Hedge fund titan Ken Griffin is leading the charge to stop a move by US regulators that would force traders to help bankroll a new market surveillance system, according to a report.
Griffin’s Citadel Securities wants to block new rules that demand investors stump up funds for the so-called Consolidated Audit Trail system that has already cost an estimated $1 billion, the Financial Times reported on Tuesday.
Known as CAT, the system gives regulators a real-time record of all investor and transaction activity across all US markets, including the New York Stock Exchange and the NASDAQ.
It has also sparked privacy concerns with one-time Donald Trump attorney general Bill Barr calling it 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 practices such as stock manipulation, or insider trading.
Citadel, whose founder Griffin is worth an estimated $43 billion according to Forbes, last week branded the move in a letter to regulators as “brazen”, the FT reported.
The letter said the rules, approved last September, amounted to “an effort to extract hundreds of millions of dollars from broker-dealers such as Citadel Securities.”
Exchanges currently soak up the costs of the system, known as CAT, but the Securities and Exchange Commission, Wall Street’s top cop, will allow them to claw back two-thirds of those funds from traders.
The first bills are set to go out in October and will be based on this month’s trading volumes.
The Miami-based investment giant wants the SEC to suspend those plans until judges have issued a definitive verdict on its legality.
Griffin also teamed up with the American Securities Association in October to launch the case that calls CAT a “sham” and claims that it is unconstitutional.
It said the Washington-based body had failed to address “widespread investor concerns about transparency, governance, costs and data privacy,” according to a court filing.
Exchange officials quoted by the Financial Times dismissed Griffin’s concerns.
“We’re just recovering our costs. There’s no profit here,” said one source directly involved in the project. “They’ve made every maneuver possible to avoid paying for the CAT.”
CAT gives regulators a real-time record of all investor and transaction activity across all US markets, including the New York Stock Exchange and the NASDAQ.
It also gives them access to the identities of traders involved.
They say they can use that data to crack down on illegal practices such as stock manipulation, or insider trading.
The idea for CAT was first floated under the Obama Administration in 2012, but it only became fully operational in 2022.
It was seen as a response to a 2010 “flash crash” that saw nearly $1 trillion in market value temporarily erased from major US exchanges.
