The Commission is adopting rule amendments that require certain filings and submissions under the Securities Exchange Act of 1934 to be made electronically. The amendments will mandate that many of these filings and submissions be provided using structured, machine-readable data language.[1] While I generally support the transition from paper filings to electronic filings, we object to the manner in which the Commission is imposing structured data requirements. Accordingly, we are unable to support today's amendments.

Specifically, the Commission is mandating that certain disclosures be structured in Inline eXtensible Business Reporting Language ("Inline XBRL") and other disclosures in eXtensible Markup Language ("XML") that are specific to those documents ("custom XMLs"). The adopting release acknowledges that, though rare, "[d]ata languages…can be subject to obsolescence."[2] Yet the Commission proffers no instruction on performing a future review of the prescribed data languages to determine whether they remain appropriate. In an era where large language models and artificial intelligence are rapidly advancing, the possibility that the structured data format may become irrelevant is very real.

Good regulatory practices include designing "new regulations in a way that will make later retrospective review easier and more effective."[3] In this regard, regulators should have a "target time frame or frequency with which they plan to reassess the proposed regulation"[4] and technological advances could help identify strong candidates for retrospective review.[5]

Like any technology, specific structured data languages can become obsolete-similar to how the "write once, read many" technological storage format (i.e., CD-ROM) for broker-dealer books and records remained a rule requirement far beyond its useful life.[6] Absent a retrospective review requirement, there is no obligation for the Commission to re-consider the continued relevance of the specified technology. This is the exact type of outcome that the recommendation of the Administrative Conference is designed to prevent.[7]

To reduce the need for a retrospective review requirement, the Commission could have adopted a less prescriptive approach to electronic filing. Such an approach would have required filings to be machine-readable without prescribing the use of particular structured data languages.[8] The Commission acknowledges that a principles-based approach "could accommodate unknown future developments," but rejects the approach on the grounds that it "would make it more difficult for Commission staff and market participants to compare disclosures across differing data languages."[9]

The Commission's apparent insatiable appetite to obtain and store more and more surveillance data in its systems grows with each rulemaking-with little consideration on issues such as cost and purpose. This same approach is reflected in the Consolidated Audit Trail ("CAT"), which the Commission boasts will "allow regulators to efficiently and accurately track all activity throughout the U.S. markets in National Market System (NMS) securities."[10]

The CAT is a system that one would expect to find in a dystopian surveillance state, not the shining beacon for liberty and the free world. The CAT system is expensive and essentially funded by the public but operates outside the direct oversight or authorization of Congress. The Commission must reflect on the costs-both monetary and societal-of its quest to have an omnibus surveillance system that tracks every investment move of its citizens, including the cyber vulnerabilities of that very system.

An additional concern is the Commission's use of CAT data in economic analyses to justify certain rulemakings while at the same time failing to make public the underlying data. A key aspect of the notice and comment process allows interested persons to critique the Commission's work, including efforts to replicate its analytical results. Access to the original data goes to the heart of scientific integrity. It may be convenient for those wishing to wield power to restrict access to the data upon which decisions are based, but it renders truly informed comment impossible. It is not enough to respond with "trust us-no need to verify."

Nonetheless, it is unacceptable to allow broad access to an individual's trading information as captured by CAT. If the Commission cannot find a way to allow the public to examine its work without compromising an individual's private and proprietary information, then perhaps the Commission should stop using CAT data as support for its policy choices.

While we are unable to support today's amendments, we thank the staff in the Divisions of Trading and Markets and Economic and Risk Analysis, as well as the Office of the General Counsel, for their efforts. We particularly appreciate the staff's efforts to develop phased compliance dates for firms with lower minimum fixed dollar net capital requirements.