Federal Register / Vol. 89, No. 245 / Friday, December 20, 2024 / Notices 104249 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 101520 

(November 6, 2024), 89 FR 89677 (November 13, 

2024) (Notice of Filing and Immediate Effectiveness 

of File No. SR–NASDAQ–2024–064). 

4See General 2, Section 22(a). Sponsored Access 

shall mean an arrangement whereby a member 

permits its customers to enter orders into the 

System that bypass the member’s trading system 

and are routed directly to the Exchange, including 

routing through a service bureau or other third 

party technology provider. 

5For purposes of Equity 4, Rule 4757, the term 

‘‘Common Ownership’’ shall mean participants 

under 75% common ownership or control. 

6The Exchange will require firms requesting to 

use Affiliate Level AIQ to complete an affidavit 

stating: (i) it is currently a Member of the Exchange 

that submits orders directly to the System, and (ii) 

it also submits orders to the System through a 

Sponsored Access arrangement. 

7A ‘‘wash sale’’ is generally defined as a trade 

involving no change in beneficial ownership that is 

intended to produce the false appearance of trading 

and is strictly prohibited under both the federal 

securities laws and FINRA rules. See, e.g., 15 U.S.C. 

78i(a)(1); FINRA Rule 6140(b) (‘‘Other Trading 

Practices’’). 

8Self-trades are ‘‘transactions in a security 

resulting from the unintentional interaction of 

orders originating from the same firm that involve 

no change in beneficial ownership of the security.’’ 

FINRA requires members to have policies and 

procedures in place that are reasonably designed to 

review trading activity for, and prevent, a pattern 

or practice of self-trades resulting from orders 

originating from a single algorithm or trading desk, 

or related algorithms or trading desks. See FINRA 

Rule 5210, Supplementary Material .02. 

This Notice will be published in the 

Federal Register. 

Erica A. Barker, 

Secretary. 

[FR Doc. 2024–30345 Filed 12–19–24; 8:45 am] 

BILLING CODE 7710–FW–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–101930; File No. SR–BX– 

2024–057] 

Self-Regulatory Organizations; Nasdaq 

BX, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Amend the 

Exchange’s Anti-Internalization 

Functionality in Equity 4, Rule 4757 

December 16, 2024. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that on December 

4, 2024, Nasdaq BX, Inc. (‘‘BX’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission (‘‘SEC’’ or 

‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III, below, which Items have been 

prepared by the Exchange. 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 

The Exchange proposes to amend the 

Exchange’s anti-internalization 

functionality in Equity 4, Rule 4757. 

The text of the proposed rule change 

is available on the Exchange’s website at 

https://listingcenter.nasdaq.com/ 

rulebook/nasdaq/rules, at the principal 

office of the Exchange, and at the 

Commission’s Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

forth in sections A, B, and C below, of 

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend 

Equity 4, Rule 4757(a)(A)(3) to offer 

increased functionality as it relates to 

anti-internalization. The Exchange’s 

proposal is identical to the changes 

adopted in SR–NASDAQ–2024–064 

with the exception of technical 

differences in the numbering 

convention.3 Specifically, the Exchange 

proposes to (i) allow participants that 

directly submit orders to the System as 

Members on the Exchange and submit 

orders to the System through Sponsored 

Access 4 as a Sponsored Participant, to 

direct that quotes/orders entered into 

the System directly as a Member not 

execute against quotes/orders submitted 

as a Sponsored Participant; (ii) specify 

when anti-internalization will activate; 

(iii) introduce an anti-internalization 

strategy that uses the strategy of the 

removing order; and (v) make other 

clarifying changes. 

Affiliate Anti-Internalization 

Currently, Equity 4, Rule 

4757(a)(A)(3) provides that market 

participants may direct that quotes/ 

orders entered into the System not 

execute against either quotes/orders 

entered under the same MPID (‘‘MPID 

Level AIQ’’) or quotes/orders entered 

across MPIDs under Common 

Ownership (‘‘Organization Level 

AIQ’’).5 In addition, market participants 

using the OUCH order entry protocol 

may assign to orders entered through a 

specific order entry port a unique group 

identification modifier that will prevent 

quotes/orders with such modifier from 

executing against each other. Antiinternalization or self-match prevention 

functionality assists participants in 

reducing trading costs from unwanted 

executions potentially resulting from 

the interaction of executable buy and 

sell trading interest from the same firm. 

The Exchange proposes to enhance its 

current self-match prevention 

functionality to allow participants that 

demonstrate (i) membership on the 

Exchange through which they directly 

submit orders to the System and (ii) 

participation as a Sponsored Participant 

whereby they submit orders to the 

System through Sponsored Access, to 

direct that quotes/orders entered into 

the System directly as a Member not 

execute against quotes/orders submitted 

as a Sponsored Participant (‘‘Affiliate 

Level AIQ’’).6 The proposed 

enhancement would be in addition to 

the other levels of self-match prevention 

offered today. Under the proposed rule 

change, the anti-internalization 

functionality would continue to be an 

optional feature. If a firm chooses to 

take advantage of self-match prevention, 

the firm would need to opt-in to the 

self-match prevention functionality, as 

is the case today. 

The purpose of this proposed change 

is to extend self-match prevention 

functionality to prevent transactions 

between a firm’s orders submitted 

directly to the System and through 

Sponsored Access. There are situations 

where an individual firm would choose 

to submit orders to the Exchange 

through different mechanisms. For 

instance, a firm may employ different 

trading strategies across different 

trading desks and choose to send orders 

for one strategy to the Exchange through 

a direct connection while the other 

strategy is sent through Sponsored 

Access. The proposed functionality 

would serve as an additional tool that 

participants may enable in order to 

assist with compliance with the various 

securities laws relating to potentially 

manipulative trading activity such as 

wash sales 7 and self-trades.8

Additionally, the proposed functionality 

would provide firms an additional 

solution to manage order flow by 

preventing undesirable executions 

where the firm submits orders in 


ddrumheller on DSK120RN23PROD with NOTICES1
104250 Federal Register / Vol. 89, No. 245 / Friday, December 20, 2024 / Notices 

9For example, assume Firm 1 accesses the 

Exchange directly and as a Sponsored Participant 

via Firm 2. Assume Firm 1 sends an order as a 

Sponsored Participant through Firm 2 with Affiliate 

Level AIQ enabled. Assume Firm 2 then sends an 

order unrelated to Firm 1 with Organization Level 

AIQ. If the current behavior prevailed, antiinternalization would activate and the orders would 

not execute, resulting in an undesirable outcome. 10 15 U.S.C. 78f(b). 

multiple formats (i.e., direct connection 

or Sponsored Access). As is the case 

with the existing risk tools, participants, 

and not the Exchange, have full 

responsibility for ensuring that their 

orders comply with applicable 

securities rules, laws, and regulations. 

Furthermore, as is the case with the 

existing risk settings, the Exchange does 

not believe that the use of the proposed 

self-match prevention functionality can 

replace participant-managed risk 

management solutions. 

Anti-Internalization Activation 

The Exchange also proposes to 

provide that, unless participants 

designate otherwise, for antiinternalization to activate across orders, 

the orders must reflect the same antiinternalization level. For example, if an 

order has designated anti-internalization 

at an MPID level (i.e., quotes/orders 

entered into the System shall not 

execute against quotes/orders entered 

under the same MPID), antiinternalization will only activate against 

another order designated with antiinternalization at an MPID level. 

This is a departure from how antiinternalization activates today. 

Currently, anti-internalization activates 

across orders with different antiinternalization levels. For example, a 

resting order with MPID Level AIQ can 

have anti-internalization activated 

against it if an incoming order with 

Organization Level AIQ has the same 

Organization ID as the resting order. 

With the introduction of Affiliate Level 

AIQ, the anti-internalization levels must 

match across both orders for antiinternalization to be activated, in order 

to prevent erroneous activation of antiinternalization.9 However, the Exchange 

proposes to preserve current 

functionality by providing participants 

with the option to elect to have antiinternalization activated against any 

anti-internalization level. 

‘‘Use Remover’’ Strategy 

The Exchange currently provides 

three versions of self-match prevention 

functionality to allow participants to 

choose how orders are handled in the 

event of a self-match situation: (1) 

decrement, (2) cancel oldest, and (3) 

cancel newest. Under the first version 

(‘‘decrement’’), if the self-match orders 

have the same share size, both orders 

will cancel back to the customer. If the 

orders are not equivalent in size, the 

smaller order will cancel back to the 

originating customer and the larger 

order will decrement by the size of the 

smaller order. The remaining shares of 

the larger order will remain on the book. 

Under the second version (‘‘cancel 

oldest’’), the full size of the order 

residing on the book will cancel back to 

the customer if the incoming order 

would execute against it. The incoming 

order will remain intact with no 

changes. Under the third version 

(‘‘cancel newest’’), the full size of the 

order coming into the book will cancel 

back to the customer. The resting order 

will remain intact with no changes. 

The Exchange proposes to add a new 

strategy (‘‘use remover’’), which would 

allow for a resting order to use the 

strategy of the removing order. If the use 

remover strategy is on an order, it will 

only have anti-internalization activated 

against it when it is the resting order 

and will never trigger antiinternalization against another order 

when it is the incoming order. The 

Exchange proposes to introduce the 

‘‘use remover’’ strategy in order to 

maintain existing anti-internalization 

functionality that would otherwise 

become obsolete with the introduction 

of the default requirement for antiinternalization activation (i.e., the 

orders must reflect the same antiinternalization level). As described 

above, currently, anti-internalization 

activates across orders with different 

anti-internalization levels. Currently, 

resting orders that have antiinternalization disabled are still subject 

to anti-internalization functionality, 

based on the anti-internalization 

selection of the incoming orders. For 

example, currently, if Firm 1 sends an 

order with anti-internalization disabled 

and then Firm 2 sends an order with 

Organization Level AIQ with a 

decrement strategy, anti-internalization 

would activate between the two orders 

based on the incoming order’s strategy 

because of the Organization Level AIQ. 

Assuming the Firm does not designate 

that anti-internalization activate across 

quotes/orders, the aforementioned 

example would no longer occur because 

Affiliate Level AIQ necessitates 

matching anti-internalization levels. 

The Exchange wishes to maintain such 

functionality as an option for 

participants and introduction of the use 

remover strategy would allow 

participants to choose to have a resting 

order use the anti-internalization 

strategy of the removing order. 

Taken together, the Exchange believes 

that the proposed anti-internalization 

enhancements would provide 

participants with more tailored selftrade functionality that allows them to 

manage their trading as appropriate 

based on the participant’s business 

needs. 

Clarifying Changes 

Lastly, the Exchange proposes to 

make several clarifying changes to 

Equity 4, Rule 4757(a)(A)(3) to promote 

clarity. 

First, the Exchange proposes to codify 

which strategy prevails when antiinternalization strategies differ between 

two orders. Specifically, the Exchange 

proposes to provide that, when antiinternalization strategies differ between 

two orders, the strategy of the order 

removing liquidity will apply and the 

strategy of the resting order will be 

ignored. This is consistent with current 

Exchange and industry practice. 

In addition, the Exchange proposes to 

modify the text introducing the various 

anti-internalization strategies to state 

that, ‘‘In each anti-internalization case, 

as described in this paragraph (3), a 

market participant may elect from the 

following strategies’’, to make it clear 

that any strategy may be selected for 

each anti-internalization level. 

Relatedly, the Exchange proposes to 

delete language stating that, ‘‘The 

foregoing options may be applied to all 

orders entered under the same MPID, 

across MPIDs under Common 

Ownership, or, in the case of market 

participants using the OUCH order entry 

protocol, may be applied to all orders 

entered through a specific order entry 

port.’’ The Exchange believes that such 

language is redundant, as the modified 

introductory language makes it clear 

that the anti-internalization strategies 

may be applied to each antiinternalization level. Finally, the 

Exchange also proposes to add the 

names of the existing antiinternalization strategies (i.e., 

Decrement, Cancel Oldest, and Cancel 

Newest) before the description of such 

strategies for clarity. 

Implementation 

The Exchange intends to introduce 

this new functionality by the first 

quarter of 2025. The Exchange will issue 

an Equities Trader Alert to provide 

notification of the change and relevant 

date prior to introducing the new 

functionality. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act,10 in general, and furthers the 


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Federal Register / Vol. 89, No. 245 / Friday, December 20, 2024 / Notices 104251 

11 15 U.S.C. 78f(b)(5). 

12Supra note 7. 

13Supra note 8. 

14The Exchange reminds participants that while 

they may utilize anti-internalization to help prevent 

potential transactions such as wash sales or selftrades, participants, not the Exchange, are 

ultimately responsible for ensuring that their orders 

comply with applicable rules, laws, and 

regulations. 15 15 U.S.C. 78f(b)(5). 

16 15 U.S.C. 78s(b)(3)(A)(iii). 

17 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6) requires a self-regulatory organization to give 

the Commission written notice of its intent to file 

the proposed rule change at least five business days 

prior to the date of filing of the proposed rule 

change, or such shorter time as designated by the 

Commission. The Exchange has satisfied this 

requirement. 

objectives of Section 6(b)(5) of the Act,11

in particular, in that it is designed to 

promote just and equitable principles of 

trade, to remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system, and, in general to protect 

investors and the public interest. 

The Exchange believes that the 

proposed Affiliate Level AIQ 

functionality promotes just and 

equitable principles of trade by allowing 

individual firms to better manage order 

flow and prevent undesirable trading 

activity such as wash sales 12 or selftrades 13 that may occur as a result of the 

velocity of trading in today’s high-speed 

marketplace. The proposed Affiliate 

Level AIQ functionality does not 

introduce novel functionality, as the 

proposed amendment extends the 

current anti-internalization 

functionality to another trading 

relationship. For instance, a participant 

may operate trading desk 1 that accesses 

the Exchange via the Member’s direct 

connection, as well as trading desk 2 

that accesses the Exchange as a 

Sponsored Participant. While these 

desks may operate different trading 

strategies, a participant may desire to 

prevent these desks from trading versus 

each other in the marketplace because 

the orders are originating from the same 

entity. Here, participants may desire 

anti-internalization functionality on an 

Affiliate Level AIQ that will help them 

achieve compliance 14 with regulatory 

rules regarding wash sales and selftrades in a very similar manner to the 

way that the current anti-internalization 

functionality applies to existing antiinternalization levels. The proposed 

Affiliate Level AIQ functionality will 

also assist participants in reducing 

trading costs from unwanted executions 

potentially resulting from the 

interaction of executable buy and sell 

trading interest from the same firm. 

The Exchange believes that the other 

proposed changes, including modifying 

the default procedure for activating antiinternalization while preserving the 

current functionality as an option for 

participants, adding the use remover 

strategy, and making clarifying changes, 

also promote just and equitable 

principles of trade by providing 

participants with more tailored selftrade functionality that allows them to 

manage their trading as appropriate 

based on the participant’s business 

needs and providing clarity and 

transparency to the rules. 

The Exchange also believes that the 

proposed rule change is fair and 

equitable and is not designed to permit 

unfair discrimination, in accordance 

with Section 6(b)(5) of the Act,15 as use 

of the proposed Affiliate Level AIQ 

functionality and related features of the 

proposal are optional, and use is not a 

prerequisite for trading on the 

Exchange. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Act. The 

proposed rule change is designed to 

enhance self-match prevention 

functionality provided to the Exchange’s 

participants and will benefit 

participants that wish to protect their 

quotes and orders entered into the 

System directly as a Member against 

trading with quotes/orders submitted as 

a Sponsored Participant. The new 

functionality is also completely 

voluntary, and members that wish to 

use the current functionality (or opt out 

altogether) can also continue to do so. 

The Exchange does not believe that 

providing more flexibility to 

participants will have any significant 

impact on competition. In fact, the 

Exchange believes that the proposed 

rule change is evidence of the 

competitive environment where 

exchanges must continually improve 

their offerings to maintain competitive 

standing. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were either 

solicited or received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing proposed rule 

change does not: (i) significantly affect 

the protection of investors or the public 

interest; (ii) impose any significant 

burden on competition; and (iii) become 

operative for 30 days from the date on 

which it was filed, or such shorter time 

as the Commission may designate, it has 

become effective pursuant to Section 

19(b)(3)(A)(iii) of the Act 16 and 

subparagraph (f)(6) of Rule 19b–4 

thereunder.17

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. If the 

Commission takes such action, the 

Commission shall institute proceedings 

to determine whether the proposed rule 

should be approved or disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (https://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include file number SR– 

BX–2024–057 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to file 

number SR–BX–2024–057. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (https://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 


ddrumheller on DSK120RN23PROD with NOTICES1
104252 Federal Register / Vol. 89, No. 245 / Friday, December 20, 2024 / Notices 

18 17 CFR 200.30–3(a)(12). 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549, on official 

business days between the hours of 10 

a.m. and 3 p.m. Copies of the filing also 

will be available for inspection and 

copying at the principal office of the 

Exchange. Do not include personal 

identifiable information in submissions; 

you should submit only information 

that you wish to make available 

publicly. We may redact in part or 

withhold entirely from publication 

submitted material that is obscene or 

subject to copyright protection. All 

submissions should refer to file number 

SR–BX–2024–057 and should be 

submitted on or before January 10, 2025. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.18

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2024–30354 Filed 12–19–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[OMB Control No. 3235–0785] 

Submission for OMB Review; 

Comment Request; Extension: Rule 

18a–10 

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 

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

Securities and Exchange Commission 

(‘‘Commission’’) has submitted to the 

Office of Management and Budget 

(‘‘OMB’’) a request for approval of 

extension of the previously approved 

collection of information provided for in 

Rule 18a–10 (17 CFR 240.18a–10), 

under the Securities Exchange Act of 

1934 (15 U.S.C. 78a et seq.). 

Exchange Act Rule 18a–10 provides 

an alternative compliance mechanism 

pursuant to which stand-alone securitybased swap dealers (‘‘SBSDs’’) 

registered as a swap dealer that 

predominantly engages in a swaps 

business, and that meet certain 

conditions set forth in the rule, may 

elect to comply with the capital, margin, 

segregation, recordkeeping, and 

reporting requirements of the 

Commodity Exchange Act (‘‘CEA’’) and 

the U.S. Commodity Futures Trading 

Commission’s (‘‘CFTC’’) rules in lieu of 

complying with SEC Rules 18a–1, and 

18a–3 through 18a–9. Rule 18a–10 

requires the firm to provide a written 

disclosure to its counterparties after it 

begins operating pursuant to the rule. 

Furthermore, Rule 18a–10 requires the 

firm to immediately notify the 

Commission and the CFTC in writing if 

it fails to meet a condition in the rule. 

There are currently two stand-alone 

SBSDs operating pursuant to the 

alternative compliance mechanism. The 

Commission estimates that these two 

stand-alone SBSDs will each spend 5 

hours per year updating the disclosure 

language required under paragraph 

(b)(2) of Rule 18a–10, and that one of 

these stand-alone SBSDs will file the 

notice with the Commission required 

under paragraph (b)(3) of Rule 18a–10, 

which will impose a burden of 5 

minutes per year. Consequnenty, the 

Commission estimates that the total 

hour burden under Rule 18a–9 is 

approximately 11 hours per year. Since 

the last approval of this information 

collection, the estimated total burden 

hours per year has decreased due to a 

decrease in the estimated number of 

respondents subject to the requirements 

of the Rule and as a result of certain 

initial burdens no longer applying. 

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. 

Public Comment Instructions: The 30- 

day public comment period for this 

information collection request closes at 

the end of the day on January 21, 2025. 

The public may view the full 

information request and submit 

comments at https://www.reginfo.gov/ 

public/do/PRAViewICR?ref_

nbr=202409-3235-002 or email 

comments to MBX.OMB.OIRA.SEC_

desk_officer@omb.eop.gov. 

Dated: December 16, 2024. 

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2024–30366 Filed 12–19–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[SEC File No. 270–441, OMB Control No. 

3235–0497] 

Submission for OMB Review; 

Comment Request; Extension: Rule 

15c3–4 

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’’) has submitted to the 

Office of Management and Budget 

(‘‘OMB’’) a request for approval of 

extension of the previously approved 

collection of information provided for in 

Rule 15c3–4 (17 CFR 240.15c3–4) (the 

‘‘Rule’’) under the Securities Exchange 

Act of 1934 (15 U.S.C. 78a et seq.). 

Rule 15c3–4 requires certain brokerdealers that are registered with the 

Commission as OTC derivatives dealers, 

or who compute their net capital 

charges under Appendix E to Rule 

15c3–1 (17 CFR 240.15c3–1) (‘‘ANC 

firms’’), to establish, document, and 

maintain a system of internal risk 

management controls. In addition, 

security-based swap dealers (‘‘SBSDs’’) 

must comply with Rule 15c3–4 as if 

they were OTC derivatives dealers. The 

Rule sets forth the basic elements for an 

OTC derivatives dealer, an ANC firm, or 

an SBSD to consider and include when 

establishing, documenting, and 

reviewing its internal risk management 

control system, which is designed to, 

among other things, ensure the integrity 

of an OTC derivatives dealer’s, an ANC 

firm’s or an SBSD’s risk measurement, 

monitoring, and management process, to 

clarify accountability at the appropriate 

organizational level, and to define the 

permitted scope of the firm’s activities 

and level of risk. The Rule also requires 

that management of an OTC derivatives 

dealer, an ANC firm, or an SBSD must 

periodically review, in accordance with 

written procedures, the firm’s business 

activities for consistency with its risk 

management guidelines. 

The staff estimates that the average 

amount of time a new firm subject to 

Rule 15c3–4 will spend establishing and 

documenting its risk management 

control system is approximately 2,000 

hours (666.666667 hours per year when 

annualized over three years) and that, 

on average, an existing firm subject to 

Rule 15c3–4 will spend approximately 

200 hours each year to maintain (e.g., 

reviewing and updating) its risk 

management control system. Currently, 

seventeen firms are required to comply 

with Rule 15c3–4. The staff estimates 

that approximately six new additional 

firms may become subject to the 

requirements of Rule 15c3–4 within the 

next three years. Thus, the estimated 

annual burden would be 3,400 hours for 

the seventeen existing firms currently 

required to comply with Rule 15c3–4 to 

maintain their risk management control 


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