Notice2023-15573
Proposed Collection; Comment Request: Rule 15c6-2
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
July 24, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 140 (Monday, July 24, 2023)</title>
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[Federal Register Volume 88, Number 140 (Monday, July 24, 2023)]
[Notices]
[Pages 47526-47528]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-15573]
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SECURITIES AND EXCHANGE COMMISSION
[SEC File No. 270-XXX, OMB Control No. 3235-XXXX]
Proposed Collection; Comment Request: Rule 15c6-2
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'') is soliciting comments on the collection of
information provided for in Rule 15c6-2 (17 CFR. 240.15c6-2) under the
Securities Exchange Act of 1934 (``Exchange Act'') (15 U.S.C. 78a et
seq.). The Commission will submit the collection of information to the
Office of Management and Budget (``OMB'') for approval. The title of
the information collection is ``Rule 15c6-2.'' 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.
Rule 15c6-2 was adopted as part of the final rules to shorten the
standard settlement cycle for securities transactions from two business
days after the transaction date to one business day following the
transaction date. The compliance date for adopted Rule 15c6-2 is May
28, 2024. Certain provisions of Rule 15c6-2 contain ``collection of
information'' requirements within the meaning of the PRA.\1\ The
requirements for this collection of information is mandatory for any
broker or dealer (``broker-dealer'') engaging in the allocation,
confirmation, or affirmation process with another party or parties to
achieve settlement of a securities transaction that is subject to the
requirements of Sec. 240.15c6-1(a) to either enter into written
agreements as specified in the rule or establish, maintain, and enforce
written policies and procedures reasonably designed to address certain
objectives related to completing allocations, confirmations, and
affirmations as soon as technologically practicable and no later than
the end of trade date.\2\
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\1\ See 44 U.S.C. 3501 et seq.
\2\ See 17 CFR 240.15c6-2; Exchange Act Release No. 96930 (Feb.
15, 2023) 88 FR 13872 (Mar. 6, 2023) (``Rule 15c6-2 Adopting
Release''); see also Exchange Act Release No. 94196 (Feb. 9, 2022),
87 FR 10436 (Feb. 24, 2022) (``Rule 15c6-2 Proposing Release'').
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Specifically, for a broker-dealer that determines to establish,
maintain, and enforce written policies and procedures pursuant to Rule
15c6-2(a), Rule 15c6-2(b) requires that such policies and procedures
must be reasonably designed to (1) identify and describe any technology
systems, operations, and processes that the broker-dealer uses to
coordinate with other relevant parties, including investment advisers
and custodians, to ensure completion of the allocation, confirmation,
or affirmation process for the transaction; (2) set target time frames
on trade date for completing the allocation, confirmation, and
affirmation for the transaction; (3) describe the procedures that the
broker-dealer will follow to ensure the prompt communication of trade
information, investigate any discrepancies in trade information, and
adjust trade information to help ensure that the allocation,
confirmation, and affirmation can be completed by the target time
frames on trade date; (4) describe how the broker-dealer plans to
identify and address delays if another party, including an investment
adviser or a custodian, is not promptly completing the allocation or
affirmation for the transaction, or if the broker-dealer experiences
delays in promptly completing the confirmation; and (5) measure,
monitor, and document the rates of allocations, confirmations, and
affirmations completed as soon as technologically practicable and no
later than the end of the day on trade date.
The purpose of the collection under Rule 15c6-2 is to ensure that
parties to institutional transactions--that is, transactions where a
broker-dealer or its customer must engage with agents of the customer,
including the customer's investment adviser or its securities
custodian, to prepare a transaction for settlement--can ensure the
completion of the allocation, confirmation, and affirmation process as
soon as technologically practicable and no later than the end of the
day on trade date.
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The respondents to the collection of information are broker-dealers
that are parties to institutional trades. As of December 31, 2021,
3,508 broker-dealers were registered with the Commission.\3\ Of those,
approximately 143 broker-dealers are participants of the Depository
Trust Company (``DTC''),\4\ a clearing agency registered with the
Commission that provides central securities depository services for
transactions in U.S. equity securities. Participants in DTC can
facilitate the settlement of securities transactions on behalf of their
customers. For example, broker-dealers that participate in DTC are
often referred to as ``clearing brokers'' within the securities
industry. In addition to broker-dealers, DTC participants include bank
custodians that may also hold securities on behalf of institutional
customers. Among other things, DTC facilitates the settlement of
securities transactions using the delivery-versus-payment (``DVP'') and
receipt-versus-payment (``RVP'') methods, both of which are commonly
used by buyers and sellers to settle an institutional transaction once
the parties have completed the allocation, confirmation, and
affirmation process. Because DTC is the only clearing agency that
provides central securities depository services for U.S. equities, the
Commission believes that the set of participants at DTC that are
broker-dealers are a useful, if partial, estimate of broker-dealers
that participate in the allocation, confirmation, and affirmation
process and therefore of broker-dealers that would be subject to the
requirements of Rule 15c6-2.
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\3\ This estimate is derived from FOCUS Report data as of
December 31, 2021.
\4\ See DTCC, DTC Member Directories, <a href="https://www.dtcc.com/client-center/dtc-directories">https://www.dtcc.com/client-center/dtc-directories</a> (last updated July 1, 2023).
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In addition, other broker-dealers may participate in the
allocation, confirmation, and affirmation process but, because they do
not maintain status as a participant in DTC, rely on commercial
relationships with DTC participants (i.e., clearing brokers) to
facilitate final settlement of their institutional transactions. Using
annual statistics compiled by the Financial Industry Regulatory
Authority (``FINRA''), the Commission estimates that approximately 268
additional broker-dealers may serve institutional customers.\5\
Accordingly, the Commission estimates that approximately 411 broker-
dealers would be subject to the requirements of Rule 15c6-2.
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\5\ Specifically, statistics compiled by FINRA suggest that
approximately 256 small firms and 12 medium-sized firms in the
``Trading and Execution'' category perform ``Institutional
Brokerage.'' FINRA, 2022 FINRA Industry Snapshot 33, 34 (2022),
<a href="https://www.finra.org/sites/default/files/2022-03/2022-industry-snapshot.pdf">https://www.finra.org/sites/default/files/2022-03/2022-industry-snapshot.pdf</a>.
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Rule 15c6-2 will impose both initial and ongoing burdens. The
extent to which a respondent will incur a burden to comply with the
collection of information under Rule 15c6-2 will depend on the extent
to which the broker-dealer determines that its policies and procedures,
as opposed to its written agreements, will be used to comply with the
rule and how any existing policies and procedures for ensuring timely
settlement would need to be modified to address same-day affirmation.
As a general matter, most broker-dealers maintain policies and
procedures to ensure the timely settlement of their transactions, and
the securities industry considers achieving ``same-day affirmation'' an
industry best practice. Nonetheless, the Commission believes that
respondent broker-dealers will need to evaluate existing policies and
procedures, identify any gaps, and then update their policies and
procedures to address any gaps identified. Accordingly, the Commission
estimates that respondent broker-dealers would incur an aggregate one-
time burden of approximately 240 hours \6\ to create policies and
procedures required under the rule, and that the internal cost (or
monetized value of the hour burden) of this one-time burden per broker-
dealer would be $88,880.\7\
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\6\ This figure was calculated as follows: (Assistant General
Counsel for 20 hours + Compliance Attorney for 120 hours + Senior
Risk Management Specialist for 20 hours + Risk Management Specialist
for 80 hours) = 240 hours x 411 respondents = 98,640 hours.
\7\ This figure was calculated as follows: (Assistant General
Counsel at $543/hour x 20 hours = $10,860) + (Compliance Attorney at
$426/hour x 120 hours = $51,120) + (Senior Risk Management
Specialist at $417/hour x 20 hours = $8,340) + (Risk Management
Specialist at $232/hour x 80 hours = $18,560) = $88,880 x 411
respondents = $36,529,680.
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Rule 15c6-2 also imposes ongoing burdens on a respondent broker-
dealer as follows: (i) ongoing monitoring and compliance activities
with respect to the written policies and procedures required by the
proposed rule; and (ii) ongoing documentation activities with respect
to its obligations to measure, monitor, and document the rates of
allocations, confirmations, and affirmations completed as soon as
technologically practicable and no later than the end of the day on
trade date. The Commission estimates that the ongoing activities
required by Rule 15c6-2 would impose an aggregate annual burden on a
respondent broker-dealer of 480 hours,\8\ and an internal cost (or
monetized value of the hour burden) per broker-dealer of $172,416.\9\
The total industry internal cost is estimated to be approximately
$107M.\10\
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\8\ This figure was calculated as follows: (Assistant General
Counsel for 48 hours + Compliance Attorney for 192 hours + Senior
Risk Management Specialist for 48 hours + Risk Management Specialist
for 192 hours) = 480 hours x 411 respondents = 197,280 hours.
\9\ This figure was calculated as follows: (Assistant General
Counsel at $543/hour x 48 hours = $26,064) + (Compliance Attorney at
$426/hour x 192 hours = $81,792) + (Senior Risk Management
Specialist at $417/hour x 48 hours = $20,016) + (Risk Management
Specialist at $232/hour x 192 hours = $44,544) = $172,416 x 411
respondents = $70,862,976.
\10\ This figure was calculated as follows: $36,529,680
(industry one-time burden) + $70,862,976 (industry ongoing burden) =
$107,392,656.
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Rule 15c6-2 imposes a recordkeeping requirement on broker-dealers
to maintain policies and procedures consistent with the rule. Where the
Commission requests that a broker-dealer produce records retained
pursuant to the requirements of Rule 15c6-2, a broker-dealer can
request confidential treatment of the information. If such confidential
treatment request is made, the Commission anticipates that it will keep
the information confidential subject to applicable law.
Pursuant to Exchange Act Rule 17a-4(b)(7), a broker or dealer
registered pursuant to section 15 of the Exchange Act must preserve for
a period of not less than three years, the first two years in an easily
accessible place, all written agreements (or copies thereof) entered
into by such member, broker or dealer relating to its business as such,
including agreements with respect to any account.\11\
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\11\ 17 CFR 240.17a-4(b)(7). The title of the information
collection for 17 CFR 240.17a-4 is ``Records to be Preserved by
Broker-Dealers'' (OMB Control No. 3235-0279).
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Pursuant to 17 CFR 240.17a-4(e)(7), a broker or dealer registered
pursuant to section 15 of the Exchange Act must maintain and preserve
in an easily accessible place each compliance, supervisory, and
procedures manual, including any updates, modifications, and revisions
to the manual, describing the policies and practices of the member,
broker or dealer with respect to compliance with applicable laws and
rules, and supervision of the activities of each natural person
associated with the member, broker or dealer until three years after
the termination of the use of the manual.\12\
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\12\ 17 CFR 240.17a-4(e)(7).
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Written comments are invited on: (a) whether the proposed
collection of information is necessary for the proper performance of
the functions of the Commission, including whether the
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information shall have practical utility; (b) the accuracy of the
Commission's estimates of the burden of the proposed collection of
information; (c) ways to enhance the quality, utility, and clarity of
the information to be collected; and (d) ways to minimize the burden of
the collection of information on respondents, including through the use
of automated collection techniques or other forms of information
technology. Consideration will be given to comments and suggestions
submitted in writing by September 22, 2023.
Please direct your written comments to: David Bottom, Director/
Chief Information Officer, Securities and Exchange Commission, c/o John
Pezzullo, 100 F Street NE, Washington, DC 20549, or send an email to:
<a href="/cdn-cgi/l/email-protection#cb9b998a9486aaa2a7a9a4b38bb8aea8e5aca4bd"><span class="__cf_email__" data-cfemail="46161407190b272f2a24293e0635232568212930">[email protected]</span></a>.
Dated: July 18, 2023.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-15573 Filed 7-21-23; 8:45 am]
BILLING CODE 8011-01-P
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