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Federal Register / Vol. 86, No. 21 / Wednesday, February 3, 2021 / Notices
flips,8 would not be required to submit an Allocation Report to the Central Repository for that allocation, but could do so on a voluntary basis. Industry Members would be allowed to report Allocations to accounts other than client accounts; in that instance, such Allocations must be marked as Allocations to accounts other than client accounts.

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A Executing Brokers and Allocation Reports To implement the Allocation Alternative, the Participants requested exemptive relief from Section 6.4diiA1 of the CAT NMS Plan, to the extent that the provision requires each Participant to, through its Compliance Rule, require its Industry Members that are executing brokers, who do not perform Allocations, to record and report to the Central Repository, if the order is executed, in whole or in part, an Allocation Report.
Under the Allocation Alternative, when an Industry Member other than an executing broker e.g., a prime broker or clearing broker performs an Allocation, that Industry Member would be required to submit the Allocation Report to the Central Repository. When an executing broker performs an Allocation for an order that is executed, in whole or in part, the burden of submitting an Allocation Report to the Central Repository would remain with the executing broker under the Allocation Alternative. In certain circumstances this would result in multiple Allocation Reportsthe executing broker if selfclearing 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.
The Participants stated that granting exemptive relief from submitting Allocation Reports for executing brokers executed trade to the clients account at another broker-dealer. In other words, a step-out functions as a clients position transfer, rather than a trade;
there is no exchange of shares and funds and no change in beneficial ownership. See FINRA, Trade Reporting Frequently Asked Questions, at Section 301, available at: https www.finra.org/filingreporting/market-transparencyreporting/tradereporting-faq.
8 Correspondent clearing flips are the movement of a position from an executing brokers account to a different account for clearance and settlement, allowing a broker-dealer to execute a trade through another broker-dealer and settle the trade in its own account. See, e.g., The Depository Trust & Clearing Corporation, Correspondent Clearing, available at:
https www.dtcc.com/clearingservices/equitiestradecapture/correspondent-clearing.

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who do not perform an Allocation, and requiring the Industry Member other than the executing broker that is performing the Allocation to submit such Allocation Reports, is consistent with the basic approach taken by the Commission in adopting Rule 613 under the Exchange Act. Specifically, the Participants stated that they believe that the Commission sought to require each broker-dealer and exchange that touches an order to record the required data with respect to actions it takes on the order.9 Without the requested exemptive relief, executing brokers that do not perform Allocations would be required to submit Allocation Reports.
In addition, the Participants stated that, because shares/contracts for every execution must be allocated to an account by the clearing broker in such circumstances, there would be no loss of information by shifting the reporting 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 9 See Securities Exchange Act Release No. 67457
July 18, 2012, 77 FR 45722, 45748 August 1, 2012.
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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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 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
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