83 FR 56121 - Submission for OMB Review; Comment Request
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 83, Issue 218 (November 9, 2018)
Federal Register Volume 83, Issue 218 (November 9, 2018)
| Page Range | 56121-56122 | |
| FR Document | 2018-24577 |
[Federal Register Volume 83, Number 218 (Friday, November 9, 2018)] [Notices] [Pages 56121-56122] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-24577] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION 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: Rule 204, SEC File No. 270-586, OMB Control No. 3235-0647 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 previously approved collection of information provided for in Rule 204 (17 CFR 242.204), under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.). Rule 204(a) provides that a participant of a registered clearing agency must deliver securities to a registered clearing agency for clearance and settlement on a long or short sale in any equity security by settlement date, or if a participant of a registered clearing agency has a fail to deliver position at a registered clearing agency in any equity security for a long or short sale transaction in the equity security, the participant shall, by no later than the beginning of regular trading hours on the applicable close-out date, immediately close out its fail to deliver positions by borrowing or purchasing securities of like kind and quantity. For a short sale transaction, the participant must close out a fail to deliver by no later than the beginning of regular trading hours on the settlement day following the settlement date. If a participant has a fail to deliver that the participant can demonstrate on its books and records resulted from a long sale, or that is attributable to bona-fide market making activities, the participant must close out the fail to deliver by no later than the beginning of regular trading hours on the third consecutive settlement day following the settlement date. Rule 204 is intended to help further the Commission's goal of reducing fails to deliver by maintaining the reductions in fails to deliver achieved by the adoption of temporary Rule 204T, as well as other actions taken by the Commission. In addition, Rule 204 is intended to help further the Commission's goal of addressing potentially abusive ``naked'' short selling in all equity securities. The information collected under Rule 204 will continue to be retained and/or provided to other entities pursuant to the specific rule provisions and will be available to the Commission and self- regulatory organization (``SRO'') examiners upon request. The information collected will continue to aid the Commission and SROs in monitoring compliance with these requirements. In addition, the information collected will aid those subject to Rule 204 in complying with its requirements. These collections of information are mandatory. Several provisions under Rule 204 will impose a ``collection of information'' within the meaning of the Paperwork Reduction Act. I. Allocation Notification Requirement: As of December 31, 2017, there were 3,893 registered broker-dealers. Each of these broker- dealers could clear trades through a participant of a registered clearing agency and, therefore, become subject to the notification requirements of Rule 204(d). If a participant allocates a fail to deliver position to a broker or dealer pursuant to Rule 204(d), the broker or dealer that has been allocated the fail to deliver position in an equity security must determine whether or not such fail to deliver position was closed out in accordance with Rule 204(a). If such broker or dealer does not comply with the provisions of Rule 204(a), such broker or dealer must immediately notify the participant that it has become subject to the requirements of Rule 204(b). We estimate that a broker or dealer could have to make such determination and notification with respect to approximately 1.76 equity securities per day.\1\ We estimate a total of 1,719,772 potential notifications in accordance with Rule 204(d) across all registered broker-dealers (that could be allocated responsibility to close out a fail to deliver position) per year (3,893 registered broker-dealers notifying participants once per day \2\ on 1.76 equity securities, multiplied by 251 trading days in 2017). The total estimated annual burden hours per year will be approximately 275,164 burden hours (1,719,772 multiplied by 0.16 hours/notification). --------------------------------------------------------------------------- \1\ The Commission's Division of Economic and Risk Analysis (``DERA'') estimates that there were approximately 6,868 average daily fail to deliver positions during 2017. Across 3,893 registered broker-dealers, the number of securities per registered broker- dealer per trading day is approximately 1.76 equity securities. \2\ Because failure to comply with the close-out requirements of Rule 204(a) is a violation of the rule, we believe that a broker or dealer would make the notification to a participant that it is subject to the borrowing requirements of Rule 204(b) at most once per day. --------------------------------------------------------------------------- II. Demonstration Requirement for Fails to Deliver on Long Sales: As of December 5, 2017, there were 132 participants of NSCC that were registered as broker-dealers. If a participant of a registered clearing agency has a fail to deliver position in an equity security at a registered clearing agency and determined that such fail to deliver position resulted from a long sale, we estimate that a participant of a registered clearing agency will have to make such determination with respect to approximately 33 securities per day.\3\ [[Page 56122]] We estimate a total of 1,093,356 potential demonstrations in accordance with Rule 204(a)(1) across all broker-dealer participants per year (132 participants checking for compliance once per day on 33 securities, multiplied by 251 trading days in 2017). The total approximate estimated annual burden hour per year will be approximately 174,937 burden hours (1,093,356 multiplied by 0.16 hours/documentation). --------------------------------------------------------------------------- \3\ DERA estimates that during 2017 approximately 62.93% of trade volume was long. DERA estimates that there were approximately 6,868 average daily fail to deliver positions during 2017. Across 132 broker-dealer participants of the NSCC, the number of securities per participant per day is approximately 52 equity securities. 62.93% of 52 equity securities per trading day equals approximately 33 securities per day. --------------------------------------------------------------------------- III. Pre-Borrow Notification Requirement: As of December 5, 2017, there were 132 participants of NSCC that were registered as broker- dealers. If a participant of a registered clearing agency has a fail to deliver position in an equity security, the participant must determine whether or not the fail to deliver position was closed out in accordance with Rule 204(a). We estimate that a participant of a registered clearing agency will have to make such determination with respect to approximately 52 equity securities per day.\4\ We estimate a total of 1,722,864 potential notifications in accordance with Rule 204(c) across all participants per year (132 broker-dealer participants notifying broker-dealers once per day on 52 securities, multiplied by 251 trading days in 2017). The total estimated annual burden hours per year will be approximately 275,658 burden hours (1,722,864 multiplied by 0.16 hours/documentation). --------------------------------------------------------------------------- \4\ See supra note 3. --------------------------------------------------------------------------- IV. Certification Requirement: As of December 31, 2017, there were 3,893 registered broker-dealers. Each of these broker-dealers may clear trades through a participant of a registered clearing agency. If the broker-dealer determines that it has not incurred a fail to deliver position on settlement date for a long or short sale in an equity security for which the participant has a fail to deliver position at a registered clearing agency or has purchased or borrowed securities in accordance with the pre-fail credit provision of Rule 204(e), we estimate that a broker-dealer could have to make such determination with respect to approximately 1.76 securities per day.\5\ We estimate that registered broker-dealers could have to certify to the participant that it has not incurred a fail to deliver position on settlement date for a long or short sale in an equity security for which the participant has a fail to deliver position at a registered clearing agency or, alternatively, that it is in compliance with the requirements set forth in the pre-fail credit provision of Rule 204(e), 1,719,772 times per year (3,893 registered broker-dealers certifying once per day on 1.76 securities, multiplied by 251 trading days in 2017). The total approximate estimated annual burden hour per year will be approximately 275,164 burden hours (1,719,772 multiplied by 0.16 hours/certification). --------------------------------------------------------------------------- \5\ See supra note 1. --------------------------------------------------------------------------- V. Pre-Fail Credit Demonstration Requirement: As of December 31, 2017, there were 3,893 registered broker-dealers. If a broker-dealer purchased or borrowed securities in accordance with the conditions specified in Rule 204(e) and determined that it had a net long position or net flat position on the settlement day for which the broker-dealer is claiming pre-fail credit, we estimate that a broker-dealer could have to make such determination with respect to approximately 1.76 securities per day.\6\ We estimate that registered broker-dealers could have to demonstrate on its books and records that it has a net long position or net flat position on the settlement day for which the broker-dealer is claiming pre-fail credit, 1,719,772 times per year (3,893 registered broker-dealers checking for compliance once per day on 1.76 equity securities, multiplied by 251 trading days in 2017). The total approximate estimated annual burden hours per year will be 275,164 burden hours (1,719,772 multiplied by 0.16 hours/ demonstration). --------------------------------------------------------------------------- \6\ See supra note 1. --------------------------------------------------------------------------- The total aggregate annual burden for the collection of information undertaken pursuant to all five provisions is thus 1,276,087 hours per year (275,164 + 174,937 + 275,658 + 275,164 + 275,164). 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 review 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: November 6, 2018. Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018-24577 Filed 11-8-18; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 83, No. 218 / Friday, November 9, 2018 / Notices 56121
subject line if email is used. To help the (‘‘OMB’’) a request for approval of there were 3,893 registered broker-
Commission process and review your extension of the previously approved dealers. Each of these broker-dealers
comments more efficiently, please use collection of information provided for in could clear trades through a participant
only one method. The Commission will Rule 204 (17 CFR 242.204), under the of a registered clearing agency and,
post all comments on the Commission’s Securities Exchange Act of 1934 (15 therefore, become subject to the
internet website (http://www.sec.gov/ U.S.C. 78a et seq.). notification requirements of Rule
rules/sro.shtml). Copies of the Rule 204(a) provides that a participant 204(d). If a participant allocates a fail to
submission, all subsequent of a registered clearing agency must deliver position to a broker or dealer
amendments, all written statements deliver securities to a registered clearing pursuant to Rule 204(d), the broker or
with respect to the proposed rule agency for clearance and settlement on dealer that has been allocated the fail to
change that are filed with the a long or short sale in any equity deliver position in an equity security
Commission, and all written security by settlement date, or if a must determine whether or not such fail
communications relating to the participant of a registered clearing to deliver position was closed out in
proposed rule change between the agency has a fail to deliver position at accordance with Rule 204(a). If such
Commission and any person, other than a registered clearing agency in any broker or dealer does not comply with
those that may be withheld from the equity security for a long or short sale the provisions of Rule 204(a), such
public in accordance with the transaction in the equity security, the broker or dealer must immediately
provisions of 5 U.S.C. 552, will be participant shall, by no later than the notify the participant that it has become
available for website viewing and beginning of regular trading hours on subject to the requirements of Rule
printing in the Commission’s Public the applicable close-out date, 204(b). We estimate that a broker or
Reference Room, 100 F Street, NE, immediately close out its fail to deliver dealer could have to make such
Washington, DC 20549, on official positions by borrowing or purchasing determination and notification with
business days between the hours of 10 securities of like kind and quantity. For respect to approximately 1.76 equity
a.m. and 3 p.m. Copies of the filing also a short sale transaction, the participant securities per day.1 We estimate a total
will be available for inspection and must close out a fail to deliver by no of 1,719,772 potential notifications in
copying at the principal office of the later than the beginning of regular accordance with Rule 204(d) across all
Exchange. All comments received will trading hours on the settlement day registered broker-dealers (that could be
be posted without change. Persons following the settlement date. If a allocated responsibility to close out a
submitting comments are cautioned that participant has a fail to deliver that the fail to deliver position) per year (3,893
we do not redact or edit personal participant can demonstrate on its books registered broker-dealers notifying
identifying information from comment and records resulted from a long sale, or participants once per day 2 on 1.76
submissions. You should submit only that is attributable to bona-fide market equity securities, multiplied by 251
information that you wish to make making activities, the participant must trading days in 2017). The total
available publicly. All submissions close out the fail to deliver by no later estimated annual burden hours per year
should refer to File Number SR–CBOE– than the beginning of regular trading will be approximately 275,164 burden
2018–070, and should be submitted on hours on the third consecutive hours (1,719,772 multiplied by 0.16
or before November 30, 2018. settlement day following the settlement hours/notification).
date. Rule 204 is intended to help II. Demonstration Requirement for
For the Commission, by the Division of further the Commission’s goal of Fails to Deliver on Long Sales: As of
Trading and Markets, pursuant to delegated reducing fails to deliver by maintaining
authority.18
December 5, 2017, there were 132
the reductions in fails to deliver participants of NSCC that were
Eduardo A. Aleman, achieved by the adoption of temporary registered as broker-dealers. If a
Assistant Secretary. Rule 204T, as well as other actions participant of a registered clearing
[FR Doc. 2018–24522 Filed 11–8–18; 8:45 am] taken by the Commission. In addition, agency has a fail to deliver position in
BILLING CODE 8011–01–P Rule 204 is intended to help further the an equity security at a registered
Commission’s goal of addressing clearing agency and determined that
potentially abusive ‘‘naked’’ short such fail to deliver position resulted
SECURITIES AND EXCHANGE selling in all equity securities. from a long sale, we estimate that a
COMMISSION The information collected under Rule participant of a registered clearing
204 will continue to be retained and/or agency will have to make such
Submission for OMB Review; provided to other entities pursuant to
Comment Request determination with respect to
the specific rule provisions and will be approximately 33 securities per day.3
Upon Written Request, Copies Available available to the Commission and self-
From: Securities and Exchange regulatory organization (‘‘SRO’’) 1 The Commission’s Division of Economic and
Commission, Office of FOIA Services, examiners upon request. The Risk Analysis (‘‘DERA’’) estimates that there were
information collected will continue to approximately 6,868 average daily fail to deliver
100 F Street NE, Washington, DC positions during 2017. Across 3,893 registered
20549–2736 aid the Commission and SROs in broker-dealers, the number of securities per
monitoring compliance with these registered broker-dealer per trading day is
Extension: requirements. In addition, the approximately 1.76 equity securities.
Rule 204, SEC File No. 270–586, OMB
information collected will aid those 2 Because failure to comply with the close-out
Control No. 3235–0647 requirements of Rule 204(a) is a violation of the
subject to Rule 204 in complying with
Notice is hereby given that pursuant rule, we believe that a broker or dealer would make
khammond on DSK30JT082PROD with NOTICES
its requirements. These collections of the notification to a participant that it is subject to
to the Paperwork Reduction Act of 1995 information are mandatory. the borrowing requirements of Rule 204(b) at most
(‘‘PRA’’) (44 U.S.C. 3501 et seq.), the Several provisions under Rule 204 once per day.
Securities and Exchange Commission will impose a ‘‘collection of 3 DERA estimates that during 2017 approximately
(‘‘Commission’’) has submitted to the information’’ within the meaning of the 62.93% of trade volume was long. DERA estimates
that there were approximately 6,868 average daily
Office of Management and Budget Paperwork Reduction Act. fail to deliver positions during 2017. Across 132
I. Allocation Notification broker-dealer participants of the NSCC, the number
18 17 CFR 200.30–3(a)(12). Requirement: As of December 31, 2017, Continued
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![56122 Federal Register / Vol. 83, No. 218 / Friday, November 9, 2018 / Notices
We estimate a total of 1,093,356 is in compliance with the requirements be submitted to OMB within 30 days of
potential demonstrations in accordance set forth in the pre-fail credit provision this notice.
with Rule 204(a)(1) across all broker- of Rule 204(e), 1,719,772 times per year Dated: November 6, 2018.
dealer participants per year (132 (3,893 registered broker-dealers Eduardo A. Aleman,
participants checking for compliance certifying once per day on 1.76
Assistant Secretary.
once per day on 33 securities, securities, multiplied by 251 trading
multiplied by 251 trading days in 2017). days in 2017). The total approximate [FR Doc. 2018–24577 Filed 11–8–18; 8:45 am]
The total approximate estimated annual estimated annual burden hour per year BILLING CODE 8011–01–P
burden hour per year will be will be approximately 275,164 burden
approximately 174,937 burden hours hours (1,719,772 multiplied by 0.16
(1,093,356 multiplied by 0.16 hours/ hours/certification). SECURITIES AND EXCHANGE
documentation). V. Pre-Fail Credit Demonstration COMMISSION
III. Pre-Borrow Notification Requirement: As of December 31, 2017,
Proposed Collection; Comment
Requirement: As of December 5, 2017, there were 3,893 registered broker-
Request
there were 132 participants of NSCC dealers. If a broker-dealer purchased or
that were registered as broker-dealers. If borrowed securities in accordance with Upon Written Request, Copies Available
a participant of a registered clearing the conditions specified in Rule 204(e) From: Securities and Exchange
agency has a fail to deliver position in and determined that it had a net long Commission, Office of FOIA Services,
an equity security, the participant must position or net flat position on the 100 F Street NE, Washington, DC
determine whether or not the fail to settlement day for which the broker- 20549–2736
deliver position was closed out in dealer is claiming pre-fail credit, we Extension:
accordance with Rule 204(a). We estimate that a broker-dealer could have Rule 2a–7, SEC File No. 270–258, OMB
estimate that a participant of a to make such determination with Control No. 3235–0268
registered clearing agency will have to respect to approximately 1.76 securities
make such determination with respect per day.6 We estimate that registered Notice is hereby given that, pursuant
to approximately 52 equity securities broker-dealers could have to to the Paperwork Reduction Act of 1995
per day.4 We estimate a total of demonstrate on its books and records (44 U.S.C. 3501 et seq.), the Securities
1,722,864 potential notifications in that it has a net long position or net flat and Exchange Commission (the
accordance with Rule 204(c) across all position on the settlement day for which ‘‘Commission’’) is soliciting comments
participants per year (132 broker-dealer the broker-dealer is claiming pre-fail on the collection of information
participants notifying broker-dealers credit, 1,719,772 times per year (3,893 summarized below. The Commission
once per day on 52 securities, registered broker-dealers checking for plans to submit this existing collection
multiplied by 251 trading days in 2017). compliance once per day on 1.76 equity of information to the Office of
The total estimated annual burden securities, multiplied by 251 trading Management and Budget for extension
hours per year will be approximately days in 2017). The total approximate and approval.
275,658 burden hours (1,722,864 estimated annual burden hours per year Rule 2a–7 (17 CFR 270.2a–7) under
multiplied by 0.16 hours/ will be 275,164 burden hours (1,719,772 the Investment Company Act of 1940
documentation). multiplied by 0.16 hours/ (15 U.S.C. 80a) (the ‘‘Act’’) governs
IV. Certification Requirement: As of demonstration). money market funds. Money market
December 31, 2017, there were 3,893 The total aggregate annual burden for funds are open-end management
registered broker-dealers. Each of these the collection of information undertaken investment companies that differ from
broker-dealers may clear trades through pursuant to all five provisions is thus other open-end management investment
a participant of a registered clearing 1,276,087 hours per year (275,164 + companies in that they seek to maintain
agency. If the broker-dealer determines 174,937 + 275,658 + 275,164 + 275,164). a stable price per share, usually $1.00.
that it has not incurred a fail to deliver An agency may not conduct or sponsor, The rule exempts money market funds
position on settlement date for a long or and a person is not required to respond from the valuation requirements of the
short sale in an equity security for to, a collection of information under the Act, and, subject to certain risk-limiting
which the participant has a fail to PRA unless it displays a currently valid conditions, permits money market funds
deliver position at a registered clearing OMB control number. to use the ‘‘amortized cost method’’ of
agency or has purchased or borrowed The public may review background asset valuation or the ‘‘penny-rounding
securities in accordance with the pre- documentation for this information method’’ of share pricing.
fail credit provision of Rule 204(e), we collection at the following website: Rule 2a–7 also imposes certain
estimate that a broker-dealer could have www.reginfo.gov. Comments should be recordkeeping and reporting obligations
to make such determination with directed to: (i) Desk Officer for the on money market funds. The board of
respect to approximately 1.76 securities Securities and Exchange Commission, directors of a money market fund, in
per day.5 We estimate that registered Office of Information and Regulatory supervising the fund’s operations, must
broker-dealers could have to certify to Affairs, Office of Management and establish written procedures designed to
the participant that it has not incurred Budget, Room 10102, New Executive stabilize the fund’s net asset value
a fail to deliver position on settlement Office Building, Washington, DC 20503, (‘‘NAV’’); establish written procedures
date for a long or short sale in an equity or by sending an email to: to test periodically the ability of the
security for which the participant has a Lindsay.M.Abate@omb.eop.gov; and (ii) fund to maintain a stable NAV based on
fail to deliver position at a registered Charles Riddle, Acting Director/Chief certain hypothetical events (‘‘stress
khammond on DSK30JT082PROD with NOTICES
clearing agency or, alternatively, that it Information Officer, Securities and testing’’); review, revise, and approve
Exchange Commission, c/o Candace written procedures to stress test a fund’s
of securities per participant per day is Kenner, 100 F Street NE, Washington portfolio; and create a report to the fund
approximately 52 equity securities. 62.93% of 52 board documenting the results of stress
equity securities per trading day equals
DC 20549, or by sending an email to:
approximately 33 securities per day. PRA_Mailbox@sec.gov. Comments must testing. The board must also adopt
4 See supra note 3. guidelines and procedures relating to
5 See supra note 1. 6 See supra note 1. certain responsibilities it delegates to
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Document Created: 2018-11-09 03:34:30
Document Modified: 2018-11-09 03:34:30
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
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| Section | Notices | |
| FR Citation | 83 FR 56121 |
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