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

Commission, Office of FOIA Services, 

100 F Street NE, Washington, DC 

20549–2736 

Extension: 

Rule 17Ad–13, SEC File No. 270–263; 

OMB Control No. 3235–0275 

Notice is hereby given that pursuant 

to the Paperwork Reduction Act of 1995 

(‘‘PRA’’) (44 U.S.C. 3501 et seq.) the 

Securities and Exchange Commission 

(‘‘Commission’’) is soliciting comments 

on the collection of information 

provided for in Rule 17Ad–13 (17 CFR 

240.17Ad–13). The Commission plans 

to submit this existing collection of 

information to the Office of 

Management and Budget (‘‘OMB’’) for 

extension and approval. 

Rule 17Ad–13 (17 CFR 240.17Ad–13) 

requires an annual study and evaluation 

of internal accounting controls under 

the Securities Exchange Act of 1934 (15 

U.S.C. 78a et seq.). It requires 

approximately 100 registered transfer 

agents to obtain an annual report on the 

adequacy of their internal accounting 

controls from an independent 

accountant. In addition, transfer agents 

must maintain copies of any reports 

prepared pursuant to Rule 17Ad–13 

plus any documents prepared to notify 

the Commission and appropriate 

regulatory agencies in the event that the 

transfer agent is required to take any 

corrective action. These recordkeeping 

requirements assist the Commission and 

other regulatory agencies with 

monitoring transfer agents and ensuring 

compliance with the rule. Small transfer 

agents are exempt from Rule 17Ad–13 

as are transfer agents that service only 

their own companies’ securities. 

Approximately 100 independent, 

professional transfer agents must file the 

independent accountant’s report 

annually. We estimate that the annual 

internal time burden for each transfer 

agent to comply with Rule 17Ad–13 by 

submitting the report prepared by the 

independent accountant to the 

Commission is minimal. The time 

required for the independent accountant 

to prepare the accountant’s report varies 

with each transfer agent depending on 

the size and nature of the transfer 

agent’s operations. The Commission 

estimates that, on average, each report 

can be completed by the independent 

accountant in 120 hours, resulting in a 

total of 12,000 external hours annually 

(120 hours × 100 reports). The burden 

was estimated using Commission review 

of filed Rule 17Ad–13 reports and 

Commission conversations with transfer 

agents and accountants. The 

Commission estimates that, on average, 

120 hours are needed to perform the 

study, prepare the report, and retain the 

required records on an annual basis. 

Assuming an average hourly rate of an 

independent accountant of $60, the 

average total annual cost of the report is 

$7,200. The total annual cost for the 

approximate 100 respondents is 

approximately $720,000. 

Written comments are invited on: (a) 

Whether the proposed collection of 

information is necessary for the 

performance of the functions of the 

agency, including whether the 

information will have any practical 

utility; (b) the accuracy of the agency’s 

estimate of the burden imposed by 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 in 

writing within 60 days of this 

publication. 

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: Pamela Dyson, Director/Chief 

Information Officer, Securities and 

Exchange Commission, c/o Candace 

Kenner, 100 F Street NE, Washington 

DC 20549, or send an email to: PRA_

Mailbox@sec.gov. 

Dated: September 7, 2018. 

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–19880 Filed 9–12–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[SEC File No. 270–586, OMB Control No. 

3235–0647] 

Proposed Collection; Comment 

Request 

Upon Written Request, Copies Available 

From: Securities and Exchange 

Commission, Office of FOIA Services, 

100 F Street NE, Washington, DC 

20549–2736 

Extension: 

Rule 204 

Notice is hereby given that pursuant 

to the Paperwork Reduction Act of 1995 

(‘‘PRA’’) (44 U.S.C. 3501 et seq.), the 

Securities and Exchange Commission 

(‘‘Commission’’) is soliciting comments 

on the collection of information 

provided for in Rule 204 (17 CFR 

242.204) 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 204(a) provides that a participant 

of a registered clearing agency must 

deliver securities to a registered clearing 

agency for clearance and settlement on 

a long or short sale in any equity 

security by settlement date, or if a 

participant of a registered clearing 

agency has a fail to deliver position at 

a registered clearing agency in any 

equity security for a long or short sale 

transaction in the equity security, the 

participant shall, by no later than the 

beginning of regular trading hours on 

the applicable close-out date, 

immediately close out its fail to deliver 

positions by borrowing or purchasing 

securities of like kind and quantity. For 

a short sale transaction, the participant 

must close out a fail to deliver by no 

later than the beginning of regular 

trading hours on the settlement day 

following the settlement date. If a 

participant has a fail to deliver that the 

participant can demonstrate on its books 

and records resulted from a long sale, or 

that is attributable to bona-fide market 

making activities, the participant must 

close out the fail to deliver by no later 

than the beginning of regular trading 

hours on the third consecutive 

settlement day following the settlement 

date. Rule 204 is intended to help 

further the Commission’s goal of 

reducing fails to deliver by maintaining 

the reductions in fails to deliver 

achieved by the adoption of temporary 

Rule 204T, as well as other actions 

taken by the Commission. In addition, 

Rule 204 is intended to help further the 

Commission’s goal of addressing 

potentially abusive ‘‘naked’’ short 

selling in all equity securities. 

The information collected under Rule 

204 will continue to be retained and/or 

provided to other entities pursuant to 

the specific rule provisions and will be 

available to the Commission and selfregulatory organization (‘‘SRO’’) 

examiners upon request. The 

information collected will continue to 

aid the Commission and SROs in 

monitoring compliance with these 

requirements. In addition, the 

information collected will aid those 

subject to Rule 204 in complying with 

its requirements. These collections of 

information are mandatory. 

Several provisions under Rule 204 

will impose a ‘‘collection of 

information’’ within the meaning of the 

Paperwork Reduction Act. 

I. Allocation Notification 

Requirement: As of December 31, 2017, 


daltland on DSKBBV9HB2PROD with NOTICES
Federal Register / Vol. 83, No. 178 / Thursday, September 13, 2018 / Notices 46529 

1The Commission’s Division of Economic and 

Risk Analysis (‘‘DERA’’) estimates that there were 

approximately 6,868 average daily fail to deliver 

positions during 2017. Across 3,893 registered 

broker-dealers, the number of securities per 

registered broker-dealer per trading day is 

approximately 1.76 equity securities. 

2Because failure to comply with the close-out 

requirements of Rule 204(a) is a violation of the 

rule, we believe that a broker or dealer would make 

the notification to a participant that it is subject to 

the borrowing requirements of Rule 204(b) at most 

once per day. 

3 DERA estimates that during 2017 approximately 

62.93% of trade volume was long. DERA estimates 

that there were approximately 6,868 average daily 

fail to deliver positions during 2017. Across 132 

broker-dealer participants of the NSCC, the number 

of securities per participant per day is 

approximately 52 equity securities. 62.93% of 52 

equity securities per trading day equals 

approximately 33 securities per day. 

4See supra note 3. 

5See supra note 1. 6See supra note 1. 

there were 3,893 registered brokerdealers. Each of these broker-dealers 

could clear trades through a participant 

of a registered clearing agency and, 

therefore, become subject to the 

notification requirements of Rule 

204(d). If a participant allocates a fail to 

deliver position to a broker or dealer 

pursuant to Rule 204(d), the broker or 

dealer that has been allocated the fail to 

deliver position in an equity security 

must determine whether or not such fail 

to deliver position was closed out in 

accordance with Rule 204(a). If such 

broker or dealer does not comply with 

the provisions of Rule 204(a), such 

broker or dealer must immediately 

notify the participant that it has become 

subject to the requirements of Rule 

204(b). We estimate that a broker or 

dealer could have to make such 

determination and notification with 

respect to approximately 1.76 equity 

securities per day.1 We estimate a total 

of 1,719,772 potential notifications in 

accordance with Rule 204(d) across all 

registered broker-dealers (that could be 

allocated responsibility to close out a 

fail to deliver position) per year (3,893 

registered broker-dealers notifying 

participants once per day 2 on 1.76 

equity securities, multiplied by 251 

trading days in 2017). The total 

estimated annual burden hours per year 

will be approximately 275,164 burden 

hours (1,719,772 multiplied by 0.16 

hours/notification). 

II. Demonstration Requirement for 

Fails to Deliver on Long Sales: As of 

December 5, 2017, there were 132 

participants of NSCC that were 

registered as broker-dealers. If a 

participant of a registered clearing 

agency has a fail to deliver position in 

an equity security at a registered 

clearing agency and determined that 

such fail to deliver position resulted 

from a long sale, we estimate that a 

participant of a registered clearing 

agency will have to make such 

determination with respect to 

approximately 33 securities per day.3

We estimate a total of 1,093,356 

potential demonstrations in accordance 

with Rule 204(a)(1) across all brokerdealer participants per year (132 

participants checking for compliance 

once per day on 33 securities, 

multiplied by 251 trading days in 2017). 

The total approximate estimated annual 

burden hour per year will be 

approximately 174,937 burden hours 

(1,093,356 multiplied by 0.16 hours/ 

documentation). 

III. Pre-Borrow Notification 

Requirement: As of December 5, 2017, 

there were 132 participants of NSCC 

that were registered as broker-dealers. If 

a participant of a registered clearing 

agency has a fail to deliver position in 

an equity security, the participant must 

determine whether or not the fail to 

deliver position was closed out in 

accordance with Rule 204(a). We 

estimate that a participant of a 

registered clearing agency will have to 

make such determination with respect 

to approximately 52 equity securities 

per day.4 We estimate a total of 

1,722,864 potential notifications in 

accordance with Rule 204(c) across all 

participants per year (132 broker-dealer 

participants notifying broker-dealers 

once per day on 52 securities, 

multiplied by 251 trading days in 2017). 

The total estimated annual burden 

hours per year will be approximately 

275,658 burden hours (1,722,864 

multiplied by 0.16 hours/ 

documentation). 

IV. Certification Requirement: As of 

December 31, 2017, there were 3,893 

registered broker-dealers. Each of these 

broker-dealers may clear trades through 

a participant of a registered clearing 

agency. If the broker-dealer determines 

that it has not incurred a fail to deliver 

position on settlement date for a long or 

short sale in an equity security for 

which the participant has a fail to 

deliver position at a registered clearing 

agency or has purchased or borrowed 

securities in accordance with the prefail credit provision of Rule 204(e), we 

estimate that a broker-dealer could have 

to make such determination with 

respect to approximately 1.76 securities 

per day.5 We estimate that registered 

broker-dealers could have to certify to 

the participant that it has not incurred 

a fail to deliver position on settlement 

date for a long or short sale in an equity 

security for which the participant has a 

fail to deliver position at a registered 

clearing agency or, alternatively, that it 

is in compliance with the requirements 

set forth in the pre-fail credit provision 

of Rule 204(e), 1,719,772 times per year 

(3,893 registered broker-dealers 

certifying once per day on 1.76 

securities, multiplied by 251 trading 

days in 2017). The total approximate 

estimated annual burden hour per year 

will be approximately 275,164 burden 

hours (1,719,772 multiplied by 0.16 

hours/certification). 

V. Pre-Fail Credit Demonstration 

Requirement: As of December 31, 2017, 

there were 3,893 registered brokerdealers. If a broker-dealer purchased or 

borrowed securities in accordance with 

the conditions specified in Rule 204(e) 

and determined that it had a net long 

position or net flat position on the 

settlement day for which the brokerdealer is claiming pre-fail credit, we 

estimate that a broker-dealer could have 

to make such determination with 

respect to approximately 1.76 securities 

per day.6 We estimate that registered 

broker-dealers could have to 

demonstrate on its books and records 

that it has a net long position or net flat 

position on the settlement day for which 

the broker-dealer is claiming pre-fail 

credit, 1,719,772 times per year (3,893 

registered broker-dealers checking for 

compliance once per day on 1.76 equity 

securities, multiplied by 251 trading 

days in 2017). The total approximate 

estimated annual burden hours per year 

will be 275,164 burden hours (1,719,772 

multiplied by 0.16 hours/ 

demonstration). 

The total aggregate annual burden for 

the collection of information undertaken 

pursuant to all five provisions is thus 

1,276,087 hours per year (275,164 + 

174,937 + 275,658 + 275,164 + 275,164). 

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 to be 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 in 

writing within 60 days of this 

publication. 

An agency may not conduct or 

sponsor, and a person is not required to 

respond to, a collection of information 


daltland on DSKBBV9HB2PROD with NOTICES
46530 Federal Register / Vol. 83, No. 178 / Thursday, September 13, 2018 / Notices 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3Securities Exchange Act Release No.83682 (July 

20, 2018), 83 FR 35513 (July 26, 2018) (SR–FICC– 

2018–005) (‘‘Notice’’). 

4MBSD maintains two sets of rulebooks: The EPN 

Rules and the MSBD rules (‘‘MBSD Rules’’). Notice, 

83 FR at 35513. The EPN Rules govern MBSD’s EPN 

Service, while the MBSD Rules govern MBSD’s 

clearance and settlement service. Id. The EPN Rules 

are available at http://www.dtcc.com/∼/media/Files/ 

Downloads/legal/rules/ficc_mbsd_epnrules.pdf. 

The MBSD Rules are available at http://

www.dtcc.com/∼/media/Files/Downloads/legal/ 

rules/ficc_mbsd_rules.pdf. 

5Notice, 83 FR at 33513. See also ‘‘EPN 

Overview,’’ available at http://www.dtcc.com/ 

clearing-services/ficc-mbsd/epn. 

6Notice, 83 FR at 33513. 

7 Id. 

8 Id. 

9Notice, 83 FR at 35514. 

10These membership standards are set forth in 

EPN Rules, Article III, Rule 1, Sections 2–3, supra 

note 4. 

11Notice, 83 FR at 35514. 

12 Id. 

13 Id. 

14As part of the proposal, FICC would include 

‘‘Reportable Event’’ as a new defined term in the 

‘‘Definitions and General Provisions’’ section of the 

EPN Rules. ‘‘Reportable Event’’ would be defined as 

‘‘an event that would effect a change in control of 

an EPN User or could have a substantial impact on 

such EPN User’s business and/or financial 

condition, including, but not limited to: (a) Material 

organizational changes including mergers, 

acquisitions, changes in corporate form, name 

changes, changes in the ownership of an EPN User 

or its affiliates, and material changes in 

management; and (b) status as a defendant in 

litigation, which could reasonably impact the EPN 

User’s financial condition or ability to conduct 

business.’’ Id. Distinct from any other notification 

obligations, an EPN User would be required to 

submit to FICC written notice of any Reportable 

Event at least 90 calendar days prior to the effective 

date of such Reportable Event unless the EPN User 

demonstrates that (i) the EPN User could not have 

reasonably done so, and (ii) the EPN User provided 

written notice and oral notice to FICC as soon as 

possible. Id. 

15Such requirements may include, but are not 

limited to, operational testing and related reporting 

requirements that FICC may imposed from time to 

time. Notice, 83 FR at 35514. 

16 Id. 

17 Id. 

18 Id. 

under the PRA unless it displays a 

currently valid OMB control number. 

Please direct your written comments 

to: Pamela Dyson, Director/Chief 

Information Officer, Securities and 

Exchange Commission, c/o Candace 

Kenner, 100 F Street NE, Washington 

DC 20549 or send an email to: PRA_

Mailbox@sec.gov. 

Dated: September 7, 2018. 

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–19882 Filed 9–12–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–84057; File No. SR–FICC– 

2018–005] 

Self-Regulatory Organizations; Fixed 

Income Clearing Corporation; Order 

Granting Approval of Proposed Rule 

Change To Correct Certain References 

and Provide Transparency to Existing 

Processes in the Mortgage-Backed 

Securities Division Electronic Pool 

Notification Rules 

September 7, 2018. 

On July 13, 2018, Fixed Income 

Clearing Corporation (‘‘FICC’’) filed 

with the U.S. Securities and Exchange 

Commission (‘‘Commission’’) proposed 

rule change SR–FICC–2018–005 

pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–4 thereunder.2

The proposed rule change was 

published for comment in the Federal 

Register on July 26, 2018.3 The 

Commission did not receive any 

comment letters on the proposed rule 

change. For the reasons discussed 

below, the Commission approves the 

proposed rule change. 

I. Description of the Proposed Rule 

Change 

The proposed rule change would 

amend FICC’s Mortgage-Backed 

Securities Division (‘‘MSBD’’) electronic 

pool notification (‘‘EPN’’) service (‘‘EPN 

Service’’) rules (‘‘EPN Rules’’).4

A. Background 

FICC states that the EPN Service 

provides an automated manner for 

market participants with an obligation 

to deliver pools of mortgages to transmit 

mortgage pool information efficiently 

and reliably to their counterparties in 

real time.5 Market participants that wish 

to use the EPN Service (i.e., become 

‘‘EPN Users’’) are required to submit an 

application to MBSD.6 The application 

process and the use of the EPN Service 

are governed by the EPN Rules.7

MBSD’s clearing members (‘‘Clearing 

Members’’) are required to be EPN 

Users; however, one can be an EPN User 

and not a Clearing Member.8

B. Proposed Amendments to the EPN 

Rules To Include an EPN User’s 

Ongoing Reporting Obligations 

FICC proposes to amend the EPN 

Rules by adding a ‘‘General Continuance 

Standards’’ section. The proposed 

section would describe two existing 

MBSD practices with respect to 

reporting obligations of EPN Users.9

First, the proposed section would state 

that an EPN User shall promptly inform 

FICC, both orally and in writing, if such 

EPN User no longer complies with any 

of the EPN Rules’ requirements for 

admission to membership.10 This 

notification must occur within two 

business days from the date on which 

the EPN User first learns of its noncompliance.11 Second, the proposed 

section would state that an EPN User 

shall notify FICC of certain 

investigations or proceedings. 

Specifically, an EPN User must notify 

FICC within two business days after 

learning (i) that the EPN User is or will 

become the subject of an investigation 

or a proceeding, and (ii) that said 

investigation or proceeding would cause 

the EPN User to fall out of compliance 

with any of the requirements for 

membership set forth in the EPN 

Rules.12 However, the EPN User would 

not be required to provide such a 

notification to FICC if doing so would 

cause the EPN User to violate an 

applicable law, rule, or regulation.13

C. Proposed Changes To Amend the 

EPN Rules To Define Circumstances 

Under Which FICC May Determine an 

EPN User’s Compliance With EPN Rules 

The proposed ‘‘General Continuance 

Standards’’ section would identify when 

FICC may review an EPN User’s access 

to the EPN Service. The proposed 

‘‘General Continuance Standards’’ 

section also would identify when FICC 

may seek written assurances from EPN 

Users. 

First, the proposal would identify five 

circumstances when FICC would assess 

if an EPN User should retain access to 

the EPN Service: (i) If an EPN User 

experiences a Reportable Event; 14 (ii) if 

an EPN User fails to maintain the 

requirements for admission to 

membership; 15 (iii) if an EPN User 

violates any EPN Rule or other 

agreement with FICC; (iv) if an EPN 

User fails to satisfy any obligation to 

FICC in a timely manner; or (v) if FICC 

otherwise deems it necessary or 

advisable, in order to protect FICC, its 

other EPN Users, or its creditors or 

investors, to safeguard securities and 

funds in the custody or control of FICC, 

or to promote the prompt and accurate 

processing, clearance or settlement of 

securities transactions.16

Second, the proposed ‘‘General 

Continuance Standards’’ section would 

state that FICC may require an EPN User 

to provide written assurances to FICC.17

The proposal would authorize FICC to 

require written assurances from an EPN 

User if FICC has reason to believe that 

an EPN User may fail to comply with 

any of the EPN Rules.18 Specifically, 

FICC could require an EPN User to 


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