60 day notice

60 day notice for Rule 2a-7.pdf

Rule 2a-7 (17 CFR 270.2a-7) under the Investment Company Act of 1940, Money market funds

60 day notice

OMB: 3235-0268

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Federal Register / Vol. 83, No. 218 / Friday, November 9, 2018 / Notices

We estimate a total of 1,093,356
potential demonstrations in accordance
with Rule 204(a)(1) across all brokerdealer participants per year (132
participants checking for compliance
once per day on 33 securities,
multiplied by 251 trading days in 2017).
The total approximate estimated annual
burden hour per year will be
approximately 174,937 burden hours
(1,093,356 multiplied by 0.16 hours/
documentation).
III. Pre-Borrow Notification
Requirement: As of December 5, 2017,
there were 132 participants of NSCC
that were registered as broker-dealers. If
a participant of a registered clearing
agency has a fail to deliver position in
an equity security, the participant must
determine whether or not the fail to
deliver position was closed out in
accordance with Rule 204(a). We
estimate that a participant of a
registered clearing agency will have to
make such determination with respect
to approximately 52 equity securities
per day.4 We estimate a total of
1,722,864 potential notifications in
accordance with Rule 204(c) across all
participants per year (132 broker-dealer
participants notifying broker-dealers
once per day on 52 securities,
multiplied by 251 trading days in 2017).
The total estimated annual burden
hours per year will be approximately
275,658 burden hours (1,722,864
multiplied by 0.16 hours/
documentation).
IV. Certification Requirement: As of
December 31, 2017, there were 3,893
registered broker-dealers. Each of these
broker-dealers may clear trades through
a participant of a registered clearing
agency. If the broker-dealer determines
that it has not incurred a fail to deliver
position on settlement date for a long or
short sale in an equity security for
which the participant has a fail to
deliver position at a registered clearing
agency or has purchased or borrowed
securities in accordance with the prefail credit provision of Rule 204(e), we
estimate that a broker-dealer could have
to make such determination with
respect to approximately 1.76 securities
per day.5 We estimate that registered
broker-dealers could have to certify to
the participant that it has not incurred
a fail to deliver position on settlement
date for a long or short sale in an equity
security for which the participant has a
fail to deliver position at a registered
clearing agency or, alternatively, that it
of securities per participant per day is
approximately 52 equity securities. 62.93% of 52
equity securities per trading day equals
approximately 33 securities per day.
4 See supra note 3.
5 See supra note 1.

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is in compliance with the requirements
set forth in the pre-fail credit provision
of Rule 204(e), 1,719,772 times per year
(3,893 registered broker-dealers
certifying once per day on 1.76
securities, multiplied by 251 trading
days in 2017). The total approximate
estimated annual burden hour per year
will be approximately 275,164 burden
hours (1,719,772 multiplied by 0.16
hours/certification).
V. Pre-Fail Credit Demonstration
Requirement: As of December 31, 2017,
there were 3,893 registered brokerdealers. If a broker-dealer purchased or
borrowed securities in accordance with
the conditions specified in Rule 204(e)
and determined that it had a net long
position or net flat position on the
settlement day for which the brokerdealer is claiming pre-fail credit, we
estimate that a broker-dealer could have
to make such determination with
respect to approximately 1.76 securities
per day.6 We estimate that registered
broker-dealers could have to
demonstrate on its books and records
that it has a net long position or net flat
position on the settlement day for which
the broker-dealer is claiming pre-fail
credit, 1,719,772 times per year (3,893
registered broker-dealers checking for
compliance once per day on 1.76 equity
securities, multiplied by 251 trading
days in 2017). The total approximate
estimated annual burden hours per year
will be 275,164 burden hours (1,719,772
multiplied by 0.16 hours/
demonstration).
The total aggregate annual burden for
the collection of information undertaken
pursuant to all five provisions is thus
1,276,087 hours per year (275,164 +
174,937 + 275,658 + 275,164 + 275,164).
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.
The public may review background
documentation for this information
collection at the following website:
www.reginfo.gov. Comments should be
directed to: (i) Desk Officer for the
Securities and Exchange Commission,
Office of Information and Regulatory
Affairs, Office of Management and
Budget, Room 10102, New Executive
Office Building, Washington, DC 20503,
or by sending an email to:
[email protected]; and (ii)
Charles Riddle, Acting Director/Chief
Information Officer, Securities and
Exchange Commission, c/o Candace
Kenner, 100 F Street NE, Washington
DC 20549, or by sending an email to:
[email protected]. Comments must
6 See

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be submitted to OMB within 30 days of
this notice.
Dated: November 6, 2018.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–24577 Filed 11–8–18; 8:45 am]
BILLING CODE 8011–01–P

SECURITIES AND EXCHANGE
COMMISSION
Proposed Collection; Comment
Request
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736
Extension:
Rule 2a–7, SEC File No. 270–258, OMB
Control No. 3235–0268

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 (the
‘‘Commission’’) is soliciting comments
on the collection of information
summarized below. The Commission
plans to submit this existing collection
of information to the Office of
Management and Budget for extension
and approval.
Rule 2a–7 (17 CFR 270.2a–7) under
the Investment Company Act of 1940
(15 U.S.C. 80a) (the ‘‘Act’’) governs
money market funds. Money market
funds are open-end management
investment companies that differ from
other open-end management investment
companies in that they seek to maintain
a stable price per share, usually $1.00.
The rule exempts money market funds
from the valuation requirements of the
Act, and, subject to certain risk-limiting
conditions, permits money market funds
to use the ‘‘amortized cost method’’ of
asset valuation or the ‘‘penny-rounding
method’’ of share pricing.
Rule 2a–7 also imposes certain
recordkeeping and reporting obligations
on money market funds. The board of
directors of a money market fund, in
supervising the fund’s operations, must
establish written procedures designed to
stabilize the fund’s net asset value
(‘‘NAV’’); establish written procedures
to test periodically the ability of the
fund to maintain a stable NAV based on
certain hypothetical events (‘‘stress
testing’’); review, revise, and approve
written procedures to stress test a fund’s
portfolio; and create a report to the fund
board documenting the results of stress
testing. The board must also adopt
guidelines and procedures relating to
certain responsibilities it delegates to

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Federal Register / Vol. 83, No. 218 / Friday, November 9, 2018 / Notices
the fund’s investment adviser. These
procedures and guidelines typically
address various aspects of the fund’s
operations. The fund must maintain and
preserve for six years a written copy of
both these procedures and guidelines.
The fund also must maintain and
preserve for six years a written record of
the board’s considerations and actions
taken in connection with the discharge
of its responsibilities, to be included in
the board’s minutes, including
determinations to impose any liquidity
fees or temporary suspension of
redemptions. In addition, the fund must
maintain and preserve for three years
written records of certain credit risk
analyses, evaluations with respect to
securities subject to demand features or
guarantees, evaluations with respect to
asset-backed securities not subject to
guarantees, and determinations with
respect to adjustable rate securities and
asset-backed securities. If the board
takes action with respect to defaulted
securities, events of insolvency, or
deviations in share price, the fund must
file with the Commission an exhibit to
Form N–CR describing the nature and
circumstances of the action. If any
portfolio security fails to meet certain
eligibility standards under the rule, the
fund also must identify those securities
in an exhibit to Form N–CR. After
certain events of default or insolvency
relating to a portfolio security, the fund
must notify the Commission of the event
and the actions the fund intends to take
in response to the situation.
A fund must also post certain periodic
information on the its website including
disclosure of portfolio holdings,
disclosure of daily and weekly liquid
assets and net shareholder flow,
disclosure of daily current NAV, and
disclosures of financial support received
by the fund, the imposition and removal
of liquidity fees, and the suspension and
resumption of fund redemptions. Lastly,
for funds that elect to be retail funds,
they must create written policies and
procedures reasonably designed to limit
all beneficial owners of the fund to
natural persons.
The recordkeeping requirements in
rule 2a–7 are designed to enable
Commission staff in its examinations of
money market funds to determine
compliance with the rule, as well as to
ensure that money market funds have
established procedures for collecting the
information necessary to make adequate
credit reviews of securities in their
portfolios. The reporting requirements
of rule 2a–7 are intended to assist
Commission staff in overseeing money
market funds and reduce the likelihood
that a fund is unable to maintain a
stable NAV.

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Commission staff estimates that there
are 433 money market funds (91 fund
complexes), all of which are subject to
rule 2a–7. Commission staff further
estimates that there will be
approximately 10 new money market
funds established each year.
Commission staff estimates that rule 2a–
7 contains the following collection of
information requirements:
• Record of credit risk analyses, and
determinations regarding adjustable rate
securities, asset-backed securities, assetbacked securities not subject to
guarantees, securities subject to a
demand feature or guarantee, and
counterparties to repurchase
agreements. Commission staff estimates
a total annual hour burden for 433 funds
to be 294,440 hours.
• Establishment of written procedures
designed to stabilize NAV and
guidelines and procedures for board
delegation of authority. Commission
staff estimates a total annual hour
burden for 10 new money market funds
to be 155 hours.
• Board review of procedures and
guidelines of any investment adviser or
officers to whom the fund’s board has
delegated responsibility under rule 2a–
7 and amendment of such procedures
and guidelines. Commission staff
estimates a total annual hour burden for
108 funds to be 540 hours.
• Records of the board’s
determination for imposing any
liquidity fees or temporary suspension
of redemptions. Commission staff
estimates a total annual hour burden for
2 funds to be 14 hours.
• Establishment of written procedures
to test periodically the ability of the
fund to maintain a stable NAV per share
based on certain hypothetical events
(‘‘stress testing’’). Commission staff
estimates a total annual hour burden for
10 new money market funds to be 220
hours.
• Review, revise, and approve written
procedures to stress test a fund’s
portfolio. Commission staff estimates a
total annual hour burden for 91 fund
complexes to be 1,092 hours.
• Reports to fund boards on the
results of stress testing. Commission
staff estimates a total annual hour
burden for 91 fund complexes to be
4,550 hours.
• website disclosures of portfolio
holdings, of daily and weekly liquid
assets and net shareholder flow, of daily
current NAV, and disclosures of
financial support received by the fund,
the imposition and removal of liquidity
fees and the suspension and resumption
of fund redemptions. Commission staff
estimates a total annual hour burden for
433 funds to be 36,291 hours.

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• For funds electing retail fund status,
written policies and procedures limiting
all beneficial owners of the fund to
natural persons. Commission staff
estimates a total annual hour burden for
2 funds to be 26 hours.
Thus, the Commission estimates the
total annual burden of the rule’s
information collection requirements is
337,328 hours.1
The estimated total annual burden is
being decreased from 632,725 hours to
337,328 hours. This net decrease of
295,397 hours 2 is attributable to a
combination of factors, including a
decrease in the number of money
market funds and fund complexes, and
updated information from money
market funds regarding hourly burdens,
including revised staff estimates of the
burden hours required to comply with
rule 2a–7 as a result of new information
received from surveyed fund
representatives.
Commission staff estimates that in
addition to the burden hours described
above, money market funds will incur
costs to preserve records, as required
under rule 2a–7.3 These costs will vary
significantly for individual funds,
depending on the amount of assets
under fund management and whether
the fund preserves its records in a
storage facility in hard copy or has
developed and maintains a computer
system to create and preserve
compliance records.4 Commission staff
estimates that the amount an individual
fund may spend ranges from $100 per
year to $300,000. Based on a cost of
$0.0051295 per dollar of assets under
management for small funds,
$0.0005041 per dollar assets under
management for medium funds, and
1 This estimate is based on the following
calculation: 294,440 hours + 155 hours + 540 hours
+ 14 hours + 220 hours + 1,092 hours + 4,550 hours
+ 36,291 hours + 26 hours = 337,328 hours.
2 This estimate is based on the following
calculation: 632,725 hours¥337,328 hours =
295,397 hours.
3 A significant portion of the recordkeeping
burden involves organizing information that the
funds already collect when initially purchasing
securities. In addition, when a money market fund
analyzes a security, the analysis need not be
presented in any particular format. Money market
funds therefore have a choice of methods for
maintaining these records that vary in technical
sophistication and formality (e.g. handwritten
notes, computer disks, etc.). Accordingly, the cost
of preparing these documents may vary
significantly among individual funds. The burden
hours associated with filing reports to the
Commission as an exhibit to Form N–CR are
included in the PRA burden estimate for that form.
4 The vast majority of assets under management
in individual money market funds range from
approximately $50 million to approximately $144.7
billion. We further note that the assets under
management figures were calculated based on net
assets at the fund level and not the sum of the
market values of the underlying funds.

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$0.0000009 per dollar of assets under
management for large funds, the staff
estimates compliance with the record
storage requirements of rule 2a–7 costs
the fund industry approximately $35.31
million per year.5
Based on responses from individuals
in the money market fund industry, the
staff estimates that some of the largest
fund complexes have created computer
programs for maintaining and
preserving compliance records for rule
2a–7. Based on a cost of $0.0000132 per
dollar of assets under management for
large funds, the staff estimates that total
annualized capital/startup costs range
from $0 for small funds to $40.9 million
for all large funds.6 Commission staff
further estimates that, even absent the
requirements of rule 2a–7, money
market funds would spend at least half
of the amount for capital costs ($20.45
million) 7 and for record preservation
($17.65 million) 8 to establish and
maintain these records and the systems
for preserving them as a part of sound
business practices to ensure
diversification and minimal credit risk
in a portfolio for a fund that seeks to
maintain a stable price per share.
As a result, the estimated total annual
cost is being decreased from $92.9
million to $38.11 million.9 This net
decrease of $54.79 million 10 is
attributable to a reduction in the
number of money market mutual funds,
updated information from money
5 The staff estimated the annual cost of preserving
the required books and records by identifying the
annual costs incurred by several funds and then
relating this total cost to the average net assets of
these funds during the year. With a total of $403.6
million under management in small funds, $60.4
billion under management in medium funds and
$3.1 trillion under management in large funds, the
costs of preservation were estimated as follows:
((0.0051295 × $403.6 million) + (0.0005041 × $60.4
billion) + (0.0000009 × $3.1 trillion) = $35.31
million. For purposes of this PRA submission,
Commission staff used the following categories for
fund sizes: (i) Small—money market funds with $50
million or less in assets under management; (ii)
medium—money market funds with more than $50
million up to and including $1 billion in assets
under management; and (iii) large—money market
funds with more than $1 billion in assets under
management.
6 This estimate is based on the following
calculation: $0.0000132 × $3.1 trillion in assets
under management for large funds = $40.9 million.
7 This estimate is based on the following
calculation: $40.9 million in capital costs/2 =
$20.45 million.
8 This estimate is based on the following
calculation: $35.31 million in record preservation
costs/2 = $17.65 million
9 This estimate is based on the following
calculation: $35.31 million in record preservation
costs + $40.9 million in capital costs¥$17.65
million in record preservation costs absent rule 2a–
7 requirements¥$20.45 million in capital costs
absent rule 2a–7 requirements = $38.11 million.
10 This estimate is based on the following
calculation: $92.9 million¥$38.11 million = $54.79
million.

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market funds regarding assets under
management, as well as deducting the
$38.1 million 11 in capital and
preservation costs a money market fund
would incur absent the requirements of
rule 2a–7.
These estimates of burden hours and
costs are made solely for the purposes
of the Paperwork Reduction Act. The
estimates are not derived from a
comprehensive or even a representative
survey or study of Commission rules.
The collections of information
required by rule 2a–7 are necessary to
obtain the benefits described above.
Notices to the Commission will not be
kept confidential. 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 control number.
Written comments are invited on: (a)
Whether the proposed collection of
information is necessary for the proper
performance of the functions of the
agency, including whether the
information will have practical utility;
(b) the accuracy of the agency’s estimate
of the burden of the collection of
information; (c) ways to enhance the
quality, utility, and clarity of the
information collected; and (d) ways to
minimize the burden of the collection of
information on respondents, including
through the use of automated collection
techniques or other forms of information
technology. Consideration will be given
to comments and suggestions submitted
in writing within 60 days of this
publication.
Please direct your written comments
to Charles Riddle, Acting Director/Chief
Information Officer, Securities and
Exchange Commission, C/O Candace
Kenner, 100 F Street NE, Washington,
DC 20549; or send an email to: PRA_
[email protected].
Dated: November 6, 2018.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–24575 Filed 11–8–18; 8:45 am]
BILLING CODE 8011–01–P

Exchange Commission staff will hold a
public roundtable on Thursday,
November 15, 2018 at 9:30 a.m.
PLACE: The roundtable will be held in
the Auditorium at the Commission’s
headquarters, 100 F Street NE,
Washington, DC.
STATUS: The meeting will begin at 9:30
a.m. and will be open to the public.
Seating will be on a first-come, firstserved basis. Doors will open at 9:00
a.m. Visitors will be subject to security
checks. The meeting will be webcast on
the Commission’s website at
www.sec.gov.
MATTERS TO BE CONSIDERED: The
Commission staff will host a roundtable
on the proxy process. The roundtable is
open to the public and the public is
invited to submit written comments.
This Sunshine Act notice is being
issued because a majority of the
Commission may attend the roundtable.
The agenda for the roundtable will
focus on key aspects of the U.S. proxy
system, including proxy voting
mechanics and technology, the
shareholder proposal process, and the
role and regulation of proxy advisory
firms.
CONTACT PERSON FOR MORE INFORMATION:
For further information, please contact
Brent J. Fields from the Office of the
Secretary at (202) 551–5400.
Dated: November 6, 2018.
Brent J. Fields,
Secretary.
[FR Doc. 2018–24632 Filed 11–7–18; 11:15 am]
BILLING CODE 8011–01–P

SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–84539; File No. SR–ISE–
2018–88]

Self-Regulatory Organizations; Nasdaq
ISE, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend ISE Rule
2008(g), Pricing When Primary Market
Does Not Open
November 5, 2018.

SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meeting
Notice is hereby given,
pursuant to the provisions of the
Government in the Sunshine Act, Public
Law 94–409, that the Securities and

TIME AND DATE:

11 This estimate is based on the following
calculation if rule 2a–7 compliance was not
required for a money market fund: $20.45 million
in capital costs + $17.65 million in record
preservation = $38.1 million.

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Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on October
23, 2018, Nasdaq ISE, LLC (‘‘ISE’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Commission is
1 15
2 17

U.S.C. 78s(b)(1).
CFR 240.19b–4.

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