Download:
pdf |
pdfSUPPORTING STATEMENT
for the Paperwork Reduction Act Information Collection Submission
for Rule 15c3-3 – Customer Protection—Reserves and Custody of Securities
3235-0078
Proposed Partial Revision
A.
JUSTIFICATION
1.
Necessity of Information Collection
During the “Paperwork Crisis” of 1967–1970, many brokers-dealers mishandled and
misused customer funds and securities because they had inadequate and inefficient record
keeping and segregation systems. Furthermore, the 1969–1970 “bear market” caused many
firms that lacked sufficient capital to utilize customer funds and securities to obtain financing for
their continued operation. In order to rectify these problems, the Securities and Exchange
Commission (“Commission”) adopted Rule 15c3-3 under the Securities Exchange Act of 1934
(“Exchange Act”) to provide increased protection for the funds and securities of customers.1
Rule 15c3-3 requires all broker-dealers that hold securities or cash belonging to
customers to obtain and maintain possession or control of all the fully-paid and excess margin
securities of their customers.2 In addition, these broker-dealers must make a periodic
computation (“reserve computation”) to ascertain the amount of money being held that
constitutes customer funds or funds obtained from the use of customer securities. If this amount
– known as “customer credits” – exceeds the amount of money customers owe the firm
(“customer debits”), the broker-dealer must deposit the excess in a special reserve bank account
for the exclusive benefit of the firm’s customers (“Special Reserve Bank Account”).3 In this
way, Rule 15c3-3 protects customer assets by requiring firms to maintain possession or control
of customer securities, and by permitting firms to use customer money only to the extent
necessary to finance customer-related business.
Rule 15c3-3 requires broker-dealers to make the reserve computation on either a weekly
or monthly basis. Broker-dealers are also required to: (1) maintain a description of the
procedures utilized to comply with the possession and control requirements of Rule 15c3-3; (2)
maintain a written notification from the bank where the Special Reserve Bank Account is located
that all assets in the account are for the exclusive benefit of the broker-dealer’s customers; and
(3) give telegraphic notice to the Commission, and the appropriate designated examining
authority (“DEA”), if they fail to make a required deposit in the Special Reserve Bank Account.
1
See Broker-dealers; Maintenance of Certain Basic Reserves, Exchange Act Release No. 9856 (Nov. 10,
1972), 37 FR 25224 (Nov. 29, 1972).
2
17 CFR 240.15c3-3.
3
For purposes of this Paperwork Reduction Act (“PRA”) submission, the term “Special Reserve Bank
Account” includes accounts set up in accordance with both paragraph (e)(1) and (k)(2)(i) of Rule 15c3-3.
In addition, paragraph (o) of Rule 15c3-3 requires that a broker-dealer that effects
transactions for customers in security futures products (“SFP”) must: (1) establish written
policies and procedures for determining whether customer SFPs will be placed in a securities
account or a futures account, and, if applicable, the process by which a customer may elect the
type of account in which SFPs will be held; (2) provide each customer that plans to effect SFP
transactions with a disclosure document containing certain information; (3) make a record of
each change in account type; and (4) send each SFP customer notification of any change of
account type.
In accordance with Section 764 of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (“Dodd-Frank Act”),4 which added section 15F to the Exchange Act,5 on June 21,
2019,6 the Commission adopted amendments to Rule 15c3-3 to establish segregation and notice
requirements for broker-dealers, including broker-dealer security-based swap dealers (“SBSDs”),
that are parallel to the requirements in Rule 18a-47 applicable to SBSDs that are not brokerdealers (“2019 amendments”). Specifically, the Commission added new paragraph (p) to Rule
15c3-3 to establish segregation and notice requirements for broker-dealers with respect to their
security-based swap activity.8 The Commission codified the security-based swap segregation
requirements for broker-dealers in Rule 15c3-3, as amended, rather than in Rule 18a-4, as
adopted, in order to consolidate broker-dealer customer protection requirements in Rule 15c3-3.9
2023 Proposed Rule Amendments
On July 12, 2023, the Commission proposed amendments to the reserve computation
requirements for certain broker-dealers pursuant to its authority under Section 15(c)(3)(A) of the
Exchange Act.10 Specifically, the proposed amendments would require broker-dealers that hold
securities and cash on behalf of customers and other broker-dealers to compute the reserve
computation on a daily basis, instead of weekly as required under the current rule, provided that
4
See Dodd-Frank Wall Street Reform and Consumer Protection Act, Public Law 111-203, 124 Stat. 1376
(2010).
5
See 15 U.S.C. 78o-10(e)(2)(B).
6
See Capital, Margin, and Segregation Requirements for Security-Based Swap Dealers and Major SecurityBased Swap Participants and Capital Requirements for Broker-Dealers, Exchange Act Release No. 86175.
7
OMB No. 3235-0700. This rule was submitted to OMB for its review at the proposing stage.
8
See paragraph (p) to Rule 15c3-3, as amended.
9
The hour burdens for the collection of information related to Rule 15c3-3, as amended, in the final rule
release were included in the collection of information for Rule 18a-4, as proposed to be adopted, in the
proposing release. See Capital, Margin, and Segregation Requirements for Security-Based Swap Dealers
and Major Security-Based Swap Participants and Capital Requirements for Broker-Dealers; Proposed
Rule, Exchange Act Release No. 68071, 77 FR 70214 (Nov. 23, 2012). These hours were moved to the
existing collection of information in Rule 15c3-3, as amended, as a result of changes made to the final rule
in response to comments to require that broker-dealers comply with the segregation requirements of
paragraph (p) to Rule 15c3-3, as amended, with respect to their security-based swap activities (rather than
the requirements of Rule 18a-4, as adopted). For more information about the comments, see infra note 15.
10
See Daily Computation of Customer and Broker-Dealer Reserve Requirements under the Broker-Dealer
Customer Protection Rule, Exchange Act Release No. 97877 (Jul. 12, 2023), 88 FR 45836 (Jul. 18, 2023)
(“2023 Proposing Release”).
2
such broker-dealers have average total credits that equal or exceed $250 million. For the
purposes of the proposed amendments, “average total credits” would be defined as the arithmetic
mean of the sum of total credits in the broker-dealer’s customer reserve computation and PAB
reserve computation reported in the twelve most recently filed month-end FOCUS Reports.
The proposed amendments would also require broker-dealers subject to the daily reserve
computation requirement to make a deposit of any excess of credits over debits to the Special
Reserve Bank Account following each computation in accordance with the timelines prescribed
in the rule. Broker-dealers re also be required to make and maintain a record of each such
computation.
Finally, the proposed amendments would require broker-dealers subject to the daily
reserve computation requirement to continue performing daily reserve computations for at least
60 days after falling below the $250 million and providing notification to the broker-dealer’s
designated examining authority in writing.
This supporting statement describes the changes to the information collection
burdens associated with Rule 15c3-3 that changed as a result of the 2023 proposed
amendments only. It does not propose to revise any of the other burdens in this ICR.
2.
Purpose and Use of the Information Collection
Rule 15c3-3 is an integral part of the Commission’s financial responsibility program for
broker-dealers. Its purpose is to protect the rights of customers to promptly obtain their property
from a broker-dealer. Rule 15c3-3’s reserve and notice requirements facilitate the process by
which the Commission and the various DEAs monitor how broker-dealers are fulfilling their
custodial responsibilities to investors. With the exception of the telegraphic notice requirement,
governmental agencies do not regularly receive any of the information described above. Instead,
the information is stored by the broker-dealer and made available to the various securities
regulatory authorities as required to facilitate examinations and investigations. If broker-dealers
were not required to create and maintain this information, the Commission’s ability to fulfill its
statutory directive to protect investors would be diminished.
Rule 15c3-3 also requires that a broker-dealer provide each customer that wishes to
engage in SFP activities with a disclosure document and notification of any change of account
type. Without these disclosures and notifications, in the event of a liquidation, customers may be
uncertain or confused as to which regulatory scheme is applicable to their account.
The 2019 amendments to Rule 15c3-3 are integral to the Commission’s financial
responsibility program for broker-dealers and broker-dealer/SBSDs as they are designed to
protect the rights of security-based swap customers and their ability to promptly obtain their
property from a broker-dealer. The collection of information requirements in the rule facilitates
the process by which the Commission and its staff monitor how broker-dealers are fulfilling their
custodial responsibilities to security-based swap customers. The 2019 amendments to Rule
15c3-3 also require that a broker-dealer provide certain notices to its counterparties.11 These
11
See paragraphs (p)(1) and (p)(3) of Rule 15c3-3, as amended.
3
notices alert counterparties to the alternatives available to them with respect to segregation of
non-cleared security-based swaps. The Commission and its staff will use the collection of
information in the 2019 amendments to confirm registrants are providing the requisite notice to
counterparties.
3.
Consideration Given to Information Technology
Rule 15c3-3 does not prevent a broker-dealer from using computers or other mechanical
devices to generate, obtain, disclose or maintain the records and information required under the
rule. Currently, most firms utilize automated systems to comply with Rule 15c3-3. The
Commission is not aware of any technical or legal obstacle to reducing the burden through the
use of improved information technology.
4.
Duplication
There are no similar rules that are duplicative of Rule 15c3-3. Copies of notices required
to be filed with the Commission under paragraph (i) of Rule 15c3-3 must also be filed with the
regulatory authority that examines the broker-dealer for compliance with financial responsibility,
helping to avoid duplication.
5.
Effects on Small Entities
Paragraph (k) of Rule 15c3-3 has the effect of exempting most small broker-dealers from
the rule’s requirements. Small broker-dealers that are not exempt from Rule 15c3-3 can make
the required computation monthly as long as they have aggregate indebtedness not exceeding
800% of net capital and carry aggregate customer funds not exceeding $1,000,000. The
Commission estimates that, as of 2022 year-end, approximately 31 broker-dealers were small
entities that performed a customer reserve computation pursuant to Rule 15c3-3.12 In addition,
the information collections required under the 2019 amendments do not place burdens on small
entities. The broker-dealer SBSDs subject to the information collections under the rule are not
expected to be small entities.
6.
Consequences of Not Conducting Collection
If the required information were not conducted or were conducted less frequently, the
level of protection afforded to the counterparties and the U.S. financial system by Rule 15c3-3
would be diminished.
7.
Inconsistencies with Guidelines in 5 CFR 1320.5(d)(2)
There are no special circumstances. This collection is consistent with the guidelines in 5
CFR 1320.5(d)(2).
12
This estimate is based on the number of firms that, as of December 31, 2022, indicated on Part II their
FOCUS reports (OMB Control Number 3235-0123) that they make their 15c3-3 computations monthly
(line 4333).
4
8.
Consultations Outside the Agency
The required Federal Register notice soliciting comments on this collection of
information was in published in the 2023 Proposing Release.13 No public comments regarding
the collection of information were received.
9.
Payment or Gift
No payments of gifts have been provided to respondents.
10.
Confidentiality
The information collected by the Commission under Rule 15c3-3, as amended, is kept
confidential to the extent permitted by the Freedom of Information Act (5 U.S.C. § 552 et seq.).
11.
Sensitive Questions
The Information Collection does not collect information about individuals, therefore a PIA,
SORN, and PAS are not required.
12.
Burden of Information Collection
The Commission estimates that the aggregate annual hour burden associated with Rule
15c3-3 is approximately 1,174,051 hours calculated as described below. This estimated figure
includes the changes to information collection burdens resulting from the 2023 proposed
amendments to Rule 15c3-3. The changes are discussed in connection with the burdens
estimated for paragraph (e) below. Additionally, a new information collection has been added to
reflect a proposed notification requirement included in the proposed amendments to Rule 15c33(e). No other estimated burdens have changed from those that were approved as of October 17,
2023.14
2023 Proposed Revisions to Existing Hour Burdens
Customer Reserve Accounts
As described above, Rule 15c3-3(e) requires broker-dealers to make a reserve
computation on either a weekly or monthly basis. The Commission estimates that, as of
December 31, 2022, there were approximately 207 broker-dealers fully subject to Rule 15c3-3
(i.e., broker-dealers that cannot claim any of the exemptions enumerated in paragraph (k)), of
which approximately 15 made daily (on a voluntary basis), 161 made weekly, and 31 made
monthly, reserve computations.15 Paragraph (e)(3) of Rule 15c3-3 requires each broker-dealer to
13
See supra, note 10.
14
https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202306-3235-015.
15
This estimate is based on the number of firms that, as of December 31, 2022, indicated on Part II of their
FOCUS reports that they make their 15c3-3 computations daily (line 4332), weekly (line 4333), or monthly
(line 4334).
5
make a record of each such computation.16 Based on staff experience, the Commission estimates
that it takes between one and five hours to make a record of each reserve computation, and that
the average time spent across all the firms is 2.5 hours.
Rule 15c3-3(e)(3) – daily computations for customer reserve account17
As noted above, in 2023 the Commission proposed amendments to Rule 15c3-3. The
amendments would require broker-dealers with $250 million or more in average total credits to
make a daily reserve computation, instead of weekly. The Commission estimates that there are
approximately 63 broker-dealers that would have average total credits equal to or exceeding
$250 million. Of these 63 broker-dealers, the Commission estimates that 11 already perform the
customer reserve computation daily. As a result, the Commission estimates that 52 brokerdealers will be required to shift from weekly to daily customer reserve computations. The total
number of broker-dealers that would perform daily customer reserve computations would
therefore be 67 broker-dealers (15 existing broker-dealers plus the 52 broker-dealers performing
weekly computations that would be required to perform daily computation).
Consequently, the revised hour burden associated with the requirement for broker-dealers
to perform a daily reserve computation for customer accounts is estimated to be 41,875 hours.18
This represents an increase of 32,500 hours over the currently approved hour burden for this
information collection.19
Rule 15c3-3(e)(3) – weekly computations for customer reserve account20
As a result of the proposed change to Rule 15c3-3(e) that would require certain brokerdealers to perform a customer reserve computation on a daily basis, the hour burden associated
with the information collection related to weekly reserve computations for customer accounts
will decrease. Specifically, the number of respondents subject to the requirement to perform
weekly reserve computations for customer accounts will decrease from 161 to 109. This
decrease of 52 broker-dealers is the number of broker-dealers that the Commission estimates will
16
17 CFR 240.15c3-3(e)(3).
17
In the most recently approved supporting statement for Rule 15c3-3, the title of this collection of
information is “Rule 15c3-3(e)(3) – daily computations.” The Commission is revising the title of this
collection of information in order to clarify that it is distinct from the collection of information related to
daily computations for PAB reserve accounts, which currently shares the same title.
18
2.5 hours x 250 computations annually x 67 respondents that calculate daily = 41,875 hours.
19
Revised hour burden of 41,875 minus currently approved burden of 9,375 hours = 32,500 hours.
20
In the most recently approved supporting statement for Rule 15c3-3, the title of this collection of
information is “Rule 15c3-3(e)(3) – weekly computations.” The Commission is revising the title of this
collection of information in order to clarify that it is distinct from the collection of information related to
weekly computations for PAB reserve accounts, which currently shares the same title.
6
be required to shift from a weekly to a daily reserve computation for customer accounts as a
result of the 2023 proposed rule changes.
Consequently, the Commission estimates that the revised hour burden for the information
collection associated with weekly reserve computations for customer accounts is 14,170 hours.21
This represents a decrease of 6,760 hours.22
The burden related to monthly reserve computations for customer accounts will not
change as a result of the 2023 proposed amendments.
Based on these revised estimates, the Commission believes that the hourly burden
associated with the information collection associated with reserve computations for customer
accounts will be approximately 56,975 hours (41,875 hours for daily computations + 14,170
hours for weekly computations + 930 for hours for monthly computations). 23 Thus, the
Commission estimates that there will be an increase in the burden associated with the
requirement to make a record of the customer reserve computation of 25,740 hours24 as a result
of the 2023 proposed amendments to Rule 15c3-3.
PAB Reserve Accounts
In addition to reserve computations for customer accounts, paragraph (e) of Rule 15c3-3
also requires a PAB25 reserve computation. The Commission previously estimated that
approximately 93 broker-dealers perform a PAB reserve computation.26 The Commission also
previously estimated that of the 93 broker-dealers required to perform a PAB reserve
computation, approximately 77 of the current PAB filers will perform the PAB reserve
computation on a weekly basis, 5 broker-dealers will perform it on a monthly basis, and 11
broker-dealers will perform the PAB reserve computation on a daily basis. The Commission
estimates that a broker-dealer will spend, on average, approximately 2.5 hours to complete the
PAB reserve computation in order to make a record of such computation pursuant to paragraph
(e) of Rule 15c3-3.
21
2.5 hours x 52 computations x 109 respondents = 14,170 hours.
22
Revised hour burden of 14,170 hours minus the currently approved hour burden of 20,930 hours = 6,760
hours.
23
(2.5 hours x 250 computations annually x 67 respondents that calculate daily) + (2.5 hours x 52
computations annually x 109 respondents that calculate weekly) + (2.5 hours x 12 computations annually x
31 respondents that calculate monthly) = 56,975 hours.
24
Estimated burden of 56,975 hours resulting from proposed amendments less previously approved burden of
31,325 hours = 25,740 hours.
25
The term PAB account means a proprietary securities account of a broker or dealer (which includes a
foreign broker or dealer, or a foreign bank acting as a broker or dealer) other than a delivery-versuspayment account or a receipt-versus-payment account. The term does not include an account that has been
subordinated to the claims of creditors of the carrying broker or dealer. 15c3-3(a)(16)
26
This estimate is based on the number of brokers-dealers that have, as of December 31, 2022, either
aggregate credit items (line 2170) or debit items (line 2230) on either Part II or Part II CSE of their FOCUS
Reports.
7
Rule 15c3-3(e)(3) – daily computations for PAB reserve account27
In connection with the 2023 proposed amendments described above, the Commission
estimates that of the 63 broker-dealers with average total credits equal to or exceeding $250
million, 49 have total credits relating to PAB account holders of more than $0, with 10 of these
broker-dealers already performing the PAB reserve computation daily. As a result, the
Commission estimates that 39 broker-dealers will be required to switch from a weekly PAB
reserve computation to a daily PAB reserve computation. The total number of broker-dealers
that would perform daily PAB reserve computations would therefore be 50 broker-dealers (11
existing broker-dealers plus the 39 broker-dealers performing weekly PAB computations that
would be required to perform daily computations).
Consequently, the revised hour burden associated with the requirement for broker-dealers
to perform a daily PAB reserve computation is estimated to be 31,250 hours.28 This represents
an increase of 24,375 hours over the currently approved hour burden for this information
collection.29
Rule 15c3-3(e)(3) – weekly computations for PAB reserve account30
As a result of the proposed amendments to Rule 15c3-3(e) that would require certain
broker-dealers to perform a PAB reserve computation on a daily basis, the hour burden
associated with the information collection related to weekly PAB reserve computations will
decrease. Specifically, the number of respondents subject to the requirement to perform weekly
reserve computations for customer accounts will decrease to 77 from 38. This decrease of 39
broker-dealers is the number of broker-dealers that the Commission estimates will be required to
27
In the most recently approved supporting statement for Rule 15c3-3, the title of this collection of
information is “Rule 15c3-3(e)(3) – daily computations.” The Commission is revising the title of this
collection of information in order to clarify that it is distinct from the collection of information related to
daily computations for customer reserve accounts, which currently shares the same title.
28
2.5 hours x 250 computations annually x 50 respondents that calculate daily = 31,250 hours.
29
Revised hour burden of 31,250 hours minus currently approved burden of 6,875 hours = 24,375 hours.
30
In the most recently approved supporting statement for Rule 15c3-3, the title of this collection of
information is “Rule 15c3-3(e)(3) – weekly computations.” The Commission is revising the title of this
collection of information in order to clarify that it is distinct from the collection of information related to
weekly computations for customer reserve accounts, which currently shares the same title.
8
shift from a weekly to a daily PAB reserve computation as a result of the 2023 proposed
amendments to Rule 15c3-3.
Consequently, the Commission estimates that the revised hour burden for the information
collection associated with weekly PAB reserve computations is 4,940 hours.31 This represents a
decrease of 5,070 hours.32
The burden related to monthly reserve computations for PAB accounts will not change as
a result of the 2023 proposed rule change.
Based on these estimates, the Commission believes that the hourly burden associated
with this collection of information will be approximately 36,340 hours (4,940 hours for weekly
computations + 150 hours for monthly computations + 31,250 hours for daily computations).33
Thus, the Commission estimates that there will be an increase in the burden associated with the
requirement to make a record of the PAB reserve formula computation of 19,305 hours.34
2023 Proposed New Information Collection
As noted above, the proposed amendments to Rule 15c3-3 require broker-dealers with
average total credits of or exceeding $250 million to perform the reserve computation daily
instead of weekly. Such broker-dealers must continue to perform a daily reserve computation
until the broker-dealer’s average total credits fall below $250 million. A broker-dealer can then
elect to revert to a weekly reserve computation but must notify its designated examining
authority in writing of its election and continue to perform a daily reserve computation for at
least 60 calendar days after providing the written notification.
Based on a review of FOCUS Report data for the 2022 calendar year, the Commission
estimates that one broker-dealer per year would provide notice to the broker-dealer’s designated
examining authority that the broker-dealer’s average total credits have fallen below have fallen
below the $250 million threshold and that the broker-dealer would revert to a weekly reserve
computation.
Based on its experience with other notification requirements, the Commission estimates
that it would take a broker-dealer 30 minutes to prepare and send the notification regarding its
election to perform weekly reserve computations to its designated examining authority. As a
result, the Commission estimates that one broker-dealer per year would send the notice for a
burden of 0.5 hours per year. This burden would represent a new collection of information.
31
2.5 hours x 52 computations x 38 respondents = 4,940 hours.
32
Revised hour burden of 4,940 hours minus the currently approved hour burden of 10,010 hours = (5,070
hours.
33
(38 weekly filers x 52 weeks x 2.5 hours per computation) + (5 monthly filers x 12 months x 2.5 hours per
computation) + (50 daily filers x 250 business days per year x 2.5 hours per computation) = 36,340total
hours.
34
Estimated burden of 36,340 hours resulting from proposed amendments less previously estimated burden of
17,035 hours = 19,305 hours
9
Unchanged Burden Hours
The following burden hour estimates have not changed from their previous
estimates in connection with the proposed amendments to Rule 15c3-3. They are included
in this supporting statement for completeness.
Paragraph (a)(16) of Rule 15c3-3 excludes from its definition of “PAB account,” an
account that “has been subordinated to the claims of creditors of the carrying broker or dealer.”35
The Commission understands that most PAB account holders that enter into a subordinated loan
agreement with a broker-dealer that maintains custody of customer securities and cash (“carrying
broker-dealer”) in order to not be treated as PAB accounts under paragraph (a)(16) likely will be
affiliates of the broker-dealer. The Commission estimates that the 93 broker-dealers that carry
PAB accounts will enter into an average of 11 subordination agreements under paragraph (a)(16)
and it will take a carrying broker-dealer approximately 20 hours to draft a subordination
agreement. Therefore, the Commission estimates that the total one-time recordkeeping burden
will be approximately 20,460 hours, or approximately 6,820 hours per year on an annualized
basis.36
Paragraph (b)(5) of Rule 15c3-3 requires carrying broker-dealers to provide PAB account
holders with written notice that the account holder’s non-margin securities may be used in the
ordinary course of its business. As noted above, the Commission estimates that approximately
93 broker-dealers carry PAB accounts. The Commission further estimates that, on average, a
firm will spend approximately 10 hours of employee resources drafting or updating a standard
notice template, for a total one-time recordkeeping burden of approximately 930 hours, or
approximately 310 hours per year on an annualized basis.37 The Commission also estimates that
there are approximately 1,107 existing PAB customers38 and approximately 5% of those
customers (approximately 55 customers) will be affected by this requirement as they have not yet
received the required written notice from their broker-dealer.39 Therefore, broker-dealers will
have to send approximately 55 written notices, spending approximately 10 minutes per account
sending out the required written notice, for a total one-time disclosure burden of 9.16 hours, or
approximately 3 hours per year on an annualized basis.40
35
For purposes of this supporting statement, the term “PAB account” references accounts held at carrying
broker-dealers that hold the proprietary securities and cash of other broker-dealers.
36
93 broker-dealers x 11 accounts x 20 hours = 20,460 hours. The total annualized burden over the threeyear approval period is 6,820 hours (20,460 / 3 = 6,820, with an average of 73 hours per respondent (6,820
/ 93 broker-dealers = 73.333, rounded down to 73).
37
93 firms x 10 hours = 930 hours. The one-time burden annualized over the three-year approval period is
310 hours (930 / 3 = 310, hours), with an average per 93 broker-dealers of 3 hours (310 / 93 = 3.333,
rounded down to 3).
38
This estimate is based on the number of firms that, as of December 31, 2022, have account numbers on
either lines 418, 419, 420, or 424 of Part IIA of the FOCUS report.
39
1,107 PAB account holders x 5% = 55.35 PAB account holders, rounded down to 55 PAB account holders.
40
55 PAB account holders x 10 minutes = 550 minutes. 550 minutes / 60 minutes = 9.16, rounded to 9 hours.
For purposes of this supporting statement, the one-time burden annualized over the three-year approval
period is 3.055 hours (9.16 / 3 = 3.055, rounded to 3 hours).
10
Further, the Commission estimates that the 93 firms that carry PAB accounts will have to
amend or update their standard PAB agreement template. The Commission estimates a firm will
spend, on average, approximately 20 hours of employee resources on this task, for a total onetime recordkeeping burden of approximately 1,860 hours, or approximately 620 hours per year
on an annualized basis.41
Paragraph (f) of Rule 15c3-3 prescribes that a broker-dealer required to maintain a
Special Reserve Bank Account must obtain and retain a written notification from each bank in
which it has a Special Reserve Bank Account to evidence the bank’s acknowledgement that
assets deposited in the account are being held by the bank for the exclusive benefit of the brokerdealer’s customers.42 As stated above, 207 broker-dealers are estimated to be fully subject to
Rule 15c3-3. In addition, 350 broker-dealers operate in accordance with the exemption provided
in paragraph (k)(2)(i),43 which also requires that a broker-dealer maintain a special reserve
account. Broker-dealers generally maintain longstanding relationships with banks where they
hold their Special Reserve Bank Accounts and thus do not need to obtain these letters frequently.
The Commission estimates that of the total number of broker-dealers that must comply with Rule
15c3-3, only 25%, or approximately 139 broker-dealers,44 must obtain one new letter each
year.45 The Commission estimates that it will take a broker-dealer approximately one hour to
obtain this written notification from a bank regarding a Special Reserve Bank Account.46
Therefore, the Commission estimates a total annual recordkeeping burden of approximately 139
hours to obtain these written notifications.47
Paragraph (f) of Rule 15c3-3 requires a broker-dealer to immediately notify the
Commission and its DEA if it fails to make a required deposit in its Special Reserve Bank
Account.48 We anticipate broker-dealers will file approximately 15 such notices each year.49
41
93 firms x 20 hours = 1,860 hours. The one-time burden annualized over the three-year approval period is
620 hours (1,860 / 3 = 620,), with an average hour burden of 6.67 hours per broker-dealer (620 / 93 =
6.666, rounded to 6.67).
42
17 CFR 240.15c3-3(f).
43
This estimate is based on the number of firms that, as of December 31, 2022, indicated on line 4560 of Part
II or Part II CSE of their FOCUS reports that they are subject to the Rule 15c3-3(k)(2)(i) exemption.
44
(207 +350) x 25% = 139.25, rounded down to 139 broker-dealers.
45
The Commission notes that a broker-dealer will need to obtain a letter from its bank regarding its Special
Reserve Bank Account because either the broker-dealer changed the type of business it does and became
subject to paragraph (e)(3) or (k)(2)(i) of Rule 15c3-3 or the broker-dealer established a new Special
Reserve Bank Account.
46
The language in these letters is largely standardized.
47
139 broker-dealers x 1 hour = 139 hours.
48
17 CFR 240.15c3-3(i).
49
Broker-dealers filed 15 such notices with the Commission, on average, in past years.
11
The Commission estimates that it will take a broker-dealer approximately 30 minutes to file the
required notice, resulting in a total annual reporting burden of approximately 8 hours.50
Paragraph (j)(1) of Rule 15c3-3 includes a condition that a broker-dealer must establish
adequate procedures that will impose a paperwork burden if a broker-dealer wishes to accept or
use any free credit balance from the account of any customer of the broker-dealer. The
requirement that broker-dealers establish adequate procedures with regard to free credit balances
will result in one-time and annual hours burdens for broker-dealers subject to the requirements of
paragraph (j)(1) to Rule 15c3-3 for the 142 broker-dealers that carry free credit balances.51 Most
firms already have such procedures in place. Therefore, the Commission estimates that a brokerdealer will spend approximately 10 hours per year reviewing and updating its procedures, for an
annual recordkeeping burden of approximately 1,420 hours.52
Paragraph (j)(2) of Rule 15c3-3 requires a broker-dealer to obtain written affirmative
consent from a new customer before including a customer’s free credit balances in a Sweep
Program, as defined in paragraph (a)(17), as well as to provide certain disclosures and notices to
all customers with regard to the broker-dealer’s Sweep Program. These requirements will result
in one-time and annual burdens to broker-dealers subject to its provisions. However, these
requirements apply only to firms that carry customer free credit balances and opt to have the
ability to change how their customers’ free credit balances are treated. The Commission is
including all 142 broker-dealers that carry free credit balances in its estimate to reflect the fact
that these firms may have to update their systems to comply with these requirements. The
Commission further estimates that these firms will spend, on average, approximately 200 hours
of employee resources per firm updating their current systems (including processes for
generating customer account statements) to comply with the rule. Therefore, the Commission
estimates that the total one-time recordkeeping burden to broker-dealers arising from this
requirement will be approximately 28,400 hours, or approximately 9,467 hours per year on an
annualized basis.53
With respect to the annual burden associated with paragraph (j)(2) of Rule 15c3-3, the
Commission estimates that there are 256,751,303 customer accounts54 of which 5%
(approximately 12,837,565) will be impacted each year.55 This equates to an average of
50
15 notices x 0.5 hours = 7.5 hours rounded up to 8.
51
This estimate is based on the number of firms that, as of December 31, 2022, had free credit balances on
line 4340 of Part II of their FOCUS reports.
52
142 broker-dealers x 10 hours = 1,420 hours.
53
142 broker-dealers x 200 hours per firm = 28,400 hours. For purposes of this supporting statement, this
one-time burden annualized over the three-year approval period is approximately 9,467 hours (28,400 / 3 =
9,466.67, rounded up to 9,467), with an average hour burden per broker-dealer of approximately 66.67
hours (9,466.6667 / 142 broker-dealers = 66.6666667, rounded up to 66.67).
54
This estimate is based on the total number of public customer accounts listed on line 8080 of firms’
FOCUS reports, as of December 31, 2022.
55
The Commission estimates approximately 12,837,565 accounts (256,751,303 x 5% = 12,837,565.15,
rounded down to 12,837,565) will be impacted annually.
12
approximately 90,405 accounts per broker-dealer.56 The Commission further estimates that a
broker-dealer will spend, on average, four minutes of employee resources to process a written
affirmative consent for new customers, as well as disclosures required under paragraph (j) to
Rule 15c3-3. Therefore, the Commission estimates that the annual recordkeeping burden to
broker-dealers57 arising from the requirement will be approximately 855,838 hours.58
Paragraph (o)(2)(i) of Rule 15c3-3 requires a broker-dealer that effects transactions for
customers in SFPs to provide each customer that engages in SFP transactions with a disclosure
document containing certain information. The Commission estimates that 8% of the accounts
held by broker-dealers that are also registered as FCMs, or 3,110,078 accounts, may engage in
SFP transactions.59 This equates to an average of approximately 21,902 accounts per brokerdealer.60 The Commission estimates that it will take approximately 3 minutes to create each
record.61 Thus, the total annual disclosure burden associated with the requirements of paragraph
(o)(2)(i) will be approximately 155,504 hours.62
Paragraph (o)(3) of Rule 15c3-3 requires a broker-dealer that effects transactions in SFPs
for customers to make a record of each change in account type and to provide certain customers
with disclosure documents containing certain information about SFP products.63 The
Commission estimates that broker-dealers that were also registered as futures commission
merchants (“FCMs”) maintained approximately 38,875,974 customer accounts.64 The
Commission estimates that 8% of these customers may engage in SFP transactions,65 and that of
that 8%, 20% per year may change account type, requiring a broker-dealer to promptly notify the
56
12,837,565 ÷ 142 = 90,405.39 rounded down to 90,405.
57
This annual burden will affect the 142 broker-dealers that carry free credit balances.
58
(12,837,565 accounts x 4 minutes per account) / 60 minutes = 855,837.667, rounded up to 855,838 hours.
For purposes of this supporting statement, the Commission divided the total annual hour burden by 161
respondents for an average annual burden per firm of approximately 3,347 hours (538,815. / 161 =
3,346.677, rounded up to 3,347).
59
38,875,974 accounts x 8% = 3,110,077.9, rounded up to 3,110,078 accounts. The Commission derived its
8% estimate from the number of active options accounts and conversations with industry representatives.
60
3,110,078 ÷ 142 = 21,901.95 rounded up to 21,902.
61
The Commission estimates that most firms will have this process automated. To the extent that no person
need be involved in the generation of this record, the burden will be very minimal.
62
3,110,078 accounts x (3 minutes/60 minutes) = 155,503.9 hours rounded up to 155,504.
63
More specifically, a broker-dealer that changes the type of account in which a customer’s SFPs are held
must create a record of each change in account type that includes the name of the customer, the account
number, the date the broker-dealer received the customer’s request to change the account type, and the date
the change in account type took place.
64
This estimate is based on the number of accounts that, as of December 31, 2022, were listed on line 8080 of
Schedule 1 of firms’ FOCUS reports provided that those firms also had a dollar amount greater than 0
listed on line 7465 of Part II of their FOCUS reports.
65
38,875,974accounts x 8% = 3,110,077.92, rounded to 3,110,078 accounts. The Commission derived its
estimate from the number of active options accounts and conversations with industry representatives.
13
customer in writing on the date that change became effective.66 Thus, broker-dealers may be
required to create these records for approximately 622,016 accounts.67 This equates to an
average of approximately 4,380 accounts per broker-dealer.68 The Commission estimates that it
will take approximately 3 minutes to create each record.69 Thus, the total annual recordkeeping
and disclosure burden associated with the requirements of paragraph (o)(3) will be
approximately 31,101 hours.70
A broker-dealer that is determining whether a registered clearing or derivatives
organization meets the requirements of Note G to Exhibit A to Rule 15c3-3 may not rely on the
credit rating of that organization to determine whether the broker-dealer can keep customer’s
positions in security future products with the organization for purposes of the reserve
computation. Thus, broker-dealers that previously relied on ratings for the purposes of Note G
use another method for assessing the creditworthiness of registered clearing or derivatives
organizations. The Commission believes that approximately 31 broker-dealers will be required
to change or update how they assess the creditworthiness of registered clearing or derivatives
organizations under Note G.71 The Commission believes that broker-dealers will spend
approximately .25 hours determining whether a clearing or derivatives organization meets the
requirements of Note G, resulting in an annual recordkeeping burden of approximately 8 hours.72
The Commission further believes that broker-dealers will spend approximately one hour
changing or reviewing their methods for determining whether a clearing or derivatives clearing
organization meets the requirements of Note G, resulting in a one-time recordkeeping burden of
approximately 31 hours, or approximately 10 hours per year on an annualized basis.73 The
aggregate Note G related recordkeeping burden is thus approximately 18 hours per year (8+10).
66
Broker-dealers that engage in an SFP business may choose not to allow customers to change account type
because it may be costly to facilitate such conversions. In addition, once a customer has researched the
issue and made a choice as to account type, it may be unlikely for the customer to change his or her account
type.
67
3,110,078 accounts x 20% = 622,015.58, rounded to 622,016 accounts.
68
622,016 ÷ 142 = 4,380.39 rounded down to 4,380.
69
The Commission estimates that most firms will have this process automated. To the extent that no person
need be involved in the generation of this record, the burden will be very minimal.
70
622,016 accounts x (3min / 60min) = 31,100.78 hours, rounded to 31,101 hours.
71
The number 31 comes from reviewing the members of the Options Clearing Corporation (“OCC”) listed in
the member directory on the OCC’s website, available at https://www.theocc.com/companyinformation/member-directory. Of the list of members, the Commission looked only at those who trade in
futures. Of the list of members that trade in futures, the Commission deleted any members who had the
exact same firm name but different firm numbers.
72
31 broker-dealers x .25 hours = 7.75 hours rounded up to 8.
73
31 broker-dealers x 1 hour = 31 hours. 31 ÷ 3 = 10.333 rounded to 10. The average hour burden per
broker-dealer is approximately 333 hours (10.33/31 broker-dealers = .333). The staff believes that brokerdealers will be subject to a one-time cost associated with reviewing the standards a broker-dealer uses to
determine whether a registered clearing or derivatives organization meets the requirements of Note G.
14
Paragraph (p) of Rule 15c3-3, as amended, establishes segregation requirements for
registered broker-dealers and broker-dealer SBSDs with respect to their security-based swap
activities and notifications requirements for broker-dealers that are either SBSDs or MSBSPs.
The amendments to Rule 15c3-3 added three new collections of information with
recordkeeping burdens and five new collections of information with third-party disclosure
burdens. These collections of information are summarized in the chart below and explained in
the following discussion.
Special Accounts (Rule 15c3-3(p)(1))
SBSDs are required to establish special accounts with banks and obtain written
acknowledgements from, and enter into written contracts with, the banks. These special
accounts include: (1) the qualified clearing agency account;74 (2) the qualified SBSD account;75
and (3) the special account for the exclusive benefit of security-based swap customers.76 The
Commission estimates that, as of December 31, 2022 there were 3 broker-dealer SBSDs
registered with the Commission, approximately 11 broker-dealers engaged in security-based
swap activities but not required to register as an SBSD or MSBSP, and no broker-dealer
MSBSPs. Staff further estimates that each of the 3 broker-dealer SBSDs and 11 broker-dealers
establishes 6 special accounts at banks (2 for each type of special account). Further, based on
staff experience with Rule 15c3-3, the Commission staff estimates that each SBSD and brokerdealer will spend approximately 30 hours to draft and obtain the written acknowledgement and
agreement for each account. These estimates result in an industry-wide one-time hour burden of
approximately 2,520 hours, or approximately 840 hours per year on an annualized basis.77
The Commission staff estimates that 25 percent78 of the 3 broker-dealer SBSDs and 11
broker-dealers (a total of approximately 4) will establish a new special account each year
because, for example, they change their banking relationship, for each type of special account.
Therefore, the Commission staff estimates an industry-wide ongoing annual hour burden of
approximately 360 recordkeeping hours.79
Customer Reserve Computation (Rule 15c3-3(p)(3)(iii))
Paragraph (p)(3) of Rule 15c3-3 requires broker-dealer SBSDs and broker-dealers
engaged in security-based swap activities to maintain a special account for the exclusive benefit
74
Paragraph (p) (1)(iii) of Rule 15c3-3, as amended.
75
Paragraph (p) (1) (iv) of Rule 15c3-3, as amended.
76
Paragraph (p)(1)(vii) of Rule 15c3-3, as amended.
77
(3 broker-dealer SBSDs + 11 broker-dealers engaged in security-based swap activities but not required to
register as an SBSD or MSBSP) x 6 special accounts x 30 hours = 2, hours. For purposes of this
supporting statement, this one-time burden annualized over the three-year approval period is 2,460 hours
(7,380 / 3 = 2,460), with an average hour burden per respondent of 60 hours (2,460 / 41 respondents = 60).
78
This number is based on the currently approved PRA collection for Rule 15c3-3. See Commission,
Supporting Statement for the Paperwork Reduction Act Information Collection Submission for Rule 15c3-3.
79
10 broker-dealer SBSDs x 3 types of special accounts x 30 hours = 900 hours.
15
of security-based swap customers and have on deposit in the account at all times an amount of
cash and/or qualified securities determined through a computation using the formula in Exhibit B
to Rule 15c3-3. Paragraph (p)(3)(iii) of Rule 15c3-3 provides that the computations necessary to
determine the amount required to be maintained in the special bank account must be made on a
weekly basis.80 Variation in size and complexity between these SBSDs and broker-dealers
makes it very difficult to develop a meaningful figure for the amount of time required to
calculate each reserve computation. Based on experience with the Rule 15c3-3 reserve
computation PRA burden hours and with the OTC derivatives industry, the Commission staff
estimates that it will take between 1 and 5 hours to compute each reserve computation, and that
the average time spent across all the broker-dealer SBSDs will be approximately 2.5 hours.
Accordingly, the Commission staff estimates that the resulting annual recordkeeping hour burden
for paragraph (p)(3)(iii) of Rule 15c3-3 is approximately 1,820 hours.81
Counterparty Notice (Rule 15c3-3(p)(4)(i))
Paragraph (p)(4)(i) of Rule 15c3-3 requires that broker-dealer SBSDs and broker-dealer
MSBSPs provide a notice to a counterparty pursuant to section 3E(f) of the Exchange Act prior
to the execution of the first non-cleared security-based swap transaction with the counterparty
occurring after the compliance date of the new rule.82 The number of notices sent in the first
year the rule is effective will depend on the number of counterparties with which each brokerdealer SBSD or broker-dealer MSBSP engages in security-based swap transactions. The number
of counterparties an SBSD and MSBSP has will vary depending on the size and complexity of
the firm and its operations. The Commission staff estimates that each of the 3 broker-dealer
SBSDs would have approximately 1,000 counterparties at any given time.83 Therefore, the
Commission staff estimates that approximately 3,000 notices will be sent in the first year the rule
80
A commenter requested that the Commission require a weekly SBS Customer Reserve Account
computation rather than a daily computation. The commenter stated that calculating the reserve account
formula is an onerous process that is operationally intensive and requires a significant commitment of
resources. The commenter further stated that the Commission can achieve its objective of decreasing
liquidity pressures on SBSDs while limiting operational burdens by requiring weekly computations and
permitting daily computations. See Letter from Kenneth E. Bentsen, Jr., Executive Vice President,
Securities Industry and Financial Markets Association (Feb. 22, 2013). In response to comments, the
Commission modified its final rules to require a weekly SBS Customer Reserve Account computation. The
final rules further provide that stand-alone broker-dealers or SBSDs may perform daily computations if
they choose to do so.
81
(3 broker-dealer SBSDs + 11 broker-dealers engaged in security-based swap activities but not required to
register as an SBSD or MSBSP) x 52 weeks x 2.5 hours/week = 1,820 hours.
82
See paragraph (p)(4)(i) of Rule 15c3-3, as amended.
83
The Commission previously estimated that there are approximately 10,900 market participants in securitybased swap transactions. See Business Conduct Release, 81 FR at 30089. Based on the 10,900 market
participants and Commission staff experience relative to the securities and OTC derivatives industry, the
Commission staff estimates that each broker-dealer SBSD and MSBSP will have 1,000 counterparties at
any given time. The number of counterparties may widely vary depending on the size of the SBSD or
MSBSP. A large firm may have thousands or counterparties at one time, while a smaller firm may have
substantially less than 1,000. The Commission staff also estimates, based on staff experience, that these
entities will establish account relationships with approximately 200 new counterparties a year, or
approximately 20 percent of a firm’s existing counterparties.
16
is effective.84 The Commission staff estimates that each of the 3 broker-dealer SBSDs will spend
approximately 10 minutes sending out the notice. These estimates result in an industry-wide
one-time third-party hour burden of approximately 500 hours, or approximately16785 hours per
year on an annualized basis.86
The Commission staff further estimates that the 3 broker-dealer SBSDs will establish
account relationships with 200 new counterparties per year. Therefore, the Commission staff
estimates that approximately 600 notices will be sent annually.87 These estimates result in an
industry-wide annual third-party hour burden of approximately 100 hours.88
Subordination Agreements (Rule 15c3-3(p)(4)(ii))
Under paragraph (p)(4)(ii) of Rule 15c3-3, a broker-dealer SBSD is required to obtain
agreements from counterparties that do not choose to require segregation of funds or other
property pursuant to Section 3E(f) of the Exchange Act or paragraph (p)(3)(iii) of Rule 15c3-3,
as amended, in which the counterparty agrees to subordinate all of its claims against the brokerdealer to the claims of customers and security-based swap customers of the broker-dealer.89 The
Commission staff estimates that a broker-dealer SBSD will spend, on average, approximately
200 hours to draft and prepare standard subordination agreements. These estimates result in an
industry-wide one-time third-party hour burden of approximately 600 hours, or approximately
200 hours per year on an annualized basis.90
As discussed above, the Commission staff estimates that each of the 3 broker-dealer
SBSDs would have approximately 1,000 counterparties at any given time. The Commission
staff further estimates that approximately 50 percent of these counterparties will either elect
individual segregation or waive segregation altogether.91 The Commission staff estimates that a
84
(3 broker-dealer SBSDs) x 1,000 counterparties = 3,000 notices.
85
166.67 rounded to 167.
86
(3,000 notices x 10 minutes) / 60 minutes = 500 hours. For purposes of this supporting statement, this
one-time burden annualized over the three-year approval period is approximately 167 hours (500/ 3 =
166.67, rounded to 167), with an average hour burden per respondent of approximately 56 hours (167 / 3
respondents = 55.67).
87
3 broker-dealer SBSDs x 200 counterparties = 600 notices.
88
(600 notices x 10 minutes) / 60 minutes = 100 hours.
89
See paragraph (p)(4)(ii) of Rule 15c3-3, as amended.
90
200 hours x 3 broker-dealer SBSDs = 600 hours. For purposes of this supporting statement, this one-time
burden annualized over the three-year approval period is approximately 200 hours per year (600/ 3 = 200),
with an average hour burden per broker-dealer SBSD of approximately 66.67 hours (200 / 3 broker-dealer
SBSDs = 66.667, rounded to 66.67).
91
Based on discussions with market participants, the Commission staff understands that many large buy-side
financial end users currently ask for individual segregation and the Commission staff assumes that many of
these end users will continue to do so. However, Commission staff believes that some smaller end users
may not choose to incur additional cost that may come with individual segregation. Therefore, the
Commission staff estimates that approximately 50 percent of counterparties will either elect individual
segregation or waiver segregation altogether.
17
broker-dealer SBSD will spend 20 hours per counterparty to enter into a written subordination
agreement. These estimates result in an industry-wide one-time hour burden of approximately
30,000 hours, or approximately 10,000 hours per year on an annualized basis.92
Further, as discussed above, the Commission staff estimates that each of the 3 brokerdealer SBSDs will establish account relationships with 200 new counterparties per year. The
Commission staff further estimates that 50 percent or 100 of these counterparties will either elect
individual segregation or waive segregation altogether. These estimates result in an industrywide annual third-party hour burden of approximately 6,000 hours.93
Total Revised Hourly Burden
The aggregate annual hour burden associated with Rule 15c3-3, as revised by the 2023
proposed amendments described above, is approximately 1,174,051 hours.94 The annual hour
burden is summarized in the table below. Hour burdens that have been revised or added are in
bold.
Summary of Hourly Burdens
Name of
Information
Collection
Rule 15c3-3(e)(3) –
daily computations
for customer reserve
account95
Rule 15c3-3(e)(3) –
weekly computations
for customer reserve
account96
Initial
Burden
per Entity
per
Response
Initial Burden
Annualized
per Entity per
Response
Ongoing
Burden per
Entity per
Response
Annual
Burden Per
Entity per
Response
Total
Annual
Burden Per
Entity
250
0.00
0.00
2.50
2.50
625.00
41,875
0
52
0.00
0.00
2.50
2.50
130.00
14.170
0
Type of
Burden
Number of
Entities
Impacted
Annual
Responses
per Entity
Recordkeeping
67
Recordkeeping
109
Total Industry
Burden
Small
Business
Entities
Affected
92
3 broker-dealer SBSDs x 500 counterparties x 20 hours = 30,000 hours. For purposes of this supporting
statement, this one-time burden annualized over the three-year approval period is approximately 10,000
hours (30,000/ 3 = 10,000, with an average hour burden per broker-dealer SBSD of approximately 3,333.33
hours (10,000 / 3 broker-dealer SBSDs = 3,333.33).
93
3 broker-dealer SBSDs x 100 counterparties x 20 hours = 6,000 hours.
94
41,875 hours + 14,170 hours + 930 hours + 4,940 hours + 150 hours + 31,250 hours + 6,820 hours + 310
hours + 3 hours + 620 hours + 139 hours + 8 hours + 1,420 hours + 9,467 hours + 855,838 hours + 155,504
hours + 31,101 hours + 8 hours + 10 hours + 0.50 hours + 840 hours + 360 hours + 1,820 hours + 167
hours + 100 hours + 200 hours + 10,000 hours + 6,000 hours = 1,174,051 hours.
95
In the most recently approved supporting statement for Rule 15c3-3, the title of this collection of
information is “Rule 15c3-3(e)(3) – daily computations.” The Commission is revising the title of this
collection of information in order to clarify that it is distinct from the collection of information related to
daily computations for PAB reserve accounts, which currently shares the same title. The Commission is
also revising the estimated burdens associated with the collection of information as a result of the proposed
amendments to Rule 15c3-3.
96
In the most recently approved supporting statement for Rule 15c3-3, the title of this collection of
information is “Rule 15c3-3(e)(3) – weekly computations.” The Commission is revising the title of this
collection of information in order to clarify that it is distinct from the collection of information related to
weekly computations for PAB reserve accounts, which currently shares the same title. The Commission is
18
Rule 15c3-3(e)(3)
monthly computations
for customer reserve
account97
Rule 15c3-3(e) –
weekly computations
for PAB reserve
account98
Rule 15c3-3(e) monthly computations
for PAB reserve
account99
Rule 15c3-3(e) daily computations –
for PAB reserve
account100
Recordkeeping
31
12
0.00
0.00
2.50
2.50
30.00
930
5
Recordkeeping
38
52
0.00
0.00
2.50
2.50
130.00
4,940
0
Recordkeeping
5
12
0.00
0.00
2.50
2.50
30.00
150
0
Recordkeeping
50
250
0.00
0.00
2.50
2.50
625.00
31,250
0
Recordkeeping
93
11
20.00
6.667
0.00
6.67
73.00
6,820
0
Recordkeeping
93
1
10.00
3.33
0.00
3.33
3.33
310
0
Third-Party
55
1
0.17
0.0566
0.00
0.0566
0.0566
3
0
Recordkeeping
93
1
20.00
6.67
0.00
6.67
6.67
620
0
Recordkeeping
139
1
0.00
0.00
1.00
1.00
1.00
139
0
Reporting
557
0.0269
0.00
0.00
0.50
0.50
0.50
8
0
Recordkeeping
142
1
0
0.00
10.00
10.00
10.00
1,420
5
Recordkeeping
142
1
200.00
66.6666667
0.00
66.6666667
66.66666667
9,467
0
Recordkeeping
142
90,405.3873
0.00
0.00
0.066666666
0.066666666
0.066666666
855,838
0
Rule 15c3-3(o)(2)(i)
Third-Party
142
21,901.95
0.00
0.00
0.05
0.05
0.05
155,504
0
Rule 15c3-3(o)(3)
Third-Party
142
4380.3915
0.00
0.00
0.05
0.05
0.05
31,101
0
Recordkeeping
31
1
0.00
0.00
0.25
0.25
0.25
8
0
Rule 15c3-3(a)(16)
Rule15c3-3(b)(5) –
drafting/updating
notice
Rule15c3-3(b)(5) –
notices to affected
customers
Rule15c3-3(b)(5) –
amend/update
agreement
Rule 15c3-3(f) obtain new letter
Rule 15c3-3(f) notice
Rule 15c3-3(j)(1) annual
Rule 15c3-3(j)(2) initial
Rule 15c3-3(j)(2) annual
Rule 15c3-3, Note G
(annual)
Rule 15c3-3, Note G
(initial)
Rule 15c3-3(e)(B)(1)
notification
Recordkeeping
31
1
1.00
0.333
Reporting
1
1
0.00
0.00
0.50
0.333
0.333
0.50
0.50
10
0.50
also revising the estimated burdens associated with the collection of information as a result of the proposed
amendments to Rule 15c3-3.
97
In the most recently approved supporting statement for Rule 15c3-3, the title of this collection of
information is “Rule 15c3-3(e)(3) – monthly computations.” The Commission is revising the title of this
collection of information in order to clarify that it is distinct from the collection of information related to
monthly computations for PAB reserve accounts, which currently shares the same title.
98
In the most recently approved supporting statement for Rule 15c3-3, the title of this collection of
information is “Rule 15c3-3(e)(3) – weekly computations.” The Commission is revising the title of this
collection of information in order to clarify that it is distinct from the collection of information related to
weekly computations for customer reserve accounts, which currently shares the same title. The
Commission is also revising the estimated burdens associated with the collection of information as a result
of the proposed amendments to Rule 15c3-3.
99
In the most recently approved supporting statement for Rule 15c3-3, the title of this collection of
information is “Rule 15c3-3(e)(3) – monthly computations.” The Commission is revising the title of this
collection of information in order to clarify that it is distinct from the collection of information related to
weekly computations for customer reserve accounts, which currently shares the same title.
100
In the most recently approved supporting statement for Rule 15c3-3, the title of this collection of
information is “Rule 15c3-3(e)(3) – daily computations.” The Commission is revising the title of this
collection of information in order to clarify that it is distinct from the collection of information related to
daily computations for customer reserve accounts, which currently shares the same title. The Commission
is also revising the estimated burdens associated with the collection of information as a result of the
proposed amendments to Rule 15c3-3.
19
0
Rule 15c3-3(p)(1)
(Special Accounts)
Rule 15c3-3(p)(1)
(Special Accounts)
Rule 15c3-3(p)(3)(iii)
(Customer Reserve
Computation)
Rule 15c3-3(p)(4)(i)
(Counterparty Notice)
Rule 15c3-3(p)(4)(i)
(Counterparty Notice)
Rule 15c3-3(p)(4)(ii)
(Subordination
Agreements)
Rule 15c3-3(p)(4)(ii)
(Subordination
Agreements)
Rule 15c3-3(p)(4)(ii)
(Subordination
Agreements)
Recordkeeping
14
6
30.00
10.00
0.00
10.00
60.00
840
0
Recordkeeping
4
3
0.00
0.00
30.00
30.00
90.00
360
0
Recordkeeping
14
52
0.00
0.00
2.50
2.50
130.00
1,820
0
Third-Party
3
1,000
0.16666667
0.05555556
0.00
0.05555556
55.55
167
0
Third Party
3
200
0.00
0.00
0.16666667
0.16666667
33.35
100
0
Third-Party
3
1
200.00
66.67
0.00
66.67
66.67
200
0
Third-Party
3
500
20.00
6.66666667
0.00
6.66666667
3,333.3
10,000
0
Third-Party
3
100
0.00
0.00
20.00
20.00
2,000.00
6,000
0
TOTAL HOURLY BURDEN FOR ALL RESPONDENTS
13.
1,174,051
Costs to Respondents
The Commission estimates that the aggregate annual cost burden associated with Rule
15c3-3 is approximately $3,530,101 calculated as described below.101 The cost burdens
associated with Rule 15c3-3 have not changed in connection with the proposed amendments
described above. The currently approved cost burdens are included in this supporting statement
for completeness.
Paragraph (b)(5) of Rule 15c3-3 will require a broker-dealer to incur postage costs when
sending out the required written notice to customers. The Commission estimates that there are
approximately 1,107 existing PAB customers and approximately 5% of those customers will be
affected by this requirement as they have not yet received the required written notice from their
broker-dealer.102 Therefore, broker-dealers will have to send approximately 55 written notices.
These carrying broker-dealers will likely use the least expensive method to comply with this
requirement and may include this notification with other mailings sent to PAB account holders.
The Commission, however, conservatively estimates that the postage cost or each notification,
using the current price of first class postage, will be approximately $0.63 per document sent.
Therefore, the Commission estimates that the total one-time third-party disclosure cost
associated with sending the required written notification to PAB account holders will be
approximately $34.65, or approximately $12 per year on an annualized basis.103
Additionally, the Commission estimates that the 93 broker-dealers carrying PAB
accounts likely will engage outside counsel to review the required notice, as well as the standard
PAB template agreement under the final rule amendments to Rule 15c3-3. As a result, the
Commission estimates that each of these 93 broker-dealers will likely incur approximately
$2,310 in one-time legal costs,104 for a total one-time recordkeeping cost to the industry of
101
$3,516,241 + $13,860 = $3,530,101.
102
1,107 PAB account holders x 5% = 55.35 PAB account holders, rounded to 55 PAB account holders.
103
55 notices x $0.63 = $34.65, or about $11.55 annualized over three years rounded up to 12.
104
5 hours x $462 per hour = $2,310. The Commission estimates the review of the notice and standard PAB
template will require 5 hours of outside counsel time, which is the same estimate used for outside counsel
review in another recent release. Based on Commission experience with the PAIB Letter and the
20
approximately $214,820, or approximately $71,610 per year on an annualized basis,105 to review
and comment on these materials.
The Commission also estimates that broker-dealers will consult with outside counsel in
making system changes, particularly with respect to the language in the disclosures and notices
under paragraph (j)(2) to Rule 15c3-3 related to the treatment of free credit balances. As a result,
the Commission estimates that the average one-time recordkeeping cost to a broker-dealer will
be approximately $23,100106 and the average one-time recordkeeping cost to all broker-dealers
will be approximately $3,280,200, or approximately $1,093,400 per year on an annualized
basis.107
Rule 15c3-3(o)(2)(i) requires a broker-dealer that effects transactions for customers in
SFPs to provide each customer that engages in SFP transactions with a disclosure document
containing certain information. The costs of printing and sending the disclosure document to
customers will be based on the number of customer accounts that will be opened by customers to
effect transactions in SFPs. As applied in section 12 above, the Commission estimates that 8%
of the accounts held by broker-dealers that are also registered as FCMs, or 3,110,078 accounts,
may engage in SFP transactions.108 This equates to an average of approximately 21,902 accounts
per broker-dealer.109 The Commission also estimates that the cost of printing and sending each
disclosure document will be approximately $.63 per document sent, based on the price of first
class postage. Therefore, the Commission estimates that the annual recordkeeping and
disclosure cost burden associated with this rule requirement is approximately $1,959,349.110
Rule 15c3-3(o)(3)(ii) requires a broker-dealer that changes the type of account in which a
customer’s SFPs are held to promptly notify the customer in writing of the date that change
became effective. The Commission estimates that 622,016 accounts111 may change account type
per year, thus broker-dealers will be required to send this notification to 622,016 customers.
This equates to an average of approximately 4,380 accounts per broker-dealer.112 The
Commission notes that firms will likely use the least expensive method to comply with these
requirements, and may include this notification with other mailings, such as customer account
application of Rule 15c3-3, the Commission estimates the outside counsel review related to the PAB
amendments will take a comparable amount of time.
105
93 firms x $2,310 legal cost = $214,820. This is $71,610 on an annualized basis ($214,820 / 3 =
$471,610).
106
$462 per hour x 50 hours = $23,100. The Commission estimates that the average hourly cost for an outside
counsel will be approximately $462 per hour.
107
142 broker-dealers x $23,100 = $3,280,200, or $1,093,400 annualized over three years.
108
38,875,974accounts x 8% = 3,110,077.92, rounded up to 3,110,078 accounts. The Commission derived its
8% estimate from the number of active options accounts and conversations with industry representatives.
109
3,110,078÷ 142 = 21,901.95 rounded up to 21,902.
110
3,110,078 accounts x $.63 = $1,959,349.14 rounded down to $1,959,349.
111
3,110,078 accounts x 20% = 622,015.6 accounts, rounded to 622,016 accounts.
112
622,016 ÷ 142 = 4,380.394 rounded down to 4,380.
21
statements, sent to the customer. Therefore, the Commission estimates that the cost of printing
and posting each notification will be approximately $.63 per document sent, resulting in an
annual recordkeeping and disclosure burden of approximately $391,870.113
Counterparty Notice (Rule 15c3-3(p)(4)(i))
Paragraph (p)(4)(i) of Rule 15c3-3, as amended, requires that broker-dealer SBSDs and
broker-dealer MSBSPs are required to provide a notice to a counterparty pursuant to section
3E(f) of the Exchange Act prior to the execution of the first non-cleared security-based swap
transaction with the counterparty occurring after the compliance date of the new rule.114 All
broker-dealer SBSDs and broker-dealer MSBSPs are required to provide these notices to their
counterparties. The Commission staff estimates that the 3 broker-dealer SBSDs will engage
outside counsel to draft and review the notice at a cost of $462 per hour for an average of 10
hours per respondent. These estimates result in a one-time third-party cost burden of
approximately $13,860 for all of these 3 entities, or approximately $4,620 per year on an
annualized basis.115
Subordination Agreements (Rule 15c3-3(p)(4)(ii))
Under paragraph (p)(4)(ii) of Rule 15c3-3, a broker-dealer SBSD is required to obtain
agreements from counterparties that do not choose to require segregation of funds or other
property pursuant to Section 3E(f) of the Exchange Act or paragraph (p)(3)(iii) of Rule 15c3-3,
as amended, in which the counterparty agrees to subordinate all of its claims against the brokerdealer to the claims of customers and security-based swap customers of the broker-dealer.116
Because the broker-dealer SBSD will enter into these agreements with security-based swap
customers after the broker-dealer SBSD prepares a standard subordination agreement in-house,
the Commission staff also estimates that a broker-dealer SBSD will have outside counsel review
the standard subordination agreements and that the review will take approximately 20 hours at a
cost of approximately $462 per hour. As a result, the Commission staff estimates that each
broker-dealer SBSD will incur one-time third-party costs of approximately $9,240.117 These
estimates result in an industry-wide one-time third-party cost of approximately $27,720, or
approximately $9,240per year on an annualized basis.118
113
622,016 accounts x $.63 = $391,870.08, rounded to $391,870.
114
See paragraph (p)(4)(i) of Rule 15c3-3, as amended.
115
3 broker-dealer SBSDs x $462 per hour x 10 hours = $13,860. The Commission expects that these
functions will likely be performed by outside counsel with an expertise in financial services law to help
ensure that counterparties are receiving the proper notice under the statutory requirement. The
Commission is annualizing the one-time costs over the three-year approval period to reflect an annualized
cost of approximately $4,620 per year ($13,860/3 = $4,620, or approximately $1,540 per respondent
($4,620/3 = $1,540)).
116
See paragraph (p)(4)(ii) of Rule 15c3-3, as amended.
117
$462 x 20 hours = $9,240.
118
$9,240 x 3 broker-dealer SBSDs = $27,720. The Commission is annualizing the one-time costs over the
three-year approval period to reflect an annualized cost of $9,240 per year ($27,720/3 = $9,240), or
approximately $3,080 per respondent ($9,240/3 = $3,080).
22
The aggregate annual cost burden associated with Rule 15c3-3 is thus approximately
$3,530,101.119 This cost burden is summarized in the table below.
Summary of Dollar Costs
Initial Cost
per Entity
per
Response
Initial Cost
Annualized
per Entity per
Response
1
$0.63
$0.21
93
1
$2,310.00
142
1
142
Name of Information
Collection
Type of
Burden
Number
of Entities
Impacted
Annual
Responses
per Entity
Rule 15c3-3(b)(5)
Third-party
disclosure
55
Rule 15c3-3(b)(5)
Recordkeeping
Rule 15c3-3(j)(2)
Recordkeeping
Rule 15c3-3(o)(3)(ii)
Rule 15c3-3(p)(4)(i)
(Counterparty Notice)
Rule 15c3-3(p)(4)(ii)
(Subordination
Agreements)
14.
Small
Business
Entities
Affected
Annual Cost
Per Entity
per Response
Total Annual
Cost Per
Entity
0
$0.21
$0.21
$12
0
$770
0
$770
$770
$71,610
0
$23,100
$7,700
0
$7,700
$7,700
$1,093,400
0
21,901.95
$0.00
$0.00
$0.63
$0.63
$0.63
$1,959,349
0
142
4,380.39
$0.00
$0.00
$0.63
$0.63
$0.63
$391,870
0
Third-Party
3
1
$4,620.00
$1,540
0
$1,540
$1,540
$4,620
0
Third-Party
3
1
$9,240
$3,080
0
$3,080
$3,080
$9,240
0
TOTAL COST FOR ALL RESPONDENTS
$3,530,101
Third-party
disclosure
Third-party
disclosure
Rule 15c3-3(o)(2)(i)
Ongoing
Cost per
Entity per
Response
Total Industry
Cost
Costs to Federal Government
The staff does not anticipate this information collection to impose additional costs to the
Federal Government.
15.
Changes in Burden
As specified in the chart below, the changes in the hourly burden are a result of the
proposed amendments to Rule 15c3-3 described above. Due to the proposed amendments, some
broker-dealers that currently preform weekly customer and PAB reserve computations will be
required to perform daily computations. Consequently, the burden associated with daily
customer and PAB reserve computations will increase due to the increased number of
respondents, while the burden associated with weekly customer and PAB computations will
decrease as a result of a decrease in the number of respondents. The changes are summarized in
the table below.
NOTE: We are also proposing to modify the titles of the information collections in the Rule
15c3-3(p) series of rules to remove the word “NEW” as these information collections were
previously approved, and we are proposing to remove the collection titled “Rule 15c3-3(e) –
updates as the estimated burden is currently zero.
Name of Information
Collection
119
Revised Annual
Industry Burden
Annual
Industry
Burden
Previously
Reviewed
Change in
Burden
Reason for Change
$12 + $71,610 + $1,093,400 + 1,959,349 + $391,870 + $4,620 + $9,240 = $3,530,101.
23
Rule 15c3-3(e)(3) –
daily computations for
customer reserve
account
Rule 15c3-3(e)(3) –
weekly computations
for customer reserve
account
41,875 hours
14,170 hours
9,375 hours
20,930 hours
32,500 hours
Increase in the number of
respondents as a result of
proposed amendments to
Rule 15c3-3
(6,760 hours)
Decrease in the number of
respondents as a result of
proposed amendments to
Rule 15c3-3
Rule 15c3-3(e) –
weekly computations
for PAB reserve
account
4,940 hours
10,010 hours
(5,070 hours)
Decrease in the number of
respondents as a result of
proposed amendments to
Rule 15c3-3
Rule 15c3-3(e) - daily
computations for PAB
reserve account
31,250 hours
6,875 hours
24,375 hours
Increase in the number of
respondents as a result of
Rule 15c3-3(e)(B)(1)
notification
0.50 hours
N/A
0.50 hours
New information collection
resulting from proposed
amendments to Rule 15c3-3
16.
Information Collection Planned for Statistical Purposes
Not applicable. The information collection is not used for statistical purposes.
17.
Approval to Omit OMB Expiration Date
The Commission is not seeking approval to omit the expiration date.
18.
Exceptions to Certification for Paperwork Reduction Act Submissions
This collection complies with the requirements in 5 CFR 1320.9.
B.
COLLECTIONS OF INFORMATION EMPLOYING STATISTICAL METHODS
This collection does not involve statistical methods.
24
| File Type | application/pdf |
| File Modified | 2023-12-06 |
| File Created | 2023-12-06 |