Quiero saber acerca de...

8076

Federal Register / Vol. 86, No. 21 / Wednesday, February 3, 2021 / Notices
C Allocation Reports
jbell on DSKJLSW7X2PROD with NOTICES

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 7.22a2Ai,14 which requires an Industry Member to record and report to the Central Repository an Allocation Report if the order is executed, in whole or in part, and to replace this provision with proposed Rule 7.22a2F 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, 14 The Exchange proposes to renumber Rule 7.22a2Aii and iii as Rules 7.22 a2Ai and ii in light of the proposed deletion of Rule 7.22a2Ai.

VerDate Sep<11>2014

17:21 Feb 02, 2021

Jkt 253001

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 7.22a2F to the Compliance Rule. Proposed Rule 7.22a2F 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.
iii Client Accounts In the Allocation Exemption, the Commission also exempted the Participants from the requirement that they amend their Compliance Rules to require Industry Members to report Allocations for accounts other than client accounts. The Commission believes that allocations to client accounts, and not allocations to proprietary accounts or events such as step-outs and correspondent flips, provide regulators the necessary information to detect abuses in the allocation process because it would provide regulators with detailed information regarding the fulfillment of orders submitted by clients, while reducing reporting burdens on brokerdealers. For example, Allocation Reports would be required for allocations to registered investment advisor and money manager accounts.
The Commission further believes that the proposed approach should facilitate regulators ability to distinguish Allocation Reports relating to allocations to client accounts from other Allocation Reports because Allocations to accounts other than client accounts would have to be identified as such.
This approach could reduce the time CAT Reporters expend to comply with CAT reporting requirements and lower costs by allowing broker-dealers to use existing business practices.
To clarify that an Industry Member must report an Allocation Report solely for Allocations to a client account, proposed Rule 7.22a2F specifically references Client Accounts, as discussed above. In addition, the Exchange proposes to add a definition 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.

PO 00000

Frm 00088

Fmt 4703

Sfmt 4703

of Client Account as proposed Rule 7.20l. Proposed Rule 7.20l would define a Client Account to mean for the purposes of an Allocation and Allocation Report, any account or subaccount that is not owned or controlled by the Industry Member.
D Identity of Prime Broker The Exchange also proposes to amend Rule 7.22a2Aii to eliminate the requirement for executing brokers to record and report the SRO-Assigned Market Participant Identifier of the prime broker. Rule 7.22a2Aii states that each Industry Member is required to record and report to the Central Repository, if the order is executed, in whole or in part, the SROAssigned Market Participant Identifier of the clearing broker or prime broker, if applicable. The Exchange proposes to delete the phrase or prime broker from this provision. Accordingly, each Industry Member that is an executing broker would no longer be required to report the SRO-Assigned Market Participant Identifier of the prime broker.
As the Commission noted in the Allocation Exemption, exempting the Participants from the requirement that they, through their Compliance Rules, require executing brokers to provide the SRO-Assigned Market Participant Identifier of the prime broker is appropriate because, as stated by the Participants, allocations are done on a post-trade basis and the executing broker will not have the requisite information at the time of the trade.
Because an executing broker, in certain circumstances, does not have this information at the time of the trade, this relief relieves executing brokers of the burdens and costs of developing infrastructure and processes to obtain this information in order to meet the contemporaneous reporting requirements of the CAT NMS Plan.
As the Commission noted in the Allocation Exemption, although executing brokers would no longer be required to provide the prime broker information, regulators will still be able to determine the prime brokers associated with orders through querying the customer and account information database. If an executing broker has only one prime broker, the identity of the prime broker can be obtained from the customer and account information associated with the executing broker.
For customers with multiple prime brokers, the identity of the prime brokers can be obtained from the customer and account information which will list the prime broker, if there
E:FRFM03FEN1.SGM

03FEN1