In January 2018, the Commission
adopted regulation 9.11(b)(3)(ii) requiring a designated contract
market (DCM) or swap execution facility (SEF) (collectively,
“exchange”) to include two additional elements in the disciplinary
or access denial notice action provided to the National Futures
Association. First, an exchange must include the type of product
(as applicable) involved in the adverse action. Requiring an
exchange to provide this information in the disciplinary or access
denial notice will provide the Commission, market participants, the
public, and other exchanges with greater transparency concerning
where market abuses originate and whether the abuses are
concentrated among certain product types. Second, an exchange must
indicate in its notice of disciplinary or access denial actions
whether the violation underlying the notice resulted in financial
harm to any customers. The Commission believes that the inclusion
of customer harm is essential because it cannot effectively perform
its regulatory and oversight functions without knowledge of those
instances in which brokers violate their fiduciary duty to
customers by taking advantage of customer orders and engaging in
fraudulent activity. The Commission concluded that the additional
burden for an exchange to add the two additional elements in the
contents of the disciplinary or access denial notice is de minimis
and will not change the burden hours for the collection. In
addition, The Commission has recently amended its regulation 1.52
to revise the scope and potential frequency of a third-party
expert’s evaluation of SROs’ financial surveillance programs. The
evaluation report requirement is a portion of the existing
information collection of requirements for SROs under Commission
regulation 1.52, including Designated Contract Markets and the
National Futures Association. The Commission is eliminating the
requirement that the examinations expert must review the SRO’s
ongoing application of its supervisory program during periodic
reviews and the analysis of the supervisory program’s design to
detect material weaknesses in internal controls during both
periodic reviews and the initial review prior to the program’s
initial use. The Commission also is revising the frequency of when
an SRO must engage an examinations expert. The changes to the
examinations expert reviews impact the resulting expert reports
information collection burden. The information collection is
necessary to enhance the ability of the Commission and the
designated self-regulatory organization to identify problematic
financial matters in time to avoid market disruptions when an FCM
may fail, particularly with respect to the tie-up of customer funds
that may result.
The Commission amended certain
portions of Regulation 1.52 to reduce the scope of the third-party
examinations expert’s review and permit a longer period of minimum
engagement of the examinations expert by certain DCMs. These
amendments reduce slightly the current burden hour estimate from 50
hours per respondent on an annual basis to 49 hours. Changes in the
Final rules adopted herein only pertain to IC: Enhancing
Protections Afforded Customers and Customer Funds Held by Futures
Commission Merchants and Derivatives Clearing Organizations and
relate only to amendments to Regulation 1.52. Additionally,
unrelated to the 2018 NPRM, the number of registered DCMs has
decreased from 15 to 14, which will also decrease the total
aggregate burden hours across all registered DCMs from 7,357.5
burden hours to 6,853 burden hours
On behalf of this Federal agency, I certify that
the collection of information encompassed by this request complies
with 5 CFR 1320.9 and the related provisions of 5 CFR
1320.8(b)(3).
The following is a summary of the topics, regarding
the proposed collection of information, that the certification
covers:
(i) Why the information is being collected;
(ii) Use of information;
(iii) Burden estimate;
(iv) Nature of response (voluntary, required for a
benefit, or mandatory);
(v) Nature and extent of confidentiality; and
(vi) Need to display currently valid OMB control
number;
If you are unable to certify compliance with any of
these provisions, identify the item by leaving the box unchecked
and explain the reason in the Supporting Statement.
(2019) 30-day Notice 3038-0052.pdf
(2019) Part 38 PRA - Supporting Statement 3038-0052.doc
Part 38 - Designated Contract Markets