Notice2022-15316
Submission for OMB Review; Comment Request: Extension: Rule 18a-3
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
July 19, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 137 (Tuesday, July 19, 2022)</title>
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[Federal Register Volume 87, Number 137 (Tuesday, July 19, 2022)]
[Notices]
[Pages 43099-43100]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-15316]
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SECURITIES AND EXCHANGE COMMISSION
[SEC File No. 270-651, OMB Control No. 3235-0702]
Submission for OMB Review; Comment Request: Extension: Rule 18a-3
Upon Written Request, Copies Available From: Securities and Exchange
Commission, Office of FOIA Services, 100 F Street NE, Washington, DC
20549-2736
Notice is hereby given that pursuant to the Paperwork Reduction Act
of 1995 (``PRA'') (44 U.S.C. 3501 et seq.), the Securities and Exchange
Commission (``Commission'') has submitted to the Office of Management
and Budget (``OMB'') a request for approval of extension of the
previously approved collection of information provided for in Rule 18a-
3 (17 CFR 240.18a-3), under the Securities Exchange Act of 1934 (15
U.S.C. 78a et seq.) (``Exchange Act'').
Rule 18a-3 establishes minimum margin requirements for nonbank
security-based swap dealers (``SBSDs'') and nonbank major security-
based swap participants (``MSBSPs'') for non-cleared security-based
swaps. Under paragraph (e) of Rule 18a-3 nonbank SBSDs are required to
monitor the risk of each account that holds non-cleared security based
swaps for a counterparty and to establish, maintain, and document
procedures and guidelines for monitoring the risk of accounts as part
of its risk management control system required under Exchange Act Rule
15c3-4. In addition, paragraph (d)(2) of Rule 18a-3 provides that a
nonbank SBSD seeking approval to use a model to calculate initial
margin will be subject to an application process consistent with
Exchange Act Rule 15c3-1e and paragraph (d) of Exchange Act Rule 18a-1,
as applicable, governing the use of internal models to compute net
capital.\1\
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\1\ While Rule 18a-3 contains requirements that apply to both
nonbank SBSDs and MSBSPs, the particular requirements that
constitute a collection of information relate only to nonbank SBSDs.
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The total annual hour burden associated with Rule 18a-3 is
approximately 2,243 hours calculated as follows:
The Commission staff estimates that there are 7 nonbank SBSDs that
are subject to Rule 18a-3. The staff further estimates that each would
spend an average of approximately 210 hours establishing and
documenting their Rule 18a-3 counterparty risk monitoring procedures,
for a one-time industry-wide hour burden of approximately 1,470
recordkeeping hours or 490 hours per year when annualized over three
years.\2\ In addition, the staff estimates that each nonbank SBSD would
spend an average of approximately 60 hours per year reviewing risks
associated with its counterparties, for an annual industry-wide burden
of approximately 420 recordkeeping hours.\3\ Taken together, the annual
industry-wide hour burden is approximately 910 hours.\4\
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\2\ 7 nonbank SBSDs x 210 hours = 1,470 hours. These amounts are
annualized over three years resulting in 70 (210 hours/3 years)
hours per nonbank SBSD per year and an industry wide annual burden
of 490 recordkeeping hours.
\3\ 7 nonbank SBSDs x 60 hours = 420 hours.
\4\ 490 hours + 420 hours = 910 hours.
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The Commission estimates it will take a nonbank SBSD approximately
50 hours to prepare and submit an application to the Commission to seek
authorization to use an internal model to calculate initial margin. The
staff estimates that five non-bank SBSDs have sought Commission
approval to use an internal model to calculate initial margin,
resulting in a total industry-wide one-time hour burden of
approximately 250 hours or approximately 83 hours per year when
annualized over three years.\5\ The Commission also estimates that each
nonbank SBSD will spend approximately 250 hours per year reviewing,
updating, and back testing their initial margin model, resulting in a
total industry-wide annual hour burden of approximately 1,250
recordkeeping hours.\6\ Taken together, the Commission estimates an
annual industry-wide hour burden of approximately 1,333 hours.\7\
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\5\ 5 nonbank SBSDs x 50 hours = 250 hours. These amounts are
annualized over three years resulting in 16.67 (50 hours/3 years)
hours per nonbank SBSD per year and an industry wide annual burden
of 83.33 recordkeeping hours, rounded down to 83 hours.
\6\ 5 nonbank SBSDs x 250 hours = 1,250 hours.
\7\ (250 hours/3 years) + 1,250 hours = 1,333.33 hours, rounded
down to 1,333 hours.
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The total annual hour burden associated with Rule 18a-3 is thus
approximately 2,243 hours (910 hours + 1,333 hours).
The total annual cost burden associated with Rule 18a-3 is
approximately $3,333 calculated as follows:
The 7 respondents subject to the collection of information may
incur start-up costs in order to comply with this collection of
information. These costs may vary depending on the size and complexity
of the nonbank SBSD. In addition, the start-up costs may be less for
the 2 nonbank SBSD respondents also registered as broker-dealers
because these firms may already be subject to similar requirements with
respect to other margin rules. For the remaining 5 nonbank SBSDs,
because these written procedures may be novel undertakings for these
firms, the Commission staff assumes these nonbank SBSDs will have their
written risk analysis methodology reviewed by outside counsel.
Therefore, the staff estimates that these 5 nonbank SBSDs will engage
an outside counsel to review their written risk analysis methodology,
at a rate of approximately $400 per hour for 5 hours (i.e., $2,000 in
legal costs). This will result in a one-time industry-wide external
recordkeeping cost of approximately $10,000, or
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approximately $3,333 \8\ annualized over 3 years.
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\8\ 5 nonbank SBSDs x $400/hour x 5 hours = $10,000. This amount
annualized is $3,333.33 per nonbank SBSD, rounded down to $3,333.
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An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information under the PRA unless it
displays a currently valid OMB control number.
The public may view background documentation for this information
collection at the following website: <a href="http://www.reginfo.gov">www.reginfo.gov</a>. Find this
particular information collection by selecting ``Currently under 30-day
Review--Open for Public Comments'' or by using the search function.
Written comments and recommendations for the proposed information
collection should be sent by August 18, 2022 to (i) <a href="http://www.reginfo.gov/public/do/PRAMain">www.reginfo.gov/public/do/PRAMain</a> and (ii) David Bottom, Director/Chief Information
Officer, Securities and Exchange Commission, c/o John Pezzullo, 100 F
Street NE, Washington, DC 20549, or by sending an email to:
<a href="/cdn-cgi/l/email-protection#48181a0917052921242a2730083b2d2b662f273e"><span class="__cf_email__" data-cfemail="722220332d3f131b1e101d0a320117115c151d04">[email protected]</span></a>.
Dated: July 13, 2022.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-15316 Filed 7-18-22; 8:45 am]
BILLING CODE 8011-01-P
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