[Federal Register Volume 61, Number 7 (Wednesday, January 10, 1996)]
[Notices]
[Pages 739-741]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-370]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36683; File No. S7-3-96]


EDGAR Request For Information

AGENCY: Securities and Exchange Commission.

ACTION: Request for comments.

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SUMMARY: The Securities and Exchange Commission is publishing 
alternative system architectures for possible use in preparing a 
Request for Proposals which will be used to recompete the contract for 
its electronic filing system known as EDGAR. Comments and information 
received will assist the agency and the Congress in making decisions as 
to how EDGAR filings will be structured, presented, formatted, filed, 
processed and disseminated. Information received will also be used to 
make determinations as to whether certain portions of the EDGAR system 
can or should be privatized.

DATES: Comments should be received on or before January 22, 1996.

ADDRESSES: Comments should be submitted to Jonathan G. Katz, Secretary, 
Securities and Exchange Commission, 450 Fifth Street, NW., Washington, 
DC 20549. Comments should refer to File No. S7-3-96. All comments will 
be available for public inspection and copying in the Commission's 
Public Reference Room, 450 Fifth Street, NW., Washington, DC.

FOR FURTHER INFORMATION CONTACT: Michael Bartell or David Copenhafer, 
Office of Information Technology, Securities and Exchange Commission at 
(202) 942-8800.

SUPPLEMENTARY INFORMATION: The Securities and Exchange Commission (SEC) 
is publishing this second Request for Information (RFI) from companies 
and individuals with experience, capabilities or interests relating to 
the SEC's electronic filing system known as EDGAR. The need for this 
second RFI arises from SEC wishes to supplement the thoughtful and 
helpful comments received in response to the first request, and as a 
result of recent SEC discussions held internally, with industry and 
academic experts, and with the Congress.
    This request solicits comment on several potential EDGAR system 
architectures, the characteristics of which are described below. 
Comment is solicited not just from a technical point of view, or from 
the perspective of potential bidders, but also from filers and the many 
users of SEC disclosure information as well. Comment on the legal and 
commercial implications of each architecture are also sought.
    Respondents should note that their comments will be considered 
public information by the SEC, and that the SEC will not be able to 
honor any requests for comments to be kept confidential.
    This notice, as published, cannot accommodate drawings of the 
architectures being considered. Respondents who wish to make reference 
to the SEC's diagrams depicting the interrelationships among the 
various elements of the system can secure copies from the SEC's World 
Wide Web site (http://www.sec.gov) or by requesting them at the address 
shown at the beginning of this notice.
    Brief descriptions of each principal model the SEC has under 
consideration are provided below. The order of presentation is not 
intended to convey any preference for one approach over another. All 
models also assume the SEC will retain its Internet site and continue 
to offer the current level of EDGAR document dissemination service (one 
day delay and FTP bulk download capability).

I. Evolve the Current Model

    A. All filings come to the SEC for receipt and acceptance.
    B. Filings are disseminated, as received, through a single, high 
volume, high speed, high reliability, commercial point of distribution.
    C. The Commission requests comment on three possible dissemination 
pricing structures:
    (1) Subscriber pricing based upon the cost and agreed-upon rate of 
return of a privatized, single point of dissemination similar to the 
approach used currently.
    (2) Alternatively, the SEC could ask for and accept a bid from a 
vendor offering the lowest cost to subscribers based upon a bid, fixed 
schedule of prices. Comment is sought on the appropriate duration of 
such a contract (e.g., 1, 2, or 3 years).
    (3) As a third alternative within this Model I, the SEC could bring 
the first tier disseminator ``in house'' and have the cost paid by the 
SEC. The SEC would establish the price of each of the services offered 
to the second tier and would apply revenues to offset a variety of 
system costs (assuming the establishment of a suitable mechanism to 
permit the agency to retain such revenues).
    D. Document structure would evolve from the current ASCII-SGML 
structure. The first addition would be to permit attached, 
standardized, image files of a specified maximum size. Later changes 
would move toward a richer text format which would not impose any undue 
burdens on the filer, the SEC, or the dissemination and public viewing 
structures. This richer text probably would be achieved through the 
addition of certain, allowable HTML commands or possibly through 
conversion to PDF format. The SEC might limit by rule the type of 
information that would be permitted to be filed inside an image file. 
Issuers also would be free to enhance the electronic information they 
distribute to shareholders and investors.
    E. Contracting would be done through separate contracts for: (1) 
Receipt and Acceptance, and (2) Dissemination.
    The fundamental advantages of this Model I and its variants are: 
(1) It preserves the existing financial investment in SEC systems; (2) 
it allows for needed (albeit slow, evolutionary) changes for solving 
the image and document format concerns; and (3) it minimizes ``end to 
end'' costs of the system (i.e., for all parties) in the short term, in 
that it does not require any significant new investment on the part of 
filers, the SEC, disseminators or document users. Long term cost-
benefits of this option are not clear.
    The disadvantages of Model I are: (1) Filers are still faced with 
the cost and difficulty of having to convert their documents to ASCII; 
(2) ASCII is retained throughout the system, and information users are 
denied (for the immediate future) a more attractive document; and (3) 
financing alternative 3 would require the SEC to invest in the design, 
construction and operation of the first tier dissemination capability.

II. Multiple Dissemination Points Model

    A. Receipt and Acceptance would remain as described in Model I 
above.
    B. The approach to dissemination would be modified such that the 
SEC would disseminate EDGAR data to possibly three, high speed, high 
volume, high reliability, commercial distribution points instead of 
one. These disseminators would sell Level I and Level II services to 
large end users and resellers.
    C. The disseminators would be selected through a bid process.
    D. Each disseminator would have a separate contract, and would pay 
the SEC either an agreed-upon fixed fee or possibly a percentage of 
revenues derived from the sale of EDGAR data.
    One advantage of Model II beyond those stated for Model I is that 
the dissemination process may be improved as a result of competition 
among multiple depositories/disseminators. Its disadvantage is that the 
SEC might be required to slightly enhance its current dissemination 
capabilities to handle three recipients instead of one. 

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III. Single Depository Filing and Dissemination Point Model

    A. Filers would have a choice of filing directly, at no cost other 
than existing filing fees, with the SEC in ASCII, or through an 
approved depository which would accept documents in a number of native 
word processing formats for which a fee could be charged.
    B. The depository would convert the documents it receives to ASCII 
for official transmission to the SEC.
    C. The SEC would provide the depository with a copy of every ASCII 
file received directly from a registered entity.
    D. (1) Within one variant of Model III, the SEC would provide an 
acceptance message to the depository service upon SEC acceptance of a 
filing in order to let the service know the document was available for 
dissemination. (2) Within a second variant, the depository would assume 
the responsibility for official acceptance, in which case, no 
acceptance message would be necessary.
    E. The depository would be responsible for all dissemination 
outside of the SEC's Internet offering and would recover the cost of 
its document conversions and dissemination services through 
dissemination fees and fees to filers.
    F. One criterion used to select the single depository would be the 
duration of the contract. By keeping the contract duration short, the 
depository would remain under competitive pressure to keep prices low 
and to remain innovative.
    Advantages of Model III are: (1) It offers filers a new, and 
possibly lower cost, option for having filings converted to ASCII; (2) 
having an approved, commercial entity involved in document conversion 
to ASCII might stimulate efforts to improve ASCII conversions 
generally; (3) it achieves an efficiency in the dissemination structure 
in that the point of document receipt is also the first point of 
commercial dissemination for all documents except those received 
directly from filers by the SEC; (4) adopting a privatized depository 
structure would enable the SEC to respond more quickly and effectively 
to changes in technology beneficial to the filers in meeting their 
document preparation and submission needs; and (5) a final advantage 
may lie with the fact that the depository could supplement the standard 
ASCII dissemination stream with native word processing documents.
    Disadvantages of this Model III are that: (1) It requires an 
investment to construct a new (somewhat duplicative) system ``front 
end'' to serve as the receipt point for the thousands of EDGAR filers. 
(The SEC might experience some cost savings to the extent it could 
reduce the size of its own front end requirements--although it would 
still have to receive and accept every filing.) (2) During the contract 
period, there would be no competition within this structure. This would 
be mitigated by keeping the contract period as short as possible.

IV. Multiple Depositories Model

    A. All aspects of this model are as described above in Model III, 
with the exception that there would be multiple depositories which 
would compete for document conversion and dissemination business.
    B. The SEC would provide copies of the ASCII files it receives 
directly from registrants to each of the depositories for their use in 
providing dissemination services.
    C. The multiple depositories would be directed to create an 
acceptable dissemination strategy. This could possibly be achieved by 
having the depositories create a single, physical database for 
dissemination purposes. Alternatively, they could each disseminate 
their separate inventories through a single point of interconnection 
which would serve the wholesale subscriber community, but would not 
maintain a separate dissemination database. Comment is sought on these 
and other approaches.
    The primary advantages of Model IV, in addition to those stated for 
Model III, are: (1) It creates competition among the depositories to 
the extent that depositories, under certain circumstances, would be 
willing to pay issuers to file with them; and (2) the filing community 
would have not only a new document conversion alternative, it would 
also benefit from the competition which will take place among the 
depositories for possible value-added services unrelated to SEC filing.
    The disadvantage is the dissemination structure is complicated by 
the fact that documents are held by several recipients.
    Respondents are asked to examine all aspects of each model and any 
internal variants and provide the SEC with their views of the perceived 
``advantages'' and ``disadvantages'' stated for each model. The 
Commission requests comment on whether it should provide EDGAR filings 
on a real-time basis or continue its current dissemination activities 
on a day-delayed basis. Comment should address policy and technical 
issues. Should the operators of the depositories described in Models 
III and IV be required to offer at no charge via the Internet the raw 
filings they receive for conversion? Issues of liability with respect 
to document conversions are another area where respondents are asked to 
focus their comments. Rating each model from 1 through 5, with 5 
signifying the highest rating, would also assist the agency in its 
deliberations. Finally, the SEC again asks for alternatives to ASCII 
which: (1) Facilitate filer document preparation and submission; (2) 
assist the SEC with storing and word searching filings; and (3) are 
easily handled and displayed by the dissemination and document viewing 
communities.
    Comments should be received by the SEC by January 22, 1996. All 
responses will be reviewed, and the submitter will be added to the 
bidders' list. Comments will be placed in the SEC's Public Reference 
Room at the SEC headquarters building located at 450 5th Street, NW. in 
Washington, DC. No telephone inquiries will be accepted. In addition to 
the mailing address provided above, the SEC will accept electronic 
comments directed via Internet e-mail to: [email protected].

    Dated: January 5, 1996.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-370 Filed 1-9-96; 8:45 am]
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