# What Are the Supervisory Responsibilities of a Firm That Uses a Third-Party for CAT Reporting? ▴ Question

**Published:** 2025-08-05
**Categories:** Question

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## Concept

Engaging a third-party for [Consolidated Audit Trail](https://prime.greeks.live/area/consolidated-audit-trail/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (CAT) reporting introduces a layer of operational leverage. It also fundamentally reshapes the architecture of a firm’s supervisory obligations. The core principle, mandated by financial regulators like FINRA, is the non-delegable nature of compliance responsibility. A firm cannot purchase absolution from its regulatory duties; it can only delegate the execution of specific tasks.

The [supervisory framework](https://prime.greeks.live/area/supervisory-framework/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), therefore, must be engineered to treat the third-party vendor not as a separate entity, but as a remote, integrated component of the firm’s own compliance machinery. The ultimate accountability for the timeliness, accuracy, and completeness of every data point reported to the CAT remains with the firm that originates or receives the order.

This reality is grounded in the foundational purpose of CAT itself ▴ to provide regulators with a comprehensive, consolidated view of all trading activity in the U.S. equity and options markets. The integrity of this market-wide surveillance system depends on the fidelity of the data submitted by each individual member firm. Permitting a firm to divest itself of responsibility simply by outsourcing the reporting function would create a critical failure point in the entire regulatory structure.

Consequently, FINRA Rule 3110 (Supervision) requires every member firm to establish and maintain a [supervisory system](https://prime.greeks.live/area/supervisory-system/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), including [Written Supervisory Procedures](https://prime.greeks.live/area/written-supervisory-procedures/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (WSPs), that is reasonably designed to achieve compliance with all applicable securities laws and regulations, including the CAT NMS Plan. When a vendor is used, this rule’s scope explicitly extends to the oversight of that vendor’s activities on the firm’s behalf.

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## The Locus of Unwavering Responsibility

The selection of a third-party reporting agent is the beginning of the supervisory process. The firm’s obligations permeate the entire lifecycle of the relationship, from initial [due diligence](https://prime.greeks.live/area/due-diligence/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) to [daily operational](https://prime.greeks.live/question/what-are-the-primary-operational-challenges-in-managing-daily-variation-margin-calls/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) oversight and periodic performance audits. The vendor’s technological infrastructure, operational processes, and human capital effectively become extensions of the firm’s own. Therefore, the firm’s supervisory system must be designed with sufficient depth and granularity to monitor, test, and validate the vendor’s performance as if it were an internal department.

This includes a profound understanding of the vendor’s data handling processes, [error correction](https://prime.greeks.live/area/error-correction/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) protocols, and [clock synchronization](https://prime.greeks.live/area/clock-synchronization/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) mechanisms. A failure by the vendor is a failure by the firm, a principle that regulators have consistently enforced through examinations and disciplinary actions.

> A firm’s use of a third-party for CAT reporting shifts the operational task, not the regulatory accountability.

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## Architecting a Supervisory Framework for Outsourced Functions

A firm’s approach to supervising a [CAT reporting](https://prime.greeks.live/area/cat-reporting/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) vendor must be systematic and proactive. It involves creating a comprehensive governance structure that defines the roles, responsibilities, and communication pathways between the firm and its vendor. This framework is memorialized in the firm’s WSPs, which must be tailored to the specifics of the outsourced relationship. These procedures should detail the precise steps the firm will take to verify the accuracy and completeness of the data submitted on its behalf.

This includes daily reviews of submission statistics, error reports available on the [CAT Reporter Portal](https://prime.greeks.live/area/cat-reporter-portal/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), and comparative analyses against the firm’s internal order and trade records. The objective is to create a closed-loop system where data is transmitted, its receipt and accuracy are verified, and any discrepancies are identified, escalated, and resolved in a timely manner, all under the firm’s direct oversight.

This architectural approach ensures that the firm is not merely reacting to problems identified by the vendor or by regulators. Instead, it is actively managing the reporting process, using the vendor as a tool while retaining ultimate command and control. The [supervisory responsibilities](https://prime.greeks.live/area/supervisory-responsibilities/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) are continuous, demanding a persistent state of vigilance and a deep, technical understanding of the CAT reporting requirements themselves.

The firm must possess the internal expertise to challenge the vendor, ask probing questions, and independently validate the outputs of the reporting process. This is the operational reality of supervisory responsibility in an outsourced environment.

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## Strategy

A robust strategy for supervising a third-party CAT reporting vendor is built upon a dual foundation ▴ rigorous initial system design and continuous, active performance validation. The objective is to construct a durable supervisory operating system that ensures the firm, as the entity with [non-delegable responsibility](https://prime.greeks.live/area/non-delegable-responsibility/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), maintains effective control over its compliance outcomes. This system must address the relationship’s entire lifecycle, from vendor selection to the daily management of data submission and error correction.

The initial phase of this strategy involves a comprehensive due diligence process that scrutinizes every facet of a potential vendor’s operations. This is the architectural design phase, where the firm ensures the component it is integrating into its compliance framework is fit for purpose. The second, ongoing phase involves the implementation of specific, documented procedures for monitoring and testing the vendor’s output.

This is the active management of the system, ensuring it performs to specification day in and day out. A failure in either phase exposes the firm to significant regulatory risk.

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## What Is the Core of Vendor Due Diligence?

The due diligence process must extend far beyond a simple review of a vendor’s marketing materials and fee structure. It is an in-depth, technical, and operational assessment designed to verify the vendor’s capability to meet the stringent requirements of the [CAT NMS Plan](https://prime.greeks.live/area/cat-nms-plan/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). The firm’s strategy should be to gather sufficient evidence to make a reasonable determination that the vendor can perform the delegated tasks accurately, timely, and reliably. This involves a multi-faceted investigation into the vendor’s technical infrastructure, data security protocols, operational competence, and overall compliance posture.

A critical component of this strategic assessment is the review of the vendor’s own compliance and supervisory controls. The firm should seek to understand how the vendor ensures the quality of its own work. This includes reviewing the vendor’s WSPs, staff training programs, and quality assurance testing procedures. The contractual agreement that formalizes the relationship is another key strategic element.

The service level agreement (SLA) must contain specific, measurable performance metrics, including uptime guarantees, data submission deadlines, and error correction timeframes. The contract must also clearly delineate the responsibilities of both parties, particularly regarding exception management and error resolution, and should grant the firm the right to conduct periodic audits of the vendor’s controls.

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## Key Areas for Vendor Due Diligence

The following table outlines the critical domains that a firm’s due diligence strategy must encompass. Each area requires deep investigation and satisfactory resolution before a vendor is onboarded.

| Due Diligence Domain | Strategic Objective and Key Areas of Inquiry |
| --- | --- |
| Technical Competence and Infrastructure | The primary goal is to verify that the vendor possesses the technological capacity to handle the firm’s order volume and meet CAT’s technical specifications. Inquiries should focus on: System architecture and scalability. Clock synchronization methodology and proof of adherence to the 50-millisecond drift standard. Data transmission protocols and connectivity to the CAT Central Repository. Disaster recovery and business continuity plans. |
| Data Security and Confidentiality | The firm must ensure the vendor can protect the sensitive customer and order data it will be handling. The strategic objective is to mitigate the risk of data breaches and unauthorized access. Key areas include: Information security policies and procedures. Data encryption standards, both in transit and at rest. Access control protocols and employee background check procedures. History of any security incidents or breaches. |
| Operational and Compliance Expertise | This domain focuses on the vendor’s ability to understand and correctly apply the complex CAT reporting rules. The firm must be confident in the vendor’s subject matter expertise. Inquiries should cover: The experience and qualifications of the vendor’s compliance and operations staff. The vendor’s process for monitoring regulatory changes to CAT rules. The vendor’s own WSPs for CAT reporting and error correction. Client references and regulatory history. |
| Error Handling and Support | Since errors are inevitable, the vendor’s process for identifying, communicating, and resolving them is a critical measure of its operational maturity. The strategy is to ensure a seamless and timely error correction process. Key considerations include: The process for notifying the firm of data submission errors. The tools and support provided to the firm to assist in researching and correcting errors. The documented protocol for managing the T+3 correction deadline. The clarity of responsibilities for error correction in the proposed service agreement. |

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## Designing the Supervisory Control Framework

Once a vendor is selected, the firm’s strategy shifts to the design and implementation of its own supervisory controls. The cornerstone of this framework is the firm’s Written [Supervisory Procedures](https://prime.greeks.live/area/supervisory-procedures/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (WSPs). These WSPs must be tailored specifically to the outsourced CAT reporting arrangement and cannot be generic. They must clearly articulate the “who, what, when, and how” of the firm’s oversight activities.

> A firm’s supervisory procedures must be a detailed blueprint for oversight, not a high-level policy statement.

The strategy must incorporate a system of checks and balances that allows the firm to independently verify the integrity of the vendor’s submissions. A primary tactic is the comparative review of CAT submissions against the firm’s own internal books and records, such as its trade blotter or order management system data. This reconciliation process is a powerful tool for detecting data discrepancies, omissions, or inaccuracies that the vendor’s systems might miss. The WSPs should define the scope and frequency of these reviews, the process for investigating any exceptions identified, and the method for documenting the review and its findings.

Furthermore, the supervisory framework must include a daily review of the reports and data available on the CAT [Reporter Portal](https://prime.greeks.live/question/what-distinguishes-the-dpe-regime-from-the-uks-designated-reporter-regime/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). This is a non-negotiable, daily operational task. The firm must monitor submission statistics, error rates, and the status of any open error corrections.

Relying solely on the vendor to report this information is an inadequate supervisory practice. The firm must pull the data directly from the source to validate the vendor’s performance and identify potential issues proactively.

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## Execution

The execution of supervisory responsibilities for a third-party CAT reporter is an exercise in disciplined, daily operational rigor. It translates the strategic framework and written procedures into concrete, repeatable actions. The primary goal is to maintain a continuous, verifiable feedback loop that ensures the data submitted on the firm’s behalf is timely, complete, and accurate. This requires the allocation of specific responsibilities to qualified personnel and the use of both internal and external systems to perform validation and reconciliation tasks.

Effective execution is predicated on the principle that the firm must act as the ultimate quality assurance layer for its own CAT data. It cannot operate under the assumption that the vendor’s processes are infallible. Instead, it must execute a series of checks designed to detect anomalies, errors, and omissions.

This operational tempo is daily, with specific tasks required to meet the regulatory expectation of robust oversight. The failure to execute these daily tasks effectively is a failure of supervision itself, regardless of how well-designed the firm’s WSPs may be.

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## The Daily Supervisory Operations Playbook

The core of supervisory execution is a non-negotiable daily checklist of activities. These tasks are designed to provide the [designated supervisor](https://prime.greeks.live/question/how-does-the-firm-designated-id-requirement-impact-client-onboarding-and-data-privacy-protocols/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) with a comprehensive view of the previous day’s reporting activity and to identify any issues requiring immediate attention. This playbook must be formally documented within the firm’s WSPs and its completion must be evidenced each day.

- **Review of CAT Reporter Portal** ▴ The designated supervisor must log in to the FINRA CAT Reporter Portal directly. The objective is to review the submission statistics for the prior trading day (T+1). This includes verifying that the vendor did in fact make a submission on the firm’s behalf and reviewing the overall file acceptance status, the number of records submitted, and the initial error rates reported by CAT.

- **Analysis of CAT-Generated Error Reports** ▴ The supervisor must download and analyze any error files generated by the CAT system. These reports detail specific records that were rejected or flagged with warnings. The supervisor is responsible for understanding the nature of these errors and initiating the correction process. This involves coordinating with the vendor and internal operations staff to research the root cause of the error.

- **Comparative [Data Reconciliation](https://prime.greeks.live/area/data-reconciliation/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)** ▴ This is a critical validation step. The supervisor must execute a comparative review of a sample of CAT data against the firm’s internal source records (e.g. OMS/EMS logs, trade blotters). The goal is to identify discrepancies in key data fields that the CAT system itself cannot detect, such as incorrect customer handling instructions or inaccurate timestamps that are still within the required format. The WSPs should define the sampling methodology and the key fields to be checked.

- **Error Correction Workflow Initiation** ▴ For all identified errors, whether from CAT-generated reports or internal reconciliation, the supervisor must formally initiate the error correction workflow. This involves logging the error, assigning responsibility for research and correction (which may be the vendor or an internal team), and tracking the issue through to resolution. This process must be managed to ensure all repairable errors are corrected within the T+3 deadline.

- **Clock Synchronization Log Review** ▴ Where a vendor is responsible for clock synchronization, the firm must obtain and review the synchronization logs from the vendor on a daily basis. The supervisor must verify that the business clocks used to record reportable events have not drifted more than the permissible 50 milliseconds from the NIST standard. This review must be documented.

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## How Should a Firm Structure Its Periodic Reviews?

Beyond the daily operational tasks, a firm must execute periodic, in-depth reviews of its CAT reporting program and its third-party vendor. These reviews are typically conducted quarterly and annually and serve as a higher-level audit of the program’s effectiveness. The goal is to identify systemic issues, assess vendor performance against contractual SLAs, and adapt the supervisory program to any changes in regulation or the firm’s business.

> Daily checks prevent immediate failures, while periodic reviews ensure long-term systemic health.

The annual review should include a formal certification, signed by the firm’s Chief Compliance Officer or an equivalent officer, attesting that the firm has established and maintains adequate supervisory procedures for CAT reporting. This process should be documented and should reassess the initial due diligence conducted on the vendor. It is an opportunity to re-evaluate whether the vendor remains the appropriate partner for the firm.

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## Framework for a Quarterly Supervisory Review

The following table provides a model for structuring a quarterly review of the outsourced CAT reporting function. This review should be conducted by the compliance department with the involvement of the designated supervisor and business line managers.

| Review Component | Execution Steps and Key Metrics |
| --- | --- |
| Error Trend Analysis | The firm should aggregate all CAT error data for the quarter. The execution involves analyzing this data to identify trends, such as recurring error types, a specific order entry system causing issues, or a particular trader’s orders frequently being flagged. Key metrics include: Overall error rate vs. prior quarters. Breakdown of errors by type (e.g. invalid symbol, timestamp format). Timeliness of error correction (percentage of errors fixed by T+3). |
| Vendor Performance Against SLAs | This component measures the vendor’s performance against the specific, measurable standards defined in the service level agreement. The firm must gather the data to validate this performance. Steps include: Verifying system uptime and data submission timeliness. Assessing the vendor’s responsiveness to inquiries and error notifications. Reviewing any reports or dashboards provided by the vendor. |
| WSP and Process Validation | The firm must test its own supervisory procedures to ensure they are being followed and remain effective. Execution involves: Sampling the daily supervisory checklists to ensure they are being completed thoroughly. Interviewing the designated supervisor to confirm their understanding of the WSPs. Conducting a “fire drill” by testing the error notification and escalation process. |
| Regulatory Change Assessment | The compliance team must assess any new CAT-related regulatory notices, FAQs, or rule changes issued during the quarter. The execution step is to determine if these changes require modifications to the firm’s WSPs, the vendor’s processes, or the comparative review logic. This ensures the supervisory system remains current. |

By executing both daily operational checks and rigorous periodic reviews, a firm can build a defensible and effective supervisory system over its third-party CAT reporting vendor. This dual-layered approach provides the structure needed to demonstrate to regulators that the firm, despite outsourcing the task, has retained full ownership of its compliance responsibility.

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## References

- FINRA. “Regulatory Notice 20-31 ▴ FINRA Reminds Firms of Their Supervisory Responsibilities Relating to CAT.” Financial Industry Regulatory Authority, September 2020.

- FINRA. “2023 Report on FINRA’s Examination and Risk Monitoring Program.” Financial Industry Regulatory Authority, January 2023.

- FINRA. “Consolidated Audit Trail (CAT).” FINRA.org, accessed July 2024.

- Kirsch, S. & Rosen, G. “FINRA Issues 2023 Report on Its Examination and Risk Monitoring Program.” Data Matters, WilmerHale, 31 January 2023.

- Smith, Ryan P. “A Strategy for Creating an Effective CAT Compliance Program.” Ryan P. Smith Law, PLC, 2022.

- Cipperman, K. “Firms’ CAT supervisory responsibilities outlined.” Regulatory Compliance Watch, 3 September 2020.

- FINRA. “FINRA Rule 3110 ▴ Supervision.” Financial Industry Regulatory Authority.

- U.S. Securities and Exchange Commission. “Exchange Act Rule 613 (Consolidated Audit Trail).”

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## Reflection

The architecture of supervision for outsourced CAT reporting reveals a fundamental truth about modern financial operations. The delegation of a function is not a transfer of accountability; it is the extension of a firm’s own operational perimeter. The systems, procedures, and controls a firm builds to oversee its vendor are a direct reflection of its internal culture of compliance. They represent the technological and procedural embodiment of the firm’s commitment to market integrity.

As you assess your own framework, consider it as a dynamic system. Is it merely a static set of procedures designed to meet the letter of a rule, or is it an adaptive intelligence engine? A truly robust supervisory system does more than catch errors. It learns from them.

It analyzes trends to anticipate future points of failure. It provides the data necessary to not only hold a vendor accountable but also to refine the firm’s own internal processes that generate the data in the first place. The ultimate goal is a state of operational resilience where the supervisory framework functions as a seamless, integrated component of the firm’s entire trade lifecycle, ensuring data fidelity from order creation to regulatory report.

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## Glossary

<a href="https://prime.greeks.live/area/consolidated-audit-trail/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Consolidated Audit Trail

Meaning ▴ The Consolidated Audit Trail (CAT) is a comprehensive, centralized database designed to capture and track every order, quote, and trade across US equity and options markets. </a><a href="https://prime.greeks.live/area/supervisory-framework/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Supervisory Framework

Meaning ▴ A Supervisory Framework constitutes a formalized system designed to impose control, facilitate continuous monitoring, and provide definitive guidance over automated trading processes and critical operational workflows within institutional digital asset derivatives. </a><a href="https://prime.greeks.live/area/written-supervisory-procedures/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Written Supervisory Procedures

Meaning ▴ Written Supervisory Procedures represent the formal documentation outlining the operational controls and compliance obligations within a regulated financial entity. </a><a href="https://prime.greeks.live/area/supervisory-system/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Supervisory System

Meaning ▴ A Supervisory System represents a high-level control plane within an automated trading architecture, designed to monitor, evaluate, and dynamically adjust or halt the operations of underlying execution algorithms and market-facing protocols based on predefined parameters and real-time market conditions. </a><a href="https://prime.greeks.live/question/what-are-the-primary-operational-challenges-in-managing-daily-variation-margin-calls/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Daily Operational

The primary operational challenge in managing daily variation margin is mastering the unpredictable, time-critical logistics of liquidity. </a><a href="https://prime.greeks.live/area/due-diligence/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Due Diligence

Meaning ▴ Due diligence refers to the systematic investigation and verification of facts pertaining to a target entity, asset, or counterparty before a financial commitment or strategic decision is executed. </a><a href="https://prime.greeks.live/area/clock-synchronization/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sleek, multi-layered system representing an institutional-grade digital asset derivatives platform. Its precise components symbolize high-fidelity RFQ execution, optimized market microstructure, and a secure intelligence layer for private quotation, ensuring efficient price discovery and robust liquidity pool management](https://options.greeks.live/wp-content/uploads/2025/07/high-fidelity-rfq-execution-digital-asset-derivatives-platform-prime-os.jpg)

## Clock Synchronization

Meaning ▴ Clock Synchronization refers to the process of aligning the internal clocks of independent computational systems within a distributed network to a common time reference. </a><a href="https://prime.greeks.live/area/error-correction/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A precision-engineered metallic institutional trading platform, bisected by an execution pathway, features a central blue RFQ protocol engine. This Crypto Derivatives OS core facilitates high-fidelity execution, optimal price discovery, and multi-leg spread trading, reflecting advanced market microstructure](https://options.greeks.live/wp-content/uploads/2025/08/precision-engineered-institutional-digital-asset-derivatives-execution-core-facilitating-rfq-protocol-driven-optimal-price-discovery-and-multi-leg-spread-trading-for-capital-efficiency.jpg)

## Error Correction

Meaning ▴ Error Correction defines a mechanism for identifying and rectifying deviations from expected or desired states within a computational system or transactional flow, particularly critical for maintaining data fidelity and operational consistency in high-velocity digital asset environments. </a><a href="https://prime.greeks.live/area/cat-reporting/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sleek, metallic module with a dark, reflective sphere sits atop a cylindrical base, symbolizing an institutional-grade Crypto Derivatives OS. This system processes aggregated inquiries for RFQ protocols, enabling high-fidelity execution of multi-leg spreads while managing gamma exposure and slippage within dark pools](https://options.greeks.live/wp-content/uploads/2025/07/principal-trading-crypto-derivatives-rfq-protocol-execution-system.jpg)

## Cat Reporting

Meaning ▴ CAT Reporting, or Consolidated Audit Trail Reporting, mandates the comprehensive capture and reporting of all order and trade events across US equity and and options markets. </a><a href="https://prime.greeks.live/area/cat-reporter-portal/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sleek, bi-component digital asset derivatives engine reveals its intricate core, symbolizing an advanced RFQ protocol. This Prime RFQ component enables high-fidelity execution and optimal price discovery within complex market microstructure, managing latent liquidity for institutional operations](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-engine-optimal-execution.jpg)

## Cat Reporter Portal

Meaning ▴ The CAT Reporter Portal is a dedicated electronic interface facilitating the submission of granular order and trade event data to the Consolidated Audit Trail (CAT), a comprehensive regulatory database mandated by the U.S. </a><a href="https://prime.greeks.live/area/supervisory-responsibilities/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A precision-engineered device with a blue lens. It symbolizes a Prime RFQ module for institutional digital asset derivatives, enabling high-fidelity execution via RFQ protocols](https://options.greeks.live/wp-content/uploads/2025/08/institutional-digital-asset-derivatives-rfq-protocol-high-fidelity-engine.jpg)

## Supervisory Responsibilities

Meaning ▴ Supervisory Responsibilities refer to the formalized framework and operational protocols designed to ensure adherence to established policies, regulatory mandates, and risk parameters within an institutional digital asset derivatives trading environment. </a><a href="https://prime.greeks.live/area/non-delegable-responsibility/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A futuristic, dark grey institutional platform with a glowing spherical core, embodying an intelligence layer for advanced price discovery. This Prime RFQ enables high-fidelity execution through RFQ protocols, optimizing market microstructure for institutional digital asset derivatives and managing liquidity pools](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-prime-os-intelligence-layer.jpg)

## Non-Delegable Responsibility

Meaning ▴ A Non-Delegable Responsibility represents an obligation that, by its inherent nature or regulatory mandate, cannot be transferred from the principal entity to an agent or third party, retaining ultimate accountability within the originating institution, particularly in the context of critical operational functions and risk exposures within digital asset derivatives trading. </a><a href="https://prime.greeks.live/area/cat-nms-plan/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A precision-engineered teal metallic mechanism, featuring springs and rods, connects to a light U-shaped interface. This represents a core RFQ protocol component enabling automated price discovery and high-fidelity execution](https://options.greeks.live/wp-content/uploads/2025/07/rfq-execution-engine-component-for-institutional-digital-asset-derivatives.jpg)

## Cat Nms Plan

Meaning ▴ The Consolidated Audit Trail National Market System Plan, or CAT NMS Plan, establishes a centralized repository for granular order and trade data across U.S. </a><a href="https://prime.greeks.live/area/supervisory-procedures/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A central core represents a Prime RFQ engine, facilitating high-fidelity execution. Transparent, layered structures denote aggregated liquidity pools and multi-leg spread strategies](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-rfq-engine-for-institutional-digital-asset-derivatives-execution.jpg)

## Supervisory Procedures

Meaning ▴ Supervisory Procedures denote the formalized frameworks and systematic controls implemented by financial institutions to monitor, regulate, and ensure adherence to internal policies, regulatory mandates, and risk parameters across their operational activities. </a><a href="https://prime.greeks.live/question/what-distinguishes-the-dpe-regime-from-the-uks-designated-reporter-regime/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sleek, disc-shaped system, with concentric rings and a central dome, visually represents an advanced Principal's operational framework. It integrates RFQ protocols for institutional digital asset derivatives, facilitating liquidity aggregation, high-fidelity execution, and real-time risk management](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-rfq-protocol-engine-digital-asset-derivatives-execution.jpg)

## Reporter Portal

The DPA regime offers judicial resolution for corporate crime, while the Designated Reporter regime provides operational clarity for market trade reporting. </a><a href="https://prime.greeks.live/question/how-does-the-firm-designated-id-requirement-impact-client-onboarding-and-data-privacy-protocols/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sleek, dark metallic surface features a cylindrical module with a luminous blue top, embodying a Prime RFQ control for RFQ protocol initiation. This institutional-grade interface enables high-fidelity execution of digital asset derivatives block trades, ensuring private quotation and atomic settlement](https://options.greeks.live/wp-content/uploads/2025/08/institutional-digital-asset-derivatives-rfq-protocol-engine-module-for-high-fidelity-execution-and-liquidity-aggregation.jpg)

## Designated Supervisor

The Firm Designated ID requirement mandates a systemic shift, embedding a persistent client identifier at the core of onboarding and data protocols. </a><a href="https://prime.greeks.live/area/data-reconciliation/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sleek, multi-component system, predominantly dark blue, features a cylindrical sensor with a central lens. This precision-engineered module embodies an intelligence layer for real-time market microstructure observation, facilitating high-fidelity execution via RFQ protocol](https://options.greeks.live/wp-content/uploads/2025/07/institutional-rfq-protocol-intelligence-layer-for-digital-asset-derivatives-microstructure.jpg)

## Data Reconciliation

Meaning ▴ Data Reconciliation is the systematic process of comparing and aligning disparate datasets to identify and resolve discrepancies, ensuring consistency and accuracy across various financial records, trading platforms, and ledger systems. </a>

**Tags:** [Third-Party Vendor Management](https://options.greeks.live/area/third-party-vendor-management/), [CAT Reporting](https://options.greeks.live/area/cat-reporting/), [Financial Industry Regulatory Authority](https://options.greeks.live/area/financial-industry-regulatory-authority/), [FINRA Rule 3110](https://options.greeks.live/area/finra-rule-3110/), [Supervisory System](https://options.greeks.live/area/supervisory-system/), [Clock Synchronization](https://options.greeks.live/area/clock-synchronization/)	

## Discover More

- 
### [What Specific Enhancements in FIX Protocol Usage Optimize Quote Management for Regulatory Compliance?](https://options.greeks.live/question/what-specific-enhancements-in-fix-protocol-usage-optimize-quote-management-for-regulatory-compliance/)
![Sleek, domed institutional-grade interface with glowing green and blue indicators highlights active RFQ protocols and price discovery. This signifies high-fidelity execution within a Prime RFQ for digital asset derivatives, ensuring real-time liquidity and capital efficiency.](https://options.greeks.live/wp-content/uploads/2025/08/institutional-digital-asset-derivatives-rfq-prime-os-execution-interface.jpg)

FIX Protocol enhancements streamline quote lifecycle control, fortifying audit trails for robust regulatory compliance and superior execution.

- 
### [How Do Regulatory Frameworks Influence Market Maker Obligations and Quote Lifespans?](https://options.greeks.live/question/how-do-regulatory-frameworks-influence-market-maker-obligations-and-quote-lifespans/)
![A sleek blue and white mechanism with a focused lens symbolizes Pre-Trade Analytics for Digital Asset Derivatives. A glowing turquoise sphere represents a Block Trade within a Liquidity Pool, demonstrating High-Fidelity Execution via RFQ protocol for Price Discovery in Dark Pool Market Microstructure.](https://options.greeks.live/wp-content/uploads/2025/07/advanced-institutional-digital-asset-derivatives-rfq-execution-system-for-optimal-price-discovery-and-high-fidelity-execution.jpg)

Regulatory frameworks mandate continuous, firm market maker quotes, influencing their duration and operational agility for optimal liquidity provision.

- 
### [What Are the Supervision and Governance Best Practices for Third Party Cat Reporting Vendors?](https://options.greeks.live/question/what-are-the-supervision-and-governance-best-practices-for-third-party-cat-reporting-vendors/)
![An abstract digital interface features a dark circular screen with two luminous dots, one teal and one grey, symbolizing active and pending private quotation statuses within an RFQ protocol. Below, sharp parallel lines in black, beige, and grey delineate distinct liquidity pools and execution pathways for multi-leg spread strategies, reflecting market microstructure and high-fidelity execution for institutional grade digital asset derivatives.](https://options.greeks.live/wp-content/uploads/2025/08/institutional-digital-asset-derivatives-rfq-protocol-displaying-multi-leg-execution-status-and-optimal-liquidity-pathways.jpg)

Effective governance of CAT reporting vendors requires a robust supervisory system where the firm retains ultimate accountability.

- 
### [What Are the Primary Operational Risks for Firms in Reporting RFQ Data to CAT?](https://options.greeks.live/question/what-are-the-primary-operational-risks-for-firms-in-reporting-rfq-data-to-cat/)
![Two dark, circular, precision-engineered components, stacked and reflecting, symbolize a Principal's Operational Framework. This layered architecture facilitates High-Fidelity Execution for Block Trades via RFQ Protocols, ensuring Atomic Settlement and Capital Efficiency within Market Microstructure for Digital Asset Derivatives.](https://options.greeks.live/wp-content/uploads/2025/08/institutional-digital-asset-derivatives-prime-os-execution-protocol.jpg)

The primary operational risks in RFQ-to-CAT reporting stem from mapping bilateral communication protocols onto a standardized framework.

- 
### [How Can a Broker-Dealer Demonstrate Direct and Exclusive Control during a Regulatory Examination?](https://options.greeks.live/question/how-can-a-broker-dealer-demonstrate-direct-and-exclusive-control-during-a-regulatory-examination/)
![A sleek, multi-component system, predominantly dark blue, features a cylindrical sensor with a central lens. This precision-engineered module embodies an intelligence layer for real-time market microstructure observation, facilitating high-fidelity execution via RFQ protocol. It's crucial for a crypto derivatives OS, enhancing price discovery within the principal's operational framework.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-rfq-protocol-intelligence-layer-for-digital-asset-derivatives-microstructure.jpg)

A broker-dealer demonstrates control by proving its own staff has ultimate, auditable authority over its trading system's risk parameters.

- 
### [What Are the Critical Considerations for Counterparty Vetting in Crypto Options RFQ?](https://options.greeks.live/question/what-are-the-critical-considerations-for-counterparty-vetting-in-crypto-options-rfq/)
![A robust green device features a central circular control, symbolizing precise RFQ protocol interaction. This enables high-fidelity execution for institutional digital asset derivatives, optimizing market microstructure, capital efficiency, and complex options trading within a Crypto Derivatives OS.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-grade-digital-asset-derivatives-rfq-protocol-interface-for-precise-market-microstructure-execution.jpg)

A systematic, multi-pillar vetting protocol is essential for quantifying and managing default risk in bilateral crypto options trading.

- 
### [How Will the Expiration of This Exemption in 2026 Impact Institutional Trading Workflows?](https://options.greeks.live/question/how-will-the-expiration-of-this-exemption-in-2026-impact-institutional-trading-workflows/)
![Precisely balanced blue spheres on a beam and angular fulcrum, atop a white dome. This signifies RFQ protocol optimization for institutional digital asset derivatives, ensuring high-fidelity execution, price discovery, capital efficiency, and systemic equilibrium in multi-leg spreads.](https://options.greeks.live/wp-content/uploads/2025/07/systemic-equilibrium-in-digital-asset-derivatives-rfq-protocols.jpg)

The 2026 expiration of SEC exemptions mandates a systemic overhaul of trading workflows to report short sales and RFQ data.

- 
### [In What Ways Does a Flawed Rfp Process Increase Long-Term Third-Party and Compliance Risks?](https://options.greeks.live/question/in-what-ways-does-a-flawed-rfp-process-increase-long-term-third-party-and-compliance-risks/)
![A sophisticated metallic mechanism with integrated translucent teal pathways on a dark background. This abstract visualizes the intricate market microstructure of an institutional digital asset derivatives platform, specifically the RFQ engine facilitating private quotation and block trade execution. It underscores high-fidelity execution and atomic settlement within a secure Prime RFQ, revealing latent liquidity and capital efficiency.](https://options.greeks.live/wp-content/uploads/2025/07/systemic-framework-for-institutional-digital-asset-derivatives-rfq-price-discovery-and-atomic-settlement.jpg)

A flawed RFP process embeds long-term risk by building partnerships on unverified claims and systemic ambiguity.

- 
### [What Are the Supervisory Responsibilities for Firms Using Third Party Cat Reporting Vendors?](https://options.greeks.live/question/what-are-the-supervisory-responsibilities-for-firms-using-third-party-cat-reporting-vendors/)
![A central glowing core within metallic structures symbolizes an Institutional Grade RFQ engine. This Intelligence Layer enables optimal Price Discovery and High-Fidelity Execution for Digital Asset Derivatives, streamlining Block Trade and Multi-Leg Spread Atomic Settlement.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-engine-microstructure-core.jpg)

A firm's duty is to build and execute a robust supervisory system to verify the accuracy of its vendor's CAT reporting.

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---

**Original URL:** https://options.greeks.live/question/what-are-the-supervisory-responsibilities-of-a-firm-that-uses-a-third-party-for-cat-reporting/
