[Federal Register Volume 86, Number 10 (Friday, January 15, 2021)]
[Notices]
[Pages 4132-4137]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-00821]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90887; File No. SR-FINRA-2021-001]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Amend the FINRA Rule 6800 Series (Consolidated 
Audit Trail Compliance Rule) Relating to Allocation Reporting 
Requirements

January 11, 2021.
    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 January 4, 2021, the Financial Industry Regulatory Authority, Inc. 
(``FINRA'') 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 FINRA. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    FINRA is proposing to amend the FINRA Rule 6800 Series, FINRA'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\
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    \3\ Unless otherwise specified, capitalized terms used in this 
rule filing are defined as set forth in the Compliance Rule.
    \4\ See Securities Exchange Act Release No. 90223 (October 19, 
2020), 85 FR 67576 (October 23, 2020) (``Allocation Exemptive 
Order'').
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    The text of the proposed rule change is available on FINRA's 
website at http://www.finra.org, at the principal office of FINRA 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, FINRA 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. FINRA 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 Rule 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'').
(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 
SRO-Assigned 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, FINRA 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 SRO-Assigned Market Participant 
Identifier of the clearing broker or prime broker, if applicable.
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    \5\ Section 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.''
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    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

[[Page 4133]]

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.
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    \6\ See letter from the Participants to Vanessa Countryman, 
Secretary, Commission, dated August 27, 2020 (the ``Exemption 
Request'').
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    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.
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    \7\ ``A step-out allows a member 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 Trade Reporting Frequently Asked Questions, Section 
301, available at: www.finra.org/filing-reporting/market-transparency-reporting/trade-reporting-faq.
    \8\ Correspondent 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: www.dtcc.com/clearing-services/equities-tradecapture/correspondent-clearing.
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(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 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.
    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.
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    \9\ See Securities Exchange Act Release No. 67457 (July 18, 
2012), 77 FR 45722, 45748 (August 1, 2012).
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(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 SRO-Assigned 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 required to report the ultimate 
allocation, which the Participants believe would provide more complete 
information.
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    \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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    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

[[Page 4134]]

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; (4) the price per share/contracts of shares/contracts 
allocated; (5) the side of shares/contracts allocated; (6) the number 
of shares/contracts allocated; and (7) 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.
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    \11\ The 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.
    \12\ FINRA 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.
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(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, 
FINRA proposes the following changes to its Compliance Rule to 
implement the reporting requirements of the Allocation Alternative.
(a) Definition of Allocation
    FINRA proposes to add a definition of ``Allocation'' as new 
paragraph (c) to Rule 6810.\13\ Proposed paragraph (c) of Rule 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.
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    \13\ FINRA proposes to renumber the definitions in Rule 6810 to 
accommodate the addition of this new definition of ``Allocation'' 
and the new definition of ``Client Account'' discussed below.
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(b) Definition of Allocation Report
    FINRA proposes to amend the definition of ``Allocation Report'' set 
forth in Rule 6810(c) (to be renumbered as Rule 6810(d)) to reflect the 
requirements of the Allocation Exemption. Rule 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.

    FINRA 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 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, FINRA proposes to amend Rule 6810(c) (to be 
renumbered as Rule 6810(d)) to apply to contracts, as well as shares. 
Specifically, FINRA 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, 
FINRA

[[Page 4135]]

proposes to require these additional elements in Allocation Reports. 
Specifically, FINRA proposes to amend the definition of ``Allocation 
Report'' in Rule 6810(c) (to be renumbered as Rule 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, step-out, 
correspondent flip, allocation to a firm owned or controlled 
account, or other non-reportable 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, FINRA 
proposes to eliminate Rule 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 6830(a)(2)(F) as discussed 
below.
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    \14\ FINRA proposes to renumber Rule 6830(a)(2)(A)(ii) and (iii) 
as Rule 6830(a)(2)(A)(i) and (ii) in light of the proposed deletion 
of Rule 6830(a)(2)(A)(i).
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(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.
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    \15\ As 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.
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    In accordance with the Allocation Exemption, FINRA proposes to add 
proposed Rule 6830(a)(2)(F) to the Compliance Rule. Proposed Rule 
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 broker-dealers. For example, Allocation Reports 
would be required for allocations to registered investment advisor and 
money manager accounts. The Commission further believes that the 
proposed approach should facilitate regulators' ability to distinguish 
Allocation Reports relating to allocations to client accounts from 
other Allocation Reports because Allocations to accounts other than 
client accounts would have to be identified as such. This approach 
could reduce the time CAT Reporters expend to comply with CAT reporting 
requirements and lower costs by allowing broker-dealers to use existing 
business practices.
    To clarify that an Industry Member must report an Allocation Report 
solely for Allocations to a client account, proposed Rule 6830(a)(2)(F) 
specifically references ``Client Accounts,'' as discussed above. In 
addition, FINRA proposes to add a definition of ``Client Account'' as 
proposed Rule 6810(l). Proposed Rule 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
    FINRA also proposes to amend Rule 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 
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 ``SRO-Assigned Market Participant Identifier 
of the clearing broker or prime broker, if applicable.'' FINRA 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,

[[Page 4136]]

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.
    FINRA has filed the proposed rule change for immediate 
effectiveness. The proposed rule change will be operative 30 days after 
the date of the filing.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\16\ which requires, among 
other things, that FINRA 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 15A(b)(9) of the Act,\17\ which requires 
that FINRA rules not impose any burden on competition that is not 
necessary or appropriate.
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    \16\ 15 U.S.C. 78o-3(b)(6).
    \17\ 15 U.S.C. 78o-3(b)(9).
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    FINRA believes that the proposed rule change is consistent with the 
Act because it is consistent with, and implements, the Allocation 
Exemption, and is designed to assist FINRA 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 the proposed rule 
change implements the Plan, and applies specific requirements to 
Industry Members, FINRA believes that it furthers the objectives of the 
Plan, as identified by the SEC, and is therefore consistent with the 
Act.
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    \18\ See Securities Exchange Act Release No. 79318 (November 15, 
2016), 81 FR 84696, 84697 (November 23, 2016).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    FINRA 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. FINRA notes that the proposed 
rule change is consistent with the Allocation Exemption and is designed 
to assist FINRA in meeting its regulatory obligations pursuant to the 
Plan. FINRA also notes that the proposed rule change will apply equally 
to all Industry Members. FINRA anticipates no new costs to member firms 
reporting to the CAT as a result of this proposed rule change, because 
any related costs have already been built in the technical 
specifications previously determined and shared broadly in conformance 
with the CAT NMS Plan and the Allocation Exemption. In addition, FINRA 
and all national securities exchanges 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

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing 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 for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \19\ and Rule 19b-
4(f)(6) thereunder.\20\
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    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 17 CFR 240.19b-4(f)(6).
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    At any time within 60 days of the filing of the 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 to 
determine whether the proposed rule 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

    <bullet> Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#b3c1c6dfd69ed0dcdeded6ddc7c0f3c0d6d09dd4dcc5"><span class="__cf_email__" data-cfemail="e193948d84cc828e8c8c848f9592a1928482cf868e97">[email protected]</span></a>. Please include 
File Number SR-FINRA-2021-001 on the subject line.

Paper Comments

    <bullet> 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-FINRA-2021-001. 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

[[Page 4137]]

inspection and copying at the principal office of FINRA. 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-FINRA-2021-001, and should be submitted 
on or before February 5, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-00821 Filed 1-14-21; 8:45 am]
BILLING CODE 8011-01-P


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