what is the order audit trail system oats 
the order audit trail system oats is an automated computer system established by the financial industry regulatory authority finra it is used to record information relating to orders quotes and other related trade data from all equities traded on the national market system nms including over the counter otc stocks this system simplifies an order s progression from the initial receipt of the order to its eventual execution or cancellation for easy tracking or auditing purposes understanding the order audit trail system oats an audit trail is a step by step record by which accounting trade details or other financial data can be traced to its source audit trails are used to verify and track many types of transactions including accounting transactions and trades in brokerage accounts finra established oats to ensure that the time sensitive information relating to the order execution process is recorded accurately this allows finra to monitor the trading practices of member firms which are required to capture and report trade data to oats 1 traders and investors are not required to submit oats data this is the job of the broker or the member firm of finra part of this process is requiring that all member firms synchronize their business computer system and time stamping clocks to avoid errors or issues related to inaccurate times associated with orders if a firm has a hard time recording or submitting all the information that oats requires the firm can hire a third party to submit the data on their behalf this is a special arrangement as oats recording may not be handled by the clearing firm the firm uses the securities and exchange commission sec approved these rules on march 6 1998 1oats reporting proceduresregulations require firms to submit daily electronic oats reports to finra oats reports must be made the same day an order was received or on the day information becomes available to the firm 2 daily electronic oats reports can be made for single or multiple orders information collected on the oats report includes in total there are 21 requirements that must be recorded under rule 7440 3oats data must be preserved for at least three years during the first two years the data must be in an accessible place in case it needs to be reviewed 4cat vs oatsthe consolidated audit trail cat under sec rule 613 is now the required system for tracking trades from start to finish 5according to deloitte cat isn t simply oats on steroids it includes substantial additional requirements such as options data allocations and customer data these new data sets may require firms to rethink their target reporting architectures additionally unlike oats the cat has no exemptions to these reporting requirements 6example of an order audit trail in actionone of the purposes of oats and the cat system is to monitor for suspicious behavior because of the data that is recorded the people undertaking the suspicious activity are easier to find a significant case occurred on may 6 2010 when a day trader spoofed the s p 500 e mini market he used an automated program that started a domino effect of sell orders which led to a flash crash on that day in 2015 the man responsible a london resident was caught and arrested in 2016 he pleaded guilty to spoofing and wire fraud 78while a number of parties were involved in providing testimony and evidence and this case involved futures not stocks it shows the importance of order audit trails and financial oversight the regulators were able to see that navinder singh sarao the man responsible put out huge orders hundreds of times with no intention of being filled on them but rather for the sole purpose of manipulating the market in his preferred direction order audit trail systems whether oats cat or some other regulator requirement provide evidence and information for regulators in such cases 