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Federal Register / Vol. 86, No. 21 / Wednesday, February 3, 2021 / Notices 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 4.7a2F specifically references Client Accounts, as discussed above. In addition, the Exchange proposes to add a definition of Client Account as proposed Rule 4.5l. Proposed Rule 4.5l 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.

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D Identity of Prime Broker The Exchange also proposes to amend Rule 4.7a2Aii to eliminate the requirement for executing brokers to record and report the SRO-Assigned Market Participant Identifier of the prime broker. Rule 4.7a2Aii 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 SRO-Assigned 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
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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 is one, that is associated with each account.
2. Statutory Basis The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 the Act and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6b of the Act.16 Specifically, the Exchange believes the proposed rule change is consistent with the Section 6b5 17 requirements that the rules of an exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to U.S.C. 78fb.
17 15 U.S.C. 78fb5.

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and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest.
Additionally, the Exchange believes the proposed rule change is consistent with the Section 6b5 18 requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers.
In particular, the Exchange believes that this proposal is consistent with the Act because it is consistent with, and implements, the Allocation Exemption, and is designed to assist the Exchange and its Industry Members in meeting regulatory obligations pursuant to the Plan. In approving the Plan, the Commission noted that the Plan is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act. 19 To the extent that this proposal implements the Plan, and applies specific requirements to Industry Members, the Exchange believes that this proposal furthers the objectives of the Plan, as identified by the Commission, and is therefore consistent with the Act.
B. Self-Regulatory Organizations Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange notes that the proposed rule changes are consistent with the Allocation Exemption, and are designed to assist the Exchange in meeting its regulatory obligations pursuant to the Plan. The Exchange also notes that the proposed rule changes will apply equally to all Industry Members. In addition, all national securities exchanges and FINRA are proposing this amendment to their Compliance Rules. Therefore, this is not a competitive rule filing and does not impose a burden on competition.
C. Self-Regulatory Organizations Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange neither solicited nor received comments on the proposed rule change.
18 Id.
19 See Securities Exchange Act Release No. 79318
November 15, 2016, 81 FR 84696, 84697
November 23, 2016.

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