Federal Register / Vol. 86, No. 3 / Wednesday, January 6, 2021 / Notices 659 

16 15 U.S.C. 78s(b)(3)(A). 

17 17 CFR 240.19b–4(f)(2). 

18 15 U.S.C. 78s(b)(2)(B). 19 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Notice of Filing infra note 4, 85 FR at 80829. 

4Securities Exchange Act Release No. 90603 (Dec. 

8, 2020), 85 FR 80829 (Dec. 14, 2020) (File No. SR– 

OCC–2020–015) (‘‘Notice of Filing’’). 

5Securities Exchange Act Release No. 83735 (Jul. 

27. 2018), 83 FR 37855 (Aug. 2, 2018) (File No. SR– 

OCC–2018–008). 

competitive environment because it 

waives fees for Qualifying Firms and is 

designed to reduce monthly costs for 

Floor participants whose operations 

continue to be disrupted even though 

the Trading Floor has partially 

reopened. In reducing this monthly 

financial burden, the proposed change 

would allow affected participants to 

reallocate funds to assist with the cost 

of shifting and maintaining their prior 

fully staffed on-Floor operations to offFloor. 

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 foregoing rule change is effective 

upon filing pursuant to Section 

19(b)(3)(A) 16 of the Act and 

subparagraph (f)(2) of Rule 19b–4 17

thereunder, because it establishes a due, 

fee, or other charge imposed by the 

Exchange. 

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) 18 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: 

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–2020–115 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–2020–115. 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–2020–115 and 

should be submitted on or before 

January 27, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.19

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2020–29285 Filed 1–5–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–90827; File No. SR–OCC– 

2020–015] 

Self-Regulatory Organizations; The 

Options Clearing Corporation; Order 

Granting Accelerated Approval of 

Proposed Rule Change Concerning the 

Implementation of New Sufficiency 

Scenarios in the Options Clearing 

Corporation’s Stress Testing Inventory 

December 30, 2020. 

I. Introduction 

On December 2, 2020, the Options 

Clearing Corporation (‘‘OCC’’) filed with 

the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change SR–OCC–2020– 

015 (‘‘Proposed Rule Change’’) pursuant 

to Section 19(b) of the Securities 

Exchange Act of 1934 (‘‘Exchange 

Act’’) 1 and Rule 19b–4 2 thereunder to 

implement additional stress test 

scenarios to OCC’s Comprehensive 

Stress Testing & Clearing Fund 

Methodology, and to its Liquidity Risk 

Management Description.3 The 

Proposed Rule Change was published 

for public comment in the Federal 

Register on December 14, 2020.4 The 

Commission has received no comments 

regarding the Proposed Rule Change. 

This order approves the Proposed Rule 

Change on an accelerated basis. 

II. Background 

The Proposed Rule Change by OCC 

would take existing informational stress 

test scenarios and add them to the list 

of stress test scenarios designed to test 

the sufficiency of OCC’s prefunded 

financial resources. The proposed 

changes are to OCC’s Comprehensive 

Stress Testing & Clearing Fund 

Methodology, and to its Liquidity Risk 

Management Description 

(‘‘Methodology Description’’). 

In 2018, OCC established its current 

clearing fund methodology, using a 

stress testing framework to measure its 

credit exposure at a level sufficient to 

cover potential losses under extreme but 

plausible market conditions.5 OCC 

performs daily stress testing using a 

wide range of scenarios, both 

hypothetical and historical. Its stress 

testing scenario inventory includes four 


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660 Federal Register / Vol. 86, No. 3 / Wednesday, January 6, 2021 / Notices 

6Pursuant to OCC Rule 609 and OCC’s Clearing 

Fund Methodology Policy, if any of OCC’s 

Sufficiency Scenarios identifies exposures that 

exceed 75% of the current Clearing Fund 

requirement less deficits, OCC may require 

additional margin deposits from the Clearing 

Member Group(s) driving the breach. Additionally, 

pursuant to Rule 1001(c) and the Clearing Fund 

Methodology Policy, if a Sufficiency Scenario 

identifies a Clearing Fund draw for any one or two 

Clearing Member Groups that exceeds 90% of the 

current Clearing Fund size (after subtracting any 

monies deposited as a result of a margin call in 

accordance with a breach of the 75% threshold), 

OCC has the authority to reset the size of the 

Clearing Fund on an intra-month basis to ensure 

that it continues to maintain sufficient prefunded 

financial resources. See Notice of Filing supra note 

4, 85 FR at 80829–30. 

7See Notice of Filing supra note 4, 85 FR at 

80830. 

8 Id. 

9 15 U.S.C. 78s(b)(2)(C). 

10 15 U.S.C. 78q–1(b)(3)(F). 

11 17 CFR 240.17Ad–22(e)(4). 

12 15 U.S.C. 78q–1(b)(3)(F). 

13See supra note 5, 83 FR at 37861–62. 

14See supra note 5, 83 FR at 37861. 

different categories: (1) Scenarios that 

determine whether the financial 

resources collected from all Clearing 

Members collectively are adequate to 

cover OCC’s risk tolerance (‘‘Adequacy 

Scenarios’’); (2) scenarios that establish 

the monthly size of the Clearing Fund 

at an amount necessary to cover losses 

arising from the default of the two 

Clearing Member Groups that would 

potentially cause the largest aggregate 

credit exposure as a result of a 1-in-80 

year hypothetical market event (‘‘Sizing 

Scenarios’’); (3) scenarios that measure 

the exposure of the Clearing Fund to the 

portfolios of individual Clearing 

Member Groups and determine whether 

any such exposure is sufficiently large 

as to necessitate OCC calling for 

additional resources to guard against 

potential losses under a wide range of 

stress scenarios, including extreme but 

plausible market conditions 

(‘‘Sufficiency Scenarios’’); 6 and (4) 

scenarios that monitor and assess the 

size of OCC’s prefunded financial 

resources against a wide range of stress 

scenarios that may include newly 

developed stress scenarios for 

evaluation as well as extreme but 

implausible scenarios (‘‘Informational 

Scenarios’’). Adequacy and 

Informational Scenarios are not used 

directly to size the Clearing Fund or 

drive calls for additional financial 

resources from OCC’s Clearing 

Members. 

As described in the Notice of Filing, 

OCC proposes to elevate four of its 

current Informational Scenarios to 

Sufficiency Scenarios. These 

Informational Scenarios are historical 

scenarios designed to represent recent 

market events from March 2020. The 

proposed Sufficiency Scenarios would 

include price shocks representing the 

most extreme market decline and rally 

moves in March 2020, and would 

include variations of these scenarios 

designed to account for specific wrongway risk exposures arising from cleared 

positions on issued exchange traded 

notes (‘‘ETNs’’).7

These four scenarios, as Informational 

Scenarios, currently do not drive the 

size of the Clearing Fund or calls for 

additional resources. Once elevated to 

Sufficiency Scenarios, they would be 

used to measure OCC’s Clearing Fund 

exposure to the portfolios of individual 

Clearing Member Groups and determine 

whether any such exposure is 

sufficiently large where it would 

necessitate OCC calling for additional 

resources in the form of margin or an 

intra-month resizing of the Clearing 

Fund. OCC asserts that by adding these 

four Sufficiency Scenarios, it would be 

able to test the sufficiency of its 

financial resources under a wider range 

of relevant stress scenarios and respond 

quickly when OCC believes additional 

financial resources are necessary.8

III. Commission’s Findings and Order 

Granting Accelerated Approval of the 

Proposed Rule Change 

Section 19(b)(2)(C) of the Exchange 

Act directs the Commission to approve 

a proposed rule change of a selfregulatory organization if it finds that 

such proposed rule change is consistent 

with the requirements of the Exchange 

Act and the rules and regulations 

thereunder applicable to such 

organization.9 After carefully 

considering the Proposed Rule Change, 

the Commission finds that the proposal 

is consistent with the requirements of 

the Exchange Act and the rules and 

regulations thereunder applicable to 

OCC. More specifically, the Commission 

finds that the proposal is consistent 

with Section 17A(b)(3)(F) of the 

Exchange Act,10 and Rule 17Ad– 

22(e)(4) 11 thereunder, as described in 

detail below. 

A. Consistency With Section 

17A(b)(3)(F) of the Exchange Act 

Section 17A(b)(3)(F) of the Exchange 

Act requires that the rules of a clearing 

agency be designed to, among other 

things, promote the prompt and 

accurate clearance and settlement of 

securities transactions, and assure the 

safeguarding of securities and funds 

which are in the custody or control of 

the clearing agency or for which it is 

responsible.12 In 2018, the Commission 

approved a Proposed Rule Change to 

formalize OCC’s current Clearing Fund 

Methodology Policy, including OCC’s 

current stress testing methodology, and 

the Commission’s approval was based in 

part on the same Section 17A(b)(3)(F) 

requirements above.13 Based on its 

review of the record, and for the reasons 

described below, the Commission 

believes that the proposed addition of 

more stress test scenarios designed to 

test the sufficiency of OCC’s prefunded 

financial resources as described above is 

consistent with the promotion of 

prompt and accurate clearance and 

settlement of securities transactions, 

and the assurance of the safeguarding of 

securities and funds which are in OCC’s 

custody or control or for which OCC is 

responsible. 

First, the proposal to elevate four 

Informational Scenarios to Sufficiency 

Scenarios would expand upon the scope 

of stress scenarios against which OCC 

monitors its financial resources. The 

Commission continues to believe that 

the historical scenarios replicating the 

1987 market crash and financial crisis 

provide additional depth to the 

monitoring of OCC’s financial 

resources.14 Similarly, for the present 

proposal, the Commission believes that 

the introduction of new historical 

scenarios replicating the market events 

of March 2020 would provide stress 

exposure estimates that would be 

meaningful for the monitoring of OCC’s 

total financial resources. Elevating these 

Informational Scenarios to become 

Sufficiency Scenarios would increase 

the likelihood that OCC will have 

sufficient financial resources in excess 

of margin to address credit losses that 

could arise from the default of a 

Clearing Member, and this would in 

turn enhance OCC’s ability to continue 

to promptly and accurately clear and 

settle securities transactions for 

participants in the options markets 

during periods of market stress. 

Therefore, the Commission believes that 

the proposal is consistent with 

promoting the prompt and accurate 

clearance and settlement of securities 

transactions. 

Second, adding the proposed 

Sufficiency Scenarios would be 

consistent with assuring the 

safeguarding of securities and funds 

currently in OCC’s custody and control 

by creating a wider range of stress 

scenarios that would improve the 

likelihood of the Clearing Fund having 

sufficient resources to cover potential 

credit losses under adverse market 

conditions. As noted above, Sufficiency 

Scenarios are used to determine 

whether any exposure of the Clearing 

Fund to the portfolios of individual 


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Federal Register / Vol. 86, No. 3 / Wednesday, January 6, 2021 / Notices 661 

15See e.g., Securities Exchange Act Release No. 

86119 (Jun. 17. 2019), 84 FR 29267, 29269 (Jun. 21, 

2019) (File No. SR–OCC–2019–004) (noting a new 

liquidation cost model’s impact on reducing 

potential loss mutualization). 

16 15 U.S.C. 78q–1(b)(3)(F). 

17 17 CFR 240.17Ad–22(e)(4)(vi) (citing 17 CFR 

240.17Ad–22(e)(4)(i)–(iii)). 

18 17 CFR 240.17Ad–22(e)(4)(vi)(A). 

19See supra note 5, 83 FR at 37863. 

20 17 CFR 240.17Ad–22(e)(4)(i), (iii), and (vi). 

21Securities Exchange Act Release No. 87718 

(Dec. 11, 2019), 84 FR 68992, 68995 (Dec. 17, 2019) 

(File No. SR–OCC–2019–010). 22 17 CFR 240.17Ad–22(e)(4). 23 15 U.S.C. 78s(b)(2)(C)(iii). 

24 Id. 

25See Notice of Filing, 85 FR at 80830. 

Clearing Member Groups is sufficiently 

large as to necessitate OCC calling for 

additional resources in the form of 

margin to guard against potential losses. 

Collecting this additional margin 

reduces the likelihood that OCC must 

mutualize the risk associated with these 

potential losses through the use of 

surviving Clearing Members’ 

contributions to the Clearing Fund. The 

Commission continues to believe that 

reducing the potentiality of loss 

mutualization during periods of market 

stress, while unavoidable in certain 

circumstances, could reduce the 

potential knock-on effects to nondefaulting Clearing Members, their 

customers and the broader options 

market.15 The addition of the four 

scenarios representing recent market 

events, previously uncaptured in OCC’s 

Sufficiency stress testing, would widen 

the set of Sufficiency Scenarios to 

include such events, and further reduce 

the likelihood of drawing upon 

surviving Clearing Members’ Clearing 

Fund collateral in the event that similar 

market scenarios occur. Therefore, the 

Commission believes that the proposal 

is consistent with assuring the 

safeguarding of securities and funds 

which are in OCC’s custody or control. 

The Commission believes, therefore, 

that the proposal to elevate the four 

Informational Scenarios to Sufficiency 

Scenarios is consistent with the 

requirements of Section 17A(b)(3)(F) of 

the Exchange Act.16

B. Consistency With Rule 17Ad–22(e)(4) 

Under the Exchange Act 

Rule 17Ad–22(e)(4)(vi) under the 

Exchange Act requires OCC to establish, 

implement, maintain, and enforce 

written policies and procedures 

reasonably designed to effectively 

identify, measure, monitor, and manage 

its credit exposures to participants and 

those arising from its payment, clearing, 

and settlement processes by testing the 

sufficiency of its total financial 

resources available to meet the 

minimum financial resource 

requirements under paragraphs Rules 

17Ad–22(e)(4)(i) through (iii).17 Such 

testing must include, among other 

things, conducting stress testing of 

OCC’s total financial resources once 

each day using standard predetermined 

parameters and assumptions.18

After reviewing and assessing the 

proposal, the Commission believes that 

the proposed changes described above 

are consistent with Rule 17Ad– 

22(e)(4)(vi) under the Exchange Act. As 

it stated in 2018, the Commission 

believes that expanding the scope of 

stress scenarios against which OCC 

monitors its financial resources would 

increase the likelihood that OCC 

maintains sufficient financial resources 

at all times.19 Similarly, the 

Commission believes that the elevation 

of the four Informational Scenarios to 

Sufficiency Scenarios is consistent with 

Rule 17Ad–22(e)(4)(vi) because the 

addition of the four Sufficiency 

Scenarios would enhance OCC’s 

financial resources testing, and the 

broader scope of stress scenarios would 

increase the chances that OCC 

maintains sufficient financial resources. 

The Commission also believes that the 

daily testing of OCC’s financial 

resources against the Sufficiency 

Scenarios, including the four proposed 

Sufficiency Scenarios based on the 

March 2020 market events, would be 

consistent with the daily stress testing 

requirements of Rule 17Ad– 

22(e)(4)(vi)(A), as described above. 

The Commission also believes that the 

proposed introduction of stress scenario 

variations accounting for specific 

wrong-way risk exposures arising from 

cleared positions on issued ETNs would 

be consistent with the requirements of 

Rules 17Ad–22(e)(4)(i), (iii), and (vi).20

These Rules require that a covered 

clearing agency establish, implement, 

maintain and enforce written policies 

and procedures reasonably designed to 

effectively identify, measure, monitor, 

and manage its credit exposures to 

participants and those arising from its 

payment, clearing, and settlement 

processes, including by: (1) Maintaining 

sufficient financial resources to cover its 

credit exposure to each participant fully 

with a high degree of confidence; (2) 

maintaining additional financial 

resources at the minimum to enable it 

to cover a wide range of foreseeable 

stress scenarios that include, but are not 

limited to, the default of the participant 

family that would potentially cause the 

largest aggregate credit exposure for the 

covered clearing agency in extreme but 

plausible market conditions; and (3) 

testing the sufficiency of its total 

financial resources available to meet 

these minimum financial resource 

requirements. In its 2019 approval of 

enhancements to OCC’s Clearing Fund 

and stress testing methodology, the 

Commission noted that OCC’s 

introduction of new stress test scenarios 

designed to capture single wrong-way 

risk exposures for Clearing Memberissued ETNs would be consistent with 

the requirements of Rules 17Ad– 

22(e)(4)(i), (iii), and (vi), because it 

would enable OCC to test its total 

financial resources and to call for 

additional resources as necessary to 

ensure the resources it holds would be 

sufficient to enable OCC to cover 

exposures arising under the relevant 

stress scenarios.21 Likewise, for the 

current proposal, the Commission 

believes that OCC’s introduction of four 

Sufficiency Scenarios reflecting the 

market events of March 2020, including 

its specific wrong-way risk exposure 

variations, would also enable OCC to 

more accurately measure its credit risks 

and better test the sufficiency of its 

overall financial resources. The 

proposed rule change would thus 

enhance OCC’s overall framework for 

measuring and managing its credit risks 

and would reduce the risk that OCC’s 

financial resources would be 

insufficient in the event of a Clearing 

Member default consistent with Rules 

17Ad–22(e)(4)(i), (iii), and (vi). 

The Commission believes, therefore, 

that the proposal to elevate the four 

Informational Scenarios to Sufficiency 

Scenarios is consistent with the 

requirements of Rule 17Ad–22(e)(4) 

under the Exchange Act.22

C. Accelerated Approval of the 

Proposed Rule Change 

In its filing, OCC requests that the 

Commission grant accelerated approval 

of the Proposed Rule Change pursuant 

to Secton 19(b)(C)(iii) of the Exchange 

Act.23 Under Section 19(b)(2)(C)(iii) of 

the Exchange Act, the Commission may 

grant accelerated approval of a proposed 

rule change if the Commission finds 

good cause for doing so.24 OCC believes 

that there is good cause for the 

Commission to accelerate effectiveness 

because the proposed changes are 

designed to improve OCC’s ability to 

measure, monitor and manage its credit 

exposures to its participants.25 Further, 

OCC believes that implementation of the 

proposed Sufficiency Scenarios would 

promote the protection of investors and 

the public interest by enabling OCC to 

test the sufficiency of its prefunded 

financial resources against a recent and 

significant period of market volatility 

and enhancing OCC’s ability to manage 


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26 Id. 

27 15 U.S.C. 78s(b)(2)(C)(iii). 

28 In approving this Proposed Rule Change, the 

Commission has considered the proposed rules’ 

impact on efficiency, competition, and capital 

formation. See 15 U.S.C. 78c(f). 

29 15 U.S.C. 78s(b)(2). 

30 17 CFR 200.30–3(a)(12). 

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

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’’). 

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’’). 

the risks it faces as a systemically 

important financial market utility.26

The Commission finds good cause, 

pursuant to Section 19(b)(2)(C)(iii) of 

the Exchange Act,27 for approving the 

Proposed Rule Change on an accelerated 

basis, prior to the 30th day after the date 

of publication of notice in the Federal 

Register, because accelerated approval 

of this proposed rule change will 

facilitate the prompt and accurate 

clearance and settlement of options 

contracts by ensuring that OCC has 

expanded the range of stress scenarios 

to measure, monitor, and manage its 

credit exposures to its participants in a 

timely fashion, thereby immediately 

putting OCC in a better position to 

manage the risks it faces as a 

systemically important financial market 

utility. 

IV. Conclusion 

On the basis of the foregoing, the 

Commission finds that the Proposed 

Rule Change is consistent with the 

requirements of the Exchange Act, and 

in particular, the requirements of 

Section 17A of the Exchange Act 28 and 

the rules and regulations thereunder. 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Exchange Act,29

that the Proposed Rule Change (SR– 

OCC–2020–015) be, and hereby is, 

approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.30

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2020–29217 Filed 1–5–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–90837; File No. SR– 

NASDAQ–2020–099] 

Self-Regulatory Organizations; The 

Nasdaq Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Amend 

General 7: Consolidated Audit Trail 

Compliance, the Exchange’s 

Compliance Rule 

December 31, 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 

30, 2020, The Nasdaq Stock Market LLC 

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

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘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 amend 

General 7: Consolidated Audit Trail 

Compliance, 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 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 

The purpose of this proposed rule 

change is to amend the General 7: 

Consolidated Audit Trail Compliance 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’’). 

(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 


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