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Federal Register / Vol. 86, No. 21 / Wednesday, February 3, 2021 / Notices 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 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.

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B Definition of Allocation Report The Exchange proposes to amend the definition of Allocation Report set forth in Rule 4.5c to reflect the 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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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.

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.
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
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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 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 14 The Exchange proposes to renumber Rule 4.7
a2Aii 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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