Hedge fund mogul Ken Griffin is reportedly leading a campaign to block U.S. regulators' efforts to force traders to fund a new market-surveillance system.
Griffin's Citadel Securities wants to block new rules that would require investors to put money aside for a so-called integrated audit trail system that has already cost an estimated $1 billion. The Financial Times reported on Tuesday.
The system, known as CAT, will provide regulators with a real-time record of all investor and trading activity in U.S. markets, including the New York Stock Exchange and Nasdaq.
And Donald Trump's former Attorney General, Bill Barr, called it a “privacy offense,” raising concerns about privacy. An “unprecedented” step towards an “Orwellian surveillance state”.
Regulators have access to the identities of the traders involved.
They claim the data can be used to crack down on illegal activities such as stock manipulation and insider trading.
Citadel, whose founder Griffin is worth an estimated $43 billion according to Forbes, denounced the move as “brazen” in a letter to regulators last week, the Financial Times reported.
The letter said the rules, approved last September, amount to “an attempt to squeeze hundreds of millions of dollars out of brokerage firms such as Citadel Securities.”
Currently, exchanges foot the bill for the system, known as CAT, but Wall Street's top brass, the Securities and Exchange Commission, plans to allow exchanges to claw back two-thirds of that money from traders.
The first bill is expected to be issued in October and will be based on this month's transaction volumes.
The Miami-based investment giant is asking the SEC to suspend the plans until a judge issues a final ruling on their legality.
Griffin also joined forces with the American Securities Association in filing a lawsuit in October calling the CAT a “sham” and arguing it is unconstitutional.
Court filings say the Washington-based agency failed to address “broad investor concerns about transparency, governance, costs and data privacy.”
Exchange officials quoted by the Financial Times dismissed Griffin's concerns.
“We are only recovering our costs. We are not making any profit,” said a source directly involved in the project. “They have tried all sorts of tactics to avoid paying the CAT.”
The CAT provides regulators with a real-time record of all investor and trading activity in markets across the U.S., including the New York Stock Exchange and NASDAQ.
It also gives you access to the identities of the traders involved.
They claim the data can be used to crack down on illegal activities such as stock manipulation and insider trading.
The concept of CAT was first proposed under the Obama administration in 2012, but it wouldn't become fully operational until 2022.
This was seen as a response to the 2010 “flash crash,” in which nearly $1 trillion in market capitalization temporarily disappeared from major U.S. exchanges.
