2023 Supporting Statement 3038-0076 (Recovery and Orderly Wind-down NPRM)

SUPPORTING STATEMENT FOR REVISED INFORMATION COLLECTION

OMB CONTROL NUMBER 3038-0076

REQUIREMENTS FOR DERIVATIVES CLEARING ORGANIZATIONS

Justification

1. Explain the circumstances that make the collection of information necessary. Identify any legal or administrative requirements that necessitate the collection. Attach a copy of the appropriate section of each statute and regulation mandating or authorizing the collection of information.

Section 5b(c)(2) of the CEA sets forth core principles with which a derivatives clearing organization (“DCO”) must comply to be registered, and to maintain registration, as a DCO. The Commission has codified these requirements in part 39.

Under these regulations, each respondent is required to maintain records of activities related to its business as a DCO, including all information required to be created, generated, or reported under part 39, including but not limited to the results of and methodology used for all tests, reviews, and calculations. Appendix A to Part 39 includes Form DCO, which standardizes the application process for DCO registration.

The Commission is proposing amendments that would address certain risk management obligations, modify definitions and reporting requirements, and codify existing staff guidance. Among other things, the proposed amendments would also revise Form DCO.

2. Indicate how, by whom, and for what purpose the data would be used. Except for a new collection, indicate the actual use the agency has made of the information received from the current collection.

The information received is analyzed by Commission staff and forms a basis for on-going evaluation and oversight of DCOs and compliance with the CEA and Commission regulations. It informs the Commission concerning whether the Commission should take any action regarding lack of compliance with the CEA and Commission regulations. It also is used as the basis for determining whether applicants meet the necessary criteria to register as a DCO. Under these proposed amendments, the Commission would be evaluating revised recovery and wind-down plans for certain DCOs and new wind-down plans for other DCOs. Additionally, the Commission would potentially be receiving resolution-planning information to be passed along to the Federal Deposit Insurance Corporation (FDIC), as well as processing resolution-planning information previously collected.

3. Describe whether, and to what extent, the collection of information involves the use of automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g. permitting electronic submission of responses, and the basis for the decision for adopting this means of collection. Also describe any consideration of using information technology to reduce burden.

Information is required to be submitted electronically.

4. Describe efforts to identify duplication. Show specifically why any similar information already available cannot be used or modified for use for the purposes described in Item 2 above.

To the maximum extent possible, the information collection was designed to avoid duplication. In all cases where it was possible to leverage information collections contained in other rulemakings, the Commission elected not to impose collections that would increase burden. The required information is not already collected by the Commission for any other purpose, nor is it collected by any other agency, nor is the information available for public disclosure through any other source.

5. If the collection of information involves small business or other small entities (Item 5 of OMB Form 83-I), describe the methods used to minimize burden.

The information collection does not involve any small businesses or other small entities.

6. Describe the consequence to the Federal Program or policy activities if the collection were conducted less frequently as well as any technical or legal obstacles to reducing burden.

If the collections were conducted less frequently, the Commission would not have sufficient information to ascertain whether DCOs are in compliance with the statutory and regulatory requirements applicable to their operation as registered DCOs.

7. Explain any special circumstances that require the collection to be conducted in a manner:

• requiring respondents to report information to the agency more often than quarterly;

For risk monitoring purposes of DCOs, certain event-specific or requested reporting may be necessary on an immediate or instant basis, and may be repeated daily or intra-day, under exigent circumstances. Other event-specific reporting may or may not be more often than quarterly, depending on when events requiring notice occur.

• requiring respondents to prepare a written response to a collection of information in fewer than 30 days after receipt of it:

In order for the Commission to adequately assess a DCO’s compliance with these core principles and related regulations, a DCO may be required to prepare a written response to a collection of information in fewer than 30 days depending on the exigency of the situation. At all times, the Commission’s goal is to protect the integrity of the U.S. clearing system.

• requiring respondents to submit more that an original and two copies of any document;

DCOs are required to submit documents electronically, only once. No hard copies are required.

• requiring respondents to retain records other than health, medical, government contract, grant-in-aid, or tax records, for more than three years;

Commission Regulation 1.31(b) expressly requires that books and records required to be kept by the CEA or Commission regulations be retained for certain specified periods. Other than with respect to oral communications and records exclusively created and maintained on paper, the shortest of these periods is five years from the date of creation.

• in connection with a statistical survey, that is not designed to produce valid and reliable results that can be generalized to the universe of study;

No statistical surveys are involved.

• requiring the use of a statistical data classification that has not been reviewed and approved by OMB;

The requirements do not involve use of any statistical data classification.

• that includes a pledge of confidentiality that is not supported by authority established in statue or regulation, that is not supported by disclosure and data security policies that are consistent with the pledge, or which unnecessarily impedes sharing of data with other agencies for compatible confidential use; or

The requirements do not involve an unsupported pledge of confidentiality regarding the collection of data.

• requiring respondents to submit proprietary trade secrets, or other confidential information unless the agency can demonstrate that it has instituted procedures to protect the information's confidentiality to the extent permitted by law.

The Commission has procedures to protect the confidentiality of an applicant’s or registrant’s data. These are set forth in the Commission’s regulations at parts 145 and 147 of title 17 of the Code of Federal Regulations.

8. If applicable, provide a copy and identify the date and page number of publication in the Federal Register of the agency's notice required by 5 CFR 1320.8(d), soliciting comments on the information collection prior to submission to OMB. Summarize public comments received in response to that notice and describe actions taken by the agency in response to these comments. Specifically address comments received on cost and hour burden.

The Commission has published a notice of proposed rulemaking (NPRM) in the Federal Register. 88 FR 48968 (July 28, 2023). The NPRM includes a request for comment on all aspects of the proposed regulation, as well as requests for comment on specific provisions and issues (including all aspects of the proposed information collection requirements). The NPRM also notified the public and other federal agencies that the Commission will submit an information collection request.

Describe efforts to consult with persons outside the agency to obtain their views on the availability of data, frequency of collection, the clarity of instructions and recordkeeping disclosure, or reporting format (if any, and on the data elements to be recorded, disclosed, or reported.

The Commission consulted with the FDIC on its views on the availability of data and the frequency of collection.

Consultation with representatives of those from whom information is to be obtained or those who must compile records should occur at least once every 3 years - even if the collection of information activity is the same as in prior periods. There may be circumstances that may preclude consultation in a specific situation. These circumstances should be explained.

No such circumstances are anticipated.

9. Explain any decision to provide any payment or gift to respondents, other than remuneration of contractors or grantees.

This question does not apply.

10. Describe any assurance of confidentiality provided to respondents and the basis for the assurance in statute, regulations, or agency policy.

The Commission does not provide respondents with an assurance of confidentiality, except as follows: The Commission fully complies with section 8(a)(1) of the Commodity Exchange Act, which strictly prohibits the Commission, unless specifically authorized by the Commodity Exchange Act, from making public “data and information that would separately disclose the business transactions or market positions of any person and trade secrets or names of customers.” The Commission has procedures to protect the confidentiality of an applicant’s or registrant’s data. These are set forth in the Commission’s regulations at parts 145 and 147 of title 17 of the Code of Federal Regulations.

11. Provide additional justification for any questions of a sensitive nature, such as sexual behavior and attitudes, religious beliefs, and other matters that are commonly considered private. This justification should include the reasons why the agency considers the questions necessary, the specific uses to be made of the information, the explanation to be given to persons from whom the information is requested, and any steps to be taken to obtain their consent.

This question does not apply. None of the required information is sensitive, as that term is used in Question 11.

12. Provide estimates of the hour burden of the collection of information. The Statement should:

• Indicate the number of respondents, frequency of response, annual hour burden and an explanation of how the burden was estimated. Unless directed to do so, agencies should not conduct special surveys to obtain information on which to base hour burden estimates. Consultation with a sample (fewer than ten) of potential respondents is desirable. If the hour burden on respondents is expected to vary widely because of differences in activity, size or complexity, show the range of estimated hour burden, and explain the reasons for the variance. Generally, estimates should not include burden hours for customary and usual business practices.

• If the request for approval covers more than one form, provide separate hour burden estimates for each form and aggregate the hour burdens in Item 13 of OMB Form 83-I.

• Provide estimates of annualized cost to respondents for the hours burdens for collections of information, identifying and using appropriate wage rate categories. The cost of contracting out or paying outside parties for information collection activities should not be included here. Instead, this cost should be included in Item 13.

See Attachment A. Attachment A illustrates the proposed changes in estimated burden hours and labor costs that would result if the proposed amendments were adopted.

13. Provide an estimate of the total annual cost burden to respondents or recordkeepers resulting from the collection of information. (Do not include the cost of any hour burden shown in Items 12 and 14).

• The cost estimate should be split into two components; (a) a total capital and start-up cost component (annualized over its expected useful life) and (b) a total operation and maintenance and purchase of services component. The estimates should take into account costs associated with generating, maintaining, and disclosing or providing the information. Include descriptions of methods used to estimate major costs factors including system and technology acquisition, expected useful life of capital equipment, the discount rate(s), and the time period over which costs will be incurred. Capital and start-up costs include, among other items, preparations for collecting information such as purchasing computers and software, monitoring, sampling, drilling and testing equipment, and record storage facilities.

• If cost estimates are expected to vary widely, agencies should present ranges of cost burdens and explain the reasons for the variance. The cost of purchasing or contracting out information collection services should be a part of this cost burden estimate, agencies may consult with a sample of respondents (fewer than ten), utilize the 60-day pre-OMB submission public comment process and use existing economic or regulatory impact analysis associated with the rulemaking containing the information collection, as appropriate.

• Generally, estimates should not include purchases of equipment or services, or portions thereof, made: (1) prior to October 1, 1995, (2) to achieve regulatory compliance with requirements not associated with the information collection, (3) for reasons other than to provide information or keep records for the government, or (4) as part of customary and usual business or private practices.

The Commission does not anticipate that the proposed amendments will generate capital and start-up costs or ongoing operation and maintenance costs for DCOs subject to the rule’s reporting requirements. The Commission anticipates that respondents are likely to leverage their existing systems to comply with the revised information collection obligations.

14. Provide estimates of the annualized costs to the Federal Government. Also provide a description of the method used to estimate cost, which should include quantification of hours, operational expenses (such as equipment, overhead, printing and support staff), and any other expense that would not have been incurred without this collection of information. Agencies may also aggregate cost estimates from Items 12, 13, and 14 in a single table.

The estimate of the annual cost to the Commission per respondent for daily, annual, and event-specific reporting is about $6,404 per year, assuming twenty-one respondents and 1,446 hours of review and analysis by Commission staff at an average salary of $93/hour.¹ This reflects 840 hours of analysis to review the requisite plans submitted by the domestically-based systemically important DCOs and Subpart C DCOs (consisting of six respondents), 300 hours of analysis to review the requisite plans submitted by the domestically-based non-Subpart C DCOs (consisting of four respondents), and 300 hours of analysis to review the requisite plans submitted by the foreign-based DCOs (consisting of five respondents), for a total of 15 respondents and 1,440 hours. Additionally, this reflects six hours of processing certain resolution-planning information that the six systemically-important and Subpart C DCOs may be required to submit to the Commission. This does not reflect the annual cost to the Federal Government that the FDIC would incur reviewing and otherwise using the resolution-planning information it receives from the Commission as part of the FDIC’s Dodd-Frank powers and responsibilities. The Commission would, however, expend time and resources reviewing resolution-planning information collected for other purposes under previous information collections. The total cost estimate to the Commission for this proposed information collection is $134,478 per year.²

15. Explain the reasons for any program changes or adjustments reported in Items 13 or 14 of the OMB Form 83-I.

The Commission is proposing amendments to Part 39 revising certain risk-management provisions and reporting requirements. The proposed amendments would add paragraph (k) to regulation 39.13 to require DCOs that are neither systemically important nor registered under Subpart C to maintain and submit to the Commission viable plans for orderly wind-down and would enhance current regulation 39.39 with respect to recovery and orderly wind-down plan requirements. The proposed amendments would also add new paragraph (xxv) to regulation 39.19(c)(4) regarding certain event-specific reporting and new paragraph (iii) to regulation 39.19(c)(5) regarding certain information for resolution planning. The Commission anticipates that changes to the event-specific reporting requirements under 39.19(c)(4), if adopted, would increase the existing burden on DCOs.

These changes would yield the following changes in the burden estimates under this clearance:

CURRENT TOTAL	86	63,311	$11,049,659
INCREMENTAL Change	0	+3,480	+2,607,574
NEW Estimated Burden	863	66,791	$13,657,233

16. For collection of information whose results are planned to be published for statistical use, outline plans for tabulation, statistical analysis, and publication. Provide the time schedule for the entire project, including beginning and ending dates of the collection of information, completion of report, publication dates, and other actions.

This question does not apply.

17. If seeking approval to not display the expiration date for OMB approval of the information collection, explain the reasons that display would be inappropriate.

This question does not apply.

18. Explain each exception to the certification statement identified in Item 19, “Certification for Paperwork Reduction Act Submissions,” of OMB Form 83-I.

This question does not apply.

Attachment A

Requirements for Derivatives Clearing Organizations

OMB Collection File 3038-0076

The Commission proposes to revise its burden estimates associated with rules implementing requirements for DCOs as illustrated below:

	1  Estimated # of Respon- dents	2  Est. Annual Reports per Respondent	3  Est. Total Annual Responses (1x2)	4  Est. Avg. No. of Hours Per Response	5  Est. Annual No. of Burden Hours Per Respondent (2x4)	6  Est. Avg. Burden Hour Cost	7  Est. Avg. Burden Cost Per Respondent (5x6)	8  Est. Total Annual Burden Hours (3x4)	9  Total Est. Annual Burden Cost of All Responses (1x7)
Reporting
Subpart A4 Reporting
Form DCO and Exhibits	1	1	1	421	421	$250	$105,250	421	$105,250
Alternative DCO Application – 39.3(a)(3)	1	1	1	100	100	$250	$25,000	100	$25,000
Agreement in writing to extend application review period-39.3(a)(7)	2	1	2	1	1	$250	$250	2	$500
Request to Vacate DCO Registration-39.3(e)(1)	1	0.33	0.33	1	1	$250	$250	1	$250
Total of Subpart A Reporting5	3	3	4	523	523		$130,750	524	$131,000
Subpart B Reporting
CCO Annual Report-39.10	13	1	13	73	73	$1026	$7,446	949	$96,798
Quarterly reporting-39.11(f)(1) and (39.19(c)(2)	13	4	52	7	28	$597	$$1,652	364	$21,476
Annual audited financial statements- 39.19(c)(3) and 39.11(f)(2)	13	1	13	2626	2626	$2488	$651,248	34,138	$8,466,224
NEW IC: 39.13(k)(1)(a) Wind-Down Planning	9	1	9	400	400	$368	$147,200	+ 3,600	+ $1,324,800
Daily reporting-39.19(c)(1)	13	250	3250	0.5	125	$469	$5,750	1625	$74,750
Event-specific reporting-39.19(c)(4)	13	14	182	0.5	7	$7910	$$553	91	$$7,189
39.21 - Public information	13	4	52	2	8	$46	$368	104	$4,784
NEW IC: 39.19(c)(4)(xxv) Notification	1	0.25	0.25	1	0.25	$499	$124.75	+ 0.25	+ $124.75
Governance disclosure of board decisions - 39.24(a)(3) and disclosure of governance arrangements - 39.24(b)	13	6	78	3	18	$7911	$1,422	234	$18,486
Legal risk considerations–§ 39.27	1	0.33	0.33	20	6.6	$250	$1,650	6.6	$1,650
Subpart B–third-party reporting:
DCO rules re: clearing member reporting of customer information on futures-39.13(g)(8)(i)(B)	64	250	16,000	0	50	$46	$2,300	3,200	$147,200
Total of Subpart B Reporting	77	532	19,650	3133	3,292		$819,714	44,312	$10,163,481
Subpart C Reporting
39.31 Subpart C Election Form	1	1	1	180	180	$250	$45,000	180	$45,000
39.31 Withdrawal Notices	1	1	1	2	2	$250	$500	2	$500
39.31 Rescission Notices	1	16	16	3	48	$250	$12,000	48	$12,000
39.31 PFMI disclosures	1	1	1	200	200	$250	$50,000	200	$50,000
39.31 Quantitative disclosures	1	1	1	80	80	$250	$20,000	80	$20,000
39.33 Financial and Liquidity Resource Documentation	9	1	9	120	120	$79	$9,480	1080	$85,320
39.36 Stress Test Results	9	16	144	14	224	$79	$17,696	2016	$159,264
39.37 Disclosure Framework Requirements	9	1	9	81	81	$79	$6,399	729	$$57,591
39.37 Quantitative Information Disclosures	9	4	36	9	36	$79	$2,844	324	$25,596
39.37 Transaction, Segregation, Portability Disclosures	9	1	9	35	35	$79	$2,765	315	$24,885
39.38 Efficiency and Effectiveness Review	9	1	9	3	3	$79	$237	27	$$2,133
REVISED IC: 39.39 Recovery and Wind-Down Plan	9 6	1 1	9 6	480 600	480 600	$79 $36812	$37,920 $220,800	4,320 3,600	$341,280 $1,324,800
INCREMENTAL CHANGE								-720	+ $983,250
NEW IC: 39.39(f)(2) Resolution Planning	6	1	6	100	100	$49913	$49,900	+ 600	+ $299,400
Total of Subpart C Reporting14	9	46	248	1,427	1,709		$437,621	9,201	$2,106,219
Subpart D-Reporting by DCOs Subject to Alternative Compliance
Daily reporting-39.51(c)(2)(i)	6	250	1500	0.1	25	$46	$1,150	150	$6,900
Quarterly reporting-39.51(c)(2)(ii)	6	4	24	1	4	$$59	$$236	24	$$1,416
Event-specific reporting-39.51(b)(3)(iii) and 39.51(c)(2)(iii)-(vii)	6	1	6	0.5	0.5	$$79	$$40	3	$$237
39.51(a)(6) - rep. of good standing	6	1	6	1	1	$250	$250	6	$1,500
Total of Subpart D Reporting	6	256	1,536	2.6	30.5		$1,676	183	$10,053
Total Reporting Part 39	86							54,220	12,410,753
Recordkeeping
Subparts A and B	13	1	13	150	150	$9915	$14,850	1950	$193,050
	1	0.33	1	1	1	$99	$100	1	$100
Total Recordkeeping Subparts A and B	13	1.33	13.33	151	$151	$99	$15,100	1951	$195,100
Recordkeeping-Subpart C
Generally	9	110	990	10	1100	$99	$$108,900	9900	$980,100
Financial and Liquidity Resources, Liquidity Resource Due Diligence and Testing	9	8	72	10	80	$99	$$7,920	720	$71,280
Total Recordkeeping- Subpart C	9	118	1,062	20	1,180		$116,820	10,620	$1,051,380
Total recordkeeping Part 39	1316							12,571	$1,246,480
CURRENT GRAND TOTAL PART 39	86							63,311	$11,049,659
INCREMENTAL Changes FOR Clearance #3038-0076	0							+3,480	+2,607,574
NEW Estimated Burden for Clearance #3038-0076	8617							66,791	$13,657,233

Total Estimated Burden for Information Collection 3038-0076

Estimated number of respondents: 86

Estimated total annual number of responses: 22,513

Estimated total annual burden hours: 66,791

Estimated total annual burden cost: $13,657,233

1 Average hourly salary based on the Commission’s CFTC 2023Pay Chart (with adjusted locality pay): https://www.cftc.gov/media/8026/CFTC2023paytables010123/download.

2 On the one hand, the total cost estimate to the Commission may be lower in subsequent years if DCOs make few changes to the requisite plans once they are developed in a manner consistent with this proposed rulemaking. In such cases, the Commission estimates two hundred fewer hours of analysis per year to review the requisite plans. On other hand, the total cost estimate may be the same or increase in subsequent years if DCOs make significant changes to the requisite plans, which may be likely during the first few years of this proposed rulemaking. The Commission therefore is maintaining a total cost estimate for this proposed collection at $134,478 per year.

3

The 86 respondents include: 3 for Subpart A reporting, 77 (13 DCOs plus 64 FCMs) for Subpart B reporting, and 6 DCOs for Subpart D reporting. Subpart C respondents are included in the 13 DCOs also reporting under Subpart B.

4 Taking into account an average salary of $75-400 per hour, the calculation uses $250 for the burden hour estimates for Subpart A. In the Commission’s experience, clearing organizations often hire outside counsel to prepare and submit these representations. While the Commission is uncertain about the billing rates that these entities may pay for outside counsel, the Commission believes that such counsel may bill at a rate of several hundred dollars per hour.

5 The “Total” rows for each subpart of Part 39 represent the total number of respondents in column 1, and the sum of the amounts for each item in columns 2-5 and 7-9. For Subpart A, the total number of respondents represents one applicant for full DCO registration, one applicant for DCO registration with alternative compliance, and one DCO requesting vacation. The two respondents agreeing to extend the review period are the two applicants for registration, so are not counted again.

6 This dollar estimate uses $102, the Bureau of Labor Statistics mean hourly rate for category 23-1011, Lawyers, as of May 2021.

7 This dollar estimate uses $59, the Bureau of Labor Statistics mean hourly rate for category 13-0000, Business and Financial Operations, as of May 2021.

8 This dollar amount takes into account an hourly cost of $196 based on the most recent publicly available data on hourly audit costs in the 2015 Audit Fee Report prepared by the Financial Executives Research Foundation, http://www.financialexecutives.org/ferf/download/2015%20Final/2015-018.pdf, and adjusted to $248 by the current rate of inflation, https://www.saving.org/inflation/inflation.php?amount=196&year=2015.

9 The dollar estimate uses $46, the Bureau of Labor Statistics mean hourly rate for category 13-2099, Financial Specialist, as of May 2021.

10 The hour burden cost is estimated at $79 based on a weighted average of 60% of the Bureau of Labor Statistics mean hourly wage as of May 2021 of $102.14 for 23-1011, Lawyers, and 40% of the mean hourly wage of $45.50 for 13-2099, Financial Specialists.

11 The hour burden cost is estimated at $79 based on a weighted average of 60% of the Bureau of Labor Statistics mean hourly wage as of May 2021 of $102.14 for 23-1011, Lawyers, and 40% of the mean hourly wage of $45.50 for 13-2099, Financial Specialists.

12 The hour burden cost used a blended rate of fifty percent lawyers ($499/hour) and fifty percent financial examiners ($237/hour). According to the May 2021 National Occupational Employment and Wage Estimates Report produced by the U.S. Bureau of Labor Statistics, available at https://www.bls.gov/oes/current/oes_nat.htm, the mean salary for category 23-1011, “Lawyers,” is $198,900.  This number is (a) divided by 1800 work hours in a year to account for sick leave and vacations, (b) multiplied by 4.0 to account for retirement, health, and other benefits or compensation, as well as for office space, computer equipment support, and human resources support, and (c) in light of recent high inflation, further multiplied by 1.1294 to account for the change in the Consumer Price Index for Urban Wage-Earners and Clerical Workers from 263.612 in May of 2021 to 297.730 in April of 2023, all of which yields an hourly rate of $499.  Using a similar analysis, category 13-2061, “Financial Examiners,” under business and financial services occupations, has a mean annual salary of $94,270, yielding an hourly rate of $237.

13 The Commission anticipates this reporting requirement would be performed by lawyers at a cost of $499 per hour. See infra n. 3.

14 The 9 respondents under Subpart C reporting are all subject to the same requirements; therefore, the total number of respondents for all of Subpart C is 9.

15 According to recent Bureau of Labor Statistics data (May 2021), the mean hourly wage of an employee under occupation code 11-3031, “Financial Managers,” that is employed by the “Securities and Commodity Contracts Intermediation and Brokerage” industry is $98.64, which the Commission rounded to $99 per hour in estimating the cost burden of all recordkeeping requirements under part 39 of its regulations.

16 These 13 DCOs are already included in the 86 total respondents subject to reporting requirements, so are not added to the total for Part 39 to avoid double counting.

17 The 86 respondents include: 3 for Subpart A reporting, 77 (13 DCOs plus 64 FCMs) for Subpart B reporting, and 6 DCOs for Subpart D reporting. Subpart C respondents are included in the 13 DCOs also reporting under Subpart B.