Notice2024-25924
Proposed Collection; Comment Request; Extension: Rule 606 of Regulation NMS
Primary source
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Published
November 8, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 217 (Friday, November 8, 2024)</title>
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[Federal Register Volume 89, Number 217 (Friday, November 8, 2024)]
[Notices]
[Pages 88841-88842]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-25924]
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SECURITIES AND EXCHANGE COMMISSION
[SEC File No. 270-489, OMB Control No. 3235-0541]
Proposed Collection; Comment Request; Extension: Rule 606 of
Regulation NMS
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 (44 U.S.C. 3501 et seq.) (``PRA''), the Securities and
Exchange Commission (``Commission'') is soliciting comments on the
existing collection of information
[[Page 88842]]
provided for in Rule 606 of Regulation NMS (``Rule 606'') (17 CFR
242.606), under the Securities Exchange Act of 1934 (15 U.S.C. 78a et
seq.). The Commission plans to submit this existing collection of
information to the Office of Management and Budget (``OMB'') for
extension and approval.
Rule 606 (formerly known as Rule 11Ac1-6) requires require
disclosure by broker-dealers of, (1) pursuant to Rule 606(a)(1), a
quarterly aggregated public report on the handling of orders in NMS
stocks that are submitted on a held basis and orders in NMS securities
that are option contracts with a market value less than $50,000; (2)
pursuant to Rule 606(b)(1), a report, upon request of a customer, on
the routing of that customer's orders in NMS stocks that are submitted
on a held basis; orders in NMS stocks that are submitted on a not held
basis and do not qualify for two de minimis exceptions; and orders in
NMS securities that are option contracts, containing certain
information on the broker-dealer's routing of such orders for that
customer for the prior six months; and (3) pursuant to Rule 606(b)(3),
a report, upon request of a customer that places with the broker-
dealer, directly or indirectly, NMS stock orders of any size that are
submitted on a not held basis (subject to two de minimis exceptions),
containing certain information on the broker-dealer's handling of such
orders for that customer for the prior six months.
The Commission estimates that out of the currently 3,399 broker-
dealers that are subject to the collection of information obligations
of Rule 606(a)(1), clearing brokers bear a substantial portion of the
burden of complying with the reporting and recordkeeping requirements
of Rule 606 on behalf of small to mid-sized introducing firms. There
currently are approximately 179 clearing brokers. In addition, there
are approximately 61 introducing brokers that receive funds or
securities from their customers. Because at least some of these firms
also may have greater involvement in determining where customer orders
are routed for execution, they have been included, along with clearing
brokers, in estimating the total burden of Rule 606(a)(1).
As described in more detail, below, the total annual time burden
associated with rule 606 is approximately 183,000 hours per year and
the total annual cost burden is approximately $1,300,000 per year.
The Commission staff estimates that each firm significantly
involved in order routing practices incurs an average burden of 40
hours to prepare and disseminate the quarterly report required by Rule
606(a)(1), or a burden of 160 hours per year. With an estimated 240
broker-dealers significantly involved in order routing practices, the
total industry-wide burden per year to comply with the quarterly
reporting requirement in Rule 606 is estimated to be 38,400 hours (160
x 240). Additionally, for each of the 240 broker-dealers subject to
disclosure requirements of Rule 606(a)(1), the Commission estimates the
annual burden under Rule 606(a)(1)(iv) to monitor payment for order
flow and profit-sharing relationships and potential self-regulatory
organization rule changes that could impact their order routing
decisions and incorporate any new information into their reports to be
10 hours and the annual burden for each broker-dealers to describe and
update any terms of payment for order flow arrangements and profit-
sharing relationships with a Specified Venue that may influence their
order routing decisions to be 15 hours, for a total annual burden of
6,000 hours (25 x 240). Therefore, the estimated total annual burden to
comply with Rule 606(a)(1) is 44,400 hours.
Clearing brokers generally bear the burden of responding to
individual customer requests under Rule 606(b)(1) for order handling
information. The Commission staff estimates that an average clearing
broker incurs an annual burden of 400 hours (2000 responses x 0.2
hours/response) to prepare, disseminate, and retain responses to
customers required by Rule 606. With an estimated 179 clearing brokers
subject to Rule 606(b)(1), the total industry-wide burden per year to
comply with the customer response requirement in Rule 606 is estimated
to be 71,600 hours (179 x 400).
The Commission estimates that approximately 200 broker-dealers are
involved in routing orders subject to the disclosure requirements of
Rule 606(b)(3). The Commission believes that some such broker-dealers
will respond to requests for customer-specific reports in house, while
others will engage a third-party service provider to do so. The
Commission estimates that approximately 135 broker-dealers will respond
in-house to individual customer requests for information on order
handling under Rule 606(b)(3), and that for each, the individual annual
burden will be 400 hours (200 responses x 2 hours/response), with a
total annual burden of 54,000 hours (400 x 135).
The Commission estimates that approximately 65 broker-dealers will
engage a third party to respond to individual customer requests, and
that for each, the individual annual burden will be 200 hours (200
responses x 1 hour/response), with a total annual burden of 13,000
hours (200 x 65). The total annual cost burden associated with engaging
such third parties is approximately $1,300,000 (65 x 200 annual
requests x $100 per request to engage a third-party service provider).
Therefore, the estimated total annual burden to comply with Rule
606(b)(3) is 67,000 hours and $1,300,000.
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 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
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 by
January 7, 2025.
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.
Please direct your written comments to: Austin Gerig, Director/
Chief Data Officer, Securities and Exchange Commission, c/o Tanya
Ruttenberg, 100 F Street NE, Washington, DC 20549, or send an email to:
<a href="/cdn-cgi/l/email-protection#d18183908e9cb0b8bdb3bea991a2b4b2ffb6bea7"><span class="__cf_email__" data-cfemail="56060417091b373f3a34392e1625333578313920">[email protected]</span></a>.
Dated: November 4, 2024.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-25924 Filed 11-7-24; 8:45 am]
BILLING CODE 8011-01-P
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