[Federal Register Volume 87, Number 93 (Friday, May 13, 2022)]
[Notices]
[Pages 29419-29420]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-10285]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[SEC File No. 270-651, OMB Control No. 3235-0702]


Proposed Collection; 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 18a-3

    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'') is soliciting comments on the existing 
collection of information provided for in Rule 18a-3 (17 CFR 240.18a-
3), under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) 
(``Exchange Act''). The Commission plans to submit this existing 
collection of information to the Office of Management and Budget 
(``OMB'') for extension and approval.\1\
---------------------------------------------------------------------------

    \1\ This OMB Control Number previously included the collections 
of information in Rule 18-10 as well as the ones in Rule 18a-3. The 
Commission subsequently requested a separate OMB Control Number for 
the collections of information in Rule 18a-10. OMB approved that 
request on February 9, 2022, and the collections of information for 
Rule 18a-10 are now in OMB Control Number 3235-0785. As a result, 
the Commission is now changing the burdens in this OMB Control 
Number 3235-0702 to remove the ones previously included for Rule 
18a-10. The Collections of information in Rule 18a-10 were included 
in OMB Control Number 3235-0702 because Rule 18a-10 was not 
proposed, but was adopted concurrently with 18a-3 as a result of 
comments received on the proposal for Rule 18a-3. The Commission 
later amended Rule 18a-10 and revised the collections of information 
in Rule 18a-10 and, at that time, requested a separate OMB Control 
Number. See PRA ICR Documents for 3235-0785 on (reginfo.gov).
---------------------------------------------------------------------------

    Rule 18a-3 establishes minimum margin requirements for nonbank 
security-based swap dealers (``SBSDs'') and nonbank major security-
based swap participants (``MSBSPs'') for non-cleared security-based 
swaps. Under paragraph (e) of Rule 18a-3 nonbank SBSDs are required to 
monitor the risk of each account that holds non-cleared security based 
swaps for a counterparty and to establish, maintain, and document 
procedures and guidelines for monitoring the risk of accounts as part 
of its risk management control system required under Exchange Act Rule 
15c3-4. In addition, paragraph (d)(2) of Rule 18a-3 provides that a 
nonbank SBSD seeking approval to use a model to calculate initial 
margin will be subject to an application process consistent with 
Exchange Act Rule 15c3-1e and paragraph (d) of Exchange Act Rule 18a-1, 
as applicable, governing the use of internal models to compute net 
capital.\2\
---------------------------------------------------------------------------

    \2\ While Rule 18a-3 contains requirements that apply to both 
nonbank SBSDs and MSBSPs, the particular requirements that 
constitute a collection of information relate only to nonbank SBSDs.
---------------------------------------------------------------------------

    The total annual hour burden associated with Rule 18a-3 is 
approximately 2,243 hours calculated as follows:
    The Commission staff estimates that there are 7 nonbank SBSDs that 
are subject to Rule 18a-3. The staff further estimates that each would 
spend an average of approximately 210 hours establishing and 
documenting their Rule 18a-3 counterparty risk monitoring procedures, 
for a one-time industry-wide hour burden of approximately 1,470 
recordkeeping hours or 490 hours per year when annualized over three 
years.\3\ In addition, the staff estimates that each nonbank SBSD would 
spend an average of approximately 60 hours per year reviewing risks 
associated with its counterparties, for an annual industry-wide burden 
of approximately 420 recordkeeping hours.\4\ Taken together, the annual 
industry-wide hour burden is approximately 910 hours.\5\
---------------------------------------------------------------------------

    \3\ 7 nonbank SBSDs x 210 hours = 1,470 hours. These amounts are 
annualized over three years resulting in 70 (210 hours/3 years) 
hours per nonbank SBSD per year and an industry wide annual burden 
of 490 recordkeeping hours.
    \4\ 7 nonbank SBSDs x 60 hours = 420 hours.
    \5\ 490 hours + 420 hours = 910 hours.
---------------------------------------------------------------------------

    The Commission estimates it will take a nonbank SBSD approximately 
50 hours to prepare and submit an application to the Commission to seek 
authorization to use an internal model to calculate initial margin. The 
staff estimates that five non-bank SBSDs have sought Commission 
approval to use an internal model to calculate initial margin, 
resulting in a total industry-wide one-time hour burden of 
approximately 250 hours or approximately 83 hours per year when 
annualized over three years.\6\ The Commission also estimates that each 
nonbank SBSD will spend approximately 250 hours per year reviewing, 
updating, and back testing their initial margin model, resulting in

[[Page 29420]]

a total industry-wide annual hour burden of approximately 1,250 
recordkeeping hours.\7\ Taken together, the Commission estimates an 
annual industry-wide hour burden of approximately 1,333 hours.\8\
---------------------------------------------------------------------------

    \6\ 5 nonbank SBSDs x 50 hours = 250 hours. These amounts are 
annualized over three years resulting in 16.67 (50 hours/3 years) 
hours per nonbank SBSD per year and an industry wide annual burden 
of 83.33 recordkeeping hours, rounded down to 83 hours.
    \7\ 5 nonbank SBSDs x 250 hours = 1,250 hours.
    \8\ (250 hours/3 years) + 1,250 hours = 1,333.33 hours, rounded 
down to 1,333 hours.
---------------------------------------------------------------------------

    The total annual hour burden associated with Rule 18a-3 is thus 
approximately 2,243 hours (910 hours + 1,333 hours).
    The total annual cost burden associated with Rule 18a-3 is 
approximately $3,333 calculated as follows:
    The 7 respondents subject to the collection of information may 
incur start-up costs in order to comply with this collection of 
information. These costs may vary depending on the size and complexity 
of the nonbank SBSD. In addition, the start-up costs may be less for 
the 2 nonbank SBSD respondents also registered as broker-dealers 
because these firms may already be subject to similar requirements with 
respect to other margin rules. For the remaining 5 nonbank SBSDs, 
because these written procedures may be novel undertakings for these 
firms, the Commission staff assumes these nonbank SBSDs will have their 
written risk analysis methodology reviewed by outside counsel. 
Therefore, the staff estimates that these 5 nonbank SBSDs will engage 
an outside counsel to review their written risk analysis methodology, 
at a rate of approximately $400 per hour for 5 hours (i.e., $2,000 in 
legal costs). This will result in a one-time industry-wide external 
recordkeeping cost of approximately $10,000, or approximately $3,333 
per year \9\ annualized over 3 years.
---------------------------------------------------------------------------

    \9\ 5 nonbank SBSDs x $400/hour x 5 hours= $10,000. This amount 
annualized is $3,333.33 per nonbank SBSD, rounded down to $3,333.
---------------------------------------------------------------------------

    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 
July 12, 2022.
    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: David Bottom, Director/
Chief Information Officer, Securities and Exchange Commission, c/o John 
Pezzullo, 100 F Street NE, Washington, DC 20549, or send an email to: 
[email protected].

    Dated: May 9, 2022.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-10285 Filed 5-12-22; 8:45 am]
BILLING CODE 8011-01-P


