Proposed Collection; Comment Request; Extension: Rule 606 of Regulation NMS, 88841-88842 [2024-25924]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 89, Number 217 (Friday, November 8, 2024)]
[Notices]
[Pages 88841-88842]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-25924]


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SECURITIES AND EXCHANGE COMMISSION

[SEC File No. 270-489, OMB Control No. 3235-0541]


Proposed Collection; Comment Request; Extension: Rule 606 of 
Regulation NMS

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 et seq.) (``PRA''), the Securities and 
Exchange Commission (``Commission'') is soliciting comments on the 
existing collection of information

[[Page 88842]]

provided for in Rule 606 of Regulation NMS (``Rule 606'') (17 CFR 
242.606), under the Securities Exchange Act of 1934 (15 U.S.C. 78a et 
seq.). The Commission plans to submit this existing collection of 
information to the Office of Management and Budget (``OMB'') for 
extension and approval.
    Rule 606 (formerly known as Rule 11Ac1-6) requires require 
disclosure by broker-dealers of, (1) pursuant to Rule 606(a)(1), a 
quarterly aggregated public report on the handling of orders in NMS 
stocks that are submitted on a held basis and orders in NMS securities 
that are option contracts with a market value less than $50,000; (2) 
pursuant to Rule 606(b)(1), a report, upon request of a customer, on 
the routing of that customer's orders in NMS stocks that are submitted 
on a held basis; orders in NMS stocks that are submitted on a not held 
basis and do not qualify for two de minimis exceptions; and orders in 
NMS securities that are option contracts, containing certain 
information on the broker-dealer's routing of such orders for that 
customer for the prior six months; and (3) pursuant to Rule 606(b)(3), 
a report, upon request of a customer that places with the broker-
dealer, directly or indirectly, NMS stock orders of any size that are 
submitted on a not held basis (subject to two de minimis exceptions), 
containing certain information on the broker-dealer's handling of such 
orders for that customer for the prior six months.
    The Commission estimates that out of the currently 3,399 broker-
dealers that are subject to the collection of information obligations 
of Rule 606(a)(1), clearing brokers bear a substantial portion of the 
burden of complying with the reporting and recordkeeping requirements 
of Rule 606 on behalf of small to mid-sized introducing firms. There 
currently are approximately 179 clearing brokers. In addition, there 
are approximately 61 introducing brokers that receive funds or 
securities from their customers. Because at least some of these firms 
also may have greater involvement in determining where customer orders 
are routed for execution, they have been included, along with clearing 
brokers, in estimating the total burden of Rule 606(a)(1).
    As described in more detail, below, the total annual time burden 
associated with rule 606 is approximately 183,000 hours per year and 
the total annual cost burden is approximately $1,300,000 per year.
    The Commission staff estimates that each firm significantly 
involved in order routing practices incurs an average burden of 40 
hours to prepare and disseminate the quarterly report required by Rule 
606(a)(1), or a burden of 160 hours per year. With an estimated 240 
broker-dealers significantly involved in order routing practices, the 
total industry-wide burden per year to comply with the quarterly 
reporting requirement in Rule 606 is estimated to be 38,400 hours (160 
x 240). Additionally, for each of the 240 broker-dealers subject to 
disclosure requirements of Rule 606(a)(1), the Commission estimates the 
annual burden under Rule 606(a)(1)(iv) to monitor payment for order 
flow and profit-sharing relationships and potential self-regulatory 
organization rule changes that could impact their order routing 
decisions and incorporate any new information into their reports to be 
10 hours and the annual burden for each broker-dealers to describe and 
update any terms of payment for order flow arrangements and profit-
sharing relationships with a Specified Venue that may influence their 
order routing decisions to be 15 hours, for a total annual burden of 
6,000 hours (25 x 240). Therefore, the estimated total annual burden to 
comply with Rule 606(a)(1) is 44,400 hours.
    Clearing brokers generally bear the burden of responding to 
individual customer requests under Rule 606(b)(1) for order handling 
information. The Commission staff estimates that an average clearing 
broker incurs an annual burden of 400 hours (2000 responses x 0.2 
hours/response) to prepare, disseminate, and retain responses to 
customers required by Rule 606. With an estimated 179 clearing brokers 
subject to Rule 606(b)(1), the total industry-wide burden per year to 
comply with the customer response requirement in Rule 606 is estimated 
to be 71,600 hours (179 x 400).
    The Commission estimates that approximately 200 broker-dealers are 
involved in routing orders subject to the disclosure requirements of 
Rule 606(b)(3). The Commission believes that some such broker-dealers 
will respond to requests for customer-specific reports in house, while 
others will engage a third-party service provider to do so. The 
Commission estimates that approximately 135 broker-dealers will respond 
in-house to individual customer requests for information on order 
handling under Rule 606(b)(3), and that for each, the individual annual 
burden will be 400 hours (200 responses x 2 hours/response), with a 
total annual burden of 54,000 hours (400 x 135).
    The Commission estimates that approximately 65 broker-dealers will 
engage a third party to respond to individual customer requests, and 
that for each, the individual annual burden will be 200 hours (200 
responses x 1 hour/response), with a total annual burden of 13,000 
hours (200 x 65). The total annual cost burden associated with engaging 
such third parties is approximately $1,300,000 (65 x 200 annual 
requests x $100 per request to engage a third-party service provider). 
Therefore, the estimated total annual burden to comply with Rule 
606(b)(3) is 67,000 hours and $1,300,000.
    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 
estimates of the burden of the proposed 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 
January 7, 2025.
    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 Tanya 
Ruttenberg, 100 F Street NE, Washington, DC 20549, or send an email to: 
[email protected].

    Dated: November 4, 2024.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-25924 Filed 11-7-24; 8:45 am]
BILLING CODE 8011-01-P