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Federal Register / Vol. 86, No. 21 / Wednesday, February 3, 2021 / Notices
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obligation from the executing broker to the clearing broker.
B Identity of Prime Broker To implement the Allocation Alternative, the Participants also requested exemptive relief from Section 6.4diiA2 of the CAT NMS Plan, to the extent that the provision requires each Participant to, through its Compliance Rule, require its Industry Members to record and report to the Central Repository, if an order is executed, in whole or in part, the SROAssigned Market Participant Identifier of the prime broker, if applicable.
Currently, under the CAT NMS Plan, an Industry Member is required to report the SRO-Assigned Market Participant Identifier of the clearing broker or prime broker in connection with the execution of an order, and such information would be part of the orders lifecycle, rather than in an Allocation Report that is not linked to the orders lifecycle.10 Under the Allocation Alternative, the identity of the prime broker would be required to be reported by the clearing broker on the Allocation Report, and, in addition, the prime broker itself would be required to report the ultimate allocation, which the Participants believe would provide more complete information.
The Participants stated that associating a prime broker with a specific execution, as is currently required by the CAT NMS Plan, does not reflect how the allocation process works in practice as allocations to a prime broker are done post-trade and are performed by the clearing broker of the executing broker. The Participants also stated that with the implementation of the Allocation Alternative, it would be duplicative for the executing broker to separately identify the prime broker for allocation purposes.
The Participants stated that if a particular customer only has one prime broker, the identity of the prime broker can be obtained from the customer and account information through the DVP
accounts for that customer that contain the identity of the prime broker. The Participants further stated that Allocation Reports related to those executions would reflect that shares/
contracts were allocated to the single prime broker. The Participants believe that there is no loss of information through the implementation of the Allocation Alternative compared to what is required in the CAT NMS Plan and that this approach does not 10 The Participants did not request exemptive relief relating to the reporting of the SRO-Assigned Market Participant Identifier of clearing brokers.

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decrease the regulatory utility of the CAT for single prime broker circumstances.
In cases where a customer maintains relationships with multiple prime brokers, the Participants asserted that the executing broker will not have information at the time of the trade as to which particular prime broker may be allocated all or part of the execution.
Under the Allocation Alternative, the executing broker if self-clearing or its clearing firm would report individual Allocation Reports identifying the specific prime broker to which shares/
contracts were allocated and then each prime broker would itself report an Allocation Report identifying the specific customer accounts where the shares/contracts were ultimately allocated. To determine the prime broker for a customer, a regulatory user would query the customer and account database using the customers CCID to obtain all DVP accounts for the CCID at broker-dealers. The Participants state that when a customer maintains relationships with multiple prime brokers, the customer typically has a separate DVP account with each prime broker, and the identities of those prime brokers can be obtained from the customer and account information.
C Additional Conditions to Exemptive Relief In the Exemption Request, the Participants included certain additional conditions for the requested relief.
Currently, the definition of Allocation Report in the CAT NMS Plan only refers to shares. To implement the Allocation Alternative, the Participants proposed to require that all required elements of Allocation Reports apply to both shares and contracts, as applicable, for all Eligible Securities. Specifically, Participants would require the reporting of the following in each Allocation Report: 1 The FDID for the account receiving the allocation, including subaccounts; 2 the security that has been allocated; 3 the identifier of the firm reporting the allocation; 3 the price per share/contracts of shares/
contracts allocated; 4 the side of shares/contracts allocated; 4 the number of shares/contracts allocated;
and 5 the time of the allocation.
Furthermore, to implement the Allocation Alternative, the Participants proposed to require the following information on all Allocation Reports:
1 Allocation ID, which is the internal allocation identifier assigned to the allocation event by the Industry Member; 2 trade date; 3 settlement date; 4 IB/correspondent CRD Number if applicable; 5 FDID of new orders
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if available in the booking system; 11
6 allocation instruction time optional; 7 if the account meets the definition of institution under FINRA
Rule 4512c; 12 8 type of allocation allocation to a custody account, allocation to a DVP account, step out, correspondent flip, allocation to a firm owned or controlled account, or other nonreportable transactions e.g., option exercises, conversions; 9 for DVP
allocations, custody broker-dealer clearing number prime broker if the custodian is a U.S. broker-dealer, DTCC
number if the custodian is a U.S. bank, or a foreign indicator, if the custodian is a foreign entity; and 10 if an allocation was cancelled, a cancel flag, which indicates that the allocation was cancelled, and a cancel timestamp, which represents the time at which the allocation was cancelled.
2 Proposed Rule Changes To Implement Exemptive Relief On October 29, 2020, the Commission granted the exemptive relief requested in the Exemption Request. The Commission granted the relief conditioned upon the adoption of Compliance Rules that implement the reporting requirements of the Allocation Alternative. Accordingly, the Exchange proposes the following changes to its Compliance Rule to implement the reporting requirements of the Allocation Alternative.
A Definition of Allocation The Exchange proposes to add a definition of Allocation as new paragraph c to Rule 4.5.13 Proposed paragraph c of Rule 4.5 would define a Allocation to mean 1 the placement of shares/contracts into the same account for which an order was 11 The Participants propose that for scenarios where the Industry Member responsible for reporting the Allocation has the FDID of the related new orders available, such FDID must be reported.
This would include scenarios in which: 1 The FDID structure of the top account and subaccounts is known to the Industry Member responsible for reporting the Allocations; and 2 the FDID
structure used by the IB/Correspondent when reporting new orders is known to the clearing firm reporting the related Allocations.
12 FINRA Rule 4512c states the for purposes of the rule, the term institutional account means the account of: 1 A bank, savings and loan association, insurance company or registered investment company; 2 an investment adviser registered either with the Commission under Section 203 of the Investment Advisers Act or with a state securities commission or any agency or office performing like functions; or 3 any other person whether a natural person, corporation, partnership, trust or otherwise with total assets of at least $50
million.
13 The Exchange proposes to renumber the definitions in Rule 4.5 to accommodate the addition of this new definition of Allocation and the new definition of Client Account discussed below.

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