81 FR 15138 - Submission for OMB Review; Comment Request

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 54 (March 21, 2016)

[Federal Register Volume 81, Number 54 (Monday, March 21, 2016)]
[Notices]
[Pages 15138-15139]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-06230]


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SECURITIES AND EXCHANGE COMMISSION


Submission for OMB Review; Comment Request

Upon Written Request, Copies Available From: US 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; SEC File No. S7-13-12, OMB Control No. 
3235-0698.

    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.
    When it adopted the Order, the Commission discussed the burden 
hours and costs associated with complying with certain provisions of 
the Order that contain ``collection of information requirements'' 
within the meaning of the PRA.\1\ The collection of information 
requirements are designed, among other things, to provide appropriate

[[Page 15139]]

agreements, disclosures, and opinions to BD/FCM customers to clarify 
key aspects of the regulatory framework that will govern their 
participation in a program to commingle and portfolio margin CDS 
positions and to ensure that appropriate levels of margin are 
collected. Because the Order is still in effect, the Commission 
believes it is prudent to extend this collection of information.
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    \1\ See Order, 77 FR at 75221-23.
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    The Commission estimates that 45 firms may seek to avail themselves 
of the conditional exemptive relief provided by the Order and therefore 
would be subject to the information collection.\2\ The Commission 
estimates that each of the 45 firms that may seek to avail themselves 
of the conditional exemptive relief provided by the Order would spend a 
total of 3,430 burden hours to comply with the existing collection of 
information, calculated as follows: (20 hours to develop a 
subordination agreement for each non-affiliate cleared credit default 
swap customers in accordance with paragraph IV(b)(1)(ii) of the Order) 
x (109 non-affiliate credit default swap customers) \3\ + ((20 hours to 
develop a subordination agreement for each affiliate cleared credit 
default swap customers in accordance with paragraph IV(b)(2)(ii) of the 
Order) + (2 hours developing and reviewing the opinion required by 
paragraph IV(b)(2)(iii) of the Order)) x (11 affiliate credit default 
swap customers) + (1,000 hours to seek the Commission's approval of 
margin methodologies under paragraph IV(b)(3) of the Order) + (8 hours 
to disclose information to customers under paragraph IV(b)(6) of the 
Order) = 3,430 burden hours, or approximately 154,350 burden hours in 
the aggregate, calculated as follows: (3,430 burden hours per firm) x 
(45 firms) = 154,350 burden hours. Amortized over three years, the 
annualized burden hours would be 1,143 hours per firm, or a total of 
51,450 for all 45 firms.
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    \2\ The Commission bases this estimate on the total number of 
entities that are dually registered as broker-dealers and futures 
commission merchants. See Financial Data for FCMs as of July 31, 
2015, Commodity Futures Trading Commission, available at http://www.cftc.gov/MarketReports/FinancialDataforFCMs/index.htm.
    \3\ Based on information that the Commission receives on a 
monthly basis, as well as current projections regarding the 
estimated increase in the number of customers per respondent, the 
Commission anticipates an average number of credit default swap 
customers to be 120 per respondent, 109 of which would be non-
affiliates and 11 of which would be affiliates. The Commission notes 
that these estimates are based on current data and the current 
regulatory framework.
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    The Commission further estimates that each respondent will incur a 
one-time cost of $8,000 in outside legal cost expenses per firm, 
calculated as follows: (200 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, for an aggregate burden of $360,000, calculated as follows: 
($8,000 in external legal costs per firm) x (45 firms) = $360,000. 
Amortized over three years, the annualized capital external cost would 
be $2,667 per firm, or a total of $120,000 for all 45 firms.
    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 Web site: 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) Pamela Dyson, Director/Chief 
Information Officer, Securities and Exchange Commission, c/o Remi 
Pavlik-Simon, 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: March 15, 2016.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-06230 Filed 3-18-16; 8:45 am]
 BILLING CODE 8011-01-P