Federal Register / Vol. 85, No. 247 / Wednesday, December 23, 2020 / Notices 84079 

14See paragraph 2 of the Amended Plan. 

15See paragraph 3 of the Amended Plan. 

16The addition to or deletion from the 

Certification of any federal securities laws, rules, 

and regulations for which FINRA would bear 

responsibility under the Amended Plan for 

examining, and enforcing compliance by, Common 

Members, also would constitute an amendment to 

the Amended Plan. 

17See supra note 11 (citing to Securities 

Exchange Act Release No. 70228). 

18 17 CFR 200.30–3(a)(34). 

1 15 U.S.C. 78a. 

2 17 CFR 240.19b–4. 

3Unless otherwise specified, capitalized terms 

used in this rule filing are defined as set forth in 

the Compliance Rule. 

4See Securities Exchange Act Rel. No. 90223 

(October 19, 2020), 85 FR 67576 (October 23, 2020) 

(‘‘Allocation Exemptive Order’’). 

rules included in the then-current list of 

Common Rules that no longer qualify as 

common rules; and confirm that the 

remaining rules on the list of Common 

Rules continue to be GEMX rules that 

qualify as common rules.14 FINRA will 

then confirm in writing whether the 

rules listed in any updated list are 

Common Rules as defined in the 

Amended Plan. Under the Amended 

Plan, GEMX also will provide FINRA 

with a current list of Common Members 

and will update the list no less 

frequently than once each quarter.15 The 

Commission believes that these 

provisions are designed to provide for 

continuing communication between the 

Parties to ensure the continued accuracy 

of the scope of the proposed allocation 

of regulatory responsibility. 

The Commission is hereby declaring 

effective an Amended Plan that, among 

other things, allocates regulatory 

responsibility to FINRA for the 

oversight and enforcement of all GEMX 

rules that are substantially similar to the 

rules of FINRA for Common Members of 

GEMX and FINRA. Therefore, 

modifications to the Certification need 

not be filed with the Commission as an 

amendment to the Amended Plan, 

provided that the Parties are only 

adding to, deleting from, or confirming 

changes to GEMX rules in the 

Certification in conformance with the 

definition of Common Rules provided in 

the Amended Plan. However, should the 

Parties decide to add a GEMX rule to the 

Certification that is not substantially 

similar to a FINRA rule; delete a GEMX 

rule from the Certification that is 

substantially similar to a FINRA rule; or 

leave on the Certification a GEMX rule 

that is no longer substantially similar to 

a FINRA rule, then such a change would 

constitute an amendment to the 

Amended Plan, which must be filed 

with the Commission pursuant to Rule 

17d–2 under the Act.16

Under paragraph (c) of Rule 17d–2, 

the Commission may, after appropriate 

notice and comment, declare a plan, or 

any part of a plan, effective. In this 

instance, the Commission believes that 

appropriate notice and comment can 

take place after the proposed 

amendment is effective. The primary 

purpose of the amendment is to allocate 

surveillance, investigation, and 

enforcement responsibilities for Rule 

14e–4 under the Act, to reflect the name 

change of Topaz Exchange, LLC to 

Nasdaq GEMX, LLC. By declaring it 

effective today, the Amended Plan can 

become effective and be implemented 

without undue delay. The Commission 

notes that the prior version of this plan 

immediately prior to this proposed 

amendment was published for comment 

and the Commission did not receive any 

comments thereon.17 Furthermore, the 

Commission does not believe that the 

amendment to the plan raises any new 

regulatory issues that the Commission 

has not previously considered. 

VI. Conclusion 

This order gives effect to the 

Amended Plan filed with the 

Commission in File No. 4–663. The 

Parties shall notify all members affected 

by the Amended Plan of their rights and 

obligations under the Amended Plan. 

It is therefore ordered, pursuant to 

Section 17(d) of the Act, that the 

Amended Plan in File No. 4–663, 

between the FINRA and GEMX, filed 

pursuant to Rule 17d–2 under the Act, 

hereby is approved and declared 

effective. 

It is further ordered that GEMX is 

relieved of those responsibilities 

allocated to FINRA under the Amended 

Plan in File No. 4–663. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.18

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2020–28309 Filed 12–22–20; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–90709; File No. SR– 

NYSEARCA–2020–108] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Amend the Rule 

11.6800 Series 

December 17, 2020. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that, on December 

4, 2020, NYSE Arca, Inc. (‘‘NYSE Arca’’ 

or the ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III below, which Items have been 

prepared by the self-regulatory 

organization. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend the 

Rule 11.6800 Series, the Exchange’s 

compliance rule (‘‘Compliance Rule’’) 

regarding the National Market System 

Plan Governing the Consolidated Audit 

Trail (the ‘‘CAT NMS Plan’’ or ‘‘Plan’’) 3

to be consistent with a conditional 

exemption granted by the Commission 

from certain allocation reporting 

requirements set forth in Sections 

6.4(d)(ii)(A)(1) and (2) of the CAT NMS 

Plan (‘‘Allocation Exemption’’).4 The 

proposed rule change is available on the 

Exchange’s website at www.nyse.com, at 

the principal office of the Exchange, and 

at the Commission’s Public Reference 

Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

self-regulatory organization included 

statements concerning the purpose of, 

and basis for, the proposed rule change 

and discussed any comments it received 

on the proposed rule change. The text 

of those statements may be examined at 

the places specified in Item IV below. 

The Exchange has prepared summaries, 

set forth in sections A, B, and C below, 

of the most significant parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of this proposed rule 

change is to amend the Rule 11.6800 

Series to be consistent with the 

Allocation Exemption. The Commission 

granted the relief conditioned upon the 

Participants’ adoption of Compliance 

Rules that implement the alternative 

approach to reporting allocations to the 

Central Repository described in the 

Allocation Exemption (referred to as the 

‘‘Allocation Alternative’’). 


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84080 Federal Register / Vol. 85, No. 247 / Wednesday, December 23, 2020 / Notices 

5Section 1.1 of the CAT NMS Plan defines an 

‘‘Allocation Report’’ as ‘‘a report made to the 

Central Repository by an Industry Member that 

identifies the Firm Designated ID for any account(s), 

including subaccount(s), 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.’’ 

6See letter from the Participants to Vanessa 

Countryman, Secretary, Commission, dated August 

27, 2020 (the ‘‘Exemption Request’’). 

7 ‘‘A step-out allows a broker-dealer to allocate all 

or part of a client’s position from a previously 

executed trade to the client’s account at another 

broker-dealer. In other words, a step-out functions 

as a client’s 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-transparency-reporting/tradereporting-faq. 8Correspondent clearing flips are the movement 

of a position from an executing broker’s 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/clearing-services/equitiestradecapture/correspondent-clearing. 

9See Securities Exchange Act Release No. 67457 

(July 18, 2012), 77 FR 45722, 45748 (August 1, 

2012). 

10The Participants did not request exemptive 

relief relating to the reporting of the SRO-Assigned 

Market Participant Identifier of clearing brokers. 

(1) Request for Exemptive Relief 

Pursuant to Section 6.4(d)(ii)(A) of the 

CAT NMS Plan, each Participant must, 

through its Compliance Rule, require its 

Industry Members to record and report 

to the Central Repository, if the order is 

executed, in whole or in part: (1) An 

Allocation Report; 5 (2) the SROAssigned Market Participant Identifier 

of the clearing broker or prime broker, 

if applicable; and the (3) CAT-Order-ID 

of any contra-side order(s). Accordingly, 

the Exchange and the other Participants 

implemented Compliance Rules that 

require their Industry Members that are 

executing brokers to submit to the 

Central Repository, among other things, 

Allocation Reports and the SROAssigned Market Participant Identifier 

of the clearing broker or prime broker, 

if applicable. 

On August 27, 2020, the Participants 

submitted to the Commission a request 

for an exemption from certain allocation 

reporting requirements set forth in 

Sections 6.4(d)(ii)(A)(1) and (2) of the 

CAT NMS Plan (‘‘Exemption 

Request’’).6 In the Exemption Request, 

the Participants requested that they be 

permitted to implement the Allocation 

Alternative, which, as noted above, is an 

alternative approach to reporting 

allocations to the Central Repository. 

Under the Allocation Alternative, any 

Industry Member that performs an 

allocation to a client account would be 

required under the Compliance Rule to 

submit an Allocation Report to the 

Central Repository when shares/ 

contracts are allocated to a client 

account regardless of whether the 

Industry Member was involved in 

executing the underlying order(s). 

Under the Allocation Alternative, a 

‘‘client account’’ would be any account 

that is not owned or controlled by the 

Industry Member. 

In addition, under the Allocation 

Alternative, an ‘‘Allocation’’ would be 

defined as: (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). Pursuant to this 

definition and the proposed Allocation 

Alternative, an Industry Member that 

performs an Allocation to an account 

that is not a client account, such as 

proprietary accounts and events 

including step outs,7 or correspondent 

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. 

(A) Executing Brokers and Allocation 

Reports 

To implement the Allocation 

Alternative, the Participants requested 

exemptive relief from Section 

6.4(d)(ii)(A)(1) 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 

Reports—the 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 

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 

6.4(d)(ii)(A)(2) 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 order’s lifecycle, rather 

than in an Allocation Report that is not 

linked to the order’s 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 


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Federal Register / Vol. 85, No. 247 / Wednesday, December 23, 2020 / Notices 84081 

11The Participants propose that for scenarios 

where the Industry Member responsible for 

reporting the Allocation has the FDID of the related 

new order(s) available, such FDID must be reported. 

This would include scenarios in which: (1) The 

FDID structure of the top account and subaccounts 

is known to the Industry Member responsible for 

reporting the Allocation(s); and (2) the FDID 

structure used by the IB/Correspondent when 

reporting new orders is known to the clearing firm 

reporting the related Allocations. 

12FINRA Rule 4512(c) 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 SEC 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. 

13The Exchange proposes to renumber the 

definitions in Rule 11.6810 to accommodate the 

addition of this new definition of ‘‘Allocation’’ and 

the new definition of ‘‘Client Account’’ discussed 

below. 

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 

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 customer’s 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 

Allocation Reports apply to both shares 

and contracts, as applicable, for all 

Eligible Securities. Specifically, 

Participants would require the reporting 

of the following in each Allocation 

Report: (1) The FDID for the account 

receiving the allocation, including 

subaccounts; (2) the security that has 

been allocated; (3) the identifier of the 

firm reporting the allocation; (3) the 

price per share/contracts of shares/ 

contracts allocated; (4) the side of 

shares/contracts allocated; (4) the 

number of shares/contracts allocated; 

and (5) the time of the allocation. 

Furthermore, to implement the 

Allocation Alternative, the Participants 

proposed to require the following 

information on all Allocation Reports: 

(1) Allocation ID, which is the internal 

allocation identifier assigned to the 

allocation event by the Industry 

Member; (2) trade date; (3) settlement 

date; (4) IB/correspondent CRD Number 

(if applicable); (5) FDID of new order(s) 

(if available in the booking system); 11

(6) allocation instruction time 

(optional); (7) if the account meets the 

definition of institution under FINRA 

Rule 4512(c); 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 

non-reportable 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 11.6810.13

Proposed paragraph (c) of Rule 11.6810 

would define an ‘‘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 SEC 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 Exchange Rule 11.6810(c) to 

reflect the requirements of the 

Allocation Exemption. Exchange Rule 

11.6810(c) 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 account(s), including 

subaccount(s), 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 


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84082 Federal Register / Vol. 85, No. 247 / Wednesday, December 23, 2020 / Notices 

14The Exchange proposes to renumber Rule 

11.6830(a)(2)(A)(ii) and (iii) as Rules 

11.6830(a)(2)(A)(i) and (ii) in light of the proposed 

deletion of Rule 11.6830(a)(2)(A)(i). 

15As 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. 

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 11.6810(c) 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 SEC 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 11.6810(c) (to 

be renumbered as Rule 11.6810(d)) 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 account(s), including 

subaccount(s), 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 

‘‘Allocation Report’’ in Rule 11.6810(c) 

(to be renumbered as Rule 11.6810(d)) 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 

order(s) (if available in the booking system); 

(12) allocation instruction time (optional); 

(12) if account meets the definition of 

institution under FINRA Rule 4512(c); (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 

11.6830(a)(2)(A)(i),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 11.6830(a)(2)(F) 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 Rule 11.6830(a)(2)(F) to 

the Compliance Rule. Proposed Rule 

11.6830(a)(2)(F) 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 


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Federal Register / Vol. 85, No. 247 / Wednesday, December 23, 2020 / Notices 84083 

16 15 U.S.C. 78f(b)(6). 17 15 U.S.C. 78f(b)(8). 18See Securities Exchange Act Release No. 79318 

(November 15, 2016), 81 FR 84696, 84697 

(November 23, 2016). 

19 15 U.S.C. 78s(b)(3)(A)(iii). 

20 17 CFR 240.19b–4(f)(6). 

21 15 U.S.C. 78s(b)(2)(B). 

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 11.6830(a)(2)(F) 

specifically references ‘‘Client 

Accounts,’’ as discussed above. In 

addition, the Exchange proposes to add 

a definition of ‘‘Client Account’’ as 

proposed Rule 11.6810(l). Proposed 

Rule 11.6810(l) 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 11.6830(a)(2)(A)(ii) to eliminate the 

requirement for executing brokers to 

record and report the SRO-Assigned 

Market Participant Identifier of the 

prime broker. Rule 11.6830(a)(2)(A)(ii) 

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 broker(s) 

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 

NYSE Arca believes that the proposed 

rule change is consistent with the 

provisions of Section 6(b)(5) of the 

Act,16 which require, among other 

things, that the Exchange’s rules must 

be designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, and, in general, to protect 

investors and the public interest, and 

Section 6(b)(8) of the Act,17 which 

requires that the Exchange’s rules not 

impose any burden on competition that 

is not necessary or appropriate. 

NYSE Arca 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 SEC 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.’’ 18 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 SEC, and is therefore consistent with 

the Act. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

NYSE Arca does not believe that the 

proposed rule change will result in any 

burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. NYSE Arca 

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. NYSE 

Arca 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 Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were solicited 

or received with respect to the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The Exchange has filed the proposed 

rule change pursuant to Section 

19(b)(3)(A)(iii) of the Act 19 and Rule 

19b–4(f)(6) thereunder.20 Because the 

proposed rule change does not: (i) 

Significantly affect the protection of 

investors or the public interest; (ii) 

impose any significant burden on 

competition; and (iii) become operative 

prior to 30 days from the date on which 

it was filed, or such shorter time as the 

Commission may designate, if 

consistent with the protection of 

investors and the public interest, the 

proposed rule change has become 

effective pursuant to Section 19(b)(3)(A) 

of the Act and Rule 19b–4(f)(6)(iii) 

thereunder. 

At any time within 60 days of the 

filing of such proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. If the 

Commission takes such action, the 

Commission shall institute proceedings 

under Section 19(b)(2)(B) 21 of the Act to 

determine whether the proposed rule 

change should be approved or 

disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 


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84084 Federal Register / Vol. 85, No. 247 / Wednesday, December 23, 2020 / Notices 

22 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 83888 

(August 20, 2018), 83 FR 42954 (August 24, 2018) 

(SR–NASDAQ–2018–069) (‘‘Prior Rule Change’’). In 

the Prior Rule Change the Exchange stated that it 

would issue an Options Trader Alert introducing 

the new OTTO protocol in Q4 of 2018. The rule 

numbers were amended in 2019 when the Rulebook 

was relocated. See Securities Exchange Act Release 

No. 87778 (December 17, 2019), 84 FR 70590 

(December 23, 2019) (SR–NASDAQ–2019–098). 

4As modified by the Prior Rule Change, OTTO is 

an interface that allows Participants and their 

Sponsored Customers to connect, send, and receive 

messages related to orders to and from the 

Exchange. Features include the following: (1) 

Options symbol directory messages (e.g., 

underlying); (2) system event messages (e.g., start of 

trading hours messages and start of opening); (3) 

trading action messages (e.g., halts and resumes); (4) 

execution messages; (5) order messages; and (6) risk 

protection triggers and cancel notifications. See 

NOM Rules at Options 3, Section 7(d)(1)(C). 

5QUO is an interface that allows NOM Market 

Makers to connect, send, and receive messages 

related to single-sided orders to and from the 

Exchange. Order Features include the following: (1) 

Options symbol directory messages (e.g., 

underlying); (2) system event messages (e.g., start of 

trading hours messages and start of opening); (3) 

trading action messages (e.g., halts and resumes); (4) 

execution messages; (5) order messages; and (6) risk 

protection triggers and cancel notifications. Orders 

submitted by NOM Market Makers over this 

interface are treated as quotes. See Options 3, 

Section 7(d)(1)(D). 

Electronic Comments 

• Use the Commission’s internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

NYSEARCA–2020–108 on the subject 

line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–NYSEARCA–2020–108. 

This file number should be included on 

the subject line if email is used. To help 

the Commission process and review 

your comments more efficiently, please 

use only one method. The Commission 

will post all comments on the 

Commission’s internet website (http://

www.sec.gov/rules/sro.shtml). Copies of 

the submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549, on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–NYSEARCA–2020–108, 

and should be submitted on or before 

January 13, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.22

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2020–28314 Filed 12–22–20; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–90697; File No. SR– 

NASDAQ–2020–089] 

Self-Regulatory Organizations; The 

Nasdaq Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To No Longer 

Implement the OTTO Protocol 

December 17, 2020. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on December 

15, 2020, The Nasdaq Stock Market LLC 

(‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III below, which Items have been 

prepared by the Exchange. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to remove the 

protocol ‘‘Ouch to Trade Options’’ or 

‘‘OTTO’’ from The Nasdaq Options 

Market LLC (‘‘NOM’’) Rulebook. The 

Exchange previously delayed its 

implementation of the OTTO protocol; 

the Exchange will no longer implement 

the OTTO protocol. 

The text of the proposed rule change 

is available on the Exchange’s website at 

https://listingcenter.nasdaq.com/ 

rulebook/nasdaq/rules, at the principal 

office of the Exchange, and at the 

Commission’s Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

forth in sections A, B, and C below, of 

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

NOM’s proposal seeks to remove the 

protocol ‘‘Ouch to Trade Options’’ or 

‘‘OTTO’’ from The Nasdaq Options 

Market LLC (‘‘NOM’’) Rulebook. The 

Exchange previously delayed its 

implementation of the OTTO protocol; 

the Exchange will no longer implement 

the OTTO protocol. 

Background 

Nasdaq filed a rule change 3 which 

adopted a new protocol ‘‘Ouch to Trade 

Options’’ or ‘‘OTTO’’ 4 and proposed to 

rename and modify the current OTTO 

protocol as ‘‘Quote Using Orders’’ or 

‘‘QUO.’’ 5 The Exchange subsequently 

filed a rule change to amend Options 3, 

Section 18, titled ‘‘Detection of Loss of 

Communication’’ which describes the 

impact to NOM protocols in the event 

of a loss of a communication. The 

Exchange accounted for both the new 

OTTO and renamed and modified QUO 

within this rule. Similarly, the Exchange 

amended Options 3, Section 8, ‘‘Nasdaq 

Opening and Halt Cross’’ to account for 

the new OTTO and renamed and 

modified QUO within this rule. Finally, 

the Exchange amended Options 3, 

Section 23, ‘‘Data Feeds and Trade 

Information’’ to amend ‘‘OTTO DROP’’ 

to ‘‘QUO DROP’’ and noted within 

Options 3, Section 15(a)(1) related to 

Order Price Protection rule or ‘‘OPP’’ 


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