[Federal Register Volume 87, Number 123 (Tuesday, June 28, 2022)]
[Notices]
[Pages 38437-38438]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-13712]


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SECURITIES AND EXCHANGE COMMISSION

[SEC File No. 270-652, OMB Control No. 3235-0699]


Proposed Collection; Comment Request; Extension: Rule 18a-2

Upon Written Request, Copies Available From: Securities and Exchange 
Commission, Office of FOIA Services, 100 F Street NE, Washington, DC 
20549-2736

    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-2 (17 CFR 240.18a-
2), 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.
    Rule 18a-2 establishes capital requirements for nonbank major 
security-based swap participants that are also not registered as 
broker-dealers (``nonbank MSBSPs''). In particular, a nonbank MSBSP is 
required at all times to have and maintain positive tangible net worth.
    Under Rule 18a-2, nonbank MSBSPs also need to comply with Exchange 
Act Rule 15c3-4 (17 CFR 240.15c3-4), which requires OTC derivatives 
dealers and other firms subject to its provisions to establish, 
document, and maintain a system of internal risk management controls to 
assist the firm in managing the risk associated with its business 
activities, including market, credit, leverage, liquidity, legal, and 
operational risks.
    The staff previously estimated that 5 or fewer nonbank entities 
would register with the Commission as MSBSPs. The staff continues to 
estimate that 5 or fewer nonbank entities will register with the 
Commission as MSBSPs, although currently no such entities have 
registered. These nonbank MSBSPs will be required to establish, 
document, and regularly review and update risk management control 
systems with

[[Page 38438]]

respect to market, credit, leverage, liquidity, legal and operational 
risks. Based on similar estimates for OTC derivatives dealers, the 
Commission staff believes that each nonbank MSBSP will spend 
approximately 2,000 hours to implement its risk management control 
system, resulting in a one-time industry-wide hour burden of 
approximately 10,000 recordkeeping hours, or approximately 3,333 hours 
per year when annualized over 3 years.\1\
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    \1\ 5 MSBSPs x 2,000 hours = 10,000 hours. This one-time burden 
annualized over a 3-year period is approximately 3,333 hours 
industry-wide (10,000 hours/3 = 3,333.33 rounded down to 3,333).
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    Based on similar estimates for OTC derivatives dealers, the staff 
further estimates that each of these firms will spend approximately 250 
hours per year reviewing and updating its risk management control 
systems, resulting in an ongoing annual industry-wide hour burden of 
approximately 1,250 recordkeeping hours per year.\2\
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    \2\ 5 MSBSPs x 250 hours/year = 1,250 hours/year.
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    Taken together, the total industry-wide recordkeeping hour burden 
is approximately 4,583 hours per year.\3\
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    \3\ 2,000 hours/3 years = 3,333.33 + 1,250 hours = 4,583.33 
hours rounded down to 4,583.
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    Because nonbank MSBSPs may not initially have the systems or 
expertise internally to meet the risk management requirements of Rule 
18a-2, these firms will likely hire an outside risk management 
consultant to assist them in implementing their risk management 
systems. The staff estimates that each firm will hire an outside 
management consultant for approximately 200 hours at a cost of 
approximately $400 per hour, for a one-time external management 
consulting cost of approximately $80,000 per respondent, and a total 
one-time industry management consulting cost of approximately $400,000, 
or approximately $133,333 per year \4\ when annualized over 3 years.
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    \4\ 5 MSBSPs x 200 hours x $400/hour = $400,000. Annualized over 
three years, this industry-wide burden is approximately $133,333 per 
year ($400,000/3 years = $133,333.33 rounded down to $133,333).
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    Nonbank MSBSPs may incur start-up costs to comply with Rule 18a-2, 
including information technology costs. The information technology 
systems of a nonbank MSBSP may be in varying stages of readiness to 
enable these firms to meet the requirements of Rule 18a-2, so the cost 
of modifying their information technology systems could vary 
significantly among firms. Based on estimates for similar collections 
of information,\5\ the Commission staff expects that each nonbank MSBSP 
will spend an average of approximately $16,000 for one-time initial 
hardware and software external expenses, for a total one-time industry-
wide external information technology cost of approximately $80,000, or 
approximately $26,667 per year \6\ when annualized over 3 years. Based 
on the estimates for these similar collections of information, the 
average ongoing external cost to meet the information technology 
requirements of Rule 18a-2 will be approximately $20,500 per nonbank 
MSBSP. This will result in an ongoing annual industry-wide external 
information technology cost of approximately $102,500.\7\ Taken 
together, the total industry-wide information technology related cost 
burden is approximately $129,167 per year.\8\
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    \5\ See Risk Management Controls for Broker or Dealers with 
Market Access, Exchange Act Release No. 6321 (Nov. 3, 2010), 75 FR 
69792, 69814 (Nov. 15, 2010).
    \6\ 5 MSBSPs x $16,000/3 years = $26,666.666, rounded up to 
$26,667.
    \7\ 5 MSBSP x $20,500 = $102,500.
    \8\ $80,000/3 years + $102,500 = $129,166.667 rounded up to 
$129,167.
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    Therefore, the total industry-wide recordkeeping cost burden is 
approximately $262,500 per year ($133,333 + $129,167 = $262,500).
    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 
August 29, 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: June 22, 2022.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-13712 Filed 6-27-22; 8:45 am]
BILLING CODE 8011-01-P


