Ok, I've just checked it again and my answear would be "unclear".
Earlier I've said reaction fire is made instead of overwatch but it's not how it's written in the rules.
Making a Reaction Fire Attack
A Reaction Fire attack is carried out exactly like an Overwatch attack except that the unit in question must first roll equal to or under its majority Initiative score on a D6. If successful, it may fire its weapons at the assaulting enemy with their full Ballistic Skill. If the test is unsuccessful, the unit may still make a normal Overwatch attack (i.e., snapshots at BS 1) instead.
A unit may not use the Counter Attack special rule if it has used Reaction Fire.
It depends on how "carried out exactly like an Overwatch attack" is interpreted. Is it just overwatch mechanics (casualities etc.) or does it also takes into account who can make overwatch (like going to ground earlier or just being shot by Primaris supressors ).
Only units not already engaged in close combat and not Falling Back may attempt Reaction Fire.
These appear to be to only Reaction Fire restrictions.
So I'm not sure RAW.
RAI however there is no doubt that cataphracts should not be able to do this, I agree.