Welcome back to the channel everyone today, i want to talk about why and how there's so much malpractice and fraud currently going on in today's market, and it all stems from the oats and the cat system, so stay tuned and let's make some money. But before i dive into the video, i just want to give a massive shout out to the 4 500 of you that have currently ding that notification bell, because you guys are always the first to watch a new video as soon as it's released. So guys be sure to drop a like down below subscribe to the channel and ding that notification bell. If you haven't already so you don't miss another video.

Just like this one, and just a quick one before i dive in with the key information, be sure to check out the links down in the description below to pick yourself up some cool merch just like this, and to also join the team in the private discord And to get those free shares with moomoo and free trade, and now i want to dive straight in with the key information. So, let's start by talking about and explaining what the oats and the cat system actually are. Obviously, oats stands for order. Audit trail system and cat stands for consolidated audit trail system, so the oat system is an automated computer system established by finra.

It's used to record all information relating to orders, quotes and other related trade data from all equities traded on the nms, including otc stocks, and it's also used to record information on otc derivatives and total return swaps and call and put options, and all of that extended. Trade data as well so oats was established, so the orders could be more easily tracked and reviewed if necessary, for instance, in the case of a trading error or suspected market manipulation. Now i want to give a massive shout out to amc. Biggins who's done some due diligence and figured out all of the weaknesses of the oak system that are about to be fixed by the cat system.

So i'm going to go through this in a little bit, but first i want to explain a bit more about oats and cat, and i've also done some of my own due diligence to figure out the need for the new cat system and also the enhancements that The cat system brings so the yoke system was originally introduced as an audit trail, which 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 brokerages accounts, so finra established oates to ensure that the time sensitive information relating to the order execution process is recorded accurately and that allows finra to monitor the trading practices Of member firms which are required to capture and report trade data to oats, so basically finra can monitor the practices of member firms to ensure they don't commit fraud and market manipulation. But as you'll find out later in the video there's a lot of downsides and disadvantages to the oak system, which basically means that these member firms could basically just get away scot-free, they can commit that market manipulation not have to report that much data on their trades And it'd just massively fly under the radar, so on the other side, we've got the cat system, the consolidated audit trail and that's a regulatory reporting utility commissioned by the sec to enable regulators to more fully track trading activity and boost transparency. The cat also heralds significant new obligations and reporting requirements for firms, so basically the sec did a review and figured out that the system just wasn't cutting it so specifically required and specifically engineered this new cat system.

So one first massive advantage of the cat system is that it retains the trade and order lifecycle, data for all nms securities as enlisted equities and options and over-the-counter equity. Securities importantly, exchanges, self-regulatory organizations or sros and broker-dealers are required to submit order. Lifecycle information to the central repository for each trading day on a nightly basis in future phases of cat broker. Dealers are also required to submit significant customer account.

Information such as name address large trader id year of birth, etc, and therefore it will make it way way easier to track exactly who's inputting this data and exactly who's potentially committing that market manipulation, and the cat system now applies to those exchanges, self-regulatory organizations and broker-dealers. Like citadel as well as just a quick cats versus oats, according 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, and this is such a massive thing because, with the oat system, if you're someone like citadel, you could just take those exemptions, for example, on the fail to deliver exemptions, and you can just create filter, Delivers and naked synthetic shares whenever you fancied so amc biggum, says in the united states stock market. You have what are called regimes. They are the central power of the market. There's only been three in the history of the market for the other two to be removed.

We had to have economic crashes, it took 2008 for the current one to take over these regimes have an insane amount of power and they control everything. We are currently in a central banking regime, which is why they are in everything isda. The dtcc members brokers can all trade stocks inside of their own market. Before all of these new margin requirements came into play, they had no rules in an isd.

Basically, they could write an israel agreement and just slap a credit support annex on it and not deposit any collateral, so they could use it over and over and over again on top of that they could use sham resets and sham closeouts on further delivers and shorts. This is what i've spoke about on the channel in the past, about those divorced puts, and those married puts as well and that's effectively how legit shorts can be hidden in the option chain by taking out call options and put options that are either in or out Of the money, this will give the appearance of closing out the fail to deliver or short, without actually doing so shares never exchanged hands, and they both just said that they did. It then closed them out when it expired and everyone's books are good to go. They can also do handwritten malarkey with trades making them take longer.

Since they're handwritten phase 5 contracts were reported to isda and not cboe, like all the other options, because it's done between the two parties - it's not backed by the cco like most options, because it's backed by those two parties phase five now makes it so. A third party, the sec, watches the transaction. They make sure the trades are actually going to trade hands. This will stop sham closeouts and sham resets and they now make them deposit.

The collateral isda has a margin requirement for the first time in the market. You have the stock market, is the market and also the over-the-counter market, and this is how they do the malarkey they use pfof, to make retail orders go to the otc market which they can control the flow with dark, pulls and riskless principal trades. The oat system was flawed to let them give misinformation and it was legal. This made it impossible to track, so they took advantage in the dark pool and in the otc market views the contracts were also.

He said she said, because it's just an agreement between two parties and it's not tracked, then the late exchanges created, vmemx and now phase five will make it, so they can track an isda the cat system, one of the nice things about it, is that it's going To get rid of the ability to create synthetics and naked shorts or naked shares, biggham says one of the key things in the cat system is that it also tracks over-the-counter trades and dark pool trades from start to finish and those options and derivatives like i had On the previous screen, they will effectively have a company attached receiving and giving the sec has admitted. Their technology has advanced past the sec with goat system, and that's why they're implementing the cat system? This is how the entire derivatives and synthetics market came to be so messed up. The isda was unsupervised because to get an isd, all you had to do was be over a certain level of assets and effectively. As soon as you reach that level of assets, you were considered trustworthy and eligible for an isda.

These banks owned the dtcc and the darkpool. So when they got fined, they basically gave the fines right back to themselves. It's gon na take time for the cat system to take place and be introduced and implemented and phase five, but once they do they'll finally be able to track their malarkey and start punishing and screwing over the bad actors. As you can see with the new facility right now, if they acted swiftly, the world would burn because of how much of a bad place the market's currently in and how over leveraged those shorts are and how much debt there currently is.

But over the course of the next year, they now have margins implemented across the board and they now have tracking also implemented across the board as well. Biggum says they want their capital gains taxes and there's more to come. Biggums reckons that the implementation of phase 5 and the cat system are going to be massive massive changes and he reckons it is going to cause the moass, because the government and the sec want their capital gains taxes. So what about that need for a new system? And the enhancements of cats compared to oats well, the sec determined that current auditing systems fell short of fully meeting the required requirements and, with the ever greater volume and complexity of electronic trading, it's likewise become increasingly difficult to follow orders through their entire life cycle.

I think, because a result of high frequency trading there's now just so much data and the oat system can't handle it. That's why it's one of the biggest needs for a new system was accessibility. How is the data stored and how practical is it to assemble aggregate reconcile and process the data and also search for anomalies? This new cat system is obviously going to implement a huge amount of big data technology, so they can collect all of this data. All of this gigabytes and terabytes and petabytes of data from these high frequency trading firms reconcile it capture everything and search through it quickly.

Obviously, no human or even no simple system can scroll through millions and potentially billions of lines of data, and that's why they needed something more advanced, something more technologically advanced to search through that data. One of the major reasons for these shortcomings is the disparate nature of auditing trails, which are maintained individually by each self-regulatory organization. This requires piecing together an order's full lifespan, from multiple potentially incomplete sources, and in many cases it may be impossible to create such a link. Crucially, current order, implementations lack the information that would identify the customer who originated an order or which would identify whether sets of orders, especially in different exchanges, were originated by the same customer.

Therefore, the cat system has several enhancements compared to the oat system. The cat has customer identification and requires customer information to be captured in reported trade data, and this comes in the form of unique fdids provided as part of a trade record. The scope of cat was expanded to include both equity securities as well as equity options. Equity options such as those total return swaps, those divorced and married puts, and so on and so forth.

Trade records will also contain market data information at the time of order routing an expanded list of reportable event types for increased granularity. It also links customer orders to representative stateside orders, for example, agency average price accounts traded on several exchanges or aggregated orders from multiple customers. The cat system also has several big data and automated implementations as well, such as file integrity. It checks the file names for uniqueness checks, the format for readability and also data files are paired with metadata files.

It also looks at the data in gestation. Individual trade records are validated for correct formatting and data contents. This is obviously going to make it way easier to map data from multiple different sources all into the same database and filter through it efficiently, and it's also going to check for linkage discovery. It checks for duplicate records that have already been reported, it checks for the correct sequence of reported events and it matches those trade events inside and outside firms using linking fields.

Here's the implementation timeline for the cat system and i do effectively think it's massively massively important that we do change over to this cat system, so the sec and finra can handle all of this data at the moment with the oat system, there's just too much data For them to process and that's why they can't accurately identify market manipulation because of the lack of current reporting requirements and also how easy it is to manipulate those reporting requirements. That's why the oat system just currently isn't good enough, and that's why finra and the sec? Currently can't do their job properly. The cat system was actually implemented on the 1st of september, but, as you can see, there is a multiple stage process and it is going to take time for everything to come into effect. Guys be sure to.

Let me know down in the comments below what you think about this new cat system and, if you think, the ability to process more data and accurately identify market manipulation is a good thing. Also guys be sure to check out the links down in the description below to check out the merch and to also sign up and get those free shares with moomoo and free trade, and also to become part of the team on the private discord. And as always guys, if you enjoyed this video, be sure to check out some of my others, alternatively, subscribe to channel and ding that notification bell, because that way, you'll be alerted. When i upload a new video cheers.