Notice2022-18982
Submission for OMB Review; Comment Request; Extension: Rule 18a-2
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
September 2, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 170 (Friday, September 2, 2022)</title>
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[Federal Register Volume 87, Number 170 (Friday, September 2, 2022)]
[Notices]
[Pages 54272-54273]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-18982]
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SECURITIES AND EXCHANGE COMMISSION
[SEC File No. 270-652, OMB Control No. 3235-0699]
Submission for OMB Review; Comment Request; Extension: Rule 18a-2
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
[[Page 54273]]
Office of Management and Budget (``OMB'') a request for approval of
extension of the previously approved collection of information provided
for in Rule 18a-2 (17 CFR 240.18a-2), under the Securities Exchange Act
of 1934 (15 U.S.C. 78a et seq.) (``Exchange Act'').
Rule 18a-2 establishes capital requirements for nonbank major
security-based swap participants that are also not registered as
broker-dealers (``nonbank MSBSPs''). In particular, a nonbank MSBSP is
required at all times to have and maintain positive tangible net worth.
Under Rule 18a-2, nonbank MSBSPs also need to comply with Exchange
Act Rule 15c3-4 (17 CFR 240.15c3-4), which requires OTC derivatives
dealers and other firms subject to its provisions to establish,
document, and maintain a system of internal risk management controls to
assist the firm in managing the risk associated with its business
activities, including market, credit, leverage, liquidity, legal, and
operational risks.
The staff previously estimated that 5 or fewer nonbank entities
would register with the Commission as MSBSPs. The staff continues to
estimate that 5 or fewer nonbank entities will register with the
Commission as MSBSPs, although currently no such entities have
registered. These nonbank MSBSPs will be required to establish,
document, and regularly review and update risk management control
systems with respect to market, credit, leverage, liquidity, legal and
operational risks. Based on similar estimates for OTC derivatives
dealers, the Commission staff believes that each nonbank MSBSP will
spend approximately 2,000 hours to implement its risk management
control system, resulting in a one-time industry-wide hour burden of
approximately 10,000 recordkeeping hours, or approximately 3,333 hours
per year when annualized over 3 years.\1\
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\1\ 5 MSBSPs x 2,000 hours = 10,000 hours. This one-time burden
annualized over a 3-year period is approximately 3,333 hours
industry-wide (10,000 hours/3 = 3,333.33 rounded down to 3,333).
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Based on similar estimates for OTC derivatives dealers, the staff
further estimates that each of these firms will spend approximately 250
hours per year reviewing and updating its risk management control
systems, resulting in an ongoing annual industry-wide hour burden of
approximately 1,250 recordkeeping hours per year.\2\
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\2\ 5 MSBSPs x 250 hours/year = 1,250 hours/year.
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Taken together, the total industry-wide recordkeeping hour burden
is approximately 4,583 hours per year.\3\
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\3\ 2,000 hours/3 years = 3,333.33 + 1,250 hours = 4,583.33
hours rounded down to 4,583.
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Because nonbank MSBSPs may not initially have the systems or
expertise internally to meet the risk management requirements of Rule
18a-2, these firms will likely hire an outside risk management
consultant to assist them in implementing their risk management
systems. The staff estimates that each firm will hire an outside
management consultant for approximately 200 hours at a cost of
approximately $400 per hour, for a one-time external management
consulting cost of approximately $80,000 per respondent, and a total
one-time industry management consulting cost of approximately $400,000,
or approximately $133,333 per year \4\ when annualized over 3 years.
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\4\ 5 MSBSPs x 200 hours x $400/hour = $400,000. Annualized over
three years, this industry-wide burden is approximately $133,333 per
year ($400,000/3 years = $133,333.33 rounded down to $133,333).
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Nonbank MSBSPs may incur start-up costs to comply with Rule 18a-2,
including information technology costs. The information technology
systems of a nonbank MSBSP may be in varying stages of readiness to
enable these firms to meet the requirements of Rule 18a-2, so the cost
of modifying their information technology systems could vary
significantly among firms. Based on estimates for similar collections
of information,\5\ the Commission staff expects that each nonbank MSBSP
will spend an average of approximately $16,000 for one-time initial
hardware and software external expenses, for a total one-time industry-
wide external information technology cost of approximately $80,000, or
approximately $26,667 per year \6\ when annualized over 3 years. Based
on the estimates for these similar collections of information, the
average ongoing external cost to meet the information technology
requirements of Rule 18a-2 will be approximately $20,500 per nonbank
MSBSP. This will result in an ongoing annual industry-wide external
information technology cost of approximately $102,500.\7\ Taken
together, the total industry-wide information technology related cost
burden is approximately $129,167 per year.\8\
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\5\ See Risk Management Controls for Broker or Dealers with
Market Access, Exchange Act Release No. 6321 (Nov. 3, 2010), 75 FR
69792, 69814 (Nov. 15, 2010).
\6\ 5 MSBSPs x $16,000/3 years = $26,666.666, rounded up to
$26,667.
\7\ 5 MSBSP x $20,500 = $102,500.
\8\ $80,000/3 years + $102,500 = $129,166.667 rounded up to
$129,167.
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Therefore, the total industry-wide recordkeeping cost burden is
approximately $262,500 per year ($133,333 + $129,167 = $262,500).
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 October 3, 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#87d7d5c6d8cae6eeebe5e8ffc7f4e2e4a9e0e8f1"><span class="__cf_email__" data-cfemail="356567746a78545c59575a4d754650561b525a43">[email protected]</span></a>.
Dated: August 29, 2022.
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-18982 Filed 9-1-22; 8:45 am]
BILLING CODE 8011-01-P
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