90 FR 133 pgs. 31733-31734 - Proposed Collection; Comment Request; Extension: Rule 18a-2
Type: NOTICEVolume: 90Number: 133Pages: 31733 - 31734
Pages: 31733, 31734Docket number: [OMB Control No. 3235-0699]
FR document: [FR Doc. 2025-13253 Filed 7-14-25; 8:45 am]
Agency: Securities and Exchange Commission
Official PDF Version: PDF Version
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SECURITIES AND EXCHANGE COMMISSION
[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 (44 U.S.C. 3501 et seq. ), the Securities and Exchange Commission ("SEC" or "Commission") is soliciting comments on the proposed collection of information in Rule 18a-2.
Rule 18a-2, 17 CFR 240.18a-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 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
Footnotes:
1 ?5 MSBSPs × 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).
[top] Based on similar estimates for OTC derivatives dealers, the staff further
Footnotes:
2 ?5 MSBSPs × 250 hours/year = 1,250 hours/year.
Taken together, the total industry-wide recordkeeping hour burden is approximately 4,583 hours per year. 3
Footnotes:
3 ?2,000 hours/3 years = 3,333.33 + 1,250 hours = 4,583.33 hours rounded down to 4,583.
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 $596 per hour, for a one-time external management consulting cost of approximately $119,200 per respondent, and a total one-time industry management consulting cost of approximately $596,000, or approximately $198,667 per year? 4 when annualized over 3 years.
Footnotes:
4 ?5 MSBSPs × 200 hours × $596/hour = $596,000. Annualized over three years, this industry-wide burden is approximately $198,667 per year ($596,000/3 years = $198,666.66 rounded up to $198,667).
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 also 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
Footnotes:
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 × $16,000/3 years = $26,666.666, rounded up to $26,667.
7 ?5 MSBSP × $20,500 = $102,500.
8 ?$80,000/3 years + $102,500 = $129,166.667 rounded up to $129,167.
Therefore, the total industry-wide recordkeeping cost burden is approximately $327,834 per year ($198,667 + $129,167 = $327,834).
The requirement to establish, document, and maintain a system of internal risk management controls will be imposed on nonbank MSBSPs because, by definition, they maintain materially large positions in security-based swap markets and will pose substantial risk to the stability of those markets should they default on their obligations. 9 The collections of information in Rule 18a-2 will facilitate the monitoring of the financial condition of nonbank MSBSPs by the Commission and its staff. The information collection is mandatory and is kept confidential to the extent permitted by the Freedom of Information Act (5 U.S.C. 552 et seq. ).
Footnotes:
9 ?The record preservation requirements for the information collections are in Rule 18a-6, 17 CFR 240.18a-6.
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB Control Number.
Written comments are invited on: (a) whether this proposed collection of information is necessary for the proper performance of the functions of the SEC, including whether the information will have practical utility; (b) the accuracy of the SEC's estimate of the burden imposed by the proposed collection of information, including the validity of the methodology and the assumptions used; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated, electronic collection techniques or other forms of information technology.
Please direct your written comments on this 60-Day Collection Notice to Austin Gerig, Director/Chief Data Officer, Securities and Exchange Commission, c/o Tanya Ruttenberg via email to PaperworkReductionAct@sec.gov by September 15, 2025. There will be a second opportunity to comment on this SEC request following the Federal Register publishing a 30-Day Submission Notice.
Dated: July 11, 2025.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-13253 Filed 7-14-25; 8:45 am]
BILLING CODE 8011-01-P