Madoff was able to pull off as an associate, I absolutely DO NOT trust the SEC.
There’s no possible way the SEC was unaware of the CDO valuation problem back in ’08.
Kyle Bass’ story is an eye opener, he tried for a year back in ’06-’07 to get info on what they were comprised of and met constant avoidance or convenient obliviousness. He finally lucked out and found an insider willing to talk, he’s a billionaire now from his shorts on sub-primes for that single fateful meeting.
The CFMA of 1999 stipulates investment banks are not required to disclose info on derivatives or futures, combined with removing Glass-Steagall, that makes them omnipotent and even now very few know or realize what the CFMA is.
Color me skeptical when this organization wants to distribute my trading info.
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Madoff died in jail and a wave of clawbacks hit the investors that had cashed out. It would have been better to catch him earlier but since he used to be a head of NASDQ he had a reputation that many did not question. Eventually he was caught.
Kyle Bass did a great job in digging into the fundamentals and I suppose you mean that the SEC should have prevented the Sub-Prime from happening. Maybe they could have but keep in mind that the markets are always inventing and changing and people keep finding new ways of ripping the client off. You find a loophole and drive a truck thorough it. If your lawyers and compliance sign off on it you are free to steal, excuse me “to innovate”. You cannot expect the SEC to anticipate every crime and cut it off before it happens. That is impossible. It’s ok if you don’t trust the SEC. The SEC doesn’t trust you either. Last of all the removal of Glass-Steagall had nothing to do with the SEC. If effectively the SEC is distributing info on stock trades to 3000 different organizations I want to know more about it too which is why I am asking for names and more detail. It’s not that I am skeptical, I just want the details so I can look into it. Hopefully someone here can provide me with more and good info.
“…since he used to be a head of NASDQ he had a reputation that many did not question….”
* Exactly, the SEC regulated with rose colored glasses with familials, bear in mind “familials” here are for-profit entities, mostly bank CEO’s
“Kyle Bass did a great job in digging into the fundamentals and I suppose you mean that the SEC should have prevented the Sub-Prime from happening. ”
* Kyle Bass did what the SEC pretended they were unable to do, he was only able to do it because he found a single insider who was loose lipped.
Any SEC action like the one Mish mentions above needs to be vetted through public scrutiny, the same way the the FCC does, as in how Net Neutrality was preserved after public outcry.
We’d be forced to only view material & info online that your IP approves, or is paid to force you to view, from political, economics, religion or ideology if Net Neutrality were overturned.
We came a hair’s width from that, even with public scrutiny.
And, for those bashing the left over “deep state” conspiracies, it was the left that fought against it.
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With the CDOs in 2008 the number one big problems is that although it was a scam that was promoted by unscrupulous people finding which specific laws they had actually broken was very problematic. They were set up using the best lawyers and sold to institutional investors who are assumed by law to be knowledgeable of what they were buying. If it is not illegal then the SEC’s can’t do much except monitor and maybe warn.
Will Nancy Pelosi and her husband be under the same rules?
The paradise of insider trading. SEC employees and 3.000 contractors will be rich. And zero risk, who watchs the watchers?
If the SEC is monitoring trades then they can confirm I opened a position on TLT as it broke below $90. I will accumulate from here all the day down. Choo! Choo!
To all government employees, at every level
Re: auditing all trades.
I’ll show you mine if you show me yours.
Rules? Laws? Surely you jest.
There is only one law: If they can they will.
I don’t see why this data is shared with any other agency or entity. It should be used for SEC investigations into security trading violations (including insider trading) only.
Or maybe just available with a warrant, you know like the supreme law of the land requires.
The story of the 2010 flash crash is hilarious, an institutional prop trader – Navinder Sarao got fed up with HFT spoofing, which is illegal, so he set up an algorithm to spoof them.
Spoofing is rapidly submitting fake orders, then cancelling them before it reaches price to fake out traders and manipulate stock price.
When the SEC warned Navinder Sarao to stop, he refused and told them he wouldn’t stop until they forced HFT’s to stop.
Finally, fed up, he started the algorithm one day and just walked away from his console, he let his algorithm spoof HFT’s for over two hours which resulted in the flash crash.
He proved, beyond question, that the sole function of the SEC is to keep lesser funded traders from making money too fast, while at the same time turning a blind eye to more wealthy institutions.
If there’s any government institution that needs to be dissolved, it’s Bernie Madoff’s SEC club.
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Dissolve the SEC? Not a good idea. The markets would dry up faster than a puddle in the Sahara. Would be good for gold…as long as it is for physical delivery and keep in your house.
“Dissolve the SEC? Not a good idea.”
The phrasing was “If there’s any government institution that needs to be dissolved,,….”
“if”
I agree, we’d be screwed without regulators, I say the same of the FED.
The problem is that these regulators blatantly serve the the wealthy above the rest, especially when they think no one notices.
The SEC enacts rules through the eyes of it’s revolving door investment banker membership.
The FED enacts policy through the eyes of its investment banking members.
Both agencies regulate under the premise that what’s bad for big banks (Agency members) profits is bad for everyone.
This is why CDO’s escaped unnoticed as “AAA” rated, or why HFT’s scalped billions for years by spoofing /market manipulation until Navinder Sarao invoked the flash crash and they had no choice but to “notice” it.
Yes, regulation is necessary, but not when it’s only to protect a minority of wealthy insiders.
As to the rule mentioned by Mish here, my guess is the banking cartel is trying to eliminate profits for these new retail brokerages that offer free trades in exchange for order flow sales by eliminating the value of order flow and forcing retail to pay their brokerages.
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I can think of other agencies to eliminated well before the SEC. Regulation is necessary if you want to have markets in the first place. That they often serve moneyed interests is a given but that doesn’t mean they serve no purpose.
” my guess is the banking cartel is trying to eliminate profits for these new retail brokerages that offer free trades in exchange for order flow sales by eliminating the value of order flow and forcing retail to pay their brokerages.”
Those retail brokerages are hardly new and “free” trades do not exist and never have. They get their money on the spread just like market-makers do and the “value” is captured by them and not the client. The spread on small trades is larger than with big blocks. Put enough trades together and you rake in the money and they do. I am sure that the big banks would like to have less competition but the SEC is not going to give it to them. Nevertheless companies like Robin Hood poses new problems and regulations will have to be tailored to their form of doing business.
They make money from selling real-time order flow to investment banks, that was Robinhood’s original business model, others followed suit.
Either way they’re scalping retail investors, but at least with the current system retailers don’t have to pay to be scalped.
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Get rid of FINRA too. I used to write trading software years ago and we had to create an absurd amount of disclosure documents so investors wouldn’t be fleeced. For example if someone bought a mutual fund that had a foreign entity in the portfolio, we had to include pages of information about risks including currency fluctuations that could effect value. And of course there’s always a risk of losing money. We created so much documentation that no one would read it, so it was worthless. They would go through every detail with a fine toothed comb to make sure it was compliant. In the mean time, the brokerage houses would pay to know what the funds were going to invest in so they could front run the trades. No mention of that in the disclosures.
By all means let’s remove all regulations that help keep investors from being fleeced. What could go wrong? Probably most retail investors didn’t read the fine print but institutional investors do and if retail investors had actually read the fine print many would have been spared investing in stupid investments.
Doug, there’s an important point he makes there.
The fact that there’s little or no transparency about your own broker mistreating your trades, yet countless pages of pointlessly contusing, misleading or misdirecting documentation could be construed as a smokescreen, intended or not.
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Legal stuff is everywhere on anything you sign. It is not for your protection but to protect the broker from you.
The institutional investors were the ones buying the software and they had to make sure the disclosures were correct. I did the code writing but they were the ones filing with FINRA. They didn’t read the disclosures. They already knew what they said.
What part do you object to? Is it that the SEC records your stock trades or that they share them with other agencies or is it both?
The very same agency that allowed Madoff to literally make a rule that served to protect his scheme (“Madoff exception”) is now giving out information to private outside entities on what we buy and sell without our consent.
I see a problem there.
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Which entities? Do you have a list?
You want a list of all 3000?
Yes. 3000 is a lot and I want to know if I could be on some of them. If 3000 entities have access to my trades I want to know their names and why.
You forgot to say if you didn’t do anything wrong you should have nothing to hide.
I guess that means you don’t have a list for us to examine.
I’m struggling to understand why that would matter. To me a giving government agencies and contractors of any kind my data without a warrant is a problem, but pedants are going to pedant I guess.
You can’t improve operations without associated data.
It wasn’t mentioned but in most cases, shared data is usually anomomized. I doubt that these “3000” companies are actually getting the full data with full SS numbers.
Both.
How long do you think it is before someone deliberately leaks out say all of Musk’s stock trades or some other public persons trades that they want to cancel or embarrass.
Or say one of them wants to juice the price of some stock so they leak out that Buffet or some other whale is accumulating / selling a position after of course they themselves have taken or sold a position. It’s going to be rife with this kind of manipulation.
Most of that is already public. Company big wigs have to file trades in their own stock and if an entity owns more than a pct of a stock, their trades are also filed.
I want to see votes by social security numbers so we all can verify that our votes are counted properly.
But no matter how many protests about it, nothing is done about it.
A good idea, in combination with online voting.
Allowing online voting with SSN verification would be perfection for all.
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How do you verify the individual? My ex wife knows my social security number and so do other people that are close to me. Verification must be done by a person with a valid identification card because everything can be hacked and manipulated
Medicare no longer uses SS numbers as identifiers. I believe medical companies have also been forbidden to do so. Many government agencies have been forced to stop using SS numbers to ID its customers.
We do not need to go backward on this initiative.
The constitution and fourth amendment is just so pre-FDR.
“It shares the data with 3,000 outside agencies.”
Once you live in a dump with 3000 “agencies,” who really cares anymore? Things can’t get worse, literally, regardless.
I guess this Hester Pierce was appointed by Trump and is outnumbered now?
Mike, every single transaction is ultimately reported by my Banks and Brokers to the US Government ALREADY. So, why do they “need this data” – – not the BS reason in the headline, but WHY for real?
Will there be a new SEC TRACKING TAX?
Sorry, meant to say: “Mish.”
The IRS has been able to do this for decades.
Thats for taxes. But if the SEC starts selling that info, then colocated bots at the exchanges can frontrun your trades and look for probabilities that you are buying etc. Sort of like how online gambling companies started selling your past playing data and now they know your probabilities that you are bluffing etc.Total BS
If TPTB wanted us dead or imprisoned, we’d have far fewer rights than we do today.
What rights would those be?
Why kill the chicken when you can collect the eggs?