Hedge fund veteran Ken Griffin is leading a campaign to block a move by US regulators that would force traders to fund a new market surveillance system, according to a report.
Griffin's Citadel Securities seeks to halt new rules that demand investors raise funds The so-called Consolidated Audit Trail System which has cost an estimated $1 billion so far, The Financial Times reported this news on Tuesday.
This system, known as CAT, provides regulators with a real-time record of all investor and transaction activity across all U.S. markets, including the New York Stock Exchange and NASDAQ.
It has also raised privacy concerns, with Donald Trump's attorney general Bill Barr at one point calling it a crime. an “unprecedented” step towards an “Orwellian surveillance state”.
Regulators have access to the identities of the traders involved.
They say they can use that data to crack down on illegal activities like stock manipulation or insider trading.
Citadel, whose founder Griffin's wealth is estimated at $43 billion according to Forbes, called the move “brazen” in a letter to regulators last week, the FT reported.
The rule, approved last September, is an “attempt to extract hundreds of millions of dollars from broker-dealers like Citadel Securities,” the letter said.
Currently exchanges cover the cost of this system, known as CAT, but Wall Street's top authority, the Securities and Exchange Commission, would allow them to recoup up to two-thirds of the funds from traders.
The first bills will be issued in October and will be based on that month's trading volume.
Miami-based investment giant He wants the SEC to put these plans on hold until a judge makes a definitive ruling on their legality.
Griffin also filed a case in October with the American Securities Association, calling the CAT a “sham” and claiming it is unconstitutional.
It said the Washington-based body had failed to address “broad concerns of investors about transparency, governance, costs and data privacy,” according to a document filed with the court.
Exchange officials quoted by the Financial Times dismissed Griffin's concerns.
“We are just recovering our costs. There is no profit here,” said a source directly involved with the project. “They have used every possible trick to avoid paying for CAT.”
CAT provides regulators with a real-time record of all investor and transaction activity across all U.S. markets, including the New York Stock Exchange and NASDAQ.
This also gives them access to the identities of the traders involved.
They say they can use that data to crack down on illegal activities like stock manipulation or insider trading.
The idea of CAT was first mooted in 2012 under the Obama administration, but it could become fully operational only in 2022.
This was seen as a response to the 2010 “flash crash”, in which approximately $1 trillion in market value was temporarily wiped off major U.S. exchanges.
