Proposed Collection; Comment Request; Extension: Rule 154, 77208-77209 [2024-21555]
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77208
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Notices
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Proposal’s analysis measured volatility
using changes in the midpoint price of
Tier 2 ETPs from second-to-second. This
method of analysis is not robust for
studying the volatility of securities that
trade infrequently or have low quoting
activity because the estimated volatility
will be biased toward zero for these
securities.76 As part of the
Supplemental Analysis the Participants
provided a new analysis of the volatility
Tier 2 ETPs.77 While this analysis uses
a more robust method for evaluating the
volatility of Tier 2 ETPs as compared to
Tier 1 non-ETPs, it presents the same
concerns discussed above. In particular,
it is an insufficiently granular statistical
analysis of all Tier 2 ETP volatility, and
there may be many Tier 2 ETPs that
exhibit different trading characteristics,
which the Analyses do not take into
consideration. This possibility is
evident in the distributional statistics in
the Supplemental Analysis: the average
quote volatilities for Tier 2 ETPs (both
leveraged and non-leveraged) are
multiples of the median quote
volatilities, implying that the
distribution is skewed by observations
with volatility far higher than the
average. Tier 1 ETPs exhibit less
evidence of skewness. Therefore, the
supplemental volatility analysis does
not support moving all Tier 2 ETPs into
Tier 1.
Accordingly, based on the study in
the Proposal and the Supplemental
was aggregated in a way that makes its results
impossible to generalize to the typical Tier 2 ETP.
76 For example, consider two ETPs with the same
fundamental volatility but different levels of trading
activity. Suppose the first ETP is traded frequently
with quote updates every second; it therefore has
23,400 second-to-second returns during the trading
day (sixty updates per minute for 6.5 hours).
Suppose that the second ETP only receives a quote
update once per minute; it will have 390 secondto-second returns, and 23,010 seconds with an
unchanged midpoint (i.e., a return of 0). The
Proposal’s methodology is likely to estimate a
substantially lower volatility for the second ETP
due to the fact that the vast majority of observations
are coded as a 0. Using the NBBO files in the TAQ
database for the second half of 2023, the
Commission estimates that the median nonleveraged Tier 2 ETP receives approximately 2,900
NBBO updates per day; this implies that the
second-to-second volatility calculation for the
median Tier 2 ETP will use at least 20,500 seconds
with a return of 0 due to a lack of data (23,400
seconds per day, less the 2,900 NBBO updates). In
contrast, the median Tier 1 security receives over
23,400 NBBO updates per day. It is likely therefore
that the Proposal’s methodology underestimates the
volatility of non-leveraged Tier 2 ETPs due to the
prevalence of missing returns. The Participants
disagreed with this assessment of their
methodology, stating that ‘‘quotes for even thinlytraded ETPs change frequently as market makers
update their valuations of ETPs’ underlying
portfolios, so it is not the case that the computation
of quote volatility is biased by many zeroes.’’ See
Participants’ Letter at 2. The Participants did not
provide any evidence to support this statement.
77 See Participants’ Letter at 2–4.
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Analysis and for the reasons discussed
throughout this order, the Commission
cannot find that designating over two
thousand ETPs as Tier 1 securities and
subjecting them to tighter Price Bands is
necessary or appropriate in the public
interest, for the protection of investors
and the maintenance of fair and orderly
markets, to remove impediments to, and
perfect the mechanisms of, a national
market system, or otherwise in
furtherance of the purposes of the Act,
as required for approval of a plan
amendment pursuant to Rule 608(b)(2).
Designating Tier 2 ETPs as Tier 1
securities based on an aggregate
statistical analysis could result in
excessive Straddle States, Limit States
and Trading Pauses in certain affected
ETPs due to tighter Price Bands, and
thus unduly impede trading in many
securities for market participants that
trade in these securities.
V. Conclusion
For the reasons set forth above, the
Commission does not find, pursuant to
Section 11A of the Act,78 and Rule
608(b)(2) thereunder,79 that the
Proposed Amendment is necessary or
appropriate in the public interest, for
the protection of investors and the
maintenance of fair and orderly markets,
to remove impediments to, and perfect
the mechanisms of, a national market
system, or otherwise in furtherance of
the purposes of the Act.
It is therefore ordered, pursuant to
Section 11A of the Act, and Rule
608(b)(2) thereunder, that the Proposed
Amendment (File No. 4–631) be, and it
hereby is, disapproved.
By the Commission.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2024–21508 Filed 9–19–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–438, OMB Control No.
3235–0495]
Proposed Collection; Comment
Request; Extension: Rule 154
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736.
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501–3520), the Securities
78 15
79 17
PO 00000
U.S.C. 78k–1.
CFR 242.608(b)(2).
Frm 00134
Fmt 4703
Sfmt 4703
and Exchange Commission
(‘‘Commission’’) is soliciting comments
on the collection of information
summarized below. The Commission
plans to submit this existing collection
of information to the Office of
Management and Budget for extension
and approval.
The federal securities laws generally
prohibit an issuer, underwriter, or
dealer from delivering a security for sale
unless a prospectus meeting certain
requirements accompanies or precedes
the security. Rule 154 (17 CFR 230.154)
under the Securities Act of 1933 (15
U.S.C. 77a) (the ‘‘Securities Act’’)
permits, under certain circumstances,
delivery of a single prospectus to
investors who purchase securities from
the same issuer and share the same
address (‘‘householding’’) to satisfy the
applicable prospectus delivery
requirements.1 The purpose of rule 154
is to reduce the amount of duplicative
prospectuses delivered to investors
sharing the same address.
Under rule 154, a prospectus is
considered delivered to all investors at
a shared address, for purposes of the
federal securities laws, if the person
relying on the rule delivers the
prospectus to the shared address,
addresses the prospectus to the
investors as a group or to each of the
investors individually, and the investors
consent to the delivery of a single
prospectus. The rule applies to
prospectuses and prospectus
supplements. Currently, the rule
permits householding of all
prospectuses by an issuer, underwriter,
or dealer relying on the rule if, in
addition to the other conditions set forth
in the rule, the issuer, underwriter, or
dealer has obtained from each investor
written or implied consent to
householding.2 The rule requires
issuers, underwriters, or dealers that
wish to household prospectuses with
implied consent to send a notice to each
investor stating that the investors in the
household will receive one prospectus
in the future unless the investors
1 The Securities Act requires the delivery of
prospectuses to investors who buy securities from
an issuer or from underwriters or dealers who
participate in a registered distribution of securities;
see Securities Act sections 2(a)(10), 4(1), 4(3), 5(b)
[15 U.S.C. 77b(a)(10), 77d(1), 77d(3), 77e(b); see
also rule 174 under the Securities Act (17 CFR
230.174) (regarding the prospectus delivery
obligation of dealers); rule 15c2–8 under the
Securities Exchange Act of 1934 (17 CFR 240.15c2–
8) (prospectus delivery obligations of brokers and
dealers).
2 Rule 154 permits the householding of
prospectuses that are delivered electronically to
investors only if delivery is made to a shared
electronic address and the investors give written
consent to householding. Implied consent is not
permitted in such a situation. See rule 154(b)(4).
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ddrumheller on DSK120RN23PROD with NOTICES1
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Notices
provide contrary instructions. In
addition, at least once a year, issuers,
underwriters, or dealers relying on rule
154 for the householding of
prospectuses relating to open-end
management investment companies that
are registered under the Investment
Company Act of 1940 (‘‘mutual funds’’)
and each series thereof must explain to
investors who have provided written or
implied consent how they can revoke
their consent.3 Preparing and sending
the notice and the annual explanation of
the right to revoke are collections of
information.
The rule allows issuers, underwriters,
or dealers to household prospectuses if
certain conditions are met. Among the
conditions with which a person relying
on the rule must comply are providing
notice to each investor that only one
prospectus will be sent to the household
and, in the case of issuers that are
mutual funds and any series thereof,
providing to each investor who consents
to householding an annual explanation
of the right to revoke consent to the
delivery of a single prospectus to
multiple investors sharing an address.
The purpose of the notice and annual
explanation requirements of the rule is
to ensure that investors who wish to
receive individual copies of
prospectuses are able to do so.
Although rule 154 is not limited to
mutual funds, the Commission believes
that it is used mainly by mutual funds
and by broker-dealers that deliver
prospectuses for mutual funds. The
Commission is unable to estimate the
number of issuers other than mutual
funds that rely on the rule.
The Commission estimates that, as of
March 2024, there are approximately
12,118 mutual fund series registered on
Form N–1A, approximately 1,060 of
which are directly sold and therefore
deliver their own prospectuses. Of
these, the Commission estimates that
approximately half (530 mutual fund
series): (i) do not send the implied
consent notice requirement because
they obtain affirmative written consent
to household prospectuses in the fund’s
account opening documentation; or (ii)
do not take advantage of the
householding provision because of
electronic delivery options which lessen
the economic and operational benefits
of rule 154 when compared with the
costs of compliance. Therefore, the
Commission estimates that each of the
530 directly sold mutual fund series
will spend an average of 20 hours per
year complying with the notice
requirement of the rule, for a total of
10,600 burden hours. In addition, of the
3 See
rule 154(c).
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approximately 1,060 mutual fund series
that are directly sold, the Commission
estimates that approximately 75% (or
795) will each spend 1 hour complying
with the annual explanation of the right
to revoke requirement of the rule, for a
total of 795 hours.
The Commission estimates that, as of
March 2024, there were approximately
70 broker-dealers that have customer
accounts with mutual funds, and
therefore may be required to deliver
mutual fund prospectuses. The
Commission estimates that each affected
broker-dealer will spend, on average, 20
hours complying with the notice
requirement of the rule, for a total of
1,400 hours. In addition, each brokerdealer will also spend one hour
complying with the annual explanation
of the right to revoke requirement, for a
total of 70 hours. Therefore, the total
number of respondents for rule 154 is
865 (795 4 mutual fund series plus 70
broker-dealers), and the estimated total
hour burden is approximately 12,865
hours (11,395 hours for mutual fund
series, plus 1,470 hours for brokerdealers).
The estimate of average burden hours
is made solely for the purposes of the
Paperwork Reduction Act and is not
derived from a comprehensive or even
a representative survey or study of the
costs of Commission rules and forms.
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.
Written comments are invited on: (a)
whether the proposed collection of
information is necessary for the proper
performance of the functions of the
Commission, including whether the
information shall have practical utility;
(b) the accuracy of the Commission’s
estimate of the burden of the collection
of information; (c) ways to enhance the
quality, utility, and clarity of the
information collected; and (d) ways to
minimize the burden of the collection of
information on respondents, including
through the use of automated collection
techniques or other forms of information
technology. Consideration will be given
to comments and suggestions submitted
by November 19, 2024.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
under the PRA unless it displays a
currently valid OMB control number.
4 The
Commission estimates that 530 mutual
funds prepare both the implied consent notice and
the annual explanation of the right to revoke
consent + 265 mutual funds that prepare only the
annual explanation of the right to revoke.
PO 00000
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77209
Please direct your written comments
to: Austin Gerig, Director/Chief Data
Officer, Securities and Exchange
Commission, c/o Oluwaseun Ajayi, 100
F Street NE, Washington, DC 20549 or
send an email to: PRA_Mailbox@
sec.gov.
Dated: September 17, 2024.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2024–21555 Filed 9–19–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–101025; File No. SR–IEX–
2024–16]
Self-Regulatory Organizations;
Investors Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Adopt
Supplementary Material .16 to IEX Rule
5.110 (Supervision), So That IEX
Members Who Participate in the
Recently Approved FINRA Pilot
Program on Remote Inspections Will
Also Satisfy the Internal Inspection
Requirements Found in IEX’s Rules
September 16, 2024.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on
September 4, 2024, the Investors
Exchange LLC (‘‘IEX’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission (the
‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the self-regulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Pursuant to the provisions of Section
19(b)(1) under the Act,4 and Rule 19b–
4 thereunder,5 the Exchange is filing
with the Commission a proposed rule
change to adopt Supplementary
Material .16 to IEX Rule 5.110
(Supervision), so that IEX Members 6
who participate in the recentlyapproved FINRA pilot program on
remote inspections (the ‘‘Remote
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
4 15 U.S.C. 78s(b)(1).
5 17 CFR 240.19b–4.
6 See IEX Rule 1.160(s).
2 15
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]]>Agencies
[Federal Register Volume 89, Number 183 (Friday, September 20, 2024)]
[Notices]
[Pages 77208-77209]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-21555]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[SEC File No. 270-438, OMB Control No. 3235-0495]
Proposed Collection; Comment Request; Extension: Rule 154
Upon Written Request, Copies Available From: Securities and Exchange
Commission, Office of FOIA Services, 100 F Street NE, Washington, DC
20549-2736.
Notice is hereby given that, pursuant to the Paperwork Reduction
Act of 1995 (44 U.S.C. 3501-3520), the Securities and Exchange
Commission (``Commission'') is soliciting comments on the collection of
information summarized below. The Commission plans to submit this
existing collection of information to the Office of Management and
Budget for extension and approval.
The federal securities laws generally prohibit an issuer,
underwriter, or dealer from delivering a security for sale unless a
prospectus meeting certain requirements accompanies or precedes the
security. Rule 154 (17 CFR 230.154) under the Securities Act of 1933
(15 U.S.C. 77a) (the ``Securities Act'') permits, under certain
circumstances, delivery of a single prospectus to investors who
purchase securities from the same issuer and share the same address
(``householding'') to satisfy the applicable prospectus delivery
requirements.\1\ The purpose of rule 154 is to reduce the amount of
duplicative prospectuses delivered to investors sharing the same
address.
---------------------------------------------------------------------------
\1\ The Securities Act requires the delivery of prospectuses to
investors who buy securities from an issuer or from underwriters or
dealers who participate in a registered distribution of securities;
see Securities Act sections 2(a)(10), 4(1), 4(3), 5(b) [15 U.S.C.
77b(a)(10), 77d(1), 77d(3), 77e(b); see also rule 174 under the
Securities Act (17 CFR 230.174) (regarding the prospectus delivery
obligation of dealers); rule 15c2-8 under the Securities Exchange
Act of 1934 (17 CFR 240.15c2-8) (prospectus delivery obligations of
brokers and dealers).
---------------------------------------------------------------------------
Under rule 154, a prospectus is considered delivered to all
investors at a shared address, for purposes of the federal securities
laws, if the person relying on the rule delivers the prospectus to the
shared address, addresses the prospectus to the investors as a group or
to each of the investors individually, and the investors consent to the
delivery of a single prospectus. The rule applies to prospectuses and
prospectus supplements. Currently, the rule permits householding of all
prospectuses by an issuer, underwriter, or dealer relying on the rule
if, in addition to the other conditions set forth in the rule, the
issuer, underwriter, or dealer has obtained from each investor written
or implied consent to householding.\2\ The rule requires issuers,
underwriters, or dealers that wish to household prospectuses with
implied consent to send a notice to each investor stating that the
investors in the household will receive one prospectus in the future
unless the investors
[[Page 77209]]
provide contrary instructions. In addition, at least once a year,
issuers, underwriters, or dealers relying on rule 154 for the
householding of prospectuses relating to open-end management investment
companies that are registered under the Investment Company Act of 1940
(``mutual funds'') and each series thereof must explain to investors
who have provided written or implied consent how they can revoke their
consent.\3\ Preparing and sending the notice and the annual explanation
of the right to revoke are collections of information.
---------------------------------------------------------------------------
\2\ Rule 154 permits the householding of prospectuses that are
delivered electronically to investors only if delivery is made to a
shared electronic address and the investors give written consent to
householding. Implied consent is not permitted in such a situation.
See rule 154(b)(4).
\3\ See rule 154(c).
---------------------------------------------------------------------------
The rule allows issuers, underwriters, or dealers to household
prospectuses if certain conditions are met. Among the conditions with
which a person relying on the rule must comply are providing notice to
each investor that only one prospectus will be sent to the household
and, in the case of issuers that are mutual funds and any series
thereof, providing to each investor who consents to householding an
annual explanation of the right to revoke consent to the delivery of a
single prospectus to multiple investors sharing an address. The purpose
of the notice and annual explanation requirements of the rule is to
ensure that investors who wish to receive individual copies of
prospectuses are able to do so.
Although rule 154 is not limited to mutual funds, the Commission
believes that it is used mainly by mutual funds and by broker-dealers
that deliver prospectuses for mutual funds. The Commission is unable to
estimate the number of issuers other than mutual funds that rely on the
rule.
The Commission estimates that, as of March 2024, there are
approximately 12,118 mutual fund series registered on Form N-1A,
approximately 1,060 of which are directly sold and therefore deliver
their own prospectuses. Of these, the Commission estimates that
approximately half (530 mutual fund series): (i) do not send the
implied consent notice requirement because they obtain affirmative
written consent to household prospectuses in the fund's account opening
documentation; or (ii) do not take advantage of the householding
provision because of electronic delivery options which lessen the
economic and operational benefits of rule 154 when compared with the
costs of compliance. Therefore, the Commission estimates that each of
the 530 directly sold mutual fund series will spend an average of 20
hours per year complying with the notice requirement of the rule, for a
total of 10,600 burden hours. In addition, of the approximately 1,060
mutual fund series that are directly sold, the Commission estimates
that approximately 75% (or 795) will each spend 1 hour complying with
the annual explanation of the right to revoke requirement of the rule,
for a total of 795 hours.
The Commission estimates that, as of March 2024, there were
approximately 70 broker-dealers that have customer accounts with mutual
funds, and therefore may be required to deliver mutual fund
prospectuses. The Commission estimates that each affected broker-dealer
will spend, on average, 20 hours complying with the notice requirement
of the rule, for a total of 1,400 hours. In addition, each broker-
dealer will also spend one hour complying with the annual explanation
of the right to revoke requirement, for a total of 70 hours. Therefore,
the total number of respondents for rule 154 is 865 (795 \4\ mutual
fund series plus 70 broker-dealers), and the estimated total hour
burden is approximately 12,865 hours (11,395 hours for mutual fund
series, plus 1,470 hours for broker-dealers).
---------------------------------------------------------------------------
\4\ The Commission estimates that 530 mutual funds prepare both
the implied consent notice and the annual explanation of the right
to revoke consent + 265 mutual funds that prepare only the annual
explanation of the right to revoke.
---------------------------------------------------------------------------
The estimate of average burden hours is made solely for the
purposes of the Paperwork Reduction Act and is not derived from a
comprehensive or even a representative survey or study of the costs of
Commission rules and forms. 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.
Written comments are invited on: (a) whether the proposed
collection of information is necessary for the proper performance of
the functions of the Commission, including whether the information
shall have practical utility; (b) the accuracy of the Commission's
estimate of the burden of the collection of information; (c) ways to
enhance the quality, utility, and clarity of the information collected;
and (d) ways to minimize the burden of the collection of information on
respondents, including through the use of automated collection
techniques or other forms of information technology. Consideration will
be given to comments and suggestions submitted by November 19, 2024.
An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information under the PRA unless it
displays a currently valid OMB control number.
Please direct your written comments to: Austin Gerig, Director/
Chief Data Officer, Securities and Exchange Commission, c/o Oluwaseun
Ajayi, 100 F Street NE, Washington, DC 20549 or send an email to:
[email protected].
Dated: September 17, 2024.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-21555 Filed 9-19-24; 8:45 am]
BILLING CODE 8011-01-P
