2013_Supporting_Stmt_Form_19b-4(e)_(3)[1]

SUPPORTING STATEMENT
for the Paperwork Reduction Act Information Collection Submission for
17 CFR 240.19b-4(e) and Form 19b-4(e)

A.

JUSTIFICATION
1.

Necessity of Information Collection

The Securities Exchange Act of 1934, as amended (“Act”) 1 sets forth a scheme of
self-regulation under which national securities exchanges, national securities
associations, and registered clearing agencies have primary responsibility for regulating
their members or participants. Under this scheme, the Commission's role is primarily one
of oversight; the Act charges the Commission with the responsibility for assuring that
each of these organizations (“self-regulatory organizations” or “SROs”) complies with
and advances the policies of the Act. As part of its oversight responsibilities, the
Commission is required to review changes in the rules of the various self-regulatory
organizations.
Section 19(b) of the Act, as amended by the Securities Act Amendments of 1975,
requires each SRO to file with the Commission copies of any proposed rule or any
proposed change in, addition to, or deletion from the rules of such SRO (collectively,
“proposed rule change”). The Commission is required to publish notice of the proposed
rule change. No proposed rule change shall take effect unless approved by the
Commission or otherwise permitted in accordance with the Act.
Rule 19b-4 implements the requirements of Section 19(b) of the Act by requiring
SROs to file their proposed rule changes on Form 19b-4 and by clarifying which actions
by SROs must be filed pursuant to Section 19(b). Rule 19b-4 was adopted in 1975
pursuant to Sections 2, 3, 6, 11A, 15A, 15B, 17, 19 and 23 of the Act.
The Commission has exercised its rulemaking authority2 by promulgating
paragraphs (b), (c) and (d) of Rule 19b-4 under the Act, which interpret the terms “stated
1

15 U.S.C. 78a et seq.

2

Sections 3(a)(26), 3(a)(27), 3(a)(28) and 3(b) of the Act provide that the
Commission may promulgate rules regarding, among other things, “stated
policies, practices and interpretations” of SROs. Section 19(b) authorizes the
Commission to promulgate rules regarding “proposed rule changes” of SROs.
Section 23(a) of the Act provides that the Commission shall have power to make
such rules and regulations as may be necessary or appropriate to implement the
provisions of the Act for which it is responsible or for the execution of the
functions vested in it by the Act, and may for such purposes classify persons,
securities, transactions, statements, applications, reports and other matters within
its jurisdiction, and prescribe greater, lesser or different requirements for different
classes thereof. (See e.g., Securities Exchange Act Release No. 35123 (Dec. 20,
1994) 59 FR 66692 (Dec. 28, 1994)). In addition, in 1996, Congress granted the
Commission the authority, under Section 36(a), to exempt, among other things,

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policy, practice or interpretation” and “proposed rule change.” Paragraph (c) of Rule
19b-4 provides that certain stated policies, practices and interpretations of SROs do not
constitute proposed rule changes. Specifically, a “stated policy, practice or
interpretation” of an SRO is not a proposed rule change if it, among other things, is
reasonably and fairly implied by an existing SRO rule. The Commission then amended
Rule 19b-4 by adding paragraph (e) to state that the listing and trading of new derivative
securities products by an SRO would not be deemed a proposed rule change if the
Commission has approved the SRO’s trading rules, procedures and listing standards for
the product class that would include the new derivative securities product and the SRO
has a surveillance program for the product class.
The Commission believes that, when the Commission has approved, pursuant to
Section 19(b) of the Act, an SRO’s trading rules, procedures and listing standards for the
product class that would include the new derivative securities product, the listing and
trading of the new derivative securities product is reasonably and fairly implied by the
SRO’s existing trading rules, procedures and listing standards. The Commission
therefore deemed the listing and trading of new derivative securities products to not be
proposed rule changes pursuant to Rule 19b-4(c)(1) under certain conditions.
Certain provisions of Rule 19b-4(e) contain “collection of information
requirements” within the meaning of the Paperwork Reduction Act of 1995 3 through the
use of Form 19b-4(e) under the Act. The collection of information requires an SRO to
submit a completed one-page sheet of nine questions within five days of beginning to
trade a new derivative securities product through its facilities. Form 19b-4(e) asks factual
information regarding the characteristics of the subject new derivative securities product
and the securities underlying it. Such questions do not require any analysis or exhibits.
2.

Purpose and Use of the Information Collection

Rule 19b-4(e) permits an SRO to list and trade a new derivative securities product
without submitting a proposed rule change pursuant to Section 19(b) of the Act (15
U.S.C. 78s(b)), so long as such product meets the criteria of Rule 19b-4(e) under the Act.
However, in order for the Commission to maintain an accurate record of all new
derivative securities products traded on the SROs, Rule 19b-4(e) requires an SRO to file
a summary form, Form 19b-4(e), to notify the Commission when the SRO begins trading
a new derivative securities product that is not required to be submitted as a proposed rule
change to the Commission. Form 19b-4(e) should be submitted within five business days
after an SRO begins trading a new derivative securities product that is not required to be
submitted as a proposed rule change. In addition, Rule 19b-4(e) requires an SRO to
maintain, on-site, a copy of Form 19b-4(e) for a prescribed period of time.

any class of person, security or transaction from any provision of the Act. Pub. L.
No. 104-290, 110 Stat. 3416 (1996).
3

44 U.S.C. 3501 et seq.

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This collection of information is designed to allow the Commission to maintain an
accurate record of all new derivative securities products traded on the SROs that are not
deemed to be proposed rule changes and to determine whether an SRO has properly
availed itself of the permission granted by Rule 19b-4(e). The Commission reviews SRO
compliance with Rule 19b-4(e) through its routine inspections of the SROs.
3.

Consideration Given to Information Technology

The collection of information does not involve the use of automated, electronic,
mechanical or other technological collection techniques or other forms of information
technology. The instructions for completing Form 19b-4(e) direct SROs to file the
original and nine copies with the Commission.
4.

Duplication

Not applicable. The Commission believes that no duplication of the requirements
of Rule 19b-4(e) exists.
5.

Effects on Small Entities

Not applicable. The SROs who are required to respond to the collection of
information are not small businesses.
6.

Consequences of Not Conducting Collection

If the Commission did not collect this information or collected it less frequently, it
would not be able to maintain an accurate and timely record of all new derivative
securities products traded on the SROs that are not deemed to be proposed rule changes
consistent with its statutory oversight obligations.
7.

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

Rule 19b-4(e) permits an SRO to list and trade a new derivative securities product
without submitting a proposed rule change pursuant to Section 19(b) of the Act (15
U.S.C. 78s(b)), so long as such product meets the criteria of Rule 19b-4(e) under the Act.
However, in order for the Commission to maintain an accurate record of all new
derivative securities products traded on the SROs, Rule 19b-4(e) requires an SRO to file
a summary form, Form 19b-4(e), to notify the Commission when the SRO begins trading
a new derivative securities product that is not required to be submitted as a proposed rule
change to the Commission. Form 19b-4(e) should be submitted within five business days
after an SRO begins trading a new derivative securities product that is not required to be
submitted as a proposed rule change. In addition, Rule 19b-4(e) requires an SRO to
maintain, on-site, a copy of Form 19b-4(e) for a period of not less than 5 years.
This collection of information is designed to allow the Commission to maintain an
accurate and timely record of all new derivative securities products traded on the SROs

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that are not deemed to be proposed rule changes and to determine whether an SRO has
properly availed itself of the permission granted by Rule 19b-4(e). The Commission
reviews SRO compliance with Rule 19b-4(e) through its routine inspections of the SROs.
Additionally, the Commission notes that Rule 19b-4(e) has not imposed new
recordkeeping burdens on the SROs. Paragraph (2)(i) of Rule 19b-4(e) reiterates the
SROs’ existing recordkeeping burdens under Rule 17a-1 of the Act.
The instructions for completing Form 19b-4(e) direct SROs to file the original and
nine copies with the Commission. Because it is necessary to share the form internally
among at least three offices (the Division of Trading and Markets, the Office of
Compliance Inspections and Examinations, and the Public Reference Room) and multiple
staff members, it is helpful to have multiple copies of the form.
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

Not applicable. No payments or gifts are required to be made or are made to
respondents.
10.

Confidentiality

Not applicable. Any collection of information pursuant to Rule 19b-4(e) and
Form 19b-4(e) under the Act would not be held confidential and would be available for
public inspection from the Commission upon request.
11.

Sensitive Questions

Not applicable. No questions of a sensitive nature are involved.
12.

Burden of Information Collection

As of March 2013, there are 17 SROs that may be subject to the reporting
requirements of Rule 19b-4(e). In proposing the adoption of Rule 19b-4(e) and Form
19b-4(e), Commission staff estimated that each respondent would require two hours to
complete and submit a Form 19b-4(e), and that there would be an aggregate of 45 such
filings per year by all respondents. The Commission’s experience since the adoption of
Rule 19b-4(e) and Form 19b-4(e), however, was that the total time required to complete
each filing is closer to one hour and the expected number of filings in a year is 3,879. 4
4

3,879 is based on the average annual number of new derivative securities products
accounted for on Forms 19b-4(e) received by the Commission in years 2010,

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The Commission estimates, therefore, that, based on an average of 3,879 annual
responses from up to 17 respondents, the total annual cost burden is 3,879 for all
respondents combined. At an average hourly cost of $63, the aggregate related cost of
compliance with Rule 19b-4(e) is $244,377 (3,879 burden hours multiplied by $63/hour).
13.

Cost to Respondents

Not applicable. It is not anticipated that respondents will have to incur any capital
and start-up costs, nor any additional operational or maintenance costs (other than as
provided in Item 12), to comply with the collection of information.
Additionally, the Commission notes that Rule 19b-4(e) has not imposed new
recordkeeping burdens on the SROs. Paragraph (2)(i) of Rule 19b-4(e) reiterates the
SROs’ existing recordkeeping burdens under Rule 17a-1 of the Act.
14.

Costs to Federal Government

Costs to the Federal Government in administering Rule 19b-4(e) result from
appropriate regulatory staff time and related overhead costs devoted to reviewing the
forms submitted by respondents. The staff estimates that it devotes approximately 259
hours of staff time (approximately four minutes per form multiplied by an average of
3,879 forms per year) to the annual administration of Rule 19b-4(e), which, at
$279/hour, 5 has a related annual cost of $72,261.
15.

Changes in Burden

The Commission staff has revised its estimate of the overall number of
respondents from 12 to 17. The Commission staff notes that there are currently 17 SROs
that could be subject to the reporting requirements of Rule 19b-4(e) since the collection
of information was last submitted to OMB for approval. The Commission staff has also
revised its estimate of the overall number of responses expected annually from 3,180 to
3,879. Based on the number of new derivative securities products that were reported to
the Commission in years 2010, 2011 and 2012, the Commission staff believes that this is
a more accurate estimate of expected responses.
16.

Information Collection Planned for Statistical Purposes

Not applicable. The information is not published for statistical use.

2011 and 2012. The Commission notes that some SROs have, on certain
occasions, filed a single Form 19b-4(e) that provided notice of the trading of
multiple new derivative securities products.
5

Based on an SEC professional, as adjusted for special SEC pay rates, fringe
benefits and overhead.

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17.

Approval to Omit OMB Expiration Date

We request authorization to omit the expiration date on the electronic version of
the form. Including the expiration date on the electronic version of the form will result
in increased costs, because the need to make changes to the form may not follow the
application’s scheduled version release dates.. The OMB control number will be
displayed.
18.

Exceptions to Certification for Paperwork Reduction Act Submissions

None.
B.

COLLECTIONS OF INFORMATION EMPLOYING STATISTICAL
METHODS
This collection does not involve statistical methods.