
[Federal Register Volume 88, Number 187 (Thursday, September 28, 2023)]
[Notices]
[Pages 66923-66925]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-21167]


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SECURITIES AND EXCHANGE COMMISSION

[SEC File No. S7-05-22, OMB Control No. 3235-XXXX]


Submission for OMB Review; Comment Request: Rule 15c6-2

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 collection of 
information provided for 17 CFR 240.15c6-2 (``Rule 15c6-2'') under the 
Securities Exchange Act of 1934 (``Exchange Act'') (15 U.S.C. 78a et 
seq.). The Commission has submitted this collection of information to 
the Office of Management and Budget (``OMB'') for approval. The title 
of the information collection is ``Rule 15c6-2.'' 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.
    Rule 15c6-2 was adopted as part of the final rules to shorten the 
standard settlement cycle for securities transactions from two business 
days after the transaction date to one business day following the 
transaction date. The compliance date for adopted Rule 15c6-2 is May 
28, 2024. Certain provisions of Rule 15c6-2 contain ``collection of 
information'' requirements within the meaning of the PRA.\1\ The 
requirements for this collection of information is mandatory for any 
broker or dealer (``broker-dealer'') engaging in the allocation, 
confirmation, or affirmation process with another party or parties to 
achieve settlement of a securities transaction that is subject to the 
requirements of Sec.  240.15c6-1(a) to either enter into written 
agreements as specified in the rule or establish, maintain, and enforce 
written policies and procedures reasonably designed to address certain 
objectives related to completing

[[Page 66924]]

allocations, confirmations, and affirmations as soon as technologically 
practicable and no later than the end of trade date.\2\
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    \1\ See 44 U.S.C. 3501 et seq.
    \2\ See 17 CFR 240.15c6-2; Exchange Act Release No. 96930 (Feb. 
15, 2023) 88 FR 13872 (Mar. 6, 2023) (``Rule 15c6-2 Adopting 
Release''); see also Exchange Act Release No. 94196 (Feb. 9, 2022), 
87 FR 10436 (Feb. 24, 2022) (``Rule 15c6-2 Proposing Release'').
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    Specifically, for a broker-dealer that determines to establish, 
maintain, and enforce written policies and procedures pursuant to Rule 
15c6-2(a), Rule 15c6-2(b) requires that such policies and procedures 
must be reasonably designed to (1) identify and describe any technology 
systems, operations, and processes that the broker-dealer uses to 
coordinate with other relevant parties, including investment advisers 
and custodians, to ensure completion of the allocation, confirmation, 
or affirmation process for the transaction; (2) set target time frames 
on trade date for completing the allocation, confirmation, and 
affirmation for the transaction; (3) describe the procedures that the 
broker-dealer will follow to ensure the prompt communication of trade 
information, investigate any discrepancies in trade information, and 
adjust trade information to help ensure that the allocation, 
confirmation, and affirmation can be completed by the target time 
frames on trade date; (4) describe how the broker-dealer plans to 
identify and address delays if another party, including an investment 
adviser or a custodian, is not promptly completing the allocation or 
affirmation for the transaction, or if the broker-dealer experiences 
delays in promptly completing the confirmation; and (5) measure, 
monitor, and document the rates of allocations, confirmations, and 
affirmations completed as soon as technologically practicable and no 
later than the end of the day on trade date.
    The purpose of the collection under Rule 15c6-2 is to ensure that 
parties to institutional transactions--that is, transactions where a 
broker-dealer or its customer must engage with agents of the customer, 
including the customer's investment adviser or its securities 
custodian, to prepare a transaction for settlement--can ensure the 
completion of the allocation, confirmation, and affirmation process as 
soon as technologically practicable and no later than the end of the 
day on trade date.
    The respondents to the collection of information are broker-dealers 
that are parties to institutional trades. As of December 31, 2021, 
3,508 broker-dealers were registered with the Commission.\3\ Of those, 
approximately 143 broker-dealers are participants of the Depository 
Trust Company (``DTC''),\4\ a clearing agency registered with the 
Commission that provides central securities depository services for 
transactions in U.S. equity securities. Participants in DTC can 
facilitate the settlement of securities transactions on behalf of their 
customers. For example, broker-dealers that participate in DTC are 
often referred to as ``clearing brokers'' within the securities 
industry. In addition to broker-dealers, DTC participants include bank 
custodians that may also hold securities on behalf of institutional 
customers. Among other things, DTC facilitates the settlement of 
securities transactions using the delivery-versus-payment (``DVP'') and 
receipt-versus-payment (``RVP'') methods, both of which are commonly 
used by buyers and sellers to settle an institutional transaction once 
the parties have completed the allocation, confirmation, and 
affirmation process. Because DTC is the only clearing agency that 
provides central securities depository services for U.S. equities, the 
Commission believes that the set of participants at DTC that are 
broker-dealers are a useful, if partial, estimate of broker-dealers 
that participate in the allocation, confirmation, and affirmation 
process and therefore of broker-dealers that would be subject to the 
requirements of Rule 15c6-2.
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    \3\ This estimate is derived from FOCUS Report data as of 
December 31, 2021.
    \4\ See DTCC, DTC Member Directories, https://www.dtcc.com/client-center/dtc-directories (last updated July 1, 2023).
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    In addition, other broker-dealers may participate in the 
allocation, confirmation, and affirmation process but, because they do 
not maintain status as a participant in DTC, rely on commercial 
relationships with DTC participants (i.e., clearing brokers) to 
facilitate final settlement of their institutional transactions. Using 
annual statistics compiled by the Financial Industry Regulatory 
Authority (``FINRA''), the Commission estimates that approximately 268 
additional broker-dealers may serve institutional customers.\5\ 
Accordingly, the Commission estimates that approximately 411 broker-
dealers would be subject to the requirements of Rule 15c6-2.
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    \5\ Specifically, statistics compiled by FINRA suggest that 
approximately 256 small firms and 12 medium-sized firms in the 
``Trading and Execution'' category perform ``Institutional 
Brokerage.'' FINRA, 2022 FINRA Industry Snapshot 33, 34 (2022), 
https://www.finra.org/sites/default/files/2022-03/2022-industry-snapshot.pdf.
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    Rule 15c6-2 will impose both initial and ongoing burdens. The 
extent to which a respondent will incur a burden to comply with the 
collection of information under Rule 15c6-2 will depend on the extent 
to which the broker-dealer determines that its policies and procedures, 
as opposed to its written agreements, will be used to comply with the 
rule and how any existing policies and procedures for ensuring timely 
settlement would need to be modified to address same-day affirmation. 
As a general matter, most broker-dealers maintain policies and 
procedures to ensure the timely settlement of their transactions, and 
the securities industry considers achieving ``same-day affirmation'' an 
industry best practice. Nonetheless, the Commission believes that 
respondent broker-dealers will need to evaluate existing policies and 
procedures, identify any gaps, and then update their policies and 
procedures to address any gaps identified. Accordingly, the Commission 
estimates that respondent broker-dealers would incur an aggregate one-
time burden of approximately 240 hours \6\ to create policies and 
procedures required under the rule, and that the internal cost (or 
monetized value of the hour burden) of this one-time burden per broker-
dealer would be $88,880.\7\
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    \6\ This figure was calculated as follows: (Assistant General 
Counsel for 20 hours + Compliance Attorney for 120 hours + Senior 
Risk Management Specialist for 20 hours + Risk Management Specialist 
for 80 hours) = 240 hours x 411 respondents = 98,640 hours.
    \7\ This figure was calculated as follows: (Assistant General 
Counsel at $543/hour x 20 hours = $10,860) + (Compliance Attorney at 
$426/hour x 120 hours = $51,120) + (Senior Risk Management 
Specialist at $417/hour x 20 hours = $8,340) + (Risk Management 
Specialist at $232/hour x 80 hours = $18,560) = $88,880 x 411 
respondents = $36,529,680.
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    Rule 15c6-2 also imposes ongoing burdens on a respondent broker-
dealer as follows: (i) ongoing monitoring and compliance activities 
with respect to the written policies and procedures required by the 
proposed rule; and (ii) ongoing documentation activities with respect 
to its obligations to measure, monitor, and document the rates of 
allocations, confirmations, and affirmations completed as soon as 
technologically practicable and no later than the end of the day on 
trade date. The Commission estimates that the ongoing activities 
required by Rule 15c6-2 would impose an aggregate annual burden on a 
respondent broker-dealer of 480 hours,\8\ and an internal cost (or 
monetized value of the hour

[[Page 66925]]

burden) per broker-dealer of $172,416.\9\ The total industry internal 
cost is estimated to be approximately $107M.\10\
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    \8\ This figure was calculated as follows: (Assistant General 
Counsel for 48 hours + Compliance Attorney for 192 hours + Senior 
Risk Management Specialist for 48 hours + Risk Management Specialist 
for 192 hours) = 480 hours x 411 respondents = 197,280 hours.
    \9\ This figure was calculated as follows: (Assistant General 
Counsel at $543/hour x 48 hours = $26,064) + (Compliance Attorney at 
$426/hour x 192 hours = $81,792) + (Senior Risk Management 
Specialist at $417/hour x 48 hours = $20,016) + (Risk Management 
Specialist at $232/hour x 192 hours = $44,544) = $172,416 x 411 
respondents = $70,862,976.
    \10\ This figure was calculated as follows: $36,529,680 
(industry one-time burden) + $70,862,976 (industry ongoing burden) = 
$107,392,656.
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    Rule 15c6-2 imposes a recordkeeping requirement on broker-dealers 
to maintain policies and procedures consistent with the rule. Where the 
Commission requests that a broker-dealer produce records retained 
pursuant to the requirements of Rule 15c6-2, a broker-dealer can 
request confidential treatment of the information. If such confidential 
treatment request is made, the Commission anticipates that it will keep 
the information confidential subject to applicable law.
    Pursuant to Exchange Act Rule 17a-4(b)(7), a broker or dealer 
registered pursuant to section 15 of the Exchange Act must preserve for 
a period of not less than three years, the first two years in an easily 
accessible place, all written agreements (or copies thereof) entered 
into by such member, broker or dealer relating to its business as such, 
including agreements with respect to any account.\11\
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    \11\ 17 CFR 240.17a-4(b)(7). The title of the information 
collection for 17 CFR 240.17a-4 is ``Records to be Preserved by 
Broker-Dealers'' (OMB Control No. 3235-0279).
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    Pursuant to 17 CFR 240.17a-4(e)(7), a broker or dealer registered 
pursuant to section 15 of the Exchange Act must maintain and preserve 
in an easily accessible place each compliance, supervisory, and 
procedures manual, including any updates, modifications, and revisions 
to the manual, describing the policies and practices of the member, 
broker or dealer with respect to compliance with applicable laws and 
rules, and supervision of the activities of each natural person 
associated with the member, broker or dealer until three years after 
the termination of the use of the manual.\12\
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    \12\ 17 CFR 240.17a-4(e)(7).
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    The public may view background documentation for this information 
collection at the following website: >www.reginfo.gov<. Find this 
particular information collection by selecting ``Currently under 30-day 
Review--Open for Public Comments'' or by using the search function. 
Written comments and recommendations for the proposed information 
collection should be sent by October 30, 2023 to (i) 
>[email protected]< and (ii) David Bottom, 
Director/Chief Information Officer, Securities and Exchange Commission, 
c/o John Pezzullo, 100 F Street NE, Washington, DC 20549, or by sending 
an email to: [email protected].

    Dated: September 22, 2023.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-21167 Filed 9-27-23; 8:45 am]
BILLING CODE 8011-01-P


