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Federal Register / Vol. 86, No. 21 / Wednesday, February 3, 2021 / Notices
originally placed; or 2 the placement of shares/contracts into an account based on allocation instructions e.g., subaccount allocations, delivery versus payment DVP allocations. The Commission stated in the Allocation Exemption that this definition of Allocation is reasonable.
B Definition of Allocation Report The Exchange proposes to amend the definition of Allocation Report set forth in Rule 4.5c to reflect the requirements of the Allocation Exemption. Rule 4.5c defines the term Allocation Report to mean:
a report made to the Central Repository by an Industry Member that identifies the Firm Designated ID for any accounts, including subaccounts, to which executed shares are allocated and provides the security that has been allocated, the identifier of the firm reporting the allocation, the price per share of shares allocated, the side of shares allocated, the number of shares allocated to each account, and the time of the allocation;
provided, for the avoidance of doubt, any such Allocation Report shall not be required to be linked to particular orders or executions.

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The Exchange proposes to amend this definition in two ways: 1 Applying the requirements for Allocation Reports to contracts in addition to shares; and 2
requiring the reporting of additional elements for the Allocation Report.
i Shares and Contracts The requirements for Allocation Reports apply only to shares, as the definition of Allocation Report in Rule 4.5c refers to shares, not contracts. In the Allocation Exemption, the Commission stated that applying the requirements for Allocation Reports to contracts in addition to shares is appropriate because CAT reporting requirements apply to both options and equities. Accordingly, the Commission stated that the Participants would be required to modify their Compliance Rules such that all required elements of Allocation Reports apply to both shares and contracts, as applicable, for all Eligible Securities. Therefore, the Exchange proposes to amend Rule 4.5c to be renumbered as Rule 4.5d to apply to contracts, as well as shares.
Specifically, the Exchange proposes to add references to contracts to the definition of Allocation Report to the following phrases: the Firm Designated ID for any accounts, including subaccounts, to which executed shares/contracts are allocated, the price per share/contract of shares/
contracts allocated, the side of shares/
contracts allocated, and the number of shares/contracts allocated to each account.

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ii Additional Elements The Commission also conditioned the Allocation Exemption on the Participants amending their Compliance Rules to require the ten additional elements in Allocation Reports described above. Accordingly, the Exchange proposes to require these additional elements in Allocation Reports. Specifically, the Exchange proposes to amend the definition of Allocation Report in Rule 4.5c to be renumbered as Rule 4.5d to include the following elements, in addition to those elements currently required under the CAT NMS Plan:
6 the time of the allocation; 7 Allocation ID, which is the internal allocation identifier assigned to the allocation event by the Industry Member; 8 trade date; 9
settlement date; 10 IB/correspondent CRD
Number if applicable; 11 FDID of new orders if available in the booking system;
12 allocation instruction time optional;
12 if account meets the definition of institution under FINRA Rule 4512c; 13
type of allocation allocation to a custody account, allocation to a DVP account, stepout, correspondent flip, allocation to a firm owned or controlled account, or other nonreportable transactions e.g., option exercises, conversions; 14 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 15 if an allocation was cancelled, a cancel flag indicating that the allocation was cancelled, and a cancel timestamp, which represents the time at which the allocation was cancelled.

C Allocation Reports i Executing Brokers That Do Not Perform Allocations The Commission granted the Participants an exemption from the requirement that the Participants, through their Compliance Rule, require executing brokers that do not perform Allocations to submit Allocation Reports. The Commission stated that it understands that executing brokers that are not self-clearing do not perform allocations themselves, and such allocations are handled by prime and/or clearing brokers, and these executing brokers therefore do not possess the requisite information to provide Allocation Reports. Accordingly, the Exchange proposes to eliminate Rule 4.7a2Ai,14 which requires an Industry Member to record and report to the Central Repository an Allocation 14 The Exchange proposes to renumber Rule 4.7a2Aii and iii as Rules 4.7a2Ai and ii in light of the proposed deletion of Rule 4.7a2Ai. The Exchange also proposes to make nonsubstantive changes to the language in Rule 4.7a2A.

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Report if the order is executed, in whole or in part, and to replace this provision with proposed Rule 4.7a2F as discussed below.
ii Industry Members That Perform Allocations The Allocation Exemption requires the Participants to amend their Compliance Rules to require Industry Members to provide Allocation Reports to the Central Repository any time they perform Allocations to a client account, whether or not the Industry Member was the executing broker for the trades.
Accordingly, the Commission conditioned the Allocation Exemption on the Participants adopting Compliance Rules that require prime and/or clearing brokers to submit Allocation Reports when such brokers perform allocations, in addition to requiring executing brokers that perform allocations to submit Allocation Reports. The Commission determined that such exemptive relief would improve efficiency and reduce the costs and burdens of reporting allocations for Industry Members because the reporting obligation would belong to the Industry Member with the requisite information, and executing brokers that do not have the information required on an Allocation Report would not have to develop the infrastructure and processes required to obtain, store and report the information. The Commission stated that this exemptive relief should not reduce the regulatory utility of the CAT
because an Allocation Report would still be submitted for each executed trade allocated to a client account, which in certain circumstances could still result in multiple Allocation Reports,15 just not necessarily by the executing broker.
In accordance with the Allocation Exemption, the Exchange proposes to add proposed 4.7a2F to the Compliance Rule. Proposed Rule 4.7a2F would require Industry Members to record and report to the Central Repository an Allocation Report any time the Industry Member performs an Allocation to a Client Account, whether or not the Industry Member was the executing broker for the trade.
15 As noted above, under the Allocation Alternative, for certain executions, 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 to which the shares/
contracts were finally allocated.

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