[Federal Register Volume 84, Number 101 (Friday, May 24, 2019)]
[Notices]
[Pages 24193-24194]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-10842]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[SEC File No. S7-13-12, OMB Control No. 3235-0698]
Submission for OMB Review; Comment Request
Upon Written Request, Copies Available From: Securities and Exchange
Commission, Office of FOIA Services, 100 F Street NE, Washington, DC
20549-2736.
Extension:
Order Granting Conditional Exemptions Under the Securities
Exchange Act of 1934 in Connection With Portfolio Margining of Swaps
and Security-Based Swaps.
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
existing collection of information provided for in the Order Granting
Conditional Exemptions Under the Securities Exchange Act of 1934
(``Exchange Act'') in Connection with Portfolio Margining of Swaps and
Security-Based Swaps, Exchange Act Release No. 68433 (Dec. 14, 2012),
77 FR 75211 (Dec. 19, 2012) (``Order'').
On December 14, 2012, the Commission found it necessary or
appropriate in the public interest and consistent with the protection
of investors to grant the conditional exemptions discussed in the
Order. Among other things, the Order requires dually-registered broker-
dealer and futures commission merchants (``BD/FCMs'') that elect to
offer a program to commingle and portfolio margin customer positions in
credit default swaps (``CDS'') in customer accounts maintained in
accordance with Section 4d(f) of the Commodity Exchange Act (``CEA'')
and rules thereunder, to obtain certain agreements and opinions from
its customers regarding the applicable regulatory regime, and to make
certain disclosures to its customers before receiving any money,
securities, or property of a customer to margin, guarantee, or secure
positions consisting of cleared CDS, which include both swaps and
security-based swaps, under a program to commingle and portfolio margin
CDS. The Order also requires BD/FCMs that elect to offer a program to
commingle and portfolio margin CDS positions in customer accounts
maintained in accordance with Section 4d(f) of the CEA and rules
thereunder, to maintain minimum margin levels using a margin
methodology approved by the Commission or the Commission staff.
The Commission estimates that 35 firms may seek to avail themselves
of the conditional exemptive relief provided by the Order and therefore
would be subject to the information collection. The Commission bases
this estimate on the total number of entities that are dually
registered as broker-dealers and futures commission merchants.
The Commission estimates that the aggregate annual time burden for
all of the 35 respondents is approximately 22,517 hours calculated as
follows:
(a) Based on information that the Commission receives on a monthly
basis, the Commission estimates that each respondent will have, on
average, 34 non-affiliate credit default swap customers. The Commission
further estimates for each such customer, a respondent will spend
approximately 20 hours developing a non-conforming subordination
agreement under paragraph IV(b)(1)(ii) of the Order. The Commission
therefore estimates that the burden associated with entering into non-
conforming subordination agreements with non-affiliate cleared credit
default swap customers under paragraph IV(b)(1)(ii) of the Order will
impose an initial, one-time average burden of 680 hours (34 non-
affiliate customers times 20 hours per customer) per respondent and an
aggregate burden of 23,800 hours for all 35 respondents (680 x 35).
This burden is a third-party disclosure burden.
(b) The Commission estimates that each respondent will have, on
average, 11 affiliate credit default swap customers and that for each
such customer, a respondent will spend approximately 20 hours
developing a non-conforming subordination agreement under paragraph
IV(b)(2)(ii) of the Order. The Commission therefore estimates that the
burden associated with entering into non-conforming subordination
agreements with affiliate cleared credit default swap customers under
paragraph IV(b)(2)(ii) of the Order will impose an initial, one-time
burden of 220 hours per respondent (11 affiliate customers times 20
hours per customer) and an aggregate burden of 7,700 hours for all 35
respondents (220 x 35) . This burden is a third-party disclosure
burden.
(c) The Commission estimates that for each affiliate cleared credit
default swap customer a respondent will spend approximately 2 hours
developing and reviewing the required opinion of counsel under
paragraph IV(b)(2)(iii) of the Order. The Commission therefore
[[Page 24194]]
estimates that the burden associated with obtaining opinions of counsel
from affiliate cleared credit default swap customers under paragraph
IV(b)(2)(iii) of the Order will impose an initial, one-time burden of
22 hours per respondent (11 affiliate customers times 2 hours per
customer) and an aggregate burden for all 35 respondents of 770 hours
(22 x 35). This burden is a third-party disclosure burden.
(d) The Commission estimates that the burden associated with
seeking the Commission's approval of margin methodologies under
paragraph IV(b)(3) of the Order will impose an initial, one-time burden
of 1,000 hours per respondent and an aggregate burden for all 35
respondents of 35,000 hours (1,000 x 35) . This burden is a reporting
burden.
(e) The Commission estimates that the burden associated with
disclosing information to customers under paragraph IV(b)(6) of the
Order will impose an initial, one-time burden of 8 hours per respondent
and an aggregate burden for all 35 respondents of 280 hours (8 x 35).
This burden is a third-party disclosure burden.
The total aggregate one-time burden for all 35 respondents is thus
67,550 hours (32,550 third party disclosure + 35,000 reporting).
Amortized over three years, the aggregate burden per year is
approximately 22,517 hours.
The Commission estimates that each respondent will incur a one-time
cost of $8,000 in outside legal counsel expenses in connection with
obtaining opinions of counsel from affiliate cleared credit default
swap customers under paragraph IV(b)(2)(iii) of the Order, calculated
as follows: (20 hours to obtain opinions of counsel from affiliate
cleared credit default swap customers under paragraph IV(b)(2)(iii) of
the Order) x ($400 per hour for outside legal counsel) = $8,000. The
one-time aggregate burden for all 35 respondents is thus $280,000
(8,000 x 35), or approximately $93,333 per year when amortized over
three years.
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: www.reginfo.gov. Comments should
be directed to: (i) Desk Officer for the Securities and Exchange
Commission, Office of Information and Regulatory Affairs, Office of
Management and Budget, Room 10102, New Executive Office Building,
Washington, DC 20503, or by sending an email to:
[email protected]; and (ii) Charles Riddle, Acting Director/
Chief Information Officer, Securities and Exchange Commission, c/o
Candace Kenner, 100 F Street NE, Washington, DC 20549, or by sending an
email to: [email protected]. Comments must be submitted to OMB within
30 days of this notice.
Dated: May 20, 2019.
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-10842 Filed 5-23-19; 8:45 am]
BILLING CODE 8011-01-P