46528 Federal Register / Vol. 83, No. 178 / Thursday, September 13, 2018 / Notices

Commission, Office of FOIA Services, required records on an annual basis. 242.204) under the Securities Exchange 100 F Street NE, Washington, DC Assuming an average hourly rate of an Act of 1934 (15 U.S.C. 78a et seq.). The 20549–2736 independent accountant of $60, the Commission plans to submit this Extension: average total annual cost of the report is existing collection of information to the Rule 17Ad–13, SEC File No. 270–263; $7,200. The total annual cost for the Office of Management and Budget OMB Control No. 3235–0275 approximate 100 respondents is (‘‘OMB’’) for extension and approval. Rule 204(a) provides that a participant Notice is hereby given that pursuant approximately $720,000. Written comments are invited on: (a) of a registered clearing agency must to the Paperwork Reduction Act of 1995 Whether the proposed collection of deliver securities to a registered clearing (‘‘PRA’’) (44 U.S.C. 3501 et seq.) the information is necessary for the agency for clearance and settlement on Securities and Exchange Commission performance of the functions of the a long or short sale in any equity (‘‘Commission’’) is soliciting comments agency, including whether the security by settlement date, or if a on the collection of information information will have any practical participant of a registered clearing provided for in Rule 17Ad–13 (17 CFR utility; (b) the accuracy of the agency’s agency has a fail to deliver position at 240.17Ad–13). The Commission plans estimate of the burden imposed by the a registered clearing agency in any to submit this existing collection of collection of information; (c) ways to equity security for a long or short sale information to the Office of enhance the quality, utility, and clarity transaction in the equity security, the Management and Budget (‘‘OMB’’) for of the information collected; and (d) participant shall, by no later than the extension and approval. ways to minimize the burden of the beginning of regular trading hours on Rule 17Ad–13 (17 CFR 240.17Ad–13) collection of information on the applicable close-out date, requires an annual study and evaluation respondents, including through the use immediately close out its fail to deliver of internal accounting controls under of automated collection techniques or positions by borrowing or purchasing the Securities Exchange Act of 1934 (15 other forms of information technology. securities of like kind and quantity. For U.S.C. 78a et seq.). It requires Consideration will be given to a short sale transaction, the participant approximately 100 registered transfer comments and suggestions submitted in must close out a fail to deliver by no agents to obtain an annual report on the writing within 60 days of this later than the beginning of regular adequacy of their internal accounting publication. trading hours on the settlement day controls from an independent An agency may not conduct or following the settlement date. If a accountant. In addition, transfer agents sponsor, and a person is not required to participant has a fail to deliver that the must maintain copies of any reports respond to, a collection of information participant can demonstrate on its books prepared pursuant to Rule 17Ad–13 under the PRA unless it displays a and records resulted from a long sale, or plus any documents prepared to notify currently valid OMB control number. that is attributable to bona-fide market the Commission and appropriate Please direct your written comments making activities, the participant must regulatory agencies in the event that the to: Pamela Dyson, Director/Chief close out the fail to deliver by no later transfer agent is required to take any Information Officer, Securities and than the beginning of regular trading corrective action. These recordkeeping Exchange Commission, c/o Candace hours on the third consecutive requirements assist the Commission and Kenner, 100 F Street NE, Washington settlement day following the settlement other regulatory agencies with DC 20549, or send an email to: PRA_ date. Rule 204 is intended to help monitoring transfer agents and ensuring [email protected]. further the Commission’s goal of compliance with the rule. Small transfer Dated: September 7, 2018. reducing fails to deliver by maintaining agents are exempt from Rule 17Ad–13 the reductions in fails to deliver Eduardo A. Aleman, as are transfer agents that service only achieved by the adoption of temporary their own companies’ securities. Assistant Secretary. Rule 204T, as well as other actions Approximately 100 independent, [FR Doc. 2018–19880 Filed 9–12–18; 8:45 am] taken by the Commission. In addition, professional transfer agents must file the BILLING CODE 8011–01–P Rule 204 is intended to help further the independent accountant’s report Commission’s goal of addressing annually. We estimate that the annual potentially abusive ‘‘naked’’ short internal time burden for each transfer SECURITIES AND EXCHANGE selling in all equity securities. agent to comply with Rule 17Ad–13 by COMMISSION The information collected under Rule submitting the report prepared by the [SEC File No. 270–586, OMB Control No. 204 will continue to be retained and/or independent accountant to the 3235–0647] provided to other entities pursuant to Commission is minimal. The time the specific rule provisions and will be required for the independent accountant Proposed Collection; Comment available to the Commission and self- to prepare the accountant’s report varies Request regulatory organization (‘‘SRO’’) with each transfer agent depending on Upon Written Request, Copies Available examiners upon request. The the size and nature of the transfer From: Securities and Exchange information collected will continue to agent’s operations. The Commission Commission, Office of FOIA Services, aid the Commission and SROs in estimates that, on average, each report 100 F Street NE, Washington, DC monitoring compliance with these can be completed by the independent 20549–2736 requirements. In addition, the accountant in 120 hours, resulting in a information collected will aid those total of 12,000 external hours annually Extension: subject to Rule 204 in complying with Rule 204 (120 hours × 100 reports). The burden its requirements. These collections of was estimated using Commission review Notice is hereby given that pursuant information are mandatory. of filed Rule 17Ad–13 reports and to the Paperwork Reduction Act of 1995 Several provisions under Rule 204 Commission conversations with transfer (‘‘PRA’’) (44 U.S.C. 3501 et seq.), the will impose a ‘‘collection of agents and accountants. The Securities and Exchange Commission information’’ within the meaning of the Commission estimates that, on average, (‘‘Commission’’) is soliciting comments Paperwork Reduction Act. 120 hours are needed to perform the on the collection of information I. Allocation Notification study, prepare the report, and retain the provided for in Rule 204 (17 CFR Requirement: As of December 31, 2017,

VerDate Sep<11>2014 19:20 Sep 12, 2018 Jkt 244001 PO 00000 Frm 00053 Fmt 4703 Sfmt 4703 E:\FR\FM\13SEN1.SGM 13SEN1 daltland on DSKBBV9HB2PROD with NOTICES Federal Register / Vol. 83, No. 178 / Thursday, September 13, 2018 / Notices 46529

there were 3,893 registered broker- We estimate a total of 1,093,356 is in compliance with the requirements dealers. Each of these broker-dealers potential demonstrations in accordance set forth in the pre-fail credit provision could clear trades through a participant with Rule 204(a)(1) across all broker- of Rule 204(e), 1,719,772 times per year of a registered clearing agency and, dealer participants per year (132 (3,893 registered broker-dealers therefore, become subject to the participants checking for compliance certifying once per day on 1.76 notification requirements of Rule once per day on 33 securities, securities, multiplied by 251 trading 204(d). If a participant allocates a fail to multiplied by 251 trading days in 2017). days in 2017). The total approximate deliver position to a broker or dealer The total approximate estimated annual estimated annual burden hour per year pursuant to Rule 204(d), the broker or burden hour per year will be will be approximately 275,164 burden dealer that has been allocated the fail to approximately 174,937 burden hours hours (1,719,772 multiplied by 0.16 deliver position in an equity security (1,093,356 multiplied by 0.16 hours/ hours/certification). must determine whether or not such fail documentation). V. Pre-Fail Credit Demonstration to deliver position was closed out in III. Pre-Borrow Notification Requirement: As of December 31, 2017, accordance with Rule 204(a). If such Requirement: As of December 5, 2017, there were 3,893 registered broker- broker or dealer does not comply with there were 132 participants of NSCC dealers. If a broker-dealer purchased or the provisions of Rule 204(a), such that were registered as broker-dealers. If borrowed securities in accordance with broker or dealer must immediately a participant of a registered clearing the conditions specified in Rule 204(e) notify the participant that it has become agency has a fail to deliver position in and determined that it had a net long subject to the requirements of Rule an equity security, the participant must position or net flat position on the 204(b). We estimate that a broker or determine whether or not the fail to settlement day for which the broker- dealer could have to make such deliver position was closed out in dealer is claiming pre-fail credit, we determination and notification with accordance with Rule 204(a). We estimate that a broker-dealer could have respect to approximately 1.76 equity estimate that a participant of a to make such determination with securities per day.1 We estimate a total registered clearing agency will have to respect to approximately 1.76 securities of 1,719,772 potential notifications in make such determination with respect per day.6 We estimate that registered accordance with Rule 204(d) across all to approximately 52 equity securities broker-dealers could have to registered broker-dealers (that could be per day.4 We estimate a total of demonstrate on its books and records allocated responsibility to close out a 1,722,864 potential notifications in that it has a net long position or net flat fail to deliver position) per year (3,893 accordance with Rule 204(c) across all position on the settlement day for which registered broker-dealers notifying participants per year (132 broker-dealer the broker-dealer is claiming pre-fail participants once per day 2 on 1.76 participants notifying broker-dealers credit, 1,719,772 times per year (3,893 equity securities, multiplied by 251 once per day on 52 securities, registered broker-dealers checking for trading days in 2017). The total multiplied by 251 trading days in 2017). compliance once per day on 1.76 equity estimated annual burden hours per year The total estimated annual burden securities, multiplied by 251 trading will be approximately 275,164 burden hours per year will be approximately days in 2017). The total approximate hours (1,719,772 multiplied by 0.16 275,658 burden hours (1,722,864 estimated annual burden hours per year hours/notification). multiplied by 0.16 hours/ will be 275,164 burden hours (1,719,772 II. Demonstration Requirement for documentation). multiplied by 0.16 hours/ Fails to Deliver on Long Sales: As of IV. Certification Requirement: As of demonstration). December 5, 2017, there were 132 December 31, 2017, there were 3,893 The total aggregate annual burden for participants of NSCC that were registered broker-dealers. Each of these the collection of information undertaken registered as broker-dealers. If a broker-dealers may clear trades through pursuant to all five provisions is thus participant of a registered clearing a participant of a registered clearing 1,276,087 hours per year (275,164 + agency has a fail to deliver position in agency. If the broker-dealer determines 174,937 + 275,658 + 275,164 + 275,164). Written comments are invited on: (a) an equity security at a registered that it has not incurred a fail to deliver Whether the proposed collection of clearing agency and determined that position on settlement date for a long or information is necessary for the proper such fail to deliver position resulted short sale in an equity security for performance of the functions of the from a long sale, we estimate that a which the participant has a fail to Commission, including whether the participant of a registered clearing deliver position at a registered clearing information shall have practical utility; agency will have to make such agency or has purchased or borrowed (b) the accuracy of the Commission’s determination with respect to securities in accordance with the pre- estimates of the burden of the proposed approximately 33 securities per day.3 fail credit provision of Rule 204(e), we collection of information; (c) ways to estimate that a broker-dealer could have 1 enhance the quality, utility, and clarity The Commission’s Division of Economic and to make such determination with of the information to be collected; and Risk Analysis (‘‘DERA’’) estimates that there were respect to approximately 1.76 securities approximately 6,868 average daily fail to deliver (d) ways to minimize the burden of the per day.5 We estimate that registered positions during 2017. Across 3,893 registered collection of information on broker-dealers, the number of securities per broker-dealers could have to certify to respondents, including through the use registered broker-dealer per trading day is the participant that it has not incurred of automated collection techniques or approximately 1.76 equity securities. a fail to deliver position on settlement 2 Because failure to comply with the close-out other forms of information technology. date for a long or short sale in an equity requirements of Rule 204(a) is a violation of the Consideration will be given to rule, we believe that a broker or dealer would make security for which the participant has a comments and suggestions submitted in the notification to a participant that it is subject to fail to deliver position at a registered writing within 60 days of this the borrowing requirements of Rule 204(b) at most clearing agency or, alternatively, that it once per day. publication. 3 DERA estimates that during 2017 approximately An agency may not conduct or 62.93% of trade volume was long. DERA estimates approximately 52 equity securities. 62.93% of 52 sponsor, and a person is not required to that there were approximately 6,868 average daily equity securities per trading day equals fail to deliver positions during 2017. Across 132 approximately 33 securities per day. respond to, a collection of information broker-dealer participants of the NSCC, the number 4 See supra note 3. of securities per participant per day is 5 See supra note 1. 6 See supra note 1.

VerDate Sep<11>2014 19:20 Sep 12, 2018 Jkt 244001 PO 00000 Frm 00054 Fmt 4703 Sfmt 4703 E:\FR\FM\13SEN1.SGM 13SEN1 daltland on DSKBBV9HB2PROD with NOTICES 46530 Federal Register / Vol. 83, No. 178 / Thursday, September 13, 2018 / Notices

under the PRA unless it displays a A. Background C. Proposed Changes To Amend the currently valid OMB control number. EPN Rules To Define Circumstances Please direct your written comments FICC states that the EPN Service Under Which FICC May Determine an to: Pamela Dyson, Director/Chief provides an automated manner for EPN User’s Compliance With EPN Rules market participants with an obligation Information Officer, Securities and The proposed ‘‘General Continuance to deliver pools of mortgages to transmit Exchange Commission, c/o Candace Standards’’ section would identify when mortgage pool information efficiently Kenner, 100 F Street NE, Washington FICC may review an EPN User’s access DC 20549 or send an email to: PRA_ and reliably to their counterparties in 5 to the EPN Service. The proposed [email protected]. real time. Market participants that wish ‘‘General Continuance Standards’’ Dated: September 7, 2018. to use the EPN Service (i.e., become section also would identify when FICC Eduardo A. Aleman, ‘‘EPN Users’’) are required to submit an may seek written assurances from EPN 6 Assistant Secretary. application to MBSD. The application Users. process and the use of the EPN Service [FR Doc. 2018–19882 Filed 9–12–18; 8:45 am] First, the proposal would identify five are governed by the EPN Rules.7 BILLING CODE 8011–01–P circumstances when FICC would assess MBSD’s clearing members (‘‘Clearing if an EPN User should retain access to Members’’) are required to be EPN the EPN Service: (i) If an EPN User SECURITIES AND EXCHANGE Users; however, one can be an EPN User experiences a Reportable Event; 14 (ii) if COMMISSION and not a Clearing Member.8 an EPN User fails to maintain the requirements for admission to B. Proposed Amendments to the EPN [Release No. 34–84057; File No. SR–FICC– membership; 15 (iii) if an EPN User 2018–005] Rules To Include an EPN User’s violates any EPN Rule or other Ongoing Reporting Obligations Self-Regulatory Organizations; Fixed agreement with FICC; (iv) if an EPN Income Clearing Corporation; Order FICC proposes to amend the EPN User fails to satisfy any obligation to Granting Approval of Proposed Rule Rules by adding a ‘‘General Continuance FICC in a timely manner; or (v) if FICC Change To Correct Certain References Standards’’ section. The proposed otherwise deems it necessary or and Provide Transparency to Existing section would describe two existing advisable, in order to protect FICC, its Processes in the Mortgage-Backed MBSD practices with respect to other EPN Users, or its creditors or Securities Division Electronic Pool reporting obligations of EPN Users.9 investors, to safeguard securities and funds in the custody or control of FICC, Notification Rules First, the proposed section would state or to promote the prompt and accurate that an EPN User shall promptly inform September 7, 2018. processing, clearance or settlement of FICC, both orally and in writing, if such On July 13, 2018, Fixed Income securities transactions.16 EPN User no longer complies with any Clearing Corporation (‘‘FICC’’) filed Second, the proposed ‘‘General of the EPN Rules’ requirements for with the U.S. Securities and Exchange Continuance Standards’’ section would admission to membership.10 This Commission (‘‘Commission’’) proposed state that FICC may require an EPN User rule change SR–FICC–2018–005 notification must occur within two to provide written assurances to FICC.17 pursuant to Section 19(b)(1) of the business days from the date on which The proposal would authorize FICC to the EPN User first learns of its non- require written assurances from an EPN Securities Exchange Act of 1934 11 (‘‘Act’’) 1 and Rule 19b–4 thereunder.2 compliance. Second, the proposed User if FICC has reason to believe that The proposed rule change was section would state that an EPN User an EPN User may fail to comply with published for comment in the Federal shall notify FICC of certain any of the EPN Rules.18 Specifically, Register on July 26, 2018.3 The investigations or proceedings. FICC could require an EPN User to Commission did not receive any Specifically, an EPN User must notify comment letters on the proposed rule FICC within two business days after 14 As part of the proposal, FICC would include change. For the reasons discussed learning (i) that the EPN User is or will ‘‘Reportable Event’’ as a new defined term in the become the subject of an investigation ‘‘Definitions and General Provisions’’ section of the below, the Commission approves the EPN Rules. ‘‘Reportable Event’’ would be defined as proposed rule change. or a proceeding, and (ii) that said ‘‘an event that would effect a change in control of investigation or proceeding would cause an EPN User or could have a substantial impact on I. Description of the Proposed Rule the EPN User to fall out of compliance such EPN User’s business and/or financial Change with any of the requirements for condition, including, but not limited to: (a) Material organizational changes including mergers, The proposed rule change would membership set forth in the EPN acquisitions, changes in corporate form, name amend FICC’s Mortgage-Backed Rules.12 However, the EPN User would changes, changes in the ownership of an EPN User Securities Division (‘‘MSBD’’) electronic not be required to provide such a or its affiliates, and material changes in pool notification (‘‘EPN’’) service (‘‘EPN notification to FICC if doing so would management; and (b) status as a defendant in litigation, which could reasonably impact the EPN 4 Service’’) rules (‘‘EPN Rules’’). cause the EPN User to violate an User’s financial condition or ability to conduct applicable law, rule, or regulation.13 business.’’ Id. Distinct from any other notification 1 15 U.S.C. 78s(b)(1). obligations, an EPN User would be required to 2 submit to FICC written notice of any Reportable 17 CFR 240.19b–4. 5 Notice, 83 FR at 33513. See also ‘‘EPN Event at least 90 calendar days prior to the effective 3 Securities Exchange Act Release No.83682 (July Overview,’’ available at http://www.dtcc.com/ date of such Reportable Event unless the EPN User 20, 2018), 83 FR 35513 (July 26, 2018) (SR–FICC– clearing-services/ficc-mbsd/epn. demonstrates that (i) the EPN User could not have 2018–005) (‘‘Notice’’). 6 Notice, 83 FR at 33513. reasonably done so, and (ii) the EPN User provided 4 MBSD maintains two sets of rulebooks: The EPN 7 Id. written notice and oral notice to FICC as soon as Rules and the MSBD rules (‘‘MBSD Rules’’). Notice, 8 Id. possible. Id. 83 FR at 35513. The EPN Rules govern MBSD’s EPN 9 Notice, 83 FR at 35514. 15 Service, while the MBSD Rules govern MBSD’s Such requirements may include, but are not 10 clearance and settlement service. Id. The EPN Rules These membership standards are set forth in limited to, operational testing and related reporting are available at http://www.dtcc.com/∼/media/Files/ EPN Rules, Article III, Rule 1, Sections 2–3, supra requirements that FICC may imposed from time to Downloads/legal/rules/ficc_mbsd_epnrules.pdf. note 4. time. Notice, 83 FR at 35514. The MBSD Rules are available at http:// 11 Notice, 83 FR at 35514. 16 Id. www.dtcc.com/∼/media/Files/Downloads/legal/ 12 Id. 17 Id. rules/ficc_mbsd_rules.pdf. 13 Id. 18 Id.

VerDate Sep<11>2014 19:20 Sep 12, 2018 Jkt 244001 PO 00000 Frm 00055 Fmt 4703 Sfmt 4703 E:\FR\FM\13SEN1.SGM 13SEN1 daltland on DSKBBV9HB2PROD with NOTICES