Supporting SS Proposed Rule 3a68-2

PAPERWORK REDUCTION ACT SUBMISSION
SUPPORTING STATEMENT
for the Paperwork Reduction Act New Information Collection Submission for
“Proposed Rule 3a68-2 (Interpretation of Swaps, Security-Based Swaps, and Mixed
Swaps) and Proposed Rule 3a68-4(c) (Process for Determining Regulatory
Treatment for Mixed Swaps)”
A.

Justification

1.

Necessity of Information Collection

Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act
(“Dodd-Frank Act”) adds to the Commodity Exchange Act (“CEA”) and the Securities
Exchange Act of 1934 (“Exchange Act”) definitions of the terms “swap,” “security-based
swap,” and “mixed swap.”1
Section 712(d)(1) of the Dodd-Frank Act provides that the Commodity Futures
Trading Commission (“CFTC”) and the Securities and Exchange Commission (“SEC”)
(together with the CFTC, the “Commissions”), in consultation with the Board of
Governors of the Federal Reserve System, shall jointly further define the terms “swap,”
“security-based swap,” “swap dealer,” “security-based swap dealer,” “major swap
participant,” “major security-based swap participant,” “eligible contract participant,” and
“security-based swap agreement.”
Under the comprehensive framework for regulating swaps and security-based
swaps established in Title VII of the Dodd-Frank Act, the CFTC is given regulatory
authority over swaps, the SEC is given regulatory authority over security-based swaps,
and the Commissions shall jointly prescribe such regulations regarding mixed swaps as
may be necessary to carry out the purposes of Title VII of the Dodd-Frank Act.
In light of the requirements in the Dodd-Frank Act noted above, the Commissions
issued a joint Advance Notice of Proposed Rulemaking (“ANPR”) on August 13, 2010,
requesting public comment regarding the definitions of “swap,” “security-based swap,”
“security-based swap agreement,” “swap dealer,” “security-based swap dealer,” “major
swap participant,” “major security-based swap participant,” and “eligible contract
participant” in Title VII of the Dodd-Frank Act.2 The Commissions reviewed more than
80 comments in response to the ANPR. The Commissions also informally solicited
comments on the definitions on their respective websites. In addition, the staffs of the
1

Citations to provisions of the CEA and the Exchange Act, 15 U.S.C. 78a et seq., in this document
refer to the numbering of those provisions after the effective date of Title VII.

2

See Definitions Contained in Title VII of Dodd-Frank Wall Street Reform and Consumer
Protection Act, Exchange Act Rel. No. 34-62717, 75 FR 51429 (Aug. 20, 2010). The comment
period for the ANPR closed on September 20, 2010.

Commissions have met with many market participants and other interested parties to
discuss the definitions.
On April 27, 2011, the Commissions jointly proposed rules and interpretative
guidance to further define the terms “swap,” “security-based swap,” and “security-based
swap agreement,” regarding “mixed swaps,” and governing books and records with
respect to “security-based swap agreements.” Section 712(d)(4) of the Dodd-Frank Act
provides that any interpretation of, or guidance by, either the CFTC or SEC regarding a
provision of Title VII of the Dodd-Frank Act shall be effective only if issued jointly by
the Commissions (after consultation with the Board) on issues where Title VII of the
Dodd-Frank Act requires the CFTC and SEC to issue joint regulations to implement the
provision. The Commissions believe that any interpretation or guidance regarding
whether a Title VII of the Dodd-Frank Act instrument is a swap, a security-based swap, or
both (i.e., a mixed swap), must be issued jointly pursuant to this requirement.
There may be instruments (or classes of instruments) that are difficult to
categorize definitively as swaps or security-based swaps. Further, because mixed swaps
are both swaps and security-based swaps, identifying a mixed swap may not always be
straightforward. In addition, because mixed swaps are both security-based swaps and
swaps, absent a joint rule or order by the Commissions permitting an alternative
regulatory approach, persons who desire or intend to list, trade, or clear a mixed swap (or
class thereof) would be required to comply with all the statutory provisions in the CEA
and the Exchange Act (including all the rules and regulations thereunder) that were added
or amended by Title VII of the Dodd-Frank Act with respect to swaps or security-based
swaps. Such dual regulation may not be appropriate in every instance and may result in
potentially conflicting or duplicative regulatory requirements. Consequently, the SEC
proposed rule 3a68-2, which creates a process for interested persons to request a joint
interpretation by the Commissions regarding whether a particular instrument (or class of
instruments) is a swap, a security-based swap, or both (i.e., a mixed swap), as well as rule
3a68-4(c), which would establish a process for persons to request that the Commissions
issue a joint order permitting such persons (and any other person or persons that
subsequently lists, trades, or clears that class of mixed swap) to comply, as to parallel
provisions3 only, with specified parallel provisions of either the CEA or the Exchange
Act, and related rules and regulations (collectively “specified parallel provisions”),
instead of being required to comply with parallel provisions of both the CEA and the
Exchange Act.
Under proposed rule 3a68-2, a person would provide to the Commissions a copy
of all material information regarding the terms of, and a statement of the economic
characteristics and purpose of, each relevant agreement, contract, or transaction (or class
thereof), along with that person’s determination as to whether each such agreement,
contract, or transaction (or class thereof) should be characterized as a swap, security3

For purposes of rule 3a68-4(c) under the Exchange Act, “parallel provisions” means comparable
provisions of the CEA and the Exchange Act that were added or amended by Title VII of the
Dodd-Frank Act with respect to security-based swaps and swaps, and the rules and regulations
thereunder.

2

based swap, or both (i.e., a mixed swap). The Commissions also may request the
submitting person to provide additional information.
Under proposed rule 3a68-4(c), a person would provide to the Commissions a
copy of all material information regarding the terms of, and the economic characteristics
and purpose of, the specified (or specified class of) mixed swap. In addition, a person
would provide the specified parallel provisions, and the reasons the person believes such
specified parallel provisions would be appropriate for relevant mixed swap (or class
thereof), and an analysis of: i) the nature and purposes of the parallel provisions that are
the subject of the request; ii) the comparability of such parallel provision; and iii) the
extent of any conflicts or differences between such parallel provisions. The Commissions
also may request the submitting person to provide additional information.
2.

Purpose and Use of the Information Collection

The SEC would use the information collected pursuant to proposed rule 3a68-2 to
evaluate an agreement, contract, or transaction (or class thereof) in order to provide joint
interpretations or joint notices of proposed rulemaking with the CFTC regarding whether
these agreements, contracts, or transactions (or classes thereof) are swaps, security-based
swaps, or both (i.e., mixed swaps) as defined in the Dodd-Frank Act.
The SEC would use the information collected pursuant to proposed rule 3a68-4(c)
to evaluate a specified, or a specified class of, mixed swaps in order to provide joint
orders or joint notices of proposed rulemaking with the CFTC regarding the regulation of
that particular mixed swap or class of mixed swap.
The information provided to the SEC pursuant to proposed rules 3a68-2 and 3a684(c) also would allow the SEC to monitor the development of new OTC derivatives
products in the marketplace and determine whether additional rulemaking or interpretive
guidance is necessary or appropriate.
3.

Consideration Given to Information Technology

Proposed rules 3a68-2 and 3a68-4(c) would allow persons to submit requests to
the Commissions for joint interpretations regarding whether a particular agreement,
contract, or transaction (or class thereof) is a swap, security-based swap, or both (i.e., a
mixed swap), and for joint orders permitting alternative regulatory treatment for particular
mixed swaps. We understand from our staff’s discussions with industry participants that
information technology is commonly used to assist in the creation and maintenance of
documentation as part of their ordinary course business and risk management practices,
including documentation such as that proposed to be required for a request submitted
pursuant to proposed rules 3a68-2 and 3a68-4(c), however, the proposed rule does not
mandate how an entity must gather or maintain the documentation required for a
submission under proposed rules 3a68-2 and 3a68-4(c).
4.

Duplication

3

The proposed rule would not duplicate existing regulatory requirements.
Moreover, we understand from our staff’s discussions with industry participants that the
persons likely to submit a request under proposed rules 3a68-2 and 3a68-4(c) may
currently create and maintain, as part of their ordinary course business and risk
management practices, some of the documentation that is required by proposed rules
3a68-2 and 3a68-4(c).4
5.

Reducing the Burden on Small Entities

For purposes of SEC rulemaking in connection with the Regulatory Flexibility
Act, a small entity includes: (i) when used with reference to an “issuer” or a “person,”
other than an investment company, an “issuer” or “person” that, on the last day of its most
recent fiscal year, had total assets of $5 million or less,5 or (ii) a broker-dealer with total
capital (net worth plus subordinated liabilities) of less than $500,000 on the date in the
prior fiscal year as of which its audited financial statements were prepared pursuant to
Rule 17a-5(d) under the Exchange Act,6 or, if not required to file such statements, a
broker-dealer with total capital (net worth plus subordinated liabilities) of less than
$500,000 on the last day of the preceding fiscal year (or in the time that it has been in
business, if shorter); and is not affiliated with any person (other than a natural person)
that is not a small business or small organization.7 Under the standards adopted by the
Small Business Administration, small entities in the finance and insurance industry
include the following: (i) for entities engaged in credit intermediation and related
activities, entities with $175 million or less in assets;8 (ii) for entities engaged in nondepository credit intermediation and certain other activities, entities with $7 million or
less in annual receipts;9 (iii) for entities engaged in financial investments and related
activities, entities with $7 million or less in annual receipts;10 (iv) for insurance carriers
and entities engaged in related activities, entities with $7 million or less in annual

4

The information required to be submitted to request an interpretation under proposed rule 3a68-2
is information about the nature of the instrument and the person’s own determination, and reasons,
regarding the instrument’s status as a swap, security-based swap, or mixed swap. The information
required to be submitted to request alternative regulatory treatment under proposed rule 3a68-4(c)
is information about the nature of the mixed swap and the person’s own determination, and
reasons, regarding the proposed alternative regulatory treatment of the instrument. In the absence
of a request pursuant to proposed rule 3a68-2 or 3a68-4(c), such persons would need to maintain
certain information about such instruments, as well as make their own determination regarding the
status of and regulatory regime applicable to the instrument, as a part of their ordinary business
practices.

5

See 17 CFR 240.0-10(a).

6

See 17 CFR 240.17a-5(d).

7

See 17 CFR 240.0-10(c).

8

See 13 CFR 121.201 (Subsector 522).

9

See id.

10

See id. at Subsector 523.

4

receipts;11 and (v) for funds, trusts, and other financial vehicles, entities with $7 million
or less in annual receipts.12
Based on the SEC’s existing information about the swap markets, we believe that
the swap markets, while broad in scope, are largely dominated by entities such as those
that would be covered by the “swap dealer,” “security-based swap dealer,” “major swap
participant,” and “major security-based swap participant” definitions.13 The SEC
believes that such entities exceed the thresholds defining “small entities” set out above.
Moreover, although it is possible that other persons may engage in swap, security-based
swap, and mixed swap transactions, we do not believe that any of these entities would be
“small entities” as defined in rule 0-10 under the Exchange Act.14 Feedback from
industry participants about the swap markets indicates that only persons or entities with
assets significantly in excess of $5 million (or with annual receipts significantly in excess
of $7 million) participate in the swap markets.
To the extent that a small number of transactions did have a counterparty that was
defined as a “small entity” under SEC rule 0-10, the SEC believes it is unlikely that the
information collections under proposed rules 3a68-2 and 3a68-4(c) would have a
significant economic impact on that entity. Proposed rules 3a68-2 and 3a68-4(c) simply
would provide a process for such persons, if they desire, to request interpretations of
whether agreements, contracts, and transactions are swaps, security-based swaps, or
mixed swaps or to request alternative regulatory treatment for mixed swaps.
6.

Consequences of Not Conducting the Collection

The collection of information in proposed rule 3a68-2 is designed to provide the
Commissions with sufficient information regarding the instrument at issue so that the
Commissions can appropriately evaluate whether it is a swap, a security-based swap, or
both (i.e., a mixed swap). We preliminarily believe that, without the information in
proposed 3a68-2, the SEC may not have sufficient information about instruments for
which market participants are unsure of the characterization and thus may not be able to
issue an interpretation of whether an instrument is a swap, security-based swap, or mixed
swap. We further preliminarily believe that, as a result, there is a possibility that market
participants who engage in agreements, contracts, or transactions about which the status
as a swap, security-based swap, or mixed swap is uncertain would face greater regulatory
uncertainty regarding the status of such instruments.

11

See id. at Subsector 524.

12

See id. at Subsector 525.

13

See, e.g., CEA section 1a(49), 7 U.S.C. 1a(49) (defining “swap dealer”); section 3(a)(71)(A) of the
Exchange Act, 15 U.S.C. 78c(a)(71)(A) (defining “security-based swap dealer”); CEA section
1a(33), 7 U.S.C. 1a(33) (defining “major swap participant”); section 3(a)(67)(A) of the Exchange
Act, 15 U.S.C. 78c(a)(67)(A) (defining “major security-based swap participant”). Such entities
also would include commercial entities that may use swaps to hedge or mitigate commercial risk.

14

See 17 CFR 240.0-10(a).

5

The collection of information in proposed rule 3a68-4(c) is designed to provide
the Commissions with sufficient information regarding the mixed swap at issue so that
the Commissions can appropriately evaluate whether alternative regulatory treatment for
the mixed swap is warranted. We preliminarily believe that, without the information in
proposed 3a68-4(c), the SEC may not have sufficient information about such mixed
swaps to permit alternative regulatory treatment. We further preliminarily believe that, as
a result, there is a possibility that market participants who engage in mixed swaps that
might otherwise be appropriate for alternative regulatory treatment would face greater
regulatory burdens regarding such instruments.
7.

Inconsistencies with Guidelines in 5 CFR 1320.5(d)(2)

There are no special circumstances. These collections are consistent with the
guidelines in 5 CFR 1320.5(d)(2), except potentially with respect to the confidentiality of
information. There is no proposed requirement that the collections of information in
proposed rules 3a68-2 and 3a68-4(c) be provided to the SEC or a third party on a regular,
ordinary course basis. However, such information may be considered proprietary
financial information regarding an entity’s swap, security-based swap, or mixed swap
transactions, and thus confidentiality concerns may arise where the SEC has obtained
information pursuant to proposed rule 3a68-2 or 3a68-4(c). In a situation where the SEC
has obtained such information, the SEC would consider requests for confidential
treatment of such information on a case-by-case basis.
8.

Consultations Outside the Agency

The CFTC and the SEC issued a joint ANPR on August 13, 2010 requesting
public comment regarding the definitions of “swap,” “security-based swap,” “securitybased swap agreement,” “swap dealer,” “security-based swap dealer,” “major swap
participant,” “major security-based swap participant,” and “eligible contract participant”
in Title VII of the Dodd-Frank Act.15 Comments received on the ANPR were taken into
account in drafting the April 27, 2011 proposing release and are posted on the
Commission’s public website and made available through
http://www.sec.gov/comments/s7-16-10/s71610.shtml.
The SEC worked very closely with the CFTC on the development and drafting of
the April 27, 2011 proposing release. In addition, the Commissions consulted and
coordinated with representatives from the Board of Governors of the Federal Reserve
System and the Office of the Comptroller of the Currency.
Furthermore, the Commissions consulted with industry participants and other
interested parties. Any comments or materials received by the Commissions from
industry participants and other interested parties relating to the development of the April
27, 2011 proposing release are posted on the SEC’s public website, and made available
through http://www.sec.gov/rules/proposed.shtml.
15

See supra note 2.

6

Additionally, in the April 27, 2011 proposing release, the SEC solicited comment
on the new “collection of information” requirements and associated paperwork burdens.
A copy of the release is attached. Comments on SEC releases are generally received from
registrants, investors, and other market participants. In addition, the SEC and staff
participate in ongoing dialogue with representatives of various market participants
through public conferences, meetings and informal exchanges. Any comments received
on this proposed rulemaking will be posted on the SEC’s public website, and made
available through http://www.sec.gov/comments/s7-16-11/s71611.shtml. The SEC will
consider all comments received prior to publishing the final rule, and will explain in any
adopting release how the final rule responds to such comments, in accordance with 5
C.F.R. 1320.11(f).
9.

Payment or Gift

There are no payments or gifts to respondents in the information collection.
10.

Confidentiality

There is no proposed requirement that the collections of information in proposed
rules 3a68-2 and 3a68-4(c) be provided to the SEC or a third party on a regular, ordinary
course basis. No assurances of confidentiality are provided in the proposed rules. In a
situation where the SEC has obtained the information, the SEC would consider requests
for confidential treatment on a case-by-case basis.
11.

Sensitive Questions

Not applicable; no information of a sensitive nature is required under the rule.
12.

Burden of Information Collection
Proposed Rule 3a68-2

It is difficult to calculate the precise number of requests that would be submitted
to the Commissions under proposed rule 3a68-2, given the historical unregulated state of
the OTC derivatives market. Although any person could submit a request under proposed
rule 3a68-2, the SEC believes as a practical matter that the relevant categories of such
persons would be swap dealers and security-based swap dealers, major swap participants
and major security-based swap participants, swap execution facilities (“SEFs”), securitybased SEFs, derivatives clearing organizations (“DCOs”) clearing swaps, designated
contract markets (“DCMs”) trading swaps, swap data repositories (“SDRs”), securitybased SDRs, and clearing agencies clearing security-based swaps, and the total number of
persons could be 475.16 However, based on the SEC’s experience and information
16

This total number includes an estimated 250 swap dealers, 50 major swap participants,
50 security-based swap dealers, 10 major security-based swap participants, 35 SEFs, 20
security-based SEFs, 12 DCOs, 17 DCMs, 15 SDRs, 10 security-based SDRs, and 6
7

received from commenters to the ANPR17 and during meetings with the public to discuss
the definitions of the terms swap, security-based swap, and mixed swap generally,
including the interpretation of whether a transaction is a swap, security-based swap, or
both (i.e., a mixed swap), and taking into consideration the certainty provided by the
proposed rules and interpretive guidance in this release, the SEC believes that the number
of requests that would be submitted by such persons to the Commissions to provide joint
interpretations as to whether a given agreement, contract, or transaction is a swap,
security-based swap, or both (i.e., a mixed swap), would be small, and therefore expects
that only a small number of requests would be submitted pursuant to proposed rule 3a682.18
Although the SEC does not have precise figures for the number of requests that
persons would submit, the SEC believes it is reasonable to estimate that it likely would be
fewer than 50 requests in the first year. The SEC estimates the total paperwork burden
associated with preparing and submitting a person’s request to the Commissions pursuant
to proposed rule 3a68-2 would be 20 hours per request of internal company or individual
time to retrieve, review, and submit the information associated with the submission.19

clearing agencies, as set forth by the CFTC and SEC, respectively, in their other DoddFrank Act rulemaking proposals. See Further Definition of “Swap Dealer,” “SecurityBased Swap Dealer,” “Major Swap Participant,” “Major Security-Based Swap
Participant” and “Eligible Contract Participant,” 75 FR 80174 (Dec. 21, 2010) (regarding
security-based swap dealers and major security-based swap participants); Registration of
Swap Dealers and Major Swap Participants, 75 FR 71379 (Nov. 23, 2010) (regarding
swap dealers and major security-based swap participants); Security-Based Swap Data
Repository Registration, Duties, and Core Principles, 75 FR 77306 (Dec. 10, 2010)
(regarding SBSDRs); Swap Data Repositories, 75 FR 80898 (Dec. 23, 2010) (regarding
SDRs); Core Principles and Other Requirements for Swap Execution Facilities, 76 FR
1214, Jan. 7, 2011 (regarding SEFs); Registration and Regulation of Security-Based
Swap Execution Facilities, 76 FR 10948, Feb. 28, 2011 (regarding security-based SEFs);
Financial Resources Requirements for Derivatives Clearing Organizations, 75 FR 63113,
Oct. 14, 2010 (regarding DCOs); Information Management Requirements for Derivatives
Clearing Organizations, 75 FR 78185, Dec. 15, 2010 (regarding DCOs); Risk
Management Requirements for Derivatives Clearing Organizations, 76 FR 3698, Jan. 20,
2011 (regarding DCOs); Core Principles and Other Requirements for Designated
Contract Markets, 75 FR 80572, Dec. 22, 2010 (regarding DCMs); Clearing Agency
Standards for Operation and Governance, 76 FR 14472, Mar. 16, 2011 (regarding
clearing agencies).
17

See supra note 2.

18

This estimate is based on comments from and discussions with market participants
regarding uncertainty concerning whether certain contracts might be considered swaps,
security-based swaps, or both, i.e., mixed swaps, and the size of the mixed swaps
category, although the SEC has not received data regarding the specific number of
potential transaction types for which there is uncertainty or that are mixed swaps.

19

This estimate is based on information indicating that the average burden associated with
preparing and submitting a no-action request to the SEC staff in connection with the
8

Assuming 50 requests in the first year, the SEC estimates that this would result in an
aggregate burden for the first year of 1000 hours of company time (50 requests x 20
hours/request).
The SEC believes that as the Commissions provide joint interpretations or joint
notices of proposed rulemaking, the number of requests received will decrease over time.
Although the SEC does not have precise figures for the number of requests that persons
would submit after the first year, the SEC believes it is reasonable to estimate that it
likely would be fewer than 10 requests on average in ensuing years. Assuming 10
requests in ensuing years, the SEC estimates that this would result in an aggregate burden
in each ensuing year of 200 hours of company time (10 requests x 20 hours/request).
Proposed Rule 3a68-4(c)
It is difficult to calculate the precise number of requests that would be submitted
to the Commissions under proposed rule 3a68-4(c), given the historical unregulated state
of the OTC derivatives market. Although any person could submit a request under
proposed rule 3a68-4(c), the SEC believes as a practical matter that the relevant
categories of such persons would be SEFs, security-based SEFs, and DCMs trading
swaps, and the total number of persons could be 72.
Because the SEC believes that both the category of mixed swap transactions and
the number of market participants that engage in mixed swap transactions are small, the
SEC believes that the pool of potential persons requesting a joint order regarding the
regulation of a specified, or specified class of, mixed swap pursuant to proposed rule
3a68-4(c) would be small (approximately 10). Also, those requests submitted pursuant to
proposed rule 3a68-2 that result in an interpretation that the agreement, contract, or
transaction (or class thereof) is not a mixed swap would reduce the pool of possible
persons submitting a request regarding the regulation of particular mixed swaps (or class
thereof) pursuant to proposed rule 3a68-4(c). In addition, not only the requesting party,
but also any other person or persons that subsequently lists, trades, or clears that mixed
swap, would be subject to, and must comply with, the joint order regarding the regulation
of the specified, or specified class of, mixed swap, as issued by the Commissions.
Therefore, the SEC believes that the number of requests for a joint order regarding the
regulation of mixed swaps, particularly involving specified classes of mixed swaps,
would decrease over time.
As discussed above, the SEC believes the number of requests that persons would
submit pursuant to proposed rule 3a68-4(c) is quite small given the limited types of
agreements, contracts, or transactions (or class thereof) the Commissions believe would
constitute mixed swaps. In addition, depending on the characteristics of a mixed swap (or
class thereof), a person may choose not to submit a request pursuant to proposed rule
3a68-4(c). The SEC also notes that any joint order issued by the Commissions would
identification of whether certain products were securities, which the SEC believes is a
process similar to the process under proposed rule 3a68-2, was approximately 20 hours.

9

apply to any person that subsequently lists, trades, or clears that specified, or specified
class of, mixed swap, so that requests for joint orders could diminish over time. Also,
persons may submit requests for an interpretation under proposed rule 3a68-4(c) that do
not result in an interpretation that the agreement, contract, or transaction (or class thereof)
is a mixed swap. Therefore, although the SEC does not have precise figures for the
number of requests that persons would submit, the SEC believes it is reasonable to
estimate that it likely would be fewer than 20 requests in the first year. The SEC
estimates the total paperwork burden associated with preparing and submitting a party’s
request to the Commissions pursuant to proposed rule 3a68-4(c) would be 30 hours per
request for mixed swaps for which a request for a joint interpretation pursuant to
proposed rule 3a68-4(c) was not previously made. Assuming 20 requests in the first
year, the SEC estimates that this would result in an aggregate burden for the first year of
600 hours of company time (20 requests x 30 hours/request) and $316,000 for the
services of outside professionals (20 requests x 50 hours/request x $316).
For mixed swaps for which a request for a joint interpretation pursuant to
proposed rule 3a68-2 was previously made, the SEC estimates the total paperwork burden
associated with preparing and submitting a party’s request to the Commissions pursuant
to proposed rule 3a68-4(c) would be 10 hours fewer than for mixed swaps for which a
request for a joint interpretation pursuant to proposed rule 3a68-2 was not previously
made because certain, although not all, of the information required to be submitted and
necessary to prepare pursuant to proposed rule 3a68-4(c) would have been required to be
submitted and necessary to prepare pursuant to proposed rule 3a68-2. Although certain
requests made pursuant to proposed rule 3a68-4(c) may be made without a previous
request for a joint interpretation pursuant to proposed rule 3a68-2, the SEC believes that
most requests under proposed rule 3a68-2 that result in the interpretation that an
agreement, contract, or transaction (or class thereof) is a mixed swap will result in a
subsequent request for alternative regulatory treatment pursuant to proposed rule 3a684(c). Assuming, therefore, that 90 percent, or 18 of the estimated 20 requests pursuant to
proposed rule 3a68-4(c) in the first year, as discussed above, would be such “follow-on”
requests, the SEC estimates that this would result in an aggregate burden in the first year
of 360 hours of company time (18 requests x 20 hours/request).
As discussed above, the SEC believes that as the Commissions provide joint
orders regarding alternative regulatory treatment, the number of requests received will
decrease over time. The SEC believes it is reasonable to estimate that it likely would be
fewer than 5 requests on average in ensuing years. Assuming 5 requests in ensuing years,
the SEC estimates that this would result in an aggregate burden in each ensuing year of
150 hours of company time (5 requests x 30 hours/request). As discussed above,
assuming that approximately 90 percent, or 4 of the estimated 5 requests pursuant to
proposed rule 3a68-4(c) in ensuing years would be “follow-on” requests to requests for
joint interpretation from the Commissions under proposed rule 3a68-4(c), the SEC
estimates that this would result in an aggregate burden in each ensuing year of 80 hours of
company time (4 requests x 20 hours/request).
13.

Costs to Respondents

10

Proposed Rule 3a68-2
The SEC estimates that the total annual costs resulting from a submission under
proposed rule 3a68-2 would be approximately $9,480 for the services of outside
professionals that the SEC believes would consist of services provided by attorneys to
retrieve, review, and submit the information associated with the submission.20 Assuming
50 requests in the first year, as discussed above, the SEC estimates that this would result
in aggregate costs for the first year of $474,000 for the services of outside professionals
(e.g., attorneys) (50 requests x 30 hours/request x $316). Assuming, as discussed above,
10 requests in each ensuing year, the SEC estimates that this would result in aggregate
costs in each ensuing year of 200 $94,800 for the services of outside professionals (e.g.,
attorneys) (10 requests x 30 hours/request x $316).
Proposed Rule 3a68-4(c)
The SEC estimates that the total annual costs resulting from a submission under
proposed rule 3a68-4(c) would be approximately $15,800 for the services of outside
professionals that the SEC believes would consist of services provided by attorneys to
retrieve, review, and submit the information associated with the submission. Assuming
20 requests in the first year, as discussed above, the SEC estimates that this would result
in aggregate costs for the first year of $316,000 for the services of outside professionals
(e.g., attorneys) (20 requests x 50 hours/request x $316).
For mixed swaps for which a request for a joint interpretation pursuant to
proposed rule 3a68-2 was previously made, the SEC estimates the total paperwork burden
associated with preparing and submitting a party’s request to the Commissions pursuant
to proposed rule 3a68-4(c) would be $4,740 less per request than for mixed swaps for
which a request for a joint interpretation pursuant to proposed rule 3a68-2 was not
previously made because, as discussed above, certain, although not all, of the information
required to be submitted and necessary to prepare pursuant to proposed rule 3a68-4(c)
would have been required to be submitted and necessary to prepare pursuant to proposed
rule 3a68-2. Assuming that 90 percent, or 18 of the estimated 20 requests pursuant to
proposed rule 3a68-4(c) in the first year, as discussed above, would be such “follow-on”
requests, the SEC estimates that this would result in an aggregate burden in the first year

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This estimate is based on information indicating that the average costs associated with
preparing and submitting a no-action request to the SEC staff in connection with the
identification of whether certain products were securities, which the SEC believes is a
process similar to the process under proposed rule 3a68-4(c), was approximately $9,480.
Assuming these costs correspond to legal fees, which we estimate at an hourly cost of
$316, we estimate that this cost is equivalent to approximately 30 hours ($9,480/$316).
For convenience, the estimated hour burdens have been rounded to the nearest whole
dollar. Data from SIFMA’s “Management & Professional Earnings in the Securities
Industry 2009,” modified by SEC staff to account for an 1800-hour work-year and
multiplied by 5.35 to account for bonuses, firm size, employee benefits, and overhead,
suggest that that the cost of an attorney is $316 per hour.

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of $199,080 for the services of outside professionals (18 requests x 35 hours/request x
$316).
Assuming, as discussed above, 5 requests in ensuing years, the SEC estimates that
this would result in an aggregate burden in each ensuing year of $79,000 for the services
of outside professionals (5 requests x 50 hours/request x $316). As discussed above,
assuming that approximately 90 percent, or 4 of the estimated 5 requests pursuant to
proposed rule 3a68-4(c) in ensuing years would be “follow-on” requests to requests for
joint interpretation from the Commissions under proposed rule 3a68-4(c), the SEC
estimates that this would result in an aggregate burden in each ensuing year of $44,240
for the services of outside professionals (4 requests x 35 hours/request x $316).
14.

Costs to Federal Government

There are no estimated operation costs to the federal government associated with
this proposed rule.
15.

Reason for Change

Not applicable.
16.

Information Collection Planned for Statistical Purposes

Not applicable; there is no intention to publish the information for any purpose.
17.

Display of OMB Approval Date

Not applicable.
18.

Exceptions to Certification for Paperwork Reduction Act Submissions

Not applicable.
B.

Collection of Information Employing Statistical Methods

The collection of information does not employ statitstical methods, nor would the
implementations of such methods reduce the burden or improve the accuracy of results.

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