2012 17a-25 Justification v2

SUPPORTING STATEMENT
for the Paperwork Reduction Act
Information Collection Submission for
“Rule 17a-25”

A.

Justification

1.

Necessity of Information Collection
Rule 17a-25 (17 CFR 240.17a-25) under the Securities Exchange Act of 1934 (15
U.S.C. 78a et. seq.), requires registered broker-dealers to electronically submit
securities transaction information, including identifiers for prime brokerage
arrangements, average price accounts, and depository institutions, in a standardized
format when requested by the Commission staff. In addition, the rule requires brokerdealers to submit, and keep current, contact person information for electronic blue
sheets ("EBS") requests.

2.

Purposes and Use of the Information Collection
Rule 17a-25 requires registered broker-dealers to submit securities trading data in a
uniform electronic format, preferably using the existing reporting mechanism known as
the electronic blue sheet system ("EBS"), when requested by the Commission staff for
enforcement and other regulatory purposes. Rule 17a-25 also requires the electronic
submission of trading information to include new data elements to the EBS that will
assist the Commission staff in conducting complex enforcement inquiries and
investigations. Additionally, the Rule requires broker-dealers to submit and keep
current, contact person information for EBS requests. The Commission uses the
information for enforcement inquiries or investigations and trading reconstructions,
as well as for inspections and examinations.

3.

Consideration Given to Information Technology
The EBS system is designed to reduce the burden of collecting and transmitting
securities trading data. This technology increases the speed, accuracy and availability
of trading information, thereby generating benefits to both investors and the financial
markets.

4.

Duplication
Not applicable. There is no apparent duplication of information.

5.

Effect on Small Entities.
The Commission believes that Rule 17a-25 has a minimal effect on the approximately
804 broker-dealers who qualify as a small business or organization. Most provisions

apply only to the 4705 that do business with the general public. The vast majority of
the information required in Rule 17a-25 involves collections of information that
broker-dealers already maintain in compliance with existing regulations, and SRO rules
currently require broker-dealers to have adequate systems and procedures to submit the
EBS transaction reports. The Commission estimates that no small broker-dealers would
be required to modify their EBS-related software to capture and report the new data.
6.

Consequences of Not Conducting Collection
The Commission requests securities trading data only when necessary for a specific
enforcement inquiry or other regulatory purpose.

7.

Inconsistencies with Guidelines in 5 CFR 1320.5(d)(2)
There are no special circumstances. The information collection is conducted in a
manner that is consistent with 5 CFR 1320.5(d)(2).

8.

Consultations Outside the Agency
The required Federal Register notice with a 60-day comment period soliciting
comments on this collection of information was published. No public comments were
received.

9.

Payment or Gift
The respondents receive no payments or gifts.

10.

Confidentiality
Information filed pursuant to Rule 17a-25 will be kept confidential, subject to the
Freedom of Information Act, 5 U.S.C. 552.

11.

Sensitive Questions
Not applicable. No inquiries of a sensitive nature are made.

12.

Burden of the Information Collection
The annual hour burden of Rule 17a-25 for individual broker-dealers would vary
widely due to differences in the levels of activities of the respondents and because of
differences in the current recordkeeping systems of the respondents. However, it is
estimated that each broker-dealer who responds electronically will take 8 minutes, and
each broker-dealer who responds manually will take 1½ hours to prepare and submit
the securities trading data requested by the Commission. Based on EBS data compiled
by the Commission for the period June 2, 2009 to July 2, 2012, the Commission
estimates that it sent 7169 electronic blue sheet requests to clearing broker-dealers, who

in turn submitted 87,454 responses. 1 Accordingly, the annual aggregate hour reporting
burden for electronic and manual response firms is estimated to be 11,780 (87,454 x 8
÷ 60 = 11,660 hours) + (80 x 1.5 = 120 hours), respectively. 2
In addition, the Commission estimates that it may request 8 broker-dealers to supply
the contact information identified in Rule 17a-25(c) and the submission should take
each broker-dealer approximately 5 minutes to prepare. To be conservative, the
Commission estimates that each of these broker-dealers will revise the contact
information twice a year, and each revision will also take approximately 5 minutes to
prepare (10 minutes total), therefore, the initial submission and the two revisions will
take approximately 15 minutes total for each broker-dealer. Accordingly, the annual
aggregate burden for supplying the information requested in Rule 17a-25(c) is 125
hours (500 x 15 ÷ 60).
Thus, the annual aggregate reporting burden for all respondents to the collection of
information requirements of Rule 17a-25 is estimated at 11,905 hours (11,660 + 120 +
125).
13.

Costs to Respondents
The Commission estimates that approximately 100 broker-dealers would have to make
a one-time adjustment to their existing EBS software to capture additional data
elements identified in Rule 17a-25(c). The Commission assumes adjustments to the
systems have been made. The Commission believes that there will be no additional
costs associated with the operation and maintenance of the modified EBS systems. In
addition, Rule 17a-25 will not impose any additional recordkeeping requirements for
the broker-dealers since broker-dealers already maintain all of the information required
for EBS reports. Therefore the annualized cost burden is $0.

1

A single EBS request has a unique number assigned to each request (e.g.
"0900001"). However, the number of broker-dealer responses generated from one
EBS request can range from one to thousands. EBS requests are sent directly
to clearing firms, as the clearing firm is the repository for trading data for securities
transactions information provided by itself and correspondent firms. Clearing
brokers respond for themselves and other firms they clear for.

2

Few of respondents submit manual EBS responses. The small percentage of
respondents that submit manual responses do so by hand, via email, spreadsheet,
disk, or other electronic media. Thus, the number of manual submissions (80) has
minimal effect on the total annual burden hours.

14.

Costs to Federal Government
$4,163,380.

15.

Changes in Burden
The increase in burden hours is based on the actual number of electronic and manual
submissions received by the Commission from June 1, 2009 to July 2, 2012. The
Commission estimates that it sent 7169 electronic blue sheet requests to 45 clearing
broker-dealers, who in turn submitted 87,454 responses; in addition there were 80
manual responses and 500 responses with updated contact information for a total of
88,034 responses. The increase in the number of responses to 88,034 increased the
burden hours to 11,905.

16.

Information Collections Planned for Statistical Purposes. The Commission does not
intend to publish or disclose specific trading data or information for statistical use.
When the Commission undertakes market reconstructions, however, some aggregate
information may be used for statistical purposes.

16.

Approval to Omit OMB Expiration Date
The Commission is not seeking approval to omit the OMB expiration date.

17.

Exceptions to Certification
Not applicable.

B.

Collection of Information Employing Statistical Methods
The collection of information does not employ statistical methods.