77208 Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Notices 

was aggregated in a way that makes its results 

impossible to generalize to the typical Tier 2 ETP. 

76For 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. 

77See Participants’ Letter at 2–4. 

78 15 U.S.C. 78k–1. 

79 17 CFR 242.608(b)(2). 

1The 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). 

2Rule 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). 

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 

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 

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 


ddrumheller on DSK120RN23PROD with NOTICES1
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Notices 77209 

3See rule 154(c). 

4The 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. 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4 15 U.S.C. 78s(b)(1). 

5 17 CFR 240.19b–4. 

6See IEX Rule 1.160(s). 

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 

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. 

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 


ddrumheller on DSK120RN23PROD with NOTICES1