Electronic Submission of Certain Materials Under the Securities Exchange Act of 1934; Amendments Regarding the FOCUS Report, 23920-24055 [2023-06330]

Download as PDF 23920 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules Comments should be received on or before May 22, 2023. ADDRESSES: Comments may be submitted by any of the following methods: DATES: SECURITIES AND EXCHANGE COMMISSION 17 CFR Parts 202, 232, 240, 249, and 249b [Release Nos. 33–11176; 34–97182; IC– 34864; File No. S7–08–23] Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ regulatory-actions/how-to-submitcomments); or • Send an email to rule-comments@ sec.gov. Please include File No. S7–08– 23 on the subject line. RIN 3235–AL85 Electronic Submission of Certain Materials Under the Securities Exchange Act of 1934; Amendments Regarding the FOCUS Report Securities and Exchange Commission. ACTION: Proposed rule. AGENCY: Paper Comments The Securities and Exchange Commission (‘‘Commission’’ or ‘‘SEC’’) is proposing to require electronic filing or submission of certain forms and other filings or submissions that are required to be filed with or submitted to the Commission under the Securities Exchange Act of 1934 (‘‘Exchange Act’’) and the rules and regulations under the Exchange Act. The proposal would require the electronic filing or submission on the Commission’s Electronic Data Gathering, Analysis, and Retrieval (‘‘EDGAR’’) system, using structured data where appropriate, for certain forms filed or submitted by selfregulatory organizations (‘‘SROs’’). The proposal would require the information currently contained in Form 19b–4(e) to be publicly posted on the SRO’s website and remove the manual signature requirements for SRO proposed rule change filings. The Commission is also proposing that a clearing agency post supplemental material to its website. In addition, the proposal would amend rules under the Exchange Act and the Securities Act of 1933 (‘‘Securities Act’’) to require the electronic filing or submission on EDGAR, using structured data where appropriate, of certain forms, reports and notices provided by broker-dealers, security-based swap dealers and major security-based swap participants. The proposed amendments also would require withdrawal in certain circumstances of notices filed in connection with an exception to counting certain dealing transactions toward determining whether a person is a security-based swap dealer. Finally, the Commission is proposing to allow electronic signatures in certain brokerdealer filings, and is proposing amendments regarding the Financial and Operational Combined Uniform Single Report (‘‘FOCUS Report’’) to harmonize with other rules, make technical corrections, and provide clarifications. • Send paper comments to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File No. S7–08–23. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s website (https:// www.sec.gov/rules/proposed.shtml). Comments are also available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549 on official business days between the hours of 10 a.m. and 3 p.m. Operating conditions may limit access to the Commission’s public reference room. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. Studies, memoranda, or other substantive items may be added by the Commission or staff to the comment file during this rulemaking. A notification of the inclusion in the comment file of any such materials will be made available on the Commission’s website. To ensure direct electronic receipt of such notifications, sign up through the ‘‘Stay Connected’’ option at www.sec.gov to receive notifications by email. FOR FURTHER INFORMATION CONTACT: For Form 1—Justin Pica, Assistant Director, and David Remus, Special Counsel; for Form 1–N—David Dimitrious, Senior Special Counsel, and Michou Nguyen, Special Counsel; for Form 15A—Molly Kim, Assistant Director, and David Michehl, Special Counsel; for Form CA– 1—Matthew Lee, Assistant Director, and Claire Noakes, Special Counsel; for Form 19b–4(e) and technical amendment to Form 19b–4—Cristie ddrumheller on DSK120RN23PROD with PROPOSALS3 SUMMARY: VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 PO 00000 Frm 00002 Fmt 4701 Sfmt 4702 March, Senior Special Counsel, and Edward Cho, Special Counsel; for Rule 17a–22—Matthew Lee, Assistant Director, and Susan Petersen, Special Counsel; for Form X–17A–5 Part III and related annual filings, Form X–17A–5 Parts II, IIA, and IIC, Form 17–H, and Form X–17A–19—Raymond A. Lombardo, Assistant Director, Rose Wells, Special Counsel, and Valentina Minak Deng, Special Counsel; for notices provided pursuant to Exchange Act Rules 3a71–3(d)(1)(vi) and 15fi– 3(c)—Carol McGee, Associate Director, and Russell Mancuso, Special Counsel; and for reports submitted pursuant to Rule 15fk–1(c)(2)(ii)(A), Kelly Shoop, Branch Chief, and Katherine Lesker, Special Counsel, Division of Trading and Markets, at (202) 551–5500, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549. SUPPLEMENTARY INFORMATION: The Commission is proposing to require the electronic filing or submission, using structured data where appropriate, of certain forms and other filings,1 which are currently filed with or submitted to the Commission in paper or via email or are new filing requirements. The proposal is divided into five parts: (1) forms that are filed or submitted by or otherwise made available electronically by SROs (‘‘Covered SRO Forms’’); (2) supplementary materials (‘‘Covered Supplementary Materials’’) that are proposed to be posted on the internet websites of clearing agencies; (3) forms and related filings filed or submitted by broker-dealers and over-the-counter derivatives dealers (‘‘OTC derivatives dealers’’), as well as security-based swap dealers (‘‘SBSDs’’) and major security-based swap participants (‘‘MSBSPs’’) (each SBSD and each MSBSP also referred to as an ‘‘SBS Entity’’ and together referred to as ‘‘SBS Entities’’); (4) other notices, filings, and reports consisting of (a) Form X–17A– 19; (b) 17 CFR 240.3a71–3(d)(1)(vi) (‘‘Rule 3a71–3(d)(1)(vi)’’) Notices; (c) 17 CFR 240.15Fi–3(c) (‘‘Rule 15fi–3(c)’’) Notices; and (d) 17 CFR 240.15Fk– 1(c)(2)(ii)(A) (‘‘Rule 15fk–1(c)(2)(ii)(A)’’) Compliance Reports; and (5) amendments regarding the FOCUS Report and signature requirements in Exchange Act Rules 17a–5, 17a–12, and 18a–7.2 The Commission is proposing 1 For purposes of this proposing release, the term ‘‘form’’ means any Commission-created document labeled as a ‘‘Form’’ that is proposed to be submitted or filed electronically, and the term ‘‘filing’’ means any form, notice, report, or material proposed to be submitted or filed electronically or proposed to be posted on an internet website in lieu of being submitted or filed. 2 The Commission’s proposal also includes proposed amendments to CFR designations in order E:\FR\FM\18APP3.SGM 18APP3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules 23921 amendments to or relating to the following rules: CFR citation (17 CFR) Commission reference Administrative Practice and Procedure, Securities: Rule 202.3 ................................................................................................................................ § 202.3. Securities Act of 1933 (‘‘Securities Act’’) 3 Regulation S–T: Rule 100 ................................................................................................................................... Rule 101 ................................................................................................................................... Rule 201 ................................................................................................................................... Rule 202 ................................................................................................................................... Rule 405 ................................................................................................................................... § 232.100. § 232.101. § 232.201. § 232.202. § 232.405. Securities Exchange Act of 1934 (‘‘Exchange Act’’) 4 Rule 3a71–3 .................................................................................................................................... Rule 6a–1 ........................................................................................................................................ Rule 6a–2 ........................................................................................................................................ Rule 6a–3 ........................................................................................................................................ Rule 6a–4 ........................................................................................................................................ Rule 15Aa–1 .................................................................................................................................... Rule 15Aa–2 .................................................................................................................................... Rule 15Aj–1 ..................................................................................................................................... Rule 15c3–1 .................................................................................................................................... Rule 15fi–3 ...................................................................................................................................... Rule 15fk–1 ..................................................................................................................................... Rule 17a–5 ...................................................................................................................................... Rule 17a–12 .................................................................................................................................... Rule 17a–19 .................................................................................................................................... Rule 17a–22 .................................................................................................................................... Rule 17ab2–1 .................................................................................................................................. Rule 17h–2T .................................................................................................................................... Rule 18a–7 ...................................................................................................................................... Rule 19b–4 ...................................................................................................................................... Rule 19b–7 ...................................................................................................................................... Rule 24b–2 ...................................................................................................................................... Form 1 ............................................................................................................................................. Form 1–N ......................................................................................................................................... Form CA–1 ...................................................................................................................................... Form 17–H ....................................................................................................................................... Form X–17A–5 Part II ..................................................................................................................... Form X–17A–5 Part IIA ................................................................................................................... Form X–17A–5 Part IIC ................................................................................................................... Form X–17A–5 Part III .................................................................................................................... Form X–17A–19 .............................................................................................................................. Form X–15AA–1 .............................................................................................................................. Proposed new Form 15A ................................................................................................................ Form 19b–4 ..................................................................................................................................... § 240.3a71–3. § 240.6a–1. § 240.6a–2. § 240.6a–3. § 240.6a–4. § 240.15Aa–1. § 240.15Aa–2. § 240.15Aj–1. § 240.15c3–1. § 240.15Fi–3. § 240.15Fk–1. § 240.17a–5. § 240.17a–12. § 240.17a–19. § 240.17a–22. § 240.17ab2–1. § 240.17h–2T. § 240.18a–7. § 240.19b–4. § 240.19b–7. § 240.24b–2. § 249.1. § 249.10. § 249.200. § 249.328T. § 249.617. § 249.617. § 249.617. § 249.617. § 249.635. § 249.801. § 249.801 (as proposed to be amended). § 249.819. Finally, the Commission is proposing to rescind: CFR citation (17 CFR) ddrumheller on DSK120RN23PROD with PROPOSALS3 Commission reference Exchange Act: Form X–15AJ–1 ...................................................................................................................................................................... Form X–15AJ–2 ...................................................................................................................................................................... Form 19b–4(e) ........................................................................................................................................................................ to ensure regulatory text conforms more consistently with section 2.13 of the Document Drafting Handbook. See Office of the Federal Register, Document Drafting Handbook (Aug. 2018 Edition, Revision 1.4, dated January 7, 2022), available at https://www.archives.gov/files/federalregister/write/handbook/ddh.pdf. For rules proposed to be amended in this release that contain VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 an uppercase letter in their CFR citations, the Commission is proposing to amend their CFR section designations to replace each such uppercase letter with the corresponding lowercase letter, and, in one case, to also redesignate the rule numbering. For example, 17 CFR 240.15Fi–3 is proposed to be redesignated as 17 CFR 240.15fi–3, 17 CFR 240.15Fk–1 is proposed to be redesignated as 17 PO 00000 Frm 00003 Fmt 4701 Sfmt 4702 § 249.802. § 249.803. § 249.820. CFR 240.15fk–1, 17 CFR 240.15Aa–1 is proposed to be redesignated as 17 CFR 240.15aa–1, and 17 CFR 240.15Aj–1 is proposed to be redesignated as 17 CFR 240.15aa–2. 3 See 15 U.S.C. 77a through 77mm. 4 See 15 U.S.C. 78a through 78qq. E:\FR\FM\18APP3.SGM 18APP3 23922 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules In developing this proposal with regard to SBS Entities, the Commission has consulted and coordinated with the Commodity Futures Trading Commission (‘‘CFTC’’) and the prudential regulators in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act (‘‘DoddFrank Act’’).5 Table of Contents ddrumheller on DSK120RN23PROD with PROPOSALS3 I. Introduction A. Experience With Targeted Regulatory Assistance During the COVID–19 Pandemic B. Covered SRO Forms C. Covered Supplementary Materials D. Filings by Broker-Dealers, OTC Derivatives Dealers, SBSDs, and MSBSPs E. Other Forms, Reports or Notices F. Structured Data Requirements G. Amendments Regarding the FOCUS Report and Signature Requirements in Rule 17a–5, 17a–12, and 18a–7 Filings II. Proposed Requirements To Electronically File Covered SRO Forms A. Form 1 B. Form 1–N C. Proposed Form 15A D. Form CA–1 E. Form 19b–4(e) F. Rule 19b–4(j) and Form 19b–4 G. Conforming Technical Amendment to Rule 202.3(b) Under the Exchange Act III. Proposed Requirements for Clearing Agencies to Electronically File Covered Supplemental Materials A. Current Rule 17a–22 B. Updated Staff Statement and Resulting Alternate Arrangements for Rule 17a–22 Compliance C. Proposed Amendments to Rule 17a–22 D. Request for Comment IV. Proposed Requirements To Electronically File Broker-Dealer, OTC Derivatives Dealer, and SBS Entity Reports A. Rules 17a–5, 18a–7, and 17a–12 B. Rule 17h–2T and Form 17–H V. Other Forms, Reports or Notices A. Notices Pursuant To Rule 17a–19 and Form X–17A–19 B. Notice (and Any Withdrawal of a Notice) Filed Pursuant to Rule 3a71– 3(d)(1)(vi) C. Notice (and Any Amendment, Including Notice of Dispute Termination) Provided Pursuant to Rule 15fi–3(c) D. Compliance Reports Submitted to the Commission Pursuant to Rule 15fk– 1(c)(2)(ii)(A) VI. Amendments Regarding the FOCUS Report and Signature Requirements in Rule 17a–5, 17a–12, and 18a–7 Filings 5 See Public Law 111–203, 124 Stat. 1376 (2010). Section 712(a)(2) of the Dodd-Frank Act provides in part that the Commission shall ‘‘consult and coordinate to the extent possible with the Commodity Futures Trading Commission and the prudential regulators for the purposes of assuring regulatory consistency and comparability, to the extent possible.’’ 6 See generally, e.g., An Update on the Commission’s Targeted Regulatory Relief to Assist Market Participants Affected by COVID–19 and Ensure the Orderly Function of our Markets (public VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 A. Corrective and Clarifying Amendments to the FOCUS Report Part II B. Harmonizing FOCUS Report Part IIC With the Call Report C. OTC Derivatives Dealer FOCUS Report Filing Requirement D. Signature Requirements in Rule 17a–5, 17a–12, and 18a–7 Filings VII. Proposed Amendments to Regulation S– T (Including Structured Data Requirements) and Rule 24b–2 A. Proposed Amendments to Regulation S– T (Including Structured Data Requirements) B. Proposed Amendments to Rule 24b–2 VIII. General Request for Comments IX. Paperwork Reduction Act A. Summary of Collection of Information B. Proposed Use of Information C. Respondents D. Total Initial and Annual Reporting and Recordkeeping Burdens E. Collection of Information is Mandatory F. Confidentiality of Responses to Collection of Information G. Retention Period for Recordkeeping Requirements H. Request for Comments X. Economic Analysis A. Broad Economic Considerations B. Baseline C. Economic Effects D. Efficiency, Competition, and Capital Formation E. Reasonable Alternatives F. Request for Comment XI. Initial Regulatory Flexibility Act Analysis A. Regulatory Flexibility Act Certification B. Initial Regulatory Flexibility Analysis C. Reasons for, and Objectives of, the Proposed Action D. Legal Basis E. Small Entities Subject to the Proposed Rules F. Reporting, Recordkeeping, and Other Compliance Requirements G. Duplicative, Overlapping, or Conflicting Federal Rules H. Significant Alternatives I. Request for Comment XII. Small Business Regulatory Enforcement Fairness Act Statutory Authority I. Introduction A. Experience With Targeted Regulatory Assistance During the COVID–19 Pandemic As part of its response to the COVID– 19 pandemic, the Commission and its staff provided assistance and regulatory relief to market participants, as statement by Chairman Jay Clayton, William Hinman, Director, Division of Corporation Finance, Dalia Blass, Director, Division of Investment Management, Brett Redfearn, Director, Division (Jan. 26, 2020, updated Jan. 5, 2021)), available at https://www.sec.gov/news/public-statement/ update-commissions-targeted-regulatory-reliefassist-market-participants. 7 See generally Division Updated Staff Statement Regarding Certain Paper Submissions in Light of COVID–19 Concerns (‘‘Updated Staff Statement’’), available at https://www.sec.gov/tm/paper- PO 00000 Frm 00004 Fmt 4701 Sfmt 4702 appropriate, to facilitate the continued orderly and fair functioning of the securities markets.6 As part of these efforts, Division of Trading and Markets (‘‘Division’’) staff issued a statement providing that the staff would not recommend enforcement action if filers and registrants made alternative arrangements, as detailed in the statement, for delivery, execution, and notarization of certain paper filings.7 More specifically, the staff stated that it would not recommend that the Commission take enforcement action with respect to any failure to comply with the paper format submission requirement or manual signature requirement of certain ‘‘Impacted Paper Submissions’’ (as defined in the Updated Staff Statement), which included, but were not limited to, broker-dealer audited annual reports, Form 1 filings for national securities exchanges, and Form CA–1 filings for clearing agencies. In general, electronic filing of Impacted Paper Submissions has been practical and efficient. It also has been the Commission’s experience that electronic filing has been positively received by the various registrants that have used it. Based in part on these positive experiences with electronic filing during the COVID–19 pandemic, and as part of its efforts to modernize the methods by which it collects and analyzes information from registrants, the Commission is proposing to amend some of the rules and forms discussed in this release, as set forth in more detail below, to require that certain filings be submitted to the Commission electronically using the Commission’s EDGAR system. As part of the effort to modernize its information collection and analysis methods, and as discussed more fully below, the Commission is proposing that a number of the filings submitted to the Commission electronically on EDGAR use structured data where appropriate. B. Covered SRO Forms The Commission is proposing to require that the following forms be filed electronically on EDGAR: submission-requirements-covid-19-updates-061820. Staff reports, Investor Bulletins, and other staff documents cited in this release represent the views of Commission staff and are not a rule, regulation, or statement of the Commission. The Commission has neither approved nor disapproved the content of these documents and, like all staff statements, they have no legal force or effect, do not alter applicable law, and create no new or additional obligations for any person. E:\FR\FM\18APP3.SGM 18APP3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules Form Filer type Proposed amendments Form 1: Application for, and Amendments to Application for, Registration as a National Securities Exchange or Exemption from Registration pursuant to section 5 of the Exchange Act. Form 1–N: Form and Amendments for Notice of Registration as a National Securities Exchange for the Sole Purpose of Trading Security Future Products Pursuant to section 6(g) of the Exchange Act. Form X–15AA–1: Application for Registration as a National Securities Association or Affiliated Securities Association, Form X–15AJ–1: Amendatory and/or Supplementary Statements to Registration Statement of a National Securities Association or an Affiliated Securities Association, and Form X–15AJ–2: Annual Consolidated Supplement of a National Securities Association or an Affiliated Securities Association. Form CA–1: Application for Registration or for Exemption from Registration as a Clearing Agency and for Amendment to Registration Pursuant to the Exchange Act. Exchange ........................ Amend 17 CFR 249.1 (‘‘Form 1’’), including the form and instructions to the form, and 17 CFR 240.6a–1 (‘‘Rule 6a–1’’), 17 CFR 240.6a–2 (‘‘Rule 6a–2’’), and 17 CFR 240.6a–3 (‘‘Rule 6a–3’’) under the Exchange Act. Amend 17 CFR 249.10 (‘‘Form 1–N’’), including the form and instructions to the form, and 17 CFR 240.6a–4 (‘‘Rule 6a–4’’) under the Exchange Act. The Commission’s regulatory framework currently requires an entity seeking to be registered as a national securities exchange (or seeking an exemption from such registration based on limited volume), a national securities association, a clearing agency (or seeking an exemption from such registration), and a national securities exchange solely for the purpose of trading futures on individual stocks or on narrow-based stock indexes 9 (‘‘Security Futures Product Exchange’’) to file, in a paper-based format, certain forms that are mandated by rules under the Exchange Act. Registered national securities exchanges, registered national securities associations, registered clearing agencies, and registered Security Futures Product Exchanges (collectively, SROs), as well as exempt exchanges and exempt clearing agencies (together with prospective SROs, ‘‘Filers’’), are also required to submit paper-based amendments to their respective forms. The Commission’s proposal would modernize the filing process for these various forms by requiring that the forms and information contained therein be submitted to the Commission electronically, thereby removing the burden of preparing and submitting paper forms by the Filers, ddrumheller on DSK120RN23PROD with PROPOSALS3 23923 Exchange ........................ Securities Association .... Form X–15AA–1 (re-numbered as Form 15A) and the instructions to the form, and corresponding Exchange Act Rule 15Aa–1 (redesignated as Rule 15aa–1). Forms X–15AJ–1 and X–15AJ–2 (repealed and the information requirements incorporated into new Form 15A),8 and corresponding Exchange Act Rule 15Aj–1 (re–numbered as Rule 15aa–2). Clearing Agency ............. The form and instructions to the form, and corresponding Exchange Act Rule 17ab2–1. and of receiving, acting upon, and maintaining the paper forms by the Commission and its staff. In particular, as required by 17 CFR 240.6a–1 (‘‘Rule 6a–1’’), 17 CFR 240.6a– 2 (‘‘Rule 6a–2’’), and 17 CFR 240.6a–3 (‘‘Rule 6a–3’’) under the Exchange Act, a prospective exchange must file on 17 CFR 249.1 (‘‘Form 1’’) an application for registration as a national securities exchange (or for an exemption from the requirement to register as a national securities exchange based on limited volume), and, once registered, the exchange must file as an amendment to its Form 1 certain updating information, as well as certain supplemental material and reports. In addition, as required by 17 CFR 240.6a–4 (‘‘Rule 6a–4’’) under the Exchange Act, a prospective exchange may register as a Security Futures Product Exchange by filing 17 CFR 249.10 (‘‘Form 1–N’’) (‘‘notice registration’’) if it satisfies certain prerequisites, and must file amendments to its initial filing and certain supplemental materials on Form 1–N as well. An applicant for registration as a national securities association must file a registration statement with the Commission on Form X–15AA–1, and every association applying for registration or registered as a national securities association must file amendments and supplements to its registration statement with the Commission on Form X–15AJ–1 and annual supplements to its registration statement with the Commission on Form X–15AJ–2. Moreover, as required by Rule 17ab2–1 (‘‘Rule 17ab2–1’’) under the Exchange Act, a prospective clearing agency must file on Form CA– 1 an application for registration as a clearing agency (or for an exemption from such registration), and both registered and exempt clearing agencies must file amendments to their Form CA–1 as necessary. In each of the foregoing situations, these forms are submitted to the Commission in a paper-based format. As a result, the prospective and existing SROs, exempt exchanges, and exempt clearing agencies must incur the costs of completing their respective paper-based forms, making the requisite number of copies, and submitting the original version and copies to the Commission. The Commission also is proposing to rescind the following form and instead require that the information currently contained in the form be publicly posted on the relevant SRO’s internet website: Form Filer type Proposed amendment Form 19b–4(e): Information Required of a Self-Regulatory Organization Listing and Trading a New Derivative Securities Product Pursuant to Rule 19b–4(e) Under the Exchange Act. SRO ................................ Rescind the form and instructions to the form, and amend 17 CFR 240.19b–4(e) (‘‘Exchange Act Rule 19b–4(e)’’). 8 See 17 CFR 249.802 and 803. The forms and instructions to the form are incorporated by reference into the Code of Federal Regulations. VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 9 Futures on individual stocks or on narrow-based stock indexes are hereinafter referred to as ‘‘security futures products.’’ PO 00000 Frm 00005 Fmt 4701 Sfmt 4702 E:\FR\FM\18APP3.SGM 18APP3 23924 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules Rule 17a–22 requires a registered clearing agency to file with the Commission three copies of any material within 10 days after issuing, or making generally available, such materials to its participants or to other entities with whom it has a significant relationship.10 A registered clearing agency for which the Commission is not the appropriate regulatory agency is required at the same time to file one copy of such material with its ‘‘appropriate regulatory agency’’ (‘‘ARA’’).11 Since the Commission adopted Rule 17a–22 in 1980, technology has evolved significantly and the internet has played an increasingly vital role in information distribution.12 During this period, the Commission has encouraged the dissemination of information electronically via the internet and other automated systems and services.13 In general, transitioning from a requirement to file paper with the Commission to an electronic filing requirement can help improve efficiency and transparency in the securities markets for registered clearing agencies, its participants and the general public. Most recently, under the Updated Staff Statement described above,14 registered clearing agencies have established alternate arrangements to satisfy the requirements of Rule 17a– 22 that do not require the submission of paper filings. The Commission is now proposing to amend Rule 17a–22 to eliminate the paper filing requirement altogether and require registered clearing agencies to post any supplementary materials to its internet website, as discussed further below.15 The Commission believes that the amended rule would increase efficiency in the distribution of supplementary materials required under the rule and promote transparency regarding their contents, as these supplementary materials are intended to be made generally available to participants in the clearing agency or other categories of market participants with whom the clearing agency has a significant relationship. In addition, the cost associated with the proposal is likely to be less than the costs currently incurred by clearing agencies utilizing alternative arrangements consistent with the Updated Staff Statement. Form Filer type Proposed amendment Form X–17A–5 Part III: Information Required Pursuant to Rules 17a–5, 17a–12, and 18a– 7 under the Exchange Act. Form 17–H: Risk Assessment Report for Brokers and Dealers. Broker-Dealer, Security-Based Swap Dealer, Major Security-Based Swap Participant. Require the form to be filed on EDGAR. Broker-Dealer ................................................... Require the form to be filed on EDGAR. The Commission believes that the certain forms and other filings that are proposed to be filed on EDGAR by broker-dealers, OTC derivatives dealers, SBSDs, and MSBSPs are appropriate for electronic filing because many of them are voluminous (in number, size, or both) and some of them contain certain information that must be disclosed publicly.16 Electronic conversion and/or publication of these filings by Commission staff, to make them available to the public and/or Commission staff, can be labor intensive and time consuming. The Commission believes that requiring submission of these filings on the Commission’s established EDGAR filing system would facilitate more efficient transmission, analysis, dissemination, storage, and retrieval of information, and would benefit the Commission, the submitting entities, investors, and other market participants. The Commission is proposing to use the existing EDGAR system for certain filings because Form X–17A–5 Part III and Form 17–H are already permitted to be filed on EDGAR and the Commission believes that some of these filings may be readily transitioned to electronic filing on EDGAR. Form, report or notice Filer/submitter type Proposed amendment Form 17a–19: Information Required of National Securities Exchanges and Registered National Securities Associations Pursuant to Section 17 and 19 of the Securities Exchange Act of 1934 and Rule 17a–19 Thereunder, Report of Change in Membership Status. National securities exchanges, national securities associations. Require the form to be filed on EDGAR. type of bank that is acting as a registered clearing agency. See 15 U.S.C. 78c(a)(34). 12 See, e.g., The Impact of Recent Technological Advances on the Securities Market (Sep. 1997), available at https://www.sec.gov/news/studies/ techrp97.htm. In this report, the Commission stated that it was mindful of the benefits of increasing use of new technologies, such as the internet, to access information more efficiently. 13 Id; see also, e.g., Commission Interpretation: Use of Electronic Media, Exchange Act Release No. 42728 (Apr. 28, 2000), 65 FR 25843 (May 4, 2000), available at https://www.sec.gov/rules/interp/3442728.htm; Press Release: SEC Provides Guidance to Open Up Use of Corporate websites for Disclosures to Investors (July 30, 2008), available at https://www.sec.gov/news/press/2008/2008158.htm. 14 See supra note 5. 15 See generally infra section III. 16 See generally infra section IV. Currently, 17 CFR 240.19b–4(e) (‘‘Rule 19b–4(e)’’) under the Exchange Act requires an SRO to submit to the Commission reports regarding the listing and trading of new derivative securities products on Form 19b–4(e) in a paper-based format. As with the forms discussed above in this section, SROs must incur the costs of completing the paper-based form, making the requisite number of copies, and submitting the original version and copies to the Commission. ddrumheller on DSK120RN23PROD with PROPOSALS3 C. Covered Supplementary Materials 10 See 17 CFR 240.17a–22. Such materials are hereinafter referred to as ‘‘supplementary materials.’’ 11 See id. When used with respect to a clearing agency, the term ‘‘appropriate regulatory authority’’ is defined under section 3(a)(34)(B) of the Exchange Act to mean broadly the Comptroller of the Currency, the Board of Governors of the Federal Reserve System (‘‘Federal Reserve’’), or the Federal Deposit Insurance Corporation, depending on the VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 PO 00000 Frm 00006 Fmt 4701 Sfmt 4702 D. Filings by Broker-Dealers, OTC Derivatives Dealers, SBSDs, and MSBSPs E. Other Forms, Reports or Notices E:\FR\FM\18APP3.SGM 18APP3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules Form, report or notice Filer/submitter type Proposed amendment Notices (and any withdrawals of notices) filed pursuant to Rule 3a71–3(d)(1)(vi) under the Exchange Act. Notices (and any amendments to the notices) of Security-Based Swap Valuation Disputes pursuant to Rule 15fi–3(c). Certain registered SBSDs or registered brokers that meet certain capital and other requirements. SBS Entities ..................................................... Compliance Reports Submitted to the Commission pursuant to Rule 15fk–1(c)(2)(ii)(A). SBS Entities ..................................................... Require the notices and withdrawals to be filed on EDGAR; require withdrawal in specified circumstances. Require the notices (and any amendments to the notices) to the Commission to be submitted on EDGAR using structured data; specify that notices (including amendments) required to be provided to any applicable prudential regulator be in a form and manner acceptable to such prudential regulator. Require reports to be submitted on EDGAR in a structured data language. The Commission is proposing to use the EDGAR system for the following notices, reports, and filings: (1) notices made pursuant to Rule 17a–19 under the Exchange Act and on accompanying Form X–17A–19; (2) notices made pursuant to Rule 3a71–3(d)(1)(vi) under the Exchange Act; (3) notices made to the Commission pursuant to Rule 15fi– 3(c) under the Exchange Act; and (4) reports made pursuant to Rule 15fk– 1(c)(2)(ii)(A) under the Exchange Act. Currently, the notices made pursuant to Rule 17a–19 under the Exchange Act and on accompanying Form X–17A–19 are submitted via paper.17 The notices made pursuant to Rule 3a71–3(d)(1)(vi) under the Exchange Act are filed via email.18 The notices made to the Commission pursuant to Rule 15fi–3(c) and the reports required under Rule 15fk–1(c)(2)(ii)(A) are either submitted via email or submitted on EDGAR, at the filer’s option.19 certain broker-dealers on Form 17–H; and (6) the notices and reports provided to the Commission by SBS Entities under Exchange Act Rules 15fi–3(c) and 15fk–1(c)(2)(ii)(A), respectively (together, the ‘‘Proposed Structured Documents’’).20 Specifically, the Commission is proposing to require the report required by Exchange Act Rule 15fk–1(c)(2)(ii)(A) and portions of Form 1, Form CA–1, Form 17–H, and Form X–17A–5 Part III and related annual filings to be provided in the Inline eXtensible Business Reporting Language (‘‘Inline XBRL’’) structured data language. The Commission is also proposing to require Form X–17A–19, the notice to the Commission (and any amendments to the notices) required by Exchange Act Rule 15fi–3(c), and portions of Form 1– N, Form 15A, Form 1, Form CA–1, Form 17–H, and Form X–17A–5 Part III and related annual filings to be provided in machine-readable, eXtensible Markup Language (‘‘XML’’)-based data languages specific to those documents (‘‘custom XMLs’’). As noted, these structured documents would be filed or submitted on EDGAR.21 In addition, the Commission is proposing to require SROs to electronically post the information required under Rule 19b–4(e) using a custom XML-based data language (also referred to as a ‘‘schema’’) that the Commission would create and publish on its website for SROs to use.22 The F. Structured Data Requirements The Commission is proposing to require certain of the disclosures required by the following filings to be provided in a structured, machinereadable data language: (1) the Covered SRO Forms; (2) the information required under Rule 19b–4(e); (3) Form X–17A– 19; (4) the annual reports (and related annual filings) filed by broker-dealers (including OTC derivatives dealers) and SBS Entities on Form X–17A–5 Part III; (5) the risk assessment reports filed by 17 See infra section V.A. infra section V.B. 19 See infra section V.C. Rule 15fi–3(c) requires that SBS Entities ‘‘notify the Commission’’ (emphasis added). See infra section V.C.1. Requiring these notices and amendments to be submitted to the Commission via EDGAR as proposed would not cause them to be deemed filed for purposes of the Exchange Act. See e.g., section 18 of the Exchange Act. 17 CFR 240.15Fk–1(c) (‘‘Rule 15fk–1(c)’’) requires that the chief compliance officer of an SBS Entity prepare and sign an annual compliance report that ‘‘shall [b]e submitted to the Commission.’’ 17 CFR 240.15Fk– 1(c) (emphasis added). Requiring these reports to be submitted via EDGAR as proposed would not cause the report to be deemed filed for purposes of the Exchange Act. 18 See ddrumheller on DSK120RN23PROD with PROPOSALS3 23925 VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 20 For certain affected documents, only some aspects are proposed to be provided in a structured data language. For example, only the execution pages of Form 1–N and Form 15A are proposed to be provided in a structured data language. See infra section VII.A. 21 The details of the proposed structured data requirements, including the specific portions of affected documents that would be structured in Inline XBRL versus custom XML, are discussed in Section VII.A below. 22 This requirement would mirror the existing requirement for registered broker-dealers to electronically post reports containing order routing information using the most recent versions of the XML schema and the associated PDF renderer as published on the Commission’s website. See 17 CFR 242.606. The custom XML schema and PDF PO 00000 Frm 00007 Fmt 4701 Sfmt 4702 Commission is also proposing to require SROs to post a rendered Portable Digital Format (‘‘PDF’’) version of the custom XML document using a PDF renderer that the Commission would also create and publish on its website for SROs to use.23 As discussed in further detail below, the Commission believes the proposed structured data requirements would facilitate access to the disclosures by users (e.g., investors, market participants, analysts, the Commission), enabling more efficient retrieval, aggregation, and comparison across different filers and time periods, as compared to an unstructured PDF, HyperText Markup Language (‘‘HTML’’), or American Standard Code for Information Interchange (‘‘ASCII’’) requirement.24 The Commission is proposing some disclosures to be structured in Inline renderer for Rule 606 reports are available at https://www.sec.gov/structureddata/dera_ taxonomies. 23 See id. 24 See infra sections VII.A and X.C. The addition of structured data requirements would also be generally consistent with objectives of the recently enacted Financial Data Transparency Act (‘‘FDTA’’), which concerns the manner in which the Commission collects and disseminates information. The FDTA was signed into law on Dec. 23, 2022, as Title LVIII of the James M. Inhofe National Defense Authorization Act for Fiscal Year 2023. See James M. Inhofe National Defense Authorization Act for Fiscal Year 2023, Public Law 117–263 (Dec. 23, 2022). Section 5811 of the FDTA directs the Commission and other covered agencies (e.g., financial regulators) to jointly issue proposed rules for public comment that establish data standards for the collections of information reported to each covered agency by financial entities and for the data collected from covered agencies on behalf of the Financial Stability Oversight Council. The data standards must meet specified criteria relating to openness and machine-readability and promote interoperability of financial regulatory data across members of the Financial Stability Oversight Council. In addition, Section 5822 of the Financial Data Transparency Act requires that all public data assets published by the Commission under the securities laws and the Dodd-Frank Act be made available in accordance with specified criteria relating to openness and machine-readability. See 44 U.S.C. 3502(20) (defining the term ‘‘open Government data asset’’ to mean, among other things, machine-readable and available (or could be made available) in an open format). E:\FR\FM\18APP3.SGM 18APP3 ddrumheller on DSK120RN23PROD with PROPOSALS3 23926 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules XBRL, and other disclosures to be structured in custom XML, because the Commission believes Inline XBRL is well-suited for certain types of content—such as financial statements and extended narrative discussions— whereas other types of content can be readily captured using custom XML data languages that yield smaller file sizes than Inline XBRL and thus facilitate more streamlined data processing. Such custom XML languages also enable EDGAR to generate fillable web forms that permit affected entities to input disclosures into form fields rather than encode their disclosures in custom XML themselves, thus likely easing compliance burdens on affected entities. Finally, certain of the proposed structured documents— Form X–17A–5 Part III and Form 17– H—are already partially subject to custom XML structured data requirements when voluntarily filed on EDGAR. For these forms, the Commission is proposing to require the same custom XML requirements so as to minimize the associated burdens on registrants already using these languages for these forms. Certain of the proposed structured documents also include requirements to attach copies of existing documents, such as copies of by-laws, written agreements, user manuals, and listing applications. The Commission is proposing to require affected entities to file these copies of documents as unstructured PDF attachments to the otherwise structured forms. The Commission believes requiring affected entities to retroactively structure such existing documents, which were prepared for purposes outside of fulfilling the Commission’s disclosure requirements, could impose compliance burdens on affected entities that may not be justified in light of the commensurate informational benefits associated with having such documents in structured form.25 Similarly, Forms 1–N and 15A (other than the cover pages—i.e., execution pages—of those Forms) would not be subject to structured data requirements, given that the very limited number of Form 1–N and Form 15A filers and filings limits the benefit that would accrue from machine-readability of the disclosures contained therein.26 ANE Exception Notices also would not be subject to structured data requirements, as the very limited number of data 25 See infra sections II.A.3, II.D.5, IV.B, and VII.A. infra sections II.B.3, II.C.3, and VII.A. 27 See infra sections V.B.2 and VII.A. 28 See infra section X. 29 See https://www.sec.gov/edgar/filermanual. 26 See VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 II. Proposed Requirements To Electronically File Covered SRO Forms The Commission proposes to amend certain Exchange Act rules and the Covered SRO Forms, including their instructions, to eliminate the current paper copy filing method and instead require electronic submission of the Covered SRO Forms. Changing from the current method of paper filing to electronic submission of the Covered SRO Forms ultimately should increase efficiencies and decrease costs for Filers with respect to their filing obligations.28 In addition, the Commission believes that the electronic filing of the Covered SRO Forms would facilitate the Commission’s oversight of SROs by streamlining the process of tracking and reviewing the filings made on the Covered SRO Forms. The proposal would require the use of EDGAR to file the Covered SRO Forms. The Commission is proposing to use the existing EDGAR system for the Covered SRO Forms because the Commission believes that these filings are similar to other filings that are currently submitted on EDGAR. Furthermore, many of the Covered SRO Forms contain information that must be disclosed publicly, and electronic conversion and/ or publication of these filings by Commission staff, to make them available to the public and Commission staff, is labor intensive and time consuming. The Commission believes that requiring the submission of these filings on EDGAR would facilitate more efficient transmission, analysis, dissemination, storage, and retrieval of information, and would benefit the Commission, the submitting entities, investors, and other market participants. As a result of the proposed amendments to relevant Commission rules and forms as described below, any Filer of the Covered SRO Forms who has not previously made an electronic filing on EDGAR would need to apply for EDGAR access pursuant to the EDGAR Filer Manual 29 in order to file documents on EDGAR.30 For each of the Covered SRO Forms, the Commission is proposing to add technical requirements to the form’s general instructions to specify when a form would be considered incomplete or deficient when filed. Specifically, each Filer would be required to provide all the information required by the form, including the exhibits, and a filing that is incomplete or otherwise deficient may be returned to the Filer. The proposed general instructions for each form also would set forth what comprises a complete filing. For instance, the proposed general instructions for Form 1 would state that a completed form filed with the Commission shall consist of Form 1, responses to all applicable items, and any exhibits required in connection with the filing. The Commission also proposes that, for each of the Covered SRO Forms, the general instructions would require some or all of the information reported on the forms (including, where applicable, the exhibits to the forms) to be provided in a structured, machine-readable data language. For Form 1 and Form CA–1, the general instructions would require the submissions to be provided in part using Inline XBRL and in part using custom XML data languages specific to those Forms, with certain submissions that constitute copies of existing documents of a Filer (such as copies of governing documents or copies of contracts) to be included as textsearchable PDF attachments rather than structured data.31 For Form 1–N and Form 15A, only the cover page (i.e., execution page) of each form would be structured in a custom XML data language, while the remainder of each form would remain unstructured. For Form X–17A–19, the entire form would be structured in a custom XML data language. Finally, the information under proposed Rule 19b–4(e)(2)(ii) would be required to be provided on the listing SRO’s website using a custom XML data language, thus making the information machine-readable. 30 As discussed in more detail in the Paperwork Reduction Act section of this release, the Commission does not believe that the Filers of Covered SRO Forms have previously made an electronic filing on EDGAR. See infra section IX.C (Form ID). 31 For example, the copies of governing documents that are required to be attached as Exhibit A to Form 1 and as part of Exhibit E to Form CA–1 would be included as a PDF attachment, rather than being structured in Inline XBRL or custom XML. See infra notes 37 and 38. points in such notices may lessen the utility of any functionality enabled by structured data (such as efficient retrieval of individual data points from structured documents).27 G. Amendments Regarding the FOCUS Report and Signature Requirements in Rule 17a–5, 17a–12, and 18a–7 Filings Finally, the Commission is proposing amendments regarding the FOCUS Report to harmonize with other rules, make technical changes, and provide clarifications. In addition, the Commission is proposing to allow electronic signatures in Rule 17a–5, 17a–12, and 18a–7 filings, including the FOCUS Report. PO 00000 Frm 00008 Fmt 4701 Sfmt 4702 E:\FR\FM\18APP3.SGM 18APP3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules 23927 PROPOSED STRUCTURED DATA REQUIREMENTS FOR COVERED SRO FORMS Form Inline XBRL requirements Custom XML requirements Unstructured PDF requirements Form CA–1 ............ Form 1–N ............... Form 15A ............... None ..................................................... None ..................................................... Execution page, Exhibits A (in part), B, D, E (in part), I, N, Q. Execution page, Exhibits C (in part), H (in part), J, K, L, M, N, 17 CFR 240.6a–3(b) (‘‘Rule 6a–3(b)’’) volume reports. Execution page only ............................. Execution page only ............................. Exhibits A (in part), E (in part), G, P, T. Form 1 ................... Schedule A, Exhibits C, F, H, J, K, L, M, O, R, S. Exhibits D, E (in part), I ........................ For Form CA–1, Schedule A and Exhibits C, F, H, J, K, L, M, O, R, and S would be filed in Inline XBRL.32 The execution page and Exhibits A (in part), B, D, E (in part), I, N, and Q would be filed in custom XML.33 Exhibits A (in part), E (in part), G, P, and T would be filed as unstructured PDF documents.34 For Form 1, Exhibits D, E (in part), and I would be filed in Inline XBRL.35 ddrumheller on DSK120RN23PROD with PROPOSALS3 Rule 19b–4(e) Information ............................. 32 Schedule A to the execution page requires certain descriptive responses to complement the clearing agency’s execution page disclosures. Exhibit C requires a description of the clearing agency’s organizational structure. Exhibit F requires a description of material pending legal proceedings involving the clearing agency. Exhibit H requires the clearing agency’s financial statements. Exhibit J requires a description of the clearing agency’s services and functions. Exhibit K requires a description of the clearing agency’s security measures and procedures. Exhibit L requires a description of the clearing agency’s safeguarding measures and procedures. Exhibit M requires a description of the clearing agency’s backup systems. Exhibit O requires a description of criteria governing access to the clearing agency’s services and a description of the reasons for imposing such criteria. Exhibit R requires a schedule of prohibitions and limitations on access to the clearing agency’s services. Exhibit S requires, if applicable, a statement explaining why the clearing agency should be exempt. 33 The execution page requires identifying information about the filer and the document being filed. Exhibit A requires, in relevant part, a list of persons controlling or directing the management or policies of the clearing agency, and descriptions of any unwritten agreements or arrangements through which such persons may exercise control or direction. Exhibit B requires a list of the clearing agency’s officers, managers, and individuals occupying similar positions. Exhibit D requires a list of persons who are controlled by, or are under common control with, the clearing agency, as well as a description of each control relationship. Exhibit E requires, in relevant part, a list of dues, fees, and other charges imposed by the clearing agency for its clearing activities. Exhibit I requires the addresses of all offices in which the clearing agency conducts its activities, and an identification of the activities that are performed in each listed office. Exhibit N requires a list of participants, or applicants for participation, in the clearing agency. Exhibit Q requires a schedule of fees fixed by the clearing agency for services rendered by its participants. 34 Exhibit A requires, in relevant part, copies of written agreements with persons who may control or direct the management or policies of the clearing VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 The execution page, Exhibits C (in part), H (in part), J, K, L, M, N, and the 17 CFR 240.6a–3(b) (‘‘Rule 6a–3(b)’’) volume reports would be filed in custom XML.36 Exhibits A, B, C (in part), E (in part), F, G, H (in part), and the 17 CFR 240.6a– 3(a)(1) (‘‘Rule 6a–3(a)(1)’’) supplemental materials would be filed as unstructured PDF documents.37 For Forms 15A and None .......................... Entire Rule 19b– 4(e) posting. Frm 00009 Fmt 4701 Sfmt 4702 1–N, only the execution page would be filed using a structured data language (custom XML).38 Similarly, the information under proposed Rule 19b–4(e)(2)(ii) would be required to be provided on the listing SRO’s website using a custom XML data language, thus making the information machine-readable. The entire posting would also be available as a rendered PDF document. agency. Exhibit E requires, in relevant part, a copy of the currently effective constitution, articles of incorporation or association, by-laws, rules, procedures and instruments corresponding thereto, of the clearing agency. Exhibit G requires copies of all contracts with any national securities exchange, national securities association or clearing agency or securities market for which the clearing agency acts as a clearing agency or performs clearing agency functions. Exhibit P requires copies of any forms of contracts governing the terms on which persons may subscribe to clearing agency services provided by the registrant. Exhibit T requires any conditions, reports, notices or other submissions to the Commission required as directed in any Order approving applications for exemption from registration as a clearing agency. 35 Exhibit D requires the unconsolidated financial statements for the latest fiscal year for each of the exchange’s subsidiaries and affiliates. Exhibit E requires, in relevant part, a description of the manner of operation of the electronic trading system that the exchange uses to effect transactions. Exhibit I requires audited financial statements for the exchange’s latest fiscal year. 36 The execution page requires identifying information about the filer and the document being filed. Exhibit C requires, in relevant part, information regarding each subsidiary or affiliate of the exchange, and each entity with whom the exchange has an agreement relating to the operation of an electronic trading system to be used to effect transactions on the exchange (such as the name and address of the organization, a brief description of the nature and extent of the affiliation, and the a brief description of the business or functions of the organization). Exhibit H requires, in relevant part, a schedule of listing fees and a brief description of the criteria governing which securities may be traded on the exchange. Exhibit J requires a list of the exchange’s officers, governors, standing committee members, or persons performing similar functions. Exhibit K requires a list of the exchange’s significant owners, shareholders, or partners. Exhibit L requires descriptions of the criteria, conditions, and procedures governing membership in the exchange. Exhibit M requires a list of members, participants, subscribers, or other users of the exchange, as well as a description of each user’s activities. Exhibit N requires schedules of securities PO 00000 Exhibits A, B, C (in part), E (in part), F, G, H (in part), 17 CFR 240.6a– 3(a)(1) (‘‘Rule 6a–3(a)(1)’’) supplemental materials. Remainder of form. Remainder of form. traded on the exchange. Rule 6a–3(b) of the Exchange Act requires a report concerning the securities sold on the exchange during the previous calendar month. See 17 CFR 240.6a–3(b). 37 Exhibit A requires copies of the constitution, articles of incorporation or association with all subsequent amendments, and of existing by-laws or corresponding rules or instruments, whatever the name, of the exchange. Exhibit B requires copies of all written rulings, settled practices having the effect of rules, and interpretations of the Governing Board or other committee of the exchange in respect of any provisions of the constitution, by-laws, rules, or trading practices of the exchange which are not included in Exhibit A. Exhibit C requires, in relevant part, copies of the constitution, a copy of the articles of incorporation or association including all amendments, and copies of the existing by-laws or corresponding rules or instruments for each of the exchange’s subsidiaries or affiliates and for each entity with whom the exchange has an agreement relating to the operation of an electronic trading system to be used to effect transactions on the exchange. Exhibit E requires, in relevant part, a copy of the exchange’s users’ manual. Exhibit F requires a complete set of all forms pertaining to membership, participation, or subscription to the exchange, application for approval as a person associated with a member, participant, or subscriber of the exchange, or any other similar materials. Exhibit G requires a complete set of all forms of financial statements, reports, or questionnaires required of members, participants, subscribers, or any other users relating to financial responsibility or minimum capital requirements for such members, participants, or any other users. Exhibit H requires, in relevant part, a complete set of documents comprising the exchange’s listing applications, including any agreements required to be executed in connection with listing. Rule 6a–3(a)(1) of the Exchange Act requires any material (including notices, circulars, bulletins, lists, and periodicals) issued or made generally available to members of, or participants or subscribers to, the exchange. See 17 CFR 240.6a– 3(a)(1). 38 The execution page requires identifying information about the filer and the document being filed. E:\FR\FM\18APP3.SGM 18APP3 23928 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules The Commission believes that the proposed requirement that the Covered SRO Forms be filed, and information pursuant to Rule 19b–4(e) be posted, using structured data languages would allow the Commission and, if applicable, investors, market participants, and other interested parties, to efficiently review and analyze the information.39 In addition, the requirement to file Covered SRO Forms on EDGAR in a structured data language would enable EDGAR to perform technical validations (i.e., programmatic checks to ensure the documents are appropriately standardized, formatted, and complete) upon intake of the documents, potentially improving the quality of the filed data by decreasing the incidence of non-substantive errors (such as the omission of values from fields that should always be populated). Based on the Commission’s experience in reviewing the Covered SRO Forms and information posted pursuant to Rule 19b–4(e), the Commission also believes that the proposed requirement to electronically file the Covered SRO Forms and electronically post the information required pursuant to Rule 19b–4(e) would allow for more efficient use of Commission resources related to reviewing, assessing, and processing these filings and postings. In addition, information provided on the Covered SRO Forms would be captured automatically by EDGAR and would be text-searchable or machine-readable. The information posted pursuant to Rule 19b–4(e) would be machinereadable as well. As a result, the Commission believes that these features would facilitate its oversight of SROs. Substantive changes would not be required to the information required to be filed on the Covered SRO Forms or the information required to be posted pursuant to Rule 19b–4(e). Rather, the proposal is intended simply to require and facilitate the electronic filing of the Covered SRO Forms and the disclosure of the information required under Rule 19b–4(e), which the SROs currently are required to provide to the Commission. ddrumheller on DSK120RN23PROD with PROPOSALS3 A. Form 1 1. Relevant Statutory Framework Section 6(a) of the Exchange Act states, ‘‘[a]n exchange may be registered as a national securities exchange . . . by filing with the Commission an application for registration in such form as the Commission, by rule, may prescribe containing the rules of the 39 For more detailed discussions of the anticipated benefits associated with structured data requirements, see infra sections VII.A. and X.C.1.b. VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 exchange and such other information and documents as the Commission, by rule, may prescribe as necessary or appropriate in the public interest or for the protection.’’ 40 Rules 6a–1, 6a–2, and 6a–3 41 under the Exchange Act and Form 1 42 set forth the filing requirements for registration as a national securities exchange and for exempt exchanges, as well as requirements for the filing of supplemental material and reports. 2. Current Requirements for Filing Form 1 Rule 6a–1 under the Exchange Act generally requires that an entity seeking to register as a national securities exchange, or seeking an exemption from such registration based on limited volume, file an application on Form 1 and correct any inaccuracy therein upon discovery.43 Form 1 contains an execution page as well as 14 exhibits that must be filed by the exchange.44 The Form 1 execution page requires certain basic information from the exchange, such as the name and street and mailing addresses of the exchange; the name, title, and telephone number of the exchange’s contact employee; and the legal status of the exchange (e.g., corporation or limited liability company). The Form 1 exhibits require the exchange to provide, among other things: its audited financial statements and unconsolidated financial statements for each subsidiary or affiliate; its governing documents and rules; the names of its members, participants, subscribers, and users; information regarding its non-member owners, shareholders, or partners; and the securities it lists or trades. The instructions to Form 1 require that one original and two copies of all the Form 1 materials be filed with the Commission in paper form.45 Rule 6a–2 requires a registered national securities exchange or an exempt exchange 46 to amend its Form 1 as specified therein. Specifically, pursuant to 17 CFR 240.6a–2(a) (‘‘Rule 6a–2(a)’’), an exchange must file an amendment to its Form 1 within 10 days after it takes any action that renders any part of its Form 1 execution page or the information provided in its Form 1 40 See 15 U.S.C. 78f(a). 17 CFR 240.6a–1; 17 CFR 240.6a–2; 17 CFR 240.6a–3. 42 See 17 CFR 249.1. 43 See 17 CFR 240.6a–1. 44 For purposes of this paragraph, these entities are collectively referred to as ‘‘exchanges.’’ 45 See 17 CFR 249.1. 46 For purposes of this paragraph, these entities are collectively referred to as ‘‘exchanges.’’ 41 See PO 00000 Frm 00010 Fmt 4701 Sfmt 4702 Exhibits C, F, G, H, J, K, or M inaccurate or incomplete.47 Pursuant to 17 CFR 240.6a–2(b) (‘‘Rule 6a–2(b)’’), on or before June 30 of each year, a national securities exchange or an exempt exchange 48 must file amendments to Exhibits D, I, K, M, and N with the Commission.49 Pursuant to 17 CFR 240.6a–2(c) (‘‘Rule 6a–2(c)’’), on a triennial basis, an exchange must file complete Exhibits A, B, C, and J with the Commission.50 Further, 17 CFR 240.6a–2(d) (‘‘Rule 6a–2(d)’’) provides alternative means for satisfying the requirements to file amendments to certain exhibits.51 These alternative means require that the exchange: (i) on an annual or more frequent basis publish the information required by the pertinent exhibits, or cooperate in its publication; 52 (ii) keep the information up to date and make it available to the Commission and the public upon request; 53 or (iii) make the required information available continuously on an internet website controlled by the exchange.54 As with Form 1 filings pursuant to Rule 6a–1, all amendments to Form 1 pursuant to Rule 6a–2 currently are submitted in paper form in accordance with the instructions to Form 1.55 Pursuant to Rule 6a–3, a national securities exchange or an exempt exchange 56 also must file certain supplemental material and reports with the Commission.57 Specifically, Rule 6a–3(a)(1) requires an exchange to file with the Commission any material issued or made generally available to members of, or participants or 47 See 17 CFR 240.6a–2(a). purposes of this paragraph, these entities are collectively referred to as ‘‘exchanges.’’ 49 See 17 CFR 240.6a–2(b). 50 See 17 CFR 240.6a–2(c). 51 See 17 CFR 240.6a–2(d). Rule 6a–2(d) applies to information required to be filed pursuant to paragraphs (b)(2) and (c) of Rule 6a–2. Rule 6a–2(d) sets forth alternative means of providing access to the information contained in Exhibits A, B, C, J, K, M, and N in lieu of filing the information with the Commission. 52 See The exchange would need to: (i) identify the publication in which the information is available, the name, address, and telephone number of the person from whom such publication may be obtained, and the price of the publication; and (ii) certify the accuracy of such information as of its publication date. 17 CFR 240.6a–2(d)(1). 53 The exchange would need to certify that the information is kept up to date and is available to the Commission and the public upon request. 17 CFR 240.6a–2(d)(2). 54 The exchange would need to: (i) indicate the location of the internet website where such information may be found; and (ii) certify that the information available at such location is accurate as of its date. 17 CFR 240.6a–2(d)(3). 55 See 17 CFR 249.1. 56 For purposes of this paragraph, these entities are collectively referred to as ‘‘exchanges.’’ 57 See 17 CFR 240.6a–3. 48 For E:\FR\FM\18APP3.SGM 18APP3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules subscribers to, the exchange within 10 days after issuing or making such material available to such members, participants or subscribers.58 17 CFR 240.6a–3(a)(2) (‘‘Rule 6a–3(a)(2)’’) provides that, if information required by Rule 6a–3(a)(1) is available continuously on a website controlled by the exchange, in lieu of filing such information, the exchange may indicate the location of the website where the information can be found, and certify that the information is accurate as of its date.59 Rule 6a–3(b) requires an exchange to file, within 15 days after the end of each calendar month, a volume report of securities transactions on the exchange during the calendar month. As with filings pursuant to Rules 6a–1 and 6a–2, all filings pursuant to Rule 6a–3 currently are submitted in paper form.60 Form 1 filings are currently made available to the public.61 Form 1 filings made pursuant to Rule 6a–1 are scanned and the resulting PDF documents are posted on the Commission’s website. Form 1 filings made pursuant to Rule 6a–2 are scanned and the resulting PDF documents are uploaded to EDGAR. Form 1 filings made pursuant to Rule 6a–3 are available for inspection in paper form in the Commission’s public reading room. 3. Proposed Requirement To Electronically File Form 1 The Commission proposes to amend Rules 6a–1, 6a–2, and 6a–3 under the Exchange Act, as well as Form 1 and the instructions to Form 1, to require the electronic filing on EDGAR of all submissions required by the rules. As explained in section II above, the Commission believes that, among other benefits, these proposed amendments should increase efficiencies related to the filing of these forms and the review 58 See 17 CFR 240.6a–3(a)(1). 17 CFR 240.6a–3(a)(2). 60 See 17 CFR 240.6a–3(b). This report must set forth: (i) the number of shares of stock sold and the aggregate dollar amount of such stock sold; (ii) the principal amount of bonds sold and the aggregate dollar amount of such bonds sold; and (iii) the number of rights and warrants sold and the aggregate dollar amount of such rights and warrants sold. Id. 61 When the Commission previously amended Form 1 and Rules 6a–1, 6a–2, and 6a–3, it stated that ‘‘[t]he information collected, retained, and/or filed pursuant to the rules for registration as a national securities exchange will not be confidential and will be available to the public.’’ Exchange Act Release No. 40760 (Dec. 8, 1998), 63 FR 70844, 70912 (Dec. 22, 1998) (Regulation of Exchanges and Alternative Trading Systems Adopting Release). Consistent with this statement, the Instructions to Form 1 specify that ‘‘[n]o assurance of confidentiality is given by the Commission with respect to the responses made in Form 1. The public has access to the information contained in Form 1.’’ ddrumheller on DSK120RN23PROD with PROPOSALS3 59 See VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 and analysis of the filed forms by the Commission and its staff as well as by investors, market participants, and other interested parties. In addition, the Commission proposes conforming changes to Rule 3(b)(2) of its Informal and Other Procedures,62 discussed below,63 to clarify that defective applications on Form 1 would be returned to the applicant and, although permitted as an option under the current rule, defective applications no longer would be held by the Commission. A description of the Commission’s proposed amendments to Rules 6a–1, 6a–2, and 6a–3, Form 1, and the instructions to Form 1 to implement the proposed electronic filing requirement is provided below. a. Proposed Amendments to Rules 6a– 1, 6a–2, and 6a–3 The Commission proposes to add a new paragraph (e) to Rule 6a–1 to require the electronic filing on EDGAR of all Form 1 filings and amendments to such filings. The Commission also proposes to amend Rules 6a–2(a), (b), and (c) to mandate the electronic filing on EDGAR of the Form 1 amendments under those paragraphs by requiring the electronic filing of those amendments, in accordance with proposed 17 CFR 240.6a–1(e) (‘‘Rule 6a–1(e)’’).64 Moreover, the Commission proposes to update in Rule 6a–2(c) the due date for the next filings due pursuant to Rule 6a–2(c), from June 30, 2001, to June 30, 2025. As stated earlier in this section, Rule 6a–3 requires national securities exchanges and exempt exchanges to file certain supplemental material and reports with the Commission after registration or being granted an exemption from registration. The Commission proposes to amend Rule 6a–3 to require national securities exchanges and exempt exchanges to file on EDGAR such supplemental material and reports electronically on Form 1, in accordance with proposed Rule 6a–1(e). 62 See 17 CFR 202.3(b)(2). infra section II.G. 64 The Commission also proposes a technical amendment to remove two extraneous commas from the text of Rule 6a–2(a). The Commission further proposes to amend paragraph (d) of Rule 6a– 2 to clarify that any certifications and other information permitted under that paragraph in lieu of filing the required documents as exhibits to Form 1 must be provided using Form 1. The Commission believes that this proposed change should facilitate compliance with the Rule 6a–2 requirements by exchanges and exempt exchanges by clarifying and standardizing the means to file any certifications and other information submitted pursuant to paragraph (d) of Rule 6a–2. 63 See PO 00000 Frm 00011 Fmt 4701 Sfmt 4702 23929 b. Proposed Amendments to Form 1 and the Form 1 Instructions In addition to the proposed revisions to Rules 6a–1, 6a–2, and 6a–3, the Commission proposes to revise and reformat Form 1, and the instructions thereto, to accommodate the electronic filing on EDGAR of initial applications, subsequent amendments, supplemental material, and reports that are made on Form 1. The proposed changes to Form 1 to permit electronic submission to the Commission would require minimal modifications to the form, as described below. The Commission also proposes to revise the Form 1 instructions to facilitate the electronic filing and machine-readability of Form 1.65 As discussed below, Commission believes that these proposed revisions to Form 1 would facilitate the filing and use of the information mandated by Form 1 and related Rules 6a–1, 6a–2, and 6a–3. The Commission proposes that electronic Form 1 would solicit information through prompts on the form. Proposed electronic Form 1 also would require an exchange to attach exhibits via a new exhibit table that would be part of electronic Form 1. Where Rule 6a–2 allows for alternative means of filing the information required under certain exhibits, the new exhibit table would permit an exchange to electronically provide the certifications and details necessary for an exchange to avail itself of those alternative means. The information required to be filed with the exhibits is not changing. Currently, Rule 6a–2 provides that in lieu of filing certain exhibits as part of a paper Form 1 submission, an exchange may: (i) identify where such information is published and certify its accuracy as of its publication date; (ii) certify that the information is available to the Commission and the public upon request; or (iii) indicate the location of the internet website where such information may be found and certify that the information available at such location is accurate as of its date.66 The proposal would not change the availability of these alternative means, only the method of providing the necessary certifications and details. As described above, instead of attaching paper exhibits, the proposal would require the exhibits to be submitted 65 In addition, the Commission proposes to remove the definition of the word ‘‘applicant’’ from the Form 1 instructions and replace the word ‘‘applicant’’ with the word ‘‘exchange’’ on Form 1. Currently, Form 1 uses both the words ‘‘exchange’’ and ‘‘applicant’’ to refer to the entity filing the Form 1. The Commission proposes this technical, nonsubstantive change to make consistent the terminology used in Form 1. 66 See 17 CFR 240.6a–2(d). E:\FR\FM\18APP3.SGM 18APP3 23930 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules ddrumheller on DSK120RN23PROD with PROPOSALS3 electronically on EDGAR. Similarly, instead of providing on paper the certifications and details required for an exchange to avail itself of these alternative means, the proposal would require those certifications and details to be provided via the electronic Form 1. In the event an exchange indicates on Form 1 an internet website where such information may be found, where applicable, the Commission proposes to require the exchange to provide on Form 1 the Uniform Resource Locator(s) (‘‘URL(s)’’) of the location(s) on the internet website where such information may be found, and to certify that information posted on such a website is accurate as of its date and is free and accessible (without any encumbrances or restrictions) by the general public. For electronic Form 1, the Commission proposes to add prompts prior to Section I that would require the exchange to identify the basis for submitting the form. Specifically, proposed electronic Form 1 would require the exchange to check a box stating one of the following: (i) whether the filing is an initial Form 1 application and if it is, whether the exchange is applying to be a national securities exchange or an exempt exchange; (ii) whether the filing is an amendment to an initial Form 1 application prior to Commission action to grant registration or an exemption based on limited volume; (iii) whether the filing is to provide the exchange’s consent to an extension of the time period within which the Commission must take action on an initial Form 1 application; 67 (iv) whether the filing is to withdraw an initial Form 1 application prior to the Commission taking action on the application; (v) whether the filing is an amendment to Form 1 pursuant to Rule 6a–2 following the Commission’s granting of registration or an exemption; or (vi) whether the filing is supplemental material or reports pursuant to Rule 6a– 3.68 Currently, there is no place on Form 1 for an exchange to indicate the type of filing that it is submitting. For example, current Form 1 does not provide an exchange the ability to indicate whether an initial Form 1 filing is an application to be a national 67 Such consents to an extension of the time period within which the Commission must take action currently are submitted as letters in paper form. Adding the ability to indicate that the exchange consents to an extension of time on electronic Form 1 would streamline the process for making such a submission. See 15 U.S.C. 78s(a)(1)(B). 68 The Commission also proposes to amend the instructions to Form 1 to add a new section titled ‘‘When to Use the Form,’’ which would explain when Form 1 filings are required. VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 securities exchange or an exempt exchange. Accordingly, the Commission believes that capturing information regarding the type of Form 1 filing would facilitate the exchange’s communication with the Commission and help the Commission more efficiently review Form 1 submissions. The proposed electronic Form 1 would also capture contact information for the exchange and certain individuals. Consistent with current Form 1, the proposed electronic Form 1 would require the exchange to identify contact information for the exchange, a contact employee, and counsel for the exchange. Unlike current Form 1, proposed electronic Form 1 would additionally require an email address for the contact employee. The Commission believes that the requirement to provide an email address for the exchange contact employee would expedite communications between Commission staff and the relevant exchange. Proposed electronic Form 1 would require an exchange to electronically attach exhibits by using an exhibit table. The proposed exhibit table would contain columns for the name of the exhibit, information required by the exhibit, whether alternative means of satisfying the filing of an exhibit are available for that particular exhibit (e.g., URL(s)), if permitted by applicable Commission rule, and checkboxes to indicate whether such alternative means are being used.69 The information proposed to be required by the exhibits to electronic Form 1 would remain the same as current Form 1. In addition, to facilitate the electronic filing of the supplemental materials required under 17 CFR 240.6a–3(a) (‘‘Rule 6a–3(a)’’) and the volume reports required under Rule 6a–3(b), the Commission proposes to add new Sections III and IV, respectively, to Form 1. Sections III and IV would not add new requirements beyond those currently included in Rules 6a–3(a) and (b). Currently, Rule 6a–3(a) requires exchanges to file certain information with the Commission or, in the alternative, to indicate where such information can be found on an internet website controlled by the exchange. The proposal would require the filing of this information through Section III of electronic Form 1 or, in the alternative, to provide through Section III of electronic Form 1 the URL(s) of the location(s) on the internet website where such information can be found. If an exchange chooses this latter option and provides URL(s) of an internet website where such information 69 See PO 00000 supra notes 69–71. Frm 00012 Fmt 4701 Sfmt 4702 can be found, Section III would also clarify that such website must be free and accessible (without any encumbrances or restrictions) by the general public. Likewise, Section IV would not change the substance of what must be filed; it would merely require the filing of the volume reports required under Rule 6a–3(b) to be made on electronic Form 1 instead of in paper format. Furthermore, electronic Form 1 would continue to require an exchange to consent to service of any civil action brought by, or notice of any proceeding before, the Commission in connection with its activities. The current language under which the exchange consents to service via registered or certified mail at the main or mailing address provided on Form 1 would continue to be included in the electronic form.70 In addition, the proposed electronic Form 1 would require the individual who is submitting the form to check a box on behalf of the exchange to represent that the information and statements contained in the Form 1, including exhibits, schedules, or other documents, are current, true, and complete. The requirement to sign and notarize the form would be eliminated because it is unnecessary, not compatible with, and not required for electronic filing on EDGAR. Finally, electronic Form 1 would require exchanges to structure Exhibits D (unconsolidated financial statements of each of the exchange’s subsidiaries or affiliates), E (description of the electronic trading system’s manner of operation, except for the attached copy of the users’ manual), and I (audited financial statements of the exchange) in Inline XBRL. The execution page, Exhibits C (information regarding each of the exchange’s subsidiaries, affiliates, and entities with whom the exchange has an agreement relating to the operation of the exchange’s electronic trading system, except for the copies of existing documents listed below), H (listing fee schedule and brief description of the criteria governing which securities may be traded on the exchange, except for the copies of existing documents listed below), J (list of officers, governors, standing committee members, or persons performing similar functions), K (list of significant shareholders or partners), L (description of criteria, conditions, and procedures governing membership in the exchange), M (list of members, participants, subscribers, or other users 70 The Commission also proposes to delete the outdated provision allowing for service of any civil action pursuant to confirmed telegram. E:\FR\FM\18APP3.SGM 18APP3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules of the exchange and description of each user’s activities), N (schedules of securities traded on the exchange), and the information required under Rule 6a– 3(b) (reports regarding the securities sold on the exchange over the previous calendar month) would also be structured, albeit in a custom XML data language specific to Form 1 rather than in Inline XBRL. Attached copies of existing documents, including those filed with Exhibits A (constitution, articles of incorporation or association, and existing by-laws or corresponding rules or instruments of the exchange), B (written rulings, settled practices having the effect of rules, and interpretations of the Governing Board or other committee of the exchange in respect of any provisions of the constitution, by-laws, rules, or trading practices of the exchange), C (written rulings, settled practices having the effect of rules, and interpretations of the Governing Board or other committee of the exchange in respect of any provisions of the constitution, by-laws, rules, or trading practices of the exchange’s affiliates, subsidiaries, or entities with whom the exchange has an agreement related to the operation of the exchange’s electronic trading system), E (listing applications and required agreements), F (forms pertaining to membership, participation, or subscription, application for approval as a person 23931 associated with a member, participant, or subscriber of the exchange, or any other similar materials), G (forms of financial statements, reports, or questionnaires required of members, participants, subscribers, or any other users relating to financial responsibility or minimum capital requirements for such members, participants, or any other users), H (listing applications and agreements required to be executed in connection with listing), and the information required under Rule 6a– 3(a)(1) (supplemental materials issued or made available to members of, or participants or subscribers to, the exchange), would be filed as unstructured PDF documents. PROPOSED STRUCTURED DATA REQUIREMENTS FOR FORM 1 ddrumheller on DSK120RN23PROD with PROPOSALS3 Inline XBRL .......................................... Custom XML ......................................... Unstructured PDF ................................. Exhibits D, E (in part), I. Execution page, Exhibits C (in part), H (in part), J, K, L, M, N, Rule 6a–3(b) monthly reports. Exhibits A, B, C (in part), E (in part), F, G, H (in part), Rule 6a–3(a)(1) supplemental materials. The proposed structuring requirements could facilitate access to the exchange’s disclosures (such as by enabling efficient retrieval of only those disclosures filed by a subset of exchanges over particular reporting periods) and their analysis (such as by enabling efficient comparisons of individual disclosures or sets of disclosures across different exchanges and reporting periods). This could benefit market participants through enhanced oversight of the exchanges. For example, Commission staff could leverage the machine-readability of Exhibit I to automatically flag any atypical fluctuations in particular financial line items across every exchange’s financial statements, and assess whether closer examination of any such fluctuations would be warranted. Similarly, Commission staff could leverage the machine-readability of Exhibit E by retrieving automated redline comparisons of the manner of operations description disclosed by exchanges from prior reporting periods to the current reporting period, thus pinpointing any widespread operational changes for further assessment. Market participants (such as issuers, analysts, and other exchanges) could also benefit from direct use of the machine-readable disclosures on Form 1. For example, the structuring requirement for Exhibit H could allow issuers to more efficiently compare listing fees charged by different exchanges as they determine the exchange on which they list their securities. Without the proposed structured data requirements, these VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 analyses, to the extent they are done, need to be performed manually, such as by gathering the current and former financial statements for each exchange and entering all financial line items of interest into databases, resulting in a significantly less efficient and precise process. In addition, the proposed structured data requirement would enable EDGAR to perform technical validations (i.e., programmatic checks to ensure the documents are appropriately standardized, formatted, and complete) upon intake of the Form 1 disclosures, thus potentially improving the quality of the filed data by decreasing the incidence of non-substantive errors (such as the omission of values from fields that should always be populated). The nature and extent of such benefits may vary based on the content of each Form 1 Exhibit. As discussed in the subsequent economic analysis, studies of XBRL requirements for public operating company financial statements indicate a number of benefits for investors and market participants.71 The probability that, and extent to which, these particular benefits would arise from structured Form 1 disclosures could be heightened for Exhibits D and I, which would likewise include structured financial statements under the proposed rule amendments. In addition, the particular benefits of structuring data would likely vary based on the type of disclosures included in each particular Exhibit. Structured numerical disclosures, such as those that would be included on Exhibit I, 71 See PO 00000 lend themselves to mathematical functionality, such as the calculation of key ratios or the identification of extreme statistical outliers. Structured textual disclosures, such as those that would be included on Exhibit E, lend themselves to targeted keyword searching and more sophisticated sentiment analysis. The Commission is proposing to require Inline XBRL for certain exhibits to Form 1 and custom XML for others because the Commission believes each data language is better suited for particular types of disclosures. Exhibits D and I require disclosure of financial statements, and Inline XBRL was designed to accommodate financial statement information, including the particular metadata (e.g., the relevant fiscal period, whether the line item is on the balance sheet, whether the line item is a credit or debit) that must be linked to each data point within the financial statements to fully convey its semantic meaning to a machine reader. Exhibit E requires narrative disclosure regarding the trading system’s manner of operations, and whereas custom XML data languages only have the capacity to accommodate brief narrative descriptions, Inline XBRL can accommodate longer narrative descriptions with presentation capabilities that preserve humanreadability while maintaining machinereadability.72 72 Compare, for example, the Inline XBRL requirement for the description of investment strategies that open-end funds disclose on Form N– infra section X.C.1.b. Frm 00013 Fmt 4701 Sfmt 4702 Continued E:\FR\FM\18APP3.SGM 18APP3 ddrumheller on DSK120RN23PROD with PROPOSALS3 23932 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules The execution page of Form 1, Exhibits C (in part), H (in part), J, K, L, M, and N to Form 1, and the Rule 6a– 3(b) reports filed on Form 1 do not require such content. For these disclosures, the Commission believes the use of custom XML data languages would be preferable to Inline XBRL, because it would yield smaller file sizes and therefore enable more streamlined processing of the information.73 The Commission believes requiring custom XML rather than Inline XBRL for these disclosures would also be preferable because it would enable EDGAR to generate fillable web forms that would permit exchanges to input their disclosures into form fields rather than structure their disclosures in custom XML themselves. This added flexibility could ease the burden of compliance on exchanges in some instances, although exchanges may have the requisite sophistication to encode the disclosures in custom XML themselves without relying on fillable web forms.74 The proposed approach of requiring Inline XBRL for some Form 1 exhibits and custom XML for others would entail drawbacks for users of the information (including Commission staff and market participants). Specifically, data users would be unable to incorporate the Inline XBRL disclosures filed on Form 1 into the same datasets and applications as the custom XML disclosures filed on Form 1, and run analyses across the differently formatted Form 1 disclosures, without undertaking data conversion processes that are frequently burdensome and imprecise. Similarly, any technical validations programmed into EDGAR would be unable to check for any inappropriate inconsistencies between disclosures on Inline XBRL exhibits and disclosures on custom XML exhibits on a given Form 1, thus reducing the benefit of improved data quality that would be likely to result from structured data requirements. Finally, some Form 1 filers may already be using Inline XBRL to structure similar data for internal business purposes, such as through the use of Enterprise Resource Planning (‘‘ERP’’) systems; these filers may prefer to use Inline XBRL for all proposed structured data requirements of Form 1, rather than using a combination of 1A to the custom XML requirement for the brief description of the applicant’s business that SBS Entities disclose on Form SBSE. See Item 4 of Form N–1A; Item 7 of Form SBSE. 73 See also infra section X.E.4 (discussing other structured data languages that would result in smaller file sizes than Inline XBRL). 74 See infra note 458, as well as the text accompanying note 654. VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 Inline XBRL and custom XML.75 Nonetheless, the Commission believes the streamlined data processing associated with the smaller sizes of the proposed custom XML exhibits, as described earlier in this section, would justify any such drawbacks. The Commission is proposing to require exchanges to file copies of existing documents, such as copies of by-laws, written agreements, and listing applications, as unstructured PDF attachments. The Commission believes an unstructured PDF requirement would be preferable to a structured data requirement for these documents, because requiring exchanges to retroactively structure these existing documents, which were prepared for purposes outside of fulfilling the Commission’s disclosure requirements, would likely impose costly compliance burdens on exchanges that may not be justified in light of the commensurate informational benefits associated with more efficient disclosure use. Thus, the Commission does not believe structured data requirements are warranted for these copies of existing documents. 4. Request for Comment 1. The Commission requests comment on all aspects of the proposed revisions to Form 1 to facilitate electronic filing on EDGAR. Are there any aspects of transitioning the form to electronic filing that the Commission has not addressed above? Please explain. 2. Would electronic filing of Form 1 on EDGAR and use of Inline XBRL and custom XML for certain elements of Form 1 filings improve the usefulness of Form 1 by members of the public? Would any market participants derive benefit from regulatory use of the Inline XBRL and custom XML disclosures on Form 1? Please explain why or why not. 3. What, if any, costs would be associated with preparing Form 1 filings for electronic filing through EDGAR? Are those costs more, less or the same as those currently expended under the current Form 1 filing process? 4. Form 1 filers would be required to prepare certain elements of Form 1 filings using Inline XBRL and custom XML. Would Form 1 filers experience practical difficulties or incur significant costs in preparing and submitting those elements of Form 1 using Inline XBRL and custom XML? If so, please explain the nature of those difficulties and costs as well as any alternative approaches the Commission should adopt. 5. Would requiring different structured data languages for different 75 See infra note 570 (discussing the prevalence of XBRL integration into ERP systems). PO 00000 Frm 00014 Fmt 4701 Sfmt 4702 Exhibits of Form 1 provide benefits to data users or filers that justify any drawbacks associated such an approach? Please explain the nature of such benefits and drawbacks, and why the benefits would justify the drawbacks (or vice versa). 6. If a mix of structured data languages would be appropriate, should the specific data languages proposed for each Form 1 Exhibit be modified? For example, are there Form 1 Exhibits proposed as custom XML documents that would be better suited as Inline XBRL documents, or vice versa? Please explain why or why not. 7. Are there other structured data languages (i.e., data languages other than Inline XBRL and custom XML) that would be more appropriate for some or all of the Form 1 disclosures? Please explain why or why not, and, if another structured data language is deemed more appropriate, please identify. 8. Would requiring exchanges to file copies of existing documents as unstructured PDF attachments, rather than requiring exchanges to retroactively structure those documents in machine-readable data languages, ease compliance burdens on exchanges? If so, would the reduced compliance burden on exchanges justify foregoing the benefits to data users of structuring these existing documents? Please explain why or why not. B. Form 1–N 1. Relevant Statutory Framework Section 6 of the Exchange Act 76 sets out a framework for the registration and regulation of national securities exchanges. The Exchange Act was amended by the Commodity Futures Modernization Act of 2000 (‘‘CFMA’’) 77 to allow the trading of security futures products. Under the CFMA, markets that wish to trade security futures products are regulated jointly by the SEC and the CFTC. The Exchange Act, as amended by the CFMA, provides that futures exchanges that meet certain criteria and that wish to trade security futures products may file notice with the SEC to become a ‘‘Security Futures Product Exchange.’’ 78 2. Current Requirements for Filing Form 1–N Rule 6a–4 under the Exchange Act 79 sets forth the notice registration procedures for Security Futures Product Exchanges and permits futures 76 See 77 See 15 U.S.C. 78f. Public Law 106–554, Appendix E, 114 Stat. 2763. 78 See 15 U.S.C. 78f(g). 79 See 17 CFR 240.6a–4. E:\FR\FM\18APP3.SGM 18APP3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules exchanges to submit a notice registration on Form 1–N.80 Form 1–N requires information regarding how the futures exchange operates, its rules and procedures, corporate governance, its criteria for membership, its subsidiaries and affiliates, and the security futures products it intends to trade. Rule 6a–4 also requires entities that have submitted an initial Form 1–N to file: (1) amendments to Form 1–N in the event any information provided in the initial Form 1–N is rendered inaccurate or incomplete; (2) periodic updates of certain information provided in the initial Form 1–N; (3) certain information that is provided to the Security Futures Product Exchange’s members; and (4) a monthly report summarizing the Security Futures Product Exchange’s trading of security futures products. The information required to be filed with the Commission pursuant to Rule 6a–4 is designed to enable the Commission to carry out its statutorily mandated oversight functions and to ensure that Security Futures Product Exchanges continue to be in compliance with the Exchange Act. ddrumheller on DSK120RN23PROD with PROPOSALS3 3. Proposed Requirement To Electronically File Form 1–N The Commission proposes to amend Rule 6a–4 under the Exchange Act, as well as Form 1–N and the instructions to Form 1–N, to require the electronic filing on EDGAR of all submissions required by the rule and forms. As explained in section II above, the Commission believes that, among other benefits, these proposed amendments should increase efficiencies and decrease overall costs 81 related to the filing of these forms and the review of the filed forms by the Commission and its staff. A description of the Commission’s proposed amendments to Rule 6a–4, Form 1–N, and the instructions to Form 1–N to implement this proposed electronic filing requirement is provided below. a. Proposed Amendments to Rule 6a–4 The Commission proposes to add a new paragraph (d) to Rule 6a–4 to require the electronic filing of Form 1– N on EDGAR for exchange notice registrations and amendments made under Rule 6a–4 in accordance with the requirements of Regulation S–T. 80 See 17 CFR 249.10. discussed in more detail in the Economic Analysis, some entities that currently do not use EDGAR may incur relatively small initial costs to submit filings on EDGAR and there are some potential costs associated with structuring certain information. However, the Commission believes that savings from filing these forms electronically rather than in paper will be greater than the costs. See infra X.C.1.a. 81 As VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 The Commission also proposes changes to the text of Rule 6a–4 to accommodate electronic filing, as well as to make minor corrections and clarifications. Specifically, the Commission proposes to modify Rules 6a–4(a)(1) and 6a–4(c)(2) to resolve existing typographical errors and Rule 6a–4(b)(1)(i) to refer to the appropriate section of Form 1–N, rather than the ‘‘Execution Page,’’ to reflect the shift to electronic filing. The Commission proposes to modify Rules 6a–4(b)(5)(i), (ii) and (iii) to delete the phrase ‘‘satisfy this filing requirement by’’ because the language is superfluous. The Commission further proposes to make conforming changes to Rules 6a– 4(b)(5)(i)(A) and (B), and 6a–4(b)(5)(ii) and (iii)(A) and (B) to make clear that certain certifications by the exchange and listing of websites containing information required by Rule 6a–4 would be required to be made on electronic Form 1–N. The Commission further proposes to update the due dates in Rules 6a–4(b)(3) and (4) for the next annual and triennial filings from June 30, 2002, and June 30, 2004, to June 30, 2023, and June 30, 2025, respectively. Finally, the Commission proposes to make non-substantive changes to Rules 6a–4(a)(1)(i), 6a–4(a)(1)(i)(B) and 6a– 4(a)(1)(ii)(B) to update cross-references in those rules to the Commodities Exchange Act to reflect changes to the Commodities Exchange Act resulting from the Dodd-Frank Act. b. Proposed Amendments to Form 1–N and the Form 1–N Instructions In addition to the proposed revisions to Rule 6a–4, the Commission proposes to revise and reformat Form 1–N, and the instructions thereto, to accommodate the electronic filing of initial notices, subsequent amendments, supplemental material, and reports that are made on Form 1–N. The proposed changes to Form 1–N to permit electronic filing to the Commission would require minimal modifications to the form, as described below. The Commission also proposes to revise the Form 1–N instructions to facilitate the electronic filing of Form 1–N. As explained in the introduction to this section,82 these revisions would address when a form would be considered incomplete or deficient when filed and use of a custom XML data language for the cover page. The Commission believes that these proposed revisions to Form 1–N and the Form 1–N instructions would facilitate the filing of 82 See PO 00000 supra introductory text to section II. Frm 00015 Fmt 4701 Sfmt 4702 23933 the information mandated by Form 1–N and Rule 6a–4. The Commission proposes that electronic Form 1–N would solicit information through prompts on the form that would better organize the information collected. Proposed electronic Form 1–N also would require an exchange to electronically attach exhibits (or provide website URL(s) where applicable) via a new exhibit table that would be part of electronic Form 1–N. The proposed exhibit table would contain columns for the name of the exhibit, information required by the exhibit, whether alternative means of satisfying the filing of an exhibit are available for that particular exhibit (e.g., URL(s)), if permitted by applicable Commission rule, and checkboxes to indicate whether such alternative means are being used. Where Rule 6a–4 allows for alternative means of filing the information required under certain exhibits, the new exhibit table would permit an exchange to electronically provide the certifications and details necessary for an exchange to avail itself of these alternative means. The information required to be filed with the exhibits is not changing. Currently, Rule 6a–4 provides that in lieu of filing certain exhibits as part of a paper Form 1–N submission, an exchange may either: (i) identify where such information is published and certify its accuracy as of its publication date; (ii) certify that the information is available to the Commission and the public upon request; or (iii) indicate the location of the internet website where such information may be found and certify that the information available at such location is accurate as of its date.83 The proposal rule would not change the availability of these alternative means, only the method of providing the necessary certifications and details. As described above, instead of attaching paper exhibits, the proposal would require those exhibits to be submitted electronically. Similarly, instead of providing on paper the certifications and details required for an exchange to avail itself of these alternative means, the proposal would require those certifications and details to be provided via the electronic Form 1–N. In the event an exchange indicates on Form 1– N the location(s) of an internet website where such information may be found, where applicable, the Commission proposes to require the exchange to provide the URL(s) of the location(s) on the internet website where such information may be found, to certify that the information posted on such 83 See E:\FR\FM\18APP3.SGM 17 CFR 240.6a–2(b)(5). 18APP3 ddrumheller on DSK120RN23PROD with PROPOSALS3 23934 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules website(s) is accurate as of its date and is free and accessible (without any encumbrances or restrictions) to the general public, as an alternative to filing certain exhibits required by electronic Form 1–N. For electronic Form 1–N, the Commission proposes to add prompts prior to Section I that would require the exchange to identify the basis for submitting Form 1–N. Specifically, proposed electronic Form 1–N would require the exchange to check a box stating one of the following: (i) whether the filing is an initial notice of registration; (ii) whether the filing is an amendment to the notice of registration; (iii) whether the exchange is providing its annual filing for the year; (iv) whether the exchange is providing a triennial filing; (v) whether the exchange is providing supplemental materials; or (vi) whether the exchange is providing a report of security futures products traded during the prior calendar month. The Commission also proposes to amend the instructions to Form 1–N to add a new section titled ‘‘When to Use the Form,’’ which would explain when Form 1–N filings are required, and which of the six types of Form 1–N filing is required (e.g., initial registration, supplemental material). Currently, there is no place on Form 1– N for an exchange to indicate the type of filing that it is submitting, other than whether it is an application or an amendment. Accordingly, the Commission believes that capturing information regarding the type of Form 1–N filing would: (1) enhance the exchange’s communication with the Commission; (2) help the Commission more efficiently review Form 1–N submissions; and (3) facilitate the searching and sorting through of Form 1–N submissions by other potential users such as market participants and investors. The proposed electronic Form 1–N would also capture contact information for the exchange and certain individuals. Consistent with current Form 1–N, the proposed electronic Form 1–N would require the exchange to identify contact information for the exchange, a contact employee, and counsel for the exchange. Unlike current Form 1–N, proposed electronic Form 1– N would additionally require an email address for the contact employee and an email address for the exchange’s counsel. The Commission believes that the requirement to provide an email address for the exchange contact employee and the exchange’s counsel will expedite any subsequent VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 communications between Commission staff and the relevant exchange. In addition, to facilitate the electronic filing of the supplemental materials and monthly reports required under Rule 6a–4(c), the Commission proposes to add new Sections III and IV, respectively, to Form 1–N. Sections III and IV would require such materials and reports to be attached to Form 1– N via the new exhibit table in the same manner as exhibits to Form 1–N, and Section III would provide the exchange with the ability to enter URL(s) to the website location of the supplemental materials in lieu of its filing the supplemental materials via Form 1–N. Sections III and IV would not add new requirements beyond those currently included in Rule 6a–4(c). Currently, Rule 6a–4(c)(1) requires exchanges to file certain information with the Commission or in the alternative to indicate where such information can be found on an internet website controlled by the exchange. The proposed rule would require the filing of this information through Section III of electronic Form 1–N or, in the alternative, to provide through Section III of electronic Form 1–N the URL(s) of the location(s) on the internet website where such information can be found. Section III would also clarify that such website must be free and accessible (without any encumbrances or restrictions) by the general public. Likewise, Section IV would not change the substance of what must be reported; it would merely require the reporting of information required under Rule 6a–4(c) to be made on electronic Form 1–N instead of in paper format. Furthermore, the Commission proposes that electronic Form 1–N would continue to require an exchange to consent to service of any civil action brought by, or notice of any proceeding before, the Commission in connection with its activities. The current language under which the Security Futures Product Exchange consents to service via registered or certified mail at the main or mailing address provided on Form 1–N would continue to be included in the electronically filed form.84 In addition, the proposed electronic Form 1–N would require the individual who is submitting the form to check a box on behalf of the Security Futures Product Exchange to represent that the information and statements contained in the Form 1–N, including exhibits, schedules, or other documents, are 84 The Commission also proposes to delete the provision allowing for service of any civil action pursuant to confirmed telegram. PO 00000 Frm 00016 Fmt 4701 Sfmt 4702 current, true, and complete. The requirement to sign and notarize the form would be eliminated because it is unnecessary, not compatible with, and not required for electronic for electronic filing through EDGAR. Finally, the proposed electronic Form 1–N would require filers to submit the execution page in a custom XML data language specific to Form 1–N. As with the other Covered SRO Forms, filers would be able to input their execution page disclosures into a fillable web form that EDGAR would subsequently convert to custom XML. The Commission believes structuring the execution page in custom XML would improve the ability to sort, filter, and otherwise organize Form 1–N filings without creating significant additional burden on Form 1–N filers. The remainder of Form 1–N would not be structured, however, because the very limited number of Form 1–N filers and filings could mitigate much of the benefit derived from machinereadability of the disclosures contained therein.85 4. Request for Comment 9. The Commission requests comment on all aspects of the proposed revisions to Form 1–N to facilitate electronic filing on EDGAR. Are there any aspects of transitioning the form to electronic filing that the Commission has not addressed above? Please explain. 10. Would allowing for the attachment of exhibits electronically on Form 1–N or to provide through Section III of electronic Form 1–N the internet website where such information can be found offer the most efficient means of complying with the requirements of Form 1–N and Rule 6a–4? 11. Do commenters agree with the Commission’s belief that the proposed amendments would increase efficiencies and decrease costs compared to current requirements? 12. What, if any, costs would be associated with preparing Form 1–N filings for electronic filing through EDGAR? Are those costs more, less or the same as those currently expended under the current Form 1–N filing process? 13. Do commenters agree with the Commission’s belief that structuring the execution page in custom XML would improve the ability to sort, filter, and otherwise organize Form 1–N filings without creating significant additional burden on Form 1–N filers? 14. Should the Commission require structuring other portions of Form 1–N (or the entirety of Form 1–N) rather than 85 See E:\FR\FM\18APP3.SGM infra Section IX.C.3. 18APP3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules only structuring the execution page? Please explain why or why not. If so, which structured data language or languages should be used for structuring the other portions of Form 1–N? C. Proposed Form 15A 1. Relevant Statutory Framework Section 15A of the Exchange Act sets forth the statutory standards for registration as a national securities association or as an affiliated securities association.86 Section 15A(b) states that the Commission shall not approve registration as a national securities association unless the Commission determines that the applicant meets specified statutory criteria.87 Under Exchange Act Rule 15Aa–1, an applicant for registration as a national securities association must file a registration statement with the Commission on Form X–15AA–1.88 The information required to be provided on Form X–15AA–1 includes, among other things, lists of officers, governors, and committee members, as well as membership lists.89 The Commission reviews the completed Form X–15AA– 1 to evaluate whether the applicant meets the standards set forth in section 15A(b) for registration as a national securities association. Furthermore, under Exchange Act Rule 15Aj–1(a), every association applying for registration or registered as a national securities association must file with the Commission an amendment to its registration statement or any amendment or supplement thereto promptly after discovering any inaccuracy therein. Similarly, under Exchange Act Rule 15Aj–1(b), every association applying for registration or registered as a national securities association, promptly after any change which renders no longer accurate any information contained or incorporated in its registration statement or in any amendment or supplement thereto, must file with the Commission a current supplement to its registration statement setting forth such change.90 86 See 15 U.S.C. 78o–3. 15 U.S.C. 78o–3(b). 88 See Exchange Act Rule 15Aa–1 (17 CFR 240.15Aa–1) and Form X–15AA–1 (17 CFR 249.801). Currently, FINRA is the only national securities association registered with the Commission. The National Futures Association (‘‘NFA’’), as specified in Section 15A(k) of the Exchange Act, is also registered as a national securities association, but only for the limited purpose of regulating the activities of NFA members that are registered as brokers or dealers in security futures products under section 15(b)(11) of the Exchange Act. 89 See 17 CFR 249.801. 90 See Exchange Act Rule 15Aj–1(a) and (b), 17 CFR 240.15Aj–1(a) and (b). These filings are ddrumheller on DSK120RN23PROD with PROPOSALS3 87 See VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 Finally, under Exchange Act Rule 15Aj–1(c), every association applying for registration or registered as a national securities association must file annual amendments to its registration statement with the Commission.91 2. Current Requirements for Filing Forms X–15AA–1, X–15AJ–1, and X– 15AJ–2 An applicant for registration as a national securities association is required to file a registration statement and exhibits with the Commission on Form X–15AA–1 in triplicate.92 Every association applying for registration or registered as a national securities association is required to file with the Commission an amendment or supplement to its registration statement on Form X–15AJ–1 and an annual consolidated supplement to its registration statement on Form X–15AJ– 2. These filings also must be made in triplicate, at least one copy of which must be signed and attested in the same manner as required in the case of the original registration statement.93 Every association applying for registration or registered as a national securities association is required to file Form X– 15AJ–2 with the Commission promptly after March 1 of each year.94 Currently, the information collected by these forms is substantially similar: Form X–15AA–1, the registration statement for registration as a national securities association, requests 29 items of information and includes 3 exhibits; 95 Form X–15AJ–1, for filing any amendments or supplements to the registration statement, requests no information beyond that requested by Form X–15AA–1; 96 and Form X–15AJ– 2, for filing the annual consolidated submitted on Form X–15AJ–1, 17 CFR 249.802. See 17 CFR 240.15Aj–1(d) (requiring that such filings be made on Form X–15Aj–1). 91 See Exchange Act Rule 15Aj–1(c), 17 CFR 240.15Aj–1(c). These filings are submitted on Form X–15AJ–2, 17 CFR 249.803. See 17 CFR 240.15Aj– 1(d) (requiring that such filings be made on Form X–15Aj–2). Rule 15Aj–1(c)(1)(ii) also requires the filing of complete sets of the constitution, by-laws, rules, and related documents of the association, once every three years. 92 See 17 CFR 240.15Aa–1. 93 See 17 CFR 240.15Aj–1. 94 See 17 CFR 240.15Aj–1(c). 95 See 17 CFR 249.801. 96 See 17 CFR 249.802. Form X–15AJ–1 and Form X–15AA–1 both require that if the association is registered, or applying for registration, as an affiliated securities association, the respondent list the registered national securities association to which the applicant or reporting association is affiliated. In addition, Form X–15AA–1 asks the applicant to state its reasons for believing that such affiliation will be granted. Form X–15AA–1 also requires the applicant to estimate the annual dollar volume of transactions effected by members of the applicant association. PO 00000 Frm 00017 Fmt 4701 Sfmt 4702 23935 supplement to the registration statement, only requires one additional item of information, the inclusion of the date of the filing, which currently is not required by Form X–15AA–1.97 3. Proposed Requirements To Electronically File on Form 15A Information Currently Filed on Forms X–15AA–1, X–15AJ–1, and X–15AJ–2 a. Proposed Amendments to Rules 15Aa–1 and 15Aj–1 As discussed in detail below, the Commission proposes to amend Rule 15Aa–1 and redesignate it as Rule 15aa– 1,98 redesignate Rule 15Aj–1 99 as Rule 15aa–2, redesignate Form X–15AA–1 as Form 15A, amend the instructions to proposed Form 15A, and repeal Forms X–15AJ–1 and X–15AJ–2 in connection with the Commission’s proposal to require applicants and national securities associations to electronically file on a duly executed Form 15A the information currently filed on Forms X– 15AA–1, X–15AJ–1, and X–15AJ–2. As stated above in the introduction to this section II, the Commission believes that, among other benefits, its proposal to revise the forms relating to registration as a national securities association should increase efficiencies and decrease costs incurred by applicants for registration as a national securities association and by national securities associations.100 In addition, the proposal should facilitate Commission review of the information to be provided on proposed Form 15A. To facilitate electronic filing of proposed Form 15A, the Commission is proposing to amend Rule 15Aa–1 to require electronic filing. The proposed amendments to Rule 15Aa–1 would require that filing submitted pursuant to Rule 15Aa–1 be filed electronically on EDGAR in accordance with the requirements of Regulation S–T (17 CFR part 232). The proposed amendments to Rule 15Aa–1 would align the electronic filings requirements with changes being proposed under Rule 6a–1 (regarding Form 1 submissions) as well as the proposed amendments to Rule 17ab2–1, which would set forth the proposed electronic filing requirements for Form CA–1 submissions.101 As stated above, 97 See 17 CFR 249.803. Form 15A would require the inclusion of the date of the filing. Capturing the date (in a structured manner) would assist the Commission in determining compliance with the rule requirement that annual supplements be filed promptly after Mar. 1 of each year (17 CFR 240.15Aj–1(c)). 98 See 17 CFR 240.15Aa–1. 99 See 17 CFR 240.15Aj–1. 100 See supra section II. 101 See also proposed amendments to Rule 6a–4. E:\FR\FM\18APP3.SGM 18APP3 23936 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules the Commission further proposes to redesignate Rule 15Aj–1 102 as Rule 15aa–2. ddrumheller on DSK120RN23PROD with PROPOSALS3 b. Proposed Form 15A The Commission proposes to redesignate Form X–15AA–1 as Form 15A and to incorporate in proposed Form 15A information related to amendments and supplements to the registration statement currently filed on Form X–15AJ–1 and information related to the annual consolidated supplement to the registration statement currently filed on Form X–15AJ–2. The Commission proposes that new Form 15A would solicit information through prompts on the form that would better organize the information that is currently collected through Forms X– 15AA–1, X–15AJ–1, and X–15AJ–2, which would make it easier for respondents to comply with the filing requirements. Furthermore, exhibits would be required to be electronically uploaded to EDGAR. The Commission believes that, among other benefits as detailed in the Economic Analysis,103 the proposal should increase efficiencies and decrease costs by consolidating substantially similar information currently filed on three paper forms into one electronic form. Because the information currently filed on the three forms would be captured entirely on proposed Form 15A, the Commission also proposes to repeal Forms X–15AJ–1 and X–15AJ–2.104 Proposed Form 15A would contain eleven sections. Preceding Section I of proposed Form 15A, the proposed form would contain prompts that would require the association to note the basis for submitting the form. The prompts would indicate whether the submission is an initial application filed pursuant to Rule 15aa–1 or an amendment or supplement—which currently would be filed on Form X–15AJ–1 or X–15AJ–2, respectively—pursuant to proposed Rule 15aa–2. Section I would be titled ‘‘Organization,’’ and it would solicit the following information about the association: (i) its name; (ii) its statutory 102 See 17 CFR 240.15Aj–1. The proposed amendments to Rule 15Aj–1 would include updated references to relevant forms as well as updates to take into account electronic filing. 103 See infra Section X.C.1 (discussing benefits such as reducing the risk that non-electronic submissions are delayed or increasing the ability to run comparisons across reporting periods). 104 The Commission proposed in 2004 to simplify and streamline the disclosure process for national securities associations by, among other things, redesignating Form X–15AA–1 and combining it with Forms X–15AJ–1 and X–15AJ–2. See Exchange Act Release No. 50699 (Nov. 18, 2004), See 69 FR 71126, 71155 (Dec. 8, 2004) (File No. S7–39–04). The Commission did not adopt any final rule based on that proposal. VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 address, principal executive office address, and the addresses of its branch or district offices (or if there are no such branch or district offices, the association would check the ‘‘Not Applicable’’ box); (iii) the contact information of each person authorized to receive service of process and notices on behalf of the association from the Commission; (iv) the contact information for the association’s counsel; (v) the association’s form of organization (e.g., corporation, sole proprietorship), date of organization, and name of state and reference to any statute thereof under which the association is organized; and (vi) information about its directors, officers, and certain other persons, and information about the members of its standing committees, or, in lieu of providing such information on proposed Form 15A, the association could provide a certification that the information can be obtained in a publication.105 The information solicited in Section I would be the same as that solicited in Items 1 through 6 on current Form X–15AA–1. Section I also would require the association to attach Exhibits A through D. Exhibit A would require the association to attach copies of its corporate governance documents (e.g., constitution, by-laws), or in lieu of filing such documents, the association could provide a certification that the information may be obtained in a publication 106 or that the information is kept up to date and available to the Commission and the public upon request.107 Exhibit A of proposed Form 15A would solicit the same information as Exhibit A of current Form X–15AA– 1 but would reflect additional ways that the association could satisfy its filing obligation. Exhibit B would require the association to attach a balance sheet of the association as of a date within 30 days of the filing of an initial application, or promptly after the close of each fiscal year if the filing is a supplement, together with an income and expense statement for the year preceding such date or, if the association was organized during such year, for the period from the date of such organization to the date of such balance sheet. Exhibit B of proposed Form 15A would solicit the same information as Exhibit B of current Form X–15AA–1. Exhibit C would require the association to provide a list, as of the latest practical date, of all of its members, and in lieu of supplementing the disclosed 105 See proposed 17 CFR 240.15aa–2(c)(1)(ii)(A). id. 107 See proposed 17 CFR 240.15aa–2(c)(1)(ii)(B). information regarding the names of members and their principal places of business when there is a change to that information—as is required under current Rule 15Aj–1(b)—the association would be able to certify that changes in that information are reported in a record which is published at least once a month and promptly filed with the Commission, reflecting an additional way that the association could satisfy its filing obligation.108 Exhibit C of proposed Form 15A would solicit the same information as Exhibit C of current Form X–15AA–1, and would add the requirement that the association set forth the date of election to membership for each member elected to membership after December 31, 1994, which is currently required on Exhibit C of Form X–15Aj–2. Exhibit D of proposed Form 15A would solicit the same information as Exhibit D of current Form X–15AA– 1, requiring the association to electronically file any notices, reports, circulars, loose-leaf insertions, riders, new additions, lists or other records of changes when, as, and if such records are made available to members of the association, as required by proposed Rule 15aa–2(d)(2). Sections II through IX of proposed Form 15A would solicit information about specific association rules and other information that is currently solicited on Form X–15AA–1. Section II would be titled ‘‘Membership’’ and require the association to cite the specific rule(s) of the association addressing membership requirements, such as any rule restricting membership. Section II would pose the same questions about the association’s membership rules as Items 7 through 10 of current Form X–15AA–1. Section III would be titled ‘‘Representation of Membership’’ and require the association to cite the specific rule(s) of the association that assures fair representation of its members, which information is currently solicited in Item 11 of Form X–15AA–1. Section IV would be titled ‘‘Dues and Expenses’’ and require the association to cite the specific rule(s) of the association that provides for the equitable allocation of dues among its members to defray reasonable expenses of administration, which information is currently solicited in Item 12 of Form X–15AA–1. Section V would be titled ‘‘Business Conduct and Protection of Members.’’ This section would require the association to cite specific rule(s) of the association addressing the protection of members and member conduct with regard to principles of fair trade and 106 See PO 00000 Frm 00018 Fmt 4701 Sfmt 4702 108 See E:\FR\FM\18APP3.SGM proposed 17 CFR 240.15aa–2(b)(3). 18APP3 ddrumheller on DSK120RN23PROD with PROPOSALS3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules dealing, such as the association rule(s) designed to prevent fraudulent and manipulative acts and practices and the rule(s) designed to provide safeguards against unreasonable profits or unreasonable rates of commissions or other charges. Section V also would solicit information about association rule(s) addressing the disclosure of financial information or other business conduct requirements, such as the types of financial statements the association requires from its members, rules with respect to member insolvency, and rules requiring the keeping and preserving of books and records. Section V would pose the same questions about business conduct and the protection of members as Items 13 through 23 of current Form X–15AA–1. Section VI would be titled ‘‘Disciplining of Members’’ and would require the association to cite the specific rule(s) of the association that addresses member discipline. Section VI would pose the same questions about member discipline as Items 24 and 25 of current Form X–15AA–1. Section VII would be titled ‘‘Affiliated Associations’’ and would require the association to cite the specific rule(s) of the association that provide for the admission of registered affiliated securities associations. Section VII would pose the same question as Item 26 of current Form X–15AA–1. Section VIII would be titled ‘‘Miscellaneous’’ and require the association to cite the specific rule(s) of the association that (i) regulate the dealings of a member with any nonmember broker or dealer and (ii) provide a method for enforcing compliance on the part of its members with the rules of the association. Section VIII of proposed Form 15A would pose the same questions as Items 27 and 28 of current Form X–15AA–1. Section IX would be titled ‘‘Additional Information for Registration as an Affiliated Securities Association’’ and would apply only to applications submitted for registration as an affiliated securities association. Section IX would require the applicant to provide the registered national securities association with which it seeks to be affiliated, its reasons for believing that such affiliation will be granted, and the estimated dollar volume of transactions effected by members of the applicant. Section IX of proposed Form 15A would pose the same questions as Items 29 and 30 of current Form X–15AA–1. Section X would require the association to provide the contact information for its contact employee, and Section XI would provide the signature block and attestation. Consistent with the proposed VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 amendments to Form 1, Form 1–N, and Form CA–1, the entity filing the proposed Form 15A would consent to service of process to the individuals listed in Section I, item 3, which service of process could be via registered or certified mail. Section XI would also require the filer to represent that the information and statements contained in the form, including exhibits, schedules, or other documents, are current, true, and complete. In addition, the Commission proposes to amend the instructions for proposed Form 15A to include general directions for preparing and filing the form, describe the seven types of submissions that may be made under proposed Rules 15aa–1 and 15aa–2, and set forth the items, exhibits, and schedules required to be filed for each type of submission. Finally, proposed Form 15A would require the execution page to be filed in a custom XML data language specific to Form 15A. As with the other Covered SRO Forms, filers would be able to input their execution page disclosures into a fillable web form that EDGAR would subsequently convert to custom XML. The Commission believes structuring the execution page in custom XML would improve the ability to sort, filter, and otherwise organize Form 15A filings, enhancing the ability of the Commission to compare filings from year to year without creating significant additional burden on filers. The remainder of Form 15A would not be structured, however, because the very limited number of Form 15A filers and filings could mitigate the benefit derived from machine-readability of the disclosures contained therein.109 4. Request for Comment 15. The Commission requests comment on all aspects of the proposed revisions to Form 15A to facilitate electronic filing in EDGAR. Are there any aspects of transitioning the form to electronic filing that the Commission has not addressed above? Please explain. 16. Do commenters agree with the Commission’s belief that the proposed amendments would increase efficiencies and decrease costs compared to current requirements? 17. Do commenters agree that the additional ways that the association could satisfy its filing obligations under the rule would be beneficial? Are there additional methods of satisfying the filing obligation that the Commission should adopt? 18. Do commenters agree with the Commission’s belief that structuring the 109 See PO 00000 infra Section IX.C.4. Frm 00019 Fmt 4701 Sfmt 4702 23937 execution page in custom XML would improve the ability to sort, filter, and otherwise organize Form 15A filings without creating significant additional burden on filers? 19. Should the Commission require structuring other portions of Form 15A (or the entirety of Form 15A) rather than only structuring the execution page? Please explain why or why not. If so, which structured data language or languages should be used for structuring the other portions of Form 15A? D. Form CA–1 1. Relevant Statutory Framework Section 17A of the Exchange Act governs the establishment of a national system for the prompt and accurate clearance and settlement of securities transactions.110 Section 17A(b)(2) of the Exchange Act 111 states that a clearing agency may be registered under the terms and conditions provided thereunder and in accordance with the provisions of section 19(a) of the Exchange Act 112 by filing with the Commission an application for registration in such forms as the Commission, by rule, may prescribe containing the rules of the clearing agency and such other information and documents as the Commission, by rule, may prescribe as necessary or appropriate in the public interest or for the prompt and accurate clearance and settlement of securities transactions. The Commission adopted Rule 17ab2– 1 113 and Form CA–1,114 pursuant to section 17A(b)(2) of the Exchange Act, in order to set forth the requirements for registration as a clearing agency or for an exemption from registration as a clearing agency under section 17A. 2. Current Requirements for Filing Form CA–1 Rule 17ab2–1(a) states that an application for registration or for exemption from registration as a clearing agency or an amendment to any such application shall be filed with the Commission on Form CA–1, in accordance with the instructions thereto.115 Form CA–1 contains general instructions for preparing and filing Form CA–1 and instructions relating to the filing of amendments to a Form CA– 1. It also includes an execution page and 19 exhibits. The Form CA–1 execution page requests general information from the applicant, as well as information 110 See 15 U.S.C. 78q–1. 15 U.S.C. 78q–1(b)(2). 112 See 15 U.S.C. 78s(a). 113 See 17 CFR 240.17ab2–1. 114 See 17 CFR 249b.200. 115 See 17 CFR 240.17ab2–1(a). 111 See E:\FR\FM\18APP3.SGM 18APP3 23938 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules ddrumheller on DSK120RN23PROD with PROPOSALS3 regarding whether the clearing agency is exposed to loss if a participant fails to perform its obligations to the clearing agency. The exhibits to Form CA–1 also require an applicant clearing agency to provide information regarding business organization, financial position, operational capacity, access to its services, and, for those seeking an exemption from registration, a statement demonstrating why granting an exemption from registration would be consistent with the public interest, the protection of investors, and the purposes of section 17A, including the prompt and accurate clearance and settlement of securities transactions and the safeguarding of securities and funds. The instructions to Form CA–1 require that an applicant clearing agency file four completed copies of Form CA–1 with the Commission.116 Rule 17ab2–1(e) requires that if responses to items 1–3 of Form CA–1 become inaccurate, misleading or incomplete, the registrant shall promptly file an amendment on Form CA–1 to correct the inaccurate, misleading or incomplete information.117 The execution page of Form CA–1 further states that, by submitting Form CA–1 along with any schedules, exhibits, and attachments thereto, the registrant and the person executing for the registrant represents that all information contained in Form CA–1 is true, current, and complete, and that submission of any amendment after registration has become effective represents that items 1–3 and any schedules, exhibits, and attachments related to items 1–3 remain true, current, and complete as previously submitted.118 Further, in accordance with the instructions to Form CA–1, if an item is amended, the registrant must repeat all unamended items as they last appeared on the page on which the amended item appears and must file four copies of the new page, each with updated and properly completed cover and execution pages.119 3. Proposed Requirement To Electronically File Form CA–1 The Commission is proposing to revise certain aspects of Rule 17ab2–1, Form CA–1, and the instructions to Form CA–1 to require electronic filing of applications on Form CA–1 and subsequent amendments thereto by applicants, registered clearing agencies, and exempt clearing agencies. The proposed revisions therefore would 17 CFR 249b.200. 117 See 17 CFR 240.17ab2–1(e). 118 See 17 CFR 249b.200. 119 See id. 20:06 Apr 17, 2023 4. Proposed Amendments to Rule 17ab2–1 To facilitate electronic filing of Form CA–1, the Commission is proposing to revise Rule 17ab2–1 to require electronic filing. Specifically, the Commission is proposing to revise paragraphs (a), (d), (e), and (f) to reference the method of filing as being electronic, and is adding paragraph (g) to provide specific instructions on the method of filing electronically, including a requirement for an electronic signature (defined as an electronic entry in the form of a magnetic impulse or other form of computer data compilation of any letter or series of letters or characters comprising a name, executed, adopted or authorized as a signature). Additionally, new paragraph (g) would specify a cutoff time of 5:30 p.m. eastern standard time or eastern daylight saving time for purposes of deeming which business day (defined to exclude certain 120 See supra section I.B. 15 U.S.C. 78s(a) and (b). 122 See 17 CFR 242.1006; see also Exchange Act Release No. 73639 (Nov. 19, 2014), 79 FR 72251, 72258 (Dec. 5, 2014) (listing categories of SCI entities under Regulation SCI). 121 See 116 See VerDate Sep<11>2014 require: (i) an applicant to file electronically its initial application on Form CA–1 for registration or for an exemption from registration and any subsequent amendments thereto; (ii) a registered clearing agency to file electronically any amendments to its Form CA–1 after being granted registration as a clearing agency; and (iii) an exempt clearing agency to file electronically any amendments to its Form CA–1 after being granted an exemption from registration as a clearing agency. As explained above in the introduction to Section II, the Commission believes that the proposed rule and form revisions should increase efficiencies and decrease costs related to the filing of Form CA–1 and amendments thereto by both registered and exempt clearing agencies, and the Commission’s review of filed Forms CA–1 and amendments thereto.120 In addition, while exempt clearing agencies are not subject to the SRO rule filing process under section 19(b) of the Exchange Act,121 certain exempt clearing agencies are currently subject to electronic filing requirements under Regulation SCI,122 and so the electronic filing of Form CA–1 and amendments thereto would not conflict with existing requirements for these entities under Regulation SCI, and therefore would simplify the process into only electronic filing procedures, rather than a mix of electronic and paper filing procedures. Jkt 259001 PO 00000 Frm 00020 Fmt 4701 Sfmt 4702 days of the week, holidays, and closures) that a filing occurred. It would also specify that a filing would be deemed timely filed if it is required to be filed on a day that is not a business day and is filed on the next available business day. As stated above in the introduction to Section II, the Commission believes that, among other benefits, its proposal to revise the forms relating to registration as a clearing agency should increase efficiencies and decrease costs incurred by applicants for registration as a clearing agency. 5. Proposed Amendments to Form CA– 1 and the Form CA–1 Instructions The Commission proposes that electronic Form CA–1 would solicit information through prompts on the form that would better structure the information collected. In addition, the Commission proposes that electronic Form CA–1 would require exhibits to be attached through a new exhibit table that would be part of electronic Form CA–1. The Commission further proposes that all information posted on a website pursuant to electronic Form CA–1 must be free and accessible (without any encumbrances or restrictions) by the general public. The Commission proposes to add prompts prior to Section I of the form that would require the registrant to note the basis for submitting Form CA–1. Specifically, proposed electronic Form CA–1 would require the registrant to check a box stating one of the following: (i) whether the filing is an application pursuant to Rule 17ab2–1(a) and if it is, whether the registrant is applying for registration as a clearing agency 123 or requesting an exemption from registration as a clearing agency; (ii) whether the filing is an amendment to an initial Form CA– 1 application pursuant to Rule 17ab2– 1(d) prior to the Commission’s grant of registration or an exemption from registration, or an update to an initial Form CA–1 application correcting information that is inaccurate, misleading, or incomplete, pursuant to Rule 17ab2–1(e); (iii) whether the filing is to provide the registrant’s consent to an extension of the time period within which the Commission must take action on an initial Form CA–1 application and the date the extension expires; 124 (iv) whether the filing is to withdraw an 123 If the registrant is applying for registration as a clearing agency, the proposed changes to Form CA–1 would require the registrant to indicate whether it requests the Commission to consider granting exemption from specified clearing agency requirements during a temporary registration period, in accordance with paragraph (c)(1) of Rule 17ab2–1 under the Exchange Act. 124 See 15 U.S.C. 78s(a)(1)(B). E:\FR\FM\18APP3.SGM 18APP3 ddrumheller on DSK120RN23PROD with PROPOSALS3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules initial Form CA–1 application prior to the Commission taking action on the application; (v) whether the filing is an amendment to Form CA–1 pursuant to Rule 17ab2–1(e) following Commission action to grant registration or an exemption; or (vi) whether the filing is required by a Commission order approving an application for exemption from registration as a clearing agency pursuant to section 17A(b)(1) of the Exchange Act. The Commission believes that requiring a registrant to indicate the type of filing would help facilitate the electronic filing of, and the Commission’s review of, Form CA–1 submissions, including information required of an exempt clearing agency by an exemptive order. The Commission also proposes to modify Form CA–1 to add a requirement for information about a contact employee. The proposed Form CA–1 would require the name, title, email address and telephone number of an employee prepared to respond to questions about the Form CA–1 submission. The Commission believes that including information about a contact employee would facilitate communication between the registrant and the Commission. Similarly, the Commission proposes to require the email address of the person in charge of the registrant’s clearing agency activities. The Commission believes that obtaining that individual’s email address would also facilitate communication between the registrant and the Commission. In addition, the proposed Form CA– 1 would require a registrant to electronically attach exhibits by using an exhibit table for all of the exhibits required by the current form, broken down into sections.125 There are also sections in the proposed form that may be applicable to only certain filings, with Section VIII covering requests for an exemption from registration under exhibit S, and Section IX covering submission of any conditions, reports, notices or other submissions to the Commission required as directed in any Order approving an application for exemption from registration as a clearing agency, under exhibit T. Furthermore, the proposed Form CA–1 would preserve the current ability for a registrant to indicate that it is requesting confidential treatment with respect to certain of the disclosed information, and make a request for confidential treatment, under Section X. In addition, 125 Sections III through VII of proposed Form CA– 1 would consist of exhibits relating to General Information, Business Organization, Financial Information, Operational Capacity, and Access to Services, respectively. VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 as discussed further below in Section VII, the Commission is proposing new paragraph (j) to Rule 24b–2 to require that a filer not omit the confidential portion from the material filed in electronic format on Form CA–1, but rather request confidential treatment of information provided in electronic format by completing Section X of Form CA–1. The Commission also is proposing to omit item 7(b) from the current Form CA–1. Item 7(b) solicits the following information: as of September 30, 1975, the dollar amount of the potential exposure of registrant, if any, as a result of differences (without offsetting long differences against short differences and without offsetting any suspense account items) in its clearing agency activities not resolved after 20 business days. On December 1, 1975, it became unlawful for any clearing agency—not subject to temporary exemptive relief under Rule 17ab2–1(b) that has since expired—to perform the functions of a clearing agency unless registered or exempt.126 Before December 1, 1975, however, applicant clearing agencies may have performed the functions of a clearing agency prior to registering with the Commission or obtaining an exemption from registration. Therefore, to facilitate review by the Commission of applications on Form CA–1 by such clearing agencies, item 7(b) of Form CA– 1 requires disclosure, as of September 30, 1975, of the dollar amount of the potential exposure of the clearing agency from differences in its clearing agency activities not resolved after 20 business days. Information provided pursuant to this provision is no longer useful to the Commission because information on potential exposures to the clearing agency as of September 30, 1975, is stale data. Accordingly, the Commission believes that it is no longer necessary to include item 7(b) on Form CA–1. The Commission also is proposing to revise the instructions to Form CA–1 to facilitate the electronic filing of Form CA–1. The proposed form instructions would not contain the language in paragraph 2 under Part I of the current form stating that clearing agencies are required to file four completed copies of Form CA–1 with the Commission, or the language in paragraph 4 under Part I of 126 Rule 17ab2–1(b) provides any clearing agency that filed an application with the Commission on or before Nov. 24, 1975, with a temporary exemption from the registration provisions of section 17A(b) of the Exchange Act and the rules and regulations thereunder until the Commission either grants registration, denies registration, or grants an exemption from registration. See 17 CFR 240.17ab2–1(b). PO 00000 Frm 00021 Fmt 4701 Sfmt 4702 23939 the current form providing instructions relating to the requirements for copies of Form CA–1. Further, the proposed instructions would not contain the language of paragraph 3 under Part I of the current form, which states that ‘‘[t]he date on which a Form CA–1 is received by the Commission shall be the date of filing thereof if all the requirements with respect to filing have been complied with.’’ This language would be inconsistent with the proposed date-of-filing provision to be added to Rule 17ab2–1, which would provide for a 5:30 p.m. eastern standard time or eastern daylight saving time, whichever is currently in effect, on a business day, cutoff for a filing to be deemed filed on the day on which it is submitted. In addition, existing paragraph 13 under Part III of the current form states that, if an item is amended, the registrant must repeat all unamended items as they last appeared on the page on which the amended item appears and must file four copies of the new page, each with updated and properly completed cover and execution pages. The requirement to repeat unamended items on certain pages relates solely to the filing of amended paper copies and, therefore, the Commission believes it would not be relevant to the proposed electronic filing process. The Commission believes that requiring a registered or exempt clearing agency to electronically file a full exhibit would help facilitate the performance of the Commission’s regulatory functions because the Commission would be able to review an amended exhibit to Form CA–1 in its entirety and more easily compare the revised exhibit against the prior version, particularly if numerous, non-consecutive pages are being amended. The proposed Inline XBRL requirement for certain Form CA–1 exhibits would further facilitate this comparison process, because Inline XBRL would allow reviewers to create automated redline comparisons of an exhibit (or specific portion thereof) to a prior version of the same exhibit (or specific portion thereof). Accordingly, the Commission proposes to delete the reference to pagination that is currently in Item III, paragraph 13. In addition, Form CA–1 and the instructions to Form CA–1 would continue to require a registered or exempt clearing agency to consent to the service of notice of a proceeding under sections 17A or 19 of the Exchange Act involving the registrant. The current language under which the registrant consents to service via registered or certified mail at the address provided on Form CA–1 would continue to be E:\FR\FM\18APP3.SGM 18APP3 23940 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules ddrumheller on DSK120RN23PROD with PROPOSALS3 included in the electronically filed form.127 Finally, Form CA–1 would require a registered or exempt clearing agency to structure Schedule A (descriptive responses complementing the clearing agency’s execution page disclosures) and Exhibits C (description of organizational structure), F (description of material pending legal proceedings), H (financial statements), J (description of services and functions), K (description of security measures and procedures), L (description of safeguarding measures and procedures), M (description of backup systems), O (description of, and reasons for, criteria governing access to services), R (prohibitions and limitations on access to services), and S (explanation of requested exemption) in Inline XBRL. The execution page and Exhibits A (persons controlling management or policies, but not the copies of written agreements with such persons), B (officers, managers, and individuals occupying similar positions), D (persons controlled by or under common control with the clearing agency, and description of control relationship), E (dues, fees, and other charges for clearing activities, but not the copies of the constitution, articles of incorporation or association, by-laws, rules procedures, and instruments corresponding thereto), I (office addresses and activities performed in each office), N (participants or applicants for participation), and Q (schedule of fees for services rendered by participants) would also be structured, albeit in a custom XML data language specific to Form CA–1 rather than in Inline XBRL. The copies of existing documents filed with Exhibits A (copies of written agreements with control persons), E (copies of the constitution, articles of incorporation or association, by-laws, rules, procedures, and instruments corresponding thereto), G (copies of contracts with exchanges, national securities associations, and securities markets), P (copies of contracts governing subscription terms), and T (submissions to the Commission required as directed in any approval order) would be filed as unstructured PDF documents. PROPOSED STRUCTURED DATA REQUIREMENTS FOR FORM CA–1 Inline XBRL. Schedule A, Exhibits C, F, H, J, K, L, M, O, R, S. 127 The provision allowing for service of any civil action pursuant to confirmed telegram would be deleted. VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 be heightened for Exhibit H, which PROPOSED STRUCTURED DATA REQUIREMENTS FOR FORM CA–1— would likewise include structured financial statements. In addition, the Continued Custom XML. Unstructured PDF. Execution page, Exhibits A (in part), B, D, E (in part), I, N, Q. Exhibits A (in part), E (in part), G, P, T. The Commission believes the proposed structuring requirements would facilitate access to the clearing agency’s disclosures (enabling, for example, more efficient retrieval of only those disclosures filed by a subset of clearing agencies over particular reporting periods) and analysis (such as by comparing individual disclosures or sets of disclosures across clearing agencies and time periods). This could benefit market participants through enhanced oversight of clearing agencies. Market participants (such as brokerdealers, analysts, and other clearing agencies) could also benefit from direct use of the machine-readable disclosures on Form CA–1. For example, institutional investors could leverage the machine-readability of Exhibit J to run automated redlines of a clearing agency’s safeguarding procedure descriptions from prior periods, thereby detecting any significant procedural changes that could raise concern. Without the proposed structured data requirements, performing these types of analyses would need to be done manually, such as by gathering the current and former descriptions of safeguarding procedures for each exchange and entering them all into databases, resulting in a significantly less efficient and precise process. In addition, the proposed structured data requirement would enable EDGAR to perform technical validations (i.e., programmatic checks to ensure the documents are appropriately standardized, formatted, and complete) upon intake of the Form CA–1 disclosures, thus potentially improving the quality of the filed data by decreasing the incidence of nonsubstantive errors (such as the omission of values from fields that should always be populated). The nature and extent of such benefits may vary based on the content of each Form CA–1 Exhibit. As discussed in the Economic Analysis, studies of XBRL requirements for public operating company financial statements indicate a number of benefits for investors and market participants.128 The probability that, and extent to which, these particular benefits would arise from structured Form CA–1 disclosures could 128 See PO 00000 infra section X.C.1.b. Frm 00022 Fmt 4701 Sfmt 4702 particular benefits of structuring data would likely vary based on the type of disclosures included in each particular Exhibit. Structured numerical disclosures, such as those that would be included on Exhibit H, lend themselves to mathematical functionality, such as the calculation of key ratios or the identification of extreme statistical outliers. Structured textual disclosures, such as those that would be included on Exhibit K, lend themselves to periodover-period redline comparisons, targeted keyword searching, and more sophisticated sentiment analysis. The Commission is proposing to require Inline XBRL for certain exhibits to Form CA–1 and custom XML for others, because the Commission believes each data language is better suited for particular types of disclosures. Exhibit H requires disclosure of financial statements, and Inline XBRL was designed to accommodate financial statement information, including the particular metadata (e.g., the relevant fiscal period, whether the line item is on the balance sheet, whether the line item is a credit or debit) that must be linked to each data point within the financial statements to fully convey its semantic meaning to a machine reader. Exhibits C, F, J, K, L, M, O, R, and S require narrative disclosures on topics such as the clearing agency’s services, security, backup systems, and criteria governing access to services; whereas custom XML data languages only have the capacity to accommodate brief narrative descriptions, Inline XBRL can accommodate longer narrative descriptions with presentation capabilities that preserve humanreadability while maintaining machinereadability.129 The execution page of Form CA–1, Exhibits A (in part), B, D, E (in part), I, N, and Q do not require such content. For these disclosures, the Commission believes the use of custom XML data languages would be preferable to Inline XBRL, because it would yield smaller file sizes and therefore enable more streamlined processing of the information.130 The Commission believes requiring custom XML rather than Inline XBRL for these disclosures would also be preferable because it would enable EDGAR to generate fillable web forms that would permit 129 See supra note 89. also infra section X.E.4 (discussing other structured data languages that would result in smaller file sizes than Inline XBRL). 130 See E:\FR\FM\18APP3.SGM 18APP3 ddrumheller on DSK120RN23PROD with PROPOSALS3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules clearing agencies to manually input their disclosures into the form fields, rather than structure their disclosure in the custom XML data language themselves. This added flexibility could ease the burden of compliance on clearing agencies in some instances, although clearing agencies may have the requisite sophistication to encode the disclosures in custom XML themselves without relying on fillable web forms. The proposed approach of requiring Inline XBRL for some Form CA–1 exhibits and custom XML for others would entail drawbacks for users of the information (including Commission staff and market participants). Specifically, data users would be unable to incorporate the Inline XBRL disclosures on Form CA–1 into the same datasets and applications as the custom XML disclosures on Form CA–1, and run analyses that incorporate both types of information, without undertaking data conversion processes that are frequently burdensome and imprecise. Similarly, any technical validations programmed into EDGAR would be unable to check for any inappropriate inconsistencies between disclosures on Inline XBRL exhibits and disclosures on custom XML exhibits on a given Form CA–1, thus reducing the benefit of improved data quality that would be likely to result from structured data requirements. Finally, some Form CA– 1 filers may already be using Inline XBRL to structure similar data for internal business purposes, such as through the use of ERP systems; these filers may prefer to use Inline XBRL for all proposed structured data requirements of Form CA–1, rather than using a combination of Inline XBRL and custom XML.131 Nonetheless, the Commission believes the streamlined data processing associated with the smaller file sizes of the proposed custom XML exhibits, as described earlier in this section, would justify any such drawbacks. The Commission is proposing to require clearing agencies to file copies of existing documents, such as copies of by-laws, written agreements, and contracts governing subscription terms, as unstructured PDF attachments. The Commission believes requiring clearing agencies to retroactively structure these existing documents, which were prepared for purposes outside of fulfilling the Commission’s disclosure requirements, would likely impose costly compliance burdens on clearing agencies that may not be justified in light of the commensurate informational 131 See infra note 570 (discussing the prevalence of XBRL integration into ERP systems). VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 benefits associated with more efficient disclosure use. Thus, the Commission does not believe structured data requirements are warranted for these copies of existing documents. 6. Request for Comment 20. The Commission requests comment on all aspects of the proposed revisions to Form CA–1 to facilitate electronic filing in EDGAR. Are there any aspects of transitioning the form to electronic filing that the Commission has not addressed above? Please explain. 21. The Commission has proposed new Section IX to address the submission of any conditions, reports, notices or other submissions to the Commission required as directed in any Order approving an application for exemption from registration as a clearing agency, under Exhibit T. Do the proposed modifications, as described above, appropriately address the wide range of submissions that these types of materials encompass, or is there a type of submission under any Order that would be technologically infeasible to require to be submitted under Section IX in EDGAR? Please explain why or why not. 22. Clearing agencies would be required to prepare certain elements of Form CA–1 filings using Inline XBRL and custom XML. Would clearing agencies experience practical difficulties or incur significant costs in preparing and submitting those elements of Form CA–1 using Inline XBRL and custom XML? If so, please explain the nature of those difficulties and costs as well as any alternative approaches the Commission should adopt. 23. Would requiring different structured data languages for different Exhibits of Form CA–1 provide benefits to data users or filers that justify any drawbacks associated such an approach? Please explain the nature of such benefits and drawbacks, and why the benefits would justify the drawbacks (or vice versa). 24. If a mix of structured data languages would be appropriate, should the specific data languages proposed for each Form CA–1 Exhibit be modified? For example, are there Form CA–1 Exhibits proposed as custom XML documents that would be better suited as Inline XBRL documents, or vice versa? Please explain why or why not. 25. Are there other structured data languages (i.e., data languages other than Inline XBRL and custom XML) that would be more appropriate for some or all of the Form CA–1 disclosures? Please explain why or why not, and, if the PO 00000 Frm 00023 Fmt 4701 Sfmt 4702 23941 former, please identify the structured data language or languages that would be more suitable. 26. Would requiring clearing agencies to file copies of existing documents as unstructured PDF attachments, rather than requiring clearing agencies to retroactively structure those documents in machine-readable data languages, ease compliance burdens on clearing agencies? If so, would the reduced compliance burden on clearing agencies justify forgoing the benefits to data users of structuring these existing documents? Please explain why or why not. E. Form 19b–4(e) 1. Relevant Statutory Framework Section 19(b) of the Exchange Act, as amended, requires each SRO to file with the Commission, in accordance with such rules as the Commission may prescribe, copies of any proposed rule, or any proposed change in, addition to, or deletion from the rules of such SRO (collectively, a ‘‘proposed rule change’’) accompanied by a concise general statement of the basis and purpose of such proposed rule change.132 Rule 19b–4(e)(1) provides that the listing and trading of a new derivative securities product by an SRO shall not be deemed a proposed rule change under the Exchange Act if the Commission has approved, pursuant to section 19(b) of the Exchange Act,133 the SRO’s trading rules, procedures, and listing standards for the product class that would include the new derivative securities product, and the SRO has a surveillance program in place for such product class.134 2. Background of Rule 19b–4(e) As discussed above, Rule 19b–4(e)(1) under the Exchange Act provides that the listing and trading of a new derivative securities product 135 by an SRO shall not be deemed a proposed rule change subject to certain conditions. The Commission determined that, when it has approved an SRO’s trading rules, procedures, and listing standards for the product class that would include the new derivative securities product, and the SRO has an adequate surveillance program in place for such product class, the listing and trading of the new derivative securities product would be ‘‘reasonably and fairly 132 See 15 U.S.C. 78s(b). 15 U.S.C. 78s(b). 134 See 17 CFR 240.19b–4(e)(1). 135 Rule 19b–4(e) defines a new derivative securities product as ‘‘any type of option, warrant, hybrid securities product or any other security, other than a single equity option or a security futures product, whose value is based, in whole or in part, upon the performance of, or interest in, an underlying instrument.’’ See 17 CFR 240.19b–4(e). 133 See E:\FR\FM\18APP3.SGM 18APP3 23942 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules ddrumheller on DSK120RN23PROD with PROPOSALS3 implied’’ by the SRO’s existing trading rules, procedures, and listing standards, and therefore, would not be deemed a proposed rule change under Rule 19b– 4(c)(1).136 For purposes of Rule 19b–4(e)(1), SROs have submitted, and the Commission has approved pursuant to section 19(b)(2) of the Exchange Act, trading rules, procedures, and listing standards for several types of new derivative securities products including, for example, exchange-traded funds, index-linked securities and other exchange-traded structured products, and narrow and broad-based index options.137 As expressed in the Rule 19b–4(e) Adopting Release, the Commission adopted Form 19b–4(e) in order for the Commission to maintain an accurate record of all new derivative securities products traded on the SROs in order to notify the Commission when an SRO begins to trade a new derivatives securities product not required to be submitted as a proposed rule change to the Commission for approval.138 The Commission also stated that it would make Forms 19b–4(e) public.139 At the time of the adoption of Rule 19b–4(e), the Commission estimated the new rule would eliminate approximately 45 SRO rule filings each year,140 and the information regarding new derivative securities products required pursuant to Rule 19b–4(e) was required to be submitted using a paper Form 19b–4(e). 136 See Exchange Act Release No. 40761 (Dec. 8, 1998), 63 FR 70952 (Dec. 22, 1998) (‘‘Rule 19b–4(e) Adopting Release’’). See also 17 CFR 240.19b– 4(c)(1). 137 See, e.g., Exchange Act Release Nos. 42787 (May 15, 2000), 65 FR 33598 (May 24, 2000) (SR– Amex–2000–14) (approving generic listing standards for exchange traded funds called Portfolio Depositary Receipts and Index Fund Shares); 45718 (Apr. 9, 2002), 67 FR 18965 (Apr. 17, 2002) (SR– NYSE–2002–07) (approving generic listing standards for Trust Issued Receipts); 55687 (May 1, 2007), 72 FR 25824 (May 7, 2007) (SR–NYSE–2007– 27) (approving generic listing standards for IndexLinked Securities); 48405 (Aug. 25, 2003), 68 FR 52257 (Sep. 2, 2003) (SR–ISE–2003–05) (approving generic listing standards for narrow-based index options); 78397 (June 22, 2016), 81 FR 49320 (July 27, 2016) (SR–NYSEArca–2015–110) (approving generic listing standards for Managed Fund Shares); and 88566 (Apr. 6, 2020), 85 FR 20312 (Apr. 10, 2020) (SR–CboeBZX–2019–097) (approving generic listing standards for Exchange-Traded Fund Shares). 138 See Rule 19b–4(e) Adopting Release, 63 FR at 70963. 139 See id. at 70964, fn. 139 (‘‘Form 19b–4(e) will be publicly available through the Commission’s Public Reference Room. In addition, the Commission will endeavor to make the Forms available on the Commission’s website.’’). 140 See Rule 19b–4(e) Adopting Release, 63 FR at 70964. VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 3. Current Requirements for Filing Form 19b–4(e) Under Rule 19b–4(e)(2)(ii), SROs are required to submit Form 19b–4(e) 141 to the Commission within five business days after commencement of trading a new derivative securities product.142 In addition, pursuant to the instructions for completing Form 19b–4(e), SROs are required to submit an original and nine paper copies of a duly executed Form 19b–4(e) with the Commission.143 4. Proposed Rescission of Form 19b–4(e) The Commission proposes to amend Rule 19b–4 to rescind Form 19b–4(e) and instead require SROs to post on their internet websites the information currently included on Form 19b–4(e). More specifically, under the proposal, an SRO would be required to post on its public internet website, within five business days after commencing the trading of a new derivatives securities product, the information required in current Part I, Items 2 through 9 of Form 19b–4(e) for that product:144 (a) type of issuer of new derivatives securities product (e.g., clearinghouse, brokerdealer, corporation, etc.); (b) class of new derivative securities product; (c) name of underlying instrument; (d) if the underlying instrument is an index, state whether it is broad-based or narrow-based; (e) ticker symbol(s) of new derivative securities product; (f) market(s) upon which securities comprising the underlying instrument trades; (g) settlement methodology of new derivative securities product; and (h) position limits of new derivative securities product (if applicable). The Commission proposes that this information be provided using the most recent versions of an XML schema and the associated PDF renderer that would be published on the Commission’s website.145 The Commission believes that this information should be available at a prominently posted hyperlink on the SRO’s website that is free and 141 See 17 CFR 249.820. Rule 19b–4(e)(2)(ii). Although Rule 19b– 4(e) relates to the listing and trading of new derivative products by SROs, the only SROs that list and trade new derivative products and file Forms 19b–4(e) to the Commission are national securities exchanges. 143 See Items II and III of the Instructions for Completing Form 19b–4(e), 17 CFR 249.820. 144 Part I, Item 1, ‘‘Name of Self-Regulatory Organization Listing New Derivative Securities Product,’’ would not be necessary to include because the table of new derivative securities products would be on the website of the SRO that has listed and is trading the new derivatives securities product, so the identity of the listing SRO will be self-evident. 145 See proposed 17 CFR 240.19b–4(e)(2)(ii). 142 See PO 00000 Frm 00024 Fmt 4701 Sfmt 4702 accessible (without any encumbrances or restrictions) by the general public. As is required currently in Part II of Form 19b–4(e), an SRO would be required to provide on its website a representation by a duly authorized SRO official that the governing body of the SRO has duly approved, or has duly delegated its approval to such official for, the listing and trading of the new derivative securities product according to its relevant trading rules, procedures, surveillance programs, and listing standards to assure that such products are being listed and traded in accordance with the SRO’s obligations under Rule 19b–4(e), as well as an email address to contact that official. The Commission believes that the requirement to provide an email address for the exchange contact employee will expedite communications between Commission staff and the relevant exchange. Any SRO that relies on Rule 19b–4(e) to list and trade a new derivative securities product would continue to be subject to Rule 19b– 4(e)(2)(i), which requires the SRO to maintain at its principal place of business a file, available to Commission staff for inspection, of all relevant records and information pertaining to each new derivatives securities product traded pursuant to Rule 19b–4(e) for a period of not less than five years, the first two years in an easily accessible place, as prescribed in Rule 17a–1 under the Exchange Act.146 Thus, the SRO trading a new derivative securities product would need to maintain the relevant records and information regarding the new derivative securities product to comply with the recordkeeping and reporting requirements of Rule 19b–4(e). As under the current rule, and as contemplated in the adoption of the current rule, the Commission will review SRO compliance through its routine inspections of SROs.147 The Commission believes that its proposal will provide the same information for the Commission and the public as is provided via current Form 19b–4(e) without necessitating the additional steps of submitting a paper form containing that information with the Commission. The Commission believes that, among other benefits, this proposal should increase efficiencies and decrease costs related to both the submission of Form 19b–4(e) by an SRO and the Commission’s processing of submitted Forms 19b–4(e). As discussed above, since the Commission adopted 146 See 147 See 17 CFR 240.17a–1. Rule 19b–4(e) Adopting Release, 63 FR at 70963. E:\FR\FM\18APP3.SGM 18APP3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules Rule 19b–4(e), technology has evolved significantly and the internet has played an increasingly vital role in information distribution.148 During this period, the Commission has encouraged the dissemination of information electronically via the internet and other automated systems and services.149 In addition, the Commission now receives thousands of Forms 19b–4(e) per year from the SROs, rather than the 45 per year as stated in the Form 19b–4(e) Adopting Release, each of which is submitted to the Commission and then must be made public individually by the Commission,150 and therefore require, in the aggregate, additional time to process before the information contained in those Forms becomes available for Commission review and also publicly available.151 The Commission believes that requiring SROs to post the information contained in the current Form 19b–4(e) on its website would accomplish the goal outlined in the Rule 19b–4(e) Adopting Release, for the Commission to maintain accurate information regarding these new derivatives securities products, while ensuring that information remains publicly available.152 In addition, the Commission believes that requiring SROs to post that information within 5 business days after commencement of trading a new derivatives product, as the current rule requires, will continue to allow the Commission to determine that an SRO has properly relied on the rule and continue to do so in a timely fashion.153 The Commission believes this is appropriate given the large number of Forms 19b–4(e) that are submitted currently as well as the nature of the information contained in those Forms, which is highly standardized. Providing that information on the relevant SRO’s publicly available website would render that information in a more readily accessible format by both the Commission and the public than submitting numerous Forms 19b–4(e) does currently, and would have the added benefit of eliminating the twostep process of an SRO submitting a Form 19b–4(e) and then that Form being made public through the Commission. ddrumheller on DSK120RN23PROD with PROPOSALS3 148 See supra note 13. See also supra note 14. 150 See id. at 70964, n. 139. 151 See FR Doc. 2022–17308, 87 FR 49894 (Aug. 12, 2022) (Request to OMB for extension of Rule 19b–4(e) and Form 19b–4(e); SEC File No. 270–447; OMB Control No. 3235–0504) (identifying 2,331 Forms 19b–4(e) submitted to the Commission based on the average annual number of Forms 19b–4(e) submitted in 2019, 2020, and 2021). 152 See Rule 19b–4(e) Adopting Release, 63 FR at 70963, 70964, n. 139. 153 See 17 CFR 240.19b–4(e)(2)(ii). 149 Id. VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 In addition, because that information would be subject to the relevant SRO’s books and records obligations 154 and subject to the Commission’s examination and inspection authority,155 the Commission believes that the accuracy of the records for Commission review would be commensurate with the accuracy of the information on the Forms 19b–4(e) submitted to the Commission under the current rule. 5. Request for Comment 27. Would it be appropriate to require the information submitted on current Form 19b–4(e) instead to be posted on the relevant SRO’s publicly available internet website? Would there be particular compliance or oversight concerns such a requirement would raise even though the relevant SRO publication of that information would remain subject to existing books and records requirements and the Commission’s examination and inspection authority? If so, explain what those concerns are, and why. 28. Should the Commission instead amend Rule 19b–4(e), Form 19b–4(e), and the instructions thereunder to require Form 19b–4(e) to be submitted electronically on EDGAR? If so, explain why. 29. Is there an alternative method for submitting Form 19b–4(e) that the Commission should use instead? If so, explain what such an alternative method would be, and why. 30. What, if any, costs would be associated with posting the information required under proposed Rule 19b–4(e) on the SRO’s website? Are those costs more, less, or the same as those currently expended under the current Form 19b–4(e) filing process? Similarly, what costs would be associated with requiring SROs to post Rule 19b–4(e) information using a custom XML data language and associated PDF renderer? Would such costs not justify the benefits associated with such requirements? Please explain why or why not. 31. Would requiring a different structured data language, such as Inline XBRL, for the Rule 19b–4(e) information provide benefits to data users justify any drawbacks associated such an approach? If so, please identify the more appropriate data language, explain the nature of such benefits and drawbacks, and why the benefits would not justify the drawbacks (or vice versa). 32. Should the Commission also amend Rule 19b–4(e) to require that the 154 See 155 See 17 CFR 240.17a–1. Rule 19b–4(e) Adopting Release, 63 FR at information submitted on current Form 19b–4(e) be posted on the relevant SRO’s publicly available internet website sooner than five business days after commencement of trading a new derivative securities product? Please explain why or why not. Are there any issues, concerns or burdens with shortening the timeframe? If so, please describe. Is there another timeframe earlier than five business days (e.g., one business day, two business days, three business days) within which it would be appropriate to require such information be posted? If so, please explain what that timeframe should be, and why. F. Rule 19b–4(j) and Form 19b–4 1. Relevant Statutory Framework Section 19(b) of the Exchange Act, as amended, requires each SRO to file with the Commission, in accordance with such rules as the Commission may prescribe, copies of any proposed rule, or any proposed change in, addition to, or deletion from the rules of such SRO (collectively, a ‘‘proposed rule change’’) accompanied by a concise general statement of the basis and purpose of such proposed rule change.156 Rule 19b–4, subject to certain exceptions, requires an SRO to submit each proposed rule change by electronically filing Form 19b–4.157 2. Proposed Rule Change The Commission proposes to remove the requirement under 17 CFR 240.19b– 4(j) (‘‘Rule 19b–4(j)’’) 158 that the signatory to an electronically submitted Form 19b–4 manually sign a signature page or other document authenticating, acknowledging, or otherwise adopting his or her signature that appears in typed form within the electronic filing, execute that document before or at the time the rule filing is electronically submitted, and retain that document for its records in accordance with Rule 17a– 1. The Commission also proposes to remove the related language in Form 19b–4 and the instructions to Form 19b– 4 that a duly authorized officer of the SRO manually sign one copy of the completed Form 19b–4 and that the manually signed signature page be maintained pursuant to section 17 of the Exchange Act.159 The Commission 156 See 15 U.S.C. 78s. 17 CFR 240.19b–4(b). 158 See 17 CFR 240.19b–4(j). 159 This proposal is for purposes of filing with the Commission only and does not affect the requirements with which certain SROs subject to oversight by other regulatory agencies must continue to comply. Currently, under section F of the instructions to Form 19b–4, a registered clearing agency for which the Commission is not the 157 See 70963. PO 00000 Frm 00025 23943 Continued Fmt 4701 Sfmt 4702 E:\FR\FM\18APP3.SGM 18APP3 23944 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules believes these amendments are appropriate because the manual signature requirement under Rule 19b– 4 is redundant and therefore unnecessary given that Form 19b–4, which is filed electronically, already requires an electronic signature. 3. Request for Comment 33. Should the Commission retain the requirement under Rule 19b–4(j) that the signatory to an electronically submitted Form 19b–4 manually sign a signature page or other document authenticating, acknowledging, or otherwise adopting his or her signature that appears in typed form within the electronic filing, execute that document before or at the time the rule filing is electronically submitted, and retain that document for its records in accordance with Rule 17a–1? If so, explain why. 34. Should the Commission retain the related language in Form 19b–4 and the instructions to Form 19b–4 that a duly authorized officer of the SRO manually sign one copy of the completed Form 19b–4 and that the manually signed signature page be maintained pursuant to section 17 of the Exchange Act? If so, explain why. 35. What, if any, costs would be associated with removing the manual signature requirement? Are those costs more, less, or the same as those currently expended under the current Form 19b–4 filing process? ddrumheller on DSK120RN23PROD with PROPOSALS3 G. Conforming Technical Amendment to Rule 202.3(b) Under the Exchange Act As noted above, the Commission proposes a technical amendment to conform its Informal and Other Procedures to the changes proposed herein to Rules 6a–1, 6a–2, and 6a–3 with respect to Form 1 filings and to Rule 6a–4 with respect to Form 1–N filings. Specifically, the Commission proposes conforming changes to Rules 202.3(b)(2) and (b)(3) of its Informal and Other Procedures 160 to clarify that defective applications on Form 1 and appropriate regulatory agency also shall file with its appropriate regulatory agency three copies of the form, one of which shall be manually signed, including exhibits. A clearing agency that also is a designated clearing agency shall file with the Federal Reserve three copies of any form containing an advance notice, one of which shall be manually signed, including exhibits; provided, however, that this requirement may be satisfied instead by providing the copies to the Federal Reserve in an electronic format as permitted by the Federal Reserve. The Municipal Securities Rulemaking Board (‘‘MSRB’’) also shall file copies of the form, including exhibits, with the Federal Reserve, the Comptroller of the Currency, and the Federal Deposit Insurance Corporation. These requirements, all promulgated pursuant to 15 U.S.C. 78q(c)(1), would remain in effect. 160 See 17 CFR 202.3(b)(2) and (3). VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 notices on Form 1–N, respectively, would be returned to the Filer,161 and would not be held by the Commission.162 While Rules 202.3(b)(2) and (b)(3) currently permit the Commission to hold defective applications on Form 1 and defective notices on Form 1–N, the Commission believes that holding such applications or notices serves no purpose, as defective Form 1 and Form 1–N filings do not allow the Commission and its staff to review such applications and notices.163 In such situations, the Commission believes that it would be appropriate to return the defective filings to the Filers so that the Filers may correct the defective filings. Additionally, Rules 202.3(b)(2) and (b)(3) 164 are being amended to update the name of the Division of Trading and Markets from the previously used Division of Market Regulation. generally paralleled the filing requirements imposed under Exchange Act Rules 6a–3, 15Aj–1, and 17a–21— rules applicable to national securities exchanges, registered securities associations, and the MSRB, respectively, that required the filing of certain supplemental materials.167 Clearing agencies, unlike other SROs, previously had not been required to file with the Commission supplemental materials (other than stated policies, practices, and interpretations deemed to be SRO rules under Rule 19b–4) they made generally available. Accordingly, the rule established a filing requirement parallel to the filing requirements already imposed on other SROs.168 The Commission stated in its adoption of the rule that receipt of such information was important to its oversight responsibilities for clearing agencies under the Exchange Act.169 III. Proposed Requirements for Clearing Agencies To Electronically File Covered Supplemental Materials B. Updated Staff Statement and Resulting Alternate Arrangements for Rule 17a–22 Compliance Since the Updated Staff Statement was issued, registered clearing agencies have been submitting electronic copies of filings required under Rule 17a–22 to the Commission through a dedicated email inbox, rather than submitting paper copies.170 In Part VIII.D., the Commission requests comment as to whether the Commission should preserve the ability of registered clearing agencies to submit materials for filing to the Commission through a dedicated email inbox if the proposed amendment is adopted. Such an alternative would eliminate the burdens associated with producing and mailing paper copies of the materials to the Commission for filing. It would also reduce the time between mailing and delivery of paper copies, improving the efficiency of the submission and review process. Since the Updated Staff Statement was issued, the Commission staff has observed that filing through the dedicated email inbox has resulted in a A. Current Rule 17a–22 Current Exchange Act Rule 17a–22 requires that within 10 days after issuing, or making generally available, to its participants or to other entities with whom it has a significant relationship, such as pledgees, transfer agents, or SROs, any material (including, for example, manuals, notices, circulars, bulletins, lists or periodicals), a registered clearing agency shall file three copies of such material with the Commission.165 A registered clearing agency for which the Commission is not the ARA shall at the same time file one copy of such material with its ARA.166 In adopting Rule 17a–22 in 1980, the Commission established for clearing agencies a filing requirement that 161 For purposes of this Rule, the Commission would return Form 1 and Form 1–N filings to Filers by deleting the application or notice from EDGAR and sending an email to the contact person notifying the Filer: (i) that the application or notice was deleted from EDGAR and thus is considered as being returned under Rule 202.3(b)(2) or Rule 202.3(b)(3), respectively, of the Commission’s Informal and Other Procedures, as applicable; (ii) of the reason(s) for such return; and (iii) that, therefore, the application or notice is not considered filed with the Commission. 162 For purposes of this rule, an application on Form 1 or a notice on Form 1–N is deemed defective if: (i) it was not properly signed; (ii) it did not contain the required information, including exhibits; or (iii) the information provided was presented in a manner that would make it difficult for the Commission and its staff to conduct its review of the application or notice. See 17 CFR 249.1 and 249.10. 163 Id. 164 See 17 CFR 202.3(b)(2) and (3). 165 See 17 CFR 240.17a–22. 166 See id. PO 00000 Frm 00026 Fmt 4701 Sfmt 4702 167 See 17 CFR 240.6a–3; 17 CFR 240.15Aj–1; and 17 CFR 240.17a–21, respectively. 168 See 17 CFR 240.6a–3; 17 CFR 240.15Aj–1; and 17 CFR 240.17a–21, respectively. Since the adoption of Rule 17a–22 in 1980, the Commission has developed a robust and extensive regulatory regime applicable to clearing agencies. See generally Exchange Act Rule 17ad–22, 17 CFR 240.17ad–22 (establishing, among other things, requirements related to governance, operations, risk management). Much of the information required to be filed with the Commission under current Rule 17a–22 is available to the Commission both through this developed regime and through other regulatory sources. 169 See Exchange Act Release No. 17258 (Oct. 30, 1980), 45 FR 73906, 73914 (Nov. 7, 1980) (‘‘Rule 17a–22 Adopting Release’’). 170 See supra note 5. E:\FR\FM\18APP3.SGM 18APP3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules more efficient process for both the clearing agencies and for Commission staff. C. Proposed Amendments to Rule 17a– 22 The Commission is now proposing to amend Rule 17a–22 to: (i) replace the requirement to file supplementary materials with the Commission or an ARA in paper form with a requirement to post such materials on the clearing agency’s internet website; and (ii) reduce the timeframe for compliance with the rule from 10 days to 2 business days for the posting requirement.171 By replacing the paper filing requirement for registered clearing agencies with an electronic posting requirement via the clearing agency’s internet website, the proposed amendment aligns with the Commission’s larger-scale objective tied to its mission of enhancing the efficiency and effectiveness of its regulatory regime for registered clearing agencies under the Exchange Act. Specifically, proposed Rule 17a–22 would require that within 2 business days after issuing, or making generally available, to its participants or other entities with whom it has a significant relationship, any material (including, for example, manuals, notices, circulars, bulletins, lists or periodicals) that is not otherwise required to be posted on its internet website pursuant to any requirement under section 19(b) of the Exchange Act or the rules thereunder, a registered clearing agency shall prominently post such material on its internet website. ddrumheller on DSK120RN23PROD with PROPOSALS3 1. Two-Day Timeframe for Compliance The Commission believes reducing the notice timeframe from 10 days to 2 business days is reasonable and appropriate for three reasons. First, the timeframe of 2 business days helps ensure the timely dissemination of information to affected market participants and is consistent with a registered clearing agency’s obligation under Rule 19b–4(m) to update its internet website to post any rule changes filed pursuant to Exchange Act Rule 19b–4 within two business days.172 As discussed above, like proposed rule 171 In consultation with the Federal Reserve, the Commission is proposing to remove the obligation to send an additional paper copy to a clearing agency’s ARA from Rule 17a–22. If the supplemental materials are prominently posted on the clearing agency’s internet website, all its regulatory authorities will have access to them, removing the need to file an additional paper copy. Separate from any requirements in Rule 17a–22, certain provisions in section 17A of the Exchange Act require notice to the ARA, and the proposed amendments to Rule 17a–22 do not affect those provisions. See, e.g., 15 U.S.C. 78q–1(b)(5)(C). 172 See 17 CFR 240.19b–4(m). VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 changes, supplementary materials required by Rule 17a–22 are important to the Commission’s ongoing supervision of clearing agencies, and the timely posting of such materials ensures that Commission supervision is effectively considering the most current information available to the clearing agency and its participants.173 Clearing agencies should already have established internal policies and procedures in place to meet these posting requirements for proposed rule changes, and the Commission believes these procedures could be reasonably replicated to meet the timeframes under the proposed amendments to Rule 17a– 22. Second, by replacing the requirement to file paper copies with a requirement to post the materials on the clearing agency’s internet website, the Commission believes that the time required to comply with the proposed rule (when compared to the current rule) should be significantly reduced. By eliminating the paper filing requirement, clearing agencies will no longer have to expend the time and resources associated with copying, packaging and mailing three copies of supplemental materials to the Commission and, where applicable, the ARA, which should in turn allow for shorter compliance timeframes. Third, the Commission believes that 2 business days for posting is reasonable because the supplemental materials will have already been prepared for distribution to its participants or other entities with whom it has a significant relationship, and as such, should be readily available for posting to the clearing agency’s internet website within the proposed 2 business days. 2. Scope of Supplemental Materials Rule 17a–22, as proposed to be amended, does not change the scope of supplemental materials to which the rule applies. Accordingly, the proposed rule retains the language that any supplemental material issued or made generally available to a clearing agency’s participants or other entities with whom it has a significant relationship would be subject to Rule 17a–22. The proposed rule retains the list of illustrative examples of types of supplemental materials. In addition, copies of any material issued or made generally available to participants or other entities with whom the clearing agency has significant relationships (e.g., issuers, transfer agents, custodian, service providers, other non-participant entities that avail themselves of clearing agency services, etc.) are, under the current rule, required to be filed, where applicable. Because the significant relationships vary across clearing agencies, the Commission is proposing to delete the list of examples of such relationships from the proposed rule text. However, the removal of these examples from the text of the proposed rule is not an indication that these entities are no longer considered within the scope of the rule. Rather, the Commission is proposing to eliminate this list to ensure that clearing agencies consider appropriately the universe of entities with whom they have a significant relationship, which varies by registered clearing agency because they serve different markets or offer different services and may also change over time as market practices evolve. The Commission continues to believe that issuers, transfer agents, custodians, service providers, and other nonparticipant entities that use the clearing agency’s services are examples of the types of entities to whom a clearing agency may provide supplementary materials under the rule, and the revisions are intended to avoid confusion because certain types of relationships, such as issuers and transfer agents, exist in some markets but not others. A clearing agency generally should consider the markets it serves, the services it offers, and the universe of entities with whom it has a significant relationship when addressing its compliance with the rule. While the scope of supplemental materials subject to the rule remains unchanged under the proposed rule, the Commission is adding new rule text to expressly exclude any materials subject to section 19(b) of the Exchange Act or rules thereunder from the supplemental materials posting requirement, and thereby specify that the materials subject to proposed Rule 17a–22 are distinct from any posting requirements required under section 19(b) and Rule 19b–4 thereunder. This proposed added text is consistent with the Commission’s stated purpose of Rule 17a–22 in 1980,174 and this proposed change is intended to avoid the imposition of duplicative posting requirements. Specifically, in the Rule 17a–22 Adopting Release, the Commission also amended, among other things, the requirements applicable to the filing by SROs of proposed rule changes and certain other materials under Rule 19b– 4 and Form 19b–4.175 There, the Commission revoked a provision on Form 19b–4B requiring SROs to file 174 See 173 See PO 00000 supra section I.C. Frm 00027 Fmt 4701 generally Rule 17a–22 Adopting Release. 175 Id. Sfmt 4702 23945 E:\FR\FM\18APP3.SGM 18APP3 23946 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules notice of stated policies, practices and interpretations not deemed to be rules because, in part, the provision duplicated the filing requirements in Rules 6a–3, 15Aj–1, and 17a–21.176 These rules required national securities exchanges, registered securities associations, and the MSRB, respectively, to submit to the Commission any material they made generally available. Accordingly, in conjunction with its revocation of the above-noted provision of Form 19b–4B, the Commission adopted Rule 17a–22, which established a filing requirement for registered clearing agencies parallel to the filing requirement under Rules 6a–3, 15Aj–1, and 17a–21. In so doing, the Commission distinguished between materials subject to Rule 19b–4 and those subject to the supplemental material rules. The proposed inclusion of new text relating to Rule 19b–4 is meant to specify clearing agencies’ obligations under Rule 17a–22 as being separate and distinct from the obligation under Rule 19b–4. In general, a clearing agency should consider within the scope of Rule 17a–22 policies, procedures, and other documents that help explain to affected parties the rules of the clearing agency but are not also required to be filed under Rule 19b–4. ddrumheller on DSK120RN23PROD with PROPOSALS3 3. Meaning of ‘‘Generally Available’’ The existing requirement under Rule 17a–22 to post only those materials that the clearing agency is ‘‘making generally available’’ would remain unchanged. Any document that is made ‘‘generally available’’ to a wide or diverse group of individuals or entities should be considered supplemental material and as such, posted to the clearing agency’s website. Because of the ‘‘generally available’’ component in Rule 17a–22, the Commission does not envision that documents of a confidential or sensitive nature, or that would cause harm if publicly disclosed, would fall within the scope of the rule. Accordingly, the Commission believes that amending Rule 17a–22 to require the posting of supplemental material on an internet website should not create concerns from a clearing agency’s perspective regarding privacy or confidentiality of materials because such material would not be in scope of the rule. In the Commission’s experience, most, if not all, of the filings required by current Rule 17a–22 are already being posted on a registered clearing agency’s website. 4. Requirement to ‘‘Prominently Post’’ Finally, in the proposed amendment to Rule 17a–22 that would require the clearing agency to ‘‘prominently post’’ any supplemental material subject to the amended rule on the clearing agency’s website, the Commission is proposing to interpret ‘‘prominently’’ to mean that the supplemental materials will be readily identifiable and accessible on the website for as long as the information remains applicable to affected parties. If access to the supplemental materials requires indepth familiarity with the website or is not readily apparent because it requires searching through multiple layers to access the information, the supplemental materials generally would not be considered prominently posted. The Commission believes generally that supplemental materials should be available at a prominently posted hyperlink on the clearing agency’s website that is free and accessible (without any encumbrances or restrictions) by the general public. To the extent one does not already exist, a registered clearing agency generally should consider creating a specific web page that identifies and catalogues (such as through a list of hyperlinks) the supplemental materials that it maintains pursuant to Rule 17a–22. D. Request for Comment 36. Would the proposal to replace the requirement to file paper copies with a requirement to post supplemental materials on a clearing agency’s website benefit or harm the clearing agencies, market participants or the general public? If so, please describe any benefits or harms. The Commission particularly is interested in comments or analysis related to costs on both a qualitative or quantitative basis. 37. Does the two-business day requirement to post supplemental materials allow for sufficient time to prepare and post the materials? If not, why not? What alternative timeframe would be appropriate and why? 38. The proposed amendment to the rule would require that materials issued or made generally available to clearing agency participants or other entities with whom the clearing agency has a significant relationship to be posted to the clearing agency’s internet website. Is the rule as proposed to be amended clear in terms of which participants or entities would be included? Should this group of persons or entities be expanded, contracted or otherwise modified? If so, why, and how? Are there any other concerns related to this requirement, such as with respect to documents that may be confidential or non-public? If so, please describe. 39. The Commission is proposing to require supplemental materials to be ‘‘prominently’’ posted on the clearing agency’s website. Is this proposed requirement clear? Should it be modified, and if so, why and how? 40. Should the Commission provide registered clearing agencies with the opportunity to continue the alternate arrangements established pursuant to the Updated Staff Statement, rather than requiring internet posting under the rule? If so, why? 41. What, if any, costs would be associated with preparing documents for posting on the clearing agency’s internet website? Are those costs more, less or the same as those currently expending under the current Updated Staff Statement processes? Would the proposed two business day timeframe to post supplemental materials cause any change in the costs associated with complying with the rule? If so, please provide as much detail as possible as to whether such costs increase or decrease, and the underlying reasons for the change. IV. Proposed Requirements To Electronically File Broker-Dealer, OTC Derivatives Dealer, and SBS Entity Reports The Commission proposes that the following forms and reports be filed in electronic format on EDGAR: Form or report Filer type Proposed amendments Form X–17A–5 Part III: Annual reports and related annual filings. Broker or Dealer ................. No amendments to the form; Exchange Act Rules 17a– 5 and 17a–12 (17 CFR 240.17a–5; 17 CFR 240.17a– 12). Rule 101(a) of Regulation S–T (17 CFR 232.101(a)). 176 Id. See also 17 CFR 240.6a–3; 17 CFR 240.15Aj–1; and 17 CFR 240.17a–21. Rule 6a–3 was amended in 2001 to allow a national securities exchange the option of posting supplementary information to its website and certifying that the VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 information available on its website is accurate as of its date. See Exchange Act Release No. 44692 (Aug. 13, 2001), 66 FR 43721 (Aug. 20, 2001). Since the adoption of this amendment, usage of and familiarity with the internet among affected market PO 00000 Frm 00028 Fmt 4701 Sfmt 4702 participants has increased substantially, and so in proposing to amend Rule 17a–22, the Commission believes it is appropriate to transition the requirement in Rule 17a–22 for clearing agencies solely to internet posting. E:\FR\FM\18APP3.SGM 18APP3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules Form or report Filer type Proposed amendments Form 17–H: Risk Assessment Report for Brokers and Dealers. Broker or Dealer ................. Form X–17A–5 Part III: Annual reports and related annual filings. SBS Entity .......................... No amendments to the form; Exchange Act Rule 17h– 2T (17 CFR 240.17h2–T). Rule 101(a) of Regulation S–T. No amendments to the form; Exchange Act Rule 18a–7 (17 CFR 240.18a–7). Rule 101(a) of Regulation S–T. A. Rules 17a–5, 18a–7, and 17a–12 1. Rule 17a–5 Filing Requirements Paragraph (d) of Exchange Act Rule 17a–5 generally requires a broker-dealer registered with the Commission to file annual reports with the Commission not more than 60 calendar days after the fiscal year end of the broker-dealer.177 Paragraph (d)(6) of Rule 17a–5 provides that the annual reports ‘‘must be filed with the Commission at the regional office of the Commission for the region in which the broker or dealer has its principal place of business and to the Commission’s principal office in Washington, DC, or the annual reports may be filed with the Commission electronically in accordance with directions provided on the Commission’s website.’’ 178 The annual reports include a financial report and either a compliance report or an exemption report, as well as reports prepared by an independent public accountant registered with the Public Company Accounting Oversight Board (‘‘PCAOB’’) covering the financial report and compliance or exemption report in accordance with standards of the PCAOB. Approximately 3,218 broker-dealers file annual reports with the Commission, and the reports vary in size from approximately 20 pages for smaller firms to approximately 100 pages for larger firms. Rule 17a–5 currently provides for paper filing of the annual reports, and paper filings are processed manually by Commission staff. However, the Commission has prepared EDGAR to receive brokerdealer annual reports electronically, and Commission staff issued a no-action letter 179 not objecting to broker-dealers ddrumheller on DSK120RN23PROD with PROPOSALS3 23947 177 See 17 CFR 240.17a–5(d). See also Order Extending the Annual Reports Filing Deadline for Certain Smaller Broker-Dealers, Exchange Act Release No. 91128 (Feb. 12, 2021), 86 FR 10372 (Feb. 19, 2022) (extending the filing deadline for the annual reports by 30 days for certain smaller broker-dealers on certain conditions, including that the annual reports be filed electronically). 178 See 17 CFR 240.17a–5(d)(6). 179 See Letter to Kris Dailey, Vice President, Risk Oversight and Operational Regulation, FINRA, from Michael Macchiaroli, Associate Director, Division, Commission (Jan. 27, 2017), available at https:// www.sec.gov/divisions/marketreg/mr-noaction/ 2017/finra-012717-electronic-filing-annualreports.pdf (‘‘Annual Reports No-Action Letter’’). VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 voluntarily filing their annual reports electronically on EDGAR in accordance with instructions posted on the Commission’s website instead of filing them in paper form. Approximately half of broker-dealers have filed the reports electronically consistent with the staff no-action letter. Based on EDGAR data, for the 12 months ended December 31, 2022, the Commission received 1,559 filings of the annual reports in paper and 1,659 electronically via EDGAR. Approximately 85% of broker-dealers have a fiscal year end of December 31, so that a significant number of filings are made at approximately the same time each year, straining the current manual intake process. A portion of the annual reports filed pursuant to Rule 17a–5 must be made public, and the Commission publishes the public portion on EDGAR. It takes on average several weeks from the date of receipt of a paper filing of a broker-dealer’s annual reports until it is scanned and the public portion published on EDGAR, and the confidential portion available to Commission staff. In contrast, an automated process is used to make the applicable portions of annual reports filed on EDGAR available to Commission staff and the public, typically within seconds of the electronic filing being made. Paragraph (e)(2) of Rule 17a–5 provides that the broker-dealer must attach to the financial report an oath or affirmation that, among other things, the financial report is true and correct.180 The oath or affirmation must be made by an individual specified in the rule, such as a chief executive officer, and must be made ‘‘before a person duly authorized to administer such oaths or affirmations.’’ 181 The Commission has promulgated Form X–17A–5 Part III as the means by which the broker-dealer provides the oath or affirmation required under paragraph (e)(2) of Rule 17a–5.182 180 See 17 CFR 240.17a–5(e)(2). See also Updated Staff Statement, supra note 6 (addressing a temporary situation with respect to paper filing and notarization requirements that applied to certain filings, which included broker-dealer annual reports). 182 See 17 CFR 249.617. See also FOCUS Reporting System; Requirements for Financial Reporting, Exchange Act Release No. 14242 (Dec. 9, 181 Id. PO 00000 Frm 00029 Fmt 4701 Sfmt 4702 The first sentence of paragraph (e)(3) of Rule 17a–5 provides that the annual reports are not confidential, except that, if the Statement of Financial Condition in a format that is consistent with Part II or Part IIA of Form X–17A–5 183 is bound separately from the balance of the annual reports filed under paragraph (d) of Rule 17a–5, and each page of the balance of the annual reports is stamped ‘‘confidential,’’ then the balance of the annual reports will be deemed confidential to the extent permitted by law.184 Paragraph (k) of Rule 17a–5 requires a broker-dealer that has been approved to use internal models when computing net capital pursuant to Appendix E of Exchange Act Rule 15c3–1 185 (‘‘ANC broker-dealer’’) to file a supplemental report on management controls concurrently with the annual reports (the ‘‘ANC broker-dealer supplemental report’’).186 The ANC broker-dealer supplemental report must be prepared by a registered public accounting firm and must indicate the results of the accountant’s agreed-upon procedures review of the internal risk management control system of the broker-dealer.187 As of June 15, 2022, there were five ANC broker-dealers. The ANC brokerdealer supplemental reports average approximately 100 pages in length and are generally sent to the Commission staff via email. 1977), 42 FR 63883 (Dec. 21, 1977) (‘‘The Commission proposed the facing page for the annual report based on its experience that the processing of the annual report would be greatly facilitated if the identification information were submitted in a consistent format. The proposed facing page requires basic identification information, including the . . . name and address of the broker or dealer and its accountant, the oath or affirmation, and the itemization of the materials included in the report.’’). Form X–17A–5 Part III is available at https://www.sec.gov/about/forms/formx17a-5_3.pdf. 183 See 17 CFR 249.617. 184 The Commission is proposing to replace ‘‘deemed confidential to the extent permitted by law’’ with ‘‘deemed confidential for the purposes of section 24(b) of the Act’’ for consistency with the language used in other rules (e.g., paragraph (c)(4) of Rule 17h–2T) and to clarify the legal basis of the rule. This proposed amendment is not intended to change the substantive meaning of this sentence. 185 See 17 CFR 240.15c3–1e. 186 See 17 CFR 240.17a–5(k). 187 See id. E:\FR\FM\18APP3.SGM 18APP3 23948 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules 2. Rule 18a–7 Filing Requirements Paragraph (c) of Rule 18a–7, which was modeled on paragraph (d) of Rule 17a–5, generally requires an SBSD or a MSBSP for which there is no prudential regulator and which is not a brokerdealer to file annual reports with the Commission not more than 60 calendar days after the fiscal year end of the entity.188 As of June 15, 2022, there were nine such entities. Paragraph (c)(6) of Rule 18a–7 provides that the annual reports ‘‘must be filed with the Commission at the regional office of the Commission for the region in which the security-based swap dealer or major security-based swap participant has its principal place of business and the Commission’s principal office in Washington, DC, or the annual reports may be filed with the Commission electronically in accordance with directions provided on the Commission’s website.’’ 189 Paragraph (d)(1) of Rule 18a–7 provides that the SBSD or MSBSP must attach to the financial report an oath or affirmation that, among other things, the financial report is true and correct.190 The oath or affirmation must be made by an individual specified in the rule, such as a chief executive officer, and must be made ‘‘before a person duly authorized to administer such oaths or affirmations.’’ 191 The first sentence of paragraph (d)(2) of Rule 18a–7 provides that the annual reports are not confidential, except that, if the Statement of Financial Condition in a format that is consistent with Part II of Form X–17A–5 192 is bound separately from the balance of the annual reports filed under paragraph (c) of Rule 18a–7, and each page of the balance of the annual reports is stamped ‘‘confidential,’’ then the balance of the annual reports will be deemed confidential to the extent permitted by law.193 3. Rule 17a–12 Filing Requirements Paragraph (b) of Rule 17a–12 requires that every OTC derivatives dealer annually file audited financial 188 See 17 CFR 240.18a–7(c). 17 CFR 240.18a–7(c)(6). 190 See 17 CFR 240.18a–7(d)(1). 191 See 17 CFR 240.18a–7(d)(1)(ii). 192 See 17 CFR 249.617. 193 The Commission is proposing to replace ‘‘deemed confidential to the extent permitted by law’’ with ‘‘deemed confidential for the purposes of section 24(b) of the Act’’ for consistency with the language used in other rules (e.g., paragraph (c)(4) of Exchange Act Rule 17h–2T) and to clarify the legal basis of the rule. This proposed amendment is not intended to change the substantive meaning of this sentence. ddrumheller on DSK120RN23PROD with PROPOSALS3 189 See VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 statements.194 Paragraph (b)(6) of Rule 17a–12 requires that the OTC derivatives dealer file two copies of the audited financial statements at the Commission’s principal office in Washington, DC.195 As of June 15, 2022, there were three OTC derivatives dealers. All three OTC derivatives dealers voluntarily file audited financial statements via EDGAR. Paragraph (c)(2) generally provides that the OTC derivatives dealer must attach to the audited financial statements an oath or affirmation that, to the best knowledge and belief of the person making the oath or affirmation, among other things, the audited financial statements and required schedules are true and correct.196 The oath or affirmation must be made by an individual specified in the rule, such as a duly authorized officer, and must be made before a person duly authorized to administer such oaths.197 Paragraph (c)(3) of Rule 17a–12 provides that all of the statements filed pursuant to paragraph (b) of Rule 17a– 12 are confidential,198 except that they will be available for use by any official or employee of the United States or by any other person to whom the Commission authorizes disclosure of such information as being in the public interest.199 Paragraphs (k), (l), and (m) of Rule 17a–12 require that the accountant’s report on material inadequacies and reportable conditions, accountant’s report on management controls, and accountant’s report on inventory pricing and modeling, respectively, be filed concurrently with the annual audit report.200 4. Proposed Amendments to Rules 17a– 5, 18a–7, and 17a–12 The Commission is proposing amendments to Rules 17a–5, 18a–7, and 194 See 17 CFR 240.17a–12(b). Although an OTC derivatives dealer is a type of broker-dealer, paragraph (p) of Rule 17a–5 provides that an OTC derivatives dealer may comply with Rule 17a–5 by complying with Rule 17a–12. 195 See 17 CFR 240.17a–12(b)(6). 196 See 17 CFR 240.17a–12(c)(2). 197 See 17 CFR 240.17a–12(c)(2). 198 The Commission is proposing to replace ‘‘shall be confidential’’ with ‘‘shall be deemed confidential for the purposes of section 24(b) of the Act’’ for consistency with the language used in other rules (e.g., paragraph (c)(4) of Exchange Act Rule 17h–2T) and to clarify the legal basis of the rule. This proposed amendment is not intended to change the substantive meaning of this sentence. 199 See 17 CFR 240.17a–12(c)(3). The Commission is proposing to replace ‘‘to whom the Commission authorizes disclosure of such information as being in the public interest’’ with ‘‘to whom the Commission authorizes disclosure of such information’’ to conform with section 24 of the Exchange Act and the rules thereunder. 200 See 17 CFR 240.17a–12(k), (l), and (m). PO 00000 Frm 00030 Fmt 4701 Sfmt 4702 17a–12 that would require that the annual reports and related annual filings that firms must file under Rules 17a–5, 18a–7, and 17a–12 be filed with the Commission electronically on EDGAR in a structured data language.201 Specifically, the Commission proposes amending paragraphs (d)(6) and (k) of Rule 17a–5, paragraph (c)(6) of Rule 18a–7, and paragraphs (b)(6), (k), (l), and (m) of Rule 17a–12 to provide that the annual reports and related annual filings must be filed with the Commission electronically on EDGAR in accordance with the EDGAR Filer Manual, as defined in Rule 11 of Regulation S–T, and must be filed in accordance with the requirements of Regulation S–T. The amended paragraphs would also provide that the annual reports must be submitted in Inline XBRL (i.e., as an Interactive Data File in accordance with 17 CFR 232.405 (‘‘Rule 405 of Regulation S–T’’)).202 If these proposed amendments are adopted, the EDGAR Filer Manual would be updated to reflect these amendments to Rules 17a–5, 18a–7, and 17a–12. As is currently the case, firsttime EDGAR filers would need to obtain EDGAR access credentials.203 The Commission is proposing to amend paragraph (e)(2) of Rule 17a–5 to add a new paragraph (e)(2)(iii). The new paragraph would provide that the notarized oath or affirmation must be kept ‘‘for a period of not less than six years, the first two years in an easily accessible place and in accordance with the requirements of Rule 17a–4.’’ 204 Similarly, the Commission is proposing to amend paragraph (d)(1) of Rule 18a– 7 to add a new paragraph (d)(1)(iii). The new paragraph would provide that the notarized oath or affirmation must be kept ‘‘for a period of not less than six years, the first two years in an easily accessible place in accordance with the requirements of Rule 18a–6.’’ 205 The 201 For further discussion of the proposed structured data requirements, including Inline XBRL requirements, see infra section VII.A. 202 See Rule 405(a)(3) of Regulation S–T, which specifies Inline XBRL as the data language to be used for the Interactive Data File. See 17 CFR 232.405(a)(3). 203 Instructions for obtaining EDGAR access credentials are on the Commission’s website at www.sec.gov/divisions/marketreg/broker-dealeredgar-access-credentials.htm. 204 See paragraph (e)(2)(iii) of proposed Rule 17a– 5. 205 See paragraph (d)(1)(iii) of proposed Rule 18a– 7. As stated above, with respect to Rules 17a–5 and 18a–7, the oath or affirmation must be made ‘‘before a person duly authorized to administer such oaths or affirmations.’’ The Commission recently updated Volume I of the EDGAR Filer Manual so that, in connection with EDGAR access requests, the required notarized signature of an authorized individual may be obtained by ‘‘manual, electronic, or remote online notarization recognized by the law E:\FR\FM\18APP3.SGM 18APP3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules ddrumheller on DSK120RN23PROD with PROPOSALS3 Commission also is proposing an analogous change to paragraph (c) of Rule 17a–12 by redesignating current paragraph (c)(3) as (c)(4) and adding a new paragraph (c)(3). The new paragraph would state that the oath or affirmation must be kept ‘‘for a period of not less than six years, the first two years in an easily accessible place and in accordance with the requirements of Rule 17a–4.’’ 206 In light of the proposed requirement that the annual reports and related annual filings under Rules 17a–5 and 18a–7 be filed electronically on EDGAR, the Commission is proposing amendments to the confidentiality provisions of the first sentence of paragraphs (e)(3) of Rule 17a–5 and (d)(2) of Rule 18a–7. Those sentences contain requirements that certain parts of the reports be ‘‘bound separately’’ and that certain pages be ‘‘stamped confidential,’’ which do not apply to the process of designating portions of the annual reports confidential when filing them on EDGAR.207 The Commission is proposing amendments to the confidentiality provisions to conform to the proposed electronic process for filing on EDGAR. The Commission proposes amending the first sentence of paragraph (e)(3) of Rule 17a–5 to state that the annual reports ‘‘may be filed as: (i) One public document; or (ii) Two documents: (A) A document consisting of the Statement of Financial Condition, the notes to the Statement of Financial Condition, and the report of the independent public accountant covering the Statement of Financial Condition, which is not confidential; and (B) A of any state or territory of the United States or the District of Columbia, and must include a manual or electronic signature of the authorized individual, as required by the notary for the type of notarization at issue. Foreign filers who do not have access to a United States notary public must use the foreign local equivalent of a notary public or obtain notarization by a remote online notary recognized by the law of any state or territory of the United States or the District of Columbia.’’ See Adoption of Updated EDGAR Filer Manual, Proposed Collection and Comment Request for Form ID, Release Nos. 33–10902; 34–90637; 39–2536, IC– 34137 (Dec. 11, 2020), 86 FR 7968, 7969 (Feb. 3, 2021). If the Commission were to adopt the proposed amendments to Rules 17a–5 and 18a–7, these recent updates to the EDGAR Filer Manual would apply to the oath or affirmation requirement in both rules. The recordkeeping requirements of Rules 17a–5 and 18a–7 could be met by keeping an electronic copy of the notarized oath or affirmation for the required length of time. 206 See paragraph (c) of Rule 17a–12, as proposed to be amended. 207 See supra sections IV.A.1. through 3. At present, a broker-dealer filing its annual reports on EDGAR designates the portions of the reports for which it is requesting confidentiality by checking a ‘‘Request Confidentiality’’ box when it uploads the relevant documents. As with the other aspects of the current voluntary filing program, this aspect of the EDGAR filing process would not change. VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 document containing the balance of the annual reports for which confidential treatment may be requested and which will be deemed confidential for the purposes of section 24(b) of the Act.’’ The Commission is proposing to replace ‘‘deemed confidential to the extent permitted by law’’ with ‘‘deemed confidential for the purposes of section 24(b) of the Act’’ for consistency with the language used in other rules (e.g., paragraph (c)(4) of Rule 17h–2T) and to clarify the legal basis of the rule. The Commission is also proposing this change in paragraph (a)(2) of Rule 17a– 5 regarding FOCUS Report filings so that the language in Rule 17a–5 is internally consistent. The proposed amendments are not intended to change the substantive meaning of these provisions. The phrase ‘‘for which confidential treatment may be requested,’’ in proposed paragraph (e)(3)(ii)(B) is not in the current rule. This proposed new language is intended to clarify that an EDGAR filer may request confidential treatment, but that ultimately whether any filed material is confidential is determined pursuant to applicable law, including but not limited to the Freedom of Information Act,208 and Commission rules governing requests for confidential treatment.209 The Commission is proposing to make analogous changes to the first sentence of paragraph (d)(2) of Rule 18a–7. Rule 17a–12 does not contain an analogous provision relating to separately binding the public portion of the report from the portion for which confidential treatment will be requested. However, the Commission is proposing to amend current paragraph (c)(3) of Rule 17a–12 (which is proposed to be re-designated as paragraph (c)(4)) to add language to state that an EDGAR filer may request confidential treatment, but that ultimately whether any filed material is confidential is determined pursuant to applicable law, including but not limited to the Freedom of Information Act,210 and Commission rules governing requests for confidential treatment.211 Currently, a firm filing annual reports with the Commission under Rules 17a– 5, 18a–7, and 17a–12 using EDGAR submits the information contained in a ‘‘facing page’’ to the annual reports by completing an electronically fillable form on the EDGAR system.212 The 208 See generally 5 U.S.C. 552. 17 CFR 240.24b–2. 210 See id. 211 See 17 CFR 240.24b–2. 212 See EDGAR Filer Manual (Volume II) version 64 (Dec. 2022), at 8.2.20. The EDGAR Filer Manual is available at https://www.sec.gov/info/edgar/ edmanuals.htm. See also Information for EDGAR 209 See PO 00000 Frm 00031 Fmt 4701 Sfmt 4702 23949 inputted information, which includes information about the firm submitting the filing and about the filing itself, is subsequently converted into a custom XML-based data language specific to the Form X–17A–5 Part III facing page.213 The documents required to be filed are then uploaded electronically. Currently, the documents are generally uploaded as PDF documents. As with other entities that make submissions through EDGAR, these submissions are subject to the provisions of Regulation S–T and the EDGAR Filer Manual, as defined in Rule 11 of Regulation S–T.214 Under the proposal, firms filing annual reports or annual supplemental reports with the Commission under Rules 17a–5, 18a–7, and 17a–12 would be required to apply machine-readable Inline XBRL data ‘‘tags’’ to the disclosures contained in those documents before filing them through EDGAR. These data tags can include numerical detail tags (which are used for tagging individual data points) for individual reported numeric values, such as line items on a financial statement, or text block tags for textual narratives, such as the discussions in the notes to financial statements. In complying with the proposed Inline XBRL requirements, filers could use Inline XBRL tagging software to apply Inline XBRL tags to their reports before submitting them to EDGAR, or could employ a tagging service provider to apply the Inline XBRL tags to their reports on their behalf. The Commission expects the proposed structuring requirements would provide informational benefits to users of the disclosures provided in the reports. Specifically, the Commission believes requiring the annual and supplemental reports to be structured would make the information included on the reports more readily accessible for retrieval, aggregation, and comparison across different broker-dealers, OTC derivatives dealers, SBSDs, and MSBSPs, and across different time periods, as compared to an unstructured PDF, HTML, or ASCII format requirement for the reports.215 For the confidential portion of the report, such benefits would redound indirectly to investors and markets through more timely and detailed supervision of filers. Filers, available at https://www.sec.gov/info/ edgar.shtml#guidance. 213 See EDGAR X–17A–5 Part III Technical Specification, available at https://www.sec.gov/ info/edgar/specifications/form-x-17a-5-xml-techspecs.htm. 214 See 17 CFR 232.11. 215 For further discussion of the expected benefits of the proposed structuring requirements, see infra sections VII.A and X.C.1.b. E:\FR\FM\18APP3.SGM 18APP3 23950 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules ddrumheller on DSK120RN23PROD with PROPOSALS3 For the public portion of the report, such as the Statement of Financial Condition and the notes thereto, such benefits would redound directly to public users of the data, which could include investors, analysts, and financial media, as well as indirectly to investors and markets through more timely and detailed supervision of filers.216 Evidence from the Commission’s XBRL requirement for public companies indicates that enhanced accessibility to financial and related information may be particularly important for disclosures made by smaller broker-dealers, as investors in small companies have been observed to prefer the XBRL filings made by those companies over the non-XBRL version of those filings.217 In addition, the proposed structured data requirement would enable EDGAR to perform technical validations (i.e., programmatic checks to ensure the documents are appropriately standardized, formatted, and complete) upon intake of the reports, thus potentially improving the quality of the filed data by decreasing the incidence of non-substantive errors (such as the omission of values from fields that should always be populated). For example, Commission staff could leverage the machine-readability of the computational schedules to automatically flag any mathematical inconsistencies or calculation errors therein. Market participants (such as customers, analysts, or other brokerdealers) could also benefit from direct use of the machine-readable disclosures; for example, analysts could leverage the machine-readability of financial statements to determine which brokerdealers have comparatively high proportions of liabilities due to affiliates. Without the proposed structured data requirements, performing these types of analyses would need to be done manually, such as by gathering the current and former financial statements for each brokerdealer and entering all financial line items of interest into databases, 216 Unlike annual audited financial statements filed with the Commission by broker-dealers, SBSDs, and MSBSPs, all of the annual audited financial statements OTC derivatives dealers filed under paragraph (b) of Rule 17a–12 are confidential. 217 See Yu Cong, Hui Du, and Miklos A. Vasarhelyi, ‘‘Are XBRL Files Being Accessed? Evidence from the SEC EDGAR Log File Dataset,’’ Journal of Information Systems 32(3), 23–29 (concluding that ‘‘small company investors not only access XBRL files but also prefer them to the nonXBRL files when both are available to download for a filing’’). Because the Commission has only recently begun requiring Inline XBRL (rather than ‘‘exhibit-only’’ XBRL) reporting, most empirical observations are based on samples with exhibitonly XBRL requirements. VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 resulting in a significantly less efficient and precise process. The proposed Inline XBRL requirement would apply to all disclosures required by Form X–17A–5 Part III other than disclosures required on the facing page. Inline XBRL was designed to accommodate financial statement information, including the particular metadata (e.g., the relevant fiscal period, whether the line item is on the balance sheet, whether the line item is a credit or debit) that must be linked to each data point within the financial statements to fully convey its semantic meaning to a machine reader. Other exhibits filed on Form X–17A–5 Part III include reports such as compliance or exemption reports that feature extended narrative descriptions, and whereas custom XML data languages are only technically suitable to accommodate brief narrative descriptions, Inline XBRL is technically suitable to accommodate longer narrative descriptions with presentation capabilities that preserve human-readability while maintaining machine-readability.218 The facing page of Form X–17A–5 Part III is currently a fillable form that EDGAR converts into a custom XML data language, and would remain so under the proposal. As a result, data users would be unable to incorporate the custom XML disclosures on the facing page into the same datasets and applications as the Inline XBRL disclosures on the rest of Form X–17A– 5 Part III, and run analyses across the differently formatted Form X–17A–5 Part III disclosures, without undertaking data conversion processes that are frequently burdensome and imprecise. Similarly, any technical validations programmed into EDGAR would be unable to check for any inappropriate inconsistencies between disclosures on Inline XBRL exhibits and disclosures on custom XML exhibits on a given Form X–17A–5 Part III, thus reducing the benefit of improved data quality that would be likely to result from structured data requirements. Finally, some Form X–17A–5 Part III filers may already be using Inline XBRL to structure similar data for internal business purposes, such as through the use of ERP systems; these filers may prefer to use Inline XBRL to file the entirety of Form X– 17A–5 Part III.219 Nonetheless, the Commission believes the benefits associated with requiring data languages more technically suitable for the particular disclosures on each exhibit, 218 See supra note 86. infra note 570 (discussing the integration of XBRL into many ERP systems). 219 See PO 00000 Frm 00032 Fmt 4701 Sfmt 4702 as described earlier in this section, would justify any such drawbacks. B. Rule 17h–2T and Form 17–H Under section 17(h) of the Exchange Act and Rule 17h–2T, broker-dealers that are part of a holding company structure and that maintain capital of at least $20 million must file quarterly and annual risk assessment reports with the Commission.220 The reports are filed using Form 17–H.221 The form elicits information concerning the financial and securities activities of the holding company and affiliates and subsidiaries of the broker-dealer that are reasonably likely to have a material impact on the financial or operational condition of the broker-dealer. Certain of this information must be entered directly onto the form in individually numbered fields. Other information—which is specified in Items 1, 2, 3, and 4 of the form—is provided by submitting copies of documents, narrative descriptions, or financial statements.222 Paragraph (a)(2) of Rule 17h–2T requires that the reports be filed with the Commission at its principal office in Washington, DC. The reports must be filed within 60 calendar days of the end of each fiscal quarter, but the year-end financial statements included in the reports may be filed separately from the remainder of the broker-dealer’s fiscal fourth quarter report within 105 calendar days of the end of that quarter. Presently, broker-dealers may choose to file these reports on EDGAR.223 As of September 30, 2022, approximately 238 of the 245 broker-dealers subject to Rule 17h–2T utilized EDGAR to make their required Form 17–H filings. The remaining firms submitted them in 220 On June 29, 2020, the Commission exempted from the requirements of Rules 17h–1T and 17h– 2T broker-dealers that do not hold funds or securities for, or owe money or securities to, customers and do not carry customer accounts, or that are exempt from Rule 15c3–3 pursuant to paragraph (k)(2) of that rule, and that maintain total assets of less than $1 billion and capital, including debt subordinated in accordance with appendix D of Rule 15c3–1 under the Exchange Act (‘‘Rule 15c3–1d’’), of less than $50 million. See Order Under Section 17(h)(4) of the Securities Exchange Act of 1934 Granting Exemption from Rule 17h–1T and Rule 17h–2T for Certain Broker-Dealers Maintaining Capital, Including Subordinated Debt of Greater than $20 Million but Less than $50 Million, Exchange Act Release No. 89184 (June 29, 2020), available at https://www.sec.gov/rules/ exorders/2020/34-89184.pdf. 221 See 17 CFR 249.328T. Form 17–H is available at https://www.sec.gov/about/forms/form17-h.pdf. 222 See Form 17–H, Item 1 (copy of organizational chart), Item 2 (copies of financing, capital adequacy, and risk management and other policies or systems), Item 3 (description of any material pending legal or arbitration proceedings), and Item 4 (certain consolidated and consolidating financial statements). 223 See supra note 230 at 8.2.23. E:\FR\FM\18APP3.SGM 18APP3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules paper form. For electronic filing on EDGAR, the facing page of Form 17–H and Part II of Form 17–H are fillable forms that EDGAR subsequently converts into a structured, XML-based data language specific to Form 17–H. The information required by Items 1, 2, 3, and 4 of Part I of Form 17–H is uploaded in separate documents. These documents are currently generally uploaded as PDF documents. The Commission proposes amending paragraph (a)(2) of Rule 17h–2T to require that the quarterly and annual risk assessment reports be filed with the Commission electronically through EDGAR. The process used to access EDGAR would be the same used by those broker-dealers voluntarily using EDGAR for their respective quarterly and annual risk assessment reports. As proposed to be amended, the paragraph would also provide that the financial statements required by Item 4 of Form 17–H must be submitted in Inline XBRL.224 With respect to the proposed Inline XBRL requirement, the proposed process would mirror the proposed process described above for brokerdealers filing annual reports in Inline XBRL.225 Specifically, broker-dealers would apply machine-readable Inline XBRL tags to the financial statements included in the quarterly and annual risk assessment reports. The existing custom XML requirement for the facing page and Part II of Form 17–H would remain in place, as would the PDF requirement for Item 1, 2, and 3 of Form 17–H (which require copies of organizational charts, risk management procedures, and descriptions of pending legal proceedings that the broker-dealer maintains pursuant to paragraph (a)(1) of Rule 17h–1T).226 PROPOSED STRUCTURED DATA REQUIREMENTS FOR FORM 17–H Inline XBRL ............... Custom XML ............. ddrumheller on DSK120RN23PROD with PROPOSALS3 Unstructured PDF ..... Item 4. Execution page, Part II. Items 1, 2, and 3. The Commission believes requiring Form 17–H to be structured would make the information filed on Form 17–H more readily accessible for retrieval, aggregation, and comparison across different broker-dealers. For example, Commission staff could leverage the machine-readability of the financial statements to automatically flag brokerdealers with current asset ratios lower 224 For further discussion of the proposed structured data requirements, including Inline XBRL requirements, see infra section VII.A. 225 See supra section IV.A.4. 226 See 17 CFR 240.17h–1T(a)(1). VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 than a certain value, and assess whether any such broker-dealers warrant further examination. Without the proposed structured data requirements, performing these types of analyses would need to be done manually, such as by gathering the current and former financial statements for each Form 17– H filer and entering all financial line items of interest into databases, resulting in a significantly less efficient and precise process. In addition, the proposed structured data requirement would enable EDGAR to perform technical validations (i.e., programmatic checks to ensure the documents are appropriately standardized, formatted, and complete) upon intake of the reports, thus potentially improving the quality of the filed data by decreasing the incidence of non-substantive errors (such as the omission of values from fields that should always be populated). The proposed Inline XBRL requirement would apply specifically to the financial statements required by Item 4 of Form 17–H. The Commission believes an Inline XBRL would be appropriate for the financial statements, because Inline XBRL was designed to accommodate financial statement information, including the particular metadata (e.g., the relevant fiscal period, whether the line item is on the balance sheet, whether the line item is a credit or debit) that must be linked to each data point within the financial statements to fully convey its semantic meaning to a machine reader. By contrast, the facing page and Part II of Form 17–H are currently fillable forms that EDGAR converts into a custom XML data language, and would remain so under the proposal. As a result, data users would be unable to incorporate the custom XML disclosures on the facing page and Part II into the same datasets and applications as the Inline XBRL disclosures on Item 4, and run analyses across the differently formatted Form 17–H disclosures, without undertaking data conversion processes that are frequently burdensome and imprecise. Similarly, any technical validations (i.e., automated checks to ensure filed documents are appropriately standardized, formatted, and complete) programmed into EDGAR would be unable to check for any inappropriate inconsistencies between disclosures on the facing page and Part II and disclosures on Item 4 on a given Form 17–H, thus reducing the benefit of improved data quality that often arises from structured data requirements. Finally, some Form 17–H filers may already be using Inline XBRL to structure similar data for internal PO 00000 Frm 00033 Fmt 4701 Sfmt 4702 23951 business purposes, such as through the use of ERP systems; these filers may prefer to use Inline XBRL to file the entirety of Form 17–H.227 Nonetheless, the Commission believes the benefits of retaining the existing custom XML requirement for the facing page and for Part II—specifically, the alleviation of compliance burdens to be incurred by broker-dealers as a result of the proposed requirements—would justify any such drawbacks. The Commission is proposing to require Form 17–H filers to file copies of existing documents, such as copies of organizational charts and risk management procedures, as unstructured PDF attachments. The Commission believes requiring Form 17–H filers to retroactively structure these existing documents, which were prepared for purposes outside of fulfilling the Commission’s disclosure requirements, would likely impose costly compliance burdens on brokerdealers without justifying the commensurate informational benefit associated with more efficient disclosure use. Thus, the Commission does not believe structured data requirements would be warranted for these copies of existing documents. Request for Comment 42. Would it be appropriate to require the annual reports or annual supplemental reports that must be filed with the Commission under Rule 17a– 5, Rule 18a–7, and Rule 17a–12 to be submitted electronically with the Commission on the EDGAR system? If so, explain why. If not, explain why not. If the Commission requires that the annual reports or annual supplemental reports that must be filed with the Commission under Rule 17a–5, Rule 18a–7, and Rule 17a–12 be submitted electronically with the Commission on the EDGAR system, would it be appropriate to require those annual reports or annual supplemental reports to be filed in a structured data language? If so, explain why. If not, explain why not. 43. Would broker-dealers, OTC derivatives dealers, SBSDs, MSBSPs, or certain of these firms, experience practical difficulties or incur significant costs in preparing and submitting these reports electronically on EDGAR in a structured data language? If so, explain why they would experience difficulties and quantify the costs. What, if any, costs would be associated with requiring these firms to file their annual reports electronically on EDGAR in a 227 See infra note 570 (discussing the integration of XBRL into many ERP systems). E:\FR\FM\18APP3.SGM 18APP3 ddrumheller on DSK120RN23PROD with PROPOSALS3 23952 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules structured data language? Are those costs more, less or the same as those currently expended to file annual reports? 44. Does the current requirement to file annual reports and annual supplemental reports either in paper or via email or on EDGAR (where they are generally uploaded as PDF documents) provide flexibility to broker-dealers, OTC derivatives dealers, SBSDs, or MSBSPs that could be lost if these filings were required to be made electronically on EDGAR in a structured data language? Explain why or why not. Should the Commission instead require that all of the annual reports or annual supplemental reports be filed electronically on EDGAR as PDF documents, as broker-dealers have the option of doing currently under the Annual Reports No-Action Letter? Explain, and identify the costs of these two alternatives. 45. If the Commission requires the annual reports and annual supplemental reports to be filed in a structured data language, should the Commission require broker-dealers, OTC derivatives dealers, SBSDs, and MSBSPs to use Inline XBRL or a custom XML data language for the reports or another structured data language? If not, which data language, if any, should the Commission permit or require and why? If certain firms were not required to file their annual reports and annual supplemental reports using Inline XBRL or a custom XML data language, should they be required to file these reports electronically using PDF format? Would a requirement to file these reports in a structured data language impose additional costs on or create cost efficiencies for these firms as compared to other languages? Would a requirement to file these reports in a structured data language enable the public to analyze the public information in the reports more efficiently and effectively? If yes, how would this efficiency and effectiveness affect investors, securities markets, brokerdealers, OTC derivatives dealers, SBSDs, or MSBSPs? Would a requirement to file these reports in a non-structured data language result in similar benefits for lower costs as compared to a structured data language? Even if the proposal to require these reports to be filed electronically on EDGAR in a structured data language would provide greater benefits as compared to the current requirement to file via paper or on EDGAR in an unstructured data language, would an alternative manner of filing provide even more benefits than the Commission’s proposal relative to the VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 costs of the alternative approach? If so, identify the alternative approach and explain why or why not. 46. If the Commission requires the annual reports or annual supplemental reports to be filed in a structured data language on EDGAR, should the Commission apply these requirements to all broker-dealers, OTC derivatives dealers, SBSDs, and MSBSPs? Explain why or why not. If not, identify an alternative and provide empirical support for the alternative. If the structured data requirement should not apply to all of these firms, should the Commission exempt certain firm types? For example, should the Commission apply the structured data requirement to a subset of broker-dealers consisting of some or all of the following types of broker-dealers: (1) broker-dealers that carry customer accounts and receive or hold customer cash and securities; (2) broker-dealers that are OTC derivatives dealers; (3) broker-dealers with a net capital requirement below a certain amount (e.g., $250,000); (4) brokerdealers below a certain asset threshold, such as $500,000 or less in total assets; (5) broker-dealers with less than $250,000 or less in total revenues; (6) broker-dealers with capital less than $50 million and with less than $1 billion in total assets; (7) broker-dealers with an aggregate amount outstanding under repurchase agreements, securities loan contracts, and bank loans less than a certain threshold (e.g., $1 billion); (8) broker-dealers with less than a certain amount of free credit balances and other credit balances (e.g., $1 million); or (9) broker-dealers with less than a certain amount of tentative net capital (e.g., $500 million).228 Commenters should also identify whether a combination of the aforementioned criteria; or some other criteria would be appropriate. 47. Would it be appropriate to require ANC broker-dealer and OTC derivatives dealer supplemental reports to be submitted electronically on EDGAR? If so, explain why. If not, explain why not. Would it be appropriate to require ANC broker-dealer and OTC derivatives dealer supplemental reports to be submitted in Inline XBRL? If so, explain why. If not, explain why not. If a different structured data language should be required, explain why. If there should be no structured data language requirement for the ANC broker-dealer and OTC derivatives dealer supplemental reports, explain why not. 48. Would it be appropriate to require Form 17–H to be submitted 228 Tentative net capital is defined in Rule 15c3– 1. See 17 CFR 240.15c3–1(c)(15). PO 00000 Frm 00034 Fmt 4701 Sfmt 4702 electronically with the Commission on the EDGAR system? If so, explain why. If not, explain why not. If the Commission requires Form 17–H to be submitted electronically with the Commission on the EDGAR system, would it be appropriate to require Form 17–H to be filed in a structured data language? If so, explain why. If not, explain why not. 49. Would Form 17–H filers experience practical difficulties or incur significant costs in preparing and submitting these reports electronically on EDGAR in a structured data language? If so, explain why they would experience difficulties and quantify the costs. What, if any, costs would be associated with requiring these firms to file Form 17–H electronically on EDGAR in a structured data language? Are those costs more, less or the same as those currently expended to file Form 17–H? 50. Does the current requirement to file Form 17–H either in paper or via email or on EDGAR provide flexibility to Form 17–H filers that could be lost if these filings were required to be made electronically on EDGAR in a structured data language? Explain why or why not. Should the Commission instead require that the entirety of Form 17–H be filed electronically on EDGAR as PDF documents? Explain, and identify the costs of these two alternatives. 51. Would requiring different structured data languages for different Items of Form 17–H provide benefits to data users or filers that justify any drawbacks associated such an approach? Please explain the nature of such benefits and drawbacks, and why the benefits would justify the drawbacks (or vice versa). 52. If a mix of structured data languages would be appropriate, should the specific data languages proposed for each Form 17–H Item be modified? For example, are there Form 17–H Items proposed as custom XML documents that would be better suited as Inline XBRL documents, or vice versa? Please explain why or why not. 53. Would requiring Form 17–H filers to file copies of existing documents as unstructured PDF attachments, rather than requiring filers to retroactively structure those documents in machinereadable data languages, ease compliance burdens on Form 17–H filers? If so, would the benefits to data users of structuring these existing documents justify the reduced compliance burden on Form 17–H filers? Please explain why or why not. 54. Rules 15c3–1, 15c3–3, 17a–4, 17a– 5, 17a–11, and 17a–12 require a brokerdealer to send notices to the E:\FR\FM\18APP3.SGM 18APP3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules Commission after the occurrence of certain events. Similarly, Rules 18a–1, 18a–4, 18a–6, 18a–7, and 18a–8 require SBS Entities to send notices to the Commission after the occurrence of certain events. Currently, such notices must be transmitted to the Commission through an email address provided on submitted through the EDGAR system in a structured data language? Explain why or why not. the Commission’s website, or alternatively, delivered to the principal office of the Commission in Washington, DC and the regional office of the Commission for the region in which the broker or dealer has its principal place of business. Should the Commission require such reports to be V. Other Forms, Reports or Notices The Commission proposes that the following forms, reports and notices be filed or submitted on EDGAR: Form, report or notice Filer/submitter type Proposed amendments Form X–17A–19: Information Required of National Securities Exchanges and Registered National Securities Associations pursuant to sections 17 and 19 of the Exchange Act and Rule 17a–19 thereunder. Report of Change in Membership Status ................. Exchange or Association .................... The form and instructions to the form (17 CFR 249.635), and corresponding Exchange Act Rule 17a–19 (17 CFR 240.17a–19). ............................................................. Notices pursuant to Rule 3a71–3(d)(1)(vi) That Associated Persons of Certain Registrants May Conduct Arranging, Negotiating, or Executing Activity in Reliance on the Conditional Exception from SBSD De Minimis Thresholds (and any withdrawals of notices). Notices (and any amendments to the notices) to the Commission of Security-Based Swap Valuation Disputes pursuant to Rule 15fi–3(c). Compliance Reports pursuant to Rule 15fk– 1(c)(2)(ii)(A). Certain registered SBSDs or registered brokers that meet certain capital and other requirements. Rule 101(a) of Regulation S–T (17 CFR 232.101(a)). 17 CFR.240.3a71–3(d)(1)(vi) (Rule 3a71– 3(d)(1)(vi)). 17 CFR 232.101(a), 232.201(a), and 232.202(a) (Rule 101(a), 201(a) and 202(a) of Regulation S–T). A. Notices Pursuant to Rule 17a–19 and Form X–17A–19 ddrumheller on DSK120RN23PROD with PROPOSALS3 23953 Generally, before commencing business activities, a broker-dealer must become a member of an SRO. SROs assist the Commission in regulating the activities of broker-dealers. Rule 17a–19 requires every national securities exchange and registered national securities association to file a Form X– 17A–19 with the Commission at its principal office in Washington, DC and with the Securities Investor Protection Corporation (‘‘SIPC’’) within five business days of the initiation, suspension, or termination of any member and, when terminating the membership interest of any member, to notify that member of its obligation to file financial reports as required by paragraph (b) of Rule 17a–5.229 As of June 15, 2022, there were 24 national securities exchanges and one registered national securities association.230 The instructions to Form X–17A–19 provide that the original of the form must be mailed to the Commission at its principal office and a copy of the form must be mailed to SIPC. Both the original and the copy must be ‘‘executed by a manual signature.’’ Upon the Commission’s receipt of a Form X–17A– 19 filing, the information is entered into 229 17 CFR 240.17a–5(b). Self-Regulatory Organization Rulemaking, available at https://www.sec.gov/rules/sro.shtml. 230 See VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 SBS Entity .......................................... SBS Entity .......................................... 17 CFR 240.15fi–3(c) (Rule 15fi–3(c)). 17 CFR 232.101(a) and (d) (Rule 101(a) and (d) of Regulation S–T). 17 CFR 240.15fk–1(c)(2)(ii)(A). (Rule 15fk– 1(c)(2)(ii)(A)). 17 CFR 232.101(a) (Rule 101(a) of Regulation S– T). a database, which is regularly shared with the SROs. Commission staff use the information contained in Form X–17A– 19 to assign the appropriate SRO as the designated examining authority for the member firms. This information is also used by SIPC in determining which SRO is the collection agent for the SIPC Fund.231 The Commission proposes to amend this requirement to provide that Form X–17A–19 must be filed with the Commission electronically on EDGAR in accordance with the EDGAR Filer Manual, as defined in Rule 11 of Regulation S–T, and in accordance with the requirements of Regulation S–T. Accordingly, Form X–17A–19 would be filed in a custom XML-based data language.232 As is the case with most of the Commission’s other XML-based forms, such as the aforementioned facing page to Form X–17A–5 Part III,233 national securities exchanges and registered national securities associations would comply with the custom XML requirement by either 231 SIPC members are required to pay annual assessments to the SIPC Fund which is used to protect customer assets when a SIPC-member brokerage firm fails financially. 232 Requirements to submit forms on EDGAR in custom XML structured data languages are set forth in the EDGAR Filer Manual, and the specific XML requirements for Form X–17A–19, if adopted, would be included in an updated version of the EDGAR Filer Manual. See supra note 230 at 8. 233 See supra section IV.A.4. PO 00000 Frm 00035 Fmt 4701 Sfmt 4702 inputting the information into a fillable web form that EDGAR would then convert into the custom XML-based data language, or submitting the information directly to EDGAR in the custom XMLbased data language. The Commission expects the proposed custom XML requirement for filing Form X–17A–19 would provide similar benefits to those described for the proposed Inline XBRL requirements for Form X–17A–5 Part III.234 Like Inline XBRL, the proposed custom XML requirement for Form X–17A–19 would make the information included on the form more readily accessible for retrieval, sorting, filtering, and other analysis. The enhanced usability of the information on Form X–17A–19 may be particularly helpful given the high volume of filings on Form X–17A–19 that the Commission receives annually.235 In addition, the proposed structured data requirement would enable EDGAR to perform technical validations (i.e., programmatic checks to ensure the documents are appropriately standardized, formatted, and complete) upon intake of the forms, thus potentially improving the quality of the filed data by decreasing the incidence of non-substantive errors (such as the 234 See supra section IV.A.4; see infra section X.C.1.b. 235 See infra sections IX.D.11 and X.C.1.b. E:\FR\FM\18APP3.SGM 18APP3 23954 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules omission of values from fields that should always be populated). The Commission also proposes making conforming amendments to the ‘‘General Instructions’’ to Form X–17A– 19. Instruction 2 would be amended to replace the instruction to mail the original of the form to the Division with an instruction to file the original ‘‘electronically on EDGAR in accordance with the EDGAR Filer Manual, as defined in Rule 11 of Regulation S–T (§ 232.11) and in accordance with the requirements of Regulation S–T.’’ Instruction 2 would also be amended to instruct filers to send copy number 1 of Form X–17A–19 to SIPC at SIPC’s updated address. Instruction 3 would be amended to replace the words ‘‘shall be executed with a manual signature’’ with the words ‘‘shall be signed.’’ Instruction 4 would be deleted (and subsequent instructions would be renumbered accordingly), because the instruction about what to do if there is insufficient space in the form is unnecessary if the filing is submitted on EDGAR. Renumbered instruction 6 (formerly instruction 7) would be amended to provide that copies of the form may be obtained ‘‘on the Commission’s website’’ instead of ‘‘from the main office of the Securities and Exchange Commission in Washington, DC’’ Request for Comment 55. Would it be appropriate to require Form X–17A–19 to be filed with the Commission electronically on EDGAR? If so, explain why. If not, explain why not. Would it be appropriate to require Form X–17A–19 to be filed in a custom XML-based data language? If so, explain why. If not, explain why not. What alternative approaches would be appropriate instead? ddrumheller on DSK120RN23PROD with PROPOSALS3 B. Notice (and Any Withdrawal of a Notice) Filed Pursuant to Rule 3a71– 3(d)(1)(vi) 238 See 1. Exchange Act Rule 3a71–3(d)(1)(vi) Notice Filing Requirement The Commission’s rules under the Exchange Act define when a person is an SBSD.236 Those rules set de minimis thresholds for security-based swap dealing activity below which a person is deemed not to be an SBSD.237 For purposes of determining whether nonU.S. persons will be deemed to be SBSDs, 17 CFR 240.3a71–3(b)(1)(iii)(C) (‘‘Rule 3a71–3(b)(1)(iii)(C)’’) provides that non-U.S. persons must count, against the applicable de minimis threshold, their security-based swap 236 See 237 See 17 CFR 240.3a71–1 et seq. 17 CFR 240.3a71–2. VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 dealing transactions that were arranged, negotiated, or executed by personnel located in a U.S. branch or office, or by personnel of an agent of such non-U.S. person located in a U.S. branch or office (‘‘ANE Activity’’).238 Exchange Act Rule 3a71–3(d),239 however, includes a conditional exception to this counting requirement (the ‘‘ANE Exception’’).240 One of the conditions to the ANE Exception is that all ANE Activity for which the non-U.S. person is relying on the exception (the ‘‘Relying Entity’’) be conducted by the U.S. personnel in their capacity as persons associated with a majority-owned affiliate 241 of the Relying Entity that is either a registered SBSD or a registered broker that meets certain capital and other requirements (such a registered majority-owned affiliate, the ‘‘Registered Entity’’).242 Before an associated person of the Registered Entity commences this ANE Activity pursuant to the ANE Exception, the Registered Entity must file with the Commission a notice that its associated persons may conduct such activity (an ‘‘ANE Exception Notice’’).243 Exchange Act Rule 3a71–3(d)(1)(vi) currently requires the Registered Entity to file the ANE Exception Notice by submitting it to the electronic mailbox described on the Commission’s website at www.sec.gov at the ‘‘ANE Exception Notices’’ section.244 The Commission is required to publicly post filed ANE Exception Notices on the same section of its website.245 The Relying Entity is able to review ANE Exception Notices published on the Commission’s website to determine whether its affiliated Registered Entity’s notice has been successfully filed, and thus whether the Rule 3a71–3(d)(1)(vi) notice condition to the ANE Exception has been satisfied. The ANE Exception also is subject to a cap on the amount of certain interdealer security-based swaps Rule 3a71–3(b)(1)(iii)(C). 17 CFR 240.3a71–3(d). 240 The exception does not apply to dealing activities involving U.S. counterparties or U.S. guarantees. See Exchange Act Release No. 87780 (Dec. 18, 2019), 85 FR 6270, 6278 (Feb. 4, 2020) (‘‘Cross-Border Adopting Release’’). 241 For this purpose, an entity is a majority-owned affiliate of another entity if the entity directly or indirectly owns a majority interest in the other, or if a third party directly or indirectly owns a majority interest in both entities, where ‘‘majority interest’’ is the right to vote or direct the vote of a majority of a class of voting securities of an entity, the power to sell or direct the sale of a majority of a class of voting securities of an entity, or the right to receive upon dissolution, or the contribution of, a majority of the capital of a partnership. See 17 CFR 240.3a71–3(a)(10). 242 See 17 CFR 240.3a71–3(d)(1). 243 See 17 CFR 240.3a71–3(d)(1)(vi). 244 See www.sec.gov/tm/ane-exception-notices. 245 See 17 CFR 240.3a71–3(d)(1)(vi). 239 See PO 00000 Frm 00036 Fmt 4701 Sfmt 4702 positions.246 Positions subject to the cap include security-based swaps between a Relying Entity and a non-U.S. person that is, or is an affiliate of, any Registered Entity that has filed an ANE Exception Notice with the Commission.247 All such positions of the Relying Entity and certain of its affiliates are counted toward the cap.248 The Relying Entity and its affiliates can review the ANE Exception Notices published on the Commission’s website to determine whether any of the filed ANE Exception Notices are relevant to the Relying Entity’s or any of its affiliates’ progress toward the cap on inter-dealer security-based swaps. 2. Proposed Amendment to Exchange Act Rule 3a71–3(d)(1)(vi) The Commission is proposing an amendment to Exchange Act Rule 3a71– 3(d)(1)(vi) to change the method of filing the ANE Exception Notice. Instead of filing the notice via email to an electronic mailbox specified on the Commission’s website, the proposed amendment would require the Registered Entity to file the notice electronically through the Commission’s EDGAR system. For all Registered Entities, only the manner of filing an ANE Exception Notice, and not its content, would change. The ANE Exception Notice would continue to consist of the name of the Registered Entity whose associated persons may conduct activity covered by the ANE Exception, the fact that those associated persons may conduct such activity, and the date. ANE Exception Notices filed electronically on EDGAR also would be permitted, but not required, to include contact details of a person or department at the Registered Entity that counterparties may contact regarding the ANE Exception. Each ANE Exception Notice thus contains a minimal amount of information. As of January 31, 2023, only three Registered Entities had filed an ANE Exception Notice, and the Commission estimates that up to 24 entities that engage in security-based swap dealing activity may rely on the ANE Exception.249 Because of the minimal amount of, and basic, narrative nature of, the information included in ANE Exception Notices, the Commission preliminarily believes that, even if Registered Entities file ANE Exception Notices (and the withdrawals described in this section below) in a structured data language, 246 See 17 CFR 240.3a71–3(d)(1)(vii). 17 CFR 240.3a71–3(a)(13). 248 See 17 CFR 240.3a71–3(d)(6). 249 See Cross-Border Adopting Release, 85 FR at 6336 n.642. 247 See E:\FR\FM\18APP3.SGM 18APP3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules ddrumheller on DSK120RN23PROD with PROPOSALS3 users of this data would be unlikely to employ structured data tools to analyze the data, as these tools typically would assist in making analysis of large data sets more efficient. Unless and until use of the ANE Exception increases substantially, the benefits of structured data in ANE Exception Notices may be limited. Accordingly, the Commission believes that accepting ANE Exception Notices (and the withdrawals described in this section below) in unstructured data format would make the better use of the resources of the Commission and market participants who use the data. The proposed change would require the Registered Entity to have EDGAR access credentials and the ability to file electronically via EDGAR. The Commission believes that requiring submission of ANE Exception Notices electronically through EDGAR is appropriate because most Registered Entities should already have access to EDGAR by virtue of having used the system to register or file information with the Commission,250 and should therefore also be familiar with how to use the system. For those Registered Entities, the Commission would expect there to be no additional burden associated with mandating EDGAR filing of ANE Exception Notices, and would help to streamline and manage those filings. A small number of Registered Entities may be first-time EDGAR filers who would need to obtain EDGAR access credentials.251 If a Registered Entity does not already have an EDGAR account, the proposed amendment would require it to obtain EDGAR access credentials and be able to file electronically on EDGAR before it could file an ANE Exception Notice. Further, because reliance on the ANE Exception, which requires the filing of an ANE Exception Notice, is voluntary, and because the Commission provided the ANE Exception only for Relying Entities whose affiliated Registered Entity is operationally capable of complying with certain disclosure, communication and recordkeeping conditions, the Commission would not provide for the possibility of temporary or continuing hardship exemptions to 250 A Registered Entity that is an SBSD must file its application for registration on EDGAR, and this requirement has been in place from the original compliance date for registration of SBSDs. See 17 CFR 240.15Fb2–1(c). Additionally, a Registered Entity that is a broker may be required to file with the Commission certain information that is currently permitted to be filed on EDGAR. See, e.g., 17 CFR 240.17a–5(d); supra note 197 and accompanying text. 251 A party that succeeds to the registration of a Registered Entity in a merger, conversion, or other corporate transaction may not yet have EDGAR access credentials. VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 allow the ANE Exception Notice (or the withdrawals described in this section below) to be filed on paper.252 An inability to file an ANE Exception Notice using the Commission’s EDGAR system may indicate that a Registered Entity’s operational conditions would present undue risk if the ANE Exception were available to permit Relying Entities to defer registration as SBSDs. Further, the ANE Exception is premised in part on the public availability of the notice to Relying Entities. For these reasons, as well as the simplicity of the expected filings and sophistication of filing entities, the Commission does not believe there would be a need for a hardship exemption. The Commission believes that requiring an ANE Exception Notice to be filed electronically on the Commission’s established EDGAR filing system would, among other things, facilitate more efficient and timely transmission and dissemination of information and would benefit the Commission, the Registered Entities, the Relying Entities, and other market participants.253 The Commission additionally believes that electronic EDGAR filing of ANE Exception Notices is appropriate because it will enhance the ability of Relying Entities and their affiliates to access and use the filed ANE Exception Notices to determine their progress toward the ANE Exception’s cap on inter-dealer security-based swaps. Other members of the public also would be able to access and review ANE Exception Notices more efficiently. Instead of reviewing each notice individually in PDF format, users would be able to access the public-facing portion of the Commission’s EDGAR system to search for a specific filer, for ANE Exception Notices filed after the effective date of the amendment to Rule 3a71–3(d)(1)(vi), and/or for withdrawals of ANE Exception Notices. Further, electronic EDGAR filing of the ANE Exception Notices as proposed is intended to provide market participants with access to such notices, including the names of the Registered Entities that have filed notices, together with the date of each notice, on EDGAR promptly after filing. The proposed EDGAR filing requirement is intended to allow for the ANE Exception Notices to be made 252 See proposed amendments to 17 CFR 232.201(a), and 17 CFR 232.202(a). 253 Currently, Rule 3a71–3(d)(1)(vi) provides that the Commission shall publicly post ANE Exception Notices at the ‘‘ANE Exception Notices’’ section of its website. The proposed amendment to the rule would provide that such notices filed after the effective date of the amendment would instead be publicly disseminated through the Commission’s EDGAR system. PO 00000 Frm 00037 Fmt 4701 Sfmt 4702 23955 available for public viewing promptly after filing without the need for manual staff processing and the associated delays and demands on Commission resources. The proposed amendment to Exchange Act Rule 3a71–3(d)(1)(vi) would include a new mechanism for withdrawing the ANE Exception Notice filed through EDGAR. Currently, a Registered Entity whose associated persons will no longer conduct ANE Activity pursuant to the ANE Exception and who wishes to withdraw a filed ANE Exception Notice may contact the Commission to request that the notice be manually removed from the ANE Exception Notices web page.254 Upon removal of the notice from the website, the ANE Exception Notice would be withdrawn and a Relying Entity would no longer be able to rely on the ANE Exception unless another relevant ANE Exception Notice is filed. The Commission also is proposing to specify that, if the Registered Entity later becomes unregistered or otherwise ineligible to serve as the Registered Entity for purposes of the ANE Exception, the Registered Entity must promptly withdraw its ANE Exception Notice.255 This would help to ensure that ANE Exception Notices published on EDGAR remain accurate for market participants and other users of the information. The Commission’s proposal to move the ANE Exception Notice to EDGAR would require the Registered Entity to file any withdrawal electronically via EDGAR. If the original ANE Exception Notice was filed on EDGAR, it would not be removed from EDGAR; rather, a withdrawal filing on EDGAR would identify the notice as no longer active.256 Users would have the ability 254 See Cross-Border Adopting Release, 85 FR at 6283 n.138. 255 Though the proposed requirement to withdraw would require prompt filing of the withdrawal, this promptness standard would not extend a Relying Entity’s ability to rely on the ANE Exception after the Registered Entity is no longer registered or otherwise no longer satisfies the conditions described in 17 CFR 240.3a71–3(d)(1) (‘‘Rule 3a71–3(d)(1)’’) but before the Registered Entity withdraws the ANE Exception Notice. The proposed changes to Rule 3a71–3(d)(1)(vi) to include a new mechanism for withdrawing the ANE Exception Notice filed through EDGAR do not change whether a Relying Entity can rely on the exception. Regardless of whether a withdrawal is filed by the Registered Entity, each condition of Rule 3a71–3(d)(1) must be satisfied in order for the Relying Entity to rely on the exception. 256 Consistent with current Rule 3a71–3(d)(1)(vi), the EDGAR system also would not allow for amendments to an ANE Exception Notice. To report a name change or change of contact details on an ANE Exception Notice via EDGAR, a Registered Entity must file a new notice with the updated information. E:\FR\FM\18APP3.SGM 18APP3 23956 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules to search for ANE Exception Notices filed after the effective date of the amendment to Rule 3a71–3(d)(1)(vi) that have not been withdrawn, i.e., the notices that remain eligible to satisfy the ANE Exception’s notice condition. These filed and not withdrawn ANE Exception Notices would help identify the Registered Entities who, together with their affiliates, could cause a transaction to fall under the ANE Exception’s cap on certain inter-dealer security-based swaps. The inclusion of ANE Exception Notices previously filed on EDGAR and withdrawn in EDGAR’s publicly available data further would aid Relying Entities and their affiliates in determining their progress toward the ANE Exception’s cap at a particular point in the past.257 This functionality is not available under the current emailbased filing system, as the Commission retains only currently active notices on the ‘‘ANE Exception Notices’’ web page. Request for Comment ddrumheller on DSK120RN23PROD with PROPOSALS3 56. Should the Commission require ANE Exception Notices, and withdrawals of ANE Exception Notices, to be filed electronically on EDGAR? Explain why or why not. 57. Does the current requirement to file this information via email provide flexibility to Registered Entities, or promote efficiency for Relying Entities and other market participants who use the information in the ANE Exception Notices, that could be lost if these filings were required to be made electronically on EDGAR? Explain why or why not. 58. Would Registered Entities experience any practical difficulties in preparing and filing an ANE Exception Notice or withdrawal of an ANE Exception Notice on EDGAR as proposed? Explain why or why not. 59. Does any market participant that acts, or expects to act, as a Registered Entity for purposes of the ANE Exception not have, or expect not to have, EDGAR access credentials? If yes, describe any burdens that the Registered Entity would face in obtaining EDGAR access credentials and explain whether the benefits of mandatory EDGAR filing—for the Registered Entity, the Relying Entity, other users of the ANE 257 The inclusion of ANE Exception Notices previously filed on EDGAR and withdrawn in EDGAR’s publicly available data also may aid Relying Entities and their affiliates in determining their progress toward the cap during the 12-month period described in 17 CFR 240.3a71–3(d)(1)(vii) (‘‘Rule 3a71–3(d)(1)(vii)’’). Security-based swap positions that counted toward the cap before withdrawal of an ANE Exception Notice continue to count toward the cap after such withdrawal for the period described in Rule 3a71–3(d)(1)(vii). VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 Exception Notices, and the Commission—justify those burdens. 60. Would Relying Entities and/or other market participants that use the information in the ANE Exception Notices experience any practical difficulties in accessing or utilizing information in ANE Exception Notices and withdrawals of ANE Exception Notices on EDGAR? Explain why or why not. Would Relying Entities and/or other market participants that use the information in the ANE Exception Notices experience greater efficiency in identifying currently active ANE Exception Notices on EDGAR? Would these users find it helpful to be able to search for previously filed and withdrawn ANE Exception Notices? Explain why or why not. 61. Should an alternative manner of filing ANE Exception Notices and withdrawals of ANE Exception Notices be required? Even if the proposal to require these filings to be made electronically on EDGAR would provide greater benefits as compared to filings made via email, would an alternative manner of filing provide even more benefits than the proposal? Please describe any alternative manner in detail and assess how the alternative would impact Registered Entities, Relying Entities, other market participants, and the Commission. For example, should the Commission instead permit, but not require, ANE Exception Notices to be filed electronically on EDGAR? Should the Commission instead retain the current email-based filing system? Should the Commission implement another method for filing ANE Exception Notices and withdrawals of ANE Exception Notices? 62. Should the Commission require or allow a specific unstructured or structured data format for ANE Exception Notices and withdrawals of ANE Exception Notices? If yes, describe the format and why it is appropriate. If no, explain why not. 63. Should the Commission require a Registered Entity to promptly withdraw its ANE Exception Notice if it becomes unregistered or otherwise ineligible to serve as the Registered Entity for purposes of the ANE Exception? If yes, explain how this withdrawal information would be useful to Registered Entities, Relying Entities and/or other market participants. If no, explain how Relying Entities and other market participants could use other methods to determine that any particular Registered Entity is eligible or ineligible, particularly if the Registered Entity is a broker who must comply with certain capital requirements to maintain eligibility. PO 00000 Frm 00038 Fmt 4701 Sfmt 4702 64. Should the Commission allow Registered Entities to file ANE Exception Notices and/or withdrawals of ANE Exception Notices on paper in case of a temporary or continuing hardship in accordance with Rules 201 and 202 of Regulation S–T? 258 Explain why or why not. 65. What, if any, costs would be associated with preparing ANE Exception Notices and withdrawals for filing on EDGAR? Are those costs more, less or the same as those under the current filing processes? 66. How does the cost of the proposed amendments to Rule 3a71–3(d)(1)(vi) compare to the cost of current requirements and the cost of the alternatives described above or other alternatives? C. Notice (and Any Amendment, Including Notice of Dispute Termination) Provided Pursuant to Rule 15fi–3(c) 1. Overview of Valuation Dispute Notice Requirements Rule 15fi–3 under the Exchange Act generally requires SBS Entities to: (1) engage in periodic portfolio reconciliation activities with counterparties who are also SBS Entities; and (2) establish, maintain, and follow written policies and procedures reasonably designed to ensure that they engage in periodic portfolio reconciliation with counterparties who are not SBS Entities with respect to their outstanding (and uncleared) securitybased swaps.259 Among other things, Rule 15fi–3 specifies the requirements applicable to an SBS Entity for purposes of engaging in portfolio reconciliation with either type of counterparty, with regard to: (1) the information that the two sides are required to exchange as part of the reconciliation process; (2) the frequency by which an SBS Entity is required to reconcile its security-based swap portfolios with its counterparties; (3) the required policies and procedures specifying the means and timeframes by which an SBS Entity is required to resolve discrepancies with respect to either the valuation or a material term of a security-based swap; and (4) the requirement that an SBS Entity agree in writing with each of its counterparties on the terms of the portfolio reconciliation, including agreement of the selection of any third-party service provider.260 Rule 15fi–3 also contains a reporting requirement. Specifically, Rule 15fi–3(c) requires each SBS Entity to promptly 258 17 CFR 232.201 and 232.202. 17 CFR 240.15Fi–3(a) and (b). 260 See id. 259 See E:\FR\FM\18APP3.SGM 18APP3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules ddrumheller on DSK120RN23PROD with PROPOSALS3 notify the Commission and any applicable prudential regulator 261 of any security-based swap valuation dispute in excess of $20,000,000 (or its equivalent in any other currency), at either the transaction or portfolio level, if not resolved within: (1) three business days, if the dispute is with a counterparty that is an SBS Entity; or (2) five business days, if the dispute is with a counterparty that is not an SBS Entity.262 SBS Entities are also required to notify the Commission and any applicable prudential regulator if the amount of any security-based swap valuation dispute that was the subject of a previous notice increases or decreases by more than $20,000,000 (or its equivalent in any other currency), at either the transaction or portfolio level.263 Such amendments are required to be provided to the Commission and any applicable prudential regulator no later than the last business day of the calendar month in which the applicable security-based swap valuation dispute increases or decreases by the applicable dispute amount.264 Rule 15fi–3(c) requires that the notices to the Commission be submitted ‘‘in a form and manner acceptable to the Commission.’’ When the Commission first proposed Rule 15fi–3(c), the Commission explained that including the phrase ‘‘in a form and manner acceptable to the Commission’’ was intended to provide SBS Entities with flexibility to determine the most efficient and cost-effective means of making such submissions, so long as it is deemed to be acceptable by the Commission.265 Such flexibility was important for a number of reasons, including the fact that SBS Entities that are dually registered with the CFTC as either a swap dealer or major swap participant (each, a ‘‘Swap Entity’’) have been subject to a comparable CFTC requirement since 2013.266 In providing flexibility, SBS Entities currently have 261 The term ‘‘prudential regulator’’ is defined in 17 CFR 240.15Fi–1(m) to have the same meaning as in section 1a of the Commodity Exchange Act (7 U.S.C. 1a) and includes the Federal Reserve, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Farm Credit Association, and the Federal Housing Finance Agency, as applicable to the SBS Entity. 262 See 17 CFR 240.15fi–3(c). 263 Id. 264 Id. 265 See Risk Mitigation Techniques for Uncleared Security-Based Swaps, Exchange Act Release No. 84861 (Dec. 19, 2018), 84 FR 4614, 4621, n. 47 (Feb. 15, 2019). 266 See Confirmation, Portfolio Reconciliation, Portfolio Compression, and Swap Trading Relationship Documentation Requirements for Swap Dealers and Major Swap Participants, 77 FR 55904 (Sep. 11, 2012). VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 two options for submitting these notices: (1) an electronic submission using EDGAR; or (2) submission to a dedicated Commission email address. Under both submission types, the system is capable of accepting the notice using unstructured data in PDF format, either as an attachment to an email or as an uploaded document to EDGAR. Security-based swap valuation dispute notices are not required to include specific fields. However, SBS Entities are encouraged to include in the notice basic information about the security-based swap valuation dispute, including: (1) identifying information about both counterparties (including each party’s Legal Entity Identifier); (2) the date of the dispute (or the termination date, if applicable); (3) the type of dispute; (4) disclosure about which counterparty is the receiver and which is the payer; and (5) the disputed amount, in U.S. Dollars (‘‘USD’’).267 This information is consistent with the notices that Swap Entities are required to provide to the NFA, which receives notices from Swap Entities pursuant to CFTC Rule 23.502(c) 268 regarding swap valuation disputes.269 SBS Entities also are encouraged to provide any applicable identifier about the relevant security-based swap (such as the product ID), the notional amount of the security-based swap, and disclosure about which counterparty is calling the dispute (i.e., the direction of the dispute).270 2. Proposal To Require Valuation Dispute Notices To Be Submitted in EDGAR Based on the Commission’s experience over the course of implementing Rule 15fi–3(c), the Commission believes that it is now appropriate to require that the securitybased swap valuation dispute notices be submitted to the Commission electronically on EDGAR using a structured data language. Accordingly, 267 See Security-Based Swap Valuation Dispute Notices, Staff Statement on Submitting SecurityBased Swap Valuation Dispute Notices, available at https://www.sec.gov/tm/Security-Based-SwapValuation-Dispute-Notices. 268 17 CFR 23.502(c). 269 See NFA Interpretive Notice 9072 to Compliance Rule 2–49: Swap Valuation Dispute Filing Requirements (May 18, 2017), available at https://www.nfa.futures.org/rulebook/ rules.aspx?Section=9&RuleID=9072 (‘‘NFA Interpretive Notice 9072’’) and Effective date of Interpretive Notice to NFA Compliance Rule 2–49: Swap Valuation Dispute Filing Requirements, Notice I–17–13 (July 20, 2017), available at https:// www.nfa.futures.org/news/ newsNotice.asp?ArticleID=4827 (‘‘NFA Notice to Members I–17–13’’ together with NFA Interpretive Notice 9072, ‘‘NFA Swap Valuation Dispute Guidance’’). 270 See supra note 285. PO 00000 Frm 00039 Fmt 4701 Sfmt 4702 23957 the Commission is now proposing to amend Rule 15fi–3(c) to affirmatively require SBS Entities to submit these notices electronically in EDGAR using a custom XML-based data language specific to the notices.271 This requirement would apply to initial notices of a dispute and amendments of such notices, including notices of termination of disputes.272 If these proposed changes are adopted, SBS Entities would no longer be able to submit dispute notices to the Commission using a dedicated email address or in PDF format on EDGAR.273 As explained in further detail below, the Commission is encouraging SBS Entities to include specific disclosures in their dispute notices, and the custom XMLbased data language that the Commission would create for the dispute notices would include specific elements reflecting those specific disclosures; however, SBS Entities would also be permitted to leave those specific fields unpopulated and provide their own description of the dispute in a separate field.274 The Commission believes that requiring submission of security-based swap valuation dispute notices electronically on EDGAR and in a structured data language is appropriate at this time for at least three reasons. First, an SBS Entity should already have access to EDGAR (and have already 271 SBS Entities relying on Commission orders granting substituted compliance pursuant to 17 CFR 240.3a71–6 may be required to provide the Commission reports regarding disputes between counterparties, among other conditions in the orders. See, e.g., Exchange Act Release No. 93411 (Oct. 22, 2021), 86 FR 59797, 59815 (Oct. 28, 2021) (File No. S7–08–21). To satisfy that requirement, SBS Entities currently can use either of the submission methods available for submitting notices under Rule 15fi–3(c). If the Commission adopts the proposed amendment to Rule 15fi–3(c), the remaining method available for SBS Entities to provide the dispute notices required by the Commission orders would be to submit them electronically in EDGAR using the custom XMLbased data language specific to valuation dispute notices. 272 Under the proposal, SBS Entities would be required to submit amendments electronically in EDGAR using the custom XML-based data language if the valuation dispute increases or decreases by the amount specified in Rule 15fi–3(c)(2), regardless of the method the SBS Entity used to submit the original notice or previous amendments. 273 The proposed changes to Rule 15fi–3(c) would require SBS Entities with a U.S. prudential regulator to notify the prudential regulator in a form and manner acceptable to the prudential regulator. See proposed amendments to paragraph (c) of Rule 15fi–3, 17 CFR 240.15fi–3(c). Currently, Rule 15fi– 3(c) does not specify how SBS Entities must notify the prudential regulator. The Commission believes that this additional proposed specificity in the rule would provide additional guidance to SBS Entities, while allowing them the flexibility to notify any applicable U.S. prudential regulator in any form and manner acceptable to that regulator. 274 See infra note 296 and accompanying text. E:\FR\FM\18APP3.SGM 18APP3 ddrumheller on DSK120RN23PROD with PROPOSALS3 23958 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules completed a Form ID, the form used to apply for EDGAR access) at the time it becomes required to submit a valuation dispute notice (or a related amendment, including a termination notice), as the SBS Entity would have to use EDGAR to register with the Commission in such capacity, and should therefore be familiar with how to use the system. As such, the Commission would not expect there to be any additional burden associated with expressly mandating EDGAR submission. Second, the Commission understands that the security-based swap valuation dispute notices may contain information that is sensitive to one or both of the counterparties. The Commission does not intend for these notices to operate as a means for providing public disclosure of security-based swap valuation disputes. To the extent that the notices provided to the Commission include confidential information that is otherwise not publicly available, the SBS Entity can request the confidential treatment of the information.275 If such a confidential treatment request is made, the Commission anticipates that it would keep the information confidential, subject to the provisions of applicable law; 276 whether any material is confidential is determined pursuant to applicable law, including but not limited to the Freedom of Information Act and Commission rules governing requests for confidential treatment. As such, the Commission believes that using EDGAR—as opposed to a dedicated email inbox—provides a more efficient and secure way to submit these notices and allows SBS Entities to electronically access and sort their notices. Third, the Commission expects that the proposed requirement to submit security-based swap valuation dispute notices in a structured data language would enable the Commission to analyze the information in those notices more efficiently and effectively. Under the current requirements, should Commission staff seek to analyze the dispute notice information (such as to identify trends in the incidence and magnitude of disclosed valuation disputes across SBS Entities or a given population thereof), the analysis would require significant manual effort because the notices are not machinereadable. In addition, the proposed 275 See 17 CFR 200.83. e.g., 5 U.S.C. 552 et seq.; 15 U.S.C. 78x (governing the public availability of information obtained by the Commission). See also Risk Mitigation Techniques for Uncleared SecurityBased Swaps, Exchange Act Release No. 87782 (Dec. 18, 2019), 85 FR 6359, 6389–90. (Feb 4, 2020) (‘‘Risk Mitigation Adopting Release’’). 276 See, VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 structured data requirement would enable EDGAR to perform technical validations (i.e., programmatic checks to ensure the notices are appropriately standardized and formatted) upon intake of the notices, thus potentially improving the quality of the submitted data by decreasing the incidence of nonsubstantive errors (such as the inclusion of text characters in a field designated to accept only numeric characters). Under the proposal, SBS Entities would no longer be permitted to submit PDF versions of dispute notices to the Commission. SBS Entities currently may email or submit on EDGAR PDF versions of dispute notices, and in some cases these notices may have been prepared using systems that were designed also to comply with NFA swap valuation dispute notice requirements. The proposal to require SBS Entities to submit security-based swap valuation dispute notices to the Commission in a structured data language would not allow SBS Entities to continue to upload notices in a non-machine-readable, unstructured data language, and instead would require SBS Entities to format these notices using a custom XML-based data language. As a general matter, the Commission believes that the type of information that Swap Entities are currently required to include in the valuation dispute notices pursuant to the NFA Swap Valuation Dispute Guidance should generally satisfy what the Commission believes to be one of the primary objectives of Rule 15fi–3(c), which is to inform the Commission and its staff that such a dispute has arisen, allowing the Commission and staff to consider whether additional follow-up is warranted. Accordingly, as a general matter, the Commission believes it is likely that a timely notice provided to the Commission with respect to a security-based swap valuation dispute would satisfy Rule 15fi–3(c), as proposed to be amended, if it continued to contain the information currently required by the NFA Swap Valuation Dispute Guidance (but for the fact that such notice pertains to a security-based swap).277 While Rule 15fi–3(c) is intended to provide SBS Entities with flexibility to submit the required information to the Commission in a manner that is most efficient for each SBS Entity,278 the Commission 277 See supra note 287. See also Risk Mitigation Adopting Release 85 FR at 6368. 278 See Risk Mitigation Adopting Release 85 FR at 6368; see also Security-Based Swap Valuation Dispute Notices, available at https://www.sec.gov/ tm/Security-Based-Swap-Valuation-Dispute-Notices (where the staff notes that, ‘‘In terms of the contents of the notice, the Commission explained when it PO 00000 Frm 00040 Fmt 4701 Sfmt 4702 encourages SBS Entities to include in the notice basic information about the security-based swap valuation dispute, including: (1) identifying information about both counterparties (including each party’s Legal Entity Identifier); (2) the date of the dispute (or the termination date, if applicable); (3) the type of dispute; (4) disclosure about which counterparty is the receiver and which is the payer; and (5) the disputed amount, in U.S. Dollars (‘‘USD’’). SBS Entities are also encouraged to provide any applicable identifier about the relevant security-based swap (such as the product ID), the notional amount of the security-based swap, and disclosure about which counterparty is calling the dispute (i.e., the direction of the dispute). In amendments to previously submitted notices by SBS Entities, including notices of termination of a dispute, SBS Entities would be encouraged to provide information to assist the Commission in understanding the purpose of the amendment or the circumstances of termination of a dispute. Such information would assist staff in focusing the scope of any followup inquiries and thus reduce both Commission and SBS Entity resources used in connection with valuation dispute reports. Consistent with this approach, the Commission’s custom XML-based data language would include discrete XML elements for each of the encouraged disclosures listed above, and the associated fillable web form on EDGAR would contain discrete fields mirroring those XML elements. However, to provide the flexibility inherent to the Commission’s approach to dispute notices, the custom XML data language (and associated fillable web form) would also contain an XML element (and fillable field) to capture any information provided by SBS Entities that does not fall within the encouraged disclosures listed above. For the same reason, the custom XML data language for dispute notices would permit SBS Entities to refrain from populating one or more of the XML elements (and associated fillable fields) that reflect the encouraged disclosures if responsive information is not needed to report the dispute. Request for Comment 67. Should the Commission require security-based swap valuation dispute notices and amendments, including adopted Rule 15fi–3(c) that the notice is not required to include specific fields, ‘in order to provide SBS Entities with the flexibility to submit the required information to the Commission in a manner that is most efficient for each SBS Entity.’ ’’). E:\FR\FM\18APP3.SGM 18APP3 ddrumheller on DSK120RN23PROD with PROPOSALS3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules notices of dispute termination, to be submitted electronically with the Commission through the EDGAR system? Explain why or why not. 68. Does the current requirement to submit security-based swap valuation dispute notices and amendments to the Commission via either email or EDGAR provide flexibility to SBS Entities that could be lost if these submissions were required to be made electronically on EDGAR in a structured data language? Explain why or why not. 69. Would SBS Entities experience practical difficulties in preparing and submitting these notices electronically on EDGAR in a structured data language? If so, explain why. 70. What, if any, costs would be associated with valuation dispute notices for submission on EDGAR? Are those costs more, less or the same as those currently expending under the current submission processes? 71. Should the Commission instead require that security-based swap valuation dispute notices, and amendments (including dispute termination notices) be submitted through a different process, such as by email to a dedicated mailbox? If so, explain why and whether such process should be adopted in lieu of requiring the notices to be submitted electronically on EDGAR system in a structured data language, or as a nonexclusive alternative (as is currently the case). How would that process affect costs and implementation of the proposed amendment to Rule 15fi–3(c) as compared to the current requirements? 72. Even if the proposal to require these notices to be submitted to the Commission electronically on EDGAR in a structured data language would provide greater benefits as compared to the current requirement to submit via email or EDGAR in an unstructured data format, would an alternative manner of submission provide even more benefits than the proposal, or be more appropriate? Why would an alternative manner of submission be appropriate or more appropriate? Please describe any alternative manner in detail and assess how the alternative would impact SBS Entities, security-based swap markets and the Commission. For example, should the Commission instead permit, but not require, security-based swap valuation dispute notices to be submitted electronically on EDGAR in structured data language? Should the Commission instead retain the current email-based submission system and/or the current unstructured data format for these reports made on EDGAR? Should the Commission implement another VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 method for submitting security-based swap valuation dispute notices and amendments, including notices of dispute termination? How would these or other alternatives affect costs and implementation of the proposed amendment to Rule 15fi–3(c) as compared to the current requirements? 73. Should the Commission require security-based swap valuation dispute notices, and amendments, including notices of dispute termination, to be made in a structured data language? If yes, should the Commission require SBS Entities to use a custom XML data language for these reports or another structured data language? If no, which data language should the Commission permit these reports to use and why? Would a requirement to submit these reports in a structured data language impose additional costs on, or create cost efficiencies for, SBS Entities as compared to other (non-structured) data languages? Please explain the benefits and costs of a requirement to submit these reports in a non-structured data format, as compared to the benefits and costs of requiring them in a structured data language. D. Compliance Reports Submitted to the Commission Pursuant to Rule 15fk– 1(c)(2)(ii)(A) Rule 15fk–1(c) requires that the chief compliance officer (‘‘CCO’’) of an SBS Entity prepare and sign an annual compliance report (‘‘CCO report’’) that must be submitted to the Commission within 30 days following the deadline for filing the SBS Entity’s annual financial report with the Commission pursuant to section 15F of the Exchange Act and the rules and regulations thereunder.279 Rule 15fk–1(c) does not specify the manner in which the CCO report must be submitted, whether in paper or electronic format.280 Accordingly, an SBS Entity may submit its CCO report as a paper or electronic submission. To facilitate submission of the CCO reports, the Commission has prepared the EDGAR system to receive the reports electronically. The Commission is proposing to amend Rule 15fk– 1(c)(2)(ii)(A) to require the CCO report to be submitted electronically in Inline XBRL (i.e., as an Interactive Data File in accordance with Rule 405 of Regulation S–T) 281 through EDGAR.282 Requiring the electronic submission of these 279 17 CFR 240.15Fk–1(c). id. 281 17 CFR 232.405. 282 The proposed amendment would not change what is required to be included in the CCO report under Exchange Act Rule 15fk–1(c). See 17 CFR 240.15Fk–1(c). 280 See PO 00000 Frm 00041 Fmt 4701 Sfmt 4702 23959 reports through EDGAR would specify the manner of submission, streamline and simplify the filing process for an SBS Entity and the Commission, eliminate the need to establish manual processes that may introduce error, and make submissions available immediately to Commission staff. Furthermore, requiring the report to be submitted electronically in Inline XBRL would facilitate access to the information included on the CCO reports, enabling Commission staff to perform more efficient retrieval, aggregation, and comparison across different SBS Entities and time periods, as compared to an unstructured PDF, HTML, or ASCII format requirement for the reports.283 The functionality enabled by a machine-readable data requirement would allow Staff to better utilize CCO reports to gauge the soundness of SBS Entity compliance programs (e.g., by enabling efficient staff identification of material changes to compliance policies or material non-compliance matters) to ensure compliance with the Exchange Act and rules and regulations thereunder applicable to security-based swaps, thus ultimately furthering the Commission’s mission of maintaining fair, orderly, and efficient markets.284 In addition, the proposed structured data requirement would enable EDGAR to perform technical validations (i.e., programmatic checks to ensure the reports are appropriately standardized, formatted, and complete) upon intake of the reports, thus potentially improving the quality of the submitted data by decreasing the incidence of nonsubstantive errors. The Commission is proposing Inline XBRL (and not custom XML) as the structured data language to be required for CCO reports, because those reports consist of extended narrative descriptions, and whereas custom XML data languages only have the capacity to accommodate brief narrative descriptions, Inline XBRL can accommodate longer narrative 283 For further discussion of the proposed structured data requirements, see infra section VII.A. 284 See Business Conduct Standards for SecurityBased Swap Dealers and Major Security-Based Swap Participants, Exchange Act Release No. 77617 (Apr. 14, 2016) 81 FR 29959, 30054 (May 13, 2016) (stating that the proposed (and subsequently adopted) requirements for Rule 15fk–1, including the requirement for the chief compliance officer to prepare an annual compliance report that is submitted with the Commission, ‘‘underscore[s] the central role that sound compliance programs play to ensure compliance with the Exchange Act and rules and regulations thereunder applicable to security-based swaps’’); see also Business Conduct Standards for Security-Based Swap Dealers and Major Security-Based Swap Participants, Exchange Act Release No. 64766 (June 29, 2011), 76 FR 42395, 42435 (July 18, 2011). E:\FR\FM\18APP3.SGM 18APP3 23960 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules descriptions with presentation capabilities that preserve humanreadability while maintaining machinereadability. ddrumheller on DSK120RN23PROD with PROPOSALS3 Request for Comment 74. Should the Commission require CCO reports to be submitted electronically with the Commission through the EDGAR system in a structured data language? Explain why or why not. 75. Would SBS Entities experience practical difficulties in preparing and submitting CCO reports electronically on EDGAR in a structured data language? If so, explain why. 76. Should the Commission instead require that CCO reports be submitted through a different process or format? If so, explain why and whether such process or format should be adopted in lieu of requiring CCO reports to be submitted electronically on EDGAR system in a structured data language. 77. Even if the proposal to require CCO reports to be submitted electronically on EDGAR in a structured data language would provide greater benefits as compared to submitting via email or on EDGAR in an unstructured data language, would an alternative manner of submitting provide even more benefits than the proposal, or be more appropriate? Please describe any alternative manner in detail and assess how the alternative would impact SBS Entities, security-based swap markets and the Commission. For example, should the Commission instead permit, but not require, CCO reports to be submitted electronically on EDGAR in structured data language? Should the Commission require a different structured data language, such as custom XML, for the CCO reports? Should the Commission implement another method for filing CCO reports? 78. Would a requirement to submit CCO reports in a structured data language impose additional costs on, or create any benefits for, SBS Entities as compared to other (non-structured) data languages? How would the benefits and costs of a requirement to submit CCO reports in an unstructured data language compare to the benefits and costs of a requirement to submit in a structured data language? VI. Amendments Regarding the FOCUS Report and Signature Requirements in Rule 17a–5, 17a–12, and 18a–7 Filings Until 2021, broker-dealers were the only entities required to file Parts II and IIA of Form X–17A–5, the FOCUS Report, which are used to report unaudited financial and operational information on a monthly or quarterly VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 basis. In 2019, as part of a new regime to regulate security-based swap activity, the Commission amended FOCUS Report Part II to: (1) elicit additional information about the security-based swap activities of broker-dealers that file Part II; (2) add OTC derivatives dealers and SBS Entities that are not dually registered as broker-dealers (‘‘standalone SBS Entities’’) as additional filers for FOCUS Report Part II; and (3) adopt new FOCUS Report Part IIC to be filed by SBS Entities with a prudential regulator (‘‘bank SBS Entities’’).285 Since these changes have taken effect, and firms have begun to file these forms, it has come to the Commission’s attention that amendments are needed regarding the FOCUS Report to correct certain technical errors and to provide clarifications. These proposed changes will help improve the accuracy of the information the Commission collects on the FOCUS Report, consistent with the goals set forth in section IV of this release to require these reports to be filed in structured data language. In addition, the Commission is proposing to allow electronic signatures in Rule 17a–5, 17a–12, and 18a–7 filings, including the FOCUS Report. The proposed amendments are described in more detail below. A. Corrective and Clarifying Amendments to the FOCUS Report Part II 1. Computation of Minimum Regulatory Capital Requirements In the Calculation of Minimum Net Capital Requirement in the Computation of Minimum Regulatory Capital Requirements section of the FOCUS Report Part II, firms have noted that Rule 15c3–1 286 instructs a broker-dealer that is also a futures commission merchant (‘‘FCM’’) to report the greater of the broker-dealer ratio requirement or ‘‘4 percent of the funds required to be segregated’’ pursuant to the CFTC rules.287 However, the form does not include a line for firms to report the 4% of segregated funds. In addition, the FOCUS Report does not align with Rule 15c3–1 in instructing firms at what point in the net capital computation to compute the percentage of the risk margin amount (if applicable) 288 and the 10% addition for broker-dealers engaged in reverse repurchase 285 See Recordkeeping and Reporting Requirements for Security-Based Swap Dealers, Major Security-Based Swap Participants, and Broker-Dealers, Exchange Act Release No. 87005 (Sept. 19, 2019), 84 FR 68550 (Dec. 16, 2019) (‘‘SBS Recordkeeping and Reporting Adopting Release’’). 286 See 17 CFR 240.15c3–1 (‘‘Rule 15c3–1’’). 287 See 17 CFR 240.15c3–1(a)(1)(iii). 288 See 17 CFR 240.15c3–1(a)(7)(i) and (a)(10). PO 00000 Frm 00042 Fmt 4701 Sfmt 4702 agreements.289 To align the FOCUS Report’s net capital computation with Rule 15c3–1, the Commission proposes to add a line for the reporting of 4% of segregated funds and to renumber other lines to clarify in the FOCUS Report when certain computations should be made as set forth in Rule 15c3–1’s net capital computation. These changes are intended to conform the FOCUS Report to Rule 15c3–1, with no substantive impact on the broker-dealer’s required capital computation under Rule 15c3– 1.290 2. Statement of Income (Loss) or Statement of Comprehensive Income, As Applicable The Commission is also proposing amendments to the FOCUS Report Part II income statement. Currently, the income statement only provides fields for reporting revenue from securities commissions, even though firms may generate revenue from other types of commissions (e.g., commodity transactions and insurance products). Because it is important for the Commission to receive comprehensive data on all types of firms’ commission revenue to ensure compliance with relevant rules and properly supervise firms as part of the Commission’s mission, the Commission proposes to revise the revenue section of the income statement to account for these other types of commission revenue.291 3. Computation of CFTC Minimum Capital Requirements CFTC rules permit a firm that is registered with the CFTC as an introducing broker, an FCM, or a swap dealer, and also registered with the Commission as a broker-dealer or SBS Entity, to file the FOCUS Report in lieu of the unaudited financial reports required under the CFTC regulations.292 Because the CFTC is not receiving its own form from these dual registrants and relies upon the Commission’s FOCUS Report as a source of data for these firms, the Commission’s FOCUS 289 See 17 CFR 240.15c3–1(a)(9)(i) through (iii). align the FOCUS report’s net capital computation with Rule 15c3–1, the Commission is proposing the following changes to the Calculation of Minimum Net Capital Requirement sub-section in the Computation of Minimum Regulatory Capital Requirements section of FOCUS Report Part II: (1) Delete old Line 5Bi; (2) Add new Line 5C; (3) Add a subtotal line as new Line 5D and renumber subsequent lines and line references accordingly; and (4) Move old Line 5D to new Line 7 and renumber subsequent lines and line references accordingly. 291 In summary, the Commission is proposing to revise Line 1E and add new Lines 1F–1H in the Revenue sub-section in the Income Statement section of FOCUS Report Part II. 292 See 17 CFR 1.10(h); 17 CFR 23.105(d)(3). 290 To E:\FR\FM\18APP3.SGM 18APP3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules Report includes several sections or schedules set forth in the CFTC’s Form 1–FR that address the segregation of customer funds and the calculation of CFTC minimum capital requirements to ensure the CFTC receives complete information about these firms.293 While CFTC FCMs are required to complete the Computation of CFTC Minimum Capital Requirements section of FOCUS Report Part II, the FOCUS Report does not instruct CFTC introducing brokers or swap dealers not also registered as an FCM (‘‘stand-alone introducing brokers’’ or ‘‘stand-alone swap dealers,’’ respectively) to complete this section of the form. Therefore, the Commission proposes to require CFTCregistered introducing brokers and swap dealers (that are also registered with the Commission as a broker-dealer or SBS Entity) to complete the Computation of CFTC Minimum Capital Requirements section of FOCUS Report Part II. ddrumheller on DSK120RN23PROD with PROPOSALS3 B. Harmonizing FOCUS Report Part IIC With the Call Report In 2019, the Commission adopted FOCUS Report Part IIC, a new unaudited financial report to be filed by bank SBS Entities.294 FOCUS Report Part IIC requires bank SBS Entities to report certain information domestic banks already report on Federal Financial Institutional Examination Council (‘‘FFIEC’’) Form 031 (also known as the ‘‘Call Report’’),295 in an effort to reduce the administrative burden of completing FOCUS Report Part IIC. The FOCUS Report Part IIC is closely modelled on FFIEC Form 031, and when the same information is solicited in both FFIEC Form 031 and FOCUS Report Part IIC, the same line item number is used in both forms, except that the FOCUS Report Part IIC line item ends with an additional ‘‘b’’ character.296 However, since FOCUS Report Part IIC was adopted, FFIEC Form 031 has 293 See FOCUS Report Part II’s Computation of CFTC Minimum Capital Requirements, Statement of Segregation Requirements and Funds in Segregation for Customers Trading on U.S. Commodity Exchanges, Statement of Cleared Swaps Customer Segregation Requirements and Funds in Cleared Swaps Customer Accounts under Section 4d(f) of the Commodity Exchange Act, Statement of Segregation Requirements and Funds in Segregation for Customers’ Dealer Options Accounts, Statement of Secured Amounts and Funds Held in Separate Accounts for Foreign Futures and Foreign Options Customers Pursuant to CFTC Regulation 30.7. 294 See SBS Recordkeeping and Reporting Adopting Release. 295 See Federal Financial Institutions Examination Council, Consolidated Reports of Condition and Income for a Bank with Domestic and Foreign Offices—FFIEC 031, available at https://www.ffiec.gov/pdf/FFIEC_forms/FFIEC031_ 202203_f.pdf. 296 See id. at 68581. VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 been updated to, among other things, reflect changes in the prudential regulators’ capital rules and generally accepted accounting principles.297 This has resulted in inconsistencies between FOCUS Report Part IIC and FFIEC Form 031, and SEC staff have received a number of phone calls seeking assistance on how to reconcile these incompatibilities. For example, FFIEC Form 031 now includes a third type of securities to be reported on the Balance Sheet section, while FOCUS Report Part IIC continues to solicit values for the original two types of securities.298 Similarly, FOCUS Report Part IIC continues to solicit Tier 3 capital in the Regulatory Capital section even though this concept no longer exists in the prudential regulators’ capital rules or in FFIEC Form 031, and FFIEC Form 031 now solicits a new capital ratio (common equity tier 1 capital ratio) that is not solicited in FOCUS Report Part IIC.299 Therefore, the Commission proposes amendments to the assets and liabilities subsections of the Balance Sheet section,300 the Regulatory Capital section,301 and the Income Statement section 302 of FOCUS Report Part IIC to harmonize FOCUS Report Part IIC with FFIEC Form 031. In sum, the proposed changes would simplify the filing of FOCUS Report Part IIC by bank SBS Entities by permitting such entities to file with the Commission the identical information required by the current version of the Call Report, without the current inconsistencies raising questions from filers regarding whether the Commission is seeking information different than that required by the comparable line in the Call Report. 297 See Federal Financial Institutions Examination Council, Reporting Forms—FFIEC 031, Consolidated Reports of Condition and Income for a Bank with Domestic and Foreign Offices, available at https://www.ffiec.gov/forms031.htm (identifying current and historical versions of FFIEC Form 031). 298 Compare FFIEC Form 031, Schedule RC— Balance Sheet, Lines 2a–2c, with FOCUS Report Part IIC, Balance Sheet, Lines 2a–2b. 299 Compare FFIEC Form 031, Schedule RC–R— Regulatory Capital, with FOCUS Report Part IIC, Regulatory Capital, Line 4. 300 The Commission is proposing the following changes to the Balance Sheet section of FOCUS Report Part IIC: (1) Add new Line 2C; (2) Revise Lines 4B, 4D, 10, 15, and 16; and (3) Delete Lines 10A and 10B. 301 The Commission is proposing the following changes to the Regulatory Capital section of FOCUS Report Part IIC: (1) Delete Line 4 and renumber subsequent lines; (2) Revise renumbered Lines 4, 9, and 10, and parenthetical note after Capital Ratios subheading; and (3) Add new Line 8. 302 The Commission is proposing the following changes to the Income Statement section of FOCUS Report Part IIC: (1) Revise Line 7; and (2) Add new Lines F.i, F.ii, G.i, and G.ii, and delete Lines F and G’s fill-in fields due to addition of sub-lines. PO 00000 Frm 00043 Fmt 4701 Sfmt 4702 23961 C. OTC Derivatives Dealer FOCUS Report Filing Requirement Most broker-dealers file the FOCUS Report electronically on the FINRA eFOCUS system developed by the Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’). These broker-dealers file the FOCUS Report pursuant to a plan established by the broker-dealer’s SRO, the procedures and provisions of which have been submitted to and declared effective by the Commission pursuant to paragraph (a)(3) of Exchange Act Rule 17a–5.303 Domestic stand-alone SBS Entities and bank SBS Entities are not dually registered as broker-dealers, and therefore are not subject to these SRO plans, but they are subject to a Commission order that separately requires these firms to file the FOCUS Report electronically on the system developed by the Commission, the ‘‘SEC eFOCUS system.’’ 304 Although the SEC eFOCUS system is separate from the FINRA eFOCUS system, it appears the same to users, is developed and maintained by FINRA, and is modelled on the FINRA eFOCUS system. The Commission order designating FINRA to receive FOCUS Reports from standalone SBS Entities and bank SBS Entities reasoned that FINRA is uniquely qualified to provide the Commission with a familiar and consolidated platform for these firms to file the FOCUS Report, uniform ancillary ongoing services associated with these filings, and a consolidated platform for transmitting this data to the Commission.305 OTC derivatives dealers are a type of broker-dealer that engages in limited securities activities and is exempt from SRO membership.306 OTC derivatives dealers are required to file FOCUS Report Part II, but unlike other brokerdealers and stand-alone SBS Entities, OTC derivatives dealers are required to file FOCUS Report Part II in paper ‘‘at the Commission’s principal office in Washington, DC.’’ 307 Given the similarities between OTC derivatives dealers and the broker-dealers and stand-alone SBS Entities filing FOCUS Report Part II, the Commission proposes to require OTC derivatives dealers to file the FOCUS Report Part II on the SEC eFOCUS system developed and 303 See 17 CFR 240.17a–5(a)(3). Order Designating Financial Industry Regulatory Authority, Inc., to Receive Form X–17A– 5 (FOCUS Report) from Certain Security-Based Swap Dealers and Major Security-Based Swap Participants, Exchange Act Release No. 88866 (May 14, 2020), 85 FR 29993 (May 19, 2020). 305 See id. 306 See 17 CFR 240.3b–12. 307 See 17 CFR 240.17a–12(a). 304 See E:\FR\FM\18APP3.SGM 18APP3 23962 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules maintained by FINRA. Because OTC derivatives dealers are required to be affiliated with a broker-dealer,308 OTC derivatives dealers’ operational staff already are familiar with the FINRA eFOCUS system’s interface, and would be able to use the same preexisting templates, software, and procedures currently used by the broker-dealer to file FOCUS Reports on the FINRA system. This would help contain costs and time burdens on OTC derivatives dealers associated with the proposed amendment to electronically submit these reports. Having this information submitted in the eFOCUS system would furthermore facilitate the ability of Commission staff to compare data between these different types of entities in a consistent manner and in the same database, which would allow staff to monitor these registrants more comprehensively and effectively.309 For these reasons, the Commission proposes to amend paragraph (a)(2) of Rule 17a– 12 to require OTC derivatives dealers to file FOCUS Report Part II on the SEC eFOCUS system maintained by FINRA.310 D. Signature Requirements in Rule 17a– 5, 17a–12, and 18a–7 Filings 1. Number of Signatures on FOCUS Report The cover pages of Parts II, IIA, and IIC of the FOCUS Report include signature lines for the filer’s principal executive officer, principal financial officer, and principal operations officer (or their comparable officers).311 In the time since the revised FOCUS Report was adopted, it has come to the Commission’s attention that obtaining the signatures of all three principal officers on or close to the same day may be burdensome, especially with respect to larger firms with thousands of 308 See 17 CFR 240.3b–12. an alternative, the Commission considered whether to require OTC derivatives dealers to file their FOCUS Reports on EDGAR, but preliminarily concludes that filing on SEC eFOCUS is preferable because the SEC eFOCUS system is already set up to receive FOCUS Report filings, OTC derivatives dealers’ staff are already familiar with the SEC eFOCUS system, and Commission staff would be better able to compare data between different entity types if FINRA eFOCUS or SEC eFOCUS is used by all firm types to file the FOCUS Report. 310 The Commission also proposes to amend paragraph (a)(2) of Rule 17a–12 to replace ‘‘deemed to be confidential’’ with ‘‘deemed to be confidential for the purposes of section 24(b) of the Act’’ for consistency with the language used in other rules (e.g., paragraph (c)(4) of Exchange Act Rule 17h-2T) and to clarify the legal basis of the rule. This proposed amendment is not intended to change the substantive meaning of the sentence. 311 FOCUS Report Part IIA uses slightly different wording: Principal Executive Officer or Managing Partner, Principal Financial Officer or Partner, and Principal Operations Officer or Partner. ddrumheller on DSK120RN23PROD with PROPOSALS3 309 As VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 employees. Further, the Commission believes that obtaining the signatures of two of the three senior officers would help ensure that the broker-dealer’s senior executives are responsible for the accuracy of the information being filed with the Commission. Therefore, the Commission proposes to require only two of the three principal officers’ signatures in an effort to balance the Commission’s desire for individual accountability with the burden on the filer. 2. Electronic Signatures in Rule 17a–5, 17a–12, and 18a–7 Filings The Commission also proposes to allow signatories on Rule 17a–5, 17a– 12, and 18a–7 filings to choose between providing either manual or electronic signatures.312 Remote work has increased in frequency in the wake of COVID–19, ‘‘increase[ing] the difficulties associated with obtaining manual ‘wet’ signatures,’’ while ‘‘improvements in electronic signature software technology make it possible to confirm (with at least equal confidence to the collection of manual signatures) who has signed a document and when it was signed.’’ 313 The Commission proposes that the signing process for an electronic signature would need to, at a minimum: ‘‘(1) Require the signatory to present a physical, logical, or digital credential that authenticates the signatory’s individual identity; (2) Reasonably provide for non-repudiation of the signature; (3) Provide that the signature be attached, affixed, or otherwise logically associated with the signature page or document being signed; and (4) Include a timestamp to record the date and time of the signature.’’ 314 These requirements, which were first identified in the Commission’s Electronic Signatures Release, are needed so that the Commission can verify the authenticity of the electronic signature, but are intended to be technologically neutral and allow for 312 See proposed amendments to paragraphs (f)(3)(v)(B), (i)(1)(ii), and (p) of Rule 17a–5; paragraphs (g)(2), (j)(1), and new paragraph (q) of Rule 17a–12; paragraphs (e)(3)(v)(B), (h)(1)(ii), and (j) of Rule 18a–7; FOCUS Report Part IIA and instructions; FOCUS Report Part II instructions; FOCUS Report Part IIC instructions. 313 See Electronic Signatures in Regulation S–T Rule 302, Exchange Act Release No. 10889 (Nov. 17, 2020), 85 FR 78224 (Dec. 4, 2020) (‘‘Electronic Signatures Release’’) (quoting comment letter from Richard Blake, et al., available at https:// www.sec.gov/comments/4-760/4760-7278993217809.pdf). 314 See proposed amendment to instructions for FOCUS Report Parts II, IIA, and IIC. An example of an electronic signature using this signing process is Adobe Acrobat’s digitally signed certificate, when the document is locked after signing. PO 00000 Frm 00044 Fmt 4701 Sfmt 4702 different types and forms of electronic signatures, provided that the signing process satisfies the aforementioned conditions that relate to the validity and enforceability of an electronic signature.315 Request for Comment 79. Are there any lines in the FOCUS Report Parts II, IIA, or IIC that should be added or removed because they result in inaccuracies or inconsistencies with other portions of the FOCUS Report? If so, identify the lines and explain why they should be added or removed. For example, should the Commission update Line 10 (Market risk exposure— for Basel 2.5 firms) of the Computation of Net Capital (Filer Authorized to Use Models) section of FOCUS Report Part II to reflect that firms are now using Basel 3? If so, explain why how Line 10 should be updated, and why. Are there any lines in the FOCUS Report that require further clarification or instruction? If so, identify the lines and explain the needed clarification or instruction. 80. The Commission is proposing amendments to FOCUS Report Part II. Do commenters agree or disagree with these proposed amendments? Explain why or why not. Should the Commission adopt its proposal to amend the Calculation of Minimum Net Capital Requirement subsection to include 4% of funds required to be segregated under the CFTC’s rules even though the CFTC’s rules no longer include the 4% of segregated funds ratio requirement? If so, what should the 4% of segregated funds be defined with respect to? If not, what standard should be used, and should Rule 15c3–1 be amended for consistency with the FOCUS Report? Explain. What, if any, costs would be associated with adopting the proposed amendments to FOCUS Report Part II? Are those costs more, less or the same as not amending the FOCUS Report? How do firms currently complete the Calculation of Minimum Net Capital Requirement subsection, and why? Should the reference to the CFTC’s ratio net capital requirement be added to the Commission’s ratio net capital requirement, or should firms be instructed to apply the greater of the CFTC or Commission ratio net capital requirements? Explain. 81. Please address whether the proposed amendments would be appropriate, and discuss any potential alternatives to the proposed amendments. For instance, as an alternative to amending the FOCUS 315 See Electronic Signatures Release, 85 FR at 78225. E:\FR\FM\18APP3.SGM 18APP3 ddrumheller on DSK120RN23PROD with PROPOSALS3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules Report to include the 4% of segregated funds ratio amount, should the Commission instead amend Rules 15c3– 1 and 15c3–1d to remove references to these requirements that are no longer in effect under the CFTC’s rules? In particular, Rules 15c3–1 and 15c3–1d include references to 4, 6, or 7 ‘‘percent of the funds required to be segregated pursuant to the Commodity Exchange Act and the regulations thereunder (less the market value of commodity options purchased by option customers on or subject to the rules of a contract market, each such deduction not to exceed the amount of funds in the option customer’s account)’’ that impose additional requirements that apply to broker-dealers that are also registered with the CFTC as FCMs.316 However, the CFTC’s rules no longer include a requirement linked to segregated funds. Removing these references from Rules 15c3–1 and 15c3–1d would mean that broker-dealers that also are registered as FCMs would no longer be subject to these additional requirements based on CFTC requirements that are no longer in effect. However, as FCMs, they will remain subject to capital and other financial responsibility requirements under the Commodity Exchange Act and the CFTC’s rules thereunder. Therefore, broker-dealers that are FCMs would continue to be required to comply with the capital requirements of Rule 15c3– 1 and its appendices (excluding the requirements linked to the CFTC’s requirements that are no longer in effect) and to comply with the capital and other financial responsibility rules of the Commodity Exchange Act and the CFTC’s rules thereunder. In light of this, should the Commission amend Rules 15c3–1 and 15c3–1d to remove all references to the CFTC’s segregated ratio requirement, which is no longer in effect? Explain why or why not. How would this impact the capital of brokerdealers also registered as FCMs? 82. As a second alternative to amending the FOCUS Report to include the 4% of segregated funds ratio amount, should the Commission replace the references to the CFTC’s segregated ratio requirement with the ratio requirement currently used in the CFTC rules? For example, should the capital requirements for FCMs referenced in existing paragraph (a)(1)(iii) of Rule 15c3–1 be modified to refer to ‘‘the FCM’s risk-based capital requirement pursuant to the Commodity Exchange 316 See 17 CFR 240.15c3–1(a)(1)(iii) (4%), (e)(2)(ii) (7%); 17 CFR 240.15c3–1d(b)(6)(iii) (7%), 17 CFR 240.15c3–1d(b)(7) (7%), 17 CFR 240.15c3– 1d(b)(8)(i)(A) (6%), 17 CFR 240.15c3– 1d(b)(10)(ii)(B) (4%), 17 CFR 240.15c3–1d(c)(2) (6%), 17 CFR 240.15c3–1d(c)(5)(i)(B) (7%). VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 Act (7 U.S.C. 1 et seq.) and the regulations thereunder’’? 317 Explain why or why not. In addition, where the other requirements of Rules 15c3–1 and 15c3–1d currently reference specific percentages that are multiples of the FCM’s segregated funds requirement (e.g., 7% under Rule 15c3– 1d(b)(6)(iii)),318 should the references be modified to read ‘‘120% of the aggregate amount of the FCM’s risk-based capital requirement’’? Explain why or why not. 83. Should the Commission amend FOCUS Report Part IIC to align with FFIEC Form 031? Explain why or why not. If the prudential regulators make further amendments to FFIEC Form 031 before the Commission issues an adopting release, if any (e.g., to how assets, liabilities, or equity capital are reported on FFIEC Form 031’s Schedule RC, to how regulatory capital or capital ratios are reported on FFIEC Form 031’s Schedule RC–R, to how income is reported on FFIEC Form 031’s Schedule RI), should the Commission make additional amendments to FOCUS Report Part IIC to align the form with FFIEC Form 031, as amended? Explain why or why not. 84. The Commission is proposing four minimum standards that an electronic signature must satisfy. Should the Commission specify standards for electronic signatures? Explain why or why not. Instead of proposing the four minimum standards, should the Commission instead rely the E-Sign Act’s more general definition of a digital signature (which is consistent with the four minimum standards)? 319 Explain why or why not. Are any of these standards unnecessary or should any additional standards be added? Explain why. Are any of these standards unclear? If so, explain how they could be clarified. What, if any, costs would result from adopting the proposed standards for an electronic signature, as 317 See 17 CFR 1.17(a)(1)(i)(B) (prescribing an FCM’s risk-based capital requirement, as the sum of: (1) 8% of the total risk margin requirement for positions carried by the FCM in customer accounts and noncustomer accounts; and (2) for an FCM that is also a registered swap dealer, 2% of the total uncleared swap margin). 318 See 17 CFR 240.15c3–1(e)(2)(ii) (referencing 7%); 17 CFR 240.15c3–1d(b)(6)(iii) (referencing 7%), 17 CFR 240.15c3–1d(b)(7) (referencing 7%), 17 CFR 240.15c3–1d(b)(8)(i)(A) (referencing 6%), 17 CFR 240.15c3–1d(b)(10)(ii)(B) (referencing 4%), 17 CFR 240.15c3–1d(c)(2) (referencing 6%), 17 CFR 240.15c3–1d(c)(5)(i)(B) (referencing 7%). 319 The E-Sign Act states: ‘‘The term ‘electronic signature’ means an electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record.’’ 15 U.S.C. 7006. PO 00000 Frm 00045 Fmt 4701 Sfmt 4702 23963 opposed to the aforementioned alternatives? 85. The Commission is proposing to require two of the three signature lines to be signed on the cover page of the FOCUS Report. Do commenters agree? Explain, and if not, identify an alternative approach. Should the Commission require all three signature lines to be signed? Should the Commission require two of the three signature lines to be signed as a general rule, but allow only one of the three signature lines to be signed when FINRA permits a single person at the broker-dealer to fill two of the roles identified on the signature lines? Explain why or why not. What, if any, costs would result from adopting the proposal to require two of the three signature lines to be signed on the cover page of the FOCUS Report? 86. The Commission is proposing to require OTC derivatives dealers to file their FOCUS Reports on the SEC eFOCUS system. What would be the burden of requiring OTC derivatives dealers to file their FOCUS Reports on the SEC eFOCUS system maintained by FINRA? Explain. Should the Commission require OTC derivatives dealers to file their FOCUS Reports on another electronic platform, such as the Commission’s EDGAR system? Explain why or why not. What, if any, costs would result from requiring OTC derivatives dealers to file their FOCUS Reports on the SEC eFOCUS system, as compared to allowing these firms to file by paper or on EDGAR? VII. Proposed Amendments to Regulation S–T (Including Structured Data Requirements) and Rule 24b–2 A. Proposed Amendments to Regulation S–T (Including Structured Data Requirements) The Commission is proposing to amend Rule 101(a) of Regulation S–T to designate Form X–17A–5 Part III, broker-dealer supplemental reports filed pursuant to paragraph (k) of Rule 17a– 5, OTC derivatives dealer supplemental reports filed pursuant to paragraphs (k), (l), and (m) of Rule 17a–12, Form 17– H, Form X–17A–19, notices (and withdrawals of notices) filed pursuant to Rule 3a71–3(d)(1)(vi), notices (and amendments, including notices of dispute termination) submitted to the Commission pursuant to Rule 15fi–3(c), and compliance reports submitted with the Commission pursuant to Rule 15fk– 1(c)(2)(ii)(A) (‘‘Covered EDGAR Documents’’) as mandated electronic E:\FR\FM\18APP3.SGM 18APP3 23964 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules ddrumheller on DSK120RN23PROD with PROPOSALS3 submissions.320 Further, the Commission is proposing to amend Rule 101(d) of Regulation S–T to require that all documents, including any information with respect for which confidential treatment is requested, filed pursuant to paragraphs (d) or (k) of Rule 17a–5, paragraphs (b), (k), (l), or (m) of Rule 17a–12, Rule 17a–19, Rule 17h–2T, or paragraph (c) of Rule 18a–7, and all notices and amendments provided pursuant to paragraph (c) of Rule 15fi– 3, must be filed or submitted in electronic format. Regulation S–T, in conjunction with the EDGAR Filer Manual and other applicable rules, regulations, and forms, governs the electronic submission of documents filed with or otherwise submitted to the Commission on EDGAR.321 The Commission is proposing to add the following filings to Rule 101(a), Mandated Electronic Submissions and Exceptions, of Regulation S–T: • Form X–17A–5 Part III • ANC broker-dealer supplemental reports filed pursuant to paragraph (k) of Rule 17a–5 • OTC derivatives dealer supplemental reports filed pursuant to paragraph (k), (l), and (m) of Rule 17a–12 • Form 17–H • Form X–17A–19 • Notices (and withdrawals of notices) filed pursuant to Rule 3a71–3(d)(1)(vi) • Notices (and amendments, including notices of dispute termination) provided to the Commission pursuant to Rule 15fi–3(c) • Compliance reports submitted with the Commission pursuant to Rule 15fk–1(c)(2)(ii)(A) These proposed amendments would incorporate the new electronic submission requirements into the existing structure of Regulation S–T and would ensure that the EDGAR rules in Regulation S–T apply to the forms and other documents proposed to be submitted electronically on EDGAR.322 320 The Commission is also proposing a technical update to Rule 100(c) of Regulation S–T, 17 CFR 232.100(c), to update the name of the Division of Trading and Markets from the previously used Division of Market Regulation. 321 Item 10(a) of Regulation S–T. The EDGAR Filer Manual contains the technical specifications needed for filers to make submissions through the EDGAR system. The Commission originally adopted the EDGAR Filer Manual on Apr. 1, 1993, with an effective date of Apr. 26, 1993. See Adoption of EDGAR Filer Manual, Securities Act Release No. 6986 (Apr. 1, 1993), 58 FR 18638 (Apr. 9, 1993). 322 As such, rules such as 17 CFR 232.12 (addressing, among other things, the time during which documents may be submitted by EDGAR) and 17 CFR 232.13 (addressing, among other things, the business day on which documents are deemed to be submitted) would be applicable to the documents proposed to be included in Rule 101(a) of Regulation S–T. VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 The filings would be added as mandatory electronic submissions under Regulation S–T; however, pursuant to the existing procedures in Rules 201 and 202 of Regulation S–T,323 filers of these filings (except for notices and withdrawals of notices filed pursuant to Rule 3a71–3(d)(1)(vi)) 324 could request temporary or continuing hardship exemptions. Structured Data Requirements The Commission is also proposing amendments to Rule 405 of Regulation S–T to implement the proposed Inline XBRL requirements. Rule 405 sets forth the Interactive Data File requirements for Commission filings, and specifies that Inline XBRL is the structured data language that must be used for Interactive Data Files.325 The Commission’s proposed amendments would expand Rule 405 of Regulation S–T to add Inline XBRL requirements for CCO reports and for portions of Form X–17A–5 Part III and related annual filings, Form 17–H, Form 1, and Form CA–1.326 PROPOSED INLINE XBRL REQUIREMENTS Form Proposed Inline XBRL requirements Form CA–1 ..................... Schedule A, Exhibits C, F, H, J, K, L, M, O, R, S. Exhibits D, E (in part), I. All disclosures except facing page. Item 4 (financial statements). All disclosures. Form 1 ............................ Form X–17A–5 Part III ... Form 17–H ...................... CCO Reports .................. For Form CA–1, Schedule A and Exhibits C, F, H, J, K, L, M, O, R, S would be filed in Inline XBRL.327 For 323 17 CFR 232.201 and 202. Commission is proposing to amend Rules 201 and 202 of Regulation S–T to preclude the possibility of temporary or continuing hardship exemptions from electronic filing for ANE Exception Notices and withdrawals. See supra note 270 and accompanying text. 325 See 17 CFR 232.405. 326 See supra Sections II, IV.A, and V.D. 327 Schedule A to the execution page requires certain descriptive responses to complement the clearing agency’s execution page disclosures. Exhibit C requires a description of the clearing agency’s organizational structure. Exhibit F requires a description of material pending legal proceedings involving the clearing agency. Exhibit H requires the clearing agency’s financial statements. Exhibit J requires a description of the clearing agency’s services and functions. Exhibit K requires a description of the clearing agency’s security measures and procedures. Exhibit L requires a description of the clearing agency’s safeguarding measures and procedures. Exhibit M requires a description of the clearing agency’s backup systems. Exhibit O requires a description of criteria governing access to the clearing agency’s services and a description of the reasons for imposing such 324 The PO 00000 Frm 00046 Fmt 4701 Sfmt 4702 Form 1, Exhibits D, E (in part), and I would be filed in Inline XBRL.328 For Form X–17A–5 Part III, all disclosures except the facing page would be filed in Inline XBRL. For Form 17–H, Item 4 (the filer’s financial statements) would be filed in Inline XBRL. Finally, for CCO reports, all disclosures would be submitted in Inline XBRL. In 2009, the Commission adopted rules requiring operating company financial statements (including footnotes and schedules thereto) and mutual fund risk return summaries to be provided in a structured, machinereadable data language using eXtensible Business Reporting Language (‘‘XBRL’’).329 In 2018, the Commission adopted modifications to these requirements by requiring issuers to use Inline XBRL, which yields documents that are both machine-readable and human-readable, to reduce the time and effort associated with preparing XBRL filings and improve the quality and usability of XBRL data for investors.330 criteria. Exhibit R requires a schedule of prohibitions and limitations on access to the clearing agency’s services. Exhibit S requires, if applicable, a statement explaining why the clearing agency should be exempt. 328 Exhibit D requires the financial statements of the exchange’s subsidiaries and affiliates. Exhibit E requires, in relevant part, a description of the manner of operation of the electronic trading system that the exchange uses to effect transactions (however, the proposed structuring requirement would not include the copy of the users’ manual). Exhibit I requires the exchange’s financial statements. 329 See Interactive Data to Improve Financial Reporting, Securities Act Release No. 9002 (Jan. 30, 2009), 74 FR 6776 (Feb. 10, 2009) (‘‘2009 Financial Statement Information Adopting Release’’) and Interactive Data for Mutual Fund Risk Return/ Summary, Securities Act Release No. 9006 (Feb. 11, 2009), 74 FR 7748 (Feb. 19, 2009) (‘‘2009 Mutual Fund Risk/Return Summary Adopting Release’’) (requiring submission of an Interactive Data File to the Commission in exhibits to such filings). 330 See Inline XBRL Filing of Tagged Data, Securities Act Release No. 10514 (June 28, 2018), 83 FR 40846, 40847 (Aug. 16, 2018). Inline XBRL allows filers to embed XBRL data directly into an HTML document, eliminating the need to tag a copy of the information in a separate XBRL exhibit. Id. at 40851. The Commission has since adopted rules adding Inline XBRL requirements for certain closedend investment company disclosures, certain variable contract issuer disclosures, and disclosures relating to Commission filing fees. See Updated Disclosure Requirements and Summary Prospectus for Variable Annuity and Variable Life Insurance Contracts, Investment Company Act Release No. 33814 (Mar. 11, 2020), 85 FR 25964 (May 1, 2020) (requiring variable contracts to use Inline XBRL to submit certain required prospectus disclosures); Securities Offering Reform for Closed-End Investment Companies, Investment Company Act Release No. 10771 (Apr. 8, 2020), 85 FR 33290 (June 1, 2020) (requiring business development companies to submit financial statement information, and registered closed-end funds and business development companies to tag registration statement cover page information and specified prospectus disclosures using Inline XBRL); Filing Fee Disclosure and Payment Methods E:\FR\FM\18APP3.SGM 18APP3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules ddrumheller on DSK120RN23PROD with PROPOSALS3 The Commission is proposing to require some or all of each Covered SRO Form, the information required by Exchange Act Rule 19b–4(e), Form X– 17A–19, Form X–17A–5 Part III, Form 17–H, and the notices to the Commission (and any amendments to the notices) required by Exchange Act Rule 15fi–3(c) to be provided in custom XML-based data languages rather than in Inline XBRL.331 While the majority of EDGAR filings are submitted in HTML or ASCII, certain EDGAR filings are submitted using machine-readable, XML-based languages that are each specific to the particular EDGAR document type being submitted.332 For these custom XML filings in EDGAR, filers or submitters are typically provided the option to either submit the filing directly to EDGAR in the XMLbased data language, or manually input their disclosures in an online web application and/or web form developed by the Commission that converts the completed form into an EDGAR-specific XML document.333 In addition to the custom XML documents that the Commission currently requires registrants to file on EDGAR, the Commission separately requires broker-dealers to post reports on order routing and execution on their own websites (i.e., not on EDGAR) using an XML-based language specific to those reports.334 In doing so, broker-dealers must use the custom XML schema (i.e., data language) and associated PDF renderer that the Commission has published on its website. The Commission proposes to amend Exchange Act Rule 19b–4(e) to require SROs similarly to post the information required under the rule on their own websites using the most recent versions of the related custom XML schema and the associated PDF renderer that the Modernization, Securities Act Release No. 10997 (Oct. 13, 2021), 86 FR 70166 (Dec. 9, 2021). 331 The Commission is not adding a structured data requirement for the Covered Supplementary Materials or the notices required by Exchange Act Rule 3a71–3(d)(1)(vi). See supra section V.B. 332 Unlike the Inline XBRL requirements, the custom XML requirements for EDGAR documents are not explicitly set forth in a separate rule within Regulation S–T; instead, they are set forth in the EDGAR Filer Manual. As such, the proposed amendments that expand Regulation S–T to require electronic filing or submission of the affected documents in accordance with the EDGAR Filer Manual also implement the proposed custom XML requirements. See 17 CFR 232.101(a); 17 CFR 232.301. See also Current and Draft Technical Specifications, available at https://www.sec.gov/ edgar/filer-information/current-edgar-technicalspecifications. 333 See supra note 230 at 8 and 9. 334 See 17 CFR 242.606; 2020 Order Handling Data Schema and Report Renderer for BrokerDealers, available at https://www.sec.gov/structure ddata/dera_taxonomies. VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 Commission would publish on its website. The Commission believes that requiring the Proposed Structured Documents to be filed or submitted in a structured data language would provide the same benefits to data users that have been observed from other structured data requirements in Commission rules. For example, structured data requirements for the aforementioned broker-dealer order routing disclosures have been leveraged by financial academics to compare execution quality across brokerdealers.335 As another example, the Commission has used structured order execution disclosures to inform its rulemaking efforts.336 The Commission therefore expects structured data language requirements for the Proposed Structured Documents would similarly make the reported disclosures more readily available, accessible, and comparable for investors, other market participants, and the Commission, as applicable. In addition, for those Proposed Structured Documents that would be filed or submitted on EDGAR (i.e., all except for the Rule 19b–4(e) postings), the proposed structured data requirements would enable EDGAR to perform technical validations (i.e., programmatic checks to ensure the documents are appropriately standardized, formatted, and complete) upon intake of the documents. This could improve the quality of the filed or submitted data by decreasing the incidence of non-substantive errors (such as the omission of values from fields that should always be populated). Structuring each Proposed Structured Document would enable functionality that would vary based on the type of disclosures included in each document. As discussed further in the discussion of individual proposed forms above, and the discussion of economic benefits below, structured numeric disclosures lend themselves to mathematical functionality, such as the identification of statistical outliers within a given disclosed metric to screen for potential areas of greater scrutiny.337 Structured 335 See, e.g., Schwarz, Christopher and Barber, Brad M. and Huang, Xing and Jorion, Philippe and Odean, Terrance, The ‘‘Actual Retail Price’’ of Equity Trades (Sep. 14, 2022), available at https:// ssrn.com/abstract=4189239 (retrieved from SSRN Elsevier database). 336 See Regulation Best Execution, Release No. 96496 (Dec. 15, 2022), 88 FR 5440, 5477 (Jan. 27, 2023). 337 See infra section X.C.2.b. Proposed Structured Documents that contain numeric disclosures include Form X–17A–5 Part III, Form 17–H, Form CA–1, Form 1, Rule 19b–4(e) information (in some cases), notices of security-based swap valuation disputes pursuant to Rule 15fi–3(c), and CCO PO 00000 Frm 00047 Fmt 4701 Sfmt 4702 23965 textual disclosures, on the other hand, lend themselves to period-over-period redline comparisons, targeted keyword searching, and more sophisticated sentiment analysis.338 This could facilitate, for example, targeted searching within broker-dealer significant accounting policy footnotes to determine the extent to which brokerdealers are adopting a given revenue recognition policy. The Commission is proposing Inline XBRL for certain affected documents and portions or portions thereof, rather than proposing Inline XBRL for all affected documents, because the Commission believes Inline XBRL is more suitable for certain types of content than other types. Specifically, the Commission believes Inline XBRL is most suitable for financial statement disclosures (including footnotes and schedules thereto), for narrative disclosures (other than brief descriptions), and for disclosures of numeric details nested within narrative disclosures. From a technical standpoint, Inline XBRL was designed to accommodate financial statement information, including the particular metadata (e.g., the relevant fiscal period, whether the line item is located on the balance sheet, whether the line item is a credit or debit) that must be linked to each data point within the financial statements to fully convey its semantic meaning to a machine reader. Inline XBRL is also well suited from a technical standpoint of accommodating lengthier narrative disclosures, including those with numeric values nested within narrative disclosures, while providing presentation capabilities that preserve humanreadability while maintaining machinereadability. For other types of disclosures, the Commission believes requiring custom XML data languages would be more suitable due to the smaller file sizes of custom XML documents and the availability of fillable web forms on EDGAR that permit filers or submitters to input their disclosures into the form rather than structure the disclosures in custom XML.339 For those affected documents where filers are required to attach copies of reports required by Rule 15fk–1(c)(2)(ii)(A). See infra notes 596–599. 338 Proposed Structured Documents that contain textual disclosures include Form X–17A–5 Part III, Form 17–H, Form CA–1, Form 1, Form 1–N (execution page only), Form X–17A–19, notices of security-based swap valuation disputes required by Rule 15fi–3(c), and CCO reports required by Rule 15fk–1(c)(2)(ii)(A). See id. 339 See also infra section X.E.4 (discussing other structured data languages that would result in smaller file sizes than Inline XBRL). E:\FR\FM\18APP3.SGM 18APP3 ddrumheller on DSK120RN23PROD with PROPOSALS3 23966 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules existing materials (such as copies of constitutions, by-laws, written agreements, applications, and other documents) rather than disclosures provided pursuant to the Commission’s disclosure requirements, the Commission is proposing to require filers to upload those copies as unstructured PDF documents. The Commission believes requiring filers to retroactively structure these existing documents, which were prepared for purposes outside of fulfilling the Commission’s disclosure requirements, would likely impose costly compliance burdens on filers without justifying the commensurate informational benefit associated with more efficient disclosure use. Thus, the Commission does not believe structured data requirements are warranted for these copies of existing documents. Because the very limited number of Form 1–N and Form 15A filers and filings could mitigate the benefit derived from machine-readability of the disclosures contained therein, structured data would not be required for Forms 1–N and 15A (other than the execution pages of those Forms). Similarly, structured data for ANE Exception Notices would not be required, because the limited number of data points on such notices may lessen the utility of any functionality enabled by structured data (such as efficient retrieval of individual data points from structured documents). For each proposed structured data requirement, the Commission is specifying the particular structured data language that filers or submitters must use, rather than leaving the data language requirement open-ended. By contrast, an open-ended data language requirement would allow different filers or submitters of the same document to provide their disclosures in different structured data languages. In such instances, data users such as Commission staff and market participants would be unable to incorporate disclosures from filers or submitters using one data language into the same datasets and applications as disclosures of other filers or submitters using different data languages without undertaking data conversion processes that are frequently burdensome and imprecise. This may hinder investors, the Commission, and market participants from efficiently comparing disclosures across the comprehensive set of entities comprising a given entity population, and could therefore dampen the benefits that would otherwise accrue from requiring the disclosures to be machine-readable. VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 B. Proposed Amendments to Rule 24b– 2 Rule 24b–2 provides procedures that are the exclusive means for requesting confidential treatment of information required to be filed under the Exchange Act.340 Paragraph (b) of Rule 24b–2 provides that, except as provided in paragraphs (g) and (h) of the Rule, a person seeking confidential treatment shall omit from materials filed with the Commission the confidential portion.341 Paragraphs (g) and (h) state that certain entities, as specified in those paragraphs, shall not omit the confidential portion from the materials such entities file with the Commission.342 The Commission is proposing to add a new paragraph (j) to Rule 24b–2. The new paragraph would be subdivided into two parts. The first sub–paragraph would provide that a broker-dealer shall not omit the confidential portion from the materials filed in electronic format pursuant to paragraphs (d) and (k) of Rule 17a–5, Rule 17a–12, or Rule 17h–2T. The second sub–paragraph would state that an SBSD shall not omit the confidential portion of materials filed in electronic format pursuant to Rule 18a–7. The Commission is also proposing to add a new paragraph (k) to Rule 24b–2. The new paragraph would provide that an entity shall not omit the confidential portion from the material filed in electronic format on Form CA–1 pursuant to Rule 17ab2–1, but rather may request confidential treatment of information provided on Form CA–1 by completing Section X of Form CA–1. The proposed amendment to Rule 24b– 2 will facilitate the filing of any information for which confidential treatment is requested. VIII. General Request for Comments 87. The Commission is requesting comments on all aspects of this proposal. As stated above, the Commission believes that replacing the current paper copy and email filing and submission methods with a requirement to post the required supplemental materials on the clearing agency’s website should result in enhanced efficiency for both the affected filers and the Commission. The Commission also believes that rescinding Form 19b–4(e) and instead requiring the information currently contained in Form 19b–4(e) to be publicly posted on the listing SRO’s 340 17 CFR 240.24b–2(a). However, with regard to Rule 15fi–3(c) security-based swap valuation dispute notices, see supra note 293 and accompanying text. 341 17 CFR 240.24b–2(b). 342 17 CFR 240.24b–2(g); 17 CFR 240.24b–2(h). PO 00000 Frm 00048 Fmt 4701 Sfmt 4702 internet website should result in enhanced efficiency for both SROs and the Commission. The Commission specifically requests comment on whether the proposal would reduce the costs associated with providing these forms and information, or would they create additional costs or burdens associated with these forms and information. 88. In addition to the proposed amendments to Regulation S–T, should the Commission amend any of the other requirements of Regulation S–T given the filings and submissions proposed to be added to Rule 101(a) of Regulation S– T? If so, why should the requirements be revised, and how should they be revised? 89. The Commission also requests comment on how long filers or submitters of Covered SRO Forms, Forms 19b–4(e), supplementary materials under Rule 17a–22 and Covered EDGAR Documents should have to come into compliance with the proposed amendments. In addressing this issue, specific comment, data, or other information is requested regarding the amount of time that filers or submitters would need to come into compliance in an orderly manner. Would filers or submitters be able to comply with some of the proposed amendments more quickly than they would be able to comply with other proposed amendments? Please identify the aspects of the proposed amendments that would require relatively more or less time to comply. Would a particular segment of filers or submitters need more or less time to comply with one or more of the proposed amendments? Please identify with specificity the segment of filers or submitters and the aspects of the proposed amendments that would require more or less time to comply. Would any alternatives identified in the proposal or by commenters allow filers or submitters to come into compliance more quickly or require additional time to implement? 90. Beyond the forms captured in this current proposed rule, would other forms or filings required under the Exchange Act and its associated rules and regulations benefit from a Commission requirement that they be submitted through the EDGAR system in a structured data language? Explain which forms would benefit from this requirement and why. 91. Commenters should, when possible, provide the Commission with empirical data to support their views. Commenters suggesting alternative approaches should provide comprehensive proposals, including any conditions or limitations that they E:\FR\FM\18APP3.SGM 18APP3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules believe should apply, the reasons for their suggested approaches, and their analysis regarding why their suggested approaches would satisfy the objectives of the proposed amendments. IX. Paperwork Reduction Act Certain provisions of the proposal contain ‘‘collection of information’’ requirements within the meaning of the Paperwork Reduction Act of 1995 (’’PRA’’).343 The titles of these requirements are: • Form ID (OMB Control No. 3235– 0328) • Rules 6a–1 and 6a–2, Form 1 (OMB Control No. 3235–0017); 344 • Rule 6a–3 (OMB Control No. 3235– 0021); 345 • Rule 6a–4, Form 1–N (OMB Control No. 3235–0554); 346 • Rules 15aa–1 and 15aa–2, Form 15A (OMB Control No. 3235–0030); 347 • Rule 17ab2–1, Form CA–1 (OMB Control No. 3235–0195); 348 • Rule 19b–4(e), Form 19b–4(e) (OMB Control No. 3235–0504); 349 • Rule 19b–4, Form 19b–4 (OMB Control No. 3235–0045); 350 • Rule 17a–22, 17 CFR 240.17a–22 (OMB Control No. 3235–0196); • Rule 3a71–3(d)—Conditional Exception from De Minimis Counting Requirement in Connection with Certain Transactions Arranged, Negotiated or Executed in the United States (OMB Control No. 3235–0771); 351 • Rules 15Fi–3 to 15Fi–5—Risk Mitigation Techniques for Uncleared Security-Based Swaps (OMB Control No. 3235–0777); 352 ddrumheller on DSK120RN23PROD with PROPOSALS3 343 44 U.S.C. 3501 et seq. 344 See 17 CFR 249.1; 17 CFR 240.6a–1; 17 CFR 240.6a–2. 345 See 17 CFR 240.6a–3. 346 See 17 CFR 249.10, 17 CFR 240.6a–4; 17 CFR 249.10. 347 See 17 CFR 240.15aa–1; 17 CFR 240.15aa–2. Proposed Form 15A currently would apply only to one SRO out of a total of 44 SROs. Although this proposed form is expected to impact fewer than 10 entities, the Commission is including this PRA analysis. The Commission has proposed to revise and reinstate collections of information that were previously approved under Control Nos. 3235–0030 and 3235–0044. Because the Commission is proposing to consolidate the collections in amended and re-designated forms, all collections would be under Control No. 3235–0030 and Control Number 3235–0044 would remain inactive. In addition, because of the length of time since these control numbers were last active, the Commission is providing completely new burden estimates. 348 See 17 CFR 240.17ab2–1; 17 CFR 249b.200. 349 See 17 CFR 240.19b–4(e); 17 CFR 249.820. 350 See 17 CFR 240. 17 CFR 249.819; 17 CFR 240.19b–4. 351 See 17 CFR 240.3a71–3(d). 352 See 17 CFR 240.15Fi–3, 17 CFR 240.15Fi–4 (‘‘Rule 15Fi–4’’), and 17 CFR 240.15Fi–5 (‘‘Rule 15Fi–5’’). The Commission is only modifying Rule 15fi–3, which relates to the requirement that SBS Entities reconcile outstanding security-based swaps VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 • Rule 15fk–1(c)(2)(ii)(A) (OMB Control No. 3235–0732); 353 • Rule 17a–5—Reports to be Made by Certain Brokers and Dealers (OMB Control No. 3235–0123); 354 • Rule 17a–12—Reports to be Made by Certain OTC Derivatives Dealers (OMB Control No. 3235–0498); 355 • Rule 17a–19 and Form X–17A–19— Report by National Securities Exchanges and Registered National Securities Associations of Changes in the Membership Status of Any of Their Members (OMB Control No. 3235– 0133); 356 • Rule 17h–2T—Reporting Requirements of Risk Assessment Information for Brokers and Dealers (OMB Control No. 3235–0410); 357 • Rule 18a–7—Reports to be Made by Certain Security-Based Swap Dealers and Major Security-Based Swap Participants (OMB Control No. 3235– 0749); 358 and • Regulation S–T—General Rules and Regulations for Electronic Filing (OMB Control Number 3235–0424). The Commission is submitting these requirements to the Office of Management and Budget (‘‘OMB’’) for review and approval in accordance with the PRA and its implementing regulations.359 If adopted, responses to the new collections of information would be mandatory, or mandatory except to the extent an exception is available. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number.360 A. Summary of Collection of Information 1. Form ID Form ID must be completed and filed with the Commission by all individuals, companies, and other organizations who seek access to file electronically on with applicable counterparties on a periodic basis. Rule 15fi–3 is included in the same collection of information as Rule 15Fi–4, which requires SBS Entities to engage in certain forms of portfolio compression exercises with their counterparties, as appropriate, and Rule 15Fi–5, which requires SBS Entities to execute written security-based swap trading relationship documentation with its counterparties, and to periodically audit the policies and procedures governing such documentation. The Commission is not changing Rules 15Fi–4 and 15Fi–5 pursuant to this rulemaking. Accordingly, those two rules are not included in the sections that follow. 353 See 17 CFR 240.15Fk–1(c)(2)(ii)(A). 354 See 17 CFR 240.17a–5. 355 See 17 CFR 240.17a–12. 356 See 17 CFR 240.17a–19; 17 CFR 249.635. 357 See 17 CFR 240.17h–2T. 358 See 17 CFR 240.18a–7. 359 44 U.S.C. 3507; 5 CFR 1320.11. 360 5 CFR 1320.11(l). PO 00000 Frm 00049 Fmt 4701 Sfmt 4702 23967 EDGAR.361 Accordingly, a filer that does not already have access to EDGAR must submit a Form ID, along with the notarized signature of an authorized individual, to obtain an EDGAR identification number and access codes to file on EDGAR. 2. Rules 6a–1, 6a–2, 6a–3, and Form 1 Rule 6a–1 under the Exchange Act generally requires that an applicant seeking to register as a national securities exchange, or seeking an exemption from such registration based on limited volume, file an application on Form 1 and correct any inaccuracy therein upon discovery of such inaccuracy.362 Form 1 contains an execution page as well as 14 exhibits that must be filed by the applicant.363 Rule 6a–2 requires a registered national securities exchange or an exempt exchange to: (1) amend its Form 1 if there are any changes to the information provided in the initial Form 1; and (2) submit periodic updates of certain information provided in the initial Form 1, whether such information has changed or not.364 Rule 6a–3 requires a national securities exchange or an exempt exchange to file certain supplemental material with the Commission.365 Specifically, Rule 6a– 3(a)(1) requires an exchange to file with the Commission any material issued or made generally available to members of, or participants or subscribers to, the exchange within 10 days after issuing or making such material available to such members, participants or subscribers.366 Rule 6a–3(a)(2) provides that, if information required by Rule 6a–3(a)(1) is available continuously on a website controlled by the exchange, in lieu of filing such information, the exchange may provide on Form 1 the URL(s) of the location(s) on the website where the information can be found, and certify that the information is accurate as of its date and is free and accessible (without any encumbrances or restrictions) by the general public.367 Rule 6a–3(b) requires an exchange to file, within 15 days after the end of each calendar month, a report concerning the securities sold on the exchange during the calendar month.368 The Commission proposes to amend Rules 6a–1, 6a–2, and 6a–3 under the Exchange Act, as well as Form 1 and the instructions to Form 1, to make certain non-substantive changes and to require 361 17 CFR 249.446. 17 CFR 240.6a–1. 363 17 CFR 249.1. 364 See 17 CFR 240.6a–2. 365 See 17 CFR 240.6a–3. 366 17 CFR 240.6a–3(a)(1). 367 17 CFR 240.6a–3(a)(2). 368 17 CFR 240.6a–3(b). 362 See E:\FR\FM\18APP3.SGM 18APP3 23968 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules the electronic filing of all filings required by Rules 6a–1, 6a–2, and 6a– 3. 3. Rule 6a–4 and Form 1–N Rule 6a–4 369 sets forth the notice registration procedures for Security Futures Product Exchanges and permits futures exchanges to submit a notice registration on Form 1–N.370 Form 1–N requires information regarding how the futures exchange operates, its rules and procedures, corporate governance, its criteria for membership, its subsidiaries and affiliates, and the security futures products it intends to trade. Rule 6a–4 also requires entities that have submitted an initial Form 1–N to file: (1) amendments to Form 1–N in the event any information provided in the initial Form 1–N is be rendered inaccurate or incomplete; (2) periodic updates of certain information provided in the initial Form 1–N; (3) certain information that is provided to the Security Futures Product Exchange’s members; and (4) a monthly report summarizing the Security Futures Product Exchange’s trading of security futures products. The Commission proposes to amend Rule 6a–4 under the Exchange Act, Form 1–N and the instructions to Form 1–N, as well as to make clarifying changes to Rule 202.3(b)(3) to the Commission’s Informal and Other Procedures, to make certain nonsubstantive changes and to require the electronic filing of all submissions required by Rule 6a–4. 4. Rules 15aa–1 and 15aa–2; Form 15A Under Exchange Act Rule 15Aa–1, an applicant for registration as a national securities association must file a registration statement with the Commission on Form X–15AA–1.371 Exchange Act Rule 15Aj–1(a) requires every association applying for registration or registered as a national securities association to file with the Commission an amendment to its registration statement or any amendment or supplement thereto promptly after discovering any inaccuracy therein. Under Exchange Act Rule 15Aj–1(b), every association 369 17 CFR 240.6a–4. CFR 249.10. 371 See Exchange Act Rule 15Aa–1, 17 CFR 240.15Aa–1 and 17 CFR 249.801. Currently, FINRA is the only national securities association registered with the Commission. The NFA, as specified in Section 15A(k) of the Exchange Act, is also registered as a national securities association, but only for the limited purpose of regulating the activities of NFA members that are registered as brokers or dealers in security futures products under section 15(b)(11) of the Exchange Act. The Commission notes that there are no burden estimates currently approved by OMB for Exchange Act Rule 15Aa–1. ddrumheller on DSK120RN23PROD with PROPOSALS3 370 17 VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 applying for registration or registered as a national securities association must file with the Commission a supplement to its registration statement or any amendment or supplement thereto promptly after discovering any inaccuracy or any change which renders no longer accurate any information contained or incorporated therein.372 Under Exchange Act Rule 15Aj–1(c), every association applying for registration or registered as a national securities association must file annual and triennial amendments to its registration statement with the Commission.373 The Commission is proposing to amend Rule 15Aa–1 and redesignate it as Rule 15aa–1,374 redesignate Rule 15Aj–1 375 as Rule 15aa–2, redesignate Form X–15AA–1 as Form 15A, amend the instructions to proposed Form 15A, and repeal Forms X–15AJ–1 and X– 15AJ–2 in connection with the Commission’s proposal to require applicants and national securities associations to electronically file on a duly executed Form 15A the information currently filed on Forms X– 15AA–1, X–15AJ–1, and X–15AJ–2. The Commission is also proposing to revise Rule 15Aa–1 to require electronic filing and an electronic signature. The Commission proposes to redesignate Form X–15AA–1 as Form 15A and to incorporate in proposed Form 15A information related to amendments and supplements to the registration statement currently filed on Form X–15AJ–1 and information related to the annual consolidated supplement to the registration statement currently filed on Form X–15AJ–2. New Form 15A would solicit information through prompts on the form that would better organize the information that is currently collected through Forms X– 15AA–1, X–15AJ–1, and X–15AJ–2. Proposed Form 15A would contain eleven sections. Preceding Section I of proposed Form 15A, the proposed form would contain prompts that would require the association to note the basis for submitting the Form 15A. The prompts would indicate whether the submission is an initial application filed pursuant to Rule 15aa–1 or an 372 See Exchange Act Rule 15Aj–1(a) and (b), 17 CFR 240.15Aj–1(a) and (b). These filings are currently submitted on Exchange Act Form X– 15AJ–1, 17 CFR 249.802. See 17 CFR 240.15Aj–1(d). 373 See Exchange Act Rule 15Aj–1(c), 17 CFR 240.15Aj–1(c). These filings are currently submitted on Exchange Act Form X–15AJ–2, 17 CFR 249.803. See 17 CFR 240.15Aj–1(d). Rule 15Aj–1(c)(1)(ii) also requires the filing of complete sets of the constitution, by-laws, rules, and related documents of the association, once every three years. 374 17 CFR 240.15Aa–1. 375 17 CFR 240.15Aj–1. PO 00000 Frm 00050 Fmt 4701 Sfmt 4702 amendment or supplement. Section I would be titled ‘‘Organization,’’ and it would solicit information about the association itself and would require the association to attach Exhibits A through D. Sections II through IX of proposed Form 15A would solicit information about specific association rules and other information. Section X would require the association to provide the contact information for its contact employee, and Section XI would provide the consent to service and attestation. 5. Rule 17ab2–1 and Form CA–1 Rule 17ab2–1(a) states that an application for registration or for exemption from registration as a clearing agency or an amendment to any such application shall be filed with the Commission on Form CA–1, in accordance with the instructions thereto.376 Form CA–1 includes an execution page and 19 exhibits. Rule 17ab2–1(e) requires an applicant, a registered clearing agency, or an exempt clearing agency to file an amendment to correct any information reported at items 1–3 of Form CA–1 if such information is, or becomes, inaccurate, misleading or incomplete for any reason.377 The instructions to Form CA– 1 require an applicant clearing agency to file four completed copies of Form CA– 1 with the Commission. In addition, if an item is amended, the instructions to Form CA–1 require a registered clearing agency or an exempt clearing agency to repeat all unamended items as they last appeared on the page on which the amended item appears and to file four copies of the new page with the Commission. The Commission is proposing to revise certain aspects of Rule 17ab2–1, Form CA–1, and the instructions to Form CA–1 to make certain nonsubstantive changes and to require electronic filing of applications on Form CA–1 and subsequent amendments thereto submitted by applicants, registered clearing agencies, and exempt clearing agencies. 6. Rule 19b–4(e) and Form 19b–4(e) Rule 19b–4(e) provides that the listing and trading of a new derivative securities product by an SRO shall not be deemed a proposed rule change if the Commission has approved, pursuant to section 19(b) of the Exchange Act,378 the SRO’s trading rules, procedures, and listing standards for the product class that would include the new derivative 376 17 CFR 240.17ab2–1(a). CFR 240.17ab2–1(e). 378 15 U.S.C. 78s(b). 377 17 E:\FR\FM\18APP3.SGM 18APP3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules ddrumheller on DSK120RN23PROD with PROPOSALS3 securities product, and the SRO has a surveillance program in place for such product class. Under Rule 19b– 4(e)(2)(ii), SROs are required to submit Form 19b–4(e) 379 to the Commission within five business days after commencement of trading a new derivative securities product.380 In addition, Rule 19b–4(e)(2)(i) requires an SRO to maintain, on-site, a copy of Form 19b–4(e) for a prescribed period of time.381 The Commission proposes to amend Rule 19b–4(e) 382 to rescind Form 19b– 4(e) and instead require the information currently contained in Form 19b–4(e) to be publicly posted on the listing SRO’s internet website. 7. Rule 19b–4(j) and Form 19b–4 Section 19(b) of the Exchange Act, as amended, requires each SRO to file with the Commission, in accordance with such rules as the Commission may prescribe, copies of any proposed rule, or any proposed change in, addition to, or deletion from the rules of such SRO (collectively, a ‘‘proposed rule change’’) accompanied by a concise general statement of the basis and purpose of such proposed rule change.383 Rule 19b–4 requires an SRO to submit each proposed rule change on Form 19b–4.384 Form 19b–4 currently requires a description of the terms of a proposed rule change, the proposed rule change’s impact on various market segments, and the relationship between the proposed rule change and the SRO’s existing rules.385 Form 19b–4 also requires an accurate statement of the authority and statutory basis for, and purpose of, the proposed rule change, the proposal’s impact on competition, and a summary of any written comments received by the SRO.386 An SRO is required to submit Form 19b–4 to the Commission electronically, post a copy of the proposed rule change on its public website within two business days of its filing, and post and maintain a current and complete set of its rules on its website.387 Rule 19b–4(j) requires that the signatory to an electronically submitted rule filing manually sign a signature page or other document authenticating, acknowledging, or otherwise adopting his or her signature that appears in typed form within the electronic 379 See 17 CFR 249.820. 17 CFR 240.19b–4(e)(2)(ii). 381 See 17 CFR 240.19b–4(e)(2)(i). 382 17 CFR 240.19b–4(e). 383 15 U.S.C. 78s(b). 384 17 CFR 240.19b–4(b). 385 17 CFR 249.819. 386 Id. 387 17 CFR 240.19b–4(b)(1), (l), (m)(1). 380 See VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 document, execute that document before or at the time the rule filing is electronically submitted, and retain that document for its records in accordance with Rule 17a–1.388 Form 19b–4 and the instructions to Form 19b–4 require that a duly authorized officer of the SRO manually sign one copy of the completed Form 19b–4 and that the manually signed signature page be maintained pursuant to section 17 of the Act.389 The Commission proposes to remove these manual requirements from Rule 19b–4(j), Form 19b–4, and the instructions to Form 19b–4. 8. Rule 17a–22 Rule 17a–22 currently requires a registered clearing agency to file with the Commission three paper copies of any material (including, for example, manuals, notices, circulars, bulletins, lists, or periodicals) issued, or made generally available, to its participants or other entities with whom it has a significant relationship, such as pledgees, transfer agents, or selfregulatory organizations, within 10 days after issuing, or making generally available, such material.390 Under current Rule 17a–22, when the Commission is not a registered clearing agency’s ARA, the clearing agency must at the same time file one paper copy of the material with its ARA.391 The proposed amendments to Rule 17a–22 would not change the scope of supplemental materials that are currently subject to the rule. However, the proposed amendments would replace the requirement to file multiple copies of supplemental materials with the Commission and, where applicable, the ARA in paper form with a requirement to prominently post such materials on a registered clearing agency’s internet website.392 In addition, the proposed amendments would reduce the timeframe for registered clearing agencies to comply with the rule from 10 days to 2 business days. As noted above, the two business day timeframe is consistent with a registered clearing agency’s obligation 388 17 CFR 240.19b–4(j). CFR 249.819. 390 17 CFR 240.17a–22. 391 Id. 392 By replacing the paper filing requirement for supplemental materials with an internet posting requirement, proposed Rule 17a–22 would allow all of a registered clearing agency’s regulatory authorities to access the materials; thereby eliminating the need to file an additional paper copy with the clearing agency’s ARA. For this reason, with respect to a registered clearing agency for which the Commission is not the ARA, the proposed amendments would remove the requirement to also file one paper copy of the supplemental materials with the clearing agency’s ARA. 389 17 PO 00000 Frm 00051 Fmt 4701 Sfmt 4702 23969 under Rule 19b–4(m) to update its website to post any rule changes filed pursuant to section 19(b) of the Exchange Act.393 Because the supplemental materials that are subject to Rule 17a–22 will have already been prepared for distribution to a registered clearing agency’s participants or other entities with whom it has a significant relationship, those documents should be readily available for the clearing agency to post on its website within the proposed two business day timeframe.394 9. Rules 17a–5, 18a–7, and 17a–12 The Commission is proposing to amend Rules 17a–5, 18a–7, and 17a–12 to require broker-dealers, SBS Entities, and OTC derivatives dealers to electronically file with the Commission in Inline XBRL through the Commission’s EDGAR system annual audited reports and related annual filings. The filings are currently made either in paper, via email, or voluntarily on the EDGAR system as PDF documents. In addition, the Commission is proposing to amend Rule 17a–12 to require OTC derivatives dealers to file the unaudited FOCUS Report Part II electronically through the SEC eFOCUS system instead of in paper. The Commission is also proposing to allow electronic signatures in Rule 17a– 5, 17a–12, and 18a–7 filings, which includes the FOCUS Report. Broker-dealers, SBS Entities, and OTC derivatives dealers file FOCUS Reports Part II, IIA, or IIC, which are periodic unaudited reports about their financial and operational condition. The Commission is proposing corrective and clarifying amendments to FOCUS Report Part II and amendments to FOCUS Report Part IIC for consistency with FFIEC Form 031. 10. Rule 17h–2T The Commission proposes amending paragraph (a)(2) of Rule 17h–2T to require that the quarterly and annual risk assessment reports be filed with the Commission electronically through EDGAR as an Interactive Data File in accordance with Rule 405 of Regulation S–T. The materials filed under the rule would not change, but the materials filed would be filed on EDGAR, and the financial statements required by Item 4 of the Form would be structured in Inline XBRL. 393 See 394 See E:\FR\FM\18APP3.SGM 17 CFR 240.19b–4(m). supra section III.C.1. 18APP3 23970 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules 11. Rule 17a–19 and Form X–17A–19 In general, Rule 17a–19 requires national securities exchanges and associations to file with the Commission certain information required on Form X–17A–19 within five business days of the occurrence of the initiation of membership, change in membership, or termination of membership of any member. The Commission proposes amending Rule 17a–19 and Form X– 17A–19 to require that filings providing such notifications be made on EDGAR, in a custom XML-based data language. ddrumheller on DSK120RN23PROD with PROPOSALS3 12. Rule 3a71–3(d)(1)(vi) The ANE Exception is conditioned in part on the Registered Entity filing with the Commission an ANE Exception Notice, which is a notice that personnel of the Relying Entity or its agent located in a branch or office in the United States may conduct ANE Activity in their capacity as persons associated with the Registered Entity in reliance on the ANE Exception. Currently, Exchange Act Rule 3a71–3(d)(1)(vi) requires the Registered Entity to file the ANE Exception Notice by submitting it to the electronic mailbox specified on the Commission’s website. The Commission is proposing to amend the manner of filing to require the Registered Entity to file the ANE Exception Notice electronically through the Commission’s EDGAR filing system, but is not changing the information required from a filer of the ANE Exception Notice. The Commission also is proposing to require that, if the Registered Entity later becomes unregistered or otherwise ineligible to serve as the Registered Entity for purposes of the ANE Exception, the Registered Entity must promptly withdraw its ANE Exception Notice. In addition, a Registered Entity whose associated persons will no longer conduct ANE Activity pursuant to the ANE Exception may withdraw its ANE Exception Notice. Currently, a Registered Entity who wishes to withdraw a filed ANE Exception Notice may contact the Commission and request that the ANE Exception Notice be manually removed from the Commission’s website. The Commission is proposing to require Registered Entities to file any withdrawal of an ANE Exception Notice electronically through the Commission’s EDGAR filing system. 13. Rule 15fi–3 Rule 15fi–3 generally requires SBS Entities to: (1) engage in periodic portfolio reconciliation activities with counterparties who are also SBS Entities; and (2) establish, maintain, and VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 follow written policies and procedures reasonably designed to ensure that they engage in periodic portfolio reconciliation with counterparties who are not SBS Entities with respect to their outstanding (and uncleared) securitybased swaps.395 Rule 15fi–3(c) requires an SBS Entity to promptly notify the Commission, and any applicable prudential regulator, of any securitybased swap valuation dispute in excess of $20,000,000 (or its equivalent in any other currency) if not resolved within: (1) three business days, if the dispute is with a counterparty that is an SBS Entity; or (2) five business days, if the dispute is with a counterparty that is not an SBS Entity.396 Rule 15fi–3(c) also requires SBS Entities to notify the Commission and any applicable prudential regulator, if the amount of any security-based swap valuation dispute that was the subject of a previous notice increases or decreases by more than $20,000,000 (or its equivalent in any other currency), at either the transaction or portfolio level. Each amended notice is required to be provided to the Commission and any applicable prudential regulator no later than the last business day of the calendar month in which the applicable security-based swap valuation dispute increases or decreases by the applicable dispute amount.397 Given that Rule 15fi–3(c) requires that the security-based swap valuation notices be submitted to the Commission ‘‘in a form and manner acceptable to the Commission,’’ staff has made available two options for submitting these notices to the Commission, which include either: (1) an electronic submission using EDGAR or (2) submission to a dedicated Commission email address. Under both submission types, the system is capable of accepting the notice in PDF format, either as an attachment to an email or as an uploaded document to EDGAR. The Commission is now proposing to amend Rule 15fi–3(c) to affirmatively require SBS Entities to submit these notices to the Commission electronically in EDGAR using a custom XML-based data language. This includes both the initial notice and any subsequent amendments. If these proposed changes are adopted, SBS Entities would no longer be able to submit dispute notices to the Commission using a dedicated email address or in PDF format on EDGAR. 14. Rule 15fk–1(c)(2)(ii)(A) Rule 15fk–1(c) currently requires that the CCO of an SBS Entity prepare and sign a CCO report. The CCO report must be submitted to the Commission within 30 days following the filing deadline for the SBS Entity’s annual financial report with the Commission.398 Rule 15fk–1(c) does not specify the manner in which the CCO report must be submitted. Accordingly, pursuant to the current rule, an SBS Entity may submit its CCO report as a paper or electronic submission. The proposed amendment to Rule 15fk–1(c)(2)(ii)(A) would not change what the report must include. Rather, the amendment would require that the CCO report be submitted electronically in Inline XBRL through EDGAR. As with other entities that make submissions through EDGAR, these submissions would be subject to the provisions of Regulation S–T and the EDGAR Filer Manual, as defined in Rule 11 of Regulation S–T.399 15. Regulation S–T The Commission is proposing amendments to Rule 101 of Regulation S–T to require that broker-dealer and non-bank SBS Entity annual reports and related annual supplemental reports, national securities exchange and association changes in member status, SBS Entity CCO reports, and brokerdealer risk assessment reports be filed electronically with the Commission. The Commission is also proposing amendments to Rule 405 to require that broker-dealer and non-bank SBS Entity annual reports and related annual supplemental reports, SBS Entity CCO reports, broker-dealer risk assessment reports (in part), clearing agency applications (in part), and national securities exchange applications (in part) be filed in Inline XBRL.400 The Commission also is proposing that ANE Exception Notices and withdrawals of ANE Exception Notices be filed with the Commission electronically using the Commission’s EDGAR system. To implement this requirement, the Commission is proposing amendments to Rule 101 of Regulation S–T to require that ANE Exception Notices and withdrawals of ANE Exception Notices be filed electronically with the Commission using the EDGAR system.401 This collection of information is the same as 398 17 CFR 240.15Fk–1(c)(2)(ii)(A). CFR 232.11. 400 See proposed paragraph (b)(5) of Rule 405 of Regulation S–T. 401 See proposed paragraph (a)(1)(xxxiii) of Rule 101 of Regulation S–T. 399 17 395 See 17 CFR 240.15Fi–3(a) and (b). See also supra section V.C.1. 396 See 17 CFR 240.15Fi–3(c)(1). 397 See 17 CFR 240.15Fi–3(c)(2). PO 00000 Frm 00052 Fmt 4701 Sfmt 4702 E:\FR\FM\18APP3.SGM 18APP3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules the collection of information in connection with the proposed amendments to Exchange Act Rule 3a71–3(d)(1)(vi). The Commission also is proposing that initial notices and any subsequent amendments pursuant to Rule 15fi–3(c) be submitted to the Commission electronically using the Commission’s EDGAR system in a custom XML-based data language. To implement this requirement, the Commission is proposing amendments to Rule 101 of Regulation S–T to require that the notices be submitted electronically to the Commission using the EDGAR system.402 This collection of information is the same as the collection of information in connection with the proposed amendments to Exchange Act Rule 15fi–3(c). B. Proposed Use of Information ddrumheller on DSK120RN23PROD with PROPOSALS3 1. Form ID The information provided on Form ID allows the Commission staff to review applications for EDGAR access and, if the application is approved, assign CIKs (if the applicant does not already have a CIK) and/or access codes to applicants to permit filing on EDGAR. Form ID is essential to EDGAR security. 2. Rules 6a–1, 6a–2, 6a–3, and Form 1 The information required pursuant to Rules 6a–1, 6a–2, and 6a–3 is necessary to enable the Commission to receive accurate and complete information from applicants seeking registration as national securities exchanges or an exemption from such registration (‘‘exempt exchanges’’) and from national securities exchanges and exempt exchanges, which would enable the Commission to exercise its statutory oversight functions. Without the information submitted pursuant to Rule 6a–1 on Form 1, the Commission would not be able to determine whether the applicant has met the criteria for registration (or an exemption from registration) set forth in section 6 of the Exchange Act. The amendments, periodic updates of information, supplemental materials, and monthly reports submitted pursuant to Rules 6a– 2 and 6a–3 are necessary to assist the Commission in its oversight of national securities exchanges and exempt exchanges. 3. Rule 6a–4 and Form 1–N The information obtained under Rule 6a–4 and Form 1–N provides the Commission with basic information about Security Futures Product 402 See proposed paragraph (a)(1)(xxxiv) and (d) of Rule 101 of Regulation S–T. VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 Exchanges. This information enables the Commission to carry out its statutorily mandated oversight functions and helps ensure that Security Futures Product Exchanges continue to be in compliance with the Exchange Act. 4. Rules 15aa–1 and 15aa–2; Form 15A The information required pursuant to Rule 15aa–1 is necessary to enable the Commission to receive accurate and complete information from applicants seeking registration as national securities association which would enable the Commission to exercise its statutory oversight functions. Without the information submitted pursuant to Rule 15aa–1 on Form 15A, the Commission would not be able to determine whether the applicant has met the criteria for registration set forth in section 15A of the Exchange Act. The amendments, periodic updates of information, and supplemental materials submitted pursuant to Rule 15Aa–2 are necessary to assist the Commission in its oversight of national securities associations. 5. Rule 17ab2–1 and Form CA–1 The Commission uses the information disclosed on Form CA–1 to: (i) determine whether an applicant for registration as a clearing agency or for an exemption from such registration meets the standards for registration set forth in the Exchange Act; (ii) enforce compliance with the Exchange Act’s registration requirements; and (iii) use as a reference for specific registered clearing agencies or exempt clearing agencies for compliance and investigatory purposes. The information required under Rule 17ab2–1 is essential for the Commission to perform its statutorily required duties. 6. Rule 19b–4(e) and Form 19b–4(e) The information collected pursuant to Rule 19b–4(e) is designed to maintain an accurate record of all new derivative securities products by SROs, the listing and trading of which are not deemed to be proposed rule changes. The Commission reviews compliance with Rule 19b–4(e) through its routine inspections of the SROs. 7. Rule 19b–4(j) and Form 19b–4 The information collected pursuant to Rule 19b–4 is designed to provide the Commission with the information necessary to determine, as required by the Exchange Act, whether the proposed rule change is consistent with the Exchange Act and the rules thereunder. The information is used to determine if the proposed rule change should be approved, disapproved, suspended, or if PO 00000 Frm 00053 Fmt 4701 Sfmt 4702 23971 proceedings should be instituted to determine whether to approve or disapprove the proposed rule change. The Commission reviews compliance with Rule 19b–4 through its routine inspections of the SROs. The Commission is proposing to remove a manual signature requirement in the existing collection of information under Rule 19b–4 and on Form 19b–4 because it believes that requirement is unnecessary given the electronic signature already required by Form 19b– 4. 8. Rule 17a–22 The information required to be posted on a registered clearing agency’s website under the proposed amendments to Rule 17a–22 would assist the Commission in carrying out its statutorily mandated oversight functions with respect to clearing agencies. The Commission uses this information to determine: (i) whether a clearing agency is implementing procedural or policy changes and, if so, whether such changes are consistent with the purposes of section 17A of the Exchange Act; and (ii) whether a clearing agency has changed its rules without filing the actual or prospective change to the Commission as required by section 19(b) of the Exchange Act. The posting of such information on a registered clearing agency’s website would improve transparency of a clearing agency’s actions and communications to a larger group of potentially interested persons, including non-member entities that directly or indirectly use the clearing agency’s services, investors, and the general public. 9. Rules 17a–5, 18a–7, and 17a–12 Reports required to be made under Rules 17a–5, 18a–7, and 17a–12 are used, among other things, to monitor the financial and operational condition of broker-dealers, SBS Entities, and OTC derivatives dealers by Commission staff and, to the extent applicable to the entity, by its designated examining authority (‘‘DEA’’). The reports required under Rules 17a–5, 18a–7, and 17a–12 are also one of the primary means of ensuring compliance with the Commission’s financial responsibility rules (e.g., Rule 15c3–1). A firm’s failure to comply with these rules would severely impair the ability of the Commission (and the firm’s DEA, if applicable) to protect investors, including customers and counterparties of the registrant. 10. Rule 17h–2T The information required to be filed with the Commission under Rule 17h– E:\FR\FM\18APP3.SGM 18APP3 23972 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules 2T is used by the Commission to monitor the activities of a covered broker-dealer’s affiliates whose business activities are reasonably likely to have a material impact on the financial and operational condition of the brokerdealer. 11. Rule 17a–19 and Form X–17A–19 Upon the Commission’s receipt of a Form X–17A–19 filing, the information is entered into a database, which is regularly shared with the SROs. Commission staff use the information contained in Form X–17A–19 to assign the appropriate SRO as DEA for the member firms. This information is also used by SIPC in determining which SRO is the collection agent for the SIPC Fund. ddrumheller on DSK120RN23PROD with PROPOSALS3 12. Rule 3a71–3(d)(1)(vi) The information provided by a Registered Entity in connection with the filing of an ANE Exception Notice pursuant to Exchange Act Rule 3a71– 3(d)(1)(vi), and any subsequent withdrawal, assists the Commission in evaluating market participants’ compliance with the limitations on use of the ANE Exception, as well as assists Relying Entities and their affiliates in determining whether they have satisfied the ANE Exception’s notice requirement and in monitoring their progress toward the ANE Exception’s cap on inter-dealer security-based swaps. The proposed amendment to Rule 3a71–3(d)(1)(vi) to move the filing of the ANE Exception Notice, and any subsequent withdrawal, to the Commission’s EDGAR filing system would facilitate more efficient and timely transmission, dissemination, and analysis of this information. 13. Rule 15fi–3 The information shared by counterparties to a security-based swap transaction periodically during the portfolio reconciliation process, as contemplated by Rule 15fi–3, plays an important role in assisting those counterparties in identifying and resolving discrepancies involving key terms of their transactions on an ongoing basis. This information also allows those counterparties to improve their management of internal risks related to the enforcement of their rights and the performance of their obligations under a security-based swap. Moreover, requiring SBS Entities to agree in writing with each of their counterparties on the terms of the portfolio reconciliation (including, if applicable, agreement on the selection of any third party service provider who may be performing the reconciliation) helps to minimize any discrepancies regarding VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 the portfolio reconciliation process itself, thereby ensuring that it operates in as efficient and cost-effective means possible. The requirement to report certain unresolved valuation disputes to the Commission assists the Commission in identifying potential issues with respect to an SBS Entity’s internal valuation methodology and also could serve as an indication of a widespread market disruption in cases where the Commission receives a large number of such notices from multiple firms. The proposed amendment to Rule 15fi–3 to require submission of the valuation dispute notices using the Commission’s EDGAR system is intended to facilitate more efficient and secure transmission and efficient and effective analysis of this information. 14. Rule 15fk–1(c)(2)(ii)(A) The information collected under Rule 15fk–1(c) assists the Commission staff’s oversight and examination of SBS Entities compliance with the business conduct requirements for such entities. 15. Regulation S–T The proposed amendments to Rule 101 of Regulation S–T, as part of implementing the requirement that broker-dealers or SBS Entities use the EDGAR system to electronically file their annual reports, broker-dealer risk assessment reports, and CCO reports, as applicable, will be used by the Commission to streamline and simplify the filing process for filers and the Commission. In addition, the public filings will be more quickly available to investors to evaluate and compare these firms. The proposed amendments to Rule 101 of Regulation S–T, as part of implementing the requirement that filers use the EDGAR system to provide Rule 3a71–3(d)(1)(vi) and Rule 15fi–3(c) notices, will be used as described above. Further, the proposed amendments to Rules 201 and 202 of Regulation S–T would preclude the possibility of temporary or continuing hardship exemptions that otherwise would allow the ANE Exception Notice (and any subsequent withdrawal) to be filed on paper. The ANE Exception Notice facilitates the availability of a conditional exception 403 premised in part on the public availability of the notice to Relying Entities. The proposed amendments to Rule 405 of Regulation S–T, which would implement the proposed Inline XBRL requirements for Form 1, Form CA–1, Form X–17A–5 Part III, Form 17–H, and the CCO reports, will be used to 403 See PO 00000 supra section V.B. Frm 00054 Fmt 4701 Sfmt 4702 facilitate the retrieval, comparison, and other analysis of the disclosures on those forms across respondents and time periods. C. Respondents 1. Form ID The respondents to the collection of information required under Form ID would be all entities that would be required to file electronically on EDGAR under the proposal and that do not already have access to EDGAR. Such respondents must submit a Form ID, along with the notarized signature of an authorized individual, to obtain an EDGAR identification number and access codes to file on EDGAR. If the requirements to file on EDGAR are adopted as proposed, the Commission estimates that these respondents would include the following entities not currently registered on EDGAR: 24 national securities exchanges and exempt exchanges; 2 Security Futures Product Exchanges; 1 registered national securities association; 12 registered and exempt clearing agencies; 1,559 brokerdealers; and 24 Registered Entities. 2. Rules 6a–1, 6a–2, 6a–3, and Form 1 The respondents to the collection of information required under Rule 6a–1 are new applicants applying to register as a national securities exchange or seeking an exemption from such registration. The Commission estimates that it would receive approximately one initial Form 1 filing per year. The respondents to the collection of information required under Rules 6a–2 and 6a–3 are national securities exchanges and exempt exchanges. Currently, there are 24 entities registered as national securities exchanges. These respondents would file annual, triennial, and periodic amendments to their Form 1 under Rule 6a–2. These respondents would also file supplemental materials and monthly reports under Rule 6a–3. There are no exempt exchanges that currently submit amendments under Rule 6a–2 or supplemental materials and monthly reports under Rule 6a–3. 3. Rule 6a–4, Form 1–N The respondents to the collection of information required under Rule 6a–4 are futures exchanges that trade security futures products. Currently, there are two Security Futures Product Exchanges. These respondents would file annual, triennial, and periodic amendments to their Form 1–N under Rule 6a–4(b). These respondents would also file supplemental materials and monthly reports under Rule 6a–4(c). E:\FR\FM\18APP3.SGM 18APP3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules The Commission estimates that it will not receive any initial Form 1–N filings.404 4. Rules 15aa–1 and 15aa–2; Form 15A The respondents to the collection of information required under Rule 15aa– 1 are new applicants applying to register as a national securities association. The Commission estimates that it would receive one initial Form 15A filing per year.405 The respondents to the collection of information required under Rule 15aa– 2 are national securities associations currently registered with the Commission. Currently, there is only one entity that would be required to file annual, triennial, and periodic amendments to its Form 15A under Rule 15aa–2. 5. Rule 17ab2–1, Form CA–1 The respondents to the collection of information required under Rule 17ab2– 1 are registered and exempt clearing agencies, as well as applicants seeking to register as a clearing agency or seeking an exemption from such registration. Currently, there are nine registered clearing agencies, only seven of which are operational,406 and five exempt clearing agencies. We estimate that there may be one new application filed each year. 6. Rule 19b–4(e), Form 19b–4(e) ddrumheller on DSK120RN23PROD with PROPOSALS3 The respondents to the collection of information required under Rule 19b– 4(e) are SROs that list and trade new derivative securities products—national securities exchanges. Currently, there are 24 entities registered as national securities exchanges. 404 The Commission is basing its estimate on its historical experience with Form 1–N filings. In particular, since the adoption of the form in 2001, six initial Form 1–N filings have been made by futures exchanges. Based on the infrequent occurrence of filings, the Commission believes that zero is a reasonable estimate. 405 The Commission notes that since the adoption of section 15A of the Exchange Act as part of the Maloney Act in 1938, only two national securities associations have registered with the Commission. Currently, FINRA is the only national securities association registered with the Commission whereas the NFA is registered as a national securities association only for the limited purpose of regulating the activities of NFA members that are registered as brokers or dealers in security futures products under section 15(b)(11) of the Exchange Act. 406 The Boston Stock Exchange Clearing Corporation (‘‘BSECC’’) and Stock Clearing Corporation of Philadelphia (‘‘SCCP’’) are currently registered with the Commission as clearing agencies but conduct no clearance or settlement operations. See Exchange Act Release No. 6329 (Jan. 3, 2011), 76 FR 1473 (Jan. 10, 2011) (‘‘BSECC Notice’’); Exchange Act Release No. 63268 (Nov. 8, 2010), 75 FR 69730 (Nov. 15, 2010) (‘‘SCCP Notice’’). VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 7. Rule 19b–4(j), Form 19b–4 The respondents to the collection of information required under Rule 19b– 4(j) and Form 19b–4 are SROs (as defined by section 3(a)(26) of the Act), including national securities exchanges, national securities associations, registered clearing agencies, notice registered securities future product exchanges, and the MSRB. The Commission’s current approved estimated number of respondents is 42 SROs.407 8. Rule 17a–22 The respondents to the collection of information required under Rule 17a–22 are registered clearing agencies. Currently, there are nine registered clearing agencies, only seven of which are operational.408 9. Rules 17a–5, 18a–7, and 17a–12 The respondents to the annual reports collection of information required under Rule 17a–5 are broker-dealers. For the 12 months ended December 31, 2022, the Commission received 1,559 filings of the broker-dealer annual reports in paper and 1,659 electronically via EDGAR. The Commission therefore estimates that approximately 3,218 broker-dealers are required to file annual reports with the Commission. As of June 15, 2022, five of those brokerdealers are ANC broker-dealers required to file supplemental reports under Rule 17a–5. The respondents to the annual reports collection of information required under Rule 18a–7 are SBSDs and MSBSPs that are not prudentially regulated. As of June 15, 2022, there are nine SBSDs and MSBSPs that are not prudentially regulated. The respondents to the annual reports collection of information under Rule 17a–12 are OTC derivatives dealers. There are three OTC derivatives dealers subject to Rule 17a– 12. There are 460 broker-dealers or standalone SBS Entities that filed FOCUS Report Part II as of March 31, 2022. Of those Part II filers, 4 firms are domestic stand-alone swap dealers and 103 firms are domestic stand-alone introducing brokers. There are 31 bank SBS Entities that filed FOCUS Report Part IIC as of March 31, 2022. There are 3,056 brokerdealers that filed FOCUS Report Part IIA as of March 31, 2022. 10. Rule 17h–2T The respondents to the collection of information required under Rule 17h– 407 See FR Doc. 2019–22222, 84 FR 54710 (Oct. 10, 2019) (Request to OMB for extension of Rule 19b–4 and Form 19b–4; SEC File No. 270–38; OMB Control No. 3235–0045). 408 See supra note 419. PO 00000 Frm 00055 Fmt 4701 Sfmt 4702 23973 2T are broker-dealers. There are 241 broker-dealers that must file quarterly and annual risk assessment reports with the Commission under Rule 17h–2T. 11. Rule 17a–19 and Form X–17A–19 The respondents to the collection of information required under Rule 17a–19 are national securities exchanges and registered national securities associations. As of June 15, 2022, there are a total of 25 national securities exchanges and registered national securities associations. 12. Rule 3a71–3(d)(1)(vi) The Commission estimates that up to 24 entities that engage in security-based swap dealing activity may rely on the ANE Exception.409 To satisfy the ANE Exception, each of those up to 24 entities will make use of an affiliated Registered Entity that will be required to file an ANE Exception Notice and may subsequently decide to file a withdrawal of the ANE Exception Notice. The proposed amendment to Rule 3a71– 3(d)(1)(vi) does not affect Commission’s estimate of the number of respondents. 13. Rule 15fi–3 The respondents to the collection of information under Rule 15fi–3 are registered SBS Entities. As of January 4, 2023, 50 entities have submitted applications for registration as an SBSD; there are no registered MSBSPs.410 In a number of prior releases, including the release adopting the rules by which SBS Entities can register (and withdraw from registration) with the Commission, the Commission estimated that approximately 50 entities may meet the definition of SBSD, and up to five entities may meet the definition of MSBSP.411 The Commission continues to believe that these estimates are appropriate. Thus, the Commission 409 See Cross-Border Adopting Release, 85 FR at 6336 n.642. 410 See List of Registered Security-Based Swap Dealers and Major Security-Based Swap Participants, available at https://www.sec.gov/tm/ List-of-SBS-Dealers-and-Major-SBS-Participants (providing the list of registered SBS dealers and major SBS participants that was updated as of Jan. 4, 2023). 411 See Registration Process for Security-Based Swap Dealers and Major Security-Based Swap Participants, Exchange Act Release No. 75611 (Aug. 5, 2015), 80 FR 48964, 48990 (Aug.14, 2015). See also Risk Mitigation Adopting Release, 85 FR at 6383; Trade Acknowledgment and Verification of Security-Based Swap Transactions, Exchange Act Release No. 78011 (June 8, 2016), 81 FR 39807, 39830 (June 17, 2016); Capital, Margin, and Segregation Requirements for Security-Based Swap Dealers and Major Security-Based Swap Participants and Capital and Segregation Requirements for Broker-Dealers, Exchange Act Release No. 86175 (June 21, 2019), 84 FR 43872, 43960 (Aug. 22, 2019). E:\FR\FM\18APP3.SGM 18APP3 23974 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules preliminarily believes that approximately 55 entities will be required to register with the Commission under either category, and will therefore be subject to Rule 15fi–3. When the Commission initially adopted Rule 15fi–3, it noted that, until SBS Entities were registered with the Commission, it was difficult for the Commission to determine the typical number of valuation disputes meeting the applicable thresholds that SBS Entities would be required to submit on an annual basis.412 Because SBS Entities have been required to submit notices under Rule 15fi–3(c) for a limited time, it remains difficult to for the Commission to determine the typical number of dispute notices that an SBS Entity will submit annually. 14. Rule 15fk–1(c)(2)(ii)(A) The respondents to the collection of information under Rule 15fk–1(c) are registered SBS Entities. As of January 4, 2023, there are 50 SBS Entities registered with the Commission. Of these entities, the Commission estimates that none will be first-time EDGAR users needing to obtain EDGAR access credentials in order to submit its CCO report because they have already registered as SBS Entities through EDGAR. 15. Regulation S–T The respondents to the collection of information under Regulation S–T are broker-dealers, SBSDs, MSBSPs, OTC derivatives dealers, and national securities associations and exchanges. The collection of information requirements are reflected in the burden hours estimated for Rule 3a71–3, 15fi– 3, 15fk–1, 17a–5, 18a–7, 17a–12, 17a– 19, and Rule 17h–2T. The rules in Regulation S–T should not impose any separate burden. D. Total Initial and Annual Reporting and Recordkeeping Burdens ddrumheller on DSK120RN23PROD with PROPOSALS3 1. Form ID Currently Approved Burden Estimate Form ID (OMB Control No. 3235– 0328) must be completed and filed with the Commission by all individuals, companies, and other organizations who seek access to file electronically on EDGAR. Accordingly, a filer that does not already have access to EDGAR must submit a Form ID, along with the notarized signature of an authorized individual, to obtain an EDGAR identification number and access codes to file on EDGAR. The Commission 412 See Risk Mitigation Adopting Release 85 FR at 6385–86. VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 currently estimates that Form ID would take 0.30 hours to prepare, resulting in an annual industry-wide burden of 17,199 hours.413 Proposed Revision to Burden Estimate The Commission estimates that each filer that currently does not have access to EDGAR would incur an initial, onetime burden of 0.30 hours to complete and submit a Form ID.414 Therefore, the Commission believes the one-time industrywide reporting burden associated with the proposed requirements to file on EDGAR is 7.2 hours for national securities exchanges and exempt exchanges; 415 .6 hours for security futures product exchanges; 416 .3 hours for registered national securities associations; 417 3.6 hours for registered and exempt clearing agencies; 418 467.7 hours for brokerdealers not already filing their annual audits on EDGAR; 419 0 hours for OTC derivatives dealers not already filing their annual audits on EDGAR; 420 and 7.2 hours for Registered Entities.421 2. Rules 6a–1, 6a–2, 6a–3 and Form 1 Currently Approved Burden Estimate 422 Initial filings on Form 1 by applicants seeking registration as a national 413 See Supporting Statement for the Paperwork Reduction Act Information Collection Submission for Form ID (Dec. 20 2021), available at https:// www.reginfo.gov/public/do/PRAView Document?ref_nbr=202112-3235-0328. 414 The Commission does not estimate a burden for SBS Entities since these firms have already filed Form ID so they can file Form SBSE on EDGAR. 415 0.30 hours × 24 national securities exchanges and exempt exchanges = 7.2 hours. 416 0.30 hours × 2 security futures product exchanges = 0.6 hours. 417 0.30 hours × 1 registered national securities association = 0.3 hours. 418 0.30 hours × 12 currently active registered and exempt clearing agencies = 3.6 hours. 419 0.30 hours × 1,559 broker-dealers not already filing on EDGAR = 467.7 hours. 420 0.30 hours × 0 OTC derivatives dealers not already filing on EDGAR = 0 hours. 421 0.30 hours × 24 Registered Entities = 7.2 hours. The Commission conservatively estimates that none of the Registered Entities would already have EDGAR access at the time of filing an ANE Exception Notice or withdrawal of an ANE Exception Notice, even though most, if not all, Registered Entities already should have access to electronic filing on EDGAR at the time of filing an ANE Exception Notice or a withdrawal of an ANE Exception Notice, as they likely have used or will have used the system to register or file other information with the Commission. A Registered Entity that is an SBSD must file its application for registration electronically on EDGAR, and this requirement has been in place from the original compliance date for registration of SBSDs. See 17 CFR 240.15Fb2–1(c). Additionally, a Registered Entity that is a broker may voluntarily file electronically on EDGAR certain annual reports. See, e.g., paragraph (d) of Rule 17a–5; supra note 197 and accompanying text. 422 For an explanation of the collection of information under these rules and Form 1, see supra section IX.A.2. PO 00000 Frm 00056 Fmt 4701 Sfmt 4702 securities exchange or an exemption from such registration are made on a one-time basis. The Commission estimates that it would receive approximately one initial Form 1 filing per year. The Commission also estimates that each respondent who submits an initial Form 1 filing would incur an average burden of 880 hours to complete and file an initial Form 1.423 With respect to amendments to Form 1, the Commission estimates that each registered or exempt exchange would file 11 amendments or periodic updates to Form 1 per year.424 Hours required for amendments to Form 1 that must be submitted to the Commission can vary, depending upon the nature and extent of the amendment, the exchange’s corporate structure, and the exchange’s business activities. The Commission estimates that each exchange would incur an average burden of 25 hours per filing to comply with Rule 6a–2.425 Accordingly, the estimated average annual burden to update and amend Form 1 is 275 hours per exchange 426 and the estimated aggregate annual burden for all national securities exchanges is 6,600 hours.427 With respect to supplemental information and monthly reports, the Commission estimates that each exchange would file such materials 12 times per year. The Commission estimates that each exchange would incur an average burden of 0.5 hours per filing to comply with Rule 6a–3.428 Accordingly, the estimated average annual burden to submit supplemental information and monthly reports is six hours per exchange 429 and the estimated aggregate annual burden for all exchanges is 144 hours.430 Thus, the Commission estimates that the total aggregate annual burden to comply with Rules 6a–2 and 6a–3 is 6,744 hours.431 423 See FR Doc. 2022–01616, 87 FR 4297 (Jan. 27, 2022) (Submission for OMB Review; Comment Request, Extension: Rules 6a–1 and 6a–2, Form 1; SEC File 270–0017; OMB Control No. 3235–0017) (hereinafter ‘‘Rules 6a–1 and 6a–2 PRA Update’’). 424 See Rules 6a–1 and 6a–2 PRA Update. 425 See Rules 6a–1 and 6a–2 PRA Update. 426 11 Form 1 Amendments annually × 25 burden hours per Form 1 Amendment = 275 burden hours per exchange. 427 275 burden hours per exchange × 24 national securities exchanges = 6,660 aggregate burden hours. 428 See FR Doc. 2022–07060, 87 FR 19541 (Apr. 4, 2022) (Submission for OMB Review; Comment Request; Extension: Rule 6a–3; SEC File 270–0015; OMB Control No. 3235–0021). 429 12 filings annually × 0.5 hours per filing = 6 burden hours per exchange. 430 6 burden hours per exchange × 24 national securities exchanges = 144 aggregate burden hours. 431 6,600 burden hours to comply with Rule 6a– 2 + 144 burden hours to comply with Rule 6a–3 = 6,744 aggregate burden hours. E:\FR\FM\18APP3.SGM 18APP3 ddrumheller on DSK120RN23PROD with PROPOSALS3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules Proposed Revision to Burden Estimate The Commission recognizes that the proposed amendments to Rules 6a–1, 6a–2, and 6a–3 would impose certain burdens on respondents. Although the information to be provided on filings made pursuant to Rules 6a–1, 6a–2, and 6a–3 would not change, respondents would be required to submit documents electronically. The instructions to Form 1 would be amended to no longer require respondents to make and submit multiple copies of the Form 1 submission. Currently, respondents must make two copies of each filing to be submitted pursuant to Rules 6a–1 and 6a–2. The Commission believes that generally the time spent making such copies instead would be spent uploading documents on EDGAR. Where a filing could include multiple exhibits, the Commission believes that the time required to upload documents would be less than the time required to make two copies of each exhibit, particularly when the exhibit contains numerous pages. Accordingly, the Commission estimates that, on average, filing an initial Form 1 application electronically would require two fewer hours of clerical work from the current baseline. The aggregate initial burden on all respondents submitting an initial Form 1 application electronically would be two hours less than the current baseline. Accordingly, the Commission believes that the aggregate initial burden on all respondents to complete and submit an initial Form 1 application would be 878 hours.432 In addition, the Commission estimates that, on average, filing amendments to Form 1 electronically would require 1 fewer hour of clerical work from the current baseline, as the amount of material filed pursuant to Rule 6a–2 may be less than an initial Form 1 application. The aggregate ongoing burden on all exchanges submitting a periodic amendment electronically would be 264 hours less than the current baseline.433 Accordingly, the Commission believes that the aggregate ongoing burden on all exchanges to submit periodic amendments to Form 1 electronically would be 6,336 hours.434 With respect to material filed under Rule 6a–3, while in some instances there may be a marginal reduction in burden hours associated with submitting these materials electronically 432 878 burden hours per initial application × 1 initial application per year = 878 burden hours. 433 Reduction of 1 hour per response × 264 responses per year = 264 fewer burden hours. 434 264 burden hours per exchange × 24 national securities exchanges = 6,336 aggregate burden hours. VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 as a result of a reduction in printing requirements, for purposes of making a PRA burden estimate the Commission believes that, on average, the most recently approved baseline represents a reasonable estimate of the burden hours associated with submitting supplemental information and monthly reports. The Commission believes that the time required to compile copies of these materials would, on average, be equivalent to the time required to upload those filings electronically. The Commission estimates that, on average, filing supplemental information and monthly reports electronically would not increase or decrease burden hours from the current baseline of 0.5 hours. Accordingly, the Commission believes that the aggregate burden associated with filing supplemental information and monthly reports would be 180 hours.435 Thus, the Commission believes that the total aggregate annual burden to comply with Rules 6a–2 and 6a–3 would be 7,212 hours.436 The Commission also recognizes that the requirement to tag certain disclosures (specifically, the financial statements and the manner of operations description) on the initial Form 1 in Inline XBRL would impose burdens on respondents. To file reports in Inline XBRL, a filer must purchase Inline XBRL tagging software to apply Inline XBRL tags to the reports before filing them on EDGAR, or employ a tagging service provider to apply the Inline XBRL tags on its behalf. As discussed in further detail below, the Commission believes this burden would be mitigated for most exchanges, because most exchanges are affiliated with public reporting companies subject to existing Inline XBRL structuring requirements and thus may be able to leverage the compliance software and experience of their reporting affiliates.437 The Commission estimates respondents will incur an average of 10 burden hours to tag the initial Form 1 in Inline XBRL (a total annual industrywide burden of 10 hours), and an average of 7 burden hours to tag financial statements included in annual amendments to Form 1 in Inline XBRL (a total annual industry-wide burden of 168 hours).438 With respect to the 435 0.5 burden hours × 360 responses per year = 180 burden hours. 436 7,032 burden hours to comply with Rule 6a– 2 + 180 burden hours to comply with Rule 6a–3 = 7,212 aggregate burden hours. 437 See infra section X.C.2. Currently, 17 of the 24 national securities exchanges are owned by public companies that file financial statements and cover page disclosures in EDGAR in Inline XBRL. 438 10 burden hours to tag Exhibits D, E (in part), and I in initial Form 1 in Inline XBRL × 1 response PO 00000 Frm 00057 Fmt 4701 Sfmt 4702 23975 external monetary costs (e.g., the costs of purchasing and renewing the necessary software to tag filings in Inline XBRL) that are incurred in addition to the internal time burden, the Commission estimates an annual average cost of $2,500 to tag Form 1 (including initial and subsequent filings) in Inline XBRL (a total annual industry-wide cost of $60,000).439 The Commission also recognizes the requirement to structure certain other disclosures on Form 1 in a custom XML data language would impose burdens on respondents.440 The Commission estimates respondents will incur an average of 3 burden hours to structure disclosures in initial Form 1 filings in custom XML (a total annual industrywide burden of 3 hours), and an average of 2 burden hours to structure disclosures in subsequent Form 1 filings in custom XML (a total annual industrywide burden of 528 hours).441 To summarize, the current estimated annual burden to submit filings pursuant to Rules 6a–1, 6a–2, and 6a– 3 is 7,624 hours.442 Under the proposal, the Commission estimates that the annual burden to submit these filings would be 8,103 hours.443 In addition, per year = 10 burden hours. 7 burden hours to tag financial statements in annual amendments to Form 1 in Inline XBRL × 24 responses per year = 168 burden hours. 439 $2,500 per year × 24 exchanges = $60,000. See infra section X.C.2.b for further detail on structured data (Inline XBRL and custom XML) compliance costs, including estimated cost ranges and factors underlying expected variance in structured data costs across different filers. For example, we expect those exchanges affiliated with public companies that are subject to Inline XBRL requirements would incur lower structured data costs than other exchanges. See infra note 638 and accompanying text. We have accounted for this expected variance in the calculations of average burden and cost figures presented in this section. 440 This does not include the monthly volume reports that exchanges must file under Rule 6a–3(b) of the Exchange Act, as we assume exchanges would file those disclosures, which comprise a very limited number of data points, using a fillable form that EDGAR would convert to custom XML. See 17 CFR 240.6a–3(b). 441 3 burden hours to structure disclosures in initial Form 1 filings in custom XML × 1 response per year = 3 burden hours. 2 burden hours to structure disclosures in subsequent Form 1 filings in custom XML × 264 responses per year = 528 burden hours. Our estimates assume exchanges would choose to encode the disclosures in the Exhibits to Form 1 in custom XML and submit the custom XML documents directly to EDGAR, rather than manually completing fillable EDGAR forms to be converted into custom XML documents. See infra text accompanying note 624. 442 880 burden hours for Rule 6a–1 + 6,600 burden hours for Rule 6a–2 + 144 burden hours for Rule 6a–3 = 7,624 burden hours. 443 891 burden hours for Rule 6a–1 (878 burden hours to file electronically + 10 burden hours to tag in Inline XBRL + 3 burden hours to tag in custom XML) + 7,032 burden hours for Rule 6a–2 (6,336 burden hours to file electronically + 168 burden E:\FR\FM\18APP3.SGM Continued 18APP3 23976 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules the Commission estimates that the total annual industry-wide external cost of the proposed Inline XBRL requirements related to Form 1 would be $62,500.444 3. Rule 6a–4, Form 1–N Currently Approved Burden Estimate 445 Initial filings on Form 1–N by futures exchanges submitting notice registration as a national securities exchange solely for the purpose of trading security futures products are made on a one-time basis. The Commission estimates that it would receive zero initial Form 1–N filing per year.446 The Commission estimates that the total burden for all respondents to file initial Form 1–N filings per year would be 0 hours (31 hours/respondent/year × 0 respondents). The Commission estimates that the total annual burden for all respondents to provide periodic amendments 447 to keep the Form 1–N accurate and up to date as required under Rule 6a–4(b)(1) would be 30 hours (15 hours/ respondent per year × 2 respondents). The Commission estimates that the total annual burden for all respondents to provide annual amendments under Rule 6a–4(b)(3) would be 30 hours (15 hours/ respondent/year × 2 respondents). The Commission estimates that the total annual burden for all respondents to provide triennial amendments 448 under Rule 6a–4(b)(4) would be 13 hours (20 hours/response × 2 responses every three years). The Commission estimates that the total annual burden for the filing of the supplemental information 449 and the monthly reports required under Rule 6a–4(c) would be 12 hours (6 hours/respondent per year × 2 respondents). Thus, the Commission estimates the total annual burden for complying with Rule 6a–4 is 86 hours. ddrumheller on DSK120RN23PROD with PROPOSALS3 Proposed Revision to Burden Estimate The Commission recognizes that the proposed amendments to Rule 6a–4 would impose certain burdens on respondents. Although the information hours to tag Exhibits in Inline XBRL + 528 burden hours to structure Exhibits in custom XML) + 180 burden hours for Rule 6a–3 = 8,103 burden hours. 444 $2,500 industry-wide cost for Rule 6a–1 (to tag in Inline XBRL an initial Form 1 filing) + $60,000 industry-wide cost for Rule 6a–2 (to tag in Inline XBRL periodic updates to Form 1) = $62,500. 445 For an explanation of the collection of information under Rule 6a–4 and Form 1–N, see supra section IX.A.3. 446 The Commission is basing its estimate on its historical experience with Form 1–N filings. In particular, since the adoption of the form in 2001, six initial Form 1–N filings have been made by futures exchanges. Based on the infrequent occurrence of filings, the Commission believes that zero is a reasonable estimate. 447 17 CFR 240.6a–4(b)(1). 448 17 CFR 240.6a–4(b)(3) and (4). 449 17 CFR 240.6a–4(c). VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 to be provided on filings made pursuant to Rule 6a–4 would not change, respondents would be required to submit documents electronically. The instructions to Form 1–N would be amended to no longer require respondents to make and submit multiple copies of the Form 1–N submission. Currently, respondents must make two copies of each filing in addition to the original Form 1–N to be submitted pursuant to Rule 6a–4. The Commission believes that, generally, the time spent making such copies instead would be spent uploading documents through EDGAR. Where a filing could include multiple exhibits, the Commission believes that, generally, the time required to upload documents would be less than the time required to make two copies of each exhibit, particularly when the exhibit contains numerous pages. The Commission estimates that, on average, filing an initial Form 1–N filing electronically would require, generally, two fewer hours of clerical work from the current baseline. Therefore, instead of 31 hours, an initial filing would require 29 hours. However, because the Commission estimates that there will be zero respondents submitting initial filings, the burden would remain zero hours (29 hours/respondent/year × 0 respondents/year). The Commission estimates that, on average, periodic amendments to Form 1–N electronically would require 1 fewer hour of clerical work from the current baseline. The aggregate ongoing burden on all respondents submitting periodic amendments electronically would be two hours fewer than the current baseline. Accordingly, the Commission estimates that the aggregate burden on all respondents to submit periodic amendments to Form 1–N would be 28 hours (14 hours/ respondent/year × 2 respondents). Similarly, the Commission estimates that, on average filing annual amendments to Form 1–N electronically would require 1 fewer hour of clerical work from the current baseline. The aggregate burden on all respondents submitting annual amendments electronically would be two hours fewer than the current baseline. Accordingly, the Commission estimates that the aggregate burden on all respondents to provide annual amendments to Form 1–N would be 28 hours (14 hours/ respondent/year × 2 respondents). The Commission estimates that, on average, filing triennial amendments to Form 1–N would require 1 fewer hour of clerical work from the current baseline. Accordingly, the Commission estimates that the total annual burden PO 00000 Frm 00058 Fmt 4701 Sfmt 4702 for all respondents to provide triennial amendments to Form 1–N would be 13 hours 450 (19 hours/response × 2 respondents per year × .33 responses per year). With respect to supplemental material filed under Rule 6a–4, while in some instances there may be a marginal reduction in burden hours associated with submitting these materials electronically as a result of a reduction in printing requirements, for purposes of making a PRA burden estimate the Commission believes that, on average, the most recently approved baseline represents an appropriate estimate of the burden hours associated with submitting supplemental information and monthly reports. The Commission believes that the time required to compile copies of these materials would, on average, be equivalent to the time required to upload those filings electronically. The Commission estimates that, on average, filing supplemental information and monthly reports electronically would not increase or decrease burden hours from the current baseline of six hours/ respondent/year. Accordingly, the Commission believes that the aggregate burden associated with filing supplemental information and monthly reports would continue to be 12 hours. Thus, the Commission believes that the total aggregate annual burden to comply with Rule 6a–4 would be 81 hours.451 4. Rules 15aa–1 and 15aa–2; Form 15A Initial filings on proposed Form 15A by an applicant seeking registration as a national securities association are made on a one-time basis.452 The Commission estimates that it would receive one initial Form 15A filing per year.453 Because the Commission believes that the filing of an initial Form 15A would be substantially similar to an initial Form 1 filing, the Commission estimates that each respondent would incur an 450 Even with the one hour per response reduction, the annual total burden would still be 13 hours due to rounding. The annual burden would be reduced from 13.33 to 12.67, which both round to 13 hours. 451 The Commission currently estimates that compliance with Form 1–N and Rule 6a–4 results in $304 of annual clerical costs (i.e., mailing forms and copying forms etc.). The Commission estimates that these costs would be eliminated with the electronic filing of Form 1–N. 452 For an explanation of the collection of information under Rules 15Aa–1 and 15Aj–1 that are being redesignated as Rules 15aa–1 and 15aa– 2 and Forms X–15AA–1, X–15AJ–1, and X–15AJ– 2 that are being redesignated as Form 15A, see supra section IX.A.4. 453 See Exchange Act Rule 15aa–1, 17 CFR 240.15aa–1 and 17 CFR 249.801. E:\FR\FM\18APP3.SGM 18APP3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules ddrumheller on DSK120RN23PROD with PROPOSALS3 average burden of 878 hours to complete and file an initial Form 15A.454 Based on the number of applications for registration as a national securities association the Commission has received, the Commission estimates that it will receive not more than one initial Form 15A filing per year. The Commission estimates that a respondent would incur an average burden of 878 hours to file an initial Form 15A. With respect to the proposed amendments to proposed Form 15A, the Commission estimates that each registered association would file 11 amendments or periodic updates to Form 15A per year.455 Hours required for amendments to Form 15A that must be submitted to the Commission can vary, depending upon the nature and extent of the amendment, the association’s corporate structure, and the association’s business activities. The Commission estimates that an association would incur an average burden of 24 hours per filing to comply with Rule 15aa–2.456 Accordingly, the estimated average annual burden to update and amend Form 15A is 264 454 See FR Doc. 2019–04007, 84 FR 8138 (Mar. 6, 2019) (Request to OMB for Extension of Rule 6a– 1, Rule 6a–2 and Form 1; SEC File 270–0017; OMB Control No. 3235–0017) (hereinafter ‘‘Rules 6a–1 and 6a–2 PRA Update’’). The Commission currently estimates that an initial Form 1 filing would incur an average burden of 880 hours, less the efficiencies contemplated in this propose that no longer require the submission of duplicate paper copies (a reduction of 2 burden hours per respondent). See supra section IX.D.2. 455 The Commission believes that the requirements of Rule 15aa–2 are substantively similar to the requirements of Rules 6a–1 and 6a– 2. As a result, the Commission believes it can rely on the past history of amendments and periodic updates submitted under those rules in determining its estimate of the number of amendments the Commission will receive under Rule 15A. The Commission estimates that each registered or exempt exchange would file 11 amendments or periodic updates to Form 1 per year. The Commission believes that using an estimate of 11 amendments or periodic updates for Form 15A is appropriate. 456 Attorney at 10 hours + Accountant at 10 hours + Compliance Clerk at 4 hours = 24 burden hours. The instructions to Form 15A would be amended to no longer require respondents to make and submit multiple copies of the Form 15A submission. Currently, respondents must make two copies of each filing to be submitted pursuant to Rule 15Aa–1 and 15Aaj–1. The Commission believes that the time spent making such copies instead would be spent uploading documents through EDGAR. Where a filing could include multiple exhibits, the Commission believes that the time required to upload documents would be less than the time required to make two copies of each exhibit, particularly when the exhibit contains numerous pages. The Commission estimates that, on average, filing amendments to Form 15A electronically would require 1 fewer hour of clerical work compared to the submission of physical copies as contained in the most recent PRA updates for Rule 6a–1 and 6a–2. VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 hours per association 457 for an estimated aggregate annual burden for all national securities associations of 264 hours.458 5. Rule 17ab2–1, Form CA–1 Currently Approved Burden Estimate The Commission has previously discussed the requirements of Rule 17ab2–1 and Form CA–1 above in IX.A.5. The Commission estimates that, on average, each initial Form CA–1 requires approximately 340 hours to complete and submit for approval, and that, on average, the Commission receives one application each year.459 This burden is composed primarily of a one-time reporting burden that reflects the applicant’s staff time to prepare and submit the Form CA–1 to the Commission.460 With respect to amendments to Form CA–1, the Commission estimates that, on average, an amendment requires 60 hours of the exempt or registered clearing agency’s staff time,461 although the time burden related to preparing and submitting an amendment widely varies depending on the nature of the information that needs to be updated. The Commission estimates that, on average, it receives one amendment per year. Accordingly, the Commission estimates that the aggregate annual burden associated with compliance with Rule 17ab2–1 and Form CA–1 is 400 hours. Proposed Revision to Burden Estimate The Commission recognizes that the proposed amendments to Rule 17ab2–1 would impose certain burdens on respondents. Although the information to be provided on filings made pursuant to Rule 17ab2–1 would not change, respondents would be required to submit documents electronically. The instructions to Form CA–1 would be amended to no longer require respondents to make and submit multiple copies of the same form. Currently, respondents must make four copies of Form CA–1. The Commission believes that the time spent making such copies would now be spent uploading documents through EDGAR. Where a filing may include multiple 457 11 Form 15Aa–2 Amendments annually × 24 burden hours per Form 15A Amendment = 264 burden hours per association. 458 264 burden hours per association × 1 national securities association = 264 aggregate burden hours. 459 See FR Doc. 2020–18498, 85 FR 52178 (Aug. 24, 2020) (Request to OMB for Extension of Rule 17Ab2–1 and Form CA–1; SEC File No. 270–203; OMB Control No. 3235–0195). 460 Compliance Attorney at 300 hours + Chief Compliance Officer at 40 hours = 340 burden hours. 461 Compliance Attorney at 40 hours + Chief Compliance Officer at 20 hours = 60 burden hours. PO 00000 Frm 00059 Fmt 4701 Sfmt 4702 23977 exhibits, the Commission believes that the time required to upload documents would be slightly less than the time required to make copies of each exhibit. As the number of exhibits required to be submitted with Form CA–1 is roughly equivalent to the number of exhibits required by an initial Form 1 application, the Commission believes that the overall burden is two hours less (for either an initial application or an amendment) to make an electronic filing, compared to making the paper copies. Thus, the Commission believes that the aggregate annual burden associated with compliance with Rule 17ab2–1 and Form CA–1, other than the structuring requirement discussed below, would be approximately 396 hours. The Commission also recognizes that the requirement to file Form CA–1 in Inline XBRL (in part) and in custom XML (in part) would impose burdens on respondents.462 The Commission estimates respondents would incur an average of 18 burden hours to structure financial statements and narrative disclosures in initial applications on Form CA–1 in Inline XBRL (resulting in a total annual industry-wide burden of 18 hours) and an average of 12 burden hours to structure financial statements and narrative disclosures in subsequent amendments on Form CA–1 in Inline XBRL (resulting in a total annual industry-wide burden of 12 hours).463 The Commission further estimates respondents would incur average annual external monetary costs (e.g., the cost of purchasing and renewing the necessary Inline XBRL tagging software) of $3,500 to structure financial statements and narrative disclosures included in Form CA–1 in Inline XBRL (resulting in a total annual industrywide burden of an average of $3,500).464 The Commission estimates respondents would incur an average of 3 burden hours to structure other disclosures in initial applications on Form CA–1 in a custom XML data language (resulting in a total annual industry-wide burden of 462 The proposed amendments would require Schedule A and Exhibits C, F, H, J, K, L, M, O, R, and S of Form CA–1 to be structured in Inline XBRL, and would require the execution page and Exhibits A (in part), B, D, E (in part), I, N, and Q to be structured in custom XML. See supra notes 34–36 and accompanying text; see also supra section VII.A. 463 18 hours per initial application × 1 initial application per year = 18 aggregate burden hours. 12 hours per subsequent amendment × 1 subsequent amendment per year = 12 aggregate burden hours. 464 $3,500 per initial application × 1 initial application per year = $3,500 aggregate cost per year. $3,500 per subsequent amendment × 1 subsequent amendment per year = $3,500 aggregate cost per year. E:\FR\FM\18APP3.SGM 18APP3 23978 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules 3 hours) and an average of 2 burden hours to structure those disclosures in subsequent amendments on Form CA–1 in custom XML (resulting in a total annual industry-wide burden of 2 hours).465 The proposed structured data requirements for Form CA–1 would thus entail an estimated total annual industry-wide burden of 21 burden hours and $3,500 in external monetary costs for initial applications, and an estimated total annual industry-wide burden of 14 burden hours and $3,500 in external monetary costs for subsequent amendments.466 6. Rule 19b–4(e), Form 19b–4(e) Currently Approved Burden Estimate The Commission’s currently approved estimate to complete and submit one Form 19b–4(e) is 1 hour, for an aggregate annual burden of 2,331 hours.467 ddrumheller on DSK120RN23PROD with PROPOSALS3 Proposed Revision to Burden Estimate The proposed amendment to Rule 19b–4(e) rescinding Form 19b–4(e) and instead requiring an SRO to publicly report the information currently provided in Forms 19b–4(e) on its internet website would impose certain burdens on respondents. Respondents would be required to use the most recent versions of the XML schema (i.e., 465 3 hours per initial application × 1 initial application per year = 3 aggregate burden hours per year. 2 hours per subsequent amendment × 1 subsequent amendment per year = 2 aggregate burden hours per year. Our estimates assume clearing agencies would choose to encode their disclosures in custom XML and submit the custom XML documents directly to EDGAR, rather than manually completing fillable EDGAR forms to be converted into custom XML documents. See infra text accompanying note 624. Consistent with burden estimates in prior Commission releases, the burden estimates here assume Inline XBRL tagging would be done by a compliance attorney, while custom XML structuring would be done by a programmer. See Shortening the Securities Transaction Settlement Cycle, Release No. 34– 94196 (Feb. 9, 2022), 87 FR 10436, 10491 (Feb. 24, 2022); Money Market Fund Reforms, Release No. IC–34441 (Dec. 15, 2021), 87 FR 7248, 7332 (Feb. 8, 2022). 466 18 hours and $3,500 for Inline XBRL structuring + 3 hours for custom XML structuring = 21 hours and $3,500 per initial application) × 1 initial application per year = 21 aggregate burden hours per year and $3,500 in aggregate external monetary cost per year. 12 hours and $3,500 for Inline XBRL structuring + 2 hours for custom XML structuring per subsequent amendment = 14 hours and $3,500 per subsequent amendment × 1 subsequent amendment per year = 14 aggregate burden hours per year and $3,500 in aggregate external monetary cost per year. See infra Section X.C.2.b for further detail on structured data (Inline XBRL and custom XML) compliance costs, including estimated cost ranges and factors underlying expected variance in structured data costs across different filers. 467 See FR Doc. 2022–17308, 87 FR 49894 (Aug. 12, 2022) (Request to OMB for extension of Rule 19b–4(e) and Form 19b–4(e); SEC File No. 270–447; OMB Control No. 3235–0504). VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 data language) and the associated PDF renderer as published on the Commission’s website to post the information required under proposed Rule 19b–4(e) for each new derivative securities product. Currently, respondents must make nine copies of Form 19b–4(e); however, the form consists of a single page and does not require respondents to submit exhibits. In some instances there may be a marginal change in burden hours associated with posting the same information as is required on current Form 19b–4(e) on a respondent’s website. However, given the relatively small amount of data to be structured, rendered, and posted for each new derivative securities product, for purposes of making a PRA burden estimate the Commission believes that, on average, the proposed requirement to structure the information in a custom XML data language, render it using the associated PDF renderer, and post it on a respondent’s website would continue to be 1 burden hour for each new derivative securities product, and that the time to structure, render and post the first new derivative securities product per respondent would be an additional 0.5 hours. Accordingly, the Commission believes that the total additional initial hour burden would be 12 hours and the total annual hour burden would continue to be 2,331 hours per year associated with the structuring, rendering, and posting of information under proposed Rule 19b– 4(e).468 The Commission does not estimate respondents would incur external monetary costs under proposed Rule 19b–4(e). 7. Rule 19b–4(j), Form 19b–4 Currently Approved Burden Estimate The Commission’s currently approved estimated response burden pursuant to Rule 19b–4 and Form 19b–4 for the 42 respondents is an aggregate burden of 91,300 hours.469 468 0.5 burden hours per first response for structuring, rendering, and posting × 24 respondents) = 12 hours. 1 burden hour per response for structuring, rendering, and posting in subsequent years × 2,331 responses) = 2,331 hours. See also infra Section X.C.2.b, including the text accompanying note 650 (discussing estimated cost ranges related to the proposed structuring requirement for Rule 19b–4(e) information). Consistent with structured data burden estimates in prior Commission releases, the burden estimates here assume the custom XML structuring would be done by a programmer. See supra note 485. 469 See FR Doc. 2019–22222, 84 FR 54710 (Oct. 10, 2019) (Request to OMB for extension of Rule 19b–4 and Form 19b–4; SEC File No. 270–38; OMB Control No. 3235–0045). PO 00000 Frm 00060 Fmt 4701 Sfmt 4702 Proposed Revision to Burden Estimate The Commission believes that, on average, the removal of the manual signature and retention requirement would not increase or decrease the burden hours associated with continuing to file Form 19b–4 electronically because the manual signature and retention requirement is only a small component of the filing requirement. Accordingly, the Commission believes that the aggregate burden for SROs associated with complying with Rule 19b–4 and filing Form 19b–4 would continue to be 91,300 hours. 8. Rule 17a–22 Currently Approved Burden Estimate 470 The Commission estimates that it receives, on average, approximately 840 filings per year pursuant to Rule 17a– 22.471 Although the frequency of filings made by registered clearing agencies pursuant to Rule 17a–22 varies, the Commission estimates that, on average, each registered clearing agency submits approximately 120 filings per year.472 The Commission estimates that, on average, each filing requires approximately 0.25 hours (fifteen minutes).473 This figure represents the time it takes for a staff person at a registered clearing agency to: (i) properly identify a document subject to the rule; (ii) print and make copies of the document; and (iii) mail the copies to the Commission and, where applicable, the ARA.474 Accordingly, the Commission estimates that the aggregate annual burden to comply with Rule 17a–22 is 210 hours.475 Further, the Commission estimates that each registered clearing agency will expend a 470 The Commission has previously discussed the requirements of Rule 17a–22 in IX.A.8, supra. 471 This figure is based on the number of aggregate filings received by the Commission in 2017, which was the last year for which the Commission had compiled data at the time of the Rule 17a–22 PRA update in 2020. 472 See FR Doc. 2020–08336, 85 FR 21910 (Apr. 20, 2020) (Request to OMB for Extension of Rule 17a–22; SEC File No. 270–202; OMB Control No. 3235–0196). Given the variability in the number of filings per clearing agency received each year, the Commission estimated an average of 120 annual filings per clearing agency by averaging the approximate number of filings received in the most recent year for which the Commission has obtained data (840 filings) by the number of registered clearing agencies (7 clearing agencies). 473 See id. 474 Although current Rule 17a–22 requires duplicate filings when the Commission is not a registered clearing agency’s ARA, the Commission believes that the additional burden of making a duplicate filing would be minimal because the rule applies only to materials that have already been published by the registered clearing agency. 475 7 registered clearing agencies × 120 responses per clearing agency × .25 hours = 210 burden hours. E:\FR\FM\18APP3.SGM 18APP3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules ddrumheller on DSK120RN23PROD with PROPOSALS3 total of 30 hours per year to comply with Rule 17a–22.476 Proposed Revision to Burden Estimate The Commission recognizes that the proposed amendments to Rule 17a–22 would impose certain burdens on respondents. Although the scope of supplemental materials subject to Rule 17a–22 would not change, respondents would be required to prominently post certain supplemental materials on their internet websites within two business days after issuing, or making generally available, such materials to their participants or other entities with whom they have a significant relationship. Currently, respondents must file with the Commission three paper copies of certain supplemental materials issued, or made generally available, to their participants or other entities with whom they have a significant relationship within 10 days after issuing, or making generally available, such materials. In addition, when the Commission is not a respondent’s ARA, the respondent must file at the same time one paper copy of the materials with its ARA. While there may be a marginal reduction in burden hours associated with replacing the paper filing requirement under Rule 17a–22 with an electronic filing requirement via a registered clearing agency’s website, the Commission believes that, for purposes of making a PRA burden estimate, the current baseline represents a reasonable estimate of the burden hours associated with filing supplemental materials. The Commission believes that the time required to compile and mail copies of supplemental materials would, on average, be equivalent to the time required to post these materials on a clearing agency’s website such that they would be readily identifiable and accessible on the website.477 Moreover, the Commission believes that reducing the timeframe under Rule 17a–22 from 10 days to 2 business days would not increase the burden hours associated with compliance with Rule 17a–22. The Commission estimates that, on average, filing supplemental materials electronically via a registered clearing agency’s internet website would not increase or decrease burden hours from the current baseline of 0.25 hours. Accordingly, the Commission believes that each registered clearing agency will continue to expend a total of 30 hours 476 840 total responses × .25 hours/7 active clearing agencies = 30 burden hours. 477 See Section III.D.3. (explaining the Commission’s interpretation of the requirement to ‘‘prominently post’’ supplemental materials on a clearing agency’s website pursuant to the proposed amendments to Rule 17a–22). VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 per year to comply with Rule 17a–22.478 Thus, the Commission believes that the aggregate annual burden associated with compliance with Rule 17a–22 would continue to be 210 hours.479 9. Rules 17a–5, 18a–7, and 17a–12 a. Requirement To File Annual Reports on EDGAR Using Structured Data Currently Approved Burden Estimate Rules 17a–5, 17a–12, and 18a–7 require broker-dealers, OTC derivatives dealers, and SBS Entities that are not prudentially regulated, respectively, to file annual reports, including financial statements and supporting schedules that must be audited by a PCAOb– registered independent public accountant in accordance with PCAOB standards. Under Rule 17a–5, each broker-dealer is estimated to have an annual reporting burden of 12 hours, resulting in an annual industry burden of 44,148 hours.480 Under Rule 17a–12, each OTC derivatives dealer is estimated to have an annual reporting burden of 100 hours, resulting in an annual industry burden of 200 hours.481 Under Rule 18a–7, each MSBSP is estimated to have an annual reporting burden of 10 hours, resulting in an annual industry burden of 40 hours and each SBSD is estimated to have an annual reporting burden of 17 hours, resulting in an annual industry burden of 102 hours.482 Proposed Revision to Burden Estimate In the context of Nationally Recognized Statistical Rating Organizations (‘‘NRSROs’’), the Commission estimated that it would take an NRSRO, on average, sixteen hours on a one-time basis to become familiar with the EDGAR system.483 The Commission believes that this estimate would also apply to entities that are new filers on EDGAR under the 478 840 total responses × .25 hours/7 active clearing agencies = 30 burden hours. 479 7 registered clearing agencies × 120 responses per clearing agency × .25 hours = 210 burden hours. 480 See Supporting Statement for the Paperwork Reduction Act Information Collection Submission for Rule 17a–5 (July 29, 2021), available at https:// www.reginfo.gov/public/do/PRAView Document?ref_nbr=202107-3235-022. 481 See Supporting Statement for the Paperwork Reduction Act Information Collection Submission for Rule 17a–12 (Jan. 11, 2022), available at https:// www.reginfo.gov/public/do/PRAView Document?ref_nbr=202110-3235-010. 482 See Supporting Statement for the Paperwork Reduction Act Information Collection Submission for Rule 18a–7 (Apr. 15, 2021), available at https:// www.reginfo.gov/public/do/Download Document?objectID=110893201. 483 See Nationally Recognized Statistical Rating Organizations, Release No. 72936 (Aug. 27, 2014), 79 FR 55077, 55235–6 (Sept. 15, 2014). PO 00000 Frm 00061 Fmt 4701 Sfmt 4702 23979 proposed amendments to Rules 17a–5, 18a–7, and 17a–12. As stated above, the Commission estimates that for the 12 months ended December 31, 2022, the Commission received 1,559 filings of the annual reports required by paragraph (d) of Rule 17a–5 in paper.484 Based on this estimate, the Commission estimates that approximately 1,559 broker-dealers that are required to file annual reports with the Commission will be new EDGAR filers. The broker-dealers that have filed annual reports on EDGAR have EDGAR access credentials and are familiar with the mechanics of filing on EDGAR. The Commission estimates the one time industry-wide burden for broker-dealers to acquire EDGAR access and familiarize themselves with EDGAR would be approximately 24,944 hours.485 ANC broker-dealers must also file annual reports under the proposed amendments to Rule 17a–5, so there would be no additional burden attributable to requiring the electronic filing on EDGAR of ANC broker-dealer supplemental reports under paragraph (k) of Rule 17a–5. In addition, as stated above, the Commission estimates that nine nonbank SBSDs and MSBSPs would be required to file annual reports under proposed paragraph (c) of Rule 18a–7 and that these firms would be new EDGAR filers. However, since these firms are already filing Form SBSE on EDGAR, the Commission does not estimate any burden for these firms to familiarize themselves with EDGAR. The Commission estimates that the one-time burden for an OTC derivatives dealer to familiarize itself with EDGAR would be approximately 16 hours. However, because all three OTC derivatives dealers already voluntarily file their annual reports on EDGAR, the Commission estimates that the one-time industry-wide burden would be zero hours. The current PRA burden for paragraph (d) of Rule 17a–5 includes an annual industry-wide cost of approximately $28,512 in postage costs to mail the annual reports to the Commission and the current PRA burden for paragraph (k) of Rule 17a–5 includes an annual industry-wide cost of approximately $85 in postage costs to mail the supplemental reports to the Commission. Under the proposal, broker-dealers would no longer incur these costs. Under the proposal, brokerdealers, OTC derivatives dealers, SBSDs, and MSBSPs filing their annual 484 See supra section IV.A.1. broker-dealers × 16 hours = 24,944 485 1,559 hours. E:\FR\FM\18APP3.SGM 18APP3 23980 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules reports electronically must keep the original notarized oath or affirmation for a period of not less than six years, the first two years in an easily accessible place. The Commission believes that the proposed requirement to keep the notarized oath or affirmation would not materially increase a broker-dealer’s recordkeeping burden. Under the proposal, broker-dealers, OTC derivatives dealers, SBSDs, and MSBSPs would be required to file their annual reports and related filings (including compliance reports, exemption reports, accountant’s reports, and supplemental reports) in Inline XBRL. To file reports in Inline XBRL, a filer must purchase Inline XBRL tagging software to apply Inline XBRL tags to the reports before submitting them to EDGAR, or employ a tagging service provider to apply the Inline XBRL tags to the reports on its behalf. As described in further detail in the subsequent economic analysis of proposed structured data requirements, the Commission expects the burdens associated with tagging the annual reports and related filings in Inline XBRL will vary based on the size of the respondent and whether the respondent is affiliated with a public reporting company that is already subject to Inline XBRL requirements.486 On average, we estimate respondents will incur 6 burden hours and $1,200 in external cost for the first response to be tagged in Inline XBRL, and will incur 4 burden hours and $800 in external cost to tag subsequent responses in Inline XBRL. Therefore, the Commission estimates the total initial industry-wide internal burden and external cost would be 19,308 hours and $3,861,600 for broker-dealers (including OTC derivatives dealers); and the total initial industry-wide internal burden and external cost would be 54 hours and $10,800 for SBSDs and MSBSPs.487 The Commission estimates the total ongoing annual industry-wide internal burden and external cost would be 12,872 hours and $2,574,400 for broker-dealers (including OTC derivatives dealers); and ddrumheller on DSK120RN23PROD with PROPOSALS3 486 See infra Section X.C.2.b, including the text accompanying notes 632–634 and 639. We have accounted for this expected variance in the calculations of average burden and cost figures presented in this section. We have accounted for this expected variance in the calculations of average burden and cost figures presented in this section. Consistent with structured data burden estimates in prior Commission releases, the burden estimates here assume Inline XBRL tagging would be done by a compliance attorney. See supra note 485. 487 3,218 broker-dealers × 6 hours = 19,308 hours; 3,218 broker-dealers × $1,200 = $3,861,600. 9 SBSDs and MSBSPs × 6 hours = 54 hours; 9 SBSDs and MSBSPs × $1,200 = $10,800. VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 36 hours and $7,200 for SBSDs and MSBSPs.488 b. Amendments Relating to the FOCUS Report Currently Approved Burden Estimate Rules 17a–5, 17a–12, and 18a–7 require broker-dealers, OTC derivatives dealers, and SBS Entities, respectively, to file unaudited financial information on the FOCUS Report (Form X–17A–5 Part II, IIA, or IIC) on a monthly or quarterly basis.489 Under Rule 17a–5, each broker-dealer is estimated to have an annual reporting burden of 12 hours, resulting in an annual industry burden of 44,148 hours.490 Under Rule 17a–12, each OTC derivatives dealer is estimated to have an annual reporting burden of 80 hours, resulting in an annual industry burden of 160 hours.491 Under Rule 18a–7, each MSBSP is estimated to have an annual reporting burden of 61.33 hours, resulting in an annual industry burden of 245.33 hours, each SBSD that is not prudentially regulated is estimated to have an annual reporting burden of 245.33 hours, resulting in an annual industry burden of 1,472 hours, and each SBSD that is prudentially regulated is estimated to have an annual reporting burden of 28 hours, resulting in an annual industry burden of 700 hours.492 Proposed Revision to Burden Estimate The Commission proposes a number of amendments to the FOCUS Report. First, it proposes corrective and clarifying amendments to FOCUS Report Part II. The Commission estimates that the proposed amendments will result in an initial burden of five hours on each Part II filer so firms can familiarize themselves with the amendments to FOCUS Report Part II. The Commission believes that these proposed amendments will generally either have no impact on or reduce the ongoing burden on the vast majority of 488 3,218 broker-dealers × 4 hours = 12,872 hours; 3,218 broker-dealers × $800 = $2,574,400. 9 SBSDs and MSBSPs × 4 hours = 36 hours; 9 SBSDs and MSBSPs × $800 = $7,200. 489 See 17 CFR 240.17a–5; 17 CFR 240.17a–12; 17 CFR 240.18a–7. 490 See Supporting Statement for the Paperwork Reduction Act Information Collection Submission for Rule 17a–5 (July 29, 2021), available at https:// www.reginfo.gov/public/do/PRAView Document?ref_nbr=202107-3235-022. 491 See Supporting Statement for the Paperwork Reduction Act Information Collection Submission for Rule 17a–12 (Jan. 11, 2022), available at https:// www.reginfo.gov/public/do/PRAView Document?ref_nbr=202110-3235-010. 492 See Supporting Statement for the Paperwork Reduction Act Information Collection Submission for Rule 18a–7 (Apr. 15, 2021), available at https:// www.reginfo.gov/public/do/Download Document?objectID=110893201. PO 00000 Frm 00062 Fmt 4701 Sfmt 4702 filers because they will generally reduce questions about where and how to report items on the form. However, because the proposed amendments require stand-alone swap dealers and stand-alone introducing brokers to complete a new section of FOCUS Report Part II that these types of firms were not previously required to complete (i.e., Computation of CFTC Minimum Capital Requirements), the Commission estimates that the proposed amendments are likely to result in an ongoing annual burden of 1 hour per stand-alone swap dealer or stand-alone introducing broker. The Commission estimates that there are 460 broker-dealers or stand-alone SBS Entities filing FOCUS Report Part II, resulting in an estimated industrywide initial burden of 2,300 hours.493 The Commission estimates that for Part II filers that are not stand-alone swap dealers, the proposed amendments generally will not change the estimated ongoing burden imposed by FOCUS Report Part II, as amended. The Commission estimates that there are 4 domestic stand-alone swap dealers and 103 domestic stand-alone introducing brokers filing FOCUS Report Part II, resulting in an estimated industry-wide ongoing burden of 107 hours per year.494 Second, the Commission proposes to align the text in FOCUS Report Part IIC with the text in FFIEC Form 031. These proposed amendments are expected to result in an initial burden of five hours on each bank SBS Entity so that firms can compare the revised FOCUS Report Part IIC with FFIEC Form 031. However, these proposed amendments are expected to generally either have no impact on or reduce the ongoing burden on bank SBS Entities because they will generally reduce questions about how to complete FOCUS Report Part IIC consistently with FFIEC Form 031. The Commission estimates that there are 31 bank SBS Entities filing FOCUS Report Part IIC, resulting in an estimated industry-wide initial burden of 155 493 5 hours × 460 Part II filers = 2,300 hours. These internal hours likely will be performed by a compliance manager. 494 1 hour × 107 Part II filers that are domestic stand-alone swap dealers or stand-alone introducing brokers = 107 hours. These internal hours likely will be performed by a compliance manager. This burden estimate may be duplicative since the CFTC estimates that swap dealers and introducing brokers elect to file the CFTC’s Form 1–FR instead of electing to file the SEC’s FOCUS Report. See Supporting Statement for Revised Information Collections—OMB Control Number 3038–0024 (July 1, 2022), available at https:// www.reginfo.gov/public/do/Download Document?objectID=122832501. E:\FR\FM\18APP3.SGM 18APP3 ddrumheller on DSK120RN23PROD with PROPOSALS3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules hours.495 The Commission estimates that the proposed amendments will not change the estimated ongoing annual burden imposed by FOCUS Report Part IIC, as amended. Third, the Commission proposes to require only two of the three signature lines to be signed on the FOCUS Report’s cover page, and allows these signatures to be signed either manually or electronically. This proposed amendment is expected to result in an initial burden of 1 hour on each filer so that the firm can review the standards for an electronic signature on the FOCUS Report Part II, IIA, or IIC, as applicable. However, this proposed amendment is expected to generally either have no impact on or reduce the ongoing burden on FOCUS Report filers, because they will not be required to furnish as many signatures as before the amendment, and it may be easier to prepare electronic signatures rather than manual signatures since firms will already be familiar with the process and can easily obtain these signatures while working remotely. The Commission estimates that there are 3,547 brokerdealers, stand-alone SBS Entities, and bank SBS Entities filing FOCUS Report Parts II, IIA, or IIC, resulting in an estimated industry-wide initial burden of 3,547 hours.496 The Commission estimates that the proposed amendments will not change the estimated ongoing annual burden imposed by FOCUS Report Parts II, IIA, and IIC, as proposed to be amended. Finally, the Commission proposes to require OTC derivatives dealers to file the FOCUS Report electronically on the SEC eFOCUS system instead of in paper. The Commission estimates that this proposed amendment will result in an initial burden of 15 hours on each OTC derivatives dealer so that the firm can familiarize itself with the SEC eFOCUS system. However, this proposed amendment is expected to generally either have no impact on or reduce the ongoing burden on OTC derivatives dealers, because filing the FOCUS Report electronically is an automated process as compared to filing by paper. Therefore, the Commission estimates that there are 3 OTC derivatives dealers, resulting in an estimated industry-wide initial burden of 45 hours.497 The Commission 495 5 hours × 31 Part IIC filers = 155 hours. These internal hours likely will be performed by a compliance manager. 496 1 hour × 3,547 Part II, IIC, and IIA filers = 3,547 hours. These internal hours likely will be performed by a compliance manager. 497 15 hours × 3 OTCDDs = 45 hours. These internal hours likely will be performed by a compliance manager. VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 estimates that the proposed amendment will not change the estimated ongoing annual burden imposed by Rule 17a–12. 10. Rule 17h–2T The current PRA burden for Rule 17h–2T does not include a burden for sending the risk assessment reports to the Commission. As broker-dealers that are required to file reports under Rule 17h–2T are also required to file annual reports under Rule 17a–5,498 the Commission is not estimating an additional burden for becoming familiar with the EDGAR system and for monitoring changes in EDGAR filing requirements attributable to the proposed amendments to Rule 17h–2T. Under the proposal, broker-dealers that are required to file reports under Rule 17h–2T would be required to tag the financial statements included with the report in Inline XBRL. Because these broker-dealers are also required to tag annual reports under Rule 17a–5 in Inline XBRL, the proposed Inline XBRL requirement for reports under Rule 17h– 2T would represent additional (quarterly) iterations of that compliance process, as abbreviated to reflect that Form 17–H requires only financial statements (and not any supplemental reports or other related filings) to be tagged in Inline XBRL, and that Form 17–H filers may omit the statement of cash flows and the footnotes to the financial statements. Thus, the Commission estimates an average additional burden of 1 hour per response and a total industrywide burden of 964 hours per year for Form 17–H filers to structure their financial statements in Inline XBRL.499 498 See supra section IX.D.9. hour per response × 4 responses per year × 241 respondents = 964 hours. Rule 17h–2T requires fourth quarter financial statements in addition to cumulative annual financial statements. See 17 CFR 240.17h–1. The Commission has not added burden hours associated with the proposed custom XML requirements for the facing page and Part II of Form 17–H, because those requirements are currently in effect for Form 17–Hs that are filed on EDGAR, and nearly all Form 17–H filers (97% as of Dec. 31, 2021) file Form 17–H on EDGAR. See infra Section X.C.2.b for further detail on structured data compliance costs, including estimated cost ranges and factors underlying expected variance in structured data costs across different filers. For example, we expect the Form 17–H filers affiliated with public companies that are subject to Inline XBRL requirements would incur lower structured data costs than other Form 17–H filers. See infra text accompanying note 647. We have accounted for this expected variance in the calculation of average burden figures presented in this section. Consistent with structured data burden estimates in prior Commission releases, the burden estimates here assume Inline XBRL tagging would be done by a compliance attorney. See supra note 485. 499 1 PO 00000 Frm 00063 Fmt 4701 Sfmt 4702 23981 11. Rule 17a–19 and Form X–17A–19 Currently Approved Burden Estimate Rule 17a–19 requires every national securities exchange and registered national securities association to file a Form X–17A–19 with the Commission and SIPC within five business days of the initiation, suspension, or termination of any member. The Commission currently estimates that Form X–17A–19 would take 0.25 hours to prepare, resulting in an annual industry-wide burden of 102 hours.500 Proposed Revision to Burden Estimate The 25 respondents who file Form X– 17A–19 would need to familiarize themselves with the EDGAR system. As stated above with respect to Rule 17a– 5, 17a–12, and 18a–7, the Commission estimates the one-time reporting burden of becoming familiar with the EDGAR system is approximately 16 hours.501 Accordingly, the Commission estimates that the one-time industry-wide reporting burden would be approximately 400 hours.502 12. Rule 3a71–3(d)(1)(vi) Currently Approved Burden Estimate Currently, Exchange Act Rule 3a71– 3(d)(1)(vi) requires the Registered Entity to file the ANE Exception Notice by submitting it to the electronic mailbox specified on the Commission’s website. When the Commission originally adopted the ANE Exception Notice requirement, it estimated that each Registered Entity would file one ANE Exception Notice with the Commission and that it would take 30 minutes to file each ANE Exception Notice, resulting in an industry-wide initial one-time burden of 12 hours.503 500 See Supporting Statement for the Paperwork Reduction Act Information Collection Submission for Rule 17A–19 and Form X–17A–19 (Sept. 3 2020), available at https://www.reginfo.gov/public/ do/PRAViewDocument?ref_nbr=202009-3235-002. 501 See supra section IX.D.9.a. 502 16 hours × 25 respondents = 400 hours. The Commission assumes all respondents would use fillable web forms on EDGAR to input their Form X–17A–19 disclosures (which EDGAR would subsequently convert into a custom XML data language), and therefore this reflects time for respondents to familiarize themselves with the forms and does not include any added burden hours associated with the proposed custom XML requirement for Form X–17A–19. 503 See Cross-Border Adopting Release, 85 FR at 6340–41. See also Supporting Statement for the Paperwork Reduction Act Information Collection Submission for the Rule 3a71–3 Security-Based Swap Dealer De Minimis Counting Exception for Certain Transactions Arranged, Negotiated or Executed in the United States (Jan. 7, 2020) note 23 and accompanying text and section 15.d, available at https://www.reginfo.gov/public/do/PRAView Document?ref_nbr=201912-3235-011. E:\FR\FM\18APP3.SGM 18APP3 23982 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules Proposed Revision to Burden Estimate The Commission does not expect that changing the manner of filing the ANE Exception Notice from an email filing to an EDGAR filing will change this estimated one-time burden. The ability to withdraw an ANE Exception Notice via EDGAR as proposed in this release will result in an additional one-time burden. The Commission estimates that withdrawing an ANE Exception Notice electronically on EDGAR will incur the same burden as filing the initial ANE Exception Notice electronically on EDGAR. If each Registered Entity files one withdrawal of its ANE Exception Notice, the Commission estimates that would result in an industry-wide initial one-time burden of 12 hours.504 13. Rule 15fi–3(c) Currently Approved Burden Estimate When the Commission originally adopted Rule 15fi–3, it expected there to be only a minimal, if any, initial burden of designing a system for submitting valuation dispute notices.505 The Commission also believed that the associated ongoing hourly burden of preparing and submitting such notices would be minimal.506 The Commission noted that, until SBS Entities were registered with the Commission, it was difficult for the Commission to determine the typical number of valuation disputes meeting the applicable thresholds that SBS Entities would be required to submit on an annual basis.507 The Commission had estimated that each SBS Entity will spend on average of 24 hours each year complying with the requirement to prepare and submit notices of valuation disputes, for an estimated average annual burden of 1,320 hours in the aggregate for all 55 SBS Entities.508 504 24 Registered Entities × 1⁄2 hour = 12 hours. Risk Mitigation Adopting Release, 85 FR ddrumheller on DSK120RN23PROD with PROPOSALS3 505 See at 6385. 506 Id. at 6385–86. 507 Id. 508 This 1,320-hour annual burden reflects the currently approved information collection burden estimate for Rule 15fi–3(c); see Supporting Statement for the Paperwork Reduction Act Information Collection Submission for Rules 15Fi– 3 through 15Fi–5—Risk Mitigation Techniques for Uncleared Security-Based Swaps (Aug. 18, 2021), available at https://www.reginfo.gov/public/do/ PRAViewICR?ref_nbr=202108-3235-011. Additionally, when the Commission adopted Rule 15fi–3(c) it noted that, although it believed that the time required to submit amendments to existing notices is likely included in the 24 hour estimate, it was ‘‘conservatively increasing that estimate by 25% to account for the submission of amended notices. As such, [the Commission estimated that] SBS Entities will spend on average of 30 hours each year complying with this requirement, for an estimated average annual burden of 1,650 hours in the aggregate for all 55 respondents.’’ See Risk Mitigation Adopting Release, 85 FR at 6386. VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 Proposed Revision to Burden Estimate The Commission believes that the proposed amendments to Rule 15fi–3 related to EDGAR submission would not have an impact on the burdens associated with the existing collection of information. In particular, Rule 15fi– 3(c) currently requires SBS Entities to submit security-based swap valuation dispute notices to the Commission ‘‘in a form and manner acceptable to the Commission.’’ Under current practice, staff has made available to SBS Entities two options for submitting these notices (and any amendments) which includes either: (1) an electronic submission using EDGAR or (2) submission to a dedicated Commission email address. The Commission is now proposing to amend Rule 15fi–3(c) to affirmatively require SBS Entities to submit these notices (and any amendments) to the Commission electronically in EDGAR in a custom XML data language. SBS Entities will already have access to EDGAR by virtue of using the system to submit their applications for registration on either Forms SBSE, SBSE–A, or SBSE–BD, and to submit their certification for registration on Form SBSE–C. As a result, SBS Entities would not incur any additional burden associated with obtaining access to EDGAR for purposes of submitting dispute notices given that all such filers should already have an active CIK. With respect to the proposed custom XML structuring requirement for the dispute notices, SBS Entities would be able to comply by inputting their disclosures into a fillable web form on EDGAR rather than structuring their disclosures in custom XML themselves. As a result, SBS Entities would not incur any additional burden associated with the proposed custom XML structuring requirement for dispute notices.509 may potentially impose certain burdens on respondents. Although the information to be included in the CCO report pursuant to Rule 15fk–1(c) would not change, the proposed amendment would require respondents to submit the CCO report electronically with the Commission through EDGAR in Inline XBRL. The Commission estimates that no SBS Entities would be first-time EDGAR users needing to obtain EDGAR access credentials. Thus, the internal time burden associated with completing a Form ID application to gain access to EDGAR would not apply to SBS Entities.511 SBS Entities would incur a burden to submit the CCO report in Inline XBRL. Because the CCO reports consist of a limited number of textual narrative sections (compared to the various sets of numerical values that comprise financial statements, which take significantly longer to tag), the Commission estimates that, on average, an SBS Entity would spend 1.5 internal burden hours and $600 in external costs (e.g., the cost to license and renew Inline XBRL compliance software and/ or services) to tag its CCO report in Inline XBRL in the initial year of compliance, and 1 internal burden hour and $400 in external costs in subsequent years.512 Accordingly, the Commission estimates that the total burden associated with compliance with Rule 15fk–1(c) would be an annual hour burden of 94.5 hours per respondent in the initial year and 94 hours per respondent in subsequent years, and an annual cost burden of $600 per respondent in the initial year and $400 per respondent in subsequent years, yielding an industry-wide annual burden of 4,630.5 hours and $29,400 in the first year and 4,606 hours and $19,600 in subsequent years.513 14. Rule 15fk–1(c)(2)(ii)(A) Currently Approved Burden Estimate Under current Rule 15fk–1(c), the CCO of a SBS Entity is required to prepare and submit a CCO report the Commission. The Commission previously estimated that these reports would require on average 93 hours per respondent per year for an ongoing annual burden of 5,115 hours.510 Proposed Revision to Burden Estimate The Commission recognizes that the proposed amendments to Rule 15fk–1(c) 509 See infra section X.C.2.b. Business Conduct Standards for SecurityBased Swap Dealers and Major Security-Based Swap Participants, Exchange Act Release No. 77617 (Apr. 14, 2016), 81 FR 29960, 30096 (May 13, 2016) (‘‘Business Conduct Release’’). 510 See PO 00000 Frm 00064 Fmt 4701 Sfmt 4702 511 See supra section IX.D.1. infra section X.C.2.b for further detail on structured data compliance costs, including estimated cost ranges and factors underlying expected variance in structured data costs across different filers. For example, we expect the SBS Entities affiliated with public companies that are subject to Inline XBRL requirements would incur lower structured data costs than other SBS Entities. See infra note 662 and accompanying text. We have accounted for this expected variance in the calculations of average burden and cost figures presented in this section. Consistent with structured data burden estimates in prior Commission releases, the burden estimates here assume Inline XBRL tagging would be done by a compliance attorney. See supra note 485. 513 The annual aggregate burden hour estimate for the initial year of compliance is based on the following calculation: (93 hours + 1.5 hours) × (50 SBS Entities) = 4,725 hours. The annual aggregate burden hour estimate for the subsequent years of compliance is based on the following calculation: (93 hours + 1 hours) × (50 SBS Entities) = 4,700 512 See E:\FR\FM\18APP3.SGM 18APP3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules 15. Proposed Amendments to Regulation S–T The Commission is proposing to require that the annual reports filed or submitted with the Commission under Rules 17a–5, 17a–12, and 18a–7, and the reports filed or submitted with the Commission under Rules 17a–19 and 15fk–1(c) be filed or submitted electronically with the Commission using the EDGAR system. The Commission also is proposing to require that the notices under Rules 3a71– 3(d)(1)(vi) and 15fi–3(c), including withdrawals and amendments, respectively, be made using the EDGAR system. In order to implement these requirements, the Commission is proposing amendments to Rule 101 of Regulation S–T. In addition, the Commission is proposing that some or all of the annual reports filed or submitted with the Commission under Rules 17a–5, 17a–12, and 18a–7, and the reports filed or submitted with the Commission under Rule 15fk–1(c), be structured in Inline XBRL. In order to implement these requirements, the Commission is proposing amendments to Rule 405 of Regulation S–T. While the amendments would revise Regulation S–T, the collection of information requirements are reflected in the burden hours estimated for Rule 3a71–3, 15fi–3, 15fk–1, 17a–5, 18a–7, 17a–12, Rule 17h–2T, and Form ID. The rules in Regulation S–T should not impose any separate burden, and accordingly the estimated burden for Regulation S–T as proposed to be amended would not change. Consistent with historical practice, the Commission is retaining a burden estimate of one hour for Regulation S–T for administrative convenience. A firm that does not already have log-in credentials for EDGAR will need to submit a request to the Commission in order to gain access to the EDGAR system.514 E. Collection of Information Is Mandatory ddrumheller on DSK120RN23PROD with PROPOSALS3 All collections of information pursuant to the proposed rules would be mandatory, or mandatory except to the extent an exception is available. hours. The annual aggregate external cost estimate for the initial year of compliance is based on the following calculation: $600 × (50 SBS Entities) = $30,000. The annual aggregate external cost estimate for subsequent years of compliance is based on the following calculation: $400 × (50 SBS Entities) = $20,000. 514 See supra section IX.D.9. (estimating a onetime industry-wide burden of 29,944 hours for broker-dealers to acquire EDGAR access and familiarize themselves with EDGAR). VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 F. Confidentiality of Responses to Collection of Information For all Covered SRO Forms, no assurance of confidentiality is given by the Commission with respect to responses made on such forms. While Rule 24b–2 allows entities to seek confidential treatment, the Commission expects that all information will be public and that confidential treatment will not be available. Any person may make written objection to the public disclosure of any information contained in such forms in accordance with the procedures set forth in Rule 24b–2(b).515 The information collected pursuant to Rule 3a71–3(d)(1)(vi) is public information to assist Relying Entities and their affiliates in determining whether they have satisfied the ANE Exception’s notice requirement and in monitoring their progress toward the ANE Exception’s cap on inter-dealer security-based swaps. The proposed amendment to Rule 3a71–3(d)(1)(vi) provides that notices and withdrawals shall be publicly disseminated through the Commission’s EDGAR system. Because reliance on the ANE Exception which requires filing of an ANE Exception Notice is voluntary, the Commission does not expect that a Registered Entity seeking to facilitate the exception would include information that could not be publicly disclosed in the notices or withdrawals required by the proposed amendment to Rule 3a71–3(d)(1)(vi) or would object to the public disclosure of information contained in such notices or withdrawals. Rule 15fi–3(c) requires an SBS Entity to promptly notify the Commission and any applicable prudential regulator of any security-based swap valuation dispute in excess of $20,000,000 (or its equivalent in any other currency) if not resolved within: (1) three business days, if the dispute is with a counterparty that is an SBS Entity; or (2) five business days, if the dispute is with a counterparty that is not an SBS Entity. The rule also requires SBS Entities to notify the Commission and any applicable prudential regulator, if the amount of any security-based swap valuation dispute that was the subject of a previous notice increases or decreases by more than $20,000,000 (or its equivalent in any other currency), at either the transaction or portfolio level. These amendments are required to be provided to the Commission, and any applicable prudential regulator, no later than the last business day of the calendar month in which the applicable 515 17 PO 00000 CFR 240.24b–2(b). Frm 00065 Fmt 4701 Sfmt 4702 23983 security-based swap valuation dispute increases or decreases by the applicable dispute amount. To the extent that the Commission receives confidential information pursuant to this collection of information that is otherwise not publicly available, including in connection with examinations or investigations, the SBS Entity can request the confidential treatment of the information.516 If such a confidential treatment request is made, the Commission anticipates that it will keep the information confidential, subject to the provisions of applicable law; whether any material is confidential is determined pursuant to applicable law, including but not limited to the Freedom of Information Act and Commission rules governing requests for confidential treatment.517 With respect to the other information collected under the proposed rule amendments and new rules, the firm can request the confidential treatment of the information.518 If such a confidential treatment request is made, the Commission anticipates that it will keep the information confidential, subject to the provisions of applicable law; whether any material is confidential is determined pursuant to applicable law, including but not limited to the Freedom of Information Act and Commission rules governing requests for confidential treatment.519 G. Retention Period for Recordkeeping Requirements For all Covered SRO Forms and for proposed Rule 19b–4(e), records of these collections of information must be retained for at least five years, the first two years in an easily accessible place, pursuant to Rule 17a–1.520 The collection of information outlined in Rule 3a71–3(d)(1)(vi) is a reporting requirement and not a recordkeeping requirement; there is no retention requirement in connection with that collection of information. SBS Entities subject to 17 CFR 240.17a–4(b) or 17 CFR 240.18a–6(b) must retain notices and amendments required by Rule 15fi– 3(c) for not less than three years, the 516 See 17 CFR 200.83. e.g., 5 U.S.C. 552 et seq.; 15 U.S.C. 78x (governing the public availability of information obtained by the Commission). See also Risk Mitigation Adopting Release 85 FR at 6389–90. 518 See 17 CFR 200.83. For Rule 15fk– 1(c)(2)(ii)(A), SBS Entities may request confidential treatment for their CCO reports pursuant to Exchange Act Rule 83. 519 See, e.g., 5 U.S.C. 552 et seq.; 15 U.S.C. 78x (governing the public availability of information obtained by the Commission). 520 17 CFR 240.17a–1. 517 See, E:\FR\FM\18APP3.SGM 18APP3 23984 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules first two years in an easily accessible place.521 Rule 17a–4 specifies the required retention periods for a broker-dealer, including an OTC derivatives dealer.522 Rule 18a–6 specifies the required retention periods for non-broker-dealer SBSDs and non-broker-dealer MSBSPs.523 Under these two rules, many of the required records must be retained for three years, while certain other records must be retained for longer periods. ddrumheller on DSK120RN23PROD with PROPOSALS3 H. Request for Comments Pursuant to 44 U.S.C. 3506(c)(2)(B), the Commission solicits comment to: 92. Evaluate whether the proposed collection of information is necessary for the proper performance of our functions, including whether the information shall have practical utility; 93. Evaluate the accuracy of our estimate of the burden of the proposed collection of information; 94. Determine whether there are ways to enhance the quality, utility, and clarity of the information to be collected; and 95. Evaluate whether there are ways to minimize the burden of collection of information on those who are to respond, including through the use of automated collection techniques or other forms of information technology. Persons submitting comments on the collection of information requirements should direct them to the Office of Management and Budget, Attention: Desk Officer for the Securities and Exchange Commission, Office of Information and Regulatory Affairs, Washington, DC 20503, and should also send a copy of their comments to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090, with reference to File Number S7–08–23. Requests for materials submitted to OMB by the Commission with regard to this collection of information should be in writing, with reference to File Number S7–08–23 and be submitted to the Securities and Exchange Commission, Office of FOIA/PA Services, 100 F Street NE, Washington, DC 20549–2736. As OMB is required to make a decision concerning the collections of information between 30 and 60 days after publication, a comment to OMB is best assured of having its full effect if OMB receives it within 30 days of publication. 521 See 17 CFR 17a–4(b)(1), 17 CFR 18a–6(b)(1)(i), and 17 CFR 18a–6(b)(2)(i). 522 17 CFR 240.17a–4. 523 17 CFR 240.18a–6. VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 X. Economic Analysis The Commission is mindful of the costs imposed by and the benefits obtained from our rules. Section 2(b) of the Securities Act,524 section 3(f) of the Exchange Act,525 and section 2(c) of the Investment Company Act of 1940 526 require us, when engaging in rulemaking that requires us to consider or determine whether an action is necessary or appropriate in or consistent with the public interest, to consider, in addition to the protection of investors, whether the action will promote efficiency, competition and capital formation. In addition, section 23(a)(2) of the Exchange Act requires us, when adopting rules under the Exchange Act, to consider the impact that any new rule would have on competition and to not adopt any rule that would impose a burden on competition that is not necessary or appropriate in furtherance of the purposes of the Exchange Act.527 Where possible, we have attempted to quantify the costs and benefits expected to result from the proposed amendments to the submission or posting requirements. However, in some cases we have been unable to quantify the economic effects because we lack the information necessary to provide an estimate. For example, we do not quantify the benefit to the general public of improved access to public filings made available in structured format. We encourage commenters to provide data that may be relevant for quantifying impacts we have not quantified. This section discusses the benefits and costs of the proposed amendments, as well as their potential effects on efficiency, competition, and capital formation. Some of the proposed amendments are, however, technical, so they will likely not have significant economic effects.528 A. Broad Economic Considerations Existing Commission rules require or provide the option for the filing in paper of certain forms and filings, including applications of entities seeking to register with the Commission as a national securities exchange (or seeking an exemption from such registration based on limited volume) or as a 524 15 U.S.C. 77b(b). U.S.C. 78c(f). 526 15 U.S.C. 80a–2(c). 527 15 U.S.C. 78w(a)(2). 528 As noted in section II.G. above, the Commission proposes a technical amendment to conform its Informal and Other Procedures to the changes proposed herein to Rules 6a–1, 6a–2, and 6a–3 with respect to Form 1 filings and to Rule 6a– 4 with respect to Form 1–N filings proposed to be submitted to the Commission electronically. 525 15 PO 00000 Frm 00066 Fmt 4701 Sfmt 4702 national securities association as well as amendments to these initial applications, reports regarding the listing and trading of new derivative securities products, clearing agency registration and updates, annual brokerdealer audit reports and risk assessment reports, and certain clearing agency supplemental materials. Other Commission rules do not specify the format in which a requirement should be satisfied, such as notices of changes in SRO membership. By requiring the electronic submission on the Commission’s EDGAR system or website posting of: (1) the Covered SRO Forms; (2) the information posted under Rule 19b–4(e); (3) the annual reports and related annual filings filed by broker-dealers, OTC derivatives dealers, SBSDs, and MSBSPs; and (4) other notices and reports from SBSDs, MSBSPs, and Registered Entities (‘‘the affected documents’’), and by requiring certain of the affected documents to be provided, where appropriate, in a structured, machine-readable data language, the proposed amendments seek to streamline the submission process, and facilitate the transmission and effective use of submitted information. The proposed amendments to certain Exchange Act rules and the affected documents are expected to increase the efficiency of, and remove certain costs related to ongoing compliance with, the existing requirements. The discussion below addresses the potential economic effects of the proposed amendments, including their likely costs and benefits as well as the likely effects of the proposed amendments on efficiency, competition, and capital formation, relative to the economic baseline, which is comprised of the filing practices in existence today. We anticipate that the proposed amendments that would require electronic submission or posting of documents that are currently filed in paper would not result in an increase in filing costs, and in some cases result in cost savings to reporting entities on an ongoing basis as a result of overall reduction in internal time burdens and the elimination of the printing and mailing expenses associated with paper filing. As noted,529 we recognize that entities that do not presently use EDGAR to comply with other reporting obligations would incur an incremental cost of initial transition to electronic submission on EDGAR. However, notwithstanding these initial transition costs, we anticipate that reporting entities would realize cost savings from 529 See E:\FR\FM\18APP3.SGM supra section IX. 18APP3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules electronic submission on EDGAR. With respect to the proposed structured data requirements, and specifically the proposed Inline XBRL reporting requirements, we recognize that entities subject to Inline XBRL reporting requirements under the proposed rules would incur ongoing costs associated with the requirement to encode and report information in Inline XBRL, and entities that do not presently use Inline XBRL would incur additional costs associated with the initial implementation of Inline XBRL compliance processes and/or the purchase of third-party Inline XBRL filing preparation services or software.530 Compared to paper filing, electronic submission or posting information directly to a website can expedite the availability of public disclosures. Improving the speed of disclosure to the public improves the price efficiency of markets by improving the timeliness of information available to market participants. Electronic submission or posting would also facilitate the Commission’s ability to oversee compliance with the securities laws and its oversight of securities markets making this information available to the Commission quicker, with added and more accessible functionality for Commission staff to review, analyze, and respond to, as necessary. The structured data requirements under the proposed amendments would augment these effects, allowing the Commission—and, where applicable, the public—to draw upon comparable information from other reporting periods and from other disclosing entities in assessing the reported disclosures.531 B. Baseline 1. Affected Entities The entities primarily affected by the proposed requirements include the filers or submitters of the affected 23985 documents and the users of the affected documents. Other affected entities include third parties that may be involved with the preparation and filing or submission of the affected documents and in facilitating the use of structured data filed or submitted with the Commission, as well as parties that may indirectly benefit from the use of the affected documents by others. Filers or Submitters of Affected Documents Entities that currently file or submit the affected documents include SROs, including: national securities exchanges and exempt exchanges; notice-registered Security Futures Product Exchanges; registered national securities associations; and registered and exempt clearing agencies. Filers or submitters of the affected documents also include broker-dealers and registered SBS Entities (and certain affiliates thereof).532 AFFECTED DOCUMENTS AND AFFECTED FILERS OR SUBMITTERS Affected document Type of affected filer or submitter Form X–17A–5 Part III ....................................... Broker-dealers (including OTC derivatives dealers) and non-bank SBS Entities. Broker-dealers (including OTC derivatives dealers). Broker-dealers (including OTC derivatives dealers) and stand-alone SBS Entities. Broker-dealers (including OTC derivatives dealers). Bank SBS Entities ............................................ National securities exchanges ......................... Security futures product exchanges ................ Registered national securities associations ..... Form 17–H ......................................................... FOCUS Report Part II ........................................ FOCUS Report Part IIA ..................................... FOCUS Report Part IIC ..................................... Form 1 ................................................................ Form 1–N ........................................................... Form X–15AA–1; Form X–15AJ–1; Form X– 15AJ–2. Form CA–1 ......................................................... Rule 17a–22 materials ....................................... Form X–17A–19 ................................................. ddrumheller on DSK120RN23PROD with PROPOSALS3 Form 19b–4(e) ................................................... Notices of Security-Based Swap Valuation Disputes pursuant to Rule 15fi–3(c). CCO Report ....................................................... ANE Exception Notice ....................................... 530 See infra section X.C.2.b. We do not believe similar structured data implementation costs would result from most of the proposed custom XML requirements, because affected entities would have the option of inputting their information in fillable forms, which EDGAR would then convert into the custom XML data language. However, we would expect structured data implementation costs would arise in connection with the custom XML requirement for information posted under Rule 19b–4(e), because the SRO would post the information on its website rather than on the VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 Registered and exempt clearing agencies ...... Registered clearing agencies ........................... National securities exchanges and registered national securities associations. National securities exchanges ......................... SBS Entities ..................................................... SBS Entities ..................................................... Majority-owned affiliates of Relying Entities that are either registered SBSDs or registered brokers that meets certain capital and other requirements. EDGAR system (and its fillable form capabilities), and in connection with the custom XML requirements on Forms 1 and CA–1, because we expect exchanges and clearing agencies would have the requisite sophistication to encode their disclosures in custom XML and submit the custom XML documents to EDGAR directly (rather than manually completing lengthy fillable forms to be converted into custom XML documents). See infra section X.C.2.b; see also supra section IX.D.6. 531 As discussed further in section X.B.1, the affected documents could be subject to requests for PO 00000 Frm 00067 Fmt 4701 Sfmt 4702 Filer or submitter count 3,218 as of 12/31/22. Approximately 241 as of 9/30/22. 460 as of 3/31/22. 3,056 as of 3/31/22. 31 as of 3/31/22. 24 as of 12/31/22. 2 as of 12/31/22. 1 as of 12/31/22. 14 (12 operational) as of 12/31/22. 9 (7 operational) as of 12/31/22. 25 as of 12/31/22. 24 as of 12/31/22. 50 as of 1/4/23. 50 as of 1/4/23. 24 (estimated) as of 12/31/22. confidential treatment. Whether any filed material is confidential is determined pursuant to applicable law, including but not limited to the Freedom of Information Act and Commission rules governing requests for confidential treatment. The public would not directly use any confidential information contained in these documents. 532 Not all of the affected documents listed for a particular entity type below apply to every entity that falls within that entity type. For details on the subsets of affected entities that file or submit particular affected documents, see supra section IX. E:\FR\FM\18APP3.SGM 18APP3 23986 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules Users of Affected Documents The particular entities that use (e.g., examine, store, analyze) each affected document vary based on whether the particular document is publicly available. As noted in Section IX.F above, the documents subject to the proposed rule amendments would be available to the public, unless the firm submits a successful confidential treatment request.533 In that case, only the Commission (and, in certain cases, other regulators and regulatory organizations) would be able to directly access and use the documents. Otherwise, the affected documents would be publicly available, and as such could be directly used by public entities in addition to the Commission, such as investors and other market participants, financial and market analysts, financial press, and other regulatory agencies or organizations.534 Third-Party Service Providers ddrumheller on DSK120RN23PROD with PROPOSALS3 In addition to the preparers and users of the affected documents, the other entities likely to be affected by the proposal are third-party service providers that assist in electronic filing and, in some cases, structuring, of regulatory documents, and in the facilitation of structured data use. As discussed in further detail below, the cost to filers or submitters of the proposed rules includes, in some instances, the cost of paying third-party service providers to prepare electronic and structured documents.535 Conversely, such third-party service providers would benefit from increased demand for electronic filing and structured data services under the proposed rules. The Commission does not have data on the costs or structure of these services to filers or submitters of the affected documents. However, although the filers or submitters might nominally 533 See supra note 545 and 546. As noted above in Section X.A, whether any filed material is confidential is determined pursuant to applicable law, including but not limited to the Freedom of Information Act and Commission rules governing requests for confidential treatment. 534 See, e.g., Arun Gupta, ‘‘The Internal Capital Markets of Global Dealer Banks,’’ Finance and Economics Discussion Series 2021–036, Washington: Board of Governors of the Federal Reserve System (Apr. 25, 2021), https://doi.org/ 10.17016/FEDS.2021.036 (Federal Reserve Board staff research paper using balance sheet data from Form X–17A–5 Part III to examine the internal capital markets of dealer banks); Srinivasan, Kandarp, ‘‘The Securitization Flash Flood’’ (Dec. 15, 2021), available at https://papers.ssrn.com/sol3/ papers.cfm?abstract_id=2814717 (academic research paper using data from Form X–17A–5 Part III to assess repo activities of large broker-dealers) (retrieved from SSRN Elsevier database). 535 See infra Section X.C.2.b. VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 bear the costs of these services, we believe that some portion of these costs are passed on to investors indirectly. The Commission requests comment or data on the costs of these third-party service providers or how these costs are borne by filers and submitters of the affected documents. With particular respect to structured data, entities currently subject to structured data requirements under Commission rules often pay third-party service providers to structure their disclosures, or to license structuring compliance software that allows filers or submitters to structure their disclosures internally. The specific amounts paid to third-party providers of structured data compliance services and/or software vary significantly based on a number of factors, such as the particular filing or submission on which structured data is required, the number of data points to be structured, the size of the filer or submitter, the industry to which the filer or submitter belongs, the number of individual users of the structured data compliance software, the extent to which the structuring is fully outsourced, and others. For example, smaller reporting companies are particularly likely to fully outsource their structured data preparation requirements to third-party service providers, leading to different cost dynamics than other companies that license third-party structured data preparation software and structure their disclosures in-house.536 Based on the Staff’s understanding of third-party structured data compliance pricing, we believe smaller filers typically pay between $1,500 and $5,000 per year for third-party structured data compliance services and/or software, while larger filers typically pay between $5,000 and $30,000 per year for such services and/ or software.537 536 See, e.g., Yu Cong, Ayishat Omar, Huey-Lian Sun; Does IT Outsourcing Affect the Accuracy and Speed of Financial Disclosures? Evidence from Preparer-Side XBRL Filing Decisions. Journal of Information Systems 1 June 2019; 33 (2): 45–61 (stating that ‘‘for the sake of compliance, many firms, especially smaller firms that lack extensive resources, have outsourced the creation and filing process . . .’’). Note also the subsequent discussion of a cost survey conducted by the Association of International Certified Professional Accountants, in which 1,032 smaller reporting companies reported full outsourcing of their XBRL structuring requirements. See infra note 627. 537 Some compliance service providers publicly disclose or advertise pricing information on their websites. See, e.g., EDGAR Filing Services, Advanced Comp. Innovations, Inc., https:// www.edgar-services.com/ (last visited Mar. 8, 2023); CompSci Resources, https://www.compsci resources.com/pricing (last visited Mar. 8, 2023). Other compliance service providers do not publicly disclose pricing information on their websites, instead requiring individual pricing consultations. See also infra notes 628 and 629. PO 00000 Frm 00068 Fmt 4701 Sfmt 4702 In some cases, rather than use a thirdparty structured data compliance service or software provider, filers or submitters will have already structured their data in-house, independently of any Commission disclosure requirements. For example, rather than paying third-party structured data compliance service providers, some filers or submitters use ERP systems or other data management platforms that include a data structuring component.538 In some instances, filers or submitters of a proposed custom XML document may already be using Inline XBRL to structure similar data for internal business purposes (such as through the use of ERP systems).539 Furthermore, companies that are affiliated with one another may be able to leverage each other’s compliance software licenses or service agreements and experience in complying with the proposed structured data requirements. In addition, with particular respect to custom XML requirements on EDGAR forms, some filers or submitters may comply by inputting their disclosures into fillable web forms on the EDGAR website; EDGAR then converts these inputted disclosures into the applicable custom XML data language. In such instances, filers or submitters forgo the cost of paying third-party structured data compliance service providers. With respect to the proposed rule amendments, because use of the fillable form permits filers or submitters to forgo the costs of structuring, we expect most entities affected by the proposed custom XML requirements would opt to use fillable forms rather than structure directly in custom XML. Other filers or submitters of custom XML documents choose not to use the fillable web form; instead, they structure their disclosures in the applicable custom XML data language and file or submit that structured custom XML document on EDGAR. These filers or submitters typically incur implementation costs to integrate any new or updated custom XML schemas into their data systems, and then incur decreased structured data costs after such integration. Such filers or submitters may find direct submission 538 See, e.g., Feng Guo, Xin Luo, Patrick R. Wheeler, Liu Yang, Xinlei Zhao, Yiyang Zhang; Enterprise Resource Planning Systems and XBRL Reporting Quality. Journal of Information Systems 1 Sept. 2021; 35 (3): 77–106 (defining ERP systems as ‘‘large-scale, modularly packaged information systems that have been widely adopted by midsize and larger firms in recent decades’’ and stating that ‘‘most ERP systems integrate an eXtensible Business Reporting Language (XBRL) component in their core modules. . .’’). 539 See supra text accompanying notes 92, 149, 237, and 245. E:\FR\FM\18APP3.SGM 18APP3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules ddrumheller on DSK120RN23PROD with PROPOSALS3 in custom XML beneficial, because it allows for greater automation for filing or submitting already structured data without the need for a final manual step of converting structured data into unstructured text to be typed into fillable web fields. For this reason, we believe the SROs that file Form 1 and Form CA–1, because they are likely to have existing data management systems (or have the internal resources and technical capability to establish such systems) that cover some of the disclosures proposed to be structured in custom XML, would opt to structure disclosures directly in custom XML rather than using the fillable EDGAR web form.540 Nonetheless, we believe providing both the fillable web form option and the direct custom XML structuring option for the proposed custom XML requirements, as we do for most other custom XML forms on EDGAR, would provide useful flexibility for any current or future affected entities that opt to take an approach that differs from our preliminary assumptions, without compromising the usefulness and accessibility of the resulting disclosures. While not required for structured data use, some data users (including some investors and analysts) pay third-party service providers for software that can facilitate their usage and analysis of structured data. As with structured data compliance, the specific amounts paid for third-party structured data research software vary significantly based on a number of factors, such as the number of individual software users, whether the user is an individual or an enterprise, and the particular type of functionality offered. Based on the Staff’s understanding of third-party structured data research software pricing, we believe data users typically pay between $1,000 and $15,000 per year for third-party structured data research software.541 Other data users, especially those with more technical experience and sophistication, import structured data into their own systems 540 Such disclosures could include, for example, schedules of fees (Exhibit H to Form 1), lists of participants or applicants for participation (Exhibit N to Form CA–1), and schedules of traded securities (Exhibit N to Form 1). 541 Some research service providers publicly disclose or advertise pricing information on their websites. See, e.g., Calcbench, https:// www.calcbench.com/payment/pricing (last visited Mar. 8, 2023); TagniFI, https://about.tagnifi.com/ pricing/ (last visited Mar. 8, 2023); FinDynamics, https://findynamics.com/subscriptions/ (last visited Mar. 8, 2023). Other research service providers do not publicly disclose pricing information on their websites, instead requiring individual pricing consultations. VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 and analyze the data without paying for third-party software.542 2. Paper and Limited Electronic Submission Certain of the affected documents are currently filed or submitted in paper format. Specifically, the Commission’s regulatory framework currently requires an entity seeking to be registered as a national securities exchange, as a clearing agency, and as a security futures product exchange, to file in a paper-based format certain forms that are mandated by rules under the Exchange Act. Filers are also required to submit paper-based amendments to their respective forms. The forms currently required to be filed in paper format include Forms 1, 1–N, X–15AA– 1, X–15AJ–1, X–15AJ–2, CA–1. Form 19b–4(e) also is required to be submitted in paper format. In addition, paragraphs (d)(6) of Rule 17a–5 and (c)(6) of Rule 18a–7 provide that broker-dealer and SBS Entity annual reports, respectively, must be sent to the Commission’s principal office in Washington, DC, and appropriate regional office or they may be submitted to the Commission electronically in accordance with directions provided on the Commission’s website. Some brokerdealers voluntarily file annual reports electronically on EDGAR,543 and instructions for doing so are posted on the Commission’s website. For the 12 months ending December 31, 2022, the Commission received 1,559 filings of the annual reports in paper and 1,659 electronically via EDGAR. The proportion of annual reports filed electronically has been steadily increasing over the years since it was first permitted in 2015. OTC derivatives dealer annual reports filed under Rule 17a–12 must be filed at the Commission’s principal office under 542 Structured data filed with or submitted to the Commission (other than structured data filed or submitted on non-public documents) are freely available to access and download. See DERA Data Library, available at https://www.sec.gov/dera/data; Structured Disclosure RSS Feeds, available at https://www.sec.gov/structureddata/rss-feedssubmitted-filings. 543 We note that Commission staff previously stated that it would not recommend enforcement action to the Commission under Rule 17a–5 or Rule 17a–12 if a broker-dealer or OTC derivatives dealer files the annual and supplemental reports required under those rules electronically through the EDGAR system in accordance with the instructions and conditions contained on the Commission’s website in lieu of filing them with the Commission in paper form. See Letter to Kris Dailey Vice President, Risk Oversight and Operational Regulation, FINRA, from Michael Macchiaroli, Associate Director, Division, Commission (Jan. 27, 2017), available at https:// www.sec.gov/divisions/marketreg/mr-noaction/ 2017/finra-012717-electronic-filing-annualreports.pdf. PO 00000 Frm 00069 Fmt 4701 Sfmt 4702 23987 paragraph (p) of that rule. Further, Rule 17h–2T permits quarterly and annual risk assessment reports to be filed with the Commission in paper-based format, and Rule 17a–19 currently requires every national securities exchange and registered national securities association to file a Form X–17A–19 with the Commission in paper format at its principal office. In some circumstances, the Commission’s regulatory framework currently requires or permits submission of documentation by email. Specifically, Exchange Act Rule 3a71– 3(d)(1)(vi) requires the Registered Entity to provide the ANE Exception Notice by submitting it to the electronic mailbox described on the Commission’s website. Further, notices made pursuant to Rule 15fi–3(c) may be made via email or on EDGAR. Annual compliance reports provided pursuant to Rule 15fk–1(c) may be submitted by an SBS Entity as a paper or electronic submission. In addition, current Rule 17a–22 under the Exchange Act requires that within 10 days after issuing, or making generally available, to its participants or to other entities with whom it has a significant relationship, such as pledgees, transfer agents, or selfregulatory organizations, any material (including, for example, manuals, notices, circulars, bulletins, lists or periodicals), a registered clearing agency shall file three copies of such material with the Commission.544 Commission staff, however, released the Staff Statement on COVID–19 flexibilities in early April 2020 and updated it in June 2020. Since that time, consistent with the Updated Staff Statement, filers and registrants have made alternate arrangements for the delivery, execution, and notarization of certain filings, including filings to be made pursuant to Rule 17a–22.545 These alternate arrangements have included electronic submission, similar to what is being proposed. When a paper filing is received, the Commission staff scan it into PDF format, and upload it to EDGAR or make it available to Commission staff. For some filings, such as broker-dealer’s annual reports, this process can take an average of a several weeks from the date of receipt of a paper filing until it is scanned and the public portion published on EDGAR, and the confidential portion available to Commission staff. 544 17 CFR 240.17a–22. Staff Statement Regarding Requirements for Certain Paper Submissions in Light of COVID–19 Concerns (Apr. 2, 2020), available at https://www.sec.gov/tm/papersubmission-requirements-covid-19; see also Updated Staff Statement, supra note 6. 545 Division E:\FR\FM\18APP3.SGM 18APP3 23988 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules ddrumheller on DSK120RN23PROD with PROPOSALS3 3. Structured Data Currently, four of the affected documents may be filed or submitted electronically using EDGAR—Form X– 17A–5 Part III, Form 17–H, notices made pursuant to Exchange Act Rule 15fi–3(c), and CCO reports.546 Form X– 17A–5 Part III, the facing page for annual reports required to be filed with the Commission under Exchange Act Rules 17a–5, 17a–12, and 18a–7 (which generally must be audited), is filed by broker-dealers (including OTC derivatives dealers) and non-bank SBS Entities; Form 17–H is filed by brokerdealers subject to paragraph (a) of Rule 17h–2T; and the notices provided under Exchange Act Rule 15fi–3(c) and the CCO reports are submitted by SBS Entities. Each of Form X–17A–5 Part III, Form 17–H, and the CCO reports is, when filed or submitted electronically, partially structured (i.e., machinereadable). None of the other affected documents is currently structured, either in whole or in part. Form X–17A–5 Part III elicits registrant and accountant identifying information and includes an oath or affirmation in a custom XML-based data language specific to that form.547 As is the case with most of the Commission’s other custom XML forms, filers of Form X–17A–5 Part III have the option of manually inputting information into a fillable form that EDGAR subsequently converts into the custom XML data language for Form X–17A–5 Part III.548 Form X–17A–5 Part III filers are then able to attach the remaining documents required by the applicable rules, including financial statements and supplemental reports, in unstructured formats such as PDF and HTML.549 Form 17–H is similar to Form X–17A– 5 Part III in that its facing page, when filed electronically through EDGAR, is structured in a custom XML-based data language specific to Form 17–H.550 In addition, Part II of Form 17–H, which consists of securities and commodities position disclosures for the filing broker-dealer’s material associated persons, must be submitted in the Form 17–H-specific custom XML when filed electronically through EDGAR.551 Form 17–H filers have the option of manually inputting Part I facing page information 546 See supra sections IV.A, IV.B, V.C, and V.D. EDGAR X–17A–5 Part III Technical Specification, available at https://www.sec.gov/ info/edgar/specifications/form-x-17a-5-xml-techspecs.htm. 548 See supra note 230 at 8.2.22. 549 See id. 550 See EDGAR 17–H Technical Specification, available at https://www.sec.gov/info/edgar/ specifications/form-17-h-xml-tech-specs.htm. 551 See id. 547 See VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 and Part II positions information into a fillable web form that EDGAR subsequently converts into the custom XML for Form 17–H.552 In addition, the CCO reports are, when filed electronically through EDGAR, partially structured in a custom XML-based data language specific to the reports.553 SBS Entities have the option of manually inputting the execution page information into a fillable web form that EDGAR subsequently converts into the custom XML-based data language specific to the reports.554 The broker-dealers (including OTC derivatives dealers) and non-bank SBS Entities that file Form X–17A–5 Part III and, where applicable, Form 17–H, are also subject to other structuring requirements under Commission rules. As discussed, all of these entities are required to file FOCUS Reports under Exchange Act Rule 17a–5, Rule 17a–12, or Rule 18a–7, as applicable.555 Brokerdealers, SBSDs, MSBSPs, and OTC derivatives dealers file these FOCUS Reports using a fillable web form that the relevant eFOCUS system converts into a custom XML.556 In addition, SBSDs and MSBSPs must file in EDGAR Form SBSE, SBSE–A, or SBSE–BD, as applicable, to register as an SBS Entity, as well as amendments to those Forms if the information in them is or has become inaccurate; Forms SBSE, SBSE– A and SBSE–BD are structured using a custom XML-based data language specific to the form.557 Broker-dealers, SBSDs, MSBSPs, and OTC derivatives dealers are not subject to any Inline XBRL requirements under Commission rules. Other filers or submitters of the affected documents include clearing agencies, national securities exchanges, Security Futures Product Exchanges, and registered national securities associations. None of these entities is currently subject to custom XML requirements or Inline XBRL requirements under the Commission’s rules. 552 See supra note 230 at 8.2.24. EDGAR SBS Entity Forms Technical Specification, available at https://www.sec.gov/ info/edgar/specifications/form-sbs-entity-xml-techspecs.htm. 554 See supra note 230 at 8.2.20.6. 555 See 17 CFR 240.17a–5; 17 CFR 240.17a–12; 17 CFR 240.18a–7. 556 See eFOCUS—Fin. & Operational Combined Unif. Single Reports, https://www.finra.org/filingreporting/regulatory-filing-systems/efocus (last visited Mar. 7, 2023); eFocus Filing Transmission, https://www.finra.org/filing-reporting/focus/efocusfiling-transmission (last visited Mar. 7, 2013); FINRA eFOCUS User Guide: Training and Reference Manual, https://www.finra.org/sites/ default/files/p118798.pdf (last visited Mar. 7, 2023). 557 See supra note 230 at 8.2.17. 553 See PO 00000 Frm 00070 Fmt 4701 Sfmt 4702 Thus, the affected documents currently include only a limited amount of structured data. For execution pages of electronically submitted Form X– 17A–5 Part III reports, Form 17–H reports and CCO reports, the inclusion of structured identifying information on the facing page facilitates the filtering and retrieval of particular reports from particular subsets of filers or submitters. For Part II of electronically submitted Form 17–H reports, the inclusion of structured material associated person disclosures enables more efficient mathematical calculations of the disclosed numerical information. Because Form 17–H reports and CCO reports are non-public, such enhanced functionality is unavailable to parties other than Commission staff; by contrast, because the execution page of Form X–17A–5 Part III is public, such enhanced functionality is available to Commission staff and to public data users. C. Economic Effects 1. Benefits a. Electronic Submission and Posting Electronic submissions can increase the accuracy, speed, and efficiency of the documents provided to the Commission. After an initial setup cost described below,558 these changes can potentially reduce the cost for reporting entities because the shift to electronic submission can obviate the need for printing costs, and improve the efficiency of filing preparation. In addition, the improved accuracy, speed, and efficiency of the documents provided to the Commission can reduce the costs associated with receiving and processing submissions, in part by reducing the time, processing, and search costs relative to the manual nature of non-electronic document processing, and accordingly aid the Commission’s examination and oversight functions. For some filings, such as broker-dealer annual reports, eliminating the need to scan paper documents could reduce processing time by as much as several weeks. An increase in the accuracy and timeliness of processing submissions boosts the efficiency of Commission document review, processing, and quality assurance. Furthermore, electronic submissions allow reporting entities and Commission staff to more easily access or submit documents during disruptive events—like COVID–19—when their physical work facilities may be inaccessible. 558 See E:\FR\FM\18APP3.SGM infra Section X.C.2. 18APP3 ddrumheller on DSK120RN23PROD with PROPOSALS3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules The proposed rule includes several amendments designed to update the FOCUS Report and related requirements. First, the release proposes amendments to FOCUS Report Part II that would allow SEC staff to compare the data reported on this page with the information being reported by firms that are FCMs, because FCMs are already required to complete this section of the form. Second, the Commission proposes to align the text in FOCUS Report Part IIC with the text in FFIEC Form 031. Making these amendments should reduce the overall burden because information input in the proposed form will be consistent with FFIEC Form 031 (i.e., the Call Report), which many Part IIC filers are already required to complete.559 The amendments also remove ambiguity about how to complete the Part IIC, which have resulted in SEC staff receiving a number of phone calls seeking assistance on how to reconcile these incompatibilities. Third, the Commission proposes to require only two of the three signature lines to be signed on the FOCUS Report’s cover page, and allows these signatures to be signed either manually or electronically. In the time since the revised FOCUS Report was adopted, it has come to the Commission’s attention that obtaining the signatures of all three principal officers on or close to the same day may be burdensome, especially with respect to larger firms with thousands of employees. Therefore, the Commission proposes to require only two of the three principal officers’ signatures in an effort to balance the Commission’s desire for individual accountability with the burden on the filer. Reducing the number of required signatures reduces the burden of submitting FOCUS reports in the long run. The use of electronic signatures would also reduce the burden in the long-run because firms would not need to obtain and store wet signatures, especially due to the increase in remote work. Finally, the Commission proposes to require OTC derivatives dealers to file the FOCUS Report electronically on the SEC eFOCUS system instead of in paper. The SEC eFOCUS system offers benefits of electronic filing of forms over paper, reducing costs and making information more easily usable and timely. 559 Of the affected entities in this release, 31 filed FOCUS Report Part IIC as of Mar. 31, 2022. See supra section IX.C.9. VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 b. Structured Data In general, the Commission believes the proposed structured data requirements will benefit investors and markets by increasing the accessibility and usability of the disclosures in the Proposed Structured Documents, thereby increasing transparency and insight into the operations, governance, management, financial condition, and other characteristics of the affected entities. Requiring machine-readability for the disclosures would enable significantly more efficient retrieval, sorting, filtering, comparison, aggregation, and other analysis of the disclosures across reporting entities and time periods. The exact nature and magnitude of such benefits may vary based on a number of factors, which are discussed herein. Structured Data Benefits As an initial point of comparison, some research on XBRL requirements for public operating company financial statement disclosures has found that such requirements have mitigated information asymmetry by reducing information processing costs, thereby facilitating access and analysis of the disclosures on a large-scale basis.560 This reduction in information processing cost has been observed to facilitate the monitoring and analysis of firms by external parties. These external parties include investors themselves, as well as other entities that process firm disclosures into conclusions that often influence investors and markets; such entities include financial analysts, data aggregators, academic researchers and financial media (collectively, ‘‘information intermediaries’’).561 In that regard, the Commission believes that 560 See, e.g., Joung W. Kim, Jee-Hae Lim, & Won Gyun No, The Effect of First Wave Mandatory XBRL Reporting Across the Financial Information Environment, 26 J. Info. Sys. 127, 127–53 (2012) (finding evidence that ‘‘mandatory XBRL disclosure decreases information risk and information asymmetry in both general and uncertain information environments’’); Yuyun Huang, Jerry T. Parwada, Yuan George Shan, & Joey Wenling Yang, Insider Profitability and Public Information: Evidence From the XBRL Mandate (SSRN Working Paper, 2020) (retrieved from SSRN Elsevier database) (finding that XBRL levels the playing field between insiders and non-insiders, in line with the hypothesis that ‘‘the adoption of XBRL enhances the processing of financial information by investors and hence reduces information asymmetry’’). 561 See, e.g., Trentmann, N., Companies Adjust Earnings for Covid–19 Costs, But Are They Still a One-Time Expense? The Wall Street Journal (2020) (citing an XBRL research software provider as a source for the analysis described in the article); Bloomberg Lists BSE XBRL Data, XBRL.org (Mar. 17, 2019), https://www.xbrl.org/news/bloomberglists-bse-xbrl-data/; Hoitash, R & U. Hoitash, Measuring accounting reporting complexity with XBRL. 93 Account. Rev. 259–287 (2018). PO 00000 Frm 00071 Fmt 4701 Sfmt 4702 23989 institutional investors are more likely to access XBRL data directly, whereas retail investors are more likely to benefit from the use of XBRL data by information intermediaries.562 Regulators, including the Commission, the Federal Deposit Insurance Commission (‘‘FDIC’’), and the Internal Revenue Service (‘‘IRS’’), have also been observed to leverage XBRL disclosure benefits in better fulfilling their mandates.563 The Commission staff uses XBRL data to efficiently analyze large quantities of information in support of risk assessment, rulemaking, and enforcement activities, including as part of its internally developed Financial Statement Query Viewer and Inline Viewer applications.564 The regulatory use of XBRL is particularly relevant to affected documents that are subject to 562 See, e.g., Alastair Lawrence, James P. Ryans, Estelle Y. Sun; Investor Demand for Sell-Side Research. The Account. Rev. (2017) (finding ‘‘the average retail investor appears to rely on analysts to interpret financial reporting information rather than read the actual filings’’); but see Chi, Sabrina and Shanthikumar, Devin M., Do Retail Investors Use SEC Filings? Evidence from EDGAR Search, SSRN (2018) (retrieved from SSRN Elsevier database) (finding ‘‘retail investor trading, both buying and selling, is significantly related to EDGAR search for 10–K and 10–Q filings, more so than to Google search,’’ especially for ‘‘the most easily readable 10–K and 10–Q filings’’); see also Brown, Nerissa & Gale, Brian & Grant, Steph, Repetition, Interactivity, and Investors’ Reliance on Firm Disclosures, SSRN (2020) (retrieved from SSRN Elsevier database) (indicating that disclosure interactivity, which is promoted by Inline XBRL, may improve investors’ direct processing of financial information). 563 With respect to Commission use of XBRL data, see infra note 596. With respect to FDIC use of XBRL data, see Meet Mark Montoya, Chief of Data Strategy, FDIC, Xcential Co. (Sept. 29, 2021), https://xcential.com/meet-mark-montoya-chiefdata-officer-fdic/ (noting in an interview with the FDIC’s Chief Data Officer that XBRL requirements for quarterly bank call reports have facilitated FDIC staff analysis of the regulated banks); see also Government Use of Data Standards—Conversation with the FDIC, XBRL US (Sep. 2, 2020), https:// xbrl.us/news/regulator-video/ (noting in an interview with the FDIC’s Chief Data Officer that, ‘‘. . . Prior (to XBRL) the data that the (FDIC) examiners used to examine the banks was probably about 2–3 months old which is old data . . . (with XBRL) the data can be pulled down in real time’’); see also Lizhong Hao and Mark J. Kohlbeck, The Market Impact of Mandatory Interactive Data: Evidence from Bank Regulatory XBRL Filings, J. Emerging Tech. Acct. (2013) (finding that banks experienced a ‘‘reduction in systematic risk in connection with filing their regulatory reports in XBRL’’). With respect to IRS use of XBRL data, see infra note 599. 564 See, e.g., How errors and delays in SEC filings can hurt companies—and their shareholders, Toppan Merrill Indus. Insights (Nov. 9, 2018), https://blog.toppanmerrill.com/insights-blog-all/ how-errors-and-delays-in-sec-filings-can-hurtcompanies-and-their-shareholders (noting, in the context of an interview with an Enforcement staff member, that the Commission uses structured data, including XBRL, ‘‘in enforcement cases, including those that involve disclosure and accounting violations’’). E:\FR\FM\18APP3.SGM 18APP3 23990 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules ddrumheller on DSK120RN23PROD with PROPOSALS3 confidential treatment and thus only accessible by the Commission and its staff.565 The enhanced monitoring facilitated by XBRL requirements has been observed to influence the behavior of firms relevant to governance and compliance, including firms’ disclosure and reporting choices as well as their strategic decisions. For example, one study found that firms increase quantitative footnote disclosures upon implementation of detailed tagging requirements.566 Another study found that XBRL reporting has reduced the cost of IRS monitoring of firms and thus decreased the likelihood of firm tax avoidance.567 Finally, multiple studies have shown that XBRL requirements have influenced firms’ strategic decision-making, an effect that appears to be heightened for Inline XBRL requirements.568 565 As noted above in Sections X.A and X.B, whether any filed material is confidential is determined pursuant to applicable law, including but not limited to the Freedom of Information Act and Commission rules governing requests for confidential treatment. 566 See Elizabeth Blankespoor, The Impact of Information Processing Costs on Firm Disclosure Choice: Evidence from the XBRL Mandate, 57 J. Acct. Res. 919 (2019) (finding ‘‘firms increase their quantitative footnote disclosures upon implementation of XBRL detailed tagging requirements designed to reduce information users’ processing costs,’’ and ‘‘both regulatory and nonregulatory market participants play a role in monitoring firm disclosures,’’ suggesting ‘‘that the processing costs of market participants can be significant enough to impact firms’ disclosure decisions’’); see also Kim, Jeong-Bon, Kim, Joung W., and Lim, Jee-Hae, Does XBRL Adoption Constrain Earnings Management? Early Evidence from Mandated U.S. Filers. Contemp. Acct. Res. (2019) (indicating that XBRL adoption ‘‘constrains earnings management via discretionary accrual choices’’). 567 See Jeff Zeyun Chen, Hyun A. Hong, JeongBon Kim, & Ji Woo Ryou, Information processing costs and corporate tax avoidance: Evidence from the SEC’s XBRL mandate, 40 J. Acct. & Pub. Policy 106822 (2021) (finding XBRL reporting decreases likelihood of firm tax avoidance because ‘‘XBRL reporting reduces the cost of IRS monitoring in terms of information processing, which dampens managerial incentives to engage in tax avoidance behavior’’). 568 See, e.g., Xin Cheng, Feiqi Huang, Dan Palmon, and Cheng Yin, How Does Information Processing Efficiency Relate to Investment Efficiency? Evidence from XBRL Adoption. J. Info. Sys. (2020) (finding firms ‘‘improve their investment efficiency after the adoption of XBRL,’’ especially for firms that ‘‘have inferior external monitoring, . . . operate in more uncertain information environments, . . . and have less readable financial reporting); see also Hyun Woong (Daniel) Chang, Steven Kaszak, Peter C. Kipp, Jesse C. Robertson, The Effect of iXBRL Formatted Financial Statements on the Effectiveness of Managers’ Decisions when Making Inter-Firm Comparisons. J. Info. Sys. (2020) (finding ‘‘iXBRL filings facilitate information search and information match by allowing users to view XBRL data in HTML filings,’’ and ‘‘managers make more (less) effective decisions when presented with financial information formatted in iXBRL (XBRL)’’). VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 XBRL requirements have also been observed to impact the timeliness and effectiveness of firms’ disclosure preparation and related processes. For example, one study found XBRL to have decreased audit report lags, especially among firms with strong internal control systems and no prior XBRL reporting experience.569 Other studies have found XBRL requirements to have improved the timeliness of financial reports, with such improvements limited to larger firms only.570 For instance, one public company executive noted that XBRL facilitates his firm’s disclosure preparation procedures by enabling efficient review of disclosures made by peer companies.571 Increasing the timeliness and effectiveness of the auditing and disclosure process would improve the speed (and, with respect to enhanced auditing processes, confidence) with which users of the affected entities’ disclosures (such as investors, analysts, and regulators) could assess and ultimately draw conclusions from, and act upon, the disclosed information.572 569 See Keval Amin, John Daniel Eshleman, Cecilia (Qian) Feng, The Effect of the SEC’s XBRL Mandate on Audit Report Lags. Acct. Horiz. (2018) (finding ‘‘audit report lags decrease following the mandatory adoption of XBRL,’’ with results ‘‘concentrated among filers with strong internal control systems and no prior XBRL reporting experience’’). 570 See, e.g., Hui Du and Kean Wu, XBRL Mandate and Timeliness of Financial Reporting: Do XBRL Filings Take Longer? J. Emerg. Tech. Acct. (2018) (finding decreased reporting lags for XBRL annual and quarterly filings compared to non-XBRL filings from accelerated and large accelerated filers, but not for non-accelerated filers); see also Zhou, J., Does one size fit all? Evidence on XBRL adoption and 10-K filing lag. Acct Fin. (2019) (noting that 10– K filing lag decreased for all filers in the XBRL reporting period except smaller reporting companies, for which 10–K filing lag increased). However, these studies were based on XBRL filings that were made before the adoption of Inline XBRL requirements, which may facilitate the filing preparation process by including the machinereadable and human-readable data in the same disclosure document. 571 See Olivia Berkman, XBRL: What are the Benefits, FEI Daily (Aug. 29, 2019), https:// www.financialexecutives.org/FEI-Daily/August2019/XBRL-What-are-the-Benefits.aspx (noting in an interview with a public company’s chief financial officer that the company is able to ‘‘search through XBRL filings to find similar companies within [its] industry that have had to present certain similar [disclosures] in the past,’’ which has helped the company ‘‘craft[] [its] disclosures to make sure that [the company is] complying with the spirit of GAAP and providing the information that [the company is] supposed to be providing’’). 572 See supra section IV.A.1 (discussing the time lag between the date of receipt of a paper filing of a broker-dealer’s annual reports until it is scanned and the public portion published on EDGAR, and the confidential portion available to Commission staff). PO 00000 Frm 00072 Fmt 4701 Sfmt 4702 Applicability and Variability of Structured Data Benefits The structured data benefits discussed above, while largely specific to public operating company financial statement disclosures, generally indicates that the proposed structured data requirements could facilitate the use and analysis of the information disclosed on the affected documents. Several of the affected documents that would be structured in Inline XBRL under the proposal—namely, Form X–17A–5 Part III, Form 17–H, Form 1, and Form CA– 1—include financial statements that are not currently provided in a structured data language, but would be provided in a structured data language (specifically, Inline XBRL) under the proposed rule amendments. The probability that, and extent to which, the observed effects can be extrapolated are thus likely greater for those affected documents than for the remaining affected documents, which do not contain financial statements. In addition, unlike the public company financial statement information evaluated in the literature referenced above, several of the affected documents are submitted confidentially or are otherwise non-public, either in whole or in part. This includes Form 17–H, Form X–17A–19, Form X–17A–5 Part III (in part), Form CA–1 (in part), and the CCO reports.573 The expected benefits of structuring non-public information would accrue to investors and markets indirectly, by enhancing the Commission’s regulatory capabilities.574 By contrast, the expected benefits of structuring public information would accrue directly to public users of the data (which could include investors and the previously 573 Additionally, the Commission does not automatically make public the information provided to it pursuant to Rule 15fi–3(c); however, the Commission may make the information available upon appropriate request (including requests made pursuant to the Freedom of Information Act) or otherwise as permitted under applicable law, subject to SBS Entities making appropriate requests for confidential treatment. See supra notes 293 and 294 and accompanying text. Whether any material is confidential is determined pursuant to applicable law, including but not limited to the Freedom of Information Act and Commission rules governing requests for confidential treatment. If the Commission makes the information provided pursuant to Rule 15fi–3(c) available, the information made available may not be in structured format. 574 See supra note 595. An example of a structured non-public disclosure form is Form PF, which registered investment advisers file with the Commission to disclose information regarding private funds under their management. See 17 CFR 275.204(b); Division of Investment Management: Electronic Filing of Form PF for Investment Advisers on PFRD, available at https:// www.sec.gov/divisions/investment/pfrd.shtml. E:\FR\FM\18APP3.SGM 18APP3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules discussed information intermediaries), as well as indirectly to investors and markets through the enhancement of the Commission’s regulatory capabilities (and, where relevant, those of other regulators). The benefits of structuring would also vary based on the number of entities in a particular population of reporting entities. As noted, one benefit of structured disclosure is the ability to run large-scale comparisons across reporting entities and across reporting periods. For those affected documents that have a small population of reporting entities, this benefit would be limited largely (or, in the case of Form 15A, wholly) to the latter. For those affected documents that have a large population of reporting entities (such as Form X–17A–5 Part III, which is filed by over 3,000 entities), the benefits of efficient cross-entity comparisons would be much more relevant.575 Similarly, the benefits of efficient access, retrieval, sorting, and filtering structured disclosures would be heightened for those affected documents generated in high volume (such as Form 19b–4(e) and Form X–17A–19) compared to those affected documents that the Commission receives in low volume (such as Form CA–1).576 Finally, the Commission expects the benefits of structuring data would vary based on the type of disclosures 23991 included in each particular affected document. Structured numerical disclosures lend themselves to mathematical functionality, such as the calculation of leverage or other ratios to assess potential exposure to insolvency or other risk. Structured textual disclosures lend themselves to periodover-period redline comparisons, targeted keyword searching, and more sophisticated sentiment analysis. The CCO report consists primarily of textual responses to required disclosure items, so the latter benefit would be relevant for that document.577 Other affected documents feature both numeric and textual disclosures, so both of these benefits would be relevant. TYPES OF DISCLOSURES AND ASSOCIATED BENEFITS IN PROPOSED STRUCTURED DOCUMENTS Numeric disclosures (mathematical functionality applicable) ddrumheller on DSK120RN23PROD with PROPOSALS3 Proposed structured document Textual disclosures (redline comparisons, targeted searches, sentiment analyses applicable) Form X–17A–5 Part III ...................................... Form 17–H ......................................................... Form CA–1 ........................................................ Form 1 ............................................................... Form 1–N (execution page only) ....................... Form 15A (execution page only) ....................... Rule 19b–4(e) Information ................................. Form X–17A–19 ................................................ Notices of Security-Based Swap Valuation Disputes pursuant to Rule 15fi–3(c). CCO Report ....................................................... Yes ................................................................... Yes ................................................................... Yes ................................................................... Yes ................................................................... No ..................................................................... No ..................................................................... In some cases .................................................. No ..................................................................... Yes ................................................................... Yes. Yes. Yes. Yes. Yes. No. No. Yes. Yes. In some cases .................................................. Yes. For Rule 19b–4(e), numeric disclosures are required only when the disclosure of position limits for new derivative products is applicable.578 For notices of security-based swap valuation disputes pursuant to Rule 15fi–3(c), SBS Entities must notify the Commission of any valuation disputes in excess of $20,000,000 if not resolved within three or five business days, depending on the counterparty.579 SBS Entities are provided flexibility to submit the required information.580 For CCO reports, while Rule 15fk–1(c) does not expressly call for numeric disclosures, a CCO report could include numeric disclosures nested within textual responses, such as the description of financial, managerial, operational, and staffing resources set aside for compliance with the Exchange Act.581 For Form 15A, its execution page (i.e., the portion of proposed Form 15A that would precede Section I) would include a series of structured checkboxes to indicate the basis for filing the Form, and the reporting period to which the Form applies. Structured checkboxes and pick lists are more relevant to the filtering and sorting benefits enabled by structured data requirements. For example, structuring the checkboxes on the Form 15A execution page would enable a data user to retrieve only those Form 15As that are current supplements to registration reported pursuant to Rule 15Aa–2(b) of the Exchange Act, and further filter those results to only those Form 15A filings that include a change to Exhibit C (list of members). Third-party structured data service providers (including providers of structured data compliance services and/or software, as well as providers of structured data research software) would also likely realize benefits as a result of the proposed rule amendments. Most affected entities would be newly required to file or submit structured data, resulting in additional clients/ customers and revenues for third-party structured data compliance service providers. Similarly, some users of the affected documents would likely seek to use third-party structured data research software to facilitate their analysis of the structured data, resulting in additional customers and revenues for third-party structured data research software providers. The Commission is proposing a specific structured data language for each Proposed Structured Document, rather than leaving the structured data language requirement open-ended (i.e., requiring only that the Proposed Structured Document be provided in a structured, machine-readable data language). Specifying a single structured data language that a filer or submitter must use for each Proposed Structured Document would benefit users of the disclosed information, including investors, market participants, other filers or submitters, information intermediaries, and the Commission, because it would help ensure the disclosures are provided in a uniform structured data language that is most suitable for the document in question, and would prevent a potential coordination failure that could occur if different respondents chose to provide inputs in different data languages. 575 See supra section IX.C.9. supra sections IX.D.5, IX.D.6, and IX.D.11. 577 See 17 CFR 240.15fk–1(c)(2)(i). 576 See VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 578 See 580 See 579 See Item 9 of Form 19b–4(e). 17 CFR 240.15Fi–3(c)(1). See also 17 CFR 240.15Fi–3(c)(2) regarding required amendments. 581 See PO 00000 Frm 00073 Fmt 4701 Sfmt 4702 E:\FR\FM\18APP3.SGM supra section V.C. 17 CFR 240.15Fk–1(c)(2)(i)(E). 18APP3 23992 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules ddrumheller on DSK120RN23PROD with PROPOSALS3 By contrast, an open-ended data language requirement would allow different filers or submitters of the same document to provide their disclosures in different data languages. In such instances, data users such as Commission staff and market participants would be unable to incorporate disclosures from filers or submitters using one data language into the same datasets and applications as disclosures of other filers or submitters using different data languages without undertaking data conversion processes that are frequently burdensome and imprecise. This may hinder investors, the Commission, and market participants from efficiently comparing disclosures across the complete set of entities within a given filer population, and could therefore dampen the benefits that would otherwise accrue from requiring the disclosures to be machinereadable. Thus, specifying the data language to be used may increase the probability of realizing the anticipated benefits of machine-readability for users of the Proposed Structured Documents. As noted above, we are requesting comment on all aspects of this proposal. By specifying the structured data language to be used for each Proposed Structured Document, we invite comment, including from affected entities, on the proposed use and effects of the proposed specified data languages. As further detailed elsewhere in this economic analysis, different structured data languages have different implications (e.g., varying compliance costs) for different affected entities. Thus, proposing a specific structured data language would allow affected entities to assess the implications of the proposed specific structured data language to be used, and comment accordingly. 2. Costs The proposal would alter the manner in which the affected entities provide the affected documents, specifically by requiring electronic submission or posting of the affected documents, and by requiring most of the content of the affected documents to be provided in a structured data language. The affected entities already are required to prepare and submit the affected forms with the Commission pursuant to Exchange Act rules that currently govern each category of affected entity.582 Thus, we generally do not expect the affected entities to incur incremental costs 582 ANE Exception Notice withdrawals currently are not required. However, a Registered Entity seeking withdrawal could send a request to a designated electronic mailbox. See supra note 272 and accompanying text, and section IX.D.12 VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 associated with preparing (e.g., collecting, drafting, reviewing) the information required to be disclosed in the affected documents prior to filing or posting under the proposed rule amendments.583 Rather, we expect certain entities to incur incremental costs associated with structuring the prepared information. a. Electronic Submission and Posting As discussed above, a significant number of the entities subject to the proposed rule amendments already have experience with EDGAR due to other reporting obligations and thus are not expected to incur EDGAR-related costs incremental to the proposed rule amendments. Entities that use EDGAR for purposes of complying with reporting obligations under existing rules generally are not expected to incur additional EDGAR access costs due to the proposed rule amendments.584 Reporting entities that do not have experience with EDGAR may incur initial compliance burdens, including the one-time burden associated with filing a Form ID for the first time to obtain the access codes needed to submit an application on the Commission’s EDGAR system.585 The Commission estimates that the cost for these entities will be $5,056 on a onetime basis to become familiar with the EDGAR system for the purposes of filing for Rules 17a–5, 18a–7, and 17a–12.586 Due to the widespread use of the internet, the cost of establishing and maintaining internet access is not expected to stem from the proposed amendments. We preliminarily believe that the costs associated with providing materials pursuant to Rule 17a–22 by registered clearing agencies on websites, and the costs associated with posting information currently required on Form 19b–4(e) by SROs, in addition to the reduced timeframe for compliance, is likely not to add significant costs to a registered clearing agencies’ 17a–22 obligations or an SRO’s 19b–4(e) obligations. The proposed rule contains several amendments related to FOCUS reports, which could impose burdens on market participants. The proposed amendments 583 A subset of SBS broker-dealers would incur additional costs associated with filing, due to the FOCUS report amendments that would require them to file information that under the baseline they currently do not file. 584 If some reporting entities with EDGAR experience require time to switch the affected documents from paper to EDGAR, they may incur an additional initial cost. 585 See 17 CFR 232.10(b). 586 See supra section IX.D.9. The one-time cost is estimated to require sixteen hours of labor from a programmer. 16 hours × $316 per hour = $5,056. PO 00000 Frm 00074 Fmt 4701 Sfmt 4702 to FOCUS Report Part II are expected to result in an initial burden of $2,130 on each Part II filer so firms can familiarize themselves with the amendments to FOCUS Report Part II.587 These proposed amendments are expected to either have no impact on or reduce the ongoing burden on the vast majority of filers, because they will reduce questions about where and how to report items on the form. However, because the proposed amendments require stand-alone swap dealers and stand-alone introducing brokers to complete a new section of FOCUS Report Part II that these types of firms were not previously required to complete (i.e., Computation of CFTC Minimum Capital Requirements), these amendments are likely to result in an ongoing annual burden of $426 hour per stand-alone swap dealer or stand-alone introducing broker.588 The proposed amendments to Part IIC are expected to result in an initial burden of five hours on each bank SBS Entity so that firms can compare the revised FOCUS Report Part IIC with FFIEC Form 031. However, these proposed amendments are expected to either have no impact on or reduce the ongoing burden on bank SBS Entities, because they will reduce questions about how to complete FOCUS Report Part IIC consistently with FFIEC Form 031. The proposed amendment to signature requirements for the FOCUS report is expected to result in an initial burden of $426 on each filer so that the firm can review the standards for an electronic signature on the FOCUS Report Part II, IIA, or IIC, as applicable.589 However, this proposed amendment is expected to either have no impact on or reduce the ongoing burden on FOCUS Report filers, because they will not be required to furnish as many signatures as before the amendment, and it may be easier to prepare electronic signatures rather than manual signatures since firms will already be familiar with the process and can easily obtain these signatures while working remotely. The proposed amendment to OTC derivatives dealer requirements is expected to result in an initial burden of $4,740 on each OTC derivatives dealer so that the firm can familiarize itself with the SEC eFOCUS system.590 587 5 hours × $426 per hour (compliance attorney) = $2,130. 588 1 hour × $426 per hour (compliance attorney) = $426. 589 1 hour × $426 per hour (compliance attorney) = $426. 590 15 hours × $316 per hour (programmer) = $4,740. E:\FR\FM\18APP3.SGM 18APP3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules ddrumheller on DSK120RN23PROD with PROPOSALS3 However, this proposed amendment is expected to either have no impact on or reduce the ongoing burden on OTC derivatives dealers, because filing the FOCUS Report electronically is an automated process as compared to filing by paper. In addition, OTC derivatives dealers are required to be affiliated with a broker-dealer, which means that OTC derivatives dealers’ operational staff already are familiar with the FINRA eFOCUS system’s interface, and can use the same preexisting templates, software, and procedures currently used by the broker-dealer to file FOCUS Reports on the FINRA system. b. Structured Data The Commission expects that certain structured data requirements under the proposed amendments would impose additional compliance costs on affected entities. Specifically, the Commission believes the proposed Inline XBRL requirements for Form 1, Form CA–1, Form X–17A–5 Part III and related annual filings, Form 17–H, and the CCO reports would result in additional compliance costs, both initial and ongoing, for the SROs, broker-dealers (including OTC derivatives dealers), and SBS Entities filing or submitting those documents relative to the current baseline, because those entities would be newly required to apply Inline XBRL tags to the documents before filing or submitting them to the Commission (or pay a third-party tagging service provider to do so). The Commission does not expect the proposed requirements to provide Form X–17A–19, the execution pages of the Covered SRO Forms, the facing page of Form X–17A–5 Part III, the facing page and Part II of Form 17–H, and the notices to the Commission (and any amendments to the notices) required by Exchange Act Rule 15fi–3(c) using custom XML-based data languages would impose similar structured data implementation costs on the SROs, broker-dealers, and SBS Entities that would be subject to those requirements. For the custom XML requirements on proposed EDGAR filings, EDGAR would provide filers or submitters with the option of using a fillable web form that would convert inputted disclosures into the relevant custom XML.591 Other than the exchanges and clearing agencies filing Form 1 and Form CA–1, respectively, we expect these entities to input their disclosures into the fillable EDGAR web form, and thus avoid compliance costs associated with structuring disclosures in custom XML data languages. By contrast, we expect 591 See supra note 230 at 8. VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 exchanges and clearing agencies, which would be subject to more extensive custom XML disclosure requirements as a result of the proposed rule amendments, would have the requisite sophistication to encode their Exhibit disclosures in custom XML and submit the custom XML Exhibits to EDGAR directly rather than manually completing lengthy fillable forms to be converted into custom XML documents.592 This would cause exchanges and clearing agencies to incur implementation costs associated with integrating any new or updated custom XML schemas into their existing data systems.593 Nonetheless, exchanges and clearing agencies may find direct submission in custom XML beneficial, because it allows for greater automation in the process of submitting data that is already structured directly to EDGAR, and removes the need for the final manual step of converting structured data into unstructured information to be typed into fillable web fields. With respect to the proposed requirement for SROs to post Rule 19b– 4(e) information using the custom XML schema for this information (such schema would be posted on the Commission’s website), the Commission expects that the SROs would incur higher implementation costs than those affected entities that are subject to EDGAR custom XML requirements, because SROs would need to encode the posted information in accordance with the schema rather than using a fillable web form on EDGAR. This would also be the case for any entities that choose to submit EDGAR documents directly in the relevant custom XML data language rather than use the fillable form that EDGAR provides. Surveys on Structured Data Costs Various XBRL and Inline XBRL preparation solutions have been developed and used by operating companies and open-end funds to fulfill their existing structuring requirements under the Commission’s rules. These existing requirements include multiple types of data, including numerical data in the context of financial statements, numerical data in the context of tables (along with the tables themselves), simple text strings, longer textual narratives, numerical data nested within textual narratives, and checkboxes.594 592 See supra sections II.A.3, II.D.4, and VII.A. infra text accompanying notes 651 and 659 for related cost estimates. 594 For example, an operating company’s annual report on Form 10–K includes iXBRL-tagged checkboxes on the cover page, iXBRL-tagged company name on the cover page (text string), iXBRL-tagged numbers on the balance sheet (face 593 See PO 00000 Frm 00075 Fmt 4701 Sfmt 4702 23993 With respect to the magnitude of Inline XBRL compliance costs, an American Institute of Certified Public Accountants (‘‘AICPA’’) survey of 1,032 public operating companies with $75 million or less in market capitalization in 2018 found an average cost of $5,850 per year, a median cost of $2,500 per year, and a maximum cost of $51,500 per year for fully outsourced XBRL creation and filing.595 These figures represent tagging costs over an entire year, which typically encompasses the Inline XBRL structuring of financial statements each quarter. A separate survey of 151 Nasdaq-listed issuers in 2018 found higher XBRL compliance costs, including an average XBRL compliance cost of $20,000 per quarter, a median XBRL compliance cost of $7,500 per quarter, and a maximum XBRL compliance cost of $350,000 per quarter in XBRL costs per quarter.596 Unlike the AICPA survey, the Nasdaq survey was not limited to smaller reporting companies (i.e., companies with $75 million or less in market capitalization), nor did it assess trends in compliance costs over time. This observed variance in XBRL and Inline XBRL compliance costs is likely attributable to variance in the number of discrete disclosures (including numbers, blocks of narrative text, checkboxes, etc.) contained in a tagged document, as well as the complexity of the specific disclosures to be tagged. Larger, more organizationally complex entities are likely to have more detailed and complex financial statements (including footnotes and schedules), and thus have more tags that they will need to apply to their documents, typically resulting in higher compliance costs (as described in further detail below in this section).597 To that end, a random financial statement), iXBRL-tagged tables and numbers therein in the financial statement footnotes, and iXBRL-tagged textual narratives and numbers therein, also in the financial statement footnotes. 595 See AICPA, XBRL Costs for Small Companies Have Declined 45% since 2014 (2018), https:// us.aicpa.org/content/dam/aicpa/interestareas/frc/ accountingfinancialreporting/xbrl/downloadable documents/xbrl-costs-for-small-companies.pdf. As discussed below in this section, the population of affected filers or submitters most analogous in size to the companies sampled here are certain registered broker-dealers. 596 See letter from Nasdaq, Inc. (Mar. 21, 2019), Request for Comment on Earnings Releases and Quarterly Reports, Release No. 33–10588 (Dec. 18, 2018), 83 FR 65601 (Dec. 21, 2018). Like the abovecited AICPA survey, this survey was limited to operating companies. In addition, both surveys were conducted before the transition from XBRL to Inline XBRL and before the implementation of cover page tagging requirements for periodic reports. 597 See, e.g., Bok Baik, et al., Organizational Complexity, Financial Reporting Complexity, and E:\FR\FM\18APP3.SGM Continued 18APP3 23994 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules sample of annual reports on Form 10– K filed by Nasdaq-listed companies for fiscal year 2021 with a parallel sample for companies with a public float of $75 million or less showed approximately twice as many tagged Inline XBRL facts in the Nasdaq-listed sample.598 Applicability and Variability of Structured Data Costs The affected documents that the Commission is proposing to be required to be structured in Inline XBRL under the proposed rule amendments consist of the same data types as the documents that are currently required to be structured in Inline XBRL (e.g., numerical data in the context of financial statements, numerical data in the context of tables (along with the tables themselves), simple text strings, longer textual narratives, numerical data nested within textual narratives, and checkboxes). Because Inline XBRL tagging software has already been developed to provide this functionality and is already in use by public reporting companies to fulfill Inline XBRL requirements, the Commission expects that vendors would update their Inline XBRL tagging software to accommodate the proposed Inline XBRL requirements for Form 1, Form CA–1, Form X–17A– 5 Part III, Form 17–H, and the CCO report, if such requirements are adopted. Because some filers or submitters of these documents are not currently subject to Inline XBRL requirements, it is unlikely that they currently use the Inline XBRL compliance products offered by these vendors. However, as discussed further below in this section, some filers or submitters are affiliated with public reporting companies subject to existing Inline XBRL requirements, and would potentially be able to leverage their affiliates’ Inline XBRL compliance software licenses or service agreements and experience in complying with the proposed Inline XBRL requirements. The Commission believes the compliance costs associated with the proposed structured data requirements, as adjusted for inflation, would likely decrease over time. Affected entities would likely comply with structuring requirements more efficiently after gaining experience over repeated filings, though such an effect would likely be diminished for affected entities that already have experience structuring similar data in other documents. Thirdparty vendors of structured data compliance software or services may decrease the prices of their products over time; the XBRL compliance costs reported in the 2018 AICPA survey of smaller operating companies reflect such a trend, as they represented a 45% decline in average cost and a 69% decline in median cost from 2014.599 The Commission expects the direct relationship between filer size and compliance costs described earlier in this section would apply to Inline XBRL compliance costs that would arise under the proposed rule amendments, and would be particularly relevant to Form X–17A–5 Part III filers (which include broker-dealers—including OTC derivatives dealers—and non-bank SBS Entities) for two reasons. First, like public operating companies, Form X– 17A–5 Part III filers would be tagging financial statements (including footnotes and schedules) in Inline XBRL under the proposal.600 Second, like public operating companies, Form X– 17A–5 Part III filers vary widely in size. For example, on December 31, 2021, approximately 300 broker-dealers reported over $100 million in total assets, while approximately 1,600 broker-dealers reported less than $1 million in total assets.601 Thus, as discussed in further detail later in this section, the Commission expects the Inline XBRL compliance costs for Form X–17A–5 Part III would vary inversely with size, as has been observed for public operating companies.602 We expect the correlation between entity size and tagging cost to be less relevant to the other populations of entities that would be subject to Inline XBRL requirements under the proposal, because those populations are more 599 See supra note 627. addition to financial statements and footnotes, Form X–17A–5 Part III filers would also need to tag their auditor’s reports and other annual reports in Inline XBRL under the proposed rules. By contrast, public operating companies only need to tag auditor identification information in their auditor’s reports. See Exchange Act Release No. 93701 (Dec. 2, 2021), 86 FR 70027, 70031 (Dec. 9, 2021). 601 We derive the broker-dealer financial data in this economic analysis from FOCUS Reports that broker-dealers filed through FINRA’s eFOCUS system for the fiscal period ending Dec. 31, 2021. See supra note 588. 602 See supra notes 627 and 628 and accompanying text for additional detail on this observed correlation. ddrumheller on DSK120RN23PROD with PROPOSALS3 600 In Voluntary Disclosure, presented at the Am. Acct. Ass’n 2020 Virtual Ann. Meeting and Conf. on Teaching & Learning (Aug. 13, 2020), https:// doi.org/10.26226/morressier.5f0c7d3058e581 e69b05d16d (finding ‘‘firm complexity is positively associated with financial reporting complexity holding all else constant, consistent with the argument Guay et al. (2016) put forward’’). 598 Targeted samples were obtained using data from XBRL and Inline XBRL EDGAR filings through the Commission’s internal Financial Statement Query Viewer tool. Tagged fact counts were obtained using ‘‘Firm Complexity (Accounting Reporting Complexity) Data’’ from XBRL Research, available at https://www.xbrlresearch.com/firmcomplexity/ (last visited Mar., 8, 2023). VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 PO 00000 Frm 00076 Fmt 4701 Sfmt 4702 limited in number and in the variation of size and complexity across entities within those populations. For example, Form CA–1 is filed by clearing agencies, including registered and exempt clearing agencies; there are currently 12 such entities in operation.603 Form 1 is filed by national securities exchanges, of which there are 24 (and by exempt exchanges, of which there are currently none).604 The CCO report is submitted by SBS Entities, of which there are 50.605 Some entities that would file or submit the documents to be structured in Inline XBRL under the proposal may be affiliated with entities that are subject to Inline XBRL requirements in other filings. For example, 17 of the 24 national securities exchanges are affiliated with public companies that file financial statements and cover page information in EDGAR in Inline XBRL.606 In addition, of the largest 20 broker-dealers by asset size as of December 31, 2021, 18 were affiliated with public companies that file financial statement and cover page information in Inline XBRL on EDGAR.607 To the extent that an affected entity shares compliance systems with an affiliated company, or could otherwise leverage the affiliated company’s processes, licenses, service agreements, and/or experience in complying with Inline XBRL requirements, the affected entity’s compliance costs incurred could likely be mitigated in part. As noted above, the Commission is proposing specific structured data languages for each Proposed Structured Document, rather than leaving the structured data language requirement open-ended (i.e., requiring only that the Proposed Structured Document be provided in a structured, machinereadable data language). A cost associated with this approach is that it would constrain the flexibility that filers or submitters of a Proposed Structured Document would otherwise have in preparing the Proposed Structured Document. For instance, some filers or submitters of a proposed custom XML document may already be using Inline XBRL to structure similar data for internal business purposes, such as through the use of ERP systems, and may therefore have preferred to use Inline XBRL rather than the required 603 See supra section IX.C.3. supra section IX.C.1. 605 See supra section IX.C.12. 606 See Self-Regulatory Organization Rulemaking, available at https://www.sec.gov/rules/sro.shtml. 607 This data is derived from FOCUS Reports filed through FINRA’s eFOCUS system for the fourth quarter of 2021. See supra note 588. 604 See E:\FR\FM\18APP3.SGM 18APP3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules custom XML data language for that document.608 In addition, proposing a specific structured data language for each Proposed Structured Document may extend the amount of time it would take were the Commission to change the particular structured data language to be used, such as to accommodate any future developments in which newly developed structured data languages prove to be more apt for the disclosures in question. For Form 1, Form CA–1, Form X– 17A–5 Part III, Form 17–H, and the CCO reports, the proposed approach of requiring Inline XBRL for some parts of the document and custom XML for other parts of the document would entail drawbacks for users of the information (including Commission staff and market participants). Specifically, data users would be unable to incorporate the Inline XBRL disclosures on a given filing or submission into the same datasets and applications as the custom XML disclosures on that filing, and would be unable to run analyses that incorporate both types of information without undertaking data conversion processes that are frequently burdensome and imprecise. Similarly, any technical validations programmed into EDGAR would be unable to check for any inappropriate inconsistencies between disclosures on Inline XBRL portions and disclosures on custom XML portions of a given filing, thus reducing the benefit of improved data quality that would be likely to result from structured data requirements. Structured Data Cost Estimates: Form X–17A–5 Part III and Form 17–H With respect to specific estimated cost ranges for Form X–17A–5 Part III and Form 17–H filers to structure their filings under the proposal, we believe the aforementioned AIPCA survey, which polled roughly 1,000 small reporting companies and found a median and average annual cost of XBRL filing of $2,500 and $5,850, respectively, is likely relevant to the majority of Form X–17A–5 Part III filers. In 2017, the 1,000 smallest reporting companies by asset size reported total assets of approximately $8 million or less. As of December 31, 2021, approximately 70% of Form X–17A–5 Part III filers fell within that $8 million total asset size threshold. For these smaller Form X–17A–5 Part III filers, we estimate the approximate median cost of tagging financial statements on Form X– 17A–5 Part III by using the median annual cost estimate from the AICPA survey ($2,500) and dividing it by four, because the respondents in the AICPA survey prepared tagged financial statements on a quarterly rather than annual basis. Using the resulting figure ($625) as a midpoint and establishing lower and upper bounds at 50% of the midpoint, we estimate smaller Form X– 17A–5 Part III filers would incur an approximate median per filing cost of $310–$940 to structure their financial statements in Inline XBRL.609 For the larger Form X–17A–5 Part III filers (i.e., those with total assets greater than $8 million), we believe the higher median compliance cost from the Nasdaq survey ($7,500 per quarter) would be a more suitable approximation. Using that median compliance cost as a midpoint would yield an estimate of $3,750–$11,250 per filing for larger Form X–17A–5 Part III filers to structure their financial statements. However, some larger Form X–17A–5 Part III filers are subsidiaries of, or otherwise affiliated with, public 23995 reporting companies that are already required to tag their financial statements.610 We expect these filers would incur significantly lower costs to tag their financial statements than other large Form X–17A–5 Part III filers, because they would likely be able to leverage the software licenses and/or service agreements and the Inline XBRL tagging processes and experience of their affiliates. Consequently, we estimate these Form X–17–5 Part III filers would incur 25% of the tagging cost of other large Form X–17A–5 Part III filers, resulting in an annual estimated cost of $940–$2,820 to tag their financial statements on Form X– 17A–5 Part III. In addition to the financial statements, footnotes, and schedules, Form X–17A–5 Part III also requires a series of reports (including accountant’s reports, compliance reports, exemption reports, and supplemental reports).611 Under the proposal, Form X–17A–5 Part III filers would be required to tag these reports in Inline XBRL. Typically, these reports consist of a short series of narrative text blocks with limited nested details, so tagging them in Inline XBRL would likely be significantly less costly than tagging the financial statements and schedules in Inline XBRL.612 We therefore estimate the approximate cost of tagging these reports would amount to 5% of the cost to tag financial statements and schedules, yielding a total estimated Inline XBRL tagging cost per filing of approximately $330–$990 for smaller Form X–17A–5 Part III filers; $3,940–$11,820 for larger Form X–17A– 5 Part III filers that are not affiliated with public reporting companies, and $990–$2,960 for larger Form X–17A–5 Part III filers that are affiliated with public reporting companies.613 STRUCTURED DATA COMPLIANCE COSTS FOR FORM X–17A–5 PART III Estimated per filing structuring data compliance costs Filer type ddrumheller on DSK120RN23PROD with PROPOSALS3 Smaller broker-dealers .................................................................................................................................................................. Larger broker-dealers and non-bank SBS Entities that are not affiliated with public reporting companies ................................. Larger broker-dealers and non-bank SBS Entities that are affiliated with public reporting companies ....................................... 608 See supra note 570 (discussing the prevalence of XBRL integration in ERP systems). 609 We round the estimated structured data cost ranges in this section to the nearest $10 because they represent approximations rather than exact costs. The estimated cost ranges in this section encompass internal time costs for preparing the structured reports (e.g., applying the relevant tag from the XBRL taxonomy or custom XML schema to the relevant disclosure) and external monetary costs (e.g., licensing structured data compliance VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 software and/or services from third-party vendors). For annualized population-wide corollaries to the structured data cost estimates in this section, see supra section IX.D. 610 We have identified 173 such broker-dealers, including 18 of the largest 20 broker-dealers by asset size, using broker-dealer FOCUS Reports and XBRL data through the Commission’s Financial Statement Query Viewer for the fiscal period ending Dec. 31, 2021. PO 00000 Frm 00077 Fmt 4701 Sfmt 4702 611 See $330–$990 $3,940–$11,820 $990–$2,960 supra section IV.A. ANC broker-dealer supplemental reports, which average approximately 100 pages in length, are an exception. Only five filers (the five ANC broker-dealers) are required provide these reports. See supra section IV.A.1. 613 See also supra section IX.D.9.a (discussing estimated burdens associated with structuring Form X–17A–5 Part III information under the proposed amendments). 612 The E:\FR\FM\18APP3.SGM 18APP3 23996 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules A subset of larger Form X–17A–5 Part III filers also file Form 17–H and would thus be required to tag their quarterly financial statements in addition to their annual financial statements.614 However, unlike Form X–17A–5 Part III, Item 4 of Form 17–H permits filers to omit the statement of cash flows and the notes to the financial statements. Thus, we use considerably lower Inline XBRL cost estimates for Form 17–H than for Form X–17A–5 Part III. We begin with the same cost estimate ranges for structuring financial statements—but not schedules or supplemental reports, because Form 17–H does not require them—on Form X–17A–5 Part III: $3,750–$11,250 per filing for larger broker-dealers that are unaffiliated with public reporting companies, and $940– $2,820 per filing for larger brokerdealers that are affiliated with public reporting companies.615 We then reduce the estimated costs by 30% to reflect the omission of notes and schedules, and further reduce the estimated costs by 30% to reflect the omission of the statement of cash flows. This yields an estimated cost of $350–$1,050 for Form 17–H filers that are unaffiliated with public reporting companies, and $100– $300 for Form 17–H filers that are affiliated with public reporting companies.616 Other portions of Form 17–H (namely, the facing page and the material associated positions and holdings disclosure) are currently structured in a custom XML data language specific to Form 17–H, and this would remain the case under the proposal. Because nearly all broker-dealers subject to Form 17–H filing requirements currently file Form 17–H via EDGAR, they are already submitting this information in that custom XML language.617 Thus, we do not believe it is relevant or appropriate to include an approximate custom XML structuring cost estimate for Form 17–H. STRUCTURED DATA COMPLIANCE COSTS FOR FORM 17–H Estimated per filing structured data costs Filer type ddrumheller on DSK120RN23PROD with PROPOSALS3 Larger broker-dealers that are not affiliated with public reporting companies .............................................................................. Larger broker-dealers that are affiliated with public reporting companies .................................................................................... $350–$1,050 $100–$300 Structured Data Cost Estimates: Covered SRO Forms and Rule 19b–4(e) Information The Covered SRO Forms (Form CA– 1, Form 1, Form 1–N, Form 15A, Form X–17A–19) and the information required to be posted under Rule 19b– 4(e) would require some or all of the information reported on the forms or postings to be provided in a structured data language. Here, we provide estimated ranges for the approximate cost that affected entities would incur to structure Forms CA–1, Form 1, and the Rule 19b–4(e) information. With respect to Form X–17A–19, due to the brevity and simplicity of that Form, we anticipate SROs would not structure their disclosures in custom XML themselves, but would instead simply input their disclosures in the fillable web form that EDGAR would provide. Thus, we do not believe a cost estimate for the structuring of Form X–17A–19 in custom XML would be relevant or appropriate to include. For the same reason, we have not included estimated custom XML structuring cost ranges for the facing pages to Form CA–1, Form 1, Form 1–N, and Form 15A. Because the facing pages of Form 1–N and Form 15A would be the only structured portion of those forms, we have not provided any estimated structuring cost ranges for them. Clearing agencies filing Form CA–1 would be required to tag their financial statements and a series of schedules containing largely narrative disclosures in Inline XBRL. For the financial statements, because clearing agencies likely operate at a higher level of complexity than the median Nasdaqlisted reporting company, we estimate a 25% higher cost than the cost reported in the Nasdaq survey, resulting in an approximate per filing cost estimate of $4,690–$14,070 for clearing agencies to tag financial statements in Inline XBRL. For the disclosures other than financial statements, the disclosure schedules on Form CA–1 to be tagged in Inline XBRL are considerably lengthier than the supplemental reports on Form X–17A– 5 Part III discussed above. We therefore estimate tagging the non-financial statement disclosures on Form CA–1 would add 25% of the costs to tag financial statements in Inline XBRL, resulting in a median per filing cost estimate of approximately $1,180– $3,530 for clearing agencies to tag the non-financial statement disclosures on Form CA–1 in Inline XBRL. This results in a total estimated Inline XBRL tagging cost of $5,870–$17,600 per filing on Form CA–1.618 Clearing agencies would be required to structure other Form CA–1 disclosures using a custom XML data language specific to that Form. The Commission recently estimated that the structuring of disclosures of Form N–CR event reports in custom XML would cost approximately $555 per filing. Here, the Form CA–1 disclosures to be structured in custom XML are lengthier than the Form N–CR disclosures that money market funds would structure in custom XML under that proposal, so we estimate an approximate cost per filing of $560–$1,670 (using a 50% increase over the Form N–CR estimate) that clearing agencies would structure the Form CA–1 schedules in custom XML.619 We therefore estimate that the total cost of structuring Form CA–1 (including Inline XBRL and custom XML disclosures) would amount to $6,430–$19,270 per filing.620 For national securities exchanges, we estimate the cost to tag financial statements on Form 1 in Inline XBRL would be similar to the cost that large broker-dealer affiliates of reporting companies would incur to tag financial 614 See supra section IX.C.10. We do not include smaller Form X–17A–5 Part III filers (i.e., those with $8 million or fewer in total assets) in this discussion because they would not meet the asset threshold for Form 17–H filing requirements. See supra note 238 (discussing the thresholds that determine whether broker-dealers are subject to Form 17–H filing requirements). 615 We have identified 89 Form 17–H filers that are affiliated with public reporting companies that structure Commission filings in Inline XBRL. 616 See also supra section X.D.10 (discussing estimated burdens associated with structuring Form 17–H information under the proposed amendments). 617 As of Sept. 30, 2022, approximately 238 of the 245 broker-dealers that were then subject to Form 17–H filing requirements used EDGAR to file Form 17–H. See supra section IV.B. 618 See supra section IX.D.5 (discussing estimated burdens associated with Form CA–1 under the proposed amendments). 619 See Investment Company Act Release No. 34441 (Dec. 15, 2021), 87 FR 7248, 7332 (Feb. 8, 2022). 620 See id. VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 PO 00000 Frm 00078 Fmt 4701 Sfmt 4702 E:\FR\FM\18APP3.SGM 18APP3 23997 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules statements on Form X–17A–5 Part III (estimated above at $940–$2,820), because most exchanges are affiliated with reporting companies.621 However, Form 1 also requires exchanges to provide balance sheets and income statements for its affiliates and subsidiaries, so we are increasing that estimate by 50%, yielding an estimated median per filing cost of $1,410–$4,230 that exchanges affiliated with reporting companies would incur to tag financial statements on Form 1 in Inline XBRL.622 For national securities exchanges that are not affiliated with reporting companies, we similarly base our Inline XBRL cost estimate on large brokerdealers unaffiliated with reporting companies, but with a 50% increase to account for the additional balance sheets and income statements for the exchange’s affiliates and subsidiaries. This results in an estimated median per filing cost of $5,630–$16,880 that exchanges unaffiliated with reporting companies would incur to tag financial statements on Form 1 in Inline XBRL.623 Exchanges would also tag their manner of operation disclosure in Inline XBRL under the proposal.624 This disclosure would consist of a series of tagged narrative text blocks, and could also include some quantitative amounts (such as those related to fee disclosures) that would also be tagged. We estimate an additional 10% cost that exchanges would incur to tag their manner of operation disclosure, resulting in a total estimated compliance cost of $1,550– $4,650 per filing for exchanges affiliated with reporting companies and $6,200– $18,580 for exchanges unaffiliated with reporting companies would incur to tag Form 1 in Inline XBRL.625 Also, like clearing agencies, exchanges would be required to structure other portions of Form 1 in a custom XML data language specific to that Form.626 Because these requirements are similar, we use the same custom XML structuring cost estimate of $560–$1,670 here, resulting in a total per filing cost of structuring Form 1 (including Inline XBRL and custom XML) of $2,110–$6,320 for exchanges affiliated with reporting companies and $6,760–$20,250 for exchanges unaffiliated with reporting companies.627 By contrast, for the Rule 19b–4(e) information that exchanges would post on their websites in a custom XML data language (i.e., schema) specific to that information, exchanges would not have the benefit of a fillable web form, and would thus be required to structure their disclosures in custom XML themselves. Rule 19b–4(e) information consists only of a short series of disclosures that are mostly text strings, so we have estimated a per response cost for structuring, rendering, and posting Rule 19b–4(e) information that is 50% lower than the Commission’s aforementioned estimate for structuring Form N–CR in a previous proposal. This yields an approximate cost of $140– $420 that exchanges would incur to structure each Rule 19b–4(e) website posting in custom XML.628 STRUCTURED DATA COMPLIANCE COSTS FOR COVERED SRO FORMS AND RULE 19b–4(e) INFORMATION Filers/submitters Form CA–1 .............................................. Form 1 ..................................................... Clearing agencies .................................................................................................... National securities exchanges that are not affiliated with public reporting companies. National securities exchanges that are affiliated with public reporting companies National securities exchanges and registered national securities associations ..... Securities Futures Product Exchanges ................................................................... Registered national securities associations ............................................................ National securities exchanges ................................................................................. Form 1 ..................................................... Form X–17A–19 ...................................... Form 1–N ................................................ Form 15A ................................................. Rule 19b–4(e) Information ...................... Structured Data Cost Estimates: Valuation Dispute Notices and CCO Reports Under the proposal, SBS Entities would be required to structure the valuation dispute notices required under Exchange Act Rule 15fi–3(c) in a custom XML data language specific to those notices, and they would also be required to structure the CCO report required under Exchange Act Rule 15fk– 1(c)(2)(ii)(A) in Inline XBRL. In addition, non-bank SBS Entities would be required to file Form X–17A–5 Part III and related annual filings in Inline ddrumheller on DSK120RN23PROD with PROPOSALS3 Estimated per filing/posting structured data costs Form/posting 621 See supra note 638. supra note 455 and accompanying text for a description of the burdens associated with tagging financial statements on Form 1. 623 See id. 624 This proposed tagging requirement would not include the copy of the users’ manual. See supra section II.A.3. 625 See id. 622 See VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 $6,430–$19,270 $6,760–$20,250 $2,110–$6,320 N/A N/A N/A $140–$420 XBRL; the structuring costs associated which could contain nested quantitative with that form are discussed above. values (such as the description of financial resources set aside for For Rule 15fi–3(c) valuation dispute compliance). This content is similar to notices, which are not required to the content of the narrative disclosures include specific fields, we expect SBS Entities would use the fillable web form on Form CA–1 that clearing agencies would structure in Inline XBRL under that EDGAR would provide rather than structure the disclosures in the custom the proposed amendments, which we XML data language themselves.629 Thus, estimate as $1,180 to $3,530. Most SBS we have not included a cost estimate for Entities, however, are affiliated with the custom XML structuring of the public reporting companies that already valuation dispute notices. structure disclosures in Inline XBRL.630 For those entities, which could leverage For the Inline XBRL tagging of the the Inline XBRL compliance experience, CCO report, those reports consist of a processes, software, and/or service series of narrative text blocks, some of 626 See supra note 458 and accompanying text for a description of the burdens associated with structuring portions of Form 1 in a custom XML data language. 627 See also supra section IX.D.2 (discussing estimated burdens associated with structuring disclosures filed on Form 1 under the proposed amendments). 628 See also supra section IX.D.6 (discussing estimated burdens associated with structuring, PO 00000 Frm 00079 Fmt 4701 Sfmt 4702 rendering, and posting Rule 19b–4(e) information under the proposed amendments). 629 See supra section V.C. 630 Of the 50 entities that have submitted applications for registration as an SBS Entity, 41 are affiliated with public companies that file financial statement and cover page information in Inline XBRL. See List of Registered Security-Based Swap Dealers and Major Security-Based Swap Participants, available at https://www.sec.gov/tm/ List-of-SBS-Dealers-and-Major-SBS-Participants. E:\FR\FM\18APP3.SGM 18APP3 23998 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules agreements that their affiliates have already implemented, we estimate a cost range of $300 to $880, which represents 25% of the cost incurred by SBS Entities that are not affiliated with public reporting companies.631 STRUCTURED DATA COMPLIANCE COSTS FOR VALUATION DISPUTE NOTICES AND CCO REPORTS Estimated per filing/notice structured data costs Form Filers/submitters Valuation Dispute Notices ....................... CCO Reports ........................................... CCO Reports ........................................... SBS Entities ............................................................................................................. SBS Entities unaffiliated with public reporting companies ...................................... SBS Entities affiliated with public reporting companies .......................................... Structured Data Cost Estimates: Initial Implementation Costs The structured data cost estimates discussed above relate to the ongoing costs of structuring various disclosures in Inline XBRL and in custom XMLbased data languages. For affected entities that do not have structured data compliance experience, and are not affiliated with entities that have structured data compliance experience, we estimate compliance costs would increase by 50% in the first year of the proposed structured data requirements. We anticipate these initial implementation costs, which could include the training of new staff and the establishing of new compliance procedures, would apply only to those filers or submitters that do not fully outsource their structured data N/A $1,180–$3,530 $300-$880 preparation requirements to a thirdparty tagging service provider (i.e., all filers or submitters other than smaller broker-dealers, which we expect would outsource their structured data preparation requirements like many smaller reporting companies do).632 The impact of this initial implementation cost overall is reflected in the following chart: STRUCTURED DATA INITIAL COMPLIANCE COSTS Form Estimated per response initial structured data costs Form X–17A–5 Part III (for larger broker-dealers and non-bank SBS Entities unaffiliated with public reporting companies). Form CA–1 .................................................................................................................................................................... Form 1 (for exchanges unaffiliated with public reporting companies) .......................................................................... $5,910–$17,730 (first year). ddrumheller on DSK120RN23PROD with PROPOSALS3 Rule 19b-4(e) information .............................................................................................................................................. CCO Report (for SBS Entities unaffiliated with public reporting companies) ............................................................... $9,650–$28,910 (first year). $10,140–$30,380 (first year). $210–$630 (first response). $1,770–$5,300. Form 17–H is excluded from the table above, because Form 17–H filers also file Form X–17A–5 Part III. Including initial implementation costs for structuring financial statements on Form 17–H would be duplicative of the initial implementation costs for structuring financial statements on Form X–17A–5 Part III, which are reflected in the table.633 For Rule 19b–4(e) information, we anticipate the initial implementation costs would apply only to the first posting, and not to subsequent postings during the first year of compliance. The content required by Rule 19b-4(e) is limited to less than 10 individual items of disclosure regarding the newly traded derivative securities product for each posting. We expect the process of structuring, rendering, and posting the first response would entail additional implementation time to map the associated (and commensurately simple) custom XML schema to the information regarding the new derivative securities product traded on the exchange; we expect subsequent responses would entail a less burdensome process of applying the newly mapped schema to each derivative securities product.634 Mandated electronic submission and posting will increase the timeliness of public access to the affected documents that are made publicly available. Insofar as market participants use the information in these documents, easier or quicker access could result in lower search costs or more efficient decision making. These benefits are potentially magnified during disruptive events, such as a pandemic, when investors may place a premium on electronic and timely access to information. Furthermore, the efficiency benefits of electronic submission or posting may be augmented by the proposed structured data requirements, as structured data requirements have been observed to decrease information asymmetries, increase liquidity, and reduce the cost of capital.635 The proposed structured data requirements for those affected documents that are used by information intermediaries (such as financial analysts and data aggregators) may also increase competition and encourage 631 See also supra section IX.D.14 (discussing estimated burdens associated with structuring CCO reports under the proposed amendments). 632 See supra note 568. 633 See 17 CFR 240.15Fk-1(c)(2)(i)(E). 634 See also supra section IX.D.6 (discussing estimated burdens associated with structuring, rendering, and posting Rule 19b–4(e) information). 635 See, e.g., N. Bhattacharya, Y.J. Cho, J.B. Kim, Leveling the Playing Field Between Large and Small Institutions: Evidence from the SEC’s XBRL Mandate, 93(5) Account. Rev. 51–71 (2018); B. Li, Z. Liu, W. Qiang, and B. Zhang, The Impact of XBRL Adoption on Local Bias: Evidence from Mandated U.S. Filers, 39(6) J. Account. Pub. Pol. (2020); W. Sassi, H. Ben Othman, and K. Hussainey, The Impact of Mandatory Adoption of XBRL on Firm’s Stock Liquidity: A Cross-Country Study, 19(2) J. Fin. Report. Account. 299–324 (2021); C. Ra and H. Lee, XBRL Adoption, Information Asymmetry, Cost of Capital, and Reporting Lags, 10 Business, 93–118 (2018); S.C. Lai, Y.S. Lin, Y.H. Lin, and H.W. Huang, XBRL Adoption and Cost of Debt, Intl. J. Account. Info. Mgmt. (2015); Y. Cong, J. Hao, and L. Zou, The Impact of XBRL Reporting on Market Efficiency, 28(2) J. Info. Sys. 181–207 (2014). VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 D. Efficiency, Competition, and Capital Formation PO 00000 Frm 00080 Fmt 4701 Sfmt 4702 E:\FR\FM\18APP3.SGM 18APP3 ddrumheller on DSK120RN23PROD with PROPOSALS3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules market entry by reducing their information processing costs.636 Moreover, as mandated electronic submission or posting leads to lower ongoing, marginal costs for reporting entities, compared to non-electronic submission, the submission or posting process may become more efficient, especially over the medium and longer term. In addition, electronic submission or posting standards in the proposed amendments are expected to make the submission or posting process more efficient by making it easier and less costly for reporting entities to assure timely receipt and/or availability of the submitted information. We expect, however, that any such efficiency gains would be small. The efficiency gains that would arise under the proposed rule would likely be further mitigated in the near term because, as noted, the proposed Inline XBRL requirements would impose initial implementation costs on affected entities subject to the requirements that do not have prior experience with Inline XBRL. As discussed above, similar implementation costs are unlikely to arise for most of the proposed EDGAR custom XML forms, because EDGAR would provide a fillable web form in which affected entities would be able to input their disclosures without having to structure them in the relevant custom XML data language. By contrast, implementation costs are likely to arise for SROs subject to the proposed custom XML schema requirement for posting Rule 19b–4(e) information, because those would be posted on the SROs’ websites rather than filed through EDGAR; however, due to the relatively small amount of data to be structured, rendered, and posted for each new derivative securities product, we expect the cost of structuring each Form 19b4(e) would be lower than the cost of structuring Commission filings in Inline XBRL.637 The costs and benefits of electronic submission or posting under the proposed rule may have differential impacts on some categories of reported entities, resulting in potential competitive effects. To the extent that the EDGAR cost has a fixed component, smaller entities that do not have experience with EDGAR may be at a relative competitive disadvantage to larger entities. In addition, smaller registrants might use third party service providers to meet the requirements of the proposed amendments. The use of these providers could reduce the costs of EDGAR access, and reduce the 636 See 637 See supra section X.C.1.b. supra sections IX.D.6 and X.C.2.b. VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 competitive effects of the requirements.638 In addition, many of the reporting entities already are familiar with electronic submission in EDGAR due to changes in market practices and an increase in electronic submission due to the pandemic. For the proposed Inline XBRL requirements, it is less likely that the associated compliance costs would be fixed, because the documents filed or submitted by smaller entities (such as smaller broker-dealers) are likely shorter and less complex than documents filed or submitted by larger entities (such as larger broker-dealers), and would thus require less time and sophistication to tag in Inline XBRL. By contrast, compliance costs for the proposed custom XML requirements are more likely to be fixed, because with the exception of Form 1 and Form CA–1 filers and SROs posting Rule 19b–4(e) information, we expect affected filers or submitters to comply with such requirements by completing fillable web forms rather than structuring their disclosures in custom XML.639 To the extent that market practices are already consistent with the Updated Staff Statement, many of the expected effects of the proposed amendments on efficiency, competition, and capital formation may be mitigated. For example, for broker-dealer registrants that file reports pursuant to Rule 17a– 5 electronically, the efficiency gains of electronic submission will be mitigated, and the effects of the proposed amendments will be limited to those associated with the use of structured data. E. Reasonable Alternatives 1. Exempt Certain Entities or Disclosures From Structured Data Requirements As an alternative, the Commission could change the scope of the proposed structured data requirements (e.g., Inline XBRL tagging requirements for Form X–17A–5 Part III, Form 17–H, Form CA–1, Form 1, and the CCO reports), by exempting certain subsets of reporting entities or disclosures. For example, the Commission could exempt some broker-dealers from the requirement to structure Form X–17A– 5 Part III and related annual filings based on size (e.g., total reported assets) or other characteristics. Potential exemption thresholds could be brokerdealers with $500,000 or less in total 638 The proposed rule might increase demand for third party services, but is unlikely to have significant effects on efficiency, competition, or capital formation in these markets. 639 See supra text accompanying note 624. PO 00000 Frm 00081 Fmt 4701 Sfmt 4702 23999 assets (which would have exempted 1,252, or 38%, of registered brokerdealers as of December 31, 2021), or broker-dealers with $250,000 or less in total annual revenues (which would have exempted 1,073, or 32%, of registered broker-dealers as of December 31, 2021).640 Such thresholds would prevent smaller broker-dealers from incurring the compliance costs associated with the proposed Inline XBRL tagging requirements for Form X– 17A–5 Part III. Another alternative would be to limit the Inline XBRL tagging requirements only to those broker-dealers that carry customer or broker-dealer accounts and receive or hold funds or securities for customers (which would have exempted 3,319, or 95%, of registered broker-dealers, as of December 31, 2021). This approach may be useful in targeting the Inline XBRL requirements towards those brokerdealers that may have the most impact on financial markets, and reducing compliance costs for all other brokerdealers. However, the Commission believes any cost savings arising from the exemption of certain subsets of reporting entities or disclosures from the Inline XBRL requirements may not justify the reduction in informational benefits to data users such as Commission staff and market participants, who would be required to manually collect unstructured data from the exempted reporting entities or disclosure items in order to analyze it (or rely on and incur costs to third parties to do so). 2. Require Structured Data on Form 1– N, Form 15A, and ANE Exception Notices to Same Extent as Proposed Structured Documents As another alternative, the Commission could require structuring Form 1–N, Form 15A, and the ANE Exception Notices to the same extent as comparable Proposed Structured Documents. For example, the Commission could require Form 1–N and Form 15A, which are similar to Form CA–1 and Form 1 in that they contain substantive disclosures in exhibits to an execution page, to be structured using a mix of Inline XBRL and custom XML data languages. The Commission could also require ANE Exception Notices, which contain only a limited number of data points, to be structured using a custom XML data language. Structuring these documents would extend the analytical capabilities associated the other structured data requirements in this proposal to these additional documents. However, the 640 See E:\FR\FM\18APP3.SGM supra note 588. 18APP3 24000 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules ddrumheller on DSK120RN23PROD with PROPOSALS3 Commission believes the limited number of filers and filings (for Form 1– N and Form 15A) and the limited number of data points on each document (for the ANE Exception Notices) would limit the potential utility of functionality enabled by structured data (such as large-scale comparisons across populations of entities). Given this limitation on expected benefits, the Commission believes the additional structuring requirements would not be justified. 3. Replace Inline XBRL Requirements With Custom XML Requirements or Vice Versa As another alternative, the Commission could replace the proposed custom XML requirements with Inline XBRL requirements for some or all of the relevant Proposed Structured Documents (which include Form X– 17A–5 Part III, Form 17–H, Form CA– 1, Form 1, Form 1–N, Form 15A, Form X–17A–19, Rule 19b–4(e) information, notices of security-based swap valuation disputes pursuant to Rule 15fi–3(c), and CCO reports). For example, rather than requiring Inline XBRL structuring for certain of the affected documents, and custom XML structuring for other affected documents, the Commission could require Inline XBRL for all of the affected documents proposed to be structured (i.e., require Form X–17A–19, the execution pages of Forms 1–N and 15A, the notice required by Rule 15fi– 3(c) under the Exchange Act, the information required to be posted under Rule 19b–4(e), and the entirety of the other Covered SRO Forms, Form X– 17A–5 Part III, and Form 17–H, to be provided using Inline XBRL rather than using custom XML-based data languages). This alternative could benefit users of the data in that the reported information could be used compatibly (e.g., using the same software tools) with the disclosures in the other affected documents (and with existing Inline XBRL data). However, the alternative would also impose the costs and complexity associated with Inline XBRL tagging on Forms and notices and reports that are each limited to a constrained set of non-financial, nonnarrative data elements or are otherwise less suitable for Inline XBRL, thus potentially making the structured disclosures more burdensome to prepare and use than is called for by these particular disclosures.641 The Commission believes the difficulties in preparing and using such data under an Inline XBRL requirement would likely 641 See supra section VII.A. VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 not be justified by any compatibility benefits that would arise from such an alternative. The Commission could alternatively replace the proposed Inline XBRL requirements with custom XML requirements for some or all of the relevant Proposed Structured Documents (which include Form X– 17A–5 Part III, Form 17–H, Form CA– 1, Form 1, and CCO reports). However, while this could lead to benefits such as smaller file sizes and lower compliance burdens (to the extent entities would input disclosures into fillable forms rather than structuring the disclosures themselves), Inline XBRL is more technically suited to handle financial statement disclosures (and was originally designed to so), as well as extended narrative discussions (including those with individual values nested within the discussions). Accordingly, the Commission believes Inline XBRL as proposed for these forms is appropriate. 4. Require Structured Data Languages Other Than Inline XBRL and Custom XML As another alternative, the Commission could require structured data languages other than Inline XBRL and custom XML for some or all of the affected documents. For example, the Commission could require other variants of XBRL, such as XBRL–CSV (‘‘Comma-Separated Values’’) or XBRL– JSON (‘‘JavaScript Object Notation’’). For example, we are aware that public commenters in other rulemakings have indicated that using these XBRL variants could entail benefits, such as smaller file sizes and greater ease of use.642 However, unlike custom XML and Inline XBRL, no EDGAR filings are currently filed using the JSON or CSV 642 See Letter from Campbell Pryde, President and CEO, XBRL US, ‘‘RE: Enhanced Reporting of Proxy Votes by Registered Management Investment Companies; Reporting of Executive Compensation Votes by Institutional Investment Managers, File Number S7–11–21’’ (Dec. 14, 2021), available at https://www.sec.gov/comments/s7-11-21/s7112120109496-263895.pdf (stating, ‘‘The XBRL–CSV specification allows data to be prepared in a simple CSV file which can then be opened in Excel. Data prepared using XBRL–CSV can be loaded automatically with no need to understand the meaning of individual columns (which would need to be reviewed if ingesting a custom XML file)’’); Letter from Gregory Babyak, Global Head of Regulatory Affairs, Bloomberg, L.P., Bloomberg L.P. ‘‘Enhanced Reporting of Proxy Votes by Registered Management Investment Companies; Reporting of Executive Compensation Votes by Institutional Investment Managers Release No. 34–93169/File No. S7–11–21’’ (Dec. 14, 2021), available at https:// www.sec.gov/comments/s7-11-21/s71121-20109566263925.pdf (stating, ‘‘JSON makes for significantly smaller files, does not need specialized tools and libraries, and is both easier to consume and generate’’). PO 00000 Frm 00082 Fmt 4701 Sfmt 4702 formats, and the EDGAR system currently does not accept these formats.643 The Commission preliminarily believes any usability benefit associated with XBRL–CSV or XBRL–JSON would likely not justify the burden of expanding reporting and intake capability to accommodate JSON or CSV. Other structured data languages that could be used include the Financial Information eXchange Markup Language (‘‘FIXML’’), which the Commission recently proposed for security-based swap position reporting, and pipedelimited ASCII, which the Rule 605 NMS Plan currently requires for market centers’ order execution reports.644 However, FIXML is generally designed to accommodate the communication of information related to securities trading, whereas the information required by the Proposed Structured Documents is broader.645 For pipe-delimited ASCII, unlike custom XML, EDGAR does not currently provide fillable forms or rendering applications for that format. In addition, the use of pipe-delimited ASCII rather than custom XML and Inline XBRL would preclude more complex technical validations (such as checks on any disclosures nested within narrative descriptions). 5. Permit, Not Require, Structured Data for Affected Documents As another alternative, the Commission could replace some or all of the proposed structured data requirements with voluntary structuring provisions. This would provide greater flexibility to respondents and ease compliance burdens on any respondents that choose not to structure their filings or postings. Some respondents may be incentivized by the benefits of structured data, and thus pursue those benefits even in the absence of structured data requirements, such as 643 See Regulation S–T, 17 CFR 232.101(a)(1)(iv); 17 CFR 232.301; EDGAR Filer Manual, supra note 230, at 5.1 (requiring EDGAR filers generally to use ASCII or HTML for their document submissions, subject to certain exceptions). 644 See Exchange Act Release No. 93784 (Dec. 15, 2021), 87 FR 6652, 6675 (Feb. 4, 2022); 17 CFR 242.605(a)(2) and Securities and Exchange Commission File No. 4–518 (National Market System Plan Establishing Procedures Under Rule 605 of Regulation NMS) at 2 (‘‘Section V . . . provides that market center files must be in standard, pipe-delimited ASCII format’’). 645 See What Is FIX?, https://www.fixtrading.org/ what-is-fix/ (last visited Mar. 3, 2023) (‘‘The FIX Protocol language is comprised of a series of messaging specifications used in trade communications’’). FIXML is the machine-readable data language associated with the Financial Information eXchange (‘‘FIX’’) Protocol. See FIXML Online, Technical Specification, Version 1.1. (May 2014), https://www.fixtrading.org/standards/fixmlonline/. E:\FR\FM\18APP3.SGM 18APP3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules reduced audit fees and efficient review of peer disclosures.646 However, relying on all affected entities to pursue such incentives would likely result in the incomplete provision of structured data. This would result in incomplete datasets, thereby adversely affecting the informational benefits that we expect would accrue from structured data requirements. ddrumheller on DSK120RN23PROD with PROPOSALS3 6. Exempt Smaller Entities From Electronic Submission or Posting Requirements As another alternative, the Commission could exempt smaller entities from electronic submission or posting requirements for some or all of the affected documents. This could take the form of some thresholds based on total assets, total annual revenues, net capital requirements, a combination of factors, or the type of entity (e.g., whether the broker-dealer carries customer accounts and receives or holds customer cash and securities, or whether the broker-dealer is an OTC derivatives dealer). While this alternative could reduce the cost burden to smaller entities, this alternative would also eliminate the benefits of electronic submission and posting for these entities, such as the reduction of costs and the improved efficiency of the submission process. In addition, exempting smaller entities from the submission or posting requirements might reduce the value of publicly available data if the result is that only a portion of the submissions are machine-readable or if multiple methods are required to access all the data as might occur if some portion of forms are submitted electronically via EDGAR while other submissions of the same form are made publicly available as PDFs of paper submissions. 7. Require SROs To Submit Form 19b– 4(e) via EDGAR As another alternative, rather than requiring the information required by Rule 19b–4(e) under the Exchange Act to be posted on an SRO’s website in custom XML, the Commission could amend Rule 19b–4, Form 19b–4(e), and the instructions thereto to require SROs to submit Form 19b–4(e) with the Commission via EDGAR using custom XML. Compared to the proposal, an EDGAR alternative could provide benefits for users of the information, because they would be able to access and analyze disclosures across different SROs from a centrally accessible location, rather than having to navigate to various individual SRO websites to retrieve the disclosures. EDGAR would also provide the ability to run technical validations upon intake of the disclosures, thus potentially improving the quality of the 19b–4(e) data by decreasing the incidence of nonsubstantive errors (e.g., omitting values from fields that should always be populated). On the other hand, SROs may find the process of posting information on their websites to be less burdensome than submitting information to EDGAR, as they currently have experience with the former but not the latter. Given the thousands of Form 19b–4(e) submissions that SROs make a year, and given the original intent for Form 19b–4(e) to provide the Commission with accurate information regarding new derivatives securities products while ensuring that information remains publicly available, the Commission preliminarily believes any informational benefits of an EDGAR requirement would likely not justify the increased burden of such a requirement.647 Furthermore, given the highly standardized nature of the information provided on Form 19b–4(e) and the relevant SRO’s books and records obligations, coupled with the Commission’s examination and inspection authority, the Commission does not believe the submission of Form 19b–4(e) through EDGAR rather than posting of the information on the relevant SRO’s website would impact the accuracy of the record of new securities derivatives products for the Commission to review. 8. Require the Use of Dedicated Mailbox As another alternative, the Commission could require registrants submit by sending some or all of the affected documents to a dedicated email inbox in addition to eliminating the paper requirement. For example, rather than requiring registered clearing agencies to post Rule 17a–22 materials on their websites, the Commission could require registered clearing agencies to submit electronic copies of Rule 17a–22 materials to a dedicated email inbox, as they have been doing recently, consistent with the Updated Staff Statement.648 Similarly, another example would be to require SROs to send Form 19b–4(e) materials to a dedicated email inbox, rather than publicly posting the materials on their websites. This alternative would facilitate Commission staff access to the Rule 17a–22 and 19b–4(e) materials compared to the proposal, as Commission staff would receive the 647 See 646 See supra Section X.C.1.b. VerDate Sep<11>2014 20:06 Apr 17, 2023 648 See Jkt 259001 PO 00000 supra section II.E. Updated Staff Statement. Frm 00083 Fmt 4701 Sfmt 4702 24001 materials directly rather than having to navigate to each registered clearing agency’s individual website. However, this alternative could delay or preclude their availability for market participants, and require Commission staff to upload these documents to EDGAR, imposing costs and delays on the process. In addition, to the extent that market participants have already developed the practice of submitting the affected documents via EDGAR—for these documents, the proposed alternative, requiring submission to an electronic mailbox would entail both a higher cost and a lower benefit for market participants. F. Request for Comment The Commission requests feedback on any aspect of the above economic analysis, including our description of the current economic baseline, the potential costs (including quantified estimates thereof) and benefits of the proposed amendments, their effect on efficiency, competition, and capital formation, and reasonable alternatives. In addition, we request comment on the following aspects of the proposal: 96. In general, are there any affected entities for whom the compliance costs associated with the proposed structured data requirements would not be justified by the informational benefits that would be realized by users of the structured data, such that exempting those entities from structured data requirements would be advisable? If so, what particular exemption threshold or thresholds should the Commission use for the structured data requirements under the proposed rule amendments, and why? 97. For example, with respect to Form X–17A–5 Part III filers, would the compliance costs incurred by smaller broker-dealers, or non-clearing/carrying broker-dealers, in filing Form X–17A–5 Part III and related annual filings in Inline XBRL not be justified by the benefits arising to data users from having the information in a structured, machine-readable data language? Should the Commission use an exemption threshold for Form X–17A– 5 Part III filers based on total assets (e.g., less than $500,000), total annual revenues (e.g., less than $250,000), net capital requirements (e.g., less than $250,000), on a combination of factors (e.g., capital less than $50 million and total assets of less than $1 billion), on the type of broker-dealer (e.g., whether the broker-dealer carries customer accounts and receives or holds customer cash and securities, or whether the broker-dealer is an OTC derivatives dealer), or on the financial condition of E:\FR\FM\18APP3.SGM 18APP3 ddrumheller on DSK120RN23PROD with PROPOSALS3 24002 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules the broker-dealer (e.g., whether the broker-dealer has less than $1 million of free credit balances and other credit balances, or whether the broker-dealer has less than $500 million of tentative net capital)? As another example, with respect to Form CA–1 and Form 1 filers, should the Commission require only registered clearing agencies and exchanges to structure those forms? Should the Commission use thresholds based on the number of members or users of the clearing agencies and exchanges? If so, what specific thresholds should the Commission use, and why? 98. Similarly, are there any affected documents (or portions thereof) subject to proposed structuring requirements (i.e., Form X–17A–5 Part III, Form 17– H, Form 1, Form 1–N, Form 15A, Form CA–1, Form X–17A–19, Rule 19b–4(e) information, valuation dispute notices, and CCO reports) for which the compliance costs associated with the proposed structured data requirements would not be justified by the informational benefits that would be realized by users of the structured data, such that exempting those documents from structured data requirements would be appropriate? If so, which particular documents (or portions thereof) should be exempted from the structured data requirements, and why? 99. For example, should the Commission refrain from adding structuring requirements for Form CA– 1, which is filed by only twelve entities, for the same reason the Commission is refraining from adding structured data requirements (other than execution page structuring) for Form 15A and Form 1– N, which are each filed by only one entity? 649 As another example, should the Commission limit the proposed structuring requirements to financial statement disclosures (including notes and schedules) only, thus requiring only portions of Form X–17A–5 Part III, Form 17–H, Form 1, and Form CA–1 to be structured? Should the Commission require all quantitative information to be structured, but refrain from requiring narrative or other non-quantitative information to be structured? 100. Conversely, are there any affected documents or portions thereof not subject to proposed structuring requirements (i.e., ANE Exception Notices, Form 1–N other than the execution page, and Form 15A other than the execution page) for which the informational benefits of structured data would justify the compliance costs associated with structuring, such that requiring those documents to be 649 See supra sections IX.C.3, IX.C.4, and IX.C.5. VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 structured would be advisable? If so, which of these documents or portions thereof should be structured, and why? 101. How would the costs of thirdparty service providers, including those that provide electronic submission and structured data compliance services and/or software to filers and submitters, as well as those that provide software that facilitates structured data research, impact affected entities and data users under the proposed rule amendments? Please provide any data you have on the current costs and usage of these thirdparty services and software, as well as how such costs and usage may change under the proposed rule amendments. 102. Does the evidence of structured data benefits in other contexts, such as XBRL requirements for public operating company financial statements, generally indicate that the proposed structured data requirements could facilitate the use and analysis of the information disclosed on the affected documents? Why or why not? 103. Is it reasonable to assume that affected entities with affiliates that are subject to Inline XBRL requirements would be able to leverage the Inline XBRL compliance software licenses and/or service agreements, as well as the Inline XBRL tagging processes and experience, of those affiliates? Why or why not? 104. Should the Commission modify the particular structured data languages required for each Proposed Structured Document? For example, should the Commission replace the proposed custom XML requirements with Inline XBRL requirements, or vice versa? Should the Commission require other structured data languages, such as XBRL–CSV, XBRL–JSON, FIXML, pipedelimited ASCII, or other structured data languages for some or all of the Proposed Structured Documents? If so, which structured data languages should be used for which documents, and why? 105. Rather than requiring structured data for the Proposed Structured Documents, should the Commission permit affected entities (or subsets thereof) to provide structured data on a voluntary basis? If so, which entities and which documents should be subject to voluntary structuring, and why? 106. Also, are there any affected documents for which the proposed manner of submission or posting creates significant costs or difficulties for reporting entities or for users of the documents? If so, which particular documents, and how should the manner of submission be changed for those documents? PO 00000 Frm 00084 Fmt 4701 Sfmt 4702 XI. Initial Regulatory Flexibility Act Analysis Section 3(a) of the Regulatory Flexibility Act of 1980 650 (‘‘RFA’’) requires the Commission to undertake an initial regulatory flexibility analysis of the impact of the proposed rule amendments on small entities unless the Commission certifies that the rule, if adopted, would not have a significant economic impact on a substantial number of small entities.651 For purposes of Commission rulemaking in connection with the RFA,652 a small entity includes a broker or dealer that: (1) had total capital (net worth plus subordinated liabilities) of less than $500,000 on the date in the prior fiscal year as of which its audited financial statements were prepared pursuant to paragraph (d) of Rule 17a–5 under the Exchange Act,653 or, if not required to file such statements, a broker-dealer with total capital (net worth plus subordinated liabilities) of less than $500,000 on the last day of the preceding fiscal year (or in the time that it has been in business, if shorter); and (2) is not affiliated with any person (other than a natural person) that is not a small business or small organization.654 With regard to a national securities exchange subject to Rule 17a–19, a small entity is an exchange that has been exempt from the reporting requirements of Rule 601 under Regulation NMS, and is not affiliated with any person (other than a 650 5 U.S.C. 603(a). U.S.C. 605(b). Section 601(b) of the RFA defines the term ‘‘small entity,’’ the statute permits agencies to formulate their own definitions. The Commission has adopted definitions for the term ‘‘small entity’’ for the purposes of Commission rulemaking in accordance with the RFA. Those definitions, as relevant to this proposed rulemaking, are set forth in Rule 0–10 under the Exchange Act, 17 CFR 240.0–10. See Exchange Act Release No. 18451 (Jan. 28, 1982), 47 FR 5215 (Feb. 4, 1982) (File No. AS– 305). 653 17 CFR 240.17a–5(d). 654 See 17 CFR 240.0–10(c). See also 17 CFR 240.0–10(i) (providing that a broker or dealer is affiliated with another person if: such broker or dealer controls, is controlled by, or is under common control with such other person; a person shall be deemed to control another person if that person has the right to vote 25% or more of the voting securities of such other person or is entitled to receive 25% or more of the net profits of such other person or is otherwise able to direct or cause the direction of the management or policies of such other person; or such broker or dealer introduces transactions in securities, other than registered investment company securities or interests or participations in insurance company separate accounts, to such other person, or introduces accounts of customers or other brokers or dealers, other than accounts that hold only registered investment company securities or interests or participations in insurance company separate accounts, to such other person that carries such accounts on a fully disclosed basis). 651 5 652 Although E:\FR\FM\18APP3.SGM 18APP3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules ddrumheller on DSK120RN23PROD with PROPOSALS3 natural person) that is not a small business or small organization. With respect to a clearing agency, a small entity is a clearing agency that: (1) compared, cleared and settled less than $500 million in securities transactions during the preceding fiscal year (or in the time that it has been in business, if shorter); (2) had less than $200 million of funds and securities in its custody or control at all times during the preceding fiscal year (or in the time that it has been in business, if shorter); and (3) is not affiliated with any person (other than a natural person) that is not a small business or small organization.655 When used with reference to an ‘‘issuer’’ or a ‘‘person,’’ other than an investment company, a small entity includes an ‘‘issuer’’ or ‘‘person’’ that, on the last day of its most recent fiscal year, had total assets of $5 million or less.656 A. Regulatory Flexibility Act Certification The Commission currently believes that no national securities exchange, Security Futures Product Exchange, or national securities association is a ‘‘small entity’’ as currently defined. With regard to clearing agencies, based on publicly reported data the Commission does not believe that any registered or exempt clearing agency is a ‘‘small entity’’ as currently defined. With respect to registrants subject to Rule 17a–12, based upon financial reports and other information filed with the Commission by such entities, none of the entities subject to Rule 17a–12 is a ‘‘small entity’’ as currently defined. With respect to SBS Entities, based on feedback from market participants and staff experience with the security-based swap markets, and consistent with the Commission’s position in prior DoddFrank Act rulemakings, the Commission continues to believe that (1) the types of entities that register with the Commission as SBSDs (i.e., because they engage in more than a de minimis amount of dealing activity involving security-based swaps)—which generally would be large financial institutions— would not be ‘‘small entities’’ for purposes of the RFA and (2) the types of entities that may have security-based swap positions above the level required to be MSBSPs would not be ‘‘small entities’’ for purposes of the RFA.657 The Commission thus continues to 655 17 CFR 240.0–10(d). CFR 240.0–10(a). 657 See Registration Process for Security-Based Swap Dealers and Major Security-Based Swap Participants, Exchange Act Release No. 75611 (Aug. 5, 2015), 80 FR 48964, 49013 (Aug. 14, 2015); Prohibition Against Fraud, Manipulation, or Deception in Connection with Security-Based 656 17 VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 believe that SBS Entities providing notices (and any amendments to the notices) required by Rule 15fi–3(c) 658 or filing annual reports required by Rule 18a–7 would not be ‘‘small entities’’ for purposes of the RFA. The Commission also continues to expect that all Relying Entities making use of the ANE Exception from the de minimis threshold to SBSD status also would not be ‘‘small entities’’ for purposes of the RFA.659 As a result, the Commission believes that any Registered Entity filing an ANE Exception Notice or withdrawal of an ANE Exception Notice also would not be a ‘‘small entity.’’ 660 Consequently, the Commission certifies that the proposed amendments would not, if adopted, have a significant economic impact on a substantial number of small entities that are described in the foregoing paragraph. The Commission encourages written comments regarding this certification. The Commission solicits comment as to whether the proposed amendments could have impacts on small entities that have not been considered. The Commission requests that commenters describe the nature of any impacts on small entities and provide empirical data to support the extent of such effect. Persons wishing to submit written comments should refer to the instructions for submitting comments located at the front of this release. B. Initial Regulatory Flexibility Analysis This Initial Regulatory Flexibility Act Analysis (‘‘IRFA’’) has been prepared, and been made available for public Swaps; Prohibition against Undue Influence over Chief Compliance Officers; Position Reporting of Large Security-Based Swap Positions, Exchange Act Release No. 93784 (Dec. 15, 2021), 87 FR 6652, 6702–03 (Feb 4, 2022). 658 See Risk Mitigation Adopting Release, 85 FR at 6411–12. 659 See Cross-Border Adopting Release, 85 FR at 6345. 660 The ‘‘small entity’’ definition applied to brokers excludes brokers that are affiliated with a person that is not a ‘‘small entity.’’ See Exchange Act Rule 0–10(c)(2), 17 CFR 240.0–10(c)(2). Because the Commission does not expect any Relying Entity to be a ‘‘small entity’’ for purpose of the RFA, any affiliated broker serving as the Registered Entity for purposes of the ANE Exception also would not be a ‘‘small entity.’’ See Cross-Border Adopting Release, 85 FR at n.737. Moreover, any registered SBSD serving as the Registered Entity for purposes of the ANE Exception would likely be registered as such because it engages in security-based swap dealing above the de minimis threshold, and therefore also would not, in the Commission’s view, be a ‘‘small entity.’’ See supra note 689 and accompanying text. Even in the unlikely event that some Relying Entities satisfy the ANE Exception’s conditions via the use of an affiliated Registered Entity that is a registered security-based swap dealer and a ‘‘small entity’’ for purposes of the RFA, the Commission continues to believe that there would not be a substantial number of such entities. See Cross-Border Adopting Release, 85 FR at 6345. PO 00000 Frm 00085 Fmt 4701 Sfmt 4702 24003 comment, in accordance with the RFA.661 It relates to the proposed amendments to Rule 17a–5. As stated above, based on experience with the staff no-action letter permitting the voluntary filing of broker-dealer annual reports on EDGAR, the staff estimates that approximately 1,559 broker-dealers file their annual reports with the Commission in paper. Based upon staff experience, the Commission estimates that almost all of these 1,559 brokerdealers are ‘‘small entities’’ (that is, such broker-dealers would, individually, have total capital (net worth plus subordinated liabilities) of less than $500,000 on the last day of the preceding fiscal year (or in the time that it has been in business, if shorter)). As required by the RFA, this IRFA describes the impact of these proposed amendments on small entities.662 C. Reasons for, and Objectives of, the Proposed Action In general, the proposed amendments to Rule 17a–5 that implicate brokerdealers that are small entities would require that a broker-dealer: (1) file its annual reports and related annual filings electronically on EDGAR using structured data; and (2) keep the original notarized oath or affirmation for a period of not less than six years, the first two in an easily accessible place in accordance with the requirements of Rule 17a–4.663 As stated above, it has been the staff’s experience that electronic filing has been practical and efficient. It also has been the staff’s experience that electronic filing has been positively received by the broker-dealers who are currently filing their annual reports electronically on EDGAR. Based on these positive experiences with electronic filing and as part of its efforts to modernize the methods by which it collects information from registrants, the Commission is proposing to amend certain rules and forms, including certain rules and forms that would impact broker-dealers that are small entities. With respect to the proposed structured data requirements, XBRL requirements for public company financial statements have been observed to increase the ease and efficiency of 661 5 U.S.C. 601 et seq. U.S.C. 603. 663 17 CFR 240.17a–5. The proposed amendments to the FOCUS Report that impact broker-dealers are limited to stand-alone swap dealers which are not expected to be small entities. The proposed amendment to allow electronic signatures will not impact small broker-dealers because they will continue to have the option to use manual signatures. 662 5 E:\FR\FM\18APP3.SGM 18APP3 24004 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules analyzing those structured disclosures (e.g., allowing for efficient comparisons of disclosures across multiple reporting entities and multiple time periods).664 Such benefits have encompassed small public companies as well as large public companies, and have accrued to both public and regulatory entities.665 Therefore, the staff believes the proposed structured data requirements under the proposed amendments would facilitate the use of the information reported by broker-dealers in their annual reports and related filings. D. Legal Basis The Commission is proposing the amendments in this release under the authority set forth in sections 6, 7, 8, 10, and 19(a) of the Securities Act of 1933,666 sections 3, 12, 13, 14, 15, 15A, 15F, 17, 17A, 19, 23, 30, and 35A of the Securities Exchange Act of 1934,667 section 319 of the Trust Indenture Act of 1939,668 sections 8, 30, 31, and 38 of the Investment Company Act of 1940 669 and section 761(b) of the Dodd-Frank Act.670 E. Small Entities Subject to the Proposed Rules The proposed changes would affect some broker-dealers that are small entities. For purposes of Commission rulemaking in connection with the RFA,671 a small entity includes a broker or dealer that: (1) had total capital (net worth plus subordinated liabilities) of less than $500,000 on the date in the prior fiscal year as of which its audited financial statements were prepared pursuant to paragraph (d) of Rule 17a– 5 under the Exchange Act,672 or, if not required to file such statements, a broker-dealer with total capital (net worth plus subordinated liabilities) of less than $500,000 on the last day of the preceding fiscal year (or in the time that it has been in business, if shorter); and (2) is not affiliated with any person (other than a natural person) that is not 664 See supra section X.C.1.b. supra notes 235 and 501. 666 15 U.S.C. 77f, 77g, 77h, 77j, and 77s(a). 667 15 U.S.C. 78c, 78l, 78m, 78n, 78o, 78o–3, 78o– 10, 78q, 78q–1, 78s, 78w, 78dd and 78ll. 668 15 U.S.C. 77sss. 669 15 U.S.C. 80a–8, 80a–29, 80a–30, and 80a–37. 670 15 U.S.C. 8341. 671 Although Section 601(b) of the RFA defines the term ‘‘small entity,’’ the statute permits agencies to formulate their own definitions. The Commission has adopted definitions for the term ‘‘small entity’’ for the purposes of Commission rulemaking in accordance with the RFA. Those definitions, as relevant to this proposed rulemaking, are set forth in Rule 0–10 under the Exchange Act, 17 CFR 240.0–10. See Exchange Act Release No. 18451 (Jan. 28, 1982), 47 FR 5215 (Feb. 4, 1982) (File No. AS– 305). 672 17 CFR 240.17a–5(d). ddrumheller on DSK120RN23PROD with PROPOSALS3 665 See VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 a small business or small organization.673 F. Reporting, Recordkeeping, and Other Compliance Requirements As noted above, the purpose of the proposed amendments to Rule 17a–5 that would impact a broker-dealer that is a small entity is to require a brokerdealer to: (1) file its annual reports on EDGAR using structured data; and (2) keep the original notarized oath or affirmation attached to the annual reports for a period of not less than six years, the first two in an easily accessible place in accordance with the requirements of Rule 17a–4. The Commission does not believe that the compliance costs of the proposed amendments relating to the requirement to file on EDGAR will be significant. The Commission does expect that smaller entities that are broker-dealers will need to familiarize themselves with the EDGAR system. However, the Commission does not believe that the familiarization process will be particularly burdensome. In support of its belief in this regard, the Commission notes that approximately 1,659 brokerdealers have chosen to voluntarily file their respective annual reports on EDGAR, and the Commission estimates that a large majority of these brokerdealers are small entities. Furthermore, with respect to the proposed structured data requirements, the Commission believes the related compliance costs for broker-dealers that are small entities would be modest and would continue to decrease over time. The Commission bases this belief on observed trends in XBRL compliance costs for small public companies.674 The Commission also believes that there will be benefits to small entities resulting from filing on EDGAR. For example, once a smaller entity has familiarized itself with EDGAR, that 673 See 17 CFR 240.0–10(c). See also 17 CFR 240.0–10(i) (providing that a broker or dealer is affiliated with another person if: such broker or dealer controls, is controlled by, or is under common control with such other person; a person shall be deemed to control another person if that person has the right to vote 25% or more of the voting securities of such other person or is entitled to receive 25% or more of the net profits of such other person or is otherwise able to direct or cause the direction of the management or policies of such other person; or such broker or dealer introduces transactions in securities, other than registered investment company securities or interests or participations in insurance company separate accounts, to such other person, or introduces accounts of customers or other brokers or dealers, other than accounts that hold only registered investment company securities or interests or participations in insurance company separate accounts, to such other person that carries such accounts on a fully disclosed basis). 674 See supra note 516. PO 00000 Frm 00086 Fmt 4701 Sfmt 4702 entity can be confident that required filings will be timely because the public portion of the filing is immediately available on the Commission’s website and the filer has received a confirming email. The Commission believes that such regulatory certainty is of benefit to registrants generally, including brokerdealers that are small entities. With respect to the requirement to maintain a copy of the oath or affirmation, the Commission does not believe this requirement will be unduly burdensome to small entities that are broker-dealers. A broker-dealer filing its annual reports in paper maintains a hard copy of the filing cover sheet as a record of the oath or affirmation. The proposed amendment in paragraph (e)(2)(iii) of Rule 17a–5 is designed to ensure that this requirement is preserved in the context of a brokerdealer filing its annual reports electronically on EDGAR. G. Duplicative, Overlapping, or Conflicting Federal Rules The Commission does not believe that the proposed amendments impacting smaller entities that are broker-dealers would duplicate, overlap, or conflict with other Federal Rules. H. Significant Alternatives The RFA directs the Commission to consider alternatives that would accomplish our stated objectives, while minimizing any significant economic impact on small entities. The Commission considered alternatives with respect to whether to utilize the EDGAR system. However, given that approximately half of all broker-dealers are voluntarily utilizing EDGAR for filing their respective annual audit reports, and that EDGAR is an existing system that is available for immediate use, the Commission does not believe that alternative electronic platforms would be practical or efficient. Further, developing an alternative technology platform for intake of annual audit reports or change in SRO membership would be time consuming and expensive relative to using an existing Commission system that is in use by a large number of broker-dealers. The Commission considered exempting small entities from the EDGAR-filing requirement and allowing small entities to make submissions via dedicated email or similar means, but there are significant efficiencies for Commission staff and other users of regulatory disclosure information in having the forms submitted to a single, uniform platform, and, as mentioned, EDGAR is the Commission’s existing platform for the receipt and publication (in the case E:\FR\FM\18APP3.SGM 18APP3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules ddrumheller on DSK120RN23PROD with PROPOSALS3 of non-confidential submission) of such information. Exempting small entities from the EDGAR-filing requirement would make aggregation of the data from regulatory disclosures less complete, which could detract from the usefulness of such data in illustrating the conditions of Commission-regulated entities in the financial markets. The Commission also considered alternatives with respect to the proposed structured data requirements, including the alternative of removing broker-dealers that are smaller entities from the structured data requirements.675 However, given users of the information disclosed by brokerdealers would be required to manually collect unstructured data in order to analyze it (or rely on third parties to do so), the Commission believes any cost savings arising from such an alternative would not justify the limitations and difficulties that would arise for investors, other market participants, and/or regulatory users of the disclosures. Likewise, the Commission considered changing the actual forms themselves— either by consolidating or simplifying the information to be submitted—for small entities, but allowing a subset of entities to submit different forms—and accompanying information—would reduce the usability and comparability of the information contained in disclosures. The Commission does not believe that the cost savings that might arise from devising different forms for small entities would justify the limitations and difficulties that would arise for investors, market participants and/or regulatory users of the information.676 Finally, the Commission considered allowing small broker-dealers a longer timeframe to file on EDGAR so they have time to familiarize themselves with the system, but given that a staff noaction letter already does not object to small broker-dealers filing their annual reports within a longer timeframe so long as they file on EDGAR,677 an additional extension of time would not provide meaningful additional benefit to these entities and could result in inordinately stale financial data being 675 See supra section X.E.1. 676 To be clear, this proposal would not require small entities to submit more—or different— information on particular forms. As mentioned previously, the proposal would not change the substantive content of Commission forms with this rulemaking, but would change the manner in which such forms are submitted to the Commission. 677 See Order Extending the Annual Audits Filing Deadline for Certain Smaller Broker-Dealers, Exchange Act release no. 91128 (Feb. 12, 2021), 86 FR 10372 (Feb. 19, 2021). VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 available to the Commission staff, investors and other market participants. I. Request for Comment The Commission encourages the submission of comments with respect to any aspect of this IRFA. In particular, the Commission requests comment regarding: 107. Are there are more efficient or less burdensome ways for the Commission to modernize its collection of information from registrants compared to what the Commission has proposed? 108. What are the number of small entities that may be affected by the proposed rule amendments? 109. What is the existence or nature of the potential impact of the proposed amendments on small entities and would the proposed amendments would have any effects that have not been discussed in the analysis? 110. Are there are any Federal rules that duplicate, overlap, or conflict with the proposed amendments? XII. Small Business Regulatory Enforcement Fairness Act For purposes of the Small Business Regulatory Enforcement Fairness Act of 1996 (‘‘SBREFA’’),678 the Commission must advise OMB as to whether the proposed amendments constitute a ‘‘major’’ rule. Under SBREFA, a rule is considered ‘‘major’’ where, if adopted, it results or is likely to result in: • An annual effect on the U.S. economy of $100 million or more (either in the form of an increase or decrease); • A major increase in costs or prices for consumers or individual industries; or • Significant adverse effects on competition, investment, or innovation. The Commission requests comment on whether the proposal would be a ‘‘major rule’’ for purposes of SBREFA. In particular, we request comment and empirical data on: • The potential effect on the U.S. economy on an annual basis; • Any potential increase in costs or prices for consumers or individual industries; and • Any potential effect on competition, investment, or innovation. Statutory Authority The amendments contained in this release are being proposed under the authority in sections 6, 7, 8, 10, and 19(a) of the Securities Act of 1933,679 sections 3, 12, 13, 14, 15, 15A, 15F, 17, 678 Public Law 104–121, Title II, 110 Stat. 857 (1996) (codified in various sections of 5 U.S.C., 15 U.S.C., and as a note in 5 U.S.C. 601). 679 15 U.S.C. 77f, 77g, 77h, 77j, and 77s(a). PO 00000 Frm 00087 Fmt 4701 Sfmt 4702 24005 17A, 19, 23, 30, and 35A of the Securities Exchange Act of 1934,680 section 319 of the Trust Indenture Act of 1939,681 sections 8, 30, 31, and 38 of the Investment Company Act of 1940 682 and section 761(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act.683 List of Subjects 17 CFR Part 202 Administrative Practice and Procedure, Securities. 17 CFR Part 232 Reporting and recordkeeping requirements, Securities. 17 CFR Part 240 Brokers, Fraud, Reporting and recordkeeping requirements, Securities, Swaps. 17 CFR Part 249 Brokers, Reporting and recordkeeping requirements, Securities. 17 CFR Part 249b Brokers, Reporting and recordkeeping requirements. Text of the Amendments In accordance with the foregoing, title 17, chapter II of the Code of Federal Regulations is proposed to be amended as follows: PART 202—INFORMAL AND OTHER PROCEDURES 1. The authority citation for part 202 continues to read as follows: ■ Authority: 15 U.S.C. 77s, 77t, 77sss, 77uuu, 78d–1, 78u, 78w, 78ll(d), 80a–37, 80a–41, 80b–9, 80b–11, 7201 et seq., unless otherwise noted. 2. Amend § 202.3 by revising the first two sentences of paragraph (b)(2) and revising paragraph (b)(3) to read as follows: ■ § 202.3 Processing of filings. * * * * * (b) * * * (2) Applications for registration as national securities exchanges, or exemption from registration as exchanges by reason of such exchanges’ limited volume of transactions filed with the Commission are routed to the Division of Trading and Markets, which examines these applications to determine whether all necessary information has been supplied and 680 15 U.S.C. 78c, 78l, 78m, 78n, 78o, 78o–3, 78o– 10, 78q, 78q–1, 78s, 78w, 78dd and 78ll. 681 15 U.S.C. 77sss. 682 15 U.S.C. 80a–8, 80a–29, 80a–30, and 80a–37. 683 15 U.S.C. 8341. E:\FR\FM\18APP3.SGM 18APP3 24006 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules whether all required financial statements and other documents have been furnished in proper form. Defective applications may be returned. * * * (3) Notice forms for registration as national securities exchanges pursuant to Section 6(g)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 78f(g)(1)) filed with the Commission are routed to the Division of Trading and Markets, which examines these notices to determine whether all necessary information has been supplied and whether all other required documents have been furnished in proper form. Defective notices may be returned. PART 232 REGULATION S–T— GENERAL RULES AND REGULATIONS FOR ELECTRONIC FILINGS 3. The general authority citation for part 232 is revised to read as follows: ■ Authority: 15 U.S.C. 77c, 77f, 77g, 77h, 77j, 77s(a), 77z–3, 77sss(a), 78c(b), 78l, 78m, 78n, 78o(d), 78o–10, 78w(a), 78ll, 80a–6(c), 80a– 8, 80a–29, 80a–30, 80a–37, 80b–4, 80b–6a, 80b–10, 80b–11, 7201 et seq.; and 18 U.S.C. 1350, unless otherwise noted. * * * * * 4. Amend § 232.100 by revising paragraph (c) to read as follows: ■ § 232.100 Persons and entities subject to mandated electronic filing. * * * * * (c) Persons or entities whose filings are subject to review by the Division of Trading and Markets; and * * * * * ■ 5. Amend § 232.101 by: ■ a. Adding new paragraphs (a)(1)(xxxii), (xxxiii), (xxxiv), and (xxxv); ■ b. Revising paragraph (c)(9); and ■ c. Revising paragraph (d). The revisions and additions read as follows: ddrumheller on DSK120RN23PROD with PROPOSALS3 § 232.101 Mandated electronic submissions and exceptions. (a) * * * (1) * * * (xxxii)(A) The annual reports filed with the Commission under § 240.17a– 5(d) of this chapter, the supplemental reports and statements filed with the Commission under § 240.17a–5(k) of this chapter, the annual reports filed with the Commission under § 240.17a– 12(b) of this chapter, the accountant’s reports filed with the Commission under § 240.17a–12(k), (l), and (m) of this chapter, the reports filed with the Commission under § 240.17a–19 of this chapter, and the annual reports filed with the Commission under § 240.18a– 7(c) of this chapter. The submissions must be made on EDGAR in the VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 electronic format required by the EDGAR Filer Manual, as defined in 17 CFR 232.11 (Rule 11 of Regulation S–T), and must be filed in accordance with the requirements of part 232 (Regulation S–T). (B) The reports filed and furnished, as applicable, with the Commission under § 240.17h–2T of this chapter. The submissions must be made on EDGAR in the electronic format required by the EDGAR Filer Manual, as defined in Rule 11 of Regulation S–T, and must be filed in accordance with the requirements of Regulation S–T. (xxxiii) Notices (and withdrawals of notices) filed with the Commission pursuant to § 240.3a71–3(d)(1)(vi) of this chapter (Rule 3a71–3(d)(1)(vi)). (xxxiv) Notices (and amendments, including notices of dispute termination) provided to the Commission pursuant to § 240.15fi–3(c) of this chapter (Rule 15fi–3(c)); and (xxxv) Compliance reports submitted with the Commission pursuant to § 240.15fk–1(c)(2)(ii)(A) of this chapter (Rule 15fk–1(c)(2)(ii)(A)). * * * * * (c) * * * (9) Exchange Act filings submitted to the Division of Trading and Markets other than those that are submitted in electronic format as mandated or permitted electronic submissions under paragraph (a) and (b) of this section or that are submitted electronically in a filing system other than EDGAR; * * * * * (d) The following must be filed in electronic format: (1) All documents, including any information with respect to which confidential treatment is requested, filed pursuant to section 13(n) (15 U.S.C. 78m(n)) and section 13(f) (15 U.S.C. 78m(f)) of the Exchange Act and the rules and regulations thereunder; (2) All documents, including any information with respect to which confidential treatment is requested, filed pursuant to §§ 240.17a–5(d), 240.17a– 5(k), 240.17a–12(b), 240.17a–12(k) through (m), 240.17a–19, 240.17h–2T, or 240.18a–7(c) of this chapter; and (3) All notices (and amendments, including notices of dispute termination), including any information with respect to which confidential treatment is requested, provided to the Commission pursuant to § 240.15fi–3(c) of this chapter. § 232.201 [Amended] 6. Amend § 232.201 by adding to paragraph (a) the phrase ‘‘a notice or withdrawal of a notice filed with the Commission pursuant to Rule 3a71– ■ PO 00000 Frm 00088 Fmt 4701 Sfmt 4702 3(d)(1)(vi) (§ 240.3a71–3(d)(1)(vi) of this chapter) under the Exchange Act (15 U.S.C. 78a et seq.),’’ after ‘‘an application for an order under any section of the Investment Advisers Act of 1940 (15 U.S.C. 80b–1 et seq.),’’ and before ‘‘an Interactive Data File (§ 232.11),’’. § 232.202 [Amended] 7. Amend § 232.202 by adding to paragraph (a) the phrase ‘‘a notice or withdrawal of a notice filed with the Commission pursuant to Rule 3a71– 3(d)(1)(vi) (§ 240.3a71–3(d)(1)(vi) of this chapter) under the Exchange Act (15 U.S.C. 78a et seq.),’’ after ‘‘a Form D (§ 239.500 of this chapter),’’ and before ‘‘or an Asset Data File (§ 232.11),’’. ■ 8. Amend § 232.405 by: ■ a. Revising the introductory text, paragraphs (a)(2), (a)(3)(i) introductory text, (a)(3)(ii), (a)(4), and (b)(1) introductory text; ■ b. Redesignating paragraph (b)(5)(i) as (b)(5)(vi); ■ c. Adding paragraphs (b)(5)(i) through (v); and ■ d. Revising Note 1 to § 232.405. The revisions and additions read as follows: ■ § 232.405 Interactive Data File submissions. This section applies to electronic filers that submit Interactive Data Files. Section 229.601(b)(101) of this chapter (Item 601(b)(101) of Regulation S–K), General Instruction F of § 249.311 (Form 11–K), §§ 240.15fk–1(c)(2)(ii)(A), 240.17a–5(d)(6)(i), 240.17a–5(k)(2), 240.17a–12(b)(6), 240.17a–12(k), 240.17a–12(l), 240.17a–12(m), 240.17h– 2T(a)(2), and 240.18a–7(c)(6) of this chapter (Rules 15fk–1(c)(2)(ii)(A), 17a– 5(d)(6)(i), 17a–5(k)(2), 17a–12(b)(6), 17a–12(k), 17a–12(l), 17a–12(m), 17h– 2T(a)(2), and 18a–7(c)(6) under the Exchange Act), paragraph (101) of Part II—Information Not Required to be Delivered to Offerees or Purchasers of § 239.40 of this chapter (Form F–10), paragraph 101 of the Instructions as to Exhibits of § 249.220f of this chapter (Form 20–F), paragraph B.(15) of the General Instructions to § 249.240f of this chapter (Form 40–F), paragraph C.(6) of the General Instructions to § 249.306 of this chapter (Form 6–K), § 240.17ad– 27(d) of this chapter (Rule 17ad–27(d) under the Exchange Act), Note D.5 of § 240.14a–101 of this chapter (Rule 14a– 101 under the Exchange Act), Item 1 of § 240.14c–101 of this chapter (Rule 14c– 101 under the Exchange Act), General Instruction C.3.(g) of §§ 239.15A and 274.11A of this chapter (Form N–1A), General Instruction I of §§ 239.14 and 274.11a–1 of this chapter (Form N–2), E:\FR\FM\18APP3.SGM 18APP3 ddrumheller on DSK120RN23PROD with PROPOSALS3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules General Instruction C.3.(h) of §§ 239.17a and 274.11b of this chapter (Form N–3), General Instruction C.3.(h) of §§ 239.17b and 274.11c of this chapter (Form N–4), General Instruction C.3.(h) of §§ 239.17c and 274.11d of this chapter (Form N–6), General Instruction C.4 of §§ 249.331 and 274.128 of this chapter (Form N– CSR), General Instruction A of § 249.1 of this chapter (Form 1), and General Instruction A of § 249b.200 of this chapter (Form CA–1) specify when electronic filers are required or permitted to submit an Interactive Data File (§ 232.11), as further described in note 1 to this section. This section imposes content, format and submission requirements for an Interactive Data File, but does not change the substantive content requirements for the financial and other disclosures in the Related Official Filing (§ 232.11). (a) * * * (2) Be submitted only by an electronic filer either required or permitted to submit an Interactive Data File as specified by § 229.601(b)(101) of this chapter (Item 601(b)(101) of Regulation S–K), General Instruction F of § 249.311 (Form 11–K), §§ 240.15fk–1(c)(2)(ii)(A), 240.17a–5(d)(6)(i), 240.17a–5(k)(2), 240.17a–12(b)(6), 240.17a–12(k), 240.17a–12(l), 240.17a–12(m), 240.17h– 2T(a)(2), and 240.18a–7(c)(6) of this chapter (Rules 15fk–1(c)(2)(ii)(A), 17a– 5(d)(6)(i), 17a–5(k)(2), 17a–12(b)(6), 17a–12(k), 17a–12(l), 17a–12(m), 17h– 2T(a)(2), and 18a–7(c)(6) under the Exchange Act), paragraph (101) of Part II—Information Not Required to be Delivered to Offerees or Purchasers of § 239.40 of this chapter (Form F–10), paragraph 101 of the Instructions as to Exhibits of § 249.220f of this chapter (Form 20–F), paragraph B.(15) of the General Instructions to § 249.240f of this chapter (Form 40–F), paragraph C.(6) of the General Instructions to § 249.306 of this chapter (Form 6–K), § 240.17ad– 27(d) of this chapter (Rule 17ad–27(d) under the Exchange Act), Note D.5 of § 240.14a–101 of this chapter (Rule 14a– 101 under the Exchange Act), Item 1 of § 240.14c–101 of this chapter (Rule 14c– 101 under the Exchange Act), General Instruction C.3.(g) of §§ 239.15A and 274.11A of this chapter (Form N–1A), General Instruction I of §§ 239.14 and 274.11a–1 of this chapter (Form N–2), General Instruction C.3.(h) of §§ 239.17a and 274.11b of this chapter (Form N–3), General Instruction C.3.(h) of §§ 239.17b and 274.11c of this chapter (Form N–4), General Instruction C.3.(h) of §§ 239.17c and 274.11d of this chapter (Form N–6), General Instruction C.4 of §§ 249.331 and 274.128 of this chapter (Form N– CSR), General Instruction A of § 249.1 of this chapter (Form 1), or General VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 Instruction A of § 249b.200 of this chapter (Form CA–1), as applicable; (3) * * * (i) If the electronic filer is not a management investment company registered under 15 U.S.C. 80a et seq. (the Investment Company Act of 1940), or a separate account as defined in 15 U.S.C. 77b(a)(14) (Section 2(a)(14) of the Securities Act) registered under the Investment Company Act of 1940, or a business development company as defined in 15 U.S.C. 80a–2(a)(48) (Section 2(a)(48) of the Investment Company Act of 1940), an entity subject to §§ 240.15fk–1, 240.17a–5, 240.17a– 12, 240.17h–2T, or 240.18a–7 of this chapter (Rule 15fk–1, 17a–5, 17a–12, 17h–2T, or 18a–7 under the Exchange Act), an exchange as defined in 15 U.S.C. 78c(a)(1) (Section 3(a)(1) of the Exchange Act), or a clearing agency as defined in 15 U.S.C. 78c(a)(23)(A) (Section 3(a)(23)(A) of the Exchange Act), and is not within one of the categories specified in paragraph (f)(1)(i) of this section, as partly embedded into a filing with the remainder simultaneously submitted as an exhibit to: * * * * * (ii) If the electronic filer is a management investment company registered under 15 U.S.C. 80a et seq. (the Investment Company Act of 1940), or a separate account (as defined in 15 U.S.C. 77b(a)(14) (Section 2(a)(14) of the Securities Act)) registered under the Investment Company Act of 1940, or a business development company as defined in 15 U.S.C. 80a–2(a)(48) (Section 2(a)(48) of the Investment Company Act of 1940), an entity subject to §§ 240.15fk–1, 240.17a–5, 240.17a– 12, 240.17h–2T, or 240.18a–7 of this chapter (Rule 15fk–1, 17a–5, 17a–12, 17h–2T, or 18a–7 under the Exchange Act), an exchange as defined in 15 U.S.C. 78c(a)(1) (Section 3(a)(1) of the Exchange Act), or a clearing agency as defined in 15 U.S.C. 78c(a)(23)(A) (Section 3(a)(23)(A) of the Exchange Act), and is not within one of the categories specified in paragraph (f)(1)(ii) of this section, as partly embedded into a filing with the remainder simultaneously submitted as an exhibit to a filing that contains the disclosure this section requires to be tagged; and (4) Be submitted in accordance with the EDGAR Filer Manual and, as applicable, § 229.601(b)(101) of this chapter (Item 601(b)(101) of Regulation S–K), General Instruction F of § 249.311 of this chapter (Form 11–K), §§ 240.15fk–1(c)(2)(ii)(A), 240.17a– 5(d)(6)(i), 240.17a–5(k)(2), 240.17a– PO 00000 Frm 00089 Fmt 4701 Sfmt 4702 24007 12(b)(6), 240.17a–12(k), 240.17a–12(l), 240.17a–12(m), 240.17h–2T(a)(2), and 240.18a–7(c)(6) of this chapter (Rules 15fk–1(c)(2)(ii)(A), 17a–5(d)(6)(i), 17a– 5(k)(2), 17a–12(b)(6), 17a–12(k), 17a– 12(l), 17a–12(m), 17h–2T(a)(2), and 18a– 7(c)(6) under the Exchange Act)15fk–1, paragraph (101) of Part II—Information Not Required to be Delivered to Offerees or Purchasers of § 239.40 of this chapter (Form F–10), paragraph 101 of the Instructions as to Exhibits of § 249.220f of this chapter (Form 20–F), paragraph B.(15) of the General Instructions to § 249.240f of this chapter (Form 40–F), paragraph C.(6) of the General Instructions to § 249.306 of this chapter (Form 6–K), § 240.17ad–27(d) of this chapter (Rule 17ad–27(d) under the Exchange Act), Note D.5 of § 240.14a– 101 of this chapter (Rule 14a–101 under the Exchange Act), Item 1 of § 240.14c– 101 of this chapter (Rule 14c–101 under the Exchange Act), General Instruction C.3.(g) of §§ 239.15A and 274.11A of this chapter (Form N–1A), General Instruction I of §§ 239.14 and 274.11a– 1 of this chapter (Form N–2), General Instruction C.3.(h) of §§ 239.17a and 274.11b of this chapter (Form N–3), General Instruction C.3.(h) of §§ 239.17b and 274.11c of this chapter (Form N–4), General Instruction C.3.(h) of §§ 239.17c and 274.11d of this chapter (Form N–6); General Instruction C.4 of §§ 249.331 and 274.128 of this chapter (Form N– CSR); General Instruction A of § 249.1 of this chapter (Form 1); or General Instruction A of § 249b.200 of this chapter (Form CA–1). (b) * * * (1) If the electronic filer is not a management investment company registered under 15 U.S.C. 80a et seq. (the Investment Company Act of 1940), a separate account as defined in 15 U.S.C. 77b(a)(14) (Section 2(a)(14) of the Securities Act) registered under the Investment Company Act of 1940, a business development company as defined in 15 U.S.C. 80a–2(a)(48) (Section 2(a)(48) of the Investment Company Act of 1940), an entity subject to §§ 240.15fk–1, 240.17a–5, 240.17a– 12, 240.17h–2T, or 240.18a–7 of this chapter (Rule 15fk–1, 17a–5, 17a–12, 17h–2T, or 18a–7 under the Exchange Act), an exchange as defined in 15 U.S.C. 78c(a)(1) (Section 3(a)(1) of the Exchange Act), or a clearing agency as defined in 15 U.S.C. 78c(a)(23)(A) (Section 3(a)(23) of the Exchange Act), an Interactive Data File must consist of only a complete set of information for all periods required to be presented in the corresponding data in the Related E:\FR\FM\18APP3.SGM 18APP3 24008 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules ddrumheller on DSK120RN23PROD with PROPOSALS3 Official Filing, no more and no less, from all of the following categories: * * * * * (5) If an electronic filer is an entity subject to §§ 240.15fk–1, 240.17a–5, 240.17a–12, 240.17h–2T, or 240.18a–7 of this chapter (Rule 15fk–1, 17a–5, 17a–12, 17h–2T, or 18a–7 under the Exchange Act), an exchange as defined in 15 U.S.C. 78c(a)(1) (Section 3(a)(1) of the Exchange Act), or a clearing agency as defined in 15 U.S.C. 78c(a)(23)(A) (Section 3(a)(23)(A) of the Exchange Act), an Interactive Data File must consist of only a complete set of information for all periods required to be presented in the corresponding data in the Related Official Filing, no more and no less, from all of the following categories, as applicable: (i) For electronic filers of § 249.517 of this chapter (Part III of Form X–17A–5): the disclosures required by Items (a) through (y) of that Form. (ii) The disclosure provided pursuant to Item 4 of § 249.328T of this chapter (Form 17–H). (iii) The report provided pursuant to § 240.15fk–1(c)(2)(ii)(A) of this chapter (Rule 15fk–1(c)(2)(ii)(A) under the Exchange Act). (iv) The exhibits specified by General Instruction A to § 249.1 of this chapter (Form 1). (v) The disclosure provided pursuant to Schedule A and Exhibits C, F, H, J, K, L, M, O, R, and S to § 249b.200 of this chapter (Form CA–1). (vi) The information provided pursuant to § 240.17ad–27 of this chapter (Rule 17ad–27 under the Exchange Act). * * * * * Note 1 to § 232.405: Section 229.601(b)(101) of this chapter (Item 601(b)(101) of Regulation S–K) specifies the circumstances under which an Interactive Data File must be submitted and the circumstances under which it is permitted to be submitted, with respect to § 239.11 of this chapter (Form S–1), § 239.13 of this chapter (Form S–3), § 239.25 of this chapter (Form S– 4), § 239.18 of this chapter (Form S–11), § 239.31 of this chapter (Form F–1), § 239.33 of this chapter (Form F–3), § 239.34 of this chapter (Form F–4), § 249.310 of this chapter (Form 10–K), § 249.308a of this chapter (Form 10–Q), and § 249.308 of this chapter (Form 8–K). General Instruction F of § 249.311 of this chapter (Form 11–K) specifies the circumstances under which an Interactive Data File must be submitted, and the circumstances under which it is permitted to be submitted, with respect to Form 11–K. Paragraph (101) of Part II— Information not Required to be Delivered to Offerees or Purchasers of § 239.40 of this chapter (Form F–10) specifies the circumstances under which an Interactive Data File must be submitted and the circumstances under which it is permitted to VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 be submitted, with respect to Form F–10. Paragraph 101 of the Instructions as to Exhibits of § 249.220f of this chapter (Form 20–F) specifies the circumstances under which an Interactive Data File must be submitted and the circumstances under which it is permitted to be submitted, with respect to Form 20–F. Paragraph B.(15) of the General Instructions to § 249.240f of this chapter (Form 40–F) and Paragraph C.(6) of the General Instructions to § 249.306 of this chapter (Form 6–K) specify the circumstances under which an Interactive Data File must be submitted and the circumstances under which it is permitted to be submitted, with respect to § 249.240f of this chapter (Form 40–F) and § 249.306 of this chapter (Form 6–K). Note D.5 of § 240.14a–101 of this chapter (Schedule 14A) and Item 1 of § 240.14c–101 of this chapter (Schedule 14C) specify the circumstances under which an Interactive Data File must be submitted with respect to Schedules 14A and 14C. Section 229.601(b)(101) (Item 601(b)(101) of Regulation S–K), paragraph (101) of Part II—Information not Required to be Delivered to Offerees or Purchasers of Form F–10, paragraph 101 of the Instructions as to Exhibits of Form 20–F, paragraph B.(15) of the General Instructions to Form 40–F, and paragraph C.(6) of the General Instructions to Form 6–K all prohibit submission of an Interactive Data File by an issuer that prepares its financial statements in accordance with 17 CFR 210.6–01 through 210.6–10 (Article 6 of Regulation S–X). For an issuer that is a management investment company or separate account registered under the Investment Company Act of 1940 (15 U.S.C. 80a et seq.) or a business development company as defined in 15 U.S.C. 80a–2(a)(48) (Section 2(a)(48) of the Investment Company Act of 1940), General Instruction C.3.(g) of §§ 239.15A and 274.11A of this chapter (Form N–1A), General Instruction I of §§ 239.14 and 274.11a–1 of this chapter (Form N–2), General Instruction C.3.(h) of §§ 239.17a and 274.11b of this chapter (Form N–3), General Instruction C.3.(h) of §§ 239.17b and 274.11c of this chapter (Form N–4), General Instruction C.3.(h) of §§ 239.17c and 274.11d of this chapter (Form N–6), and General Instruction C.4 of §§ 249.331 and 274.128 of this chapter (Form N–CSR), as applicable, specifies the circumstances under which an Interactive Data File must be submitted. For entities subject to §§ 240.15fk–1, 240.17a–5, 240.17a– 12, 240.17h–2T, or 240.18a–7 of this chapter (Rule 15fk–1, 17a–5, 17a–12, 17h–2T, or 18a– 7 under the Exchange Act), §§ 240.15fk– 1(c)(2)(ii)(A), 240.17a–5(d)(6)(i), 240.17a– 5(k)(2), 240.17a–12(b)(6), 240.17a–12(k), 240.17a–12(l), 240.17a–12(m), 240.17h– 2T(a)(2), and 240.18a–7(c)(6) of this chapter (Rules 15fk–1(c)(2)(ii)(A), 17a–5(d)(6)(i), 17a– 5(k)(2), 17a–12(b)(6), 17a–12(k), 17a–12(l), 17a–12(m), 17h–2T(a)(2), and 18a–7(c)(6) under the Exchange Act), as applicable, specify the circumstances under which an Interactive Data File must be submitted. For an exchange as defined in 15 U.S.C. 78c(a)(1) (Section 3(a)(1) of the Exchange Act), General Instruction A of § 249.1 of this chapter (Form 1) specifies the circumstances under which an Interactive Data File must be submitted. PO 00000 Frm 00090 Fmt 4701 Sfmt 4702 For a clearing agency as defined in 15 U.S.C. 78c(a)(23)(A) (Section 3(a)(23)(A) of the Exchange Act), General Instruction A of § 249.200b of this chapter (Form CA–1) specifies the circumstances under which an Interactive Data File must be submitted with respect to § 249.200b of this chapter (Form CA–1), and § 240.17ad–27(d) of this chapter (Rule 17ad–27(d) under the Exchange Act) specify the circumstances under which an Interactive Data File must be submitted with respect to the reports required under § 249.200b of this chapter (Form CA–1) and § 240.17ad–27 of this chapter (Rule 17ad–27 under the Exchange Act). PART 240—GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 1934 9. The authority citation for part 240 continues to read, in part, as follows: ■ Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z–2, 77z–3, 77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78c–3, 78c–5, 78d, 78e, 78f, 78g, 78i, 78j, 78j–1, 78j–4, 78k, 78k–1, 78l, 78m, 78n, 78n–1, 78o, 78o–4, 78o–10, 78p, 78q, 78q–1, 78s, 78u–5, 78w, 78x, 78dd, 78ll, 78mm, 80a–20, 80a–23, 80a–29, 80a–37, 80b– 3, 80b–4, 80b–11, 7201 et seq., and 8302; 7 U.S.C. 2(c)(2)(E); 12 U.S.C. 5221(e)(3); 18 U.S.C. 1350; and Pub. L. 111–203, 939A, 124 Stat. 1376 (2010); and Pub. L. 112–106, sec. 503 and 602, 126 Stat. 326 (2012), unless otherwise noted. * * * * * Sections 240.3a71–3 and 240.3a71–5 are also issued under Public Law 111–203, sec. 761(b), 124 Stat. 1754 (2010), and 15 U.S.C. 78dd(c). * * * * * Sections 240.15Fh–1 through 240.15Fh–6 and 240.15fk–1 are also issued under sec. 943, Public Law 111–203, 124 Stat. 1376. * * * * * Section 240.19b–4 is also issued under 12 U.S.C. 5465(e). * * * * * 10. Amend § 240.3a71–3 by revising paragraph (d)(1)(vi) to read as follows: ■ § 240.3a71–3 Cross-border security-based swap dealing activity. * * * * * (d) * * * (1) * * * (vi) Notices and withdrawals of notices by registered entity. Before an associated person of the registered entity described in paragraph (d)(1)(i) of this section commences the activity described in paragraph (d)(1)(i) of this section, such registered entity shall have filed a notice with the Commission (that has not been withdrawn) that its associated persons may conduct such activity. Such registered entity shall file this notice electronically on EDGAR in accordance with the EDGAR Filer Manual, as defined in 17 CFR 232.11 (Rule 11 of Regulation S–T), and in accordance with the requirements of 17 E:\FR\FM\18APP3.SGM 18APP3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules CFR part 232 (Regulation S–T). A registered entity whose associated persons will no longer conduct the activity described in paragraph (d)(1)(i) of this section may withdraw, and an entity that no longer is described in paragraph (d)(1) of this section shall promptly withdraw, its previously filed notice by filing a withdrawal electronically on EDGAR in accordance with the EDGAR Filer Manual, as defined in Rule 11 of Regulation S–T, and in accordance with the requirements of Regulation S–T. Such notices and withdrawals shall be publicly disseminated through the Commission’s EDGAR system. * * * * * ■ 11. Amend § 240.6a–1 by adding paragraph (e) to read as follows: § 240.6a–1 Application for registration as a national securities exchange or exemption from registration based on limited volume. * * * * * (e) Filings on Form 1 (§ 249.1 of this chapter) submitted pursuant to this chapter shall be filed electronically on EDGAR in accordance with the requirements of 17 CFR part 232 (Regulation S–T). Except as otherwise specified on Form 1, the disclosure required to be included in Exhibits D, E, and I must be provided as an Interactive Data File in accordance with 17 CFR 232.405 (Rule 405 of Regulation S–T). ■ 12. Amend § 240.6a–2 by: ■ a. Revising paragraph (a) introductory text; ■ b. Revising paragraph (a)(1); ■ c. Revising paragraph (b) introductory text; ■ d. Revising the first sentence of paragraph (c); and ■ e. Revising paragraph (d). The revisions read as follows: ddrumheller on DSK120RN23PROD with PROPOSALS3 § 240.6a–2 Amendments to application. (a) A national securities exchange, or an exchange exempted from such registration based on limited volume, shall electronically file an amendment to Form 1 (§ 249.1 of this chapter), in accordance with § 240.6a–1(e) of this chapter, which shall set forth the nature and effective date of the action taken and shall provide any new information and correct any information rendered inaccurate, on Form 1 (§ 249.1 of this chapter), within 10 days after any action is taken that renders inaccurate, or that causes to be incomplete, any of the following: (1) Information filed on Sections I and II of Form 1, or amendment thereto; or * * * * * (b) On or before June 30 of each year, a national securities exchange, or an exchange exempted from such VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 registration based on limited volume, shall electronically file, as an amendment to Form 1, in accordance with § 240.6a–1(e) of this chapter, the following: * * * * * (c) On or before June 30, 2025, and every three years thereafter, a national securities exchange, or an exchange exempted from such registration based on limited volume, shall electronically file, as an amendment to Form 1, in accordance with § 240.6a–1(e) of this chapter, complete Exhibits A, B, C and J. * * * (d)(1) If an exchange, on an annual or more frequent basis, publishes, or cooperates in the publication of, any of the information required to be filed by paragraphs (b)(2) and (c) of this section, in lieu of filing such information, an exchange may: (i) Identify on Form 1 the publication in which such information is available, the name, address, and telephone number of the person from whom such publication may be obtained, and the price of such publication; and (ii) Certify on Form 1 to the accuracy of such information as of its publication date. (2) If an exchange keeps the information required under paragraphs (b)(2) and (c) of this section up to date and makes it available to the Commission and the public upon request, in lieu of filing such information, an exchange may certify on Form 1 that the information is kept up to date and is available to the Commission and the public upon request. (3) If the information required to be filed under paragraphs (b)(2) and (c) of this section is available continuously on an internet website controlled by an exchange, in lieu of filing such information with the Commission, such exchange may: (i) Provide on Form 1 the Uniform Resource Locator(s) (URL(s)) of the location(s) on the internet website where such information may be found; and (ii) Certify on Form 1 that the information available at such location(s) is accurate as of its date and is free and accessible (without any encumbrances or restrictions) by the general public. * * * * * ■ 13. Amend § 240.6a–3 by: ■ a. Revising the second sentence of paragraph (a)(1); ■ b. Revising paragraph (a)(2); and ■ c. Revising the first sentence of the introductory text to paragraph (b). The revisions read as follows: PO 00000 Frm 00091 Fmt 4701 Sfmt 4702 24009 § 240.6a–3 Supplemental material to be filed by exchanges. (a)(1) * * * Such material shall be electronically filed with the Commission on Form 1 (§ 249.1 of this chapter), in accordance with § 240.6a– 1(e) of this chapter, within 10 days after issuing or making such material available to members, participants or subscribers. (2) If the information required to be filed under paragraph (a)(1) of this section is available continuously on an internet website controlled by an exchange, in lieu of filing such information with the Commission, such exchange may: (i) Provide on Form 1 the Uniform Resource Locator(s) (URL(s)) of the location(s) on the internet website where such information may be found; and (ii) Certify on Form 1 that the information available at such location(s) is accurate as of its date and is free and accessible (without any encumbrances or restrictions) by the general public. (b) Within 15 days after the end of each calendar month, a national securities exchange or an exchange exempted from such registration based on limited volume, shall electronically file on Form 1 (§ 249.1 of this chapter), in accordance with § 240.6a–1(e) of this chapter, a report concerning the securities sold on such exchange during the calendar month. * * * * * * * * ■ 14. Amend § 240.6a–4 by: ■ a. Revising the introductory text to paragraph (a)(1)(i); ■ b. Revising paragraphs (a)(1)(i)(B) and (a)(1)(ii)(B); ■ c. Revising paragraphs (b)(1)(i), (b)(3), (b)(4), and (b)(5); ■ d. Revising paragraphs (c)(1)(ii)(A) and (B); ■ e. Revising the second sentence of the introductory text to paragraph (c)(2); and ■ f. Adding paragraph (d). The revisions and addition read as follows: § 240.6a–4 Notice of registration under Section 6(g) of the Act, amendment to such notice, and supplemental materials to be filed by exchanges registered under Section 6(g) of the Act. (a) * * * (1) * * * (i) The exchange is a board of trade, as that term is defined in the Commodity Exchange Act (7 U.S.C. 1a(6)), that: (B) Is registered as a derivative transaction execution facility under Section 6(a) of the Commodity Exchange Act (7 U.S.C. 8(a)) and such registration E:\FR\FM\18APP3.SGM 18APP3 ddrumheller on DSK120RN23PROD with PROPOSALS3 24010 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules is not suspended by the Commodity Futures Trading Commission; and (ii) * * * (B) Futures on exempted securities or on groups or indexes of securities or options thereon that have been authorized under Section 2(a)(1)(C) of the Commodity Exchange Act (7 U.S.C. 2(a)(1)(C)). * * * * * (b) * * * (1) * * * (i) Ten days after any action is taken that renders inaccurate, or that causes to be incomplete, any information filed on Sections I through III of Form 1–N (§ 249.10 of this chapter), or amendment thereto; or * * * * * (3) On or before June 30, 2023, and by June 30 every year thereafter, a Security Futures Product Exchange shall file, as an amendment to Form 1–N (§ 249.10 of this chapter), Exhibits F, H, and I, which shall be current as of the latest practicable date, but shall, at a minimum, be up to date within three months as of the date the amendment is filed. (4) On or before June 30, 2025, and by June 30 every three years thereafter, a Security Futures Product Exchange shall file, as an amendment to Form 1–N (§ 249.10 of this chapter), complete Exhibits A, B, C, and E, which shall be current as of the latest practicable date, but shall, at a minimum, be up to date within three months as of the date the amendment is filed. (5)(i) If a Security Futures Product Exchange, on an annual or more frequent basis, publishes, or cooperates in the publication of, any of the information required to be filed by paragraphs (b)(3) and (b)(4) of this section, in lieu of filing such information, a Security Futures Product Exchange may: (A) Identify on Form 1–N the publication in which such information is available, the name, address, and telephone number of the person from whom such publication may be obtained, and the price of such publication; and (B) Certify on Form 1–N to the accuracy of such information as of its publication date. (ii) If a Security Futures Product Exchange keeps the information required under paragraphs (b)(3) and (b)(4) of this section up to date and makes it available to the Commission and the public upon request, in lieu of filing such information, a Security Futures Product Exchange may certify on Form 1–N that the information is kept up to date and is available to the VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 Commission and the public upon request. (iii) If the information required to be filed under paragraphs (b)(3) and (b)(4) of this section is available continuously on an internet website controlled by a Security Futures Product Exchange, in lieu of filing such information with the Commission, such Security Futures Product Exchange may: (A) Provide on Form 1–N the Uniform Resource Locator(s) (URL(s)) of the location(s) of the internet website where such information may be found; and (B) Certify on Form 1–N that the information available at such location(s) is accurate as of its date and is free and accessible (without any encumbrances or restrictions) by the general public. * * * * * (c) * * * (1) * * * (ii) * * * (A) Provide on Form 1–N the Uniform Resource Locator(s) (URL(s)) of the location(s) of the internet website where such information may be found; and (B) Certify on Form 1–N that the information available at such location(s) is accurate as of its date and is free and accessible (without any encumbrances or restrictions) by the general public. (2) * * * Such a report shall state: * * * * * (d) Filings on Form 1–N (§ 249.10 of this chapter) submitted pursuant to this section shall be filed electronically on EDGAR in accordance with the requirements of 17 CFR part 232 (Regulation S–T). ■ 15. Redesignate § 240.15Aa–1 as § 240.15aa–1 and revise newly redesignated § 240.15aa–1 to read as follows: § 240.15aa–1 Registration of a national or an affiliated securities association. Any application for registration of an association as a national, or as an affiliated, securities association shall be submitted on Form 15A. Filings on Form 15A (§ 249.801 of this chapter) submitted pursuant to this section shall be filed electronically on EDGAR in accordance with the requirements of 17 CFR part 232 (Regulation S–T). ■ 16. Redesignate § 240.15Aj–1 as § 240.15aa–2 and amend newly redesignated § 240.15aa–2 by: ■ a. Revising paragraphs (b)(1), (b)(2), and (b)(3); ■ b. Revising paragraph (c)(1); and ■ c. Revising paragraph (d). The revisions read as follows: § 240.15aa–2 Amendments and supplements to registration statements of securities associations. * PO 00000 * * Frm 00092 * Fmt 4701 * Sfmt 4702 (b) * * * (1) No current supplements need be filed with respect to changes in the information called for in Exhibit B. (2) Supplements setting forth changes in the information called for in Exhibit C need not be filed until 10 days after the calendar month in which the changes occur. (3) If changes in the information called for in items (1) and (2) of Exhibit C are reported in any record which is published at least once a month by the association and promptly filed with the Commission, no current supplement need be filed with respect thereto. (c) * * * (1) Promptly after March 1 of each year, the association shall file with the Commission an annual consolidated supplement as of such date on Form 15A (§ 249.801) except that: (i) If the securities association publishes or cooperates in the publication of the information required in Items 6(a) and 6(b) of Form 15A on an annual or more frequent basis, in lieu of filing such an item the securities association may: (A) Identify on Form 15A the publication in which such information is available, the name, address, and telephone number of the person from whom such publication may be obtained, and the price thereof; and (B) Certify on Form 15A to the accuracy of such information as of its date. (ii) Promptly after March 1, 2025, and every three years thereafter each association shall file complete Exhibit A to Form 15A. The information contained in this exhibit shall be up to date as of the latest practicable date within 3 months of the date on which these exhibits are filed. If the association publishes or cooperates in the publication of the information required in this exhibit on an annual or more frequent basis, in lieu of filing such exhibit the association may: (A) Identify on Form 15A the publication in which such information is available, the name, address, and telephone number of the person from whom such publication may be obtained, and the price thereof; and (B) Certify on Form 15A to the accuracy of such information as of its date. If a securities association keeps the information required in the exhibit up to date and makes it available to the Commission and the public upon request, in lieu of filing such an exhibit a securities association may certify on Form 15A that the information is kept up to date and is available to the E:\FR\FM\18APP3.SGM 18APP3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules Commission and the public upon request. * * * * * (d) Filing, dating, etc. (1) Each amendment or supplement, including the annual consolidated supplement, shall be submitted electronically on Form 15A in a manner prescribed in 17 CFR 240.15Aa–1 (Rule 15aa–1). (2) One amendment or supplement may include any number of changes. In addition to the formal filing of amendments and supplements above described, each association shall electronically file with the Commission copies of any notices, reports, circulars, loose-leaf insertions, riders, new additions, lists or other records of changes covered by amendments or supplements when, as and if such records are made available to members of the association. ■ 17. Amend § 240.15Fi–3 by: ■ a. Redesignating § 240.15Fi–3 as § 240.15fi–3; and ■ b. Revising paragraph (c) in newly redesignated § 240.15fi–3. The revision reads as follows: § 240.15fi–3 Security-based swap portfolio reconciliation. ddrumheller on DSK120RN23PROD with PROPOSALS3 * * * * * (c) Reporting of security-based swap valuation disputes. (1) Notice requirement. Each security-based swap dealer and major security-based swap participant shall promptly notify the Commission, electronically through the Commission’s EDGAR system, in accordance with the EDGAR Filer Manual, as defined in 17 CFR 232.11 (Rule 11 of Regulation S–T), and in accordance with the requirements of 17 CFR part 232 (Regulation S–T), and any applicable prudential regulator, in a form and manner acceptable to such applicable prudential regulator, of any security-based swap valuation dispute in excess of $20,000,000 (or its equivalent in any other currency), at either the transaction or portfolio level, if not resolved within: (i) Three business days, if the dispute is with a counterparty that is a securitybased swap dealer or major securitybased swap participant; or (ii) Five business days, if the dispute is with a counterparty that is not a security-based swap dealer or major security-based swap participant. (2) Amendments. Each security-based swap dealer and major security-based swap participant shall notify the Commission, electronically through the Commission’s EDGAR system, in accordance with the EDGAR Filer Manual, as defined in Rule 11 of Regulation S–T, and in accordance with the requirements of Regulation S–T, and VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 any applicable prudential regulator, in a form and manner acceptable to such applicable prudential regulator, if the amount of any security-based swap valuation dispute that was the subject of a previous notice made pursuant to paragraph (c)(1) of this section increases or decreases by more than $20,000,000 (or its equivalent in any other currency), at either the transaction or portfolio level. Such amended notice shall be provided to the Commission and any applicable prudential regulator no later than the last business day of the calendar month in which the applicable security-based swap valuation dispute increases or decreases by the applicable dispute amount. * * * * * ■ 18. Amend § 240.15Fk–1 by: ■ a. Redesignating § 240.15Fk–1 as § 240.15fk–1; and ■ b. Revising paragraph (c)(2)(ii)(A) in newly redesignated § 240.15fk–1. The revision reads as follows: § 240.15fk–1 Designation of chief compliance officer for security-based swap dealers and major security-based swap participants. * * * * * (c) * * * (2) * * * (ii) * * * (A) Be submitted to the Commission electronically through the EDGAR system as an Interactive Data File in accordance with 17 CFR 232.405 (Rule 405 of Regulation S–T) within 30 days following the deadline for filing the security-based swap dealer’s or major security-based swap participant’s annual financial report with the Commission pursuant to section 15F of the Act and rules and regulations thereunder; * * * * * ■ 19. Amend § 240.17a–5 by: ■ a. Revising the last sentence of paragraph (a)(2); ■ b. Revising paragraph (d)(6); ■ c. Adding new paragraph (e)(2)(iii); ■ d. Revising paragraph (e)(3), the last sentence of paragraph (f)(3)(v)(B), paragraph (i)(1)(ii), and paragraph (k); ■ e. Removing paragraph (o); ■ f. Redesignating paragraph (p) as new paragraph (o); and ■ g. Adding new paragraph (p). The revisions and additions read as follows: § 240.17a–5 Reports to be made by certain brokers and dealers. * * * * * (a) * * * (2) * * * All reports filed pursuant to this paragraph (a) will be deemed PO 00000 Frm 00093 Fmt 4701 Sfmt 4702 24011 confidential for the purposes of section 24(b) of the Act. * * * * * (d) * * * (6)(i) Filing with the Commission. The annual reports must be filed with the Commission electronically on EDGAR in accordance with the EDGAR Filer Manual, as defined in 17 CFR 232.11 (Rule 11 of Regulation S–T), and must be filed in accordance with the requirements of 17 CFR part 232 (Regulation S–T). The annual reports must be provided as an Interactive Data File in accordance with 17 CFR 232.405 (Rule 405 of Regulation S–T). (ii) Filing with other organizations. The annual reports also must be filed with the designated examining authority for the broker or dealer and with the Securities Investor Protection Corporation (‘‘SIPC’’) if the broker or dealer is a member of SIPC. Copies of the reports must be provided to all selfregulatory organizations of which the broker or dealer is a member, unless the self-regulatory organization by rule waives this requirement. * * * * * (e) * * * (2) * * * (iii) The broker or dealer must keep the original notarized oath or affirmation for a period of not less than six years, the first two years in an easily accessible place and in accordance with the requirements of § 240.17a–4 of this chapter (Rule 17a–4) under the Exchange Act. (3) The annual reports filed under paragraph (d) of this section may be filed as: (i) One public document; or (ii) Two documents: (A) A document consisting of the Statement of Financial Condition, the notes to the Statement of Financial Condition, and the report of the independent public accountant covering the Statement of Financial Condition, which is not confidential; and (B) A document containing the balance of the annual reports for which confidential treatment may be requested and which will be deemed confidential for the purposes of section 24(b) of the Act. However, the annual reports, including the confidential portions, will be available for official use by any official or employee of the U.S. or any State, by national securities exchanges and registered national securities associations of which the broker or dealer filing such a report is a member, by the Public Company Accounting Oversight Board, and by any other person if the Commission authorizes disclosure of the annual reports to that E:\FR\FM\18APP3.SGM 18APP3 ddrumheller on DSK120RN23PROD with PROPOSALS3 24012 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules person. Nothing contained in this paragraph (e)(3) may be construed to be in derogation of the rules of any registered national securities association or national securities exchange that give to customers of a broker or dealer the right, upon request to the broker or dealer, to obtain information relative to its financial condition. (f) * * * (3) * * * (v) * * * (B) * * * The broker or dealer must file three copies of the notice and the accountant’s letter, one copy of which must be signed by the sole proprietor, a general partner, or a duly authorized corporate, limited liability company, or limited liability partnership officer or member, as appropriate, and by the independent public accountant, respectively. * * * * * (i) * * * (1) * * * (ii) Be signed; * * * * * (k) Supplemental reports. (1) Each broker or dealer that computes certain of its capital charges in accordance with § 240.15c3–1e shall file concurrently with the annual reports a supplemental report on management controls, which must be prepared by a registered public accounting firm (as that term is defined in section 2(a)(12) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201 et seq.)). The supplemental report must indicate the results of the accountant’s review of the internal risk management control system established and documented by the broker or dealer in accordance with § 240.15c3–4. This review shall be conducted in accordance with procedures agreed upon by the broker or dealer and the registered public accounting firm conducting the review. The agreed upon procedures are to be performed and the report is to be prepared in accordance with the rules promulgated by the Public Company Accounting Oversight Board. The purpose of the review is to confirm that the broker or dealer has established, documented, and is in compliance with the internal risk management controls established in accordance with § 240.15c3–4. Before commencement of the review and no later than December 10 of each year, the broker or dealer must file a statement with the Commission that includes: (i) A description of the agreed-upon procedures agreed to by the broker or dealer and the registered public accounting firm; and (ii) A notice describing changes in those agreed-upon procedures, if any. If VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 there are no changes, the broker or dealer should so indicate. (2) The supplemental report and statement to be filed under paragraph (k)(1) of this section must be filed with the Commission electronically on EDGAR in the manner described by the EDGAR Filer Manual, as defined in 17 CFR 232.11 (Rule 11 of Regulation S–T), and must be filed in accordance with the requirements of 17 CFR part 232 (Regulation S–T). The supplemental report and statement must be provided as an Interactive Data File in accordance with 17 CFR 232.405 (Rule 405 of Regulation S–T). * * * * * (p) Signatures. Any signature required by this section may be a manual or electronic signature. The signing process for an electronic signature must, at a minimum: (1) Require the signatory to present a physical, logical, or digital credential that authenticates the signatory’s individual identity; (2) Reasonably provide for nonrepudiation of the signature; (3) Provide that the signature be attached, affixed, or otherwise logically associated with the signature page or document being signed; and (4) Include a timestamp to record the date and time of the signature. ■ 20. Amend § 240.17a–12 by: ■ a. Revising paragraph (a)(2); ■ b. Revising paragraph (b)(6); ■ c. Redesignating paragraph (c)(3) as paragraph (c)(4) and revising newly redesignated paragraph (c)(4); ■ d. Adding new paragraph (c)(3); ■ e. Revising the last sentence of paragraph (g)(2), and paragraphs (j)(1), (k), (l)(1), (m)(1), and (p); and ■ f. Adding paragraph (q). The revisions and additions read as follows: § 240.17a–12 Reports to be made by certain OTC derivatives dealers. (a) * * * (2) The reports provided for in this paragraph (a) must be filed with the Commission electronically on the SEC eFOCUS system. All reports filed pursuant to paragraph (a) of this section shall be deemed to be confidential for the purposes of section 24(b) of the Act. * * * * * (b) * * * (6) The annual audit report shall be filed with the Commission electronically on EDGAR in the manner described by the EDGAR Filer Manual, as defined in 17 CFR 232.11 (Rule 11 of Regulation S–T), and must be filed in accordance with the requirements of 17 CFR part 232 (Regulation S–T). The PO 00000 Frm 00094 Fmt 4701 Sfmt 4702 annual audit report must be provided as an Interactive Data File in accordance with 17 CFR 232.405 (Rule 405 of Regulation S–T). (c) * * * (3) The OTC derivatives dealer must keep the original notarized oath or affirmation for a period of not less than six years, the first two years in an easily accessible place and in accordance with the requirements of § 240.17a–4 of this chapter (Rule 17a–4 under the Exchange Act). (4) An OTC derivatives dealer may request confidential treatment for all of the statements filed pursuant to paragraph (b) of this rule and such statements will be deemed confidential for the purposes of section 24(b) of the Act. However, such statements shall be available for use by any official or employee of the United States or by any other person if the Commission authorizes disclosure of such information to that person. * * * * * (g) * * * (2) * * * The OTC derivatives dealer shall file three copies of the notice and the accountant’s letter, one copy of which shall be signed by the sole proprietor, a general partner, or a duly authorized corporate, limited liability company, or limited liability partnership officer or member, as appropriate, and by the independent public accountant, respectively. * * * * * (j) * * * (1) Technical requirements. The certified public accountant’s report shall be dated; be signed; indicate the city and state where issued; and identify without detailed enumeration the financial statements and schedules covered by the report. * * * * * (k) Accountant’s report on material inadequacies and reportable conditions. The OTC derivatives dealer shall file concurrently with the annual audit report a supplemental report by the certified public accountant describing any material inadequacies or any matter that would be deemed to be a reportable condition under U.S. Generally Accepted Auditing Standards that are unresolved as of the date of the certified public accountant’s report. The report shall also describe any material inadequacies found to have existed since the date of the previous audit. The supplemental report shall indicate any corrective action taken or proposed by the OTC derivatives dealer with regard to any identified material inadequacies or reportable conditions. If the audit did not disclose any material inadequacies E:\FR\FM\18APP3.SGM 18APP3 ddrumheller on DSK120RN23PROD with PROPOSALS3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules or reportable conditions, the supplemental report shall so state. This supplemental report shall be filed with the Commission electronically on EDGAR in the manner described by the EDGAR Filer Manual, as defined in 17 CFR 232.11 (Rule 11 of Regulation S–T), and must be filed in accordance with the requirements of 17 CFR part 232 (Regulation S–T). This supplemental report must be provided as an Interactive Data File in accordance with 17 CFR 232.405 (Rule 405 of Regulation S–T). (l) * * * (1) The OTC derivatives dealer shall file concurrently with the annual audit report a supplemental report by the certified public accountant indicating the results of the certified public accountant’s review of the OTC derivatives dealer’s internal risk management control system with respect to the requirements of § 240.15c3–4. This review shall be conducted in accordance with procedures agreed to by the OTC derivatives dealer and the certified public accountant conducting the review. The purpose of the review is to confirm that the OTC derivatives dealer has established, documented, and maintained an internal risk management control system in accordance with § 240.15c3–4, and is in compliance with that internal risk management control system. This supplemental report shall be filed with the Commission electronically on EDGAR in the manner described by the EDGAR Filer Manual, as defined in 17 CFR 232.11 (Rule 11 of Regulation S–T), and must be filed in accordance with the requirements of 17 CFR part 232 (Regulation S–T). This supplemental report must be provided as an Interactive Data File in accordance with 17 CFR 232.405 (Rule 405 of Regulation S–T). * * * * * (m) * * * (1) The OTC derivatives dealer shall file concurrently with the annual audit report a supplemental report by the certified public accountant indicating the results of the certified public accountant’s review of the broker’s or dealer’s inventory pricing and modeling procedures. This review shall be conducted in accordance with procedures agreed to by the OTC derivatives dealer and by the certified public accountant conducting the review. The purpose of the review is to confirm that the pricing and modeling procedures relied upon by the OTC derivatives dealer conform to the procedures submitted to the Commission as part of its OTC VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 derivatives dealer application, and that the procedures comply with the qualitative and quantitative standards set forth in § 240.15c3–1f. This supplemental report shall be filed with the Commission electronically on EDGAR in the manner described by the EDGAR Filer Manual, as defined in 17 CFR 232.11 (Rule 11 of Regulation S–T), and must be filed in accordance with the requirements of 17 CFR part 232 (Regulation S–T). This supplemental report must be provided as an Interactive Data File in accordance with 17 CFR 232.405 (Rule 405 of Regulation S–T). * * * * * (p) Unless otherwise stated in this rule, for purposes of filing requirements as described in § 240.17a–12, these filings shall be deemed to have been accomplished upon receipt at the Commission’s principal office in Washington, DC. (q) Any signature required by this section may be a manual or electronic signature. The signing process for an electronic signature must, at a minimum: (1) Require the signatory to present a physical, logical, or digital credential that authenticates the signatory’s individual identity; (2) Reasonably provide for nonrepudiation of the signature; (3) Provide that the signature be attached, affixed, or otherwise logically associated with the signature page or document being signed; and (4) Include a timestamp to record the date and time of the signature. ■ 21. Revise § 240.17a–19 to read as follows: § 240.17a–19 Form X–17A–19 Report by national securities exchanges and registered national securities associations of changes in the membership status of any of their members. Every national securities exchange and every registered national securities association must file with the Commission and with the Securities Investor Protection Corporation such information as is required by § 249.635 of this chapter on Form X–17A–19 within five business days of the occurrence of the initiation of the membership of any person or the suspension or termination of the membership of any member. Form X– 17A–19 must be filed with the Commission electronically on EDGAR in accordance with the EDGAR Filer Manual, as defined in 17 CFR 232.11 (Rule 11 of Regulation S–T), and must be filed in accordance with the requirements of Regulation S–T. Nothing in this section shall be deemed PO 00000 Frm 00095 Fmt 4701 Sfmt 4702 24013 to relieve a national securities exchange or a registered national securities association of its responsibilities under § 240.17a–5(b)(5) except that, to the extent a national securities exchange or a registered national securities association promptly files a report on Form X–17A–19 including therewith, inter alia, information sufficient to satisfy the requirements of § 240.17a– 5(b)(5), it shall not be required to file a report pursuant to § 240.17a–5(b). Upon the occurrence of the events described in this paragraph, every national securities exchange and every registered national securities association shall notify in writing such member of its responsibilities under § 240.17a–5(b). ■ 22. Revise § 240.17a–22 to read as follows: § 240.17a–22 Supplemental material of registered clearing agencies. Within two business days after issuing, or making generally available, to its participants or to other entities with whom it has a significant relationship, any material (including, for example, manuals, notices, circulars, bulletins, lists or periodicals) that are not otherwise required to be posted on its internet website pursuant to any requirement under Section 19(b) of the Exchange Act or any rule under § 240.19b–4, a registered clearing agency shall prominently post such material on its internet website. ■ 23. Amend § 240.17h–2T by revising paragraph (a) to read as follows: § 240.17h–2T Risk assessment reporting requirements for brokers and dealers. (a) Reporting requirements of risk assessment information required to be maintained by section 240.17h–1T. (1) Every broker or dealer registered with the Commission pursuant to section 15 of the Act, and every municipal securities dealer registered pursuant to section 15B of the Act for which the Commission is the appropriate regulatory agency, unless exempt pursuant to paragraph (b) of this section, shall file a Form 17–H within 60 calendar days after the end of each fiscal quarter. The Form 17–H for the fourth fiscal quarter shall be filed within 60 calendar days of the end of the fiscal year. The cumulative year-end financial statements required by section 240.17h– 1T may be filed separately within 105 calendar days of the end of the fiscal year. (2) The reports required to be filed pursuant to paragraph (a)(1) of this section must be filed with the Commission electronically on EDGAR in accordance with the EDGAR Filer Manual, as defined in 17 CFR 232.11 E:\FR\FM\18APP3.SGM 18APP3 24014 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules (Rule 11 of Regulation S–T), and must be filed in accordance with the requirements of 17 CFR part 232 (Regulation S–T). The filings must be provided as Interactive Data Files in accordance with 17 CFR 232.405 (Rule 405 of Regulation S–T). (3) For purposes of this section, the term Material Associated Person shall have the meaning used in § 240.17h–1T. * * * * * ■ 24. Amend § 240.17Ab2–1 by: ■ a. Redesignating § 240.17Ab2–1 as § 240.17ab2–1; ■ b. Revising paragraphs (a), (d), (e), and (f) in newly redesignated § 240.17ab2–1; and ■ c. Adding paragraph (g). The revisions and addition read as follows: ddrumheller on DSK120RN23PROD with PROPOSALS3 § 240.17ab2–1 agencies. Registration of clearing (a) An application for registration or for exemption from registration as a clearing agency, as defined in section 3(a)(23) of the Act, or an amendment to any such application shall be filed electronically with the Commission on Form CA–1, in accordance with the instructions thereto and paragraph (g) below. * * * * * (d) The electronic filing of an amendment to an application for registration or for exemption from registration as a clearing agency, which registration or exemption has not been granted, or the electronic filing of additional information or documents prior to the granting of registration or an exemption from registration shall extend to ninety days from the date such electronic filing is made (or to such longer period as to which the applicant consents) the period within which the Commission shall grant registration, institute proceedings to determine whether such registration shall be denied, or conditionally or unconditionally exempt registrant from the registration and other provisions of section 17A of the Act or the rules or regulations thereunder. (e) If any information reported at items 1–3 of Form CA–1 is or becomes inaccurate, misleading or incomplete for any reason, whether before or after registration or an exemption from registration has been granted, the registrant shall electronically file promptly an amendment on Form CA– 1 correcting the inaccurate, misleading or incomplete information. (f) Every application for registration or for exemption from registration as a clearing agency or amendment to, or additional information or document VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 electronically filed in connection with, any such application shall constitute a ‘‘report’’ or ‘‘application’’ within the meaning of sections 17, 17A, 19, and 32(a) of the Act. (g)(1) Filings on Form CA–1 made pursuant to this section shall be made electronically and shall contain an electronic signature. (2) For the purposes of this section, the term electronic signature means an electronic entry in the form of a magnetic impulse or other form of computer data compilation of any letter or series of letters or characters comprising a name, executed, adopted or authorized as a signature. (3) If the conditions of this section and Form CA–1 are otherwise satisfied, all filings submitted electronically on or before 5:30 p.m. eastern standard time or eastern daylight saving time, whichever is currently in effect, on a business day, shall be deemed filed on that business day, and all filings submitted after 5:30 p.m. eastern standard time or eastern daylight saving time, whichever is currently in effect, shall be deemed filed on the next business day. A filing would be deemed timely filed if it is required to be filed on a day that is not a business day and it is filed on the next available business day. (4) For purposes of this section, the term business day means any day other than a Saturday, Sunday, Federal Holiday, a day that the Office of Personnel Management has announced that Federal agencies in the Washington, DC, area, are closed to the public, a day on which the Commission is subject to a Federal Government shutdown or a day on which the Commission’s Washington, DC, office is otherwise not open for regular business. ■ 25. Amend § 240.18a–7 by revising paragraphs (c)(6), (d)(1), (d)(2), the last sentence of (e)(3)(v)(B), and paragraphs (h)(1)(ii) and (j) as follows: § 240.18a–7 Reports to be made by certain security-based swap dealers and major security-based swap participants. * * * * * (c) * * * (6) Filing with the Commission. The annual reports must be filed with the Commission electronically on EDGAR in accordance with the EDGAR Filer Manual, as defined in 17 CFR 232.11 (Rule 11 of Regulation S–T), and must be filed in accordance with the requirements of 17 CFR part 232 (Regulation S–T). The annual reports must be provided as an Interactive Data File in accordance with 17 CFR 232.405 (Rule 405 of Regulation S–T). (d) * * * PO 00000 Frm 00096 Fmt 4701 Sfmt 4702 (1)(i) Oath or affirmation. The security-based swap dealer or major security-based swap participant must attach to the annual reports an oath or affirmation that, to the best knowledge and belief of the person making the oath or affirmation: (A) The financial report is true and correct; and (B) Neither the registrant, nor any partner, officer, director, or equivalent person, as the case may be, has any proprietary interest in any account classified solely as that of a customer. (ii) The oath or affirmation must be made before a person duly authorized to administer such oaths or affirmations. If the security-based swap dealer or major security-based swap participant is a sole proprietorship, the oath or affirmation must be made by the proprietor; if a partnership, by a general partner; if a corporation, by a duly authorized officer; or if a limited liability company or limited liability partnership, by the chief executive officer, chief financial officer, manager, managing member, or those members vested with management authority for the limited liability company or limited liability partnership. (iii) The security-based swap dealer or major security-based swap participant must keep the original notarized oath or affirmation for a period of not less than six years, the first two years in an easily accessible place in accordance with the requirements of § 240.18a–6 of this chapter (Rule 18a–6 under the Exchange Act). (2) Confidentiality. The annual reports filed under paragraph (c) of this section may be filed as: (i) One public document; or (ii) Two documents: (A) A document consisting of the Statement of Financial Condition, the notes to the Statement of Financial Condition, and the report of the independent public accountant covering the Statement of Financial Condition, which is not confidential; and (B) A document containing the balance of the annual reports for which confidential treatment may be requested and which will be deemed confidential for the purposes of section 24(b) of the Act. However, the annual reports, including the confidential portions, will be available for official use by any official or employee of the U.S. or any State, and by any other person if the Commission authorizes disclosure of the annual reports to that person. Nothing contained in paragraph (d)(2) of this section may be construed to be in derogation of the rights of customers of a security-based-swap dealer or major security-based swap participant, upon E:\FR\FM\18APP3.SGM 18APP3 24015 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules request to the security-based sway dealer or major security-based swap participant, to obtain information relative to its financial condition. (e) * * * (3) * * * (v) * * * (B) * * * The security-based swap dealer or major security-based swap participant must file three copies of the notice and the accountant’s letter, one copy of which must be signed by the sole proprietor, or a general partner or a duly authorized corporate, limited liability company, or limited liability partnership officer or member, as appropriate, and by the independent public accountant, respectively. * * * * * (h) * * * (1) * * * (ii) Be signed; * * * * * (j) Signatures. Any signature required by this section may be a manual or electronic signature. The signing process for an electronic signature must, at a minimum: (1) Require the signatory to present a physical, logical, or digital credential that authenticates the signatory’s individual identity; (2) Reasonably provide for nonrepudiation of the signature; (3) Provide that the signature be attached, affixed, or otherwise logically associated with the signature page or document being signed; and (4) Include a timestamp to record the date and time of the signature. ■ 26. Amend § 240.19b–4 by revising paragraphs (e)(2)(ii) and (j) to read as follows: § 240.19b–4 Filings with respect to proposed rule changes by self-regulatory organizations. ddrumheller on DSK120RN23PROD with PROPOSALS3 * * * * * (e) * * * (2) * * * (ii) When relying on paragraph (e) of this section, a self-regulatory organization shall post the following information, using the most recent versions of the XML schema and the associated PDF renderer as published on the Commission’s website for all reports required by this section, on its publicly available internet website within five business days after commencement of trading a new derivative securities product: (A) Type of issuer of new derivatives securities product; (B) Class of new derivative securities product; (C) Name of underlying instrument; (D) If the underlying instrument is an index, identify whether it is broad-based or narrow-based; VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 (E) Ticker symbol(s) of new derivative securities product; (F) Market(s) upon which securities comprising the underlying instrument trades; (G) Settlement methodology of new derivative securities product; and (H) Position limits of new derivative securities product (if applicable). * * * * * (j) Filings by a self-regulatory organization submitted under 17 CFR 249.819 on Form 19b–4 electronically shall contain an electronic signature. For the purposes of this section, the term electronic signature means an electronic entry in the form of a magnetic impulse or other form of computer data compilation of any letter or series of letters or characters comprising a name, executed, adopted or authorized as a signature. * * * * * ■ 27. Amend § 240.24b–2 by: ■ a. In paragraph (b), removing the words ‘‘Except as otherwise provided in paragraphs (g) through (i) of this section’’ and adding in their place ‘‘Except as otherwise provided in paragraphs (g), (h), (i), (j), and (k) of this section’’; and ■ b. Adding paragraphs (j) and (k). The revisions and additions read as follows: § 240.24b–2 Nondisclosure of information filed with the Commission and with any exchange. * * * * * (j)(1) A broker or dealer shall not omit the confidential portion from the material filed in electronic format pursuant to §§ 240.17a–5(d), 240.17a– 5(k), 240.17a–12, or 240.17h–2T of this chapter. In lieu of the procedures described in paragraph (b) of this section, a broker or dealer shall request confidential treatment electronically for any material filed in electronic format pursuant to pursuant to §§ 240.17a–5(d), 240.17a–5(k), 240.17a–12, or 240.17h– 2T, of this chapter. (2) A security-based swap dealer shall not omit the confidential portion from the material filed in electronic format pursuant to § 240.18a–7(c) of this chapter. In lieu of the procedures described in paragraph (b) of this section, a security-based swap dealer shall request confidential treatment electronically for any material filed in electronic format pursuant to § 240.18a– 7(c) of this chapter. (k) An entity shall not omit the confidential portion from the material filed in electronic format on Form CA– 1 pursuant to § 240.17ab2–1, and, in lieu of the procedures described in paragraph (b) of this section, may PO 00000 Frm 00097 Fmt 4701 Sfmt 4702 request confidential treatment of information provided on Form CA–1 by completing Section X of Form CA–1. PART 249—FORMS, SECURITIES EXCHANGE ACT OF 1934 28. The authority citation for part 249 continues to read, in part, as follows: ■ Authority: 15 U.S.C. 78a et seq. and 7201 et seq.; 12 U.S.C. 5461 et seq.; 18 U.S.C. 1350; Sec. 953(b) Public Law 111–203, 124 Stat. 1904; Sec. 102(a)(3) Public Law 112–106, 126 Stat. 309 (2012), Sec. 107 Public Law 112– 106, 126 Stat. 313 (2012), Sec. 72001 Public Law 114–94, 129 Stat. 1312 (2015), and secs. 2 and 3 Public Law 116–222, 134 Stat. 1063 (2020), unless otherwise noted. * * * * * Section 249.617 is also issued under Public Law 111–203, 939, 939A, 124. Stat. 1376 (2010) (15 U.S.C. 78c, 15 U.S.C. 78o–7 note). * * * * * Section 249.819 is also issued under 12 U.S.C. 5465(e). * * * * * 29. Revise Form 1 (referenced in § 249.1) to read as follows: ■ Note: Form 1 is attached as Appendix 1 to this document. Form 1 will not appear in the Code of Federal Regulations. 30. Revise Form 1–N (referenced in § 249.10) to read as follows: ■ Note: Form 1–N is attached as Appendix 2 to this document. Form 1–N will not appear in the Code of Federal Regulations. 31. Amend Part II of Form X–17A–5 (referenced in § 249.617 of this chapter) by: ■ a. Revising the Computation of Minimum Regulatory Capital Requirements section, Line 1 in the Statement of Income (Loss) or Statement of Comprehensive Income, As Applicable section, and the Computation of CFTC Minimum Capital Requirements section, as shown in Appendix 3; ■ b. In the Cover Page section of the instructions, adding the following text after ‘‘The cover page must be completed in its entirety. If a line does not apply, the firm should write ‘‘None’’ or ‘‘N/A’’ on the line, as applicable.’’: ‘‘The cover page of the FOCUS Report includes signature lines for the principal executive officer or comparable officer, principal financial officer or comparable officer, and principal operations officer or comparable officer. The firm must obtain manual or electronic signatures from at least two of the three listed officers. The signing process for an electronic signature must, at a minimum: (1) Require the signatory to present a physical, logical, or digital credential that authenticates the ■ E:\FR\FM\18APP3.SGM 18APP3 24016 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules ddrumheller on DSK120RN23PROD with PROPOSALS3 signatory’s individual identity; (2) Reasonably provide for non-repudiation of the signature; (3) Provide that the signature be attached, affixed, or otherwise logically associated with the signature page or document being signed; and (4) Include a timestamp to record the date and time of the signature.’’; ■ c. Removing the following instruction from the Computation of Minimum Regulatory Capital Requirements (Broker-Dealer) section: 3870 Ratio requirement—2% of aggregate debit items. FCMs must report here the greater of: • 2% of aggregate debit items, or • 8% of funds required to be segregated pursuant to the Commodity Exchange Act. ■ d. Replacing the instructions for the Computation of CFTC Minimum Capital Requirements section, as shown in Appendix 4. ■ 32. Amend Part IIC of Form X–17A– 5 (referenced in § 249.617 of this chapter) by: ■ a. Revising the Balance Sheet, Regulatory Capital, and Income Statement sections as shown in Appendix 5; and ■ b. Amend the instructions to the Cover Page section of Part IIC of Form X–17A–5 (referenced in § 249.617 of this chapter) by adding the following text after ‘‘The cover page must be completed in its entirety. If a line does not apply, the firm should write ‘‘None’’ or ‘‘N/A’’ on the line, as applicable.’’: ‘‘The cover page of the FOCUS Report includes signature lines for the principal executive officer or comparable officer, principal financial officer or comparable officer, and principal operations officer or comparable officer. The firm must obtain manual or electronic signatures from at least two of the three listed officers. The signing process for an electronic signature must, at a minimum: (1) Require the signatory to VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 present a physical, logical, or digital credential that authenticates the signatory’s individual identity; (2) Reasonably provide for non-repudiation of the signature; (3) Provide that the signature be attached, affixed, or otherwise logically associated with the signature page or document being signed; and (4) Include a timestamp to record the date and time of the signature.’’ ■ 33. Amend the Cover Page of Part IIA of Form X–17A–5 (referenced in § 249.617 of this chapter) by: ■ a. Removing the words ‘‘Manual signatures of:’’ and adding in their place ‘‘Signatures of:’’; ■ b. In the instructions, adding the following text in the ‘‘Filing Requirements for Part IIA’’ section as a second new paragraph after ‘‘Part IIA shall be filed monthly by such of these firms which receive written notice pursuant to Rule 17a–5(a)(2)(iv) that they have exceeded parameters set by the self-regulators.’’: ‘‘The cover page of the FOCUS Report includes signature lines for the principal executive officer or managing partner, principal financial officer or partner, and principal operations officer or partner. The firm must obtain manual or electronic signatures from at least two of the three listed officers. The signing process for an electronic signature must, at a minimum: (1) Require the signatory to present a physical, logical, or digital credential that authenticates the signatory’s individual identity; (2) Reasonably provide for non-repudiation of the signature; (3) Provide that the signature be attached, affixed, or otherwise logically associated with the signature page or document being signed; and (4) Include a timestamp to record the date and time of the signature.’’ ■ 34. Redesignate Form X–15AA–1 (referenced in § 249.801) as Form 15A and revise newly redesignated Form 15A to read as follows: PO 00000 Frm 00098 Fmt 4701 Sfmt 4702 Note: Form 15A is attached as Appendix 6 to this document. Form 15A will not appear in the Code of Federal Regulations. 35. Amend the General Instructions for Form X–17A–19 (referenced in § 249.635) by: ■ a. Revising instructions 2 and 3; ■ b. Removing instruction 4; ■ c. Redesignating instructions 5 through 8 as instructions 4 through 7; and ■ d. Revising newly redesignated instruction 6. The revisions read as shown in Appendix 7. ■ § 249.802 ■ [Removed and Reserved] 36. Remove and reserve § 249.802. § 249.803 [Removed and Reserved] 37. Remove and reserve § 249.803.38. 38. Amend the General Instructions for Form 19b–4 (referenced in § 249.819) by revising Section F as shown in Appendix 8. ■ ■ PART 249b—FURTHER FORMS, SECURITIES EXCHANGE ACT OF 1934 39. The general authority citation for part 249b continues to read as follows: ■ Authority: 15 U.S.C. 78a et seq., unless otherwise noted. * * * * * 40. Revise Form CA–1 (referenced in § 249b.200) as shown in Appendix 8. ■ Note: Form CA–1 is attached as Appendix 9 to this document. Form CA–1 will not appear in the Code of Federal Regulations. By the Commission. Dated: March 22, 2023. J. Matthew DeLesDernier, Deputy Secretary. Appendix 1 Note: The text of Form 1 does not, and this amendment will not, appear in the Code of Federal Regulations. E:\FR\FM\18APP3.SGM 18APP3 VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 PO 00000 Frm 00099 Fmt 4701 Sfmt 4725 E:\FR\FM\18APP3.SGM 18APP3 24017 EP18AP23.009</GPH> ddrumheller on DSK120RN23PROD with PROPOSALS3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules VerDate Sep<11>2014 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules 20:06 Apr 17, 2023 Jkt 259001 PO 00000 Frm 00100 Fmt 4701 Sfmt 4725 E:\FR\FM\18APP3.SGM 18APP3 EP18AP23.010</GPH> ddrumheller on DSK120RN23PROD with PROPOSALS3 24018 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules 24019 Alternative means of filing certain exhibits in annual (exhibits K, M, N) and triennial (exhibits A, B, C, J) filings Rule 6a–2(d)(1)—available by publication Rule 6a–2(d)(2)—available upon request Rule 6a–2(d)(3)—available via internet website Exhibit A: A copy of the constitution, articles of incorporation or association with all subsequent amendments, and of existing by-laws or corresponding rules or instruments, whatever the name, of the exchange. b In lieu of filing {entity} certifies that the information may be obtained below and is accurate as of the publication date: Name of Publication: Name Address Telephone # Price of Publication $ll Date of Publication: mm/dd/yyyy b In lieu of filing {entity} certifies that the information requested under this exhibit is kept up to date and is available to the Commission and the public upon request. Exhibit B: A copy of all written rulings, settled practices having the effect of rules, and interpretations of the Governing Board or other committee of the exchange in respect of any provisions of the constitution, by-laws, rules, or trading practices of the exchange which are not included in Exhibit A. b In lieu of filing {entity} certifies that the information may be obtained below and is accurate as of the publication date: Name of Publication: Name Address Telephone # Price of Publication $ll Date of Publication: mm/dd/yyyy b In lieu of filing {entity} certifies that the information requested under this exhibit is kept up to date and is available to the Commission and the public upon request. b In lieu of filing {entity} certifies that the information requested under this exhibit is continuously available at the internet website below, which is controlled by {entity}, and the information is accurate as of the date of this filing and is free and accessible (without any encumbrances or restrictions) by the general public URL(s): b In lieu of filing {entity} certifies that the information requested under this exhibit is continuously available at the internet website below, which is controlled by {entity}, and the information is accurate as of the date of this filing and is free and accessible (without any encumbrances or restrictions) by the general public URL(s): VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 PO 00000 Frm 00101 Fmt 4701 Sfmt 4702 E:\FR\FM\18APP3.SGM 18APP3 EP18AP23.011</GPH> ddrumheller on DSK120RN23PROD with PROPOSALS3 Information required by the exhibit 24020 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules Alternative means of filing certain exhibits in annual (exhibits K, M, N) and triennial (exhibits A, B, C, J) filings ddrumheller on DSK120RN23PROD with PROPOSALS3 Information required by the exhibit Exhibit C: For each subsidiary or affiliate of the exchange, and for any entity with whom the exchange has a contractual or other agreement relating to the operation of an electronic trading system to be used to effect transactions on the exchange (‘‘System’’), provide the following information: 1. Name and address of organization. 2. Form of organization (e.g., association, corporation, partnership, etc.). 3. Name of state and statute citation under which organized. Date of incorporation in present form. 4. Brief description of nature and extent of affiliation. 5. Brief description of business or functions. Description should include responsibilities with respect to operation of the System and/or execution, reporting, clearance, or settlement of transactions in connection with operation of the System. 6. A copy of the constitution. 7. A copy of the articles of incorporation or association including all amendments. 8. A copy of existing by-laws or corresponding rules or instruments. 9. The name and title of the present officers, governors, members of all standing committees, or persons performing similar functions. 10. An indication of whether such business or organization ceased to be associated with the exchange during the previous year, and a brief statement of the reasons for termination of the association. Exhibit D: For each subsidiary or affiliate of the exchange, provide unconsolidated financial statements for the latest fiscal year. Such financial statements shall consist, at a minimum, of a balance sheet and an income statement with such footnotes and other disclosures as are necessary to avoid rendering the financial statements misleading. If any affiliate or subsidiary is required by another Commission rule to submit annual financial statements, a statement to that effect, with a citation to the other Commission rule, may be provided in lieu of the financial statements required here. Exhibit E: Describe the manner of operation of the System. This description should include the following: 1. The means of access to the System. 2. Procedures governing the entry and display of quotations and orders in the System. 3. Procedures governing the execution, reporting, clearance and settlement of transactions in connection with the System. 4. Proposed fees. 5. Procedures for ensuring compliance with System usage guidelines. 6. The hours of operation of the System, and the date on which exchange intends to commence operation of the System. 7. Attach a copy of the users’ manual. 8. If exchange proposes to hold funds or securities on a regular basis, describe the controls that will be implemented to ensure safety of those funds or securities. Exhibit F: A complete set of all forms pertaining to: 1. Application for membership, participation, or subscription to the entity. 2. Application for approval as a person associated with a member, participant, or subscriber of the entity. 3. Any other similar materials. Exhibit G: A complete set of all forms of financial statements, reports, or questionnaires required of members, participants, subscribers, or any other users relating to financial responsibility or minimum capital requirements for such members, participants, or any other users. Provide a table of contents listing the forms included in this Exhibit G. Exhibit H: A complete set of documents comprising the exchange’s listing applications, including any agreements required to be executed in connection with listing and a schedule of listing fees. If the exchange does not list securities, provide a brief description of the criteria used to determine what securities may be traded on the exchange. Provide a table of contents listing the forms included in this Exhibit H. VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 PO 00000 Rule 6a–2(d)(1)—available by publication Rule 6a–2(d)(2)—available upon request Rule 6a–2(d)(3)—available via internet website b In lieu of filing {entity} certifies that the information may be obtained below and is accurate as of the publication date: Name of Publication: Name Address Telephone # Price of Publication $ll Date of Publication: mm/dd/yyyy b In lieu of filing {entity} certifies that the information requested under this exhibit is kept up to date and is available to the Commission and the public upon request. b In lieu of filing {entity} certifies that the information requested under this exhibit is continuously available at the internet website below, which is controlled by {entity} and the information is accurate as of the date of this filing and is free and accessible (without any encumbrances or restrictions) by the general public URL(s): Not Applicable Not Applicable Not Applicable Not Applicable Not Applicable Not Applicable Not Applicable Not Applicable Not Applicable Not Applicable Not Applicable Not Applicable Not Applicable Not Applicable Not Applicable Frm 00102 Fmt 4701 Sfmt 4702 E:\FR\FM\18APP3.SGM 18APP3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules 24021 Alternative means of filing certain exhibits in annual (exhibits K, M, N) and triennial (exhibits A, B, C, J) filings Information required by the exhibit Rule 6a–2(d)(1)—available by publication ddrumheller on DSK120RN23PROD with PROPOSALS3 Exhibit I: For the latest fiscal year of the exchange, audited financial statements which are prepared in accordance with, or in the case of a foreign exchange, reconciled with, United States generally accepted accounting principles, and are covered by a report prepared by an independent public accountant. If an exchange has no consolidated subsidiaries, it shall file audited financial statements under Exhibit I alone and need not file a separate unaudited financial statement for the exchange under Exhibit D. Exhibit J: A list of the officers, governors, members of all standing committees, or persons performing similar functions, who presently hold or have held their offices or positions during the previous year, indicating the following for each: 1. Name. 2. Title. 3. Dates of commencement and termination of term of office or position. 4. Type of business in which each is primarily engaged (e.g., floor broker, specialist, odd lot dealer, etc.). Exhibit K: This Exhibit is applicable only to exchanges that have one or more owners, shareholders, or partners that are not also members of the exchange. If the exchange is a corporation, please provide a list of each shareholder that directly owns 5% or more of a class of a voting security of the exchange. If the exchange is a partnership, please provide a list of all general partners and those limited and special partners that have the right to receive upon dissolution, or have contributed, 5% or more of the partnership’s capital. For each of the persons listed in the Exhibit K, please provide the following: 1. Full legal name; 2. Title or Status; 3. Date title or status was acquired; 4. Approximate ownership interest; and 5. Whether the person has control, a term that is defined in the instructions to this Form. Exhibit L: Describe the exchange’s criteria for membership in the exchange. Describe conditions under which members may be subject to suspension or termination with regard to the exchange. Describe procedures that will be involved in the suspension or termination of a member. Exhibit M: Provide an alphabetical list of all members, participants, subscribers or other users, including the following information: 1. Name; 2. Date of election to membership or acceptance as a participant, subscriber or other user; 3. Principal business address and telephone number; 4. If member, participant, subscriber or other user is an individual, the name of the entity with which such individual is associated and the relationship of such individual to the entity (e.g. partner, officer, director, employee, etc.); 5. Describe the type of activities primarily engaged in by the member, participant, subscriber, or other user (e.g. floor broker, specialist, odd lot dealer, other market maker, proprietary trader, non-broker dealer, inactive or other functions). A person shall be ‘‘primarily engaged’’ in an activity or function for purposes of this item when that activity or function is the one in which that person is engaged for the majority of their time. When more than one type of person at an entity engages in any of the six types of activities or functions enumerated in this item, identify each type (e.g. proprietary, trader, Registered Competitive Trader and Registered Competitive Market Maker) and state the number of members, participants, subscribers, or other users in each; and 6. The class of membership, participation or subscription or other access. VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 PO 00000 Rule 6a–2(d)(2)—available upon request Rule 6a–2(d)(3)—available via internet website Not Applicable Not Applicable Not ApplicableROW≤ b In lieu of filing {entity} certifies that the information may be obtained below and is accurate as of the publication date: Name of Publication: Name Address Telephone # Price of Publication $ll Date of Publication: mm/dd/yyyy b In lieu of filing {entity} certifies that the information requested under this exhibit is kept up to date and is available to the Commission and the public upon request. b In lieu of filing {entity} certifies that the information may be obtained below and is accurate as of the publication date: Name of Publication: Name Address Telephone # Price of Publication $ll Date of Publication: mm/dd/yyyy b In lieu of filing {entity} certifies that the information requested under this exhibit is kept up to date and is available to the Commission and the public upon request. b In lieu of filing {entity} certifies that the information requested under this exhibit is continuously available at the internet website below, which is controlled by {entity}, and the information is accurate as of the date of this filing and is free and accessible (without any encumbrances or restrictions) by the general public URL(s): b In lieu of filing {entity} certifies that the information requested under this exhibit is continuously available at the internet website below, which is controlled by {entity}, and the information is accurate as of the date of this filing and is free and accessible (without any encumbrances or restrictions) by the general public URL(s): Not Applicable Not Applicable Not Applicable b In lieu of filing {entity} certifies that the information may be obtained below and is accurate as of the publication date: Name of Publication: Name Address Telephone # Price of Publication $ll Date of Publication: mm/dd/yyyy b In lieu of filing {entity} certifies that the information requested under this exhibit is kept up to date and is available to the Commission and the public upon request. b In lieu of filing {entity} certifies that the information requested under this exhibit is continuously available at the internet website below, which is controlled by {entity}, and the information is accurate as of the date of this filing and is free and accessible (without any encumbrances or restrictions) by the general public URL(s): Frm 00103 Fmt 4701 Sfmt 4702 E:\FR\FM\18APP3.SGM 18APP3 24022 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules Alternative means of filing certain exhibits in annual (exhibits K, M, N) and triennial (exhibits A, B, C, J) filings Information required by the exhibit Exhibit N: Provide a schedule for each of the following: 1. The securities listed in the exchange, indicating for each the name of the issuer and a description of the security; 2. The securities admitted to unlisted trading privileges, indicating for each the name of the issuer and a description of the security; 3. The unregistered securities admitted to trading on the exchange which are exempt from registration under Section 12(a) of the Act. For each security listed, provide the name of the issuer and a description of the security, and the statutory exemption claimed (e.g. Rule 12a–6); and 4. Other securities traded on the exchange, including for each the name of the issuer and a description of the security. Section VI—Contact Employee Information Provide the following information of the person at {entity name} prepared to respond to questions for this submission: First Name: Last Name: Title: Email: Telephone: Section VII—Consent to Service and Attestation b By checking this box, {Name of Entity} consents that service of any civil action brought by, or notice of any proceeding before, the Securities and Exchange Commission in connection with the exchange’s activities may be given to the contact employee by registered or certified mail at the main address, or mailing address if different, given in Section I above; and represents that the information and statements contained herein, including exhibits, schedules, or other documents attached hereto, and other information filed herewith, all of which are made a part hereof, are current, true, and complete. ddrumheller on DSK120RN23PROD with PROPOSALS3 Form 1 General Instructions A. Use of the Form Form 1 is the form used by: (a) an applicant for registration as a national securities exchange under Section 6 of the Securities Exchange Act of 1934 (‘‘Exchange Act’’) or for an exemption from registration pursuant to Section 5 of the Exchange Act by reason of the limited volume of transactions effected on such exchange (‘‘applicant’’) to provide to the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) specific items of information about the applicant and its operations, or to amend such application, as required under Rule 6a– 1; and (b) a national securities exchange (‘‘registered exchange’’) or an exchange exempted from such registration by reason of the limited volume of transactions effected on such exchange (‘‘exempt exchange’’) uses to provide the information required by Rule 6a–2 and Rule 6a–3. Filings on Form 1 submitted pursuant to Rule 6a–1, Rule 6a–2 or Rule 6a–3 of the Exchange Act shall be filed in an electronic format on the Commission’s Electronic Data Gathering, Analysis, and Retrieval system (EDGAR) in accordance with EDGAR rules set forth in Regulation S–T (17 CFR part 232). VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 Rule 6a–2(d)(1)—available by publication Rule 6a–2(d)(2)—available upon request Rule 6a–2(d)(3)—available via internet website b In lieu of filing {entity} certifies that the information may be obtained below and is accurate as of the publication date: Name of Publication: Name Address Telephone # Price of Publication $ll Date of Publication: mm/dd/yyyy b In lieu of filing {entity} certifies that the information requested under this exhibit is kept up to date and is available to the Commission and the public upon request. b In lieu of filing {entity} certifies that the information requested under this exhibit is continuously available at the internet website below, which is controlled by {entity}, and the information is accurate as of the date of this filing and is free and accessible (without any encumbrances or restrictions) by the general public URL(s): All pages of an electronically filed Form 1, including exhibits, shall be numbered consecutively, consistent with Rule 0–3 under the Exchange Act (17 CFR 240.0–3). For assistance with EDGAR issues, please consult the EDGAR—Information for Filers web page on SEC.gov. The disclosure required to be included in the following exhibits to Form 1 must be provided as an Interactive Data File in accordance with Rule 405 of Regulation S– T. This requirement does not extend to copies of existing documents: (1) Exhibit D; (2) Exhibit E, except for the copy of the users’ manual; and (3) Exhibit I. B. Need for Careful Preparation of the Completed Form, Including Exhibits Applicants and registered and exempt exchanges must provide all the information required by the form, including the exhibits, and must present the information in a clear and comprehensible manner. A filing that is incomplete or similarly deficient may be returned to the applicant or registered or exempt exchange. Any filing so returned shall for all purposes be deemed not to have been filed with the Commission. See also Rule 0–3 under the Exchange Act (17 CFR 240.0–3). If any exhibit required is inapplicable, a statement to that effect shall be furnished in lieu of such exhibit. C. When to Use the Form 1 Form 1 is composed of 6 types of submissions to the Commission pursuant to Rules 6a–1, 6a–2 and 6a–3 under the Exchange Act. In completing Form 1, an applicant or exchange shall select the type of filing and provide all information required by the relevant rules. The types of submissions are: (1) ‘‘Rule 6a–1 Application’’ submissions are applications for registration as a national securities exchange or for exemption from such registration based on limited volume. The applicant must select the type of application during the initial filing. An exchange that is filing Form 1 as an application may not satisfy the requirements to provide certain information by means of an internet website. All materials must be filed with the Commission as part of the Form 1 application. Amendments to PO 00000 Frm 00104 Fmt 4701 Sfmt 4702 applications as required by Rules 6a–1(b), (c) or (d) must be filed as amending the Rule 6a– 1 application type, and marked to number the amendments consecutively. An applicant may withdraw a Rule 6a–1 application submission type prior to Commission action to issue any order granting registration, or institute proceedings to determine whether registration should be denied. (2) ‘‘Rule 6a–2(a) Amendment to Registration’’ submissions are for amendments to the Form 1 by registered exchanges and exempt exchanges. The amendments shall set forth the nature and effective date of the action taken and shall provide any new information and correct any information rendered inaccurate within 10 days after any action that is taken renders inaccurate, or that causes to be incomplete, any of the following: (i) Information in Section I-Entity Contact Information, or any amendments thereto; or (ii) Information filed as part of Exhibits C, F, G, H, J, K or M, or any amendments thereto. (3) ‘‘Rule 6a–2(b) Annual Filing’’ submission shall be filed on or before June 30 of each year and include the following: (i) Exhibits D and I as of the end of the latest fiscal year of the exchange; and (ii) Exhibits K, M, and N, which shall be up to date as of the latest date practicable within three (3) months of the date the amendment is filed. (4) ‘‘Rule 6a–2(c) Triennial Filing’’ submission shall be filed on or before June 30, 2025, and every three years thereafter and shall include complete Exhibits A, B, C and J. The information filed under this submission type shall, at a minimum, be up to date within three (3) months as of the date the amendment is filed. (5) ‘‘Rule 6a–3(a) Supplemental Material’’ submission shall be filed with the Commission within 10 days after issuing or making any materials (including notices, circulars, bulletins, lists and periodicals) issued or made generally available to members of, or participants or subscribers to, the exchange. (6) ‘‘Rule 6a–3(b) Report of securities sold’’ submission type shall be filed within 15 days after the end of each calendar month and shall include a report concerning the securities sold on such exchange during the calendar month. The report shall set forth: E:\FR\FM\18APP3.SGM 18APP3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules (i) The number of shares of stock sold and the aggregate dollar amount of such stock sold; (ii) The principal amount of bonds sold and the aggregate dollar amount of such bonds sold; and (iii) The number of rights and warrants sold and the aggregate dollar amount of such rights and warrants sold. D. Documents Comprising the Completed Form The completed form filed with the Commission shall consist of Form 1, responses to all applicable items, and any exhibits required in connection with the filing. E. Contact Information and Filing of Completed Form Each time an applicant or exchange submits a filing to the Commission on Form 1, the applicant or exchange must provide the contact information required by Section II of Form 1. The contact employee must be authorized to receive all contact information, communications and mailings and must be responsible for disseminating that information within the applicant or exchange’s organization. For assistance with EDGAR issues, please consult the EDGAR—Information for Filers web page on SEC.gov. F. Recordkeeping A copy of this Form 1 must be retained by the exchange and made available for inspection upon request of the SEC. ddrumheller on DSK120RN23PROD with PROPOSALS3 G. Paperwork Reduction Act Disclosure Form 1 requires an applicant seeking to register as a national securities exchange or seeking an exemption from registration as a national securities exchange pursuant to Section 5 of the Exchange Act to provide the SEC with certain information regarding the operation of the exchange. Form 1 also requires national securities exchanges or exchanges exempt from registration based on limited volume to update certain information on a periodic basis and to provide supplemental material as required. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 a currently valid control number. Sections 3(a)(1), 5, 6(a) and 23(a) authorize the Commission to collect information on this Form 1 from exchanges. See 15 U.S.C. 78c(a)(1), 78e, 78f(a) and 78w(a). Any member of the public may direct to the Commission any comments concerning the accuracy of the burden estimate on the facing page of Form 1 and any suggestions for reducing this burden. Form 1 is designed to enable the Commission to determine whether an exchange applying for registration is in compliance with the provisions of Sections 6 and 19 of the Exchange Act. Form 1 is also designed to enable the Commission to determine whether a national securities exchange or exchange exempt from registration based on limited volume is operating in compliance with the Exchange Act. It is estimated that an exchange will spend approximately 891 hours completing the initial application on Form 1 pursuant to Rule 6a–1. It is also estimated that each exchange will spend approximately 26 hours to prepare each amendment to Form 1 pursuant to Rule 6a–2. It is also estimated that each exchange will spend approximately 0.5 hours to prepare each submission pursuant to Rule 6a–3. It is mandatory that an exchange seeking to operate as a national securities exchange or as an exchange exempt from registration based on limited volume file Form 1 with the Commission. It is also mandatory that national securities exchanges or exchanges exempt from registration based on limited volume file amendments to Form 1 under Rule 6a–2. It is further mandatory that national securities exchanges or exchanges exempt from registration based on limited volume file supplemental information and monthly reports under Rule 6a–3. No assurance of confidentiality is given by the Commission with respect to the responses made in Form 1. The public has access to the information contained in Form 1. This collection of information has been reviewed by the Office of Management and Budget (‘‘OMB’’) in accordance with the clearance requirements of 44 U.S.C. 3507. The Commission has determined that the information collection does not constitute a PO 00000 Frm 00105 Fmt 4701 Sfmt 4702 24023 system of record for purposes of the Privacy Act. H. Explanation of Terms Affiliate—Any person that, directly or indirectly, controls, is under common control with, or is controlled by, the national securities exchange or exchange exempt from registration based on the limited volume of transactions effected on such exchange, including any employees. Control—The power, directly or indirectly, to direct the management or policies of a company, whether through ownership of securities, by contract, or otherwise. Any person that (i) is a director, general partner or officer exercising executive responsibility (or having similar status or functions); (ii) directly or indirectly has the right to vote 25% or more of a class of voting securities or has the power to sell or direct the sale of 25% or more of a class of voting securities; or (iii) in the case of a partnership, has the right to receive, upon dissolution, or has contributed, 25% or more of the capital, is presumed to control that entity. Direct Owners—Any person that owns, beneficially owns, has the right to vote, or has the power to sell or direct the sale of, 5% or more of a class of a voting security of the applicant. For purposes of this Form 1, a person beneficially owns any securities (i) owned by his/her child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law, sharing the same residence; or (ii) that he/she has the right to acquire, within 60 days, through the exercise of any option, warrant or right to purchase the security. Member—Shall have the same meaning as under Exchange Act Section 3(a)(3). National Securities Exchange—Shall mean any exchange registered pursuant to Section 6 of the Exchange Act. Person Associated With a Member—Shall have the same meaning as under Section 3(a)(21) of the Exchange Act. Appendix 2 Note: The text of Form 1–N does not, and this amendment will not, appear in the Code of Federal Regulations. E:\FR\FM\18APP3.SGM 18APP3 VerDate Sep<11>2014 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules 20:06 Apr 17, 2023 Jkt 259001 PO 00000 Frm 00106 Fmt 4701 Sfmt 4725 E:\FR\FM\18APP3.SGM 18APP3 EP18AP23.012</GPH> ddrumheller on DSK120RN23PROD with PROPOSALS3 24024 VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 PO 00000 Frm 00107 Fmt 4701 Sfmt 4725 E:\FR\FM\18APP3.SGM 18APP3 24025 EP18AP23.013</GPH> ddrumheller on DSK120RN23PROD with PROPOSALS3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules 24026 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules Alternative means of filing certain exhibits in annual (exhibits F, H, I) and triennial (exhibits A, B, C, E) filings Rule 6a–4(b)(5)(i) available by publication Rule 6a–4(b)(5)(ii) available upon request Rule 6a–4(b)(5)(iii) available via internet website Exhibit A: As of the latest date practicable within one (1) month of the date Form 1–N is filed, a copy of the constitution, articles of incorporation or association with all subsequent amendments, and existing by-laws or corresponding rules or instruments, whatever the name, of the filing exchange. b In lieu of filing {entity} certifies that the information may be obtained below and is accurate as of the publication date: Name of Publication: Name Address Telephone # Price of Publication $l Date of Publication: mm/dd/yyyy b In lieu of filing {entity} certifies that the information requested under this exhibit is kept up to date and is available to the Commission and the public upon request. Exhibit B: As of the latest date practicable within one (1) month of the date Form 1–N is filed, a copy of all written rulings, settled practices having the effect of rules, and interpretations of the Governing Board or other committee of the exchange in respect of any provisions of the constitution, by-laws, rules, or trading practices of the filing exchange which are not included in Exhibit A. b In lieu of filing {entity} certifies that the information may be obtained below and is accurate as of the publication date: Name of Publication: Name Address Telephone # Price of Publication $l Date of Publication: mm/dd/yyyy b In lieu of filing {entity} certifies that the information may be obtained below and is accurate as of the publication date: Name of Publication: Name Address Telephone # Price of Publication $l Date of Publication: mm/dd/yyyy b In lieu of filing {entity} certifies that the information requested under this exhibit is kept up to date and is available to the Commission and the public upon request. b In lieu of filing {entity} certifies that the information requested under this exhibit is continuously available at the internet website below, which is controlled by {entity}, and is accurate as of the date of this filing and is free and accessible (without any encumbrances or restrictions) by the general public. URL(s): b In lieu of filing {entity} certifies that the information requested under this exhibit is available at the internet website below and is accurate as of the date of this filing and is free and accessible (without any encumbrances or restrictions) by the general public. URL(s): b In lieu of filing {entity} certifies that the information requested under this exhibit is kept up to date and is available to the Commission and the public upon request. b In lieu of filing {entity} certifies that the information requested under this exhibit is available at the internet website below and is accurate as of the date of this filing and is free and accessible (without any encumbrances or restrictions) by the general public. URL(s): Not Applicable. Not Applicable. Not Applicable. Exhibit C: As of the latest date practicable within one (1) month of the date Form 1–N is filed, for each subsidiary or affiliate of the filing exchange that will be involved in the trading of security futures products, and for any entity with whom the exchange has a contractual or other agreement relating to the operation of an electronic trading system to be used to effect transactions in security futures products on the exchange (‘‘System’’), provide the following information: 1. Name and address of organization. 2. Form of organization (e.g., association, corporation, partnership, etc.). 3. Name of state and statute citation under which organized. Date of incorporation in present form. 4. Brief description of nature and extent of affiliation. 5. Brief description of business or functions. Description should include responsibilities with respect to operation of the System and/or execution, reporting, clearance (including the controls that will be implemented to ensure the safety of held funds or securities), or settlement of transactions in connection with operation of the System. 6. A copy of the constitution. 7. A copy of the articles of incorporation or association including all amendments. 8. A copy of existing by-laws or corresponding rules or instruments. 9. The name and title of the present officers, governors, members of all standing committees, or persons performing similar functions. 10. An indication of whether such business or organization ceased to be associated with the Security Futures Product Exchange during the previous year, and a brief statement of the reasons for termination of the association. Exhibit D: Describe the manner of operation of the System involving trading of security futures products. The description should include the following: VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 PO 00000 Frm 00108 Fmt 4701 Sfmt 4702 E:\FR\FM\18APP3.SGM 18APP3 EP18AP23.014</GPH> ddrumheller on DSK120RN23PROD with PROPOSALS3 Information required by the exhibit Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules 24027 Alternative means of filing certain exhibits in annual (exhibits F, H, I) and triennial (exhibits A, B, C, E) filings Information required by the exhibit ddrumheller on DSK120RN23PROD with PROPOSALS3 1. The means of access to the System. 2. Procedures governing entry and display of quotations and orders in the System. 3. Procedures governing the execution, reporting, clearance, and settlement of transactions in connection with the System. 4. Proposed fees. 5. Procedures for ensuring compliance with System usage guidelines. 6. The hours of operation of the System, and the date of which the exchange intends to commence operation of the System. 7. Attach a copy of the users’ manual. Exhibit E: A list of the officers, governors, or persons performing similar functions, who presently hold or have held their offices or positions during the previous year, indicating the following for each: 1. Name. 2. Title. 3. Dates of commencement and termination of term of office or position. 4. Type of business in which each is primarily engaged. Exhibit F: This Exhibit is applicable only to filing exchanges that have one or more owners, shareholders, partners that are also not members of the exchange and should be current as of the latest date practicable within one month of the date Form 1–N is filed. If the exchange is a corporation, please provide a list of each shareholder that directly owns 5% or more of a class of a voting security of the Security Futures Product Exchange. If the exchange is a partnership, please provide a list of all general partners and those limited and special partners that have the right to receive upon dissolution, or have contributed, 5% or more of the partnership’s capital. For each person listed in the Exhibit F, please provide the following: 1. Full legal name. 2. Title of Status. 3. Date of title or status acquired. 4. Approximate ownership interest. 5. Whether the person has control, a term that is defined in the instructions to this Form. Exhibit G: To the extent not covered in an exchange’s rules submitted under Exhibit A, describe the Security Futures Product Exchange’s criteria for membership. Describe conditions under which members may be subject to suspension or termination for infractions relating to the trading of security futures products. Describe any procedures that will be involved in the suspension or termination of a member for such infractions. Exhibit H: As of the latest date practicable within 1 month of the date Form 1–N is filed, provide an alphabetical list of all members, participants, subscribers, or other users, including the following information: 1. Name. 2. If a member, participant, subscriber, or other user is an individual, the name of the entity with which such individual is associated and the relationship of such individual to the entity (e.g., partner, officer, director, employee, etc.). 3. Brief description of the type of activities primarily engaged in by the member, participant, subscriber, or other user. A person shall be ‘‘primarily engage’’ in an activity or function for purposes of this item when that activity or function is the one in which that person is engaged for the majority of their time. When more than one type of person at an entity engages in activities or functions, identify each type and state the number of members, participants, subscribers, or other users in each. 4. The class of membership, participation, subscription, or other access. VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 PO 00000 Rule 6a–4(b)(5)(i) available by publication Rule 6a–4(b)(5)(ii) available upon request Rule 6a–4(b)(5)(iii) available via internet website b In lieu of filing {entity} certifies that the information may be obtained below and is accurate as of the publication date: Name of Publication: Name Address Telephone # Price of Publication $l Date of Publication: mm/dd/yyyy b In lieu of filing {entity} certifies that the information may be obtained below and is accurate as of the publication date: Name of Publication: Name Address Telephone # Price of Publication $l Date of Publication: mm/dd/yyyy b In lieu of filing {entity} certifies that the information requested under this exhibit is kept up to date and is available to the Commission and the public upon request. b In lieu of filing {entity} certifies that the information requested under this exhibit is available at the internet website below and is accurate as of the date of this filing and is free and accessible (without any encumbrances or restrictions) by the general public. URL(s): b In lieu of filing {entity} certifies that the information requested under this exhibit is kept up to date and is available to the Commission and the public upon request. b In lieu of filing {entity} certifies that the information requested under this exhibit is available at the internet website below and is accurate as of the date of this filing and is free and accessible (without any encumbrances or restrictions) by the general public. URL(s): b In lieu of filing {entity} certifies that the information may be obtained below and is accurate as of the publication date: Name of Publication: Name Address Telephone # Price of Publication $l Date of Publication: mm/dd/yyyy b In lieu of filing {entity} certifies that the information requested under this exhibit is kept up to date and is available to the Commission and the public upon request. b In lieu of filing {entity} certifies that the information requested under this exhibit is available at the internet website below and is accurate as of the date of this filing and is free and accessible (without any encumbrances or restrictions) by the general public. URL(s): Frm 00109 Fmt 4701 Sfmt 4702 E:\FR\FM\18APP3.SGM 18APP3 24028 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules Alternative means of filing certain exhibits in annual (exhibits F, H, I) and triennial (exhibits A, B, C, E) filings Information required by the exhibit Exhibit I: Provide a schedule of the security futures products proposed to be listed by the filing exchange, or for amendments to the Form 1–N the security futures products listed by the exchange, indicating for each the name of the issuer and a description of the security. Section VI: Contact Employee Information The individual listed herein as the Contact Employee for {name of exchange} must be authorized to receive all contact information, communications, and mailings and is responsible for disseminating such information within the Security Futures Product Exchange’s organization. First Name: Last Name: Title: Email: Telephone: Section VII: Consent to Service and Attestation b By checking this box, {Name of Entity} consents that service of any civil action brought by, or notice of any proceeding before, the Securities and Exchange Commission in connection with the exchange’s activities may be given by registered or certified mail to the contact employee at the main address, or mailing address if different, given in Section I above; and represents that the information and statements contained herein, including exhibits, schedules, or other documents attached hereto, and other information filed herewith, all of which are made a part hereof, are current, true, and complete. ddrumheller on DSK120RN23PROD with PROPOSALS3 Form 1–N General Instructions A. Use of the Form Form 1–N is the form used for: (a) notice of registration as a national securities exchange for the sole purpose of trading security futures products (‘‘Security Futures Product Exchange’’) under Section 6(g) of the Securities Exchange Act of 1934 (‘‘Exchange Act’’) to provide to the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) specific items of information about the Security Futures Product Exchange and its operations; (b) the filing of annual and triennial updates to the information required by Form 1–N following notice of registration; and (c) supplemental material and reports of security futures products traded. Filings on Form 1–N submitted pursuant to Rule 6a–4 of the Exchange Act (17 CFR 240.6a–4) shall be filed in an electronic format on the Commission’s Electronic Data Gathering, Analysis, and Retrieval System (EDGAR) in accordance with EDGAR rules set forth in Regulation S– T (17 CFR part 232). For assistance with EDGAR issues, please consult the EDGAR— VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 Rule 6a–4(b)(5)(i) available by publication Rule 6a–4(b)(5)(ii) available upon request Rule 6a–4(b)(5)(iii) available via internet website b In lieu of filing {entity} certifies that the information may be obtained below and is accurate as of the publication date: Name of Publication: Name Address Telephone # Price of Publication $l Date of Publication: mm/dd/yyyy b In lieu of filing {entity} certifies that the information requested under this exhibit is kept up to date and is available to the Commission and the public upon request. b In lieu of filing {entity} certifies that the information requested under this exhibit is available at the internet website below and is accurate as of the date of this filing and is free and accessible (without any encumbrances or restrictions) by the general public. URL(s): Information for Filers web page on SEC.gov. All pages of an electronically filed Form 1– N, including exhibits, shall be numbered consecutively, consistent with Rule 0–3 under the Exchange Act (17 CFR 240.0–3). B. Need for Careful Preparation of the Completed Form, Including Exhibits Security Futures Product Exchanges must provide all the information required by the form, including the exhibits, and must present the information in a clear and comprehensible manner. A filing that is incomplete or similarly deficient may be returned to the Security Futures Product Exchange. Any filing so returned shall for all purposes be deemed not to have been filed with the Commission. See also Rule 0–3 under the Exchange Act (17 CFR 240.0–3). If any exhibit required is inapplicable, a statement to that effect shall be furnished in lieu of such exhibit. The first filing on Form 1–N that a Security Futures Product Exchange submits through EDGAR must contain all items required by Section I. C. When to Use the Form 1–N Form 1–N is composed of 6 types of submissions to the Commission pursuant to Rule 6a–4 under the Exchange Act. In completing Form 1–N, a Security Futures Product Exchange shall select the type of filing and provide all information required by the relevant rules. The types of submissions are: (1) ‘‘Rule 6a–4 Initial Notice of Registration’’ submissions for notice of registration as a Security Futures Product Exchange. An exchange that is filing Form 1– N may not satisfy the requirements to provide certain information by means of an internet website. All materials must be filed with the Commission as part of the Form 1– N notice of registration. (2) ‘‘Rule 6a–4(b) Amendment to Notice of Registration’’ submissions for amendments to the Form 1–N, which shall set forth the nature and effective date of the action taken and shall provide any new information and correct any information rendered inaccurate within: (i) 10 days after any action that is taken renders inaccurate, or that causes to be incomplete, any information in Sections I through IV, or any amendments thereto; or PO 00000 Frm 00110 Fmt 4701 Sfmt 4702 (ii) 30 days after any action is taken that renders inaccurate, or that causes to be incomplete, any information filed as part of Exhibit F to Form 1–N, or any amendments thereto. (3) ‘‘Rule 6a–4(b)(3) Annual Filing’’ submission, which shall be filed by June 30 of each year and include Exhibits F, H, and I, which shall be current as of the latest date practicable within 3 months of the date the amendment is filed. (4) ‘‘Rule 6a–4(b)(4) Triennial Filing’’ submission, which shall be filed by June 30, 2025, and by June 30 every three years thereafter, and shall include complete Exhibits A, B, C, and E. The information filed under this submission type shall be current as of the latest practicable date, but shall at a minimum, be up to date within 3 months as of the date the amendment is filed. (5) ‘‘Rule 6a–4(c)(1) Supplemental Material’’ submission type, for submission of supplemental material within 10 days after issuing or making such material available to members, participants, or subscribers. (6) ‘‘Rule 6a–4(c)(2) Report of security futures products traded’’ submission type shall be filed within 15 days after the end of each calendar month. Such report shall contain: (i) For each contract of sale for future delivery of a single security, the number of contracts traded on such exchange during the relevant calendar month and the total number of share underlying such contracts traded; and (ii) For each contract of sale for future delivery of a narrow-based security index, the number of contracts traded on such exchange during the relevant calendar month and the total number of shares represented by the index underlying such contracts traded. D. Documents Comprising the Completed Form The completed form filed with the Commission shall consist of Form 1–N, responses to all applicable items, and any exhibits required in connection with the filing. E. Contact Information and Filing of Completed Form Each time a Security Futures Product Exchange submits a filing to the Commission on Form 1–N, the Security Futures Product Exchange must provide the contact information required by Section II of Form 1– E:\FR\FM\18APP3.SGM 18APP3 24029 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules N. The contact employee must be authorized to receive all contact information, communications and mailings and must be responsible for disseminating that information within the Security Futures Product Exchange. For assistance with EDGAR issues, please consult the EDGAR—Information for Filers web page on SEC.gov. F. Recordkeeping A copy of this Form 1–N, as well as the forms filed with the SEC, must be retained by the Security Futures Product Exchange and made available for inspection upon request of the SEC. ddrumheller on DSK120RN23PROD with PROPOSALS3 G. Paperwork Reduction Act Disclosure Form 1–N requires an exchange seeking to register as a national securities exchange for the sole purpose of trading security futures products, pursuant to Section 6(g) of the Exchange Act, to provide the Commission with certain information regarding its operation. If documents containing information satisfying the Commission’s information requirements have been filed with the Commodity Futures Trading Commission, copies of such documents may be filed with the Commission. Form 1–N also requires Security Futures Product Exchanges to update certain information on a periodic basis. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number. Sections 3(a)(1), 5, 6(a) and 23(a) authorize the Commission to collect information on this Form 1–N from Security Futures Product Exchanges. See 15 U.S.C. 78c(a)(1), 78e, 78f(a) and 78w(a). Form 1–N is designed to enable the Commission to determine whether a Security Futures Product Exchange is in compliance with the Exchange Act. VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 It is estimated that a Security Futures Product Exchange will spend approximately 29 hours completing the initial application on Form 1–N pursuant to Rule 6a–4. It is estimated that each Security Futures Product Exchange will spend approximately 14 hours annually to prepare periodic amendments, 14 hours annually to prepare annual amendments, 7 hours annually to prepare triennial amendments to Form 1–N and 6 hours annually for the required supplemental information and monthly reports pursuant to Rule 6a–4. Any member of the public may direct to the Commission any comments concerning the accuracy of this burden estimate and any suggestions for reducing this burden. It is mandatory that an exchange seeking to operate as a national securities exchange for the sole purpose of trading security futures products file a Form 1–N with the Commission. It is also mandatory that Security Futures Product Exchanges file amendments to Form 1–N under Rule 6a–4. No assurance of confidentiality is given by the Commission with respect to the responses made in Form 1–N. The public has access to the information contained in Form 1–N. This collection of information has been reviewed by the Office of Management and Budget (‘‘OMB’’) in accordance with the clearance requirements of 44 U.S.C. 3507. The Commission has determined that the information collection does not constitute a system of record for purposes of the Privacy Act. H. Explanation of Terms Affiliate—Any person that, directly or indirectly, controls, is under common control with, or is controlled by, the national securities exchange or exchange exempt from registration based on the limited volume of transactions effected on such exchange, including any employees. PO 00000 Frm 00111 Fmt 4701 Sfmt 4702 Control—The power, directly or indirectly, to direct the management or policies of a company, whether through ownership of securities, by contract, or otherwise. Any person that (i) is a director, general partner or officer exercising executive responsibility (or having similar status or functions); (ii) directly or indirectly has the right to vote 25% or more of a class of voting securities or has the power to sell or direct the sale of 25% or more of a class of voting securities; or (iii) in the case of a partnership, has the right to receive, upon dissolution, or has contributed, 25% or more of the capital, is presumed to control that entity. Direct Owners—Any person that owns, beneficially owns, has the right to vote, or has the power to sell or direct the sale of, 5% or more of a class of a voting security of the Security Futures Product Exchange. For purposes of this Form 1–N, a person beneficially owns any securities (i) owned by his/her child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-inlaw, sharing the same residence; or (ii) that he/she has the right to acquire, within 60 days, through the exercise of any option, warrant or right to purchase the security. Member—Shall have the same meaning as under Exchange Act Section 3(a)(3). Person Associated With a Member—Shall have the same meaning as under Section 3(a)(21) of the Exchange Act. Appendix 3 Note: The text of Part II of Form X–17A– 5 and the instructions thereto do not and these amendments will not appear in the Code of Federal Regulations. * E:\FR\FM\18APP3.SGM * * 18APP3 * * VerDate Sep<11>2014 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules 20:06 Apr 17, 2023 Jkt 259001 PO 00000 Frm 00112 Fmt 4701 Sfmt 4725 E:\FR\FM\18APP3.SGM 18APP3 EP18AP23.001</GPH> ddrumheller on DSK120RN23PROD with PROPOSALS3 24030 VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 PO 00000 Frm 00113 Fmt 4701 Sfmt 4725 E:\FR\FM\18APP3.SGM 18APP3 24031 EP18AP23.002</GPH> ddrumheller on DSK120RN23PROD with PROPOSALS3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules 24032 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules Note: The text of Part II of Form X–17A– 5 and the instructions thereto do not and these amendments will not appear in the Code of Federal Regulations. * * * * * ddrumheller on DSK120RN23PROD with PROPOSALS3 Computation of CFTC Minimum Capital Requirements This section must be prepared by brokerdealers, nonbank SBSDs, and nonbank MSBSPs registered with the CFTC as futures VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 commission merchants (‘‘FCMs’’), swap dealers, and/or introducing brokers pursuant to section 4f and 4s, as applicable, of the Commodity Exchange Act and that elect to file a FOCUS Report in lieu of required CFTC financial reports. (Broker-dealers that notice register as FCMs with the CFTC for the sole purpose of soliciting order, accepting orders, or executing orders for security futures products on behalf of others are not subject to CFTC financial reporting requirements.) This section should be prepared in accordance with the CFTC’s Form 1–FR and PO 00000 Frm 00114 Fmt 4701 Sfmt 4702 other guidance issued by the CFTC or CFTC staff (‘‘CFTC Instructions’’). * * * * * Appendix 5 Note: The text of Part IIC of Form X–17A– 5 and the instructions thereto do not and these amendments will not appear in the Code of Federal Regulations. * E:\FR\FM\18APP3.SGM * * 18APP3 * * EP18AP23.003</GPH> Appendix 4 VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 PO 00000 Frm 00115 Fmt 4701 Sfmt 4725 E:\FR\FM\18APP3.SGM 18APP3 24033 EP18AP23.004</GPH> ddrumheller on DSK120RN23PROD with PROPOSALS3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules VerDate Sep<11>2014 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules 20:06 Apr 17, 2023 Jkt 259001 PO 00000 Frm 00116 Fmt 4701 Sfmt 4725 E:\FR\FM\18APP3.SGM 18APP3 EP18AP23.005</GPH> ddrumheller on DSK120RN23PROD with PROPOSALS3 24034 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules * * * * * 24035 Appendix 6 VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 PO 00000 Frm 00117 Fmt 4701 Sfmt 4702 E:\FR\FM\18APP3.SGM 18APP3 EP18AP23.006</GPH> ddrumheller on DSK120RN23PROD with PROPOSALS3 Note: The text of Form 15A does not and the amendments will not appear in the Code of Federal Regulations. VerDate Sep<11>2014 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules 20:06 Apr 17, 2023 Jkt 259001 PO 00000 Frm 00118 Fmt 4701 Sfmt 4725 E:\FR\FM\18APP3.SGM 18APP3 EP18AP23.015</GPH> ddrumheller on DSK120RN23PROD with PROPOSALS3 24036 VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 PO 00000 Frm 00119 Fmt 4701 Sfmt 4725 E:\FR\FM\18APP3.SGM 18APP3 24037 EP18AP23.016</GPH> ddrumheller on DSK120RN23PROD with PROPOSALS3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules VerDate Sep<11>2014 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules 20:06 Apr 17, 2023 Jkt 259001 PO 00000 Frm 00120 Fmt 4701 Sfmt 4725 E:\FR\FM\18APP3.SGM 18APP3 EP18AP23.017</GPH> ddrumheller on DSK120RN23PROD with PROPOSALS3 24038 VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 PO 00000 Frm 00121 Fmt 4701 Sfmt 4725 E:\FR\FM\18APP3.SGM 18APP3 24039 EP18AP23.018</GPH> ddrumheller on DSK120RN23PROD with PROPOSALS3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules VerDate Sep<11>2014 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules 20:06 Apr 17, 2023 Jkt 259001 PO 00000 Frm 00122 Fmt 4701 Sfmt 4725 E:\FR\FM\18APP3.SGM 18APP3 EP18AP23.019</GPH> ddrumheller on DSK120RN23PROD with PROPOSALS3 24040 VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 PO 00000 Frm 00123 Fmt 4701 Sfmt 4725 E:\FR\FM\18APP3.SGM 18APP3 24041 EP18AP23.020</GPH> ddrumheller on DSK120RN23PROD with PROPOSALS3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules VerDate Sep<11>2014 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules 20:06 Apr 17, 2023 Jkt 259001 PO 00000 Frm 00124 Fmt 4701 Sfmt 4725 E:\FR\FM\18APP3.SGM 18APP3 EP18AP23.021</GPH> ddrumheller on DSK120RN23PROD with PROPOSALS3 24042 permanent approval of the association’s rules and practices. FORM 15A General Instructions ddrumheller on DSK120RN23PROD with PROPOSALS3 A. General Instructions for Preparing and Filing Form 15A Form 15A is to be used by an entity for registration with the Securities and Exchange Commission (the ‘‘Commission’’) as a national securities association or an affiliated securities association, and for any amendments or supplements to such registration statement under Section 15A of the Securities Exchange Act of 1934 (‘‘the Act’’). As used hereinafter, the term ‘‘Form 15A’’ includes the form and any required exhibits and schedules thereto. Form 15A shall be filed in an electronic format through the Commission’s Electronic Data Gathering, Analysis, and Retrieval System (EDGAR) in accordance with EDGAR rules set forth in Regulation S–T (17 CFR part 232). Unless the context clearly indicates otherwise, the terms used in Form 15A have the meanings given in the Act. Note: The granting of registration is not to be deemed VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 B. Need for Careful Preparation of the Completed Form, Including Schedules and Exhibits A Form 15A that is not prepared and executed in compliance with applicable requirements may be returned as not acceptable for filing. Any filing so returned shall for all purposes be deemed not to have been filed with the Commission. See also Rule 0–3 under the Act (17 CFR 240.0–3). However, acceptance of Form 15A shall not constitute a finding that it has been filed as required or that the information submitted is true, current or complete. C. When To Use the Form 15A Form 15A is composed of seven types of submissions to the Commission pursuant to Section 15A of the Act and Rules 15aa–1 and 15aa–2 thereunder. In completing the Form 15A, a registrant shall select the type of filing and provide all information required by the rules and instructions thereunder. In PO 00000 Frm 00125 Fmt 4701 Sfmt 4702 24043 submitting this Form, its exhibits, and its schedules, the person by whom it is executed represents that all information contained within is true, current and complete. The types of submissions are: (1) Rule 15aa–1 submissions are applications for registration as a national securities association or an affiliated securities association. If Form 15A is being filed as an application for registration as a national securities association, all applicable items are required to be answered in full, except for items in Section IX. If Form 15A is being filed as an application for registration as an affiliated securities association, all applicable items are required to be answered in full. Note: The granting of registration is not to be deemed permanent approval of the association’s rules and practices. (2) Rule 15aa–2(a) submissions shall be filed promptly after the discovery of any inaccuracy in the registration statement or in any amendment or supplement thereto. All amended items are required to be answered in full. All amended exhibits or schedules are E:\FR\FM\18APP3.SGM 18APP3 EP18AP23.022</GPH> Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules 24044 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules ddrumheller on DSK120RN23PROD with PROPOSALS3 required to be provided completely. Any item that is not being amended may be left blank. If no item in a section is being amended, the association may check the box next to the applicable section heading labeled ‘‘Check if information has not changed since previous filing.’’ (3) Rule 15aa–2(b) submissions shall be filed promptly after any change which renders no longer accurate any information contained or incorporated in the registration statement or in any amendment or supplement thereto, except that no current supplements need be filed with respect to changes in the information called for in Exhibit B. All supplemented items are required to be answered in full. All supplemented exhibits or schedules are required to be provided completely. Any item that is not being amended may be left blank. If no item in a section is being supplemented, the association may check the box next to the applicable section heading labeled ‘‘Check if information has not changed since previous filing.’’ Supplements setting forth changes in the information called for in Exhibit C need not be filed until 10 days after the calendar month in which the changes occur. If the submission is being filed solely to supplement changes in the information called for in Exhibit C, association should check the applicable box and provide the month and year in which the changes occurred. The association need not provide a current supplement to Exhibit C if it checks the box indicating it has complied with the requirements of Rule 15aa–2(b)(3). (4) Rule 15aa–2(c) submissions are annual consolidated supplements to a registration statement as a national securities association or an affiliated securities association and shall be filed promptly after March 1 of each year. If the association is filing an annual consolidated supplement to a registration statement as a national securities association, all applicable items are required to be answered in full, except for items in Section IX. If the association is filing an annual consolidated supplement to a registration statement as an affiliated securities association, all applicable items are required VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 to be answered in full. The association need not answer Item 6 if it checks the box indicating it has complied with the requirements of Rules 15aa–2(c)(1)(i)(A)–(B) and provides the applicable information. (5) Rule 15aa–2(c)(2) submissions shall be filed promptly after the close of each fiscal year of the association. The association is required to provide a complete Exhibit B. (6) Rule 15aa–2(c)(1)(ii) submissions shall be filed promptly by March 1, 2025, and every three years thereafter. The association is required either to provide a complete Exhibit A or check the boxes indicating it has complied with the requirements of Rules 15aa–2(c)(1)(ii)(A)–(B) and provide the applicable information. (7) Rule 15aa–2(d)(2) submissions require the association to electronically file any notices, reports, circulars, loose-leaf insertions, riders, new additions, lists or other records of changes when, as, and if such records are made available to members of the association. D. Documents Comprising the Completed Form The completed form filed with the Commission shall consist of Form 15A, responses to all applicable items, and any exhibits and schedules required in connection with the filing. Any item may be answered by reference to the page, article, section or paragraph of any document filed as an exhibit herewith which contains the information required. Unless the context otherwise requires, the terms ‘‘rule of the association,’’ as used in Form 15A shall include any provision of the association’s constitution, charter, articles of incorporation or association and by-laws, and any rule of the association or any of its committees and any settled practice association or of any of its committees having the effect of a rule. E. Contact Information and Filing of Completed Form Each time an association submits a filing to the Commission on Form 15A, the association must provide the contact information required by Section X of the PO 00000 Frm 00126 Fmt 4701 Sfmt 4702 form. The contact employee must be authorized to receive all contact information, communications and mailings and must be responsible for disseminating that information within the association’s organization. Consult the EDGAR Filer Manual for EDGAR filing instructions, including the instructions for becoming an EDGAR Filer. Appendix 7 Note: The text of Form X–17A–19 does not, and this amendment will not, appear in the Code of Federal Regulations. * * * * * General Instructions FORM X–17A–19 1. * * * 2. Original: File with the Commission electronically on EDGAR in accordance with the EDGAR Filer Manual, as defined in Rule 11 of Regulation S–T (§ 232.11) and in accordance with the requirements of Regulation S–T. Copy No. 1—Mail to: Securities Investor Protection Corporation, 1667 K St. NW, Suite 1000, Washington, DC 20006–1620. Copy No. 2: Retain for your files. 3. The original filed with the Securities and Exchange Commission and the copy filed with the Securities Investor Protection Corporation shall be signed by a duly authorized official of the national securities exchange or registered securities association (self-regulatory organization). * * * * * 6. Copies of this Form may be obtained on the Commission’s website. * * * * * Appendix 8 Note: The text of Form 19b–4 does not, and this amendment will not, appear in the Code of Federal Regulations. * E:\FR\FM\18APP3.SGM * * 18APP3 * * * * * * * F. Signature and Filing of the Completed Form All proposed rule changes, amendments, extensions, and withdrawals of proposed rule VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 PO 00000 Frm 00127 Fmt 4701 Sfmt 4702 changes shall be filed through the EFFS. All security-based swap submissions, advance notices, and amendments, extensions, and withdrawals of security-based swap E:\FR\FM\18APP3.SGM 18APP3 EP18AP23.008</GPH> General Instructions for Form 19b–4 24045 EP18AP23.007</GPH> ddrumheller on DSK120RN23PROD with PROPOSALS3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules 24046 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules ddrumheller on DSK120RN23PROD with PROPOSALS3 submissions and advance notices shall be filed to a dedicated email address established by the Commission, SBSwapsSubmissions@ sec.gov for security-based swap submissions and AdvanceNoticeFilings@sec.gov for advance notices. In order to file Form 19b– 4 through EFFS, self-regulatory organizations must request access to the SEC’s External Application Server by completing a request for an external account user ID and password. Initial requests will be received by contacting the Trading and Markets Administrator located on our website (https:// www.sec.gov). An email will be sent to the requestor that will provide a link to a secure website where basic profile information will be requested. VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 A duly authorized officer of the selfregulatory organization shall electronically sign the completed Form 19b–4 as indicated on Page 1 of the Form. A registered clearing agency for which the Commission is not the appropriate regulatory agency also shall file with its appropriate regulatory agency three copies of the form, one of which shall be manually signed, including exhibits. A clearing agency that also is a designated clearing agency shall file with the Board of Governors of the Federal Reserve System (‘‘Federal Reserve’’) three copies of any form containing an advance notice, one of which shall be manually signed, including exhibits; provided, however, that this requirement may be satisfied instead by providing the PO 00000 Frm 00128 Fmt 4701 Sfmt 4702 copies to the Federal Reserve in an electronic format as permitted by the Federal Reserve. The Municipal Securities Rulemaking Board also shall file copies of the form, including exhibits, with the Federal Reserve, the Comptroller of the Currency, and the Federal Deposit Insurance Corporation. * * * * * Appendix 9 Note: The text of Form CA–1 does not, and this amendment will not, appear in the Code of Federal Regulations. E:\FR\FM\18APP3.SGM 18APP3 VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 PO 00000 Frm 00129 Fmt 4701 Sfmt 4725 E:\FR\FM\18APP3.SGM 18APP3 24047 EP18AP23.023</GPH> ddrumheller on DSK120RN23PROD with PROPOSALS3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules VerDate Sep<11>2014 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules 20:06 Apr 17, 2023 Jkt 259001 PO 00000 Frm 00130 Fmt 4701 Sfmt 4725 E:\FR\FM\18APP3.SGM 18APP3 EP18AP23.024</GPH> ddrumheller on DSK120RN23PROD with PROPOSALS3 24048 VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 PO 00000 Frm 00131 Fmt 4701 Sfmt 4725 E:\FR\FM\18APP3.SGM 18APP3 24049 EP18AP23.025</GPH> ddrumheller on DSK120RN23PROD with PROPOSALS3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules VerDate Sep<11>2014 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules 20:06 Apr 17, 2023 Jkt 259001 PO 00000 Frm 00132 Fmt 4701 Sfmt 4725 E:\FR\FM\18APP3.SGM 18APP3 EP18AP23.026</GPH> ddrumheller on DSK120RN23PROD with PROPOSALS3 24050 VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 PO 00000 Frm 00133 Fmt 4701 Sfmt 4725 E:\FR\FM\18APP3.SGM 18APP3 24051 EP18AP23.027</GPH> ddrumheller on DSK120RN23PROD with PROPOSALS3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules VerDate Sep<11>2014 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules 20:06 Apr 17, 2023 Jkt 259001 PO 00000 Frm 00134 Fmt 4701 Sfmt 4725 E:\FR\FM\18APP3.SGM 18APP3 EP18AP23.028</GPH> ddrumheller on DSK120RN23PROD with PROPOSALS3 24052 VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 PO 00000 Frm 00135 Fmt 4701 Sfmt 4725 E:\FR\FM\18APP3.SGM 18APP3 24053 EP18AP23.029</GPH> ddrumheller on DSK120RN23PROD with PROPOSALS3 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules ddrumheller on DSK120RN23PROD with PROPOSALS3 FORM CA–1 General Instructions A. General Instructions for Preparing and Filing Form CA–1 Form CA–1 is to be used by clearing agencies, as defined in Section 3(a)(23) of the Securities Exchange Act of 1934 (‘‘the Act’’), which perform the functions of a clearing agency with respect to any security other than an exempted security, as defined in Section 3(a)(l2) of the Act, to apply for registration or for exemption from registration or to amend registration with the Securities and Exchange Commission (the ‘‘Commission’’). As used hereinafter, the term ‘‘Form CA–1’’ includes the form and any required schedules, exhibits or attachments thereto. A response is required for every exhibit. For any exhibit that is inapplicable, a statement to that effect shall be furnished in lieu of such exhibit. Form CA–1 shall be filed in an electronic format through the Commission’s Electronic Data Gathering, Analysis, and Retrieval System (EDGAR) in accordance with EDGAR rules set forth in Regulation S–T (17 CFR part 232). With the exception of certain attachments, Form CA–1 must be provided as an Interactive Data File in accordance with Rule 405 of Regulation S–T. This requirement does not extend to submissions that constitute copies of existing documents other than the financial statements (e.g., the copy of the clearing agency’s currently effective VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 constitution, articles of incorporation or association, by-laws, rules, procedures and instruments corresponding thereto, that is required to be provided as Exhibit E; the copy of a form of participant agreement that is required to be provided as Exhibit P; any reports, assessments, or formal opinions provided by internal or external auditors, attorneys, or similar assessors, or other similar documents that were prepared for a purpose other than submission of the Form CA–1). The requirement to provide Form CA–1 as an Interactive Data File applies to each of the 3 submissions described in General Instruction H below. In addition, with respect to a clearing agency for which the Commission is not the appropriate regulatory agency, as defined in Section 3(a)(34)(B) of the Act, Section 17(c)(1) of the Act requires such clearing agency to file with the appropriate regulatory agency for such clearing agency a signed copy of any application, document or report filed with the Commission. Each clearing agency should retain an exact copy of Form CA–1 for the clearing agency’s records. Unless the context clearly indicates otherwise, the terms used in Form CA–1 have the meanings given in the Act. Unless the context otherwise requires, ‘‘registrant’’ means the entity on whose behalf Form CA–1 is filed, whether filed as a registration, as an application for exemption from registration or as an PO 00000 Frm 00136 Fmt 4701 Sfmt 4702 amendment to a previously filed Form CA–1. B. Need for Careful Preparation of the Completed Form, Including Schedules and Exhibits A Form CA–1 which is not prepared and executed in compliance with applicable requirements may be returned as not acceptable for filing. Any filing so returned shall for all purposes be deemed not to have been filed with the Commission. See also Rule 0–3 under the Act (17 CFR 240.0–3). However, acceptance of Form CA–1 shall not constitute a finding that it has been filed as required or that the information submitted is true, current or complete. Individuals’ names, except for executing signatures, shall be given in full wherever required (last name, first name, and middle name). The full middle name is required. Initials are not acceptable unless the individual legally has only an initial. C. When To Use the Form CA–1 Form CA–1 is comprised of 3 types of submissions to the Commission pursuant to Section 17A(b)(1) of the Act and Rule 17ab2– 1 thereunder. In completing the Form CA–1, a registrant shall select the type of filing and provide all information required by the rules and instructions thereunder. For any exhibit that is inapplicable, a statement to that effect shall be furnished in lieu of such exhibit. In submitting this Form, its schedules, its E:\FR\FM\18APP3.SGM 18APP3 EP18AP23.030</GPH> 24054 Federal Register / Vol. 88, No. 74 / Tuesday, April 18, 2023 / Proposed Rules exhibits and its attachments, the registrant and the person by whom it is executed represents that all information contained within is true, current and complete. The types of submissions are: (1) Rule 17ab2–1(a) submissions are applications for registration as a clearing agency or for exemption from registration as a clearing agency. If Form CA–1 is being filed as a registration form or an application for exemption from registration, all applicable items are required to be answered in full. If any item is not applicable respond with ‘‘none’’ or ‘‘N/A’’ (not applicable) as appropriate. If the Form is filed as a registration, indicate whether the applicant requests the Commission to consider granting registration in accordance with paragraph (c)(1) of Rule 17ab2–1. If Form CA–1 is being filed as an application for exemption from registration, it must be accompanied by a statement, marked as Exhibit S, demonstrating why the granting of an exemption from registration as a clearing agency would be consistent with the public interest, the protection of investors and the purposes of Section 17A of the Act. (2) Rule 17ab2–1(e) submissions shall be filed promptly following the date on which information reported on items 1–3 on Form CA–1 becomes inaccurate, incomplete or misleading. Submission of any amendment after registration has become effective represents that items 1–3 and any schedules, exhibits and attachments related to items 1– 3 remain true, current and complete as previously submitted. (3) Sec. 17A(b)(1) submissions shall be filed as directed by any Order approving an application for exemption from registration as a clearing agency. Such submissions may include any report, notice or other submission as ordered by the Commission as a condition of granting exemption from registration. ddrumheller on DSK120RN23PROD with PROPOSALS3 D. Documents Comprising the Completed Form The completed form filed with the Commission shall consist of Form CA–1, responses to all applicable items, and any schedules and exhibits required in connection with the filing. Each filing shall be marked on Form CA–1 with the initials of VerDate Sep<11>2014 20:06 Apr 17, 2023 Jkt 259001 the registrant, the four-digit year, and the number of the filing for the year (e.g., CA1– initials–YYYY–XXX). E. Contact Information; Signature; and Filing of Completed Form Each time a registrant submits a filing to the Commission on Form CA–1, the registrant must provide the contact information required by Section II of the form. The contact employee must be authorized to receive all contact information, communications and mailings and must be responsible for disseminating that information within the registrant’s organization. Consult the EDGAR Filer Manual for EDGAR filing instructions, including the instructions for becoming an EDGAR Filer. If Form CA–1 is filed by a corporation, it shall be signed in the name of the corporation by a principal officer duly authorized; if it is filed other than by a corporation it shall be signed by a duly authorized principal of the organization filing the Form. As used in this Form, principal officer means the president, vice president, treasurer, secretary, comptroller or any other person performing a similar function. The EDGAR receipt confirmation that demonstrates who filed the Form CA–1 shall be preserved pursuant to the requirements of Section 17 of the Act and any rules and regulations thereunder. See, e.g., Rule 17a–1 under the Act (17 CFR 240.17a–1). Request for confidential treatment. In responding to, and furnishing the schedules required by, the items on Form CA–1, the registrant may request that confidential treatment be accorded with respect to the information disclosed. The registrant must furnish a statement requesting confidential treatment, detailing the specific responses, schedules and exhibits for which confidential treatment is sought, and specifying both the exemptive provision under the Freedom of Information Act (5 U.S.C. 552(b)) on which the request is based and the considerations which make the exemptive provision applicable to the information for which confidential treatment is requested. PO 00000 Frm 00137 Fmt 4701 Sfmt 9990 24055 F. Notice Disclosure to the Commission of the information requested in Form CA–1 (except for the disclosure by an individual registrant of his Social Security number as an IRS Employee Identification Number, which is voluntary) is a prerequisite to the processing of applications for registration or for exemption from registration as a clearing agency. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a current valid control number. Under Sections 17, 17A(b) and 23(a) of the Act and the rules and regulations thereunder, the Securities and Exchange Commission is authorized to solicit the information required to be supplied by this Form from applicants for registration or for exemption from registration as a clearing agency. See 15 U.S.C. 78q, 78q–1(b) and 78w(a). The information will be used for the principal purpose of determining whether the Commission should grant registration or an exemption from registration or institute proceedings to deny registration. Social Security numbers, if furnished, will be used only to assist the Commission in identifying applicants and, therefore, in promptly processing applications. It is estimated that a clearing agency will have an average burden of approximately 338 hours completing a new application on the Form CA–1, and 58 hours completing an amendment to an application on the Form CA–1. Any member of the public may direct to the Commission any comments concerning the accuracy of the burden estimate on the facing page of Form CA–1 and any suggestions for reducing this burden. It is mandatory that an applicant seeking to operate as a clearing agency or as an exempt clearing agency file Form CA–1 with the Commission. It is also mandatory that registrants file amendments to Form CA–1 under Rule 17ab2–1(e). Information supplied on this Form will be included routinely in the public files of the Commission. [FR Doc. 2023–06330 Filed 4–17–23; 8:45 am] BILLING CODE 8011–01–P E:\FR\FM\18APP3.SGM 18APP3

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 88, Number 74 (Tuesday, April 18, 2023)]
[Proposed Rules]
[Pages 23920-24055]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-06330]



[[Page 23919]]

Vol. 88

Tuesday,

No. 74

April 18, 2023

Part III





Securities and Exchange Commission





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17 CFR Parts 202, 232, 240, et al.





Electronic Submission of Certain Materials Under the Securities 
Exchange Act of 1934; Amendments Regarding the FOCUS Report; Proposed 
Rule

Federal Register / Vol. 88 , No. 74 / Tuesday, April 18, 2023 / 
Proposed Rules

[[Page 23920]]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 202, 232, 240, 249, and 249b

[Release Nos. 33-11176; 34-97182; IC-34864; File No. S7-08-23]
RIN 3235-AL85


Electronic Submission of Certain Materials Under the Securities 
Exchange Act of 1934; Amendments Regarding the FOCUS Report

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rule.

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SUMMARY: The Securities and Exchange Commission (``Commission'' or 
``SEC'') is proposing to require electronic filing or submission of 
certain forms and other filings or submissions that are required to be 
filed with or submitted to the Commission under the Securities Exchange 
Act of 1934 (``Exchange Act'') and the rules and regulations under the 
Exchange Act. The proposal would require the electronic filing or 
submission on the Commission's Electronic Data Gathering, Analysis, and 
Retrieval (``EDGAR'') system, using structured data where appropriate, 
for certain forms filed or submitted by self-regulatory organizations 
(``SROs''). The proposal would require the information currently 
contained in Form 19b-4(e) to be publicly posted on the SRO's website 
and remove the manual signature requirements for SRO proposed rule 
change filings. The Commission is also proposing that a clearing agency 
post supplemental material to its website. In addition, the proposal 
would amend rules under the Exchange Act and the Securities Act of 1933 
(``Securities Act'') to require the electronic filing or submission on 
EDGAR, using structured data where appropriate, of certain forms, 
reports and notices provided by broker-dealers, security-based swap 
dealers and major security-based swap participants. The proposed 
amendments also would require withdrawal in certain circumstances of 
notices filed in connection with an exception to counting certain 
dealing transactions toward determining whether a person is a security-
based swap dealer. Finally, the Commission is proposing to allow 
electronic signatures in certain broker-dealer filings, and is 
proposing amendments regarding the Financial and Operational Combined 
Uniform Single Report (``FOCUS Report'') to harmonize with other rules, 
make technical corrections, and provide clarifications.

DATES: Comments should be received on or before May 22, 2023.

ADDRESSES: Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/regulatory-actions/how-to-submit-comments); or
     Send an email to [email protected]. Please include 
File No. S7-08-23 on the subject line.

Paper Comments

     Send paper comments to Secretary, Securities and Exchange 
Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File No. S7-08-23. This file number 
should be included on the subject line if email is used. To help the 
Commission process and review your comments more efficiently, please 
use only one method. The Commission will post all comments on the 
Commission's website (https://www.sec.gov/rules/proposed.shtml). 
Comments are also available for website viewing and printing in the 
Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10 a.m. and 3 p.m. 
Operating conditions may limit access to the Commission's public 
reference room. All comments received will be posted without change. 
Persons submitting comments are cautioned that we do not redact or edit 
personal identifying information from comment submissions. You should 
submit only information that you wish to make available publicly.
    Studies, memoranda, or other substantive items may be added by the 
Commission or staff to the comment file during this rulemaking. A 
notification of the inclusion in the comment file of any such materials 
will be made available on the Commission's website. To ensure direct 
electronic receipt of such notifications, sign up through the ``Stay 
Connected'' option at www.sec.gov to receive notifications by email.

FOR FURTHER INFORMATION CONTACT: For Form 1--Justin Pica, Assistant 
Director, and David Remus, Special Counsel; for Form 1-N--David 
Dimitrious, Senior Special Counsel, and Michou Nguyen, Special Counsel; 
for Form 15A--Molly Kim, Assistant Director, and David Michehl, Special 
Counsel; for Form CA-1--Matthew Lee, Assistant Director, and Claire 
Noakes, Special Counsel; for Form 19b-4(e) and technical amendment to 
Form 19b-4--Cristie March, Senior Special Counsel, and Edward Cho, 
Special Counsel; for Rule 17a-22--Matthew Lee, Assistant Director, and 
Susan Petersen, Special Counsel; for Form X-17A-5 Part III and related 
annual filings, Form X-17A-5 Parts II, IIA, and IIC, Form 17-H, and 
Form X-17A-19--Raymond A. Lombardo, Assistant Director, Rose Wells, 
Special Counsel, and Valentina Minak Deng, Special Counsel; for notices 
provided pursuant to Exchange Act Rules 3a71-3(d)(1)(vi) and 15fi-
3(c)--Carol McGee, Associate Director, and Russell Mancuso, Special 
Counsel; and for reports submitted pursuant to Rule 15fk-
1(c)(2)(ii)(A), Kelly Shoop, Branch Chief, and Katherine Lesker, 
Special Counsel, Division of Trading and Markets, at (202) 551-5500, 
Securities and Exchange Commission, 100 F Street NE, Washington, DC 
20549.

SUPPLEMENTARY INFORMATION: The Commission is proposing to require the 
electronic filing or submission, using structured data where 
appropriate, of certain forms and other filings,\1\ which are currently 
filed with or submitted to the Commission in paper or via email or are 
new filing requirements. The proposal is divided into five parts: (1) 
forms that are filed or submitted by or otherwise made available 
electronically by SROs (``Covered SRO Forms''); (2) supplementary 
materials (``Covered Supplementary Materials'') that are proposed to be 
posted on the internet websites of clearing agencies; (3) forms and 
related filings filed or submitted by broker-dealers and over-the-
counter derivatives dealers (``OTC derivatives dealers''), as well as 
security-based swap dealers (``SBSDs'') and major security-based swap 
participants (``MSBSPs'') (each SBSD and each MSBSP also referred to as 
an ``SBS Entity'' and together referred to as ``SBS Entities''); (4) 
other notices, filings, and reports consisting of (a) Form X-17A-19; 
(b) 17 CFR 240.3a71-3(d)(1)(vi) (``Rule 3a71-3(d)(1)(vi)'') Notices; 
(c) 17 CFR 240.15Fi-3(c) (``Rule 15fi-3(c)'') Notices; and (d) 17 CFR 
240.15Fk-1(c)(2)(ii)(A) (``Rule 15fk-1(c)(2)(ii)(A)'') Compliance 
Reports; and (5) amendments regarding the FOCUS Report and signature 
requirements in Exchange Act Rules 17a-5, 17a-12, and 18a-7.\2\ The 
Commission is proposing

[[Page 23921]]

amendments to or relating to the following rules:
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    \1\ For purposes of this proposing release, the term ``form'' 
means any Commission-created document labeled as a ``Form'' that is 
proposed to be submitted or filed electronically, and the term 
``filing'' means any form, notice, report, or material proposed to 
be submitted or filed electronically or proposed to be posted on an 
internet website in lieu of being submitted or filed.
    \2\ The Commission's proposal also includes proposed amendments 
to CFR designations in order to ensure regulatory text conforms more 
consistently with section 2.13 of the Document Drafting Handbook. 
See Office of the Federal Register, Document Drafting Handbook (Aug. 
2018 Edition, Revision 1.4, dated January 7, 2022), available at 
https://www.archives.gov/files/federal-register/write/handbook/ddh.pdf. For rules proposed to be amended in this release that 
contain an uppercase letter in their CFR citations, the Commission 
is proposing to amend their CFR section designations to replace each 
such uppercase letter with the corresponding lowercase letter, and, 
in one case, to also redesignate the rule numbering. For example, 17 
CFR 240.15Fi-3 is proposed to be redesignated as 17 CFR 240.15fi-3, 
17 CFR 240.15Fk-1 is proposed to be redesignated as 17 CFR 240.15fk-
1, 17 CFR 240.15Aa-1 is proposed to be redesignated as 17 CFR 
240.15aa-1, and 17 CFR 240.15Aj-1 is proposed to be redesignated as 
17 CFR 240.15aa-2.

------------------------------------------------------------------------
            Commission reference                CFR citation (17 CFR)
------------------------------------------------------------------------
Administrative Practice and Procedure,
 Securities:
    Rule 202.3.............................  Sec.   202.3.
------------------------------------------------------------------------
             Securities Act of 1933 (``Securities Act'') \3\
------------------------------------------------------------------------
Regulation S-T:
    Rule 100...............................  Sec.   232.100.
    Rule 101...............................  Sec.   232.101.
    Rule 201...............................  Sec.   232.201.
    Rule 202...............................  Sec.   232.202.
    Rule 405...............................  Sec.   232.405.
------------------------------------------------------------------------
         Securities Exchange Act of 1934 (``Exchange Act'') \4\
------------------------------------------------------------------------
Rule 3a71-3................................  Sec.   240.3a71-3.
Rule 6a-1..................................  Sec.   240.6a-1.
Rule 6a-2..................................  Sec.   240.6a-2.
Rule 6a-3..................................  Sec.   240.6a-3.
Rule 6a-4..................................  Sec.   240.6a-4.
Rule 15Aa-1................................  Sec.   240.15Aa-1.
Rule 15Aa-2................................  Sec.   240.15Aa-2.
Rule 15Aj-1................................  Sec.   240.15Aj-1.
Rule 15c3-1................................  Sec.   240.15c3-1.
Rule 15fi-3................................  Sec.   240.15Fi-3.
Rule 15fk-1................................  Sec.   240.15Fk-1.
Rule 17a-5.................................  Sec.   240.17a-5.
Rule 17a-12................................  Sec.   240.17a-12.
Rule 17a-19................................  Sec.   240.17a-19.
Rule 17a-22................................  Sec.   240.17a-22.
Rule 17ab2-1...............................  Sec.   240.17ab2-1.
Rule 17h-2T................................  Sec.   240.17h-2T.
Rule 18a-7.................................  Sec.   240.18a-7.
Rule 19b-4.................................  Sec.   240.19b-4.
Rule 19b-7.................................  Sec.   240.19b-7.
Rule 24b-2.................................  Sec.   240.24b-2.
Form 1.....................................  Sec.   249.1.
Form 1-N...................................  Sec.   249.10.
Form CA-1..................................  Sec.   249.200.
Form 17-H..................................  Sec.   249.328T.
Form X-17A-5 Part II.......................  Sec.   249.617.
Form X-17A-5 Part IIA......................  Sec.   249.617.
Form X-17A-5 Part IIC......................  Sec.   249.617.
Form X-17A-5 Part III......................  Sec.   249.617.
Form X-17A-19..............................  Sec.   249.635.
Form X-15AA-1..............................  Sec.   249.801.
Proposed new Form 15A......................  Sec.   249.801 (as proposed
                                              to be amended).
Form 19b-4.................................  Sec.   249.819.
------------------------------------------------------------------------

    Finally, the Commission is proposing to rescind:
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    \3\ See 15 U.S.C. 77a through 77mm.
    \4\ See 15 U.S.C. 78a through 78qq.

------------------------------------------------------------------------
                                                        CFR citation (17
                 Commission reference                         CFR)
------------------------------------------------------------------------
Exchange Act:
    Form X-15AJ-1....................................    Sec.   249.802.
    Form X-15AJ-2....................................    Sec.   249.803.
    Form 19b-4(e)....................................    Sec.   249.820.
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[[Page 23922]]

    In developing this proposal with regard to SBS Entities, the 
Commission has consulted and coordinated with the Commodity Futures 
Trading Commission (``CFTC'') and the prudential regulators in 
accordance with the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (``Dodd-Frank Act'').\5\
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    \5\ See Public Law 111-203, 124 Stat. 1376 (2010). Section 
712(a)(2) of the Dodd-Frank Act provides in part that the Commission 
shall ``consult and coordinate to the extent possible with the 
Commodity Futures Trading Commission and the prudential regulators 
for the purposes of assuring regulatory consistency and 
comparability, to the extent possible.''
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Table of Contents

I. Introduction
    A. Experience With Targeted Regulatory Assistance During the 
COVID-19 Pandemic
    B. Covered SRO Forms
    C. Covered Supplementary Materials
    D. Filings by Broker-Dealers, OTC Derivatives Dealers, SBSDs, 
and MSBSPs
    E. Other Forms, Reports or Notices
    F. Structured Data Requirements
    G. Amendments Regarding the FOCUS Report and Signature 
Requirements in Rule 17a-5, 17a-12, and 18a-7 Filings
II. Proposed Requirements To Electronically File Covered SRO Forms
    A. Form 1
    B. Form 1-N
    C. Proposed Form 15A
    D. Form CA-1
    E. Form 19b-4(e)
    F. Rule 19b-4(j) and Form 19b-4
    G. Conforming Technical Amendment to Rule 202.3(b) Under the 
Exchange Act
III. Proposed Requirements for Clearing Agencies to Electronically 
File Covered Supplemental Materials
    A. Current Rule 17a-22
    B. Updated Staff Statement and Resulting Alternate Arrangements 
for Rule 17a-22 Compliance
    C. Proposed Amendments to Rule 17a-22
    D. Request for Comment
IV. Proposed Requirements To Electronically File Broker-Dealer, OTC 
Derivatives Dealer, and SBS Entity Reports
    A. Rules 17a-5, 18a-7, and 17a-12
    B. Rule 17h-2T and Form 17-H
V. Other Forms, Reports or Notices
    A. Notices Pursuant To Rule 17a-19 and Form X-17A-19
    B. Notice (and Any Withdrawal of a Notice) Filed Pursuant to 
Rule 3a71-3(d)(1)(vi)
    C. Notice (and Any Amendment, Including Notice of Dispute 
Termination) Provided Pursuant to Rule 15fi-3(c)
    D. Compliance Reports Submitted to the Commission Pursuant to 
Rule 15fk-1(c)(2)(ii)(A)
VI. Amendments Regarding the FOCUS Report and Signature Requirements 
in Rule 17a-5, 17a-12, and 18a-7 Filings
    A. Corrective and Clarifying Amendments to the FOCUS Report Part 
II
    B. Harmonizing FOCUS Report Part IIC With the Call Report
    C. OTC Derivatives Dealer FOCUS Report Filing Requirement
    D. Signature Requirements in Rule 17a-5, 17a-12, and 18a-7 
Filings
VII. Proposed Amendments to Regulation S-T (Including Structured 
Data Requirements) and Rule 24b-2
    A. Proposed Amendments to Regulation S-T (Including Structured 
Data Requirements)
    B. Proposed Amendments to Rule 24b-2
VIII. General Request for Comments
IX. Paperwork Reduction Act
    A. Summary of Collection of Information
    B. Proposed Use of Information
    C. Respondents
    D. Total Initial and Annual Reporting and Recordkeeping Burdens
    E. Collection of Information is Mandatory
    F. Confidentiality of Responses to Collection of Information
    G. Retention Period for Recordkeeping Requirements
    H. Request for Comments
X. Economic Analysis
    A. Broad Economic Considerations
    B. Baseline
    C. Economic Effects
    D. Efficiency, Competition, and Capital Formation
    E. Reasonable Alternatives
    F. Request for Comment
XI. Initial Regulatory Flexibility Act Analysis
    A. Regulatory Flexibility Act Certification
    B. Initial Regulatory Flexibility Analysis
    C. Reasons for, and Objectives of, the Proposed Action
    D. Legal Basis
    E. Small Entities Subject to the Proposed Rules
    F. Reporting, Recordkeeping, and Other Compliance Requirements
    G. Duplicative, Overlapping, or Conflicting Federal Rules
    H. Significant Alternatives
    I. Request for Comment
XII. Small Business Regulatory Enforcement Fairness Act
Statutory Authority

I. Introduction

A. Experience With Targeted Regulatory Assistance During the COVID-19 
Pandemic

    As part of its response to the COVID-19 pandemic, the Commission 
and its staff provided assistance and regulatory relief to market 
participants, as appropriate, to facilitate the continued orderly and 
fair functioning of the securities markets.\6\ As part of these 
efforts, Division of Trading and Markets (``Division'') staff issued a 
statement providing that the staff would not recommend enforcement 
action if filers and registrants made alternative arrangements, as 
detailed in the statement, for delivery, execution, and notarization of 
certain paper filings.\7\ More specifically, the staff stated that it 
would not recommend that the Commission take enforcement action with 
respect to any failure to comply with the paper format submission 
requirement or manual signature requirement of certain ``Impacted Paper 
Submissions'' (as defined in the Updated Staff Statement), which 
included, but were not limited to, broker-dealer audited annual 
reports, Form 1 filings for national securities exchanges, and Form CA-
1 filings for clearing agencies.
---------------------------------------------------------------------------

    \6\ See generally, e.g., An Update on the Commission's Targeted 
Regulatory Relief to Assist Market Participants Affected by COVID-19 
and Ensure the Orderly Function of our Markets (public statement by 
Chairman Jay Clayton, William Hinman, Director, Division of 
Corporation Finance, Dalia Blass, Director, Division of Investment 
Management, Brett Redfearn, Director, Division (Jan. 26, 2020, 
updated Jan. 5, 2021)), available at https://www.sec.gov/news/public-statement/update-commissions-targeted-regulatory-relief-assist-market-participants.
    \7\ See generally Division Updated Staff Statement Regarding 
Certain Paper Submissions in Light of COVID-19 Concerns (``Updated 
Staff Statement''), available at https://www.sec.gov/tm/paper-submission-requirements-covid-19-updates-061820. Staff reports, 
Investor Bulletins, and other staff documents cited in this release 
represent the views of Commission staff and are not a rule, 
regulation, or statement of the Commission. The Commission has 
neither approved nor disapproved the content of these documents and, 
like all staff statements, they have no legal force or effect, do 
not alter applicable law, and create no new or additional 
obligations for any person.
---------------------------------------------------------------------------

    In general, electronic filing of Impacted Paper Submissions has 
been practical and efficient. It also has been the Commission's 
experience that electronic filing has been positively received by the 
various registrants that have used it. Based in part on these positive 
experiences with electronic filing during the COVID-19 pandemic, and as 
part of its efforts to modernize the methods by which it collects and 
analyzes information from registrants, the Commission is proposing to 
amend some of the rules and forms discussed in this release, as set 
forth in more detail below, to require that certain filings be 
submitted to the Commission electronically using the Commission's EDGAR 
system. As part of the effort to modernize its information collection 
and analysis methods, and as discussed more fully below, the Commission 
is proposing that a number of the filings submitted to the Commission 
electronically on EDGAR use structured data where appropriate.

B. Covered SRO Forms

    The Commission is proposing to require that the following forms be 
filed electronically on EDGAR:

[[Page 23923]]



------------------------------------------------------------------------
             Form                   Filer type      Proposed amendments
------------------------------------------------------------------------
Form 1: Application for, and    Exchange.........  Amend 17 CFR 249.1
 Amendments to Application                          (``Form 1''),
 for, Registration as a                             including the form
 National Securities Exchange                       and instructions to
 or Exemption from                                  the form, and 17 CFR
 Registration pursuant to                           240.6a-1 (``Rule 6a-
 section 5 of the Exchange Act.                     1''), 17 CFR 240.6a-
                                                    2 (``Rule 6a-2''),
                                                    and 17 CFR 240.6a-3
                                                    (``Rule 6a-3'')
                                                    under the Exchange
                                                    Act.
Form 1-N: Form and Amendments   Exchange.........  Amend 17 CFR 249.10
 for Notice of Registration as                      (``Form 1-N''),
 a National Securities                              including the form
 Exchange for the Sole Purpose                      and instructions to
 of Trading Security Future                         the form, and 17 CFR
 Products Pursuant to section                       240.6a-4 (``Rule 6a-
 6(g) of the Exchange Act.                          4'') under the
                                                    Exchange Act.
Form X-15AA-1: Application for  Securities         Form X-15AA-1 (re-
 Registration as a National      Association.       numbered as Form
 Securities Association or                          15A) and the
 Affiliated Securities                              instructions to the
 Association, Form X-15AJ-1:                        form, and
 Amendatory and/or                                  corresponding
 Supplementary Statements to                        Exchange Act Rule
 Registration Statement of a                        15Aa-1 (redesignated
 National Securities                                as Rule 15aa-1).
 Association or an Affiliated                      Forms X-15AJ-1 and X-
 Securities Association, and                        15AJ-2 (repealed and
 Form X-15AJ-2: Annual                              the information
 Consolidated Supplement of a                       requirements
 National Securities                                incorporated into
 Association or an Affiliated                       new Form 15A),\8\
 Securities Association.                            and corresponding
                                                    Exchange Act Rule
                                                    15Aj-1 (re-numbered
                                                    as Rule 15aa-2).
Form CA-1: Application for      Clearing Agency..  The form and
 Registration or for Exemption                      instructions to the
 from Registration as a                             form, and
 Clearing Agency and for                            corresponding
 Amendment to Registration                          Exchange Act Rule
 Pursuant to the Exchange Act.                      17ab2-1.
------------------------------------------------------------------------

    The Commission's regulatory framework currently requires an entity 
seeking to be registered as a national securities exchange (or seeking 
an exemption from such registration based on limited volume), a 
national securities association, a clearing agency (or seeking an 
exemption from such registration), and a national securities exchange 
solely for the purpose of trading futures on individual stocks or on 
narrow-based stock indexes \9\ (``Security Futures Product Exchange'') 
to file, in a paper-based format, certain forms that are mandated by 
rules under the Exchange Act. Registered national securities exchanges, 
registered national securities associations, registered clearing 
agencies, and registered Security Futures Product Exchanges 
(collectively, SROs), as well as exempt exchanges and exempt clearing 
agencies (together with prospective SROs, ``Filers''), are also 
required to submit paper-based amendments to their respective forms. 
The Commission's proposal would modernize the filing process for these 
various forms by requiring that the forms and information contained 
therein be submitted to the Commission electronically, thereby removing 
the burden of preparing and submitting paper forms by the Filers, and 
of receiving, acting upon, and maintaining the paper forms by the 
Commission and its staff.
---------------------------------------------------------------------------

    \8\ See 17 CFR 249.802 and 803. The forms and instructions to 
the form are incorporated by reference into the Code of Federal 
Regulations.
    \9\ Futures on individual stocks or on narrow-based stock 
indexes are hereinafter referred to as ``security futures 
products.''
---------------------------------------------------------------------------

    In particular, as required by 17 CFR 240.6a-1 (``Rule 6a-1''), 17 
CFR 240.6a-2 (``Rule 6a-2''), and 17 CFR 240.6a-3 (``Rule 6a-3'') under 
the Exchange Act, a prospective exchange must file on 17 CFR 249.1 
(``Form 1'') an application for registration as a national securities 
exchange (or for an exemption from the requirement to register as a 
national securities exchange based on limited volume), and, once 
registered, the exchange must file as an amendment to its Form 1 
certain updating information, as well as certain supplemental material 
and reports. In addition, as required by 17 CFR 240.6a-4 (``Rule 6a-
4'') under the Exchange Act, a prospective exchange may register as a 
Security Futures Product Exchange by filing 17 CFR 249.10 (``Form 1-
N'') (``notice registration'') if it satisfies certain prerequisites, 
and must file amendments to its initial filing and certain supplemental 
materials on Form 1-N as well. An applicant for registration as a 
national securities association must file a registration statement with 
the Commission on Form X-15AA-1, and every association applying for 
registration or registered as a national securities association must 
file amendments and supplements to its registration statement with the 
Commission on Form X-15AJ-1 and annual supplements to its registration 
statement with the Commission on Form X-15AJ-2. Moreover, as required 
by Rule 17ab2-1 (``Rule 17ab2-1'') under the Exchange Act, a 
prospective clearing agency must file on Form CA-1 an application for 
registration as a clearing agency (or for an exemption from such 
registration), and both registered and exempt clearing agencies must 
file amendments to their Form CA-1 as necessary. In each of the 
foregoing situations, these forms are submitted to the Commission in a 
paper-based format. As a result, the prospective and existing SROs, 
exempt exchanges, and exempt clearing agencies must incur the costs of 
completing their respective paper-based forms, making the requisite 
number of copies, and submitting the original version and copies to the 
Commission.
    The Commission also is proposing to rescind the following form and 
instead require that the information currently contained in the form be 
publicly posted on the relevant SRO's internet website:

------------------------------------------------------------------------
             Form                   Filer type       Proposed amendment
------------------------------------------------------------------------
Form 19b-4(e): Information      SRO..............  Rescind the form and
 Required of a Self-Regulatory                      instructions to the
 Organization Listing and                           form, and amend 17
 Trading a New Derivative                           CFR 240.19b-4(e)
 Securities Product Pursuant                        (``Exchange Act Rule
 to Rule 19b-4(e) Under the                         19b-4(e)'').
 Exchange Act.
------------------------------------------------------------------------


[[Page 23924]]

    Currently, 17 CFR 240.19b-4(e) (``Rule 19b-4(e)'') under the 
Exchange Act requires an SRO to submit to the Commission reports 
regarding the listing and trading of new derivative securities products 
on Form 19b-4(e) in a paper-based format. As with the forms discussed 
above in this section, SROs must incur the costs of completing the 
paper-based form, making the requisite number of copies, and submitting 
the original version and copies to the Commission.

C. Covered Supplementary Materials

    Rule 17a-22 requires a registered clearing agency to file with the 
Commission three copies of any material within 10 days after issuing, 
or making generally available, such materials to its participants or to 
other entities with whom it has a significant relationship.\10\ A 
registered clearing agency for which the Commission is not the 
appropriate regulatory agency is required at the same time to file one 
copy of such material with its ``appropriate regulatory agency'' 
(``ARA'').\11\
---------------------------------------------------------------------------

    \10\ See 17 CFR 240.17a-22. Such materials are hereinafter 
referred to as ``supplementary materials.''
    \11\ See id. When used with respect to a clearing agency, the 
term ``appropriate regulatory authority'' is defined under section 
3(a)(34)(B) of the Exchange Act to mean broadly the Comptroller of 
the Currency, the Board of Governors of the Federal Reserve System 
(``Federal Reserve''), or the Federal Deposit Insurance Corporation, 
depending on the type of bank that is acting as a registered 
clearing agency. See 15 U.S.C. 78c(a)(34).
---------------------------------------------------------------------------

    Since the Commission adopted Rule 17a-22 in 1980, technology has 
evolved significantly and the internet has played an increasingly vital 
role in information distribution.\12\
---------------------------------------------------------------------------

    \12\ See, e.g., The Impact of Recent Technological Advances on 
the Securities Market (Sep. 1997), available at https://www.sec.gov/news/studies/techrp97.htm. In this report, the Commission stated 
that it was mindful of the benefits of increasing use of new 
technologies, such as the internet, to access information more 
efficiently.
---------------------------------------------------------------------------

    During this period, the Commission has encouraged the dissemination 
of information electronically via the internet and other automated 
systems and services.\13\ In general, transitioning from a requirement 
to file paper with the Commission to an electronic filing requirement 
can help improve efficiency and transparency in the securities markets 
for registered clearing agencies, its participants and the general 
public. Most recently, under the Updated Staff Statement described 
above,\14\ registered clearing agencies have established alternate 
arrangements to satisfy the requirements of Rule 17a-22 that do not 
require the submission of paper filings.
---------------------------------------------------------------------------

    \13\ Id; see also, e.g., Commission Interpretation: Use of 
Electronic Media, Exchange Act Release No. 42728 (Apr. 28, 2000), 65 
FR 25843 (May 4, 2000), available at https://www.sec.gov/rules/interp/34-42728.htm; Press Release: SEC Provides Guidance to Open Up 
Use of Corporate websites for Disclosures to Investors (July 30, 
2008), available at https://www.sec.gov/news/press/2008/2008-158.htm.
    \14\ See supra note 5.
---------------------------------------------------------------------------

    The Commission is now proposing to amend Rule 17a-22 to eliminate 
the paper filing requirement altogether and require registered clearing 
agencies to post any supplementary materials to its internet website, 
as discussed further below.\15\ The Commission believes that the 
amended rule would increase efficiency in the distribution of 
supplementary materials required under the rule and promote 
transparency regarding their contents, as these supplementary materials 
are intended to be made generally available to participants in the 
clearing agency or other categories of market participants with whom 
the clearing agency has a significant relationship. In addition, the 
cost associated with the proposal is likely to be less than the costs 
currently incurred by clearing agencies utilizing alternative 
arrangements consistent with the Updated Staff Statement.
---------------------------------------------------------------------------

    \15\ See generally infra section III.
---------------------------------------------------------------------------

D. Filings by Broker-Dealers, OTC Derivatives Dealers, SBSDs, and 
MSBSPs

------------------------------------------------------------------------
              Form                    Filer type      Proposed amendment
------------------------------------------------------------------------
Form X-17A-5 Part III:            Broker-Dealer,      Require the form
 Information Required Pursuant     Security-Based      to be filed on
 to Rules 17a-5, 17a-12, and 18a-  Swap Dealer,        EDGAR.
 7 under the Exchange Act.         Major Security-
                                   Based Swap
                                   Participant.
Form 17-H: Risk Assessment        Broker-Dealer.....  Require the form
 Report for Brokers and Dealers.                       to be filed on
                                                       EDGAR.
------------------------------------------------------------------------

    The Commission believes that the certain forms and other filings 
that are proposed to be filed on EDGAR by broker-dealers, OTC 
derivatives dealers, SBSDs, and MSBSPs are appropriate for electronic 
filing because many of them are voluminous (in number, size, or both) 
and some of them contain certain information that must be disclosed 
publicly.\16\ Electronic conversion and/or publication of these filings 
by Commission staff, to make them available to the public and/or 
Commission staff, can be labor intensive and time consuming. The 
Commission believes that requiring submission of these filings on the 
Commission's established EDGAR filing system would facilitate more 
efficient transmission, analysis, dissemination, storage, and retrieval 
of information, and would benefit the Commission, the submitting 
entities, investors, and other market participants.
---------------------------------------------------------------------------

    \16\ See generally infra section IV.
---------------------------------------------------------------------------

    The Commission is proposing to use the existing EDGAR system for 
certain filings because Form X-17A-5 Part III and Form 17-H are already 
permitted to be filed on EDGAR and the Commission believes that some of 
these filings may be readily transitioned to electronic filing on 
EDGAR.

E. Other Forms, Reports or Notices

------------------------------------------------------------------------
                                    Filer/submitter
     Form, report or notice              type         Proposed amendment
------------------------------------------------------------------------
Form 17a-19: Information          National            Require the form
 Required of National Securities   securities          to be filed on
 Exchanges and Registered          exchanges,          EDGAR.
 National Securities               national
 Associations Pursuant to          securities
 Section 17 and 19 of the          associations.
 Securities Exchange Act of 1934
 and Rule 17a-19 Thereunder,
 Report of Change in Membership
 Status.

[[Page 23925]]

 
Notices (and any withdrawals of   Certain registered  Require the
 notices) filed pursuant to Rule   SBSDs or            notices and
 3a71-3(d)(1)(vi) under the        registered          withdrawals to be
 Exchange Act.                     brokers that meet   filed on EDGAR;
                                   certain capital     require
                                   and other           withdrawal in
                                   requirements.       specified
                                                       circumstances.
Notices (and any amendments to    SBS Entities......  Require the
 the notices) of Security-Based                        notices (and any
 Swap Valuation Disputes                               amendments to the
 pursuant to Rule 15fi-3(c).                           notices) to the
                                                       Commission to be
                                                       submitted on
                                                       EDGAR using
                                                       structured data;
                                                       specify that
                                                       notices
                                                       (including
                                                       amendments)
                                                       required to be
                                                       provided to any
                                                       applicable
                                                       prudential
                                                       regulator be in a
                                                       form and manner
                                                       acceptable to
                                                       such prudential
                                                       regulator.
Compliance Reports Submitted to   SBS Entities......  Require reports to
 the Commission pursuant to Rule                       be submitted on
 15fk-1(c)(2)(ii)(A).                                  EDGAR in a
                                                       structured data
                                                       language.
------------------------------------------------------------------------

    The Commission is proposing to use the EDGAR system for the 
following notices, reports, and filings: (1) notices made pursuant to 
Rule 17a-19 under the Exchange Act and on accompanying Form X-17A-19; 
(2) notices made pursuant to Rule 3a71-3(d)(1)(vi) under the Exchange 
Act; (3) notices made to the Commission pursuant to Rule 15fi-3(c) 
under the Exchange Act; and (4) reports made pursuant to Rule 15fk-
1(c)(2)(ii)(A) under the Exchange Act. Currently, the notices made 
pursuant to Rule 17a-19 under the Exchange Act and on accompanying Form 
X-17A-19 are submitted via paper.\17\ The notices made pursuant to Rule 
3a71-3(d)(1)(vi) under the Exchange Act are filed via email.\18\ The 
notices made to the Commission pursuant to Rule 15fi-3(c) and the 
reports required under Rule 15fk-1(c)(2)(ii)(A) are either submitted 
via email or submitted on EDGAR, at the filer's option.\19\
---------------------------------------------------------------------------

    \17\ See infra section V.A.
    \18\ See infra section V.B.
    \19\ See infra section V.C. Rule 15fi-3(c) requires that SBS 
Entities ``notify the Commission'' (emphasis added). See infra 
section V.C.1. Requiring these notices and amendments to be 
submitted to the Commission via EDGAR as proposed would not cause 
them to be deemed filed for purposes of the Exchange Act. See e.g., 
section 18 of the Exchange Act. 17 CFR 240.15Fk-1(c) (``Rule 15fk-
1(c)'') requires that the chief compliance officer of an SBS Entity 
prepare and sign an annual compliance report that ``shall [b]e 
submitted to the Commission.'' 17 CFR 240.15Fk-1(c) (emphasis 
added). Requiring these reports to be submitted via EDGAR as 
proposed would not cause the report to be deemed filed for purposes 
of the Exchange Act.
---------------------------------------------------------------------------

F. Structured Data Requirements

    The Commission is proposing to require certain of the disclosures 
required by the following filings to be provided in a structured, 
machine-readable data language: (1) the Covered SRO Forms; (2) the 
information required under Rule 19b-4(e); (3) Form X-17A-19; (4) the 
annual reports (and related annual filings) filed by broker-dealers 
(including OTC derivatives dealers) and SBS Entities on Form X-17A-5 
Part III; (5) the risk assessment reports filed by certain broker-
dealers on Form 17-H; and (6) the notices and reports provided to the 
Commission by SBS Entities under Exchange Act Rules 15fi-3(c) and 15fk-
1(c)(2)(ii)(A), respectively (together, the ``Proposed Structured 
Documents'').\20\
---------------------------------------------------------------------------

    \20\ For certain affected documents, only some aspects are 
proposed to be provided in a structured data language. For example, 
only the execution pages of Form 1-N and Form 15A are proposed to be 
provided in a structured data language. See infra section VII.A.
---------------------------------------------------------------------------

    Specifically, the Commission is proposing to require the report 
required by Exchange Act Rule 15fk-1(c)(2)(ii)(A) and portions of Form 
1, Form CA-1, Form 17-H, and Form X-17A-5 Part III and related annual 
filings to be provided in the Inline eXtensible Business Reporting 
Language (``Inline XBRL'') structured data language. The Commission is 
also proposing to require Form X-17A-19, the notice to the Commission 
(and any amendments to the notices) required by Exchange Act Rule 15fi-
3(c), and portions of Form 1-N, Form 15A, Form 1, Form CA-1, Form 17-H, 
and Form X-17A-5 Part III and related annual filings to be provided in 
machine-readable, eXtensible Markup Language (``XML'')-based data 
languages specific to those documents (``custom XMLs''). As noted, 
these structured documents would be filed or submitted on EDGAR.\21\
---------------------------------------------------------------------------

    \21\ The details of the proposed structured data requirements, 
including the specific portions of affected documents that would be 
structured in Inline XBRL versus custom XML, are discussed in 
Section VII.A below.
---------------------------------------------------------------------------

    In addition, the Commission is proposing to require SROs to 
electronically post the information required under Rule 19b-4(e) using 
a custom XML-based data language (also referred to as a ``schema'') 
that the Commission would create and publish on its website for SROs to 
use.\22\ The Commission is also proposing to require SROs to post a 
rendered Portable Digital Format (``PDF'') version of the custom XML 
document using a PDF renderer that the Commission would also create and 
publish on its website for SROs to use.\23\
---------------------------------------------------------------------------

    \22\ This requirement would mirror the existing requirement for 
registered broker-dealers to electronically post reports containing 
order routing information using the most recent versions of the XML 
schema and the associated PDF renderer as published on the 
Commission's website. See 17 CFR 242.606. The custom XML schema and 
PDF renderer for Rule 606 reports are available at https://www.sec.gov/structureddata/dera_taxonomies.
    \23\ See id.
---------------------------------------------------------------------------

    As discussed in further detail below, the Commission believes the 
proposed structured data requirements would facilitate access to the 
disclosures by users (e.g., investors, market participants, analysts, 
the Commission), enabling more efficient retrieval, aggregation, and 
comparison across different filers and time periods, as compared to an 
unstructured PDF, HyperText Markup Language (``HTML''), or American 
Standard Code for Information Interchange (``ASCII'') requirement.\24\
---------------------------------------------------------------------------

    \24\ See infra sections VII.A and X.C. The addition of 
structured data requirements would also be generally consistent with 
objectives of the recently enacted Financial Data Transparency Act 
(``FDTA''), which concerns the manner in which the Commission 
collects and disseminates information. The FDTA was signed into law 
on Dec. 23, 2022, as Title LVIII of the James M. Inhofe National 
Defense Authorization Act for Fiscal Year 2023. See James M. Inhofe 
National Defense Authorization Act for Fiscal Year 2023, Public Law 
117-263 (Dec. 23, 2022). Section 5811 of the FDTA directs the 
Commission and other covered agencies (e.g., financial regulators) 
to jointly issue proposed rules for public comment that establish 
data standards for the collections of information reported to each 
covered agency by financial entities and for the data collected from 
covered agencies on behalf of the Financial Stability Oversight 
Council. The data standards must meet specified criteria relating to 
openness and machine-readability and promote interoperability of 
financial regulatory data across members of the Financial Stability 
Oversight Council. In addition, Section 5822 of the Financial Data 
Transparency Act requires that all public data assets published by 
the Commission under the securities laws and the Dodd-Frank Act be 
made available in accordance with specified criteria relating to 
openness and machine-readability. See 44 U.S.C. 3502(20) (defining 
the term ``open Government data asset'' to mean, among other things, 
machine-readable and available (or could be made available) in an 
open format).
---------------------------------------------------------------------------

    The Commission is proposing some disclosures to be structured in 
Inline

[[Page 23926]]

XBRL, and other disclosures to be structured in custom XML, because the 
Commission believes Inline XBRL is well-suited for certain types of 
content--such as financial statements and extended narrative 
discussions--whereas other types of content can be readily captured 
using custom XML data languages that yield smaller file sizes than 
Inline XBRL and thus facilitate more streamlined data processing. Such 
custom XML languages also enable EDGAR to generate fillable web forms 
that permit affected entities to input disclosures into form fields 
rather than encode their disclosures in custom XML themselves, thus 
likely easing compliance burdens on affected entities. Finally, certain 
of the proposed structured documents--Form X-17A-5 Part III and Form 
17-H--are already partially subject to custom XML structured data 
requirements when voluntarily filed on EDGAR. For these forms, the 
Commission is proposing to require the same custom XML requirements so 
as to minimize the associated burdens on registrants already using 
these languages for these forms.
    Certain of the proposed structured documents also include 
requirements to attach copies of existing documents, such as copies of 
by-laws, written agreements, user manuals, and listing applications. 
The Commission is proposing to require affected entities to file these 
copies of documents as unstructured PDF attachments to the otherwise 
structured forms. The Commission believes requiring affected entities 
to retroactively structure such existing documents, which were prepared 
for purposes outside of fulfilling the Commission's disclosure 
requirements, could impose compliance burdens on affected entities that 
may not be justified in light of the commensurate informational 
benefits associated with having such documents in structured form.\25\
---------------------------------------------------------------------------

    \25\ See infra sections II.A.3, II.D.5, IV.B, and VII.A.
---------------------------------------------------------------------------

    Similarly, Forms 1-N and 15A (other than the cover pages--i.e., 
execution pages--of those Forms) would not be subject to structured 
data requirements, given that the very limited number of Form 1-N and 
Form 15A filers and filings limits the benefit that would accrue from 
machine-readability of the disclosures contained therein.\26\ ANE 
Exception Notices also would not be subject to structured data 
requirements, as the very limited number of data points in such notices 
may lessen the utility of any functionality enabled by structured data 
(such as efficient retrieval of individual data points from structured 
documents).\27\
---------------------------------------------------------------------------

    \26\ See infra sections II.B.3, II.C.3, and VII.A.
    \27\ See infra sections V.B.2 and VII.A.
---------------------------------------------------------------------------

G. Amendments Regarding the FOCUS Report and Signature Requirements in 
Rule 17a-5, 17a-12, and 18a-7 Filings

    Finally, the Commission is proposing amendments regarding the FOCUS 
Report to harmonize with other rules, make technical changes, and 
provide clarifications. In addition, the Commission is proposing to 
allow electronic signatures in Rule 17a-5, 17a-12, and 18a-7 filings, 
including the FOCUS Report.

II. Proposed Requirements To Electronically File Covered SRO Forms

    The Commission proposes to amend certain Exchange Act rules and the 
Covered SRO Forms, including their instructions, to eliminate the 
current paper copy filing method and instead require electronic 
submission of the Covered SRO Forms. Changing from the current method 
of paper filing to electronic submission of the Covered SRO Forms 
ultimately should increase efficiencies and decrease costs for Filers 
with respect to their filing obligations.\28\ In addition, the 
Commission believes that the electronic filing of the Covered SRO Forms 
would facilitate the Commission's oversight of SROs by streamlining the 
process of tracking and reviewing the filings made on the Covered SRO 
Forms.
---------------------------------------------------------------------------

    \28\ See infra section X.
---------------------------------------------------------------------------

    The proposal would require the use of EDGAR to file the Covered SRO 
Forms. The Commission is proposing to use the existing EDGAR system for 
the Covered SRO Forms because the Commission believes that these 
filings are similar to other filings that are currently submitted on 
EDGAR. Furthermore, many of the Covered SRO Forms contain information 
that must be disclosed publicly, and electronic conversion and/or 
publication of these filings by Commission staff, to make them 
available to the public and Commission staff, is labor intensive and 
time consuming. The Commission believes that requiring the submission 
of these filings on EDGAR would facilitate more efficient transmission, 
analysis, dissemination, storage, and retrieval of information, and 
would benefit the Commission, the submitting entities, investors, and 
other market participants. As a result of the proposed amendments to 
relevant Commission rules and forms as described below, any Filer of 
the Covered SRO Forms who has not previously made an electronic filing 
on EDGAR would need to apply for EDGAR access pursuant to the EDGAR 
Filer Manual \29\ in order to file documents on EDGAR.\30\
---------------------------------------------------------------------------

    \29\ See https://www.sec.gov/edgar/filermanual.
    \30\ As discussed in more detail in the Paperwork Reduction Act 
section of this release, the Commission does not believe that the 
Filers of Covered SRO Forms have previously made an electronic 
filing on EDGAR. See infra section IX.C (Form ID).
---------------------------------------------------------------------------

    For each of the Covered SRO Forms, the Commission is proposing to 
add technical requirements to the form's general instructions to 
specify when a form would be considered incomplete or deficient when 
filed. Specifically, each Filer would be required to provide all the 
information required by the form, including the exhibits, and a filing 
that is incomplete or otherwise deficient may be returned to the Filer. 
The proposed general instructions for each form also would set forth 
what comprises a complete filing. For instance, the proposed general 
instructions for Form 1 would state that a completed form filed with 
the Commission shall consist of Form 1, responses to all applicable 
items, and any exhibits required in connection with the filing.
    The Commission also proposes that, for each of the Covered SRO 
Forms, the general instructions would require some or all of the 
information reported on the forms (including, where applicable, the 
exhibits to the forms) to be provided in a structured, machine-readable 
data language. For Form 1 and Form CA-1, the general instructions would 
require the submissions to be provided in part using Inline XBRL and in 
part using custom XML data languages specific to those Forms, with 
certain submissions that constitute copies of existing documents of a 
Filer (such as copies of governing documents or copies of contracts) to 
be included as text-searchable PDF attachments rather than structured 
data.\31\ For Form 1-N and Form 15A, only the cover page (i.e., 
execution page) of each form would be structured in a custom XML data 
language, while the remainder of each form would remain unstructured. 
For Form X-17A-19, the entire form would be structured in a custom XML 
data language. Finally, the information under proposed Rule 19b-
4(e)(2)(ii) would be required to be provided on the listing SRO's 
website using a custom XML data language, thus making the information 
machine-readable.
---------------------------------------------------------------------------

    \31\ For example, the copies of governing documents that are 
required to be attached as Exhibit A to Form 1 and as part of 
Exhibit E to Form CA-1 would be included as a PDF attachment, rather 
than being structured in Inline XBRL or custom XML. See infra notes 
37 and 38.

[[Page 23927]]



                           Proposed Structured Data Requirements for Covered SRO Forms
----------------------------------------------------------------------------------------------------------------
                                             Inline XBRL                                     Unstructured PDF
                 Form                        requirements       Custom XML requirements        requirements
----------------------------------------------------------------------------------------------------------------
Form CA-1............................  Schedule A, Exhibits C,  Execution page,          Exhibits A (in part), E
                                        F, H, J, K, L, M, O,     Exhibits A (in part),    (in part), G, P, T.
                                        R, S.                    B, D, E (in part), I,
                                                                 N, Q.
Form 1...............................  Exhibits D, E (in        Execution page,          Exhibits A, B, C (in
                                        part), I.                Exhibits C (in part),    part), E (in part), F,
                                                                 H (in part), J, K, L,    G, H (in part), 17 CFR
                                                                 M, N, 17 CFR 240.6a-     240.6a-3(a)(1) (``Rule
                                                                 3(b) (``Rule 6a-         6a-3(a)(1)'')
                                                                 3(b)'') volume reports.  supplemental
                                                                                          materials.
Form 1-N.............................  None...................  Execution page only....  Remainder of form.
Form 15A.............................  None...................  Execution page only....  Remainder of form.
----------------------------------------------------------------------------------------------------------------

    For Form CA-1, Schedule A and Exhibits C, F, H, J, K, L, M, O, R, 
and S would be filed in Inline XBRL.\32\ The execution page and 
Exhibits A (in part), B, D, E (in part), I, N, and Q would be filed in 
custom XML.\33\ Exhibits A (in part), E (in part), G, P, and T would be 
filed as unstructured PDF documents.\34\
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    \32\ Schedule A to the execution page requires certain 
descriptive responses to complement the clearing agency's execution 
page disclosures. Exhibit C requires a description of the clearing 
agency's organizational structure. Exhibit F requires a description 
of material pending legal proceedings involving the clearing agency. 
Exhibit H requires the clearing agency's financial statements. 
Exhibit J requires a description of the clearing agency's services 
and functions. Exhibit K requires a description of the clearing 
agency's security measures and procedures. Exhibit L requires a 
description of the clearing agency's safeguarding measures and 
procedures. Exhibit M requires a description of the clearing 
agency's backup systems. Exhibit O requires a description of 
criteria governing access to the clearing agency's services and a 
description of the reasons for imposing such criteria. Exhibit R 
requires a schedule of prohibitions and limitations on access to the 
clearing agency's services. Exhibit S requires, if applicable, a 
statement explaining why the clearing agency should be exempt.
    \33\ The execution page requires identifying information about 
the filer and the document being filed. Exhibit A requires, in 
relevant part, a list of persons controlling or directing the 
management or policies of the clearing agency, and descriptions of 
any unwritten agreements or arrangements through which such persons 
may exercise control or direction. Exhibit B requires a list of the 
clearing agency's officers, managers, and individuals occupying 
similar positions. Exhibit D requires a list of persons who are 
controlled by, or are under common control with, the clearing 
agency, as well as a description of each control relationship. 
Exhibit E requires, in relevant part, a list of dues, fees, and 
other charges imposed by the clearing agency for its clearing 
activities. Exhibit I requires the addresses of all offices in which 
the clearing agency conducts its activities, and an identification 
of the activities that are performed in each listed office. Exhibit 
N requires a list of participants, or applicants for participation, 
in the clearing agency. Exhibit Q requires a schedule of fees fixed 
by the clearing agency for services rendered by its participants.
    \34\ Exhibit A requires, in relevant part, copies of written 
agreements with persons who may control or direct the management or 
policies of the clearing agency. Exhibit E requires, in relevant 
part, a copy of the currently effective constitution, articles of 
incorporation or association, by-laws, rules, procedures and 
instruments corresponding thereto, of the clearing agency. Exhibit G 
requires copies of all contracts with any national securities 
exchange, national securities association or clearing agency or 
securities market for which the clearing agency acts as a clearing 
agency or performs clearing agency functions. Exhibit P requires 
copies of any forms of contracts governing the terms on which 
persons may subscribe to clearing agency services provided by the 
registrant. Exhibit T requires any conditions, reports, notices or 
other submissions to the Commission required as directed in any 
Order approving applications for exemption from registration as a 
clearing agency.
---------------------------------------------------------------------------

    For Form 1, Exhibits D, E (in part), and I would be filed in Inline 
XBRL.\35\ The execution page, Exhibits C (in part), H (in part), J, K, 
L, M, N, and the 17 CFR 240.6a-3(b) (``Rule 6a-3(b)'') volume reports 
would be filed in custom XML.\36\ Exhibits A, B, C (in part), E (in 
part), F, G, H (in part), and the 17 CFR 240.6a-3(a)(1) (``Rule 6a-
3(a)(1)'') supplemental materials would be filed as unstructured PDF 
documents.\37\ For Forms 15A and 1-N, only the execution page would be 
filed using a structured data language (custom XML).\38\
---------------------------------------------------------------------------

    \35\ Exhibit D requires the unconsolidated financial statements 
for the latest fiscal year for each of the exchange's subsidiaries 
and affiliates. Exhibit E requires, in relevant part, a description 
of the manner of operation of the electronic trading system that the 
exchange uses to effect transactions. Exhibit I requires audited 
financial statements for the exchange's latest fiscal year.
    \36\ The execution page requires identifying information about 
the filer and the document being filed. Exhibit C requires, in 
relevant part, information regarding each subsidiary or affiliate of 
the exchange, and each entity with whom the exchange has an 
agreement relating to the operation of an electronic trading system 
to be used to effect transactions on the exchange (such as the name 
and address of the organization, a brief description of the nature 
and extent of the affiliation, and the a brief description of the 
business or functions of the organization). Exhibit H requires, in 
relevant part, a schedule of listing fees and a brief description of 
the criteria governing which securities may be traded on the 
exchange. Exhibit J requires a list of the exchange's officers, 
governors, standing committee members, or persons performing similar 
functions. Exhibit K requires a list of the exchange's significant 
owners, shareholders, or partners. Exhibit L requires descriptions 
of the criteria, conditions, and procedures governing membership in 
the exchange. Exhibit M requires a list of members, participants, 
subscribers, or other users of the exchange, as well as a 
description of each user's activities. Exhibit N requires schedules 
of securities traded on the exchange. Rule 6a-3(b) of the Exchange 
Act requires a report concerning the securities sold on the exchange 
during the previous calendar month. See 17 CFR 240.6a-3(b).
    \37\ Exhibit A requires copies of the constitution, articles of 
incorporation or association with all subsequent amendments, and of 
existing by-laws or corresponding rules or instruments, whatever the 
name, of the exchange. Exhibit B requires copies of all written 
rulings, settled practices having the effect of rules, and 
interpretations of the Governing Board or other committee of the 
exchange in respect of any provisions of the constitution, by-laws, 
rules, or trading practices of the exchange which are not included 
in Exhibit A. Exhibit C requires, in relevant part, copies of the 
constitution, a copy of the articles of incorporation or association 
including all amendments, and copies of the existing by-laws or 
corresponding rules or instruments for each of the exchange's 
subsidiaries or affiliates and for each entity with whom the 
exchange has an agreement relating to the operation of an electronic 
trading system to be used to effect transactions on the exchange. 
Exhibit E requires, in relevant part, a copy of the exchange's 
users' manual. Exhibit F requires a complete set of all forms 
pertaining to membership, participation, or subscription to the 
exchange, application for approval as a person associated with a 
member, participant, or subscriber of the exchange, or any other 
similar materials. Exhibit G requires a complete set of all forms of 
financial statements, reports, or questionnaires required of 
members, participants, subscribers, or any other users relating to 
financial responsibility or minimum capital requirements for such 
members, participants, or any other users. Exhibit H requires, in 
relevant part, a complete set of documents comprising the exchange's 
listing applications, including any agreements required to be 
executed in connection with listing. Rule 6a-3(a)(1) of the Exchange 
Act requires any material (including notices, circulars, bulletins, 
lists, and periodicals) issued or made generally available to 
members of, or participants or subscribers to, the exchange. See 17 
CFR 240.6a-3(a)(1).
    \38\ The execution page requires identifying information about 
the filer and the document being filed.
---------------------------------------------------------------------------

    Similarly, the information under proposed Rule 19b-4(e)(2)(ii) 
would be required to be provided on the listing SRO's website using a 
custom XML data language, thus making the information machine-readable.

----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Rule 19b-4(e) Information............  None...................  Entire Rule 19b-4(e)     The entire posting
                                                                 posting.                 would also be
                                                                                          available as a
                                                                                          rendered PDF document.
----------------------------------------------------------------------------------------------------------------


[[Page 23928]]

    The Commission believes that the proposed requirement that the 
Covered SRO Forms be filed, and information pursuant to Rule 19b-4(e) 
be posted, using structured data languages would allow the Commission 
and, if applicable, investors, market participants, and other 
interested parties, to efficiently review and analyze the 
information.\39\ In addition, the requirement to file Covered SRO Forms 
on EDGAR in a structured data language would enable EDGAR to perform 
technical validations (i.e., programmatic checks to ensure the 
documents are appropriately standardized, formatted, and complete) upon 
intake of the documents, potentially improving the quality of the filed 
data by decreasing the incidence of non-substantive errors (such as the 
omission of values from fields that should always be populated).
---------------------------------------------------------------------------

    \39\ For more detailed discussions of the anticipated benefits 
associated with structured data requirements, see infra sections 
VII.A. and X.C.1.b.
---------------------------------------------------------------------------

    Based on the Commission's experience in reviewing the Covered SRO 
Forms and information posted pursuant to Rule 19b-4(e), the Commission 
also believes that the proposed requirement to electronically file the 
Covered SRO Forms and electronically post the information required 
pursuant to Rule 19b-4(e) would allow for more efficient use of 
Commission resources related to reviewing, assessing, and processing 
these filings and postings. In addition, information provided on the 
Covered SRO Forms would be captured automatically by EDGAR and would be 
text-searchable or machine-readable. The information posted pursuant to 
Rule 19b-4(e) would be machine-readable as well. As a result, the 
Commission believes that these features would facilitate its oversight 
of SROs.
    Substantive changes would not be required to the information 
required to be filed on the Covered SRO Forms or the information 
required to be posted pursuant to Rule 19b-4(e). Rather, the proposal 
is intended simply to require and facilitate the electronic filing of 
the Covered SRO Forms and the disclosure of the information required 
under Rule 19b-4(e), which the SROs currently are required to provide 
to the Commission.

A. Form 1

1. Relevant Statutory Framework
    Section 6(a) of the Exchange Act states, ``[a]n exchange may be 
registered as a national securities exchange . . . by filing with the 
Commission an application for registration in such form as the 
Commission, by rule, may prescribe containing the rules of the exchange 
and such other information and documents as the Commission, by rule, 
may prescribe as necessary or appropriate in the public interest or for 
the protection.'' \40\ Rules 6a-1, 6a-2, and 6a-3 \41\ under the 
Exchange Act and Form 1 \42\ set forth the filing requirements for 
registration as a national securities exchange and for exempt 
exchanges, as well as requirements for the filing of supplemental 
material and reports.
---------------------------------------------------------------------------

    \40\ See 15 U.S.C. 78f(a).
    \41\ See 17 CFR 240.6a-1; 17 CFR 240.6a-2; 17 CFR 240.6a-3.
    \42\ See 17 CFR 249.1.
---------------------------------------------------------------------------

2. Current Requirements for Filing Form 1
    Rule 6a-1 under the Exchange Act generally requires that an entity 
seeking to register as a national securities exchange, or seeking an 
exemption from such registration based on limited volume, file an 
application on Form 1 and correct any inaccuracy therein upon 
discovery.\43\ Form 1 contains an execution page as well as 14 exhibits 
that must be filed by the exchange.\44\ The Form 1 execution page 
requires certain basic information from the exchange, such as the name 
and street and mailing addresses of the exchange; the name, title, and 
telephone number of the exchange's contact employee; and the legal 
status of the exchange (e.g., corporation or limited liability 
company). The Form 1 exhibits require the exchange to provide, among 
other things: its audited financial statements and unconsolidated 
financial statements for each subsidiary or affiliate; its governing 
documents and rules; the names of its members, participants, 
subscribers, and users; information regarding its non-member owners, 
shareholders, or partners; and the securities it lists or trades. The 
instructions to Form 1 require that one original and two copies of all 
the Form 1 materials be filed with the Commission in paper form.\45\
---------------------------------------------------------------------------

    \43\ See 17 CFR 240.6a-1.
    \44\ For purposes of this paragraph, these entities are 
collectively referred to as ``exchanges.''
    \45\ See 17 CFR 249.1.
---------------------------------------------------------------------------

    Rule 6a-2 requires a registered national securities exchange or an 
exempt exchange \46\ to amend its Form 1 as specified therein. 
Specifically, pursuant to 17 CFR 240.6a-2(a) (``Rule 6a-2(a)''), an 
exchange must file an amendment to its Form 1 within 10 days after it 
takes any action that renders any part of its Form 1 execution page or 
the information provided in its Form 1 Exhibits C, F, G, H, J, K, or M 
inaccurate or incomplete.\47\
---------------------------------------------------------------------------

    \46\ For purposes of this paragraph, these entities are 
collectively referred to as ``exchanges.''
    \47\ See 17 CFR 240.6a-2(a).
---------------------------------------------------------------------------

    Pursuant to 17 CFR 240.6a-2(b) (``Rule 6a-2(b)''), on or before 
June 30 of each year, a national securities exchange or an exempt 
exchange \48\ must file amendments to Exhibits D, I, K, M, and N with 
the Commission.\49\ Pursuant to 17 CFR 240.6a-2(c) (``Rule 6a-2(c)''), 
on a triennial basis, an exchange must file complete Exhibits A, B, C, 
and J with the Commission.\50\ Further, 17 CFR 240.6a-2(d) (``Rule 6a-
2(d)'') provides alternative means for satisfying the requirements to 
file amendments to certain exhibits.\51\ These alternative means 
require that the exchange: (i) on an annual or more frequent basis 
publish the information required by the pertinent exhibits, or 
cooperate in its publication; \52\ (ii) keep the information up to date 
and make it available to the Commission and the public upon request; 
\53\ or (iii) make the required information available continuously on 
an internet website controlled by the exchange.\54\ As with Form 1 
filings pursuant to Rule 6a-1, all amendments to Form 1 pursuant to 
Rule 6a-2 currently are submitted in paper form in accordance with the 
instructions to Form 1.\55\
---------------------------------------------------------------------------

    \48\ For purposes of this paragraph, these entities are 
collectively referred to as ``exchanges.''
    \49\ See 17 CFR 240.6a-2(b).
    \50\ See 17 CFR 240.6a-2(c).
    \51\ See 17 CFR 240.6a-2(d). Rule 6a-2(d) applies to information 
required to be filed pursuant to paragraphs (b)(2) and (c) of Rule 
6a-2. Rule 6a-2(d) sets forth alternative means of providing access 
to the information contained in Exhibits A, B, C, J, K, M, and N in 
lieu of filing the information with the Commission.
    \52\ See The exchange would need to: (i) identify the 
publication in which the information is available, the name, 
address, and telephone number of the person from whom such 
publication may be obtained, and the price of the publication; and 
(ii) certify the accuracy of such information as of its publication 
date. 17 CFR 240.6a-2(d)(1).
    \53\ The exchange would need to certify that the information is 
kept up to date and is available to the Commission and the public 
upon request. 17 CFR 240.6a-2(d)(2).
    \54\ The exchange would need to: (i) indicate the location of 
the internet website where such information may be found; and (ii) 
certify that the information available at such location is accurate 
as of its date. 17 CFR 240.6a-2(d)(3).
    \55\ See 17 CFR 249.1.
---------------------------------------------------------------------------

    Pursuant to Rule 6a-3, a national securities exchange or an exempt 
exchange \56\ also must file certain supplemental material and reports 
with the Commission.\57\ Specifically, Rule 6a-3(a)(1) requires an 
exchange to file with the Commission any material issued or made 
generally available to members of, or participants or

[[Page 23929]]

subscribers to, the exchange within 10 days after issuing or making 
such material available to such members, participants or 
subscribers.\58\ 17 CFR 240.6a-3(a)(2) (``Rule 6a-3(a)(2)'') provides 
that, if information required by Rule 6a-3(a)(1) is available 
continuously on a website controlled by the exchange, in lieu of filing 
such information, the exchange may indicate the location of the website 
where the information can be found, and certify that the information is 
accurate as of its date.\59\ Rule 6a-3(b) requires an exchange to file, 
within 15 days after the end of each calendar month, a volume report of 
securities transactions on the exchange during the calendar month. As 
with filings pursuant to Rules 6a-1 and 6a-2, all filings pursuant to 
Rule 6a-3 currently are submitted in paper form.\60\
---------------------------------------------------------------------------

    \56\ For purposes of this paragraph, these entities are 
collectively referred to as ``exchanges.''
    \57\ See 17 CFR 240.6a-3.
    \58\ See 17 CFR 240.6a-3(a)(1).
    \59\ See 17 CFR 240.6a-3(a)(2).
    \60\ See 17 CFR 240.6a-3(b). This report must set forth: (i) the 
number of shares of stock sold and the aggregate dollar amount of 
such stock sold; (ii) the principal amount of bonds sold and the 
aggregate dollar amount of such bonds sold; and (iii) the number of 
rights and warrants sold and the aggregate dollar amount of such 
rights and warrants sold. Id.
---------------------------------------------------------------------------

    Form 1 filings are currently made available to the public.\61\ Form 
1 filings made pursuant to Rule 6a-1 are scanned and the resulting PDF 
documents are posted on the Commission's website. Form 1 filings made 
pursuant to Rule 6a-2 are scanned and the resulting PDF documents are 
uploaded to EDGAR. Form 1 filings made pursuant to Rule 6a-3 are 
available for inspection in paper form in the Commission's public 
reading room.
---------------------------------------------------------------------------

    \61\ When the Commission previously amended Form 1 and Rules 6a-
1, 6a-2, and 6a-3, it stated that ``[t]he information collected, 
retained, and/or filed pursuant to the rules for registration as a 
national securities exchange will not be confidential and will be 
available to the public.'' Exchange Act Release No. 40760 (Dec. 8, 
1998), 63 FR 70844, 70912 (Dec. 22, 1998) (Regulation of Exchanges 
and Alternative Trading Systems Adopting Release). Consistent with 
this statement, the Instructions to Form 1 specify that ``[n]o 
assurance of confidentiality is given by the Commission with respect 
to the responses made in Form 1. The public has access to the 
information contained in Form 1.''
---------------------------------------------------------------------------

3. Proposed Requirement To Electronically File Form 1
    The Commission proposes to amend Rules 6a-1, 6a-2, and 6a-3 under 
the Exchange Act, as well as Form 1 and the instructions to Form 1, to 
require the electronic filing on EDGAR of all submissions required by 
the rules. As explained in section II above, the Commission believes 
that, among other benefits, these proposed amendments should increase 
efficiencies related to the filing of these forms and the review and 
analysis of the filed forms by the Commission and its staff as well as 
by investors, market participants, and other interested parties. In 
addition, the Commission proposes conforming changes to Rule 3(b)(2) of 
its Informal and Other Procedures,\62\ discussed below,\63\ to clarify 
that defective applications on Form 1 would be returned to the 
applicant and, although permitted as an option under the current rule, 
defective applications no longer would be held by the Commission. A 
description of the Commission's proposed amendments to Rules 6a-1, 6a-
2, and 6a-3, Form 1, and the instructions to Form 1 to implement the 
proposed electronic filing requirement is provided below.
---------------------------------------------------------------------------

    \62\ See 17 CFR 202.3(b)(2).
    \63\ See infra section II.G.
---------------------------------------------------------------------------

a. Proposed Amendments to Rules 6a-1, 6a-2, and 6a-3
    The Commission proposes to add a new paragraph (e) to Rule 6a-1 to 
require the electronic filing on EDGAR of all Form 1 filings and 
amendments to such filings. The Commission also proposes to amend Rules 
6a-2(a), (b), and (c) to mandate the electronic filing on EDGAR of the 
Form 1 amendments under those paragraphs by requiring the electronic 
filing of those amendments, in accordance with proposed 17 CFR 240.6a-
1(e) (``Rule 6a-1(e)'').\64\ Moreover, the Commission proposes to 
update in Rule 6a-2(c) the due date for the next filings due pursuant 
to Rule 6a-2(c), from June 30, 2001, to June 30, 2025.
---------------------------------------------------------------------------

    \64\ The Commission also proposes a technical amendment to 
remove two extraneous commas from the text of Rule 6a-2(a). The 
Commission further proposes to amend paragraph (d) of Rule 6a-2 to 
clarify that any certifications and other information permitted 
under that paragraph in lieu of filing the required documents as 
exhibits to Form 1 must be provided using Form 1. The Commission 
believes that this proposed change should facilitate compliance with 
the Rule 6a-2 requirements by exchanges and exempt exchanges by 
clarifying and standardizing the means to file any certifications 
and other information submitted pursuant to paragraph (d) of Rule 
6a-2.
---------------------------------------------------------------------------

    As stated earlier in this section, Rule 6a-3 requires national 
securities exchanges and exempt exchanges to file certain supplemental 
material and reports with the Commission after registration or being 
granted an exemption from registration. The Commission proposes to 
amend Rule 6a-3 to require national securities exchanges and exempt 
exchanges to file on EDGAR such supplemental material and reports 
electronically on Form 1, in accordance with proposed Rule 6a-1(e).
b. Proposed Amendments to Form 1 and the Form 1 Instructions
    In addition to the proposed revisions to Rules 6a-1, 6a-2, and 6a-
3, the Commission proposes to revise and reformat Form 1, and the 
instructions thereto, to accommodate the electronic filing on EDGAR of 
initial applications, subsequent amendments, supplemental material, and 
reports that are made on Form 1. The proposed changes to Form 1 to 
permit electronic submission to the Commission would require minimal 
modifications to the form, as described below. The Commission also 
proposes to revise the Form 1 instructions to facilitate the electronic 
filing and machine-readability of Form 1.\65\ As discussed below, 
Commission believes that these proposed revisions to Form 1 would 
facilitate the filing and use of the information mandated by Form 1 and 
related Rules 6a-1, 6a-2, and 6a-3.
---------------------------------------------------------------------------

    \65\ In addition, the Commission proposes to remove the 
definition of the word ``applicant'' from the Form 1 instructions 
and replace the word ``applicant'' with the word ``exchange'' on 
Form 1. Currently, Form 1 uses both the words ``exchange'' and 
``applicant'' to refer to the entity filing the Form 1. The 
Commission proposes this technical, non-substantive change to make 
consistent the terminology used in Form 1.
---------------------------------------------------------------------------

    The Commission proposes that electronic Form 1 would solicit 
information through prompts on the form. Proposed electronic Form 1 
also would require an exchange to attach exhibits via a new exhibit 
table that would be part of electronic Form 1. Where Rule 6a-2 allows 
for alternative means of filing the information required under certain 
exhibits, the new exhibit table would permit an exchange to 
electronically provide the certifications and details necessary for an 
exchange to avail itself of those alternative means. The information 
required to be filed with the exhibits is not changing. Currently, Rule 
6a-2 provides that in lieu of filing certain exhibits as part of a 
paper Form 1 submission, an exchange may: (i) identify where such 
information is published and certify its accuracy as of its publication 
date; (ii) certify that the information is available to the Commission 
and the public upon request; or (iii) indicate the location of the 
internet website where such information may be found and certify that 
the information available at such location is accurate as of its 
date.\66\ The proposal would not change the availability of these 
alternative means, only the method of providing the necessary 
certifications and details. As described above, instead of attaching 
paper exhibits, the proposal would require the exhibits to be submitted

[[Page 23930]]

electronically on EDGAR. Similarly, instead of providing on paper the 
certifications and details required for an exchange to avail itself of 
these alternative means, the proposal would require those 
certifications and details to be provided via the electronic Form 1. In 
the event an exchange indicates on Form 1 an internet website where 
such information may be found, where applicable, the Commission 
proposes to require the exchange to provide on Form 1 the Uniform 
Resource Locator(s) (``URL(s)'') of the location(s) on the internet 
website where such information may be found, and to certify that 
information posted on such a website is accurate as of its date and is 
free and accessible (without any encumbrances or restrictions) by the 
general public.
---------------------------------------------------------------------------

    \66\ See 17 CFR 240.6a-2(d).
---------------------------------------------------------------------------

    For electronic Form 1, the Commission proposes to add prompts prior 
to Section I that would require the exchange to identify the basis for 
submitting the form. Specifically, proposed electronic Form 1 would 
require the exchange to check a box stating one of the following: (i) 
whether the filing is an initial Form 1 application and if it is, 
whether the exchange is applying to be a national securities exchange 
or an exempt exchange; (ii) whether the filing is an amendment to an 
initial Form 1 application prior to Commission action to grant 
registration or an exemption based on limited volume; (iii) whether the 
filing is to provide the exchange's consent to an extension of the time 
period within which the Commission must take action on an initial Form 
1 application; \67\ (iv) whether the filing is to withdraw an initial 
Form 1 application prior to the Commission taking action on the 
application; (v) whether the filing is an amendment to Form 1 pursuant 
to Rule 6a-2 following the Commission's granting of registration or an 
exemption; or (vi) whether the filing is supplemental material or 
reports pursuant to Rule 6a-3.\68\ Currently, there is no place on Form 
1 for an exchange to indicate the type of filing that it is submitting. 
For example, current Form 1 does not provide an exchange the ability to 
indicate whether an initial Form 1 filing is an application to be a 
national securities exchange or an exempt exchange. Accordingly, the 
Commission believes that capturing information regarding the type of 
Form 1 filing would facilitate the exchange's communication with the 
Commission and help the Commission more efficiently review Form 1 
submissions.
---------------------------------------------------------------------------

    \67\ Such consents to an extension of the time period within 
which the Commission must take action currently are submitted as 
letters in paper form. Adding the ability to indicate that the 
exchange consents to an extension of time on electronic Form 1 would 
streamline the process for making such a submission. See 15 U.S.C. 
78s(a)(1)(B).
    \68\ The Commission also proposes to amend the instructions to 
Form 1 to add a new section titled ``When to Use the Form,'' which 
would explain when Form 1 filings are required.
---------------------------------------------------------------------------

    The proposed electronic Form 1 would also capture contact 
information for the exchange and certain individuals. Consistent with 
current Form 1, the proposed electronic Form 1 would require the 
exchange to identify contact information for the exchange, a contact 
employee, and counsel for the exchange. Unlike current Form 1, proposed 
electronic Form 1 would additionally require an email address for the 
contact employee. The Commission believes that the requirement to 
provide an email address for the exchange contact employee would 
expedite communications between Commission staff and the relevant 
exchange.
    Proposed electronic Form 1 would require an exchange to 
electronically attach exhibits by using an exhibit table. The proposed 
exhibit table would contain columns for the name of the exhibit, 
information required by the exhibit, whether alternative means of 
satisfying the filing of an exhibit are available for that particular 
exhibit (e.g., URL(s)), if permitted by applicable Commission rule, and 
checkboxes to indicate whether such alternative means are being 
used.\69\ The information proposed to be required by the exhibits to 
electronic Form 1 would remain the same as current Form 1. In addition, 
to facilitate the electronic filing of the supplemental materials 
required under 17 CFR 240.6a-3(a) (``Rule 6a-3(a)'') and the volume 
reports required under Rule 6a-3(b), the Commission proposes to add new 
Sections III and IV, respectively, to Form 1. Sections III and IV would 
not add new requirements beyond those currently included in Rules 6a-
3(a) and (b). Currently, Rule 6a-3(a) requires exchanges to file 
certain information with the Commission or, in the alternative, to 
indicate where such information can be found on an internet website 
controlled by the exchange. The proposal would require the filing of 
this information through Section III of electronic Form 1 or, in the 
alternative, to provide through Section III of electronic Form 1 the 
URL(s) of the location(s) on the internet website where such 
information can be found. If an exchange chooses this latter option and 
provides URL(s) of an internet website where such information can be 
found, Section III would also clarify that such website must be free 
and accessible (without any encumbrances or restrictions) by the 
general public. Likewise, Section IV would not change the substance of 
what must be filed; it would merely require the filing of the volume 
reports required under Rule 6a-3(b) to be made on electronic Form 1 
instead of in paper format.
---------------------------------------------------------------------------

    \69\ See supra notes 69-71.
---------------------------------------------------------------------------

    Furthermore, electronic Form 1 would continue to require an 
exchange to consent to service of any civil action brought by, or 
notice of any proceeding before, the Commission in connection with its 
activities. The current language under which the exchange consents to 
service via registered or certified mail at the main or mailing address 
provided on Form 1 would continue to be included in the electronic 
form.\70\
---------------------------------------------------------------------------

    \70\ The Commission also proposes to delete the outdated 
provision allowing for service of any civil action pursuant to 
confirmed telegram.
---------------------------------------------------------------------------

    In addition, the proposed electronic Form 1 would require the 
individual who is submitting the form to check a box on behalf of the 
exchange to represent that the information and statements contained in 
the Form 1, including exhibits, schedules, or other documents, are 
current, true, and complete. The requirement to sign and notarize the 
form would be eliminated because it is unnecessary, not compatible 
with, and not required for electronic filing on EDGAR.
    Finally, electronic Form 1 would require exchanges to structure 
Exhibits D (unconsolidated financial statements of each of the 
exchange's subsidiaries or affiliates), E (description of the 
electronic trading system's manner of operation, except for the 
attached copy of the users' manual), and I (audited financial 
statements of the exchange) in Inline XBRL. The execution page, 
Exhibits C (information regarding each of the exchange's subsidiaries, 
affiliates, and entities with whom the exchange has an agreement 
relating to the operation of the exchange's electronic trading system, 
except for the copies of existing documents listed below), H (listing 
fee schedule and brief description of the criteria governing which 
securities may be traded on the exchange, except for the copies of 
existing documents listed below), J (list of officers, governors, 
standing committee members, or persons performing similar functions), K 
(list of significant shareholders or partners), L (description of 
criteria, conditions, and procedures governing membership in the 
exchange), M (list of members, participants, subscribers, or other 
users

[[Page 23931]]

of the exchange and description of each user's activities), N 
(schedules of securities traded on the exchange), and the information 
required under Rule 6a-3(b) (reports regarding the securities sold on 
the exchange over the previous calendar month) would also be 
structured, albeit in a custom XML data language specific to Form 1 
rather than in Inline XBRL.
    Attached copies of existing documents, including those filed with 
Exhibits A (constitution, articles of incorporation or association, and 
existing by-laws or corresponding rules or instruments of the 
exchange), B (written rulings, settled practices having the effect of 
rules, and interpretations of the Governing Board or other committee of 
the exchange in respect of any provisions of the constitution, by-laws, 
rules, or trading practices of the exchange), C (written rulings, 
settled practices having the effect of rules, and interpretations of 
the Governing Board or other committee of the exchange in respect of 
any provisions of the constitution, by-laws, rules, or trading 
practices of the exchange's affiliates, subsidiaries, or entities with 
whom the exchange has an agreement related to the operation of the 
exchange's electronic trading system), E (listing applications and 
required agreements), F (forms pertaining to membership, participation, 
or subscription, application for approval as a person associated with a 
member, participant, or subscriber of the exchange, or any other 
similar materials), G (forms of financial statements, reports, or 
questionnaires required of members, participants, subscribers, or any 
other users relating to financial responsibility or minimum capital 
requirements for such members, participants, or any other users), H 
(listing applications and agreements required to be executed in 
connection with listing), and the information required under Rule 6a-
3(a)(1) (supplemental materials issued or made available to members of, 
or participants or subscribers to, the exchange), would be filed as 
unstructured PDF documents.

            Proposed Structured Data Requirements for Form 1
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Inline XBRL..................  Exhibits D, E (in part), I.
Custom XML...................  Execution page, Exhibits C (in part), H
                                (in part), J, K, L, M, N, Rule 6a-3(b)
                                monthly reports.
Unstructured PDF.............  Exhibits A, B, C (in part), E (in part),
                                F, G, H (in part), Rule 6a-3(a)(1)
                                supplemental materials.
------------------------------------------------------------------------

    The proposed structuring requirements could facilitate access to 
the exchange's disclosures (such as by enabling efficient retrieval of 
only those disclosures filed by a subset of exchanges over particular 
reporting periods) and their analysis (such as by enabling efficient 
comparisons of individual disclosures or sets of disclosures across 
different exchanges and reporting periods). This could benefit market 
participants through enhanced oversight of the exchanges. For example, 
Commission staff could leverage the machine-readability of Exhibit I to 
automatically flag any atypical fluctuations in particular financial 
line items across every exchange's financial statements, and assess 
whether closer examination of any such fluctuations would be warranted. 
Similarly, Commission staff could leverage the machine-readability of 
Exhibit E by retrieving automated redline comparisons of the manner of 
operations description disclosed by exchanges from prior reporting 
periods to the current reporting period, thus pinpointing any 
widespread operational changes for further assessment.
    Market participants (such as issuers, analysts, and other 
exchanges) could also benefit from direct use of the machine-readable 
disclosures on Form 1. For example, the structuring requirement for 
Exhibit H could allow issuers to more efficiently compare listing fees 
charged by different exchanges as they determine the exchange on which 
they list their securities. Without the proposed structured data 
requirements, these analyses, to the extent they are done, need to be 
performed manually, such as by gathering the current and former 
financial statements for each exchange and entering all financial line 
items of interest into databases, resulting in a significantly less 
efficient and precise process. In addition, the proposed structured 
data requirement would enable EDGAR to perform technical validations 
(i.e., programmatic checks to ensure the documents are appropriately 
standardized, formatted, and complete) upon intake of the Form 1 
disclosures, thus potentially improving the quality of the filed data 
by decreasing the incidence of non-substantive errors (such as the 
omission of values from fields that should always be populated).
    The nature and extent of such benefits may vary based on the 
content of each Form 1 Exhibit. As discussed in the subsequent economic 
analysis, studies of XBRL requirements for public operating company 
financial statements indicate a number of benefits for investors and 
market participants.\71\ The probability that, and extent to which, 
these particular benefits would arise from structured Form 1 
disclosures could be heightened for Exhibits D and I, which would 
likewise include structured financial statements under the proposed 
rule amendments. In addition, the particular benefits of structuring 
data would likely vary based on the type of disclosures included in 
each particular Exhibit. Structured numerical disclosures, such as 
those that would be included on Exhibit I, lend themselves to 
mathematical functionality, such as the calculation of key ratios or 
the identification of extreme statistical outliers. Structured textual 
disclosures, such as those that would be included on Exhibit E, lend 
themselves to targeted keyword searching and more sophisticated 
sentiment analysis.
---------------------------------------------------------------------------

    \71\ See infra section X.C.1.b.
---------------------------------------------------------------------------

    The Commission is proposing to require Inline XBRL for certain 
exhibits to Form 1 and custom XML for others because the Commission 
believes each data language is better suited for particular types of 
disclosures. Exhibits D and I require disclosure of financial 
statements, and Inline XBRL was designed to accommodate financial 
statement information, including the particular metadata (e.g., the 
relevant fiscal period, whether the line item is on the balance sheet, 
whether the line item is a credit or debit) that must be linked to each 
data point within the financial statements to fully convey its semantic 
meaning to a machine reader. Exhibit E requires narrative disclosure 
regarding the trading system's manner of operations, and whereas custom 
XML data languages only have the capacity to accommodate brief 
narrative descriptions, Inline XBRL can accommodate longer narrative 
descriptions with presentation capabilities that preserve human-
readability while maintaining machine-readability.\72\
---------------------------------------------------------------------------

    \72\ Compare, for example, the Inline XBRL requirement for the 
description of investment strategies that open-end funds disclose on 
Form N-1A to the custom XML requirement for the brief description of 
the applicant's business that SBS Entities disclose on Form SBSE. 
See Item 4 of Form N-1A; Item 7 of Form SBSE.

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[[Page 23932]]

    The execution page of Form 1, Exhibits C (in part), H (in part), J, 
K, L, M, and N to Form 1, and the Rule 6a-3(b) reports filed on Form 1 
do not require such content. For these disclosures, the Commission 
believes the use of custom XML data languages would be preferable to 
Inline XBRL, because it would yield smaller file sizes and therefore 
enable more streamlined processing of the information.\73\ The 
Commission believes requiring custom XML rather than Inline XBRL for 
these disclosures would also be preferable because it would enable 
EDGAR to generate fillable web forms that would permit exchanges to 
input their disclosures into form fields rather than structure their 
disclosures in custom XML themselves. This added flexibility could ease 
the burden of compliance on exchanges in some instances, although 
exchanges may have the requisite sophistication to encode the 
disclosures in custom XML themselves without relying on fillable web 
forms.\74\
---------------------------------------------------------------------------

    \73\ See also infra section X.E.4 (discussing other structured 
data languages that would result in smaller file sizes than Inline 
XBRL).
    \74\ See infra note 458, as well as the text accompanying note 
654.
---------------------------------------------------------------------------

    The proposed approach of requiring Inline XBRL for some Form 1 
exhibits and custom XML for others would entail drawbacks for users of 
the information (including Commission staff and market participants). 
Specifically, data users would be unable to incorporate the Inline XBRL 
disclosures filed on Form 1 into the same datasets and applications as 
the custom XML disclosures filed on Form 1, and run analyses across the 
differently formatted Form 1 disclosures, without undertaking data 
conversion processes that are frequently burdensome and imprecise. 
Similarly, any technical validations programmed into EDGAR would be 
unable to check for any inappropriate inconsistencies between 
disclosures on Inline XBRL exhibits and disclosures on custom XML 
exhibits on a given Form 1, thus reducing the benefit of improved data 
quality that would be likely to result from structured data 
requirements. Finally, some Form 1 filers may already be using Inline 
XBRL to structure similar data for internal business purposes, such as 
through the use of Enterprise Resource Planning (``ERP'') systems; 
these filers may prefer to use Inline XBRL for all proposed structured 
data requirements of Form 1, rather than using a combination of Inline 
XBRL and custom XML.\75\ Nonetheless, the Commission believes the 
streamlined data processing associated with the smaller sizes of the 
proposed custom XML exhibits, as described earlier in this section, 
would justify any such drawbacks.
---------------------------------------------------------------------------

    \75\ See infra note 570 (discussing the prevalence of XBRL 
integration into ERP systems).
---------------------------------------------------------------------------

    The Commission is proposing to require exchanges to file copies of 
existing documents, such as copies of by-laws, written agreements, and 
listing applications, as unstructured PDF attachments. The Commission 
believes an unstructured PDF requirement would be preferable to a 
structured data requirement for these documents, because requiring 
exchanges to retroactively structure these existing documents, which 
were prepared for purposes outside of fulfilling the Commission's 
disclosure requirements, would likely impose costly compliance burdens 
on exchanges that may not be justified in light of the commensurate 
informational benefits associated with more efficient disclosure use. 
Thus, the Commission does not believe structured data requirements are 
warranted for these copies of existing documents.
4. Request for Comment
    1. The Commission requests comment on all aspects of the proposed 
revisions to Form 1 to facilitate electronic filing on EDGAR. Are there 
any aspects of transitioning the form to electronic filing that the 
Commission has not addressed above? Please explain.
    2. Would electronic filing of Form 1 on EDGAR and use of Inline 
XBRL and custom XML for certain elements of Form 1 filings improve the 
usefulness of Form 1 by members of the public? Would any market 
participants derive benefit from regulatory use of the Inline XBRL and 
custom XML disclosures on Form 1? Please explain why or why not.
    3. What, if any, costs would be associated with preparing Form 1 
filings for electronic filing through EDGAR? Are those costs more, less 
or the same as those currently expended under the current Form 1 filing 
process?
    4. Form 1 filers would be required to prepare certain elements of 
Form 1 filings using Inline XBRL and custom XML. Would Form 1 filers 
experience practical difficulties or incur significant costs in 
preparing and submitting those elements of Form 1 using Inline XBRL and 
custom XML? If so, please explain the nature of those difficulties and 
costs as well as any alternative approaches the Commission should 
adopt.
    5. Would requiring different structured data languages for 
different Exhibits of Form 1 provide benefits to data users or filers 
that justify any drawbacks associated such an approach? Please explain 
the nature of such benefits and drawbacks, and why the benefits would 
justify the drawbacks (or vice versa).
    6. If a mix of structured data languages would be appropriate, 
should the specific data languages proposed for each Form 1 Exhibit be 
modified? For example, are there Form 1 Exhibits proposed as custom XML 
documents that would be better suited as Inline XBRL documents, or vice 
versa? Please explain why or why not.
    7. Are there other structured data languages (i.e., data languages 
other than Inline XBRL and custom XML) that would be more appropriate 
for some or all of the Form 1 disclosures? Please explain why or why 
not, and, if another structured data language is deemed more 
appropriate, please identify.
    8. Would requiring exchanges to file copies of existing documents 
as unstructured PDF attachments, rather than requiring exchanges to 
retroactively structure those documents in machine-readable data 
languages, ease compliance burdens on exchanges? If so, would the 
reduced compliance burden on exchanges justify foregoing the benefits 
to data users of structuring these existing documents? Please explain 
why or why not.

B. Form 1-N

1. Relevant Statutory Framework
    Section 6 of the Exchange Act \76\ sets out a framework for the 
registration and regulation of national securities exchanges. The 
Exchange Act was amended by the Commodity Futures Modernization Act of 
2000 (``CFMA'') \77\ to allow the trading of security futures products. 
Under the CFMA, markets that wish to trade security futures products 
are regulated jointly by the SEC and the CFTC. The Exchange Act, as 
amended by the CFMA, provides that futures exchanges that meet certain 
criteria and that wish to trade security futures products may file 
notice with the SEC to become a ``Security Futures Product Exchange.'' 
\78\
---------------------------------------------------------------------------

    \76\ See 15 U.S.C. 78f.
    \77\ See Public Law 106-554, Appendix E, 114 Stat. 2763.
    \78\ See 15 U.S.C. 78f(g).
---------------------------------------------------------------------------

2. Current Requirements for Filing Form 1-N
    Rule 6a-4 under the Exchange Act \79\ sets forth the notice 
registration procedures for Security Futures Product Exchanges and 
permits futures

[[Page 23933]]

exchanges to submit a notice registration on Form 1-N.\80\ Form 1-N 
requires information regarding how the futures exchange operates, its 
rules and procedures, corporate governance, its criteria for 
membership, its subsidiaries and affiliates, and the security futures 
products it intends to trade. Rule 6a-4 also requires entities that 
have submitted an initial Form 1-N to file: (1) amendments to Form 1-N 
in the event any information provided in the initial Form 1-N is 
rendered inaccurate or incomplete; (2) periodic updates of certain 
information provided in the initial Form 1-N; (3) certain information 
that is provided to the Security Futures Product Exchange's members; 
and (4) a monthly report summarizing the Security Futures Product 
Exchange's trading of security futures products. The information 
required to be filed with the Commission pursuant to Rule 6a-4 is 
designed to enable the Commission to carry out its statutorily mandated 
oversight functions and to ensure that Security Futures Product 
Exchanges continue to be in compliance with the Exchange Act.
---------------------------------------------------------------------------

    \79\ See 17 CFR 240.6a-4.
    \80\ See 17 CFR 249.10.
---------------------------------------------------------------------------

3. Proposed Requirement To Electronically File Form 1-N
    The Commission proposes to amend Rule 6a-4 under the Exchange Act, 
as well as Form 1-N and the instructions to Form 1-N, to require the 
electronic filing on EDGAR of all submissions required by the rule and 
forms. As explained in section II above, the Commission believes that, 
among other benefits, these proposed amendments should increase 
efficiencies and decrease overall costs \81\ related to the filing of 
these forms and the review of the filed forms by the Commission and its 
staff. A description of the Commission's proposed amendments to Rule 
6a-4, Form 1-N, and the instructions to Form 1-N to implement this 
proposed electronic filing requirement is provided below.
---------------------------------------------------------------------------

    \81\ As discussed in more detail in the Economic Analysis, some 
entities that currently do not use EDGAR may incur relatively small 
initial costs to submit filings on EDGAR and there are some 
potential costs associated with structuring certain information. 
However, the Commission believes that savings from filing these 
forms electronically rather than in paper will be greater than the 
costs. See infra X.C.1.a.
---------------------------------------------------------------------------

a. Proposed Amendments to Rule 6a-4
    The Commission proposes to add a new paragraph (d) to Rule 6a-4 to 
require the electronic filing of Form 1-N on EDGAR for exchange notice 
registrations and amendments made under Rule 6a-4 in accordance with 
the requirements of Regulation S-T.
    The Commission also proposes changes to the text of Rule 6a-4 to 
accommodate electronic filing, as well as to make minor corrections and 
clarifications. Specifically, the Commission proposes to modify Rules 
6a-4(a)(1) and 6a-4(c)(2) to resolve existing typographical errors and 
Rule 6a-4(b)(1)(i) to refer to the appropriate section of Form 1-N, 
rather than the ``Execution Page,'' to reflect the shift to electronic 
filing. The Commission proposes to modify Rules 6a-4(b)(5)(i), (ii) and 
(iii) to delete the phrase ``satisfy this filing requirement by'' 
because the language is superfluous. The Commission further proposes to 
make conforming changes to Rules 6a-4(b)(5)(i)(A) and (B), and 6a-
4(b)(5)(ii) and (iii)(A) and (B) to make clear that certain 
certifications by the exchange and listing of websites containing 
information required by Rule 6a-4 would be required to be made on 
electronic Form 1-N. The Commission further proposes to update the due 
dates in Rules 6a-4(b)(3) and (4) for the next annual and triennial 
filings from June 30, 2002, and June 30, 2004, to June 30, 2023, and 
June 30, 2025, respectively. Finally, the Commission proposes to make 
non-substantive changes to Rules 6a-4(a)(1)(i), 6a-4(a)(1)(i)(B) and 
6a-4(a)(1)(ii)(B) to update cross-references in those rules to the 
Commodities Exchange Act to reflect changes to the Commodities Exchange 
Act resulting from the Dodd-Frank Act.
b. Proposed Amendments to Form 1-N and the Form 1-N Instructions
    In addition to the proposed revisions to Rule 6a-4, the Commission 
proposes to revise and reformat Form 1-N, and the instructions thereto, 
to accommodate the electronic filing of initial notices, subsequent 
amendments, supplemental material, and reports that are made on Form 1-
N. The proposed changes to Form 1-N to permit electronic filing to the 
Commission would require minimal modifications to the form, as 
described below. The Commission also proposes to revise the Form 1-N 
instructions to facilitate the electronic filing of Form 1-N. As 
explained in the introduction to this section,\82\ these revisions 
would address when a form would be considered incomplete or deficient 
when filed and use of a custom XML data language for the cover page. 
The Commission believes that these proposed revisions to Form 1-N and 
the Form 1-N instructions would facilitate the filing of the 
information mandated by Form 1-N and Rule 6a-4.
---------------------------------------------------------------------------

    \82\ See supra introductory text to section II.
---------------------------------------------------------------------------

    The Commission proposes that electronic Form 1-N would solicit 
information through prompts on the form that would better organize the 
information collected. Proposed electronic Form 1-N also would require 
an exchange to electronically attach exhibits (or provide website 
URL(s) where applicable) via a new exhibit table that would be part of 
electronic Form 1-N. The proposed exhibit table would contain columns 
for the name of the exhibit, information required by the exhibit, 
whether alternative means of satisfying the filing of an exhibit are 
available for that particular exhibit (e.g., URL(s)), if permitted by 
applicable Commission rule, and checkboxes to indicate whether such 
alternative means are being used. Where Rule 6a-4 allows for 
alternative means of filing the information required under certain 
exhibits, the new exhibit table would permit an exchange to 
electronically provide the certifications and details necessary for an 
exchange to avail itself of these alternative means. The information 
required to be filed with the exhibits is not changing. Currently, Rule 
6a-4 provides that in lieu of filing certain exhibits as part of a 
paper Form 1-N submission, an exchange may either: (i) identify where 
such information is published and certify its accuracy as of its 
publication date; (ii) certify that the information is available to the 
Commission and the public upon request; or (iii) indicate the location 
of the internet website where such information may be found and certify 
that the information available at such location is accurate as of its 
date.\83\ The proposal rule would not change the availability of these 
alternative means, only the method of providing the necessary 
certifications and details. As described above, instead of attaching 
paper exhibits, the proposal would require those exhibits to be 
submitted electronically. Similarly, instead of providing on paper the 
certifications and details required for an exchange to avail itself of 
these alternative means, the proposal would require those 
certifications and details to be provided via the electronic Form 1-N. 
In the event an exchange indicates on Form 1-N the location(s) of an 
internet website where such information may be found, where applicable, 
the Commission proposes to require the exchange to provide the URL(s) 
of the location(s) on the internet website where such information may 
be found, to certify that the information posted on such

[[Page 23934]]

website(s) is accurate as of its date and is free and accessible 
(without any encumbrances or restrictions) to the general public, as an 
alternative to filing certain exhibits required by electronic Form 1-N.
---------------------------------------------------------------------------

    \83\ See 17 CFR 240.6a-2(b)(5).
---------------------------------------------------------------------------

    For electronic Form 1-N, the Commission proposes to add prompts 
prior to Section I that would require the exchange to identify the 
basis for submitting Form 1-N. Specifically, proposed electronic Form 
1-N would require the exchange to check a box stating one of the 
following: (i) whether the filing is an initial notice of registration; 
(ii) whether the filing is an amendment to the notice of registration; 
(iii) whether the exchange is providing its annual filing for the year; 
(iv) whether the exchange is providing a triennial filing; (v) whether 
the exchange is providing supplemental materials; or (vi) whether the 
exchange is providing a report of security futures products traded 
during the prior calendar month.
    The Commission also proposes to amend the instructions to Form 1-N 
to add a new section titled ``When to Use the Form,'' which would 
explain when Form 1-N filings are required, and which of the six types 
of Form 1-N filing is required (e.g., initial registration, 
supplemental material). Currently, there is no place on Form 1-N for an 
exchange to indicate the type of filing that it is submitting, other 
than whether it is an application or an amendment. Accordingly, the 
Commission believes that capturing information regarding the type of 
Form 1-N filing would: (1) enhance the exchange's communication with 
the Commission; (2) help the Commission more efficiently review Form 1-
N submissions; and (3) facilitate the searching and sorting through of 
Form 1-N submissions by other potential users such as market 
participants and investors.
    The proposed electronic Form 1-N would also capture contact 
information for the exchange and certain individuals. Consistent with 
current Form 1-N, the proposed electronic Form 1-N would require the 
exchange to identify contact information for the exchange, a contact 
employee, and counsel for the exchange. Unlike current Form 1-N, 
proposed electronic Form 1-N would additionally require an email 
address for the contact employee and an email address for the 
exchange's counsel. The Commission believes that the requirement to 
provide an email address for the exchange contact employee and the 
exchange's counsel will expedite any subsequent communications between 
Commission staff and the relevant exchange.
    In addition, to facilitate the electronic filing of the 
supplemental materials and monthly reports required under Rule 6a-4(c), 
the Commission proposes to add new Sections III and IV, respectively, 
to Form 1-N. Sections III and IV would require such materials and 
reports to be attached to Form 1-N via the new exhibit table in the 
same manner as exhibits to Form 1-N, and Section III would provide the 
exchange with the ability to enter URL(s) to the website location of 
the supplemental materials in lieu of its filing the supplemental 
materials via Form 1-N. Sections III and IV would not add new 
requirements beyond those currently included in Rule 6a-4(c). 
Currently, Rule 6a-4(c)(1) requires exchanges to file certain 
information with the Commission or in the alternative to indicate where 
such information can be found on an internet website controlled by the 
exchange. The proposed rule would require the filing of this 
information through Section III of electronic Form 1-N or, in the 
alternative, to provide through Section III of electronic Form 1-N the 
URL(s) of the location(s) on the internet website where such 
information can be found. Section III would also clarify that such 
website must be free and accessible (without any encumbrances or 
restrictions) by the general public. Likewise, Section IV would not 
change the substance of what must be reported; it would merely require 
the reporting of information required under Rule 6a-4(c) to be made on 
electronic Form 1-N instead of in paper format.
    Furthermore, the Commission proposes that electronic Form 1-N would 
continue to require an exchange to consent to service of any civil 
action brought by, or notice of any proceeding before, the Commission 
in connection with its activities. The current language under which the 
Security Futures Product Exchange consents to service via registered or 
certified mail at the main or mailing address provided on Form 1-N 
would continue to be included in the electronically filed form.\84\
---------------------------------------------------------------------------

    \84\ The Commission also proposes to delete the provision 
allowing for service of any civil action pursuant to confirmed 
telegram.
---------------------------------------------------------------------------

    In addition, the proposed electronic Form 1-N would require the 
individual who is submitting the form to check a box on behalf of the 
Security Futures Product Exchange to represent that the information and 
statements contained in the Form 1-N, including exhibits, schedules, or 
other documents, are current, true, and complete. The requirement to 
sign and notarize the form would be eliminated because it is 
unnecessary, not compatible with, and not required for electronic for 
electronic filing through EDGAR.
    Finally, the proposed electronic Form 1-N would require filers to 
submit the execution page in a custom XML data language specific to 
Form 1-N. As with the other Covered SRO Forms, filers would be able to 
input their execution page disclosures into a fillable web form that 
EDGAR would subsequently convert to custom XML. The Commission believes 
structuring the execution page in custom XML would improve the ability 
to sort, filter, and otherwise organize Form 1-N filings without 
creating significant additional burden on Form 1-N filers. The 
remainder of Form 1-N would not be structured, however, because the 
very limited number of Form 1-N filers and filings could mitigate much 
of the benefit derived from machine-readability of the disclosures 
contained therein.\85\
---------------------------------------------------------------------------

    \85\ See infra Section IX.C.3.
---------------------------------------------------------------------------

4. Request for Comment
    9. The Commission requests comment on all aspects of the proposed 
revisions to Form 1-N to facilitate electronic filing on EDGAR. Are 
there any aspects of transitioning the form to electronic filing that 
the Commission has not addressed above? Please explain.
    10. Would allowing for the attachment of exhibits electronically on 
Form 1-N or to provide through Section III of electronic Form 1-N the 
internet website where such information can be found offer the most 
efficient means of complying with the requirements of Form 1-N and Rule 
6a-4?
    11. Do commenters agree with the Commission's belief that the 
proposed amendments would increase efficiencies and decrease costs 
compared to current requirements?
    12. What, if any, costs would be associated with preparing Form 1-N 
filings for electronic filing through EDGAR? Are those costs more, less 
or the same as those currently expended under the current Form 1-N 
filing process?
    13. Do commenters agree with the Commission's belief that 
structuring the execution page in custom XML would improve the ability 
to sort, filter, and otherwise organize Form 1-N filings without 
creating significant additional burden on Form 1-N filers?
    14. Should the Commission require structuring other portions of 
Form 1-N (or the entirety of Form 1-N) rather than

[[Page 23935]]

only structuring the execution page? Please explain why or why not. If 
so, which structured data language or languages should be used for 
structuring the other portions of Form 1-N?

C. Proposed Form 15A

1. Relevant Statutory Framework
    Section 15A of the Exchange Act sets forth the statutory standards 
for registration as a national securities association or as an 
affiliated securities association.\86\ Section 15A(b) states that the 
Commission shall not approve registration as a national securities 
association unless the Commission determines that the applicant meets 
specified statutory criteria.\87\ Under Exchange Act Rule 15Aa-1, an 
applicant for registration as a national securities association must 
file a registration statement with the Commission on Form X-15AA-1.\88\ 
The information required to be provided on Form X-15AA-1 includes, 
among other things, lists of officers, governors, and committee 
members, as well as membership lists.\89\ The Commission reviews the 
completed Form X-15AA-1 to evaluate whether the applicant meets the 
standards set forth in section 15A(b) for registration as a national 
securities association.
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    \86\ See 15 U.S.C. 78o-3.
    \87\ See 15 U.S.C. 78o-3(b).
    \88\ See Exchange Act Rule 15Aa-1 (17 CFR 240.15Aa-1) and Form 
X-15AA-1 (17 CFR 249.801). Currently, FINRA is the only national 
securities association registered with the Commission. The National 
Futures Association (``NFA''), as specified in Section 15A(k) of the 
Exchange Act, is also registered as a national securities 
association, but only for the limited purpose of regulating the 
activities of NFA members that are registered as brokers or dealers 
in security futures products under section 15(b)(11) of the Exchange 
Act.
    \89\ See 17 CFR 249.801.
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    Furthermore, under Exchange Act Rule 15Aj-1(a), every association 
applying for registration or registered as a national securities 
association must file with the Commission an amendment to its 
registration statement or any amendment or supplement thereto promptly 
after discovering any inaccuracy therein. Similarly, under Exchange Act 
Rule 15Aj-1(b), every association applying for registration or 
registered as a national securities association, promptly after any 
change which renders no longer accurate any information contained or 
incorporated in its registration statement or in any amendment or 
supplement thereto, must file with the Commission a current supplement 
to its registration statement setting forth such change.\90\
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    \90\ See Exchange Act Rule 15Aj-1(a) and (b), 17 CFR 240.15Aj-
1(a) and (b). These filings are submitted on Form X-15AJ-1, 17 CFR 
249.802. See 17 CFR 240.15Aj-1(d) (requiring that such filings be 
made on Form X-15Aj-1).
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    Finally, under Exchange Act Rule 15Aj-1(c), every association 
applying for registration or registered as a national securities 
association must file annual amendments to its registration statement 
with the Commission.\91\
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    \91\ See Exchange Act Rule 15Aj-1(c), 17 CFR 240.15Aj-1(c). 
These filings are submitted on Form X-15AJ-2, 17 CFR 249.803. See 17 
CFR 240.15Aj-1(d) (requiring that such filings be made on Form X-
15Aj-2). Rule 15Aj-1(c)(1)(ii) also requires the filing of complete 
sets of the constitution, by-laws, rules, and related documents of 
the association, once every three years.
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2. Current Requirements for Filing Forms X-15AA-1, X-15AJ-1, and X-
15AJ-2
    An applicant for registration as a national securities association 
is required to file a registration statement and exhibits with the 
Commission on Form X-15AA-1 in triplicate.\92\ Every association 
applying for registration or registered as a national securities 
association is required to file with the Commission an amendment or 
supplement to its registration statement on Form X-15AJ-1 and an annual 
consolidated supplement to its registration statement on Form X-15AJ-2. 
These filings also must be made in triplicate, at least one copy of 
which must be signed and attested in the same manner as required in the 
case of the original registration statement.\93\ Every association 
applying for registration or registered as a national securities 
association is required to file Form X-15AJ-2 with the Commission 
promptly after March 1 of each year.\94\
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    \92\ See 17 CFR 240.15Aa-1.
    \93\ See 17 CFR 240.15Aj-1.
    \94\ See 17 CFR 240.15Aj-1(c).
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    Currently, the information collected by these forms is 
substantially similar: Form X-15AA-1, the registration statement for 
registration as a national securities association, requests 29 items of 
information and includes 3 exhibits; \95\ Form X-15AJ-1, for filing any 
amendments or supplements to the registration statement, requests no 
information beyond that requested by Form X-15AA-1; \96\ and Form X-
15AJ-2, for filing the annual consolidated supplement to the 
registration statement, only requires one additional item of 
information, the inclusion of the date of the filing, which currently 
is not required by Form X-15AA-1.\97\
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    \95\ See 17 CFR 249.801.
    \96\ See 17 CFR 249.802. Form X-15AJ-1 and Form X-15AA-1 both 
require that if the association is registered, or applying for 
registration, as an affiliated securities association, the 
respondent list the registered national securities association to 
which the applicant or reporting association is affiliated. In 
addition, Form X-15AA-1 asks the applicant to state its reasons for 
believing that such affiliation will be granted. Form X-15AA-1 also 
requires the applicant to estimate the annual dollar volume of 
transactions effected by members of the applicant association.
    \97\ See 17 CFR 249.803. Form 15A would require the inclusion of 
the date of the filing. Capturing the date (in a structured manner) 
would assist the Commission in determining compliance with the rule 
requirement that annual supplements be filed promptly after Mar. 1 
of each year (17 CFR 240.15Aj-1(c)).
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3. Proposed Requirements To Electronically File on Form 15A Information 
Currently Filed on Forms X-15AA-1, X-15AJ-1, and X-15AJ-2
a. Proposed Amendments to Rules 15Aa-1 and 15Aj-1
    As discussed in detail below, the Commission proposes to amend Rule 
15Aa-1 and redesignate it as Rule 15aa-1,\98\ redesignate Rule 15Aj-1 
\99\ as Rule 15aa-2, redesignate Form X-15AA-1 as Form 15A, amend the 
instructions to proposed Form 15A, and repeal Forms X-15AJ-1 and X-
15AJ-2 in connection with the Commission's proposal to require 
applicants and national securities associations to electronically file 
on a duly executed Form 15A the information currently filed on Forms X-
15AA-1, X-15AJ-1, and X-15AJ-2. As stated above in the introduction to 
this section II, the Commission believes that, among other benefits, 
its proposal to revise the forms relating to registration as a national 
securities association should increase efficiencies and decrease costs 
incurred by applicants for registration as a national securities 
association and by national securities associations.\100\ In addition, 
the proposal should facilitate Commission review of the information to 
be provided on proposed Form 15A.
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    \98\ See 17 CFR 240.15Aa-1.
    \99\ See 17 CFR 240.15Aj-1.
    \100\ See supra section II.
---------------------------------------------------------------------------

    To facilitate electronic filing of proposed Form 15A, the 
Commission is proposing to amend Rule 15Aa-1 to require electronic 
filing. The proposed amendments to Rule 15Aa-1 would require that 
filing submitted pursuant to Rule 15Aa-1 be filed electronically on 
EDGAR in accordance with the requirements of Regulation S-T (17 CFR 
part 232). The proposed amendments to Rule 15Aa-1 would align the 
electronic filings requirements with changes being proposed under Rule 
6a-1 (regarding Form 1 submissions) as well as the proposed amendments 
to Rule 17ab2-1, which would set forth the proposed electronic filing 
requirements for Form CA-1 submissions.\101\ As stated above,

[[Page 23936]]

the Commission further proposes to redesignate Rule 15Aj-1 \102\ as 
Rule 15aa-2.
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    \101\ See also proposed amendments to Rule 6a-4.
    \102\ See 17 CFR 240.15Aj-1. The proposed amendments to Rule 
15Aj-1 would include updated references to relevant forms as well as 
updates to take into account electronic filing.
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b. Proposed Form 15A
    The Commission proposes to redesignate Form X-15AA-1 as Form 15A 
and to incorporate in proposed Form 15A information related to 
amendments and supplements to the registration statement currently 
filed on Form X-15AJ-1 and information related to the annual 
consolidated supplement to the registration statement currently filed 
on Form X-15AJ-2. The Commission proposes that new Form 15A would 
solicit information through prompts on the form that would better 
organize the information that is currently collected through Forms X-
15AA-1, X-15AJ-1, and X-15AJ-2, which would make it easier for 
respondents to comply with the filing requirements. Furthermore, 
exhibits would be required to be electronically uploaded to EDGAR. The 
Commission believes that, among other benefits as detailed in the 
Economic Analysis,\103\ the proposal should increase efficiencies and 
decrease costs by consolidating substantially similar information 
currently filed on three paper forms into one electronic form. Because 
the information currently filed on the three forms would be captured 
entirely on proposed Form 15A, the Commission also proposes to repeal 
Forms X-15AJ-1 and X-15AJ-2.\104\
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    \103\ See infra Section X.C.1 (discussing benefits such as 
reducing the risk that non-electronic submissions are delayed or 
increasing the ability to run comparisons across reporting periods).
    \104\ The Commission proposed in 2004 to simplify and streamline 
the disclosure process for national securities associations by, 
among other things, redesignating Form X-15AA-1 and combining it 
with Forms X-15AJ-1 and X-15AJ-2. See Exchange Act Release No. 50699 
(Nov. 18, 2004), See 69 FR 71126, 71155 (Dec. 8, 2004) (File No. S7-
39-04). The Commission did not adopt any final rule based on that 
proposal.
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    Proposed Form 15A would contain eleven sections. Preceding Section 
I of proposed Form 15A, the proposed form would contain prompts that 
would require the association to note the basis for submitting the 
form. The prompts would indicate whether the submission is an initial 
application filed pursuant to Rule 15aa-1 or an amendment or 
supplement--which currently would be filed on Form X-15AJ-1 or X-15AJ-
2, respectively--pursuant to proposed Rule 15aa-2. Section I would be 
titled ``Organization,'' and it would solicit the following information 
about the association: (i) its name; (ii) its statutory address, 
principal executive office address, and the addresses of its branch or 
district offices (or if there are no such branch or district offices, 
the association would check the ``Not Applicable'' box); (iii) the 
contact information of each person authorized to receive service of 
process and notices on behalf of the association from the Commission; 
(iv) the contact information for the association's counsel; (v) the 
association's form of organization (e.g., corporation, sole 
proprietorship), date of organization, and name of state and reference 
to any statute thereof under which the association is organized; and 
(vi) information about its directors, officers, and certain other 
persons, and information about the members of its standing committees, 
or, in lieu of providing such information on proposed Form 15A, the 
association could provide a certification that the information can be 
obtained in a publication.\105\ The information solicited in Section I 
would be the same as that solicited in Items 1 through 6 on current 
Form X-15AA-1.
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    \105\ See proposed 17 CFR 240.15aa-2(c)(1)(ii)(A).
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    Section I also would require the association to attach Exhibits A 
through D. Exhibit A would require the association to attach copies of 
its corporate governance documents (e.g., constitution, by-laws), or in 
lieu of filing such documents, the association could provide a 
certification that the information may be obtained in a publication 
\106\ or that the information is kept up to date and available to the 
Commission and the public upon request.\107\ Exhibit A of proposed Form 
15A would solicit the same information as Exhibit A of current Form X-
15AA-1 but would reflect additional ways that the association could 
satisfy its filing obligation. Exhibit B would require the association 
to attach a balance sheet of the association as of a date within 30 
days of the filing of an initial application, or promptly after the 
close of each fiscal year if the filing is a supplement, together with 
an income and expense statement for the year preceding such date or, if 
the association was organized during such year, for the period from the 
date of such organization to the date of such balance sheet. Exhibit B 
of proposed Form 15A would solicit the same information as Exhibit B of 
current Form X-15AA-1. Exhibit C would require the association to 
provide a list, as of the latest practical date, of all of its members, 
and in lieu of supplementing the disclosed information regarding the 
names of members and their principal places of business when there is a 
change to that information--as is required under current Rule 15Aj-
1(b)--the association would be able to certify that changes in that 
information are reported in a record which is published at least once a 
month and promptly filed with the Commission, reflecting an additional 
way that the association could satisfy its filing obligation.\108\ 
Exhibit C of proposed Form 15A would solicit the same information as 
Exhibit C of current Form X-15AA-1, and would add the requirement that 
the association set forth the date of election to membership for each 
member elected to membership after December 31, 1994, which is 
currently required on Exhibit C of Form X-15Aj-2. Exhibit D of proposed 
Form 15A would solicit the same information as Exhibit D of current 
Form X-15AA-1, requiring the association to electronically file any 
notices, reports, circulars, loose-leaf insertions, riders, new 
additions, lists or other records of changes when, as, and if such 
records are made available to members of the association, as required 
by proposed Rule 15aa-2(d)(2).
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    \106\ See id.
    \107\ See proposed 17 CFR 240.15aa-2(c)(1)(ii)(B).
    \108\ See proposed 17 CFR 240.15aa-2(b)(3).
---------------------------------------------------------------------------

    Sections II through IX of proposed Form 15A would solicit 
information about specific association rules and other information that 
is currently solicited on Form X-15AA-1. Section II would be titled 
``Membership'' and require the association to cite the specific rule(s) 
of the association addressing membership requirements, such as any rule 
restricting membership. Section II would pose the same questions about 
the association's membership rules as Items 7 through 10 of current 
Form X-15AA-1. Section III would be titled ``Representation of 
Membership'' and require the association to cite the specific rule(s) 
of the association that assures fair representation of its members, 
which information is currently solicited in Item 11 of Form X-15AA-1. 
Section IV would be titled ``Dues and Expenses'' and require the 
association to cite the specific rule(s) of the association that 
provides for the equitable allocation of dues among its members to 
defray reasonable expenses of administration, which information is 
currently solicited in Item 12 of Form X-15AA-1.
    Section V would be titled ``Business Conduct and Protection of 
Members.'' This section would require the association to cite specific 
rule(s) of the association addressing the protection of members and 
member conduct with regard to principles of fair trade and

[[Page 23937]]

dealing, such as the association rule(s) designed to prevent fraudulent 
and manipulative acts and practices and the rule(s) designed to provide 
safeguards against unreasonable profits or unreasonable rates of 
commissions or other charges. Section V also would solicit information 
about association rule(s) addressing the disclosure of financial 
information or other business conduct requirements, such as the types 
of financial statements the association requires from its members, 
rules with respect to member insolvency, and rules requiring the 
keeping and preserving of books and records. Section V would pose the 
same questions about business conduct and the protection of members as 
Items 13 through 23 of current Form X-15AA-1.
    Section VI would be titled ``Disciplining of Members'' and would 
require the association to cite the specific rule(s) of the association 
that addresses member discipline. Section VI would pose the same 
questions about member discipline as Items 24 and 25 of current Form X-
15AA-1. Section VII would be titled ``Affiliated Associations'' and 
would require the association to cite the specific rule(s) of the 
association that provide for the admission of registered affiliated 
securities associations. Section VII would pose the same question as 
Item 26 of current Form X-15AA-1. Section VIII would be titled 
``Miscellaneous'' and require the association to cite the specific 
rule(s) of the association that (i) regulate the dealings of a member 
with any nonmember broker or dealer and (ii) provide a method for 
enforcing compliance on the part of its members with the rules of the 
association. Section VIII of proposed Form 15A would pose the same 
questions as Items 27 and 28 of current Form X-15AA-1. Section IX would 
be titled ``Additional Information for Registration as an Affiliated 
Securities Association'' and would apply only to applications submitted 
for registration as an affiliated securities association. Section IX 
would require the applicant to provide the registered national 
securities association with which it seeks to be affiliated, its 
reasons for believing that such affiliation will be granted, and the 
estimated dollar volume of transactions effected by members of the 
applicant. Section IX of proposed Form 15A would pose the same 
questions as Items 29 and 30 of current Form X-15AA-1.
    Section X would require the association to provide the contact 
information for its contact employee, and Section XI would provide the 
signature block and attestation. Consistent with the proposed 
amendments to Form 1, Form 1-N, and Form CA-1, the entity filing the 
proposed Form 15A would consent to service of process to the 
individuals listed in Section I, item 3, which service of process could 
be via registered or certified mail. Section XI would also require the 
filer to represent that the information and statements contained in the 
form, including exhibits, schedules, or other documents, are current, 
true, and complete.
    In addition, the Commission proposes to amend the instructions for 
proposed Form 15A to include general directions for preparing and 
filing the form, describe the seven types of submissions that may be 
made under proposed Rules 15aa-1 and 15aa-2, and set forth the items, 
exhibits, and schedules required to be filed for each type of 
submission.
    Finally, proposed Form 15A would require the execution page to be 
filed in a custom XML data language specific to Form 15A. As with the 
other Covered SRO Forms, filers would be able to input their execution 
page disclosures into a fillable web form that EDGAR would subsequently 
convert to custom XML. The Commission believes structuring the 
execution page in custom XML would improve the ability to sort, filter, 
and otherwise organize Form 15A filings, enhancing the ability of the 
Commission to compare filings from year to year without creating 
significant additional burden on filers. The remainder of Form 15A 
would not be structured, however, because the very limited number of 
Form 15A filers and filings could mitigate the benefit derived from 
machine-readability of the disclosures contained therein.\109\
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    \109\ See infra Section IX.C.4.
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4. Request for Comment
    15. The Commission requests comment on all aspects of the proposed 
revisions to Form 15A to facilitate electronic filing in EDGAR. Are 
there any aspects of transitioning the form to electronic filing that 
the Commission has not addressed above? Please explain.
    16. Do commenters agree with the Commission's belief that the 
proposed amendments would increase efficiencies and decrease costs 
compared to current requirements?
    17. Do commenters agree that the additional ways that the 
association could satisfy its filing obligations under the rule would 
be beneficial? Are there additional methods of satisfying the filing 
obligation that the Commission should adopt?
    18. Do commenters agree with the Commission's belief that 
structuring the execution page in custom XML would improve the ability 
to sort, filter, and otherwise organize Form 15A filings without 
creating significant additional burden on filers?
    19. Should the Commission require structuring other portions of 
Form 15A (or the entirety of Form 15A) rather than only structuring the 
execution page? Please explain why or why not. If so, which structured 
data language or languages should be used for structuring the other 
portions of Form 15A?

D. Form CA-1

1. Relevant Statutory Framework
    Section 17A of the Exchange Act governs the establishment of a 
national system for the prompt and accurate clearance and settlement of 
securities transactions.\110\ Section 17A(b)(2) of the Exchange Act 
\111\ states that a clearing agency may be registered under the terms 
and conditions provided thereunder and in accordance with the 
provisions of section 19(a) of the Exchange Act \112\ by filing with 
the Commission an application for registration in such forms as the 
Commission, by rule, may prescribe containing the rules of the clearing 
agency and such other information and documents as the Commission, by 
rule, may prescribe as necessary or appropriate in the public interest 
or for the prompt and accurate clearance and settlement of securities 
transactions. The Commission adopted Rule 17ab2-1 \113\ and Form CA-
1,\114\ pursuant to section 17A(b)(2) of the Exchange Act, in order to 
set forth the requirements for registration as a clearing agency or for 
an exemption from registration as a clearing agency under section 17A.
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    \110\ See 15 U.S.C. 78q-1.
    \111\ See 15 U.S.C. 78q-1(b)(2).
    \112\ See 15 U.S.C. 78s(a).
    \113\ See 17 CFR 240.17ab2-1.
    \114\ See 17 CFR 249b.200.
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2. Current Requirements for Filing Form CA-1
    Rule 17ab2-1(a) states that an application for registration or for 
exemption from registration as a clearing agency or an amendment to any 
such application shall be filed with the Commission on Form CA-1, in 
accordance with the instructions thereto.\115\ Form CA-1 contains 
general instructions for preparing and filing Form CA-1 and 
instructions relating to the filing of amendments to a Form CA-1. It 
also includes an execution page and 19 exhibits. The Form CA-1 
execution page requests general information from the applicant, as well 
as information

[[Page 23938]]

regarding whether the clearing agency is exposed to loss if a 
participant fails to perform its obligations to the clearing agency. 
The exhibits to Form CA-1 also require an applicant clearing agency to 
provide information regarding business organization, financial 
position, operational capacity, access to its services, and, for those 
seeking an exemption from registration, a statement demonstrating why 
granting an exemption from registration would be consistent with the 
public interest, the protection of investors, and the purposes of 
section 17A, including the prompt and accurate clearance and settlement 
of securities transactions and the safeguarding of securities and 
funds. The instructions to Form CA-1 require that an applicant clearing 
agency file four completed copies of Form CA-1 with the 
Commission.\116\
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    \115\ See 17 CFR 240.17ab2-1(a).
    \116\ See 17 CFR 249b.200.
---------------------------------------------------------------------------

    Rule 17ab2-1(e) requires that if responses to items 1-3 of Form CA-
1 become inaccurate, misleading or incomplete, the registrant shall 
promptly file an amendment on Form CA-1 to correct the inaccurate, 
misleading or incomplete information.\117\ The execution page of Form 
CA-1 further states that, by submitting Form CA-1 along with any 
schedules, exhibits, and attachments thereto, the registrant and the 
person executing for the registrant represents that all information 
contained in Form CA-1 is true, current, and complete, and that 
submission of any amendment after registration has become effective 
represents that items 1-3 and any schedules, exhibits, and attachments 
related to items 1-3 remain true, current, and complete as previously 
submitted.\118\ Further, in accordance with the instructions to Form 
CA-1, if an item is amended, the registrant must repeat all unamended 
items as they last appeared on the page on which the amended item 
appears and must file four copies of the new page, each with updated 
and properly completed cover and execution pages.\119\
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    \117\ See 17 CFR 240.17ab2-1(e).
    \118\ See 17 CFR 249b.200.
    \119\ See id.
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3. Proposed Requirement To Electronically File Form CA-1
    The Commission is proposing to revise certain aspects of Rule 
17ab2-1, Form CA-1, and the instructions to Form CA-1 to require 
electronic filing of applications on Form CA-1 and subsequent 
amendments thereto by applicants, registered clearing agencies, and 
exempt clearing agencies. The proposed revisions therefore would 
require: (i) an applicant to file electronically its initial 
application on Form CA-1 for registration or for an exemption from 
registration and any subsequent amendments thereto; (ii) a registered 
clearing agency to file electronically any amendments to its Form CA-1 
after being granted registration as a clearing agency; and (iii) an 
exempt clearing agency to file electronically any amendments to its 
Form CA-1 after being granted an exemption from registration as a 
clearing agency. As explained above in the introduction to Section II, 
the Commission believes that the proposed rule and form revisions 
should increase efficiencies and decrease costs related to the filing 
of Form CA-1 and amendments thereto by both registered and exempt 
clearing agencies, and the Commission's review of filed Forms CA-1 and 
amendments thereto.\120\ In addition, while exempt clearing agencies 
are not subject to the SRO rule filing process under section 19(b) of 
the Exchange Act,\121\ certain exempt clearing agencies are currently 
subject to electronic filing requirements under Regulation SCI,\122\ 
and so the electronic filing of Form CA-1 and amendments thereto would 
not conflict with existing requirements for these entities under 
Regulation SCI, and therefore would simplify the process into only 
electronic filing procedures, rather than a mix of electronic and paper 
filing procedures.
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    \120\ See supra section I.B.
    \121\ See 15 U.S.C. 78s(a) and (b).
    \122\ See 17 CFR 242.1006; see also Exchange Act Release No. 
73639 (Nov. 19, 2014), 79 FR 72251, 72258 (Dec. 5, 2014) (listing 
categories of SCI entities under Regulation SCI).
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4. Proposed Amendments to Rule 17ab2-1
    To facilitate electronic filing of Form CA-1, the Commission is 
proposing to revise Rule 17ab2-1 to require electronic filing. 
Specifically, the Commission is proposing to revise paragraphs (a), 
(d), (e), and (f) to reference the method of filing as being 
electronic, and is adding paragraph (g) to provide specific 
instructions on the method of filing electronically, including a 
requirement for an electronic signature (defined as an electronic entry 
in the form of a magnetic impulse or other form of computer data 
compilation of any letter or series of letters or characters comprising 
a name, executed, adopted or authorized as a signature). Additionally, 
new paragraph (g) would specify a cutoff time of 5:30 p.m. eastern 
standard time or eastern daylight saving time for purposes of deeming 
which business day (defined to exclude certain days of the week, 
holidays, and closures) that a filing occurred. It would also specify 
that a filing would be deemed timely filed if it is required to be 
filed on a day that is not a business day and is filed on the next 
available business day. As stated above in the introduction to Section 
II, the Commission believes that, among other benefits, its proposal to 
revise the forms relating to registration as a clearing agency should 
increase efficiencies and decrease costs incurred by applicants for 
registration as a clearing agency.
5. Proposed Amendments to Form CA-1 and the Form CA-1 Instructions
    The Commission proposes that electronic Form CA-1 would solicit 
information through prompts on the form that would better structure the 
information collected. In addition, the Commission proposes that 
electronic Form CA-1 would require exhibits to be attached through a 
new exhibit table that would be part of electronic Form CA-1. The 
Commission further proposes that all information posted on a website 
pursuant to electronic Form CA-1 must be free and accessible (without 
any encumbrances or restrictions) by the general public. The Commission 
proposes to add prompts prior to Section I of the form that would 
require the registrant to note the basis for submitting Form CA-1. 
Specifically, proposed electronic Form CA-1 would require the 
registrant to check a box stating one of the following: (i) whether the 
filing is an application pursuant to Rule 17ab2-1(a) and if it is, 
whether the registrant is applying for registration as a clearing 
agency \123\ or requesting an exemption from registration as a clearing 
agency; (ii) whether the filing is an amendment to an initial Form CA-1 
application pursuant to Rule 17ab2-1(d) prior to the Commission's grant 
of registration or an exemption from registration, or an update to an 
initial Form CA-1 application correcting information that is 
inaccurate, misleading, or incomplete, pursuant to Rule 17ab2-1(e); 
(iii) whether the filing is to provide the registrant's consent to an 
extension of the time period within which the Commission must take 
action on an initial Form CA-1 application and the date the extension 
expires; \124\ (iv) whether the filing is to withdraw an

[[Page 23939]]

initial Form CA-1 application prior to the Commission taking action on 
the application; (v) whether the filing is an amendment to Form CA-1 
pursuant to Rule 17ab2-1(e) following Commission action to grant 
registration or an exemption; or (vi) whether the filing is required by 
a Commission order approving an application for exemption from 
registration as a clearing agency pursuant to section 17A(b)(1) of the 
Exchange Act. The Commission believes that requiring a registrant to 
indicate the type of filing would help facilitate the electronic filing 
of, and the Commission's review of, Form CA-1 submissions, including 
information required of an exempt clearing agency by an exemptive 
order.
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    \123\ If the registrant is applying for registration as a 
clearing agency, the proposed changes to Form CA-1 would require the 
registrant to indicate whether it requests the Commission to 
consider granting exemption from specified clearing agency 
requirements during a temporary registration period, in accordance 
with paragraph (c)(1) of Rule 17ab2-1 under the Exchange Act.
    \124\ See 15 U.S.C. 78s(a)(1)(B).
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    The Commission also proposes to modify Form CA-1 to add a 
requirement for information about a contact employee. The proposed Form 
CA-1 would require the name, title, email address and telephone number 
of an employee prepared to respond to questions about the Form CA-1 
submission. The Commission believes that including information about a 
contact employee would facilitate communication between the registrant 
and the Commission. Similarly, the Commission proposes to require the 
email address of the person in charge of the registrant's clearing 
agency activities. The Commission believes that obtaining that 
individual's email address would also facilitate communication between 
the registrant and the Commission.
    In addition, the proposed Form CA-1 would require a registrant to 
electronically attach exhibits by using an exhibit table for all of the 
exhibits required by the current form, broken down into sections.\125\ 
There are also sections in the proposed form that may be applicable to 
only certain filings, with Section VIII covering requests for an 
exemption from registration under exhibit S, and Section IX covering 
submission of any conditions, reports, notices or other submissions to 
the Commission required as directed in any Order approving an 
application for exemption from registration as a clearing agency, under 
exhibit T. Furthermore, the proposed Form CA-1 would preserve the 
current ability for a registrant to indicate that it is requesting 
confidential treatment with respect to certain of the disclosed 
information, and make a request for confidential treatment, under 
Section X. In addition, as discussed further below in Section VII, the 
Commission is proposing new paragraph (j) to Rule 24b-2 to require that 
a filer not omit the confidential portion from the material filed in 
electronic format on Form CA-1, but rather request confidential 
treatment of information provided in electronic format by completing 
Section X of Form CA-1.
---------------------------------------------------------------------------

    \125\ Sections III through VII of proposed Form CA-1 would 
consist of exhibits relating to General Information, Business 
Organization, Financial Information, Operational Capacity, and 
Access to Services, respectively.
---------------------------------------------------------------------------

    The Commission also is proposing to omit item 7(b) from the current 
Form CA-1. Item 7(b) solicits the following information: as of 
September 30, 1975, the dollar amount of the potential exposure of 
registrant, if any, as a result of differences (without offsetting long 
differences against short differences and without offsetting any 
suspense account items) in its clearing agency activities not resolved 
after 20 business days. On December 1, 1975, it became unlawful for any 
clearing agency--not subject to temporary exemptive relief under Rule 
17ab2-1(b) that has since expired--to perform the functions of a 
clearing agency unless registered or exempt.\126\ Before December 1, 
1975, however, applicant clearing agencies may have performed the 
functions of a clearing agency prior to registering with the Commission 
or obtaining an exemption from registration. Therefore, to facilitate 
review by the Commission of applications on Form CA-1 by such clearing 
agencies, item 7(b) of Form CA-1 requires disclosure, as of September 
30, 1975, of the dollar amount of the potential exposure of the 
clearing agency from differences in its clearing agency activities not 
resolved after 20 business days. Information provided pursuant to this 
provision is no longer useful to the Commission because information on 
potential exposures to the clearing agency as of September 30, 1975, is 
stale data. Accordingly, the Commission believes that it is no longer 
necessary to include item 7(b) on Form CA-1.
---------------------------------------------------------------------------

    \126\ Rule 17ab2-1(b) provides any clearing agency that filed an 
application with the Commission on or before Nov. 24, 1975, with a 
temporary exemption from the registration provisions of section 
17A(b) of the Exchange Act and the rules and regulations thereunder 
until the Commission either grants registration, denies 
registration, or grants an exemption from registration. See 17 CFR 
240.17ab2-1(b).
---------------------------------------------------------------------------

    The Commission also is proposing to revise the instructions to Form 
CA-1 to facilitate the electronic filing of Form CA-1. The proposed 
form instructions would not contain the language in paragraph 2 under 
Part I of the current form stating that clearing agencies are required 
to file four completed copies of Form CA-1 with the Commission, or the 
language in paragraph 4 under Part I of the current form providing 
instructions relating to the requirements for copies of Form CA-1. 
Further, the proposed instructions would not contain the language of 
paragraph 3 under Part I of the current form, which states that ``[t]he 
date on which a Form CA-1 is received by the Commission shall be the 
date of filing thereof if all the requirements with respect to filing 
have been complied with.'' This language would be inconsistent with the 
proposed date-of-filing provision to be added to Rule 17ab2-1, which 
would provide for a 5:30 p.m. eastern standard time or eastern daylight 
saving time, whichever is currently in effect, on a business day, 
cutoff for a filing to be deemed filed on the day on which it is 
submitted.
    In addition, existing paragraph 13 under Part III of the current 
form states that, if an item is amended, the registrant must repeat all 
unamended items as they last appeared on the page on which the amended 
item appears and must file four copies of the new page, each with 
updated and properly completed cover and execution pages. The 
requirement to repeat unamended items on certain pages relates solely 
to the filing of amended paper copies and, therefore, the Commission 
believes it would not be relevant to the proposed electronic filing 
process. The Commission believes that requiring a registered or exempt 
clearing agency to electronically file a full exhibit would help 
facilitate the performance of the Commission's regulatory functions 
because the Commission would be able to review an amended exhibit to 
Form CA-1 in its entirety and more easily compare the revised exhibit 
against the prior version, particularly if numerous, non-consecutive 
pages are being amended. The proposed Inline XBRL requirement for 
certain Form CA-1 exhibits would further facilitate this comparison 
process, because Inline XBRL would allow reviewers to create automated 
redline comparisons of an exhibit (or specific portion thereof) to a 
prior version of the same exhibit (or specific portion thereof). 
Accordingly, the Commission proposes to delete the reference to 
pagination that is currently in Item III, paragraph 13.
    In addition, Form CA-1 and the instructions to Form CA-1 would 
continue to require a registered or exempt clearing agency to consent 
to the service of notice of a proceeding under sections 17A or 19 of 
the Exchange Act involving the registrant. The current language under 
which the registrant consents to service via registered or certified 
mail at the address provided on Form CA-1 would continue to be

[[Page 23940]]

included in the electronically filed form.\127\
---------------------------------------------------------------------------

    \127\ The provision allowing for service of any civil action 
pursuant to confirmed telegram would be deleted.
---------------------------------------------------------------------------

    Finally, Form CA-1 would require a registered or exempt clearing 
agency to structure Schedule A (descriptive responses complementing the 
clearing agency's execution page disclosures) and Exhibits C 
(description of organizational structure), F (description of material 
pending legal proceedings), H (financial statements), J (description of 
services and functions), K (description of security measures and 
procedures), L (description of safeguarding measures and procedures), M 
(description of backup systems), O (description of, and reasons for, 
criteria governing access to services), R (prohibitions and limitations 
on access to services), and S (explanation of requested exemption) in 
Inline XBRL. The execution page and Exhibits A (persons controlling 
management or policies, but not the copies of written agreements with 
such persons), B (officers, managers, and individuals occupying similar 
positions), D (persons controlled by or under common control with the 
clearing agency, and description of control relationship), E (dues, 
fees, and other charges for clearing activities, but not the copies of 
the constitution, articles of incorporation or association, by-laws, 
rules procedures, and instruments corresponding thereto), I (office 
addresses and activities performed in each office), N (participants or 
applicants for participation), and Q (schedule of fees for services 
rendered by participants) would also be structured, albeit in a custom 
XML data language specific to Form CA-1 rather than in Inline XBRL.
    The copies of existing documents filed with Exhibits A (copies of 
written agreements with control persons), E (copies of the 
constitution, articles of incorporation or association, by-laws, rules, 
procedures, and instruments corresponding thereto), G (copies of 
contracts with exchanges, national securities associations, and 
securities markets), P (copies of contracts governing subscription 
terms), and T (submissions to the Commission required as directed in 
any approval order) would be filed as unstructured PDF documents.

           Proposed Structured Data Requirements for Form CA-1
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Inline XBRL...............................  Schedule A, Exhibits C, F,
                                             H, J, K, L, M, O, R, S.
Custom XML................................  Execution page, Exhibits A
                                             (in part), B, D, E (in
                                             part), I, N, Q.
Unstructured PDF..........................  Exhibits A (in part), E (in
                                             part), G, P, T.
------------------------------------------------------------------------

    The Commission believes the proposed structuring requirements would 
facilitate access to the clearing agency's disclosures (enabling, for 
example, more efficient retrieval of only those disclosures filed by a 
subset of clearing agencies over particular reporting periods) and 
analysis (such as by comparing individual disclosures or sets of 
disclosures across clearing agencies and time periods). This could 
benefit market participants through enhanced oversight of clearing 
agencies. Market participants (such as broker-dealers, analysts, and 
other clearing agencies) could also benefit from direct use of the 
machine-readable disclosures on Form CA-1. For example, institutional 
investors could leverage the machine-readability of Exhibit J to run 
automated redlines of a clearing agency's safeguarding procedure 
descriptions from prior periods, thereby detecting any significant 
procedural changes that could raise concern.
    Without the proposed structured data requirements, performing these 
types of analyses would need to be done manually, such as by gathering 
the current and former descriptions of safeguarding procedures for each 
exchange and entering them all into databases, resulting in a 
significantly less efficient and precise process. In addition, the 
proposed structured data requirement would enable EDGAR to perform 
technical validations (i.e., programmatic checks to ensure the 
documents are appropriately standardized, formatted, and complete) upon 
intake of the Form CA-1 disclosures, thus potentially improving the 
quality of the filed data by decreasing the incidence of non-
substantive errors (such as the omission of values from fields that 
should always be populated).
    The nature and extent of such benefits may vary based on the 
content of each Form CA-1 Exhibit. As discussed in the Economic 
Analysis, studies of XBRL requirements for public operating company 
financial statements indicate a number of benefits for investors and 
market participants.\128\ The probability that, and extent to which, 
these particular benefits would arise from structured Form CA-1 
disclosures could be heightened for Exhibit H, which would likewise 
include structured financial statements. In addition, the particular 
benefits of structuring data would likely vary based on the type of 
disclosures included in each particular Exhibit. Structured numerical 
disclosures, such as those that would be included on Exhibit H, lend 
themselves to mathematical functionality, such as the calculation of 
key ratios or the identification of extreme statistical outliers. 
Structured textual disclosures, such as those that would be included on 
Exhibit K, lend themselves to period-over-period redline comparisons, 
targeted keyword searching, and more sophisticated sentiment analysis.
---------------------------------------------------------------------------

    \128\ See infra section X.C.1.b.
---------------------------------------------------------------------------

    The Commission is proposing to require Inline XBRL for certain 
exhibits to Form CA-1 and custom XML for others, because the Commission 
believes each data language is better suited for particular types of 
disclosures. Exhibit H requires disclosure of financial statements, and 
Inline XBRL was designed to accommodate financial statement 
information, including the particular metadata (e.g., the relevant 
fiscal period, whether the line item is on the balance sheet, whether 
the line item is a credit or debit) that must be linked to each data 
point within the financial statements to fully convey its semantic 
meaning to a machine reader. Exhibits C, F, J, K, L, M, O, R, and S 
require narrative disclosures on topics such as the clearing agency's 
services, security, backup systems, and criteria governing access to 
services; whereas custom XML data languages only have the capacity to 
accommodate brief narrative descriptions, Inline XBRL can accommodate 
longer narrative descriptions with presentation capabilities that 
preserve human-readability while maintaining machine-readability.\129\
---------------------------------------------------------------------------

    \129\ See supra note 89.
---------------------------------------------------------------------------

    The execution page of Form CA-1, Exhibits A (in part), B, D, E (in 
part), I, N, and Q do not require such content. For these disclosures, 
the Commission believes the use of custom XML data languages would be 
preferable to Inline XBRL, because it would yield smaller file sizes 
and therefore enable more streamlined processing of the 
information.\130\ The Commission believes requiring custom XML rather 
than Inline XBRL for these disclosures would also be preferable because 
it would enable EDGAR to generate fillable web forms that would permit

[[Page 23941]]

clearing agencies to manually input their disclosures into the form 
fields, rather than structure their disclosure in the custom XML data 
language themselves. This added flexibility could ease the burden of 
compliance on clearing agencies in some instances, although clearing 
agencies may have the requisite sophistication to encode the 
disclosures in custom XML themselves without relying on fillable web 
forms.
---------------------------------------------------------------------------

    \130\ See also infra section X.E.4 (discussing other structured 
data languages that would result in smaller file sizes than Inline 
XBRL).
---------------------------------------------------------------------------

    The proposed approach of requiring Inline XBRL for some Form CA-1 
exhibits and custom XML for others would entail drawbacks for users of 
the information (including Commission staff and market participants). 
Specifically, data users would be unable to incorporate the Inline XBRL 
disclosures on Form CA-1 into the same datasets and applications as the 
custom XML disclosures on Form CA-1, and run analyses that incorporate 
both types of information, without undertaking data conversion 
processes that are frequently burdensome and imprecise. Similarly, any 
technical validations programmed into EDGAR would be unable to check 
for any inappropriate inconsistencies between disclosures on Inline 
XBRL exhibits and disclosures on custom XML exhibits on a given Form 
CA-1, thus reducing the benefit of improved data quality that would be 
likely to result from structured data requirements. Finally, some Form 
CA-1 filers may already be using Inline XBRL to structure similar data 
for internal business purposes, such as through the use of ERP systems; 
these filers may prefer to use Inline XBRL for all proposed structured 
data requirements of Form CA-1, rather than using a combination of 
Inline XBRL and custom XML.\131\ Nonetheless, the Commission believes 
the streamlined data processing associated with the smaller file sizes 
of the proposed custom XML exhibits, as described earlier in this 
section, would justify any such drawbacks.
---------------------------------------------------------------------------

    \131\ See infra note 570 (discussing the prevalence of XBRL 
integration into ERP systems).
---------------------------------------------------------------------------

    The Commission is proposing to require clearing agencies to file 
copies of existing documents, such as copies of by-laws, written 
agreements, and contracts governing subscription terms, as unstructured 
PDF attachments. The Commission believes requiring clearing agencies to 
retroactively structure these existing documents, which were prepared 
for purposes outside of fulfilling the Commission's disclosure 
requirements, would likely impose costly compliance burdens on clearing 
agencies that may not be justified in light of the commensurate 
informational benefits associated with more efficient disclosure use. 
Thus, the Commission does not believe structured data requirements are 
warranted for these copies of existing documents.
6. Request for Comment
    20. The Commission requests comment on all aspects of the proposed 
revisions to Form CA-1 to facilitate electronic filing in EDGAR. Are 
there any aspects of transitioning the form to electronic filing that 
the Commission has not addressed above? Please explain.
    21. The Commission has proposed new Section IX to address the 
submission of any conditions, reports, notices or other submissions to 
the Commission required as directed in any Order approving an 
application for exemption from registration as a clearing agency, under 
Exhibit T. Do the proposed modifications, as described above, 
appropriately address the wide range of submissions that these types of 
materials encompass, or is there a type of submission under any Order 
that would be technologically infeasible to require to be submitted 
under Section IX in EDGAR? Please explain why or why not.
    22. Clearing agencies would be required to prepare certain elements 
of Form CA-1 filings using Inline XBRL and custom XML. Would clearing 
agencies experience practical difficulties or incur significant costs 
in preparing and submitting those elements of Form CA-1 using Inline 
XBRL and custom XML? If so, please explain the nature of those 
difficulties and costs as well as any alternative approaches the 
Commission should adopt.
    23. Would requiring different structured data languages for 
different Exhibits of Form CA-1 provide benefits to data users or 
filers that justify any drawbacks associated such an approach? Please 
explain the nature of such benefits and drawbacks, and why the benefits 
would justify the drawbacks (or vice versa).
    24. If a mix of structured data languages would be appropriate, 
should the specific data languages proposed for each Form CA-1 Exhibit 
be modified? For example, are there Form CA-1 Exhibits proposed as 
custom XML documents that would be better suited as Inline XBRL 
documents, or vice versa? Please explain why or why not.
    25. Are there other structured data languages (i.e., data languages 
other than Inline XBRL and custom XML) that would be more appropriate 
for some or all of the Form CA-1 disclosures? Please explain why or why 
not, and, if the former, please identify the structured data language 
or languages that would be more suitable.
    26. Would requiring clearing agencies to file copies of existing 
documents as unstructured PDF attachments, rather than requiring 
clearing agencies to retroactively structure those documents in 
machine-readable data languages, ease compliance burdens on clearing 
agencies? If so, would the reduced compliance burden on clearing 
agencies justify forgoing the benefits to data users of structuring 
these existing documents? Please explain why or why not.

E. Form 19b-4(e)

1. Relevant Statutory Framework
    Section 19(b) of the Exchange Act, as amended, requires each SRO to 
file with the Commission, in accordance with such rules as the 
Commission may prescribe, copies of any proposed rule, or any proposed 
change in, addition to, or deletion from the rules of such SRO 
(collectively, a ``proposed rule change'') accompanied by a concise 
general statement of the basis and purpose of such proposed rule 
change.\132\ Rule 19b-4(e)(1) provides that the listing and trading of 
a new derivative securities product by an SRO shall not be deemed a 
proposed rule change under the Exchange Act if the Commission has 
approved, pursuant to section 19(b) of the Exchange Act,\133\ the SRO's 
trading rules, procedures, and listing standards for the product class 
that would include the new derivative securities product, and the SRO 
has a surveillance program in place for such product class.\134\
---------------------------------------------------------------------------

    \132\ See 15 U.S.C. 78s(b).
    \133\ See 15 U.S.C. 78s(b).
    \134\ See 17 CFR 240.19b-4(e)(1).
---------------------------------------------------------------------------

2. Background of Rule 19b-4(e)
    As discussed above, Rule 19b-4(e)(1) under the Exchange Act 
provides that the listing and trading of a new derivative securities 
product \135\ by an SRO shall not be deemed a proposed rule change 
subject to certain conditions. The Commission determined that, when it 
has approved an SRO's trading rules, procedures, and listing standards 
for the product class that would include the new derivative securities 
product, and the SRO has an adequate surveillance program in place for 
such product class, the listing and trading of the new derivative 
securities product would be ``reasonably and fairly

[[Page 23942]]

implied'' by the SRO's existing trading rules, procedures, and listing 
standards, and therefore, would not be deemed a proposed rule change 
under Rule 19b-4(c)(1).\136\
---------------------------------------------------------------------------

    \135\ Rule 19b-4(e) defines a new derivative securities product 
as ``any type of option, warrant, hybrid securities product or any 
other security, other than a single equity option or a security 
futures product, whose value is based, in whole or in part, upon the 
performance of, or interest in, an underlying instrument.'' See 17 
CFR 240.19b-4(e).
    \136\ See Exchange Act Release No. 40761 (Dec. 8, 1998), 63 FR 
70952 (Dec. 22, 1998) (``Rule 19b-4(e) Adopting Release''). See also 
17 CFR 240.19b-4(c)(1).
---------------------------------------------------------------------------

    For purposes of Rule 19b-4(e)(1), SROs have submitted, and the 
Commission has approved pursuant to section 19(b)(2) of the Exchange 
Act, trading rules, procedures, and listing standards for several types 
of new derivative securities products including, for example, exchange-
traded funds, index-linked securities and other exchange-traded 
structured products, and narrow and broad-based index options.\137\
---------------------------------------------------------------------------

    \137\ See, e.g., Exchange Act Release Nos. 42787 (May 15, 2000), 
65 FR 33598 (May 24, 2000) (SR-Amex-2000-14) (approving generic 
listing standards for exchange traded funds called Portfolio 
Depositary Receipts and Index Fund Shares); 45718 (Apr. 9, 2002), 67 
FR 18965 (Apr. 17, 2002) (SR-NYSE-2002-07) (approving generic 
listing standards for Trust Issued Receipts); 55687 (May 1, 2007), 
72 FR 25824 (May 7, 2007) (SR-NYSE-2007-27) (approving generic 
listing standards for Index-Linked Securities); 48405 (Aug. 25, 
2003), 68 FR 52257 (Sep. 2, 2003) (SR-ISE-2003-05) (approving 
generic listing standards for narrow-based index options); 78397 
(June 22, 2016), 81 FR 49320 (July 27, 2016) (SR-NYSEArca-2015-110) 
(approving generic listing standards for Managed Fund Shares); and 
88566 (Apr. 6, 2020), 85 FR 20312 (Apr. 10, 2020) (SR-CboeBZX-2019-
097) (approving generic listing standards for Exchange-Traded Fund 
Shares).
---------------------------------------------------------------------------

    As expressed in the Rule 19b-4(e) Adopting Release, the Commission 
adopted Form 19b-4(e) in order for the Commission to maintain an 
accurate record of all new derivative securities products traded on the 
SROs in order to notify the Commission when an SRO begins to trade a 
new derivatives securities product not required to be submitted as a 
proposed rule change to the Commission for approval.\138\ The 
Commission also stated that it would make Forms 19b-4(e) public.\139\ 
At the time of the adoption of Rule 19b-4(e), the Commission estimated 
the new rule would eliminate approximately 45 SRO rule filings each 
year,\140\ and the information regarding new derivative securities 
products required pursuant to Rule 19b-4(e) was required to be 
submitted using a paper Form 19b-4(e).
---------------------------------------------------------------------------

    \138\ See Rule 19b-4(e) Adopting Release, 63 FR at 70963.
    \139\ See id. at 70964, fn. 139 (``Form 19b-4(e) will be 
publicly available through the Commission's Public Reference Room. 
In addition, the Commission will endeavor to make the Forms 
available on the Commission's website.'').
    \140\ See Rule 19b-4(e) Adopting Release, 63 FR at 70964.
---------------------------------------------------------------------------

3. Current Requirements for Filing Form 19b-4(e)
    Under Rule 19b-4(e)(2)(ii), SROs are required to submit Form 19b-
4(e) \141\ to the Commission within five business days after 
commencement of trading a new derivative securities product.\142\ In 
addition, pursuant to the instructions for completing Form 19b-4(e), 
SROs are required to submit an original and nine paper copies of a duly 
executed Form 19b-4(e) with the Commission.\143\
---------------------------------------------------------------------------

    \141\ See 17 CFR 249.820.
    \142\ See Rule 19b-4(e)(2)(ii). Although Rule 19b-4(e) relates 
to the listing and trading of new derivative products by SROs, the 
only SROs that list and trade new derivative products and file Forms 
19b-4(e) to the Commission are national securities exchanges.
    \143\ See Items II and III of the Instructions for Completing 
Form 19b-4(e), 17 CFR 249.820.
---------------------------------------------------------------------------

4. Proposed Rescission of Form 19b-4(e)
    The Commission proposes to amend Rule 19b-4 to rescind Form 19b-
4(e) and instead require SROs to post on their internet websites the 
information currently included on Form 19b-4(e). More specifically, 
under the proposal, an SRO would be required to post on its public 
internet website, within five business days after commencing the 
trading of a new derivatives securities product, the information 
required in current Part I, Items 2 through 9 of Form 19b-4(e) for that 
product:\144\ (a) type of issuer of new derivatives securities product 
(e.g., clearinghouse, broker-dealer, corporation, etc.); (b) class of 
new derivative securities product; (c) name of underlying instrument; 
(d) if the underlying instrument is an index, state whether it is 
broad-based or narrow-based; (e) ticker symbol(s) of new derivative 
securities product; (f) market(s) upon which securities comprising the 
underlying instrument trades; (g) settlement methodology of new 
derivative securities product; and (h) position limits of new 
derivative securities product (if applicable). The Commission proposes 
that this information be provided using the most recent versions of an 
XML schema and the associated PDF renderer that would be published on 
the Commission's website.\145\ The Commission believes that this 
information should be available at a prominently posted hyperlink on 
the SRO's website that is free and accessible (without any encumbrances 
or restrictions) by the general public.
---------------------------------------------------------------------------

    \144\ Part I, Item 1, ``Name of Self-Regulatory Organization 
Listing New Derivative Securities Product,'' would not be necessary 
to include because the table of new derivative securities products 
would be on the website of the SRO that has listed and is trading 
the new derivatives securities product, so the identity of the 
listing SRO will be self-evident.
    \145\ See proposed 17 CFR 240.19b-4(e)(2)(ii).
---------------------------------------------------------------------------

    As is required currently in Part II of Form 19b-4(e), an SRO would 
be required to provide on its website a representation by a duly 
authorized SRO official that the governing body of the SRO has duly 
approved, or has duly delegated its approval to such official for, the 
listing and trading of the new derivative securities product according 
to its relevant trading rules, procedures, surveillance programs, and 
listing standards to assure that such products are being listed and 
traded in accordance with the SRO's obligations under Rule 19b-4(e), as 
well as an email address to contact that official. The Commission 
believes that the requirement to provide an email address for the 
exchange contact employee will expedite communications between 
Commission staff and the relevant exchange. Any SRO that relies on Rule 
19b-4(e) to list and trade a new derivative securities product would 
continue to be subject to Rule 19b-4(e)(2)(i), which requires the SRO 
to maintain at its principal place of business a file, available to 
Commission staff for inspection, of all relevant records and 
information pertaining to each new derivatives securities product 
traded pursuant to Rule 19b-4(e) for a period of not less than five 
years, the first two years in an easily accessible place, as prescribed 
in Rule 17a-1 under the Exchange Act.\146\ Thus, the SRO trading a new 
derivative securities product would need to maintain the relevant 
records and information regarding the new derivative securities product 
to comply with the recordkeeping and reporting requirements of Rule 
19b-4(e). As under the current rule, and as contemplated in the 
adoption of the current rule, the Commission will review SRO compliance 
through its routine inspections of SROs.\147\
---------------------------------------------------------------------------

    \146\ See 17 CFR 240.17a-1.
    \147\ See Rule 19b-4(e) Adopting Release, 63 FR at 70963.
---------------------------------------------------------------------------

    The Commission believes that its proposal will provide the same 
information for the Commission and the public as is provided via 
current Form 19b-4(e) without necessitating the additional steps of 
submitting a paper form containing that information with the 
Commission. The Commission believes that, among other benefits, this 
proposal should increase efficiencies and decrease costs related to 
both the submission of Form 19b-4(e) by an SRO and the Commission's 
processing of submitted Forms 19b-4(e). As discussed above, since the 
Commission adopted

[[Page 23943]]

Rule 19b-4(e), technology has evolved significantly and the internet 
has played an increasingly vital role in information distribution.\148\ 
During this period, the Commission has encouraged the dissemination of 
information electronically via the internet and other automated systems 
and services.\149\ In addition, the Commission now receives thousands 
of Forms 19b-4(e) per year from the SROs, rather than the 45 per year 
as stated in the Form 19b-4(e) Adopting Release, each of which is 
submitted to the Commission and then must be made public individually 
by the Commission,\150\ and therefore require, in the aggregate, 
additional time to process before the information contained in those 
Forms becomes available for Commission review and also publicly 
available.\151\ The Commission believes that requiring SROs to post the 
information contained in the current Form 19b-4(e) on its website would 
accomplish the goal outlined in the Rule 19b-4(e) Adopting Release, for 
the Commission to maintain accurate information regarding these new 
derivatives securities products, while ensuring that information 
remains publicly available.\152\ In addition, the Commission believes 
that requiring SROs to post that information within 5 business days 
after commencement of trading a new derivatives product, as the current 
rule requires, will continue to allow the Commission to determine that 
an SRO has properly relied on the rule and continue to do so in a 
timely fashion.\153\ The Commission believes this is appropriate given 
the large number of Forms 19b-4(e) that are submitted currently as well 
as the nature of the information contained in those Forms, which is 
highly standardized. Providing that information on the relevant SRO's 
publicly available website would render that information in a more 
readily accessible format by both the Commission and the public than 
submitting numerous Forms 19b-4(e) does currently, and would have the 
added benefit of eliminating the two-step process of an SRO submitting 
a Form 19b-4(e) and then that Form being made public through the 
Commission. In addition, because that information would be subject to 
the relevant SRO's books and records obligations \154\ and subject to 
the Commission's examination and inspection authority,\155\ the 
Commission believes that the accuracy of the records for Commission 
review would be commensurate with the accuracy of the information on 
the Forms 19b-4(e) submitted to the Commission under the current rule.
---------------------------------------------------------------------------

    \148\ See supra note 13.
    \149\ Id. See also supra note 14.
    \150\ See id. at 70964, n. 139.
    \151\ See FR Doc. 2022-17308, 87 FR 49894 (Aug. 12, 2022) 
(Request to OMB for extension of Rule 19b-4(e) and Form 19b-4(e); 
SEC File No. 270-447; OMB Control No. 3235-0504) (identifying 2,331 
Forms 19b-4(e) submitted to the Commission based on the average 
annual number of Forms 19b-4(e) submitted in 2019, 2020, and 2021).
    \152\ See Rule 19b-4(e) Adopting Release, 63 FR at 70963, 70964, 
n. 139.
    \153\ See 17 CFR 240.19b-4(e)(2)(ii).
    \154\ See 17 CFR 240.17a-1.
    \155\ See Rule 19b-4(e) Adopting Release, 63 FR at 70963.
---------------------------------------------------------------------------

5. Request for Comment
    27. Would it be appropriate to require the information submitted on 
current Form 19b-4(e) instead to be posted on the relevant SRO's 
publicly available internet website? Would there be particular 
compliance or oversight concerns such a requirement would raise even 
though the relevant SRO publication of that information would remain 
subject to existing books and records requirements and the Commission's 
examination and inspection authority? If so, explain what those 
concerns are, and why.
    28. Should the Commission instead amend Rule 19b-4(e), Form 19b-
4(e), and the instructions thereunder to require Form 19b-4(e) to be 
submitted electronically on EDGAR? If so, explain why.
    29. Is there an alternative method for submitting Form 19b-4(e) 
that the Commission should use instead? If so, explain what such an 
alternative method would be, and why.
    30. What, if any, costs would be associated with posting the 
information required under proposed Rule 19b-4(e) on the SRO's website? 
Are those costs more, less, or the same as those currently expended 
under the current Form 19b-4(e) filing process? Similarly, what costs 
would be associated with requiring SROs to post Rule 19b-4(e) 
information using a custom XML data language and associated PDF 
renderer? Would such costs not justify the benefits associated with 
such requirements? Please explain why or why not.
    31. Would requiring a different structured data language, such as 
Inline XBRL, for the Rule 19b-4(e) information provide benefits to data 
users justify any drawbacks associated such an approach? If so, please 
identify the more appropriate data language, explain the nature of such 
benefits and drawbacks, and why the benefits would not justify the 
drawbacks (or vice versa).
    32. Should the Commission also amend Rule 19b-4(e) to require that 
the information submitted on current Form 19b-4(e) be posted on the 
relevant SRO's publicly available internet website sooner than five 
business days after commencement of trading a new derivative securities 
product? Please explain why or why not. Are there any issues, concerns 
or burdens with shortening the timeframe? If so, please describe. Is 
there another timeframe earlier than five business days (e.g., one 
business day, two business days, three business days) within which it 
would be appropriate to require such information be posted? If so, 
please explain what that timeframe should be, and why.

F. Rule 19b-4(j) and Form 19b-4

1. Relevant Statutory Framework
    Section 19(b) of the Exchange Act, as amended, requires each SRO to 
file with the Commission, in accordance with such rules as the 
Commission may prescribe, copies of any proposed rule, or any proposed 
change in, addition to, or deletion from the rules of such SRO 
(collectively, a ``proposed rule change'') accompanied by a concise 
general statement of the basis and purpose of such proposed rule 
change.\156\ Rule 19b-4, subject to certain exceptions, requires an SRO 
to submit each proposed rule change by electronically filing Form 19b-
4.\157\
---------------------------------------------------------------------------

    \156\ See 15 U.S.C. 78s.
    \157\ See 17 CFR 240.19b-4(b).
---------------------------------------------------------------------------

2. Proposed Rule Change
    The Commission proposes to remove the requirement under 17 CFR 
240.19b-4(j) (``Rule 19b-4(j)'') \158\ that the signatory to an 
electronically submitted Form 19b-4 manually sign a signature page or 
other document authenticating, acknowledging, or otherwise adopting his 
or her signature that appears in typed form within the electronic 
filing, execute that document before or at the time the rule filing is 
electronically submitted, and retain that document for its records in 
accordance with Rule 17a-1. The Commission also proposes to remove the 
related language in Form 19b-4 and the instructions to Form 19b-4 that 
a duly authorized officer of the SRO manually sign one copy of the 
completed Form 19b-4 and that the manually signed signature page be 
maintained pursuant to section 17 of the Exchange Act.\159\ The 
Commission

[[Page 23944]]

believes these amendments are appropriate because the manual signature 
requirement under Rule 19b-4 is redundant and therefore unnecessary 
given that Form 19b-4, which is filed electronically, already requires 
an electronic signature.
---------------------------------------------------------------------------

    \158\ See 17 CFR 240.19b-4(j).
    \159\ This proposal is for purposes of filing with the 
Commission only and does not affect the requirements with which 
certain SROs subject to oversight by other regulatory agencies must 
continue to comply. Currently, under section F of the instructions 
to Form 19b-4, a registered clearing agency for which the Commission 
is not the appropriate regulatory agency also shall file with its 
appropriate regulatory agency three copies of the form, one of which 
shall be manually signed, including exhibits. A clearing agency that 
also is a designated clearing agency shall file with the Federal 
Reserve three copies of any form containing an advance notice, one 
of which shall be manually signed, including exhibits; provided, 
however, that this requirement may be satisfied instead by providing 
the copies to the Federal Reserve in an electronic format as 
permitted by the Federal Reserve. The Municipal Securities 
Rulemaking Board (``MSRB'') also shall file copies of the form, 
including exhibits, with the Federal Reserve, the Comptroller of the 
Currency, and the Federal Deposit Insurance Corporation. These 
requirements, all promulgated pursuant to 15 U.S.C. 78q(c)(1), would 
remain in effect.
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3. Request for Comment
    33. Should the Commission retain the requirement under Rule 19b-
4(j) that the signatory to an electronically submitted Form 19b-4 
manually sign a signature page or other document authenticating, 
acknowledging, or otherwise adopting his or her signature that appears 
in typed form within the electronic filing, execute that document 
before or at the time the rule filing is electronically submitted, and 
retain that document for its records in accordance with Rule 17a-1? If 
so, explain why.
    34. Should the Commission retain the related language in Form 19b-4 
and the instructions to Form 19b-4 that a duly authorized officer of 
the SRO manually sign one copy of the completed Form 19b-4 and that the 
manually signed signature page be maintained pursuant to section 17 of 
the Exchange Act? If so, explain why.
    35. What, if any, costs would be associated with removing the 
manual signature requirement? Are those costs more, less, or the same 
as those currently expended under the current Form 19b-4 filing 
process?

G. Conforming Technical Amendment to Rule 202.3(b) Under the Exchange 
Act

    As noted above, the Commission proposes a technical amendment to 
conform its Informal and Other Procedures to the changes proposed 
herein to Rules 6a-1, 6a-2, and 6a-3 with respect to Form 1 filings and 
to Rule 6a-4 with respect to Form 1-N filings. Specifically, the 
Commission proposes conforming changes to Rules 202.3(b)(2) and (b)(3) 
of its Informal and Other Procedures \160\ to clarify that defective 
applications on Form 1 and notices on Form 1-N, respectively, would be 
returned to the Filer,\161\ and would not be held by the 
Commission.\162\ While Rules 202.3(b)(2) and (b)(3) currently permit 
the Commission to hold defective applications on Form 1 and defective 
notices on Form 1-N, the Commission believes that holding such 
applications or notices serves no purpose, as defective Form 1 and Form 
1-N filings do not allow the Commission and its staff to review such 
applications and notices.\163\ In such situations, the Commission 
believes that it would be appropriate to return the defective filings 
to the Filers so that the Filers may correct the defective filings. 
Additionally, Rules 202.3(b)(2) and (b)(3) \164\ are being amended to 
update the name of the Division of Trading and Markets from the 
previously used Division of Market Regulation.
---------------------------------------------------------------------------

    \160\ See 17 CFR 202.3(b)(2) and (3).
    \161\ For purposes of this Rule, the Commission would return 
Form 1 and Form 1-N filings to Filers by deleting the application or 
notice from EDGAR and sending an email to the contact person 
notifying the Filer: (i) that the application or notice was deleted 
from EDGAR and thus is considered as being returned under Rule 
202.3(b)(2) or Rule 202.3(b)(3), respectively, of the Commission's 
Informal and Other Procedures, as applicable; (ii) of the reason(s) 
for such return; and (iii) that, therefore, the application or 
notice is not considered filed with the Commission.
    \162\ For purposes of this rule, an application on Form 1 or a 
notice on Form 1-N is deemed defective if: (i) it was not properly 
signed; (ii) it did not contain the required information, including 
exhibits; or (iii) the information provided was presented in a 
manner that would make it difficult for the Commission and its staff 
to conduct its review of the application or notice. See 17 CFR 249.1 
and 249.10.
    \163\ Id.
    \164\ See 17 CFR 202.3(b)(2) and (3).
---------------------------------------------------------------------------

III. Proposed Requirements for Clearing Agencies To Electronically File 
Covered Supplemental Materials

A. Current Rule 17a-22

    Current Exchange Act Rule 17a-22 requires that within 10 days after 
issuing, or making generally available, to its participants or to other 
entities with whom it has a significant relationship, such as pledgees, 
transfer agents, or SROs, any material (including, for example, 
manuals, notices, circulars, bulletins, lists or periodicals), a 
registered clearing agency shall file three copies of such material 
with the Commission.\165\ A registered clearing agency for which the 
Commission is not the ARA shall at the same time file one copy of such 
material with its ARA.\166\
---------------------------------------------------------------------------

    \165\ See 17 CFR 240.17a-22.
    \166\ See id.
---------------------------------------------------------------------------

    In adopting Rule 17a-22 in 1980, the Commission established for 
clearing agencies a filing requirement that generally paralleled the 
filing requirements imposed under Exchange Act Rules 6a-3, 15Aj-1, and 
17a-21--rules applicable to national securities exchanges, registered 
securities associations, and the MSRB, respectively, that required the 
filing of certain supplemental materials.\167\ Clearing agencies, 
unlike other SROs, previously had not been required to file with the 
Commission supplemental materials (other than stated policies, 
practices, and interpretations deemed to be SRO rules under Rule 19b-4) 
they made generally available. Accordingly, the rule established a 
filing requirement parallel to the filing requirements already imposed 
on other SROs.\168\ The Commission stated in its adoption of the rule 
that receipt of such information was important to its oversight 
responsibilities for clearing agencies under the Exchange Act.\169\
---------------------------------------------------------------------------

    \167\ See 17 CFR 240.6a-3; 17 CFR 240.15Aj-1; and 17 CFR 
240.17a-21, respectively.
    \168\ See 17 CFR 240.6a-3; 17 CFR 240.15Aj-1; and 17 CFR 
240.17a-21, respectively. Since the adoption of Rule 17a-22 in 1980, 
the Commission has developed a robust and extensive regulatory 
regime applicable to clearing agencies. See generally Exchange Act 
Rule 17ad-22, 17 CFR 240.17ad-22 (establishing, among other things, 
requirements related to governance, operations, risk management). 
Much of the information required to be filed with the Commission 
under current Rule 17a-22 is available to the Commission both 
through this developed regime and through other regulatory sources.
    \169\ See Exchange Act Release No. 17258 (Oct. 30, 1980), 45 FR 
73906, 73914 (Nov. 7, 1980) (``Rule 17a-22 Adopting Release'').
---------------------------------------------------------------------------

B. Updated Staff Statement and Resulting Alternate Arrangements for 
Rule 17a-22 Compliance

    Since the Updated Staff Statement was issued, registered clearing 
agencies have been submitting electronic copies of filings required 
under Rule 17a-22 to the Commission through a dedicated email inbox, 
rather than submitting paper copies.\170\ In Part VIII.D., the 
Commission requests comment as to whether the Commission should 
preserve the ability of registered clearing agencies to submit 
materials for filing to the Commission through a dedicated email inbox 
if the proposed amendment is adopted. Such an alternative would 
eliminate the burdens associated with producing and mailing paper 
copies of the materials to the Commission for filing. It would also 
reduce the time between mailing and delivery of paper copies, improving 
the efficiency of the submission and review process. Since the Updated 
Staff Statement was issued, the Commission staff has observed that 
filing through the dedicated email inbox has resulted in a

[[Page 23945]]

more efficient process for both the clearing agencies and for 
Commission staff.
---------------------------------------------------------------------------

    \170\ See supra note 5.
---------------------------------------------------------------------------

C. Proposed Amendments to Rule 17a-22

    The Commission is now proposing to amend Rule 17a-22 to: (i) 
replace the requirement to file supplementary materials with the 
Commission or an ARA in paper form with a requirement to post such 
materials on the clearing agency's internet website; and (ii) reduce 
the timeframe for compliance with the rule from 10 days to 2 business 
days for the posting requirement.\171\ By replacing the paper filing 
requirement for registered clearing agencies with an electronic posting 
requirement via the clearing agency's internet website, the proposed 
amendment aligns with the Commission's larger-scale objective tied to 
its mission of enhancing the efficiency and effectiveness of its 
regulatory regime for registered clearing agencies under the Exchange 
Act.
---------------------------------------------------------------------------

    \171\ In consultation with the Federal Reserve, the Commission 
is proposing to remove the obligation to send an additional paper 
copy to a clearing agency's ARA from Rule 17a-22. If the 
supplemental materials are prominently posted on the clearing 
agency's internet website, all its regulatory authorities will have 
access to them, removing the need to file an additional paper copy. 
Separate from any requirements in Rule 17a-22, certain provisions in 
section 17A of the Exchange Act require notice to the ARA, and the 
proposed amendments to Rule 17a-22 do not affect those provisions. 
See, e.g., 15 U.S.C. 78q-1(b)(5)(C).
---------------------------------------------------------------------------

    Specifically, proposed Rule 17a-22 would require that within 2 
business days after issuing, or making generally available, to its 
participants or other entities with whom it has a significant 
relationship, any material (including, for example, manuals, notices, 
circulars, bulletins, lists or periodicals) that is not otherwise 
required to be posted on its internet website pursuant to any 
requirement under section 19(b) of the Exchange Act or the rules 
thereunder, a registered clearing agency shall prominently post such 
material on its internet website.
1. Two-Day Timeframe for Compliance
    The Commission believes reducing the notice timeframe from 10 days 
to 2 business days is reasonable and appropriate for three reasons. 
First, the timeframe of 2 business days helps ensure the timely 
dissemination of information to affected market participants and is 
consistent with a registered clearing agency's obligation under Rule 
19b-4(m) to update its internet website to post any rule changes filed 
pursuant to Exchange Act Rule 19b-4 within two business days.\172\ As 
discussed above, like proposed rule changes, supplementary materials 
required by Rule 17a-22 are important to the Commission's ongoing 
supervision of clearing agencies, and the timely posting of such 
materials ensures that Commission supervision is effectively 
considering the most current information available to the clearing 
agency and its participants.\173\ Clearing agencies should already have 
established internal policies and procedures in place to meet these 
posting requirements for proposed rule changes, and the Commission 
believes these procedures could be reasonably replicated to meet the 
timeframes under the proposed amendments to Rule 17a-22. Second, by 
replacing the requirement to file paper copies with a requirement to 
post the materials on the clearing agency's internet website, the 
Commission believes that the time required to comply with the proposed 
rule (when compared to the current rule) should be significantly 
reduced. By eliminating the paper filing requirement, clearing agencies 
will no longer have to expend the time and resources associated with 
copying, packaging and mailing three copies of supplemental materials 
to the Commission and, where applicable, the ARA, which should in turn 
allow for shorter compliance timeframes. Third, the Commission believes 
that 2 business days for posting is reasonable because the supplemental 
materials will have already been prepared for distribution to its 
participants or other entities with whom it has a significant 
relationship, and as such, should be readily available for posting to 
the clearing agency's internet website within the proposed 2 business 
days.
---------------------------------------------------------------------------

    \172\ See 17 CFR 240.19b-4(m).
    \173\ See supra section I.C.
---------------------------------------------------------------------------

2. Scope of Supplemental Materials
    Rule 17a-22, as proposed to be amended, does not change the scope 
of supplemental materials to which the rule applies. Accordingly, the 
proposed rule retains the language that any supplemental material 
issued or made generally available to a clearing agency's participants 
or other entities with whom it has a significant relationship would be 
subject to Rule 17a-22. The proposed rule retains the list of 
illustrative examples of types of supplemental materials. In addition, 
copies of any material issued or made generally available to 
participants or other entities with whom the clearing agency has 
significant relationships (e.g., issuers, transfer agents, custodian, 
service providers, other non-participant entities that avail themselves 
of clearing agency services, etc.) are, under the current rule, 
required to be filed, where applicable.
    Because the significant relationships vary across clearing 
agencies, the Commission is proposing to delete the list of examples of 
such relationships from the proposed rule text. However, the removal of 
these examples from the text of the proposed rule is not an indication 
that these entities are no longer considered within the scope of the 
rule. Rather, the Commission is proposing to eliminate this list to 
ensure that clearing agencies consider appropriately the universe of 
entities with whom they have a significant relationship, which varies 
by registered clearing agency because they serve different markets or 
offer different services and may also change over time as market 
practices evolve. The Commission continues to believe that issuers, 
transfer agents, custodians, service providers, and other non-
participant entities that use the clearing agency's services are 
examples of the types of entities to whom a clearing agency may provide 
supplementary materials under the rule, and the revisions are intended 
to avoid confusion because certain types of relationships, such as 
issuers and transfer agents, exist in some markets but not others. A 
clearing agency generally should consider the markets it serves, the 
services it offers, and the universe of entities with whom it has a 
significant relationship when addressing its compliance with the rule.
    While the scope of supplemental materials subject to the rule 
remains unchanged under the proposed rule, the Commission is adding new 
rule text to expressly exclude any materials subject to section 19(b) 
of the Exchange Act or rules thereunder from the supplemental materials 
posting requirement, and thereby specify that the materials subject to 
proposed Rule 17a-22 are distinct from any posting requirements 
required under section 19(b) and Rule 19b-4 thereunder. This proposed 
added text is consistent with the Commission's stated purpose of Rule 
17a-22 in 1980,\174\ and this proposed change is intended to avoid the 
imposition of duplicative posting requirements.
---------------------------------------------------------------------------

    \174\ See generally Rule 17a-22 Adopting Release.
---------------------------------------------------------------------------

    Specifically, in the Rule 17a-22 Adopting Release, the Commission 
also amended, among other things, the requirements applicable to the 
filing by SROs of proposed rule changes and certain other materials 
under Rule 19b-4 and Form 19b-4.\175\ There, the Commission revoked a 
provision on Form 19b-4B requiring SROs to file

[[Page 23946]]

notice of stated policies, practices and interpretations not deemed to 
be rules because, in part, the provision duplicated the filing 
requirements in Rules 6a-3, 15Aj-1, and 17a-21.\176\ These rules 
required national securities exchanges, registered securities 
associations, and the MSRB, respectively, to submit to the Commission 
any material they made generally available. Accordingly, in conjunction 
with its revocation of the above-noted provision of Form 19b-4B, the 
Commission adopted Rule 17a-22, which established a filing requirement 
for registered clearing agencies parallel to the filing requirement 
under Rules 6a-3, 15Aj-1, and 17a-21. In so doing, the Commission 
distinguished between materials subject to Rule 19b-4 and those subject 
to the supplemental material rules. The proposed inclusion of new text 
relating to Rule 19b-4 is meant to specify clearing agencies' 
obligations under Rule 17a-22 as being separate and distinct from the 
obligation under Rule 19b-4. In general, a clearing agency should 
consider within the scope of Rule 17a-22 policies, procedures, and 
other documents that help explain to affected parties the rules of the 
clearing agency but are not also required to be filed under Rule 19b-4.
---------------------------------------------------------------------------

    \175\ Id.
    \176\ Id. See also 17 CFR 240.6a-3; 17 CFR 240.15Aj-1; and 17 
CFR 240.17a-21. Rule 6a-3 was amended in 2001 to allow a national 
securities exchange the option of posting supplementary information 
to its website and certifying that the information available on its 
website is accurate as of its date. See Exchange Act Release No. 
44692 (Aug. 13, 2001), 66 FR 43721 (Aug. 20, 2001). Since the 
adoption of this amendment, usage of and familiarity with the 
internet among affected market participants has increased 
substantially, and so in proposing to amend Rule 17a-22, the 
Commission believes it is appropriate to transition the requirement 
in Rule 17a-22 for clearing agencies solely to internet posting.
---------------------------------------------------------------------------

3. Meaning of ``Generally Available''
    The existing requirement under Rule 17a-22 to post only those 
materials that the clearing agency is ``making generally available'' 
would remain unchanged. Any document that is made ``generally 
available'' to a wide or diverse group of individuals or entities 
should be considered supplemental material and as such, posted to the 
clearing agency's website. Because of the ``generally available'' 
component in Rule 17a-22, the Commission does not envision that 
documents of a confidential or sensitive nature, or that would cause 
harm if publicly disclosed, would fall within the scope of the rule. 
Accordingly, the Commission believes that amending Rule 17a-22 to 
require the posting of supplemental material on an internet website 
should not create concerns from a clearing agency's perspective 
regarding privacy or confidentiality of materials because such material 
would not be in scope of the rule. In the Commission's experience, 
most, if not all, of the filings required by current Rule 17a-22 are 
already being posted on a registered clearing agency's website.
4. Requirement to ``Prominently Post''
    Finally, in the proposed amendment to Rule 17a-22 that would 
require the clearing agency to ``prominently post'' any supplemental 
material subject to the amended rule on the clearing agency's website, 
the Commission is proposing to interpret ``prominently'' to mean that 
the supplemental materials will be readily identifiable and accessible 
on the website for as long as the information remains applicable to 
affected parties. If access to the supplemental materials requires in-
depth familiarity with the website or is not readily apparent because 
it requires searching through multiple layers to access the 
information, the supplemental materials generally would not be 
considered prominently posted. The Commission believes generally that 
supplemental materials should be available at a prominently posted 
hyperlink on the clearing agency's website that is free and accessible 
(without any encumbrances or restrictions) by the general public. To 
the extent one does not already exist, a registered clearing agency 
generally should consider creating a specific web page that identifies 
and catalogues (such as through a list of hyperlinks) the supplemental 
materials that it maintains pursuant to Rule 17a-22.

D. Request for Comment

    36. Would the proposal to replace the requirement to file paper 
copies with a requirement to post supplemental materials on a clearing 
agency's website benefit or harm the clearing agencies, market 
participants or the general public? If so, please describe any benefits 
or harms. The Commission particularly is interested in comments or 
analysis related to costs on both a qualitative or quantitative basis.
    37. Does the two-business day requirement to post supplemental 
materials allow for sufficient time to prepare and post the materials? 
If not, why not? What alternative timeframe would be appropriate and 
why?
    38. The proposed amendment to the rule would require that materials 
issued or made generally available to clearing agency participants or 
other entities with whom the clearing agency has a significant 
relationship to be posted to the clearing agency's internet website. Is 
the rule as proposed to be amended clear in terms of which participants 
or entities would be included? Should this group of persons or entities 
be expanded, contracted or otherwise modified? If so, why, and how? Are 
there any other concerns related to this requirement, such as with 
respect to documents that may be confidential or non-public? If so, 
please describe.
    39. The Commission is proposing to require supplemental materials 
to be ``prominently'' posted on the clearing agency's website. Is this 
proposed requirement clear? Should it be modified, and if so, why and 
how?
    40. Should the Commission provide registered clearing agencies with 
the opportunity to continue the alternate arrangements established 
pursuant to the Updated Staff Statement, rather than requiring internet 
posting under the rule? If so, why?
    41. What, if any, costs would be associated with preparing 
documents for posting on the clearing agency's internet website? Are 
those costs more, less or the same as those currently expending under 
the current Updated Staff Statement processes? Would the proposed two 
business day timeframe to post supplemental materials cause any change 
in the costs associated with complying with the rule? If so, please 
provide as much detail as possible as to whether such costs increase or 
decrease, and the underlying reasons for the change.

IV. Proposed Requirements To Electronically File Broker-Dealer, OTC 
Derivatives Dealer, and SBS Entity Reports

    The Commission proposes that the following forms and reports be 
filed in electronic format on EDGAR:

------------------------------------------------------------------------
        Form or report              Filer type      Proposed amendments
------------------------------------------------------------------------
Form X-17A-5 Part III: Annual   Broker or Dealer.  No amendments to the
 reports and related annual                         form; Exchange Act
 filings.                                           Rules 17a-5 and 17a-
                                                    12 (17 CFR 240.17a-
                                                    5; 17 CFR 240.17a-
                                                    12).
                                                   Rule 101(a) of
                                                    Regulation S-T (17
                                                    CFR 232.101(a)).

[[Page 23947]]

 
Form 17-H: Risk Assessment      Broker or Dealer.  No amendments to the
 Report for Brokers and                             form; Exchange Act
 Dealers.                                           Rule 17h-2T (17 CFR
                                                    240.17h2-T).
                                                   Rule 101(a) of
                                                    Regulation S-T.
Form X-17A-5 Part III: Annual   SBS Entity.......  No amendments to the
 reports and related annual                         form; Exchange Act
 filings.                                           Rule 18a-7 (17 CFR
                                                    240.18a-7).
                                                   Rule 101(a) of
                                                    Regulation S-T.
------------------------------------------------------------------------

A. Rules 17a-5, 18a-7, and 17a-12

1. Rule 17a-5 Filing Requirements
    Paragraph (d) of Exchange Act Rule 17a-5 generally requires a 
broker-dealer registered with the Commission to file annual reports 
with the Commission not more than 60 calendar days after the fiscal 
year end of the broker-dealer.\177\ Paragraph (d)(6) of Rule 17a-5 
provides that the annual reports ``must be filed with the Commission at 
the regional office of the Commission for the region in which the 
broker or dealer has its principal place of business and to the 
Commission's principal office in Washington, DC, or the annual reports 
may be filed with the Commission electronically in accordance with 
directions provided on the Commission's website.'' \178\ The annual 
reports include a financial report and either a compliance report or an 
exemption report, as well as reports prepared by an independent public 
accountant registered with the Public Company Accounting Oversight 
Board (``PCAOB'') covering the financial report and compliance or 
exemption report in accordance with standards of the PCAOB.
---------------------------------------------------------------------------

    \177\ See 17 CFR 240.17a-5(d). See also Order Extending the 
Annual Reports Filing Deadline for Certain Smaller Broker-Dealers, 
Exchange Act Release No. 91128 (Feb. 12, 2021), 86 FR 10372 (Feb. 
19, 2022) (extending the filing deadline for the annual reports by 
30 days for certain smaller broker-dealers on certain conditions, 
including that the annual reports be filed electronically).
    \178\ See 17 CFR 240.17a-5(d)(6).
---------------------------------------------------------------------------

    Approximately 3,218 broker-dealers file annual reports with the 
Commission, and the reports vary in size from approximately 20 pages 
for smaller firms to approximately 100 pages for larger firms. Rule 
17a-5 currently provides for paper filing of the annual reports, and 
paper filings are processed manually by Commission staff. However, the 
Commission has prepared EDGAR to receive broker-dealer annual reports 
electronically, and Commission staff issued a no-action letter \179\ 
not objecting to broker-dealers voluntarily filing their annual reports 
electronically on EDGAR in accordance with instructions posted on the 
Commission's website instead of filing them in paper form. 
Approximately half of broker-dealers have filed the reports 
electronically consistent with the staff no-action letter. Based on 
EDGAR data, for the 12 months ended December 31, 2022, the Commission 
received 1,559 filings of the annual reports in paper and 1,659 
electronically via EDGAR. Approximately 85% of broker-dealers have a 
fiscal year end of December 31, so that a significant number of filings 
are made at approximately the same time each year, straining the 
current manual intake process. A portion of the annual reports filed 
pursuant to Rule 17a-5 must be made public, and the Commission 
publishes the public portion on EDGAR. It takes on average several 
weeks from the date of receipt of a paper filing of a broker-dealer's 
annual reports until it is scanned and the public portion published on 
EDGAR, and the confidential portion available to Commission staff. In 
contrast, an automated process is used to make the applicable portions 
of annual reports filed on EDGAR available to Commission staff and the 
public, typically within seconds of the electronic filing being made.
---------------------------------------------------------------------------

    \179\ See Letter to Kris Dailey, Vice President, Risk Oversight 
and Operational Regulation, FINRA, from Michael Macchiaroli, 
Associate Director, Division, Commission (Jan. 27, 2017), available 
at https://www.sec.gov/divisions/marketreg/mr-noaction/2017/finra-012717-electronic-filing-annual-reports.pdf (``Annual Reports No-
Action Letter'').
---------------------------------------------------------------------------

    Paragraph (e)(2) of Rule 17a-5 provides that the broker-dealer must 
attach to the financial report an oath or affirmation that, among other 
things, the financial report is true and correct.\180\ The oath or 
affirmation must be made by an individual specified in the rule, such 
as a chief executive officer, and must be made ``before a person duly 
authorized to administer such oaths or affirmations.'' \181\ The 
Commission has promulgated Form X-17A-5 Part III as the means by which 
the broker-dealer provides the oath or affirmation required under 
paragraph (e)(2) of Rule 17a-5.\182\
---------------------------------------------------------------------------

    \180\ See 17 CFR 240.17a-5(e)(2).
    \181\ Id. See also Updated Staff Statement, supra note 6 
(addressing a temporary situation with respect to paper filing and 
notarization requirements that applied to certain filings, which 
included broker-dealer annual reports).
    \182\ See 17 CFR 249.617. See also FOCUS Reporting System; 
Requirements for Financial Reporting, Exchange Act Release No. 14242 
(Dec. 9, 1977), 42 FR 63883 (Dec. 21, 1977) (``The Commission 
proposed the facing page for the annual report based on its 
experience that the processing of the annual report would be greatly 
facilitated if the identification information were submitted in a 
consistent format. The proposed facing page requires basic 
identification information, including the . . . name and address of 
the broker or dealer and its accountant, the oath or affirmation, 
and the itemization of the materials included in the report.''). 
Form X-17A-5 Part III is available at https://www.sec.gov/about/forms/formx-17a-5_3.pdf.
---------------------------------------------------------------------------

    The first sentence of paragraph (e)(3) of Rule 17a-5 provides that 
the annual reports are not confidential, except that, if the Statement 
of Financial Condition in a format that is consistent with Part II or 
Part IIA of Form X-17A-5 \183\ is bound separately from the balance of 
the annual reports filed under paragraph (d) of Rule 17a-5, and each 
page of the balance of the annual reports is stamped ``confidential,'' 
then the balance of the annual reports will be deemed confidential to 
the extent permitted by law.\184\
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    \183\ See 17 CFR 249.617.
    \184\ The Commission is proposing to replace ``deemed 
confidential to the extent permitted by law'' with ``deemed 
confidential for the purposes of section 24(b) of the Act'' for 
consistency with the language used in other rules (e.g., paragraph 
(c)(4) of Rule 17h-2T) and to clarify the legal basis of the rule. 
This proposed amendment is not intended to change the substantive 
meaning of this sentence.
---------------------------------------------------------------------------

    Paragraph (k) of Rule 17a-5 requires a broker-dealer that has been 
approved to use internal models when computing net capital pursuant to 
Appendix E of Exchange Act Rule 15c3-1 \185\ (``ANC broker-dealer'') to 
file a supplemental report on management controls concurrently with the 
annual reports (the ``ANC broker-dealer supplemental report'').\186\ 
The ANC broker-dealer supplemental report must be prepared by a 
registered public accounting firm and must indicate the results of the 
accountant's agreed-upon procedures review of the internal risk 
management control system of the broker-dealer.\187\ As of June 15, 
2022, there were five ANC broker-dealers. The ANC broker-dealer 
supplemental reports average approximately 100 pages in length and are 
generally sent to the Commission staff via email.
---------------------------------------------------------------------------

    \185\ See 17 CFR 240.15c3-1e.
    \186\ See 17 CFR 240.17a-5(k).
    \187\ See id.

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[[Page 23948]]

2. Rule 18a-7 Filing Requirements
    Paragraph (c) of Rule 18a-7, which was modeled on paragraph (d) of 
Rule 17a-5, generally requires an SBSD or a MSBSP for which there is no 
prudential regulator and which is not a broker-dealer to file annual 
reports with the Commission not more than 60 calendar days after the 
fiscal year end of the entity.\188\ As of June 15, 2022, there were 
nine such entities. Paragraph (c)(6) of Rule 18a-7 provides that the 
annual reports ``must be filed with the Commission at the regional 
office of the Commission for the region in which the security-based 
swap dealer or major security-based swap participant has its principal 
place of business and the Commission's principal office in Washington, 
DC, or the annual reports may be filed with the Commission 
electronically in accordance with directions provided on the 
Commission's website.'' \189\
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    \188\ See 17 CFR 240.18a-7(c).
    \189\ See 17 CFR 240.18a-7(c)(6).
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    Paragraph (d)(1) of Rule 18a-7 provides that the SBSD or MSBSP must 
attach to the financial report an oath or affirmation that, among other 
things, the financial report is true and correct.\190\ The oath or 
affirmation must be made by an individual specified in the rule, such 
as a chief executive officer, and must be made ``before a person duly 
authorized to administer such oaths or affirmations.'' \191\
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    \190\ See 17 CFR 240.18a-7(d)(1).
    \191\ See 17 CFR 240.18a-7(d)(1)(ii).
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    The first sentence of paragraph (d)(2) of Rule 18a-7 provides that 
the annual reports are not confidential, except that, if the Statement 
of Financial Condition in a format that is consistent with Part II of 
Form X-17A-5 \192\ is bound separately from the balance of the annual 
reports filed under paragraph (c) of Rule 18a-7, and each page of the 
balance of the annual reports is stamped ``confidential,'' then the 
balance of the annual reports will be deemed confidential to the extent 
permitted by law.\193\
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    \192\ See 17 CFR 249.617.
    \193\ The Commission is proposing to replace ``deemed 
confidential to the extent permitted by law'' with ``deemed 
confidential for the purposes of section 24(b) of the Act'' for 
consistency with the language used in other rules (e.g., paragraph 
(c)(4) of Exchange Act Rule 17h-2T) and to clarify the legal basis 
of the rule. This proposed amendment is not intended to change the 
substantive meaning of this sentence.
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3. Rule 17a-12 Filing Requirements
    Paragraph (b) of Rule 17a-12 requires that every OTC derivatives 
dealer annually file audited financial statements.\194\ Paragraph 
(b)(6) of Rule 17a-12 requires that the OTC derivatives dealer file two 
copies of the audited financial statements at the Commission's 
principal office in Washington, DC.\195\ As of June 15, 2022, there 
were three OTC derivatives dealers. All three OTC derivatives dealers 
voluntarily file audited financial statements via EDGAR.
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    \194\ See 17 CFR 240.17a-12(b). Although an OTC derivatives 
dealer is a type of broker-dealer, paragraph (p) of Rule 17a-5 
provides that an OTC derivatives dealer may comply with Rule 17a-5 
by complying with Rule 17a-12.
    \195\ See 17 CFR 240.17a-12(b)(6).
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    Paragraph (c)(2) generally provides that the OTC derivatives dealer 
must attach to the audited financial statements an oath or affirmation 
that, to the best knowledge and belief of the person making the oath or 
affirmation, among other things, the audited financial statements and 
required schedules are true and correct.\196\ The oath or affirmation 
must be made by an individual specified in the rule, such as a duly 
authorized officer, and must be made before a person duly authorized to 
administer such oaths.\197\
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    \196\ See 17 CFR 240.17a-12(c)(2).
    \197\ See 17 CFR 240.17a-12(c)(2).
---------------------------------------------------------------------------

    Paragraph (c)(3) of Rule 17a-12 provides that all of the statements 
filed pursuant to paragraph (b) of Rule 17a-12 are confidential,\198\ 
except that they will be available for use by any official or employee 
of the United States or by any other person to whom the Commission 
authorizes disclosure of such information as being in the public 
interest.\199\
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    \198\ The Commission is proposing to replace ``shall be 
confidential'' with ``shall be deemed confidential for the purposes 
of section 24(b) of the Act'' for consistency with the language used 
in other rules (e.g., paragraph (c)(4) of Exchange Act Rule 17h-2T) 
and to clarify the legal basis of the rule. This proposed amendment 
is not intended to change the substantive meaning of this sentence.
    \199\ See 17 CFR 240.17a-12(c)(3). The Commission is proposing 
to replace ``to whom the Commission authorizes disclosure of such 
information as being in the public interest'' with ``to whom the 
Commission authorizes disclosure of such information'' to conform 
with section 24 of the Exchange Act and the rules thereunder.
---------------------------------------------------------------------------

    Paragraphs (k), (l), and (m) of Rule 17a-12 require that the 
accountant's report on material inadequacies and reportable conditions, 
accountant's report on management controls, and accountant's report on 
inventory pricing and modeling, respectively, be filed concurrently 
with the annual audit report.\200\
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    \200\ See 17 CFR 240.17a-12(k), (l), and (m).
---------------------------------------------------------------------------

4. Proposed Amendments to Rules 17a-5, 18a-7, and 17a-12
    The Commission is proposing amendments to Rules 17a-5, 18a-7, and 
17a-12 that would require that the annual reports and related annual 
filings that firms must file under Rules 17a-5, 18a-7, and 17a-12 be 
filed with the Commission electronically on EDGAR in a structured data 
language.\201\ Specifically, the Commission proposes amending 
paragraphs (d)(6) and (k) of Rule 17a-5, paragraph (c)(6) of Rule 18a-
7, and paragraphs (b)(6), (k), (l), and (m) of Rule 17a-12 to provide 
that the annual reports and related annual filings must be filed with 
the Commission electronically on EDGAR in accordance with the EDGAR 
Filer Manual, as defined in Rule 11 of Regulation S-T, and must be 
filed in accordance with the requirements of Regulation S-T. The 
amended paragraphs would also provide that the annual reports must be 
submitted in Inline XBRL (i.e., as an Interactive Data File in 
accordance with 17 CFR 232.405 (``Rule 405 of Regulation S-T'')).\202\ 
If these proposed amendments are adopted, the EDGAR Filer Manual would 
be updated to reflect these amendments to Rules 17a-5, 18a-7, and 17a-
12. As is currently the case, first-time EDGAR filers would need to 
obtain EDGAR access credentials.\203\
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    \201\ For further discussion of the proposed structured data 
requirements, including Inline XBRL requirements, see infra section 
VII.A.
    \202\ See Rule 405(a)(3) of Regulation S-T, which specifies 
Inline XBRL as the data language to be used for the Interactive Data 
File. See 17 CFR 232.405(a)(3).
    \203\ Instructions for obtaining EDGAR access credentials are on 
the Commission's website at www.sec.gov/divisions/marketreg/broker-dealer-edgar-access-credentials.htm.
---------------------------------------------------------------------------

    The Commission is proposing to amend paragraph (e)(2) of Rule 17a-5 
to add a new paragraph (e)(2)(iii). The new paragraph would provide 
that the notarized oath or affirmation must be kept ``for a period of 
not less than six years, the first two years in an easily accessible 
place and in accordance with the requirements of Rule 17a-4.'' \204\ 
Similarly, the Commission is proposing to amend paragraph (d)(1) of 
Rule 18a-7 to add a new paragraph (d)(1)(iii). The new paragraph would 
provide that the notarized oath or affirmation must be kept ``for a 
period of not less than six years, the first two years in an easily 
accessible place in accordance with the requirements of Rule 18a-6.'' 
\205\ The

[[Page 23949]]

Commission also is proposing an analogous change to paragraph (c) of 
Rule 17a-12 by redesignating current paragraph (c)(3) as (c)(4) and 
adding a new paragraph (c)(3). The new paragraph would state that the 
oath or affirmation must be kept ``for a period of not less than six 
years, the first two years in an easily accessible place and in 
accordance with the requirements of Rule 17a-4.'' \206\
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    \204\ See paragraph (e)(2)(iii) of proposed Rule 17a-5.
    \205\ See paragraph (d)(1)(iii) of proposed Rule 18a-7. As 
stated above, with respect to Rules 17a-5 and 18a-7, the oath or 
affirmation must be made ``before a person duly authorized to 
administer such oaths or affirmations.'' The Commission recently 
updated Volume I of the EDGAR Filer Manual so that, in connection 
with EDGAR access requests, the required notarized signature of an 
authorized individual may be obtained by ``manual, electronic, or 
remote online notarization recognized by the law of any state or 
territory of the United States or the District of Columbia, and must 
include a manual or electronic signature of the authorized 
individual, as required by the notary for the type of notarization 
at issue. Foreign filers who do not have access to a United States 
notary public must use the foreign local equivalent of a notary 
public or obtain notarization by a remote online notary recognized 
by the law of any state or territory of the United States or the 
District of Columbia.'' See Adoption of Updated EDGAR Filer Manual, 
Proposed Collection and Comment Request for Form ID, Release Nos. 
33-10902; 34-90637; 39-2536, IC-34137 (Dec. 11, 2020), 86 FR 7968, 
7969 (Feb. 3, 2021). If the Commission were to adopt the proposed 
amendments to Rules 17a-5 and 18a-7, these recent updates to the 
EDGAR Filer Manual would apply to the oath or affirmation 
requirement in both rules. The recordkeeping requirements of Rules 
17a-5 and 18a-7 could be met by keeping an electronic copy of the 
notarized oath or affirmation for the required length of time.
    \206\ See paragraph (c) of Rule 17a-12, as proposed to be 
amended.
---------------------------------------------------------------------------

    In light of the proposed requirement that the annual reports and 
related annual filings under Rules 17a-5 and 18a-7 be filed 
electronically on EDGAR, the Commission is proposing amendments to the 
confidentiality provisions of the first sentence of paragraphs (e)(3) 
of Rule 17a-5 and (d)(2) of Rule 18a-7. Those sentences contain 
requirements that certain parts of the reports be ``bound separately'' 
and that certain pages be ``stamped confidential,'' which do not apply 
to the process of designating portions of the annual reports 
confidential when filing them on EDGAR.\207\ The Commission is 
proposing amendments to the confidentiality provisions to conform to 
the proposed electronic process for filing on EDGAR. The Commission 
proposes amending the first sentence of paragraph (e)(3) of Rule 17a-5 
to state that the annual reports ``may be filed as: (i) One public 
document; or (ii) Two documents: (A) A document consisting of the 
Statement of Financial Condition, the notes to the Statement of 
Financial Condition, and the report of the independent public 
accountant covering the Statement of Financial Condition, which is not 
confidential; and (B) A document containing the balance of the annual 
reports for which confidential treatment may be requested and which 
will be deemed confidential for the purposes of section 24(b) of the 
Act.''
---------------------------------------------------------------------------

    \207\ See supra sections IV.A.1. through 3. At present, a 
broker-dealer filing its annual reports on EDGAR designates the 
portions of the reports for which it is requesting confidentiality 
by checking a ``Request Confidentiality'' box when it uploads the 
relevant documents. As with the other aspects of the current 
voluntary filing program, this aspect of the EDGAR filing process 
would not change.
---------------------------------------------------------------------------

    The Commission is proposing to replace ``deemed confidential to the 
extent permitted by law'' with ``deemed confidential for the purposes 
of section 24(b) of the Act'' for consistency with the language used in 
other rules (e.g., paragraph (c)(4) of Rule 17h-2T) and to clarify the 
legal basis of the rule. The Commission is also proposing this change 
in paragraph (a)(2) of Rule 17a-5 regarding FOCUS Report filings so 
that the language in Rule 17a-5 is internally consistent. The proposed 
amendments are not intended to change the substantive meaning of these 
provisions.
    The phrase ``for which confidential treatment may be requested,'' 
in proposed paragraph (e)(3)(ii)(B) is not in the current rule. This 
proposed new language is intended to clarify that an EDGAR filer may 
request confidential treatment, but that ultimately whether any filed 
material is confidential is determined pursuant to applicable law, 
including but not limited to the Freedom of Information Act,\208\ and 
Commission rules governing requests for confidential treatment.\209\ 
The Commission is proposing to make analogous changes to the first 
sentence of paragraph (d)(2) of Rule 18a-7. Rule 17a-12 does not 
contain an analogous provision relating to separately binding the 
public portion of the report from the portion for which confidential 
treatment will be requested. However, the Commission is proposing to 
amend current paragraph (c)(3) of Rule 17a-12 (which is proposed to be 
re-designated as paragraph (c)(4)) to add language to state that an 
EDGAR filer may request confidential treatment, but that ultimately 
whether any filed material is confidential is determined pursuant to 
applicable law, including but not limited to the Freedom of Information 
Act,\210\ and Commission rules governing requests for confidential 
treatment.\211\
---------------------------------------------------------------------------

    \208\ See generally 5 U.S.C. 552.
    \209\ See 17 CFR 240.24b-2.
    \210\ See id.
    \211\ See 17 CFR 240.24b-2.
---------------------------------------------------------------------------

    Currently, a firm filing annual reports with the Commission under 
Rules 17a-5, 18a-7, and 17a-12 using EDGAR submits the information 
contained in a ``facing page'' to the annual reports by completing an 
electronically fillable form on the EDGAR system.\212\ The inputted 
information, which includes information about the firm submitting the 
filing and about the filing itself, is subsequently converted into a 
custom XML-based data language specific to the Form X-17A-5 Part III 
facing page.\213\ The documents required to be filed are then uploaded 
electronically. Currently, the documents are generally uploaded as PDF 
documents. As with other entities that make submissions through EDGAR, 
these submissions are subject to the provisions of Regulation S-T and 
the EDGAR Filer Manual, as defined in Rule 11 of Regulation S-T.\214\
---------------------------------------------------------------------------

    \212\ See EDGAR Filer Manual (Volume II) version 64 (Dec. 2022), 
at 8.2.20. The EDGAR Filer Manual is available at https://www.sec.gov/info/edgar/edmanuals.htm. See also Information for EDGAR 
Filers, available at https://www.sec.gov/info/edgar.shtml#guidance.
    \213\ See EDGAR X-17A-5 Part III Technical Specification, 
available at https://www.sec.gov/info/edgar/specifications/form-x-17a-5-xml-tech-specs.htm.
    \214\ See 17 CFR 232.11.
---------------------------------------------------------------------------

    Under the proposal, firms filing annual reports or annual 
supplemental reports with the Commission under Rules 17a-5, 18a-7, and 
17a-12 would be required to apply machine-readable Inline XBRL data 
``tags'' to the disclosures contained in those documents before filing 
them through EDGAR. These data tags can include numerical detail tags 
(which are used for tagging individual data points) for individual 
reported numeric values, such as line items on a financial statement, 
or text block tags for textual narratives, such as the discussions in 
the notes to financial statements. In complying with the proposed 
Inline XBRL requirements, filers could use Inline XBRL tagging software 
to apply Inline XBRL tags to their reports before submitting them to 
EDGAR, or could employ a tagging service provider to apply the Inline 
XBRL tags to their reports on their behalf. The Commission expects the 
proposed structuring requirements would provide informational benefits 
to users of the disclosures provided in the reports. Specifically, the 
Commission believes requiring the annual and supplemental reports to be 
structured would make the information included on the reports more 
readily accessible for retrieval, aggregation, and comparison across 
different broker-dealers, OTC derivatives dealers, SBSDs, and MSBSPs, 
and across different time periods, as compared to an unstructured PDF, 
HTML, or ASCII format requirement for the reports.\215\ For the 
confidential portion of the report, such benefits would redound 
indirectly to investors and markets through more timely and detailed 
supervision of filers.

[[Page 23950]]

For the public portion of the report, such as the Statement of 
Financial Condition and the notes thereto, such benefits would redound 
directly to public users of the data, which could include investors, 
analysts, and financial media, as well as indirectly to investors and 
markets through more timely and detailed supervision of filers.\216\ 
Evidence from the Commission's XBRL requirement for public companies 
indicates that enhanced accessibility to financial and related 
information may be particularly important for disclosures made by 
smaller broker-dealers, as investors in small companies have been 
observed to prefer the XBRL filings made by those companies over the 
non-XBRL version of those filings.\217\ In addition, the proposed 
structured data requirement would enable EDGAR to perform technical 
validations (i.e., programmatic checks to ensure the documents are 
appropriately standardized, formatted, and complete) upon intake of the 
reports, thus potentially improving the quality of the filed data by 
decreasing the incidence of non-substantive errors (such as the 
omission of values from fields that should always be populated).
---------------------------------------------------------------------------

    \215\ For further discussion of the expected benefits of the 
proposed structuring requirements, see infra sections VII.A and 
X.C.1.b.
    \216\ Unlike annual audited financial statements filed with the 
Commission by broker-dealers, SBSDs, and MSBSPs, all of the annual 
audited financial statements OTC derivatives dealers filed under 
paragraph (b) of Rule 17a-12 are confidential.
    \217\ See Yu Cong, Hui Du, and Miklos A. Vasarhelyi, ``Are XBRL 
Files Being Accessed? Evidence from the SEC EDGAR Log File 
Dataset,'' Journal of Information Systems 32(3), 23-29 (concluding 
that ``small company investors not only access XBRL files but also 
prefer them to the non-XBRL files when both are available to 
download for a filing''). Because the Commission has only recently 
begun requiring Inline XBRL (rather than ``exhibit-only'' XBRL) 
reporting, most empirical observations are based on samples with 
exhibit-only XBRL requirements.
---------------------------------------------------------------------------

    For example, Commission staff could leverage the machine-
readability of the computational schedules to automatically flag any 
mathematical inconsistencies or calculation errors therein. Market 
participants (such as customers, analysts, or other broker-dealers) 
could also benefit from direct use of the machine-readable disclosures; 
for example, analysts could leverage the machine-readability of 
financial statements to determine which broker-dealers have 
comparatively high proportions of liabilities due to affiliates. 
Without the proposed structured data requirements, performing these 
types of analyses would need to be done manually, such as by gathering 
the current and former financial statements for each broker-dealer and 
entering all financial line items of interest into databases, resulting 
in a significantly less efficient and precise process.
    The proposed Inline XBRL requirement would apply to all disclosures 
required by Form X-17A-5 Part III other than disclosures required on 
the facing page. Inline XBRL was designed to accommodate financial 
statement information, including the particular metadata (e.g., the 
relevant fiscal period, whether the line item is on the balance sheet, 
whether the line item is a credit or debit) that must be linked to each 
data point within the financial statements to fully convey its semantic 
meaning to a machine reader. Other exhibits filed on Form X-17A-5 Part 
III include reports such as compliance or exemption reports that 
feature extended narrative descriptions, and whereas custom XML data 
languages are only technically suitable to accommodate brief narrative 
descriptions, Inline XBRL is technically suitable to accommodate longer 
narrative descriptions with presentation capabilities that preserve 
human-readability while maintaining machine-readability.\218\
---------------------------------------------------------------------------

    \218\ See supra note 86.
---------------------------------------------------------------------------

    The facing page of Form X-17A-5 Part III is currently a fillable 
form that EDGAR converts into a custom XML data language, and would 
remain so under the proposal. As a result, data users would be unable 
to incorporate the custom XML disclosures on the facing page into the 
same datasets and applications as the Inline XBRL disclosures on the 
rest of Form X-17A-5 Part III, and run analyses across the differently 
formatted Form X-17A-5 Part III disclosures, without undertaking data 
conversion processes that are frequently burdensome and imprecise. 
Similarly, any technical validations programmed into EDGAR would be 
unable to check for any inappropriate inconsistencies between 
disclosures on Inline XBRL exhibits and disclosures on custom XML 
exhibits on a given Form X-17A-5 Part III, thus reducing the benefit of 
improved data quality that would be likely to result from structured 
data requirements. Finally, some Form X-17A-5 Part III filers may 
already be using Inline XBRL to structure similar data for internal 
business purposes, such as through the use of ERP systems; these filers 
may prefer to use Inline XBRL to file the entirety of Form X-17A-5 Part 
III.\219\ Nonetheless, the Commission believes the benefits associated 
with requiring data languages more technically suitable for the 
particular disclosures on each exhibit, as described earlier in this 
section, would justify any such drawbacks.
---------------------------------------------------------------------------

    \219\ See infra note 570 (discussing the integration of XBRL 
into many ERP systems).
---------------------------------------------------------------------------

B. Rule 17h-2T and Form 17-H

    Under section 17(h) of the Exchange Act and Rule 17h-2T, broker-
dealers that are part of a holding company structure and that maintain 
capital of at least $20 million must file quarterly and annual risk 
assessment reports with the Commission.\220\ The reports are filed 
using Form 17-H.\221\ The form elicits information concerning the 
financial and securities activities of the holding company and 
affiliates and subsidiaries of the broker-dealer that are reasonably 
likely to have a material impact on the financial or operational 
condition of the broker-dealer. Certain of this information must be 
entered directly onto the form in individually numbered fields. Other 
information--which is specified in Items 1, 2, 3, and 4 of the form--is 
provided by submitting copies of documents, narrative descriptions, or 
financial statements.\222\
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    \220\ On June 29, 2020, the Commission exempted from the 
requirements of Rules 17h-1T and 17h-2T broker-dealers that do not 
hold funds or securities for, or owe money or securities to, 
customers and do not carry customer accounts, or that are exempt 
from Rule 15c3-3 pursuant to paragraph (k)(2) of that rule, and that 
maintain total assets of less than $1 billion and capital, including 
debt subordinated in accordance with appendix D of Rule 15c3-1 under 
the Exchange Act (``Rule 15c3-1d''), of less than $50 million. See 
Order Under Section 17(h)(4) of the Securities Exchange Act of 1934 
Granting Exemption from Rule 17h-1T and Rule 17h-2T for Certain 
Broker-Dealers Maintaining Capital, Including Subordinated Debt of 
Greater than $20 Million but Less than $50 Million, Exchange Act 
Release No. 89184 (June 29, 2020), available at https://www.sec.gov/rules/exorders/2020/34-89184.pdf.
    \221\ See 17 CFR 249.328T. Form 17-H is available at https://www.sec.gov/about/forms/form17-h.pdf.
    \222\ See Form 17-H, Item 1 (copy of organizational chart), Item 
2 (copies of financing, capital adequacy, and risk management and 
other policies or systems), Item 3 (description of any material 
pending legal or arbitration proceedings), and Item 4 (certain 
consolidated and consolidating financial statements).
---------------------------------------------------------------------------

    Paragraph (a)(2) of Rule 17h-2T requires that the reports be filed 
with the Commission at its principal office in Washington, DC. The 
reports must be filed within 60 calendar days of the end of each fiscal 
quarter, but the year-end financial statements included in the reports 
may be filed separately from the remainder of the broker-dealer's 
fiscal fourth quarter report within 105 calendar days of the end of 
that quarter. Presently, broker-dealers may choose to file these 
reports on EDGAR.\223\ As of September 30, 2022, approximately 238 of 
the 245 broker-dealers subject to Rule 17h-2T utilized EDGAR to make 
their required Form 17-H filings. The remaining firms submitted them in

[[Page 23951]]

paper form. For electronic filing on EDGAR, the facing page of Form 17-
H and Part II of Form 17-H are fillable forms that EDGAR subsequently 
converts into a structured, XML-based data language specific to Form 
17-H. The information required by Items 1, 2, 3, and 4 of Part I of 
Form 17-H is uploaded in separate documents. These documents are 
currently generally uploaded as PDF documents.
---------------------------------------------------------------------------

    \223\ See supra note 230 at 8.2.23.
---------------------------------------------------------------------------

    The Commission proposes amending paragraph (a)(2) of Rule 17h-2T to 
require that the quarterly and annual risk assessment reports be filed 
with the Commission electronically through EDGAR. The process used to 
access EDGAR would be the same used by those broker-dealers voluntarily 
using EDGAR for their respective quarterly and annual risk assessment 
reports. As proposed to be amended, the paragraph would also provide 
that the financial statements required by Item 4 of Form 17-H must be 
submitted in Inline XBRL.\224\ With respect to the proposed Inline XBRL 
requirement, the proposed process would mirror the proposed process 
described above for broker-dealers filing annual reports in Inline 
XBRL.\225\ Specifically, broker-dealers would apply machine-readable 
Inline XBRL tags to the financial statements included in the quarterly 
and annual risk assessment reports. The existing custom XML requirement 
for the facing page and Part II of Form 17-H would remain in place, as 
would the PDF requirement for Item 1, 2, and 3 of Form 17-H (which 
require copies of organizational charts, risk management procedures, 
and descriptions of pending legal proceedings that the broker-dealer 
maintains pursuant to paragraph (a)(1) of Rule 17h-1T).\226\
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    \224\ For further discussion of the proposed structured data 
requirements, including Inline XBRL requirements, see infra section 
VII.A.
    \225\ See supra section IV.A.4.
    \226\ See 17 CFR 240.17h-1T(a)(1).

           Proposed Structured Data Requirements for Form 17-H
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Inline XBRL...............................  Item 4.
Custom XML................................  Execution page, Part II.
Unstructured PDF..........................  Items 1, 2, and 3.
------------------------------------------------------------------------

    The Commission believes requiring Form 17-H to be structured would 
make the information filed on Form 17-H more readily accessible for 
retrieval, aggregation, and comparison across different broker-dealers. 
For example, Commission staff could leverage the machine-readability of 
the financial statements to automatically flag broker-dealers with 
current asset ratios lower than a certain value, and assess whether any 
such broker-dealers warrant further examination. Without the proposed 
structured data requirements, performing these types of analyses would 
need to be done manually, such as by gathering the current and former 
financial statements for each Form 17-H filer and entering all 
financial line items of interest into databases, resulting in a 
significantly less efficient and precise process. In addition, the 
proposed structured data requirement would enable EDGAR to perform 
technical validations (i.e., programmatic checks to ensure the 
documents are appropriately standardized, formatted, and complete) upon 
intake of the reports, thus potentially improving the quality of the 
filed data by decreasing the incidence of non-substantive errors (such 
as the omission of values from fields that should always be populated).
    The proposed Inline XBRL requirement would apply specifically to 
the financial statements required by Item 4 of Form 17-H. The 
Commission believes an Inline XBRL would be appropriate for the 
financial statements, because Inline XBRL was designed to accommodate 
financial statement information, including the particular metadata 
(e.g., the relevant fiscal period, whether the line item is on the 
balance sheet, whether the line item is a credit or debit) that must be 
linked to each data point within the financial statements to fully 
convey its semantic meaning to a machine reader.
    By contrast, the facing page and Part II of Form 17-H are currently 
fillable forms that EDGAR converts into a custom XML data language, and 
would remain so under the proposal. As a result, data users would be 
unable to incorporate the custom XML disclosures on the facing page and 
Part II into the same datasets and applications as the Inline XBRL 
disclosures on Item 4, and run analyses across the differently 
formatted Form 17-H disclosures, without undertaking data conversion 
processes that are frequently burdensome and imprecise. Similarly, any 
technical validations (i.e., automated checks to ensure filed documents 
are appropriately standardized, formatted, and complete) programmed 
into EDGAR would be unable to check for any inappropriate 
inconsistencies between disclosures on the facing page and Part II and 
disclosures on Item 4 on a given Form 17-H, thus reducing the benefit 
of improved data quality that often arises from structured data 
requirements. Finally, some Form 17-H filers may already be using 
Inline XBRL to structure similar data for internal business purposes, 
such as through the use of ERP systems; these filers may prefer to use 
Inline XBRL to file the entirety of Form 17-H.\227\ Nonetheless, the 
Commission believes the benefits of retaining the existing custom XML 
requirement for the facing page and for Part II--specifically, the 
alleviation of compliance burdens to be incurred by broker-dealers as a 
result of the proposed requirements--would justify any such drawbacks.
---------------------------------------------------------------------------

    \227\ See infra note 570 (discussing the integration of XBRL 
into many ERP systems).
---------------------------------------------------------------------------

    The Commission is proposing to require Form 17-H filers to file 
copies of existing documents, such as copies of organizational charts 
and risk management procedures, as unstructured PDF attachments. The 
Commission believes requiring Form 17-H filers to retroactively 
structure these existing documents, which were prepared for purposes 
outside of fulfilling the Commission's disclosure requirements, would 
likely impose costly compliance burdens on broker-dealers without 
justifying the commensurate informational benefit associated with more 
efficient disclosure use. Thus, the Commission does not believe 
structured data requirements would be warranted for these copies of 
existing documents.
Request for Comment
    42. Would it be appropriate to require the annual reports or annual 
supplemental reports that must be filed with the Commission under Rule 
17a-5, Rule 18a-7, and Rule 17a-12 to be submitted electronically with 
the Commission on the EDGAR system? If so, explain why. If not, explain 
why not. If the Commission requires that the annual reports or annual 
supplemental reports that must be filed with the Commission under Rule 
17a-5, Rule 18a-7, and Rule 17a-12 be submitted electronically with the 
Commission on the EDGAR system, would it be appropriate to require 
those annual reports or annual supplemental reports to be filed in a 
structured data language? If so, explain why. If not, explain why not.
    43. Would broker-dealers, OTC derivatives dealers, SBSDs, MSBSPs, 
or certain of these firms, experience practical difficulties or incur 
significant costs in preparing and submitting these reports 
electronically on EDGAR in a structured data language? If so, explain 
why they would experience difficulties and quantify the costs. What, if 
any, costs would be associated with requiring these firms to file their 
annual reports electronically on EDGAR in a

[[Page 23952]]

structured data language? Are those costs more, less or the same as 
those currently expended to file annual reports?
    44. Does the current requirement to file annual reports and annual 
supplemental reports either in paper or via email or on EDGAR (where 
they are generally uploaded as PDF documents) provide flexibility to 
broker-dealers, OTC derivatives dealers, SBSDs, or MSBSPs that could be 
lost if these filings were required to be made electronically on EDGAR 
in a structured data language? Explain why or why not. Should the 
Commission instead require that all of the annual reports or annual 
supplemental reports be filed electronically on EDGAR as PDF documents, 
as broker-dealers have the option of doing currently under the Annual 
Reports No-Action Letter? Explain, and identify the costs of these two 
alternatives.
    45. If the Commission requires the annual reports and annual 
supplemental reports to be filed in a structured data language, should 
the Commission require broker-dealers, OTC derivatives dealers, SBSDs, 
and MSBSPs to use Inline XBRL or a custom XML data language for the 
reports or another structured data language? If not, which data 
language, if any, should the Commission permit or require and why? If 
certain firms were not required to file their annual reports and annual 
supplemental reports using Inline XBRL or a custom XML data language, 
should they be required to file these reports electronically using PDF 
format? Would a requirement to file these reports in a structured data 
language impose additional costs on or create cost efficiencies for 
these firms as compared to other languages? Would a requirement to file 
these reports in a structured data language enable the public to 
analyze the public information in the reports more efficiently and 
effectively? If yes, how would this efficiency and effectiveness affect 
investors, securities markets, broker-dealers, OTC derivatives dealers, 
SBSDs, or MSBSPs? Would a requirement to file these reports in a non-
structured data language result in similar benefits for lower costs as 
compared to a structured data language? Even if the proposal to require 
these reports to be filed electronically on EDGAR in a structured data 
language would provide greater benefits as compared to the current 
requirement to file via paper or on EDGAR in an unstructured data 
language, would an alternative manner of filing provide even more 
benefits than the Commission's proposal relative to the costs of the 
alternative approach? If so, identify the alternative approach and 
explain why or why not.
    46. If the Commission requires the annual reports or annual 
supplemental reports to be filed in a structured data language on 
EDGAR, should the Commission apply these requirements to all broker-
dealers, OTC derivatives dealers, SBSDs, and MSBSPs? Explain why or why 
not. If not, identify an alternative and provide empirical support for 
the alternative. If the structured data requirement should not apply to 
all of these firms, should the Commission exempt certain firm types? 
For example, should the Commission apply the structured data 
requirement to a subset of broker-dealers consisting of some or all of 
the following types of broker-dealers: (1) broker-dealers that carry 
customer accounts and receive or hold customer cash and securities; (2) 
broker-dealers that are OTC derivatives dealers; (3) broker-dealers 
with a net capital requirement below a certain amount (e.g., $250,000); 
(4) broker-dealers below a certain asset threshold, such as $500,000 or 
less in total assets; (5) broker-dealers with less than $250,000 or 
less in total revenues; (6) broker-dealers with capital less than $50 
million and with less than $1 billion in total assets; (7) broker-
dealers with an aggregate amount outstanding under repurchase 
agreements, securities loan contracts, and bank loans less than a 
certain threshold (e.g., $1 billion); (8) broker-dealers with less than 
a certain amount of free credit balances and other credit balances 
(e.g., $1 million); or (9) broker-dealers with less than a certain 
amount of tentative net capital (e.g., $500 million).\228\ Commenters 
should also identify whether a combination of the aforementioned 
criteria; or some other criteria would be appropriate.
---------------------------------------------------------------------------

    \228\ Tentative net capital is defined in Rule 15c3-1. See 17 
CFR 240.15c3-1(c)(15).
---------------------------------------------------------------------------

    47. Would it be appropriate to require ANC broker-dealer and OTC 
derivatives dealer supplemental reports to be submitted electronically 
on EDGAR? If so, explain why. If not, explain why not. Would it be 
appropriate to require ANC broker-dealer and OTC derivatives dealer 
supplemental reports to be submitted in Inline XBRL? If so, explain 
why. If not, explain why not. If a different structured data language 
should be required, explain why. If there should be no structured data 
language requirement for the ANC broker-dealer and OTC derivatives 
dealer supplemental reports, explain why not.
    48. Would it be appropriate to require Form 17-H to be submitted 
electronically with the Commission on the EDGAR system? If so, explain 
why. If not, explain why not. If the Commission requires Form 17-H to 
be submitted electronically with the Commission on the EDGAR system, 
would it be appropriate to require Form 17-H to be filed in a 
structured data language? If so, explain why. If not, explain why not.
    49. Would Form 17-H filers experience practical difficulties or 
incur significant costs in preparing and submitting these reports 
electronically on EDGAR in a structured data language? If so, explain 
why they would experience difficulties and quantify the costs. What, if 
any, costs would be associated with requiring these firms to file Form 
17-H electronically on EDGAR in a structured data language? Are those 
costs more, less or the same as those currently expended to file Form 
17-H?
    50. Does the current requirement to file Form 17-H either in paper 
or via email or on EDGAR provide flexibility to Form 17-H filers that 
could be lost if these filings were required to be made electronically 
on EDGAR in a structured data language? Explain why or why not. Should 
the Commission instead require that the entirety of Form 17-H be filed 
electronically on EDGAR as PDF documents? Explain, and identify the 
costs of these two alternatives.
    51. Would requiring different structured data languages for 
different Items of Form 17-H provide benefits to data users or filers 
that justify any drawbacks associated such an approach? Please explain 
the nature of such benefits and drawbacks, and why the benefits would 
justify the drawbacks (or vice versa).
    52. If a mix of structured data languages would be appropriate, 
should the specific data languages proposed for each Form 17-H Item be 
modified? For example, are there Form 17-H Items proposed as custom XML 
documents that would be better suited as Inline XBRL documents, or vice 
versa? Please explain why or why not.
    53. Would requiring Form 17-H filers to file copies of existing 
documents as unstructured PDF attachments, rather than requiring filers 
to retroactively structure those documents in machine-readable data 
languages, ease compliance burdens on Form 17-H filers? If so, would 
the benefits to data users of structuring these existing documents 
justify the reduced compliance burden on Form 17-H filers? Please 
explain why or why not.
    54. Rules 15c3-1, 15c3-3, 17a-4, 17a-5, 17a-11, and 17a-12 require 
a broker-dealer to send notices to the

[[Page 23953]]

Commission after the occurrence of certain events. Similarly, Rules 
18a-1, 18a-4, 18a-6, 18a-7, and 18a-8 require SBS Entities to send 
notices to the Commission after the occurrence of certain events. 
Currently, such notices must be transmitted to the Commission through 
an email address provided on the Commission's website, or 
alternatively, delivered to the principal office of the Commission in 
Washington, DC and the regional office of the Commission for the region 
in which the broker or dealer has its principal place of business. 
Should the Commission require such reports to be submitted through the 
EDGAR system in a structured data language? Explain why or why not.

V. Other Forms, Reports or Notices

    The Commission proposes that the following forms, reports and 
notices be filed or submitted on EDGAR:

------------------------------------------------------------------------
                                 Filer/submitter
    Form, report or notice             type         Proposed amendments
------------------------------------------------------------------------
Form X-17A-19: Information      Exchange or        The form and
 Required of National            Association.       instructions to the
 Securities Exchanges and                           form (17 CFR
 Registered National                                249.635), and
 Securities Associations                            corresponding
 pursuant to sections 17 and                        Exchange Act Rule
 19 of the Exchange Act and                         17a-19 (17 CFR
 Rule 17a-19 thereunder.                            240.17a-19).
Report of Change in Membership  .................  Rule 101(a) of
 Status.                                            Regulation S-T (17
                                                    CFR 232.101(a)).
Notices pursuant to Rule 3a71-  Certain            17 CFR.240.3a71-
 3(d)(1)(vi) That Associated     registered SBSDs   3(d)(1)(vi) (Rule
 Persons of Certain              or registered      3a71-3(d)(1)(vi)).
 Registrants May Conduct         brokers that      17 CFR 232.101(a),
 Arranging, Negotiating, or      meet certain       232.201(a), and
 Executing Activity in           capital and        232.202(a) (Rule
 Reliance on the Conditional     other              101(a), 201(a) and
 Exception from SBSD De          requirements.      202(a) of Regulation
 Minimis Thresholds (and any                        S-T).
 withdrawals of notices).
Notices (and any amendments to  SBS Entity.......  17 CFR 240.15fi-3(c)
 the notices) to the                                (Rule 15fi-3(c)).
 Commission of Security-Based                      17 CFR 232.101(a) and
 Swap Valuation Disputes                            (d) (Rule 101(a) and
 pursuant to Rule 15fi-3(c).                        (d) of Regulation S-
                                                    T).
Compliance Reports pursuant to  SBS Entity.......  17 CFR 240.15fk-
 Rule 15fk-1(c)(2)(ii)(A).                          1(c)(2)(ii)(A).
                                                    (Rule 15fk-
                                                    1(c)(2)(ii)(A)).
                                                   17 CFR 232.101(a)
                                                    (Rule 101(a) of
                                                    Regulation S-T).
------------------------------------------------------------------------

A. Notices Pursuant to Rule 17a-19 and Form X-17A-19

    Generally, before commencing business activities, a broker-dealer 
must become a member of an SRO. SROs assist the Commission in 
regulating the activities of broker-dealers. Rule 17a-19 requires every 
national securities exchange and registered national securities 
association to file a Form X-17A-19 with the Commission at its 
principal office in Washington, DC and with the Securities Investor 
Protection Corporation (``SIPC'') within five business days of the 
initiation, suspension, or termination of any member and, when 
terminating the membership interest of any member, to notify that 
member of its obligation to file financial reports as required by 
paragraph (b) of Rule 17a-5.\229\ As of June 15, 2022, there were 24 
national securities exchanges and one registered national securities 
association.\230\
---------------------------------------------------------------------------

    \229\ 17 CFR 240.17a-5(b).
    \230\ See Self-Regulatory Organization Rulemaking, available at 
https://www.sec.gov/rules/sro.shtml.
---------------------------------------------------------------------------

    The instructions to Form X-17A-19 provide that the original of the 
form must be mailed to the Commission at its principal office and a 
copy of the form must be mailed to SIPC. Both the original and the copy 
must be ``executed by a manual signature.'' Upon the Commission's 
receipt of a Form X-17A-19 filing, the information is entered into a 
database, which is regularly shared with the SROs. Commission staff use 
the information contained in Form X-17A-19 to assign the appropriate 
SRO as the designated examining authority for the member firms. This 
information is also used by SIPC in determining which SRO is the 
collection agent for the SIPC Fund.\231\
---------------------------------------------------------------------------

    \231\ SIPC members are required to pay annual assessments to the 
SIPC Fund which is used to protect customer assets when a SIPC-
member brokerage firm fails financially.
---------------------------------------------------------------------------

    The Commission proposes to amend this requirement to provide that 
Form X-17A-19 must be filed with the Commission electronically on EDGAR 
in accordance with the EDGAR Filer Manual, as defined in Rule 11 of 
Regulation S-T, and in accordance with the requirements of Regulation 
S-T. Accordingly, Form X-17A-19 would be filed in a custom XML-based 
data language.\232\ As is the case with most of the Commission's other 
XML-based forms, such as the aforementioned facing page to Form X-17A-5 
Part III,\233\ national securities exchanges and registered national 
securities associations would comply with the custom XML requirement by 
either inputting the information into a fillable web form that EDGAR 
would then convert into the custom XML-based data language, or 
submitting the information directly to EDGAR in the custom XML-based 
data language.
---------------------------------------------------------------------------

    \232\ Requirements to submit forms on EDGAR in custom XML 
structured data languages are set forth in the EDGAR Filer Manual, 
and the specific XML requirements for Form X-17A-19, if adopted, 
would be included in an updated version of the EDGAR Filer Manual. 
See supra note 230 at 8.
    \233\ See supra section IV.A.4.
---------------------------------------------------------------------------

    The Commission expects the proposed custom XML requirement for 
filing Form X-17A-19 would provide similar benefits to those described 
for the proposed Inline XBRL requirements for Form X-17A-5 Part 
III.\234\ Like Inline XBRL, the proposed custom XML requirement for 
Form X-17A-19 would make the information included on the form more 
readily accessible for retrieval, sorting, filtering, and other 
analysis. The enhanced usability of the information on Form X-17A-19 
may be particularly helpful given the high volume of filings on Form X-
17A-19 that the Commission receives annually.\235\ In addition, the 
proposed structured data requirement would enable EDGAR to perform 
technical validations (i.e., programmatic checks to ensure the 
documents are appropriately standardized, formatted, and complete) upon 
intake of the forms, thus potentially improving the quality of the 
filed data by decreasing the incidence of non-substantive errors (such 
as the

[[Page 23954]]

omission of values from fields that should always be populated).
---------------------------------------------------------------------------

    \234\ See supra section IV.A.4; see infra section X.C.1.b.
    \235\ See infra sections IX.D.11 and X.C.1.b.
---------------------------------------------------------------------------

    The Commission also proposes making conforming amendments to the 
``General Instructions'' to Form X-17A-19. Instruction 2 would be 
amended to replace the instruction to mail the original of the form to 
the Division with an instruction to file the original ``electronically 
on EDGAR in accordance with the EDGAR Filer Manual, as defined in Rule 
11 of Regulation S-T (Sec.  232.11) and in accordance with the 
requirements of Regulation S-T.'' Instruction 2 would also be amended 
to instruct filers to send copy number 1 of Form X-17A-19 to SIPC at 
SIPC's updated address. Instruction 3 would be amended to replace the 
words ``shall be executed with a manual signature'' with the words 
``shall be signed.'' Instruction 4 would be deleted (and subsequent 
instructions would be renumbered accordingly), because the instruction 
about what to do if there is insufficient space in the form is 
unnecessary if the filing is submitted on EDGAR. Renumbered instruction 
6 (formerly instruction 7) would be amended to provide that copies of 
the form may be obtained ``on the Commission's website'' instead of 
``from the main office of the Securities and Exchange Commission in 
Washington, DC''
Request for Comment
    55. Would it be appropriate to require Form X-17A-19 to be filed 
with the Commission electronically on EDGAR? If so, explain why. If 
not, explain why not. Would it be appropriate to require Form X-17A-19 
to be filed in a custom XML-based data language? If so, explain why. If 
not, explain why not. What alternative approaches would be appropriate 
instead?

B. Notice (and Any Withdrawal of a Notice) Filed Pursuant to Rule 3a71-
3(d)(1)(vi)

1. Exchange Act Rule 3a71-3(d)(1)(vi) Notice Filing Requirement
    The Commission's rules under the Exchange Act define when a person 
is an SBSD.\236\ Those rules set de minimis thresholds for security-
based swap dealing activity below which a person is deemed not to be an 
SBSD.\237\ For purposes of determining whether non-U.S. persons will be 
deemed to be SBSDs, 17 CFR 240.3a71-3(b)(1)(iii)(C) (``Rule 3a71-
3(b)(1)(iii)(C)'') provides that non-U.S. persons must count, against 
the applicable de minimis threshold, their security-based swap dealing 
transactions that were arranged, negotiated, or executed by personnel 
located in a U.S. branch or office, or by personnel of an agent of such 
non-U.S. person located in a U.S. branch or office (``ANE 
Activity'').\238\ Exchange Act Rule 3a71-3(d),\239\ however, includes a 
conditional exception to this counting requirement (the ``ANE 
Exception'').\240\
---------------------------------------------------------------------------

    \236\ See 17 CFR 240.3a71-1 et seq.
    \237\ See 17 CFR 240.3a71-2.
    \238\ See Rule 3a71-3(b)(1)(iii)(C).
    \239\ See 17 CFR 240.3a71-3(d).
    \240\ The exception does not apply to dealing activities 
involving U.S. counterparties or U.S. guarantees. See Exchange Act 
Release No. 87780 (Dec. 18, 2019), 85 FR 6270, 6278 (Feb. 4, 2020) 
(``Cross-Border Adopting Release'').
---------------------------------------------------------------------------

    One of the conditions to the ANE Exception is that all ANE Activity 
for which the non-U.S. person is relying on the exception (the 
``Relying Entity'') be conducted by the U.S. personnel in their 
capacity as persons associated with a majority-owned affiliate \241\ of 
the Relying Entity that is either a registered SBSD or a registered 
broker that meets certain capital and other requirements (such a 
registered majority-owned affiliate, the ``Registered Entity'').\242\ 
Before an associated person of the Registered Entity commences this ANE 
Activity pursuant to the ANE Exception, the Registered Entity must file 
with the Commission a notice that its associated persons may conduct 
such activity (an ``ANE Exception Notice'').\243\ Exchange Act Rule 
3a71-3(d)(1)(vi) currently requires the Registered Entity to file the 
ANE Exception Notice by submitting it to the electronic mailbox 
described on the Commission's website at www.sec.gov at the ``ANE 
Exception Notices'' section.\244\ The Commission is required to 
publicly post filed ANE Exception Notices on the same section of its 
website.\245\ The Relying Entity is able to review ANE Exception 
Notices published on the Commission's website to determine whether its 
affiliated Registered Entity's notice has been successfully filed, and 
thus whether the Rule 3a71-3(d)(1)(vi) notice condition to the ANE 
Exception has been satisfied.
---------------------------------------------------------------------------

    \241\ For this purpose, an entity is a majority-owned affiliate 
of another entity if the entity directly or indirectly owns a 
majority interest in the other, or if a third party directly or 
indirectly owns a majority interest in both entities, where 
``majority interest'' is the right to vote or direct the vote of a 
majority of a class of voting securities of an entity, the power to 
sell or direct the sale of a majority of a class of voting 
securities of an entity, or the right to receive upon dissolution, 
or the contribution of, a majority of the capital of a partnership. 
See 17 CFR 240.3a71-3(a)(10).
    \242\ See 17 CFR 240.3a71-3(d)(1).
    \243\ See 17 CFR 240.3a71-3(d)(1)(vi).
    \244\ See www.sec.gov/tm/ane-exception-notices.
    \245\ See 17 CFR 240.3a71-3(d)(1)(vi).
---------------------------------------------------------------------------

    The ANE Exception also is subject to a cap on the amount of certain 
inter-dealer security-based swaps positions.\246\ Positions subject to 
the cap include security-based swaps between a Relying Entity and a 
non-U.S. person that is, or is an affiliate of, any Registered Entity 
that has filed an ANE Exception Notice with the Commission.\247\ All 
such positions of the Relying Entity and certain of its affiliates are 
counted toward the cap.\248\ The Relying Entity and its affiliates can 
review the ANE Exception Notices published on the Commission's website 
to determine whether any of the filed ANE Exception Notices are 
relevant to the Relying Entity's or any of its affiliates' progress 
toward the cap on inter-dealer security-based swaps.
---------------------------------------------------------------------------

    \246\ See 17 CFR 240.3a71-3(d)(1)(vii).
    \247\ See 17 CFR 240.3a71-3(a)(13).
    \248\ See 17 CFR 240.3a71-3(d)(6).
---------------------------------------------------------------------------

2. Proposed Amendment to Exchange Act Rule 3a71-3(d)(1)(vi)
    The Commission is proposing an amendment to Exchange Act Rule 3a71-
3(d)(1)(vi) to change the method of filing the ANE Exception Notice. 
Instead of filing the notice via email to an electronic mailbox 
specified on the Commission's website, the proposed amendment would 
require the Registered Entity to file the notice electronically through 
the Commission's EDGAR system. For all Registered Entities, only the 
manner of filing an ANE Exception Notice, and not its content, would 
change. The ANE Exception Notice would continue to consist of the name 
of the Registered Entity whose associated persons may conduct activity 
covered by the ANE Exception, the fact that those associated persons 
may conduct such activity, and the date. ANE Exception Notices filed 
electronically on EDGAR also would be permitted, but not required, to 
include contact details of a person or department at the Registered 
Entity that counterparties may contact regarding the ANE Exception. 
Each ANE Exception Notice thus contains a minimal amount of 
information. As of January 31, 2023, only three Registered Entities had 
filed an ANE Exception Notice, and the Commission estimates that up to 
24 entities that engage in security-based swap dealing activity may 
rely on the ANE Exception.\249\ Because of the minimal amount of, and 
basic, narrative nature of, the information included in ANE Exception 
Notices, the Commission preliminarily believes that, even if Registered 
Entities file ANE Exception Notices (and the withdrawals described in 
this section below) in a structured data language,

[[Page 23955]]

users of this data would be unlikely to employ structured data tools to 
analyze the data, as these tools typically would assist in making 
analysis of large data sets more efficient. Unless and until use of the 
ANE Exception increases substantially, the benefits of structured data 
in ANE Exception Notices may be limited. Accordingly, the Commission 
believes that accepting ANE Exception Notices (and the withdrawals 
described in this section below) in unstructured data format would make 
the better use of the resources of the Commission and market 
participants who use the data.
---------------------------------------------------------------------------

    \249\ See Cross-Border Adopting Release, 85 FR at 6336 n.642.
---------------------------------------------------------------------------

    The proposed change would require the Registered Entity to have 
EDGAR access credentials and the ability to file electronically via 
EDGAR. The Commission believes that requiring submission of ANE 
Exception Notices electronically through EDGAR is appropriate because 
most Registered Entities should already have access to EDGAR by virtue 
of having used the system to register or file information with the 
Commission,\250\ and should therefore also be familiar with how to use 
the system. For those Registered Entities, the Commission would expect 
there to be no additional burden associated with mandating EDGAR filing 
of ANE Exception Notices, and would help to streamline and manage those 
filings. A small number of Registered Entities may be first-time EDGAR 
filers who would need to obtain EDGAR access credentials.\251\ If a 
Registered Entity does not already have an EDGAR account, the proposed 
amendment would require it to obtain EDGAR access credentials and be 
able to file electronically on EDGAR before it could file an ANE 
Exception Notice. Further, because reliance on the ANE Exception, which 
requires the filing of an ANE Exception Notice, is voluntary, and 
because the Commission provided the ANE Exception only for Relying 
Entities whose affiliated Registered Entity is operationally capable of 
complying with certain disclosure, communication and recordkeeping 
conditions, the Commission would not provide for the possibility of 
temporary or continuing hardship exemptions to allow the ANE Exception 
Notice (or the withdrawals described in this section below) to be filed 
on paper.\252\ An inability to file an ANE Exception Notice using the 
Commission's EDGAR system may indicate that a Registered Entity's 
operational conditions would present undue risk if the ANE Exception 
were available to permit Relying Entities to defer registration as 
SBSDs. Further, the ANE Exception is premised in part on the public 
availability of the notice to Relying Entities. For these reasons, as 
well as the simplicity of the expected filings and sophistication of 
filing entities, the Commission does not believe there would be a need 
for a hardship exemption.
---------------------------------------------------------------------------

    \250\ A Registered Entity that is an SBSD must file its 
application for registration on EDGAR, and this requirement has been 
in place from the original compliance date for registration of 
SBSDs. See 17 CFR 240.15Fb2-1(c). Additionally, a Registered Entity 
that is a broker may be required to file with the Commission certain 
information that is currently permitted to be filed on EDGAR. See, 
e.g., 17 CFR 240.17a-5(d); supra note 197 and accompanying text.
    \251\ A party that succeeds to the registration of a Registered 
Entity in a merger, conversion, or other corporate transaction may 
not yet have EDGAR access credentials.
    \252\ See proposed amendments to 17 CFR 232.201(a), and 17 CFR 
232.202(a).
---------------------------------------------------------------------------

    The Commission believes that requiring an ANE Exception Notice to 
be filed electronically on the Commission's established EDGAR filing 
system would, among other things, facilitate more efficient and timely 
transmission and dissemination of information and would benefit the 
Commission, the Registered Entities, the Relying Entities, and other 
market participants.\253\ The Commission additionally believes that 
electronic EDGAR filing of ANE Exception Notices is appropriate because 
it will enhance the ability of Relying Entities and their affiliates to 
access and use the filed ANE Exception Notices to determine their 
progress toward the ANE Exception's cap on inter-dealer security-based 
swaps. Other members of the public also would be able to access and 
review ANE Exception Notices more efficiently. Instead of reviewing 
each notice individually in PDF format, users would be able to access 
the public-facing portion of the Commission's EDGAR system to search 
for a specific filer, for ANE Exception Notices filed after the 
effective date of the amendment to Rule 3a71-3(d)(1)(vi), and/or for 
withdrawals of ANE Exception Notices. Further, electronic EDGAR filing 
of the ANE Exception Notices as proposed is intended to provide market 
participants with access to such notices, including the names of the 
Registered Entities that have filed notices, together with the date of 
each notice, on EDGAR promptly after filing. The proposed EDGAR filing 
requirement is intended to allow for the ANE Exception Notices to be 
made available for public viewing promptly after filing without the 
need for manual staff processing and the associated delays and demands 
on Commission resources.
---------------------------------------------------------------------------

    \253\ Currently, Rule 3a71-3(d)(1)(vi) provides that the 
Commission shall publicly post ANE Exception Notices at the ``ANE 
Exception Notices'' section of its website. The proposed amendment 
to the rule would provide that such notices filed after the 
effective date of the amendment would instead be publicly 
disseminated through the Commission's EDGAR system.
---------------------------------------------------------------------------

    The proposed amendment to Exchange Act Rule 3a71-3(d)(1)(vi) would 
include a new mechanism for withdrawing the ANE Exception Notice filed 
through EDGAR. Currently, a Registered Entity whose associated persons 
will no longer conduct ANE Activity pursuant to the ANE Exception and 
who wishes to withdraw a filed ANE Exception Notice may contact the 
Commission to request that the notice be manually removed from the ANE 
Exception Notices web page.\254\ Upon removal of the notice from the 
website, the ANE Exception Notice would be withdrawn and a Relying 
Entity would no longer be able to rely on the ANE Exception unless 
another relevant ANE Exception Notice is filed. The Commission also is 
proposing to specify that, if the Registered Entity later becomes 
unregistered or otherwise ineligible to serve as the Registered Entity 
for purposes of the ANE Exception, the Registered Entity must promptly 
withdraw its ANE Exception Notice.\255\ This would help to ensure that 
ANE Exception Notices published on EDGAR remain accurate for market 
participants and other users of the information.
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    \254\ See Cross-Border Adopting Release, 85 FR at 6283 n.138.
    \255\ Though the proposed requirement to withdraw would require 
prompt filing of the withdrawal, this promptness standard would not 
extend a Relying Entity's ability to rely on the ANE Exception after 
the Registered Entity is no longer registered or otherwise no longer 
satisfies the conditions described in 17 CFR 240.3a71-3(d)(1) 
(``Rule 3a71-3(d)(1)'') but before the Registered Entity withdraws 
the ANE Exception Notice. The proposed changes to Rule 3a71-
3(d)(1)(vi) to include a new mechanism for withdrawing the ANE 
Exception Notice filed through EDGAR do not change whether a Relying 
Entity can rely on the exception. Regardless of whether a withdrawal 
is filed by the Registered Entity, each condition of Rule 3a71-
3(d)(1) must be satisfied in order for the Relying Entity to rely on 
the exception.
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    The Commission's proposal to move the ANE Exception Notice to EDGAR 
would require the Registered Entity to file any withdrawal 
electronically via EDGAR. If the original ANE Exception Notice was 
filed on EDGAR, it would not be removed from EDGAR; rather, a 
withdrawal filing on EDGAR would identify the notice as no longer 
active.\256\ Users would have the ability

[[Page 23956]]

to search for ANE Exception Notices filed after the effective date of 
the amendment to Rule 3a71-3(d)(1)(vi) that have not been withdrawn, 
i.e., the notices that remain eligible to satisfy the ANE Exception's 
notice condition. These filed and not withdrawn ANE Exception Notices 
would help identify the Registered Entities who, together with their 
affiliates, could cause a transaction to fall under the ANE Exception's 
cap on certain inter-dealer security-based swaps. The inclusion of ANE 
Exception Notices previously filed on EDGAR and withdrawn in EDGAR's 
publicly available data further would aid Relying Entities and their 
affiliates in determining their progress toward the ANE Exception's cap 
at a particular point in the past.\257\ This functionality is not 
available under the current email-based filing system, as the 
Commission retains only currently active notices on the ``ANE Exception 
Notices'' web page.
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    \256\ Consistent with current Rule 3a71-3(d)(1)(vi), the EDGAR 
system also would not allow for amendments to an ANE Exception 
Notice. To report a name change or change of contact details on an 
ANE Exception Notice via EDGAR, a Registered Entity must file a new 
notice with the updated information.
    \257\ The inclusion of ANE Exception Notices previously filed on 
EDGAR and withdrawn in EDGAR's publicly available data also may aid 
Relying Entities and their affiliates in determining their progress 
toward the cap during the 12-month period described in 17 CFR 
240.3a71-3(d)(1)(vii) (``Rule 3a71-3(d)(1)(vii)''). Security-based 
swap positions that counted toward the cap before withdrawal of an 
ANE Exception Notice continue to count toward the cap after such 
withdrawal for the period described in Rule 3a71-3(d)(1)(vii).
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Request for Comment
    56. Should the Commission require ANE Exception Notices, and 
withdrawals of ANE Exception Notices, to be filed electronically on 
EDGAR? Explain why or why not.
    57. Does the current requirement to file this information via email 
provide flexibility to Registered Entities, or promote efficiency for 
Relying Entities and other market participants who use the information 
in the ANE Exception Notices, that could be lost if these filings were 
required to be made electronically on EDGAR? Explain why or why not.
    58. Would Registered Entities experience any practical difficulties 
in preparing and filing an ANE Exception Notice or withdrawal of an ANE 
Exception Notice on EDGAR as proposed? Explain why or why not.
    59. Does any market participant that acts, or expects to act, as a 
Registered Entity for purposes of the ANE Exception not have, or expect 
not to have, EDGAR access credentials? If yes, describe any burdens 
that the Registered Entity would face in obtaining EDGAR access 
credentials and explain whether the benefits of mandatory EDGAR 
filing--for the Registered Entity, the Relying Entity, other users of 
the ANE Exception Notices, and the Commission--justify those burdens.
    60. Would Relying Entities and/or other market participants that 
use the information in the ANE Exception Notices experience any 
practical difficulties in accessing or utilizing information in ANE 
Exception Notices and withdrawals of ANE Exception Notices on EDGAR? 
Explain why or why not. Would Relying Entities and/or other market 
participants that use the information in the ANE Exception Notices 
experience greater efficiency in identifying currently active ANE 
Exception Notices on EDGAR? Would these users find it helpful to be 
able to search for previously filed and withdrawn ANE Exception 
Notices? Explain why or why not.
    61. Should an alternative manner of filing ANE Exception Notices 
and withdrawals of ANE Exception Notices be required? Even if the 
proposal to require these filings to be made electronically on EDGAR 
would provide greater benefits as compared to filings made via email, 
would an alternative manner of filing provide even more benefits than 
the proposal? Please describe any alternative manner in detail and 
assess how the alternative would impact Registered Entities, Relying 
Entities, other market participants, and the Commission. For example, 
should the Commission instead permit, but not require, ANE Exception 
Notices to be filed electronically on EDGAR? Should the Commission 
instead retain the current email-based filing system? Should the 
Commission implement another method for filing ANE Exception Notices 
and withdrawals of ANE Exception Notices?
    62. Should the Commission require or allow a specific unstructured 
or structured data format for ANE Exception Notices and withdrawals of 
ANE Exception Notices? If yes, describe the format and why it is 
appropriate. If no, explain why not.
    63. Should the Commission require a Registered Entity to promptly 
withdraw its ANE Exception Notice if it becomes unregistered or 
otherwise ineligible to serve as the Registered Entity for purposes of 
the ANE Exception? If yes, explain how this withdrawal information 
would be useful to Registered Entities, Relying Entities and/or other 
market participants. If no, explain how Relying Entities and other 
market participants could use other methods to determine that any 
particular Registered Entity is eligible or ineligible, particularly if 
the Registered Entity is a broker who must comply with certain capital 
requirements to maintain eligibility.
    64. Should the Commission allow Registered Entities to file ANE 
Exception Notices and/or withdrawals of ANE Exception Notices on paper 
in case of a temporary or continuing hardship in accordance with Rules 
201 and 202 of Regulation S-T? \258\ Explain why or why not.
---------------------------------------------------------------------------

    \258\ 17 CFR 232.201 and 232.202.
---------------------------------------------------------------------------

    65. What, if any, costs would be associated with preparing ANE 
Exception Notices and withdrawals for filing on EDGAR? Are those costs 
more, less or the same as those under the current filing processes?
    66. How does the cost of the proposed amendments to Rule 3a71-
3(d)(1)(vi) compare to the cost of current requirements and the cost of 
the alternatives described above or other alternatives?

C. Notice (and Any Amendment, Including Notice of Dispute Termination) 
Provided Pursuant to Rule 15fi-3(c)

1. Overview of Valuation Dispute Notice Requirements
    Rule 15fi-3 under the Exchange Act generally requires SBS Entities 
to: (1) engage in periodic portfolio reconciliation activities with 
counterparties who are also SBS Entities; and (2) establish, maintain, 
and follow written policies and procedures reasonably designed to 
ensure that they engage in periodic portfolio reconciliation with 
counterparties who are not SBS Entities with respect to their 
outstanding (and uncleared) security-based swaps.\259\ Among other 
things, Rule 15fi-3 specifies the requirements applicable to an SBS 
Entity for purposes of engaging in portfolio reconciliation with either 
type of counterparty, with regard to: (1) the information that the two 
sides are required to exchange as part of the reconciliation process; 
(2) the frequency by which an SBS Entity is required to reconcile its 
security-based swap portfolios with its counterparties; (3) the 
required policies and procedures specifying the means and timeframes by 
which an SBS Entity is required to resolve discrepancies with respect 
to either the valuation or a material term of a security-based swap; 
and (4) the requirement that an SBS Entity agree in writing with each 
of its counterparties on the terms of the portfolio reconciliation, 
including agreement of the selection of any third-party service 
provider.\260\
---------------------------------------------------------------------------

    \259\ See 17 CFR 240.15Fi-3(a) and (b).
    \260\ See id.
---------------------------------------------------------------------------

    Rule 15fi-3 also contains a reporting requirement. Specifically, 
Rule 15fi-3(c) requires each SBS Entity to promptly

[[Page 23957]]

notify the Commission and any applicable prudential regulator \261\ of 
any security-based swap valuation dispute in excess of $20,000,000 (or 
its equivalent in any other currency), at either the transaction or 
portfolio level, if not resolved within: (1) three business days, if 
the dispute is with a counterparty that is an SBS Entity; or (2) five 
business days, if the dispute is with a counterparty that is not an SBS 
Entity.\262\
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    \261\ The term ``prudential regulator'' is defined in 17 CFR 
240.15Fi-1(m) to have the same meaning as in section 1a of the 
Commodity Exchange Act (7 U.S.C. 1a) and includes the Federal 
Reserve, the Office of the Comptroller of the Currency, the Federal 
Deposit Insurance Corporation, the Farm Credit Association, and the 
Federal Housing Finance Agency, as applicable to the SBS Entity.
    \262\ See 17 CFR 240.15fi-3(c).
---------------------------------------------------------------------------

    SBS Entities are also required to notify the Commission and any 
applicable prudential regulator if the amount of any security-based 
swap valuation dispute that was the subject of a previous notice 
increases or decreases by more than $20,000,000 (or its equivalent in 
any other currency), at either the transaction or portfolio level.\263\ 
Such amendments are required to be provided to the Commission and any 
applicable prudential regulator no later than the last business day of 
the calendar month in which the applicable security-based swap 
valuation dispute increases or decreases by the applicable dispute 
amount.\264\
---------------------------------------------------------------------------

    \263\ Id.
    \264\ Id.
---------------------------------------------------------------------------

    Rule 15fi-3(c) requires that the notices to the Commission be 
submitted ``in a form and manner acceptable to the Commission.'' When 
the Commission first proposed Rule 15fi-3(c), the Commission explained 
that including the phrase ``in a form and manner acceptable to the 
Commission'' was intended to provide SBS Entities with flexibility to 
determine the most efficient and cost-effective means of making such 
submissions, so long as it is deemed to be acceptable by the 
Commission.\265\ Such flexibility was important for a number of 
reasons, including the fact that SBS Entities that are dually 
registered with the CFTC as either a swap dealer or major swap 
participant (each, a ``Swap Entity'') have been subject to a comparable 
CFTC requirement since 2013.\266\ In providing flexibility, SBS 
Entities currently have two options for submitting these notices: (1) 
an electronic submission using EDGAR; or (2) submission to a dedicated 
Commission email address. Under both submission types, the system is 
capable of accepting the notice using unstructured data in PDF format, 
either as an attachment to an email or as an uploaded document to 
EDGAR.
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    \265\ See Risk Mitigation Techniques for Uncleared Security-
Based Swaps, Exchange Act Release No. 84861 (Dec. 19, 2018), 84 FR 
4614, 4621, n. 47 (Feb. 15, 2019).
    \266\ See Confirmation, Portfolio Reconciliation, Portfolio 
Compression, and Swap Trading Relationship Documentation 
Requirements for Swap Dealers and Major Swap Participants, 77 FR 
55904 (Sep. 11, 2012).
---------------------------------------------------------------------------

    Security-based swap valuation dispute notices are not required to 
include specific fields. However, SBS Entities are encouraged to 
include in the notice basic information about the security-based swap 
valuation dispute, including: (1) identifying information about both 
counterparties (including each party's Legal Entity Identifier); (2) 
the date of the dispute (or the termination date, if applicable); (3) 
the type of dispute; (4) disclosure about which counterparty is the 
receiver and which is the payer; and (5) the disputed amount, in U.S. 
Dollars (``USD'').\267\ This information is consistent with the notices 
that Swap Entities are required to provide to the NFA, which receives 
notices from Swap Entities pursuant to CFTC Rule 23.502(c) \268\ 
regarding swap valuation disputes.\269\ SBS Entities also are 
encouraged to provide any applicable identifier about the relevant 
security-based swap (such as the product ID), the notional amount of 
the security-based swap, and disclosure about which counterparty is 
calling the dispute (i.e., the direction of the dispute).\270\
---------------------------------------------------------------------------

    \267\ See Security-Based Swap Valuation Dispute Notices, Staff 
Statement on Submitting Security-Based Swap Valuation Dispute 
Notices, available at https://www.sec.gov/tm/Security-Based-Swap-Valuation-Dispute-Notices.
    \268\ 17 CFR 23.502(c).
    \269\ See NFA Interpretive Notice 9072 to Compliance Rule 2-49: 
Swap Valuation Dispute Filing Requirements (May 18, 2017), available 
at https://www.nfa.futures.org/rulebook/rules.aspx?Section=9&RuleID=9072 (``NFA Interpretive Notice 9072'') 
and Effective date of Interpretive Notice to NFA Compliance Rule 2-
49: Swap Valuation Dispute Filing Requirements, Notice I-17-13 (July 
20, 2017), available at https://www.nfa.futures.org/news/newsNotice.asp?ArticleID=4827 (``NFA Notice to Members I-17-13'' 
together with NFA Interpretive Notice 9072, ``NFA Swap Valuation 
Dispute Guidance'').
    \270\ See supra note 285.
---------------------------------------------------------------------------

2. Proposal To Require Valuation Dispute Notices To Be Submitted in 
EDGAR
    Based on the Commission's experience over the course of 
implementing Rule 15fi-3(c), the Commission believes that it is now 
appropriate to require that the security-based swap valuation dispute 
notices be submitted to the Commission electronically on EDGAR using a 
structured data language. Accordingly, the Commission is now proposing 
to amend Rule 15fi-3(c) to affirmatively require SBS Entities to submit 
these notices electronically in EDGAR using a custom XML-based data 
language specific to the notices.\271\ This requirement would apply to 
initial notices of a dispute and amendments of such notices, including 
notices of termination of disputes.\272\ If these proposed changes are 
adopted, SBS Entities would no longer be able to submit dispute notices 
to the Commission using a dedicated email address or in PDF format on 
EDGAR.\273\ As explained in further detail below, the Commission is 
encouraging SBS Entities to include specific disclosures in their 
dispute notices, and the custom XML-based data language that the 
Commission would create for the dispute notices would include specific 
elements reflecting those specific disclosures; however, SBS Entities 
would also be permitted to leave those specific fields unpopulated and 
provide their own description of the dispute in a separate field.\274\
---------------------------------------------------------------------------

    \271\ SBS Entities relying on Commission orders granting 
substituted compliance pursuant to 17 CFR 240.3a71-6 may be required 
to provide the Commission reports regarding disputes between 
counterparties, among other conditions in the orders. See, e.g., 
Exchange Act Release No. 93411 (Oct. 22, 2021), 86 FR 59797, 59815 
(Oct. 28, 2021) (File No. S7-08-21). To satisfy that requirement, 
SBS Entities currently can use either of the submission methods 
available for submitting notices under Rule 15fi-3(c). If the 
Commission adopts the proposed amendment to Rule 15fi-3(c), the 
remaining method available for SBS Entities to provide the dispute 
notices required by the Commission orders would be to submit them 
electronically in EDGAR using the custom XML-based data language 
specific to valuation dispute notices.
    \272\ Under the proposal, SBS Entities would be required to 
submit amendments electronically in EDGAR using the custom XML-based 
data language if the valuation dispute increases or decreases by the 
amount specified in Rule 15fi-3(c)(2), regardless of the method the 
SBS Entity used to submit the original notice or previous 
amendments.
    \273\ The proposed changes to Rule 15fi-3(c) would require SBS 
Entities with a U.S. prudential regulator to notify the prudential 
regulator in a form and manner acceptable to the prudential 
regulator. See proposed amendments to paragraph (c) of Rule 15fi-3, 
17 CFR 240.15fi-3(c). Currently, Rule 15fi-3(c) does not specify how 
SBS Entities must notify the prudential regulator. The Commission 
believes that this additional proposed specificity in the rule would 
provide additional guidance to SBS Entities, while allowing them the 
flexibility to notify any applicable U.S. prudential regulator in 
any form and manner acceptable to that regulator.
    \274\ See infra note 296 and accompanying text.
---------------------------------------------------------------------------

    The Commission believes that requiring submission of security-based 
swap valuation dispute notices electronically on EDGAR and in a 
structured data language is appropriate at this time for at least three 
reasons. First, an SBS Entity should already have access to EDGAR (and 
have already

[[Page 23958]]

completed a Form ID, the form used to apply for EDGAR access) at the 
time it becomes required to submit a valuation dispute notice (or a 
related amendment, including a termination notice), as the SBS Entity 
would have to use EDGAR to register with the Commission in such 
capacity, and should therefore be familiar with how to use the system. 
As such, the Commission would not expect there to be any additional 
burden associated with expressly mandating EDGAR submission.
    Second, the Commission understands that the security-based swap 
valuation dispute notices may contain information that is sensitive to 
one or both of the counterparties. The Commission does not intend for 
these notices to operate as a means for providing public disclosure of 
security-based swap valuation disputes. To the extent that the notices 
provided to the Commission include confidential information that is 
otherwise not publicly available, the SBS Entity can request the 
confidential treatment of the information.\275\ If such a confidential 
treatment request is made, the Commission anticipates that it would 
keep the information confidential, subject to the provisions of 
applicable law; \276\ whether any material is confidential is 
determined pursuant to applicable law, including but not limited to the 
Freedom of Information Act and Commission rules governing requests for 
confidential treatment. As such, the Commission believes that using 
EDGAR--as opposed to a dedicated email inbox--provides a more efficient 
and secure way to submit these notices and allows SBS Entities to 
electronically access and sort their notices.
---------------------------------------------------------------------------

    \275\ See 17 CFR 200.83.
    \276\ See, e.g., 5 U.S.C. 552 et seq.; 15 U.S.C. 78x (governing 
the public availability of information obtained by the Commission). 
See also Risk Mitigation Techniques for Uncleared Security-Based 
Swaps, Exchange Act Release No. 87782 (Dec. 18, 2019), 85 FR 6359, 
6389-90. (Feb 4, 2020) (``Risk Mitigation Adopting Release'').
---------------------------------------------------------------------------

    Third, the Commission expects that the proposed requirement to 
submit security-based swap valuation dispute notices in a structured 
data language would enable the Commission to analyze the information in 
those notices more efficiently and effectively. Under the current 
requirements, should Commission staff seek to analyze the dispute 
notice information (such as to identify trends in the incidence and 
magnitude of disclosed valuation disputes across SBS Entities or a 
given population thereof), the analysis would require significant 
manual effort because the notices are not machine-readable. In 
addition, the proposed structured data requirement would enable EDGAR 
to perform technical validations (i.e., programmatic checks to ensure 
the notices are appropriately standardized and formatted) upon intake 
of the notices, thus potentially improving the quality of the submitted 
data by decreasing the incidence of non-substantive errors (such as the 
inclusion of text characters in a field designated to accept only 
numeric characters).
    Under the proposal, SBS Entities would no longer be permitted to 
submit PDF versions of dispute notices to the Commission. SBS Entities 
currently may email or submit on EDGAR PDF versions of dispute notices, 
and in some cases these notices may have been prepared using systems 
that were designed also to comply with NFA swap valuation dispute 
notice requirements. The proposal to require SBS Entities to submit 
security-based swap valuation dispute notices to the Commission in a 
structured data language would not allow SBS Entities to continue to 
upload notices in a non-machine-readable, unstructured data language, 
and instead would require SBS Entities to format these notices using a 
custom XML-based data language.
    As a general matter, the Commission believes that the type of 
information that Swap Entities are currently required to include in the 
valuation dispute notices pursuant to the NFA Swap Valuation Dispute 
Guidance should generally satisfy what the Commission believes to be 
one of the primary objectives of Rule 15fi-3(c), which is to inform the 
Commission and its staff that such a dispute has arisen, allowing the 
Commission and staff to consider whether additional follow-up is 
warranted. Accordingly, as a general matter, the Commission believes it 
is likely that a timely notice provided to the Commission with respect 
to a security-based swap valuation dispute would satisfy Rule 15fi-
3(c), as proposed to be amended, if it continued to contain the 
information currently required by the NFA Swap Valuation Dispute 
Guidance (but for the fact that such notice pertains to a security-
based swap).\277\ While Rule 15fi-3(c) is intended to provide SBS 
Entities with flexibility to submit the required information to the 
Commission in a manner that is most efficient for each SBS Entity,\278\ 
the Commission encourages SBS Entities to include in the notice basic 
information about the security-based swap valuation dispute, including: 
(1) identifying information about both counterparties (including each 
party's Legal Entity Identifier); (2) the date of the dispute (or the 
termination date, if applicable); (3) the type of dispute; (4) 
disclosure about which counterparty is the receiver and which is the 
payer; and (5) the disputed amount, in U.S. Dollars (``USD''). SBS 
Entities are also encouraged to provide any applicable identifier about 
the relevant security-based swap (such as the product ID), the notional 
amount of the security-based swap, and disclosure about which 
counterparty is calling the dispute (i.e., the direction of the 
dispute). In amendments to previously submitted notices by SBS 
Entities, including notices of termination of a dispute, SBS Entities 
would be encouraged to provide information to assist the Commission in 
understanding the purpose of the amendment or the circumstances of 
termination of a dispute. Such information would assist staff in 
focusing the scope of any follow-up inquiries and thus reduce both 
Commission and SBS Entity resources used in connection with valuation 
dispute reports.
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    \277\ See supra note 287. See also Risk Mitigation Adopting 
Release 85 FR at 6368.
    \278\ See Risk Mitigation Adopting Release 85 FR at 6368; see 
also Security-Based Swap Valuation Dispute Notices, available at 
https://www.sec.gov/tm/Security-Based-Swap-Valuation-Dispute-Notices 
(where the staff notes that, ``In terms of the contents of the 
notice, the Commission explained when it adopted Rule 15fi-3(c) that 
the notice is not required to include specific fields, `in order to 
provide SBS Entities with the flexibility to submit the required 
information to the Commission in a manner that is most efficient for 
each SBS Entity.' '').
---------------------------------------------------------------------------

    Consistent with this approach, the Commission's custom XML-based 
data language would include discrete XML elements for each of the 
encouraged disclosures listed above, and the associated fillable web 
form on EDGAR would contain discrete fields mirroring those XML 
elements. However, to provide the flexibility inherent to the 
Commission's approach to dispute notices, the custom XML data language 
(and associated fillable web form) would also contain an XML element 
(and fillable field) to capture any information provided by SBS 
Entities that does not fall within the encouraged disclosures listed 
above. For the same reason, the custom XML data language for dispute 
notices would permit SBS Entities to refrain from populating one or 
more of the XML elements (and associated fillable fields) that reflect 
the encouraged disclosures if responsive information is not needed to 
report the dispute.
Request for Comment
    67. Should the Commission require security-based swap valuation 
dispute notices and amendments, including

[[Page 23959]]

notices of dispute termination, to be submitted electronically with the 
Commission through the EDGAR system? Explain why or why not.
    68. Does the current requirement to submit security-based swap 
valuation dispute notices and amendments to the Commission via either 
email or EDGAR provide flexibility to SBS Entities that could be lost 
if these submissions were required to be made electronically on EDGAR 
in a structured data language? Explain why or why not.
    69. Would SBS Entities experience practical difficulties in 
preparing and submitting these notices electronically on EDGAR in a 
structured data language? If so, explain why.
    70. What, if any, costs would be associated with valuation dispute 
notices for submission on EDGAR? Are those costs more, less or the same 
as those currently expending under the current submission processes?
    71. Should the Commission instead require that security-based swap 
valuation dispute notices, and amendments (including dispute 
termination notices) be submitted through a different process, such as 
by email to a dedicated mailbox? If so, explain why and whether such 
process should be adopted in lieu of requiring the notices to be 
submitted electronically on EDGAR system in a structured data language, 
or as a non-exclusive alternative (as is currently the case). How would 
that process affect costs and implementation of the proposed amendment 
to Rule 15fi-3(c) as compared to the current requirements?
    72. Even if the proposal to require these notices to be submitted 
to the Commission electronically on EDGAR in a structured data language 
would provide greater benefits as compared to the current requirement 
to submit via email or EDGAR in an unstructured data format, would an 
alternative manner of submission provide even more benefits than the 
proposal, or be more appropriate? Why would an alternative manner of 
submission be appropriate or more appropriate? Please describe any 
alternative manner in detail and assess how the alternative would 
impact SBS Entities, security-based swap markets and the Commission. 
For example, should the Commission instead permit, but not require, 
security-based swap valuation dispute notices to be submitted 
electronically on EDGAR in structured data language? Should the 
Commission instead retain the current email-based submission system 
and/or the current unstructured data format for these reports made on 
EDGAR? Should the Commission implement another method for submitting 
security-based swap valuation dispute notices and amendments, including 
notices of dispute termination? How would these or other alternatives 
affect costs and implementation of the proposed amendment to Rule 15fi-
3(c) as compared to the current requirements?
    73. Should the Commission require security-based swap valuation 
dispute notices, and amendments, including notices of dispute 
termination, to be made in a structured data language? If yes, should 
the Commission require SBS Entities to use a custom XML data language 
for these reports or another structured data language? If no, which 
data language should the Commission permit these reports to use and 
why? Would a requirement to submit these reports in a structured data 
language impose additional costs on, or create cost efficiencies for, 
SBS Entities as compared to other (non-structured) data languages? 
Please explain the benefits and costs of a requirement to submit these 
reports in a non-structured data format, as compared to the benefits 
and costs of requiring them in a structured data language.

D. Compliance Reports Submitted to the Commission Pursuant to Rule 
15fk-1(c)(2)(ii)(A)

    Rule 15fk-1(c) requires that the chief compliance officer (``CCO'') 
of an SBS Entity prepare and sign an annual compliance report (``CCO 
report'') that must be submitted to the Commission within 30 days 
following the deadline for filing the SBS Entity's annual financial 
report with the Commission pursuant to section 15F of the Exchange Act 
and the rules and regulations thereunder.\279\ Rule 15fk-1(c) does not 
specify the manner in which the CCO report must be submitted, whether 
in paper or electronic format.\280\ Accordingly, an SBS Entity may 
submit its CCO report as a paper or electronic submission.
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    \279\ 17 CFR 240.15Fk-1(c).
    \280\ See id.
---------------------------------------------------------------------------

    To facilitate submission of the CCO reports, the Commission has 
prepared the EDGAR system to receive the reports electronically. The 
Commission is proposing to amend Rule 15fk-1(c)(2)(ii)(A) to require 
the CCO report to be submitted electronically in Inline XBRL (i.e., as 
an Interactive Data File in accordance with Rule 405 of Regulation S-T) 
\281\ through EDGAR.\282\ Requiring the electronic submission of these 
reports through EDGAR would specify the manner of submission, 
streamline and simplify the filing process for an SBS Entity and the 
Commission, eliminate the need to establish manual processes that may 
introduce error, and make submissions available immediately to 
Commission staff. Furthermore, requiring the report to be submitted 
electronically in Inline XBRL would facilitate access to the 
information included on the CCO reports, enabling Commission staff to 
perform more efficient retrieval, aggregation, and comparison across 
different SBS Entities and time periods, as compared to an unstructured 
PDF, HTML, or ASCII format requirement for the reports.\283\ The 
functionality enabled by a machine-readable data requirement would 
allow Staff to better utilize CCO reports to gauge the soundness of SBS 
Entity compliance programs (e.g., by enabling efficient staff 
identification of material changes to compliance policies or material 
non-compliance matters) to ensure compliance with the Exchange Act and 
rules and regulations thereunder applicable to security-based swaps, 
thus ultimately furthering the Commission's mission of maintaining 
fair, orderly, and efficient markets.\284\ In addition, the proposed 
structured data requirement would enable EDGAR to perform technical 
validations (i.e., programmatic checks to ensure the reports are 
appropriately standardized, formatted, and complete) upon intake of the 
reports, thus potentially improving the quality of the submitted data 
by decreasing the incidence of non-substantive errors. The Commission 
is proposing Inline XBRL (and not custom XML) as the structured data 
language to be required for CCO reports, because those reports consist 
of extended narrative descriptions, and whereas custom XML data 
languages only have the capacity to accommodate brief narrative 
descriptions, Inline XBRL can accommodate longer narrative

[[Page 23960]]

descriptions with presentation capabilities that preserve human-
readability while maintaining machine-readability.
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    \281\ 17 CFR 232.405.
    \282\ The proposed amendment would not change what is required 
to be included in the CCO report under Exchange Act Rule 15fk-1(c). 
See 17 CFR 240.15Fk-1(c).
    \283\ For further discussion of the proposed structured data 
requirements, see infra section VII.A.
    \284\ See Business Conduct Standards for Security-Based Swap 
Dealers and Major Security-Based Swap Participants, Exchange Act 
Release No. 77617 (Apr. 14, 2016) 81 FR 29959, 30054 (May 13, 2016) 
(stating that the proposed (and subsequently adopted) requirements 
for Rule 15fk-1, including the requirement for the chief compliance 
officer to prepare an annual compliance report that is submitted 
with the Commission, ``underscore[s] the central role that sound 
compliance programs play to ensure compliance with the Exchange Act 
and rules and regulations thereunder applicable to security-based 
swaps''); see also Business Conduct Standards for Security-Based 
Swap Dealers and Major Security-Based Swap Participants, Exchange 
Act Release No. 64766 (June 29, 2011), 76 FR 42395, 42435 (July 18, 
2011).
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Request for Comment
    74. Should the Commission require CCO reports to be submitted 
electronically with the Commission through the EDGAR system in a 
structured data language? Explain why or why not.
    75. Would SBS Entities experience practical difficulties in 
preparing and submitting CCO reports electronically on EDGAR in a 
structured data language? If so, explain why.
    76. Should the Commission instead require that CCO reports be 
submitted through a different process or format? If so, explain why and 
whether such process or format should be adopted in lieu of requiring 
CCO reports to be submitted electronically on EDGAR system in a 
structured data language.
    77. Even if the proposal to require CCO reports to be submitted 
electronically on EDGAR in a structured data language would provide 
greater benefits as compared to submitting via email or on EDGAR in an 
unstructured data language, would an alternative manner of submitting 
provide even more benefits than the proposal, or be more appropriate? 
Please describe any alternative manner in detail and assess how the 
alternative would impact SBS Entities, security-based swap markets and 
the Commission. For example, should the Commission instead permit, but 
not require, CCO reports to be submitted electronically on EDGAR in 
structured data language? Should the Commission require a different 
structured data language, such as custom XML, for the CCO reports? 
Should the Commission implement another method for filing CCO reports?
    78. Would a requirement to submit CCO reports in a structured data 
language impose additional costs on, or create any benefits for, SBS 
Entities as compared to other (non-structured) data languages? How 
would the benefits and costs of a requirement to submit CCO reports in 
an unstructured data language compare to the benefits and costs of a 
requirement to submit in a structured data language?

VI. Amendments Regarding the FOCUS Report and Signature Requirements in 
Rule 17a-5, 17a-12, and 18a-7 Filings

    Until 2021, broker-dealers were the only entities required to file 
Parts II and IIA of Form X-17A-5, the FOCUS Report, which are used to 
report unaudited financial and operational information on a monthly or 
quarterly basis. In 2019, as part of a new regime to regulate security-
based swap activity, the Commission amended FOCUS Report Part II to: 
(1) elicit additional information about the security-based swap 
activities of broker-dealers that file Part II; (2) add OTC derivatives 
dealers and SBS Entities that are not dually registered as broker-
dealers (``stand-alone SBS Entities'') as additional filers for FOCUS 
Report Part II; and (3) adopt new FOCUS Report Part IIC to be filed by 
SBS Entities with a prudential regulator (``bank SBS Entities'').\285\ 
Since these changes have taken effect, and firms have begun to file 
these forms, it has come to the Commission's attention that amendments 
are needed regarding the FOCUS Report to correct certain technical 
errors and to provide clarifications. These proposed changes will help 
improve the accuracy of the information the Commission collects on the 
FOCUS Report, consistent with the goals set forth in section IV of this 
release to require these reports to be filed in structured data 
language. In addition, the Commission is proposing to allow electronic 
signatures in Rule 17a-5, 17a-12, and 18a-7 filings, including the 
FOCUS Report. The proposed amendments are described in more detail 
below.
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    \285\ See Recordkeeping and Reporting Requirements for Security-
Based Swap Dealers, Major Security-Based Swap Participants, and 
Broker-Dealers, Exchange Act Release No. 87005 (Sept. 19, 2019), 84 
FR 68550 (Dec. 16, 2019) (``SBS Recordkeeping and Reporting Adopting 
Release'').
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A. Corrective and Clarifying Amendments to the FOCUS Report Part II

1. Computation of Minimum Regulatory Capital Requirements
    In the Calculation of Minimum Net Capital Requirement in the 
Computation of Minimum Regulatory Capital Requirements section of the 
FOCUS Report Part II, firms have noted that Rule 15c3-1 \286\ instructs 
a broker-dealer that is also a futures commission merchant (``FCM'') to 
report the greater of the broker-dealer ratio requirement or ``4 
percent of the funds required to be segregated'' pursuant to the CFTC 
rules.\287\ However, the form does not include a line for firms to 
report the 4% of segregated funds. In addition, the FOCUS Report does 
not align with Rule 15c3-1 in instructing firms at what point in the 
net capital computation to compute the percentage of the risk margin 
amount (if applicable) \288\ and the 10% addition for broker-dealers 
engaged in reverse repurchase agreements.\289\ To align the FOCUS 
Report's net capital computation with Rule 15c3-1, the Commission 
proposes to add a line for the reporting of 4% of segregated funds and 
to renumber other lines to clarify in the FOCUS Report when certain 
computations should be made as set forth in Rule 15c3-1's net capital 
computation. These changes are intended to conform the FOCUS Report to 
Rule 15c3-1, with no substantive impact on the broker-dealer's required 
capital computation under Rule 15c3-1.\290\
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    \286\ See 17 CFR 240.15c3-1 (``Rule 15c3-1'').
    \287\ See 17 CFR 240.15c3-1(a)(1)(iii).
    \288\ See 17 CFR 240.15c3-1(a)(7)(i) and (a)(10).
    \289\ See 17 CFR 240.15c3-1(a)(9)(i) through (iii).
    \290\ To align the FOCUS report's net capital computation with 
Rule 15c3-1, the Commission is proposing the following changes to 
the Calculation of Minimum Net Capital Requirement sub-section in 
the Computation of Minimum Regulatory Capital Requirements section 
of FOCUS Report Part II: (1) Delete old Line 5Bi; (2) Add new Line 
5C; (3) Add a subtotal line as new Line 5D and renumber subsequent 
lines and line references accordingly; and (4) Move old Line 5D to 
new Line 7 and renumber subsequent lines and line references 
accordingly.
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2. Statement of Income (Loss) or Statement of Comprehensive Income, As 
Applicable
    The Commission is also proposing amendments to the FOCUS Report 
Part II income statement. Currently, the income statement only provides 
fields for reporting revenue from securities commissions, even though 
firms may generate revenue from other types of commissions (e.g., 
commodity transactions and insurance products). Because it is important 
for the Commission to receive comprehensive data on all types of firms' 
commission revenue to ensure compliance with relevant rules and 
properly supervise firms as part of the Commission's mission, the 
Commission proposes to revise the revenue section of the income 
statement to account for these other types of commission revenue.\291\
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    \291\ In summary, the Commission is proposing to revise Line 1E 
and add new Lines 1F-1H in the Revenue sub-section in the Income 
Statement section of FOCUS Report Part II.
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3. Computation of CFTC Minimum Capital Requirements
    CFTC rules permit a firm that is registered with the CFTC as an 
introducing broker, an FCM, or a swap dealer, and also registered with 
the Commission as a broker-dealer or SBS Entity, to file the FOCUS 
Report in lieu of the unaudited financial reports required under the 
CFTC regulations.\292\ Because the CFTC is not receiving its own form 
from these dual registrants and relies upon the Commission's FOCUS 
Report as a source of data for these firms, the Commission's FOCUS

[[Page 23961]]

Report includes several sections or schedules set forth in the CFTC's 
Form 1-FR that address the segregation of customer funds and the 
calculation of CFTC minimum capital requirements to ensure the CFTC 
receives complete information about these firms.\293\
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    \292\ See 17 CFR 1.10(h); 17 CFR 23.105(d)(3).
    \293\ See FOCUS Report Part II's Computation of CFTC Minimum 
Capital Requirements, Statement of Segregation Requirements and 
Funds in Segregation for Customers Trading on U.S. Commodity 
Exchanges, Statement of Cleared Swaps Customer Segregation 
Requirements and Funds in Cleared Swaps Customer Accounts under 
Section 4d(f) of the Commodity Exchange Act, Statement of 
Segregation Requirements and Funds in Segregation for Customers' 
Dealer Options Accounts, Statement of Secured Amounts and Funds Held 
in Separate Accounts for Foreign Futures and Foreign Options 
Customers Pursuant to CFTC Regulation 30.7.
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    While CFTC FCMs are required to complete the Computation of CFTC 
Minimum Capital Requirements section of FOCUS Report Part II, the FOCUS 
Report does not instruct CFTC introducing brokers or swap dealers not 
also registered as an FCM (``stand-alone introducing brokers'' or 
``stand-alone swap dealers,'' respectively) to complete this section of 
the form. Therefore, the Commission proposes to require CFTC-registered 
introducing brokers and swap dealers (that are also registered with the 
Commission as a broker-dealer or SBS Entity) to complete the 
Computation of CFTC Minimum Capital Requirements section of FOCUS 
Report Part II.

B. Harmonizing FOCUS Report Part IIC With the Call Report

    In 2019, the Commission adopted FOCUS Report Part IIC, a new 
unaudited financial report to be filed by bank SBS Entities.\294\ FOCUS 
Report Part IIC requires bank SBS Entities to report certain 
information domestic banks already report on Federal Financial 
Institutional Examination Council (``FFIEC'') Form 031 (also known as 
the ``Call Report''),\295\ in an effort to reduce the administrative 
burden of completing FOCUS Report Part IIC. The FOCUS Report Part IIC 
is closely modelled on FFIEC Form 031, and when the same information is 
solicited in both FFIEC Form 031 and FOCUS Report Part IIC, the same 
line item number is used in both forms, except that the FOCUS Report 
Part IIC line item ends with an additional ``b'' character.\296\
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    \294\ See SBS Recordkeeping and Reporting Adopting Release.
    \295\ See Federal Financial Institutions Examination Council, 
Consolidated Reports of Condition and Income for a Bank with 
Domestic and Foreign Offices--FFIEC 031, available at https://www.ffiec.gov/pdf/FFIEC_forms/FFIEC031_202203_f.pdf.
    \296\ See id. at 68581.
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    However, since FOCUS Report Part IIC was adopted, FFIEC Form 031 
has been updated to, among other things, reflect changes in the 
prudential regulators' capital rules and generally accepted accounting 
principles.\297\ This has resulted in inconsistencies between FOCUS 
Report Part IIC and FFIEC Form 031, and SEC staff have received a 
number of phone calls seeking assistance on how to reconcile these 
incompatibilities. For example, FFIEC Form 031 now includes a third 
type of securities to be reported on the Balance Sheet section, while 
FOCUS Report Part IIC continues to solicit values for the original two 
types of securities.\298\ Similarly, FOCUS Report Part IIC continues to 
solicit Tier 3 capital in the Regulatory Capital section even though 
this concept no longer exists in the prudential regulators' capital 
rules or in FFIEC Form 031, and FFIEC Form 031 now solicits a new 
capital ratio (common equity tier 1 capital ratio) that is not 
solicited in FOCUS Report Part IIC.\299\ Therefore, the Commission 
proposes amendments to the assets and liabilities subsections of the 
Balance Sheet section,\300\ the Regulatory Capital section,\301\ and 
the Income Statement section \302\ of FOCUS Report Part IIC to 
harmonize FOCUS Report Part IIC with FFIEC Form 031. In sum, the 
proposed changes would simplify the filing of FOCUS Report Part IIC by 
bank SBS Entities by permitting such entities to file with the 
Commission the identical information required by the current version of 
the Call Report, without the current inconsistencies raising questions 
from filers regarding whether the Commission is seeking information 
different than that required by the comparable line in the Call Report.
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    \297\ See Federal Financial Institutions Examination Council, 
Reporting Forms--FFIEC 031, Consolidated Reports of Condition and 
Income for a Bank with Domestic and Foreign Offices, available at 
https://www.ffiec.gov/forms031.htm (identifying current and 
historical versions of FFIEC Form 031).
    \298\ Compare FFIEC Form 031, Schedule RC--Balance Sheet, Lines 
2a-2c, with FOCUS Report Part IIC, Balance Sheet, Lines 2a-2b.
    \299\ Compare FFIEC Form 031, Schedule RC-R--Regulatory Capital, 
with FOCUS Report Part IIC, Regulatory Capital, Line 4.
    \300\ The Commission is proposing the following changes to the 
Balance Sheet section of FOCUS Report Part IIC: (1) Add new Line 2C; 
(2) Revise Lines 4B, 4D, 10, 15, and 16; and (3) Delete Lines 10A 
and 10B.
    \301\ The Commission is proposing the following changes to the 
Regulatory Capital section of FOCUS Report Part IIC: (1) Delete Line 
4 and renumber subsequent lines; (2) Revise renumbered Lines 4, 9, 
and 10, and parenthetical note after Capital Ratios subheading; and 
(3) Add new Line 8.
    \302\ The Commission is proposing the following changes to the 
Income Statement section of FOCUS Report Part IIC: (1) Revise Line 
7; and (2) Add new Lines F.i, F.ii, G.i, and G.ii, and delete Lines 
F and G's fill-in fields due to addition of sub-lines.
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C. OTC Derivatives Dealer FOCUS Report Filing Requirement

    Most broker-dealers file the FOCUS Report electronically on the 
FINRA eFOCUS system developed by the Financial Industry Regulatory 
Authority, Inc. (``FINRA''). These broker-dealers file the FOCUS Report 
pursuant to a plan established by the broker-dealer's SRO, the 
procedures and provisions of which have been submitted to and declared 
effective by the Commission pursuant to paragraph (a)(3) of Exchange 
Act Rule 17a-5.\303\ Domestic stand-alone SBS Entities and bank SBS 
Entities are not dually registered as broker-dealers, and therefore are 
not subject to these SRO plans, but they are subject to a Commission 
order that separately requires these firms to file the FOCUS Report 
electronically on the system developed by the Commission, the ``SEC 
eFOCUS system.'' \304\ Although the SEC eFOCUS system is separate from 
the FINRA eFOCUS system, it appears the same to users, is developed and 
maintained by FINRA, and is modelled on the FINRA eFOCUS system. The 
Commission order designating FINRA to receive FOCUS Reports from stand-
alone SBS Entities and bank SBS Entities reasoned that FINRA is 
uniquely qualified to provide the Commission with a familiar and 
consolidated platform for these firms to file the FOCUS Report, uniform 
ancillary ongoing services associated with these filings, and a 
consolidated platform for transmitting this data to the 
Commission.\305\
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    \303\ See 17 CFR 240.17a-5(a)(3).
    \304\ See Order Designating Financial Industry Regulatory 
Authority, Inc., to Receive Form X-17A-5 (FOCUS Report) from Certain 
Security-Based Swap Dealers and Major Security-Based Swap 
Participants, Exchange Act Release No. 88866 (May 14, 2020), 85 FR 
29993 (May 19, 2020).
    \305\ See id.
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    OTC derivatives dealers are a type of broker-dealer that engages in 
limited securities activities and is exempt from SRO membership.\306\ 
OTC derivatives dealers are required to file FOCUS Report Part II, but 
unlike other broker-dealers and stand-alone SBS Entities, OTC 
derivatives dealers are required to file FOCUS Report Part II in paper 
``at the Commission's principal office in Washington, DC.'' \307\ Given 
the similarities between OTC derivatives dealers and the broker-dealers 
and stand-alone SBS Entities filing FOCUS Report Part II, the 
Commission proposes to require OTC derivatives dealers to file the 
FOCUS Report Part II on the SEC eFOCUS system developed and

[[Page 23962]]

maintained by FINRA. Because OTC derivatives dealers are required to be 
affiliated with a broker-dealer,\308\ OTC derivatives dealers' 
operational staff already are familiar with the FINRA eFOCUS system's 
interface, and would be able to use the same preexisting templates, 
software, and procedures currently used by the broker-dealer to file 
FOCUS Reports on the FINRA system. This would help contain costs and 
time burdens on OTC derivatives dealers associated with the proposed 
amendment to electronically submit these reports. Having this 
information submitted in the eFOCUS system would furthermore facilitate 
the ability of Commission staff to compare data between these different 
types of entities in a consistent manner and in the same database, 
which would allow staff to monitor these registrants more 
comprehensively and effectively.\309\ For these reasons, the Commission 
proposes to amend paragraph (a)(2) of Rule 17a-12 to require OTC 
derivatives dealers to file FOCUS Report Part II on the SEC eFOCUS 
system maintained by FINRA.\310\
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    \306\ See 17 CFR 240.3b-12.
    \307\ See 17 CFR 240.17a-12(a).
    \308\ See 17 CFR 240.3b-12.
    \309\ As an alternative, the Commission considered whether to 
require OTC derivatives dealers to file their FOCUS Reports on 
EDGAR, but preliminarily concludes that filing on SEC eFOCUS is 
preferable because the SEC eFOCUS system is already set up to 
receive FOCUS Report filings, OTC derivatives dealers' staff are 
already familiar with the SEC eFOCUS system, and Commission staff 
would be better able to compare data between different entity types 
if FINRA eFOCUS or SEC eFOCUS is used by all firm types to file the 
FOCUS Report.
    \310\ The Commission also proposes to amend paragraph (a)(2) of 
Rule 17a-12 to replace ``deemed to be confidential'' with ``deemed 
to be confidential for the purposes of section 24(b) of the Act'' 
for consistency with the language used in other rules (e.g., 
paragraph (c)(4) of Exchange Act Rule 17h-2T) and to clarify the 
legal basis of the rule. This proposed amendment is not intended to 
change the substantive meaning of the sentence.
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D. Signature Requirements in Rule 17a-5, 17a-12, and 18a-7 Filings

1. Number of Signatures on FOCUS Report
    The cover pages of Parts II, IIA, and IIC of the FOCUS Report 
include signature lines for the filer's principal executive officer, 
principal financial officer, and principal operations officer (or their 
comparable officers).\311\ In the time since the revised FOCUS Report 
was adopted, it has come to the Commission's attention that obtaining 
the signatures of all three principal officers on or close to the same 
day may be burdensome, especially with respect to larger firms with 
thousands of employees. Further, the Commission believes that obtaining 
the signatures of two of the three senior officers would help ensure 
that the broker-dealer's senior executives are responsible for the 
accuracy of the information being filed with the Commission. Therefore, 
the Commission proposes to require only two of the three principal 
officers' signatures in an effort to balance the Commission's desire 
for individual accountability with the burden on the filer.
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    \311\ FOCUS Report Part IIA uses slightly different wording: 
Principal Executive Officer or Managing Partner, Principal Financial 
Officer or Partner, and Principal Operations Officer or Partner.
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2. Electronic Signatures in Rule 17a-5, 17a-12, and 18a-7 Filings
    The Commission also proposes to allow signatories on Rule 17a-5, 
17a-12, and 18a-7 filings to choose between providing either manual or 
electronic signatures.\312\ Remote work has increased in frequency in 
the wake of COVID-19, ``increase[ing] the difficulties associated with 
obtaining manual `wet' signatures,'' while ``improvements in electronic 
signature software technology make it possible to confirm (with at 
least equal confidence to the collection of manual signatures) who has 
signed a document and when it was signed.'' \313\
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    \312\ See proposed amendments to paragraphs (f)(3)(v)(B), 
(i)(1)(ii), and (p) of Rule 17a-5; paragraphs (g)(2), (j)(1), and 
new paragraph (q) of Rule 17a-12; paragraphs (e)(3)(v)(B), 
(h)(1)(ii), and (j) of Rule 18a-7; FOCUS Report Part IIA and 
instructions; FOCUS Report Part II instructions; FOCUS Report Part 
IIC instructions.
    \313\ See Electronic Signatures in Regulation S-T Rule 302, 
Exchange Act Release No. 10889 (Nov. 17, 2020), 85 FR 78224 (Dec. 4, 
2020) (``Electronic Signatures Release'') (quoting comment letter 
from Richard Blake, et al., available at https://www.sec.gov/comments/4-760/4760-7278993-217809.pdf).
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    The Commission proposes that the signing process for an electronic 
signature would need to, at a minimum: ``(1) Require the signatory to 
present a physical, logical, or digital credential that authenticates 
the signatory's individual identity; (2) Reasonably provide for non-
repudiation of the signature; (3) Provide that the signature be 
attached, affixed, or otherwise logically associated with the signature 
page or document being signed; and (4) Include a timestamp to record 
the date and time of the signature.'' \314\ These requirements, which 
were first identified in the Commission's Electronic Signatures 
Release, are needed so that the Commission can verify the authenticity 
of the electronic signature, but are intended to be technologically 
neutral and allow for different types and forms of electronic 
signatures, provided that the signing process satisfies the 
aforementioned conditions that relate to the validity and 
enforceability of an electronic signature.\315\
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    \314\ See proposed amendment to instructions for FOCUS Report 
Parts II, IIA, and IIC. An example of an electronic signature using 
this signing process is Adobe Acrobat's digitally signed 
certificate, when the document is locked after signing.
    \315\ See Electronic Signatures Release, 85 FR at 78225.
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Request for Comment
    79. Are there any lines in the FOCUS Report Parts II, IIA, or IIC 
that should be added or removed because they result in inaccuracies or 
inconsistencies with other portions of the FOCUS Report? If so, 
identify the lines and explain why they should be added or removed. For 
example, should the Commission update Line 10 (Market risk exposure--
for Basel 2.5 firms) of the Computation of Net Capital (Filer 
Authorized to Use Models) section of FOCUS Report Part II to reflect 
that firms are now using Basel 3? If so, explain why how Line 10 should 
be updated, and why. Are there any lines in the FOCUS Report that 
require further clarification or instruction? If so, identify the lines 
and explain the needed clarification or instruction.
    80. The Commission is proposing amendments to FOCUS Report Part II. 
Do commenters agree or disagree with these proposed amendments? Explain 
why or why not. Should the Commission adopt its proposal to amend the 
Calculation of Minimum Net Capital Requirement subsection to include 4% 
of funds required to be segregated under the CFTC's rules even though 
the CFTC's rules no longer include the 4% of segregated funds ratio 
requirement? If so, what should the 4% of segregated funds be defined 
with respect to? If not, what standard should be used, and should Rule 
15c3-1 be amended for consistency with the FOCUS Report? Explain. What, 
if any, costs would be associated with adopting the proposed amendments 
to FOCUS Report Part II? Are those costs more, less or the same as not 
amending the FOCUS Report? How do firms currently complete the 
Calculation of Minimum Net Capital Requirement subsection, and why? 
Should the reference to the CFTC's ratio net capital requirement be 
added to the Commission's ratio net capital requirement, or should 
firms be instructed to apply the greater of the CFTC or Commission 
ratio net capital requirements? Explain.
    81. Please address whether the proposed amendments would be 
appropriate, and discuss any potential alternatives to the proposed 
amendments. For instance, as an alternative to amending the FOCUS

[[Page 23963]]

Report to include the 4% of segregated funds ratio amount, should the 
Commission instead amend Rules 15c3-1 and 15c3-1d to remove references 
to these requirements that are no longer in effect under the CFTC's 
rules? In particular, Rules 15c3-1 and 15c3-1d include references to 4, 
6, or 7 ``percent of the funds required to be segregated pursuant to 
the Commodity Exchange Act and the regulations thereunder (less the 
market value of commodity options purchased by option customers on or 
subject to the rules of a contract market, each such deduction not to 
exceed the amount of funds in the option customer's account)'' that 
impose additional requirements that apply to broker-dealers that are 
also registered with the CFTC as FCMs.\316\ However, the CFTC's rules 
no longer include a requirement linked to segregated funds. Removing 
these references from Rules 15c3-1 and 15c3-1d would mean that broker-
dealers that also are registered as FCMs would no longer be subject to 
these additional requirements based on CFTC requirements that are no 
longer in effect. However, as FCMs, they will remain subject to capital 
and other financial responsibility requirements under the Commodity 
Exchange Act and the CFTC's rules thereunder. Therefore, broker-dealers 
that are FCMs would continue to be required to comply with the capital 
requirements of Rule 15c3-1 and its appendices (excluding the 
requirements linked to the CFTC's requirements that are no longer in 
effect) and to comply with the capital and other financial 
responsibility rules of the Commodity Exchange Act and the CFTC's rules 
thereunder. In light of this, should the Commission amend Rules 15c3-1 
and 15c3-1d to remove all references to the CFTC's segregated ratio 
requirement, which is no longer in effect? Explain why or why not. How 
would this impact the capital of broker-dealers also registered as 
FCMs?
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    \316\ See 17 CFR 240.15c3-1(a)(1)(iii) (4%), (e)(2)(ii) (7%); 17 
CFR 240.15c3-1d(b)(6)(iii) (7%), 17 CFR 240.15c3-1d(b)(7) (7%), 17 
CFR 240.15c3-1d(b)(8)(i)(A) (6%), 17 CFR 240.15c3-1d(b)(10)(ii)(B) 
(4%), 17 CFR 240.15c3-1d(c)(2) (6%), 17 CFR 240.15c3-1d(c)(5)(i)(B) 
(7%).
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    82. As a second alternative to amending the FOCUS Report to include 
the 4% of segregated funds ratio amount, should the Commission replace 
the references to the CFTC's segregated ratio requirement with the 
ratio requirement currently used in the CFTC rules? For example, should 
the capital requirements for FCMs referenced in existing paragraph 
(a)(1)(iii) of Rule 15c3-1 be modified to refer to ``the FCM's risk-
based capital requirement pursuant to the Commodity Exchange Act (7 
U.S.C. 1 et seq.) and the regulations thereunder''? \317\ Explain why 
or why not. In addition, where the other requirements of Rules 15c3-1 
and 15c3-1d currently reference specific percentages that are multiples 
of the FCM's segregated funds requirement (e.g., 7% under Rule 15c3-
1d(b)(6)(iii)),\318\ should the references be modified to read ``120% 
of the aggregate amount of the FCM's risk-based capital requirement''? 
Explain why or why not.
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    \317\ See 17 CFR 1.17(a)(1)(i)(B) (prescribing an FCM's risk-
based capital requirement, as the sum of: (1) 8% of the total risk 
margin requirement for positions carried by the FCM in customer 
accounts and noncustomer accounts; and (2) for an FCM that is also a 
registered swap dealer, 2% of the total uncleared swap margin).
    \318\ See 17 CFR 240.15c3-1(e)(2)(ii) (referencing 7%); 17 CFR 
240.15c3-1d(b)(6)(iii) (referencing 7%), 17 CFR 240.15c3-1d(b)(7) 
(referencing 7%), 17 CFR 240.15c3-1d(b)(8)(i)(A) (referencing 6%), 
17 CFR 240.15c3-1d(b)(10)(ii)(B) (referencing 4%), 17 CFR 240.15c3-
1d(c)(2) (referencing 6%), 17 CFR 240.15c3-1d(c)(5)(i)(B) 
(referencing 7%).
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    83. Should the Commission amend FOCUS Report Part IIC to align with 
FFIEC Form 031? Explain why or why not. If the prudential regulators 
make further amendments to FFIEC Form 031 before the Commission issues 
an adopting release, if any (e.g., to how assets, liabilities, or 
equity capital are reported on FFIEC Form 031's Schedule RC, to how 
regulatory capital or capital ratios are reported on FFIEC Form 031's 
Schedule RC-R, to how income is reported on FFIEC Form 031's Schedule 
RI), should the Commission make additional amendments to FOCUS Report 
Part IIC to align the form with FFIEC Form 031, as amended? Explain why 
or why not.
    84. The Commission is proposing four minimum standards that an 
electronic signature must satisfy. Should the Commission specify 
standards for electronic signatures? Explain why or why not. Instead of 
proposing the four minimum standards, should the Commission instead 
rely the E-Sign Act's more general definition of a digital signature 
(which is consistent with the four minimum standards)? \319\ Explain 
why or why not. Are any of these standards unnecessary or should any 
additional standards be added? Explain why. Are any of these standards 
unclear? If so, explain how they could be clarified. What, if any, 
costs would result from adopting the proposed standards for an 
electronic signature, as opposed to the aforementioned alternatives?
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    \319\ The E-Sign Act states: ``The term `electronic signature' 
means an electronic sound, symbol, or process, attached to or 
logically associated with a contract or other record and executed or 
adopted by a person with the intent to sign the record.'' 15 U.S.C. 
7006.
---------------------------------------------------------------------------

    85. The Commission is proposing to require two of the three 
signature lines to be signed on the cover page of the FOCUS Report. Do 
commenters agree? Explain, and if not, identify an alternative 
approach. Should the Commission require all three signature lines to be 
signed? Should the Commission require two of the three signature lines 
to be signed as a general rule, but allow only one of the three 
signature lines to be signed when FINRA permits a single person at the 
broker-dealer to fill two of the roles identified on the signature 
lines? Explain why or why not. What, if any, costs would result from 
adopting the proposal to require two of the three signature lines to be 
signed on the cover page of the FOCUS Report?
    86. The Commission is proposing to require OTC derivatives dealers 
to file their FOCUS Reports on the SEC eFOCUS system. What would be the 
burden of requiring OTC derivatives dealers to file their FOCUS Reports 
on the SEC eFOCUS system maintained by FINRA? Explain. Should the 
Commission require OTC derivatives dealers to file their FOCUS Reports 
on another electronic platform, such as the Commission's EDGAR system? 
Explain why or why not. What, if any, costs would result from requiring 
OTC derivatives dealers to file their FOCUS Reports on the SEC eFOCUS 
system, as compared to allowing these firms to file by paper or on 
EDGAR?

VII. Proposed Amendments to Regulation S-T (Including Structured Data 
Requirements) and Rule 24b-2

A. Proposed Amendments to Regulation S-T (Including Structured Data 
Requirements)

    The Commission is proposing to amend Rule 101(a) of Regulation S-T 
to designate Form X-17A-5 Part III, broker-dealer supplemental reports 
filed pursuant to paragraph (k) of Rule 17a-5, OTC derivatives dealer 
supplemental reports filed pursuant to paragraphs (k), (l), and (m) of 
Rule 17a-12, Form 17-H, Form X-17A-19, notices (and withdrawals of 
notices) filed pursuant to Rule 3a71-3(d)(1)(vi), notices (and 
amendments, including notices of dispute termination) submitted to the 
Commission pursuant to Rule 15fi-3(c), and compliance reports submitted 
with the Commission pursuant to Rule 15fk-1(c)(2)(ii)(A) (``Covered 
EDGAR Documents'') as mandated electronic

[[Page 23964]]

submissions.\320\ Further, the Commission is proposing to amend Rule 
101(d) of Regulation S-T to require that all documents, including any 
information with respect for which confidential treatment is requested, 
filed pursuant to paragraphs (d) or (k) of Rule 17a-5, paragraphs (b), 
(k), (l), or (m) of Rule 17a-12, Rule 17a-19, Rule 17h-2T, or paragraph 
(c) of Rule 18a-7, and all notices and amendments provided pursuant to 
paragraph (c) of Rule 15fi-3, must be filed or submitted in electronic 
format.
---------------------------------------------------------------------------

    \320\ The Commission is also proposing a technical update to 
Rule 100(c) of Regulation S-T, 17 CFR 232.100(c), to update the name 
of the Division of Trading and Markets from the previously used 
Division of Market Regulation.
---------------------------------------------------------------------------

    Regulation S-T, in conjunction with the EDGAR Filer Manual and 
other applicable rules, regulations, and forms, governs the electronic 
submission of documents filed with or otherwise submitted to the 
Commission on EDGAR.\321\ The Commission is proposing to add the 
following filings to Rule 101(a), Mandated Electronic Submissions and 
Exceptions, of Regulation S-T:
---------------------------------------------------------------------------

    \321\ Item 10(a) of Regulation S-T. The EDGAR Filer Manual 
contains the technical specifications needed for filers to make 
submissions through the EDGAR system. The Commission originally 
adopted the EDGAR Filer Manual on Apr. 1, 1993, with an effective 
date of Apr. 26, 1993. See Adoption of EDGAR Filer Manual, 
Securities Act Release No. 6986 (Apr. 1, 1993), 58 FR 18638 (Apr. 9, 
1993).

 Form X-17A-5 Part III
 ANC broker-dealer supplemental reports filed pursuant to 
paragraph (k) of Rule 17a-5
 OTC derivatives dealer supplemental reports filed pursuant to 
paragraph (k), (l), and (m) of Rule 17a-12
 Form 17-H
 Form X-17A-19
 Notices (and withdrawals of notices) filed pursuant to Rule 
3a71-3(d)(1)(vi)
 Notices (and amendments, including notices of dispute 
termination) provided to the Commission pursuant to Rule 15fi-3(c)
 Compliance reports submitted with the Commission pursuant to 
Rule 15fk-1(c)(2)(ii)(A)

    These proposed amendments would incorporate the new electronic 
submission requirements into the existing structure of Regulation S-T 
and would ensure that the EDGAR rules in Regulation S-T apply to the 
forms and other documents proposed to be submitted electronically on 
EDGAR.\322\ The filings would be added as mandatory electronic 
submissions under Regulation S-T; however, pursuant to the existing 
procedures in Rules 201 and 202 of Regulation S-T,\323\ filers of these 
filings (except for notices and withdrawals of notices filed pursuant 
to Rule 3a71-3(d)(1)(vi)) \324\ could request temporary or continuing 
hardship exemptions.
---------------------------------------------------------------------------

    \322\ As such, rules such as 17 CFR 232.12 (addressing, among 
other things, the time during which documents may be submitted by 
EDGAR) and 17 CFR 232.13 (addressing, among other things, the 
business day on which documents are deemed to be submitted) would be 
applicable to the documents proposed to be included in Rule 101(a) 
of Regulation S-T.
    \323\ 17 CFR 232.201 and 202.
    \324\ The Commission is proposing to amend Rules 201 and 202 of 
Regulation S-T to preclude the possibility of temporary or 
continuing hardship exemptions from electronic filing for ANE 
Exception Notices and withdrawals. See supra note 270 and 
accompanying text.
---------------------------------------------------------------------------

Structured Data Requirements
    The Commission is also proposing amendments to Rule 405 of 
Regulation S-T to implement the proposed Inline XBRL requirements. Rule 
405 sets forth the Interactive Data File requirements for Commission 
filings, and specifies that Inline XBRL is the structured data language 
that must be used for Interactive Data Files.\325\ The Commission's 
proposed amendments would expand Rule 405 of Regulation S-T to add 
Inline XBRL requirements for CCO reports and for portions of Form X-
17A-5 Part III and related annual filings, Form 17-H, Form 1, and Form 
CA-1.\326\
---------------------------------------------------------------------------

    \325\ See 17 CFR 232.405.
    \326\ See supra Sections II, IV.A, and V.D.

                    Proposed Inline XBRL Requirements
------------------------------------------------------------------------
                                                Proposed Inline XBRL
                   Form                             requirements
------------------------------------------------------------------------
Form CA-1.................................  Schedule A, Exhibits C, F,
                                             H, J, K, L, M, O, R, S.
Form 1....................................  Exhibits D, E (in part), I.
Form X-17A-5 Part III.....................  All disclosures except
                                             facing page.
Form 17-H.................................  Item 4 (financial
                                             statements).
CCO Reports...............................  All disclosures.
------------------------------------------------------------------------

    For Form CA-1, Schedule A and Exhibits C, F, H, J, K, L, M, O, R, S 
would be filed in Inline XBRL.\327\ For Form 1, Exhibits D, E (in 
part), and I would be filed in Inline XBRL.\328\ For Form X-17A-5 Part 
III, all disclosures except the facing page would be filed in Inline 
XBRL. For Form 17-H, Item 4 (the filer's financial statements) would be 
filed in Inline XBRL. Finally, for CCO reports, all disclosures would 
be submitted in Inline XBRL.
---------------------------------------------------------------------------

    \327\ Schedule A to the execution page requires certain 
descriptive responses to complement the clearing agency's execution 
page disclosures. Exhibit C requires a description of the clearing 
agency's organizational structure. Exhibit F requires a description 
of material pending legal proceedings involving the clearing agency. 
Exhibit H requires the clearing agency's financial statements. 
Exhibit J requires a description of the clearing agency's services 
and functions. Exhibit K requires a description of the clearing 
agency's security measures and procedures. Exhibit L requires a 
description of the clearing agency's safeguarding measures and 
procedures. Exhibit M requires a description of the clearing 
agency's backup systems. Exhibit O requires a description of 
criteria governing access to the clearing agency's services and a 
description of the reasons for imposing such criteria. Exhibit R 
requires a schedule of prohibitions and limitations on access to the 
clearing agency's services. Exhibit S requires, if applicable, a 
statement explaining why the clearing agency should be exempt.
    \328\ Exhibit D requires the financial statements of the 
exchange's subsidiaries and affiliates. Exhibit E requires, in 
relevant part, a description of the manner of operation of the 
electronic trading system that the exchange uses to effect 
transactions (however, the proposed structuring requirement would 
not include the copy of the users' manual). Exhibit I requires the 
exchange's financial statements.
---------------------------------------------------------------------------

    In 2009, the Commission adopted rules requiring operating company 
financial statements (including footnotes and schedules thereto) and 
mutual fund risk return summaries to be provided in a structured, 
machine-readable data language using eXtensible Business Reporting 
Language (``XBRL'').\329\ In 2018, the Commission adopted modifications 
to these requirements by requiring issuers to use Inline XBRL, which 
yields documents that are both machine-readable and human-readable, to 
reduce the time and effort associated with preparing XBRL filings and 
improve the quality and usability of XBRL data for investors.\330\
---------------------------------------------------------------------------

    \329\ See Interactive Data to Improve Financial Reporting, 
Securities Act Release No. 9002 (Jan. 30, 2009), 74 FR 6776 (Feb. 
10, 2009) (``2009 Financial Statement Information Adopting 
Release'') and Interactive Data for Mutual Fund Risk Return/Summary, 
Securities Act Release No. 9006 (Feb. 11, 2009), 74 FR 7748 (Feb. 
19, 2009) (``2009 Mutual Fund Risk/Return Summary Adopting 
Release'') (requiring submission of an Interactive Data File to the 
Commission in exhibits to such filings).
    \330\ See Inline XBRL Filing of Tagged Data, Securities Act 
Release No. 10514 (June 28, 2018), 83 FR 40846, 40847 (Aug. 16, 
2018). Inline XBRL allows filers to embed XBRL data directly into an 
HTML document, eliminating the need to tag a copy of the information 
in a separate XBRL exhibit. Id. at 40851. The Commission has since 
adopted rules adding Inline XBRL requirements for certain closed-end 
investment company disclosures, certain variable contract issuer 
disclosures, and disclosures relating to Commission filing fees. See 
Updated Disclosure Requirements and Summary Prospectus for Variable 
Annuity and Variable Life Insurance Contracts, Investment Company 
Act Release No. 33814 (Mar. 11, 2020), 85 FR 25964 (May 1, 2020) 
(requiring variable contracts to use Inline XBRL to submit certain 
required prospectus disclosures); Securities Offering Reform for 
Closed-End Investment Companies, Investment Company Act Release No. 
10771 (Apr. 8, 2020), 85 FR 33290 (June 1, 2020) (requiring business 
development companies to submit financial statement information, and 
registered closed-end funds and business development companies to 
tag registration statement cover page information and specified 
prospectus disclosures using Inline XBRL); Filing Fee Disclosure and 
Payment Methods Modernization, Securities Act Release No. 10997 
(Oct. 13, 2021), 86 FR 70166 (Dec. 9, 2021).

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[[Page 23965]]

    The Commission is proposing to require some or all of each Covered 
SRO Form, the information required by Exchange Act Rule 19b-4(e), Form 
X-17A-19, Form X-17A-5 Part III, Form 17-H, and the notices to the 
Commission (and any amendments to the notices) required by Exchange Act 
Rule 15fi-3(c) to be provided in custom XML-based data languages rather 
than in Inline XBRL.\331\ While the majority of EDGAR filings are 
submitted in HTML or ASCII, certain EDGAR filings are submitted using 
machine-readable, XML-based languages that are each specific to the 
particular EDGAR document type being submitted.\332\ For these custom 
XML filings in EDGAR, filers or submitters are typically provided the 
option to either submit the filing directly to EDGAR in the XML-based 
data language, or manually input their disclosures in an online web 
application and/or web form developed by the Commission that converts 
the completed form into an EDGAR-specific XML document.\333\
---------------------------------------------------------------------------

    \331\ The Commission is not adding a structured data requirement 
for the Covered Supplementary Materials or the notices required by 
Exchange Act Rule 3a71-3(d)(1)(vi). See supra section V.B.
    \332\ Unlike the Inline XBRL requirements, the custom XML 
requirements for EDGAR documents are not explicitly set forth in a 
separate rule within Regulation S-T; instead, they are set forth in 
the EDGAR Filer Manual. As such, the proposed amendments that expand 
Regulation S-T to require electronic filing or submission of the 
affected documents in accordance with the EDGAR Filer Manual also 
implement the proposed custom XML requirements. See 17 CFR 
232.101(a); 17 CFR 232.301. See also Current and Draft Technical 
Specifications, available at https://www.sec.gov/edgar/filer-information/current-edgar-technical-specifications.
    \333\ See supra note 230 at 8 and 9.
---------------------------------------------------------------------------

    In addition to the custom XML documents that the Commission 
currently requires registrants to file on EDGAR, the Commission 
separately requires broker-dealers to post reports on order routing and 
execution on their own websites (i.e., not on EDGAR) using an XML-based 
language specific to those reports.\334\ In doing so, broker-dealers 
must use the custom XML schema (i.e., data language) and associated PDF 
renderer that the Commission has published on its website. The 
Commission proposes to amend Exchange Act Rule 19b-4(e) to require SROs 
similarly to post the information required under the rule on their own 
websites using the most recent versions of the related custom XML 
schema and the associated PDF renderer that the Commission would 
publish on its website.
---------------------------------------------------------------------------

    \334\ See 17 CFR 242.606; 2020 Order Handling Data Schema and 
Report Renderer for Broker-Dealers, available at https://www.sec.gov/structureddata/dera_taxonomies.
---------------------------------------------------------------------------

    The Commission believes that requiring the Proposed Structured 
Documents to be filed or submitted in a structured data language would 
provide the same benefits to data users that have been observed from 
other structured data requirements in Commission rules. For example, 
structured data requirements for the aforementioned broker-dealer order 
routing disclosures have been leveraged by financial academics to 
compare execution quality across broker-dealers.\335\ As another 
example, the Commission has used structured order execution disclosures 
to inform its rulemaking efforts.\336\ The Commission therefore expects 
structured data language requirements for the Proposed Structured 
Documents would similarly make the reported disclosures more readily 
available, accessible, and comparable for investors, other market 
participants, and the Commission, as applicable. In addition, for those 
Proposed Structured Documents that would be filed or submitted on EDGAR 
(i.e., all except for the Rule 19b-4(e) postings), the proposed 
structured data requirements would enable EDGAR to perform technical 
validations (i.e., programmatic checks to ensure the documents are 
appropriately standardized, formatted, and complete) upon intake of the 
documents. This could improve the quality of the filed or submitted 
data by decreasing the incidence of non-substantive errors (such as the 
omission of values from fields that should always be populated).
---------------------------------------------------------------------------

    \335\ See, e.g., Schwarz, Christopher and Barber, Brad M. and 
Huang, Xing and Jorion, Philippe and Odean, Terrance, The ``Actual 
Retail Price'' of Equity Trades (Sep. 14, 2022), available at 
https://ssrn.com/abstract=4189239 (retrieved from SSRN Elsevier 
database).
    \336\ See Regulation Best Execution, Release No. 96496 (Dec. 15, 
2022), 88 FR 5440, 5477 (Jan. 27, 2023).
---------------------------------------------------------------------------

    Structuring each Proposed Structured Document would enable 
functionality that would vary based on the type of disclosures included 
in each document. As discussed further in the discussion of individual 
proposed forms above, and the discussion of economic benefits below, 
structured numeric disclosures lend themselves to mathematical 
functionality, such as the identification of statistical outliers 
within a given disclosed metric to screen for potential areas of 
greater scrutiny.\337\ Structured textual disclosures, on the other 
hand, lend themselves to period-over-period redline comparisons, 
targeted keyword searching, and more sophisticated sentiment 
analysis.\338\ This could facilitate, for example, targeted searching 
within broker-dealer significant accounting policy footnotes to 
determine the extent to which broker-dealers are adopting a given 
revenue recognition policy.
---------------------------------------------------------------------------

    \337\ See infra section X.C.2.b. Proposed Structured Documents 
that contain numeric disclosures include Form X-17A-5 Part III, Form 
17-H, Form CA-1, Form 1, Rule 19b-4(e) information (in some cases), 
notices of security-based swap valuation disputes pursuant to Rule 
15fi-3(c), and CCO reports required by Rule 15fk-1(c)(2)(ii)(A). See 
infra notes 596-599.
    \338\ Proposed Structured Documents that contain textual 
disclosures include Form X-17A-5 Part III, Form 17-H, Form CA-1, 
Form 1, Form 1-N (execution page only), Form X-17A-19, notices of 
security-based swap valuation disputes required by Rule 15fi-3(c), 
and CCO reports required by Rule 15fk-1(c)(2)(ii)(A). See id.
---------------------------------------------------------------------------

    The Commission is proposing Inline XBRL for certain affected 
documents and portions or portions thereof, rather than proposing 
Inline XBRL for all affected documents, because the Commission believes 
Inline XBRL is more suitable for certain types of content than other 
types. Specifically, the Commission believes Inline XBRL is most 
suitable for financial statement disclosures (including footnotes and 
schedules thereto), for narrative disclosures (other than brief 
descriptions), and for disclosures of numeric details nested within 
narrative disclosures. From a technical standpoint, Inline XBRL was 
designed to accommodate financial statement information, including the 
particular metadata (e.g., the relevant fiscal period, whether the line 
item is located on the balance sheet, whether the line item is a credit 
or debit) that must be linked to each data point within the financial 
statements to fully convey its semantic meaning to a machine reader. 
Inline XBRL is also well suited from a technical standpoint of 
accommodating lengthier narrative disclosures, including those with 
numeric values nested within narrative disclosures, while providing 
presentation capabilities that preserve human-readability while 
maintaining machine-readability. For other types of disclosures, the 
Commission believes requiring custom XML data languages would be more 
suitable due to the smaller file sizes of custom XML documents and the 
availability of fillable web forms on EDGAR that permit filers or 
submitters to input their disclosures into the form rather than 
structure the disclosures in custom XML.\339\
---------------------------------------------------------------------------

    \339\ See also infra section X.E.4 (discussing other structured 
data languages that would result in smaller file sizes than Inline 
XBRL).
---------------------------------------------------------------------------

    For those affected documents where filers are required to attach 
copies of

[[Page 23966]]

existing materials (such as copies of constitutions, by-laws, written 
agreements, applications, and other documents) rather than disclosures 
provided pursuant to the Commission's disclosure requirements, the 
Commission is proposing to require filers to upload those copies as 
unstructured PDF documents. The Commission believes requiring filers to 
retroactively structure these existing documents, which were prepared 
for purposes outside of fulfilling the Commission's disclosure 
requirements, would likely impose costly compliance burdens on filers 
without justifying the commensurate informational benefit associated 
with more efficient disclosure use. Thus, the Commission does not 
believe structured data requirements are warranted for these copies of 
existing documents.
    Because the very limited number of Form 1-N and Form 15A filers and 
filings could mitigate the benefit derived from machine-readability of 
the disclosures contained therein, structured data would not be 
required for Forms 1-N and 15A (other than the execution pages of those 
Forms). Similarly, structured data for ANE Exception Notices would not 
be required, because the limited number of data points on such notices 
may lessen the utility of any functionality enabled by structured data 
(such as efficient retrieval of individual data points from structured 
documents).
    For each proposed structured data requirement, the Commission is 
specifying the particular structured data language that filers or 
submitters must use, rather than leaving the data language requirement 
open-ended. By contrast, an open-ended data language requirement would 
allow different filers or submitters of the same document to provide 
their disclosures in different structured data languages. In such 
instances, data users such as Commission staff and market participants 
would be unable to incorporate disclosures from filers or submitters 
using one data language into the same datasets and applications as 
disclosures of other filers or submitters using different data 
languages without undertaking data conversion processes that are 
frequently burdensome and imprecise. This may hinder investors, the 
Commission, and market participants from efficiently comparing 
disclosures across the comprehensive set of entities comprising a given 
entity population, and could therefore dampen the benefits that would 
otherwise accrue from requiring the disclosures to be machine-readable.

B. Proposed Amendments to Rule 24b-2

    Rule 24b-2 provides procedures that are the exclusive means for 
requesting confidential treatment of information required to be filed 
under the Exchange Act.\340\ Paragraph (b) of Rule 24b-2 provides that, 
except as provided in paragraphs (g) and (h) of the Rule, a person 
seeking confidential treatment shall omit from materials filed with the 
Commission the confidential portion.\341\ Paragraphs (g) and (h) state 
that certain entities, as specified in those paragraphs, shall not omit 
the confidential portion from the materials such entities file with the 
Commission.\342\ The Commission is proposing to add a new paragraph (j) 
to Rule 24b-2. The new paragraph would be subdivided into two parts. 
The first sub-paragraph would provide that a broker-dealer shall not 
omit the confidential portion from the materials filed in electronic 
format pursuant to paragraphs (d) and (k) of Rule 17a-5, Rule 17a-12, 
or Rule 17h-2T. The second sub-paragraph would state that an SBSD shall 
not omit the confidential portion of materials filed in electronic 
format pursuant to Rule 18a-7.
---------------------------------------------------------------------------

    \340\ 17 CFR 240.24b-2(a). However, with regard to Rule 15fi-
3(c) security-based swap valuation dispute notices, see supra note 
293 and accompanying text.
    \341\ 17 CFR 240.24b-2(b).
    \342\ 17 CFR 240.24b-2(g); 17 CFR 240.24b-2(h).
---------------------------------------------------------------------------

    The Commission is also proposing to add a new paragraph (k) to Rule 
24b-2. The new paragraph would provide that an entity shall not omit 
the confidential portion from the material filed in electronic format 
on Form CA-1 pursuant to Rule 17ab2-1, but rather may request 
confidential treatment of information provided on Form CA-1 by 
completing Section X of Form CA-1. The proposed amendment to Rule 24b-2 
will facilitate the filing of any information for which confidential 
treatment is requested.

VIII. General Request for Comments

    87. The Commission is requesting comments on all aspects of this 
proposal. As stated above, the Commission believes that replacing the 
current paper copy and email filing and submission methods with a 
requirement to post the required supplemental materials on the clearing 
agency's website should result in enhanced efficiency for both the 
affected filers and the Commission. The Commission also believes that 
rescinding Form 19b-4(e) and instead requiring the information 
currently contained in Form 19b-4(e) to be publicly posted on the 
listing SRO's internet website should result in enhanced efficiency for 
both SROs and the Commission. The Commission specifically requests 
comment on whether the proposal would reduce the costs associated with 
providing these forms and information, or would they create additional 
costs or burdens associated with these forms and information.
    88. In addition to the proposed amendments to Regulation S-T, 
should the Commission amend any of the other requirements of Regulation 
S-T given the filings and submissions proposed to be added to Rule 
101(a) of Regulation S-T? If so, why should the requirements be 
revised, and how should they be revised?
    89. The Commission also requests comment on how long filers or 
submitters of Covered SRO Forms, Forms 19b-4(e), supplementary 
materials under Rule 17a-22 and Covered EDGAR Documents should have to 
come into compliance with the proposed amendments. In addressing this 
issue, specific comment, data, or other information is requested 
regarding the amount of time that filers or submitters would need to 
come into compliance in an orderly manner. Would filers or submitters 
be able to comply with some of the proposed amendments more quickly 
than they would be able to comply with other proposed amendments? 
Please identify the aspects of the proposed amendments that would 
require relatively more or less time to comply. Would a particular 
segment of filers or submitters need more or less time to comply with 
one or more of the proposed amendments? Please identify with 
specificity the segment of filers or submitters and the aspects of the 
proposed amendments that would require more or less time to comply. 
Would any alternatives identified in the proposal or by commenters 
allow filers or submitters to come into compliance more quickly or 
require additional time to implement?
    90. Beyond the forms captured in this current proposed rule, would 
other forms or filings required under the Exchange Act and its 
associated rules and regulations benefit from a Commission requirement 
that they be submitted through the EDGAR system in a structured data 
language? Explain which forms would benefit from this requirement and 
why.
    91. Commenters should, when possible, provide the Commission with 
empirical data to support their views. Commenters suggesting 
alternative approaches should provide comprehensive proposals, 
including any conditions or limitations that they

[[Page 23967]]

believe should apply, the reasons for their suggested approaches, and 
their analysis regarding why their suggested approaches would satisfy 
the objectives of the proposed amendments.

IX. Paperwork Reduction Act

    Certain provisions of the proposal contain ``collection of 
information'' requirements within the meaning of the Paperwork 
Reduction Act of 1995 (''PRA'').\343\ The titles of these requirements 
are:
---------------------------------------------------------------------------

    \343\ 44 U.S.C. 3501 et seq.
---------------------------------------------------------------------------

     Form ID (OMB Control No. 3235-0328)
     Rules 6a-1 and 6a-2, Form 1 (OMB Control No. 3235-0017); 
\344\
---------------------------------------------------------------------------

    \344\ See 17 CFR 249.1; 17 CFR 240.6a-1; 17 CFR 240.6a-2.
---------------------------------------------------------------------------

     Rule 6a-3 (OMB Control No. 3235-0021); \345\
---------------------------------------------------------------------------

    \345\ See 17 CFR 240.6a-3.
---------------------------------------------------------------------------

     Rule 6a-4, Form 1-N (OMB Control No. 3235-0554); \346\
---------------------------------------------------------------------------

    \346\ See 17 CFR 249.10, 17 CFR 240.6a-4; 17 CFR 249.10.
---------------------------------------------------------------------------

     Rules 15aa-1 and 15aa-2, Form 15A (OMB Control No. 3235-
0030); \347\
---------------------------------------------------------------------------

    \347\ See 17 CFR 240.15aa-1; 17 CFR 240.15aa-2. Proposed Form 
15A currently would apply only to one SRO out of a total of 44 SROs. 
Although this proposed form is expected to impact fewer than 10 
entities, the Commission is including this PRA analysis. The 
Commission has proposed to revise and reinstate collections of 
information that were previously approved under Control Nos. 3235-
0030 and 3235-0044. Because the Commission is proposing to 
consolidate the collections in amended and re-designated forms, all 
collections would be under Control No. 3235-0030 and Control Number 
3235-0044 would remain inactive. In addition, because of the length 
of time since these control numbers were last active, the Commission 
is providing completely new burden estimates.
---------------------------------------------------------------------------

     Rule 17ab2-1, Form CA-1 (OMB Control No. 3235-0195); \348\
---------------------------------------------------------------------------

    \348\ See 17 CFR 240.17ab2-1; 17 CFR 249b.200.
---------------------------------------------------------------------------

     Rule 19b-4(e), Form 19b-4(e) (OMB Control No. 3235-0504); 
\349\
---------------------------------------------------------------------------

    \349\ See 17 CFR 240.19b-4(e); 17 CFR 249.820.
---------------------------------------------------------------------------

     Rule 19b-4, Form 19b-4 (OMB Control No. 3235-0045); \350\
---------------------------------------------------------------------------

    \350\ See 17 CFR 240. 17 CFR 249.819; 17 CFR 240.19b-4.
---------------------------------------------------------------------------

     Rule 17a-22, 17 CFR 240.17a-22 (OMB Control No. 3235-
0196);
     Rule 3a71-3(d)--Conditional Exception from De Minimis 
Counting Requirement in Connection with Certain Transactions Arranged, 
Negotiated or Executed in the United States (OMB Control No. 3235-
0771); \351\
---------------------------------------------------------------------------

    \351\ See 17 CFR 240.3a71-3(d).
---------------------------------------------------------------------------

     Rules 15Fi-3 to 15Fi-5--Risk Mitigation Techniques for 
Uncleared Security-Based Swaps (OMB Control No. 3235-0777); \352\
---------------------------------------------------------------------------

    \352\ See 17 CFR 240.15Fi-3, 17 CFR 240.15Fi-4 (``Rule 15Fi-
4''), and 17 CFR 240.15Fi-5 (``Rule 15Fi-5''). The Commission is 
only modifying Rule 15fi-3, which relates to the requirement that 
SBS Entities reconcile outstanding security-based swaps with 
applicable counterparties on a periodic basis. Rule 15fi-3 is 
included in the same collection of information as Rule 15Fi-4, which 
requires SBS Entities to engage in certain forms of portfolio 
compression exercises with their counterparties, as appropriate, and 
Rule 15Fi-5, which requires SBS Entities to execute written 
security-based swap trading relationship documentation with its 
counterparties, and to periodically audit the policies and 
procedures governing such documentation. The Commission is not 
changing Rules 15Fi-4 and 15Fi-5 pursuant to this rulemaking. 
Accordingly, those two rules are not included in the sections that 
follow.
---------------------------------------------------------------------------

     Rule 15fk-1(c)(2)(ii)(A) (OMB Control No. 3235-0732); 
\353\
---------------------------------------------------------------------------

    \353\ See 17 CFR 240.15Fk-1(c)(2)(ii)(A).
---------------------------------------------------------------------------

     Rule 17a-5--Reports to be Made by Certain Brokers and 
Dealers (OMB Control No. 3235-0123); \354\
---------------------------------------------------------------------------

    \354\ See 17 CFR 240.17a-5.
---------------------------------------------------------------------------

     Rule 17a-12--Reports to be Made by Certain OTC Derivatives 
Dealers (OMB Control No. 3235-0498); \355\
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    \355\ See 17 CFR 240.17a-12.
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     Rule 17a-19 and Form X-17A-19--Report by National 
Securities Exchanges and Registered National Securities Associations of 
Changes in the Membership Status of Any of Their Members (OMB Control 
No. 3235-0133); \356\
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    \356\ See 17 CFR 240.17a-19; 17 CFR 249.635.
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     Rule 17h-2T--Reporting Requirements of Risk Assessment 
Information for Brokers and Dealers (OMB Control No. 3235-0410); \357\
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    \357\ See 17 CFR 240.17h-2T.
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     Rule 18a-7--Reports to be Made by Certain Security-Based 
Swap Dealers and Major Security-Based Swap Participants (OMB Control 
No. 3235-0749); \358\ and
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    \358\ See 17 CFR 240.18a-7.
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     Regulation S-T--General Rules and Regulations for 
Electronic Filing (OMB Control Number 3235-0424).
    The Commission is submitting these requirements to the Office of 
Management and Budget (``OMB'') for review and approval in accordance 
with the PRA and its implementing regulations.\359\ If adopted, 
responses to the new collections of information would be mandatory, or 
mandatory except to the extent an exception is available. An agency may 
not conduct or sponsor, and a person is not required to respond to, a 
collection of information unless it displays a currently valid OMB 
control number.\360\
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    \359\ 44 U.S.C. 3507; 5 CFR 1320.11.
    \360\ 5 CFR 1320.11(l).
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A. Summary of Collection of Information

1. Form ID
    Form ID must be completed and filed with the Commission by all 
individuals, companies, and other organizations who seek access to file 
electronically on EDGAR.\361\ Accordingly, a filer that does not 
already have access to EDGAR must submit a Form ID, along with the 
notarized signature of an authorized individual, to obtain an EDGAR 
identification number and access codes to file on EDGAR.
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    \361\ 17 CFR 249.446.
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2. Rules 6a-1, 6a-2, 6a-3, and Form 1
    Rule 6a-1 under the Exchange Act generally requires that an 
applicant seeking to register as a national securities exchange, or 
seeking an exemption from such registration based on limited volume, 
file an application on Form 1 and correct any inaccuracy therein upon 
discovery of such inaccuracy.\362\ Form 1 contains an execution page as 
well as 14 exhibits that must be filed by the applicant.\363\ Rule 6a-2 
requires a registered national securities exchange or an exempt 
exchange to: (1) amend its Form 1 if there are any changes to the 
information provided in the initial Form 1; and (2) submit periodic 
updates of certain information provided in the initial Form 1, whether 
such information has changed or not.\364\ Rule 6a-3 requires a national 
securities exchange or an exempt exchange to file certain supplemental 
material with the Commission.\365\ Specifically, Rule 6a-3(a)(1) 
requires an exchange to file with the Commission any material issued or 
made generally available to members of, or participants or subscribers 
to, the exchange within 10 days after issuing or making such material 
available to such members, participants or subscribers.\366\ Rule 6a-
3(a)(2) provides that, if information required by Rule 6a-3(a)(1) is 
available continuously on a website controlled by the exchange, in lieu 
of filing such information, the exchange may provide on Form 1 the 
URL(s) of the location(s) on the website where the information can be 
found, and certify that the information is accurate as of its date and 
is free and accessible (without any encumbrances or restrictions) by 
the general public.\367\ Rule 6a-3(b) requires an exchange to file, 
within 15 days after the end of each calendar month, a report 
concerning the securities sold on the exchange during the calendar 
month.\368\
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    \362\ See 17 CFR 240.6a-1.
    \363\ 17 CFR 249.1.
    \364\ See 17 CFR 240.6a-2.
    \365\ See 17 CFR 240.6a-3.
    \366\ 17 CFR 240.6a-3(a)(1).
    \367\ 17 CFR 240.6a-3(a)(2).
    \368\ 17 CFR 240.6a-3(b).
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    The Commission proposes to amend Rules 6a-1, 6a-2, and 6a-3 under 
the Exchange Act, as well as Form 1 and the instructions to Form 1, to 
make certain non-substantive changes and to require

[[Page 23968]]

the electronic filing of all filings required by Rules 6a-1, 6a-2, and 
6a-3.
3. Rule 6a-4 and Form 1-N
    Rule 6a-4 \369\ sets forth the notice registration procedures for 
Security Futures Product Exchanges and permits futures exchanges to 
submit a notice registration on Form 1-N.\370\ Form 1-N requires 
information regarding how the futures exchange operates, its rules and 
procedures, corporate governance, its criteria for membership, its 
subsidiaries and affiliates, and the security futures products it 
intends to trade. Rule 6a-4 also requires entities that have submitted 
an initial Form 1-N to file: (1) amendments to Form 1-N in the event 
any information provided in the initial Form 1-N is be rendered 
inaccurate or incomplete; (2) periodic updates of certain information 
provided in the initial Form 1-N; (3) certain information that is 
provided to the Security Futures Product Exchange's members; and (4) a 
monthly report summarizing the Security Futures Product Exchange's 
trading of security futures products.
---------------------------------------------------------------------------

    \369\ 17 CFR 240.6a-4.
    \370\ 17 CFR 249.10.
---------------------------------------------------------------------------

    The Commission proposes to amend Rule 6a-4 under the Exchange Act, 
Form 1-N and the instructions to Form 1-N, as well as to make 
clarifying changes to Rule 202.3(b)(3) to the Commission's Informal and 
Other Procedures, to make certain non-substantive changes and to 
require the electronic filing of all submissions required by Rule 6a-4.
4. Rules 15aa-1 and 15aa-2; Form 15A
    Under Exchange Act Rule 15Aa-1, an applicant for registration as a 
national securities association must file a registration statement with 
the Commission on Form X-15AA-1.\371\ Exchange Act Rule 15Aj-1(a) 
requires every association applying for registration or registered as a 
national securities association to file with the Commission an 
amendment to its registration statement or any amendment or supplement 
thereto promptly after discovering any inaccuracy therein. Under 
Exchange Act Rule 15Aj-1(b), every association applying for 
registration or registered as a national securities association must 
file with the Commission a supplement to its registration statement or 
any amendment or supplement thereto promptly after discovering any 
inaccuracy or any change which renders no longer accurate any 
information contained or incorporated therein.\372\ Under Exchange Act 
Rule 15Aj-1(c), every association applying for registration or 
registered as a national securities association must file annual and 
triennial amendments to its registration statement with the 
Commission.\373\
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    \371\ See Exchange Act Rule 15Aa-1, 17 CFR 240.15Aa-1 and 17 CFR 
249.801. Currently, FINRA is the only national securities 
association registered with the Commission. The NFA, as specified in 
Section 15A(k) of the Exchange Act, is also registered as a national 
securities association, but only for the limited purpose of 
regulating the activities of NFA members that are registered as 
brokers or dealers in security futures products under section 
15(b)(11) of the Exchange Act. The Commission notes that there are 
no burden estimates currently approved by OMB for Exchange Act Rule 
15Aa-1.
    \372\ See Exchange Act Rule 15Aj-1(a) and (b), 17 CFR 240.15Aj-
1(a) and (b). These filings are currently submitted on Exchange Act 
Form X-15AJ-1, 17 CFR 249.802. See 17 CFR 240.15Aj-1(d).
    \373\ See Exchange Act Rule 15Aj-1(c), 17 CFR 240.15Aj-1(c). 
These filings are currently submitted on Exchange Act Form X-15AJ-2, 
17 CFR 249.803. See 17 CFR 240.15Aj-1(d). Rule 15Aj-1(c)(1)(ii) also 
requires the filing of complete sets of the constitution, by-laws, 
rules, and related documents of the association, once every three 
years.
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    The Commission is proposing to amend Rule 15Aa-1 and redesignate it 
as Rule 15aa-1,\374\ redesignate Rule 15Aj-1 \375\ as Rule 15aa-2, 
redesignate Form X-15AA-1 as Form 15A, amend the instructions to 
proposed Form 15A, and repeal Forms X-15AJ-1 and X-15AJ-2 in connection 
with the Commission's proposal to require applicants and national 
securities associations to electronically file on a duly executed Form 
15A the information currently filed on Forms X-15AA-1, X-15AJ-1, and X-
15AJ-2. The Commission is also proposing to revise Rule 15Aa-1 to 
require electronic filing and an electronic signature.
---------------------------------------------------------------------------

    \374\ 17 CFR 240.15Aa-1.
    \375\ 17 CFR 240.15Aj-1.
---------------------------------------------------------------------------

    The Commission proposes to redesignate Form X-15AA-1 as Form 15A 
and to incorporate in proposed Form 15A information related to 
amendments and supplements to the registration statement currently 
filed on Form X-15AJ-1 and information related to the annual 
consolidated supplement to the registration statement currently filed 
on Form X-15AJ-2. New Form 15A would solicit information through 
prompts on the form that would better organize the information that is 
currently collected through Forms X-15AA-1, X-15AJ-1, and X-15AJ-2.
    Proposed Form 15A would contain eleven sections. Preceding Section 
I of proposed Form 15A, the proposed form would contain prompts that 
would require the association to note the basis for submitting the Form 
15A. The prompts would indicate whether the submission is an initial 
application filed pursuant to Rule 15aa-1 or an amendment or 
supplement. Section I would be titled ``Organization,'' and it would 
solicit information about the association itself and would require the 
association to attach Exhibits A through D. Sections II through IX of 
proposed Form 15A would solicit information about specific association 
rules and other information.
    Section X would require the association to provide the contact 
information for its contact employee, and Section XI would provide the 
consent to service and attestation.
5. Rule 17ab2-1 and Form CA-1
    Rule 17ab2-1(a) states that an application for registration or for 
exemption from registration as a clearing agency or an amendment to any 
such application shall be filed with the Commission on Form CA-1, in 
accordance with the instructions thereto.\376\ Form CA-1 includes an 
execution page and 19 exhibits. Rule 17ab2-1(e) requires an applicant, 
a registered clearing agency, or an exempt clearing agency to file an 
amendment to correct any information reported at items 1-3 of Form CA-1 
if such information is, or becomes, inaccurate, misleading or 
incomplete for any reason.\377\ The instructions to Form CA-1 require 
an applicant clearing agency to file four completed copies of Form CA-1 
with the Commission. In addition, if an item is amended, the 
instructions to Form CA-1 require a registered clearing agency or an 
exempt clearing agency to repeat all unamended items as they last 
appeared on the page on which the amended item appears and to file four 
copies of the new page with the Commission.
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    \376\ 17 CFR 240.17ab2-1(a).
    \377\ 17 CFR 240.17ab2-1(e).
---------------------------------------------------------------------------

    The Commission is proposing to revise certain aspects of Rule 
17ab2-1, Form CA-1, and the instructions to Form CA-1 to make certain 
non-substantive changes and to require electronic filing of 
applications on Form CA-1 and subsequent amendments thereto submitted 
by applicants, registered clearing agencies, and exempt clearing 
agencies.
6. Rule 19b-4(e) and Form 19b-4(e)
    Rule 19b-4(e) provides that the listing and trading of a new 
derivative securities product by an SRO shall not be deemed a proposed 
rule change if the Commission has approved, pursuant to section 19(b) 
of the Exchange Act,\378\ the SRO's trading rules, procedures, and 
listing standards for the product class that would include the new 
derivative

[[Page 23969]]

securities product, and the SRO has a surveillance program in place for 
such product class. Under Rule 19b-4(e)(2)(ii), SROs are required to 
submit Form 19b-4(e) \379\ to the Commission within five business days 
after commencement of trading a new derivative securities product.\380\ 
In addition, Rule 19b-4(e)(2)(i) requires an SRO to maintain, on-site, 
a copy of Form 19b-4(e) for a prescribed period of time.\381\
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    \378\ 15 U.S.C. 78s(b).
    \379\ See 17 CFR 249.820.
    \380\ See 17 CFR 240.19b-4(e)(2)(ii).
    \381\ See 17 CFR 240.19b-4(e)(2)(i).
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    The Commission proposes to amend Rule 19b-4(e) \382\ to rescind 
Form 19b-4(e) and instead require the information currently contained 
in Form 19b-4(e) to be publicly posted on the listing SRO's internet 
website.
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    \382\ 17 CFR 240.19b-4(e).
---------------------------------------------------------------------------

7. Rule 19b-4(j) and Form 19b-4
    Section 19(b) of the Exchange Act, as amended, requires each SRO to 
file with the Commission, in accordance with such rules as the 
Commission may prescribe, copies of any proposed rule, or any proposed 
change in, addition to, or deletion from the rules of such SRO 
(collectively, a ``proposed rule change'') accompanied by a concise 
general statement of the basis and purpose of such proposed rule 
change.\383\ Rule 19b-4 requires an SRO to submit each proposed rule 
change on Form 19b-4.\384\ Form 19b-4 currently requires a description 
of the terms of a proposed rule change, the proposed rule change's 
impact on various market segments, and the relationship between the 
proposed rule change and the SRO's existing rules.\385\ Form 19b-4 also 
requires an accurate statement of the authority and statutory basis 
for, and purpose of, the proposed rule change, the proposal's impact on 
competition, and a summary of any written comments received by the 
SRO.\386\ An SRO is required to submit Form 19b-4 to the Commission 
electronically, post a copy of the proposed rule change on its public 
website within two business days of its filing, and post and maintain a 
current and complete set of its rules on its website.\387\
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    \383\ 15 U.S.C. 78s(b).
    \384\ 17 CFR 240.19b-4(b).
    \385\ 17 CFR 249.819.
    \386\ Id.
    \387\ 17 CFR 240.19b-4(b)(1), (l), (m)(1).
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    Rule 19b-4(j) requires that the signatory to an electronically 
submitted rule filing manually sign a signature page or other document 
authenticating, acknowledging, or otherwise adopting his or her 
signature that appears in typed form within the electronic document, 
execute that document before or at the time the rule filing is 
electronically submitted, and retain that document for its records in 
accordance with Rule 17a-1.\388\ Form 19b-4 and the instructions to 
Form 19b-4 require that a duly authorized officer of the SRO manually 
sign one copy of the completed Form 19b-4 and that the manually signed 
signature page be maintained pursuant to section 17 of the Act.\389\ 
The Commission proposes to remove these manual requirements from Rule 
19b-4(j), Form 19b-4, and the instructions to Form 19b-4.
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    \388\ 17 CFR 240.19b-4(j).
    \389\ 17 CFR 249.819.
---------------------------------------------------------------------------

8. Rule 17a-22
    Rule 17a-22 currently requires a registered clearing agency to file 
with the Commission three paper copies of any material (including, for 
example, manuals, notices, circulars, bulletins, lists, or periodicals) 
issued, or made generally available, to its participants or other 
entities with whom it has a significant relationship, such as pledgees, 
transfer agents, or self-regulatory organizations, within 10 days after 
issuing, or making generally available, such material.\390\ Under 
current Rule 17a-22, when the Commission is not a registered clearing 
agency's ARA, the clearing agency must at the same time file one paper 
copy of the material with its ARA.\391\
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    \390\ 17 CFR 240.17a-22.
    \391\ Id.
---------------------------------------------------------------------------

    The proposed amendments to Rule 17a-22 would not change the scope 
of supplemental materials that are currently subject to the rule. 
However, the proposed amendments would replace the requirement to file 
multiple copies of supplemental materials with the Commission and, 
where applicable, the ARA in paper form with a requirement to 
prominently post such materials on a registered clearing agency's 
internet website.\392\ In addition, the proposed amendments would 
reduce the timeframe for registered clearing agencies to comply with 
the rule from 10 days to 2 business days. As noted above, the two 
business day timeframe is consistent with a registered clearing 
agency's obligation under Rule 19b-4(m) to update its website to post 
any rule changes filed pursuant to section 19(b) of the Exchange 
Act.\393\ Because the supplemental materials that are subject to Rule 
17a-22 will have already been prepared for distribution to a registered 
clearing agency's participants or other entities with whom it has a 
significant relationship, those documents should be readily available 
for the clearing agency to post on its website within the proposed two 
business day timeframe.\394\
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    \392\ By replacing the paper filing requirement for supplemental 
materials with an internet posting requirement, proposed Rule 17a-22 
would allow all of a registered clearing agency's regulatory 
authorities to access the materials; thereby eliminating the need to 
file an additional paper copy with the clearing agency's ARA. For 
this reason, with respect to a registered clearing agency for which 
the Commission is not the ARA, the proposed amendments would remove 
the requirement to also file one paper copy of the supplemental 
materials with the clearing agency's ARA.
    \393\ See 17 CFR 240.19b-4(m).
    \394\ See supra section III.C.1.
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9. Rules 17a-5, 18a-7, and 17a-12
    The Commission is proposing to amend Rules 17a-5, 18a-7, and 17a-12 
to require broker-dealers, SBS Entities, and OTC derivatives dealers to 
electronically file with the Commission in Inline XBRL through the 
Commission's EDGAR system annual audited reports and related annual 
filings. The filings are currently made either in paper, via email, or 
voluntarily on the EDGAR system as PDF documents.
    In addition, the Commission is proposing to amend Rule 17a-12 to 
require OTC derivatives dealers to file the unaudited FOCUS Report Part 
II electronically through the SEC eFOCUS system instead of in paper.
    The Commission is also proposing to allow electronic signatures in 
Rule 17a-5, 17a-12, and 18a-7 filings, which includes the FOCUS Report.
    Broker-dealers, SBS Entities, and OTC derivatives dealers file 
FOCUS Reports Part II, IIA, or IIC, which are periodic unaudited 
reports about their financial and operational condition. The Commission 
is proposing corrective and clarifying amendments to FOCUS Report Part 
II and amendments to FOCUS Report Part IIC for consistency with FFIEC 
Form 031.
10. Rule 17h-2T
    The Commission proposes amending paragraph (a)(2) of Rule 17h-2T to 
require that the quarterly and annual risk assessment reports be filed 
with the Commission electronically through EDGAR as an Interactive Data 
File in accordance with Rule 405 of Regulation S-T. The materials filed 
under the rule would not change, but the materials filed would be filed 
on EDGAR, and the financial statements required by Item 4 of the Form 
would be structured in Inline XBRL.

[[Page 23970]]

11. Rule 17a-19 and Form X-17A-19
    In general, Rule 17a-19 requires national securities exchanges and 
associations to file with the Commission certain information required 
on Form X-17A-19 within five business days of the occurrence of the 
initiation of membership, change in membership, or termination of 
membership of any member. The Commission proposes amending Rule 17a-19 
and Form X-17A-19 to require that filings providing such notifications 
be made on EDGAR, in a custom XML-based data language.
12. Rule 3a71-3(d)(1)(vi)
    The ANE Exception is conditioned in part on the Registered Entity 
filing with the Commission an ANE Exception Notice, which is a notice 
that personnel of the Relying Entity or its agent located in a branch 
or office in the United States may conduct ANE Activity in their 
capacity as persons associated with the Registered Entity in reliance 
on the ANE Exception. Currently, Exchange Act Rule 3a71-3(d)(1)(vi) 
requires the Registered Entity to file the ANE Exception Notice by 
submitting it to the electronic mailbox specified on the Commission's 
website. The Commission is proposing to amend the manner of filing to 
require the Registered Entity to file the ANE Exception Notice 
electronically through the Commission's EDGAR filing system, but is not 
changing the information required from a filer of the ANE Exception 
Notice. The Commission also is proposing to require that, if the 
Registered Entity later becomes unregistered or otherwise ineligible to 
serve as the Registered Entity for purposes of the ANE Exception, the 
Registered Entity must promptly withdraw its ANE Exception Notice. In 
addition, a Registered Entity whose associated persons will no longer 
conduct ANE Activity pursuant to the ANE Exception may withdraw its ANE 
Exception Notice. Currently, a Registered Entity who wishes to withdraw 
a filed ANE Exception Notice may contact the Commission and request 
that the ANE Exception Notice be manually removed from the Commission's 
website. The Commission is proposing to require Registered Entities to 
file any withdrawal of an ANE Exception Notice electronically through 
the Commission's EDGAR filing system.
13. Rule 15fi-3
    Rule 15fi-3 generally requires SBS Entities to: (1) engage in 
periodic portfolio reconciliation activities with counterparties who 
are also SBS Entities; and (2) establish, maintain, and follow written 
policies and procedures reasonably designed to ensure that they engage 
in periodic portfolio reconciliation with counterparties who are not 
SBS Entities with respect to their outstanding (and uncleared) 
security-based swaps.\395\ Rule 15fi-3(c) requires an SBS Entity to 
promptly notify the Commission, and any applicable prudential 
regulator, of any security-based swap valuation dispute in excess of 
$20,000,000 (or its equivalent in any other currency) if not resolved 
within: (1) three business days, if the dispute is with a counterparty 
that is an SBS Entity; or (2) five business days, if the dispute is 
with a counterparty that is not an SBS Entity.\396\ Rule 15fi-3(c) also 
requires SBS Entities to notify the Commission and any applicable 
prudential regulator, if the amount of any security-based swap 
valuation dispute that was the subject of a previous notice increases 
or decreases by more than $20,000,000 (or its equivalent in any other 
currency), at either the transaction or portfolio level. Each amended 
notice is required to be provided to the Commission and any applicable 
prudential regulator no later than the last business day of the 
calendar month in which the applicable security-based swap valuation 
dispute increases or decreases by the applicable dispute amount.\397\
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    \395\ See 17 CFR 240.15Fi-3(a) and (b). See also supra section 
V.C.1.
    \396\ See 17 CFR 240.15Fi-3(c)(1).
    \397\ See 17 CFR 240.15Fi-3(c)(2).
---------------------------------------------------------------------------

    Given that Rule 15fi-3(c) requires that the security-based swap 
valuation notices be submitted to the Commission ``in a form and manner 
acceptable to the Commission,'' staff has made available two options 
for submitting these notices to the Commission, which include either: 
(1) an electronic submission using EDGAR or (2) submission to a 
dedicated Commission email address. Under both submission types, the 
system is capable of accepting the notice in PDF format, either as an 
attachment to an email or as an uploaded document to EDGAR. The 
Commission is now proposing to amend Rule 15fi-3(c) to affirmatively 
require SBS Entities to submit these notices to the Commission 
electronically in EDGAR using a custom XML-based data language. This 
includes both the initial notice and any subsequent amendments. If 
these proposed changes are adopted, SBS Entities would no longer be 
able to submit dispute notices to the Commission using a dedicated 
email address or in PDF format on EDGAR.
14. Rule 15fk-1(c)(2)(ii)(A)
    Rule 15fk-1(c) currently requires that the CCO of an SBS Entity 
prepare and sign a CCO report. The CCO report must be submitted to the 
Commission within 30 days following the filing deadline for the SBS 
Entity's annual financial report with the Commission.\398\ Rule 15fk-
1(c) does not specify the manner in which the CCO report must be 
submitted. Accordingly, pursuant to the current rule, an SBS Entity may 
submit its CCO report as a paper or electronic submission.
---------------------------------------------------------------------------

    \398\ 17 CFR 240.15Fk-1(c)(2)(ii)(A).
---------------------------------------------------------------------------

    The proposed amendment to Rule 15fk-1(c)(2)(ii)(A) would not change 
what the report must include. Rather, the amendment would require that 
the CCO report be submitted electronically in Inline XBRL through 
EDGAR. As with other entities that make submissions through EDGAR, 
these submissions would be subject to the provisions of Regulation S-T 
and the EDGAR Filer Manual, as defined in Rule 11 of Regulation S-
T.\399\
---------------------------------------------------------------------------

    \399\ 17 CFR 232.11.
---------------------------------------------------------------------------

15. Regulation S-T
    The Commission is proposing amendments to Rule 101 of Regulation S-
T to require that broker-dealer and non-bank SBS Entity annual reports 
and related annual supplemental reports, national securities exchange 
and association changes in member status, SBS Entity CCO reports, and 
broker-dealer risk assessment reports be filed electronically with the 
Commission. The Commission is also proposing amendments to Rule 405 to 
require that broker-dealer and non-bank SBS Entity annual reports and 
related annual supplemental reports, SBS Entity CCO reports, broker-
dealer risk assessment reports (in part), clearing agency applications 
(in part), and national securities exchange applications (in part) be 
filed in Inline XBRL.\400\
---------------------------------------------------------------------------

    \400\ See proposed paragraph (b)(5) of Rule 405 of Regulation S-
T.
---------------------------------------------------------------------------

    The Commission also is proposing that ANE Exception Notices and 
withdrawals of ANE Exception Notices be filed with the Commission 
electronically using the Commission's EDGAR system. To implement this 
requirement, the Commission is proposing amendments to Rule 101 of 
Regulation S-T to require that ANE Exception Notices and withdrawals of 
ANE Exception Notices be filed electronically with the Commission using 
the EDGAR system.\401\ This collection of information is the same as

[[Page 23971]]

the collection of information in connection with the proposed 
amendments to Exchange Act Rule 3a71-3(d)(1)(vi).
---------------------------------------------------------------------------

    \401\ See proposed paragraph (a)(1)(xxxiii) of Rule 101 of 
Regulation S-T.
---------------------------------------------------------------------------

    The Commission also is proposing that initial notices and any 
subsequent amendments pursuant to Rule 15fi-3(c) be submitted to the 
Commission electronically using the Commission's EDGAR system in a 
custom XML-based data language. To implement this requirement, the 
Commission is proposing amendments to Rule 101 of Regulation S-T to 
require that the notices be submitted electronically to the Commission 
using the EDGAR system.\402\ This collection of information is the same 
as the collection of information in connection with the proposed 
amendments to Exchange Act Rule 15fi-3(c).
---------------------------------------------------------------------------

    \402\ See proposed paragraph (a)(1)(xxxiv) and (d) of Rule 101 
of Regulation S-T.
---------------------------------------------------------------------------

B. Proposed Use of Information

1. Form ID
    The information provided on Form ID allows the Commission staff to 
review applications for EDGAR access and, if the application is 
approved, assign CIKs (if the applicant does not already have a CIK) 
and/or access codes to applicants to permit filing on EDGAR. Form ID is 
essential to EDGAR security.
2. Rules 6a-1, 6a-2, 6a-3, and Form 1
    The information required pursuant to Rules 6a-1, 6a-2, and 6a-3 is 
necessary to enable the Commission to receive accurate and complete 
information from applicants seeking registration as national securities 
exchanges or an exemption from such registration (``exempt exchanges'') 
and from national securities exchanges and exempt exchanges, which 
would enable the Commission to exercise its statutory oversight 
functions. Without the information submitted pursuant to Rule 6a-1 on 
Form 1, the Commission would not be able to determine whether the 
applicant has met the criteria for registration (or an exemption from 
registration) set forth in section 6 of the Exchange Act. The 
amendments, periodic updates of information, supplemental materials, 
and monthly reports submitted pursuant to Rules 6a-2 and 6a-3 are 
necessary to assist the Commission in its oversight of national 
securities exchanges and exempt exchanges.
3. Rule 6a-4 and Form 1-N
    The information obtained under Rule 6a-4 and Form 1-N provides the 
Commission with basic information about Security Futures Product 
Exchanges. This information enables the Commission to carry out its 
statutorily mandated oversight functions and helps ensure that Security 
Futures Product Exchanges continue to be in compliance with the 
Exchange Act.
4. Rules 15aa-1 and 15aa-2; Form 15A
    The information required pursuant to Rule 15aa-1 is necessary to 
enable the Commission to receive accurate and complete information from 
applicants seeking registration as national securities association 
which would enable the Commission to exercise its statutory oversight 
functions. Without the information submitted pursuant to Rule 15aa-1 on 
Form 15A, the Commission would not be able to determine whether the 
applicant has met the criteria for registration set forth in section 
15A of the Exchange Act. The amendments, periodic updates of 
information, and supplemental materials submitted pursuant to Rule 
15Aa-2 are necessary to assist the Commission in its oversight of 
national securities associations.
5. Rule 17ab2-1 and Form CA-1
    The Commission uses the information disclosed on Form CA-1 to: (i) 
determine whether an applicant for registration as a clearing agency or 
for an exemption from such registration meets the standards for 
registration set forth in the Exchange Act; (ii) enforce compliance 
with the Exchange Act's registration requirements; and (iii) use as a 
reference for specific registered clearing agencies or exempt clearing 
agencies for compliance and investigatory purposes. The information 
required under Rule 17ab2-1 is essential for the Commission to perform 
its statutorily required duties.
6. Rule 19b-4(e) and Form 19b-4(e)
    The information collected pursuant to Rule 19b-4(e) is designed to 
maintain an accurate record of all new derivative securities products 
by SROs, the listing and trading of which are not deemed to be proposed 
rule changes. The Commission reviews compliance with Rule 19b-4(e) 
through its routine inspections of the SROs.
7. Rule 19b-4(j) and Form 19b-4
    The information collected pursuant to Rule 19b-4 is designed to 
provide the Commission with the information necessary to determine, as 
required by the Exchange Act, whether the proposed rule change is 
consistent with the Exchange Act and the rules thereunder. The 
information is used to determine if the proposed rule change should be 
approved, disapproved, suspended, or if proceedings should be 
instituted to determine whether to approve or disapprove the proposed 
rule change. The Commission reviews compliance with Rule 19b-4 through 
its routine inspections of the SROs. The Commission is proposing to 
remove a manual signature requirement in the existing collection of 
information under Rule 19b-4 and on Form 19b-4 because it believes that 
requirement is unnecessary given the electronic signature already 
required by Form 19b-4.
8. Rule 17a-22
    The information required to be posted on a registered clearing 
agency's website under the proposed amendments to Rule 17a-22 would 
assist the Commission in carrying out its statutorily mandated 
oversight functions with respect to clearing agencies. The Commission 
uses this information to determine: (i) whether a clearing agency is 
implementing procedural or policy changes and, if so, whether such 
changes are consistent with the purposes of section 17A of the Exchange 
Act; and (ii) whether a clearing agency has changed its rules without 
filing the actual or prospective change to the Commission as required 
by section 19(b) of the Exchange Act. The posting of such information 
on a registered clearing agency's website would improve transparency of 
a clearing agency's actions and communications to a larger group of 
potentially interested persons, including non-member entities that 
directly or indirectly use the clearing agency's services, investors, 
and the general public.
9. Rules 17a-5, 18a-7, and 17a-12
    Reports required to be made under Rules 17a-5, 18a-7, and 17a-12 
are used, among other things, to monitor the financial and operational 
condition of broker-dealers, SBS Entities, and OTC derivatives dealers 
by Commission staff and, to the extent applicable to the entity, by its 
designated examining authority (``DEA''). The reports required under 
Rules 17a-5, 18a-7, and 17a-12 are also one of the primary means of 
ensuring compliance with the Commission's financial responsibility 
rules (e.g., Rule 15c3-1). A firm's failure to comply with these rules 
would severely impair the ability of the Commission (and the firm's 
DEA, if applicable) to protect investors, including customers and 
counterparties of the registrant.
10. Rule 17h-2T
    The information required to be filed with the Commission under Rule 
17h-

[[Page 23972]]

2T is used by the Commission to monitor the activities of a covered 
broker-dealer's affiliates whose business activities are reasonably 
likely to have a material impact on the financial and operational 
condition of the broker-dealer.
11. Rule 17a-19 and Form X-17A-19
    Upon the Commission's receipt of a Form X-17A-19 filing, the 
information is entered into a database, which is regularly shared with 
the SROs. Commission staff use the information contained in Form X-17A-
19 to assign the appropriate SRO as DEA for the member firms. This 
information is also used by SIPC in determining which SRO is the 
collection agent for the SIPC Fund.
12. Rule 3a71-3(d)(1)(vi)
    The information provided by a Registered Entity in connection with 
the filing of an ANE Exception Notice pursuant to Exchange Act Rule 
3a71-3(d)(1)(vi), and any subsequent withdrawal, assists the Commission 
in evaluating market participants' compliance with the limitations on 
use of the ANE Exception, as well as assists Relying Entities and their 
affiliates in determining whether they have satisfied the ANE 
Exception's notice requirement and in monitoring their progress toward 
the ANE Exception's cap on inter-dealer security-based swaps. The 
proposed amendment to Rule 3a71-3(d)(1)(vi) to move the filing of the 
ANE Exception Notice, and any subsequent withdrawal, to the 
Commission's EDGAR filing system would facilitate more efficient and 
timely transmission, dissemination, and analysis of this information.
13. Rule 15fi-3
    The information shared by counterparties to a security-based swap 
transaction periodically during the portfolio reconciliation process, 
as contemplated by Rule 15fi-3, plays an important role in assisting 
those counterparties in identifying and resolving discrepancies 
involving key terms of their transactions on an ongoing basis. This 
information also allows those counterparties to improve their 
management of internal risks related to the enforcement of their rights 
and the performance of their obligations under a security-based swap. 
Moreover, requiring SBS Entities to agree in writing with each of their 
counterparties on the terms of the portfolio reconciliation (including, 
if applicable, agreement on the selection of any third party service 
provider who may be performing the reconciliation) helps to minimize 
any discrepancies regarding the portfolio reconciliation process 
itself, thereby ensuring that it operates in as efficient and cost-
effective means possible. The requirement to report certain unresolved 
valuation disputes to the Commission assists the Commission in 
identifying potential issues with respect to an SBS Entity's internal 
valuation methodology and also could serve as an indication of a 
widespread market disruption in cases where the Commission receives a 
large number of such notices from multiple firms. The proposed 
amendment to Rule 15fi-3 to require submission of the valuation dispute 
notices using the Commission's EDGAR system is intended to facilitate 
more efficient and secure transmission and efficient and effective 
analysis of this information.
14. Rule 15fk-1(c)(2)(ii)(A)
    The information collected under Rule 15fk-1(c) assists the 
Commission staff's oversight and examination of SBS Entities compliance 
with the business conduct requirements for such entities.
15. Regulation S-T
    The proposed amendments to Rule 101 of Regulation S-T, as part of 
implementing the requirement that broker-dealers or SBS Entities use 
the EDGAR system to electronically file their annual reports, broker-
dealer risk assessment reports, and CCO reports, as applicable, will be 
used by the Commission to streamline and simplify the filing process 
for filers and the Commission. In addition, the public filings will be 
more quickly available to investors to evaluate and compare these 
firms.
    The proposed amendments to Rule 101 of Regulation S-T, as part of 
implementing the requirement that filers use the EDGAR system to 
provide Rule 3a71-3(d)(1)(vi) and Rule 15fi-3(c) notices, will be used 
as described above. Further, the proposed amendments to Rules 201 and 
202 of Regulation S-T would preclude the possibility of temporary or 
continuing hardship exemptions that otherwise would allow the ANE 
Exception Notice (and any subsequent withdrawal) to be filed on paper. 
The ANE Exception Notice facilitates the availability of a conditional 
exception \403\ premised in part on the public availability of the 
notice to Relying Entities.
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    \403\ See supra section V.B.
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    The proposed amendments to Rule 405 of Regulation S-T, which would 
implement the proposed Inline XBRL requirements for Form 1, Form CA-1, 
Form X-17A-5 Part III, Form 17-H, and the CCO reports, will be used to 
facilitate the retrieval, comparison, and other analysis of the 
disclosures on those forms across respondents and time periods.

C. Respondents

1. Form ID
    The respondents to the collection of information required under 
Form ID would be all entities that would be required to file 
electronically on EDGAR under the proposal and that do not already have 
access to EDGAR. Such respondents must submit a Form ID, along with the 
notarized signature of an authorized individual, to obtain an EDGAR 
identification number and access codes to file on EDGAR. If the 
requirements to file on EDGAR are adopted as proposed, the Commission 
estimates that these respondents would include the following entities 
not currently registered on EDGAR: 24 national securities exchanges and 
exempt exchanges; 2 Security Futures Product Exchanges; 1 registered 
national securities association; 12 registered and exempt clearing 
agencies; 1,559 broker-dealers; and 24 Registered Entities.
2. Rules 6a-1, 6a-2, 6a-3, and Form 1
    The respondents to the collection of information required under 
Rule 6a-1 are new applicants applying to register as a national 
securities exchange or seeking an exemption from such registration. The 
Commission estimates that it would receive approximately one initial 
Form 1 filing per year.
    The respondents to the collection of information required under 
Rules 6a-2 and 6a-3 are national securities exchanges and exempt 
exchanges. Currently, there are 24 entities registered as national 
securities exchanges. These respondents would file annual, triennial, 
and periodic amendments to their Form 1 under Rule 6a-2. These 
respondents would also file supplemental materials and monthly reports 
under Rule 6a-3. There are no exempt exchanges that currently submit 
amendments under Rule 6a-2 or supplemental materials and monthly 
reports under Rule 6a-3.
3. Rule 6a-4, Form 1-N
    The respondents to the collection of information required under 
Rule 6a-4 are futures exchanges that trade security futures products. 
Currently, there are two Security Futures Product Exchanges. These 
respondents would file annual, triennial, and periodic amendments to 
their Form 1-N under Rule 6a-4(b). These respondents would also file 
supplemental materials and monthly reports under Rule 6a-4(c).

[[Page 23973]]

The Commission estimates that it will not receive any initial Form 1-N 
filings.\404\
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    \404\ The Commission is basing its estimate on its historical 
experience with Form 1-N filings. In particular, since the adoption 
of the form in 2001, six initial Form 1-N filings have been made by 
futures exchanges. Based on the infrequent occurrence of filings, 
the Commission believes that zero is a reasonable estimate.
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4. Rules 15aa-1 and 15aa-2; Form 15A
    The respondents to the collection of information required under 
Rule 15aa-1 are new applicants applying to register as a national 
securities association. The Commission estimates that it would receive 
one initial Form 15A filing per year.\405\
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    \405\ The Commission notes that since the adoption of section 
15A of the Exchange Act as part of the Maloney Act in 1938, only two 
national securities associations have registered with the 
Commission. Currently, FINRA is the only national securities 
association registered with the Commission whereas the NFA is 
registered as a national securities association only for the limited 
purpose of regulating the activities of NFA members that are 
registered as brokers or dealers in security futures products under 
section 15(b)(11) of the Exchange Act.
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    The respondents to the collection of information required under 
Rule 15aa-2 are national securities associations currently registered 
with the Commission. Currently, there is only one entity that would be 
required to file annual, triennial, and periodic amendments to its Form 
15A under Rule 15aa-2.
5. Rule 17ab2-1, Form CA-1
    The respondents to the collection of information required under 
Rule 17ab2-1 are registered and exempt clearing agencies, as well as 
applicants seeking to register as a clearing agency or seeking an 
exemption from such registration. Currently, there are nine registered 
clearing agencies, only seven of which are operational,\406\ and five 
exempt clearing agencies. We estimate that there may be one new 
application filed each year.
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    \406\ The Boston Stock Exchange Clearing Corporation (``BSECC'') 
and Stock Clearing Corporation of Philadelphia (``SCCP'') are 
currently registered with the Commission as clearing agencies but 
conduct no clearance or settlement operations. See Exchange Act 
Release No. 6329 (Jan. 3, 2011), 76 FR 1473 (Jan. 10, 2011) (``BSECC 
Notice''); Exchange Act Release No. 63268 (Nov. 8, 2010), 75 FR 
69730 (Nov. 15, 2010) (``SCCP Notice'').
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6. Rule 19b-4(e), Form 19b-4(e)
    The respondents to the collection of information required under 
Rule 19b-4(e) are SROs that list and trade new derivative securities 
products--national securities exchanges. Currently, there are 24 
entities registered as national securities exchanges.
7. Rule 19b-4(j), Form 19b-4
    The respondents to the collection of information required under 
Rule 19b-4(j) and Form 19b-4 are SROs (as defined by section 3(a)(26) 
of the Act), including national securities exchanges, national 
securities associations, registered clearing agencies, notice 
registered securities future product exchanges, and the MSRB. The 
Commission's current approved estimated number of respondents is 42 
SROs.\407\
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    \407\ See FR Doc. 2019-22222, 84 FR 54710 (Oct. 10, 2019) 
(Request to OMB for extension of Rule 19b-4 and Form 19b-4; SEC File 
No. 270-38; OMB Control No. 3235-0045).
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8. Rule 17a-22
    The respondents to the collection of information required under 
Rule 17a-22 are registered clearing agencies. Currently, there are nine 
registered clearing agencies, only seven of which are operational.\408\
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    \408\ See supra note 419.
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9. Rules 17a-5, 18a-7, and 17a-12
    The respondents to the annual reports collection of information 
required under Rule 17a-5 are broker-dealers. For the 12 months ended 
December 31, 2022, the Commission received 1,559 filings of the broker-
dealer annual reports in paper and 1,659 electronically via EDGAR. The 
Commission therefore estimates that approximately 3,218 broker-dealers 
are required to file annual reports with the Commission. As of June 15, 
2022, five of those broker-dealers are ANC broker-dealers required to 
file supplemental reports under Rule 17a-5. The respondents to the 
annual reports collection of information required under Rule 18a-7 are 
SBSDs and MSBSPs that are not prudentially regulated. As of June 15, 
2022, there are nine SBSDs and MSBSPs that are not prudentially 
regulated. The respondents to the annual reports collection of 
information under Rule 17a-12 are OTC derivatives dealers. There are 
three OTC derivatives dealers subject to Rule 17a-12.
    There are 460 broker-dealers or stand-alone SBS Entities that filed 
FOCUS Report Part II as of March 31, 2022. Of those Part II filers, 4 
firms are domestic stand-alone swap dealers and 103 firms are domestic 
stand-alone introducing brokers. There are 31 bank SBS Entities that 
filed FOCUS Report Part IIC as of March 31, 2022. There are 3,056 
broker-dealers that filed FOCUS Report Part IIA as of March 31, 2022.
10. Rule 17h-2T
    The respondents to the collection of information required under 
Rule 17h-2T are broker-dealers. There are 241 broker-dealers that must 
file quarterly and annual risk assessment reports with the Commission 
under Rule 17h-2T.
11. Rule 17a-19 and Form X-17A-19
    The respondents to the collection of information required under 
Rule 17a-19 are national securities exchanges and registered national 
securities associations. As of June 15, 2022, there are a total of 25 
national securities exchanges and registered national securities 
associations.
12. Rule 3a71-3(d)(1)(vi)
    The Commission estimates that up to 24 entities that engage in 
security-based swap dealing activity may rely on the ANE 
Exception.\409\ To satisfy the ANE Exception, each of those up to 24 
entities will make use of an affiliated Registered Entity that will be 
required to file an ANE Exception Notice and may subsequently decide to 
file a withdrawal of the ANE Exception Notice. The proposed amendment 
to Rule 3a71-3(d)(1)(vi) does not affect Commission's estimate of the 
number of respondents.
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    \409\ See Cross-Border Adopting Release, 85 FR at 6336 n.642.
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13. Rule 15fi-3
    The respondents to the collection of information under Rule 15fi-3 
are registered SBS Entities. As of January 4, 2023, 50 entities have 
submitted applications for registration as an SBSD; there are no 
registered MSBSPs.\410\ In a number of prior releases, including the 
release adopting the rules by which SBS Entities can register (and 
withdraw from registration) with the Commission, the Commission 
estimated that approximately 50 entities may meet the definition of 
SBSD, and up to five entities may meet the definition of MSBSP.\411\ 
The Commission continues to believe that these estimates are 
appropriate. Thus, the Commission

[[Page 23974]]

preliminarily believes that approximately 55 entities will be required 
to register with the Commission under either category, and will 
therefore be subject to Rule 15fi-3. When the Commission initially 
adopted Rule 15fi-3, it noted that, until SBS Entities were registered 
with the Commission, it was difficult for the Commission to determine 
the typical number of valuation disputes meeting the applicable 
thresholds that SBS Entities would be required to submit on an annual 
basis.\412\ Because SBS Entities have been required to submit notices 
under Rule 15fi-3(c) for a limited time, it remains difficult to for 
the Commission to determine the typical number of dispute notices that 
an SBS Entity will submit annually.
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    \410\ See List of Registered Security-Based Swap Dealers and 
Major Security-Based Swap Participants, available at https://www.sec.gov/tm/List-of-SBS-Dealers-and-Major-SBS-Participants 
(providing the list of registered SBS dealers and major SBS 
participants that was updated as of Jan. 4, 2023).
    \411\ See Registration Process for Security-Based Swap Dealers 
and Major Security-Based Swap Participants, Exchange Act Release No. 
75611 (Aug. 5, 2015), 80 FR 48964, 48990 (Aug.14, 2015). See also 
Risk Mitigation Adopting Release, 85 FR at 6383; Trade 
Acknowledgment and Verification of Security-Based Swap Transactions, 
Exchange Act Release No. 78011 (June 8, 2016), 81 FR 39807, 39830 
(June 17, 2016); Capital, Margin, and Segregation Requirements for 
Security-Based Swap Dealers and Major Security-Based Swap 
Participants and Capital and Segregation Requirements for Broker-
Dealers, Exchange Act Release No. 86175 (June 21, 2019), 84 FR 
43872, 43960 (Aug. 22, 2019).
    \412\ See Risk Mitigation Adopting Release 85 FR at 6385-86.
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14. Rule 15fk-1(c)(2)(ii)(A)
    The respondents to the collection of information under Rule 15fk-
1(c) are registered SBS Entities. As of January 4, 2023, there are 50 
SBS Entities registered with the Commission. Of these entities, the 
Commission estimates that none will be first-time EDGAR users needing 
to obtain EDGAR access credentials in order to submit its CCO report 
because they have already registered as SBS Entities through EDGAR.
15. Regulation S-T
    The respondents to the collection of information under Regulation 
S-T are broker-dealers, SBSDs, MSBSPs, OTC derivatives dealers, and 
national securities associations and exchanges. The collection of 
information requirements are reflected in the burden hours estimated 
for Rule 3a71-3, 15fi-3, 15fk-1, 17a-5, 18a-7, 17a-12, 17a-19, and Rule 
17h-2T. The rules in Regulation S-T should not impose any separate 
burden.

D. Total Initial and Annual Reporting and Recordkeeping Burdens

1. Form ID
Currently Approved Burden Estimate
    Form ID (OMB Control No. 3235-0328) must be completed and filed 
with the Commission by all individuals, companies, and other 
organizations who seek access to file electronically on EDGAR. 
Accordingly, a filer that does not already have access to EDGAR must 
submit a Form ID, along with the notarized signature of an authorized 
individual, to obtain an EDGAR identification number and access codes 
to file on EDGAR. The Commission currently estimates that Form ID would 
take 0.30 hours to prepare, resulting in an annual industry-wide burden 
of 17,199 hours.\413\
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    \413\ See Supporting Statement for the Paperwork Reduction Act 
Information Collection Submission for Form ID (Dec. 20 2021), 
available at https://www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=202112-3235-0328.
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Proposed Revision to Burden Estimate
    The Commission estimates that each filer that currently does not 
have access to EDGAR would incur an initial, one-time burden of 0.30 
hours to complete and submit a Form ID.\414\ Therefore, the Commission 
believes the one-time industrywide reporting burden associated with the 
proposed requirements to file on EDGAR is 7.2 hours for national 
securities exchanges and exempt exchanges; \415\ .6 hours for security 
futures product exchanges; \416\ .3 hours for registered national 
securities associations; \417\ 3.6 hours for registered and exempt 
clearing agencies; \418\ 467.7 hours for broker-dealers not already 
filing their annual audits on EDGAR; \419\ 0 hours for OTC derivatives 
dealers not already filing their annual audits on EDGAR; \420\ and 7.2 
hours for Registered Entities.\421\
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    \414\ The Commission does not estimate a burden for SBS Entities 
since these firms have already filed Form ID so they can file Form 
SBSE on EDGAR.
    \415\ 0.30 hours x 24 national securities exchanges and exempt 
exchanges = 7.2 hours.
    \416\ 0.30 hours x 2 security futures product exchanges = 0.6 
hours.
    \417\ 0.30 hours x 1 registered national securities association 
= 0.3 hours.
    \418\ 0.30 hours x 12 currently active registered and exempt 
clearing agencies = 3.6 hours.
    \419\ 0.30 hours x 1,559 broker-dealers not already filing on 
EDGAR = 467.7 hours.
    \420\ 0.30 hours x 0 OTC derivatives dealers not already filing 
on EDGAR = 0 hours.
    \421\ 0.30 hours x 24 Registered Entities = 7.2 hours. The 
Commission conservatively estimates that none of the Registered 
Entities would already have EDGAR access at the time of filing an 
ANE Exception Notice or withdrawal of an ANE Exception Notice, even 
though most, if not all, Registered Entities already should have 
access to electronic filing on EDGAR at the time of filing an ANE 
Exception Notice or a withdrawal of an ANE Exception Notice, as they 
likely have used or will have used the system to register or file 
other information with the Commission. A Registered Entity that is 
an SBSD must file its application for registration electronically on 
EDGAR, and this requirement has been in place from the original 
compliance date for registration of SBSDs. See 17 CFR 240.15Fb2-
1(c). Additionally, a Registered Entity that is a broker may 
voluntarily file electronically on EDGAR certain annual reports. 
See, e.g., paragraph (d) of Rule 17a-5; supra note 197 and 
accompanying text.
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2. Rules 6a-1, 6a-2, 6a-3 and Form 1
Currently Approved Burden Estimate \422\
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    \422\ For an explanation of the collection of information under 
these rules and Form 1, see supra section IX.A.2.
---------------------------------------------------------------------------

    Initial filings on Form 1 by applicants seeking registration as a 
national securities exchange or an exemption from such registration are 
made on a one-time basis. The Commission estimates that it would 
receive approximately one initial Form 1 filing per year. The 
Commission also estimates that each respondent who submits an initial 
Form 1 filing would incur an average burden of 880 hours to complete 
and file an initial Form 1.\423\ With respect to amendments to Form 1, 
the Commission estimates that each registered or exempt exchange would 
file 11 amendments or periodic updates to Form 1 per year.\424\ Hours 
required for amendments to Form 1 that must be submitted to the 
Commission can vary, depending upon the nature and extent of the 
amendment, the exchange's corporate structure, and the exchange's 
business activities. The Commission estimates that each exchange would 
incur an average burden of 25 hours per filing to comply with Rule 6a-
2.\425\ Accordingly, the estimated average annual burden to update and 
amend Form 1 is 275 hours per exchange \426\ and the estimated 
aggregate annual burden for all national securities exchanges is 6,600 
hours.\427\
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    \423\ See FR Doc. 2022-01616, 87 FR 4297 (Jan. 27, 2022) 
(Submission for OMB Review; Comment Request, Extension: Rules 6a-1 
and 6a-2, Form 1; SEC File 270-0017; OMB Control No. 3235-0017) 
(hereinafter ``Rules 6a-1 and 6a-2 PRA Update'').
    \424\ See Rules 6a-1 and 6a-2 PRA Update.
    \425\ See Rules 6a-1 and 6a-2 PRA Update.
    \426\ 11 Form 1 Amendments annually x 25 burden hours per Form 1 
Amendment = 275 burden hours per exchange.
    \427\ 275 burden hours per exchange x 24 national securities 
exchanges = 6,660 aggregate burden hours.
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    With respect to supplemental information and monthly reports, the 
Commission estimates that each exchange would file such materials 12 
times per year. The Commission estimates that each exchange would incur 
an average burden of 0.5 hours per filing to comply with Rule 6a-
3.\428\ Accordingly, the estimated average annual burden to submit 
supplemental information and monthly reports is six hours per exchange 
\429\ and the estimated aggregate annual burden for all exchanges is 
144 hours.\430\ Thus, the Commission estimates that the total aggregate 
annual burden to comply with Rules 6a-2 and 6a-3 is 6,744 hours.\431\
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    \428\ See FR Doc. 2022-07060, 87 FR 19541 (Apr. 4, 2022) 
(Submission for OMB Review; Comment Request; Extension: Rule 6a-3; 
SEC File 270-0015; OMB Control No. 3235-0021).
    \429\ 12 filings annually x 0.5 hours per filing = 6 burden 
hours per exchange.
    \430\ 6 burden hours per exchange x 24 national securities 
exchanges = 144 aggregate burden hours.
    \431\ 6,600 burden hours to comply with Rule 6a-2 + 144 burden 
hours to comply with Rule 6a-3 = 6,744 aggregate burden hours.

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[[Page 23975]]

Proposed Revision to Burden Estimate
    The Commission recognizes that the proposed amendments to Rules 6a-
1, 6a-2, and 6a-3 would impose certain burdens on respondents. Although 
the information to be provided on filings made pursuant to Rules 6a-1, 
6a-2, and 6a-3 would not change, respondents would be required to 
submit documents electronically. The instructions to Form 1 would be 
amended to no longer require respondents to make and submit multiple 
copies of the Form 1 submission. Currently, respondents must make two 
copies of each filing to be submitted pursuant to Rules 6a-1 and 6a-2. 
The Commission believes that generally the time spent making such 
copies instead would be spent uploading documents on EDGAR. Where a 
filing could include multiple exhibits, the Commission believes that 
the time required to upload documents would be less than the time 
required to make two copies of each exhibit, particularly when the 
exhibit contains numerous pages. Accordingly, the Commission estimates 
that, on average, filing an initial Form 1 application electronically 
would require two fewer hours of clerical work from the current 
baseline. The aggregate initial burden on all respondents submitting an 
initial Form 1 application electronically would be two hours less than 
the current baseline. Accordingly, the Commission believes that the 
aggregate initial burden on all respondents to complete and submit an 
initial Form 1 application would be 878 hours.\432\ In addition, the 
Commission estimates that, on average, filing amendments to Form 1 
electronically would require 1 fewer hour of clerical work from the 
current baseline, as the amount of material filed pursuant to Rule 6a-2 
may be less than an initial Form 1 application. The aggregate ongoing 
burden on all exchanges submitting a periodic amendment electronically 
would be 264 hours less than the current baseline.\433\ Accordingly, 
the Commission believes that the aggregate ongoing burden on all 
exchanges to submit periodic amendments to Form 1 electronically would 
be 6,336 hours.\434\
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    \432\ 878 burden hours per initial application x 1 initial 
application per year = 878 burden hours.
    \433\ Reduction of 1 hour per response x 264 responses per year 
= 264 fewer burden hours.
    \434\ 264 burden hours per exchange x 24 national securities 
exchanges = 6,336 aggregate burden hours.
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    With respect to material filed under Rule 6a-3, while in some 
instances there may be a marginal reduction in burden hours associated 
with submitting these materials electronically as a result of a 
reduction in printing requirements, for purposes of making a PRA burden 
estimate the Commission believes that, on average, the most recently 
approved baseline represents a reasonable estimate of the burden hours 
associated with submitting supplemental information and monthly 
reports. The Commission believes that the time required to compile 
copies of these materials would, on average, be equivalent to the time 
required to upload those filings electronically. The Commission 
estimates that, on average, filing supplemental information and monthly 
reports electronically would not increase or decrease burden hours from 
the current baseline of 0.5 hours. Accordingly, the Commission believes 
that the aggregate burden associated with filing supplemental 
information and monthly reports would be 180 hours.\435\ Thus, the 
Commission believes that the total aggregate annual burden to comply 
with Rules 6a-2 and 6a-3 would be 7,212 hours.\436\
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    \435\ 0.5 burden hours x 360 responses per year = 180 burden 
hours.
    \436\ 7,032 burden hours to comply with Rule 6a-2 + 180 burden 
hours to comply with Rule 6a-3 = 7,212 aggregate burden hours.
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    The Commission also recognizes that the requirement to tag certain 
disclosures (specifically, the financial statements and the manner of 
operations description) on the initial Form 1 in Inline XBRL would 
impose burdens on respondents. To file reports in Inline XBRL, a filer 
must purchase Inline XBRL tagging software to apply Inline XBRL tags to 
the reports before filing them on EDGAR, or employ a tagging service 
provider to apply the Inline XBRL tags on its behalf. As discussed in 
further detail below, the Commission believes this burden would be 
mitigated for most exchanges, because most exchanges are affiliated 
with public reporting companies subject to existing Inline XBRL 
structuring requirements and thus may be able to leverage the 
compliance software and experience of their reporting affiliates.\437\
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    \437\ See infra section X.C.2. Currently, 17 of the 24 national 
securities exchanges are owned by public companies that file 
financial statements and cover page disclosures in EDGAR in Inline 
XBRL.
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    The Commission estimates respondents will incur an average of 10 
burden hours to tag the initial Form 1 in Inline XBRL (a total annual 
industry-wide burden of 10 hours), and an average of 7 burden hours to 
tag financial statements included in annual amendments to Form 1 in 
Inline XBRL (a total annual industry-wide burden of 168 hours).\438\ 
With respect to the external monetary costs (e.g., the costs of 
purchasing and renewing the necessary software to tag filings in Inline 
XBRL) that are incurred in addition to the internal time burden, the 
Commission estimates an annual average cost of $2,500 to tag Form 1 
(including initial and subsequent filings) in Inline XBRL (a total 
annual industry-wide cost of $60,000).\439\
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    \438\ 10 burden hours to tag Exhibits D, E (in part), and I in 
initial Form 1 in Inline XBRL x 1 response per year = 10 burden 
hours. 7 burden hours to tag financial statements in annual 
amendments to Form 1 in Inline XBRL x 24 responses per year = 168 
burden hours.
    \439\ $2,500 per year x 24 exchanges = $60,000. See infra 
section X.C.2.b for further detail on structured data (Inline XBRL 
and custom XML) compliance costs, including estimated cost ranges 
and factors underlying expected variance in structured data costs 
across different filers. For example, we expect those exchanges 
affiliated with public companies that are subject to Inline XBRL 
requirements would incur lower structured data costs than other 
exchanges. See infra note 638 and accompanying text. We have 
accounted for this expected variance in the calculations of average 
burden and cost figures presented in this section.
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    The Commission also recognizes the requirement to structure certain 
other disclosures on Form 1 in a custom XML data language would impose 
burdens on respondents.\440\ The Commission estimates respondents will 
incur an average of 3 burden hours to structure disclosures in initial 
Form 1 filings in custom XML (a total annual industrywide burden of 3 
hours), and an average of 2 burden hours to structure disclosures in 
subsequent Form 1 filings in custom XML (a total annual industrywide 
burden of 528 hours).\441\
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    \440\ This does not include the monthly volume reports that 
exchanges must file under Rule 6a-3(b) of the Exchange Act, as we 
assume exchanges would file those disclosures, which comprise a very 
limited number of data points, using a fillable form that EDGAR 
would convert to custom XML. See 17 CFR 240.6a-3(b).
    \441\ 3 burden hours to structure disclosures in initial Form 1 
filings in custom XML x 1 response per year = 3 burden hours. 2 
burden hours to structure disclosures in subsequent Form 1 filings 
in custom XML x 264 responses per year = 528 burden hours. Our 
estimates assume exchanges would choose to encode the disclosures in 
the Exhibits to Form 1 in custom XML and submit the custom XML 
documents directly to EDGAR, rather than manually completing 
fillable EDGAR forms to be converted into custom XML documents. See 
infra text accompanying note 624.
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    To summarize, the current estimated annual burden to submit filings 
pursuant to Rules 6a-1, 6a-2, and 6a-3 is 7,624 hours.\442\ Under the 
proposal, the Commission estimates that the annual burden to submit 
these filings would be 8,103 hours.\443\ In addition,

[[Page 23976]]

the Commission estimates that the total annual industry-wide external 
cost of the proposed Inline XBRL requirements related to Form 1 would 
be $62,500.\444\
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    \442\ 880 burden hours for Rule 6a-1 + 6,600 burden hours for 
Rule 6a-2 + 144 burden hours for Rule 6a-3 = 7,624 burden hours.
    \443\ 891 burden hours for Rule 6a-1 (878 burden hours to file 
electronically + 10 burden hours to tag in Inline XBRL + 3 burden 
hours to tag in custom XML) + 7,032 burden hours for Rule 6a-2 
(6,336 burden hours to file electronically + 168 burden hours to tag 
Exhibits in Inline XBRL + 528 burden hours to structure Exhibits in 
custom XML) + 180 burden hours for Rule 6a-3 = 8,103 burden hours.
    \444\ $2,500 industry-wide cost for Rule 6a-1 (to tag in Inline 
XBRL an initial Form 1 filing) + $60,000 industry-wide cost for Rule 
6a-2 (to tag in Inline XBRL periodic updates to Form 1) = $62,500.
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3. Rule 6a-4, Form 1-N
Currently Approved Burden Estimate \445\
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    \445\ For an explanation of the collection of information under 
Rule 6a-4 and Form 1-N, see supra section IX.A.3.
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    Initial filings on Form 1-N by futures exchanges submitting notice 
registration as a national securities exchange solely for the purpose 
of trading security futures products are made on a one-time basis. The 
Commission estimates that it would receive zero initial Form 1-N filing 
per year.\446\ The Commission estimates that the total burden for all 
respondents to file initial Form 1-N filings per year would be 0 hours 
(31 hours/respondent/year x 0 respondents). The Commission estimates 
that the total annual burden for all respondents to provide periodic 
amendments \447\ to keep the Form 1-N accurate and up to date as 
required under Rule 6a-4(b)(1) would be 30 hours (15 hours/respondent 
per year x 2 respondents). The Commission estimates that the total 
annual burden for all respondents to provide annual amendments under 
Rule 6a-4(b)(3) would be 30 hours (15 hours/respondent/year x 2 
respondents). The Commission estimates that the total annual burden for 
all respondents to provide triennial amendments \448\ under Rule 6a-
4(b)(4) would be 13 hours (20 hours/response x 2 responses every three 
years). The Commission estimates that the total annual burden for the 
filing of the supplemental information \449\ and the monthly reports 
required under Rule 6a-4(c) would be 12 hours (6 hours/respondent per 
year x 2 respondents). Thus, the Commission estimates the total annual 
burden for complying with Rule 6a-4 is 86 hours.
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    \446\ The Commission is basing its estimate on its historical 
experience with Form 1-N filings. In particular, since the adoption 
of the form in 2001, six initial Form 1-N filings have been made by 
futures exchanges. Based on the infrequent occurrence of filings, 
the Commission believes that zero is a reasonable estimate.
    \447\ 17 CFR 240.6a-4(b)(1).
    \448\ 17 CFR 240.6a-4(b)(3) and (4).
    \449\ 17 CFR 240.6a-4(c).
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Proposed Revision to Burden Estimate
    The Commission recognizes that the proposed amendments to Rule 6a-4 
would impose certain burdens on respondents. Although the information 
to be provided on filings made pursuant to Rule 6a-4 would not change, 
respondents would be required to submit documents electronically. The 
instructions to Form 1-N would be amended to no longer require 
respondents to make and submit multiple copies of the Form 1-N 
submission. Currently, respondents must make two copies of each filing 
in addition to the original Form 1-N to be submitted pursuant to Rule 
6a-4. The Commission believes that, generally, the time spent making 
such copies instead would be spent uploading documents through EDGAR. 
Where a filing could include multiple exhibits, the Commission believes 
that, generally, the time required to upload documents would be less 
than the time required to make two copies of each exhibit, particularly 
when the exhibit contains numerous pages.
    The Commission estimates that, on average, filing an initial Form 
1-N filing electronically would require, generally, two fewer hours of 
clerical work from the current baseline. Therefore, instead of 31 
hours, an initial filing would require 29 hours. However, because the 
Commission estimates that there will be zero respondents submitting 
initial filings, the burden would remain zero hours (29 hours/
respondent/year x 0 respondents/year).
    The Commission estimates that, on average, periodic amendments to 
Form 1-N electronically would require 1 fewer hour of clerical work 
from the current baseline. The aggregate ongoing burden on all 
respondents submitting periodic amendments electronically would be two 
hours fewer than the current baseline. Accordingly, the Commission 
estimates that the aggregate burden on all respondents to submit 
periodic amendments to Form 1-N would be 28 hours (14 hours/respondent/
year x 2 respondents).
    Similarly, the Commission estimates that, on average filing annual 
amendments to Form 1-N electronically would require 1 fewer hour of 
clerical work from the current baseline. The aggregate burden on all 
respondents submitting annual amendments electronically would be two 
hours fewer than the current baseline. Accordingly, the Commission 
estimates that the aggregate burden on all respondents to provide 
annual amendments to Form 1-N would be 28 hours (14 hours/respondent/
year x 2 respondents).
    The Commission estimates that, on average, filing triennial 
amendments to Form 1-N would require 1 fewer hour of clerical work from 
the current baseline. Accordingly, the Commission estimates that the 
total annual burden for all respondents to provide triennial amendments 
to Form 1-N would be 13 hours \450\ (19 hours/response x 2 respondents 
per year x .33 responses per year).
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    \450\ Even with the one hour per response reduction, the annual 
total burden would still be 13 hours due to rounding. The annual 
burden would be reduced from 13.33 to 12.67, which both round to 13 
hours.
---------------------------------------------------------------------------

    With respect to supplemental material filed under Rule 6a-4, while 
in some instances there may be a marginal reduction in burden hours 
associated with submitting these materials electronically as a result 
of a reduction in printing requirements, for purposes of making a PRA 
burden estimate the Commission believes that, on average, the most 
recently approved baseline represents an appropriate estimate of the 
burden hours associated with submitting supplemental information and 
monthly reports. The Commission believes that the time required to 
compile copies of these materials would, on average, be equivalent to 
the time required to upload those filings electronically. The 
Commission estimates that, on average, filing supplemental information 
and monthly reports electronically would not increase or decrease 
burden hours from the current baseline of six hours/respondent/year. 
Accordingly, the Commission believes that the aggregate burden 
associated with filing supplemental information and monthly reports 
would continue to be 12 hours. Thus, the Commission believes that the 
total aggregate annual burden to comply with Rule 6a-4 would be 81 
hours.\451\
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    \451\ The Commission currently estimates that compliance with 
Form 1-N and Rule 6a-4 results in $304 of annual clerical costs 
(i.e., mailing forms and copying forms etc.). The Commission 
estimates that these costs would be eliminated with the electronic 
filing of Form 1-N.
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4. Rules 15aa-1 and 15aa-2; Form 15A
    Initial filings on proposed Form 15A by an applicant seeking 
registration as a national securities association are made on a one-
time basis.\452\ The Commission estimates that it would receive one 
initial Form 15A filing per year.\453\ Because the Commission believes 
that the filing of an initial Form 15A would be substantially similar 
to an initial Form 1 filing, the Commission estimates that each 
respondent would incur an

[[Page 23977]]

average burden of 878 hours to complete and file an initial Form 
15A.\454\
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    \452\ For an explanation of the collection of information under 
Rules 15Aa-1 and 15Aj-1 that are being redesignated as Rules 15aa-1 
and 15aa-2 and Forms X-15AA-1, X-15AJ-1, and X-15AJ-2 that are being 
redesignated as Form 15A, see supra section IX.A.4.
    \453\ See Exchange Act Rule 15aa-1, 17 CFR 240.15aa-1 and 17 CFR 
249.801.
    \454\ See FR Doc. 2019-04007, 84 FR 8138 (Mar. 6, 2019) (Request 
to OMB for Extension of Rule 6a-1, Rule 6a-2 and Form 1; SEC File 
270-0017; OMB Control No. 3235-0017) (hereinafter ``Rules 6a-1 and 
6a-2 PRA Update''). The Commission currently estimates that an 
initial Form 1 filing would incur an average burden of 880 hours, 
less the efficiencies contemplated in this propose that no longer 
require the submission of duplicate paper copies (a reduction of 2 
burden hours per respondent). See supra section IX.D.2.
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    Based on the number of applications for registration as a national 
securities association the Commission has received, the Commission 
estimates that it will receive not more than one initial Form 15A 
filing per year. The Commission estimates that a respondent would incur 
an average burden of 878 hours to file an initial Form 15A.
    With respect to the proposed amendments to proposed Form 15A, the 
Commission estimates that each registered association would file 11 
amendments or periodic updates to Form 15A per year.\455\ Hours 
required for amendments to Form 15A that must be submitted to the 
Commission can vary, depending upon the nature and extent of the 
amendment, the association's corporate structure, and the association's 
business activities. The Commission estimates that an association would 
incur an average burden of 24 hours per filing to comply with Rule 
15aa-2.\456\ Accordingly, the estimated average annual burden to update 
and amend Form 15A is 264 hours per association \457\ for an estimated 
aggregate annual burden for all national securities associations of 264 
hours.\458\
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    \455\ The Commission believes that the requirements of Rule 
15aa-2 are substantively similar to the requirements of Rules 6a-1 
and 6a-2. As a result, the Commission believes it can rely on the 
past history of amendments and periodic updates submitted under 
those rules in determining its estimate of the number of amendments 
the Commission will receive under Rule 15A. The Commission estimates 
that each registered or exempt exchange would file 11 amendments or 
periodic updates to Form 1 per year. The Commission believes that 
using an estimate of 11 amendments or periodic updates for Form 15A 
is appropriate.
    \456\ Attorney at 10 hours + Accountant at 10 hours + Compliance 
Clerk at 4 hours = 24 burden hours. The instructions to Form 15A 
would be amended to no longer require respondents to make and submit 
multiple copies of the Form 15A submission. Currently, respondents 
must make two copies of each filing to be submitted pursuant to Rule 
15Aa-1 and 15Aaj-1. The Commission believes that the time spent 
making such copies instead would be spent uploading documents 
through EDGAR. Where a filing could include multiple exhibits, the 
Commission believes that the time required to upload documents would 
be less than the time required to make two copies of each exhibit, 
particularly when the exhibit contains numerous pages. The 
Commission estimates that, on average, filing amendments to Form 15A 
electronically would require 1 fewer hour of clerical work compared 
to the submission of physical copies as contained in the most recent 
PRA updates for Rule 6a-1 and 6a-2.
    \457\ 11 Form 15Aa-2 Amendments annually x 24 burden hours per 
Form 15A Amendment = 264 burden hours per association.
    \458\ 264 burden hours per association x 1 national securities 
association = 264 aggregate burden hours.
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5. Rule 17ab2-1, Form CA-1
Currently Approved Burden Estimate
    The Commission has previously discussed the requirements of Rule 
17ab2-1 and Form CA-1 above in IX.A.5.
    The Commission estimates that, on average, each initial Form CA-1 
requires approximately 340 hours to complete and submit for approval, 
and that, on average, the Commission receives one application each 
year.\459\ This burden is composed primarily of a one-time reporting 
burden that reflects the applicant's staff time to prepare and submit 
the Form CA-1 to the Commission.\460\ With respect to amendments to 
Form CA-1, the Commission estimates that, on average, an amendment 
requires 60 hours of the exempt or registered clearing agency's staff 
time,\461\ although the time burden related to preparing and submitting 
an amendment widely varies depending on the nature of the information 
that needs to be updated. The Commission estimates that, on average, it 
receives one amendment per year. Accordingly, the Commission estimates 
that the aggregate annual burden associated with compliance with Rule 
17ab2-1 and Form CA-1 is 400 hours.
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    \459\ See FR Doc. 2020-18498, 85 FR 52178 (Aug. 24, 2020) 
(Request to OMB for Extension of Rule 17Ab2-1 and Form CA-1; SEC 
File No. 270-203; OMB Control No. 3235-0195).
    \460\ Compliance Attorney at 300 hours + Chief Compliance 
Officer at 40 hours = 340 burden hours.
    \461\ Compliance Attorney at 40 hours + Chief Compliance Officer 
at 20 hours = 60 burden hours.
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Proposed Revision to Burden Estimate
    The Commission recognizes that the proposed amendments to Rule 
17ab2-1 would impose certain burdens on respondents. Although the 
information to be provided on filings made pursuant to Rule 17ab2-1 
would not change, respondents would be required to submit documents 
electronically. The instructions to Form CA-1 would be amended to no 
longer require respondents to make and submit multiple copies of the 
same form. Currently, respondents must make four copies of Form CA-1. 
The Commission believes that the time spent making such copies would 
now be spent uploading documents through EDGAR. Where a filing may 
include multiple exhibits, the Commission believes that the time 
required to upload documents would be slightly less than the time 
required to make copies of each exhibit. As the number of exhibits 
required to be submitted with Form CA-1 is roughly equivalent to the 
number of exhibits required by an initial Form 1 application, the 
Commission believes that the overall burden is two hours less (for 
either an initial application or an amendment) to make an electronic 
filing, compared to making the paper copies. Thus, the Commission 
believes that the aggregate annual burden associated with compliance 
with Rule 17ab2-1 and Form CA-1, other than the structuring requirement 
discussed below, would be approximately 396 hours.
    The Commission also recognizes that the requirement to file Form 
CA-1 in Inline XBRL (in part) and in custom XML (in part) would impose 
burdens on respondents.\462\ The Commission estimates respondents would 
incur an average of 18 burden hours to structure financial statements 
and narrative disclosures in initial applications on Form CA-1 in 
Inline XBRL (resulting in a total annual industry-wide burden of 18 
hours) and an average of 12 burden hours to structure financial 
statements and narrative disclosures in subsequent amendments on Form 
CA-1 in Inline XBRL (resulting in a total annual industry-wide burden 
of 12 hours).\463\ The Commission further estimates respondents would 
incur average annual external monetary costs (e.g., the cost of 
purchasing and renewing the necessary Inline XBRL tagging software) of 
$3,500 to structure financial statements and narrative disclosures 
included in Form CA-1 in Inline XBRL (resulting in a total annual 
industry-wide burden of an average of $3,500).\464\ The Commission 
estimates respondents would incur an average of 3 burden hours to 
structure other disclosures in initial applications on Form CA-1 in a 
custom XML data language (resulting in a total annual industry-wide 
burden of

[[Page 23978]]

3 hours) and an average of 2 burden hours to structure those 
disclosures in subsequent amendments on Form CA-1 in custom XML 
(resulting in a total annual industry-wide burden of 2 hours).\465\ The 
proposed structured data requirements for Form CA-1 would thus entail 
an estimated total annual industry-wide burden of 21 burden hours and 
$3,500 in external monetary costs for initial applications, and an 
estimated total annual industry-wide burden of 14 burden hours and 
$3,500 in external monetary costs for subsequent amendments.\466\
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    \462\ The proposed amendments would require Schedule A and 
Exhibits C, F, H, J, K, L, M, O, R, and S of Form CA-1 to be 
structured in Inline XBRL, and would require the execution page and 
Exhibits A (in part), B, D, E (in part), I, N, and Q to be 
structured in custom XML. See supra notes 34-36 and accompanying 
text; see also supra section VII.A.
    \463\ 18 hours per initial application x 1 initial application 
per year = 18 aggregate burden hours. 12 hours per subsequent 
amendment x 1 subsequent amendment per year = 12 aggregate burden 
hours.
    \464\ $3,500 per initial application x 1 initial application per 
year = $3,500 aggregate cost per year. $3,500 per subsequent 
amendment x 1 subsequent amendment per year = $3,500 aggregate cost 
per year.
    \465\ 3 hours per initial application x 1 initial application 
per year = 3 aggregate burden hours per year. 2 hours per subsequent 
amendment x 1 subsequent amendment per year = 2 aggregate burden 
hours per year. Our estimates assume clearing agencies would choose 
to encode their disclosures in custom XML and submit the custom XML 
documents directly to EDGAR, rather than manually completing 
fillable EDGAR forms to be converted into custom XML documents. See 
infra text accompanying note 624. Consistent with burden estimates 
in prior Commission releases, the burden estimates here assume 
Inline XBRL tagging would be done by a compliance attorney, while 
custom XML structuring would be done by a programmer. See Shortening 
the Securities Transaction Settlement Cycle, Release No. 34-94196 
(Feb. 9, 2022), 87 FR 10436, 10491 (Feb. 24, 2022); Money Market 
Fund Reforms, Release No. IC-34441 (Dec. 15, 2021), 87 FR 7248, 7332 
(Feb. 8, 2022).
    \466\ 18 hours and $3,500 for Inline XBRL structuring + 3 hours 
for custom XML structuring = 21 hours and $3,500 per initial 
application) x 1 initial application per year = 21 aggregate burden 
hours per year and $3,500 in aggregate external monetary cost per 
year. 12 hours and $3,500 for Inline XBRL structuring + 2 hours for 
custom XML structuring per subsequent amendment = 14 hours and 
$3,500 per subsequent amendment x 1 subsequent amendment per year = 
14 aggregate burden hours per year and $3,500 in aggregate external 
monetary cost per year. See infra Section X.C.2.b for further detail 
on structured data (Inline XBRL and custom XML) compliance costs, 
including estimated cost ranges and factors underlying expected 
variance in structured data costs across different filers.
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6. Rule 19b-4(e), Form 19b-4(e)
Currently Approved Burden Estimate
    The Commission's currently approved estimate to complete and submit 
one Form 19b-4(e) is 1 hour, for an aggregate annual burden of 2,331 
hours.\467\
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    \467\ See FR Doc. 2022-17308, 87 FR 49894 (Aug. 12, 2022) 
(Request to OMB for extension of Rule 19b-4(e) and Form 19b-4(e); 
SEC File No. 270-447; OMB Control No. 3235-0504).
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Proposed Revision to Burden Estimate
    The proposed amendment to Rule 19b-4(e) rescinding Form 19b-4(e) 
and instead requiring an SRO to publicly report the information 
currently provided in Forms 19b-4(e) on its internet website would 
impose certain burdens on respondents. Respondents would be required to 
use the most recent versions of the XML schema (i.e., data language) 
and the associated PDF renderer as published on the Commission's 
website to post the information required under proposed Rule 19b-4(e) 
for each new derivative securities product. Currently, respondents must 
make nine copies of Form 19b-4(e); however, the form consists of a 
single page and does not require respondents to submit exhibits. In 
some instances there may be a marginal change in burden hours 
associated with posting the same information as is required on current 
Form 19b-4(e) on a respondent's website. However, given the relatively 
small amount of data to be structured, rendered, and posted for each 
new derivative securities product, for purposes of making a PRA burden 
estimate the Commission believes that, on average, the proposed 
requirement to structure the information in a custom XML data language, 
render it using the associated PDF renderer, and post it on a 
respondent's website would continue to be 1 burden hour for each new 
derivative securities product, and that the time to structure, render 
and post the first new derivative securities product per respondent 
would be an additional 0.5 hours. Accordingly, the Commission believes 
that the total additional initial hour burden would be 12 hours and the 
total annual hour burden would continue to be 2,331 hours per year 
associated with the structuring, rendering, and posting of information 
under proposed Rule 19b-4(e).\468\ The Commission does not estimate 
respondents would incur external monetary costs under proposed Rule 
19b-4(e).
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    \468\ 0.5 burden hours per first response for structuring, 
rendering, and posting x 24 respondents) = 12 hours. 1 burden hour 
per response for structuring, rendering, and posting in subsequent 
years x 2,331 responses) = 2,331 hours. See also infra Section 
X.C.2.b, including the text accompanying note 650 (discussing 
estimated cost ranges related to the proposed structuring 
requirement for Rule 19b-4(e) information). Consistent with 
structured data burden estimates in prior Commission releases, the 
burden estimates here assume the custom XML structuring would be 
done by a programmer. See supra note 485.
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7. Rule 19b-4(j), Form 19b-4
Currently Approved Burden Estimate
    The Commission's currently approved estimated response burden 
pursuant to Rule 19b-4 and Form 19b-4 for the 42 respondents is an 
aggregate burden of 91,300 hours.\469\
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    \469\ See FR Doc. 2019-22222, 84 FR 54710 (Oct. 10, 2019) 
(Request to OMB for extension of Rule 19b-4 and Form 19b-4; SEC File 
No. 270-38; OMB Control No. 3235-0045).
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Proposed Revision to Burden Estimate
    The Commission believes that, on average, the removal of the manual 
signature and retention requirement would not increase or decrease the 
burden hours associated with continuing to file Form 19b-4 
electronically because the manual signature and retention requirement 
is only a small component of the filing requirement. Accordingly, the 
Commission believes that the aggregate burden for SROs associated with 
complying with Rule 19b-4 and filing Form 19b-4 would continue to be 
91,300 hours.
8. Rule 17a-22
Currently Approved Burden Estimate \470\
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    \470\ The Commission has previously discussed the requirements 
of Rule 17a-22 in IX.A.8, supra.
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    The Commission estimates that it receives, on average, 
approximately 840 filings per year pursuant to Rule 17a-22.\471\ 
Although the frequency of filings made by registered clearing agencies 
pursuant to Rule 17a-22 varies, the Commission estimates that, on 
average, each registered clearing agency submits approximately 120 
filings per year.\472\ The Commission estimates that, on average, each 
filing requires approximately 0.25 hours (fifteen minutes).\473\ This 
figure represents the time it takes for a staff person at a registered 
clearing agency to: (i) properly identify a document subject to the 
rule; (ii) print and make copies of the document; and (iii) mail the 
copies to the Commission and, where applicable, the ARA.\474\ 
Accordingly, the Commission estimates that the aggregate annual burden 
to comply with Rule 17a-22 is 210 hours.\475\ Further, the Commission 
estimates that each registered clearing agency will expend a

[[Page 23979]]

total of 30 hours per year to comply with Rule 17a-22.\476\
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    \471\ This figure is based on the number of aggregate filings 
received by the Commission in 2017, which was the last year for 
which the Commission had compiled data at the time of the Rule 17a-
22 PRA update in 2020.
    \472\ See FR Doc. 2020-08336, 85 FR 21910 (Apr. 20, 2020) 
(Request to OMB for Extension of Rule 17a-22; SEC File No. 270-202; 
OMB Control No. 3235-0196). Given the variability in the number of 
filings per clearing agency received each year, the Commission 
estimated an average of 120 annual filings per clearing agency by 
averaging the approximate number of filings received in the most 
recent year for which the Commission has obtained data (840 filings) 
by the number of registered clearing agencies (7 clearing agencies).
    \473\ See id.
    \474\ Although current Rule 17a-22 requires duplicate filings 
when the Commission is not a registered clearing agency's ARA, the 
Commission believes that the additional burden of making a duplicate 
filing would be minimal because the rule applies only to materials 
that have already been published by the registered clearing agency.
    \475\ 7 registered clearing agencies x 120 responses per 
clearing agency x .25 hours = 210 burden hours.
    \476\ 840 total responses x .25 hours/7 active clearing agencies 
= 30 burden hours.
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Proposed Revision to Burden Estimate
    The Commission recognizes that the proposed amendments to Rule 17a-
22 would impose certain burdens on respondents. Although the scope of 
supplemental materials subject to Rule 17a-22 would not change, 
respondents would be required to prominently post certain supplemental 
materials on their internet websites within two business days after 
issuing, or making generally available, such materials to their 
participants or other entities with whom they have a significant 
relationship. Currently, respondents must file with the Commission 
three paper copies of certain supplemental materials issued, or made 
generally available, to their participants or other entities with whom 
they have a significant relationship within 10 days after issuing, or 
making generally available, such materials. In addition, when the 
Commission is not a respondent's ARA, the respondent must file at the 
same time one paper copy of the materials with its ARA.
    While there may be a marginal reduction in burden hours associated 
with replacing the paper filing requirement under Rule 17a-22 with an 
electronic filing requirement via a registered clearing agency's 
website, the Commission believes that, for purposes of making a PRA 
burden estimate, the current baseline represents a reasonable estimate 
of the burden hours associated with filing supplemental materials. The 
Commission believes that the time required to compile and mail copies 
of supplemental materials would, on average, be equivalent to the time 
required to post these materials on a clearing agency's website such 
that they would be readily identifiable and accessible on the 
website.\477\ Moreover, the Commission believes that reducing the 
timeframe under Rule 17a-22 from 10 days to 2 business days would not 
increase the burden hours associated with compliance with Rule 17a-22. 
The Commission estimates that, on average, filing supplemental 
materials electronically via a registered clearing agency's internet 
website would not increase or decrease burden hours from the current 
baseline of 0.25 hours. Accordingly, the Commission believes that each 
registered clearing agency will continue to expend a total of 30 hours 
per year to comply with Rule 17a-22.\478\ Thus, the Commission believes 
that the aggregate annual burden associated with compliance with Rule 
17a-22 would continue to be 210 hours.\479\
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    \477\ See Section III.D.3. (explaining the Commission's 
interpretation of the requirement to ``prominently post'' 
supplemental materials on a clearing agency's website pursuant to 
the proposed amendments to Rule 17a-22).
    \478\ 840 total responses x .25 hours/7 active clearing agencies 
= 30 burden hours.
    \479\ 7 registered clearing agencies x 120 responses per 
clearing agency x .25 hours = 210 burden hours.
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9. Rules 17a-5, 18a-7, and 17a-12
a. Requirement To File Annual Reports on EDGAR Using Structured Data
Currently Approved Burden Estimate
    Rules 17a-5, 17a-12, and 18a-7 require broker-dealers, OTC 
derivatives dealers, and SBS Entities that are not prudentially 
regulated, respectively, to file annual reports, including financial 
statements and supporting schedules that must be audited by a PCAOb-
registered independent public accountant in accordance with PCAOB 
standards. Under Rule 17a-5, each broker-dealer is estimated to have an 
annual reporting burden of 12 hours, resulting in an annual industry 
burden of 44,148 hours.\480\ Under Rule 17a-12, each OTC derivatives 
dealer is estimated to have an annual reporting burden of 100 hours, 
resulting in an annual industry burden of 200 hours.\481\ Under Rule 
18a-7, each MSBSP is estimated to have an annual reporting burden of 10 
hours, resulting in an annual industry burden of 40 hours and each SBSD 
is estimated to have an annual reporting burden of 17 hours, resulting 
in an annual industry burden of 102 hours.\482\
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    \480\ See Supporting Statement for the Paperwork Reduction Act 
Information Collection Submission for Rule 17a-5 (July 29, 2021), 
available at https://www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=202107-3235-022.
    \481\ See Supporting Statement for the Paperwork Reduction Act 
Information Collection Submission for Rule 17a-12 (Jan. 11, 2022), 
available at https://www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=202110-3235-010.
    \482\ See Supporting Statement for the Paperwork Reduction Act 
Information Collection Submission for Rule 18a-7 (Apr. 15, 2021), 
available at https://www.reginfo.gov/public/do/DownloadDocument?objectID=110893201.
---------------------------------------------------------------------------

Proposed Revision to Burden Estimate
    In the context of Nationally Recognized Statistical Rating 
Organizations (``NRSROs''), the Commission estimated that it would take 
an NRSRO, on average, sixteen hours on a one-time basis to become 
familiar with the EDGAR system.\483\ The Commission believes that this 
estimate would also apply to entities that are new filers on EDGAR 
under the proposed amendments to Rules 17a-5, 18a-7, and 17a-12.
---------------------------------------------------------------------------

    \483\ See Nationally Recognized Statistical Rating 
Organizations, Release No. 72936 (Aug. 27, 2014), 79 FR 55077, 
55235-6 (Sept. 15, 2014).
---------------------------------------------------------------------------

    As stated above, the Commission estimates that for the 12 months 
ended December 31, 2022, the Commission received 1,559 filings of the 
annual reports required by paragraph (d) of Rule 17a-5 in paper.\484\ 
Based on this estimate, the Commission estimates that approximately 
1,559 broker-dealers that are required to file annual reports with the 
Commission will be new EDGAR filers. The broker-dealers that have filed 
annual reports on EDGAR have EDGAR access credentials and are familiar 
with the mechanics of filing on EDGAR. The Commission estimates the one 
time industry-wide burden for broker-dealers to acquire EDGAR access 
and familiarize themselves with EDGAR would be approximately 24,944 
hours.\485\ ANC broker-dealers must also file annual reports under the 
proposed amendments to Rule 17a-5, so there would be no additional 
burden attributable to requiring the electronic filing on EDGAR of ANC 
broker-dealer supplemental reports under paragraph (k) of Rule 17a-5.
---------------------------------------------------------------------------

    \484\ See supra section IV.A.1.
    \485\ 1,559 broker-dealers x 16 hours = 24,944 hours.
---------------------------------------------------------------------------

    In addition, as stated above, the Commission estimates that nine 
non-bank SBSDs and MSBSPs would be required to file annual reports 
under proposed paragraph (c) of Rule 18a-7 and that these firms would 
be new EDGAR filers. However, since these firms are already filing Form 
SBSE on EDGAR, the Commission does not estimate any burden for these 
firms to familiarize themselves with EDGAR.
    The Commission estimates that the one-time burden for an OTC 
derivatives dealer to familiarize itself with EDGAR would be 
approximately 16 hours. However, because all three OTC derivatives 
dealers already voluntarily file their annual reports on EDGAR, the 
Commission estimates that the one-time industry-wide burden would be 
zero hours.
    The current PRA burden for paragraph (d) of Rule 17a-5 includes an 
annual industry-wide cost of approximately $28,512 in postage costs to 
mail the annual reports to the Commission and the current PRA burden 
for paragraph (k) of Rule 17a-5 includes an annual industry-wide cost 
of approximately $85 in postage costs to mail the supplemental reports 
to the Commission. Under the proposal, broker-dealers would no longer 
incur these costs. Under the proposal, broker-dealers, OTC derivatives 
dealers, SBSDs, and MSBSPs filing their annual

[[Page 23980]]

reports electronically must keep the original notarized oath or 
affirmation for a period of not less than six years, the first two 
years in an easily accessible place. The Commission believes that the 
proposed requirement to keep the notarized oath or affirmation would 
not materially increase a broker-dealer's recordkeeping burden.
    Under the proposal, broker-dealers, OTC derivatives dealers, SBSDs, 
and MSBSPs would be required to file their annual reports and related 
filings (including compliance reports, exemption reports, accountant's 
reports, and supplemental reports) in Inline XBRL. To file reports in 
Inline XBRL, a filer must purchase Inline XBRL tagging software to 
apply Inline XBRL tags to the reports before submitting them to EDGAR, 
or employ a tagging service provider to apply the Inline XBRL tags to 
the reports on its behalf. As described in further detail in the 
subsequent economic analysis of proposed structured data requirements, 
the Commission expects the burdens associated with tagging the annual 
reports and related filings in Inline XBRL will vary based on the size 
of the respondent and whether the respondent is affiliated with a 
public reporting company that is already subject to Inline XBRL 
requirements.\486\
---------------------------------------------------------------------------

    \486\ See infra Section X.C.2.b, including the text accompanying 
notes 632-634 and 639. We have accounted for this expected variance 
in the calculations of average burden and cost figures presented in 
this section. We have accounted for this expected variance in the 
calculations of average burden and cost figures presented in this 
section. Consistent with structured data burden estimates in prior 
Commission releases, the burden estimates here assume Inline XBRL 
tagging would be done by a compliance attorney. See supra note 485.
---------------------------------------------------------------------------

    On average, we estimate respondents will incur 6 burden hours and 
$1,200 in external cost for the first response to be tagged in Inline 
XBRL, and will incur 4 burden hours and $800 in external cost to tag 
subsequent responses in Inline XBRL. Therefore, the Commission 
estimates the total initial industry-wide internal burden and external 
cost would be 19,308 hours and $3,861,600 for broker-dealers (including 
OTC derivatives dealers); and the total initial industry-wide internal 
burden and external cost would be 54 hours and $10,800 for SBSDs and 
MSBSPs.\487\ The Commission estimates the total ongoing annual 
industry-wide internal burden and external cost would be 12,872 hours 
and $2,574,400 for broker-dealers (including OTC derivatives dealers); 
and 36 hours and $7,200 for SBSDs and MSBSPs.\488\
---------------------------------------------------------------------------

    \487\ 3,218 broker-dealers x 6 hours = 19,308 hours; 3,218 
broker-dealers x $1,200 = $3,861,600. 9 SBSDs and MSBSPs x 6 hours = 
54 hours; 9 SBSDs and MSBSPs x $1,200 = $10,800.
    \488\ 3,218 broker-dealers x 4 hours = 12,872 hours; 3,218 
broker-dealers x $800 = $2,574,400. 9 SBSDs and MSBSPs x 4 hours = 
36 hours; 9 SBSDs and MSBSPs x $800 = $7,200.
---------------------------------------------------------------------------

b. Amendments Relating to the FOCUS Report
Currently Approved Burden Estimate
    Rules 17a-5, 17a-12, and 18a-7 require broker-dealers, OTC 
derivatives dealers, and SBS Entities, respectively, to file unaudited 
financial information on the FOCUS Report (Form X-17A-5 Part II, IIA, 
or IIC) on a monthly or quarterly basis.\489\ Under Rule 17a-5, each 
broker-dealer is estimated to have an annual reporting burden of 12 
hours, resulting in an annual industry burden of 44,148 hours.\490\ 
Under Rule 17a-12, each OTC derivatives dealer is estimated to have an 
annual reporting burden of 80 hours, resulting in an annual industry 
burden of 160 hours.\491\ Under Rule 18a-7, each MSBSP is estimated to 
have an annual reporting burden of 61.33 hours, resulting in an annual 
industry burden of 245.33 hours, each SBSD that is not prudentially 
regulated is estimated to have an annual reporting burden of 245.33 
hours, resulting in an annual industry burden of 1,472 hours, and each 
SBSD that is prudentially regulated is estimated to have an annual 
reporting burden of 28 hours, resulting in an annual industry burden of 
700 hours.\492\
---------------------------------------------------------------------------

    \489\ See 17 CFR 240.17a-5; 17 CFR 240.17a-12; 17 CFR 240.18a-7.
    \490\ See Supporting Statement for the Paperwork Reduction Act 
Information Collection Submission for Rule 17a-5 (July 29, 2021), 
available at https://www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=202107-3235-022.
    \491\ See Supporting Statement for the Paperwork Reduction Act 
Information Collection Submission for Rule 17a-12 (Jan. 11, 2022), 
available at https://www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=202110-3235-010.
    \492\ See Supporting Statement for the Paperwork Reduction Act 
Information Collection Submission for Rule 18a-7 (Apr. 15, 2021), 
available at https://www.reginfo.gov/public/do/DownloadDocument?objectID=110893201.
---------------------------------------------------------------------------

Proposed Revision to Burden Estimate
    The Commission proposes a number of amendments to the FOCUS Report. 
First, it proposes corrective and clarifying amendments to FOCUS Report 
Part II. The Commission estimates that the proposed amendments will 
result in an initial burden of five hours on each Part II filer so 
firms can familiarize themselves with the amendments to FOCUS Report 
Part II. The Commission believes that these proposed amendments will 
generally either have no impact on or reduce the ongoing burden on the 
vast majority of filers because they will generally reduce questions 
about where and how to report items on the form. However, because the 
proposed amendments require stand-alone swap dealers and stand-alone 
introducing brokers to complete a new section of FOCUS Report Part II 
that these types of firms were not previously required to complete 
(i.e., Computation of CFTC Minimum Capital Requirements), the 
Commission estimates that the proposed amendments are likely to result 
in an ongoing annual burden of 1 hour per stand-alone swap dealer or 
stand-alone introducing broker.
    The Commission estimates that there are 460 broker-dealers or 
stand-alone SBS Entities filing FOCUS Report Part II, resulting in an 
estimated industry-wide initial burden of 2,300 hours.\493\ The 
Commission estimates that for Part II filers that are not stand-alone 
swap dealers, the proposed amendments generally will not change the 
estimated ongoing burden imposed by FOCUS Report Part II, as amended. 
The Commission estimates that there are 4 domestic stand-alone swap 
dealers and 103 domestic stand-alone introducing brokers filing FOCUS 
Report Part II, resulting in an estimated industry-wide ongoing burden 
of 107 hours per year.\494\
---------------------------------------------------------------------------

    \493\ 5 hours x 460 Part II filers = 2,300 hours. These internal 
hours likely will be performed by a compliance manager.
    \494\ 1 hour x 107 Part II filers that are domestic stand-alone 
swap dealers or stand-alone introducing brokers = 107 hours. These 
internal hours likely will be performed by a compliance manager. 
This burden estimate may be duplicative since the CFTC estimates 
that swap dealers and introducing brokers elect to file the CFTC's 
Form 1-FR instead of electing to file the SEC's FOCUS Report. See 
Supporting Statement for Revised Information Collections--OMB 
Control Number 3038-0024 (July 1, 2022), available at https://www.reginfo.gov/public/do/DownloadDocument?objectID=122832501.
---------------------------------------------------------------------------

    Second, the Commission proposes to align the text in FOCUS Report 
Part IIC with the text in FFIEC Form 031. These proposed amendments are 
expected to result in an initial burden of five hours on each bank SBS 
Entity so that firms can compare the revised FOCUS Report Part IIC with 
FFIEC Form 031. However, these proposed amendments are expected to 
generally either have no impact on or reduce the ongoing burden on bank 
SBS Entities because they will generally reduce questions about how to 
complete FOCUS Report Part IIC consistently with FFIEC Form 031. The 
Commission estimates that there are 31 bank SBS Entities filing FOCUS 
Report Part IIC, resulting in an estimated industry-wide initial burden 
of 155

[[Page 23981]]

hours.\495\ The Commission estimates that the proposed amendments will 
not change the estimated ongoing annual burden imposed by FOCUS Report 
Part IIC, as amended.
---------------------------------------------------------------------------

    \495\ 5 hours x 31 Part IIC filers = 155 hours. These internal 
hours likely will be performed by a compliance manager.
---------------------------------------------------------------------------

    Third, the Commission proposes to require only two of the three 
signature lines to be signed on the FOCUS Report's cover page, and 
allows these signatures to be signed either manually or electronically. 
This proposed amendment is expected to result in an initial burden of 1 
hour on each filer so that the firm can review the standards for an 
electronic signature on the FOCUS Report Part II, IIA, or IIC, as 
applicable. However, this proposed amendment is expected to generally 
either have no impact on or reduce the ongoing burden on FOCUS Report 
filers, because they will not be required to furnish as many signatures 
as before the amendment, and it may be easier to prepare electronic 
signatures rather than manual signatures since firms will already be 
familiar with the process and can easily obtain these signatures while 
working remotely. The Commission estimates that there are 3,547 broker-
dealers, stand-alone SBS Entities, and bank SBS Entities filing FOCUS 
Report Parts II, IIA, or IIC, resulting in an estimated industry-wide 
initial burden of 3,547 hours.\496\ The Commission estimates that the 
proposed amendments will not change the estimated ongoing annual burden 
imposed by FOCUS Report Parts II, IIA, and IIC, as proposed to be 
amended.
---------------------------------------------------------------------------

    \496\ 1 hour x 3,547 Part II, IIC, and IIA filers = 3,547 hours. 
These internal hours likely will be performed by a compliance 
manager.
---------------------------------------------------------------------------

    Finally, the Commission proposes to require OTC derivatives dealers 
to file the FOCUS Report electronically on the SEC eFOCUS system 
instead of in paper. The Commission estimates that this proposed 
amendment will result in an initial burden of 15 hours on each OTC 
derivatives dealer so that the firm can familiarize itself with the SEC 
eFOCUS system. However, this proposed amendment is expected to 
generally either have no impact on or reduce the ongoing burden on OTC 
derivatives dealers, because filing the FOCUS Report electronically is 
an automated process as compared to filing by paper. Therefore, the 
Commission estimates that there are 3 OTC derivatives dealers, 
resulting in an estimated industry-wide initial burden of 45 
hours.\497\ The Commission estimates that the proposed amendment will 
not change the estimated ongoing annual burden imposed by Rule 17a-12.
---------------------------------------------------------------------------

    \497\ 15 hours x 3 OTCDDs = 45 hours. These internal hours 
likely will be performed by a compliance manager.
---------------------------------------------------------------------------

10. Rule 17h-2T
    The current PRA burden for Rule 17h-2T does not include a burden 
for sending the risk assessment reports to the Commission. As broker-
dealers that are required to file reports under Rule 17h-2T are also 
required to file annual reports under Rule 17a-5,\498\ the Commission 
is not estimating an additional burden for becoming familiar with the 
EDGAR system and for monitoring changes in EDGAR filing requirements 
attributable to the proposed amendments to Rule 17h-2T.
---------------------------------------------------------------------------

    \498\ See supra section IX.D.9.
---------------------------------------------------------------------------

    Under the proposal, broker-dealers that are required to file 
reports under Rule 17h-2T would be required to tag the financial 
statements included with the report in Inline XBRL. Because these 
broker-dealers are also required to tag annual reports under Rule 17a-5 
in Inline XBRL, the proposed Inline XBRL requirement for reports under 
Rule 17h-2T would represent additional (quarterly) iterations of that 
compliance process, as abbreviated to reflect that Form 17-H requires 
only financial statements (and not any supplemental reports or other 
related filings) to be tagged in Inline XBRL, and that Form 17-H filers 
may omit the statement of cash flows and the footnotes to the financial 
statements. Thus, the Commission estimates an average additional burden 
of 1 hour per response and a total industrywide burden of 964 hours per 
year for Form 17-H filers to structure their financial statements in 
Inline XBRL.\499\
---------------------------------------------------------------------------

    \499\ 1 hour per response x 4 responses per year x 241 
respondents = 964 hours. Rule 17h-2T requires fourth quarter 
financial statements in addition to cumulative annual financial 
statements. See 17 CFR 240.17h-1. The Commission has not added 
burden hours associated with the proposed custom XML requirements 
for the facing page and Part II of Form 17-H, because those 
requirements are currently in effect for Form 17-Hs that are filed 
on EDGAR, and nearly all Form 17-H filers (97% as of Dec. 31, 2021) 
file Form 17-H on EDGAR. See infra Section X.C.2.b for further 
detail on structured data compliance costs, including estimated cost 
ranges and factors underlying expected variance in structured data 
costs across different filers. For example, we expect the Form 17-H 
filers affiliated with public companies that are subject to Inline 
XBRL requirements would incur lower structured data costs than other 
Form 17-H filers. See infra text accompanying note 647. We have 
accounted for this expected variance in the calculation of average 
burden figures presented in this section. Consistent with structured 
data burden estimates in prior Commission releases, the burden 
estimates here assume Inline XBRL tagging would be done by a 
compliance attorney. See supra note 485.
---------------------------------------------------------------------------

11. Rule 17a-19 and Form X-17A-19
Currently Approved Burden Estimate
    Rule 17a-19 requires every national securities exchange and 
registered national securities association to file a Form X-17A-19 with 
the Commission and SIPC within five business days of the initiation, 
suspension, or termination of any member. The Commission currently 
estimates that Form X-17A-19 would take 0.25 hours to prepare, 
resulting in an annual industry-wide burden of 102 hours.\500\
---------------------------------------------------------------------------

    \500\ See Supporting Statement for the Paperwork Reduction Act 
Information Collection Submission for Rule 17A-19 and Form X-17A-19 
(Sept. 3 2020), available at https://www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=202009-3235-002.
---------------------------------------------------------------------------

Proposed Revision to Burden Estimate
    The 25 respondents who file Form X-17A-19 would need to familiarize 
themselves with the EDGAR system. As stated above with respect to Rule 
17a-5, 17a-12, and 18a-7, the Commission estimates the one-time 
reporting burden of becoming familiar with the EDGAR system is 
approximately 16 hours.\501\ Accordingly, the Commission estimates that 
the one-time industry-wide reporting burden would be approximately 400 
hours.\502\
---------------------------------------------------------------------------

    \501\ See supra section IX.D.9.a.
    \502\ 16 hours x 25 respondents = 400 hours. The Commission 
assumes all respondents would use fillable web forms on EDGAR to 
input their Form X-17A-19 disclosures (which EDGAR would 
subsequently convert into a custom XML data language), and therefore 
this reflects time for respondents to familiarize themselves with 
the forms and does not include any added burden hours associated 
with the proposed custom XML requirement for Form X-17A-19.
---------------------------------------------------------------------------

12. Rule 3a71-3(d)(1)(vi)
Currently Approved Burden Estimate
    Currently, Exchange Act Rule 3a71-3(d)(1)(vi) requires the 
Registered Entity to file the ANE Exception Notice by submitting it to 
the electronic mailbox specified on the Commission's website. When the 
Commission originally adopted the ANE Exception Notice requirement, it 
estimated that each Registered Entity would file one ANE Exception 
Notice with the Commission and that it would take 30 minutes to file 
each ANE Exception Notice, resulting in an industry-wide initial one-
time burden of 12 hours.\503\
---------------------------------------------------------------------------

    \503\ See Cross-Border Adopting Release, 85 FR at 6340-41. See 
also Supporting Statement for the Paperwork Reduction Act 
Information Collection Submission for the Rule 3a71-3 Security-Based 
Swap Dealer De Minimis Counting Exception for Certain Transactions 
Arranged, Negotiated or Executed in the United States (Jan. 7, 2020) 
note 23 and accompanying text and section 15.d, available at https://www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=201912-3235-011.

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[[Page 23982]]

Proposed Revision to Burden Estimate
    The Commission does not expect that changing the manner of filing 
the ANE Exception Notice from an email filing to an EDGAR filing will 
change this estimated one-time burden. The ability to withdraw an ANE 
Exception Notice via EDGAR as proposed in this release will result in 
an additional one-time burden. The Commission estimates that 
withdrawing an ANE Exception Notice electronically on EDGAR will incur 
the same burden as filing the initial ANE Exception Notice 
electronically on EDGAR. If each Registered Entity files one withdrawal 
of its ANE Exception Notice, the Commission estimates that would result 
in an industry-wide initial one-time burden of 12 hours.\504\
---------------------------------------------------------------------------

    \504\ 24 Registered Entities x \1/2\ hour = 12 hours.
---------------------------------------------------------------------------

13. Rule 15fi-3(c)
Currently Approved Burden Estimate
    When the Commission originally adopted Rule 15fi-3, it expected 
there to be only a minimal, if any, initial burden of designing a 
system for submitting valuation dispute notices.\505\ The Commission 
also believed that the associated ongoing hourly burden of preparing 
and submitting such notices would be minimal.\506\ The Commission noted 
that, until SBS Entities were registered with the Commission, it was 
difficult for the Commission to determine the typical number of 
valuation disputes meeting the applicable thresholds that SBS Entities 
would be required to submit on an annual basis.\507\ The Commission had 
estimated that each SBS Entity will spend on average of 24 hours each 
year complying with the requirement to prepare and submit notices of 
valuation disputes, for an estimated average annual burden of 1,320 
hours in the aggregate for all 55 SBS Entities.\508\
---------------------------------------------------------------------------

    \505\ See Risk Mitigation Adopting Release, 85 FR at 6385.
    \506\ Id. at 6385-86.
    \507\ Id.
    \508\ This 1,320-hour annual burden reflects the currently 
approved information collection burden estimate for Rule 15fi-3(c); 
see Supporting Statement for the Paperwork Reduction Act Information 
Collection Submission for Rules 15Fi-3 through 15Fi-5--Risk 
Mitigation Techniques for Uncleared Security-Based Swaps (Aug. 18, 
2021), available at https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202108-3235-011. Additionally, when the 
Commission adopted Rule 15fi-3(c) it noted that, although it 
believed that the time required to submit amendments to existing 
notices is likely included in the 24 hour estimate, it was 
``conservatively increasing that estimate by 25% to account for the 
submission of amended notices. As such, [the Commission estimated 
that] SBS Entities will spend on average of 30 hours each year 
complying with this requirement, for an estimated average annual 
burden of 1,650 hours in the aggregate for all 55 respondents.'' See 
Risk Mitigation Adopting Release, 85 FR at 6386.
---------------------------------------------------------------------------

Proposed Revision to Burden Estimate
    The Commission believes that the proposed amendments to Rule 15fi-3 
related to EDGAR submission would not have an impact on the burdens 
associated with the existing collection of information. In particular, 
Rule 15fi-3(c) currently requires SBS Entities to submit security-based 
swap valuation dispute notices to the Commission ``in a form and manner 
acceptable to the Commission.'' Under current practice, staff has made 
available to SBS Entities two options for submitting these notices (and 
any amendments) which includes either: (1) an electronic submission 
using EDGAR or (2) submission to a dedicated Commission email address. 
The Commission is now proposing to amend Rule 15fi-3(c) to 
affirmatively require SBS Entities to submit these notices (and any 
amendments) to the Commission electronically in EDGAR in a custom XML 
data language.
    SBS Entities will already have access to EDGAR by virtue of using 
the system to submit their applications for registration on either 
Forms SBSE, SBSE-A, or SBSE-BD, and to submit their certification for 
registration on Form SBSE-C. As a result, SBS Entities would not incur 
any additional burden associated with obtaining access to EDGAR for 
purposes of submitting dispute notices given that all such filers 
should already have an active CIK. With respect to the proposed custom 
XML structuring requirement for the dispute notices, SBS Entities would 
be able to comply by inputting their disclosures into a fillable web 
form on EDGAR rather than structuring their disclosures in custom XML 
themselves. As a result, SBS Entities would not incur any additional 
burden associated with the proposed custom XML structuring requirement 
for dispute notices.\509\
---------------------------------------------------------------------------

    \509\ See infra section X.C.2.b.
---------------------------------------------------------------------------

14. Rule 15fk-1(c)(2)(ii)(A)
Currently Approved Burden Estimate
    Under current Rule 15fk-1(c), the CCO of a SBS Entity is required 
to prepare and submit a CCO report the Commission. The Commission 
previously estimated that these reports would require on average 93 
hours per respondent per year for an ongoing annual burden of 5,115 
hours.\510\
---------------------------------------------------------------------------

    \510\ See Business Conduct Standards for Security- Based Swap 
Dealers and Major Security-Based Swap Participants, Exchange Act 
Release No. 77617 (Apr. 14, 2016), 81 FR 29960, 30096 (May 13, 2016) 
(``Business Conduct Release'').
---------------------------------------------------------------------------

Proposed Revision to Burden Estimate
    The Commission recognizes that the proposed amendments to Rule 
15fk-1(c) may potentially impose certain burdens on respondents. 
Although the information to be included in the CCO report pursuant to 
Rule 15fk-1(c) would not change, the proposed amendment would require 
respondents to submit the CCO report electronically with the Commission 
through EDGAR in Inline XBRL.
    The Commission estimates that no SBS Entities would be first-time 
EDGAR users needing to obtain EDGAR access credentials. Thus, the 
internal time burden associated with completing a Form ID application 
to gain access to EDGAR would not apply to SBS Entities.\511\
---------------------------------------------------------------------------

    \511\ See supra section IX.D.1.
---------------------------------------------------------------------------

    SBS Entities would incur a burden to submit the CCO report in 
Inline XBRL. Because the CCO reports consist of a limited number of 
textual narrative sections (compared to the various sets of numerical 
values that comprise financial statements, which take significantly 
longer to tag), the Commission estimates that, on average, an SBS 
Entity would spend 1.5 internal burden hours and $600 in external costs 
(e.g., the cost to license and renew Inline XBRL compliance software 
and/or services) to tag its CCO report in Inline XBRL in the initial 
year of compliance, and 1 internal burden hour and $400 in external 
costs in subsequent years.\512\ Accordingly, the Commission estimates 
that the total burden associated with compliance with Rule 15fk-1(c) 
would be an annual hour burden of 94.5 hours per respondent in the 
initial year and 94 hours per respondent in subsequent years, and an 
annual cost burden of $600 per respondent in the initial year and $400 
per respondent in subsequent years, yielding an industry-wide annual 
burden of 4,630.5 hours and $29,400 in the first year and 4,606 hours 
and $19,600 in subsequent years.\513\
---------------------------------------------------------------------------

    \512\ See infra section X.C.2.b for further detail on structured 
data compliance costs, including estimated cost ranges and factors 
underlying expected variance in structured data costs across 
different filers. For example, we expect the SBS Entities affiliated 
with public companies that are subject to Inline XBRL requirements 
would incur lower structured data costs than other SBS Entities. See 
infra note 662 and accompanying text. We have accounted for this 
expected variance in the calculations of average burden and cost 
figures presented in this section. Consistent with structured data 
burden estimates in prior Commission releases, the burden estimates 
here assume Inline XBRL tagging would be done by a compliance 
attorney. See supra note 485.
    \513\ The annual aggregate burden hour estimate for the initial 
year of compliance is based on the following calculation: (93 hours 
+ 1.5 hours) x (50 SBS Entities) = 4,725 hours. The annual aggregate 
burden hour estimate for the subsequent years of compliance is based 
on the following calculation: (93 hours + 1 hours) x (50 SBS 
Entities) = 4,700 hours. The annual aggregate external cost estimate 
for the initial year of compliance is based on the following 
calculation: $600 x (50 SBS Entities) = $30,000. The annual 
aggregate external cost estimate for subsequent years of compliance 
is based on the following calculation: $400 x (50 SBS Entities) = 
$20,000.

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[[Page 23983]]

15. Proposed Amendments to Regulation S-T
    The Commission is proposing to require that the annual reports 
filed or submitted with the Commission under Rules 17a-5, 17a-12, and 
18a-7, and the reports filed or submitted with the Commission under 
Rules 17a-19 and 15fk-1(c) be filed or submitted electronically with 
the Commission using the EDGAR system. The Commission also is proposing 
to require that the notices under Rules 3a71-3(d)(1)(vi) and 15fi-3(c), 
including withdrawals and amendments, respectively, be made using the 
EDGAR system. In order to implement these requirements, the Commission 
is proposing amendments to Rule 101 of Regulation S-T. In addition, the 
Commission is proposing that some or all of the annual reports filed or 
submitted with the Commission under Rules 17a-5, 17a-12, and 18a-7, and 
the reports filed or submitted with the Commission under Rule 15fk-
1(c), be structured in Inline XBRL. In order to implement these 
requirements, the Commission is proposing amendments to Rule 405 of 
Regulation S-T.
    While the amendments would revise Regulation S-T, the collection of 
information requirements are reflected in the burden hours estimated 
for Rule 3a71-3, 15fi-3, 15fk-1, 17a-5, 18a-7, 17a-12, Rule 17h-2T, and 
Form ID. The rules in Regulation S-T should not impose any separate 
burden, and accordingly the estimated burden for Regulation S-T as 
proposed to be amended would not change. Consistent with historical 
practice, the Commission is retaining a burden estimate of one hour for 
Regulation S-T for administrative convenience. A firm that does not 
already have log-in credentials for EDGAR will need to submit a request 
to the Commission in order to gain access to the EDGAR system.\514\
---------------------------------------------------------------------------

    \514\ See supra section IX.D.9. (estimating a one-time industry-
wide burden of 29,944 hours for broker-dealers to acquire EDGAR 
access and familiarize themselves with EDGAR).
---------------------------------------------------------------------------

E. Collection of Information Is Mandatory

    All collections of information pursuant to the proposed rules would 
be mandatory, or mandatory except to the extent an exception is 
available.

F. Confidentiality of Responses to Collection of Information

    For all Covered SRO Forms, no assurance of confidentiality is given 
by the Commission with respect to responses made on such forms. While 
Rule 24b-2 allows entities to seek confidential treatment, the 
Commission expects that all information will be public and that 
confidential treatment will not be available. Any person may make 
written objection to the public disclosure of any information contained 
in such forms in accordance with the procedures set forth in Rule 24b-
2(b).\515\
---------------------------------------------------------------------------

    \515\ 17 CFR 240.24b-2(b).
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    The information collected pursuant to Rule 3a71-3(d)(1)(vi) is 
public information to assist Relying Entities and their affiliates in 
determining whether they have satisfied the ANE Exception's notice 
requirement and in monitoring their progress toward the ANE Exception's 
cap on inter-dealer security-based swaps. The proposed amendment to 
Rule 3a71-3(d)(1)(vi) provides that notices and withdrawals shall be 
publicly disseminated through the Commission's EDGAR system. Because 
reliance on the ANE Exception which requires filing of an ANE Exception 
Notice is voluntary, the Commission does not expect that a Registered 
Entity seeking to facilitate the exception would include information 
that could not be publicly disclosed in the notices or withdrawals 
required by the proposed amendment to Rule 3a71-3(d)(1)(vi) or would 
object to the public disclosure of information contained in such 
notices or withdrawals.
    Rule 15fi-3(c) requires an SBS Entity to promptly notify the 
Commission and any applicable prudential regulator of any security-
based swap valuation dispute in excess of $20,000,000 (or its 
equivalent in any other currency) if not resolved within: (1) three 
business days, if the dispute is with a counterparty that is an SBS 
Entity; or (2) five business days, if the dispute is with a 
counterparty that is not an SBS Entity. The rule also requires SBS 
Entities to notify the Commission and any applicable prudential 
regulator, if the amount of any security-based swap valuation dispute 
that was the subject of a previous notice increases or decreases by 
more than $20,000,000 (or its equivalent in any other currency), at 
either the transaction or portfolio level. These amendments are 
required to be provided to the Commission, and any applicable 
prudential regulator, no later than the last business day of the 
calendar month in which the applicable security-based swap valuation 
dispute increases or decreases by the applicable dispute amount. To the 
extent that the Commission receives confidential information pursuant 
to this collection of information that is otherwise not publicly 
available, including in connection with examinations or investigations, 
the SBS Entity can request the confidential treatment of the 
information.\516\ If such a confidential treatment request is made, the 
Commission anticipates that it will keep the information confidential, 
subject to the provisions of applicable law; whether any material is 
confidential is determined pursuant to applicable law, including but 
not limited to the Freedom of Information Act and Commission rules 
governing requests for confidential treatment.\517\
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    \516\ See 17 CFR 200.83.
    \517\ See, e.g., 5 U.S.C. 552 et seq.; 15 U.S.C. 78x (governing 
the public availability of information obtained by the Commission). 
See also Risk Mitigation Adopting Release 85 FR at 6389-90.
---------------------------------------------------------------------------

    With respect to the other information collected under the proposed 
rule amendments and new rules, the firm can request the confidential 
treatment of the information.\518\ If such a confidential treatment 
request is made, the Commission anticipates that it will keep the 
information confidential, subject to the provisions of applicable law; 
whether any material is confidential is determined pursuant to 
applicable law, including but not limited to the Freedom of Information 
Act and Commission rules governing requests for confidential 
treatment.\519\
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    \518\ See 17 CFR 200.83. For Rule 15fk-1(c)(2)(ii)(A), SBS 
Entities may request confidential treatment for their CCO reports 
pursuant to Exchange Act Rule 83.
    \519\ See, e.g., 5 U.S.C. 552 et seq.; 15 U.S.C. 78x (governing 
the public availability of information obtained by the Commission).
---------------------------------------------------------------------------

G. Retention Period for Recordkeeping Requirements

    For all Covered SRO Forms and for proposed Rule 19b-4(e), records 
of these collections of information must be retained for at least five 
years, the first two years in an easily accessible place, pursuant to 
Rule 17a-1.\520\ The collection of information outlined in Rule 3a71-
3(d)(1)(vi) is a reporting requirement and not a recordkeeping 
requirement; there is no retention requirement in connection with that 
collection of information. SBS Entities subject to 17 CFR 240.17a-4(b) 
or 17 CFR 240.18a-6(b) must retain notices and amendments required by 
Rule 15fi-3(c) for not less than three years, the

[[Page 23984]]

first two years in an easily accessible place.\521\
---------------------------------------------------------------------------

    \520\ 17 CFR 240.17a-1.
    \521\ See 17 CFR 17a-4(b)(1), 17 CFR 18a-6(b)(1)(i), and 17 CFR 
18a-6(b)(2)(i).
---------------------------------------------------------------------------

    Rule 17a-4 specifies the required retention periods for a broker-
dealer, including an OTC derivatives dealer.\522\ Rule 18a-6 specifies 
the required retention periods for non-broker-dealer SBSDs and non-
broker-dealer MSBSPs.\523\ Under these two rules, many of the required 
records must be retained for three years, while certain other records 
must be retained for longer periods.
---------------------------------------------------------------------------

    \522\ 17 CFR 240.17a-4.
    \523\ 17 CFR 240.18a-6.
---------------------------------------------------------------------------

H. Request for Comments

    Pursuant to 44 U.S.C. 3506(c)(2)(B), the Commission solicits 
comment to:
    92. Evaluate whether the proposed collection of information is 
necessary for the proper performance of our functions, including 
whether the information shall have practical utility;
    93. Evaluate the accuracy of our estimate of the burden of the 
proposed collection of information;
    94. Determine whether there are ways to enhance the quality, 
utility, and clarity of the information to be collected; and
    95. Evaluate whether there are ways to minimize the burden of 
collection of information on those who are to respond, including 
through the use of automated collection techniques or other forms of 
information technology.
    Persons submitting comments on the collection of information 
requirements should direct them to the Office of Management and Budget, 
Attention: Desk Officer for the Securities and Exchange Commission, 
Office of Information and Regulatory Affairs, Washington, DC 20503, and 
should also send a copy of their comments to Secretary, Securities and 
Exchange Commission, 100 F Street NE, Washington, DC 20549-1090, with 
reference to File Number S7-08-23. Requests for materials submitted to 
OMB by the Commission with regard to this collection of information 
should be in writing, with reference to File Number S7-08-23 and be 
submitted to the Securities and Exchange Commission, Office of FOIA/PA 
Services, 100 F Street NE, Washington, DC 20549-2736. As OMB is 
required to make a decision concerning the collections of information 
between 30 and 60 days after publication, a comment to OMB is best 
assured of having its full effect if OMB receives it within 30 days of 
publication.

X. Economic Analysis

    The Commission is mindful of the costs imposed by and the benefits 
obtained from our rules. Section 2(b) of the Securities Act,\524\ 
section 3(f) of the Exchange Act,\525\ and section 2(c) of the 
Investment Company Act of 1940 \526\ require us, when engaging in 
rulemaking that requires us to consider or determine whether an action 
is necessary or appropriate in or consistent with the public interest, 
to consider, in addition to the protection of investors, whether the 
action will promote efficiency, competition and capital formation. In 
addition, section 23(a)(2) of the Exchange Act requires us, when 
adopting rules under the Exchange Act, to consider the impact that any 
new rule would have on competition and to not adopt any rule that would 
impose a burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Exchange Act.\527\
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    \524\ 15 U.S.C. 77b(b).
    \525\ 15 U.S.C. 78c(f).
    \526\ 15 U.S.C. 80a-2(c).
    \527\ 15 U.S.C. 78w(a)(2).
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    Where possible, we have attempted to quantify the costs and 
benefits expected to result from the proposed amendments to the 
submission or posting requirements. However, in some cases we have been 
unable to quantify the economic effects because we lack the information 
necessary to provide an estimate. For example, we do not quantify the 
benefit to the general public of improved access to public filings made 
available in structured format. We encourage commenters to provide data 
that may be relevant for quantifying impacts we have not quantified.
    This section discusses the benefits and costs of the proposed 
amendments, as well as their potential effects on efficiency, 
competition, and capital formation. Some of the proposed amendments 
are, however, technical, so they will likely not have significant 
economic effects.\528\
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    \528\ As noted in section II.G. above, the Commission proposes a 
technical amendment to conform its Informal and Other Procedures to 
the changes proposed herein to Rules 6a-1, 6a-2, and 6a-3 with 
respect to Form 1 filings and to Rule 6a-4 with respect to Form 1-N 
filings proposed to be submitted to the Commission electronically.
---------------------------------------------------------------------------

A. Broad Economic Considerations

    Existing Commission rules require or provide the option for the 
filing in paper of certain forms and filings, including applications of 
entities seeking to register with the Commission as a national 
securities exchange (or seeking an exemption from such registration 
based on limited volume) or as a national securities association as 
well as amendments to these initial applications, reports regarding the 
listing and trading of new derivative securities products, clearing 
agency registration and updates, annual broker-dealer audit reports and 
risk assessment reports, and certain clearing agency supplemental 
materials. Other Commission rules do not specify the format in which a 
requirement should be satisfied, such as notices of changes in SRO 
membership.
    By requiring the electronic submission on the Commission's EDGAR 
system or website posting of: (1) the Covered SRO Forms; (2) the 
information posted under Rule 19b-4(e); (3) the annual reports and 
related annual filings filed by broker-dealers, OTC derivatives 
dealers, SBSDs, and MSBSPs; and (4) other notices and reports from 
SBSDs, MSBSPs, and Registered Entities (``the affected documents''), 
and by requiring certain of the affected documents to be provided, 
where appropriate, in a structured, machine-readable data language, the 
proposed amendments seek to streamline the submission process, and 
facilitate the transmission and effective use of submitted information. 
The proposed amendments to certain Exchange Act rules and the affected 
documents are expected to increase the efficiency of, and remove 
certain costs related to ongoing compliance with, the existing 
requirements. The discussion below addresses the potential economic 
effects of the proposed amendments, including their likely costs and 
benefits as well as the likely effects of the proposed amendments on 
efficiency, competition, and capital formation, relative to the 
economic baseline, which is comprised of the filing practices in 
existence today.
    We anticipate that the proposed amendments that would require 
electronic submission or posting of documents that are currently filed 
in paper would not result in an increase in filing costs, and in some 
cases result in cost savings to reporting entities on an ongoing basis 
as a result of overall reduction in internal time burdens and the 
elimination of the printing and mailing expenses associated with paper 
filing. As noted,\529\ we recognize that entities that do not presently 
use EDGAR to comply with other reporting obligations would incur an 
incremental cost of initial transition to electronic submission on 
EDGAR. However, notwithstanding these initial transition costs, we 
anticipate that reporting entities would realize cost savings from

[[Page 23985]]

electronic submission on EDGAR. With respect to the proposed structured 
data requirements, and specifically the proposed Inline XBRL reporting 
requirements, we recognize that entities subject to Inline XBRL 
reporting requirements under the proposed rules would incur ongoing 
costs associated with the requirement to encode and report information 
in Inline XBRL, and entities that do not presently use Inline XBRL 
would incur additional costs associated with the initial implementation 
of Inline XBRL compliance processes and/or the purchase of third-party 
Inline XBRL filing preparation services or software.\530\
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    \529\ See supra section IX.
    \530\ See infra section X.C.2.b. We do not believe similar 
structured data implementation costs would result from most of the 
proposed custom XML requirements, because affected entities would 
have the option of inputting their information in fillable forms, 
which EDGAR would then convert into the custom XML data language. 
However, we would expect structured data implementation costs would 
arise in connection with the custom XML requirement for information 
posted under Rule 19b-4(e), because the SRO would post the 
information on its website rather than on the EDGAR system (and its 
fillable form capabilities), and in connection with the custom XML 
requirements on Forms 1 and CA-1, because we expect exchanges and 
clearing agencies would have the requisite sophistication to encode 
their disclosures in custom XML and submit the custom XML documents 
to EDGAR directly (rather than manually completing lengthy fillable 
forms to be converted into custom XML documents). See infra section 
X.C.2.b; see also supra section IX.D.6.
---------------------------------------------------------------------------

    Compared to paper filing, electronic submission or posting 
information directly to a website can expedite the availability of 
public disclosures. Improving the speed of disclosure to the public 
improves the price efficiency of markets by improving the timeliness of 
information available to market participants. Electronic submission or 
posting would also facilitate the Commission's ability to oversee 
compliance with the securities laws and its oversight of securities 
markets making this information available to the Commission quicker, 
with added and more accessible functionality for Commission staff to 
review, analyze, and respond to, as necessary. The structured data 
requirements under the proposed amendments would augment these effects, 
allowing the Commission--and, where applicable, the public--to draw 
upon comparable information from other reporting periods and from other 
disclosing entities in assessing the reported disclosures.\531\
---------------------------------------------------------------------------

    \531\ As discussed further in section X.B.1, the affected 
documents could be subject to requests for confidential treatment. 
Whether any filed material is confidential is determined pursuant to 
applicable law, including but not limited to the Freedom of 
Information Act and Commission rules governing requests for 
confidential treatment. The public would not directly use any 
confidential information contained in these documents.
---------------------------------------------------------------------------

B. Baseline

1. Affected Entities
    The entities primarily affected by the proposed requirements 
include the filers or submitters of the affected documents and the 
users of the affected documents. Other affected entities include third 
parties that may be involved with the preparation and filing or 
submission of the affected documents and in facilitating the use of 
structured data filed or submitted with the Commission, as well as 
parties that may indirectly benefit from the use of the affected 
documents by others.
Filers or Submitters of Affected Documents
    Entities that currently file or submit the affected documents 
include SROs, including: national securities exchanges and exempt 
exchanges; notice-registered Security Futures Product Exchanges; 
registered national securities associations; and registered and exempt 
clearing agencies. Filers or submitters of the affected documents also 
include broker-dealers and registered SBS Entities (and certain 
affiliates thereof).\532\
---------------------------------------------------------------------------

    \532\ Not all of the affected documents listed for a particular 
entity type below apply to every entity that falls within that 
entity type. For details on the subsets of affected entities that 
file or submit particular affected documents, see supra section IX.

          Affected Documents and Affected Filers or Submitters
------------------------------------------------------------------------
                                   Type of affected   Filer or submitter
        Affected document         filer or submitter         count
------------------------------------------------------------------------
Form X-17A-5 Part III...........  Broker-dealers      3,218 as of 12/31/
                                   (including OTC      22.
                                   derivatives
                                   dealers) and non-
                                   bank SBS Entities.
Form 17-H.......................  Broker-dealers      Approximately 241
                                   (including OTC      as of 9/30/22.
                                   derivatives
                                   dealers).
FOCUS Report Part II............  Broker-dealers      460 as of 3/31/22.
                                   (including OTC
                                   derivatives
                                   dealers) and
                                   stand-alone SBS
                                   Entities.
FOCUS Report Part IIA...........  Broker-dealers      3,056 as of 3/31/
                                   (including OTC      22.
                                   derivatives
                                   dealers).
FOCUS Report Part IIC...........  Bank SBS Entities.  31 as of 3/31/22.
Form 1..........................  National            24 as of 12/31/22.
                                   securities
                                   exchanges.
Form 1-N........................  Security futures    2 as of 12/31/22.
                                   product exchanges.
Form X-15AA-1; Form X-15AJ-1;     Registered          1 as of 12/31/22.
 Form X-15AJ-2.                    national
                                   securities
                                   associations.
Form CA-1.......................  Registered and      14 (12
                                   exempt clearing     operational) as
                                   agencies.           of 12/31/22.
Rule 17a-22 materials...........  Registered          9 (7 operational)
                                   clearing agencies.  as of 12/31/22.
Form X-17A-19...................  National            25 as of 12/31/22.
                                   securities
                                   exchanges and
                                   registered
                                   national
                                   securities
                                   associations.
Form 19b-4(e)...................  National            24 as of 12/31/22.
                                   securities
                                   exchanges.
Notices of Security-Based Swap    SBS Entities......  50 as of 1/4/23.
 Valuation Disputes pursuant to
 Rule 15fi-3(c).
CCO Report......................  SBS Entities......  50 as of 1/4/23.
ANE Exception Notice............  Majority-owned      24 (estimated) as
                                   affiliates of       of 12/31/22.
                                   Relying Entities
                                   that are either
                                   registered SBSDs
                                   or registered
                                   brokers that
                                   meets certain
                                   capital and other
                                   requirements.
------------------------------------------------------------------------


[[Page 23986]]

Users of Affected Documents
    The particular entities that use (e.g., examine, store, analyze) 
each affected document vary based on whether the particular document is 
publicly available. As noted in Section IX.F above, the documents 
subject to the proposed rule amendments would be available to the 
public, unless the firm submits a successful confidential treatment 
request.\533\ In that case, only the Commission (and, in certain cases, 
other regulators and regulatory organizations) would be able to 
directly access and use the documents. Otherwise, the affected 
documents would be publicly available, and as such could be directly 
used by public entities in addition to the Commission, such as 
investors and other market participants, financial and market analysts, 
financial press, and other regulatory agencies or organizations.\534\
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    \533\ See supra note 545 and 546. As noted above in Section X.A, 
whether any filed material is confidential is determined pursuant to 
applicable law, including but not limited to the Freedom of 
Information Act and Commission rules governing requests for 
confidential treatment.
    \534\ See, e.g., Arun Gupta, ``The Internal Capital Markets of 
Global Dealer Banks,'' Finance and Economics Discussion Series 2021-
036, Washington: Board of Governors of the Federal Reserve System 
(Apr. 25, 2021), https://doi.org/10.17016/FEDS.2021.036 (Federal 
Reserve Board staff research paper using balance sheet data from 
Form X-17A-5 Part III to examine the internal capital markets of 
dealer banks); Srinivasan, Kandarp, ``The Securitization Flash 
Flood'' (Dec. 15, 2021), available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2814717 (academic research paper using data 
from Form X-17A-5 Part III to assess repo activities of large 
broker-dealers) (retrieved from SSRN Elsevier database).
---------------------------------------------------------------------------

Third-Party Service Providers
    In addition to the preparers and users of the affected documents, 
the other entities likely to be affected by the proposal are third-
party service providers that assist in electronic filing and, in some 
cases, structuring, of regulatory documents, and in the facilitation of 
structured data use. As discussed in further detail below, the cost to 
filers or submitters of the proposed rules includes, in some instances, 
the cost of paying third-party service providers to prepare electronic 
and structured documents.\535\ Conversely, such third-party service 
providers would benefit from increased demand for electronic filing and 
structured data services under the proposed rules.
---------------------------------------------------------------------------

    \535\ See infra Section X.C.2.b.
---------------------------------------------------------------------------

    The Commission does not have data on the costs or structure of 
these services to filers or submitters of the affected documents. 
However, although the filers or submitters might nominally bear the 
costs of these services, we believe that some portion of these costs 
are passed on to investors indirectly. The Commission requests comment 
or data on the costs of these third-party service providers or how 
these costs are borne by filers and submitters of the affected 
documents.
    With particular respect to structured data, entities currently 
subject to structured data requirements under Commission rules often 
pay third-party service providers to structure their disclosures, or to 
license structuring compliance software that allows filers or 
submitters to structure their disclosures internally. The specific 
amounts paid to third-party providers of structured data compliance 
services and/or software vary significantly based on a number of 
factors, such as the particular filing or submission on which 
structured data is required, the number of data points to be 
structured, the size of the filer or submitter, the industry to which 
the filer or submitter belongs, the number of individual users of the 
structured data compliance software, the extent to which the 
structuring is fully outsourced, and others. For example, smaller 
reporting companies are particularly likely to fully outsource their 
structured data preparation requirements to third-party service 
providers, leading to different cost dynamics than other companies that 
license third-party structured data preparation software and structure 
their disclosures in-house.\536\ Based on the Staff's understanding of 
third-party structured data compliance pricing, we believe smaller 
filers typically pay between $1,500 and $5,000 per year for third-party 
structured data compliance services and/or software, while larger 
filers typically pay between $5,000 and $30,000 per year for such 
services and/or software.\537\
---------------------------------------------------------------------------

    \536\ See, e.g., Yu Cong, Ayishat Omar, Huey-Lian Sun; Does IT 
Outsourcing Affect the Accuracy and Speed of Financial Disclosures? 
Evidence from Preparer-Side XBRL Filing Decisions. Journal of 
Information Systems 1 June 2019; 33 (2): 45-61 (stating that ``for 
the sake of compliance, many firms, especially smaller firms that 
lack extensive resources, have outsourced the creation and filing 
process . . .''). Note also the subsequent discussion of a cost 
survey conducted by the Association of International Certified 
Professional Accountants, in which 1,032 smaller reporting companies 
reported full outsourcing of their XBRL structuring requirements. 
See infra note 627.
    \537\ Some compliance service providers publicly disclose or 
advertise pricing information on their websites. See, e.g., EDGAR 
Filing Services, Advanced Comp. Innovations, Inc., https://www.edgar-services.com/ (last visited Mar. 8, 2023); CompSci Resources, 
https://www.compsciresources.com/pricing (last visited Mar. 8, 
2023). Other compliance service providers do not publicly disclose 
pricing information on their websites, instead requiring individual 
pricing consultations. See also infra notes 628 and 629.
---------------------------------------------------------------------------

    In some cases, rather than use a third-party structured data 
compliance service or software provider, filers or submitters will have 
already structured their data in-house, independently of any Commission 
disclosure requirements. For example, rather than paying third-party 
structured data compliance service providers, some filers or submitters 
use ERP systems or other data management platforms that include a data 
structuring component.\538\ In some instances, filers or submitters of 
a proposed custom XML document may already be using Inline XBRL to 
structure similar data for internal business purposes (such as through 
the use of ERP systems).\539\ Furthermore, companies that are 
affiliated with one another may be able to leverage each other's 
compliance software licenses or service agreements and experience in 
complying with the proposed structured data requirements.
---------------------------------------------------------------------------

    \538\ See, e.g., Feng Guo, Xin Luo, Patrick R. Wheeler, Liu 
Yang, Xinlei Zhao, Yiyang Zhang; Enterprise Resource Planning 
Systems and XBRL Reporting Quality. Journal of Information Systems 1 
Sept. 2021; 35 (3): 77-106 (defining ERP systems as ``large-scale, 
modularly packaged information systems that have been widely adopted 
by midsize and larger firms in recent decades'' and stating that 
``most ERP systems integrate an eXtensible Business Reporting 
Language (XBRL) component in their core modules. . .'').
    \539\ See supra text accompanying notes 92, 149, 237, and 245.
---------------------------------------------------------------------------

    In addition, with particular respect to custom XML requirements on 
EDGAR forms, some filers or submitters may comply by inputting their 
disclosures into fillable web forms on the EDGAR website; EDGAR then 
converts these inputted disclosures into the applicable custom XML data 
language. In such instances, filers or submitters forgo the cost of 
paying third-party structured data compliance service providers. With 
respect to the proposed rule amendments, because use of the fillable 
form permits filers or submitters to forgo the costs of structuring, we 
expect most entities affected by the proposed custom XML requirements 
would opt to use fillable forms rather than structure directly in 
custom XML.
    Other filers or submitters of custom XML documents choose not to 
use the fillable web form; instead, they structure their disclosures in 
the applicable custom XML data language and file or submit that 
structured custom XML document on EDGAR. These filers or submitters 
typically incur implementation costs to integrate any new or updated 
custom XML schemas into their data systems, and then incur decreased 
structured data costs after such integration. Such filers or submitters 
may find direct submission

[[Page 23987]]

in custom XML beneficial, because it allows for greater automation for 
filing or submitting already structured data without the need for a 
final manual step of converting structured data into unstructured text 
to be typed into fillable web fields. For this reason, we believe the 
SROs that file Form 1 and Form CA-1, because they are likely to have 
existing data management systems (or have the internal resources and 
technical capability to establish such systems) that cover some of the 
disclosures proposed to be structured in custom XML, would opt to 
structure disclosures directly in custom XML rather than using the 
fillable EDGAR web form.\540\ Nonetheless, we believe providing both 
the fillable web form option and the direct custom XML structuring 
option for the proposed custom XML requirements, as we do for most 
other custom XML forms on EDGAR, would provide useful flexibility for 
any current or future affected entities that opt to take an approach 
that differs from our preliminary assumptions, without compromising the 
usefulness and accessibility of the resulting disclosures.
---------------------------------------------------------------------------

    \540\ Such disclosures could include, for example, schedules of 
fees (Exhibit H to Form 1), lists of participants or applicants for 
participation (Exhibit N to Form CA-1), and schedules of traded 
securities (Exhibit N to Form 1).
---------------------------------------------------------------------------

    While not required for structured data use, some data users 
(including some investors and analysts) pay third-party service 
providers for software that can facilitate their usage and analysis of 
structured data. As with structured data compliance, the specific 
amounts paid for third-party structured data research software vary 
significantly based on a number of factors, such as the number of 
individual software users, whether the user is an individual or an 
enterprise, and the particular type of functionality offered. Based on 
the Staff's understanding of third-party structured data research 
software pricing, we believe data users typically pay between $1,000 
and $15,000 per year for third-party structured data research 
software.\541\ Other data users, especially those with more technical 
experience and sophistication, import structured data into their own 
systems and analyze the data without paying for third-party 
software.\542\
---------------------------------------------------------------------------

    \541\ Some research service providers publicly disclose or 
advertise pricing information on their websites. See, e.g., 
Calcbench, https://www.calcbench.com/payment/pricing (last visited 
Mar. 8, 2023); TagniFI, https://about.tagnifi.com/pricing/ (last 
visited Mar. 8, 2023); FinDynamics, https://findynamics.com/subscriptions/ (last visited Mar. 8, 2023). Other research service 
providers do not publicly disclose pricing information on their 
websites, instead requiring individual pricing consultations.
    \542\ Structured data filed with or submitted to the Commission 
(other than structured data filed or submitted on non-public 
documents) are freely available to access and download. See DERA 
Data Library, available at https://www.sec.gov/dera/data; Structured 
Disclosure RSS Feeds, available at https://www.sec.gov/structureddata/rss-feeds-submitted-filings.
---------------------------------------------------------------------------

2. Paper and Limited Electronic Submission
    Certain of the affected documents are currently filed or submitted 
in paper format. Specifically, the Commission's regulatory framework 
currently requires an entity seeking to be registered as a national 
securities exchange, as a clearing agency, and as a security futures 
product exchange, to file in a paper-based format certain forms that 
are mandated by rules under the Exchange Act. Filers are also required 
to submit paper-based amendments to their respective forms. The forms 
currently required to be filed in paper format include Forms 1, 1-N, X-
15AA-1, X-15AJ-1, X-15AJ-2, CA-1. Form 19b-4(e) also is required to be 
submitted in paper format. In addition, paragraphs (d)(6) of Rule 17a-5 
and (c)(6) of Rule 18a-7 provide that broker-dealer and SBS Entity 
annual reports, respectively, must be sent to the Commission's 
principal office in Washington, DC, and appropriate regional office or 
they may be submitted to the Commission electronically in accordance 
with directions provided on the Commission's website. Some broker-
dealers voluntarily file annual reports electronically on EDGAR,\543\ 
and instructions for doing so are posted on the Commission's website. 
For the 12 months ending December 31, 2022, the Commission received 
1,559 filings of the annual reports in paper and 1,659 electronically 
via EDGAR. The proportion of annual reports filed electronically has 
been steadily increasing over the years since it was first permitted in 
2015.
---------------------------------------------------------------------------

    \543\ We note that Commission staff previously stated that it 
would not recommend enforcement action to the Commission under Rule 
17a-5 or Rule 17a-12 if a broker-dealer or OTC derivatives dealer 
files the annual and supplemental reports required under those rules 
electronically through the EDGAR system in accordance with the 
instructions and conditions contained on the Commission's website in 
lieu of filing them with the Commission in paper form. See Letter to 
Kris Dailey Vice President, Risk Oversight and Operational 
Regulation, FINRA, from Michael Macchiaroli, Associate Director, 
Division, Commission (Jan. 27, 2017), available at https://www.sec.gov/divisions/marketreg/mr-noaction/2017/finra-012717-electronic-filing-annual-reports.pdf.
---------------------------------------------------------------------------

    OTC derivatives dealer annual reports filed under Rule 17a-12 must 
be filed at the Commission's principal office under paragraph (p) of 
that rule. Further, Rule 17h-2T permits quarterly and annual risk 
assessment reports to be filed with the Commission in paper-based 
format, and Rule 17a-19 currently requires every national securities 
exchange and registered national securities association to file a Form 
X-17A-19 with the Commission in paper format at its principal office. 
In some circumstances, the Commission's regulatory framework currently 
requires or permits submission of documentation by email. Specifically, 
Exchange Act Rule 3a71-3(d)(1)(vi) requires the Registered Entity to 
provide the ANE Exception Notice by submitting it to the electronic 
mailbox described on the Commission's website. Further, notices made 
pursuant to Rule 15fi-3(c) may be made via email or on EDGAR. Annual 
compliance reports provided pursuant to Rule 15fk-1(c) may be submitted 
by an SBS Entity as a paper or electronic submission.
    In addition, current Rule 17a-22 under the Exchange Act requires 
that within 10 days after issuing, or making generally available, to 
its participants or to other entities with whom it has a significant 
relationship, such as pledgees, transfer agents, or self-regulatory 
organizations, any material (including, for example, manuals, notices, 
circulars, bulletins, lists or periodicals), a registered clearing 
agency shall file three copies of such material with the 
Commission.\544\ Commission staff, however, released the Staff 
Statement on COVID-19 flexibilities in early April 2020 and updated it 
in June 2020. Since that time, consistent with the Updated Staff 
Statement, filers and registrants have made alternate arrangements for 
the delivery, execution, and notarization of certain filings, including 
filings to be made pursuant to Rule 17a-22.\545\ These alternate 
arrangements have included electronic submission, similar to what is 
being proposed.
---------------------------------------------------------------------------

    \544\ 17 CFR 240.17a-22.
    \545\ Division Staff Statement Regarding Requirements for 
Certain Paper Submissions in Light of COVID-19 Concerns (Apr. 2, 
2020), available at https://www.sec.gov/tm/paper-submission-requirements-covid-19; see also Updated Staff Statement, supra note 
6.
---------------------------------------------------------------------------

    When a paper filing is received, the Commission staff scan it into 
PDF format, and upload it to EDGAR or make it available to Commission 
staff. For some filings, such as broker-dealer's annual reports, this 
process can take an average of a several weeks from the date of receipt 
of a paper filing until it is scanned and the public portion published 
on EDGAR, and the confidential portion available to Commission staff.

[[Page 23988]]

3. Structured Data
    Currently, four of the affected documents may be filed or submitted 
electronically using EDGAR--Form X-17A-5 Part III, Form 17-H, notices 
made pursuant to Exchange Act Rule 15fi-3(c), and CCO reports.\546\ 
Form X-17A-5 Part III, the facing page for annual reports required to 
be filed with the Commission under Exchange Act Rules 17a-5, 17a-12, 
and 18a-7 (which generally must be audited), is filed by broker-dealers 
(including OTC derivatives dealers) and non-bank SBS Entities; Form 17-
H is filed by broker-dealers subject to paragraph (a) of Rule 17h-2T; 
and the notices provided under Exchange Act Rule 15fi-3(c) and the CCO 
reports are submitted by SBS Entities. Each of Form X-17A-5 Part III, 
Form 17-H, and the CCO reports is, when filed or submitted 
electronically, partially structured (i.e., machine-readable). None of 
the other affected documents is currently structured, either in whole 
or in part.
---------------------------------------------------------------------------

    \546\ See supra sections IV.A, IV.B, V.C, and V.D.
---------------------------------------------------------------------------

    Form X-17A-5 Part III elicits registrant and accountant identifying 
information and includes an oath or affirmation in a custom XML-based 
data language specific to that form.\547\ As is the case with most of 
the Commission's other custom XML forms, filers of Form X-17A-5 Part 
III have the option of manually inputting information into a fillable 
form that EDGAR subsequently converts into the custom XML data language 
for Form X-17A-5 Part III.\548\ Form X-17A-5 Part III filers are then 
able to attach the remaining documents required by the applicable 
rules, including financial statements and supplemental reports, in 
unstructured formats such as PDF and HTML.\549\
---------------------------------------------------------------------------

    \547\ See EDGAR X-17A-5 Part III Technical Specification, 
available at https://www.sec.gov/info/edgar/specifications/form-x-17a-5-xml-tech-specs.htm.
    \548\ See supra note 230 at 8.2.22.
    \549\ See id.
---------------------------------------------------------------------------

    Form 17-H is similar to Form X-17A-5 Part III in that its facing 
page, when filed electronically through EDGAR, is structured in a 
custom XML-based data language specific to Form 17-H.\550\ In addition, 
Part II of Form 17-H, which consists of securities and commodities 
position disclosures for the filing broker-dealer's material associated 
persons, must be submitted in the Form 17-H-specific custom XML when 
filed electronically through EDGAR.\551\ Form 17-H filers have the 
option of manually inputting Part I facing page information and Part II 
positions information into a fillable web form that EDGAR subsequently 
converts into the custom XML for Form 17-H.\552\
---------------------------------------------------------------------------

    \550\ See EDGAR 17-H Technical Specification, available at 
https://www.sec.gov/info/edgar/specifications/form-17-h-xml-tech-specs.htm.
    \551\ See id.
    \552\ See supra note 230 at 8.2.24.
---------------------------------------------------------------------------

    In addition, the CCO reports are, when filed electronically through 
EDGAR, partially structured in a custom XML-based data language 
specific to the reports.\553\ SBS Entities have the option of manually 
inputting the execution page information into a fillable web form that 
EDGAR subsequently converts into the custom XML-based data language 
specific to the reports.\554\
---------------------------------------------------------------------------

    \553\ See EDGAR SBS Entity Forms Technical Specification, 
available at https://www.sec.gov/info/edgar/specifications/form-sbs-entity-xml-tech-specs.htm.
    \554\ See supra note 230 at 8.2.20.6.
---------------------------------------------------------------------------

    The broker-dealers (including OTC derivatives dealers) and non-bank 
SBS Entities that file Form X-17A-5 Part III and, where applicable, 
Form 17-H, are also subject to other structuring requirements under 
Commission rules. As discussed, all of these entities are required to 
file FOCUS Reports under Exchange Act Rule 17a-5, Rule 17a-12, or Rule 
18a-7, as applicable.\555\ Broker-dealers, SBSDs, MSBSPs, and OTC 
derivatives dealers file these FOCUS Reports using a fillable web form 
that the relevant eFOCUS system converts into a custom XML.\556\ In 
addition, SBSDs and MSBSPs must file in EDGAR Form SBSE, SBSE-A, or 
SBSE-BD, as applicable, to register as an SBS Entity, as well as 
amendments to those Forms if the information in them is or has become 
inaccurate; Forms SBSE, SBSE-A and SBSE-BD are structured using a 
custom XML-based data language specific to the form.\557\ Broker-
dealers, SBSDs, MSBSPs, and OTC derivatives dealers are not subject to 
any Inline XBRL requirements under Commission rules.
---------------------------------------------------------------------------

    \555\ See 17 CFR 240.17a-5; 17 CFR 240.17a-12; 17 CFR 240.18a-7.
    \556\ See eFOCUS--Fin. & Operational Combined Unif. Single 
Reports, https://www.finra.org/filing-reporting/regulatory-filing-systems/efocus (last visited Mar. 7, 2023); eFocus Filing 
Transmission, https://www.finra.org/filing-reporting/focus/efocus-filing-transmission (last visited Mar. 7, 2013); FINRA eFOCUS User 
Guide: Training and Reference Manual, https://www.finra.org/sites/default/files/p118798.pdf (last visited Mar. 7, 2023).
    \557\ See supra note 230 at 8.2.17.
---------------------------------------------------------------------------

    Other filers or submitters of the affected documents include 
clearing agencies, national securities exchanges, Security Futures 
Product Exchanges, and registered national securities associations. 
None of these entities is currently subject to custom XML requirements 
or Inline XBRL requirements under the Commission's rules.
    Thus, the affected documents currently include only a limited 
amount of structured data. For execution pages of electronically 
submitted Form X-17A-5 Part III reports, Form 17-H reports and CCO 
reports, the inclusion of structured identifying information on the 
facing page facilitates the filtering and retrieval of particular 
reports from particular subsets of filers or submitters. For Part II of 
electronically submitted Form 17-H reports, the inclusion of structured 
material associated person disclosures enables more efficient 
mathematical calculations of the disclosed numerical information. 
Because Form 17-H reports and CCO reports are non-public, such enhanced 
functionality is unavailable to parties other than Commission staff; by 
contrast, because the execution page of Form X-17A-5 Part III is 
public, such enhanced functionality is available to Commission staff 
and to public data users.

C. Economic Effects

1. Benefits
a. Electronic Submission and Posting
    Electronic submissions can increase the accuracy, speed, and 
efficiency of the documents provided to the Commission. After an 
initial setup cost described below,\558\ these changes can potentially 
reduce the cost for reporting entities because the shift to electronic 
submission can obviate the need for printing costs, and improve the 
efficiency of filing preparation. In addition, the improved accuracy, 
speed, and efficiency of the documents provided to the Commission can 
reduce the costs associated with receiving and processing submissions, 
in part by reducing the time, processing, and search costs relative to 
the manual nature of non-electronic document processing, and 
accordingly aid the Commission's examination and oversight functions. 
For some filings, such as broker-dealer annual reports, eliminating the 
need to scan paper documents could reduce processing time by as much as 
several weeks. An increase in the accuracy and timeliness of processing 
submissions boosts the efficiency of Commission document review, 
processing, and quality assurance. Furthermore, electronic submissions 
allow reporting entities and Commission staff to more easily access or 
submit documents during disruptive events--like COVID-19--when their 
physical work facilities may be inaccessible.
---------------------------------------------------------------------------

    \558\ See infra Section X.C.2.

---------------------------------------------------------------------------

[[Page 23989]]

    The proposed rule includes several amendments designed to update 
the FOCUS Report and related requirements. First, the release proposes 
amendments to FOCUS Report Part II that would allow SEC staff to 
compare the data reported on this page with the information being 
reported by firms that are FCMs, because FCMs are already required to 
complete this section of the form.
    Second, the Commission proposes to align the text in FOCUS Report 
Part IIC with the text in FFIEC Form 031. Making these amendments 
should reduce the overall burden because information input in the 
proposed form will be consistent with FFIEC Form 031 (i.e., the Call 
Report), which many Part IIC filers are already required to 
complete.\559\ The amendments also remove ambiguity about how to 
complete the Part IIC, which have resulted in SEC staff receiving a 
number of phone calls seeking assistance on how to reconcile these 
incompatibilities.
---------------------------------------------------------------------------

    \559\ Of the affected entities in this release, 31 filed FOCUS 
Report Part IIC as of Mar. 31, 2022. See supra section IX.C.9.
---------------------------------------------------------------------------

    Third, the Commission proposes to require only two of the three 
signature lines to be signed on the FOCUS Report's cover page, and 
allows these signatures to be signed either manually or electronically. 
In the time since the revised FOCUS Report was adopted, it has come to 
the Commission's attention that obtaining the signatures of all three 
principal officers on or close to the same day may be burdensome, 
especially with respect to larger firms with thousands of employees. 
Therefore, the Commission proposes to require only two of the three 
principal officers' signatures in an effort to balance the Commission's 
desire for individual accountability with the burden on the filer. 
Reducing the number of required signatures reduces the burden of 
submitting FOCUS reports in the long run. The use of electronic 
signatures would also reduce the burden in the long-run because firms 
would not need to obtain and store wet signatures, especially due to 
the increase in remote work.
    Finally, the Commission proposes to require OTC derivatives dealers 
to file the FOCUS Report electronically on the SEC eFOCUS system 
instead of in paper. The SEC eFOCUS system offers benefits of 
electronic filing of forms over paper, reducing costs and making 
information more easily usable and timely.
b. Structured Data
    In general, the Commission believes the proposed structured data 
requirements will benefit investors and markets by increasing the 
accessibility and usability of the disclosures in the Proposed 
Structured Documents, thereby increasing transparency and insight into 
the operations, governance, management, financial condition, and other 
characteristics of the affected entities. Requiring machine-readability 
for the disclosures would enable significantly more efficient 
retrieval, sorting, filtering, comparison, aggregation, and other 
analysis of the disclosures across reporting entities and time periods. 
The exact nature and magnitude of such benefits may vary based on a 
number of factors, which are discussed herein.
Structured Data Benefits
    As an initial point of comparison, some research on XBRL 
requirements for public operating company financial statement 
disclosures has found that such requirements have mitigated information 
asymmetry by reducing information processing costs, thereby 
facilitating access and analysis of the disclosures on a large-scale 
basis.\560\ This reduction in information processing cost has been 
observed to facilitate the monitoring and analysis of firms by external 
parties.
---------------------------------------------------------------------------

    \560\ See, e.g., Joung W. Kim, Jee-Hae Lim, & Won Gyun No, The 
Effect of First Wave Mandatory XBRL Reporting Across the Financial 
Information Environment, 26 J. Info. Sys. 127, 127-53 (2012) 
(finding evidence that ``mandatory XBRL disclosure decreases 
information risk and information asymmetry in both general and 
uncertain information environments''); Yuyun Huang, Jerry T. 
Parwada, Yuan George Shan, & Joey Wenling Yang, Insider 
Profitability and Public Information: Evidence From the XBRL Mandate 
(SSRN Working Paper, 2020) (retrieved from SSRN Elsevier database) 
(finding that XBRL levels the playing field between insiders and 
non-insiders, in line with the hypothesis that ``the adoption of 
XBRL enhances the processing of financial information by investors 
and hence reduces information asymmetry'').
---------------------------------------------------------------------------

    These external parties include investors themselves, as well as 
other entities that process firm disclosures into conclusions that 
often influence investors and markets; such entities include financial 
analysts, data aggregators, academic researchers and financial media 
(collectively, ``information intermediaries'').\561\ In that regard, 
the Commission believes that institutional investors are more likely to 
access XBRL data directly, whereas retail investors are more likely to 
benefit from the use of XBRL data by information intermediaries.\562\
---------------------------------------------------------------------------

    \561\ See, e.g., Trentmann, N., Companies Adjust Earnings for 
Covid-19 Costs, But Are They Still a One-Time Expense? The Wall 
Street Journal (2020) (citing an XBRL research software provider as 
a source for the analysis described in the article); Bloomberg Lists 
BSE XBRL Data, XBRL.org (Mar. 17, 2019), https://www.xbrl.org/news/bloomberg-lists-bse-xbrl-data/; Hoitash, R & U. Hoitash, Measuring 
accounting reporting complexity with XBRL. 93 Account. Rev. 259-287 
(2018).
    \562\ See, e.g., Alastair Lawrence, James P. Ryans, Estelle Y. 
Sun; Investor Demand for Sell-Side Research. The Account. Rev. 
(2017) (finding ``the average retail investor appears to rely on 
analysts to interpret financial reporting information rather than 
read the actual filings''); but see Chi, Sabrina and Shanthikumar, 
Devin M., Do Retail Investors Use SEC Filings? Evidence from EDGAR 
Search, SSRN (2018) (retrieved from SSRN Elsevier database) (finding 
``retail investor trading, both buying and selling, is significantly 
related to EDGAR search for 10-K and 10-Q filings, more so than to 
Google search,'' especially for ``the most easily readable 10-K and 
10-Q filings''); see also Brown, Nerissa & Gale, Brian & Grant, 
Steph, Repetition, Interactivity, and Investors' Reliance on Firm 
Disclosures, SSRN (2020) (retrieved from SSRN Elsevier database) 
(indicating that disclosure interactivity, which is promoted by 
Inline XBRL, may improve investors' direct processing of financial 
information).
---------------------------------------------------------------------------

    Regulators, including the Commission, the Federal Deposit Insurance 
Commission (``FDIC''), and the Internal Revenue Service (``IRS''), have 
also been observed to leverage XBRL disclosure benefits in better 
fulfilling their mandates.\563\ The Commission staff uses XBRL data to 
efficiently analyze large quantities of information in support of risk 
assessment, rulemaking, and enforcement activities, including as part 
of its internally developed Financial Statement Query Viewer and Inline 
Viewer applications.\564\ The regulatory use of XBRL is particularly 
relevant to affected documents that are subject to

[[Page 23990]]

confidential treatment and thus only accessible by the Commission and 
its staff.\565\
---------------------------------------------------------------------------

    \563\ With respect to Commission use of XBRL data, see infra 
note 596. With respect to FDIC use of XBRL data, see Meet Mark 
Montoya, Chief of Data Strategy, FDIC, Xcential Co. (Sept. 29, 
2021), https://xcential.com/meet-mark-montoya-chief-data-officer-fdic/ (noting in an interview with the FDIC's Chief Data Officer 
that XBRL requirements for quarterly bank call reports have 
facilitated FDIC staff analysis of the regulated banks); see also 
Government Use of Data Standards--Conversation with the FDIC, XBRL 
US (Sep. 2, 2020), https://xbrl.us/news/regulator-video/ (noting in 
an interview with the FDIC's Chief Data Officer that, ``. . . Prior 
(to XBRL) the data that the (FDIC) examiners used to examine the 
banks was probably about 2-3 months old which is old data . . . 
(with XBRL) the data can be pulled down in real time''); see also 
Lizhong Hao and Mark J. Kohlbeck, The Market Impact of Mandatory 
Interactive Data: Evidence from Bank Regulatory XBRL Filings, J. 
Emerging Tech. Acct. (2013) (finding that banks experienced a 
``reduction in systematic risk in connection with filing their 
regulatory reports in XBRL''). With respect to IRS use of XBRL data, 
see infra note 599.
    \564\ See, e.g., How errors and delays in SEC filings can hurt 
companies--and their shareholders, Toppan Merrill Indus. Insights 
(Nov. 9, 2018), https://blog.toppanmerrill.com/insights-blog-all/how-errors-and-delays-in-sec-filings-can-hurt-companies-and-their-shareholders (noting, in the context of an interview with an 
Enforcement staff member, that the Commission uses structured data, 
including XBRL, ``in enforcement cases, including those that involve 
disclosure and accounting violations'').
    \565\ As noted above in Sections X.A and X.B, whether any filed 
material is confidential is determined pursuant to applicable law, 
including but not limited to the Freedom of Information Act and 
Commission rules governing requests for confidential treatment.
---------------------------------------------------------------------------

    The enhanced monitoring facilitated by XBRL requirements has been 
observed to influence the behavior of firms relevant to governance and 
compliance, including firms' disclosure and reporting choices as well 
as their strategic decisions. For example, one study found that firms 
increase quantitative footnote disclosures upon implementation of 
detailed tagging requirements.\566\ Another study found that XBRL 
reporting has reduced the cost of IRS monitoring of firms and thus 
decreased the likelihood of firm tax avoidance.\567\ Finally, multiple 
studies have shown that XBRL requirements have influenced firms' 
strategic decision-making, an effect that appears to be heightened for 
Inline XBRL requirements.\568\
---------------------------------------------------------------------------

    \566\ See Elizabeth Blankespoor, The Impact of Information 
Processing Costs on Firm Disclosure Choice: Evidence from the XBRL 
Mandate, 57 J. Acct. Res. 919 (2019) (finding ``firms increase their 
quantitative footnote disclosures upon implementation of XBRL 
detailed tagging requirements designed to reduce information users' 
processing costs,'' and ``both regulatory and non-regulatory market 
participants play a role in monitoring firm disclosures,'' 
suggesting ``that the processing costs of market participants can be 
significant enough to impact firms' disclosure decisions''); see 
also Kim, Jeong-Bon, Kim, Joung W., and Lim, Jee-Hae, Does XBRL 
Adoption Constrain Earnings Management? Early Evidence from Mandated 
U.S. Filers. Contemp. Acct. Res. (2019) (indicating that XBRL 
adoption ``constrains earnings management via discretionary accrual 
choices'').
    \567\ See Jeff Zeyun Chen, Hyun A. Hong, Jeong-Bon Kim, & Ji Woo 
Ryou, Information processing costs and corporate tax avoidance: 
Evidence from the SEC's XBRL mandate, 40 J. Acct. & Pub. Policy 
106822 (2021) (finding XBRL reporting decreases likelihood of firm 
tax avoidance because ``XBRL reporting reduces the cost of IRS 
monitoring in terms of information processing, which dampens 
managerial incentives to engage in tax avoidance behavior'').
    \568\ See, e.g., Xin Cheng, Feiqi Huang, Dan Palmon, and Cheng 
Yin, How Does Information Processing Efficiency Relate to Investment 
Efficiency? Evidence from XBRL Adoption. J. Info. Sys. (2020) 
(finding firms ``improve their investment efficiency after the 
adoption of XBRL,'' especially for firms that ``have inferior 
external monitoring, . . . operate in more uncertain information 
environments, . . . and have less readable financial reporting); see 
also Hyun Woong (Daniel) Chang, Steven Kaszak, Peter C. Kipp, Jesse 
C. Robertson, The Effect of iXBRL Formatted Financial Statements on 
the Effectiveness of Managers' Decisions when Making Inter-Firm 
Comparisons. J. Info. Sys. (2020) (finding ``iXBRL filings 
facilitate information search and information match by allowing 
users to view XBRL data in HTML filings,'' and ``managers make more 
(less) effective decisions when presented with financial information 
formatted in iXBRL (XBRL)'').
---------------------------------------------------------------------------

    XBRL requirements have also been observed to impact the timeliness 
and effectiveness of firms' disclosure preparation and related 
processes. For example, one study found XBRL to have decreased audit 
report lags, especially among firms with strong internal control 
systems and no prior XBRL reporting experience.\569\ Other studies have 
found XBRL requirements to have improved the timeliness of financial 
reports, with such improvements limited to larger firms only.\570\ For 
instance, one public company executive noted that XBRL facilitates his 
firm's disclosure preparation procedures by enabling efficient review 
of disclosures made by peer companies.\571\ Increasing the timeliness 
and effectiveness of the auditing and disclosure process would improve 
the speed (and, with respect to enhanced auditing processes, 
confidence) with which users of the affected entities' disclosures 
(such as investors, analysts, and regulators) could assess and 
ultimately draw conclusions from, and act upon, the disclosed 
information.\572\
---------------------------------------------------------------------------

    \569\ See Keval Amin, John Daniel Eshleman, Cecilia (Qian) Feng, 
The Effect of the SEC's XBRL Mandate on Audit Report Lags. Acct. 
Horiz. (2018) (finding ``audit report lags decrease following the 
mandatory adoption of XBRL,'' with results ``concentrated among 
filers with strong internal control systems and no prior XBRL 
reporting experience'').
    \570\ See, e.g., Hui Du and Kean Wu, XBRL Mandate and Timeliness 
of Financial Reporting: Do XBRL Filings Take Longer? J. Emerg. Tech. 
Acct. (2018) (finding decreased reporting lags for XBRL annual and 
quarterly filings compared to non-XBRL filings from accelerated and 
large accelerated filers, but not for non-accelerated filers); see 
also Zhou, J., Does one size fit all? Evidence on XBRL adoption and 
10[hyphen]K filing lag. Acct Fin. (2019) (noting that 10-K filing 
lag decreased for all filers in the XBRL reporting period except 
smaller reporting companies, for which 10-K filing lag increased). 
However, these studies were based on XBRL filings that were made 
before the adoption of Inline XBRL requirements, which may 
facilitate the filing preparation process by including the machine-
readable and human-readable data in the same disclosure document.
    \571\ See Olivia Berkman, XBRL: What are the Benefits, FEI Daily 
(Aug. 29, 2019), https://www.financialexecutives.org/FEI-Daily/August-2019/XBRL-What-are-the-Benefits.aspx (noting in an interview 
with a public company's chief financial officer that the company is 
able to ``search through XBRL filings to find similar companies 
within [its] industry that have had to present certain similar 
[disclosures] in the past,'' which has helped the company ``craft[] 
[its] disclosures to make sure that [the company is] complying with 
the spirit of GAAP and providing the information that [the company 
is] supposed to be providing'').
    \572\ See supra section IV.A.1 (discussing the time lag between 
the date of receipt of a paper filing of a broker-dealer's annual 
reports until it is scanned and the public portion published on 
EDGAR, and the confidential portion available to Commission staff).
---------------------------------------------------------------------------

Applicability and Variability of Structured Data Benefits
    The structured data benefits discussed above, while largely 
specific to public operating company financial statement disclosures, 
generally indicates that the proposed structured data requirements 
could facilitate the use and analysis of the information disclosed on 
the affected documents. Several of the affected documents that would be 
structured in Inline XBRL under the proposal--namely, Form X-17A-5 Part 
III, Form 17-H, Form 1, and Form CA-1--include financial statements 
that are not currently provided in a structured data language, but 
would be provided in a structured data language (specifically, Inline 
XBRL) under the proposed rule amendments. The probability that, and 
extent to which, the observed effects can be extrapolated are thus 
likely greater for those affected documents than for the remaining 
affected documents, which do not contain financial statements.
    In addition, unlike the public company financial statement 
information evaluated in the literature referenced above, several of 
the affected documents are submitted confidentially or are otherwise 
non-public, either in whole or in part. This includes Form 17-H, Form 
X-17A-19, Form X-17A-5 Part III (in part), Form CA-1 (in part), and the 
CCO reports.\573\ The expected benefits of structuring non-public 
information would accrue to investors and markets indirectly, by 
enhancing the Commission's regulatory capabilities.\574\ By contrast, 
the expected benefits of structuring public information would accrue 
directly to public users of the data (which could include investors and 
the previously

[[Page 23991]]

discussed information intermediaries), as well as indirectly to 
investors and markets through the enhancement of the Commission's 
regulatory capabilities (and, where relevant, those of other 
regulators).
---------------------------------------------------------------------------

    \573\ Additionally, the Commission does not automatically make 
public the information provided to it pursuant to Rule 15fi-3(c); 
however, the Commission may make the information available upon 
appropriate request (including requests made pursuant to the Freedom 
of Information Act) or otherwise as permitted under applicable law, 
subject to SBS Entities making appropriate requests for confidential 
treatment. See supra notes 293 and 294 and accompanying text. 
Whether any material is confidential is determined pursuant to 
applicable law, including but not limited to the Freedom of 
Information Act and Commission rules governing requests for 
confidential treatment. If the Commission makes the information 
provided pursuant to Rule 15fi-3(c) available, the information made 
available may not be in structured format.
    \574\ See supra note 595. An example of a structured non-public 
disclosure form is Form PF, which registered investment advisers 
file with the Commission to disclose information regarding private 
funds under their management. See 17 CFR 275.204(b); Division of 
Investment Management: Electronic Filing of Form PF for Investment 
Advisers on PFRD, available at https://www.sec.gov/divisions/investment/pfrd.shtml.
---------------------------------------------------------------------------

    The benefits of structuring would also vary based on the number of 
entities in a particular population of reporting entities. As noted, 
one benefit of structured disclosure is the ability to run large-scale 
comparisons across reporting entities and across reporting periods. For 
those affected documents that have a small population of reporting 
entities, this benefit would be limited largely (or, in the case of 
Form 15A, wholly) to the latter. For those affected documents that have 
a large population of reporting entities (such as Form X-17A-5 Part 
III, which is filed by over 3,000 entities), the benefits of efficient 
cross-entity comparisons would be much more relevant.\575\ Similarly, 
the benefits of efficient access, retrieval, sorting, and filtering 
structured disclosures would be heightened for those affected documents 
generated in high volume (such as Form 19b-4(e) and Form X-17A-19) 
compared to those affected documents that the Commission receives in 
low volume (such as Form CA-1).\576\
---------------------------------------------------------------------------

    \575\ See supra section IX.C.9.
    \576\ See supra sections IX.D.5, IX.D.6, and IX.D.11.
---------------------------------------------------------------------------

    Finally, the Commission expects the benefits of structuring data 
would vary based on the type of disclosures included in each particular 
affected document. Structured numerical disclosures lend themselves to 
mathematical functionality, such as the calculation of leverage or 
other ratios to assess potential exposure to insolvency or other risk. 
Structured textual disclosures lend themselves to period-over-period 
redline comparisons, targeted keyword searching, and more sophisticated 
sentiment analysis. The CCO report consists primarily of textual 
responses to required disclosure items, so the latter benefit would be 
relevant for that document.\577\ Other affected documents feature both 
numeric and textual disclosures, so both of these benefits would be 
relevant.
---------------------------------------------------------------------------

    \577\ See 17 CFR 240.15fk-1(c)(2)(i).

   Types of Disclosures and Associated Benefits in Proposed Structured
                                Documents
------------------------------------------------------------------------
                                                            Textual
                                        Numeric           disclosures
                                      disclosures          (redline
  Proposed structured document       (mathematical       comparisons,
                                     functionality    targeted searches,
                                      applicable)     sentiment analyses
                                                          applicable)
------------------------------------------------------------------------
Form X-17A-5 Part III...........  Yes...............  Yes.
Form 17-H.......................  Yes...............  Yes.
Form CA-1.......................  Yes...............  Yes.
Form 1..........................  Yes...............  Yes.
Form 1-N (execution page only)..  No................  Yes.
Form 15A (execution page only)..  No................  No.
Rule 19b-4(e) Information.......  In some cases.....  No.
Form X-17A-19...................  No................  Yes.
Notices of Security-Based Swap    Yes...............  Yes.
 Valuation Disputes pursuant to
 Rule 15fi-3(c).
CCO Report......................  In some cases.....  Yes.
------------------------------------------------------------------------

    For Rule 19b-4(e), numeric disclosures are required only when the 
disclosure of position limits for new derivative products is 
applicable.\578\ For notices of security-based swap valuation disputes 
pursuant to Rule 15fi-3(c), SBS Entities must notify the Commission of 
any valuation disputes in excess of $20,000,000 if not resolved within 
three or five business days, depending on the counterparty.\579\ SBS 
Entities are provided flexibility to submit the required 
information.\580\ For CCO reports, while Rule 15fk-1(c) does not 
expressly call for numeric disclosures, a CCO report could include 
numeric disclosures nested within textual responses, such as the 
description of financial, managerial, operational, and staffing 
resources set aside for compliance with the Exchange Act.\581\
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    \578\ See Item 9 of Form 19b-4(e).
    \579\ See 17 CFR 240.15Fi-3(c)(1). See also 17 CFR 240.15Fi-
3(c)(2) regarding required amendments.
    \580\ See supra section V.C.
    \581\ See 17 CFR 240.15Fk-1(c)(2)(i)(E).
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    For Form 15A, its execution page (i.e., the portion of proposed 
Form 15A that would precede Section I) would include a series of 
structured checkboxes to indicate the basis for filing the Form, and 
the reporting period to which the Form applies. Structured checkboxes 
and pick lists are more relevant to the filtering and sorting benefits 
enabled by structured data requirements. For example, structuring the 
checkboxes on the Form 15A execution page would enable a data user to 
retrieve only those Form 15As that are current supplements to 
registration reported pursuant to Rule 15Aa-2(b) of the Exchange Act, 
and further filter those results to only those Form 15A filings that 
include a change to Exhibit C (list of members).
    Third-party structured data service providers (including providers 
of structured data compliance services and/or software, as well as 
providers of structured data research software) would also likely 
realize benefits as a result of the proposed rule amendments. Most 
affected entities would be newly required to file or submit structured 
data, resulting in additional clients/customers and revenues for third-
party structured data compliance service providers. Similarly, some 
users of the affected documents would likely seek to use third-party 
structured data research software to facilitate their analysis of the 
structured data, resulting in additional customers and revenues for 
third-party structured data research software providers.
    The Commission is proposing a specific structured data language for 
each Proposed Structured Document, rather than leaving the structured 
data language requirement open-ended (i.e., requiring only that the 
Proposed Structured Document be provided in a structured, machine-
readable data language). Specifying a single structured data language 
that a filer or submitter must use for each Proposed Structured 
Document would benefit users of the disclosed information, including 
investors, market participants, other filers or submitters, information 
intermediaries, and the Commission, because it would help ensure the 
disclosures are provided in a uniform structured data language that is 
most suitable for the document in question, and would prevent a 
potential coordination failure that could occur if different 
respondents chose to provide inputs in different data languages.

[[Page 23992]]

    By contrast, an open-ended data language requirement would allow 
different filers or submitters of the same document to provide their 
disclosures in different data languages. In such instances, data users 
such as Commission staff and market participants would be unable to 
incorporate disclosures from filers or submitters using one data 
language into the same datasets and applications as disclosures of 
other filers or submitters using different data languages without 
undertaking data conversion processes that are frequently burdensome 
and imprecise. This may hinder investors, the Commission, and market 
participants from efficiently comparing disclosures across the complete 
set of entities within a given filer population, and could therefore 
dampen the benefits that would otherwise accrue from requiring the 
disclosures to be machine-readable. Thus, specifying the data language 
to be used may increase the probability of realizing the anticipated 
benefits of machine-readability for users of the Proposed Structured 
Documents.
    As noted above, we are requesting comment on all aspects of this 
proposal. By specifying the structured data language to be used for 
each Proposed Structured Document, we invite comment, including from 
affected entities, on the proposed use and effects of the proposed 
specified data languages. As further detailed elsewhere in this 
economic analysis, different structured data languages have different 
implications (e.g., varying compliance costs) for different affected 
entities. Thus, proposing a specific structured data language would 
allow affected entities to assess the implications of the proposed 
specific structured data language to be used, and comment accordingly.
2. Costs
    The proposal would alter the manner in which the affected entities 
provide the affected documents, specifically by requiring electronic 
submission or posting of the affected documents, and by requiring most 
of the content of the affected documents to be provided in a structured 
data language. The affected entities already are required to prepare 
and submit the affected forms with the Commission pursuant to Exchange 
Act rules that currently govern each category of affected entity.\582\ 
Thus, we generally do not expect the affected entities to incur 
incremental costs associated with preparing (e.g., collecting, 
drafting, reviewing) the information required to be disclosed in the 
affected documents prior to filing or posting under the proposed rule 
amendments.\583\ Rather, we expect certain entities to incur 
incremental costs associated with structuring the prepared information.
---------------------------------------------------------------------------

    \582\ ANE Exception Notice withdrawals currently are not 
required. However, a Registered Entity seeking withdrawal could send 
a request to a designated electronic mailbox. See supra note 272 and 
accompanying text, and section IX.D.12
    \583\ A subset of SBS broker-dealers would incur additional 
costs associated with filing, due to the FOCUS report amendments 
that would require them to file information that under the baseline 
they currently do not file.
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a. Electronic Submission and Posting
    As discussed above, a significant number of the entities subject to 
the proposed rule amendments already have experience with EDGAR due to 
other reporting obligations and thus are not expected to incur EDGAR-
related costs incremental to the proposed rule amendments. Entities 
that use EDGAR for purposes of complying with reporting obligations 
under existing rules generally are not expected to incur additional 
EDGAR access costs due to the proposed rule amendments.\584\ Reporting 
entities that do not have experience with EDGAR may incur initial 
compliance burdens, including the one-time burden associated with 
filing a Form ID for the first time to obtain the access codes needed 
to submit an application on the Commission's EDGAR system.\585\ The 
Commission estimates that the cost for these entities will be $5,056 on 
a one-time basis to become familiar with the EDGAR system for the 
purposes of filing for Rules 17a-5, 18a-7, and 17a-12.\586\
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    \584\ If some reporting entities with EDGAR experience require 
time to switch the affected documents from paper to EDGAR, they may 
incur an additional initial cost.
    \585\ See 17 CFR 232.10(b).
    \586\ See supra section IX.D.9. The one-time cost is estimated 
to require sixteen hours of labor from a programmer. 16 hours x $316 
per hour = $5,056.
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    Due to the widespread use of the internet, the cost of establishing 
and maintaining internet access is not expected to stem from the 
proposed amendments. We preliminarily believe that the costs associated 
with providing materials pursuant to Rule 17a-22 by registered clearing 
agencies on websites, and the costs associated with posting information 
currently required on Form 19b-4(e) by SROs, in addition to the reduced 
timeframe for compliance, is likely not to add significant costs to a 
registered clearing agencies' 17a-22 obligations or an SRO's 19b-4(e) 
obligations.
    The proposed rule contains several amendments related to FOCUS 
reports, which could impose burdens on market participants. The 
proposed amendments to FOCUS Report Part II are expected to result in 
an initial burden of $2,130 on each Part II filer so firms can 
familiarize themselves with the amendments to FOCUS Report Part 
II.\587\ These proposed amendments are expected to either have no 
impact on or reduce the ongoing burden on the vast majority of filers, 
because they will reduce questions about where and how to report items 
on the form. However, because the proposed amendments require stand-
alone swap dealers and stand-alone introducing brokers to complete a 
new section of FOCUS Report Part II that these types of firms were not 
previously required to complete (i.e., Computation of CFTC Minimum 
Capital Requirements), these amendments are likely to result in an 
ongoing annual burden of $426 hour per stand-alone swap dealer or 
stand-alone introducing broker.\588\
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    \587\ 5 hours x $426 per hour (compliance attorney) = $2,130.
    \588\ 1 hour x $426 per hour (compliance attorney) = $426.
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    The proposed amendments to Part IIC are expected to result in an 
initial burden of five hours on each bank SBS Entity so that firms can 
compare the revised FOCUS Report Part IIC with FFIEC Form 031. However, 
these proposed amendments are expected to either have no impact on or 
reduce the ongoing burden on bank SBS Entities, because they will 
reduce questions about how to complete FOCUS Report Part IIC 
consistently with FFIEC Form 031.
    The proposed amendment to signature requirements for the FOCUS 
report is expected to result in an initial burden of $426 on each filer 
so that the firm can review the standards for an electronic signature 
on the FOCUS Report Part II, IIA, or IIC, as applicable.\589\ However, 
this proposed amendment is expected to either have no impact on or 
reduce the ongoing burden on FOCUS Report filers, because they will not 
be required to furnish as many signatures as before the amendment, and 
it may be easier to prepare electronic signatures rather than manual 
signatures since firms will already be familiar with the process and 
can easily obtain these signatures while working remotely.
---------------------------------------------------------------------------

    \589\ 1 hour x $426 per hour (compliance attorney) = $426.
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    The proposed amendment to OTC derivatives dealer requirements is 
expected to result in an initial burden of $4,740 on each OTC 
derivatives dealer so that the firm can familiarize itself with the SEC 
eFOCUS system.\590\

[[Page 23993]]

However, this proposed amendment is expected to either have no impact 
on or reduce the ongoing burden on OTC derivatives dealers, because 
filing the FOCUS Report electronically is an automated process as 
compared to filing by paper. In addition, OTC derivatives dealers are 
required to be affiliated with a broker-dealer, which means that OTC 
derivatives dealers' operational staff already are familiar with the 
FINRA eFOCUS system's interface, and can use the same preexisting 
templates, software, and procedures currently used by the broker-dealer 
to file FOCUS Reports on the FINRA system.
---------------------------------------------------------------------------

    \590\ 15 hours x $316 per hour (programmer) = $4,740.
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b. Structured Data
    The Commission expects that certain structured data requirements 
under the proposed amendments would impose additional compliance costs 
on affected entities. Specifically, the Commission believes the 
proposed Inline XBRL requirements for Form 1, Form CA-1, Form X-17A-5 
Part III and related annual filings, Form 17-H, and the CCO reports 
would result in additional compliance costs, both initial and ongoing, 
for the SROs, broker-dealers (including OTC derivatives dealers), and 
SBS Entities filing or submitting those documents relative to the 
current baseline, because those entities would be newly required to 
apply Inline XBRL tags to the documents before filing or submitting 
them to the Commission (or pay a third-party tagging service provider 
to do so).
    The Commission does not expect the proposed requirements to provide 
Form X-17A-19, the execution pages of the Covered SRO Forms, the facing 
page of Form X-17A-5 Part III, the facing page and Part II of Form 17-
H, and the notices to the Commission (and any amendments to the 
notices) required by Exchange Act Rule 15fi-3(c) using custom XML-based 
data languages would impose similar structured data implementation 
costs on the SROs, broker-dealers, and SBS Entities that would be 
subject to those requirements. For the custom XML requirements on 
proposed EDGAR filings, EDGAR would provide filers or submitters with 
the option of using a fillable web form that would convert inputted 
disclosures into the relevant custom XML.\591\ Other than the exchanges 
and clearing agencies filing Form 1 and Form CA-1, respectively, we 
expect these entities to input their disclosures into the fillable 
EDGAR web form, and thus avoid compliance costs associated with 
structuring disclosures in custom XML data languages. By contrast, we 
expect exchanges and clearing agencies, which would be subject to more 
extensive custom XML disclosure requirements as a result of the 
proposed rule amendments, would have the requisite sophistication to 
encode their Exhibit disclosures in custom XML and submit the custom 
XML Exhibits to EDGAR directly rather than manually completing lengthy 
fillable forms to be converted into custom XML documents.\592\ This 
would cause exchanges and clearing agencies to incur implementation 
costs associated with integrating any new or updated custom XML schemas 
into their existing data systems.\593\ Nonetheless, exchanges and 
clearing agencies may find direct submission in custom XML beneficial, 
because it allows for greater automation in the process of submitting 
data that is already structured directly to EDGAR, and removes the need 
for the final manual step of converting structured data into 
unstructured information to be typed into fillable web fields.
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    \591\ See supra note 230 at 8.
    \592\ See supra sections II.A.3, II.D.4, and VII.A.
    \593\ See infra text accompanying notes 651 and 659 for related 
cost estimates.
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    With respect to the proposed requirement for SROs to post Rule 19b-
4(e) information using the custom XML schema for this information (such 
schema would be posted on the Commission's website), the Commission 
expects that the SROs would incur higher implementation costs than 
those affected entities that are subject to EDGAR custom XML 
requirements, because SROs would need to encode the posted information 
in accordance with the schema rather than using a fillable web form on 
EDGAR. This would also be the case for any entities that choose to 
submit EDGAR documents directly in the relevant custom XML data 
language rather than use the fillable form that EDGAR provides.
Surveys on Structured Data Costs
    Various XBRL and Inline XBRL preparation solutions have been 
developed and used by operating companies and open-end funds to fulfill 
their existing structuring requirements under the Commission's rules. 
These existing requirements include multiple types of data, including 
numerical data in the context of financial statements, numerical data 
in the context of tables (along with the tables themselves), simple 
text strings, longer textual narratives, numerical data nested within 
textual narratives, and checkboxes.\594\
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    \594\ For example, an operating company's annual report on Form 
10-K includes iXBRL-tagged checkboxes on the cover page, iXBRL-
tagged company name on the cover page (text string), iXBRL-tagged 
numbers on the balance sheet (face financial statement), iXBRL-
tagged tables and numbers therein in the financial statement 
footnotes, and iXBRL-tagged textual narratives and numbers therein, 
also in the financial statement footnotes.
---------------------------------------------------------------------------

    With respect to the magnitude of Inline XBRL compliance costs, an 
American Institute of Certified Public Accountants (``AICPA'') survey 
of 1,032 public operating companies with $75 million or less in market 
capitalization in 2018 found an average cost of $5,850 per year, a 
median cost of $2,500 per year, and a maximum cost of $51,500 per year 
for fully outsourced XBRL creation and filing.\595\ These figures 
represent tagging costs over an entire year, which typically 
encompasses the Inline XBRL structuring of financial statements each 
quarter. A separate survey of 151 Nasdaq-listed issuers in 2018 found 
higher XBRL compliance costs, including an average XBRL compliance cost 
of $20,000 per quarter, a median XBRL compliance cost of $7,500 per 
quarter, and a maximum XBRL compliance cost of $350,000 per quarter in 
XBRL costs per quarter.\596\ Unlike the AICPA survey, the Nasdaq survey 
was not limited to smaller reporting companies (i.e., companies with 
$75 million or less in market capitalization), nor did it assess trends 
in compliance costs over time.
---------------------------------------------------------------------------

    \595\ See AICPA, XBRL Costs for Small Companies Have Declined 
45% since 2014 (2018), https://us.aicpa.org/content/dam/aicpa/interestareas/frc/accountingfinancialreporting/xbrl/downloadabledocuments/xbrl-costs-for-small-companies.pdf. As 
discussed below in this section, the population of affected filers 
or submitters most analogous in size to the companies sampled here 
are certain registered broker-dealers.
    \596\ See letter from Nasdaq, Inc. (Mar. 21, 2019), Request for 
Comment on Earnings Releases and Quarterly Reports, Release No. 33-
10588 (Dec. 18, 2018), 83 FR 65601 (Dec. 21, 2018). Like the above-
cited AICPA survey, this survey was limited to operating companies. 
In addition, both surveys were conducted before the transition from 
XBRL to Inline XBRL and before the implementation of cover page 
tagging requirements for periodic reports.
---------------------------------------------------------------------------

    This observed variance in XBRL and Inline XBRL compliance costs is 
likely attributable to variance in the number of discrete disclosures 
(including numbers, blocks of narrative text, checkboxes, etc.) 
contained in a tagged document, as well as the complexity of the 
specific disclosures to be tagged. Larger, more organizationally 
complex entities are likely to have more detailed and complex financial 
statements (including footnotes and schedules), and thus have more tags 
that they will need to apply to their documents, typically resulting in 
higher compliance costs (as described in further detail below in this 
section).\597\ To that end, a random

[[Page 23994]]

sample of annual reports on Form 10-K filed by Nasdaq-listed companies 
for fiscal year 2021 with a parallel sample for companies with a public 
float of $75 million or less showed approximately twice as many tagged 
Inline XBRL facts in the Nasdaq-listed sample.\598\
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    \597\ See, e.g., Bok Baik, et al., Organizational Complexity, 
Financial Reporting Complexity, and Voluntary Disclosure, presented 
at the Am. Acct. Ass'n 2020 Virtual Ann. Meeting and Conf. on 
Teaching & Learning (Aug. 13, 2020), https://doi.org/10.26226/morressier.5f0c7d3058e581e69b05d16d (finding ``firm complexity is 
positively associated with financial reporting complexity holding 
all else constant, consistent with the argument Guay et al. (2016) 
put forward'').
    \598\ Targeted samples were obtained using data from XBRL and 
Inline XBRL EDGAR filings through the Commission's internal 
Financial Statement Query Viewer tool. Tagged fact counts were 
obtained using ``Firm Complexity (Accounting Reporting Complexity) 
Data'' from XBRL Research, available at https://www.xbrlresearch.com/firm-complexity/ (last visited Mar., 8, 2023).
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Applicability and Variability of Structured Data Costs
    The affected documents that the Commission is proposing to be 
required to be structured in Inline XBRL under the proposed rule 
amendments consist of the same data types as the documents that are 
currently required to be structured in Inline XBRL (e.g., numerical 
data in the context of financial statements, numerical data in the 
context of tables (along with the tables themselves), simple text 
strings, longer textual narratives, numerical data nested within 
textual narratives, and checkboxes). Because Inline XBRL tagging 
software has already been developed to provide this functionality and 
is already in use by public reporting companies to fulfill Inline XBRL 
requirements, the Commission expects that vendors would update their 
Inline XBRL tagging software to accommodate the proposed Inline XBRL 
requirements for Form 1, Form CA-1, Form X-17A-5 Part III, Form 17-H, 
and the CCO report, if such requirements are adopted. Because some 
filers or submitters of these documents are not currently subject to 
Inline XBRL requirements, it is unlikely that they currently use the 
Inline XBRL compliance products offered by these vendors. However, as 
discussed further below in this section, some filers or submitters are 
affiliated with public reporting companies subject to existing Inline 
XBRL requirements, and would potentially be able to leverage their 
affiliates' Inline XBRL compliance software licenses or service 
agreements and experience in complying with the proposed Inline XBRL 
requirements.
    The Commission believes the compliance costs associated with the 
proposed structured data requirements, as adjusted for inflation, would 
likely decrease over time. Affected entities would likely comply with 
structuring requirements more efficiently after gaining experience over 
repeated filings, though such an effect would likely be diminished for 
affected entities that already have experience structuring similar data 
in other documents. Third-party vendors of structured data compliance 
software or services may decrease the prices of their products over 
time; the XBRL compliance costs reported in the 2018 AICPA survey of 
smaller operating companies reflect such a trend, as they represented a 
45% decline in average cost and a 69% decline in median cost from 
2014.\599\
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    \599\ See supra note 627.
---------------------------------------------------------------------------

    The Commission expects the direct relationship between filer size 
and compliance costs described earlier in this section would apply to 
Inline XBRL compliance costs that would arise under the proposed rule 
amendments, and would be particularly relevant to Form X-17A-5 Part III 
filers (which include broker-dealers--including OTC derivatives 
dealers--and non-bank SBS Entities) for two reasons. First, like public 
operating companies, Form X-17A-5 Part III filers would be tagging 
financial statements (including footnotes and schedules) in Inline XBRL 
under the proposal.\600\ Second, like public operating companies, Form 
X-17A-5 Part III filers vary widely in size. For example, on December 
31, 2021, approximately 300 broker-dealers reported over $100 million 
in total assets, while approximately 1,600 broker-dealers reported less 
than $1 million in total assets.\601\ Thus, as discussed in further 
detail later in this section, the Commission expects the Inline XBRL 
compliance costs for Form X-17A-5 Part III would vary inversely with 
size, as has been observed for public operating companies.\602\
---------------------------------------------------------------------------

    \600\ In addition to financial statements and footnotes, Form X-
17A-5 Part III filers would also need to tag their auditor's reports 
and other annual reports in Inline XBRL under the proposed rules. By 
contrast, public operating companies only need to tag auditor 
identification information in their auditor's reports. See Exchange 
Act Release No. 93701 (Dec. 2, 2021), 86 FR 70027, 70031 (Dec. 9, 
2021).
    \601\ We derive the broker-dealer financial data in this 
economic analysis from FOCUS Reports that broker-dealers filed 
through FINRA's eFOCUS system for the fiscal period ending Dec. 31, 
2021. See supra note 588.
    \602\ See supra notes 627 and 628 and accompanying text for 
additional detail on this observed correlation.
---------------------------------------------------------------------------

    We expect the correlation between entity size and tagging cost to 
be less relevant to the other populations of entities that would be 
subject to Inline XBRL requirements under the proposal, because those 
populations are more limited in number and in the variation of size and 
complexity across entities within those populations. For example, Form 
CA-1 is filed by clearing agencies, including registered and exempt 
clearing agencies; there are currently 12 such entities in 
operation.\603\ Form 1 is filed by national securities exchanges, of 
which there are 24 (and by exempt exchanges, of which there are 
currently none).\604\ The CCO report is submitted by SBS Entities, of 
which there are 50.\605\
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    \603\ See supra section IX.C.3.
    \604\ See supra section IX.C.1.
    \605\ See supra section IX.C.12.
---------------------------------------------------------------------------

    Some entities that would file or submit the documents to be 
structured in Inline XBRL under the proposal may be affiliated with 
entities that are subject to Inline XBRL requirements in other filings. 
For example, 17 of the 24 national securities exchanges are affiliated 
with public companies that file financial statements and cover page 
information in EDGAR in Inline XBRL.\606\ In addition, of the largest 
20 broker-dealers by asset size as of December 31, 2021, 18 were 
affiliated with public companies that file financial statement and 
cover page information in Inline XBRL on EDGAR.\607\ To the extent that 
an affected entity shares compliance systems with an affiliated 
company, or could otherwise leverage the affiliated company's 
processes, licenses, service agreements, and/or experience in complying 
with Inline XBRL requirements, the affected entity's compliance costs 
incurred could likely be mitigated in part.
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    \606\ See Self-Regulatory Organization Rulemaking, available at 
https://www.sec.gov/rules/sro.shtml.
    \607\ This data is derived from FOCUS Reports filed through 
FINRA's eFOCUS system for the fourth quarter of 2021. See supra note 
588.
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    As noted above, the Commission is proposing specific structured 
data languages for each Proposed Structured Document, rather than 
leaving the structured data language requirement open-ended (i.e., 
requiring only that the Proposed Structured Document be provided in a 
structured, machine-readable data language). A cost associated with 
this approach is that it would constrain the flexibility that filers or 
submitters of a Proposed Structured Document would otherwise have in 
preparing the Proposed Structured Document. For instance, some filers 
or submitters of a proposed custom XML document may already be using 
Inline XBRL to structure similar data for internal business purposes, 
such as through the use of ERP systems, and may therefore have 
preferred to use Inline XBRL rather than the required

[[Page 23995]]

custom XML data language for that document.\608\ In addition, proposing 
a specific structured data language for each Proposed Structured 
Document may extend the amount of time it would take were the 
Commission to change the particular structured data language to be 
used, such as to accommodate any future developments in which newly 
developed structured data languages prove to be more apt for the 
disclosures in question.
---------------------------------------------------------------------------

    \608\ See supra note 570 (discussing the prevalence of XBRL 
integration in ERP systems).
---------------------------------------------------------------------------

    For Form 1, Form CA-1, Form X-17A-5 Part III, Form 17-H, and the 
CCO reports, the proposed approach of requiring Inline XBRL for some 
parts of the document and custom XML for other parts of the document 
would entail drawbacks for users of the information (including 
Commission staff and market participants). Specifically, data users 
would be unable to incorporate the Inline XBRL disclosures on a given 
filing or submission into the same datasets and applications as the 
custom XML disclosures on that filing, and would be unable to run 
analyses that incorporate both types of information without undertaking 
data conversion processes that are frequently burdensome and imprecise. 
Similarly, any technical validations programmed into EDGAR would be 
unable to check for any inappropriate inconsistencies between 
disclosures on Inline XBRL portions and disclosures on custom XML 
portions of a given filing, thus reducing the benefit of improved data 
quality that would be likely to result from structured data 
requirements.
Structured Data Cost Estimates: Form X-17A-5 Part III and Form 17-H
    With respect to specific estimated cost ranges for Form X-17A-5 
Part III and Form 17-H filers to structure their filings under the 
proposal, we believe the aforementioned AIPCA survey, which polled 
roughly 1,000 small reporting companies and found a median and average 
annual cost of XBRL filing of $2,500 and $5,850, respectively, is 
likely relevant to the majority of Form X-17A-5 Part III filers. In 
2017, the 1,000 smallest reporting companies by asset size reported 
total assets of approximately $8 million or less. As of December 31, 
2021, approximately 70% of Form X-17A-5 Part III filers fell within 
that $8 million total asset size threshold. For these smaller Form X-
17A-5 Part III filers, we estimate the approximate median cost of 
tagging financial statements on Form X-17A-5 Part III by using the 
median annual cost estimate from the AICPA survey ($2,500) and dividing 
it by four, because the respondents in the AICPA survey prepared tagged 
financial statements on a quarterly rather than annual basis. Using the 
resulting figure ($625) as a midpoint and establishing lower and upper 
bounds at 50% of the midpoint, we estimate smaller Form X-17A-5 Part 
III filers would incur an approximate median per filing cost of $310-
$940 to structure their financial statements in Inline XBRL.\609\
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    \609\ We round the estimated structured data cost ranges in this 
section to the nearest $10 because they represent approximations 
rather than exact costs. The estimated cost ranges in this section 
encompass internal time costs for preparing the structured reports 
(e.g., applying the relevant tag from the XBRL taxonomy or custom 
XML schema to the relevant disclosure) and external monetary costs 
(e.g., licensing structured data compliance software and/or services 
from third-party vendors). For annualized population-wide 
corollaries to the structured data cost estimates in this section, 
see supra section IX.D.
---------------------------------------------------------------------------

    For the larger Form X-17A-5 Part III filers (i.e., those with total 
assets greater than $8 million), we believe the higher median 
compliance cost from the Nasdaq survey ($7,500 per quarter) would be a 
more suitable approximation. Using that median compliance cost as a 
midpoint would yield an estimate of $3,750-$11,250 per filing for 
larger Form X-17A-5 Part III filers to structure their financial 
statements. However, some larger Form X-17A-5 Part III filers are 
subsidiaries of, or otherwise affiliated with, public reporting 
companies that are already required to tag their financial 
statements.\610\ We expect these filers would incur significantly lower 
costs to tag their financial statements than other large Form X-17A-5 
Part III filers, because they would likely be able to leverage the 
software licenses and/or service agreements and the Inline XBRL tagging 
processes and experience of their affiliates. Consequently, we estimate 
these Form X-17-5 Part III filers would incur 25% of the tagging cost 
of other large Form X-17A-5 Part III filers, resulting in an annual 
estimated cost of $940-$2,820 to tag their financial statements on Form 
X-17A-5 Part III.
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    \610\ We have identified 173 such broker-dealers, including 18 
of the largest 20 broker-dealers by asset size, using broker-dealer 
FOCUS Reports and XBRL data through the Commission's Financial 
Statement Query Viewer for the fiscal period ending Dec. 31, 2021.
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    In addition to the financial statements, footnotes, and schedules, 
Form X-17A-5 Part III also requires a series of reports (including 
accountant's reports, compliance reports, exemption reports, and 
supplemental reports).\611\ Under the proposal, Form X-17A-5 Part III 
filers would be required to tag these reports in Inline XBRL. 
Typically, these reports consist of a short series of narrative text 
blocks with limited nested details, so tagging them in Inline XBRL 
would likely be significantly less costly than tagging the financial 
statements and schedules in Inline XBRL.\612\ We therefore estimate the 
approximate cost of tagging these reports would amount to 5% of the 
cost to tag financial statements and schedules, yielding a total 
estimated Inline XBRL tagging cost per filing of approximately $330-
$990 for smaller Form X-17A-5 Part III filers; $3,940-$11,820 for 
larger Form X-17A-5 Part III filers that are not affiliated with public 
reporting companies, and $990-$2,960 for larger Form X-17A-5 Part III 
filers that are affiliated with public reporting companies.\613\
---------------------------------------------------------------------------

    \611\ See supra section IV.A.
    \612\ The ANC broker-dealer supplemental reports, which average 
approximately 100 pages in length, are an exception. Only five 
filers (the five ANC broker-dealers) are required provide these 
reports. See supra section IV.A.1.
    \613\ See also supra section IX.D.9.a (discussing estimated 
burdens associated with structuring Form X-17A-5 Part III 
information under the proposed amendments).

       Structured Data Compliance Costs for Form X-17A-5 Part III
------------------------------------------------------------------------
                                                         Estimated per
                                                             filing
                      Filer type                        structuring data
                                                        compliance costs
------------------------------------------------------------------------
Smaller broker-dealers...............................          $330-$990
Larger broker-dealers and non-bank SBS Entities that      $3,940-$11,820
 are not affiliated with public reporting companies..
Larger broker-dealers and non-bank SBS Entities that         $990-$2,960
 are affiliated with public reporting companies......
------------------------------------------------------------------------


[[Page 23996]]

    A subset of larger Form X-17A-5 Part III filers also file Form 17-H 
and would thus be required to tag their quarterly financial statements 
in addition to their annual financial statements.\614\ However, unlike 
Form X-17A-5 Part III, Item 4 of Form 17-H permits filers to omit the 
statement of cash flows and the notes to the financial statements. 
Thus, we use considerably lower Inline XBRL cost estimates for Form 17-
H than for Form X-17A-5 Part III. We begin with the same cost estimate 
ranges for structuring financial statements--but not schedules or 
supplemental reports, because Form 17-H does not require them--on Form 
X-17A-5 Part III: $3,750-$11,250 per filing for larger broker-dealers 
that are unaffiliated with public reporting companies, and $940-$2,820 
per filing for larger broker-dealers that are affiliated with public 
reporting companies.\615\ We then reduce the estimated costs by 30% to 
reflect the omission of notes and schedules, and further reduce the 
estimated costs by 30% to reflect the omission of the statement of cash 
flows. This yields an estimated cost of $350-$1,050 for Form 17-H 
filers that are unaffiliated with public reporting companies, and $100-
$300 for Form 17-H filers that are affiliated with public reporting 
companies.\616\
---------------------------------------------------------------------------

    \614\ See supra section IX.C.10. We do not include smaller Form 
X-17A-5 Part III filers (i.e., those with $8 million or fewer in 
total assets) in this discussion because they would not meet the 
asset threshold for Form 17-H filing requirements. See supra note 
238 (discussing the thresholds that determine whether broker-dealers 
are subject to Form 17-H filing requirements).
    \615\ We have identified 89 Form 17-H filers that are affiliated 
with public reporting companies that structure Commission filings in 
Inline XBRL.
    \616\ See also supra section X.D.10 (discussing estimated 
burdens associated with structuring Form 17-H information under the 
proposed amendments).
---------------------------------------------------------------------------

    Other portions of Form 17-H (namely, the facing page and the 
material associated positions and holdings disclosure) are currently 
structured in a custom XML data language specific to Form 17-H, and 
this would remain the case under the proposal. Because nearly all 
broker-dealers subject to Form 17-H filing requirements currently file 
Form 17-H via EDGAR, they are already submitting this information in 
that custom XML language.\617\ Thus, we do not believe it is relevant 
or appropriate to include an approximate custom XML structuring cost 
estimate for Form 17-H.
---------------------------------------------------------------------------

    \617\ As of Sept. 30, 2022, approximately 238 of the 245 broker-
dealers that were then subject to Form 17-H filing requirements used 
EDGAR to file Form 17-H. See supra section IV.B.

             Structured Data Compliance Costs for Form 17-H
------------------------------------------------------------------------
                                                         Estimated per
                      Filer type                       filing structured
                                                           data costs
------------------------------------------------------------------------
Larger broker-dealers that are not affiliated with           $350-$1,050
 public reporting companies..........................
Larger broker-dealers that are affiliated with public          $100-$300
 reporting companies.................................
------------------------------------------------------------------------

Structured Data Cost Estimates: Covered SRO Forms and Rule 19b-4(e) 
Information
    The Covered SRO Forms (Form CA-1, Form 1, Form 1-N, Form 15A, Form 
X-17A-19) and the information required to be posted under Rule 19b-4(e) 
would require some or all of the information reported on the forms or 
postings to be provided in a structured data language. Here, we provide 
estimated ranges for the approximate cost that affected entities would 
incur to structure Forms CA-1, Form 1, and the Rule 19b-4(e) 
information. With respect to Form X-17A-19, due to the brevity and 
simplicity of that Form, we anticipate SROs would not structure their 
disclosures in custom XML themselves, but would instead simply input 
their disclosures in the fillable web form that EDGAR would provide. 
Thus, we do not believe a cost estimate for the structuring of Form X-
17A-19 in custom XML would be relevant or appropriate to include. For 
the same reason, we have not included estimated custom XML structuring 
cost ranges for the facing pages to Form CA-1, Form 1, Form 1-N, and 
Form 15A. Because the facing pages of Form 1-N and Form 15A would be 
the only structured portion of those forms, we have not provided any 
estimated structuring cost ranges for them.
    Clearing agencies filing Form CA-1 would be required to tag their 
financial statements and a series of schedules containing largely 
narrative disclosures in Inline XBRL. For the financial statements, 
because clearing agencies likely operate at a higher level of 
complexity than the median Nasdaq-listed reporting company, we estimate 
a 25% higher cost than the cost reported in the Nasdaq survey, 
resulting in an approximate per filing cost estimate of $4,690-$14,070 
for clearing agencies to tag financial statements in Inline XBRL. For 
the disclosures other than financial statements, the disclosure 
schedules on Form CA-1 to be tagged in Inline XBRL are considerably 
lengthier than the supplemental reports on Form X-17A-5 Part III 
discussed above. We therefore estimate tagging the non-financial 
statement disclosures on Form CA-1 would add 25% of the costs to tag 
financial statements in Inline XBRL, resulting in a median per filing 
cost estimate of approximately $1,180-$3,530 for clearing agencies to 
tag the non-financial statement disclosures on Form CA-1 in Inline 
XBRL. This results in a total estimated Inline XBRL tagging cost of 
$5,870-$17,600 per filing on Form CA-1.\618\
---------------------------------------------------------------------------

    \618\ See supra section IX.D.5 (discussing estimated burdens 
associated with Form CA-1 under the proposed amendments).
---------------------------------------------------------------------------

    Clearing agencies would be required to structure other Form CA-1 
disclosures using a custom XML data language specific to that Form. The 
Commission recently estimated that the structuring of disclosures of 
Form N-CR event reports in custom XML would cost approximately $555 per 
filing. Here, the Form CA-1 disclosures to be structured in custom XML 
are lengthier than the Form N-CR disclosures that money market funds 
would structure in custom XML under that proposal, so we estimate an 
approximate cost per filing of $560-$1,670 (using a 50% increase over 
the Form N-CR estimate) that clearing agencies would structure the Form 
CA-1 schedules in custom XML.\619\ We therefore estimate that the total 
cost of structuring Form CA-1 (including Inline XBRL and custom XML 
disclosures) would amount to $6,430-$19,270 per filing.\620\
---------------------------------------------------------------------------

    \619\ See Investment Company Act Release No. 34441 (Dec. 15, 
2021), 87 FR 7248, 7332 (Feb. 8, 2022).
    \620\ See id.
---------------------------------------------------------------------------

    For national securities exchanges, we estimate the cost to tag 
financial statements on Form 1 in Inline XBRL would be similar to the 
cost that large broker-dealer affiliates of reporting companies would 
incur to tag financial

[[Page 23997]]

statements on Form X-17A-5 Part III (estimated above at $940-$2,820), 
because most exchanges are affiliated with reporting companies.\621\ 
However, Form 1 also requires exchanges to provide balance sheets and 
income statements for its affiliates and subsidiaries, so we are 
increasing that estimate by 50%, yielding an estimated median per 
filing cost of $1,410-$4,230 that exchanges affiliated with reporting 
companies would incur to tag financial statements on Form 1 in Inline 
XBRL.\622\ For national securities exchanges that are not affiliated 
with reporting companies, we similarly base our Inline XBRL cost 
estimate on large broker-dealers unaffiliated with reporting companies, 
but with a 50% increase to account for the additional balance sheets 
and income statements for the exchange's affiliates and subsidiaries. 
This results in an estimated median per filing cost of $5,630-$16,880 
that exchanges unaffiliated with reporting companies would incur to tag 
financial statements on Form 1 in Inline XBRL.\623\
---------------------------------------------------------------------------

    \621\ See supra note 638.
    \622\ See supra note 455 and accompanying text for a description 
of the burdens associated with tagging financial statements on Form 
1.
    \623\ See id.
---------------------------------------------------------------------------

    Exchanges would also tag their manner of operation disclosure in 
Inline XBRL under the proposal.\624\ This disclosure would consist of a 
series of tagged narrative text blocks, and could also include some 
quantitative amounts (such as those related to fee disclosures) that 
would also be tagged. We estimate an additional 10% cost that exchanges 
would incur to tag their manner of operation disclosure, resulting in a 
total estimated compliance cost of $1,550-$4,650 per filing for 
exchanges affiliated with reporting companies and $6,200-$18,580 for 
exchanges unaffiliated with reporting companies would incur to tag Form 
1 in Inline XBRL.\625\ Also, like clearing agencies, exchanges would be 
required to structure other portions of Form 1 in a custom XML data 
language specific to that Form.\626\ Because these requirements are 
similar, we use the same custom XML structuring cost estimate of $560-
$1,670 here, resulting in a total per filing cost of structuring Form 1 
(including Inline XBRL and custom XML) of $2,110-$6,320 for exchanges 
affiliated with reporting companies and $6,760-$20,250 for exchanges 
unaffiliated with reporting companies.\627\
---------------------------------------------------------------------------

    \624\ This proposed tagging requirement would not include the 
copy of the users' manual. See supra section II.A.3.
    \625\ See id.
    \626\ See supra note 458 and accompanying text for a description 
of the burdens associated with structuring portions of Form 1 in a 
custom XML data language.
    \627\ See also supra section IX.D.2 (discussing estimated 
burdens associated with structuring disclosures filed on Form 1 
under the proposed amendments).
---------------------------------------------------------------------------

    By contrast, for the Rule 19b-4(e) information that exchanges would 
post on their websites in a custom XML data language (i.e., schema) 
specific to that information, exchanges would not have the benefit of a 
fillable web form, and would thus be required to structure their 
disclosures in custom XML themselves. Rule 19b-4(e) information 
consists only of a short series of disclosures that are mostly text 
strings, so we have estimated a per response cost for structuring, 
rendering, and posting Rule 19b-4(e) information that is 50% lower than 
the Commission's aforementioned estimate for structuring Form N-CR in a 
previous proposal. This yields an approximate cost of $140-$420 that 
exchanges would incur to structure each Rule 19b-4(e) website posting 
in custom XML.\628\
---------------------------------------------------------------------------

    \628\ See also supra section IX.D.6 (discussing estimated 
burdens associated with structuring, rendering, and posting Rule 
19b-4(e) information under the proposed amendments).

Structured Data Compliance Costs for Covered SRO Forms and Rule 19b-4(e)
                               Information
------------------------------------------------------------------------
                                                         Estimated per
                                                         filing/posting
         Form/posting             Filers/submitters     structured data
                                                             costs
------------------------------------------------------------------------
Form CA-1.....................  Clearing agencies....     $6,430-$19,270
Form 1........................  National securities       $6,760-$20,250
                                 exchanges that are
                                 not affiliated with
                                 public reporting
                                 companies.
Form 1........................  National securities        $2,110-$6,320
                                 exchanges that are
                                 affiliated with
                                 public reporting
                                 companies.
Form X-17A-19.................  National securities                  N/A
                                 exchanges and
                                 registered national
                                 securities
                                 associations.
Form 1-N......................  Securities Futures                   N/A
                                 Product Exchanges.
Form 15A......................  Registered national                  N/A
                                 securities
                                 associations.
Rule 19b-4(e) Information.....  National securities            $140-$420
                                 exchanges.
------------------------------------------------------------------------

Structured Data Cost Estimates: Valuation Dispute Notices and CCO 
Reports
    Under the proposal, SBS Entities would be required to structure the 
valuation dispute notices required under Exchange Act Rule 15fi-3(c) in 
a custom XML data language specific to those notices, and they would 
also be required to structure the CCO report required under Exchange 
Act Rule 15fk-1(c)(2)(ii)(A) in Inline XBRL. In addition, non-bank SBS 
Entities would be required to file Form X-17A-5 Part III and related 
annual filings in Inline XBRL; the structuring costs associated with 
that form are discussed above.
    For Rule 15fi-3(c) valuation dispute notices, which are not 
required to include specific fields, we expect SBS Entities would use 
the fillable web form that EDGAR would provide rather than structure 
the disclosures in the custom XML data language themselves.\629\ Thus, 
we have not included a cost estimate for the custom XML structuring of 
the valuation dispute notices.
---------------------------------------------------------------------------

    \629\ See supra section V.C.
---------------------------------------------------------------------------

    For the Inline XBRL tagging of the CCO report, those reports 
consist of a series of narrative text blocks, some of which could 
contain nested quantitative values (such as the description of 
financial resources set aside for compliance). This content is similar 
to the content of the narrative disclosures on Form CA-1 that clearing 
agencies would structure in Inline XBRL under the proposed amendments, 
which we estimate as $1,180 to $3,530. Most SBS Entities, however, are 
affiliated with public reporting companies that already structure 
disclosures in Inline XBRL.\630\ For those entities, which could 
leverage the Inline XBRL compliance experience, processes, software, 
and/or service

[[Page 23998]]

agreements that their affiliates have already implemented, we estimate 
a cost range of $300 to $880, which represents 25% of the cost incurred 
by SBS Entities that are not affiliated with public reporting 
companies.\631\
---------------------------------------------------------------------------

    \630\ Of the 50 entities that have submitted applications for 
registration as an SBS Entity, 41 are affiliated with public 
companies that file financial statement and cover page information 
in Inline XBRL. See List of Registered Security-Based Swap Dealers 
and Major Security-Based Swap Participants, available at https://www.sec.gov/tm/List-of-SBS-Dealers-and-Major-SBS-Participants.
    \631\ See also supra section IX.D.14 (discussing estimated 
burdens associated with structuring CCO reports under the proposed 
amendments).

 Structured Data Compliance Costs for Valuation Dispute Notices and CCO
                                 Reports
------------------------------------------------------------------------
                                                         Estimated per
                                                         filing/notice
             Form                 Filers/submitters     structured data
                                                             costs
------------------------------------------------------------------------
Valuation Dispute Notices.....  SBS Entities.........                N/A
CCO Reports...................  SBS Entities               $1,180-$3,530
                                 unaffiliated with
                                 public reporting
                                 companies.
CCO Reports...................  SBS Entities                   $300-$880
                                 affiliated with
                                 public reporting
                                 companies.
------------------------------------------------------------------------

Structured Data Cost Estimates: Initial Implementation Costs
    The structured data cost estimates discussed above relate to the 
ongoing costs of structuring various disclosures in Inline XBRL and in 
custom XML-based data languages. For affected entities that do not have 
structured data compliance experience, and are not affiliated with 
entities that have structured data compliance experience, we estimate 
compliance costs would increase by 50% in the first year of the 
proposed structured data requirements. We anticipate these initial 
implementation costs, which could include the training of new staff and 
the establishing of new compliance procedures, would apply only to 
those filers or submitters that do not fully outsource their structured 
data preparation requirements to a third-party tagging service provider 
(i.e., all filers or submitters other than smaller broker-dealers, 
which we expect would outsource their structured data preparation 
requirements like many smaller reporting companies do).\632\
---------------------------------------------------------------------------

    \632\ See supra note 568.
---------------------------------------------------------------------------

    The impact of this initial implementation cost overall is reflected 
in the following chart:

                Structured Data Initial Compliance Costs
------------------------------------------------------------------------
                                                  Estimated per response
                      Form                          initial structured
                                                        data costs
------------------------------------------------------------------------
Form X-17A-5 Part III (for larger broker-dealers  $5,910-$17,730 (first
 and non-bank SBS Entities unaffiliated with       year).
 public reporting companies).
Form CA-1.......................................  $9,650-$28,910 (first
                                                   year).
Form 1 (for exchanges unaffiliated with public    $10,140-$30,380 (first
 reporting companies).                             year).
Rule 19b-4(e) information.......................  $210-$630 (first
                                                   response).
CCO Report (for SBS Entities unaffiliated with    $1,770-$5,300.
 public reporting companies).
------------------------------------------------------------------------

    Form 17-H is excluded from the table above, because Form 17-H 
filers also file Form X-17A-5 Part III. Including initial 
implementation costs for structuring financial statements on Form 17-H 
would be duplicative of the initial implementation costs for 
structuring financial statements on Form X-17A-5 Part III, which are 
reflected in the table.\633\
---------------------------------------------------------------------------

    \633\ See 17 CFR 240.15Fk-1(c)(2)(i)(E).
---------------------------------------------------------------------------

    For Rule 19b-4(e) information, we anticipate the initial 
implementation costs would apply only to the first posting, and not to 
subsequent postings during the first year of compliance. The content 
required by Rule 19b-4(e) is limited to less than 10 individual items 
of disclosure regarding the newly traded derivative securities product 
for each posting. We expect the process of structuring, rendering, and 
posting the first response would entail additional implementation time 
to map the associated (and commensurately simple) custom XML schema to 
the information regarding the new derivative securities product traded 
on the exchange; we expect subsequent responses would entail a less 
burdensome process of applying the newly mapped schema to each 
derivative securities product.\634\
---------------------------------------------------------------------------

    \634\ See also supra section IX.D.6 (discussing estimated 
burdens associated with structuring, rendering, and posting Rule 
19b-4(e) information).
---------------------------------------------------------------------------

D. Efficiency, Competition, and Capital Formation

    Mandated electronic submission and posting will increase the 
timeliness of public access to the affected documents that are made 
publicly available. Insofar as market participants use the information 
in these documents, easier or quicker access could result in lower 
search costs or more efficient decision making. These benefits are 
potentially magnified during disruptive events, such as a pandemic, 
when investors may place a premium on electronic and timely access to 
information. Furthermore, the efficiency benefits of electronic 
submission or posting may be augmented by the proposed structured data 
requirements, as structured data requirements have been observed to 
decrease information asymmetries, increase liquidity, and reduce the 
cost of capital.\635\ The proposed structured data requirements for 
those affected documents that are used by information intermediaries 
(such as financial analysts and data aggregators) may also increase 
competition and encourage

[[Page 23999]]

market entry by reducing their information processing costs.\636\
---------------------------------------------------------------------------

    \635\ See, e.g., N. Bhattacharya, Y.J. Cho, J.B. Kim, Leveling 
the Playing Field Between Large and Small Institutions: Evidence 
from the SEC's XBRL Mandate, 93(5) Account. Rev. 51-71 (2018); B. 
Li, Z. Liu, W. Qiang, and B. Zhang, The Impact of XBRL Adoption on 
Local Bias: Evidence from Mandated U.S. Filers, 39(6) J. Account. 
Pub. Pol. (2020); W. Sassi, H. Ben Othman, and K. Hussainey, The 
Impact of Mandatory Adoption of XBRL on Firm's Stock Liquidity: A 
Cross-Country Study, 19(2) J. Fin. Report. Account. 299-324 (2021); 
C. Ra and H. Lee, XBRL Adoption, Information Asymmetry, Cost of 
Capital, and Reporting Lags, 10 Business, 93-118 (2018); S.C. Lai, 
Y.S. Lin, Y.H. Lin, and H.W. Huang, XBRL Adoption and Cost of Debt, 
Intl. J. Account. Info. Mgmt. (2015); Y. Cong, J. Hao, and L. Zou, 
The Impact of XBRL Reporting on Market Efficiency, 28(2) J. Info. 
Sys. 181-207 (2014).
    \636\ See supra section X.C.1.b.
---------------------------------------------------------------------------

    Moreover, as mandated electronic submission or posting leads to 
lower ongoing, marginal costs for reporting entities, compared to non-
electronic submission, the submission or posting process may become 
more efficient, especially over the medium and longer term. In 
addition, electronic submission or posting standards in the proposed 
amendments are expected to make the submission or posting process more 
efficient by making it easier and less costly for reporting entities to 
assure timely receipt and/or availability of the submitted information. 
We expect, however, that any such efficiency gains would be small. The 
efficiency gains that would arise under the proposed rule would likely 
be further mitigated in the near term because, as noted, the proposed 
Inline XBRL requirements would impose initial implementation costs on 
affected entities subject to the requirements that do not have prior 
experience with Inline XBRL.
    As discussed above, similar implementation costs are unlikely to 
arise for most of the proposed EDGAR custom XML forms, because EDGAR 
would provide a fillable web form in which affected entities would be 
able to input their disclosures without having to structure them in the 
relevant custom XML data language. By contrast, implementation costs 
are likely to arise for SROs subject to the proposed custom XML schema 
requirement for posting Rule 19b-4(e) information, because those would 
be posted on the SROs' websites rather than filed through EDGAR; 
however, due to the relatively small amount of data to be structured, 
rendered, and posted for each new derivative securities product, we 
expect the cost of structuring each Form 19b-4(e) would be lower than 
the cost of structuring Commission filings in Inline XBRL.\637\
---------------------------------------------------------------------------

    \637\ See supra sections IX.D.6 and X.C.2.b.
---------------------------------------------------------------------------

    The costs and benefits of electronic submission or posting under 
the proposed rule may have differential impacts on some categories of 
reported entities, resulting in potential competitive effects. To the 
extent that the EDGAR cost has a fixed component, smaller entities that 
do not have experience with EDGAR may be at a relative competitive 
disadvantage to larger entities. In addition, smaller registrants might 
use third party service providers to meet the requirements of the 
proposed amendments. The use of these providers could reduce the costs 
of EDGAR access, and reduce the competitive effects of the 
requirements.\638\ In addition, many of the reporting entities already 
are familiar with electronic submission in EDGAR due to changes in 
market practices and an increase in electronic submission due to the 
pandemic.
---------------------------------------------------------------------------

    \638\ The proposed rule might increase demand for third party 
services, but is unlikely to have significant effects on efficiency, 
competition, or capital formation in these markets.
---------------------------------------------------------------------------

    For the proposed Inline XBRL requirements, it is less likely that 
the associated compliance costs would be fixed, because the documents 
filed or submitted by smaller entities (such as smaller broker-dealers) 
are likely shorter and less complex than documents filed or submitted 
by larger entities (such as larger broker-dealers), and would thus 
require less time and sophistication to tag in Inline XBRL. By 
contrast, compliance costs for the proposed custom XML requirements are 
more likely to be fixed, because with the exception of Form 1 and Form 
CA-1 filers and SROs posting Rule 19b-4(e) information, we expect 
affected filers or submitters to comply with such requirements by 
completing fillable web forms rather than structuring their disclosures 
in custom XML.\639\
---------------------------------------------------------------------------

    \639\ See supra text accompanying note 624.
---------------------------------------------------------------------------

    To the extent that market practices are already consistent with the 
Updated Staff Statement, many of the expected effects of the proposed 
amendments on efficiency, competition, and capital formation may be 
mitigated. For example, for broker-dealer registrants that file reports 
pursuant to Rule 17a-5 electronically, the efficiency gains of 
electronic submission will be mitigated, and the effects of the 
proposed amendments will be limited to those associated with the use of 
structured data.

E. Reasonable Alternatives

1. Exempt Certain Entities or Disclosures From Structured Data 
Requirements
    As an alternative, the Commission could change the scope of the 
proposed structured data requirements (e.g., Inline XBRL tagging 
requirements for Form X-17A-5 Part III, Form 17-H, Form CA-1, Form 1, 
and the CCO reports), by exempting certain subsets of reporting 
entities or disclosures. For example, the Commission could exempt some 
broker-dealers from the requirement to structure Form X-17A-5 Part III 
and related annual filings based on size (e.g., total reported assets) 
or other characteristics. Potential exemption thresholds could be 
broker-dealers with $500,000 or less in total assets (which would have 
exempted 1,252, or 38%, of registered broker-dealers as of December 31, 
2021), or broker-dealers with $250,000 or less in total annual revenues 
(which would have exempted 1,073, or 32%, of registered broker-dealers 
as of December 31, 2021).\640\ Such thresholds would prevent smaller 
broker-dealers from incurring the compliance costs associated with the 
proposed Inline XBRL tagging requirements for Form X-17A-5 Part III. 
Another alternative would be to limit the Inline XBRL tagging 
requirements only to those broker-dealers that carry customer or 
broker-dealer accounts and receive or hold funds or securities for 
customers (which would have exempted 3,319, or 95%, of registered 
broker-dealers, as of December 31, 2021). This approach may be useful 
in targeting the Inline XBRL requirements towards those broker-dealers 
that may have the most impact on financial markets, and reducing 
compliance costs for all other broker-dealers. However, the Commission 
believes any cost savings arising from the exemption of certain subsets 
of reporting entities or disclosures from the Inline XBRL requirements 
may not justify the reduction in informational benefits to data users 
such as Commission staff and market participants, who would be required 
to manually collect unstructured data from the exempted reporting 
entities or disclosure items in order to analyze it (or rely on and 
incur costs to third parties to do so).
---------------------------------------------------------------------------

    \640\ See supra note 588.
---------------------------------------------------------------------------

2. Require Structured Data on Form 1-N, Form 15A, and ANE Exception 
Notices to Same Extent as Proposed Structured Documents
    As another alternative, the Commission could require structuring 
Form 1-N, Form 15A, and the ANE Exception Notices to the same extent as 
comparable Proposed Structured Documents. For example, the Commission 
could require Form 1-N and Form 15A, which are similar to Form CA-1 and 
Form 1 in that they contain substantive disclosures in exhibits to an 
execution page, to be structured using a mix of Inline XBRL and custom 
XML data languages. The Commission could also require ANE Exception 
Notices, which contain only a limited number of data points, to be 
structured using a custom XML data language. Structuring these 
documents would extend the analytical capabilities associated the other 
structured data requirements in this proposal to these additional 
documents. However, the

[[Page 24000]]

Commission believes the limited number of filers and filings (for Form 
1-N and Form 15A) and the limited number of data points on each 
document (for the ANE Exception Notices) would limit the potential 
utility of functionality enabled by structured data (such as large-
scale comparisons across populations of entities). Given this 
limitation on expected benefits, the Commission believes the additional 
structuring requirements would not be justified.
3. Replace Inline XBRL Requirements With Custom XML Requirements or 
Vice Versa
    As another alternative, the Commission could replace the proposed 
custom XML requirements with Inline XBRL requirements for some or all 
of the relevant Proposed Structured Documents (which include Form X-
17A-5 Part III, Form 17-H, Form CA-1, Form 1, Form 1-N, Form 15A, Form 
X-17A-19, Rule 19b-4(e) information, notices of security-based swap 
valuation disputes pursuant to Rule 15fi-3(c), and CCO reports). For 
example, rather than requiring Inline XBRL structuring for certain of 
the affected documents, and custom XML structuring for other affected 
documents, the Commission could require Inline XBRL for all of the 
affected documents proposed to be structured (i.e., require Form X-17A-
19, the execution pages of Forms 1-N and 15A, the notice required by 
Rule 15fi-3(c) under the Exchange Act, the information required to be 
posted under Rule 19b-4(e), and the entirety of the other Covered SRO 
Forms, Form X-17A-5 Part III, and Form 17-H, to be provided using 
Inline XBRL rather than using custom XML-based data languages).
    This alternative could benefit users of the data in that the 
reported information could be used compatibly (e.g., using the same 
software tools) with the disclosures in the other affected documents 
(and with existing Inline XBRL data). However, the alternative would 
also impose the costs and complexity associated with Inline XBRL 
tagging on Forms and notices and reports that are each limited to a 
constrained set of non-financial, non-narrative data elements or are 
otherwise less suitable for Inline XBRL, thus potentially making the 
structured disclosures more burdensome to prepare and use than is 
called for by these particular disclosures.\641\ The Commission 
believes the difficulties in preparing and using such data under an 
Inline XBRL requirement would likely not be justified by any 
compatibility benefits that would arise from such an alternative.
---------------------------------------------------------------------------

    \641\ See supra section VII.A.
---------------------------------------------------------------------------

    The Commission could alternatively replace the proposed Inline XBRL 
requirements with custom XML requirements for some or all of the 
relevant Proposed Structured Documents (which include Form X-17A-5 Part 
III, Form 17-H, Form CA-1, Form 1, and CCO reports). However, while 
this could lead to benefits such as smaller file sizes and lower 
compliance burdens (to the extent entities would input disclosures into 
fillable forms rather than structuring the disclosures themselves), 
Inline XBRL is more technically suited to handle financial statement 
disclosures (and was originally designed to so), as well as extended 
narrative discussions (including those with individual values nested 
within the discussions). Accordingly, the Commission believes Inline 
XBRL as proposed for these forms is appropriate.
4. Require Structured Data Languages Other Than Inline XBRL and Custom 
XML
    As another alternative, the Commission could require structured 
data languages other than Inline XBRL and custom XML for some or all of 
the affected documents. For example, the Commission could require other 
variants of XBRL, such as XBRL-CSV (``Comma-Separated Values'') or 
XBRL-JSON (``JavaScript Object Notation''). For example, we are aware 
that public commenters in other rulemakings have indicated that using 
these XBRL variants could entail benefits, such as smaller file sizes 
and greater ease of use.\642\ However, unlike custom XML and Inline 
XBRL, no EDGAR filings are currently filed using the JSON or CSV 
formats, and the EDGAR system currently does not accept these 
formats.\643\ The Commission preliminarily believes any usability 
benefit associated with XBRL-CSV or XBRL-JSON would likely not justify 
the burden of expanding reporting and intake capability to accommodate 
JSON or CSV.
---------------------------------------------------------------------------

    \642\ See Letter from Campbell Pryde, President and CEO, XBRL 
US, ``RE: Enhanced Reporting of Proxy Votes by Registered Management 
Investment Companies; Reporting of Executive Compensation Votes by 
Institutional Investment Managers, File Number S7-11-21'' (Dec. 14, 
2021), available at https://www.sec.gov/comments/s7-11-21/s71121-20109496-263895.pdf (stating, ``The XBRL-CSV specification allows 
data to be prepared in a simple CSV file which can then be opened in 
Excel. Data prepared using XBRL-CSV can be loaded automatically with 
no need to understand the meaning of individual columns (which would 
need to be reviewed if ingesting a custom XML file)''); Letter from 
Gregory Babyak, Global Head of Regulatory Affairs, Bloomberg, L.P., 
Bloomberg L.P. ``Enhanced Reporting of Proxy Votes by Registered 
Management Investment Companies; Reporting of Executive Compensation 
Votes by Institutional Investment Managers Release No. 34-93169/File 
No. S7-11-21'' (Dec. 14, 2021), available at https://www.sec.gov/comments/s7-11-21/s71121-20109566-263925.pdf (stating, ``JSON makes 
for significantly smaller files, does not need specialized tools and 
libraries, and is both easier to consume and generate'').
    \643\ See Regulation S-T, 17 CFR 232.101(a)(1)(iv); 17 CFR 
232.301; EDGAR Filer Manual, supra note 230, at 5.1 (requiring EDGAR 
filers generally to use ASCII or HTML for their document 
submissions, subject to certain exceptions).
---------------------------------------------------------------------------

    Other structured data languages that could be used include the 
Financial Information eXchange Markup Language (``FIXML''), which the 
Commission recently proposed for security-based swap position 
reporting, and pipe-delimited ASCII, which the Rule 605 NMS Plan 
currently requires for market centers' order execution reports.\644\ 
However, FIXML is generally designed to accommodate the communication 
of information related to securities trading, whereas the information 
required by the Proposed Structured Documents is broader.\645\ For 
pipe-delimited ASCII, unlike custom XML, EDGAR does not currently 
provide fillable forms or rendering applications for that format. In 
addition, the use of pipe-delimited ASCII rather than custom XML and 
Inline XBRL would preclude more complex technical validations (such as 
checks on any disclosures nested within narrative descriptions).
---------------------------------------------------------------------------

    \644\ See Exchange Act Release No. 93784 (Dec. 15, 2021), 87 FR 
6652, 6675 (Feb. 4, 2022); 17 CFR 242.605(a)(2) and Securities and 
Exchange Commission File No. 4-518 (National Market System Plan 
Establishing Procedures Under Rule 605 of Regulation NMS) at 2 
(``Section V . . . provides that market center files must be in 
standard, pipe-delimited ASCII format'').
    \645\ See What Is FIX?, https://www.fixtrading.org/what-is-fix/ 
(last visited Mar. 3, 2023) (``The FIX Protocol language is 
comprised of a series of messaging specifications used in trade 
communications''). FIXML is the machine-readable data language 
associated with the Financial Information eXchange (``FIX'') 
Protocol. See FIXML Online, Technical Specification, Version 1.1. 
(May 2014), https://www.fixtrading.org/standards/fixml-online/.
---------------------------------------------------------------------------

5. Permit, Not Require, Structured Data for Affected Documents
    As another alternative, the Commission could replace some or all of 
the proposed structured data requirements with voluntary structuring 
provisions. This would provide greater flexibility to respondents and 
ease compliance burdens on any respondents that choose not to structure 
their filings or postings. Some respondents may be incentivized by the 
benefits of structured data, and thus pursue those benefits even in the 
absence of structured data requirements, such as

[[Page 24001]]

reduced audit fees and efficient review of peer disclosures.\646\ 
However, relying on all affected entities to pursue such incentives 
would likely result in the incomplete provision of structured data. 
This would result in incomplete datasets, thereby adversely affecting 
the informational benefits that we expect would accrue from structured 
data requirements.
---------------------------------------------------------------------------

    \646\ See supra Section X.C.1.b.
---------------------------------------------------------------------------

6. Exempt Smaller Entities From Electronic Submission or Posting 
Requirements
    As another alternative, the Commission could exempt smaller 
entities from electronic submission or posting requirements for some or 
all of the affected documents. This could take the form of some 
thresholds based on total assets, total annual revenues, net capital 
requirements, a combination of factors, or the type of entity (e.g., 
whether the broker-dealer carries customer accounts and receives or 
holds customer cash and securities, or whether the broker-dealer is an 
OTC derivatives dealer).
    While this alternative could reduce the cost burden to smaller 
entities, this alternative would also eliminate the benefits of 
electronic submission and posting for these entities, such as the 
reduction of costs and the improved efficiency of the submission 
process. In addition, exempting smaller entities from the submission or 
posting requirements might reduce the value of publicly available data 
if the result is that only a portion of the submissions are machine-
readable or if multiple methods are required to access all the data as 
might occur if some portion of forms are submitted electronically via 
EDGAR while other submissions of the same form are made publicly 
available as PDFs of paper submissions.
7. Require SROs To Submit Form 19b-4(e) via EDGAR
    As another alternative, rather than requiring the information 
required by Rule 19b-4(e) under the Exchange Act to be posted on an 
SRO's website in custom XML, the Commission could amend Rule 19b-4, 
Form 19b-4(e), and the instructions thereto to require SROs to submit 
Form 19b-4(e) with the Commission via EDGAR using custom XML. Compared 
to the proposal, an EDGAR alternative could provide benefits for users 
of the information, because they would be able to access and analyze 
disclosures across different SROs from a centrally accessible location, 
rather than having to navigate to various individual SRO websites to 
retrieve the disclosures. EDGAR would also provide the ability to run 
technical validations upon intake of the disclosures, thus potentially 
improving the quality of the 19b-4(e) data by decreasing the incidence 
of non-substantive errors (e.g., omitting values from fields that 
should always be populated). On the other hand, SROs may find the 
process of posting information on their websites to be less burdensome 
than submitting information to EDGAR, as they currently have experience 
with the former but not the latter. Given the thousands of Form 19b-
4(e) submissions that SROs make a year, and given the original intent 
for Form 19b-4(e) to provide the Commission with accurate information 
regarding new derivatives securities products while ensuring that 
information remains publicly available, the Commission preliminarily 
believes any informational benefits of an EDGAR requirement would 
likely not justify the increased burden of such a requirement.\647\ 
Furthermore, given the highly standardized nature of the information 
provided on Form 19b-4(e) and the relevant SRO's books and records 
obligations, coupled with the Commission's examination and inspection 
authority, the Commission does not believe the submission of Form 19b-
4(e) through EDGAR rather than posting of the information on the 
relevant SRO's website would impact the accuracy of the record of new 
securities derivatives products for the Commission to review.
---------------------------------------------------------------------------

    \647\ See supra section II.E.
---------------------------------------------------------------------------

8. Require the Use of Dedicated Mailbox
    As another alternative, the Commission could require registrants 
submit by sending some or all of the affected documents to a dedicated 
email inbox in addition to eliminating the paper requirement. For 
example, rather than requiring registered clearing agencies to post 
Rule 17a-22 materials on their websites, the Commission could require 
registered clearing agencies to submit electronic copies of Rule 17a-22 
materials to a dedicated email inbox, as they have been doing recently, 
consistent with the Updated Staff Statement.\648\ Similarly, another 
example would be to require SROs to send Form 19b-4(e) materials to a 
dedicated email inbox, rather than publicly posting the materials on 
their websites. This alternative would facilitate Commission staff 
access to the Rule 17a-22 and 19b-4(e) materials compared to the 
proposal, as Commission staff would receive the materials directly 
rather than having to navigate to each registered clearing agency's 
individual website. However, this alternative could delay or preclude 
their availability for market participants, and require Commission 
staff to upload these documents to EDGAR, imposing costs and delays on 
the process. In addition, to the extent that market participants have 
already developed the practice of submitting the affected documents via 
EDGAR--for these documents, the proposed alternative, requiring 
submission to an electronic mailbox would entail both a higher cost and 
a lower benefit for market participants.
---------------------------------------------------------------------------

    \648\ See Updated Staff Statement.
---------------------------------------------------------------------------

F. Request for Comment

    The Commission requests feedback on any aspect of the above 
economic analysis, including our description of the current economic 
baseline, the potential costs (including quantified estimates thereof) 
and benefits of the proposed amendments, their effect on efficiency, 
competition, and capital formation, and reasonable alternatives. In 
addition, we request comment on the following aspects of the proposal:
    96. In general, are there any affected entities for whom the 
compliance costs associated with the proposed structured data 
requirements would not be justified by the informational benefits that 
would be realized by users of the structured data, such that exempting 
those entities from structured data requirements would be advisable? If 
so, what particular exemption threshold or thresholds should the 
Commission use for the structured data requirements under the proposed 
rule amendments, and why?
    97. For example, with respect to Form X-17A-5 Part III filers, 
would the compliance costs incurred by smaller broker-dealers, or non-
clearing/carrying broker-dealers, in filing Form X-17A-5 Part III and 
related annual filings in Inline XBRL not be justified by the benefits 
arising to data users from having the information in a structured, 
machine-readable data language? Should the Commission use an exemption 
threshold for Form X-17A-5 Part III filers based on total assets (e.g., 
less than $500,000), total annual revenues (e.g., less than $250,000), 
net capital requirements (e.g., less than $250,000), on a combination 
of factors (e.g., capital less than $50 million and total assets of 
less than $1 billion), on the type of broker-dealer (e.g., whether the 
broker-dealer carries customer accounts and receives or holds customer 
cash and securities, or whether the broker-dealer is an OTC derivatives 
dealer), or on the financial condition of

[[Page 24002]]

the broker-dealer (e.g., whether the broker-dealer has less than $1 
million of free credit balances and other credit balances, or whether 
the broker-dealer has less than $500 million of tentative net capital)? 
As another example, with respect to Form CA-1 and Form 1 filers, should 
the Commission require only registered clearing agencies and exchanges 
to structure those forms? Should the Commission use thresholds based on 
the number of members or users of the clearing agencies and exchanges? 
If so, what specific thresholds should the Commission use, and why?
    98. Similarly, are there any affected documents (or portions 
thereof) subject to proposed structuring requirements (i.e., Form X-
17A-5 Part III, Form 17-H, Form 1, Form 1-N, Form 15A, Form CA-1, Form 
X-17A-19, Rule 19b-4(e) information, valuation dispute notices, and CCO 
reports) for which the compliance costs associated with the proposed 
structured data requirements would not be justified by the 
informational benefits that would be realized by users of the 
structured data, such that exempting those documents from structured 
data requirements would be appropriate? If so, which particular 
documents (or portions thereof) should be exempted from the structured 
data requirements, and why?
    99. For example, should the Commission refrain from adding 
structuring requirements for Form CA-1, which is filed by only twelve 
entities, for the same reason the Commission is refraining from adding 
structured data requirements (other than execution page structuring) 
for Form 15A and Form 1-N, which are each filed by only one entity? 
\649\ As another example, should the Commission limit the proposed 
structuring requirements to financial statement disclosures (including 
notes and schedules) only, thus requiring only portions of Form X-17A-5 
Part III, Form 17-H, Form 1, and Form CA-1 to be structured? Should the 
Commission require all quantitative information to be structured, but 
refrain from requiring narrative or other non-quantitative information 
to be structured?
---------------------------------------------------------------------------

    \649\ See supra sections IX.C.3, IX.C.4, and IX.C.5.
---------------------------------------------------------------------------

    100. Conversely, are there any affected documents or portions 
thereof not subject to proposed structuring requirements (i.e., ANE 
Exception Notices, Form 1-N other than the execution page, and Form 15A 
other than the execution page) for which the informational benefits of 
structured data would justify the compliance costs associated with 
structuring, such that requiring those documents to be structured would 
be advisable? If so, which of these documents or portions thereof 
should be structured, and why?
    101. How would the costs of third-party service providers, 
including those that provide electronic submission and structured data 
compliance services and/or software to filers and submitters, as well 
as those that provide software that facilitates structured data 
research, impact affected entities and data users under the proposed 
rule amendments? Please provide any data you have on the current costs 
and usage of these third-party services and software, as well as how 
such costs and usage may change under the proposed rule amendments.
    102. Does the evidence of structured data benefits in other 
contexts, such as XBRL requirements for public operating company 
financial statements, generally indicate that the proposed structured 
data requirements could facilitate the use and analysis of the 
information disclosed on the affected documents? Why or why not?
    103. Is it reasonable to assume that affected entities with 
affiliates that are subject to Inline XBRL requirements would be able 
to leverage the Inline XBRL compliance software licenses and/or service 
agreements, as well as the Inline XBRL tagging processes and 
experience, of those affiliates? Why or why not?
    104. Should the Commission modify the particular structured data 
languages required for each Proposed Structured Document? For example, 
should the Commission replace the proposed custom XML requirements with 
Inline XBRL requirements, or vice versa? Should the Commission require 
other structured data languages, such as XBRL-CSV, XBRL-JSON, FIXML, 
pipe-delimited ASCII, or other structured data languages for some or 
all of the Proposed Structured Documents? If so, which structured data 
languages should be used for which documents, and why?
    105. Rather than requiring structured data for the Proposed 
Structured Documents, should the Commission permit affected entities 
(or subsets thereof) to provide structured data on a voluntary basis? 
If so, which entities and which documents should be subject to 
voluntary structuring, and why?
    106. Also, are there any affected documents for which the proposed 
manner of submission or posting creates significant costs or 
difficulties for reporting entities or for users of the documents? If 
so, which particular documents, and how should the manner of submission 
be changed for those documents?

XI. Initial Regulatory Flexibility Act Analysis

    Section 3(a) of the Regulatory Flexibility Act of 1980 \650\ 
(``RFA'') requires the Commission to undertake an initial regulatory 
flexibility analysis of the impact of the proposed rule amendments on 
small entities unless the Commission certifies that the rule, if 
adopted, would not have a significant economic impact on a substantial 
number of small entities.\651\ For purposes of Commission rulemaking in 
connection with the RFA,\652\ a small entity includes a broker or 
dealer that: (1) had total capital (net worth plus subordinated 
liabilities) of less than $500,000 on the date in the prior fiscal year 
as of which its audited financial statements were prepared pursuant to 
paragraph (d) of Rule 17a-5 under the Exchange Act,\653\ or, if not 
required to file such statements, a broker-dealer with total capital 
(net worth plus subordinated liabilities) of less than $500,000 on the 
last day of the preceding fiscal year (or in the time that it has been 
in business, if shorter); and (2) is not affiliated with any person 
(other than a natural person) that is not a small business or small 
organization.\654\ With regard to a national securities exchange 
subject to Rule 17a-19, a small entity is an exchange that has been 
exempt from the reporting requirements of Rule 601 under Regulation 
NMS, and is not affiliated with any person (other than a

[[Page 24003]]

natural person) that is not a small business or small organization. 
With respect to a clearing agency, a small entity is a clearing agency 
that: (1) compared, cleared and settled less than $500 million in 
securities transactions during the preceding fiscal year (or in the 
time that it has been in business, if shorter); (2) had less than $200 
million of funds and securities in its custody or control at all times 
during the preceding fiscal year (or in the time that it has been in 
business, if shorter); and (3) is not affiliated with any person (other 
than a natural person) that is not a small business or small 
organization.\655\ When used with reference to an ``issuer'' or a 
``person,'' other than an investment company, a small entity includes 
an ``issuer'' or ``person'' that, on the last day of its most recent 
fiscal year, had total assets of $5 million or less.\656\
---------------------------------------------------------------------------

    \650\ 5 U.S.C. 603(a).
    \651\ 5 U.S.C. 605(b).
    \652\ Although Section 601(b) of the RFA defines the term 
``small entity,'' the statute permits agencies to formulate their 
own definitions. The Commission has adopted definitions for the term 
``small entity'' for the purposes of Commission rulemaking in 
accordance with the RFA. Those definitions, as relevant to this 
proposed rulemaking, are set forth in Rule 0-10 under the Exchange 
Act, 17 CFR 240.0-10. See Exchange Act Release No. 18451 (Jan. 28, 
1982), 47 FR 5215 (Feb. 4, 1982) (File No. AS-305).
    \653\ 17 CFR 240.17a-5(d).
    \654\ See 17 CFR 240.0-10(c). See also 17 CFR 240.0-10(i) 
(providing that a broker or dealer is affiliated with another person 
if: such broker or dealer controls, is controlled by, or is under 
common control with such other person; a person shall be deemed to 
control another person if that person has the right to vote 25% or 
more of the voting securities of such other person or is entitled to 
receive 25% or more of the net profits of such other person or is 
otherwise able to direct or cause the direction of the management or 
policies of such other person; or such broker or dealer introduces 
transactions in securities, other than registered investment company 
securities or interests or participations in insurance company 
separate accounts, to such other person, or introduces accounts of 
customers or other brokers or dealers, other than accounts that hold 
only registered investment company securities or interests or 
participations in insurance company separate accounts, to such other 
person that carries such accounts on a fully disclosed basis).
    \655\ 17 CFR 240.0-10(d).
    \656\ 17 CFR 240.0-10(a).
---------------------------------------------------------------------------

A. Regulatory Flexibility Act Certification

    The Commission currently believes that no national securities 
exchange, Security Futures Product Exchange, or national securities 
association is a ``small entity'' as currently defined. With regard to 
clearing agencies, based on publicly reported data the Commission does 
not believe that any registered or exempt clearing agency is a ``small 
entity'' as currently defined. With respect to registrants subject to 
Rule 17a-12, based upon financial reports and other information filed 
with the Commission by such entities, none of the entities subject to 
Rule 17a-12 is a ``small entity'' as currently defined. With respect to 
SBS Entities, based on feedback from market participants and staff 
experience with the security-based swap markets, and consistent with 
the Commission's position in prior Dodd-Frank Act rulemakings, the 
Commission continues to believe that (1) the types of entities that 
register with the Commission as SBSDs (i.e., because they engage in 
more than a de minimis amount of dealing activity involving security-
based swaps)--which generally would be large financial institutions--
would not be ``small entities'' for purposes of the RFA and (2) the 
types of entities that may have security-based swap positions above the 
level required to be MSBSPs would not be ``small entities'' for 
purposes of the RFA.\657\ The Commission thus continues to believe that 
SBS Entities providing notices (and any amendments to the notices) 
required by Rule 15fi-3(c) \658\ or filing annual reports required by 
Rule 18a-7 would not be ``small entities'' for purposes of the RFA. The 
Commission also continues to expect that all Relying Entities making 
use of the ANE Exception from the de minimis threshold to SBSD status 
also would not be ``small entities'' for purposes of the RFA.\659\ As a 
result, the Commission believes that any Registered Entity filing an 
ANE Exception Notice or withdrawal of an ANE Exception Notice also 
would not be a ``small entity.'' \660\ Consequently, the Commission 
certifies that the proposed amendments would not, if adopted, have a 
significant economic impact on a substantial number of small entities 
that are described in the foregoing paragraph.
---------------------------------------------------------------------------

    \657\ See Registration Process for Security-Based Swap Dealers 
and Major Security-Based Swap Participants, Exchange Act Release No. 
75611 (Aug. 5, 2015), 80 FR 48964, 49013 (Aug. 14, 2015); 
Prohibition Against Fraud, Manipulation, or Deception in Connection 
with Security-Based Swaps; Prohibition against Undue Influence over 
Chief Compliance Officers; Position Reporting of Large Security-
Based Swap Positions, Exchange Act Release No. 93784 (Dec. 15, 
2021), 87 FR 6652, 6702-03 (Feb 4, 2022).
    \658\ See Risk Mitigation Adopting Release, 85 FR at 6411-12.
    \659\ See Cross-Border Adopting Release, 85 FR at 6345.
    \660\ The ``small entity'' definition applied to brokers 
excludes brokers that are affiliated with a person that is not a 
``small entity.'' See Exchange Act Rule 0-10(c)(2), 17 CFR 240.0-
10(c)(2). Because the Commission does not expect any Relying Entity 
to be a ``small entity'' for purpose of the RFA, any affiliated 
broker serving as the Registered Entity for purposes of the ANE 
Exception also would not be a ``small entity.'' See Cross-Border 
Adopting Release, 85 FR at n.737. Moreover, any registered SBSD 
serving as the Registered Entity for purposes of the ANE Exception 
would likely be registered as such because it engages in security-
based swap dealing above the de minimis threshold, and therefore 
also would not, in the Commission's view, be a ``small entity.'' See 
supra note 689 and accompanying text. Even in the unlikely event 
that some Relying Entities satisfy the ANE Exception's conditions 
via the use of an affiliated Registered Entity that is a registered 
security-based swap dealer and a ``small entity'' for purposes of 
the RFA, the Commission continues to believe that there would not be 
a substantial number of such entities. See Cross-Border Adopting 
Release, 85 FR at 6345.
---------------------------------------------------------------------------

    The Commission encourages written comments regarding this 
certification. The Commission solicits comment as to whether the 
proposed amendments could have impacts on small entities that have not 
been considered. The Commission requests that commenters describe the 
nature of any impacts on small entities and provide empirical data to 
support the extent of such effect. Persons wishing to submit written 
comments should refer to the instructions for submitting comments 
located at the front of this release.

B. Initial Regulatory Flexibility Analysis

    This Initial Regulatory Flexibility Act Analysis (``IRFA'') has 
been prepared, and been made available for public comment, in 
accordance with the RFA.\661\ It relates to the proposed amendments to 
Rule 17a-5. As stated above, based on experience with the staff no-
action letter permitting the voluntary filing of broker-dealer annual 
reports on EDGAR, the staff estimates that approximately 1,559 broker-
dealers file their annual reports with the Commission in paper. Based 
upon staff experience, the Commission estimates that almost all of 
these 1,559 broker-dealers are ``small entities'' (that is, such 
broker-dealers would, individually, have total capital (net worth plus 
subordinated liabilities) of less than $500,000 on the last day of the 
preceding fiscal year (or in the time that it has been in business, if 
shorter)). As required by the RFA, this IRFA describes the impact of 
these proposed amendments on small entities.\662\
---------------------------------------------------------------------------

    \661\ 5 U.S.C. 601 et seq.
    \662\ 5 U.S.C. 603.
---------------------------------------------------------------------------

C. Reasons for, and Objectives of, the Proposed Action

    In general, the proposed amendments to Rule 17a-5 that implicate 
broker-dealers that are small entities would require that a broker-
dealer: (1) file its annual reports and related annual filings 
electronically on EDGAR using structured data; and (2) keep the 
original notarized oath or affirmation for a period of not less than 
six years, the first two in an easily accessible place in accordance 
with the requirements of Rule 17a-4.\663\
---------------------------------------------------------------------------

    \663\ 17 CFR 240.17a-5. The proposed amendments to the FOCUS 
Report that impact broker-dealers are limited to stand-alone swap 
dealers which are not expected to be small entities. The proposed 
amendment to allow electronic signatures will not impact small 
broker-dealers because they will continue to have the option to use 
manual signatures.
---------------------------------------------------------------------------

    As stated above, it has been the staff's experience that electronic 
filing has been practical and efficient. It also has been the staff's 
experience that electronic filing has been positively received by the 
broker-dealers who are currently filing their annual reports 
electronically on EDGAR. Based on these positive experiences with 
electronic filing and as part of its efforts to modernize the methods 
by which it collects information from registrants, the Commission is 
proposing to amend certain rules and forms, including certain rules and 
forms that would impact broker-dealers that are small entities.
    With respect to the proposed structured data requirements, XBRL 
requirements for public company financial statements have been observed 
to increase the ease and efficiency of

[[Page 24004]]

analyzing those structured disclosures (e.g., allowing for efficient 
comparisons of disclosures across multiple reporting entities and 
multiple time periods).\664\ Such benefits have encompassed small 
public companies as well as large public companies, and have accrued to 
both public and regulatory entities.\665\ Therefore, the staff believes 
the proposed structured data requirements under the proposed amendments 
would facilitate the use of the information reported by broker-dealers 
in their annual reports and related filings.
---------------------------------------------------------------------------

    \664\ See supra section X.C.1.b.
    \665\ See supra notes 235 and 501.
---------------------------------------------------------------------------

D. Legal Basis

    The Commission is proposing the amendments in this release under 
the authority set forth in sections 6, 7, 8, 10, and 19(a) of the 
Securities Act of 1933,\666\ sections 3, 12, 13, 14, 15, 15A, 15F, 17, 
17A, 19, 23, 30, and 35A of the Securities Exchange Act of 1934,\667\ 
section 319 of the Trust Indenture Act of 1939,\668\ sections 8, 30, 
31, and 38 of the Investment Company Act of 1940 \669\ and section 
761(b) of the Dodd-Frank Act.\670\
---------------------------------------------------------------------------

    \666\ 15 U.S.C. 77f, 77g, 77h, 77j, and 77s(a).
    \667\ 15 U.S.C. 78c, 78l, 78m, 78n, 78o, 78o-3, 78o-10, 78q, 
78q-1, 78s, 78w, 78dd and 78ll.
    \668\ 15 U.S.C. 77sss.
    \669\ 15 U.S.C. 80a-8, 80a-29, 80a-30, and 80a-37.
    \670\ 15 U.S.C. 8341.
---------------------------------------------------------------------------

E. Small Entities Subject to the Proposed Rules

    The proposed changes would affect some broker-dealers that are 
small entities. For purposes of Commission rulemaking in connection 
with the RFA,\671\ a small entity includes a broker or dealer that: (1) 
had total capital (net worth plus subordinated liabilities) of less 
than $500,000 on the date in the prior fiscal year as of which its 
audited financial statements were prepared pursuant to paragraph (d) of 
Rule 17a-5 under the Exchange Act,\672\ or, if not required to file 
such statements, a broker-dealer with total capital (net worth plus 
subordinated liabilities) of less than $500,000 on the last day of the 
preceding fiscal year (or in the time that it has been in business, if 
shorter); and (2) is not affiliated with any person (other than a 
natural person) that is not a small business or small 
organization.\673\
---------------------------------------------------------------------------

    \671\ Although Section 601(b) of the RFA defines the term 
``small entity,'' the statute permits agencies to formulate their 
own definitions. The Commission has adopted definitions for the term 
``small entity'' for the purposes of Commission rulemaking in 
accordance with the RFA. Those definitions, as relevant to this 
proposed rulemaking, are set forth in Rule 0-10 under the Exchange 
Act, 17 CFR 240.0-10. See Exchange Act Release No. 18451 (Jan. 28, 
1982), 47 FR 5215 (Feb. 4, 1982) (File No. AS-305).
    \672\ 17 CFR 240.17a-5(d).
    \673\ See 17 CFR 240.0-10(c). See also 17 CFR 240.0-10(i) 
(providing that a broker or dealer is affiliated with another person 
if: such broker or dealer controls, is controlled by, or is under 
common control with such other person; a person shall be deemed to 
control another person if that person has the right to vote 25% or 
more of the voting securities of such other person or is entitled to 
receive 25% or more of the net profits of such other person or is 
otherwise able to direct or cause the direction of the management or 
policies of such other person; or such broker or dealer introduces 
transactions in securities, other than registered investment company 
securities or interests or participations in insurance company 
separate accounts, to such other person, or introduces accounts of 
customers or other brokers or dealers, other than accounts that hold 
only registered investment company securities or interests or 
participations in insurance company separate accounts, to such other 
person that carries such accounts on a fully disclosed basis).
---------------------------------------------------------------------------

F. Reporting, Recordkeeping, and Other Compliance Requirements

    As noted above, the purpose of the proposed amendments to Rule 17a-
5 that would impact a broker-dealer that is a small entity is to 
require a broker-dealer to: (1) file its annual reports on EDGAR using 
structured data; and (2) keep the original notarized oath or 
affirmation attached to the annual reports for a period of not less 
than six years, the first two in an easily accessible place in 
accordance with the requirements of Rule 17a-4.
    The Commission does not believe that the compliance costs of the 
proposed amendments relating to the requirement to file on EDGAR will 
be significant. The Commission does expect that smaller entities that 
are broker-dealers will need to familiarize themselves with the EDGAR 
system. However, the Commission does not believe that the 
familiarization process will be particularly burdensome. In support of 
its belief in this regard, the Commission notes that approximately 
1,659 broker-dealers have chosen to voluntarily file their respective 
annual reports on EDGAR, and the Commission estimates that a large 
majority of these broker-dealers are small entities. Furthermore, with 
respect to the proposed structured data requirements, the Commission 
believes the related compliance costs for broker-dealers that are small 
entities would be modest and would continue to decrease over time. The 
Commission bases this belief on observed trends in XBRL compliance 
costs for small public companies.\674\
---------------------------------------------------------------------------

    \674\ See supra note 516.
---------------------------------------------------------------------------

    The Commission also believes that there will be benefits to small 
entities resulting from filing on EDGAR. For example, once a smaller 
entity has familiarized itself with EDGAR, that entity can be confident 
that required filings will be timely because the public portion of the 
filing is immediately available on the Commission's website and the 
filer has received a confirming email. The Commission believes that 
such regulatory certainty is of benefit to registrants generally, 
including broker-dealers that are small entities.
    With respect to the requirement to maintain a copy of the oath or 
affirmation, the Commission does not believe this requirement will be 
unduly burdensome to small entities that are broker-dealers. A broker-
dealer filing its annual reports in paper maintains a hard copy of the 
filing cover sheet as a record of the oath or affirmation. The proposed 
amendment in paragraph (e)(2)(iii) of Rule 17a-5 is designed to ensure 
that this requirement is preserved in the context of a broker-dealer 
filing its annual reports electronically on EDGAR.

G. Duplicative, Overlapping, or Conflicting Federal Rules

    The Commission does not believe that the proposed amendments 
impacting smaller entities that are broker-dealers would duplicate, 
overlap, or conflict with other Federal Rules.

H. Significant Alternatives

    The RFA directs the Commission to consider alternatives that would 
accomplish our stated objectives, while minimizing any significant 
economic impact on small entities. The Commission considered 
alternatives with respect to whether to utilize the EDGAR system. 
However, given that approximately half of all broker-dealers are 
voluntarily utilizing EDGAR for filing their respective annual audit 
reports, and that EDGAR is an existing system that is available for 
immediate use, the Commission does not believe that alternative 
electronic platforms would be practical or efficient. Further, 
developing an alternative technology platform for intake of annual 
audit reports or change in SRO membership would be time consuming and 
expensive relative to using an existing Commission system that is in 
use by a large number of broker-dealers. The Commission considered 
exempting small entities from the EDGAR-filing requirement and allowing 
small entities to make submissions via dedicated email or similar 
means, but there are significant efficiencies for Commission staff and 
other users of regulatory disclosure information in having the forms 
submitted to a single, uniform platform, and, as mentioned, EDGAR is 
the Commission's existing platform for the receipt and publication (in 
the case

[[Page 24005]]

of non-confidential submission) of such information. Exempting small 
entities from the EDGAR-filing requirement would make aggregation of 
the data from regulatory disclosures less complete, which could detract 
from the usefulness of such data in illustrating the conditions of 
Commission-regulated entities in the financial markets.
    The Commission also considered alternatives with respect to the 
proposed structured data requirements, including the alternative of 
removing broker-dealers that are smaller entities from the structured 
data requirements.\675\ However, given users of the information 
disclosed by broker-dealers would be required to manually collect 
unstructured data in order to analyze it (or rely on third parties to 
do so), the Commission believes any cost savings arising from such an 
alternative would not justify the limitations and difficulties that 
would arise for investors, other market participants, and/or regulatory 
users of the disclosures.
---------------------------------------------------------------------------

    \675\ See supra section X.E.1.
---------------------------------------------------------------------------

    Likewise, the Commission considered changing the actual forms 
themselves--either by consolidating or simplifying the information to 
be submitted--for small entities, but allowing a subset of entities to 
submit different forms--and accompanying information--would reduce the 
usability and comparability of the information contained in 
disclosures. The Commission does not believe that the cost savings that 
might arise from devising different forms for small entities would 
justify the limitations and difficulties that would arise for 
investors, market participants and/or regulatory users of the 
information.\676\
---------------------------------------------------------------------------

    \676\ To be clear, this proposal would not require small 
entities to submit more--or different--information on particular 
forms. As mentioned previously, the proposal would not change the 
substantive content of Commission forms with this rulemaking, but 
would change the manner in which such forms are submitted to the 
Commission.
---------------------------------------------------------------------------

    Finally, the Commission considered allowing small broker-dealers a 
longer timeframe to file on EDGAR so they have time to familiarize 
themselves with the system, but given that a staff no-action letter 
already does not object to small broker-dealers filing their annual 
reports within a longer timeframe so long as they file on EDGAR,\677\ 
an additional extension of time would not provide meaningful additional 
benefit to these entities and could result in inordinately stale 
financial data being available to the Commission staff, investors and 
other market participants.
---------------------------------------------------------------------------

    \677\ See Order Extending the Annual Audits Filing Deadline for 
Certain Smaller Broker-Dealers, Exchange Act release no. 91128 (Feb. 
12, 2021), 86 FR 10372 (Feb. 19, 2021).
---------------------------------------------------------------------------

I. Request for Comment

    The Commission encourages the submission of comments with respect 
to any aspect of this IRFA. In particular, the Commission requests 
comment regarding:
    107. Are there are more efficient or less burdensome ways for the 
Commission to modernize its collection of information from registrants 
compared to what the Commission has proposed?
    108. What are the number of small entities that may be affected by 
the proposed rule amendments?
    109. What is the existence or nature of the potential impact of the 
proposed amendments on small entities and would the proposed amendments 
would have any effects that have not been discussed in the analysis?
    110. Are there are any Federal rules that duplicate, overlap, or 
conflict with the proposed amendments?

XII. Small Business Regulatory Enforcement Fairness Act

    For purposes of the Small Business Regulatory Enforcement Fairness 
Act of 1996 (``SBREFA''),\678\ the Commission must advise OMB as to 
whether the proposed amendments constitute a ``major'' rule. Under 
SBREFA, a rule is considered ``major'' where, if adopted, it results or 
is likely to result in:
---------------------------------------------------------------------------

    \678\ Public Law 104-121, Title II, 110 Stat. 857 (1996) 
(codified in various sections of 5 U.S.C., 15 U.S.C., and as a note 
in 5 U.S.C. 601).
---------------------------------------------------------------------------

     An annual effect on the U.S. economy of $100 million or 
more (either in the form of an increase or decrease);
     A major increase in costs or prices for consumers or 
individual industries; or
     Significant adverse effects on competition, investment, or 
innovation.
    The Commission requests comment on whether the proposal would be a 
``major rule'' for purposes of SBREFA. In particular, we request 
comment and empirical data on:
     The potential effect on the U.S. economy on an annual 
basis;
     Any potential increase in costs or prices for consumers or 
individual industries; and
     Any potential effect on competition, investment, or 
innovation.

Statutory Authority

    The amendments contained in this release are being proposed under 
the authority in sections 6, 7, 8, 10, and 19(a) of the Securities Act 
of 1933,\679\ sections 3, 12, 13, 14, 15, 15A, 15F, 17, 17A, 19, 23, 
30, and 35A of the Securities Exchange Act of 1934,\680\ section 319 of 
the Trust Indenture Act of 1939,\681\ sections 8, 30, 31, and 38 of the 
Investment Company Act of 1940 \682\ and section 761(b) of the Dodd-
Frank Wall Street Reform and Consumer Protection Act.\683\
---------------------------------------------------------------------------

    \679\ 15 U.S.C. 77f, 77g, 77h, 77j, and 77s(a).
    \680\ 15 U.S.C. 78c, 78l, 78m, 78n, 78o, 78o-3, 78o-10, 78q, 
78q-1, 78s, 78w, 78dd and 78ll.
    \681\ 15 U.S.C. 77sss.
    \682\ 15 U.S.C. 80a-8, 80a-29, 80a-30, and 80a-37.
    \683\ 15 U.S.C. 8341.
---------------------------------------------------------------------------

List of Subjects

17 CFR Part 202

    Administrative Practice and Procedure, Securities.

17 CFR Part 232

    Reporting and recordkeeping requirements, Securities.

17 CFR Part 240

    Brokers, Fraud, Reporting and recordkeeping requirements, 
Securities, Swaps.

17 CFR Part 249

    Brokers, Reporting and recordkeeping requirements, Securities.

17 CFR Part 249b

    Brokers, Reporting and recordkeeping requirements.

Text of the Amendments

    In accordance with the foregoing, title 17, chapter II of the Code 
of Federal Regulations is proposed to be amended as follows:

PART 202--INFORMAL AND OTHER PROCEDURES

0
1. The authority citation for part 202 continues to read as follows:

    Authority: 15 U.S.C. 77s, 77t, 77sss, 77uuu, 78d-1, 78u, 78w, 
78ll(d), 80a-37, 80a-41, 80b-9, 80b-11, 7201 et seq., unless 
otherwise noted.

0
2. Amend Sec.  202.3 by revising the first two sentences of paragraph 
(b)(2) and revising paragraph (b)(3) to read as follows:


Sec.  202.3  Processing of filings.

* * * * *
    (b) * * *
    (2) Applications for registration as national securities exchanges, 
or exemption from registration as exchanges by reason of such 
exchanges' limited volume of transactions filed with the Commission are 
routed to the Division of Trading and Markets, which examines these 
applications to determine whether all necessary information has been 
supplied and

[[Page 24006]]

whether all required financial statements and other documents have been 
furnished in proper form. Defective applications may be returned. * * *
    (3) Notice forms for registration as national securities exchanges 
pursuant to Section 6(g)(1) of the Securities Exchange Act of 1934 (15 
U.S.C. 78f(g)(1)) filed with the Commission are routed to the Division 
of Trading and Markets, which examines these notices to determine 
whether all necessary information has been supplied and whether all 
other required documents have been furnished in proper form. Defective 
notices may be returned.

PART 232 REGULATION S-T--GENERAL RULES AND REGULATIONS FOR 
ELECTRONIC FILINGS

0
3. The general authority citation for part 232 is revised to read as 
follows:

    Authority: 15 U.S.C. 77c, 77f, 77g, 77h, 77j, 77s(a), 77z-3, 
77sss(a), 78c(b), 78l, 78m, 78n, 78o(d), 78o-10, 78w(a), 78ll, 80a-
6(c), 80a-8, 80a-29, 80a-30, 80a-37, 80b-4, 80b-6a, 80b-10, 80b-11, 
7201 et seq.; and 18 U.S.C. 1350, unless otherwise noted.
* * * * *
0
4. Amend Sec.  232.100 by revising paragraph (c) to read as follows:


Sec.  232.100  Persons and entities subject to mandated electronic 
filing.

* * * * *
    (c) Persons or entities whose filings are subject to review by the 
Division of Trading and Markets; and
* * * * *
0
5. Amend Sec.  232.101 by:
0
a. Adding new paragraphs (a)(1)(xxxii), (xxxiii), (xxxiv), and (xxxv);
0
b. Revising paragraph (c)(9); and
0
c. Revising paragraph (d).
    The revisions and additions read as follows:


Sec.  232.101  Mandated electronic submissions and exceptions.

    (a) * * *
    (1) * * *
    (xxxii)(A) The annual reports filed with the Commission under Sec.  
240.17a-5(d) of this chapter, the supplemental reports and statements 
filed with the Commission under Sec.  240.17a-5(k) of this chapter, the 
annual reports filed with the Commission under Sec.  240.17a-12(b) of 
this chapter, the accountant's reports filed with the Commission under 
Sec.  240.17a-12(k), (l), and (m) of this chapter, the reports filed 
with the Commission under Sec.  240.17a-19 of this chapter, and the 
annual reports filed with the Commission under Sec.  240.18a-7(c) of 
this chapter. The submissions must be made on EDGAR in the electronic 
format required by the EDGAR Filer Manual, as defined in 17 CFR 232.11 
(Rule 11 of Regulation S-T), and must be filed in accordance with the 
requirements of part 232 (Regulation S-T).
    (B) The reports filed and furnished, as applicable, with the 
Commission under Sec.  240.17h-2T of this chapter. The submissions must 
be made on EDGAR in the electronic format required by the EDGAR Filer 
Manual, as defined in Rule 11 of Regulation S-T, and must be filed in 
accordance with the requirements of Regulation S-T.
    (xxxiii) Notices (and withdrawals of notices) filed with the 
Commission pursuant to Sec.  240.3a71-3(d)(1)(vi) of this chapter (Rule 
3a71-3(d)(1)(vi)).
    (xxxiv) Notices (and amendments, including notices of dispute 
termination) provided to the Commission pursuant to Sec.  240.15fi-3(c) 
of this chapter (Rule 15fi-3(c)); and
    (xxxv) Compliance reports submitted with the Commission pursuant to 
Sec.  240.15fk-1(c)(2)(ii)(A) of this chapter (Rule 15fk-
1(c)(2)(ii)(A)).
* * * * *
    (c) * * *
    (9) Exchange Act filings submitted to the Division of Trading and 
Markets other than those that are submitted in electronic format as 
mandated or permitted electronic submissions under paragraph (a) and 
(b) of this section or that are submitted electronically in a filing 
system other than EDGAR;
* * * * *
    (d) The following must be filed in electronic format:
    (1) All documents, including any information with respect to which 
confidential treatment is requested, filed pursuant to section 13(n) 
(15 U.S.C. 78m(n)) and section 13(f) (15 U.S.C. 78m(f)) of the Exchange 
Act and the rules and regulations thereunder;
    (2) All documents, including any information with respect to which 
confidential treatment is requested, filed pursuant to Sec. Sec.  
240.17a-5(d), 240.17a-5(k), 240.17a-12(b), 240.17a-12(k) through (m), 
240.17a-19, 240.17h-2T, or 240.18a-7(c) of this chapter; and
    (3) All notices (and amendments, including notices of dispute 
termination), including any information with respect to which 
confidential treatment is requested, provided to the Commission 
pursuant to Sec.  240.15fi-3(c) of this chapter.


Sec.  232.201  [Amended]

0
6. Amend Sec.  232.201 by adding to paragraph (a) the phrase ``a notice 
or withdrawal of a notice filed with the Commission pursuant to Rule 
3a71-3(d)(1)(vi) (Sec.  240.3a71-3(d)(1)(vi) of this chapter) under the 
Exchange Act (15 U.S.C. 78a et seq.),'' after ``an application for an 
order under any section of the Investment Advisers Act of 1940 (15 
U.S.C. 80b-1 et seq.),'' and before ``an Interactive Data File (Sec.  
232.11),''.


Sec.  232.202  [Amended]

0
7. Amend Sec.  232.202 by adding to paragraph (a) the phrase ``a notice 
or withdrawal of a notice filed with the Commission pursuant to Rule 
3a71-3(d)(1)(vi) (Sec.  240.3a71-3(d)(1)(vi) of this chapter) under the 
Exchange Act (15 U.S.C. 78a et seq.),'' after ``a Form D (Sec.  239.500 
of this chapter),'' and before ``or an Asset Data File (Sec.  
232.11),''.
0
8. Amend Sec.  232.405 by:
0
a. Revising the introductory text, paragraphs (a)(2), (a)(3)(i) 
introductory text, (a)(3)(ii), (a)(4), and (b)(1) introductory text;
0
b. Redesignating paragraph (b)(5)(i) as (b)(5)(vi);
0
c. Adding paragraphs (b)(5)(i) through (v); and
0
d. Revising Note 1 to Sec.  232.405.
    The revisions and additions read as follows:


Sec.  232.405  Interactive Data File submissions.

    This section applies to electronic filers that submit Interactive 
Data Files. Section 229.601(b)(101) of this chapter (Item 601(b)(101) 
of Regulation S-K), General Instruction F of Sec.  249.311 (Form 11-K), 
Sec. Sec.  240.15fk-1(c)(2)(ii)(A), 240.17a-5(d)(6)(i), 240.17a-
5(k)(2), 240.17a-12(b)(6), 240.17a-12(k), 240.17a-12(l), 240.17a-12(m), 
240.17h-2T(a)(2), and 240.18a-7(c)(6) of this chapter (Rules 15fk-
1(c)(2)(ii)(A), 17a-5(d)(6)(i), 17a-5(k)(2), 17a-12(b)(6), 17a-12(k), 
17a-12(l), 17a-12(m), 17h-2T(a)(2), and 18a-7(c)(6) under the Exchange 
Act), paragraph (101) of Part II--Information Not Required to be 
Delivered to Offerees or Purchasers of Sec.  239.40 of this chapter 
(Form F-10), paragraph 101 of the Instructions as to Exhibits of Sec.  
249.220f of this chapter (Form 20-F), paragraph B.(15) of the General 
Instructions to Sec.  249.240f of this chapter (Form 40-F), paragraph 
C.(6) of the General Instructions to Sec.  249.306 of this chapter 
(Form 6-K), Sec.  240.17ad-27(d) of this chapter (Rule 17ad-27(d) under 
the Exchange Act), Note D.5 of Sec.  240.14a-101 of this chapter (Rule 
14a-101 under the Exchange Act), Item 1 of Sec.  240.14c-101 of this 
chapter (Rule 14c-101 under the Exchange Act), General Instruction 
C.3.(g) of Sec. Sec.  239.15A and 274.11A of this chapter (Form N-1A), 
General Instruction I of Sec. Sec.  239.14 and 274.11a-1 of this 
chapter (Form N-2),

[[Page 24007]]

General Instruction C.3.(h) of Sec. Sec.  239.17a and 274.11b of this 
chapter (Form N-3), General Instruction C.3.(h) of Sec. Sec.  239.17b 
and 274.11c of this chapter (Form N-4), General Instruction C.3.(h) of 
Sec. Sec.  239.17c and 274.11d of this chapter (Form N-6), General 
Instruction C.4 of Sec. Sec.  249.331 and 274.128 of this chapter (Form 
N-CSR), General Instruction A of Sec.  249.1 of this chapter (Form 1), 
and General Instruction A of Sec.  249b.200 of this chapter (Form CA-1) 
specify when electronic filers are required or permitted to submit an 
Interactive Data File (Sec.  232.11), as further described in note 1 to 
this section. This section imposes content, format and submission 
requirements for an Interactive Data File, but does not change the 
substantive content requirements for the financial and other 
disclosures in the Related Official Filing (Sec.  232.11).
    (a) * * *
    (2) Be submitted only by an electronic filer either required or 
permitted to submit an Interactive Data File as specified by Sec.  
229.601(b)(101) of this chapter (Item 601(b)(101) of Regulation S-K), 
General Instruction F of Sec.  249.311 (Form 11-K), Sec. Sec.  
240.15fk-1(c)(2)(ii)(A), 240.17a-5(d)(6)(i), 240.17a-5(k)(2), 240.17a-
12(b)(6), 240.17a-12(k), 240.17a-12(l), 240.17a-12(m), 240.17h-
2T(a)(2), and 240.18a-7(c)(6) of this chapter (Rules 15fk-
1(c)(2)(ii)(A), 17a-5(d)(6)(i), 17a-5(k)(2), 17a-12(b)(6), 17a-12(k), 
17a-12(l), 17a-12(m), 17h-2T(a)(2), and 18a-7(c)(6) under the Exchange 
Act), paragraph (101) of Part II--Information Not Required to be 
Delivered to Offerees or Purchasers of Sec.  239.40 of this chapter 
(Form F-10), paragraph 101 of the Instructions as to Exhibits of Sec.  
249.220f of this chapter (Form 20-F), paragraph B.(15) of the General 
Instructions to Sec.  249.240f of this chapter (Form 40-F), paragraph 
C.(6) of the General Instructions to Sec.  249.306 of this chapter 
(Form 6-K), Sec.  240.17ad-27(d) of this chapter (Rule 17ad-27(d) under 
the Exchange Act), Note D.5 of Sec.  240.14a-101 of this chapter (Rule 
14a-101 under the Exchange Act), Item 1 of Sec.  240.14c-101 of this 
chapter (Rule 14c-101 under the Exchange Act), General Instruction 
C.3.(g) of Sec. Sec.  239.15A and 274.11A of this chapter (Form N-1A), 
General Instruction I of Sec. Sec.  239.14 and 274.11a-1 of this 
chapter (Form N-2), General Instruction C.3.(h) of Sec. Sec.  239.17a 
and 274.11b of this chapter (Form N-3), General Instruction C.3.(h) of 
Sec. Sec.  239.17b and 274.11c of this chapter (Form N-4), General 
Instruction C.3.(h) of Sec. Sec.  239.17c and 274.11d of this chapter 
(Form N-6), General Instruction C.4 of Sec. Sec.  249.331 and 274.128 
of this chapter (Form N-CSR), General Instruction A of Sec.  249.1 of 
this chapter (Form 1), or General Instruction A of Sec.  249b.200 of 
this chapter (Form CA-1), as applicable;
    (3) * * *
    (i) If the electronic filer is not a management investment company 
registered under 15 U.S.C. 80a et seq. (the Investment Company Act of 
1940), or a separate account as defined in 15 U.S.C. 77b(a)(14) 
(Section 2(a)(14) of the Securities Act) registered under the 
Investment Company Act of 1940, or a business development company as 
defined in 15 U.S.C. 80a-2(a)(48) (Section 2(a)(48) of the Investment 
Company Act of 1940), an entity subject to Sec. Sec.  240.15fk-1, 
240.17a-5, 240.17a-12, 240.17h-2T, or 240.18a-7 of this chapter (Rule 
15fk-1, 17a-5, 17a-12, 17h-2T, or 18a-7 under the Exchange Act), an 
exchange as defined in 15 U.S.C. 78c(a)(1) (Section 3(a)(1) of the 
Exchange Act), or a clearing agency as defined in 15 U.S.C. 
78c(a)(23)(A) (Section 3(a)(23)(A) of the Exchange Act), and is not 
within one of the categories specified in paragraph (f)(1)(i) of this 
section, as partly embedded into a filing with the remainder 
simultaneously submitted as an exhibit to:
* * * * *
    (ii) If the electronic filer is a management investment company 
registered under 15 U.S.C. 80a et seq. (the Investment Company Act of 
1940), or a separate account (as defined in 15 U.S.C. 77b(a)(14) 
(Section 2(a)(14) of the Securities Act)) registered under the 
Investment Company Act of 1940, or a business development company as 
defined in 15 U.S.C. 80a-2(a)(48) (Section 2(a)(48) of the Investment 
Company Act of 1940), an entity subject to Sec. Sec.  240.15fk-1, 
240.17a-5, 240.17a-12, 240.17h-2T, or 240.18a-7 of this chapter (Rule 
15fk-1, 17a-5, 17a-12, 17h-2T, or 18a-7 under the Exchange Act), an 
exchange as defined in 15 U.S.C. 78c(a)(1) (Section 3(a)(1) of the 
Exchange Act), or a clearing agency as defined in 15 U.S.C. 
78c(a)(23)(A) (Section 3(a)(23)(A) of the Exchange Act), and is not 
within one of the categories specified in paragraph (f)(1)(ii) of this 
section, as partly embedded into a filing with the remainder 
simultaneously submitted as an exhibit to a filing that contains the 
disclosure this section requires to be tagged; and
    (4) Be submitted in accordance with the EDGAR Filer Manual and, as 
applicable, Sec.  229.601(b)(101) of this chapter (Item 601(b)(101) of 
Regulation S-K), General Instruction F of Sec.  249.311 of this chapter 
(Form 11-K), Sec. Sec.  240.15fk-1(c)(2)(ii)(A), 240.17a-5(d)(6)(i), 
240.17a-5(k)(2), 240.17a-12(b)(6), 240.17a-12(k), 240.17a-12(l), 
240.17a-12(m), 240.17h-2T(a)(2), and 240.18a-7(c)(6) of this chapter 
(Rules 15fk-1(c)(2)(ii)(A), 17a-5(d)(6)(i), 17a-5(k)(2), 17a-12(b)(6), 
17a-12(k), 17a-12(l), 17a-12(m), 17h-2T(a)(2), and 18a-7(c)(6) under 
the Exchange Act)15fk-1, paragraph (101) of Part II--Information Not 
Required to be Delivered to Offerees or Purchasers of Sec.  239.40 of 
this chapter (Form F-10), paragraph 101 of the Instructions as to 
Exhibits of Sec.  249.220f of this chapter (Form 20-F), paragraph 
B.(15) of the General Instructions to Sec.  249.240f of this chapter 
(Form 40-F), paragraph C.(6) of the General Instructions to Sec.  
249.306 of this chapter (Form 6-K), Sec.  240.17ad-27(d) of this 
chapter (Rule 17ad-27(d) under the Exchange Act), Note D.5 of Sec.  
240.14a-101 of this chapter (Rule 14a-101 under the Exchange Act), Item 
1 of Sec.  240.14c-101 of this chapter (Rule 14c-101 under the Exchange 
Act), General Instruction C.3.(g) of Sec. Sec.  239.15A and 274.11A of 
this chapter (Form N-1A), General Instruction I of Sec. Sec.  239.14 
and 274.11a-1 of this chapter (Form N-2), General Instruction C.3.(h) 
of Sec. Sec.  239.17a and 274.11b of this chapter (Form N-3), General 
Instruction C.3.(h) of Sec. Sec.  239.17b and 274.11c of this chapter 
(Form N-4), General Instruction C.3.(h) of Sec. Sec.  239.17c and 
274.11d of this chapter (Form N-6); General Instruction C.4 of 
Sec. Sec.  249.331 and 274.128 of this chapter (Form N-CSR); General 
Instruction A of Sec.  249.1 of this chapter (Form 1); or General 
Instruction A of Sec.  249b.200 of this chapter (Form CA-1).
    (b) * * *
    (1) If the electronic filer is not a management investment company 
registered under 15 U.S.C. 80a et seq. (the Investment Company Act of 
1940), a separate account as defined in 15 U.S.C. 77b(a)(14) (Section 
2(a)(14) of the Securities Act) registered under the Investment Company 
Act of 1940, a business development company as defined in 15 U.S.C. 
80a-2(a)(48) (Section 2(a)(48) of the Investment Company Act of 1940), 
an entity subject to Sec. Sec.  240.15fk-1, 240.17a-5, 240.17a-12, 
240.17h-2T, or 240.18a-7 of this chapter (Rule 15fk-1, 17a-5, 17a-12, 
17h-2T, or 18a-7 under the Exchange Act), an exchange as defined in 15 
U.S.C. 78c(a)(1) (Section 3(a)(1) of the Exchange Act), or a clearing 
agency as defined in 15 U.S.C. 78c(a)(23)(A) (Section 3(a)(23) of the 
Exchange Act), an Interactive Data File must consist of only a complete 
set of information for all periods required to be presented in the 
corresponding data in the Related

[[Page 24008]]

Official Filing, no more and no less, from all of the following 
categories:
* * * * *
    (5) If an electronic filer is an entity subject to Sec. Sec.  
240.15fk-1, 240.17a-5, 240.17a-12, 240.17h-2T, or 240.18a-7 of this 
chapter (Rule 15fk-1, 17a-5, 17a-12, 17h-2T, or 18a-7 under the 
Exchange Act), an exchange as defined in 15 U.S.C. 78c(a)(1) (Section 
3(a)(1) of the Exchange Act), or a clearing agency as defined in 15 
U.S.C. 78c(a)(23)(A) (Section 3(a)(23)(A) of the Exchange Act), an 
Interactive Data File must consist of only a complete set of 
information for all periods required to be presented in the 
corresponding data in the Related Official Filing, no more and no less, 
from all of the following categories, as applicable:
    (i) For electronic filers of Sec.  249.517 of this chapter (Part 
III of Form X-17A-5): the disclosures required by Items (a) through (y) 
of that Form.
    (ii) The disclosure provided pursuant to Item 4 of Sec.  249.328T 
of this chapter (Form 17-H).
    (iii) The report provided pursuant to Sec.  240.15fk-1(c)(2)(ii)(A) 
of this chapter (Rule 15fk-1(c)(2)(ii)(A) under the Exchange Act).
    (iv) The exhibits specified by General Instruction A to Sec.  249.1 
of this chapter (Form 1).
    (v) The disclosure provided pursuant to Schedule A and Exhibits C, 
F, H, J, K, L, M, O, R, and S to Sec.  249b.200 of this chapter (Form 
CA-1).
    (vi) The information provided pursuant to Sec.  240.17ad-27 of this 
chapter (Rule 17ad-27 under the Exchange Act).
* * * * *

    Note 1 to Sec.  232.405: Section 229.601(b)(101) of this chapter 
(Item 601(b)(101) of Regulation S-K) specifies the circumstances 
under which an Interactive Data File must be submitted and the 
circumstances under which it is permitted to be submitted, with 
respect to Sec.  239.11 of this chapter (Form S-1), Sec.  239.13 of 
this chapter (Form S-3), Sec.  239.25 of this chapter (Form S-4), 
Sec.  239.18 of this chapter (Form S-11), Sec.  239.31 of this 
chapter (Form F-1), Sec.  239.33 of this chapter (Form F-3), Sec.  
239.34 of this chapter (Form F-4), Sec.  249.310 of this chapter 
(Form 10-K), Sec.  249.308a of this chapter (Form 10-Q), and Sec.  
249.308 of this chapter (Form 8-K). General Instruction F of Sec.  
249.311 of this chapter (Form 11-K) specifies the circumstances 
under which an Interactive Data File must be submitted, and the 
circumstances under which it is permitted to be submitted, with 
respect to Form 11-K. Paragraph (101) of Part II--Information not 
Required to be Delivered to Offerees or Purchasers of Sec.  239.40 
of this chapter (Form F-10) specifies the circumstances under which 
an Interactive Data File must be submitted and the circumstances 
under which it is permitted to be submitted, with respect to Form F-
10. Paragraph 101 of the Instructions as to Exhibits of Sec.  
249.220f of this chapter (Form 20-F) specifies the circumstances 
under which an Interactive Data File must be submitted and the 
circumstances under which it is permitted to be submitted, with 
respect to Form 20-F. Paragraph B.(15) of the General Instructions 
to Sec.  249.240f of this chapter (Form 40-F) and Paragraph C.(6) of 
the General Instructions to Sec.  249.306 of this chapter (Form 6-K) 
specify the circumstances under which an Interactive Data File must 
be submitted and the circumstances under which it is permitted to be 
submitted, with respect to Sec.  249.240f of this chapter (Form 40-
F) and Sec.  249.306 of this chapter (Form 6-K). Note D.5 of Sec.  
240.14a-101 of this chapter (Schedule 14A) and Item 1 of Sec.  
240.14c-101 of this chapter (Schedule 14C) specify the circumstances 
under which an Interactive Data File must be submitted with respect 
to Schedules 14A and 14C. Section 229.601(b)(101) (Item 601(b)(101) 
of Regulation S-K), paragraph (101) of Part II--Information not 
Required to be Delivered to Offerees or Purchasers of Form F-10, 
paragraph 101 of the Instructions as to Exhibits of Form 20-F, 
paragraph B.(15) of the General Instructions to Form 40-F, and 
paragraph C.(6) of the General Instructions to Form 6-K all prohibit 
submission of an Interactive Data File by an issuer that prepares 
its financial statements in accordance with 17 CFR 210.6-01 through 
210.6-10 (Article 6 of Regulation S-X). For an issuer that is a 
management investment company or separate account registered under 
the Investment Company Act of 1940 (15 U.S.C. 80a et seq.) or a 
business development company as defined in 15 U.S.C. 80a-2(a)(48) 
(Section 2(a)(48) of the Investment Company Act of 1940), General 
Instruction C.3.(g) of Sec. Sec.  239.15A and 274.11A of this 
chapter (Form N-1A), General Instruction I of Sec. Sec.  239.14 and 
274.11a-1 of this chapter (Form N-2), General Instruction C.3.(h) of 
Sec. Sec.  239.17a and 274.11b of this chapter (Form N-3), General 
Instruction C.3.(h) of Sec. Sec.  239.17b and 274.11c of this 
chapter (Form N-4), General Instruction C.3.(h) of Sec. Sec.  
239.17c and 274.11d of this chapter (Form N-6), and General 
Instruction C.4 of Sec. Sec.  249.331 and 274.128 of this chapter 
(Form N-CSR), as applicable, specifies the circumstances under which 
an Interactive Data File must be submitted. For entities subject to 
Sec. Sec.  240.15fk-1, 240.17a-5, 240.17a-12, 240.17h-2T, or 
240.18a-7 of this chapter (Rule 15fk-1, 17a-5, 17a-12, 17h-2T, or 
18a-7 under the Exchange Act), Sec. Sec.  240.15fk-1(c)(2)(ii)(A), 
240.17a-5(d)(6)(i), 240.17a-5(k)(2), 240.17a-12(b)(6), 240.17a-
12(k), 240.17a-12(l), 240.17a-12(m), 240.17h-2T(a)(2), and 240.18a-
7(c)(6) of this chapter (Rules 15fk-1(c)(2)(ii)(A), 17a-5(d)(6)(i), 
17a-5(k)(2), 17a-12(b)(6), 17a-12(k), 17a-12(l), 17a-12(m), 17h-
2T(a)(2), and 18a-7(c)(6) under the Exchange Act), as applicable, 
specify the circumstances under which an Interactive Data File must 
be submitted. For an exchange as defined in 15 U.S.C. 78c(a)(1) 
(Section 3(a)(1) of the Exchange Act), General Instruction A of 
Sec.  249.1 of this chapter (Form 1) specifies the circumstances 
under which an Interactive Data File must be submitted. For a 
clearing agency as defined in 15 U.S.C. 78c(a)(23)(A) (Section 
3(a)(23)(A) of the Exchange Act), General Instruction A of Sec.  
249.200b of this chapter (Form CA-1) specifies the circumstances 
under which an Interactive Data File must be submitted with respect 
to Sec.  249.200b of this chapter (Form CA-1), and Sec.  240.17ad-
27(d) of this chapter (Rule 17ad-27(d) under the Exchange Act) 
specify the circumstances under which an Interactive Data File must 
be submitted with respect to the reports required under Sec.  
249.200b of this chapter (Form CA-1) and Sec.  240.17ad-27 of this 
chapter (Rule 17ad-27 under the Exchange Act).

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 
1934

0
9. The authority citation for part 240 continues to read, in part, as 
follows:

    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78c-3, 78c-5, 78d, 78e, 78f, 
78g, 78i, 78j, 78j-1, 78j-4, 78k, 78k-1, 78l, 78m, 78n, 78n-1, 78o, 
78o-4, 78o-10, 78p, 78q, 78q-1, 78s, 78u-5, 78w, 78x, 78dd, 78ll, 
78mm, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4, 80b-11, 7201 et 
seq., and 8302; 7 U.S.C. 2(c)(2)(E); 12 U.S.C. 5221(e)(3); 18 U.S.C. 
1350; and Pub. L. 111-203, 939A, 124 Stat. 1376 (2010); and Pub. L. 
112-106, sec. 503 and 602, 126 Stat. 326 (2012), unless otherwise 
noted.
* * * * *
    Sections 240.3a71-3 and 240.3a71-5 are also issued under Public 
Law 111-203, sec. 761(b), 124 Stat. 1754 (2010), and 15 U.S.C. 
78dd(c).
* * * * *
    Sections 240.15Fh-1 through 240.15Fh-6 and 240.15fk-1 are also 
issued under sec. 943, Public Law 111-203, 124 Stat. 1376.
* * * * *
    Section 240.19b-4 is also issued under 12 U.S.C. 5465(e).
* * * * *
0
10. Amend Sec.  240.3a71-3 by revising paragraph (d)(1)(vi) to read as 
follows:


Sec.  240.3a71-3  Cross-border security-based swap dealing activity.

* * * * *
    (d) * * *
    (1) * * *
    (vi) Notices and withdrawals of notices by registered entity. 
Before an associated person of the registered entity described in 
paragraph (d)(1)(i) of this section commences the activity described in 
paragraph (d)(1)(i) of this section, such registered entity shall have 
filed a notice with the Commission (that has not been withdrawn) that 
its associated persons may conduct such activity. Such registered 
entity shall file this notice electronically on EDGAR in accordance 
with the EDGAR Filer Manual, as defined in 17 CFR 232.11 (Rule 11 of 
Regulation S-T), and in accordance with the requirements of 17

[[Page 24009]]

CFR part 232 (Regulation S-T). A registered entity whose associated 
persons will no longer conduct the activity described in paragraph 
(d)(1)(i) of this section may withdraw, and an entity that no longer is 
described in paragraph (d)(1) of this section shall promptly withdraw, 
its previously filed notice by filing a withdrawal electronically on 
EDGAR in accordance with the EDGAR Filer Manual, as defined in Rule 11 
of Regulation S-T, and in accordance with the requirements of 
Regulation S-T. Such notices and withdrawals shall be publicly 
disseminated through the Commission's EDGAR system.
* * * * *
0
11. Amend Sec.  240.6a-1 by adding paragraph (e) to read as follows:


Sec.  240.6a-1  Application for registration as a national securities 
exchange or exemption from registration based on limited volume.

* * * * *
    (e) Filings on Form 1 (Sec.  249.1 of this chapter) submitted 
pursuant to this chapter shall be filed electronically on EDGAR in 
accordance with the requirements of 17 CFR part 232 (Regulation S-T). 
Except as otherwise specified on Form 1, the disclosure required to be 
included in Exhibits D, E, and I must be provided as an Interactive 
Data File in accordance with 17 CFR 232.405 (Rule 405 of Regulation S-
T).
0
12. Amend Sec.  240.6a-2 by:
0
a. Revising paragraph (a) introductory text;
0
b. Revising paragraph (a)(1);
0
c. Revising paragraph (b) introductory text;
0
d. Revising the first sentence of paragraph (c); and
0
e. Revising paragraph (d).

    The revisions read as follows:


Sec.  240.6a-2  Amendments to application.

    (a) A national securities exchange, or an exchange exempted from 
such registration based on limited volume, shall electronically file an 
amendment to Form 1 (Sec.  249.1 of this chapter), in accordance with 
Sec.  240.6a-1(e) of this chapter, which shall set forth the nature and 
effective date of the action taken and shall provide any new 
information and correct any information rendered inaccurate, on Form 1 
(Sec.  249.1 of this chapter), within 10 days after any action is taken 
that renders inaccurate, or that causes to be incomplete, any of the 
following:
    (1) Information filed on Sections I and II of Form 1, or amendment 
thereto; or
* * * * *
    (b) On or before June 30 of each year, a national securities 
exchange, or an exchange exempted from such registration based on 
limited volume, shall electronically file, as an amendment to Form 1, 
in accordance with Sec.  240.6a-1(e) of this chapter, the following:
* * * * *
    (c) On or before June 30, 2025, and every three years thereafter, a 
national securities exchange, or an exchange exempted from such 
registration based on limited volume, shall electronically file, as an 
amendment to Form 1, in accordance with Sec.  240.6a-1(e) of this 
chapter, complete Exhibits A, B, C and J. * * *
    (d)(1) If an exchange, on an annual or more frequent basis, 
publishes, or cooperates in the publication of, any of the information 
required to be filed by paragraphs (b)(2) and (c) of this section, in 
lieu of filing such information, an exchange may:
    (i) Identify on Form 1 the publication in which such information is 
available, the name, address, and telephone number of the person from 
whom such publication may be obtained, and the price of such 
publication; and
    (ii) Certify on Form 1 to the accuracy of such information as of 
its publication date.
    (2) If an exchange keeps the information required under paragraphs 
(b)(2) and (c) of this section up to date and makes it available to the 
Commission and the public upon request, in lieu of filing such 
information, an exchange may certify on Form 1 that the information is 
kept up to date and is available to the Commission and the public upon 
request.
    (3) If the information required to be filed under paragraphs (b)(2) 
and (c) of this section is available continuously on an internet 
website controlled by an exchange, in lieu of filing such information 
with the Commission, such exchange may:
    (i) Provide on Form 1 the Uniform Resource Locator(s) (URL(s)) of 
the location(s) on the internet website where such information may be 
found; and
    (ii) Certify on Form 1 that the information available at such 
location(s) is accurate as of its date and is free and accessible 
(without any encumbrances or restrictions) by the general public.
* * * * *
0
13. Amend Sec.  240.6a-3 by:
0
a. Revising the second sentence of paragraph (a)(1);
0
b. Revising paragraph (a)(2); and
0
c. Revising the first sentence of the introductory text to paragraph 
(b).

    The revisions read as follows:


Sec.  240.6a-3  Supplemental material to be filed by exchanges.

    (a)(1) * * * Such material shall be electronically filed with the 
Commission on Form 1 (Sec.  249.1 of this chapter), in accordance with 
Sec.  240.6a-1(e) of this chapter, within 10 days after issuing or 
making such material available to members, participants or subscribers.
    (2) If the information required to be filed under paragraph (a)(1) 
of this section is available continuously on an internet website 
controlled by an exchange, in lieu of filing such information with the 
Commission, such exchange may:
    (i) Provide on Form 1 the Uniform Resource Locator(s) (URL(s)) of 
the location(s) on the internet website where such information may be 
found; and
    (ii) Certify on Form 1 that the information available at such 
location(s) is accurate as of its date and is free and accessible 
(without any encumbrances or restrictions) by the general public.
    (b) Within 15 days after the end of each calendar month, a national 
securities exchange or an exchange exempted from such registration 
based on limited volume, shall electronically file on Form 1 (Sec.  
249.1 of this chapter), in accordance with Sec.  240.6a-1(e) of this 
chapter, a report concerning the securities sold on such exchange 
during the calendar month. * * *
* * * * *
0
14. Amend Sec.  240.6a-4 by:
0
a. Revising the introductory text to paragraph (a)(1)(i);
0
b. Revising paragraphs (a)(1)(i)(B) and (a)(1)(ii)(B);
0
c. Revising paragraphs (b)(1)(i), (b)(3), (b)(4), and (b)(5);
0
d. Revising paragraphs (c)(1)(ii)(A) and (B);
0
e. Revising the second sentence of the introductory text to paragraph 
(c)(2); and
0
f. Adding paragraph (d).

    The revisions and addition read as follows:


Sec.  240.6a-4  Notice of registration under Section 6(g) of the Act, 
amendment to such notice, and supplemental materials to be filed by 
exchanges registered under Section 6(g) of the Act.

    (a) * * *
    (1) * * *
    (i) The exchange is a board of trade, as that term is defined in 
the Commodity Exchange Act (7 U.S.C. 1a(6)), that:
    (B) Is registered as a derivative transaction execution facility 
under Section 6(a) of the Commodity Exchange Act (7 U.S.C. 8(a)) and 
such registration

[[Page 24010]]

is not suspended by the Commodity Futures Trading Commission; and
    (ii) * * *
    (B) Futures on exempted securities or on groups or indexes of 
securities or options thereon that have been authorized under Section 
2(a)(1)(C) of the Commodity Exchange Act (7 U.S.C. 2(a)(1)(C)).
* * * * *
    (b) * * *
    (1) * * *
    (i) Ten days after any action is taken that renders inaccurate, or 
that causes to be incomplete, any information filed on Sections I 
through III of Form 1-N (Sec.  249.10 of this chapter), or amendment 
thereto; or
* * * * *
    (3) On or before June 30, 2023, and by June 30 every year 
thereafter, a Security Futures Product Exchange shall file, as an 
amendment to Form 1-N (Sec.  249.10 of this chapter), Exhibits F, H, 
and I, which shall be current as of the latest practicable date, but 
shall, at a minimum, be up to date within three months as of the date 
the amendment is filed.
    (4) On or before June 30, 2025, and by June 30 every three years 
thereafter, a Security Futures Product Exchange shall file, as an 
amendment to Form 1-N (Sec.  249.10 of this chapter), complete Exhibits 
A, B, C, and E, which shall be current as of the latest practicable 
date, but shall, at a minimum, be up to date within three months as of 
the date the amendment is filed.
    (5)(i) If a Security Futures Product Exchange, on an annual or more 
frequent basis, publishes, or cooperates in the publication of, any of 
the information required to be filed by paragraphs (b)(3) and (b)(4) of 
this section, in lieu of filing such information, a Security Futures 
Product Exchange may:
    (A) Identify on Form 1-N the publication in which such information 
is available, the name, address, and telephone number of the person 
from whom such publication may be obtained, and the price of such 
publication; and
    (B) Certify on Form 1-N to the accuracy of such information as of 
its publication date.
    (ii) If a Security Futures Product Exchange keeps the information 
required under paragraphs (b)(3) and (b)(4) of this section up to date 
and makes it available to the Commission and the public upon request, 
in lieu of filing such information, a Security Futures Product Exchange 
may certify on Form 1-N that the information is kept up to date and is 
available to the Commission and the public upon request.
    (iii) If the information required to be filed under paragraphs 
(b)(3) and (b)(4) of this section is available continuously on an 
internet website controlled by a Security Futures Product Exchange, in 
lieu of filing such information with the Commission, such Security 
Futures Product Exchange may:
    (A) Provide on Form 1-N the Uniform Resource Locator(s) (URL(s)) of 
the location(s) of the internet website where such information may be 
found; and
    (B) Certify on Form 1-N that the information available at such 
location(s) is accurate as of its date and is free and accessible 
(without any encumbrances or restrictions) by the general public.
* * * * *
    (c) * * *
    (1) * * *
    (ii) * * *
    (A) Provide on Form 1-N the Uniform Resource Locator(s) (URL(s)) of 
the location(s) of the internet website where such information may be 
found; and
    (B) Certify on Form 1-N that the information available at such 
location(s) is accurate as of its date and is free and accessible 
(without any encumbrances or restrictions) by the general public.
    (2) * * * Such a report shall state:
* * * * *
    (d) Filings on Form 1-N (Sec.  249.10 of this chapter) submitted 
pursuant to this section shall be filed electronically on EDGAR in 
accordance with the requirements of 17 CFR part 232 (Regulation S-T).
0
15. Redesignate Sec.  240.15Aa-1 as Sec.  240.15aa-1 and revise newly 
redesignated Sec.  240.15aa-1 to read as follows:


Sec.  240.15aa-1  Registration of a national or an affiliated 
securities association.

    Any application for registration of an association as a national, 
or as an affiliated, securities association shall be submitted on Form 
15A. Filings on Form 15A (Sec.  249.801 of this chapter) submitted 
pursuant to this section shall be filed electronically on EDGAR in 
accordance with the requirements of 17 CFR part 232 (Regulation S-T).
0
16. Redesignate Sec.  240.15Aj-1 as Sec.  240.15aa-2 and amend newly 
redesignated Sec.  240.15aa-2 by:
0
a. Revising paragraphs (b)(1), (b)(2), and (b)(3);
0
b. Revising paragraph (c)(1); and
0
c. Revising paragraph (d).

    The revisions read as follows:


Sec.  240.15aa-2  Amendments and supplements to registration statements 
of securities associations.

* * * * *
    (b) * * *
    (1) No current supplements need be filed with respect to changes in 
the information called for in Exhibit B.
    (2) Supplements setting forth changes in the information called for 
in Exhibit C need not be filed until 10 days after the calendar month 
in which the changes occur.
    (3) If changes in the information called for in items (1) and (2) 
of Exhibit C are reported in any record which is published at least 
once a month by the association and promptly filed with the Commission, 
no current supplement need be filed with respect thereto.
    (c) * * *
    (1) Promptly after March 1 of each year, the association shall file 
with the Commission an annual consolidated supplement as of such date 
on Form 15A (Sec.  249.801) except that:
    (i) If the securities association publishes or cooperates in the 
publication of the information required in Items 6(a) and 6(b) of Form 
15A on an annual or more frequent basis, in lieu of filing such an item 
the securities association may:
    (A) Identify on Form 15A the publication in which such information 
is available, the name, address, and telephone number of the person 
from whom such publication may be obtained, and the price thereof; and
    (B) Certify on Form 15A to the accuracy of such information as of 
its date.
    (ii) Promptly after March 1, 2025, and every three years thereafter 
each association shall file complete Exhibit A to Form 15A. The 
information contained in this exhibit shall be up to date as of the 
latest practicable date within 3 months of the date on which these 
exhibits are filed. If the association publishes or cooperates in the 
publication of the information required in this exhibit on an annual or 
more frequent basis, in lieu of filing such exhibit the association 
may:
    (A) Identify on Form 15A the publication in which such information 
is available, the name, address, and telephone number of the person 
from whom such publication may be obtained, and the price thereof; and
    (B) Certify on Form 15A to the accuracy of such information as of 
its date. If a securities association keeps the information required in 
the exhibit up to date and makes it available to the Commission and the 
public upon request, in lieu of filing such an exhibit a securities 
association may certify on Form 15A that the information is kept up to 
date and is available to the

[[Page 24011]]

Commission and the public upon request.
* * * * *
    (d) Filing, dating, etc. (1) Each amendment or supplement, 
including the annual consolidated supplement, shall be submitted 
electronically on Form 15A in a manner prescribed in 17 CFR 240.15Aa-1 
(Rule 15aa-1).
    (2) One amendment or supplement may include any number of changes. 
In addition to the formal filing of amendments and supplements above 
described, each association shall electronically file with the 
Commission copies of any notices, reports, circulars, loose-leaf 
insertions, riders, new additions, lists or other records of changes 
covered by amendments or supplements when, as and if such records are 
made available to members of the association.
0
17. Amend Sec.  240.15Fi-3 by:
0
a. Redesignating Sec.  240.15Fi-3 as Sec.  240.15fi-3; and
0
b. Revising paragraph (c) in newly redesignated Sec.  240.15fi-3.

    The revision reads as follows:


Sec.  240.15fi-3  Security-based swap portfolio reconciliation.

* * * * *
    (c) Reporting of security-based swap valuation disputes. (1) Notice 
requirement. Each security-based swap dealer and major security-based 
swap participant shall promptly notify the Commission, electronically 
through the Commission's EDGAR system, in accordance with the EDGAR 
Filer Manual, as defined in 17 CFR 232.11 (Rule 11 of Regulation S-T), 
and in accordance with the requirements of 17 CFR part 232 (Regulation 
S-T), and any applicable prudential regulator, in a form and manner 
acceptable to such applicable prudential regulator, of any security-
based swap valuation dispute in excess of $20,000,000 (or its 
equivalent in any other currency), at either the transaction or 
portfolio level, if not resolved within:
    (i) Three business days, if the dispute is with a counterparty that 
is a security-based swap dealer or major security-based swap 
participant; or
    (ii) Five business days, if the dispute is with a counterparty that 
is not a security-based swap dealer or major security-based swap 
participant.
    (2) Amendments. Each security-based swap dealer and major security-
based swap participant shall notify the Commission, electronically 
through the Commission's EDGAR system, in accordance with the EDGAR 
Filer Manual, as defined in Rule 11 of Regulation S-T, and in 
accordance with the requirements of Regulation S-T, and any applicable 
prudential regulator, in a form and manner acceptable to such 
applicable prudential regulator, if the amount of any security-based 
swap valuation dispute that was the subject of a previous notice made 
pursuant to paragraph (c)(1) of this section increases or decreases by 
more than $20,000,000 (or its equivalent in any other currency), at 
either the transaction or portfolio level. Such amended notice shall be 
provided to the Commission and any applicable prudential regulator no 
later than the last business day of the calendar month in which the 
applicable security-based swap valuation dispute increases or decreases 
by the applicable dispute amount.
* * * * *
0
18. Amend Sec.  240.15Fk-1 by:
0
a. Redesignating Sec.  240.15Fk-1 as Sec.  240.15fk-1; and
0
b. Revising paragraph (c)(2)(ii)(A) in newly redesignated Sec.  
240.15fk-1.

    The revision reads as follows:


Sec.  240.15fk-1  Designation of chief compliance officer for security-
based swap dealers and major security-based swap participants.

* * * * *
    (c) * * *
    (2) * * *
    (ii) * * *
    (A) Be submitted to the Commission electronically through the EDGAR 
system as an Interactive Data File in accordance with 17 CFR 232.405 
(Rule 405 of Regulation S-T) within 30 days following the deadline for 
filing the security-based swap dealer's or major security-based swap 
participant's annual financial report with the Commission pursuant to 
section 15F of the Act and rules and regulations thereunder;
* * * * *
0
19. Amend Sec.  240.17a-5 by:
0
a. Revising the last sentence of paragraph (a)(2);
0
b. Revising paragraph (d)(6);
0
c. Adding new paragraph (e)(2)(iii);
0
d. Revising paragraph (e)(3), the last sentence of paragraph 
(f)(3)(v)(B), paragraph (i)(1)(ii), and paragraph (k);
0
e. Removing paragraph (o);
0
f. Redesignating paragraph (p) as new paragraph (o); and
0
g. Adding new paragraph (p).

    The revisions and additions read as follows:


Sec.  240.17a-5  Reports to be made by certain brokers and dealers.

* * * * *
    (a) * * *
    (2) * * * All reports filed pursuant to this paragraph (a) will be 
deemed confidential for the purposes of section 24(b) of the Act.
* * * * *
    (d) * * *
    (6)(i) Filing with the Commission. The annual reports must be filed 
with the Commission electronically on EDGAR in accordance with the 
EDGAR Filer Manual, as defined in 17 CFR 232.11 (Rule 11 of Regulation 
S-T), and must be filed in accordance with the requirements of 17 CFR 
part 232 (Regulation S-T). The annual reports must be provided as an 
Interactive Data File in accordance with 17 CFR 232.405 (Rule 405 of 
Regulation S-T).
    (ii) Filing with other organizations. The annual reports also must 
be filed with the designated examining authority for the broker or 
dealer and with the Securities Investor Protection Corporation 
(``SIPC'') if the broker or dealer is a member of SIPC. Copies of the 
reports must be provided to all self-regulatory organizations of which 
the broker or dealer is a member, unless the self-regulatory 
organization by rule waives this requirement.
* * * * *
    (e) * * *
    (2) * * *
    (iii) The broker or dealer must keep the original notarized oath or 
affirmation for a period of not less than six years, the first two 
years in an easily accessible place and in accordance with the 
requirements of Sec.  240.17a-4 of this chapter (Rule 17a-4) under the 
Exchange Act.
    (3) The annual reports filed under paragraph (d) of this section 
may be filed as:
    (i) One public document; or
    (ii) Two documents:
    (A) A document consisting of the Statement of Financial Condition, 
the notes to the Statement of Financial Condition, and the report of 
the independent public accountant covering the Statement of Financial 
Condition, which is not confidential; and
    (B) A document containing the balance of the annual reports for 
which confidential treatment may be requested and which will be deemed 
confidential for the purposes of section 24(b) of the Act. However, the 
annual reports, including the confidential portions, will be available 
for official use by any official or employee of the U.S. or any State, 
by national securities exchanges and registered national securities 
associations of which the broker or dealer filing such a report is a 
member, by the Public Company Accounting Oversight Board, and by any 
other person if the Commission authorizes disclosure of the annual 
reports to that

[[Page 24012]]

person. Nothing contained in this paragraph (e)(3) may be construed to 
be in derogation of the rules of any registered national securities 
association or national securities exchange that give to customers of a 
broker or dealer the right, upon request to the broker or dealer, to 
obtain information relative to its financial condition.
    (f) * * *
    (3) * * *
    (v) * * *
    (B) * * * The broker or dealer must file three copies of the notice 
and the accountant's letter, one copy of which must be signed by the 
sole proprietor, a general partner, or a duly authorized corporate, 
limited liability company, or limited liability partnership officer or 
member, as appropriate, and by the independent public accountant, 
respectively.
* * * * *
    (i) * * *
    (1) * * *
    (ii) Be signed;
* * * * *
    (k) Supplemental reports. (1) Each broker or dealer that computes 
certain of its capital charges in accordance with Sec.  240.15c3-1e 
shall file concurrently with the annual reports a supplemental report 
on management controls, which must be prepared by a registered public 
accounting firm (as that term is defined in section 2(a)(12) of the 
Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201 et seq.)). The supplemental 
report must indicate the results of the accountant's review of the 
internal risk management control system established and documented by 
the broker or dealer in accordance with Sec.  240.15c3-4. This review 
shall be conducted in accordance with procedures agreed upon by the 
broker or dealer and the registered public accounting firm conducting 
the review. The agreed upon procedures are to be performed and the 
report is to be prepared in accordance with the rules promulgated by 
the Public Company Accounting Oversight Board. The purpose of the 
review is to confirm that the broker or dealer has established, 
documented, and is in compliance with the internal risk management 
controls established in accordance with Sec.  240.15c3-4. Before 
commencement of the review and no later than December 10 of each year, 
the broker or dealer must file a statement with the Commission that 
includes:
    (i) A description of the agreed-upon procedures agreed to by the 
broker or dealer and the registered public accounting firm; and
    (ii) A notice describing changes in those agreed-upon procedures, 
if any. If there are no changes, the broker or dealer should so 
indicate.
    (2) The supplemental report and statement to be filed under 
paragraph (k)(1) of this section must be filed with the Commission 
electronically on EDGAR in the manner described by the EDGAR Filer 
Manual, as defined in 17 CFR 232.11 (Rule 11 of Regulation S-T), and 
must be filed in accordance with the requirements of 17 CFR part 232 
(Regulation S-T). The supplemental report and statement must be 
provided as an Interactive Data File in accordance with 17 CFR 232.405 
(Rule 405 of Regulation S-T).
* * * * *
    (p) Signatures. Any signature required by this section may be a 
manual or electronic signature. The signing process for an electronic 
signature must, at a minimum:
    (1) Require the signatory to present a physical, logical, or 
digital credential that authenticates the signatory's individual 
identity;
    (2) Reasonably provide for non-repudiation of the signature;
    (3) Provide that the signature be attached, affixed, or otherwise 
logically associated with the signature page or document being signed; 
and
    (4) Include a timestamp to record the date and time of the 
signature.
0
20. Amend Sec.  240.17a-12 by:
0
a. Revising paragraph (a)(2);
0
b. Revising paragraph (b)(6);
0
c. Redesignating paragraph (c)(3) as paragraph (c)(4) and revising 
newly redesignated paragraph (c)(4);
0
d. Adding new paragraph (c)(3);
0
e. Revising the last sentence of paragraph (g)(2), and paragraphs 
(j)(1), (k), (l)(1), (m)(1), and (p); and
0
f. Adding paragraph (q).

    The revisions and additions read as follows:


Sec.  240.17a-12  Reports to be made by certain OTC derivatives 
dealers.

    (a) * * *
    (2) The reports provided for in this paragraph (a) must be filed 
with the Commission electronically on the SEC eFOCUS system. All 
reports filed pursuant to paragraph (a) of this section shall be deemed 
to be confidential for the purposes of section 24(b) of the Act.
* * * * *
    (b) * * *
    (6) The annual audit report shall be filed with the Commission 
electronically on EDGAR in the manner described by the EDGAR Filer 
Manual, as defined in 17 CFR 232.11 (Rule 11 of Regulation S-T), and 
must be filed in accordance with the requirements of 17 CFR part 232 
(Regulation S-T). The annual audit report must be provided as an 
Interactive Data File in accordance with 17 CFR 232.405 (Rule 405 of 
Regulation S-T).
    (c) * * *
    (3) The OTC derivatives dealer must keep the original notarized 
oath or affirmation for a period of not less than six years, the first 
two years in an easily accessible place and in accordance with the 
requirements of Sec.  240.17a-4 of this chapter (Rule 17a-4 under the 
Exchange Act).
    (4) An OTC derivatives dealer may request confidential treatment 
for all of the statements filed pursuant to paragraph (b) of this rule 
and such statements will be deemed confidential for the purposes of 
section 24(b) of the Act. However, such statements shall be available 
for use by any official or employee of the United States or by any 
other person if the Commission authorizes disclosure of such 
information to that person.
* * * * *
    (g) * * *
    (2) * * * The OTC derivatives dealer shall file three copies of the 
notice and the accountant's letter, one copy of which shall be signed 
by the sole proprietor, a general partner, or a duly authorized 
corporate, limited liability company, or limited liability partnership 
officer or member, as appropriate, and by the independent public 
accountant, respectively.
* * * * *
    (j) * * *
    (1) Technical requirements. The certified public accountant's 
report shall be dated; be signed; indicate the city and state where 
issued; and identify without detailed enumeration the financial 
statements and schedules covered by the report.
* * * * *
    (k) Accountant's report on material inadequacies and reportable 
conditions. The OTC derivatives dealer shall file concurrently with the 
annual audit report a supplemental report by the certified public 
accountant describing any material inadequacies or any matter that 
would be deemed to be a reportable condition under U.S. Generally 
Accepted Auditing Standards that are unresolved as of the date of the 
certified public accountant's report. The report shall also describe 
any material inadequacies found to have existed since the date of the 
previous audit. The supplemental report shall indicate any corrective 
action taken or proposed by the OTC derivatives dealer with regard to 
any identified material inadequacies or reportable conditions. If the 
audit did not disclose any material inadequacies

[[Page 24013]]

or reportable conditions, the supplemental report shall so state. This 
supplemental report shall be filed with the Commission electronically 
on EDGAR in the manner described by the EDGAR Filer Manual, as defined 
in 17 CFR 232.11 (Rule 11 of Regulation S-T), and must be filed in 
accordance with the requirements of 17 CFR part 232 (Regulation S-T). 
This supplemental report must be provided as an Interactive Data File 
in accordance with 17 CFR 232.405 (Rule 405 of Regulation S-T).
    (l) * * *
    (1) The OTC derivatives dealer shall file concurrently with the 
annual audit report a supplemental report by the certified public 
accountant indicating the results of the certified public accountant's 
review of the OTC derivatives dealer's internal risk management control 
system with respect to the requirements of Sec.  240.15c3-4. This 
review shall be conducted in accordance with procedures agreed to by 
the OTC derivatives dealer and the certified public accountant 
conducting the review. The purpose of the review is to confirm that the 
OTC derivatives dealer has established, documented, and maintained an 
internal risk management control system in accordance with Sec.  
240.15c3-4, and is in compliance with that internal risk management 
control system. This supplemental report shall be filed with the 
Commission electronically on EDGAR in the manner described by the EDGAR 
Filer Manual, as defined in 17 CFR 232.11 (Rule 11 of Regulation S-T), 
and must be filed in accordance with the requirements of 17 CFR part 
232 (Regulation S-T). This supplemental report must be provided as an 
Interactive Data File in accordance with 17 CFR 232.405 (Rule 405 of 
Regulation S-T).
* * * * *
    (m) * * *
    (1) The OTC derivatives dealer shall file concurrently with the 
annual audit report a supplemental report by the certified public 
accountant indicating the results of the certified public accountant's 
review of the broker's or dealer's inventory pricing and modeling 
procedures. This review shall be conducted in accordance with 
procedures agreed to by the OTC derivatives dealer and by the certified 
public accountant conducting the review. The purpose of the review is 
to confirm that the pricing and modeling procedures relied upon by the 
OTC derivatives dealer conform to the procedures submitted to the 
Commission as part of its OTC derivatives dealer application, and that 
the procedures comply with the qualitative and quantitative standards 
set forth in Sec.  240.15c3-1f. This supplemental report shall be filed 
with the Commission electronically on EDGAR in the manner described by 
the EDGAR Filer Manual, as defined in 17 CFR 232.11 (Rule 11 of 
Regulation S-T), and must be filed in accordance with the requirements 
of 17 CFR part 232 (Regulation S-T). This supplemental report must be 
provided as an Interactive Data File in accordance with 17 CFR 232.405 
(Rule 405 of Regulation S-T).
* * * * *
    (p) Unless otherwise stated in this rule, for purposes of filing 
requirements as described in Sec.  240.17a-12, these filings shall be 
deemed to have been accomplished upon receipt at the Commission's 
principal office in Washington, DC.
    (q) Any signature required by this section may be a manual or 
electronic signature. The signing process for an electronic signature 
must, at a minimum:
    (1) Require the signatory to present a physical, logical, or 
digital credential that authenticates the signatory's individual 
identity;
    (2) Reasonably provide for non-repudiation of the signature;
    (3) Provide that the signature be attached, affixed, or otherwise 
logically associated with the signature page or document being signed; 
and
    (4) Include a timestamp to record the date and time of the 
signature.

0
21. Revise Sec.  240.17a-19 to read as follows:


Sec.  240.17a-19  Form X-17A-19 Report by national securities exchanges 
and registered national securities associations of changes in the 
membership status of any of their members.

    Every national securities exchange and every registered national 
securities association must file with the Commission and with the 
Securities Investor Protection Corporation such information as is 
required by Sec.  249.635 of this chapter on Form X-17A-19 within five 
business days of the occurrence of the initiation of the membership of 
any person or the suspension or termination of the membership of any 
member. Form X-17A-19 must be filed with the Commission electronically 
on EDGAR in accordance with the EDGAR Filer Manual, as defined in 17 
CFR 232.11 (Rule 11 of Regulation S-T), and must be filed in accordance 
with the requirements of Regulation S-T. Nothing in this section shall 
be deemed to relieve a national securities exchange or a registered 
national securities association of its responsibilities under Sec.  
240.17a-5(b)(5) except that, to the extent a national securities 
exchange or a registered national securities association promptly files 
a report on Form X-17A-19 including therewith, inter alia, information 
sufficient to satisfy the requirements of Sec.  240.17a-5(b)(5), it 
shall not be required to file a report pursuant to Sec.  240.17a-5(b). 
Upon the occurrence of the events described in this paragraph, every 
national securities exchange and every registered national securities 
association shall notify in writing such member of its responsibilities 
under Sec.  240.17a-5(b).
0
22. Revise Sec.  240.17a-22 to read as follows:


Sec.  240.17a-22  Supplemental material of registered clearing 
agencies.

    Within two business days after issuing, or making generally 
available, to its participants or to other entities with whom it has a 
significant relationship, any material (including, for example, 
manuals, notices, circulars, bulletins, lists or periodicals) that are 
not otherwise required to be posted on its internet website pursuant to 
any requirement under Section 19(b) of the Exchange Act or any rule 
under Sec.  240.19b-4, a registered clearing agency shall prominently 
post such material on its internet website.
0
23. Amend Sec.  240.17h-2T by revising paragraph (a) to read as 
follows:


Sec.  240.17h-2T  Risk assessment reporting requirements for brokers 
and dealers.

    (a) Reporting requirements of risk assessment information required 
to be maintained by section 240.17h-1T.
    (1) Every broker or dealer registered with the Commission pursuant 
to section 15 of the Act, and every municipal securities dealer 
registered pursuant to section 15B of the Act for which the Commission 
is the appropriate regulatory agency, unless exempt pursuant to 
paragraph (b) of this section, shall file a Form 17-H within 60 
calendar days after the end of each fiscal quarter. The Form 17-H for 
the fourth fiscal quarter shall be filed within 60 calendar days of the 
end of the fiscal year. The cumulative year-end financial statements 
required by section 240.17h-1T may be filed separately within 105 
calendar days of the end of the fiscal year.
    (2) The reports required to be filed pursuant to paragraph (a)(1) 
of this section must be filed with the Commission electronically on 
EDGAR in accordance with the EDGAR Filer Manual, as defined in 17 CFR 
232.11

[[Page 24014]]

(Rule 11 of Regulation S-T), and must be filed in accordance with the 
requirements of 17 CFR part 232 (Regulation S-T). The filings must be 
provided as Interactive Data Files in accordance with 17 CFR 232.405 
(Rule 405 of Regulation S-T).
    (3) For purposes of this section, the term Material Associated 
Person shall have the meaning used in Sec.  240.17h-1T.
* * * * *
0
24. Amend Sec.  240.17Ab2-1 by:
0
a. Redesignating Sec.  240.17Ab2-1 as Sec.  240.17ab2-1;
0
b. Revising paragraphs (a), (d), (e), and (f) in newly redesignated 
Sec.  240.17ab2-1; and
0
c. Adding paragraph (g).

    The revisions and addition read as follows:


Sec.  240.17ab2-1  Registration of clearing agencies.

    (a) An application for registration or for exemption from 
registration as a clearing agency, as defined in section 3(a)(23) of 
the Act, or an amendment to any such application shall be filed 
electronically with the Commission on Form CA-1, in accordance with the 
instructions thereto and paragraph (g) below.
* * * * *
    (d) The electronic filing of an amendment to an application for 
registration or for exemption from registration as a clearing agency, 
which registration or exemption has not been granted, or the electronic 
filing of additional information or documents prior to the granting of 
registration or an exemption from registration shall extend to ninety 
days from the date such electronic filing is made (or to such longer 
period as to which the applicant consents) the period within which the 
Commission shall grant registration, institute proceedings to determine 
whether such registration shall be denied, or conditionally or 
unconditionally exempt registrant from the registration and other 
provisions of section 17A of the Act or the rules or regulations 
thereunder.
    (e) If any information reported at items 1-3 of Form CA-1 is or 
becomes inaccurate, misleading or incomplete for any reason, whether 
before or after registration or an exemption from registration has been 
granted, the registrant shall electronically file promptly an amendment 
on Form CA-1 correcting the inaccurate, misleading or incomplete 
information.
    (f) Every application for registration or for exemption from 
registration as a clearing agency or amendment to, or additional 
information or document electronically filed in connection with, any 
such application shall constitute a ``report'' or ``application'' 
within the meaning of sections 17, 17A, 19, and 32(a) of the Act.
    (g)(1) Filings on Form CA-1 made pursuant to this section shall be 
made electronically and shall contain an electronic signature.
    (2) For the purposes of this section, the term electronic signature 
means an electronic entry in the form of a magnetic impulse or other 
form of computer data compilation of any letter or series of letters or 
characters comprising a name, executed, adopted or authorized as a 
signature.
    (3) If the conditions of this section and Form CA-1 are otherwise 
satisfied, all filings submitted electronically on or before 5:30 p.m. 
eastern standard time or eastern daylight saving time, whichever is 
currently in effect, on a business day, shall be deemed filed on that 
business day, and all filings submitted after 5:30 p.m. eastern 
standard time or eastern daylight saving time, whichever is currently 
in effect, shall be deemed filed on the next business day. A filing 
would be deemed timely filed if it is required to be filed on a day 
that is not a business day and it is filed on the next available 
business day.
    (4) For purposes of this section, the term business day means any 
day other than a Saturday, Sunday, Federal Holiday, a day that the 
Office of Personnel Management has announced that Federal agencies in 
the Washington, DC, area, are closed to the public, a day on which the 
Commission is subject to a Federal Government shutdown or a day on 
which the Commission's Washington, DC, office is otherwise not open for 
regular business.
0
25. Amend Sec.  240.18a-7 by revising paragraphs (c)(6), (d)(1), 
(d)(2), the last sentence of (e)(3)(v)(B), and paragraphs (h)(1)(ii) 
and (j) as follows:


Sec.  240.18a-7  Reports to be made by certain security-based swap 
dealers and major security-based swap participants.

* * * * *
    (c) * * *
    (6) Filing with the Commission. The annual reports must be filed 
with the Commission electronically on EDGAR in accordance with the 
EDGAR Filer Manual, as defined in 17 CFR 232.11 (Rule 11 of Regulation 
S-T), and must be filed in accordance with the requirements of 17 CFR 
part 232 (Regulation S-T). The annual reports must be provided as an 
Interactive Data File in accordance with 17 CFR 232.405 (Rule 405 of 
Regulation S-T).
    (d) * * *
    (1)(i) Oath or affirmation. The security-based swap dealer or major 
security-based swap participant must attach to the annual reports an 
oath or affirmation that, to the best knowledge and belief of the 
person making the oath or affirmation:
    (A) The financial report is true and correct; and
    (B) Neither the registrant, nor any partner, officer, director, or 
equivalent person, as the case may be, has any proprietary interest in 
any account classified solely as that of a customer.
    (ii) The oath or affirmation must be made before a person duly 
authorized to administer such oaths or affirmations. If the security-
based swap dealer or major security-based swap participant is a sole 
proprietorship, the oath or affirmation must be made by the proprietor; 
if a partnership, by a general partner; if a corporation, by a duly 
authorized officer; or if a limited liability company or limited 
liability partnership, by the chief executive officer, chief financial 
officer, manager, managing member, or those members vested with 
management authority for the limited liability company or limited 
liability partnership.
    (iii) The security-based swap dealer or major security-based swap 
participant must keep the original notarized oath or affirmation for a 
period of not less than six years, the first two years in an easily 
accessible place in accordance with the requirements of Sec.  240.18a-6 
of this chapter (Rule 18a-6 under the Exchange Act).
    (2) Confidentiality. The annual reports filed under paragraph (c) 
of this section may be filed as:
    (i) One public document; or
    (ii) Two documents:
    (A) A document consisting of the Statement of Financial Condition, 
the notes to the Statement of Financial Condition, and the report of 
the independent public accountant covering the Statement of Financial 
Condition, which is not confidential; and
    (B) A document containing the balance of the annual reports for 
which confidential treatment may be requested and which will be deemed 
confidential for the purposes of section 24(b) of the Act. However, the 
annual reports, including the confidential portions, will be available 
for official use by any official or employee of the U.S. or any State, 
and by any other person if the Commission authorizes disclosure of the 
annual reports to that person. Nothing contained in paragraph (d)(2) of 
this section may be construed to be in derogation of the rights of 
customers of a security-based-swap dealer or major security-based swap 
participant, upon

[[Page 24015]]

request to the security-based sway dealer or major security-based swap 
participant, to obtain information relative to its financial condition.
    (e) * * *
    (3) * * *
    (v) * * *
    (B) * * * The security-based swap dealer or major security-based 
swap participant must file three copies of the notice and the 
accountant's letter, one copy of which must be signed by the sole 
proprietor, or a general partner or a duly authorized corporate, 
limited liability company, or limited liability partnership officer or 
member, as appropriate, and by the independent public accountant, 
respectively.
* * * * *
    (h) * * *
    (1) * * *
    (ii) Be signed;
* * * * *
    (j) Signatures. Any signature required by this section may be a 
manual or electronic signature. The signing process for an electronic 
signature must, at a minimum:
    (1) Require the signatory to present a physical, logical, or 
digital credential that authenticates the signatory's individual 
identity;
    (2) Reasonably provide for non-repudiation of the signature;
    (3) Provide that the signature be attached, affixed, or otherwise 
logically associated with the signature page or document being signed; 
and
    (4) Include a timestamp to record the date and time of the 
signature.
0
26. Amend Sec.  240.19b-4 by revising paragraphs (e)(2)(ii) and (j) to 
read as follows:


Sec.  240.19b-4  Filings with respect to proposed rule changes by self-
regulatory organizations.

* * * * *
    (e) * * *
    (2) * * *
    (ii) When relying on paragraph (e) of this section, a self-
regulatory organization shall post the following information, using the 
most recent versions of the XML schema and the associated PDF renderer 
as published on the Commission's website for all reports required by 
this section, on its publicly available internet website within five 
business days after commencement of trading a new derivative securities 
product:
    (A) Type of issuer of new derivatives securities product;
    (B) Class of new derivative securities product;
    (C) Name of underlying instrument;
    (D) If the underlying instrument is an index, identify whether it 
is broad-based or narrow-based;
    (E) Ticker symbol(s) of new derivative securities product;
    (F) Market(s) upon which securities comprising the underlying 
instrument trades;
    (G) Settlement methodology of new derivative securities product; 
and
    (H) Position limits of new derivative securities product (if 
applicable).
* * * * *
    (j) Filings by a self-regulatory organization submitted under 17 
CFR 249.819 on Form 19b-4 electronically shall contain an electronic 
signature. For the purposes of this section, the term electronic 
signature means an electronic entry in the form of a magnetic impulse 
or other form of computer data compilation of any letter or series of 
letters or characters comprising a name, executed, adopted or 
authorized as a signature.
* * * * *
0
27. Amend Sec.  240.24b-2 by:
0
a. In paragraph (b), removing the words ``Except as otherwise provided 
in paragraphs (g) through (i) of this section'' and adding in their 
place ``Except as otherwise provided in paragraphs (g), (h), (i), (j), 
and (k) of this section''; and
0
b. Adding paragraphs (j) and (k).
    The revisions and additions read as follows:


Sec.  240.24b-2  Nondisclosure of information filed with the Commission 
and with any exchange.

* * * * *
    (j)(1) A broker or dealer shall not omit the confidential portion 
from the material filed in electronic format pursuant to Sec. Sec.  
240.17a-5(d), 240.17a-5(k), 240.17a-12, or 240.17h-2T of this chapter. 
In lieu of the procedures described in paragraph (b) of this section, a 
broker or dealer shall request confidential treatment electronically 
for any material filed in electronic format pursuant to pursuant to 
Sec. Sec.  240.17a-5(d), 240.17a-5(k), 240.17a-12, or 240.17h-2T, of 
this chapter.
    (2) A security-based swap dealer shall not omit the confidential 
portion from the material filed in electronic format pursuant to Sec.  
240.18a-7(c) of this chapter. In lieu of the procedures described in 
paragraph (b) of this section, a security-based swap dealer shall 
request confidential treatment electronically for any material filed in 
electronic format pursuant to Sec.  240.18a-7(c) of this chapter.
    (k) An entity shall not omit the confidential portion from the 
material filed in electronic format on Form CA-1 pursuant to Sec.  
240.17ab2-1, and, in lieu of the procedures described in paragraph (b) 
of this section, may request confidential treatment of information 
provided on Form CA-1 by completing Section X of Form CA-1.

PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934

0
28. The authority citation for part 249 continues to read, in part, as 
follows:

    Authority: 15 U.S.C. 78a et seq. and 7201 et seq.; 12 U.S.C. 
5461 et seq.; 18 U.S.C. 1350; Sec. 953(b) Public Law 111-203, 124 
Stat. 1904; Sec. 102(a)(3) Public Law 112-106, 126 Stat. 309 (2012), 
Sec. 107 Public Law 112-106, 126 Stat. 313 (2012), Sec. 72001 Public 
Law 114-94, 129 Stat. 1312 (2015), and secs. 2 and 3 Public Law 116-
222, 134 Stat. 1063 (2020), unless otherwise noted.
* * * * *
    Section 249.617 is also issued under Public Law 111-203, 939, 
939A, 124. Stat. 1376 (2010) (15 U.S.C. 78c, 15 U.S.C. 78o-7 note).
* * * * *
    Section 249.819 is also issued under 12 U.S.C. 5465(e).
* * * * *

0
29. Revise Form 1 (referenced in Sec.  249.1) to read as follows:

    Note: Form 1 is attached as Appendix 1 to this document. Form 1 
will not appear in the Code of Federal Regulations.

0
30. Revise Form 1-N (referenced in Sec.  249.10) to read as follows:

    Note: Form 1-N is attached as Appendix 2 to this document. Form 
1-N will not appear in the Code of Federal Regulations.

0
31. Amend Part II of Form X-17A-5 (referenced in Sec.  249.617 of this 
chapter) by:
0
a. Revising the Computation of Minimum Regulatory Capital Requirements 
section, Line 1 in the Statement of Income (Loss) or Statement of 
Comprehensive Income, As Applicable section, and the Computation of 
CFTC Minimum Capital Requirements section, as shown in Appendix 3;
0
b. In the Cover Page section of the instructions, adding the following 
text after ``The cover page must be completed in its entirety. If a 
line does not apply, the firm should write ``None'' or ``N/A'' on the 
line, as applicable.'': ``The cover page of the FOCUS Report includes 
signature lines for the principal executive officer or comparable 
officer, principal financial officer or comparable officer, and 
principal operations officer or comparable officer. The firm must 
obtain manual or electronic signatures from at least two of the three 
listed officers. The signing process for an electronic signature must, 
at a minimum: (1) Require the signatory to present a physical, logical, 
or digital credential that authenticates the

[[Page 24016]]

signatory's individual identity; (2) Reasonably provide for non-
repudiation of the signature; (3) Provide that the signature be 
attached, affixed, or otherwise logically associated with the signature 
page or document being signed; and (4) Include a timestamp to record 
the date and time of the signature.'';
0
c. Removing the following instruction from the Computation of Minimum 
Regulatory Capital Requirements (Broker-Dealer) section:
    3870 Ratio requirement--2% of aggregate debit items. FCMs must 
report here the greater of:
     2% of aggregate debit items, or
     8% of funds required to be segregated pursuant to the 
Commodity Exchange Act.
0
d. Replacing the instructions for the Computation of CFTC Minimum 
Capital Requirements section, as shown in Appendix 4.
0
32. Amend Part IIC of Form X-17A-5 (referenced in Sec.  249.617 of this 
chapter) by:
0
a. Revising the Balance Sheet, Regulatory Capital, and Income Statement 
sections as shown in Appendix 5; and
0
b. Amend the instructions to the Cover Page section of Part IIC of Form 
X-17A-5 (referenced in Sec.  249.617 of this chapter) by adding the 
following text after ``The cover page must be completed in its 
entirety. If a line does not apply, the firm should write ``None'' or 
``N/A'' on the line, as applicable.'': ``The cover page of the FOCUS 
Report includes signature lines for the principal executive officer or 
comparable officer, principal financial officer or comparable officer, 
and principal operations officer or comparable officer. The firm must 
obtain manual or electronic signatures from at least two of the three 
listed officers. The signing process for an electronic signature must, 
at a minimum: (1) Require the signatory to present a physical, logical, 
or digital credential that authenticates the signatory's individual 
identity; (2) Reasonably provide for non-repudiation of the signature; 
(3) Provide that the signature be attached, affixed, or otherwise 
logically associated with the signature page or document being signed; 
and (4) Include a timestamp to record the date and time of the 
signature.''
0
33. Amend the Cover Page of Part IIA of Form X-17A-5 (referenced in 
Sec.  249.617 of this chapter) by:
0
a. Removing the words ``Manual signatures of:'' and adding in their 
place ``Signatures of:'';
0
b. In the instructions, adding the following text in the ``Filing 
Requirements for Part IIA'' section as a second new paragraph after 
``Part IIA shall be filed monthly by such of these firms which receive 
written notice pursuant to Rule 17a-5(a)(2)(iv) that they have exceeded 
parameters set by the self-regulators.'': ``The cover page of the FOCUS 
Report includes signature lines for the principal executive officer or 
managing partner, principal financial officer or partner, and principal 
operations officer or partner. The firm must obtain manual or 
electronic signatures from at least two of the three listed officers. 
The signing process for an electronic signature must, at a minimum: (1) 
Require the signatory to present a physical, logical, or digital 
credential that authenticates the signatory's individual identity; (2) 
Reasonably provide for non-repudiation of the signature; (3) Provide 
that the signature be attached, affixed, or otherwise logically 
associated with the signature page or document being signed; and (4) 
Include a timestamp to record the date and time of the signature.''
0
34. Redesignate Form X-15AA-1 (referenced in Sec.  249.801) as Form 15A 
and revise newly redesignated Form 15A to read as follows:

    Note: Form 15A is attached as Appendix 6 to this document. Form 
15A will not appear in the Code of Federal Regulations.

0
35. Amend the General Instructions for Form X-17A-19 (referenced in 
Sec.  249.635) by:
0
a. Revising instructions 2 and 3;
0
b. Removing instruction 4;
0
c. Redesignating instructions 5 through 8 as instructions 4 through 7; 
and
0
d. Revising newly redesignated instruction 6.
    The revisions read as shown in Appendix 7.


Sec.  249.802  [Removed and Reserved]

0
36. Remove and reserve Sec.  249.802.


Sec.  249.803  [Removed and Reserved]

0
37. Remove and reserve Sec.  249.803.38.
0
38. Amend the General Instructions for Form 19b-4 (referenced in Sec.  
249.819) by revising Section F as shown in Appendix 8.

PART 249b--FURTHER FORMS, SECURITIES EXCHANGE ACT OF 1934

0
39. The general authority citation for part 249b continues to read as 
follows:

    Authority: 15 U.S.C. 78a et seq., unless otherwise noted.
* * * * *
0
40. Revise Form CA-1 (referenced in Sec.  249b.200) as shown in 
Appendix 8.

    Note: Form CA-1 is attached as Appendix 9 to this document. Form 
CA-1 will not appear in the Code of Federal Regulations.


    By the Commission.

    Dated: March 22, 2023.
J. Matthew DeLesDernier,
Deputy Secretary.

Appendix 1

    Note: The text of Form 1 does not, and this amendment will not, 
appear in the Code of Federal Regulations.


[[Page 24017]]


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[[Page 24018]]


[GRAPHIC] [TIFF OMITTED] TP18AP23.010


[[Page 24019]]


[GRAPHIC] [TIFF OMITTED] TP18AP23.011


----------------------------------------------------------------------------------------------------------------
                                     Alternative means of filing certain exhibits in annual  (exhibits K, M, N)
                                                     and triennial (exhibits A, B, C, J) filings
    Information required by the    -----------------------------------------------------------------------------
              exhibit                   Rule 6a-2(d)(1)--         Rule 6a-2(d)(2)--         Rule 6a-2(d)(3)--
                                          available by         available upon  request   available via internet
                                           publication                                           website
----------------------------------------------------------------------------------------------------------------
Exhibit A: A copy of the            [square] In lieu of       [square] In lieu of       [square] In lieu of
 constitution, articles of           filing {entity{time}      filing {entity{time}      filing {entity{time}
 incorporation or association with   certifies that the        certifies that the        certifies that the
 all subsequent amendments, and of   information may be        information requested     information requested
 existing by-laws or corresponding   obtained below and is     under this exhibit is     under this exhibit is
 rules or instruments, whatever      accurate as of the        kept up to date and is    continuously available
 the name, of the exchange.          publication date:         available to the          at the internet website
                                    Name of Publication:       Commission and the        below, which is
                                    Name                       public upon request.      controlled by
                                    Address                                              {entity{time} , and the
                                    Telephone #                                          information is accurate
                                    Price of Publication $__                             as of the date of this
                                    Date of Publication: mm/                             filing and is free and
                                     dd/yyyy                                             accessible (without any
                                                                                         encumbrances or
                                                                                         restrictions) by the
                                                                                         general public
                                                                                        URL(s):
Exhibit B: A copy of all written    [square] In lieu of       [square] In lieu of       [square] In lieu of
 rulings, settled practices having   filing {entity{time}      filing {entity{time}      filing {entity{time}
 the effect of rules, and            certifies that the        certifies that the        certifies that the
 interpretations of the Governing    information may be        information requested     information requested
 Board or other committee of the     obtained below and is     under this exhibit is     under this exhibit is
 exchange in respect of any          accurate as of the        kept up to date and is    continuously available
 provisions of the constitution,     publication date:         available to the          at the internet website
 by-laws, rules, or trading         Name of Publication:       Commission and the        below, which is
 practices of the exchange which    Name                       public upon request.      controlled by
 are not included in Exhibit A.     Address                                              {entity{time} , and the
                                    Telephone #                                          information is accurate
                                    Price of Publication $__                             as of the date of this
                                    Date of Publication: mm/                             filing and is free and
                                     dd/yyyy                                             accessible (without any
                                                                                         encumbrances or
                                                                                         restrictions) by the
                                                                                         general public
                                                                                        URL(s):

[[Page 24020]]

 
Exhibit C: For each subsidiary or   [square] In lieu of       [square] In lieu of       [square] In lieu of
 affiliate of the exchange, and      filing {entity{time}      filing {entity{time}      filing {entity{time}
 for any entity with whom the        certifies that the        certifies that the        certifies that the
 exchange has a contractual or       information may be        information requested     information requested
 other agreement relating to the     obtained below and is     under this exhibit is     under this exhibit is
 operation of an electronic          accurate as of the        kept up to date and is    continuously available
 trading system to be used to        publication date:         available to the          at the internet website
 effect transactions on the         Name of Publication:       Commission and the        below, which is
 exchange (``System''), provide     Name                       public upon request.      controlled by
 the following information:         Address                                              {entity{time}  and the
1. Name and address of              Telephone #                                          information is accurate
 organization.                      Price of Publication $__                             as of the date of this
2. Form of organization (e.g.,      Date of Publication: mm/                             filing and is free and
 association, corporation,           dd/yyyy                                             accessible (without any
 partnership, etc.).                                                                     encumbrances or
3. Name of state and statute                                                             restrictions) by the
 citation under which organized.                                                         general public
 Date of incorporation in present                                                       URL(s):
 form.
4. Brief description of nature and
 extent of affiliation.
5. Brief description of business
 or functions. Description should
 include responsibilities with
 respect to operation of the
 System and/or execution,
 reporting, clearance, or
 settlement of transactions in
 connection with operation of the
 System.
6. A copy of the constitution.
7. A copy of the articles of
 incorporation or association
 including all amendments.
8. A copy of existing by-laws or
 corresponding rules or
 instruments.
9. The name and title of the
 present officers, governors,
 members of all standing
 committees, or persons performing
 similar functions.
10. An indication of whether such
 business or organization ceased
 to be associated with the
 exchange during the previous
 year, and a brief statement of
 the reasons for termination of
 the association.
Exhibit D: For each subsidiary or   Not Applicable            Not Applicable            Not Applicable
 affiliate of the exchange,
 provide unconsolidated financial
 statements for the latest fiscal
 year. Such financial statements
 shall consist, at a minimum, of a
 balance sheet and an income
 statement with such footnotes and
 other disclosures as are
 necessary to avoid rendering the
 financial statements misleading.
 If any affiliate or subsidiary is
 required by another Commission
 rule to submit annual financial
 statements, a statement to that
 effect, with a citation to the
 other Commission rule, may be
 provided in lieu of the financial
 statements required here.
Exhibit E: Describe the manner of   Not Applicable            Not Applicable            Not Applicable
 operation of the System. This
 description should include the
 following:
1. The means of access to the
 System.
2. Procedures governing the entry
 and display of quotations and
 orders in the System.
3. Procedures governing the
 execution, reporting, clearance
 and settlement of transactions in
 connection with the System.
4. Proposed fees.
5. Procedures for ensuring
 compliance with System usage
 guidelines.
6. The hours of operation of the
 System, and the date on which
 exchange intends to commence
 operation of the System.
7. Attach a copy of the users'
 manual.
8. If exchange proposes to hold
 funds or securities on a regular
 basis, describe the controls that
 will be implemented to ensure
 safety of those funds or
 securities.
Exhibit F: A complete set of all    Not Applicable            Not Applicable            Not Applicable
 forms pertaining to:
1. Application for membership,
 participation, or subscription to
 the entity.
2. Application for approval as a
 person associated with a member,
 participant, or subscriber of the
 entity.
3. Any other similar materials.
Exhibit G: A complete set of all    Not Applicable            Not Applicable            Not Applicable
 forms of financial statements,
 reports, or questionnaires
 required of members,
 participants, subscribers, or any
 other users relating to financial
 responsibility or minimum capital
 requirements for such members,
 participants, or any other users.
 Provide a table of contents
 listing the forms included in
 this Exhibit G.
Exhibit H: A complete set of        Not Applicable            Not Applicable            Not Applicable
 documents comprising the
 exchange's listing applications,
 including any agreements required
 to be executed in connection with
 listing and a schedule of listing
 fees. If the exchange does not
 list securities, provide a brief
 description of the criteria used
 to determine what securities may
 be traded on the exchange.
 Provide a table of contents
 listing the forms included in
 this Exhibit H.

[[Page 24021]]

 
Exhibit I: For the latest fiscal    Not Applicable            Not Applicable            Not Applicable
 year of the exchange, audited
 financial statements which are
 prepared in accordance with, or
 in the case of a foreign
 exchange, reconciled with, United
 States generally accepted
 accounting principles, and are
 covered by a report prepared by
 an independent public accountant.
 If an exchange has no
 consolidated subsidiaries, it
 shall file audited financial
 statements under Exhibit I alone
 and need not file a separate
 unaudited financial statement for
 the exchange under Exhibit D.
Exhibit J: A list of the officers,  [square] In lieu of       [square] In lieu of       [square] In lieu of
 governors, members of all           filing {entity{time}      filing {entity{time}      filing {entity{time}
 standing committees, or persons     certifies that the        certifies that the        certifies that the
 performing similar functions, who   information may be        information requested     information requested
 presently hold or have held their   obtained below and is     under this exhibit is     under this exhibit is
 offices or positions during the     accurate as of the        kept up to date and is    continuously available
 previous year, indicating the       publication date:         available to the          at the internet website
 following for each:                Name of Publication:       Commission and the        below, which is
1. Name.                            Name                       public upon request.      controlled by
2. Title.                           Address                                              {entity{time} , and the
3. Dates of commencement and        Telephone #                                          information is accurate
 termination of term of office or   Price of Publication $__                             as of the date of this
 position.                          Date of Publication: mm/                             filing and is free and
4. Type of business in which each    dd/yyyy                                             accessible (without any
 is primarily engaged (e.g., floor                                                       encumbrances or
 broker, specialist, odd lot                                                             restrictions) by the
 dealer, etc.).                                                                          general public
                                                                                        URL(s):
Exhibit K: This Exhibit is          [square] In lieu of       [square] In lieu of       [square] In lieu of
 applicable only to exchanges that   filing {entity{time}      filing {entity{time}      filing {entity{time}
 have one or more owners,            certifies that the        certifies that the        certifies that the
 shareholders, or partners that      information may be        information requested     information requested
 are not also members of the         obtained below and is     under this exhibit is     under this exhibit is
 exchange. If the exchange is a      accurate as of the        kept up to date and is    continuously available
 corporation, please provide a       publication date:         available to the          at the internet website
 list of each shareholder that      Name of Publication:       Commission and the        below, which is
 directly owns 5% or more of a      Name                       public upon request.      controlled by
 class of a voting security of the  Address                                              {entity{time} , and the
 exchange. If the exchange is a     Telephone #                                          information is accurate
 partnership, please provide a      Price of Publication $__                             as of the date of this
 list of all general partners and   Date of Publication: mm/                             filing and is free and
 those limited and special           dd/yyyy                                             accessible (without any
 partners that have the right to                                                         encumbrances or
 receive upon dissolution, or have                                                       restrictions) by the
 contributed, 5% or more of the                                                          general public
 partnership's capital. For each                                                        URL(s):
 of the persons listed in the
 Exhibit K, please provide the
 following:
1. Full legal name;
2. Title or Status;
3. Date title or status was
 acquired;
4. Approximate ownership interest;
 and
5. Whether the person has control,
 a term that is defined in the
 instructions to this Form.
Exhibit L: Describe the exchange's  Not Applicable            Not Applicable            Not Applicable
 criteria for membership in the
 exchange. Describe conditions
 under which members may be
 subject to suspension or
 termination with regard to the
 exchange. Describe procedures
 that will be involved in the
 suspension or termination of a
 member.
Exhibit M: Provide an alphabetical  [square] In lieu of       [square] In lieu of       [square] In lieu of
 list of all members,                filing {entity{time}      filing {entity{time}      filing {entity{time}
 participants, subscribers or        certifies that the        certifies that the        certifies that the
 other users, including the          information may be        information requested     information requested
 following information:              obtained below and is     under this exhibit is     under this exhibit is
1. Name;                             accurate as of the        kept up to date and is    continuously available
2. Date of election to membership    publication date:         available to the          at the internet website
 or acceptance as a participant,    Name of Publication:       Commission and the        below, which is
 subscriber or other user;          Name                       public upon request.      controlled by
3. Principal business address and   Address                                              {entity{time} , and the
 telephone number;                  Telephone #                                          information is accurate
4. If member, participant,          Price of Publication $__                             as of the date of this
 subscriber or other user is an     Date of Publication: mm/                             filing and is free and
 individual, the name of the         dd/yyyy                                             accessible (without any
 entity with which such individual                                                       encumbrances or
 is associated and the                                                                   restrictions) by the
 relationship of such individual                                                         general public
 to the entity (e.g. partner,                                                           URL(s):
 officer, director, employee,
 etc.);
5. Describe the type of activities
 primarily engaged in by the
 member, participant, subscriber,
 or other user (e.g. floor broker,
 specialist, odd lot dealer, other
 market maker, proprietary trader,
 non-broker dealer, inactive or
 other functions). A person shall
 be ``primarily engaged'' in an
 activity or function for purposes
 of this item when that activity
 or function is the one in which
 that person is engaged for the
 majority of their time. When more
 than one type of person at an
 entity engages in any of the six
 types of activities or functions
 enumerated in this item, identify
 each type (e.g. proprietary,
 trader, Registered Competitive
 Trader and Registered Competitive
 Market Maker) and state the
 number of members, participants,
 subscribers, or other users in
 each; and
6. The class of membership,
 participation or subscription or
 other access.

[[Page 24022]]

 
Exhibit N: Provide a schedule for   [square] In lieu of       [square] In lieu of       [square] In lieu of
 each of the following:              filing {entity{time}      filing {entity{time}      filing {entity{time}
1. The securities listed in the      certifies that the        certifies that the        certifies that the
 exchange, indicating for each the   information may be        information requested     information requested
 name of the issuer and a            obtained below and is     under this exhibit is     under this exhibit is
 description of the security;        accurate as of the        kept up to date and is    continuously available
2. The securities admitted to        publication date:         available to the          at the internet website
 unlisted trading privileges,       Name of Publication:       Commission and the        below, which is
 indicating for each the name of    Name                       public upon request.      controlled by
 the issuer and a description of    Address                                              {entity{time} , and the
 the security;                      Telephone #                                          information is accurate
3. The unregistered securities      Price of Publication $__                             as of the date of this
 admitted to trading on the         Date of Publication: mm/                             filing and is free and
 exchange which are exempt from      dd/yyyy                                             accessible (without any
 registration under Section 12(a)                                                        encumbrances or
 of the Act. For each security                                                           restrictions) by the
 listed, provide the name of the                                                         general public
 issuer and a description of the                                                        URL(s):
 security, and the statutory
 exemption claimed (e.g. Rule 12a-
 6); and
4. Other securities traded on the
 exchange, including for each the
 name of the issuer and a
 description of the security.
----------------------------------------------------------------------------------------------------------------

Section VI--Contact Employee Information

    Provide the following information of the person at {entity 
name{time}  prepared to respond to questions for this submission:

First Name:                           Last Name:
Title:
Email:                                Telephone:
 

Section VII--Consent to Service and Attestation

    [ballot] By checking this box, {Name of Entity{time}  consents 
that service of any civil action brought by, or notice of any 
proceeding before, the Securities and Exchange Commission in 
connection with the exchange's activities may be given to the 
contact employee by registered or certified mail at the main 
address, or mailing address if different, given in Section I above; 
and represents that the information and statements contained herein, 
including exhibits, schedules, or other documents attached hereto, 
and other information filed herewith, all of which are made a part 
hereof, are current, true, and complete.

Form 1 General Instructions

A. Use of the Form

    Form 1 is the form used by: (a) an applicant for registration as 
a national securities exchange under Section 6 of the Securities 
Exchange Act of 1934 (``Exchange Act'') or for an exemption from 
registration pursuant to Section 5 of the Exchange Act by reason of 
the limited volume of transactions effected on such exchange 
(``applicant'') to provide to the Securities and Exchange Commission 
(``SEC'' or ``Commission'') specific items of information about the 
applicant and its operations, or to amend such application, as 
required under Rule 6a-1; and (b) a national securities exchange 
(``registered exchange'') or an exchange exempted from such 
registration by reason of the limited volume of transactions 
effected on such exchange (``exempt exchange'') uses to provide the 
information required by Rule 6a-2 and Rule 6a-3.
    Filings on Form 1 submitted pursuant to Rule 6a-1, Rule 6a-2 or 
Rule 6a-3 of the Exchange Act shall be filed in an electronic format 
on the Commission's Electronic Data Gathering, Analysis, and 
Retrieval system (EDGAR) in accordance with EDGAR rules set forth in 
Regulation S-T (17 CFR part 232). All pages of an electronically 
filed Form 1, including exhibits, shall be numbered consecutively, 
consistent with Rule 0-3 under the Exchange Act (17 CFR 240.0-3). 
For assistance with EDGAR issues, please consult the EDGAR--
Information for Filers web page on SEC.gov.
    The disclosure required to be included in the following exhibits 
to Form 1 must be provided as an Interactive Data File in accordance 
with Rule 405 of Regulation S-T. This requirement does not extend to 
copies of existing documents:
    (1) Exhibit D;
    (2) Exhibit E, except for the copy of the users' manual; and
    (3) Exhibit I.

B. Need for Careful Preparation of the Completed Form, Including 
Exhibits

    Applicants and registered and exempt exchanges must provide all 
the information required by the form, including the exhibits, and 
must present the information in a clear and comprehensible manner. A 
filing that is incomplete or similarly deficient may be returned to 
the applicant or registered or exempt exchange. Any filing so 
returned shall for all purposes be deemed not to have been filed 
with the Commission. See also Rule 0-3 under the Exchange Act (17 
CFR 240.0-3). If any exhibit required is inapplicable, a statement 
to that effect shall be furnished in lieu of such exhibit.

C. When to Use the Form 1

    Form 1 is composed of 6 types of submissions to the Commission 
pursuant to Rules 6a-1, 6a-2 and 6a-3 under the Exchange Act. In 
completing Form 1, an applicant or exchange shall select the type of 
filing and provide all information required by the relevant rules. 
The types of submissions are:
    (1) ``Rule 6a-1 Application'' submissions are applications for 
registration as a national securities exchange or for exemption from 
such registration based on limited volume. The applicant must select 
the type of application during the initial filing. An exchange that 
is filing Form 1 as an application may not satisfy the requirements 
to provide certain information by means of an internet website. All 
materials must be filed with the Commission as part of the Form 1 
application. Amendments to applications as required by Rules 6a-
1(b), (c) or (d) must be filed as amending the Rule 6a-1 application 
type, and marked to number the amendments consecutively. An 
applicant may withdraw a Rule 6a-1 application submission type prior 
to Commission action to issue any order granting registration, or 
institute proceedings to determine whether registration should be 
denied.
    (2) ``Rule 6a-2(a) Amendment to Registration'' submissions are 
for amendments to the Form 1 by registered exchanges and exempt 
exchanges. The amendments shall set forth the nature and effective 
date of the action taken and shall provide any new information and 
correct any information rendered inaccurate within 10 days after any 
action that is taken renders inaccurate, or that causes to be 
incomplete, any of the following:
    (i) Information in Section I-Entity Contact Information, or any 
amendments thereto; or
    (ii) Information filed as part of Exhibits C, F, G, H, J, K or 
M, or any amendments thereto.
    (3) ``Rule 6a-2(b) Annual Filing'' submission shall be filed on 
or before June 30 of each year and include the following:
    (i) Exhibits D and I as of the end of the latest fiscal year of 
the exchange; and
    (ii) Exhibits K, M, and N, which shall be up to date as of the 
latest date practicable within three (3) months of the date the 
amendment is filed.
    (4) ``Rule 6a-2(c) Triennial Filing'' submission shall be filed 
on or before June 30, 2025, and every three years thereafter and 
shall include complete Exhibits A, B, C and J. The information filed 
under this submission type shall, at a minimum, be up to date within 
three (3) months as of the date the amendment is filed.
    (5) ``Rule 6a-3(a) Supplemental Material'' submission shall be 
filed with the Commission within 10 days after issuing or making any 
materials (including notices, circulars, bulletins, lists and 
periodicals) issued or made generally available to members of, or 
participants or subscribers to, the exchange.
    (6) ``Rule 6a-3(b) Report of securities sold'' submission type 
shall be filed within 15 days after the end of each calendar month 
and shall include a report concerning the securities sold on such 
exchange during the calendar month. The report shall set forth:

[[Page 24023]]

    (i) The number of shares of stock sold and the aggregate dollar 
amount of such stock sold;
    (ii) The principal amount of bonds sold and the aggregate dollar 
amount of such bonds sold; and
    (iii) The number of rights and warrants sold and the aggregate 
dollar amount of such rights and warrants sold.

D. Documents Comprising the Completed Form

    The completed form filed with the Commission shall consist of 
Form 1, responses to all applicable items, and any exhibits required 
in connection with the filing.

E. Contact Information and Filing of Completed Form

    Each time an applicant or exchange submits a filing to the 
Commission on Form 1, the applicant or exchange must provide the 
contact information required by Section II of Form 1. The contact 
employee must be authorized to receive all contact information, 
communications and mailings and must be responsible for 
disseminating that information within the applicant or exchange's 
organization.
    For assistance with EDGAR issues, please consult the EDGAR--
Information for Filers web page on SEC.gov.

F. Recordkeeping

    A copy of this Form 1 must be retained by the exchange and made 
available for inspection upon request of the SEC.

G. Paperwork Reduction Act Disclosure

    Form 1 requires an applicant seeking to register as a national 
securities exchange or seeking an exemption from registration as a 
national securities exchange pursuant to Section 5 of the Exchange 
Act to provide the SEC with certain information regarding the 
operation of the exchange. Form 1 also requires national securities 
exchanges or exchanges exempt from registration based on limited 
volume to update certain information on a periodic basis and to 
provide supplemental material as required.
    An agency may not conduct or sponsor, and a person is not 
required to respond to, a collection of information unless it 
displays a currently valid control number. Sections 3(a)(1), 5, 6(a) 
and 23(a) authorize the Commission to collect information on this 
Form 1 from exchanges. See 15 U.S.C. 78c(a)(1), 78e, 78f(a) and 
78w(a).
    Any member of the public may direct to the Commission any 
comments concerning the accuracy of the burden estimate on the 
facing page of Form 1 and any suggestions for reducing this burden.
    Form 1 is designed to enable the Commission to determine whether 
an exchange applying for registration is in compliance with the 
provisions of Sections 6 and 19 of the Exchange Act. Form 1 is also 
designed to enable the Commission to determine whether a national 
securities exchange or exchange exempt from registration based on 
limited volume is operating in compliance with the Exchange Act.
    It is estimated that an exchange will spend approximately 891 
hours completing the initial application on Form 1 pursuant to Rule 
6a-1. It is also estimated that each exchange will spend 
approximately 26 hours to prepare each amendment to Form 1 pursuant 
to Rule 6a-2. It is also estimated that each exchange will spend 
approximately 0.5 hours to prepare each submission pursuant to Rule 
6a-3.
    It is mandatory that an exchange seeking to operate as a 
national securities exchange or as an exchange exempt from 
registration based on limited volume file Form 1 with the 
Commission. It is also mandatory that national securities exchanges 
or exchanges exempt from registration based on limited volume file 
amendments to Form 1 under Rule 6a-2. It is further mandatory that 
national securities exchanges or exchanges exempt from registration 
based on limited volume file supplemental information and monthly 
reports under Rule 6a-3.
    No assurance of confidentiality is given by the Commission with 
respect to the responses made in Form 1. The public has access to 
the information contained in Form 1.
    This collection of information has been reviewed by the Office 
of Management and Budget (``OMB'') in accordance with the clearance 
requirements of 44 U.S.C. 3507. The Commission has determined that 
the information collection does not constitute a system of record 
for purposes of the Privacy Act.

H. Explanation of Terms

    Affiliate--Any person that, directly or indirectly, controls, is 
under common control with, or is controlled by, the national 
securities exchange or exchange exempt from registration based on 
the limited volume of transactions effected on such exchange, 
including any employees.
    Control--The power, directly or indirectly, to direct the 
management or policies of a company, whether through ownership of 
securities, by contract, or otherwise. Any person that (i) is a 
director, general partner or officer exercising executive 
responsibility (or having similar status or functions); (ii) 
directly or indirectly has the right to vote 25% or more of a class 
of voting securities or has the power to sell or direct the sale of 
25% or more of a class of voting securities; or (iii) in the case of 
a partnership, has the right to receive, upon dissolution, or has 
contributed, 25% or more of the capital, is presumed to control that 
entity.
    Direct Owners--Any person that owns, beneficially owns, has the 
right to vote, or has the power to sell or direct the sale of, 5% or 
more of a class of a voting security of the applicant. For purposes 
of this Form 1, a person beneficially owns any securities (i) owned 
by his/her child, stepchild, grandchild, parent, stepparent, 
grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-
law, daughter-in-law, brother-in-law, sister-in-law, sharing the 
same residence; or (ii) that he/she has the right to acquire, within 
60 days, through the exercise of any option, warrant or right to 
purchase the security.
    Member--Shall have the same meaning as under Exchange Act 
Section 3(a)(3).
    National Securities Exchange--Shall mean any exchange registered 
pursuant to Section 6 of the Exchange Act.
    Person Associated With a Member--Shall have the same meaning as 
under Section 3(a)(21) of the Exchange Act.

Appendix 2

    Note: The text of Form 1-N does not, and this amendment will 
not, appear in the Code of Federal Regulations.


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----------------------------------------------------------------------------------------------------------------
                                       Alternative means of filing certain exhibits in annual (exhibits F, H, I)
                                                      and triennial (exhibits A, B, C, E) filings
                                      --------------------------------------------------------------------------
 Information required by the exhibit      Rule 6a-4(b)(5)(i)                               Rule 6a-4(b)(5)(iii)
                                             available by         Rule 6a-4(b)(5)(ii)     available via internet
                                             publication         available upon request          website
----------------------------------------------------------------------------------------------------------------
Exhibit A: As of the latest date       [ballot] In lieu of      [ballot] In lieu of      [ballot] In lieu of
 practicable within one (1) month of    filing {entity{time}     filing {entity{time}     filing {entity{time}
 the date Form 1-N is filed, a copy     certifies that the       certifies that the       certifies that the
 of the constitution, articles of       information may be       information requested    information requested
 incorporation or association with      obtained below and is    under this exhibit is    under this exhibit is
 all subsequent amendments, and         accurate as of the       kept up to date and is   continuously available
 existing by-laws or corresponding      publication date:        available to the         at the internet
 rules or instruments, whatever the    Name of Publication:      Commission and the       website below, which
 name, of the filing exchange.         Name                      public upon request.     is controlled by
                                       Address                                            {entity{time} , and is
                                       Telephone #                                        accurate as of the
                                       Price of Publication $_                            date of this filing
                                       Date of Publication: mm/                           and is free and
                                        dd/yyyy                                           accessible (without
                                                                                          any encumbrances or
                                                                                          restrictions) by the
                                                                                          general public.
                                                                                         URL(s):
Exhibit B: As of the latest date       [ballot] In lieu of      [ballot] In lieu of      [ballot] In lieu of
 practicable within one (1) month of    filing {entity{time}     filing {entity{time}     filing {entity{time}
 the date Form 1-N is filed, a copy     certifies that the       certifies that the       certifies that the
 of all written rulings, settled        information may be       information requested    information requested
 practices having the effect of         obtained below and is    under this exhibit is    under this exhibit is
 rules, and interpretations of the      accurate as of the       kept up to date and is   available at the
 Governing Board or other committee     publication date:        available to the         internet website below
 of the exchange in respect of any     Name of Publication:      Commission and the       and is accurate as of
 provisions of the constitution, by-   Name                      public upon request.     the date of this
 laws, rules, or trading practices of  Address                                            filing and is free and
 the filing exchange which are not     Telephone #                                        accessible (without
 included in Exhibit A.                Price of Publication $_                            any encumbrances or
                                       Date of Publication: mm/                           restrictions) by the
                                        dd/yyyy                                           general public.
                                                                                         URL(s):
Exhibit C: As of the latest date       [ballot] In lieu of      [ballot] In lieu of      [ballot] In lieu of
 practicable within one (1) month of    filing {entity{time}     filing {entity{time}     filing {entity{time}
 the date Form 1-N is filed, for each   certifies that the       certifies that the       certifies that the
 subsidiary or affiliate of the         information may be       information requested    information requested
 filing exchange that will be           obtained below and is    under this exhibit is    under this exhibit is
 involved in the trading of security    accurate as of the       kept up to date and is   available at the
 futures products, and for any entity   publication date:        available to the         internet website below
 with whom the exchange has a          Name of Publication:      Commission and the       and is accurate as of
 contractual or other agreement        Name                      public upon request.     the date of this
 relating to the operation of an       Address                                            filing and is free and
 electronic trading system to be used  Telephone #                                        accessible (without
 to effect transactions in security    Price of Publication $_                            any encumbrances or
 futures products on the exchange      Date of Publication: mm/                           restrictions) by the
 (``System''), provide the following    dd/yyyy                                           general public.
 information:                                                                            URL(s):
1. Name and address of organization.
2. Form of organization (e.g.,
 association, corporation,
 partnership, etc.).
3. Name of state and statute citation
 under which organized. Date of
 incorporation in present form.
4. Brief description of nature and
 extent of affiliation.
5. Brief description of business or
 functions. Description should
 include responsibilities with
 respect to operation of the System
 and/or execution, reporting,
 clearance (including the controls
 that will be implemented to ensure
 the safety of held funds or
 securities), or settlement of
 transactions in connection with
 operation of the System.
6. A copy of the constitution.
7. A copy of the articles of
 incorporation or association
 including all amendments.
8. A copy of existing by-laws or
 corresponding rules or instruments.
9. The name and title of the present
 officers, governors, members of all
 standing committees, or persons
 performing similar functions.
10. An indication of whether such
 business or organization ceased to
 be associated with the Security
 Futures Product Exchange during the
 previous year, and a brief statement
 of the reasons for termination of
 the association.
Exhibit D: Describe the manner of      Not Applicable.          Not Applicable.          Not Applicable.
 operation of the System involving
 trading of security futures
 products. The description should
 include the following:

[[Page 24027]]

 
1. The means of access to the System.
2. Procedures governing entry and
 display of quotations and orders in
 the System.
3. Procedures governing the
 execution, reporting, clearance, and
 settlement of transactions in
 connection with the System.
4. Proposed fees.
5. Procedures for ensuring compliance
 with System usage guidelines.
6. The hours of operation of the
 System, and the date of which the
 exchange intends to commence
 operation of the System.
7. Attach a copy of the users'
 manual.
Exhibit E: A list of the officers,     [ballot] In lieu of      [ballot] In lieu of      [ballot] In lieu of
 governors, or persons performing       filing {entity{time}     filing {entity{time}     filing {entity{time}
 similar functions, who presently       certifies that the       certifies that the       certifies that the
 hold or have held their offices or     information may be       information requested    information requested
 positions during the previous year,    obtained below and is    under this exhibit is    under this exhibit is
 indicating the following for each:     accurate as of the       kept up to date and is   available at the
1. Name.                                publication date:        available to the         internet website below
2. Title.                              Name of Publication:      Commission and the       and is accurate as of
3. Dates of commencement and           Name                      public upon request.     the date of this
 termination of term of office or      Address                                            filing and is free and
 position.                             Telephone #                                        accessible (without
4. Type of business in which each is   Price of Publication $_                            any encumbrances or
 primarily engaged.                    Date of Publication: mm/                           restrictions) by the
                                        dd/yyyy                                           general public.
                                                                                         URL(s):
Exhibit F: This Exhibit is applicable  [ballot] In lieu of      [ballot] In lieu of      [ballot] In lieu of
 only to filing exchanges that have     filing {entity{time}     filing {entity{time}     filing {entity{time}
 one or more owners, shareholders,      certifies that the       certifies that the       certifies that the
 partners that are also not members     information may be       information requested    information requested
 of the exchange and should be          obtained below and is    under this exhibit is    under this exhibit is
 current as of the latest date          accurate as of the       kept up to date and is   available at the
 practicable within one month of the    publication date:        available to the         internet website below
 date Form 1-N is filed. If the        Name of Publication:      Commission and the       and is accurate as of
 exchange is a corporation, please     Name                      public upon request.     the date of this
 provide a list of each shareholder    Address                                            filing and is free and
 that directly owns 5% or more of a    Telephone #                                        accessible (without
 class of a voting security of the     Price of Publication $_                            any encumbrances or
 Security Futures Product Exchange.    Date of Publication: mm/                           restrictions) by the
 If the exchange is a partnership,      dd/yyyy                                           general public.
 please provide a list of all general                                                    URL(s):
 partners and those limited and
 special partners that have the right
 to receive upon dissolution, or have
 contributed, 5% or more of the
 partnership's capital. For each
 person listed in the Exhibit F,
 please provide the following:
1. Full legal name.
2. Title of Status.
3. Date of title or status acquired.
4. Approximate ownership interest.
5. Whether the person has control, a
 term that is defined in the
 instructions to this Form.
Exhibit G: To the extent not covered
 in an exchange's rules submitted
 under Exhibit A, describe the
 Security Futures Product Exchange's
 criteria for membership. Describe
 conditions under which members may
 be subject to suspension or
 termination for infractions relating
 to the trading of security futures
 products. Describe any procedures
 that will be involved in the
 suspension or termination of a
 member for such infractions.
Exhibit H: As of the latest date       [ballot] In lieu of      [ballot] In lieu of      [ballot] In lieu of
 practicable within 1 month of the      filing {entity{time}     filing {entity{time}     filing {entity{time}
 date Form 1-N is filed, provide an     certifies that the       certifies that the       certifies that the
 alphabetical list of all members,      information may be       information requested    information requested
 participants, subscribers, or other    obtained below and is    under this exhibit is    under this exhibit is
 users, including the following         accurate as of the       kept up to date and is   available at the
 information:                           publication date:        available to the         internet website below
1. Name.                               Name of Publication:      Commission and the       and is accurate as of
2. If a member, participant,           Name                      public upon request.     the date of this
 subscriber, or other user is an       Address                                            filing and is free and
 individual, the name of the entity    Telephone #                                        accessible (without
 with which such individual is         Price of Publication $_                            any encumbrances or
 associated and the relationship of    Date of Publication: mm/                           restrictions) by the
 such individual to the entity (e.g.,   dd/yyyy                                           general public.
 partner, officer, director,                                                             URL(s):
 employee, etc.).
3. Brief description of the type of
 activities primarily engaged in by
 the member, participant, subscriber,
 or other user. A person shall be
 ``primarily engage'' in an activity
 or function for purposes of this
 item when that activity or function
 is the one in which that person is
 engaged for the majority of their
 time. When more than one type of
 person at an entity engages in
 activities or functions, identify
 each type and state the number of
 members, participants, subscribers,
 or other users in each.
4. The class of membership,
 participation, subscription, or
 other access.

[[Page 24028]]

 
Exhibit I: Provide a schedule of the   [ballot] In lieu of      [ballot] In lieu of      [ballot] In lieu of
 security futures products proposed     filing {entity{time}     filing {entity{time}     filing {entity{time}
 to be listed by the filing exchange,   certifies that the       certifies that the       certifies that the
 or for amendments to the Form 1-N      information may be       information requested    information requested
 the security futures products listed   obtained below and is    under this exhibit is    under this exhibit is
 by the exchange, indicating for each   accurate as of the       kept up to date and is   available at the
 the name of the issuer and a           publication date:        available to the         internet website below
 description of the security.          Name of Publication:      Commission and the       and is accurate as of
                                       Name                      public upon request.     the date of this
                                       Address                                            filing and is free and
                                       Telephone #                                        accessible (without
                                       Price of Publication $_                            any encumbrances or
                                       Date of Publication: mm/                           restrictions) by the
                                        dd/yyyy                                           general public.
                                                                                         URL(s):
----------------------------------------------------------------------------------------------------------------

Section VI: Contact Employee Information

    The individual listed herein as the Contact Employee for {name 
of exchange{time}  must be authorized to receive all contact 
information, communications, and mailings and is responsible for 
disseminating such information within the Security Futures Product 
Exchange's organization.

First Name:                           Last Name:
Title:
Email:                                Telephone:
 

Section VII: Consent to Service and Attestation

    [ballot] By checking this box, {Name of Entity{time}  consents 
that service of any civil action brought by, or notice of any 
proceeding before, the Securities and Exchange Commission in 
connection with the exchange's activities may be given by registered 
or certified mail to the contact employee at the main address, or 
mailing address if different, given in Section I above; and 
represents that the information and statements contained herein, 
including exhibits, schedules, or other documents attached hereto, 
and other information filed herewith, all of which are made a part 
hereof, are current, true, and complete.

Form 1-N General Instructions

A. Use of the Form

    Form 1-N is the form used for: (a) notice of registration as a 
national securities exchange for the sole purpose of trading 
security futures products (``Security Futures Product Exchange'') 
under Section 6(g) of the Securities Exchange Act of 1934 
(``Exchange Act'') to provide to the Securities and Exchange 
Commission (``SEC'' or ``Commission'') specific items of information 
about the Security Futures Product Exchange and its operations; (b) 
the filing of annual and triennial updates to the information 
required by Form 1-N following notice of registration; and (c) 
supplemental material and reports of security futures products 
traded. Filings on Form 1-N submitted pursuant to Rule 6a-4 of the 
Exchange Act (17 CFR 240.6a-4) shall be filed in an electronic 
format on the Commission's Electronic Data Gathering, Analysis, and 
Retrieval System (EDGAR) in accordance with EDGAR rules set forth in 
Regulation S-T (17 CFR part 232). For assistance with EDGAR issues, 
please consult the EDGAR--Information for Filers web page on 
SEC.gov. All pages of an electronically filed Form 1-N, including 
exhibits, shall be numbered consecutively, consistent with Rule 0-3 
under the Exchange Act (17 CFR 240.0-3).

B. Need for Careful Preparation of the Completed Form, Including 
Exhibits

    Security Futures Product Exchanges must provide all the 
information required by the form, including the exhibits, and must 
present the information in a clear and comprehensible manner. A 
filing that is incomplete or similarly deficient may be returned to 
the Security Futures Product Exchange. Any filing so returned shall 
for all purposes be deemed not to have been filed with the 
Commission. See also Rule 0-3 under the Exchange Act (17 CFR 240.0-
3). If any exhibit required is inapplicable, a statement to that 
effect shall be furnished in lieu of such exhibit.
    The first filing on Form 1-N that a Security Futures Product 
Exchange submits through EDGAR must contain all items required by 
Section I.

C. When to Use the Form 1-N

    Form 1-N is composed of 6 types of submissions to the Commission 
pursuant to Rule 6a-4 under the Exchange Act. In completing Form 1-
N, a Security Futures Product Exchange shall select the type of 
filing and provide all information required by the relevant rules. 
The types of submissions are:
    (1) ``Rule 6a-4 Initial Notice of Registration'' submissions for 
notice of registration as a Security Futures Product Exchange. An 
exchange that is filing Form 1-N may not satisfy the requirements to 
provide certain information by means of an internet website. All 
materials must be filed with the Commission as part of the Form 1-N 
notice of registration.
    (2) ``Rule 6a-4(b) Amendment to Notice of Registration'' 
submissions for amendments to the Form 1-N, which shall set forth 
the nature and effective date of the action taken and shall provide 
any new information and correct any information rendered inaccurate 
within:
    (i) 10 days after any action that is taken renders inaccurate, 
or that causes to be incomplete, any information in Sections I 
through IV, or any amendments thereto; or
    (ii) 30 days after any action is taken that renders inaccurate, 
or that causes to be incomplete, any information filed as part of 
Exhibit F to Form 1-N, or any amendments thereto.
    (3) ``Rule 6a-4(b)(3) Annual Filing'' submission, which shall be 
filed by June 30 of each year and include Exhibits F, H, and I, 
which shall be current as of the latest date practicable within 3 
months of the date the amendment is filed.
    (4) ``Rule 6a-4(b)(4) Triennial Filing'' submission, which shall 
be filed by June 30, 2025, and by June 30 every three years 
thereafter, and shall include complete Exhibits A, B, C, and E. The 
information filed under this submission type shall be current as of 
the latest practicable date, but shall at a minimum, be up to date 
within 3 months as of the date the amendment is filed.
    (5) ``Rule 6a-4(c)(1) Supplemental Material'' submission type, 
for submission of supplemental material within 10 days after issuing 
or making such material available to members, participants, or 
subscribers.
    (6) ``Rule 6a-4(c)(2) Report of security futures products 
traded'' submission type shall be filed within 15 days after the end 
of each calendar month. Such report shall contain: (i) For each 
contract of sale for future delivery of a single security, the 
number of contracts traded on such exchange during the relevant 
calendar month and the total number of share underlying such 
contracts traded; and (ii) For each contract of sale for future 
delivery of a narrow-based security index, the number of contracts 
traded on such exchange during the relevant calendar month and the 
total number of shares represented by the index underlying such 
contracts traded.

D. Documents Comprising the Completed Form

    The completed form filed with the Commission shall consist of 
Form 1-N, responses to all applicable items, and any exhibits 
required in connection with the filing.

E. Contact Information and Filing of Completed Form

    Each time a Security Futures Product Exchange submits a filing 
to the Commission on Form 1-N, the Security Futures Product Exchange 
must provide the contact information required by Section II of Form 
1-

[[Page 24029]]

N. The contact employee must be authorized to receive all contact 
information, communications and mailings and must be responsible for 
disseminating that information within the Security Futures Product 
Exchange.
    For assistance with EDGAR issues, please consult the EDGAR--
Information for Filers web page on SEC.gov.

F. Recordkeeping

    A copy of this Form 1-N, as well as the forms filed with the 
SEC, must be retained by the Security Futures Product Exchange and 
made available for inspection upon request of the SEC.

G. Paperwork Reduction Act Disclosure

    Form 1-N requires an exchange seeking to register as a national 
securities exchange for the sole purpose of trading security futures 
products, pursuant to Section 6(g) of the Exchange Act, to provide 
the Commission with certain information regarding its operation. If 
documents containing information satisfying the Commission's 
information requirements have been filed with the Commodity Futures 
Trading Commission, copies of such documents may be filed with the 
Commission. Form 1-N also requires Security Futures Product 
Exchanges to update certain information on a periodic basis.
    An agency may not conduct or sponsor, and a person is not 
required to respond to, a collection of information unless it 
displays a currently valid control number. Sections 3(a)(1), 5, 6(a) 
and 23(a) authorize the Commission to collect information on this 
Form 1-N from Security Futures Product Exchanges. See 15 U.S.C. 
78c(a)(1), 78e, 78f(a) and 78w(a).
    Form 1-N is designed to enable the Commission to determine 
whether a Security Futures Product Exchange is in compliance with 
the Exchange Act.
    It is estimated that a Security Futures Product Exchange will 
spend approximately 29 hours completing the initial application on 
Form 1-N pursuant to Rule 6a-4. It is estimated that each Security 
Futures Product Exchange will spend approximately 14 hours annually 
to prepare periodic amendments, 14 hours annually to prepare annual 
amendments, 7 hours annually to prepare triennial amendments to Form 
1-N and 6 hours annually for the required supplemental information 
and monthly reports pursuant to Rule 6a-4.
    Any member of the public may direct to the Commission any 
comments concerning the accuracy of this burden estimate and any 
suggestions for reducing this burden.
    It is mandatory that an exchange seeking to operate as a 
national securities exchange for the sole purpose of trading 
security futures products file a Form 1-N with the Commission. It is 
also mandatory that Security Futures Product Exchanges file 
amendments to Form 1-N under Rule 6a-4.
    No assurance of confidentiality is given by the Commission with 
respect to the responses made in Form 1-N. The public has access to 
the information contained in Form 1-N.
    This collection of information has been reviewed by the Office 
of Management and Budget (``OMB'') in accordance with the clearance 
requirements of 44 U.S.C. 3507. The Commission has determined that 
the information collection does not constitute a system of record 
for purposes of the Privacy Act.

H. Explanation of Terms

    Affiliate--Any person that, directly or indirectly, controls, is 
under common control with, or is controlled by, the national 
securities exchange or exchange exempt from registration based on 
the limited volume of transactions effected on such exchange, 
including any employees.
    Control--The power, directly or indirectly, to direct the 
management or policies of a company, whether through ownership of 
securities, by contract, or otherwise. Any person that (i) is a 
director, general partner or officer exercising executive 
responsibility (or having similar status or functions); (ii) 
directly or indirectly has the right to vote 25% or more of a class 
of voting securities or has the power to sell or direct the sale of 
25% or more of a class of voting securities; or (iii) in the case of 
a partnership, has the right to receive, upon dissolution, or has 
contributed, 25% or more of the capital, is presumed to control that 
entity.
    Direct Owners--Any person that owns, beneficially owns, has the 
right to vote, or has the power to sell or direct the sale of, 5% or 
more of a class of a voting security of the Security Futures Product 
Exchange. For purposes of this Form 1-N, a person beneficially owns 
any securities (i) owned by his/her child, stepchild, grandchild, 
parent, stepparent, grandparent, spouse, sibling, mother-in-law, 
father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-
in-law, sharing the same residence; or (ii) that he/she has the 
right to acquire, within 60 days, through the exercise of any 
option, warrant or right to purchase the security.
    Member--Shall have the same meaning as under Exchange Act 
Section 3(a)(3).
    Person Associated With a Member--Shall have the same meaning as 
under Section 3(a)(21) of the Exchange Act.

Appendix 3

    Note: The text of Part II of Form X-17A-5 and the instructions 
thereto do not and these amendments will not appear in the Code of 
Federal Regulations.

* * * * *

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[[Page 24031]]


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[[Page 24032]]


[GRAPHIC] [TIFF OMITTED] TP18AP23.003

Appendix 4

    Note:  The text of Part II of Form X-17A-5 and the instructions 
thereto do not and these amendments will not appear in the Code of 
Federal Regulations.

* * * * *

Computation of CFTC Minimum Capital Requirements

    This section must be prepared by broker-dealers, nonbank SBSDs, 
and nonbank MSBSPs registered with the CFTC as futures commission 
merchants (``FCMs''), swap dealers, and/or introducing brokers 
pursuant to section 4f and 4s, as applicable, of the Commodity 
Exchange Act and that elect to file a FOCUS Report in lieu of 
required CFTC financial reports. (Broker-dealers that notice 
register as FCMs with the CFTC for the sole purpose of soliciting 
order, accepting orders, or executing orders for security futures 
products on behalf of others are not subject to CFTC financial 
reporting requirements.)
    This section should be prepared in accordance with the CFTC's 
Form 1-FR and other guidance issued by the CFTC or CFTC staff 
(``CFTC Instructions'').
* * * * *

Appendix 5

    Note: The text of Part IIC of Form X-17A-5 and the instructions 
thereto do not and these amendments will not appear in the Code of 
Federal Regulations.

* * * * *

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* * * * *

Appendix 6

    Note: The text of Form 15A does not and the amendments will not 
appear in the Code of Federal Regulations.


[[Page 24036]]


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[[Page 24043]]


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FORM 15A General Instructions

A. General Instructions for Preparing and Filing Form 15A

    Form 15A is to be used by an entity for registration with the 
Securities and Exchange Commission (the ``Commission'') as a 
national securities association or an affiliated securities 
association, and for any amendments or supplements to such 
registration statement under Section 15A of the Securities Exchange 
Act of 1934 (``the Act''). As used hereinafter, the term ``Form 
15A'' includes the form and any required exhibits and schedules 
thereto.
    Form 15A shall be filed in an electronic format through the 
Commission's Electronic Data Gathering, Analysis, and Retrieval 
System (EDGAR) in accordance with EDGAR rules set forth in 
Regulation S-T (17 CFR part 232).
    Unless the context clearly indicates otherwise, the terms used 
in Form 15A have the meanings given in the Act. Note: The granting 
of registration is not to be deemed permanent approval of the 
association's rules and practices.

B. Need for Careful Preparation of the Completed Form, Including 
Schedules and Exhibits

    A Form 15A that is not prepared and executed in compliance with 
applicable requirements may be returned as not acceptable for 
filing. Any filing so returned shall for all purposes be deemed not 
to have been filed with the Commission. See also Rule 0-3 under the 
Act (17 CFR 240.0-3). However, acceptance of Form 15A shall not 
constitute a finding that it has been filed as required or that the 
information submitted is true, current or complete.

C. When To Use the Form 15A

    Form 15A is composed of seven types of submissions to the 
Commission pursuant to Section 15A of the Act and Rules 15aa-1 and 
15aa-2 thereunder. In completing the Form 15A, a registrant shall 
select the type of filing and provide all information required by 
the rules and instructions thereunder. In submitting this Form, its 
exhibits, and its schedules, the person by whom it is executed 
represents that all information contained within is true, current 
and complete. The types of submissions are:
    (1) Rule 15aa-1 submissions are applications for registration as 
a national securities association or an affiliated securities 
association. If Form 15A is being filed as an application for 
registration as a national securities association, all applicable 
items are required to be answered in full, except for items in 
Section IX. If Form 15A is being filed as an application for 
registration as an affiliated securities association, all applicable 
items are required to be answered in full. Note: The granting of 
registration is not to be deemed permanent approval of the 
association's rules and practices.
    (2) Rule 15aa-2(a) submissions shall be filed promptly after the 
discovery of any inaccuracy in the registration statement or in any 
amendment or supplement thereto. All amended items are required to 
be answered in full. All amended exhibits or schedules are

[[Page 24044]]

required to be provided completely. Any item that is not being 
amended may be left blank. If no item in a section is being amended, 
the association may check the box next to the applicable section 
heading labeled ``Check if information has not changed since 
previous filing.''
    (3) Rule 15aa-2(b) submissions shall be filed promptly after any 
change which renders no longer accurate any information contained or 
incorporated in the registration statement or in any amendment or 
supplement thereto, except that no current supplements need be filed 
with respect to changes in the information called for in Exhibit B. 
All supplemented items are required to be answered in full. All 
supplemented exhibits or schedules are required to be provided 
completely. Any item that is not being amended may be left blank. If 
no item in a section is being supplemented, the association may 
check the box next to the applicable section heading labeled ``Check 
if information has not changed since previous filing.'' Supplements 
setting forth changes in the information called for in Exhibit C 
need not be filed until 10 days after the calendar month in which 
the changes occur. If the submission is being filed solely to 
supplement changes in the information called for in Exhibit C, 
association should check the applicable box and provide the month 
and year in which the changes occurred. The association need not 
provide a current supplement to Exhibit C if it checks the box 
indicating it has complied with the requirements of Rule 15aa-
2(b)(3).
    (4) Rule 15aa-2(c) submissions are annual consolidated 
supplements to a registration statement as a national securities 
association or an affiliated securities association and shall be 
filed promptly after March 1 of each year. If the association is 
filing an annual consolidated supplement to a registration statement 
as a national securities association, all applicable items are 
required to be answered in full, except for items in Section IX. If 
the association is filing an annual consolidated supplement to a 
registration statement as an affiliated securities association, all 
applicable items are required to be answered in full. The 
association need not answer Item 6 if it checks the box indicating 
it has complied with the requirements of Rules 15aa-2(c)(1)(i)(A)-
(B) and provides the applicable information.
    (5) Rule 15aa-2(c)(2) submissions shall be filed promptly after 
the close of each fiscal year of the association. The association is 
required to provide a complete Exhibit B.
    (6) Rule 15aa-2(c)(1)(ii) submissions shall be filed promptly by 
March 1, 2025, and every three years thereafter. The association is 
required either to provide a complete Exhibit A or check the boxes 
indicating it has complied with the requirements of Rules 15aa-
2(c)(1)(ii)(A)-(B) and provide the applicable information.
    (7) Rule 15aa-2(d)(2) submissions require the association to 
electronically file any notices, reports, circulars, loose-leaf 
insertions, riders, new additions, lists or other records of changes 
when, as, and if such records are made available to members of the 
association.

D. Documents Comprising the Completed Form

    The completed form filed with the Commission shall consist of 
Form 15A, responses to all applicable items, and any exhibits and 
schedules required in connection with the filing. Any item may be 
answered by reference to the page, article, section or paragraph of 
any document filed as an exhibit herewith which contains the 
information required. Unless the context otherwise requires, the 
terms ``rule of the association,'' as used in Form 15A shall include 
any provision of the association's constitution, charter, articles 
of incorporation or association and by-laws, and any rule of the 
association or any of its committees and any settled practice 
association or of any of its committees having the effect of a rule.

E. Contact Information and Filing of Completed Form

    Each time an association submits a filing to the Commission on 
Form 15A, the association must provide the contact information 
required by Section X of the form. The contact employee must be 
authorized to receive all contact information, communications and 
mailings and must be responsible for disseminating that information 
within the association's organization.
    Consult the EDGAR Filer Manual for EDGAR filing instructions, 
including the instructions for becoming an EDGAR Filer.

Appendix 7

    Note: The text of Form X-17A-19 does not, and this amendment 
will not, appear in the Code of Federal Regulations.

* * * * *

General Instructions

FORM X-17A-19

    1. * * *
    2. Original: File with the Commission electronically on EDGAR in 
accordance with the EDGAR Filer Manual, as defined in Rule 11 of 
Regulation S-T (Sec.  232.11) and in accordance with the 
requirements of Regulation S-T.
    Copy No. 1--Mail to: Securities Investor Protection Corporation, 
1667 K St. NW, Suite 1000, Washington, DC 20006-1620.
    Copy No. 2: Retain for your files.
    3. The original filed with the Securities and Exchange 
Commission and the copy filed with the Securities Investor 
Protection Corporation shall be signed by a duly authorized official 
of the national securities exchange or registered securities 
association (self-regulatory organization).
* * * * *
    6. Copies of this Form may be obtained on the Commission's 
website.
* * * * *

Appendix 8

    Note: The text of Form 19b-4 does not, and this amendment will 
not, appear in the Code of Federal Regulations.

* * * * *

[[Page 24045]]

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General Instructions for Form 19b-4

* * * * *

F. Signature and Filing of the Completed Form

    All proposed rule changes, amendments, extensions, and 
withdrawals of proposed rule changes shall be filed through the 
EFFS. All security-based swap submissions, advance notices, and 
amendments, extensions, and withdrawals of security-based swap

[[Page 24046]]

submissions and advance notices shall be filed to a dedicated email 
address established by the Commission, [email protected] 
for security-based swap submissions and [email protected] 
for advance notices. In order to file Form 19b-4 through EFFS, self-
regulatory organizations must request access to the SEC's External 
Application Server by completing a request for an external account 
user ID and password. Initial requests will be received by 
contacting the Trading and Markets Administrator located on our 
website (https://www.sec.gov). An email will be sent to the requestor 
that will provide a link to a secure website where basic profile 
information will be requested.
    A duly authorized officer of the self-regulatory organization 
shall electronically sign the completed Form 19b-4 as indicated on 
Page 1 of the Form. A registered clearing agency for which the 
Commission is not the appropriate regulatory agency also shall file 
with its appropriate regulatory agency three copies of the form, one 
of which shall be manually signed, including exhibits. A clearing 
agency that also is a designated clearing agency shall file with the 
Board of Governors of the Federal Reserve System (``Federal 
Reserve'') three copies of any form containing an advance notice, 
one of which shall be manually signed, including exhibits; provided, 
however, that this requirement may be satisfied instead by providing 
the copies to the Federal Reserve in an electronic format as 
permitted by the Federal Reserve. The Municipal Securities 
Rulemaking Board also shall file copies of the form, including 
exhibits, with the Federal Reserve, the Comptroller of the Currency, 
and the Federal Deposit Insurance Corporation.
* * * * *

Appendix 9

    Note: The text of Form CA-1 does not, and this amendment will 
not, appear in the Code of Federal Regulations.


[[Page 24047]]


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[[Page 24049]]


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[[Page 24054]]


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FORM CA-1 General Instructions

A. General Instructions for Preparing and Filing Form CA-1

    Form CA-1 is to be used by clearing agencies, as defined in 
Section 3(a)(23) of the Securities Exchange Act of 1934 (``the 
Act''), which perform the functions of a clearing agency with 
respect to any security other than an exempted security, as defined 
in Section 3(a)(l2) of the Act, to apply for registration or for 
exemption from registration or to amend registration with the 
Securities and Exchange Commission (the ``Commission''). As used 
hereinafter, the term ``Form CA-1'' includes the form and any 
required schedules, exhibits or attachments thereto. A response is 
required for every exhibit. For any exhibit that is inapplicable, a 
statement to that effect shall be furnished in lieu of such exhibit.
    Form CA-1 shall be filed in an electronic format through the 
Commission's Electronic Data Gathering, Analysis, and Retrieval 
System (EDGAR) in accordance with EDGAR rules set forth in 
Regulation S-T (17 CFR part 232).
    With the exception of certain attachments, Form CA-1 must be 
provided as an Interactive Data File in accordance with Rule 405 of 
Regulation S-T. This requirement does not extend to submissions that 
constitute copies of existing documents other than the financial 
statements (e.g., the copy of the clearing agency's currently 
effective constitution, articles of incorporation or association, 
by-laws, rules, procedures and instruments corresponding thereto, 
that is required to be provided as Exhibit E; the copy of a form of 
participant agreement that is required to be provided as Exhibit P; 
any reports, assessments, or formal opinions provided by internal or 
external auditors, attorneys, or similar assessors, or other similar 
documents that were prepared for a purpose other than submission of 
the Form CA-1). The requirement to provide Form CA-1 as an 
Interactive Data File applies to each of the 3 submissions described 
in General Instruction H below.
    In addition, with respect to a clearing agency for which the 
Commission is not the appropriate regulatory agency, as defined in 
Section 3(a)(34)(B) of the Act, Section 17(c)(1) of the Act requires 
such clearing agency to file with the appropriate regulatory agency 
for such clearing agency a signed copy of any application, document 
or report filed with the Commission. Each clearing agency should 
retain an exact copy of Form CA-1 for the clearing agency's records.
    Unless the context clearly indicates otherwise, the terms used 
in Form CA-1 have the meanings given in the Act.
    Unless the context otherwise requires, ``registrant'' means the 
entity on whose behalf Form CA-1 is filed, whether filed as a 
registration, as an application for exemption from registration or 
as an amendment to a previously filed Form CA-1.

B. Need for Careful Preparation of the Completed Form, Including 
Schedules and Exhibits

    A Form CA-1 which is not prepared and executed in compliance 
with applicable requirements may be returned as not acceptable for 
filing. Any filing so returned shall for all purposes be deemed not 
to have been filed with the Commission. See also Rule 0-3 under the 
Act (17 CFR 240.0-3). However, acceptance of Form CA-1 shall not 
constitute a finding that it has been filed as required or that the 
information submitted is true, current or complete.
    Individuals' names, except for executing signatures, shall be 
given in full wherever required (last name, first name, and middle 
name). The full middle name is required. Initials are not acceptable 
unless the individual legally has only an initial.

C. When To Use the Form CA-1

    Form CA-1 is comprised of 3 types of submissions to the 
Commission pursuant to Section 17A(b)(1) of the Act and Rule 17ab2-1 
thereunder. In completing the Form CA-1, a registrant shall select 
the type of filing and provide all information required by the rules 
and instructions thereunder. For any exhibit that is inapplicable, a 
statement to that effect shall be furnished in lieu of such exhibit. 
In submitting this Form, its schedules, its

[[Page 24055]]

exhibits and its attachments, the registrant and the person by whom 
it is executed represents that all information contained within is 
true, current and complete. The types of submissions are:
    (1) Rule 17ab2-1(a) submissions are applications for 
registration as a clearing agency or for exemption from registration 
as a clearing agency. If Form CA-1 is being filed as a registration 
form or an application for exemption from registration, all 
applicable items are required to be answered in full. If any item is 
not applicable respond with ``none'' or ``N/A'' (not applicable) as 
appropriate. If the Form is filed as a registration, indicate 
whether the applicant requests the Commission to consider granting 
registration in accordance with paragraph (c)(1) of Rule 17ab2-1. If 
Form CA-1 is being filed as an application for exemption from 
registration, it must be accompanied by a statement, marked as 
Exhibit S, demonstrating why the granting of an exemption from 
registration as a clearing agency would be consistent with the 
public interest, the protection of investors and the purposes of 
Section 17A of the Act.
    (2) Rule 17ab2-1(e) submissions shall be filed promptly 
following the date on which information reported on items 1-3 on 
Form CA-1 becomes inaccurate, incomplete or misleading. Submission 
of any amendment after registration has become effective represents 
that items 1-3 and any schedules, exhibits and attachments related 
to items 1-3 remain true, current and complete as previously 
submitted.
    (3) Sec. 17A(b)(1) submissions shall be filed as directed by any 
Order approving an application for exemption from registration as a 
clearing agency. Such submissions may include any report, notice or 
other submission as ordered by the Commission as a condition of 
granting exemption from registration.

D. Documents Comprising the Completed Form

    The completed form filed with the Commission shall consist of 
Form CA-1, responses to all applicable items, and any schedules and 
exhibits required in connection with the filing. Each filing shall 
be marked on Form CA-1 with the initials of the registrant, the 
four-digit year, and the number of the filing for the year (e.g., 
CA1-initials-YYYY-XXX).

E. Contact Information; Signature; and Filing of Completed Form

    Each time a registrant submits a filing to the Commission on 
Form CA-1, the registrant must provide the contact information 
required by Section II of the form. The contact employee must be 
authorized to receive all contact information, communications and 
mailings and must be responsible for disseminating that information 
within the registrant's organization.
    Consult the EDGAR Filer Manual for EDGAR filing instructions, 
including the instructions for becoming an EDGAR Filer.
    If Form CA-1 is filed by a corporation, it shall be signed in 
the name of the corporation by a principal officer duly authorized; 
if it is filed other than by a corporation it shall be signed by a 
duly authorized principal of the organization filing the Form. As 
used in this Form, principal officer means the president, vice 
president, treasurer, secretary, comptroller or any other person 
performing a similar function.
    The EDGAR receipt confirmation that demonstrates who filed the 
Form CA-1 shall be preserved pursuant to the requirements of Section 
17 of the Act and any rules and regulations thereunder. See, e.g., 
Rule 17a-1 under the Act (17 CFR 240.17a-1).
    Request for confidential treatment.
    In responding to, and furnishing the schedules required by, the 
items on Form CA-1, the registrant may request that confidential 
treatment be accorded with respect to the information disclosed. The 
registrant must furnish a statement requesting confidential 
treatment, detailing the specific responses, schedules and exhibits 
for which confidential treatment is sought, and specifying both the 
exemptive provision under the Freedom of Information Act (5 U.S.C. 
552(b)) on which the request is based and the considerations which 
make the exemptive provision applicable to the information for which 
confidential treatment is requested.

F. Notice

    Disclosure to the Commission of the information requested in 
Form CA-1 (except for the disclosure by an individual registrant of 
his Social Security number as an IRS Employee Identification Number, 
which is voluntary) is a prerequisite to the processing of 
applications for registration or for exemption from registration as 
a clearing agency.
    An agency may not conduct or sponsor, and a person is not 
required to respond to, a collection of information unless it 
displays a current valid control number. Under Sections 17, 17A(b) 
and 23(a) of the Act and the rules and regulations thereunder, the 
Securities and Exchange Commission is authorized to solicit the 
information required to be supplied by this Form from applicants for 
registration or for exemption from registration as a clearing 
agency. See 15 U.S.C. 78q, 78q-1(b) and 78w(a).
    The information will be used for the principal purpose of 
determining whether the Commission should grant registration or an 
exemption from registration or institute proceedings to deny 
registration. Social Security numbers, if furnished, will be used 
only to assist the Commission in identifying applicants and, 
therefore, in promptly processing applications.
    It is estimated that a clearing agency will have an average 
burden of approximately 338 hours completing a new application on 
the Form CA-1, and 58 hours completing an amendment to an 
application on the Form CA-1. Any member of the public may direct to 
the Commission any comments concerning the accuracy of the burden 
estimate on the facing page of Form CA-1 and any suggestions for 
reducing this burden.
    It is mandatory that an applicant seeking to operate as a 
clearing agency or as an exempt clearing agency file Form CA-1 with 
the Commission. It is also mandatory that registrants file 
amendments to Form CA-1 under Rule 17ab2-1(e).
    Information supplied on this Form will be included routinely in 
the public files of the Commission.

[FR Doc. 2023-06330 Filed 4-17-23; 8:45 am]
BILLING CODE 8011-01-P

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