2790 Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 

1 15 U.S.C. 78o(c)(3)(A). The amendments to 

section 15(c)(3) of the Exchange Act granting this 

rulemaking authority were adopted in section 7(d) 

of the Securities Investor Protection Act of 1970 

(‘‘SIPA’’). Public Law 91–598, 7(d), Dec. 30, 1970, 

84 Stat. 1563. Rule 15c3–3 was promulgated in the 

aftermath of the securities industry ‘‘paper work 

crisis’’ of 1967–1970. See Commission, Study of 

Unsafe and Unsound Practices of Brokers and 

Dealers, H.R. Doc. No. 231, 92d Cong., 1st Sess. 6 

(1971) (‘‘During the 1967–70 period of severe 

operational and financial problems, many firms, 

primarily because of inadequate and inefficient 

recordkeeping and segregation systems and 

SECURITIES AND EXCHANGE 

COMMISSION 

17 CFR Parts 240 and 249 

[Release No. 34–102022; File No. S7–11– 

23] 

RIN 3235–AN28 

Daily Computation of Customer and 

Broker-Dealer Reserve Requirements 

Under the Broker-Dealer Customer 

Protection Rule 

AGENCY: Securities and Exchange 

Commission. 

ACTION: Final rule. 

SUMMARY: The Securities and Exchange 

Commission (‘‘Commission’’) is 

adopting amendments to the brokerdealer customer protection rule to 

require certain broker-dealers to perform 

their reserve computations for accounts 

of customers and proprietary accounts 

of broker-dealers and make any required 

deposits into their reserve bank 

accounts daily rather than weekly. The 

Commission also is adopting 

amendments to the broker-dealer net 

capital rule and customer protection 

rule to permit certain broker-dealers that 

perform a daily reserve computation for 

accounts of customers to reduce 

aggregate debit items (i.e., customerrelated receivables) by 2% rather than 

3% as part of the computation. Finally, 

the Commission is adopting technical 

amendments to the Financial and 

Operational Combined Uniform Single 

Report (‘‘FOCUS Report’’) to conform it 

to the amendments with respect to the 

lowering of the debit reduction from 3% 

to 2%. 

DATES: 

Effective date: March 14, 2025. 

Compliance date: The compliance 

date is discussed in section III. of this 

release. 

FOR FURTHER INFORMATION CONTACT: 

Michael A. Macchiaroli, Associate 

Director; Thomas K. McGowan, 

Associate Director; Randall W. Roy, 

Deputy Associate Director; Raymond 

Lombardo, Assistant Director; Sheila 

Dombal Swartz, Senior Special Counsel; 

or Abraham Jacob, Special Counsel, at 

(202) 551–5500, Office of Broker-Dealer 

Finances, Division of Trading and 

Markets; Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–7010. 

SUPPLEMENTARY INFORMATION: The 

Commission is amending: 

Commission 

reference 

CFR citation 

(17 CFR) 

Rule 15c3–1 .............. 17 CFR 240.15c3–1. 

Commission 

reference 

CFR citation 

(17 CFR) 

Rule 15c3–3 .............. 17 CFR 240.15c3–3. 

Form X–17A–5 Part II 17 CFR 249.617. 

Table of Contents 

I. Introduction 

A. The Need For Daily Reserve 

Computations 

B. Overview of the Final Amendments 

C. Overview of Rule 15c3–3 and BrokerDealer Liquidations 

1. Overview of Rule 15c3–3 

2. Overview of Broker-Dealer Liquidations 

and SIPA 

II. Discussion of Comments and Final 

Amendments 

A. Requirement To Perform a Daily 

Computation 

1. Proposal 

2. Comments Received and Final 

Amendments 

B. Compliance With Daily Reserve 

Computation After Exceeding $500 

Million Threshold 

1. Proposal 

2. Comments Received and Final 

Amendments 

C. Reducing the Aggregate Debit Reduction 

From 3% to 2% 

1. Amendments to Rules 15c3–1 and 15c3– 

3 

2. Conforming Amendments to the FOCUS 

Report 

D. Voluntary Customer and PAB Reserve 

Computations 

E. Other Comments 

1. Sweep Programs and Other ‘‘Cash in 

Motion’’ or ‘‘Transitory’’ Credits’’ 

2. Requests for Interpretations and 

Clarifications 

F. Reserve Account Requirements for 

Security-Based Swaps 

III. Compliance Date 

IV. Economic Analysis 

A. Introduction 

B. Baseline 

1. Regulatory Baseline 

2. Affected Broker-Dealers 

3. Debit Reduction in the Customer Reserve 

Computation for Certain Broker-Dealers 

C. Economic Effects of the Final 

Amendments 

1. Benefits 

2. Costs 

3. Other Compliance Costs 

D. Effects on Efficiency, Competition, and 

Capital Formation 

E. Reasonable Alternatives 

1. Over-Funding of the Customer and PAB 

Reserve Bank Accounts 

2. A Threshold Based on a Different Metric 

3. Daily Computation Requirement for All 

Carrying Broker-Dealers 

4. A Higher or Lower Threshold for Daily 

Computation 

5. Calculation Based on the Maximum 

Value Over the Past Year 

6. Daily Computation if an Average 

Required Deposit Exceeds a Threshold 

7. Daily Computation Requirement Based 

on Average Total Credits per Number of 

Customer and PAB Accounts 

8. Daily Computation Based on Average 

Total Credits From the Most Recent 

Calendar Year 

9. Reduction of the Aggregate Debit Items 

Charge From 3% to 1% 

10. Exemption for Cash in Motion 

V. Paperwork Reduction Act 

A. Summary of Collections of Information 

Under the Final Amendments 

B. Use of the Information 

C. Respondents 

1. Recordkeeping Requirements 

2. Notification Requirement To Revert to 

Weekly Computations 

3. Notification Requirement To Voluntarily 

Perform Daily Customer Reserve 

Computation With 2% Debit Reduction 

D. Total Annual Burden Estimate 

1. Recordkeeping Requirements 

2. Notification Requirement To Revert to 

Weekly Computations 

3. Notification Requirement To Voluntarily 

Perform Daily Customer Reserve 

Computation With 2% Debit Reduction 

4. Summary of the Burden Revisions 

E. Collections of Information Are 

Mandatory 

F. Confidentiality of Response to 

Collections of Information 

G. Retention Period for Recordkeeping 

Requirements 

VI. Regulatory Flexibiliy Act Certification 

VII. Other Matters 

Statutory Authority 

I. Introduction 

A. The Need For Daily Reserve 

Computations 

Section 15(c)(3)(A) of the Securities 

Exchange Act of 1934 (‘‘Exchange Act’’) 

provides, in pertinent part, that no 

broker-dealer shall make use of the 

mails or any means or instrumentality of 

interstate commerce to effect any 

transaction in, or to induce or attempt 

to induce the purchase or sale of, any 

security (with exceptions for certain 

securities) in contravention of such 

rules and regulations as the Commission 

shall prescribe as necessary or 

appropriate in the public interest or for 

the protection of investors to provide 

safeguards with respect to the financial 

responsibility and related practices of 

broker-dealers including, but not 

limited to, the acceptance of custody 

and use of customers’ securities and the 

carrying and use of customers’ deposits 

or credit balances.1 The statute further 


ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 2791 

procedures, and the infrequent counting of 

securities in their possession, mishandled and 

misused customers’ funds and securities. . . . 

Firms used customers’ free credit and other credit 

balances in their daily activities.’’) Id. at 43. 

2 15 U.S.C. 78o(c)(3)(A). 

3See Broker-Dealers; Maintenance of Certain 

Basic Reserves, Exchange Act Release No. 9856 

(Nov. 17, 1972) [37 FR 25224 (Nov. 29, 1972)] 

(‘‘Rule 15c3–3 Adopting Release’’). 

4See section I.C.1. of this release (discussing Rule 

15c3–3). 

5See Financial Responsibility Rules for BrokerDealers; Final Rule, Exchange Act Release No. 

70072 (July 30, 2013) [78 FR 51824, 51869 (Aug. 21, 

2013)] (‘‘Financial Responsibility Rules for BrokerDealers’’); See also section I.C.2. of this release 

(discussing broker-dealer liquidations and SIPA). 

6The net amount of cash owed to customers is 

generally the amount the total cash owed to 

customers (e.g., cash balances in securities 

accounts) (referred to as ‘‘credits’’) exceeds the total 

amount of cash customers owe the carrying brokerdealer (e.g., margin loans to customers) (referred to 

as ‘‘debits’’). 17 CFR 240.15c3–3a (‘‘Rule 15c3–3a’’). 

7Preexisting Rule 15c3–3 also permits carrying 

broker-dealers to perform the customer reserve 

computation more frequently than weekly (e.g., 

daily) and, in certain limited circumstances, 

monthly. See paragraph (e)(3) of Rule 15c3–3. 

8See Rule 15c3–3 Adopting Release, 37 FR at 

25226. While Rule 15c3–3 was adopted in 1972, the 

effective date for the rule was January 15, 1973. Id. 

9The term PAB account means a proprietary 

securities account of a broker-dealer (which 

includes a foreign broker-dealer, or a foreign bank 

acting as a broker-dealer) other than a deliveryversus-payment account or a receipt-versuspayment account. The term does not include an 

account that has been subordinated to the claims of 

creditors of the carrying broker-dealer. See 

paragraph (a)(16) of Rule 15c3–3. For example, a 

broker-dealer that is not a carrying broker-dealer 

(e.g., a broker-dealer that introduces its customer 

accounts to a carrying broker-dealer (‘‘introducing 

broker-dealer’’)) may hold its proprietary securities 

and cash at a carrying broker-dealer. In this case, 

the securities account of the introducing brokerdealer held at the carrying broker-dealer would be 

a PAB account and the introducing broker-dealer 

would be a PAB account holder of the carrying 

broker-dealer. See Daily Computation of Customer 

and Broker-Dealer Reserve Requirements under the 

Broker-Dealer Customer Protection Rule, Exchange 

Act Release No. 97877 (July 12, 2023) [88 FR 45836, 

45837 (July 18, 2023)] (‘‘Proposing Release’’). 

10See section I.C.1. of this release (discussing 

Rule 15c3–3). 

11Broker-dealers file monthly or quarterly 

financial and operational information using the 

FOCUS Report. Based on FOCUS Report data as of 

December 31, 2023, carrying broker-dealers, in 

aggregate, reported approximately $1.1 trillion in 

total customer and PAB credits. See section IV.B.2. 

of this release (discussing affected broker-dealers in 

the baseline). Of that amount, approximately $965 

billion constituted total credits for customer 

accounts (the remaining balance was total credits 

for PAB accounts). Further, carrying broker-dealers 

reported approximately $319 billion in customer 

free credit balances. By comparison, free credit 

balances at year-end 1970 totaled $2 billion for all 

broker-dealers that were NYSE members and 

carried public customer accounts. See Study of 

Unsafe and Unsound Practices of Brokers and 

Dealers at 51. Free credit balances are generally 

liabilities of a broker-dealer to customers which are 

subject to immediate cash payment to customers on 

demand, whether resulting from sales of securities, 

dividends, interest, deposits or otherwise, subject to 

certain exclusions. See paragraph (a)(8) of Rule 

15c3–3. 

12See Proposing Release, 88 FR at 45842. 

13See id. 

14See id. 

15This data is based on the 25 largest additional 

deposit requirements reported in the monthly 

FOCUS Reports filed during the 2023 calendar year. 

16This data is based on the 25 largest additional 

deposit requirements reported in the monthly 

FOCUS Reports filed during the 2023 calendar year. 

The largest additional deposit requirements were 

made by carrying broker-dealers that also had the 

25 largest credit balances based on 2023 FOCUS 

Report data. A total of nine carrying broker-dealers 

made the 25 largest additional deposit requirements 

into the customer reserve bank accounts. Six of the 

25 largest additional deposits into the customer 

reserve bank accounts were made by three carrying 

broker-dealers that voluntarily perform a daily 

reserve computation. The mean of these additional 

deposit requirements was $4.2 billion, and the 

median was $3.6 billion. With respect to the largest 

deposits into the PAB reserve bank accounts, a total 

of six carrying broker-dealers made the 25 largest 

Continued 

provides, in pertinent part, that the 

rules and regulations shall require the 

maintenance of reserves with respect to 

customers’ deposits or credit balances.2

Pursuant to this statutory directive, 

the Commission adopted the customer 

protection rule (‘‘Rule 15c3–3’’) in 

1972.3 This rule requires broker-dealers 

that hold customer cash and securities 

(‘‘carrying broker-dealers’’) to treat these 

assets in a manner that facilitates their 

prompt return to the customers if the 

broker-dealer fails financially.4 The goal 

of the rule is to place a carrying brokerdealer in a position where it is able to 

wind down in an orderly selfliquidation without the need of 

financial assistance provided by the 

Securities Investor Protection 

Corporation (‘‘SIPC’’) through a formal 

proceeding under SIPA.5

In order to facilitate an orderly selfliquidation, Rule 15c3–3 requires a 

carrying broker-dealer to compute the 

net amount of cash owed to customers 

under a formula in the rule (‘‘customer 

reserve computation’’).6 Generally, 

carrying broker-dealers must perform 

their customer reserve computation and 

make any required deposits in a special 

reserve account at a bank (‘‘customer 

reserve bank account’’) weekly.7 This 

weekly cadence has been in effect since 

1973.8 The rule also addresses how a 

carrying broker-dealer must treat 

proprietary securities and cash it holds 

for other broker-dealers, known as 

proprietary accounts of broker-dealers 

(‘‘PAB accounts’’).9 While brokerdealers are not treated as customers 

under preexisting Rule 15c3–3, the rule 

requires a carrying broker-dealer to 

perform a PAB reserve computation and 

make any required deposits into its PAB 

reserve bank account weekly, similar to 

the requirements for the customer 

reserve computation and customer 

reserve bank account.10

Since the adoption of Rule 15c3–3 in 

1972, investor—including retail 

investor—participation in the U.S. 

securities markets has grown 

dramatically, which has led to a 

correspondingly dramatic increase in 

the amount of cash carrying brokerdealers hold for customers.11 Cash owed 

to customers and PAB account holders 

may include proceeds received from 

sales of securities, cash customers and 

PAB account holders deposit for the 

purpose of purchasing securities, and 

monthly or quarterly dividends received 

on behalf of customers and PAB account 

holders.12 Carrying broker-dealers may 

receive large cash inflows on behalf of 

their customers and PAB account 

holders during the week (e.g., monthend or quarter-end interest and 

dividend payments) and days prior to 

the next required weekly reserve 

computations and deposits into the 

reserve bank accounts.13 This can lead 

to situations where—for a period of 

days—the net amount of cash owed to 

customers and PAB account holders is 

greater than the amounts held in the 

carrying broker-dealer’s combined 

customer and PAB reserve bank 

accounts.14 This creates a ‘‘mismatch’’ 

or difference between the net cash owed 

to customers and PAB accounts holders 

and the amounts held in the carrying 

broker-dealer’s combined customer and 

PAB reserve bank accounts. Moreover, 

because of the dramatic increase in cash 

held by carrying broker-dealers since 

1972, the amount of the mismatch 

between cash owed and cash reserved 

can be much larger than the 

Commission contemplated when it 

adopted the requirement to perform a 

weekly reserve computation. The 

potential for much larger mismatches 

today (as compared to 1972) poses a risk 

that if the carrying broker-dealer fails 

financially it may not be able to 

promptly return all cash and securities 

owed to customers and PAB account 

holders in an orderly self-liquidation 

and, instead, will need to be liquidated 

in a SIPA proceeding. 

The potential size of the mismatch 

risk impacting carrying broker-dealers 

today can be demonstrated through the 

size of the deposits they are required to 

make into their reserve bank accounts. 

For example, during the 2023 calendar 

year, the largest required additional 

deposits into the customer reserve bank 

accounts of all carrying broker-dealers 

ranged from approximately $2.3 billion 

to over $10 billion.15 During the 2023 

calendar year, the largest required 

additional deposits into their PAB 

reserve bank accounts ranged from 

approximately $345 million to almost 

$4.0 billion.16 Furthermore, during the 


ddrumheller on DSK120RN23PROD with RULES2
2792 Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 

additional deposit requirements. Twenty-one of the 

25 largest additional deposits into the PAB reserve 

bank accounts were made by four carrying brokerdealers that voluntarily perform a daily reserve 

computation. The mean of these additional deposit 

requirements was approximately $1.3 billion, and 

the median was approximately $1.1 billion. In 

addition to large deposit requirements, the 

customer and PAB reserve computations also 

permitted some carrying broker-dealers to make 

large withdrawals from both their customer and 

PAB reserve bank accounts during the 2023 

calendar year. For example, during the 2023 

calendar year, the 25 largest withdrawals from 

customer reserve bank accounts ranged from 

approximately $1.2 billion to $4.8 billion, and the 

25 largest withdrawals from PAB reserve bank 

accounts ranged from $170 million to $2.6 billion. 

17See section IV.B.2. in this release (discussing 

scope of affected entities in the economic baseline). 

18This data is based on the largest additional 

deposit requirements reported in the monthly 

FOCUS Reports filed during the 2023 calendar year 

for carrying broker-dealers above the $500 million 

threshold. 

19See section II.A. of this release (describing the 

final $500 million threshold). 

20See section IV.B.2. of this release (discussing 

average mismatches). The aggregated average 

mismatch of 15.7% is calculated as an average of 

the average mismatches for all carrying brokerdealers that met the $500 million threshold. The 

same was done for carrying broker-dealers below 

the $500 million threshold. 

21See section IV.B.2. of this release (discussing 

average mismatches). 

22See Proposing Release, 88 FR at 45843. 

23See id. at 45842. 

24How quickly claims are satisfied in a SIPA 

liquidation depends on the complexity of the 

liquidation and the condition of the carrying 

broker-dealer’s records. See How The Claims 

Process Works, available at https://www.sipc.org/ 

cases-and-claims/how-the-claims-process-works; 

see also Proposing Release, 88 FR at 45848; section 

IV.A. of this release (discussing potential risks that 

an intra-week mismatch introduces); section IV.C. 

(discussing economic effects of the final 

amendments). 

25See section I.C.2. of this release (discussing the 

SIPC Fund). 

26See Proposing Release, 88 FR at 45842. The 

amount that can be advanced to each customer is 

capped at $500,000 (of which $250,000 can be used 

to cover cash claims). Broker-dealers with securities 

accounts at a failed broker-dealer—as SIPA 

customers—have the right to a pro rata share of 

customer property in a SIPA liquidation, but they 

are not entitled to advances from the SIPC Fund. 

See section I.C.2. of this release (providing an 

overview of broker-dealer liquidations and SIPA). 

27See Proposing Release, 88 FR at 45842. 

28See Proposing Release, 88 FR at 45848. See also 

section IV.A. of this release (discussing potential 

risks that an intra-week mismatch introduces). 

29See section IV.A. of this release (discussing 

potential risks that an intra-week mismatch 

introduces). 

30See section II.A. of this release (discussing the 

final $500 million threshold, which is a 

modification from the proposed $250 million 

threshold); See also Proposing Release, 88 FR at 

45843–45 (discussing proposed $250 million 

threshold). 

31See Proposing Release, 88 FR 45842–43, 45848. 

32See paragraph (e)(3)(iv) of Rule 15c3–3. 

33See supra note 16 (citing data related to the 25 

largest withdrawals from customer and PAB reserve 

bank accounts for the calendar year 2023). 

2023 calendar year, the top ten 

additional required deposits to the 

customer reserve bank accounts for the 

20 carrying broker-dealers with the 

lowest average total credits (of the 49 

carrying broker-dealers estimated to be 

subject to the final amendments),17

ranged from approximately $74.3 

million to over $600 million.18

Moreover, the largest potential 

mismatches today occur at carrying 

broker-dealers that reported the greatest 

amount of total credits for their 

customers and PAB account holders 

(i.e., amounts that exceed the final $500 

million threshold discussed below).19 In 

2023, in the aggregate, the average 

mismatch for customer reserve bank 

accounts was 15.7% for carrying brokerdealers above the $500 million 

threshold.20 It was 6.4% for carrying 

broker-dealers below the threshold.21

These large deposit requirements and 

mismatch percentages indicate that 

there may be times when the net 

amount of cash owed to customers and 

PAB account holders is substantially 

greater than the amounts on deposit in 

the customer and PAB reserve bank 

accounts.22 Large mismatches may lead 

to correspondingly large shortfalls in the 

amounts available in the customer and 

PAB reserve bank accounts, which, in 

the event of a failure of a carrying 

broker-dealer, may result in the delayed 

reimbursement of customer securities 

and cash, and the potential that 

customers’ claims may not be satisfied 

in full.23 In the case of a large shortfall, 

the cash and securities owed to 

customers or PAB account holders may 

be tied up in liquidation proceedings 

and these customers or PAB account 

holders would have to wait to receive 

their cash and securities until the 

broker-dealer liquidation is carried out 

under SIPA, which may take a 

significant amount of time.24 This 

potential delay in obtaining access to 

their securities and cash also could 

cause customers to rapidly withdraw 

cash from a carrying broker-dealer 

during times of market turmoil, putting 

further stress on the carrying brokerdealer and the securities markets more 

generally, as well as potentially 

triggering or accelerating the failure of a 

carrying broker-dealer. 

Further, in a SIPA liquidation, SIPC 

may be required to advance money from 

the SIPC Fund 25 to the extent the fund 

of customer property was insufficient to 

make customers—but not to PAB 

account holders—whole through the pro 

rata distribution.26 In particular, if the 

mismatch or difference between the net 

amount a carrying broker-dealer owes 

its customers and PAB account holders 

and the combined amounts in the 

customer and PAB reserve accounts was 

sufficiently large, customers’ claims 

may not be satisfied in full.27 In this 

case, the trustee would need to use the 

SIPC Fund to satisfy customers’ claims 

to make them whole. This risk may be 

exacerbated for carrying broker-dealers 

experiencing large aggregate intra-week 

mismatches.28 As a result, the SIPC 

Fund may be at a higher risk of 

depletion.29

To address these risks, the 

Commission is amending Rule 15c3–3 

to require carrying broker-dealers that 

owe large amounts of cash to customers 

and PAB account holders (i.e., have 

large total credits), measured by both 

their customer and PAB reserve 

computations for the previous 12 month 

ends (i.e., a rolling 12-month average), 

to perform those computations and 

make any required deposits into their 

respective reserve bank accounts daily 

rather than weekly.30 The final 

amendments—by requiring daily rather 

than weekly reserve computations—will 

more quickly apply the protective 

measures of the Rule 15c3–3 reserve 

requirements to cash of customers and 

PAB account holders that is newly 

deposited into the carrying brokerdealer. This will reduce the risk— 

caused by the dramatic increase in cash 

carrying broker-dealers hold—that if the 

carrying broker-dealer fails financially, 

it may be unable to promptly return 

cash and securities to customers and 

PAB account holders through an orderly 

self-liquidation. It also reduces the risk 

that the SIPC Fund may be depleted.31

Further, a daily computation—as 

compared with a weekly computation— 

will more dynamically match the net 

amount of cash owed to customers and 

PAB account holders with the amount 

on deposit in the carrying brokerdealer’s customer and PAB reserve bank 

accounts (i.e., daily changes in the net 

cash owed to customers and PAB 

account holders will be accounted for 

more quickly in the reserve 

computations). While Rule 15c3–3 

currently permits a carrying brokerdealer to elect to perform its customer 

and PAB reserve computations more 

frequently than weekly,32 a practical 

effect of a daily computation 

requirement will permit carrying brokerdealers to withdraw excess cash or 

qualified securities more quickly from 

the reserve bank account, which will 

improve their liquidity.33

In sum, the daily reserve 

computations—by protecting customer 

and PAB cash more quickly than is the 


ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 2793 

34See Proposing Release. 

35Comment letters on the Proposing Release are 

available at https://www.sec.gov/comments/s7-11- 

23/s71123.htm. 

36See section II.C. of this release (describing this 

modification in more detail). 

37See paragraph (e)(3)(i)(A)(1) of Rule 15c3–3, as 

amended. 

38See id. 

39See id. 

40See id. 

41See paragraph (e)(3)(i)(B)(2) of Rule 15c3–3, as 

amended. 

42See section I.C.1. of this release (describing 

these provisions of the Rule 15c3–1 in more detail). 

43See paragraph (a)(1)(ii)(A) of Rule 15c3–1, as 

amended and paragraph (e)(3)(v) of Rule 15c3–3, as 

amended. 

44See paragraph (e)(3)(v) of Rule 15c3–3, as 

amended. 

45See section III. of this release (discussing the 

compliance date). 

46See id. 

case with weekly computations—will 

make the financial system safer by: (1) 

increasing the likelihood that a failing 

carrying broker-dealer can self-liquidate 

(meaning customers and PAB account 

holders do not temporarily lose access 

to their cash and securities); (2) 

lowering the risk that the SIPC Fund 

may be depleted by having to address a 

large shortfall in customer cash held by 

a failed carrying broker-dealer; and (3) 

increasing the liquidity of carrying 

broker-dealers performing the daily 

customer and PAB reserve computations 

thereby positioning them to better 

address potential financial shocks. 

B. Overview of the Final Amendments 

The Commission proposed the 

requirement to perform daily customer 

and PAB reserve computations on July 

12, 2023.34 The Commission received 

comments from a variety of persons, 

including broker-dealers, retail 

investors, industry associations, and 

other market participants.35 As 

discussed in detail below, the 

Commission has modified the final 

amendments in response to comments. 

For example, while the Commission is 

retaining the overall structure of the 

proposal, the Commission has raised the 

threshold from $250 million to $500 

million. The Commission also is 

reducing the 3% aggregate debit items 

charge (‘‘3% debit reduction’’) that 

certain carrying broker-dealers must 

take in performing a customer reserve 

computation to 2% (‘‘2% debit 

reduction’’) if they perform a daily 

customer reserve computation.36

The final amendments are 

summarized below. 

Daily Computation—Under the final 

amendments, a carrying broker-dealer 

that has average total credits that are 

equal to or greater than $500 million 

(‘‘$500 Million Threshold’’) must 

perform the customer and/or PAB 

reserve computations daily, rather than 

weekly as is required under preexisting 

Rule 15c3–3.37 As proposed and under 

the final amendments, a carrying brokerdealer must perform the customer and 

PAB reserve computations, as 

applicable, as of the close of the 

previous business day, and any required 

deposits must be made no later than one 

hour after the opening of banking 

business on the second following 

business day.38

Definition of Average Total Credits— 

As proposed and under the final 

amendments, ‘‘average total credits’’ 

means the arithmetic mean of the sum 

of total credits in the customer reserve 

computation and the PAB reserve 

computation reported in the carrying 

broker-dealer’s 12 most recently filed 

month-end FOCUS Reports.39 This 

means the average total credits are a 12- 

month rolling average, as the carrying 

broker-dealer must add up the sum of 

the total credits reported in the 

customer and PAB reserve computations 

in each of the 12 most recently filed 

month-end FOCUS Reports and divide 

that amount by 12 to calculate the 

arithmetic mean of the total credits. 

Six-Month Compliance Period after 

Exceeding $500 Million Threshold— 

Under the final amendments, a carrying 

broker-dealer must comply with the 

requirement to perform a customer and 

PAB reserve computation daily no later 

than six months after its average total 

credits equal or exceed the $500 Million 

Threshold.40

60-day Written DEA Notification to 

Revert to Weekly Computation—Under 

the final amendments, in the event that 

a carrying broker-dealer’s 12-month 

rolling average of total credits 

subsequently falls below the $500 

Million Threshold, it must continue to 

perform customer and PAB reserve 

computations daily until it provides 

written notification to its designated 

examining authority (‘‘DEA’’) of its 

election to perform weekly 

computations. The amendments require 

the carrying broker-dealer to provide 

this written notification 60 days prior to 

reverting to weekly computations.41

Lowering the 3% Debit Reduction to 

2% for Carrying Broker Dealers that 

Perform a Daily Customer Reserve 

Computation—As discussed in more 

detail below, the minimum net capital 

requirement for broker-dealers is the 

greater of a fixed-dollar amount 

specified in Rule 15c3–1 and an amount 

determined by applying one of two 

financial ratios: the 15-to-1 aggregate 

indebtedness to net capital ratio (‘‘basic 

method’’) or the 2% of aggregate debit 

items ratio (‘‘alternative method’’).42 A 

carrying broker-dealer using the 

alternative method must reduce 

aggregate debit items by 3% when 

performing its customer reserve 

computation under Rule 15c3–3. This 

can increase the amount the carrying 

broker-dealer must lock up in its 

customer reserve bank account. 

Under the final amendments, the 

Commission has modified Rule 15c3–1 

to permit carrying broker-dealers that 

use the alternative method and are 

above the $500 Million Threshold (i.e., 

that perform a daily customer reserve 

computation) to reduce their aggregate 

debit items by 2% rather than 3%.43

Further, carrying broker-dealers that use 

the alternative method and are below 

the $500 Million Threshold may 

voluntarily perform a daily customer 

reserve computation under Rule 15c3–3 

and, in so doing, apply the 2% debit 

reduction in lieu of the 3% debit 

reduction if they notify their DEA at 

least 30-days prior to beginning the 

daily customer reserve computation. 

Under the final amendments, carrying 

broker-dealers voluntarily performing a 

daily reserve computation and applying 

the 2% debit reduction must receive 

prior approval from their DEA to revert 

to a weekly customer reserve 

computation.44 If they revert to 

performing a weekly customer reserve 

computation, they also must revert to 

applying a 3% debit reduction. Finally, 

under the final amendments, the 

Commission is adopting technical 

amendments to the FOCUS Report to 

conform it to the amendments with 

respect to the lowering of the debit 

reduction from 3% to 2%. 

Compliance Date—Generally, 

carrying broker-dealers that exceed the 

$500 Million Threshold using each of 

the 12 filed month-end FOCUS Reports 

from July 31, 2024, through June 30, 

2025, must perform customer and PAB 

reserve computations daily beginning 

no later than December 31, 2025 (i.e., six 

months after June 30, 2025).45 On or 

after the effective date of the final 

amendments, a carrying broker-dealer 

may voluntarily perform a daily 

customer reserve computation and 

apply the 2% debit reduction, provided 

it notifies its DEA in writing at least 30 

calendar days prior to beginning the 

daily customer reserve computation that 

applies the 2% debit reduction.46

Reserve Account Requirements for 

Security-Based Swaps—The 

Commission is not adopting any 

changes to the reserve account 

requirements for security-based swaps. 


ddrumheller on DSK120RN23PROD with RULES2
2794 Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 

47See Net Capital Requirements for Brokers and 

Dealers, Exchange Act Release No. 21651 (Jan. 11, 

1985) [50 FR 2690, 2690 (Jan. 18, 1985)]. See also 

Broker-Dealers; Maintenance of Certain Basic 

Reserves, Exchange Act Release No. 9856 (Nov. 17, 

1972) [37 FR 25224, 25224 (Nov. 29, 1972)]; 

Proposing Release, 88 FR at 45837. 

48See section I.C.2. of this release (discussing 

broker-dealer liquidations under SIPA). 

49See paragraph (b) of Rule 15c3–3; Proposing 

Release, 88 FR at 45838. 

50See paragraph (c) of Rule 15c3–3. A carrying 

broker-dealer does not treat customer securities as 

its own assets. Rather, the carrying broker-dealer 

holds them in a custodial capacity, and the 

possession and control requirement is designed to 

ensure that the carrying broker-dealer treats them in 

a manner that allows for their prompt return. 

51See id. In 2020, the Commission issued a 

statement describing its position that, for a period 

of five years, special purpose broker-dealers 

operating under the circumstances set forth in the 

statement will not be subject to a Commission 

enforcement action on the basis that the brokerdealer deems itself to have obtained and maintained 

physical possession or control of customer fully 

paid and excess margin ‘‘digital asset securities’’ for 

purposes of Rule 15c3–3. See Commission 

Statement on Custody of Digital Asset Securities by 

Special Purpose Broker-Dealers, Exchange Act 

Release No. 90788 (Dec. 23, 2020), 86 FR 11627 

(Feb. 21, 2021). While the final amendments apply 

to all carrying broker-dealers, including special 

purpose broker-dealers, the amendments do not 

alter the current possession and control 

requirements of Rule 15c3–3 for any broker-dealer. 

See also Division of Trading and Markets, 

Commission and Office of General Counsel, FINRA, 

Joint Staff Statement on Broker-Dealer Custody of 

Digital Asset Securities (July 8, 2019), available at 

https://www.sec.gov/news/public-statement/jointstaffstatement-broker-dealer-custody-digital-assetsecurities. The 2019 staff statement represents the 

views of the staff. It is not a rule, regulation, or 

statement of the Commission. Furthermore, the 

Commission has neither approved nor disapproved 

its content. This staff statement, like all staff 

statements, has no legal force or effect: it does not 

alter or amend applicable law; and it creates no new 

or additional obligations for any person. 

52See Rule 15c3–3a. 

53See paragraph (e)(3)(iv) of Rule 15c3–3. 

54See paragraph (e)(3)(i) of Rule 15c3–3. 

55See Rule 15c3–3a. 

56See Rule 15c3–3a, Items 1–9; Proposing 

Release, 88 FR at 45838. 

57See Rule 15c3–3a, Items 10–15. 58See paragraph (e) of Rule 15c3–3. 59See paragraph (e)(3)(i) of Rule 15c3–3. For 

example, a carrying broker-dealer would perform 

the customer reserve computation on Monday as of 

the close of business on the previous Friday and 

generally be required to make the necessary deposit 

no later than 10 a.m. Tuesday. See Proposing 

Release, 88 FR at 45839. 60See paragraph (e) of Rule 15c3–3. 

61See paragraph (e)(3)(v) of Rule 15c3–3. Each 

record must be preserved in accordance with Rule 

17a–4. Id. See also Proposing Release, 88 FR at 

45839. As a result of the final amendments, 

paragraph (e)(3)(v) is being re-designated as 

paragraph (e)(3)(vi). 

62See paragraph (e)(2) of Rule 15c3–3; Rule 15c3– 

3a. 

C. Overview of Rule 15c3–3 and BrokerDealer Liquidations 

1. Overview of Rule 15c3–3 

Rule 15c3–3 is designed to give 

specific protection to customer funds 

and securities, in effect forbidding 

broker-dealers from using customer 

assets to finance any part of their 

businesses unrelated to servicing 

securities customers. For example, a 

broker-dealer is ‘‘virtually’’ precluded 

from using customer funds to buy 

securities for its own account.47 To meet 

this objective, Rule 15c3–3 requires a 

carrying broker-dealer to take two 

primary steps to safeguard these assets, 

as described in this section below. The 

steps are designed to protect customers 

by segregating their securities and cash 

from the carrying broker-dealer’s 

proprietary business activities. The final 

amendments address the second step. If 

the carrying broker-dealer fails 

financially, the customer securities and 

cash should be readily available to be 

returned to the customers, which 

facilitates an orderly self-liquidation. 

However, if the failed carrying brokerdealer is liquidated under SIPA, the 

customer securities and cash should be 

isolated and readily identifiable as 

‘‘customer property’’ and, consequently, 

available to be distributed to customers 

ahead of other creditors.48

The first step required by Rule 15c3– 

3 is that a carrying broker-dealer must 

maintain physical possession or control 

over customers’ fully paid and excess 

margin securities.49 Control means the 

carrying broker-dealer must hold these 

securities in one of several locations 

specified in Rule 15c3–3 and free of 

liens or any other interest that a thirdparty could exercise to secure an 

obligation of the carrying brokerdealer.50 Permissible locations include a 

clearing corporation and a ‘‘bank,’’ as 

defined in section 3(a)(6) of the 

Exchange Act.51

The second step is that Rule 15c3–3 

requires carrying broker-dealers to have 

a customer reserve bank account that 

must hold cash and/or qualified 

securities (e.g., U.S. Treasury securities) 

in an amount determined by a 

computation of the net cash owed to the 

carrying broker-dealer’s customers 

pursuant to a formula set forth in 

Exchange Act Rule 15c3–3a, the 

customer reserve computation.52

Preexisting Rule 15c3–3 requires 

carrying broker-dealers to perform the 

customer reserve computation as of the 

close of the last business day of the 

week and make any required deposits 

into the customer reserve bank account 

weekly. Rule 15c3–3 also permits 

carrying broker-dealers to perform the 

customer reserve computation more 

frequently than weekly (e.g., daily),53

and, in certain limited circumstances, to 

perform a monthly computation.54

Under the customer reserve 

computation, the carrying broker-dealer 

adds up customer credit items and then 

subtracts from that amount customer 

debit items.55 The credit items include 

credit balances in customer securities 

accounts (i.e., cash owed to customers) 

and funds obtained through the use of 

customer securities (e.g., a loan from a 

bank collateralized with customer 

margin securities).56 The debit items 

include money owed by customers (e.g., 

from margin lending), securities 

borrowed by the carrying broker-dealer 

to effectuate customer short sales, and 

margin required and on deposit with 

certain clearing agencies as a 

consequence of customer securities 

transactions.57 If credit items exceed 

debit items, the net amount must be on 

deposit in the customer reserve bank 

account in the form of cash and/or 

qualified securities.58 The carrying 

broker-dealer must make a deposit into 

the customer reserve bank account by 10 

a.m. of the second business day 

following the ‘‘as of’’ date of the new 

computation if the computation shows 

the amount required to be on deposit in 

the customer reserve bank account is 

greater than the amount currently on 

deposit in the account.59 Conversely, if 

the computation shows the amount 

required to be on deposit in the 

customer reserve bank account is less 

than the amount currently on deposit in 

the account, the carrying broker-dealer 

can withdraw the difference.60 A 

carrying broker-dealer also must make 

and maintain a record of each 

computation.61

The customer reserve computation 

permits the carrying broker-dealer to 

offset customer credit items only with 

customer debit items.62 This means the 

carrying broker-dealer can use customer 

cash to facilitate customer transactions 

such as financing customer margin 

loans and borrowing securities to make 

deliveries of securities customers have 

sold short. For example, if a carrying 

broker-dealer holds $100 for customer 

A, the carrying broker-dealer can use 

that $100 to finance a security purchase 

of customer B (i.e., make a margin loan 

to customer B). The $100 the carrying 

broker-dealer owes customer A is a 

credit in the customer reserve 

computation and the $100 customer B 

owes the carrying broker-dealer is a 

debit in the computation. Therefore, 

under the customer reserve computation 

there would be no requirement to 

maintain cash and/or qualified 

securities in the customer reserve bank 

account. However, if the carrying 

broker-dealer did not use the $100 held 

in customer A’s account for this 

purpose, there would be no offsetting 


ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 2795 

63See Proposing Release 88 FR at 45839, n.22. 

64See paragraph (a)(1) of Rule 15c3–3. The 

definition of ‘‘customer’’ in SIPA, however, is 

broader than the definition in Rule 15c3–3 in that 

the SIPA definition includes broker-dealers that 

have proprietary accounts at the carrying brokerdealer. As discussed in section I.C.2. of this release, 

broker-dealers—as customers under SIPA—have the 

right to a pro rata share of customer property in a 

SIPA liquidation. See 15 U.S.C. 78lll(2). 

65See paragraph (e)(1) of Rule 15c3–3. Carrying 

broker-dealers also must obtain and maintain 

physical possession or control of securities carried 

for a PAB account holder unless the carrying 

broker-dealer has provided written notice to the 

PAB account holder that it may use those securities 

in the ordinary course of its securities business and 

has provided opportunity for the PAB account 

holder to object to such use. See paragraph (b)(5) 

of Rule 15c3–3. See Financial Responsibility Rules 

for Broker-Dealers, 78 FR at 51827–31 (adopting a 

PAB reserve computation and possession and 

control requirements for securities held in PAB 

accounts under Rule 15c3–3). 

66See paragraph (e)(3) of Rule 15c3–3; Proposing 

Release, 88 FR at 45839–40. 

67See paragraph (e)(2) of Rule 15c3–3. 

68See 15 U.S.C. 78aaa et seq. 

69See 15 U.S.C. 78ccc(a)(1) and 78ddd(a)(1). 

70With some limited exceptions set forth in SIPA, 

all registered broker-dealers are SIPC members. 15 

U.S.C. 78ccc(a)(2). SIPC is a non-profit member 

organization created in 1970 under SIPA. 15 U.S.C. 

78ccc(a); Proposing Release, 88 FR at 45840. 

71See 15 U.S.C. 78fff–2(c) and 15 U.S.C. 78fff– 

3(a). SIPA liquidations generally involve customer 

claims and the claims of general unsecured 

creditors. Customer claims are satisfied out of the 

customer estate, while general unsecured claims are 

paid from the general estate (any remaining assets). 

To the extent a customer’s claims are not fully 

satisfied through advances from the SIPC Fund and 

the customer’s share of the customer estate, a 

customer will be eligible to receive a distribution 

as a general creditor if there are any general estate 

assets. See 15 U.S.C. 78fff2(c)(1). 

72 15 U.S.C. 78fff–3. 

73 15 U.S.C. 78ddd(c) and (d); Proposing Release, 

88 FR at 45841. The SIPC Fund is also financed 

through interest on U.S. Government securities held 

in the SIPC Fund. See 2023 SIPC Annual Report at 

4, available at https://www.sipc.org/media/annualreports/2023-annual-report.pdf. 

74 In the event that the SIPC Fund is or may 

reasonably appear to be insufficient for the 

purposes of SIPA, the Commission is authorized to 

lend SIPC up to $2.5 billion, which the 

Commission, in turn, would borrow from the U.S. 

Treasury. 15 U.S.C. 78ddd(g) and (h). The 

Commission has not borrowed funds under the 

authority in SIPA since the legislation was enacted 

in 1970. See 2023 SIPC Annual Report at 3; 

Proposing Release, 88 FR at 45841, n.49. In 2023, 

no liquidations under SIPA were initiated. Over the 

last ten-year period, the annual average of new 

cases was 0.2. Since the inception of SIPC, 

liquidation proceedings under SIPA were 

commenced for 330 SIPC-member broker-dealers. 

These 330 members represent less than 1% of the 

approximately 40,000 broker-dealers that have been 

SIPC members during the past fifty-three years. In 

addition, during that timeframe, cash and securities 

distributed for accounts of customers totaled 

approximately $142.5 billion. Of that amount, 

approximately $141.6 billion came from debtors’ 

estates and $915.7 million came from the SIPC 

Fund. Currently, SIPC has 3,297 members. See SIPC 

2023 Annual Report at 8. 

75See 2023 SIPC Annual Report at 10. The target 

level of the SIPC Fund is set out in SIPC’s Bylaws 

and has increased from an initial target of $150 

million in 1970, to the current target of $5.0 billion 

as measured in unrestricted net assets. See Article 

6 (Assessments) of SIPC Bylaws; The SIPC Fund, 

available at https://www.sipc.org/about-sipc/thesipc-fund; 2023 SIPC Annual Report at 3. 

76See Article 6 (Assessments) of SIPC Bylaws. 

SIPC’s unrestricted net assets are SIPC’s total assets 

(including the SIPC Fund) less liabilities, which 

include estimated costs to complete ongoing SIPA 

liquidations. See 2023 SIPC Annual Report at 20. 

See also 15 U.S.C. 78ddd(c) and (d); Proposing 

Release, 88 FR at 45841. 

77See Assessment Rate, available at https://

www.sipc.org/for-members/assessment-rate. The 

amount of each SIPC member’s assessment for the 

member’s fiscal year is the product of the 

assessment rate established by SIPC for that fiscal 

year and either the member’s gross revenues or net 

operating revenues from the securities business. See 

section 6(a)(1) of SIPC’s Bylaws; Proposing Release, 

88 FR at 45841. 

debit and, consequently, the carrying 

broker-dealer would need to have on 

deposit in the customer reserve bank 

account cash and/or qualified securities 

in an amount at least equal to $100.63

Rule 15c3–3 also addresses how a 

carrying broker-dealer must treat 

proprietary securities and cash it holds 

for other broker-dealers, known as PAB 

accounts. While broker-dealers are not 

treated as customers of the carrying 

broker-dealer under Rule 15c3–3,64 the 

rule requires the carrying broker-dealer 

to have a PAB reserve bank account.65

The PAB reserve bank account must 

hold cash and/or qualified securities in 

an amount determined by the PAB 

reserve computation. Under preexisting 

Rule 15c3–3, carrying broker-dealers are 

generally required to perform the PAB 

reserve computation and make any 

required deposits into the PAB reserve 

bank account weekly, similar to the 

requirements for the customer reserve 

computation.66 Finally, consistent with 

the requirements for the customer 

reserve computation, the PAB reserve 

computation permits the carrying 

broker-dealer to offset PAB credit items 

only with PAB debit items.67

2. Overview of Broker-Dealer 

Liquidations and SIPA 

SIPA 68 affords certain protections 

against loss to customers resulting from 

a broker-dealer failure through the 

establishment of SIPC and the SIPC 

Fund.69 SIPC oversees the liquidation of 

SIPC-member broker-dealers that fail 

financially and where customer assets 

the broker-dealer holds (i.e., cash or 

securities) are missing from customers’ 

securities accounts (i.e., broker-dealers 

that cannot return these assets through 

a self-liquidation).70

In a SIPA liquidation of a brokerdealer, SIPC and a court-appointed 

trustee work to return customers’ cash 

and securities as quickly as possible. 

Customers under SIPA, including 

broker-dealers with securities accounts 

at the failed broker-dealer (‘‘SIPA 

customers’’), generally are entitled to 

certain protections, including the right 

to share pro rata with other SIPA 

customers in the customer property held 

by the carrying broker-dealer by way of 

a priority claim on the customer 

property compared to general unsecured 

creditors of the carrying broker-dealer.71

SIPA protections also include the 

ability for a SIPA customer—other than 

a SIPA customer that is a broker-dealer 

(i.e., a PAB account holder)—to receive 

an advance from the SIPC Fund of up 

to $500,000 (of which $250,000 can be 

used to cover cash claims), if the 

amount of customer property is 

insufficient to satisfy the customer’s 

claim for securities and/or cash.72 The 

SIPC Fund largely is financed through 

assessments paid to SIPC by its brokerdealer members.73 The SIPC Fund is 

used to pay SIPC’s expenses, the 

administrative costs of a SIPA 

liquidation to the extent the carrying 

broker-dealer’s estate is insufficient to 

cover those costs, and—as stated above 

in this section—to pay advances to SIPA 

customers whose claims cannot be fully 

satisfied by the estate of a failed 

carrying broker-dealer.74 The SIPC 

Fund—which consists of cash and U.S. 

Government securities—totaled 

approximately $4.47 billion as of 

December 31, 2023.75 Finally, the 

schedule for calculation of the annual 

assessment for SIPC members is 

governed under the SIPC Bylaws and 

generally depends on the level of SIPC’s 

unrestricted net assets.76 The current 

assessment rate (effective January 1, 

2024) is 0.15% of net operating 

revenues.77 A summary of the possible 

level of SIPC assessments is as follows: 


ddrumheller on DSK120RN23PROD with RULES2
2796 Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 

78See section I.A. of this release (discussing the 

need for daily reserve computations); Proposing 

Release, 88 FR at 45843. 79See paragraph (e)(3)(i)(B) to Rule 15c3–3, as 

proposed to be amended. In addition, the 

Commission proposed the following conforming 

amendments to paragraph (e)(3)(i) of Rule 15c3–3: 

(1) paragraph (e)(3)(i) would be re-lettered 

paragraph (e)(3)(i)(A); and (2) the text in paragraph 

(e)(3)(i) regarding monthly computations would be 

set forth in new paragraph (e)(3)(i)(C). Further, the 

phrase ‘‘[e]xcept as provided in paragraphs 

(e)(3)(i)(B)(1) and (C) of this section’’ would be 

added to the beginning of paragraph (e)(3)(i)(A) of 

Rule 15c3–3, as proposed to be amended, to clarify 

that the weekly computation requirement in 

paragraph (e)(3)(i)(A) applies unless the carrying 

broker-dealer is subject to the daily computation 

requirement of paragraph (e)(3)(i)(B)(1) or meets the 

conditions of paragraph (e)(3)(i)(C) to perform a 

monthly computation. See Proposing Release, 88 FR 

at 45843, n.74. The Commission did not receive 

comments on these proposed conforming 

amendments and is adopting them as proposed. 

80The text of paragraph (e)(3)(i)(B) of Rule 15c3– 

3—as proposed to be amended—was modelled 

closely on the preexisting text of paragraph (e)(3)(i) 

of Rule 15c3–3. See Proposing Release 88 FR at 

45843, n.75. 

81For example, a carrying broker-dealer 

performing the computation on Tuesday—as of the 

close of business on Monday—would be required to 

make the deposit on Wednesday, assuming all three 

days are business days. On Wednesday, the carrying 

broker-dealer would perform the computation as of 

the close of business Tuesday and be required to 

make the deposit on Thursday (assuming Thursday 

is a business day). See Proposing Release 88 FR at 

45844. 

82See paragraph (e)(3)(i)(B)(1) of Rule 15c3–3, as 

proposed to be amended. This would mean the 

carrying broker-dealer would add up the sum of the 

total credits reported in the customer and PAB 

reserve computations in each of the twelve most 

recently filed month-end FOCUS Reports and 

divide that amount by 12 to calculate the arithmetic 

mean of the total credits. See Proposing Release, 88 

FR at 45844, n.76. 

83See Proposing Release, 88 FR at 45844, n.79. 

84See Proposing Release, 88 FR at 45844, n.80. 

85See, e.g., Letter from Joshua Beattie, 

FriendshipWorks (July 20, 2023); Roger Cryer (Aug. 

16, 2023); Ethan Jenni (Aug. 20, 2023); Ruth Earle 

(Aug. 20, 2023); Jesse Tutti (Aug. 20, 2023); Nathan 

Saint (Aug. 20, 2023); Chris Edmondson (Aug. 20, 

2023); and Janice Schrader (Aug. 21, 2023). 

86See Letter from Joseph (Sept. 8, 2023); Golden 

DOGE (Sept. 9, 2023). 

87See Letter from Christopher A. Iacovella 

President & CEO, American Securities Association 

(Sept. 11, 2023) (‘‘ASA Letter’’) at 4. 

88See section II.C.2. of this release (discussing 

broker-dealer liquidations and SIPA). 

89See section I.A. of this release (discussing the 

need for daily reserve computations); section 

IV.B.2. of this release (discussing average 

mismatches). 

TABLE 1—SIPC ASSESSMENT SCHEDULE

Unrestricted net assets/SIPC Fund balance Annual assessment rate 

Unrestricted net assets $2.5–<$5 billion (and reasonably likely to remain less than $5 billion but not less than $2.5 billion).0.15% of net operating revenues. 

SIPC Fund balance of $150 million—unrestricted net assets of <$2.5 

billion.

0.25% of net operating revenues. 

SIPC Fund balance $100 million–<$150 million ...................................... Determined by SIPC, but not less than 0.25% of gross revenues. 

SIPC Fund balance below $100 million ................................................... Determined by SIPC, but not less than 0.5% of gross revenues. 

Unrestricted net assets ≥$5 billion (and reasonably likely to remain >$5 

billion (after review of study * and consultation with Commission and 

SROs)).

SIPC may not more than once in any four-year period, increase or decrease the assessment rate by up to, but not more than, 25% of the 

assessment rate in effect at that time. 

* When unrestricted net assets total $5 billion, SIPC will commission a study every four years to examine the adequacy of SIPC’s unrestricted 

net asset balance and the SIPC Fund and the appropriate assessment rate. See section 6(a)(1)(C) and (D) of SIPC’s Bylaws. 

II. Discussion of Comments and Final 

Amendments 

A. Requirement To Perform a Daily 

Computation 

1. Proposal 

The Commission proposed 

amendments to Rule 15c3–3 that would 

require carrying broker-dealers with 

large amounts of total credits to perform 

the customer and PAB reserve 

computations daily rather than 

weekly.78 More specifically, the 

amendments would add paragraph 

(e)(3)(i)(B) to Rule 15c3–3.79 This 

paragraph would provide that a carrying 

broker-dealer with average total credits 

that are equal to or greater than $250 

million (‘‘$250 Million Threshold’’) 

must make the computation necessary 

to determine the amounts required to be 

deposited in the customer and PAB 

reserve bank accounts daily as of the 

close of the previous business day.80

The paragraph would further provide 

that the deposit so computed must be 

made no later than one hour after the 

opening of banking business on the 

second following business day.81 For 

purposes of paragraph (e)(3) of Rule 

15c3–3, the Commission proposed to 

define average total credits as the 

arithmetic mean of the sum of total 

credits in the customer reserve 

computation and PAB reserve 

computation reported in the twelve 

most recently filed month-end FOCUS 

Reports.82 Based on regulatory filings 

for the period of January 2022 through 

December 2022, the $250 Million 

Threshold would have applied the 

proposed daily computation 

requirement to approximately 63 

carrying broker-dealers.83 These brokerdealers included 11 carrying brokerdealers that already voluntarily 

performed the customer reserve 

computation daily.84

2. Comments Received and Final 

Amendments 

Many commenters supported the 

overall proposal.85 Commenters stated 

that the proposal would help protect 

customers, and address potential risks 

in a more timely and proactive manner, 

which safeguards investors and market 

participants, as well as strengthens the 

overall resilience of the financial 

markets.86 One commenter, however, 

stated that the preexisting weekly 

reserve requirements have proven 

effective for the industry and not 

resulted in any problems.87

The Commission agrees with 

commenters that the amendments to 

require daily customer and PAB reserve 

computations will protect customer and 

PAB cash more quickly than is the case 

with weekly computations. While the 

preexisting weekly customer and PAB 

reserve requirements have generally 

been effective,88 the observed large 

deposit requirements, and differences or 

‘‘mismatches’’ between the net amount 

of cash a carrying broker-dealer owes its 

customers and PAB account holders and 

the amounts on deposit in the customer 

and PAB reserve bank accounts, 

indicate that a daily reserve 

computation requirement enhances the 

preexisting rule.89

As discussed in section I.A. of this 

release, a daily reserve computation 

requirement will make the financial 

system safer by: (1) increasing the 

likelihood that a failing carrying brokerdealer can self-liquidate (meaning 

customers and PAB account holders do 

not temporarily lose access to their cash 

and securities); (2) lowering the risk that 

the SIPC Fund may be depleted by 

having to address a large shortfall in 

customer cash held by a failed carrying 

broker-dealer; and (3) increasing the 

liquidity of carrying broker-dealers 

performing the daily customer and PAB 

reserve computations thereby 

positioning them to better address 

potential financial shocks. 


ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 2797 

90See Letter from Kevin Zambrowicz, Deputy 

General Counsel (Institutional) & Managing Partner, 

SIFMA (Sept. 11, 2023) (‘‘SIFMA Letter) at 6–7. 

91See id. 

92See ASA Letter at 5. 

93See id. The commenter did not identify specific 

risk or liquidity factors that the Commission could 

use for this purpose but suggested that the 

Commission could consider the liquidity factors in 

a FINRA concept release for a potential FINRA 

liquidity risk management rule. Id. 

94See Letter from Andrew Hartnett, NASAA 

President and Deputy Commissioner, Iowa 

Insurance Division (Sept. 11, 2023) (‘‘NASAA 

Letter’’) at 2–3. The commenter stated that this 

alternative would ensure that the Commission 

reevaluates, and refreshes (as necessary) the 

proposal’s systemic risk mitigation aims and ease 

the Commission’s future burdens given the 

significant effort required to engage in rulemaking. 

Id. at 3. 

95See Letter from Stephen W. Hall, Legal Director 

and Securities Specialist, Better Markets, Inc. (Sept. 

11, 2023) (‘‘Better Markets Letter’’) at 8; Cory (Sept. 

19, 2023) (‘‘Cory Letter’’). Another commenter 

stated that it is possible that a threshold based on 

a narrow set of FOCUS Reports could become stale 

if the data changes materially and that one remedy 

would be to require all carrying broker-dealers to 

compute reserve requirements daily. The 

commenter, however, recognized the Commission’s 

implicit concern that extending the requirement to 

all carrying broker-dealers might be unnecessarily 

burdensome, and stated that there is a potential 

consensus to support a reasonable ‘‘balanced 

demarcation’’ [between carrying broker-dealers with 

large amounts of total credits relative to smaller 

carrying broker dealers]. See NASAA Letter at 2. 

96See Better Markets Letter at 8. 

97See id at 8–9. 

98See section IV.B.2. of this release (discussing 

the number of affected broker-dealers as part of the 

baseline for the economic analysis of the final 

amendments). 

99See Proposing Release, 88 FR at 45849–50. 

Included in the 187 carrying broker-dealers were 25 

carrying broker-dealers that reported zero customer 

or PAB credits in 2022. 

100See id. at 45852. 

101See Proposing Release, 88 FR at 45852 (table 

4 depicting broker-dealer deposits and withdrawals 

as a share of the reserve account balance). In this 

release, the aggregated average mismatch of 11.2% 

is calculated as an average of the average 

mismatches for all carrying broker-dealers that met 

the proposed $250 Million Threshold in 2022. A 

mismatch is calculated as a carrying broker-dealer’s 

deposit (FOCUS Report Line 4520) divided by its 

reserve account balance from any month (Line 

4530). The average of these mismatches for each 

broker-dealer is computed to determine the 

‘‘average mismatches.’’ The same was done for 

carrying broker-dealers below the proposed $250 

Million Threshold in 2022. Using a $500 Million 

Threshold, based on 2022 data, on the aggregate 

level, the average mismatch across the 187 carrying 

broker-dealers for customer reserve accounts was 

11.9% for carrying broker-dealers above the $500 

Million Threshold, and 6.1% for carrying brokerdealers below the $500 Million Threshold. 

102See section IV.B.2. of this release. 

103 Included in the 191 carrying broker-dealers 

were 29 carrying broker-dealers that reported zero 

customer or PAB credits in 2023. See section IV.B.2. 

of this release. 

104Based on FOCUS Report data for December 31, 

2023. 

105See id. 

106See section IV.B.2. of this release, table 5— 

Broker-Dealer Deposits and Withdrawals as a Share 

of Reserve Account Balance, 2023. 

107See section IV.B.2. of this release. 

Regarding the proposed $250 Million 

Threshold, one commenter suggested 

modifying the proposal to include a 

second test that would need to be met 

to trigger the requirement to perform 

daily reserve computations.90 In 

particular, the commenter 

recommended requiring a carrying 

broker-dealer to perform daily 

computations if it exceeds the proposed 

$250 Million Threshold and has average 

net credits of $10 million or more 

because some carrying broker-dealers 

that meet the proposed $250 Million 

Threshold do not present a material risk 

as they do not carry a large excess of 

credits over debits. This commenter also 

stated that a number of carrying brokerdealers rarely have an excess of credits 

over debits because of the nature of their 

activities, and the customer protection 

benefit of a daily computation 

requirement for these carrying brokerdealers is minimal, and should be 

weighed against the significant costs of 

the proposal, which are not 

commensurate with the risk profiles 

they present.91 Another commenter 

stated the Commission should adopt a 

threshold using risk or liquidity factors 

because they are better predictors of a 

failing carrying broker-dealer than a 

fixed threshold based on size.92 The 

commenter stated that this threshold 

classification would avoid penalizing 

carrying broker-dealers with strong 

balance sheets that exceed a fixed 

threshold.93 One commenter stated that 

the Commission should define the 

threshold as a formula that it could 

adjust periodically without further 

rulemaking, because the proposed 

threshold is based on a narrow set of 

FOCUS reports and could become 

outdated as a result of material 

changes.94

Some commenters suggested 

eliminating the proposed $250 Million 

Threshold so that all carrying brokerdealers would be required to perform 

daily customer and PAB reserve 

computations.95 One of these 

commenters stated that the mismatch 

risk applies equally to both large and 

small carrying broker-dealers, and, as 

such, the Commission should apply the 

requirement to all carrying brokerdealers so that customers are not left 

vulnerable simply because they hold 

their securities accounts at smaller 

broker-dealers.96 The commenter also 

stated that this modification would 

eliminate the need for carrying brokerdealers to monitor their average total 

credits over a 12-month period to 

determine whether or not they meet the 

$250 Million Threshold.97

The final amendments modify the 

proposal by raising the $250 Million 

Threshold to $500 million. This 

threshold is designed to provide a 

balanced demarcation between carrying 

broker-dealers with large amounts of 

total credits relative to smaller carrying 

broker-dealers (with lower average total 

credits). The former are more likely to 

have larger mismatches in any given 

year, and are better positioned to absorb 

the increased costs resulting from 

performing daily reserve 

computations.98 For example, when 

proposed, the threshold was estimated 

to apply the daily reserve computations 

requirement to 63 of the 187 total 

broker-dealers subject to the customer 

and PAB reserve requirements of Rule 

15c3–3.99 Further, at proposal, the 

mismatch risk was calculated as a 

carrying broker-dealer’s deposit divided 

by its reserve account balance from any 

month. The average of these mismatches 

for each carrying broker-dealer during 

2022 was computed to determine the 

average mismatches.100 For example, in 

2022, on the aggregate level, the average 

mismatch across the 187 carrying 

broker-dealers for customer reserve 

accounts was 11.2% for carrying brokerdealers above the proposed $250 

Million Threshold.101 It was 6.1% for 

carrying broker-dealers below the 

proposed $250 Million Threshold. 

The threshold is being raised to $500 

Million to further narrow the scope of 

the final amendments to carrying 

broker-dealers whose average 

mismatches are larger as compared to 

carrying broker-dealers that are below 

the threshold.102 In particular, the $500 

Million Threshold is estimated to apply 

the daily computation requirement to 49 

of the 191 carrying broker-dealers 

subject to the customer and PAB reserve 

requirements of Rule 15c3–3.103 Nine of 

these 49 carrying broker-dealers already 

voluntarily perform daily customer and 

PAB reserve computations.104

Moreover, it is estimated that these 49 

carrying broker-dealers—in the 

aggregate—account for 99.3% of the 

total credits of all 191 carrying brokerdealers subject to the requirement.105

Further, the average mismatches were 

generally higher for carrying brokerdealers above the $500 Million 

Threshold as compared to carrying 

broker-dealers below the threshold.106

For example, the average mismatch 

across the 191 carrying broker-dealers 

for customer reserve bank accounts is 

15.7% for carrying broker-dealers above 

the $500 Million Threshold.107 It is 

6.4% for carrying broker-dealers below 

the threshold. 

These data indicate that the $500 

Million Threshold will apply to carrying 


ddrumheller on DSK120RN23PROD with RULES2
2798 Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 

108This estimate is based on FOCUS Report data 

for calendar year 2023. 

109See section IV.E.2. of this release (discussing 

alternative thresholds based on different metrics). 

110Based on FOCUS Report data for calendar year 

2023, at least one carrying broker-dealer that would 

be excluded from the scope of the rule using a net 

credit amount in addition to a $500 Million 

Threshold had two of the top 100 largest deposits 

in customer reserve bank accounts in 2023. Further, 

four of the top 25 PAB reserve bank account 

deposits in calendar year 2023 were made by two 

carrying broker-dealers that would be excluded 

using the net credit amount in addition to the $500 

Million Threshold. 

111A uniform threshold also is less costly to 

monitor because it does not change. See the 

Economic Analysis in section IV. of this release 

(discussing the economic effects of the final 

amendments). 112See Rule 15c3–1. The net capital rule also 

requires that a carrying broker-dealer must not 

otherwise be insolvent as defined in the net capital 

rule. See paragraph (a)(16) of Rule 15c3–1 (defining 

the term insolvent). 

113See section IV.D. of this release (discussing 

capital losses that could arise in times of market 

stress); section I.A. of this release (discussing the 

need for daily reserve computations). 

114See paragraph (a)(16) of Rule 15c3–1 (defining 

the term insolvent). 

115See Rules 15c3–1 and 15c3–3. 

116See NASAA Letter at 2; see also Letter from 

Josephine Wang, President and CEO, SIPC (Sept. 11, 

2023) (‘‘SIPC Letter’’) at 2 (supporting the rolling 

12-month average). 

117The commenter also stated that applying the 

daily reserve computation requirement to all 

carrying broker-dealers would eliminate the need to 

monitor average total credits over a 12-month 

period. See Better Markets Letter at 8. As discussed 

above in this section, the $500 Million Threshold 

is a fairly simple calculation that relies on numbers 

carrying broker-dealers already report on the 

FOCUS Report. Consequently, it will not be 

difficult for carrying broker-dealers to determine 

whether they have triggered the daily reserve 

computation requirement. 

118See section IV.E.3. of this release (discussing 

applying the daily reserve requirement to all 

carrying broker-dealers as a reasonable alternative). 

broker-dealers that hold the bulk of total 

credits in the industry and to the 

carrying broker-dealers that tend to have 

the larger mismatches as measured by 

the average of reserve deposits required 

for the carrying broker-dealer relative to 

the average balance in its reserve 

accounts. In this way, the $500 Million 

Threshold seeks to reasonably balance 

the enhancements to customer 

protection under Rule 15c3–3 through 

reductions in the mismatch risk, with 

the potential increases in compliance 

costs and staffing that may be necessary 

to perform a daily reserve computation. 

The $500 Million Threshold is a 

straightforward way to narrow the scope 

of the final rule to carrying broke/rdealers that tend to have larger 

mismatches. For example, this 

modification will exclude an additional 

12 carrying broker-dealers from the 

scope of the final rule.108 For these 

reasons, the Commission is not 

modifying the final $500 Million 

Threshold to include the second test a 

commenter suggested (i.e., having 

average net credits of $10 million or 

more) or to use risk or liquidity factors, 

as a different commenter suggested. 

These suggested modifications would 

narrow the application of the rule in a 

way that would exclude some carrying 

broker-dealers from the daily reserve 

computation requirement that have the 

potential for large mismatch risks. 

Further, the final $500 Million 

Threshold—because it is based on total 

customer and PAB credits (as opposed 

to a net amount of credits)—will apply 

the daily reserve computations 

requirement to carrying broker-dealers 

that tend to have large obligations to 

customers (e.g., through receiving large 

infusions of customer cash, holding 

cash balances in customers’ securities 

accounts, or using customer margin 

securities). Using a net credit amount, in 

addition to the $500 Million Threshold 

would exclude 10 of the 49 carrying 

broker-dealers that would be subject to 

the daily reserve requirement based on 

FOCUS Report data for calendar year 

2023.109 At the time of the weekly 

computation, however, a carrying 

broker-dealer may have substantial 

debits to offset the credits and, 

therefore, have a relatively small 

amount of excess credits in comparison 

to its total credits. This could cause the 

carrying broker-dealer to stay under the 

threshold notwithstanding the fact that 

it typically has large amounts of total 

credits, and large intra-week 

mismatches.110 Consequently, a net 

credit amount may not indicate that a 

carrying broker-dealer is at a lower risk 

of large intra-week mismatches because 

it does not account for large fluctuations 

in the net cash owed to customers and 

PAB account holders between reserve 

computations. The final amendments 

are designed to reduce the mismatch 

risk for carrying broker-dealers with 

large amounts of total credits (who are 

more likely to have larger mismatches) 

by protecting customer and PAB cash 

more quickly than is the case with 

weekly computations. This will increase 

the likelihood that a failing carrying 

broker-dealer can self-liquidate 

(meaning customers and PAB account 

holders do not temporarily lose access 

to their cash and securities). 

Finally, the $500 Million Threshold 

also is designed as a straightforward 

way for a carrying broker-dealer to 

determine whether it is subject to the 

requirement to perform daily customer 

and PAB reserve computations. As such, 

it will be simple for carrying brokerdealers and the Commission or 

Commission staff to calculate and 

monitor because it is a fixed-threshold 

and the data for the calculation is 

derived from FOCUS Reports.111 Setting 

formula-based thresholds that 

incorporate dynamic risk or liquidity 

factors would make the rule 

requirements less predictable and more 

complex to monitor because of their 

variability. Moreover, carrying brokerdealers in compliance with the net 

capital rule typically have strong 

balance sheets because the rule imposes 

a net liquid assets test that is designed 

to promote liquidity within brokerdealers.112 During times of market 

stress, however, carrying broker-dealers 

may experience fluctuations in their 

capital if customers and/or PAB account 

holders rapidly withdraw cash and 

securities from their accounts to reduce 

their exposure to the carrying brokerdealer and the securities markets more 

generally.113 Consequently, a formulabased threshold that incorporates 

dynamic risk or liquidity factors would 

exclude carrying broker-dealers that are 

more likely to experience larger 

mismatches, including carrying brokerdealers with large amounts of credits 

that have strong balance sheets.114 A 

fixed threshold also is consistent with 

other thresholds and ratios in the 

Commission’s broker-dealer financial 

responsibility rules, which use fixeddollar amounts or predetermined ratios 

that do not contain formulas for future 

adjustments.115 Finally, the $500 

Million Threshold will incorporate any 

month-to-month material changes 

because it uses a 12-month rolling 

average (as compared to basing the 

calculation on a single filing or date).116

For these reasons, the Commission is 

not adopting a formula-based threshold 

that incorporates dynamic risk or 

liquidity factors, or a threshold that can 

be adjusted without rulemaking as some 

commenters suggested. 

By adopting a $500 Million 

Threshold, the final rule does not apply 

the daily reserve computation 

requirement to all carrying brokerdealers, as a commenter suggested.117

This suggested modification would 

apply the requirement to carrying 

broker-dealers that do not have the 

potential for large mismatch risks and 

that are less able to bear the costs of— 

and devote the resources necessary for— 

performing daily reserve computations 

because of their size or limited customer 

or PAB account carrying activity. 

Applying the daily reserve computation 

to all carrying broker-dealers would 

impose compliance costs on an 

additional 113 carrying broker-dealers 

with relatively less customer and PAB 

account activity.118 Thus, it would 


ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 2799 

119See id. 

120See section II.C. of this release (describing the 

2% debit reduction). 

121See SIFMA Letter at 10–11; Letter from Erik 

Soderberg, Head of Regulatory Affairs, Americas, 

Deutsche Bank Securities, Inc. (Sept. 11, 2023) 

(‘‘Deutsche Bank Letter’’) at 1–2. These commenters 

stated that inflows of customer cash to customer 

accounts for interest and dividends represent the 

vast bulk of any net equity that a carrying brokerdealer would owe its customers if such a carrying 

broker-dealer were subject to a liquidation. See 

SIFMA Letter at 10; see also Deutsche Bank Letter 

at 2. 

122 DVP/RVP means a delivery-versus-payment or 

receipt-versus-payment. This generally refers to an 

arrangement whereby payment for securities 

purchased is made to the selling customer’s agent 

or delivery of securities sold is made to the buying 

customer’s agent in exchange for payment at time 

of settlement, usually in the form of cash. This 

settlement method generally guarantees the transfer 

of securities only happens after payment has been 

made. Carrying broker-dealers whose primary 

business is DVP/RVP transactions also may have 

limited carrying business (including for affiliates) 

including margin accounts. See SIFMA Letter at 10. 

123See SIFMA Letter at 10; Deutsche Bank Letter 

at 1–2. These commenters suggested that these 

carrying broker-dealers be permitted to calculate 

free credit balances daily as of the previous 

business day, identify whether such balances are 

greater than the free credit balances reflected in 

their most recent reserve computation, and, on the 

same day, either: (1) sweep any excess into a sweep 

program; or (2) deposit any increase into their 

customer reserve bank accounts. Id. 

124See ASA Letter at 5; Letter from ASA (Jan. 19, 

2024) (‘‘ASA Letter 2’’) at 2; Letter from ASA (Oct. 

2, 2024) (‘‘ASA Letter 3’’). The commenter stated 

that this computation would achieve a similar 

purpose as the daily customer and PAB reserve 

computations requirement and provide relief for 

carrying broker-dealers from having to develop 

infrastructure and hire regulatory staff to perform a 

customer and PAB reserve computation daily. See 

ASA Letter at 5. 

125 In this regard, in adopting the original 

customer reserve requirements of Rule 15c3–3 in 

1972, the Commission stated that ‘‘[it] has taken a 

broad view of the Congressional mandate by 

requiring that the reserve account include all funds 

which have as their source customer assets.’’ See 

Rule 15c3–3 Adopting Release, 37 FR at 25224. 

126See 1972 15c3–3 Adopting Release, 37 FR at 

25224 (One of the goals of Rule 15c3–3 is to ‘‘insure 

that customers’ funds held by a broker-dealer (both 

free credit balances and deposits which may be 

restricted as to withdrawal) and the cash which is 

realized through the lending, hypothecation and 

other permissible uses of customers’ securities are 

deployed in safe areas of the broker-dealer’s 

business related to servicing his customers, or to the 

extent that the funds are not deployed in these 

limited areas, that they be deposited in a reserve 

bank account.’’). Id. 

127See section I.A. of this release (describing the 

need for daily reserve computations). 

128See section II.E.1. of this release (discussing 

sweep programs and cash in motion and other 

transitory credits); section IV.E.10. (discussing 

exemption for cash in motion as a reasonable 

alternative). 

129See section I.A. of this release (describing the 

need for daily reserve computations). 

130See Marshall Ollia, Chief Financial Officer, 

Raymond James & Associates, Inc. (Sept. 11, 2023) 

(‘‘Raymond James Letter’’) at 2–3. This commenter 

stated that its total customer credits would exceed 

$250 million but its PAB credit balances are 

significantly below the threshold. The commenter 

further stated that in practice it does not see large 

inflows or outflows of broker-dealer credit items in 

PAB accounts and so the carrying broker-dealer 

does not experience a mismatch in timing of those 

items. Id. 

subject them to increased compliance 

costs while they do not have the 

potential for large mismatches.119

However, carrying broker-dealers below 

the $500 Million Threshold may choose 

to voluntarily perform a daily customer 

reserve computation in order to apply 

the 2% debit reduction in lieu of the 3% 

reduction.120 In this way, the investor 

protection benefits of performing a daily 

computation may be expanded beyond 

the carrying broker-dealers that will be 

required to perform a daily 

computation, but in a way that does not 

impose undue costs on smaller carrying 

broker-dealers. For example, smaller 

carrying broker-dealers can analyze 

whether it is advantageous from a cost 

perspective to realize the liquidity 

benefits that result from performing a 

daily customer reserve computation and 

applying a 2% debit reduction in lieu of 

a 3% debit reduction. 

In addition to addressing the 

proposed $250 Million Threshold, some 

commenters suggested modifying the 

proposal in a way that would make the 

reserve computations a hybrid of the 

daily and weekly approaches where 

carrying broker-dealers would compute 

certain items in the reserve formula 

daily and others weekly. For example, 

two commenters 121 suggested that a 

more cost efficient and effective 

alternative to prevent a deficit of 

customer property in a SIPA liquidation 

(for carrying broker-dealers primarily 

conducting a DVP/RVP business) 122

would be to continue weekly 

computations with a daily calculation of 

free credit balances.123 Another 

commenter acknowledged that while 

certain carrying broker-dealers should 

perform a daily reserve computation, 

the Commission should permit other 

carrying broker-dealers to perform a 

weekly reserve computation, and a 

simplified intra-week reserve 

computation of only material balances 

(while excluding cash balances moved 

to external sweep programs).124

The final amendments retain the daily 

customer and PAB reserve computation 

requirement, as proposed. The hybrid 

approaches commenters suggested 

would not provide the same level of 

customer protection afforded by 

complete daily customer and PAB 

reserve computations because these 

hybrid approaches do not include all 

debits and credits.125 As discussed 

above in section I.C.1. of this release, 

preexisting Rule 15c3–3 is designed to 

protect customers by segregating their 

securities and cash from the carrying 

broker-dealer’s proprietary business 

activities. This is accomplished through 

the customer and PAB reserve 

computations that must include all 

funds which have customer assets as 

their source, and ensures that the net 

amount of cash owed to customers and 

PAB account holders that is not 

deployed for customer or PAB account 

holder securities transactions is 

deposited in the customer and PAB 

reserve bank accounts.126 Performing 

only a modified or hybrid customer or 

PAB reserve computation increases the 

risk of a large mismatch for carrying 

broker-dealers with large amounts of 

credits that exceed the $500 Million 

Threshold because they would not be 

accounting for all credit items when 

performing daily reserve computations 

under these alternatives.127 This, in 

turn, would increase the risk that a 

carrying broker-dealer may be unable to 

promptly return cash and securities to 

customer and PAB account holders in 

the event the carrying broker-dealer fails 

financially. 

Further, limiting the daily 

computation to the amount of free credit 

balances and including any increase in 

only free credit balances in a sweep 

program or a separate special reserve 

bank account,128 or an intra-week 

computation of only certain credit items 

would not account for possible material 

changes in other credit items not 

accounted for daily that could 

substantially affect the customer or PAB 

reserve computation and any required 

deposit. Finally, the hybrid 

computations commenters suggested 

would introduce an additional level of 

complexity to the computation that 

could tax the resources of carrying 

broker-dealers while not achieving the 

full risk-reducing benefits of a complete 

daily reserve computation.129

Another commenter stated that the 

Commission should adopt a separate 

$250 million threshold requirement for 

the customer and PAB reserve 

computations, to allow carrying brokerdealers to focus their resources on the 

reserve computation that merits the 

most attention, rather than one that 

presents minimal risk to the carrying 

broker-dealer or the financial system as 

a whole.130 This commenter also 

suggested as another alternative that the 

Commission permit a carrying brokerdealer that exceeds the proposed $250 

Million Threshold to perform an 

optional weekly computation for either 

its customer or PAB accounts where 

credits in that particular computation 

fall below a certain level (e.g., $50 


ddrumheller on DSK120RN23PROD with RULES2
2800 Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 

131See Raymond James Letter at 3. This 

commenter stated, for example, where a carrying 

broker-dealer has $2.0 billion in customer credits, 

but only $45 million in PAB credits, then it would 

perform a customer reserve computation daily for 

the customer reserve bank account and have the 

option of performing PAB reserve computations 

weekly for the PAB reserve bank account. Id. 

132See ASA Letter at 4. 

133See Proposing Release, 88 FR at 45842. 

134Based on FOCUS Report data for December 31, 

2023, all nine of the carrying broker-dealers above 

the $500 Million Threshold that voluntarily 

perform daily reserve computations currently 

perform daily customer and PAB reserve 

computations. 

135See paragraph (e)(3)(iv) of Rule 15c3–3. 

136See section I.A. of this release (discussing the 

need for daily reserve computations). 

137See section II.C. of this release (describing the 

2% debit reduction) and the Economic Analysis in 

section IV. of this release (discussing the costs and 

benefits of the rule). 

138See Letter from Greg Linder (Aug. 20, 2023) 

(‘‘Linder Letter’’); Andrew O’Donnell (July 30, 2023) 

(‘‘O’Donnell Letter’’) and Alex MacCartney (July 21, 

2023); Joao F. Santos (July 28, 2023) (‘‘Santos 

Letter’’); Eddie Klas (July 18, 2023); Adam 

Whitehurst (July 12, 2023) (‘‘Whitehurst Letter’’); 

Cory Letter. 

139See Santos Letter. This commenter suggested 

that carrying broker-dealers be required to 

electronically publish whether reserve requirements 

have been met or breached. Id. 

140See Whitehurst Letter; Anonymous Letter 

(Aug. 21, 2023). 

141See Whitehurst Letter; Cory Letter. 

million).131 Another commenter stated 

that for carrying broker-dealers 

performing both the customer and PAB 

reserve computations, the Commission 

should not require daily PAB reserve 

computations in order to protect 

customer reserves while mitigating 

stress on carrying broker-dealers’ 

resources.132

The final amendments do not take 

these approaches commenters suggested 

to bifurcate the frequency of the 

customer and PAB reserve 

computations. Both the securities 

accounts of customers and PAB account 

holders would be affected if a carrying 

broker-dealer experiences a large intraweek mismatch in either its customer or 

PAB reserve bank accounts. This 

mismatch risk increases the risk to both 

the carrying broker-dealer’s customers 

and PAB account holders that if the 

carrying broker-dealer fails financially, 

the customers and PAB account holders 

may experience a delay in receiving 

their cash and securities or be subject to 

a disorderly liquidation. Requiring that 

a carrying broker-dealer that exceeds the 

$500 Million Threshold perform a daily 

customer and PAB reserve computation 

reduces the mismatch risk in each of 

these accounts and more dynamically 

matches the net cash owed to PAB 

account holders with the amount on 

deposit in the customer and PAB 

reserve bank accounts. This requirement 

will reduce mismatch risk, and benefit 

both customer and PAB account holders 

if a carrying broker-dealer fails 

financially by ensuring their cash and 

securities are promptly returned to 

them. 

In addition, in the event of a SIPA 

liquidation of a failed carrying brokerdealer, both customers and PAB account 

holders would be part of the customer 

estate which would include both the 

customer and PAB reserve bank 

accounts to the extent needed to satisfy 

customers’ claims. Further, because 

PAB account holders—as brokerdealers—are not entitled to advances 

from the SIPC Fund, their claims for 

securities and cash would be at a greater 

risk of not being satisfied in full (as 

compared to non-broker-dealer 

customers). This could expose the PAB 

account holder to financial stress and 

increased risk of liquidation.133

Therefore, because a large mismatch in 

the customer or PAB reserve bank 

account will affect both customers and 

PAB account holders in a SIPA 

liquidation, the final rules require a 

carrying broker-dealer to perform a daily 

customer and PAB reserve computation 

if it meets or exceeds the $500 Million 

Threshold. 

Finally, a daily requirement for both 

the customer and PAB reserve 

computations also will promote 

consistency by requiring that a carrying 

broker-dealer perform the customer and 

PAB reserve computations with the 

same frequency.134 While Rule 15c3–3 

currently permits a carrying brokerdealer to elect to perform its customer 

and PAB reserve computations more 

frequently than weekly,135 a practical 

effect of requiring a uniform standard 

that a carrying broker-dealer perform 

both the customer and PAB reserve 

computations daily will be to permit the 

carrying broker-dealer to withdraw 

excess funds more quickly from either 

the customer or PAB reserve bank 

account (as compared to a weekly 

reserve computation). This consistency 

will increase liquidity for carrying 

broker-dealers and position them to 

better address potential financial 

shocks.136

For the reasons discussed above in 

this section, the Commission has not 

modified the final amendments to 

establish the alternative thresholds or 

hybrid computations commenters 

suggested. However, to the extent that 

carrying broker-dealers incur costs to 

transition to a daily reserve 

computation, the modification of the 

final amendments to permit a 2% debit 

reduction in performing the customer 

reserve computation will provide them 

additional liquidity.137 This 

modification will reduce costs from the 

proposal for carrying broker-dealers 

without compromising the 

enhancements to customer protection 

that the final $500 Million Threshold is 

designed to provide (and without 

adopting any of the alternative 

thresholds or hybrid computations 

commenters suggested). 

Several commenters stated that 

carrying broker-dealers should perform 

reserve computations in real time or 

commented on the technological 

advances in the securities markets.138

One commenter stated that technical 

prerequisites for such complex 

computational operations are already in 

place and should not be burdensome to 

carrying broker-dealers.139 Another 

commenter stated that the Commission 

should not entertain any carrying 

broker-dealer’s objections that the 

proposal would be ineffective or 

burdensome to implement since the 

entirety of their services should now be 

automated.140 Commenters also stated 

that the proposal is a necessary reform 

given technological advances and pace 

of today’s financial markets.141

Although there have been 

technological advances to automate and 

streamline the customer and PAB 

reserve computations to enable carrying 

broker-dealers to perform a computation 

daily, there are still portions of the 

customer and PAB reserve computations 

that employees must perform manually 

(such as performing reconciliations or 

researching items in suspense accounts 

in order to properly credit the correct 

customer securities account), or 

required data inputs that a carrying 

broker-dealer may be unable to obtain in 

real time (such as data from a third 

party service provider). These manual 

items and unavailability of certain data 

in real time make it impractical to 

require carrying broker-dealers to 

perform a customer or PAB reserve 

computation in real time. Moreover, 

adjusting amounts deposited in the 

customer and PAB reserve bank 

accounts in real time would be 

impractical. 

B. Compliance With Daily Reserve 

Computation After Exceeding $500 

Million Threshold 

1. Proposal 

The Commission proposed to require 

that a carrying broker-dealer comply 

with performing a customer and PAB 

reserve computation daily no later than 

six months after having average total 

credits that are equal to or greater than 

$250 million. The purpose of the sixmonth compliance period in the 


ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 2801 

142See Proposing Release, 88 FR at 45844. 143See id. 144See Proposing Release, 88 FR at 45844–45. 145See Proposing Release, 88 FR at 45845. 146See id. at 45845–46. 147See SIPC Letter at 1. The commenter did not 

suggest any specific groupings or time periods. Id. 

148See SIPC Letter at 1. 

149See Letter from Brad D. (Sept. 9, 2023). 

150See Raymond James Letter at 3. As discussed 

in section II.A.2. of this release, the Commission is 

adopting a single threshold, the $500 Million 

Threshold, for the customer and PAB reserve 

computations. As a result, a single compliance 

period once a carrying broker-dealer has exceeded 

the $500 Million Threshold is appropriate. 

151See NASAA Letter at 3. 

152See id. 

153See id. at 3–4. 

proposed rule text was to provide time 

for a carrying broker-dealer to prepare to 

perform a customer and PAB reserve 

computation daily after it exceeds the 

proposed $250 Million Threshold.142

The Commission stated that a carrying 

broker-dealer in this situation may need 

to add resources in order to perform the 

computations, including hiring or 

assigning additional staff to perform the 

daily computations.143

Once a carrying broker-dealer begins 

to perform customer and PAB reserve 

computations daily (because it exceeded 

the $250 Million Threshold), the 

Commission proposed to require the 

carrying broker-dealer to continue 

performing customer and PAB reserve 

computations daily for at least 60 days 

after it falls below the $250 Million 

Threshold. More specifically, under the 

proposal, a carrying broker-dealer could 

elect to perform computations weekly 

by notifying its DEA in writing at least 

60 calendar days before reverting to a 

weekly computation.144 If a carrying 

broker-dealer that provided the 60-day 

notice under the proposal reverts to a 

weekly rather than daily customer and 

PAB reserve computation and 

subsequently exceeds the proposed 

$250 Million Threshold once again, the 

proposed rule would require the 

carrying broker-dealer to comply with 

the daily computation requirement no 

later than six months after having 

average total credits equal to or greater 

than $250 million.145 This would be the 

same process as when a carrying brokerdealer exceeded the proposed $250 

Million Threshold for the first time. 

2. Comments Received and Final 

Amendments 

The Commission sought comment on 

the proposed compliance period for 

beginning to perform customer and PAB 

reserve computations daily after a 

carrying broker-dealers exceeds the 

proposed $250 Million Threshold.146 As 

discussed below in this section, the 

Commission received several comments 

regarding the proposed compliance 

period. 

One commenter suggested the 

Commission group carrying brokerdealers by size and select a transition 

period for compliance appropriate for 

carrying broker-dealers in each group to 

accelerate the transition to performing a 

customer and PAB reserve computation 

daily.147 This commenter stated that six 

months may be longer than many large 

and sophisticated carrying brokerdealers need to complete the transition 

to a daily reserve computation after 

exceeding the proposed $250 Million 

Threshold.148 Another commenter 

stated that the Commission should 

shorten the proposed six-month 

compliance period to three-months for a 

carrying broker-dealer to make the 

systems and staffing changes necessary 

to perform a daily computation after it 

exceeds the proposed $250 Million 

Threshold.149 Finally, one commenter 

requested that the calculations for 

customer and PAB reserve computations 

be bifurcated, with the proposed $250 

Million Threshold applied separately 

for the customer and PAB reserve 

computations, and that the six month 

compliance period apply when the 

particular type of average total credits 

(customer or PAB) crosses the proposed 

$250 Million Threshold.150

As discussed in section II.A. of this 

release, the Commission is adopting a 

$500 Million Threshold as part of the 

final amendments. The six-month 

timeframe accounts for the fact that 

carrying broker-dealers of different sizes 

may need more or less time to comply 

with a requirement to perform the 

customer and PAB reserve computations 

daily. The six-month timeframe, 

accordingly, provides a straightforward 

and uniform compliance period for 

carrying broker-dealers to meet if they 

exceed the $500 Million Threshold and 

must begin performing the customer and 

PAB reserve computations daily. A 

uniform compliance period also will be 

easier for the Commission, Commission 

staff and a carrying broker-dealer’s DEA 

to monitor for compliance because the 

same requirement will apply to all 

carrying broker-dealers. As such, the 

Commission is not modifying the final 

rule to provide for different compliance 

timeframes based on the size of a 

carrying broker-dealer, as commenters 

suggested. 

A six-month compliance period also 

helps to ensure a carrying broker-dealer 

that exceeds the $500 Million Threshold 

begins to perform a daily customer and 

PAB reserve computation within a 

reasonable period of time. In light of the 

enhancements to customer protection a 

daily reserve computation provides, it is 

important that carrying broker-dealers 

transition to a daily reserve computation 

as soon as practicable after exceeding 

the $500 Million Threshold. Shortening 

the compliance period to three-months, 

however, may not give carrying brokerdealers sufficient time to transition to a 

daily customer and PAB reserve 

computation, given the need to add 

resources in order to perform the 

computations, including hiring or 

assigning additional staff, upgrading 

systems, and making other operational 

changes. A six-month compliance 

period reasonably balances the 

importance of transitioning to a daily 

customer and PAB reserve computation 

soon after exceeding the $500 Million 

Threshold to enhance customer 

protection requirements, with the time 

period a carrying broker-dealer needs to 

make the changes required to comply 

with the rule. Therefore, the 

Commission is not modifying the final 

rule to provide for a three-month 

compliance period as a commenter 

suggested. 

One commenter stated that the 

proposal would allow a carrying brokerdealer that is required to perform daily 

computations to revert to a weekly 

computation 60 days after notifying its 

DEA, but if it exceeds the proposed 

$250 Million Threshold, it would not be 

required to return to performing a 

customer and PAB reserve computation 

daily for six months.151 The commenter 

stated that while the Commission 

assumes it may be infrequent that a 

carrying broker-dealer that reverts to 

weekly computations after falling below 

the proposed $250 Million Threshold 

re-crosses it shortly after because of 

increased customer activity, if such 

circumstances were to occur the 

carrying broker-dealer at issue would 

present the risk that the Commission is 

trying to address in the proposal for a 

period of six months.152 Consequently, 

this commenter suggested that the 

Commission revise the rule so that a 

carrying broker-dealer that falls below 

the proposed $250 Million Threshold 

would enter a probationary period of six 

months during which time it would be 

required to immediately return to 

performing the customer and PAB 

reserve computations daily if its total 

credits re-crossed the threshold.153

Another commenter suggested that 

the Commission provide a transition of 

not more than 30 days for a carrying 

broker-dealer that performs a customer 

and PAB reserve computation daily, 

reverts to a weekly computation because 

it falls below the proposed $250 Million 


ddrumheller on DSK120RN23PROD with RULES2
2802 Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 

154See SIPC Letter at 2. 

155For example, based on FOCUS Report data for 

the 2023 calendar year, there were three carrying 

broker-dealers with average total credits that were 

between $450 million and $500 million, and one 

carrying broker-dealer with average total credits 

between $500 million and $600 million. 

156See paragraph (e)(3)(iv) of Rule 15c3–3. 

157See paragraph (e)(3)(v) of Rule 15c3–3, as 

amended. 

158See paragraph (e)(3)(i)(B)(1) and (2) of Rule 

15c3–3, as amended. 

159See Note E(3) to Rule 15c3–3a (requiring the 

1% debit reduction); paragraph (a)(1)(ii)(A) of Rule 

15c3–1 (requiring the 3% debit reduction). The PAB 

reserve computation does not require either the 3% 

or the 1% debit reduction. See Rule 15c3–3a, Notes 

Regarding the PAB Computation, Note 4 (providing 

that Note E(3) to Rule 15c3–3a—which imposes the 

1% debit reduction—does not apply to the PAB 

reserve computation); paragraph (a)(1)(ii)(A) of Rule 

15c3–1 (imposing the 3% debit reduction in lieu of 

the 1% debit reduction of Note E(3) of Rule 15c3– 

3a for carrying broker-dealers using the alternative 

method). 

160See Rule 15c3–1. 

161See paragraphs (a)(1)(i) and (ii) of Rule 15c3– 

1. 

162See paragraphs (a)(1)(i) and (a)(2)(i) of Rule 

15c3–1. Aggregate debit items in the customer 

reserve computation (FOCUS Line 4470) is total 

debit items before the 3% debit reduction. The 

Commission adopted the alternative method as part 

of the Commission’s continuing efforts to structure 

its rules to provide adequate protection for 

customers’ assets while recognizing the industry’s 

need for flexibility in efficiently allocating capital 

resources. See Net Capital Requirements for Brokers 

and Dealers; Amended Rules, Exchange Act Release 

No. 18417 (Jan. 13, 1982) [47 FR 3512, 3513 (Jan. 

25, 1982)]. 

163See 17 CFR 240.17a–11(b)(2). This 5% of 

aggregate debits ‘‘early warning’’ threshold acts as 

a de facto minimum net capital requirement for 

broker-dealers using the alternative method since 

they seek to maintain sufficient levels of net capital 

to avoid the necessity of providing this regulatory 

notice. 

Threshold, and then subsequently 

exceeds the proposed $250 Million 

Threshold and must perform a daily 

computation. This commenter stated 

that a carrying broker-dealer that 

formerly performed customer and PAB 

reserve computations daily is unlikely 

to require six months to reinstate 

procedures previously in effect.154

In response to the comments that the 

Commission require a carrying brokerdealer to immediately return to 

performing a customer and PAB reserve 

computation daily if it exceeds the 

threshold for a second time, or only be 

permitted a three-month compliance 

period, the compliance period is 

designed to provide sufficient time for 

a carrying broker-dealer to prepare to 

perform a customer and PAB reserve 

computation daily after it exceeds the 

threshold. A carrying broker-dealer 

performing the customer and PAB 

reserve computations weekly which 

recrosses the $500 Million Threshold for 

a second or subsequent time will likely 

continue to need time to prepare to 

perform the customer and PAB reserve 

computations daily, because the 

carrying broker-dealer may have reallocated resources when it reverted to 

a weekly computation. A return to 

performing a customer and PAB reserve 

computation daily likely means a 

carrying broker-dealer will require time 

to enhance its current operational 

resources in order to increase the 

frequency of the customer and PAB 

reserve computations once more. It also 

may be the case that a carrying brokerdealer may exceed the $500 Million 

Threshold for a second or subsequent 

time after a substantial period of time 

has passed. Finally, although a carrying 

broker-dealer may re-cross the $500 

Million Threshold shortly after falling 

below it, and not yet have re-allocated 

resources required to perform a daily 

computation, consistent standards will 

be applied to all carrying broker-dealers 

that exceed the $500 Million Threshold 

after a long or short period of time as 

they will have the same risk profile. 

Therefore, a six-month compliance 

period is appropriate in this case. 

Some carrying broker-dealers’ average 

total credits may hover around the $500 

Million Threshold from time to time. 

This will likely be an infrequent 

occurrence since there will only be a 

few carrying broker-dealers at any given 

time whose average total credits remain 

close to the $500 Million Threshold.155

These carrying broker-dealers may 

choose to monitor and manage their 

average total credits to remain below the 

$500 Million Threshold or voluntarily 

perform the customer and PAB reserve 

computations daily to realize the 

beneficial impact on liquidity 

management resulting from the ability 

to make more frequent withdrawals 

from the customer and PAB reserve 

bank accounts.156 Carrying brokerdealers that voluntarily perform the 

customer reserve computation daily also 

may apply the 2% debit reduction to the 

computation.157 These alternatives will 

assist carrying broker-dealers in 

complying with the requirement to 

perform a customer and PAB reserve 

computation daily if they exceed the 

$500 Million Threshold. 

After review of the comments, the 

Commission is adopting the six-month 

compliance period after a carrying 

broker-dealer exceeds the $500 Million 

Threshold, and the 60-day written 

notice requirement to revert to a daily 

computation.158 Therefore, under the 

amendments, a carrying broker-dealer 

must begin to perform a customer and 

PAB reserve computation daily no later 

than six months after its average total 

credits equal or exceed the $500 Million 

Threshold. This means, for example, 

that a carrying broker-dealer which 

exceeds the $500 Million Threshold for 

12 filed monthly FOCUS Reports for a 

particular calendar year (i.e., FOCUS 

Reports filed for January through 

December in a calendar year), must 

begin performing a customer and PAB 

reserve computation daily no later than 

June 30th of the next calendar year. 

Finally, this amendment provides time 

for a carrying broker-dealer to prepare to 

perform a customer and PAB reserve 

computation daily after it exceeds the 

$500 Million Threshold. This 

preparation may involve adding 

resources to perform the computations, 

including, among other things, hiring 

extra staff, assigning additional staff, 

and updating or enhancing technology 

and software. 

C. Reducing the Aggregate Debit 

Reduction From 3% to 2% 

1. Amendments to Rules 15c3–1 and 

15c3–3 

Under existing requirements, carrying 

broker-dealers—as part of the customer 

reserve computation—must reduce the 

value of debits items (i.e., customerrelated receivables) in the customer 

reserve computation by either 1% (for 

debit balances in customers’ cash and 

margin accounts) or 3% (for aggregate 

debit items which includes all debit 

items).159 Whether a carrying brokerdealer must apply the 1% or 3% debit 

reduction depends on how it calculates 

its minimum net capital requirement 

under Rule 15c3–1. Rule 15c3–1 

requires that broker-dealers maintain a 

minimum level of net capital (meaning 

highly liquid capital) at all times.160 The 

minimum net capital requirement for 

broker-dealers is the greater of a fixeddollar amount specified in the rule and 

an amount determined by applying one 

of two financial ratios: the 15-to-1 

aggregate indebtedness to net capital 

ratio (basic method) or the 2% of 

aggregate debit items ratio (alternative 

method).161 Carrying broker-dealers 

electing the alternative method must 

maintain minimum net capital of the 

greater of $250,000 or 2% of their 

aggregate debit items included in the 

customer reserve computation.162 In 

addition, a broker-dealer that uses the 

alternative method must provide the 

Commission with an ‘‘early warning’’ 

notice when the amount of its net 

capital falls below 5% of aggregate debit 

items.163 Most carrying broker-dealers 

use the alternative method, including 

the 49 carrying broker-dealers that 


ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 2803 

164Based on FOCUS Report data as of December 

31, 2023, using the 3% aggregate debit item (Line 

4471) and/or 2% aggregate debit items in 

computation of minimum regulatory capital 

requirements (Line 3870). Most broker-dealers that 

use the basic method to compute net capital are 

smaller broker-dealers that are not carrying brokerdealers, and generally have minimum net capital 

requirements that are less than the $250,000 

required to use the alternative method. See also 

section IV.B.2. of this release (discussing the scope 

of affected broker-dealers). 

165See paragraph (a)(1)(ii)(A) of Rule 15c3–1. 

166See Rule 15c3–3a, Item 10 (debit balances in 

customers’ cash and margin accounts excluding 

unsecured accounts and accounts doubtful of 

collection). 

167See Financial Responsibility Rules for BrokerDealers, 78 FR at 51858. 

168See SIFMA Letter at 5; Raymond James Letter 

at 2; ASA Letter at 5; ASA Letter 2; ASA Letter 3. 

169See SIFMA Letter at 6. 170See Raymond James Letter at 2. 171See id. 172See id. 173See Rule 15c3–3 Adopting Release, 37 FR at 

25229. 

174See id. In 1972, there were three categories of 

debit items in the customer reserve computation: 

Items 10, 11, and 12. Id. Item 10 was where the 

carrying broker-dealer recorded the value of debit 

balances in cash and margin accounts. Id. Today, 

there are six categories of debit items in the 

customer reserve computation: Items 10, 11, 12, 13, 

14, and 15. See Rule 15c3–3a. Item 10 continues to 

be where the carrying broker-dealer records the 

value of debit balances in cash and margin 

accounts. Id. 

175See Net Capital Rule-Proposed Uniform and 

Comprehensive Regulation, Exchange Act Release 

No. 9891 (Dec. 5, 1972) [38 FR 56 (Jan. 3, 1973)]. 

176Net Capital Requirements for Brokers and 

Dealers; Amended Rules, 47 FR at 3512. 

177See Alternative Net Capital Requirement for 

Certain Brokers and Dealers, Exchange Act Release 

No. 11094 (Nov. 11, 1974) [39 FR 41540 (Nov. 29, 

1974)]. 

178 Id. at 41541–42. 

179 Id. at 41540. (‘‘The Commission has 

determined to publish for comment a new concept 

to measure the capital adequacy of broker-dealers 

which would eliminate in part restraints presently 

imposed by the net capital ratio and aggregate 

indebtedness concepts which have served as the 

Continued 

exceeded the $500 Million Threshold 

for calendar year 2023.164

Under Rule 15c3–1, a carrying brokerdealer using the alternative method 

must reduce aggregate debit items (i.e., 

the total of all debit items in the 

customer reserve computation) by 3% 

when performing its customer reserve 

computation under Rule 15c3–3.165

Conversely, Note E(3) to the customer 

reserve computation under Rule 15c3– 

3a requires a carrying broker-dealer 

using the basic method to reduce by 1% 

the total debit balances in customer cash 

and margin accounts (i.e., margin loan 

balances customers owe the carrying 

broker-dealer).166 Both of these 

provisions can increase the amount that 

must be on deposit (locked up) in the 

customer reserve bank account; 

however, the 3% debit reduction can 

result in an even larger increase in the 

deposit requirement.167 This is because 

the reduction is larger (3% compared to 

1%) and is applied to the total amount 

of debit items while the 1% debit 

reduction applies to a single category of 

debit items: customer margin loan 

balances. 

The Commission is lowering the 3% 

debit reduction to 2% in response to 

comments that a reduction as large as 

3% would no longer be necessary if the 

requirement to perform a daily reserve 

computation is adopted.168 This 

modification to the proposal is designed 

to recalibrate how Rule 15c3–3 

addresses the risk that the amount on 

deposit in the customer reserve bank 

account is less than the net amount of 

cash owed to customers in light of the 

new requirement to perform daily 

customer and PAB reserve 

computations. As a commenter stated, 

‘‘[u]nder a daily computation, the value 

of debit items and the amounts owing to 

customers on any given day are 

accounted for in the next day’s 

computation and the difference is 

protected via the following day’s 

deposit into the Special Reserve Bank 

Accounts’’ and therefore ‘‘[t]he amount 

of assets in the Special Reserve Bank 

Accounts would . . . more quickly 

reflect the amounts owing to customers 

on any given day and the value of debit 

items, thereby reducing the need for any 

cushion [(i.e., the 3% debit reduction)] 

to account for a potential mismatch.’’ 169

Similarly, another commenter stated 

that when the Commission adopted the 

3% debit reduction in 1975 the purpose 

was to provide, in the event of a 

liquidation, an additional cushion of 

secured debit items which will be 

available to satisfy customers with 

whom the carrying broker-dealer effects 

transactions.170 This commenter stated 

that a shift to a daily customer reserve 

computation enabled by technological 

advancements since 1975 will result in 

a more precise and up-to-date 

computation, thereby mitigating the risk 

that the 3% debit reduction addresses in 

the customer reserve computation.171

The commenter went on to state that ‘‘a 

1% deduction in line with that applied 

to other broker-dealers seems 

appropriate for firms that calculate net 

capital under the alternative 

method.’’ 172

Commenters suggested eliminating 

the 3% debit reduction that applies to 

carrying broker-dealers using the 

alternative method. This would then 

subject these carrying broker-dealers to 

the 1% debit reduction that applies to 

carrying broker-dealers using the basic 

method. For the reasons discussed 

below, the Commission is not taking 

this approach and instead is lowering 

the 3% debit reduction to 2%. 

In order to understand the 

Commission’s rationale for recalibrating 

Rule 15c3–3 in this manner, it is 

necessary to discuss the origins and 

purpose of the 3% debit reduction and 

its connection to Rule 15c3–1. Rule 

15c3–3—when it was adopted in 1972— 

required carrying broker-dealers to 

reduce the value of debit balances in 

cash and margin accounts by 1% when 

performing the customer reserve 

computation.173 Debit balances in cash 

and margin accounts was one of three 

categories of debit balances included in 

the customer reserve computation at 

that time (i.e., the 1% debit reduction 

did not apply to the total value of debits 

in the customer reserve 

computation).174 In 1972, the 

Commission also proposed significant 

revisions to Rule 15c3–1 (the brokerdealer net capital rule).175 The original 

rule prohibited a broker-dealer from 

having aggregate indebtedness that 

exceeded 2000% of its net capital, 

exclusive of exchange memberships and 

fixed assets (a 20-to-1 requirement).176

Moreover, the rule did not apply to 

broker-dealers that were members of a 

securities exchange on the premise that 

these broker-dealers were subject to 

capital requirements promulgated by 

their respective exchanges. The 1972 

proposed amendments—among other 

things—would apply Rule 15c3–1 to all 

broker-dealers (i.e., a uniform net 

capital rule) and change the minimum 

net capital requirement to the greater of 

a fixed-dollar amount and a ratio 

amount: the 15-to-1 aggregate 

indebtedness to net capital ratio (i.e., the 

basic method). Thus, as originally 

proposed in 1972, the amendments to 

Rule 15c3–1 did not include the 

alternative method of computing 

minimum net capital. 

While the 1972 amendments to Rule 

15c3–1 were still pending, the 

Commission proposed further 

amendments to the rule as well as 

corresponding amendments to Rule 

15c3–3. They included a 1974 proposal 

to add the alternative method of 

calculating minimum net capital.177 The 

proposed alternative method would 

require a carrying broker-dealer to 

maintain a minimum level of net capital 

equal to the greater of $100,000 or 4% 

of aggregate debit balances includable in 

the customer reserve computation.178 At 

that time, the Commission 

acknowledged that the alternative 

method could result in lower minimum 

net capital requirements as compared 

with the basic method.179 Given this 


ddrumheller on DSK120RN23PROD with RULES2
2804 Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 

primary source of protection of customers and other 

broker-dealers for over 30 years. As a result of the 

numerous changes that have occurred in the 

securities industry over the last five years, the 

evolving future structure of the securities markets 

and the future needs of the nation’s corporate 

issuers to raise both equity and debt capital, it is 

important at this time to develop new approaches 

to the financial responsibility and capital adequacy 

of broker-dealers for both the protection of 

customers and to maintain sound and viable 

primary and secondary capital markets.’’). 

180 Id. at 41542. 

181 Id. The Commission further explained that 

such additional reserves will be available to provide 

self-regulatory organizations and others with 

additional assets for the satisfaction of customer 

cash claims and to redeem customers’ securities 

which have been hypothecated or otherwise 

encumbered when necessary for the orderly 

winding up of the business of any broker-dealer. Id. 

182See Adoption of Uniform Net Capital Rule and 

an Alternative Net Capital Requirement for Certain 

Brokers and Dealer, Exchange Act Release No. 

11497 (June. 26, 1975) [40 FR 29795 (July 16, 

1975)]. 

183 In 1982, the Commission modified the 

alternative method to reduce the ratio from 4% of 

aggregate debit items to 2% of aggregate debit items. 

See Net Capital Requirements for Brokers and 

Dealers; Amended Rules. 

184See Adoption of Uniform Net Capital Rule and 

an Alternative Net Capital Requirement for Certain 

Brokers and Dealers, 40 FR at 29798. 

185 Id. 

186See sections IV.B.3. and C.1. of this release 

(discussing the 2% debit reduction). 

187See section IV.B.2. of this release (discussing 

scope of affected carrying broker-dealers). In 

comparison, there were 3,461 broker-dealers 

registered with the Commission on December 31, 

2023. 

188See table 5, panel C in section IV. of this 

release. 

189The 2% debit reduction also is consistent with 

the incremental increase in the frequency of the 

customer reserve computation for carrying brokerdealers that perform a monthly customer reserve 

computation and carrying broker-dealers that elect 

to compute net capital under the alternative method 

and perform a customer reserve computation 

weekly or daily under the amendments. Monthly 

customer reserve computations require a 5% buffer 

above the carrying broker-dealer’s deposit 

impact, the Commission proposed a 

number of more stringent requirements 

for carrying broker-dealers using the 

alternative method, including that they 

would need to apply the 3% debit 

reduction in lieu of the existing 1% 

debit reduction in Rule 15c3–3.180 In 

proposing the 3% debit reduction, the 

Commission explained that the 

proposed debit reduction would require 

a 100% reserve for customer funds not 

available for use by the broker-dealer, 

and an additional 3% commitment of 

the broker-dealer’s own liquid capital in 

the form of cash or qualified securities 

as an additional reserve and to insure 

the broker-dealer’s ability to finance its 

customer-related receivables.181

The Commission adopted the 

proposed amendments to Rules 15c3–1 

and 15c3–3 in 1975.182 They included 

the alternative method for calculating 

the minimum net capital requirement 

and the requirement that carrying 

broker-dealers using the alternative 

method apply the 3% debit 

reduction.183 In this regard, the 

Commission explained ‘‘that the 

objectives of the [alternative method] 

can only be achieved by further 

strengthening the custodial 

requirements and Reserve Formula 

safeguards developed for the protection 

of customer assets established by [Rule 

15c3–3]’’ and therefore the alternative 

method ‘‘requires aggregate debit items 

in the Reserve Formula to be reduced by 

3% rather than the 1% reduction of 

certain debit items which now 

exists.’’ 184 The Commission stated that 

this ‘‘reduction of debit items will thus 

provide, in the event of a liquidation, an 

additional cushion of secured debit 

items which will be available to satisfy 

customers with whom the broker or 

dealer effects transactions.’’ 185

Thus, the 3% debit reduction is 

designed to compensate for the potential 

lower minimum net capital requirement 

resulting from carrying broker-dealers 

electing the alternative method in lieu 

of the basic method. Consequently, the 

Commission lowered the capital 

requirements and strengthened the 

customer reserve computation 

requirements for carrying broker-dealers 

using the alternative method. In 

particular, the 3% debit reduction 

decreases the amount of debits that 

offset credits in the customer reserve 

computation and, thereby, can increase 

the amounts carrying broker-dealers 

must lock up in their customer reserve 

bank accounts. The 3% debit reduction 

applies to aggregate debit items in the 

customer reserve computation under 

Rule 15c3–3 (i.e., all debit items in the 

customer reserve computation). 

Carrying broker-dealers that use the 

basic method to compute their 

minimum net capital requirement must 

reduce certain debits (i.e., not all debits) 

by 1%. This results in a lower reduction 

and a correspondingly smaller potential 

increase in the amount carrying brokerdealers applying the 1% debit reduction 

must lock up in their customer reserve 

bank accounts. 

For these reasons, the Commission is 

not eliminating the 3% debit reduction 

as commenters suggested because doing 

so would subject carrying broker-dealers 

using the alternative method to the same 

1% debit reduction that applies to 

carrying broker-dealers using the basic 

method.186 As discussed above in this 

section, the 3% debit reduction is 

designed to compensate for how the 

alternative method can result in a lower 

minimum net capital requirement than 

the basic method. In addition, as stated 

in this section above, the 49 carrying 

broker-dealers that exceeded the $500 

Million Threshold for calendar year 

2023 use the alternative method for net 

capital purposes. The Commission also 

estimates that these 49 carrying brokerdealers, based on FOCUS Report data 

for January 2023 through December 

2023, held 99.3% of aggregate total 

credits of all carrying broker-dealers.187

Therefore, carrying broker-dealers using 

the alternative method for net capital 

hold the bulk of customer credits (i.e., 

amounts the carrying broker-dealer 

owes customers) as compared to 

carrying broker-dealers using the basic 

method. 

However, the new requirement to 

perform daily customer reserve 

computations significantly strengthens 

the customer protection measures of 

Rule 15c3–3. In particular, performing a 

daily customer reserve computation 

reduces the risk that the net amount of 

cash owed to customers will be 

substantially greater than the amount on 

deposit in a carrying broker-dealer’s 

customer reserve bank account.188 A 

daily computation requirement allows 

for cash owed to customers from a 

particular day to be included in that 

day’s customer reserve computation, 

computed the next business day and 

any required deposits made the 

following business day. Therefore, 

under a daily customer reserve 

computation, the amount on deposit in 

the customer reserve bank account will 

more quickly reflect the net amount of 

cash the carrying broker-dealer owes its 

customers. Performing a daily customer 

reserve computation also will reduce 

the maximum time between required 

deposits into a customer reserve bank 

account to two business days. In 

contrast, under a weekly customer 

reserve computation, a carrying brokerdealer performs the customer reserve 

computation on Monday, using numbers 

as of the close of business on Friday, 

and makes any required deposits in its 

customer reserve bank account on 

Tuesday (typically) of each week. 

Therefore, the next deposit requirement 

under a weekly customer reserve 

computation will be the Tuesday of the 

following week. 

These enhancements to the customer 

protection measures of Rule 15c3–3 

warrant a corresponding adjustment to 

the 3% debit reduction in order to avoid 

overcompensating for the differences 

between the alternative and basic 

method. Consequently, the Commission 

is lowering the 3% debit reduction to 

2% for carrying broker-dealers that use 

the alternative method if they perform a 

daily customer reserve computation.189


ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 2805 

requirement, while carrying broker-dealers electing 

the alternative method for net capital are required 

to use a 3% ‘‘buffer’’ for weekly customer reserve 

computations and a 2% ‘‘buffer’’ for daily customer 

reserve computations. See paragraph (e)(3)(i)(A) of 

Rule 15c3–3 and paragraph (a)(1)(ii)(A) of Rule 

15c3–1, as amended. 

190See paragraph (a)(1)(ii)(A) of Rule 15c3–1, as 

amended. In order to implement this change, the 

following phrase is being added to the end of the 

current rule text in paragraph (a)(1)(ii)(A): 

‘‘provided, however, that, if a broker or dealer is 

required to make the computation required by 

§ 240.15c3–3(e) and set forth in Exhibit A, 

§ 240.15c3–3a, on a daily basis, the broker or dealer 

may reduce aggregate debit items in such 

computation by 2%.’’ 

191See paragraph (a)(1)(ii) of Rule 15c3–1; 

paragraph (b)(2) of Rule 17a–11. 

192See paragraph (e)(3)(v) of Rule 15c3–3, as 

amended. 

193 Id. 

194See paragraph (e)(3)(iv) of Rule 15c3–3, as 

amended. 

195See SIFMA Letter at 6. This commenter stated 

one member carrying broker-dealer estimated that 

eliminating the 3% debit reduction in favor of the 

1% debit reduction would free up $3 billion in 

liquidity. Id. Another commenter stated that this 

potential change would, on average, amount to 

approximately $50 million in liquid assets each 

week. See Raymond James Letter at 2. Lowering the 

3% debit reduction to 2% will result in additional 

liquidity for carrying broker-dealers performing a 

daily customer reserve computation. 

196See SIFMA Letter at 6. 

197See SIFMA Letter at 6. 

198See ASA Letter at 5. 

199See section II.E.1. of this release (describing 

sweep programs and other transitory credits). 

Lowering the debit reduction to 2% is 

designed to adjust this risk-reducing 

measure in response to the customer 

protection enhancements of the new 

daily customer reserve computation 

requirements while maintaining a debit 

reduction amount (2% as compared to 

1%) that will continue to compensate 

for the differences between the 

alternative and basic methods of 

calculating minimum net capital 

requirements. 

In order to implement this change, the 

Commission is amending paragraph 

(a)(1)(ii)(A) of Rule 15c3–1 to provide 

that a carrying broker-dealer that is 

required to perform a daily customer 

reserve computation under paragraph 

(e) of Rule 15c3–3 may reduce aggregate 

debit items in such computation by 2% 

(rather than 3%).190 Carrying brokerdealers that elect the alternative method 

for calculating their minimum net 

capital requirement and perform their 

customer reserve computation weekly 

must continue to apply the preexisting 

3% debit reduction. Further, this 

amendment to Rule 15c3–1 applies only 

to a carrying broker-dealer’s customer 

reserve computation. It does not amend 

or change the minimum net capital 

requirements for carrying broker-dealers 

under Rule 15c3–1 irrespective of 

whether they use the basic or alternative 

methods. Consequently, carrying brokerdealers electing the alternative method 

must continue to maintain the greater of 

$250,000 or 2% of aggregate debit items 

under Rule 15c3–1 and they remain 

subject to an early warning notification 

requirement under Rule 17a–11 if their 

net capital falls below 5% of aggregate 

debit items.191

In addition, the Commission is 

modifying paragraph (e)(3) of Rule 

15c3–3 to add a new paragraph (e)(3)(v) 

to permit a carrying broker-dealer that 

voluntarily performs the customer 

reserve computation daily under 

preexisting paragraph (e)(3)(iv) of Rule 

15c3–1 to reduce its aggregate debit 

items by 2%, if the carrying brokerdealer notifies its DEA, in writing, of its 

election at least 30 calendar days before 

beginning such computation.192 The 

new paragraph also provides that if a 

carrying broker-dealer has notified its 

DEA of this election, the carrying 

broker-dealer must continue to compute 

the customer reserve computation daily 

unless a change is approved by its 

DEA.193 This amendment is being made 

in Rule 15c3–3 (as compared to Rule 

15c3–1 where the 3% and 2% debit 

reduction provisions are located) 

because it relates to a carrying brokerdealer voluntarily performing a daily 

customer reserve computation. 

Therefore, to maintain consistency with 

existing rule text, this new paragraph 

follows paragraph (e)(3)(iv) of Rule 

15c3–3, which permits carrying brokerdealers to voluntarily perform reserve 

computations more frequently than 

required under the rule.194 The notice 

requirement to voluntarily begin the 

daily customer reserve computations 

with the 2% debit reduction will assist 

the DEA in monitoring the carrying 

broker-dealer. For example, upon 

receiving the notice, the DEA can 

contact the carrying broker-dealer to 

inquire about its plan for transitioning 

to a daily customer reserve computation 

and about any changes to its systems 

and processes for performing the daily 

computation and for applying the lower 

2% debit reduction (in lieu of the 3% 

debit reduction). The approval 

requirement to revert to performing a 

weekly customer reserve computation is 

designed to ensure that a carrying 

broker-dealer performs a daily customer 

reserve requirement consistently rather 

than constantly switching between daily 

and weekly reserve computations 

depending on which approach is more 

advantageous on a given day. This will 

prevent a carrying broker-dealer from 

performing a daily customer reserve 

computation on an ad hoc basis solely 

to reduce an excess of credits over 

debits in the customer reserve 

computation and thereby minimize 

deposit requirements in the customer 

reserve bank account. 

Commenters stated that lowering the 

3% debit reduction will increase the 

liquidity of carrying broker-dealers 

because it will reduce the extra buffer of 

broker-dealer capital that must be 

deposited into the customer reserve 

bank account. For example, a 

commenter stated that the new 

requirement to perform a customer 

reserve computation daily would reduce 

the need for any cushion to account for 

a mismatch and, consequently, would 

increase liquidity and lower costs for 

customer financing by allowing carrying 

broker-dealers to use assets that would 

otherwise be locked up (in their 

customer reserve bank account).195 This 

commenter further stated that the 

increased liquidity resulting from 

lowering the amount of the 3% debit 

reduction could be redeployed by 

carrying broker-dealers to provide 

customers with more financing at a 

lower cost, which benefits customers 

and carrying broker-dealers.196 This 

commenter also stated that carrying 

broker-dealers would use this additional 

liquidity to pay the costs associated 

with transitioning from weekly to daily 

reserve computations, potentially 

allowing carrying broker-dealers to 

make the transition more efficiently and 

at a lower relative cost.197 Another 

commenter stated that this modification 

would provide financial relief to 

carrying broker-dealers.198

Decreasing the debit reduction from 

3% to 2% will provide extra liquidity to 

carrying broker-dealers, as commenters 

suggested. Enhancing the liquidity of 

carrying broker-dealers will position 

them to better withstand financial 

shocks and thereby lower the risk that 

such a shock causes the carrying brokerdealer to fail financially (which in turn 

will benefit the carrying broker-dealer’s 

customers, counterparties, and 

creditors). Further, carrying brokerdealers will be able to use this extra 

liquidity to pay the initial and ongoing 

compliance costs to transition from 

weekly to daily reserve computations. 

They also may use the extra liquidity to 

address situations where they must 

make large additional deposits into the 

customer or PAB reserve bank accounts 

to account for large infusions of 

customer or PAB account holder cash 

that is intended to be swept out of the 

broker-dealer but gets accounted for in 

the reserve computations before it can 

be swept.199


ddrumheller on DSK120RN23PROD with RULES2
2806 Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 

200 In addition to amending the FOCUS Report 

Part II as part of the final amendments, the 

Commission is updating the FOCUS Report on the 

Commission’s website that highlights the fields that 

security-based swap dealers and major securitybased swap participants relying on a Commission 

substituted compliance order (‘‘Covered Entities’’) 

must complete pursuant to the Amended and 

Restated Order Specifying the Manner and Format 

of Filing Unaudited Financial and Operational 

Information by Security-Based Swap Dealers and 

Major Security-Based Swap Participants that are 

not U.S. Persons and are Relying on Substituted 

Compliance Determinations with Respect to Rule 

18a–7, Exchange Act Release No. 101932 (Dec. 16, 

2024). However, these amendments do not result in 

any changes to the number of fields in the FOCUS 

Report that Covered Entities must complete. 

201See Proposing Release, 88 FR at 45845. 

202 17 CFR 240.15c3–3(e)(3)(iv); Proposing 

Release, 88 FR at 45845. 

203This proposed amendment would insert the 

phrase ‘‘other than computations made under 

paragraph (e)(3)(i)(B)(1) of this section,’’ following 

the words ‘‘this paragraph (e)(3),’’ in preexisting 

paragraph (e)(3)(iv) of Rule 15c3–3. See Proposing 

Release, 88 FR at 45845. The Commission did not 

receive any comments on this amendment and is 

adopting it as proposed. 

204See Proposing Release, 88 FR at 45845. 

205See SIPC Letter at 2. 

206See id. 

207See id. 

208See section IV.B.2. of this release (discussing 

affected broker-dealers in the baseline). 209A carrying broker-dealer that is under the $500 

Million Threshold may nonetheless elect to perform 

a daily customer reserve computation in order to 

apply the 2% debit reduction in lieu of the 3% 

reduction. A carrying broker-dealer making this 

election will be subject to the DEA notification 

requirements of paragraph (e)(3)(v) of Rule 15c3–3, 

as amended. 210See paragraph (e)(3)(iv) of Rule15c3–3, as 

amended. 211A sweep program is a service provided by a 

carrying broker-dealer where it offers to its 

customer the option to automatically transfer free 

credit balances in the securities account of the 

customer to either a money market fund or an 

account at a bank whose deposits are insured by the 

Federal Deposit Insurance Corporation (‘‘FDIC’’). 

See paragraph (a)(17) of Rule 15c3–3. The sweep 

program requirements for customer accounts are set 

forth in paragraph (j)(2)(ii) of Rule 15c3–3. Brokerdealers are not customers under Rule 15c3–3. 

Therefore, PAB account holders are not subject to 

the sweep program requirements under the rule 

with respect to their free credit balances. See 

paragraph (a)(1) of Rule 15c3–3. Nonetheless, PAB 

account holders may elect to have their free credit 

balances included in a sweep program. See 

Proposing Release, 88 FR at 45842, n.58. 

2. Conforming Amendments to the 

FOCUS Report 

The Commission is adopting 

amendments to the Part II of the FOCUS 

Report to conform the reporting 

obligations with the final amendment 

lowering the debit reduction from 3% to 

2% for carrying broker-dealers that use 

the alternative method and perform 

daily customer and PAB reserve 

computations.200 Currently, in the 

Computation for Determination of 

Customer Reserve Requirements in Part 

II of the FOCUS Report, the form 

includes a line for a carrying brokerdealer that uses the alternative method 

for computing net capital to report the 

3% debit reduction. The amendments to 

the FOCUS Report add a line to report 

the 2% debit reduction in lieu of 

reporting the 3% debit reduction. The 

existing line to report the 3% deduction 

is being retained for carrying brokerdealers that are below the $500 Million 

Threshold and that do not voluntarily 

perform daily customer and PAB reserve 

computations. 

Further, the Commission is amending 

the line for reporting ‘‘Total Debits’’ in 

the Computation for Determination of 

Customer Reserve Requirements in Part 

II of the FOCUS Report to reflect that 

Total Debits equals ‘‘Aggregate Debit 

Items’’ less the 3% or 2% debit 

reduction, as applicable. The 

Commission also is adding an 

additional line under ‘‘Frequency of 

Computation’’ to require that a carrying 

broker-dealer check one of two new 

boxes to indicate whether it is using the 

2% debit reduction or 3% debit 

reduction. Finally, the Commission is 

amending the footnote to the 

Computation for Determination of 

Customer Reserve Requirements in the 

FOCUS Report Part II to add a reference 

to paragraph (e)(3)(v) of Rule 15c3–3. 

D. Voluntary Customer and PAB 

Reserve Computations 

The Commission proposed to amend 

paragraph (e)(3)(iv) of Rule 15c3–3, 

which permits interim reserve 

computations to be performed between 

the days that the weekly or permitted 

monthly computations must be 

performed.201 In particular, preexisting 

paragraph (e)(3)(iv) of Rule 15c3–3 

provided that computations in addition 

to the computations required in 

paragraph (e)(3) (i.e., the weekly and 

permitted monthly computations) may 

be made as of the close of any business 

day, and the deposits so computed must 

be made no later than one hour after the 

opening of banking business on the 

second following business day.202 The 

amendment to paragraph (e)(3)(iv) 

provides that computations—other than 

those made under paragraph 

(e)(3)(i)(B)(1) of Rule 15c3–3, as 

amended (i.e., the daily 

computations)—may be made as of the 

close of any business day.203 This 

amendment specifies that the option to 

perform a customer or PAB reserve 

computation more frequently than 

weekly or monthly (as applicable) 

remains available to carrying brokerdealers that must make such 

computations weekly or monthly. 

Carrying broker-dealers voluntarily 

performing daily customer and PAB 

reserve computations have used this 

option.204

A commenter stated that the proposal 

permits carrying broker-dealers that 

perform weekly reserve computations to 

continue to make voluntary, interim 

computations but does not expressly 

require approval from the carrying 

broker-dealer’s DEA.205 The commenter 

stated that the Commission should make 

this approval a requirement in the final 

rule, as well as require approval from 

the DEA for the carrying broker-dealer 

to cease performing the interim 

computation.206 The commenter stated 

these changes would help guard against 

a carrying broker-dealer performing 

interim reserve computations 

opportunistically to minimize required 

reserve account deposits.207

The final amendments do not include 

this modification, as it would impose 

new requirements on carrying brokerdealers that elect to perform an interim 

reserve computation. Further, carrying 

broker-dealers that utilize this provision 

to perform an interim reserve 

computation will remain subject to the 

3% debit reduction. In addition, the 

Commission estimates that, based on 

data for January 2023 through December 

2023, 49 carrying broker-dealers, which 

held 99.3% of aggregated total credits of 

all carrying broker-dealers, will exceed 

the $500 Million Threshold and will be 

required to perform a daily customer 

and PAB reserve computation.208

Because these carrying broker-dealers 

will perform daily customer and PAB 

computations under the final 

amendments, they will not perform 

interim reserve computations. Given 

that these carrying broker-dealers hold 

nearly all of the total credits of all 

carrying broker-dealers, an amendment 

to the rule as the commenter suggested 

is not merited given the relatively 

smaller amounts required to be on 

deposit for the remaining carrying 

broker-dealers.209 For these reasons, the 

Commission is not adopting the 

commenter’s suggested modification 

and is adopting the amendment as 

proposed.210

E. Other Comments 

The Commission received other 

comments related to the proposal that 

cover technical questions about how the 

final amendments will operate, as well 

as requests for clarification and 

interpretations on specific issues related 

to performing a customer and PAB 

reserve computation daily. 

1. Sweep Programs and Other ‘‘Cash in 

Motion’’ or ‘‘Transitory’’ Credits’’ 

The Commission received two 

comments regarding sweep programs 211


ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 2807 

212See ASA Letter at 2; SIFMA Letter at 7; ASA 

Letter 3. 

213See ASA Letter at 2. 

214See id. 

215See id. 

216See ASA Letter at 2. The commenter stated 

that for purposes of the comment, transitory means 

free credits that are: (1) included in the 

computation; (2) will be needed to fund a known 

activity the first following day; and (3) will be 

included in the deposit due the morning of the 

second following day (despite the fact that the free 

credits have already been used for another client 

directed purpose). Id. The commenter also referred 

to these transitory credits as ‘‘cash in motion.’’ See 

ASA Letter 2 at 1. 

217See ASA Letter at 2. 

218See ASA Letter 3 at 1. 

219 Id. 

220See SIFMA Letter at 7. For example, that 

commenter stated that if a carrying broker-dealer 

receives $100 million shortly before market close on 

Monday, that $100 million will be incorporated into 

the customer reserve computation for Monday. 

Even if the carrying broker-dealer sweeps the funds 

into a sweep program first thing Tuesday morning 

as part of its normal operations, the commenter 

stated that it would still need to deposit $100 

million into its customer reserve bank account on 

Wednesday morning, since the relevant 

computation would be as of close of business on 

Monday. The commenter stated that this would 

effectively require carrying broker-dealer to use its 

own $100 million, thereby tying up liquidity for no 

corresponding benefit. Id. 

221See SIFMA Letter at 7. The commenter did not 

provide data regarding the specific amounts of cash 

each day that is not swept to a carrying brokerdealer’s sweep program because the carrying 

broker-dealer received it after the sweep cut-off 

time. 

222See SIFMA Letter at 7; ASA Letter at 3; ASA 

Letter 2 at 1; ASA Letter 3 at 3. 

223See SIFMA Letter at 7. The commenter stated 

that these staff no-action positions have a number 

of provisions that are challenging for carrying 

broker-dealers to meet (e.g., requiring that funds 

received per transaction or with respect to a 

particular customer equal at least 25% of the total 

credits of the carrying broker-dealer’s most recent 

reserve computation). Id. See also Letter from 

Michael A. Macchiaroli, Assistant Director, 

Commission to Mr. Salvatore Pallante, Vice 

President, NYSE (Apr. 25, 1990) (‘‘NYSE 

Letter’’)(stating that the staff will not recommend 

enforcement action to the Commission if a carrying 

broker-dealer withdraws funds from the special 

reserve bank account without a computation under 

paragraph (g) of Rule 15c3–3 to fulfill certain 

specific customer transactions where such 

transaction represents 25% or more of the total 

credits in the carrying broker-dealer’s most recent 

reserve account computation, and where the 

customer funds received are deposited into a 

separate reserve bank account) and FINRA 

Interpretations of Financial and Operational Rules, 

15c3–3(g)/05, available at www.finra.org; Letter 

from Aase A. Berling, Staff Accountant, Division of 

Market Regulation, Commission to James A. 

Francis, Vice President, The Ohio Company (Mar. 

21, 1985) (‘‘Ohio Company Letter’’)(stating that the 

staff will not recommend enforcement action to the 

Commission if a carrying broker-dealer makes a 

withdrawal from the special reserve bank account 

without performing a computation in order to 

obtain sufficient cash to effect the purchase of 

money market fund shares for customers, and 

deposits such funds into a separate reserve bank 

account to purchase money market fund shares) and 

FINRA Interpretations of Financial and Operational 

Rules 15c3–3(g)/021, available at www.finra.org. 

Staff statements (including those cited herein) 

represent views of the Commission staff and are not 

a rule, regulation, or statement of the Commission. 

The Commission has neither approved nor 

disapproved of these staff statements, and, like all 

staff statements, they have no legal force or effect, 

do not alter or amend applicable law, and create no 

new or additional obligations for any person. 

224See SIFMA Letter at 7. 

225See id. 

226See ASA Letter 3 at 3. 

and performing daily customer and PAB 

reserve computations.212 One 

commenter stated that a daily reserve 

computation would not benefit 

customers of carrying broker-dealers 

with widely-used sweep programs.213

This commenter stated that sweep 

programs contribute to protecting 

customer assets and already address the 

mismatch risk the proposal seeks to 

remedy by regularly moving customer 

cash off a carrying broker-dealer’s 

balance sheet.214 In addition, this 

commenter stated that if a carrying 

broker-dealer receives customer cash 

after the daily sweep cutoff time, it is 

generally swept early the next business 

day and, as such, will be protected 

sooner than including such cash in a 

daily reserve computation.215

This commenter also stated that there 

are potential benefits to more frequent 

customer and PAB reserve computations 

but raised concerns about potential 

impacts on liquidity, particularly in 

cases where a free credit balance is 

‘‘transitory’’ or is ‘‘cash in motion,’’ 216

such as cash that the carrying brokerdealer needs the next day to fund an 

Automated Clearing House transfer or a 

wire request received after banking 

cutoff times.217 This commenter stated 

that carrying broker-dealers may need to 

use their own funds to account for 

transitory funds and that this may result 

in only large carrying broker-dealers 

(with substantial liquidity) being able to 

service ultra-high net worth clients with 

large transitory credits.218 The 

commenter stated that this would 

disadvantage smaller carrying brokerdealers who would be unable to 

compete for certain types of clients or 

transactions.219 Another commenter 

stated that the proposed daily 

computation requirement would impose 

substantial unintended costs on carrying 

broker-dealers that regularly deposit 

inflows of customer cash into reserve 

bank accounts or transfer them into a 

sweep account.220 For these carrying 

broker-dealers, the commenter stated 

that a daily computation could require 

them to segregate large portions of funds 

that are already protected by virtue of 

the sweep/deposit.221 Commenters 

stated that, although this issue exists 

with the preexisting weekly 

computations under Rule 15c3–3, this 

risk is exacerbated under a daily 

computation because carrying brokerdealers will no longer have a week to 

resolve any issues, which creates 

uncertainty, as the amount of cash tied 

up would vary each day.222

One commenter stated that 

Commission staff has previously 

recognized this issue under existing 

staff no-action positions where carrying 

broker-dealers in certain circumstances 

have withdrawn funds from the special 

reserve bank account or deposited funds 

into separate special reserve bank 

accounts that are promptly swept or are 

otherwise used to meet specific 

customer instructions.223 This 

commenter further stated that if funds 

the carrying broker-dealer receives from 

or for customers are swept on a same or 

next day basis into a sweep program or 

into a customer reserve bank account, 

they are protected against loss and there 

is no reason for including these amounts 

in a reserve computation.224

Accordingly, the commenter suggested 

that the Commission simplify the staff 

no-action positions and permit a 

carrying broker-dealer to exclude from 

the customer and PAB reserve 

computations any funds that the 

carrying broker-dealer has swept or 

deposited promptly upon receipt.225

Another commenter stated that the 

Commission should permit cash held 

for a customer that is intended to be 

swept not be treated as a credit in the 

customer reserve computation. The 

commenter stated that this suggestion is 

analogous to a current interpretation 

under Rule 15c3–3a that states, if a 

carrying broker-dealer pre-funds a 

redemption of money market shares but 

still carries the shares long in the 

customer’s account, it cannot treat the 

pre-funding as a debit in the reserve 

computation. The commenter stated that 

cash held for a customer that is 

intended to be swept should not be 

treated as a credit in the reserve 

computation just as pre-funded money 

market fund redemptions are not treated 

as debits in the computation.226

For the reasons discussed below, the 

final amendments do not exclude cash 

that is intended to be swept or is 

otherwise ‘‘transitory’’ or in ‘‘motion’’ 

from the customer and PAB reserve 

computations. However, the final 

amendments lowering the debit 

reduction from 3% to 2% in the 

customer reserve computations mitigate 

concerns commenters raised about how 

a daily reserve requirement could 

require carrying broker-dealers to use 

their own capital to fund reserve 

account deposit requirements that relate 


ddrumheller on DSK120RN23PROD with RULES2
2808 Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 

227 In addition, with respect to accounts of high 

net worth individuals, the staff has issued no-action 

positions regarding smaller carrying broker-dealers 

that receive substantial deposits from individual 

customers for a current specific purpose. See, e.g., 

NYSE Letter. 

228See section II.A.2. of this release (discussing 

the $500 Million Threshold). 

229Customer securities are protected under the 

possession and control requirements under 

paragraphs (b) and (c) of Rule 15c3–3. See section 

I.C.1. of this release (discussing the possession and 

control requirements of Rule 15c3–3). 

230See SIFMA Letter at 7; ASA Letter at 2; ASA 

Letter 2 at 1. 

to cash that will be swept or otherwise 

deployed the next day. In particular, a 

carrying broker-dealer can use the 

additional liquidity available to it 

through the lower 2% debit reduction to 

meet a required reserve deposit that 

results from a situation where cash is 

not swept or otherwise deployed 

quickly enough to avoid its inclusion in 

the customer or PAB reserve 

computations. Further, in response to 

the comment that smaller carrying 

broker-dealers may be disadvantaged in 

servicing customers with large 

transitory credits as compared to larger 

carrying broker-dealers with more 

liquidity, smaller carrying brokerdealers (as measured in terms of average 

total credits) also can use this additional 

liquidity to provide services to all types 

of customers, including ultra-high net 

worth individuals with large transitory 

credits.227 In addition, raising the 

threshold to $500 Million will exclude 

an additional cohort of smaller carrying 

broker-dealers—relative to the carrying 

broker-dealers subject to the 

requirement—from the scope of the final 

amendments as compared to the 

proposal. These smaller carrying brokerdealers (as measured in terms of average 

total credits) may continue to perform 

weekly customer and PAB reserve 

computations and will have a week to 

resolve any issues related to transitory 

credits.228 Lowering the debit reduction 

from 3% to 2% and increasing the 

threshold from $250 million to $500 

million will address—in part—concerns 

about transitory credits by either 

providing excess liquidity to account for 

these credits or excluding a larger 

number of relatively smaller carrying 

broker-dealers from the need to address 

these credits on a daily basis. 

Transferring cash in a customer or 

PAB account to an FDIC-insured bank as 

part of a sweep program protects 

customers’ and PAB account holders’ 

cash in that it is no longer on the 

carrying broker-dealer’s balance sheet. 

Other cash that has been redeployed 

such as cash used to purchase securities 

also is no longer included on a carrying 

broker-dealer’s balance sheet.229

However, this does not mean that it 

would be appropriate to permit a 

carrying broker-dealer performing daily 

customer and PAB reserve computations 

to exclude cash of customer and PAB 

account holders (including cash 

received after the daily cutoff time for 

a sweep program and other ‘‘transitory 

credits’’) from its customer and PAB 

reserve computations because the intent 

is to sweep the cash out of the accounts 

or otherwise deploy it before the next 

deposit into the customer and PAB 

reserve accounts is due. Uninvested 

cash (such as cash received after a 

sweep cut-off time) held for customers 

and PAB account holders remains in the 

customer’s or PAB account holder’s 

securities account and on a carrying 

broker-dealer’s balance sheet. A carrying 

broker-dealer must include this cash in 

its customer or PAB reserve 

computation for that particular business 

day because the carrying broker-dealer 

owes that cash to its customer and PAB 

account holders, and it will not receive 

FDIC protection until it is swept the 

next business day. 

As discussed in section I.C.1. of this 

release, preexisting Rule 15c3–3 is 

designed to protect customers by 

segregating their securities and cash 

from the carrying broker-dealer’s 

proprietary business activities. This is 

accomplished through the customer and 

PAB reserve computations. If a carrying 

broker-dealer excludes customer and 

PAB cash that is included in its books 

and records from its reserve 

computation, it increases the risk that— 

if the carrying broker-dealer fails—the 

cash and securities may not be readily 

available to be returned to customers 

and PAB account holders. This, in turn, 

would increase the risk that a carrying 

broker-dealer may be unable to 

promptly return cash and securities to 

customer and PAB account holders in 

the event the carrying broker-dealer fails 

financially. This risk is exacerbated for 

PAB account holders, as they are not 

entitled to advances from the SIPC 

Fund. 

In response to the comment that the 

Commission should permit cash held 

for a customer that is intended to be 

swept not be treated as a credit in the 

customer reserve computation, a 

carrying broker-dealer cannot include 

this debit in the reserve computation 

because the receivable is from the 

money market fund and not the 

customer. In other words, the carrying 

broker-dealer cannot treat the prefunding like a margin loan collateralized 

by the money market shares carried in 

the account. Margin loans are debits in 

the reserve computation, but they are 

loans to the customers to purchase the 

securities and the customer owes the 

money to the carrying broker-dealer. In 

the case of cash intended to be swept, 

however, the carrying broker-dealer 

holds the cash for the customer, which 

is a credit item in the reserve 

computation. This cash is a customer 

payable (i.e., customer credit) until it is 

swept and is no longer on the carrying 

broker-dealer’s books and records. A 

carrying broker-dealer must include 

such customer credits in its customer 

reserve computation. 

In response to comments that the 

issue related to cash in motion or 

transitory credits will be exacerbated 

under a daily computation requirement 

because a carrying broker-dealer will no 

longer have a week to resolve issues 

under a daily computation requirement 

because credit amounts vary each 

day,230 the scenario of having to account 

for cash that the carrying broker-dealer 

no longer holds also can occur under 

the preexisting weekly reserve 

computation requirement. For example, 

customer cash deposited at the carrying 

broker-dealer on Friday after the time 

when it can be swept to a money market 

fund or bank must be accounted for in 

the customer reserve computation 

performed the following Monday (using 

numbers as of the close of business 

Friday) and, to the extent it creates a 

deposit requirement, the required 

deposit must be made by 10 a.m. on 

Tuesday even though by that time the 

customer cash has been swept to the 

money market fund or bank. Moreover, 

unless the carrying broker-dealer 

performs an intra-week reserve 

computation, the cash must remain in 

the customer reserve bank account until 

the following Tuesday. A daily reserve 

computation requirement will shorten 

the time that the cash must be held in 

the customer reserve bank account. 

While a daily reserve computation 

requirement will shorten the time that a 

carrying broker-dealer must hold cash in 

the customer reserve bank account, the 

Commission recognizes that a carrying 

broker-dealer performing a daily reserve 

computation will need to manage its 

sweep cash and other transitory credits 

daily rather than weekly. This increase 

in frequency in performing the customer 

and PAB reserve computations will not 

exacerbate the issue related to sweeprelated cash and transitory credits as 

daily cash fluctuations may become 

more predictable over time, but it will 

require the carrying broker-dealer to 

manage this cash more quickly and 

efficiently, as compared to a weekly 

computation. This increase in 

efficiency, however, as a result of a 

daily reserve computation requirement 


ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 2809 

231See section I.A. of this release (discussing the 

need for daily reserve computations and ability of 

carrying broker-dealers to be able to withdraw 

excess cash or qualified securities more quickly 

from the reserve bank account under a daily reserve 

computation requirement, which will improve their 

liquidity); section IV.D. of this release (discussing 

increase in operational efficiency for carrying 

broker-dealers as a result of the amendments 

allowing for the more efficient management of 

funds); section IV.E.10. of this release (discussing 

exemptions for cash in motion as a reasonable 

alternative, including the costs). 

232See ASA Letter at 4. 

233Customer cash is a balance sheet item of the 

carrying broker-dealer (i.e., the amount of cash 

received from a customer increases the amount of 

the carrying broker-dealer’s assets and creates a 

corresponding liability to the customer). The 

customer reserve computation is designed to isolate 

these carrying broker-dealer assets so that an 

amount equal to the net liabilities to customers is 

held as a reserve in the form of cash or U.S. 

Government securities. The requirement to 

maintain this reserve is designed to effectively 

prevent the carrying broker-dealer from using 

customer funds for proprietary business activities 

such as investing in securities. The goal is to put 

the carrying broker-dealer in a position to be able 

to readily meet its cash obligations to customers by 

requiring the carrying broker-dealer to make 

deposits of cash and/or U.S. Government securities 

into the customer reserve bank account in the 

amount of the net cash owed to customers. See 

Proposing Release, 88 FR at 45838, n.17. 

234See SIFMA Letter at 8–9. 

235See SIFMA Letter at 8. 

236See SIFMA Letter at 8. 

237See id. 

238See id. 

239See SIFMA Letter at 8–9. Paragraph (i) of Rule 

15c3–3 currently provides that if a carrying brokerdealer fails to make a deposit in its customer or 

PAB reserve bank account, as required by Rule 

15c3–3, the carrying broker-dealer must 

immediately notify the Commission and its DEA. 

Notification requirements for broker-dealers 

generally range from immediate, promptly (but 

within 24 hours), within 24 hours, and within 48 

hours. See, e.g., paragraphs (f), (d)(1), (b), (d)(2) of 

Rule 17a–11, respectively. Given the importance of 

the customer protection requirements of Rule 15c3– 

3, a 24-hour notification requirement pertaining to 

Continued 

will allow a carrying broker-dealer to 

withdraw funds more quickly from its 

customer reserve bank account, as 

compared to a weekly reserve 

computation, which will improve its 

liquidity.231

Further, while the amount of credits 

related to cash that is not swept in a 

particular business day or other ‘‘cash in 

motion’’ would vary each day under a 

daily reserve computation requirement, 

the same is true for all customer credits 

and debits in the customer and PAB 

reserve computations. Therefore, a 

carrying broker-dealer must maintain 

sufficient capital or access to funding to 

make any required deposit into its 

customer or PAB reserve bank account, 

including any increased deposit 

requirements related to ‘‘transitory 

credits’’ or ‘‘cash in motion,’’ including 

when cash is not swept soon enough. 

This ensures that broker-dealers 

maintain sufficient access to capital and 

funding to support the volume of 

customer and PAB account holder 

business that they are carrying. 

While lowering the debit reduction to 

2% and raising of the threshold to $500 

million mitigates concerns commenters 

raised regarding issues related to cash 

sweeps and other transitory credits, the 

Commission recognizes that carrying 

broker-dealers performing a daily 

reserve computation may sometimes 

experience liquidity issues with respect 

to unusual or large inflows of customer 

cash received late in the day that is 

intended to be transferred to a sweep 

program under paragraph (j)(2)(ii) under 

Rule 15c3–3. If the unusual or large 

inflow of cash is swept out of the 

broker-dealer on the day the 

computation is performed, it 

nonetheless will be accounted for in the 

computation and may result in an 

increased deposit requirement. This 

issue merits further consideration. 

However, any potential solution must 

not diminish customer protection and 

be practical. Further, attempting to 

develop an appropriate solution would 

be a complex undertaking and could 

affect a range of carrying broker-dealers 

depending on their business model, the 

types of accounts the carrying brokerdealer services, and the products offered 

in the carrying broker-dealer’s sweep 

program. The Commission would need 

to assess many factors, for example, the 

amount of cash that would be 

considered large or unusual (i.e., not 

routine) on a particular business day, 

the size of cash inflows that typically 

may be received by the broker-dealer on 

the business days following a large or 

unusual cash inflow, the types of 

customer accounts or firm business 

models affected by unusual or large cash 

inflows (e.g., retail or institutional 

accounts), and the practices of carrying 

broker-dealers currently performing 

daily computations. For these reasons, 

the Commission is not excluding credits 

arising from unusual or large inflows of 

cash from a carrying broker-dealer’s 

daily reserve computation at this time. 

The Commission encourages market 

participants to engage with Commission 

staff regarding their particular facts and 

circumstances on this issue. 

Finally, a commenter stated that if a 

carrying broker-dealer must use its own 

funds to make a required deposit 

because customer transitory credits are 

no longer available, it could result in 

commingling of carrying broker-dealer 

and customer assets and/or constitute a 

misuse of the special reserve account.232

In response, the commenter appears to 

have misunderstood the requirements of 

Rule 15c3–3. Carrying broker-dealers 

may deposit their own cash and/or 

qualified securities in a customer or 

PAB reserve bank account to meet any 

minimum deposit requirements under 

Rule 15c3–3 or as an additional buffer 

above the minimum deposit amount. 

These deposits to the customer and PAB 

reserve bank accounts comply with the 

requirements of Rule 15c3–3.233

2. Requests for Interpretations and 

Clarifications 

A commenter stated that the 

Commission should allow carrying 

broker-dealers to notify their DEA if 

they will be unable to perform a 

customer or PAB reserve computation or 

make a required deposit on a specific 

day due to exigent circumstances.234

The commenter stated that carrying 

broker-dealers occasionally face 

unexpected circumstances that could 

make it difficult or impossible to 

perform their reserve computation (or 

part of the computation) on a specific 

day, or to make the required deposit 

into the special reserve bank account.235

For example, the commenter stated that 

an unexpected market close (which 

could result from a systems outage or a 

natural disaster) could temporarily 

prevent personnel from accessing 

systems necessary to make the reserve 

computation; a bank may be unable to 

accept deposits due to a systems outage; 

or the failure of a third-party system 

may make it impossible for a carrying 

broker-dealer to access data necessary to 

compute some element of the reserve 

computation.236 The commenter further 

stated these events actually occur and 

provided an example of a significant 

processing issue that a large financial 

market utility had in 2023 that affected 

the ability of carrying broker-dealers to 

accurately calculate their end-of-day 

balances.237 The commenter stated that 

the problems such exigent 

circumstances cause often cannot be 

resolved in a day, and because these 

events are beyond the carrying brokerdealer’s control, the Commission should 

not penalize a carrying broker-dealer for 

its inability to perform the reserve 

computation or make a required deposit 

on a particular day because of them.238

More specifically, in order to address 

situations where there is an exigent 

circumstance, the commenter stated that 

the Commission should allow carrying 

broker-dealers to notify their DEA 

within 24 hours (including an 

explanation) if they will be unable to 

perform a customer or PAB reserve 

computation or make a required deposit 

on a specific day due to exigent 

circumstances.239 The explanation 


ddrumheller on DSK120RN23PROD with RULES2
2810 Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 

the failure to make a required deposit would be 

inappropriate. Consequently, the final amendments 

do not modify the immediate notification 

requirement of paragraph (i) of Rule 15c3–3. 

240See SIFMA Letter at 9. 

241The Commission has previously provided 

exemptive relief and other relief and guidance for 

circumstances that have affected market 

participants, including carrying broker-dealers, for 

events such as the COVID–19 pandemic and for 

Hurricane Sandy in 2012. See, e.g., Commission, 

Coronavirus (COVID–19) Response, available at: 

https://www.sec.gov/sec-coronavirus-covid-19- 

response (Commission statement summarizing the 

operational initiatives, market-focused actions, 

guidance and targeted assistance and relief, investor 

protection efforts and other work of the 

Commission in response to the effects of COVID– 

19). See also Letter from Michael A. Macchiaroli, 

Associate Director, Division of Trading and 

Markets, Commission to Ira Hammerman, General 

Counsel, SIFMA (Dec. 21, 2012) (staff no-action 

position about regulatory issues under Rules 15c3– 

1 and 15c3–3 related to the lack of access to the 

physical securities located at the vault of the 

Depository Trust & Clearing Corporation due to 

Hurricane Sandy), available at https://www.sec.gov/ 

divisions/marketreg/mr-noaction/2012/sifma122112-15c3.pdf. 

242See 17 CFR 240.17a–5(d)(3). This rule requires 

a carrying broker-dealer to include a compliance 

report in its annual reports filed with the 

Commission and a report of an independent public 

accountant covering the compliance report. The 

compliance report must include, among other 

statements, statements that the carrying brokerdealer has established and maintained ‘‘Internal 

Control Over Compliance’’ as that term is defined 

in the rule and that the Internal Control Over 

Compliance was effective during the most recent 

fiscal year and as of the end of the fiscal year. See 

17 CFR 240.17a–5(d)(3)(i). The rule defines 

‘‘Internal Control Over Compliance’’ in pertinent 

part as controls that have the objective of providing 

the broker-dealer with reasonable assurance that 

non-compliance with Rule 15c3–3 will be 

prevented or detected on a timely basis. See 17 CFR 

240.17a–5(d)(3)(i). Failure to perform a customer or 

PAB reserve computation due to exigent 

circumstances beyond the control of the carrying 

broker-dealer would not necessarily constitute a 

material weakness for purposes of the compliance 

report. See 17 CFR 240.17a–5(d)(3)(iii) (stating that 

a broker-dealer is not permitted to conclude that its 

Internal Control Over Compliance was effective 

during the most recent fiscal year if there were one 

or more material weaknesses in its Internal Control 

Over Compliance during the most recent fiscal 

year). 

243As noted above, the carrying broker dealer 

must immediately notify the Commission and its 

DEA if it fails to make a required deposit into its 

customer or PAB reserve accounts. See paragraph 

(i) of Rule 15c3–3. 

244See SIFMA Letter at 9; ASA Letter at 4; 

Raymond James Letter at 4–5. 

245See SIFMA Letter at 9. 

246See SIFMA Letter at 9. 

247See SIFMA Letter at 9–10; Raymond James 

Letter at 4–5. One commenter stated that the 

Commission staff has previously recognized that 

carrying broker-dealers should not be required to 

make deposits and certain transfers in connection 

with the special reserve bank account on certain 

days where exchanges are open but banks are 

closed, as carrying broker-dealers may be unable to 

actually process or make such deposits or transfers. 

See SIFMA Letter at 9. 

248See ASA Letter at 4. 

249See Raymond James Letter at 5. 

would describe the circumstances and 

why it prevents the carrying brokerdealer from performing the reserve 

computation or making the deposit. The 

commenter also stated that if the 

carrying broker-dealer cannot perform 

the computation, the Commission 

should permit it to use to the prior day’s 

figures to perform the computation, and 

suggested that the Commission should 

require carrying broker-dealers to 

subsequently notify their DEA of the 

steps taken to remedy the deficiency.240

The Commission recognizes that there 

may be exigent circumstances beyond 

the control of the carrying broker-dealer 

that could interfere with its ability to 

perform its customer or PAB reserve 

computation or make a required deposit 

into the customer or PAB reserve bank 

accounts.241 For example, exigent 

circumstances beyond the control of the 

carrying broker-dealer may include, 

among other things, a natural disaster; 

the failure of a third-party data 

provider’s system that affects the 

carrying broker-dealer’s ability to access 

data necessary to compute the customer 

or PAB reserve computation, or part of 

the computation; or where a carrying 

broker-dealer cannot make a required 

deposit at a specific bank because the 

bank cannot accept deposits due to a 

systemwide outage. The Commission 

expects that these exigent circumstances 

would be rare. The Commission further 

recognizes that performing a daily 

computation—as compared to a weekly 

computation—increases the potential 

that exigent circumstances could 

interfere with the operations necessary 

to comply with the computation and 

deposit requirements of Rule 15c3–3, 

given the greater frequency of the 

necessary computations and deposits. 

Moreover, this interference—in certain 

circumstances—could occur even 

though the carrying broker-dealer has 

established and maintained effective 

internal controls over compliance.242

If the exigent circumstances interfere 

with the carrying broker-dealer’s ability 

to perform the reserve computation, the 

firm is encouraged to notify its DEA of 

the situation, explain how the exigent 

circumstances are interfering with its 

ability to perform the customer or PAB 

reserve computation,243 and describe 

any steps it is taking to address the 

situation such as using the prior day’s 

figures to perform the computation, 

depositing an additional buffer into the 

customer or PAB reserve account, or 

opening a reserve account at an 

alternative bank. 

Commenters also stated that the 

Commission should not require carrying 

broker-dealers to perform a computation 

(or make it optional) on certain days on 

which markets are closed or close early 

because it is not practical to perform a 

computation on these days.244 In 

particular, one commenter stated that 

exchanges and financial market utilities 

often close early on the business day 

before a major holiday, and that this 

makes it difficult to receive on a timely 

basis certain information needed to 

perform the reserve computation, as 

exchanges and financial market utilities 

may not update the systems and data 

needed to conduct the computation.245

This commenter suggested that the 

Commission should treat New Year’s 

Eve, the Friday before Memorial Day, 

the Wednesday before Thanksgiving, the 

Friday after Thanksgiving, and 

Christmas Eve as non-business days for 

purposes of the customer and PAB 

reserve computations.246 Commenters 

also suggested that the Commission also 

should not treat days on which either 

exchanges or banks, but not both, are 

open, or where exchanges or banks close 

early, as non-business days for purposes 

of the reserve computations (including 

Veterans Day, Columbus Day, and Good 

Friday).247 One commenter stated that 

this flexibility could improve 

operational efficiency and mitigate the 

burden on carrying broker-dealers 

during unusual market conditions.248

Another commenter stated that it has 

found that customers enjoy the same 

holidays and half-days, reducing the 

number of customer transactions and, 

thus, any fluctuations in required 

minimum account balances are likely to 

be within acceptable ranges.249

The Commission recognizes there 

may be days where it is more 

challenging for a carrying broker-dealer 

to perform a customer or PAB reserve 

computation due to staffing issues 

related to holidays or when banks or 

exchanges are closed or close early. 

Performing a daily computation—as 

compared to a weekly computation— 

means that the work necessary to 

perform the daily computations will 

need to be performed on these days. 

Carrying broker-dealers should contact 

the Commission or Commission staff, as 

well as their DEA, if they anticipate that 

performing the reserve computations or 

making the required deposits will be 

challenging for these or other reasons. 

The Commission or Commission staff 

will evaluate these requests and may 

provide exemptive or other relief as 

appropriate. For example, the 

Commission or Commission staff could 

consider that in some circumstances 

many employees of a carrying brokerdealer may not be working certain days 

before major holidays, and as such, 

carrying broker-dealers may need an 


ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 2811 

250See, e.g., FINRA Regulatory Notice 18–41 

(Dec. 17, 2018) (notifying FINRA members of an 

optional one-day extension for customer and PAB 

reserve computations and required deposits around 

the December 2018 month-end holidays). Similar 

extensions were announced in 2007 and 2012. Id. 

See also FINRA Interpretations of Financial and 

Operational Rules, 15c3–3(e)(3)/021, Reserve 

Deposits Focusing Around Bank Holidays. 

251See Proposing Release, 88 FR at 45847. In 

2019, the Commission adopted customer 

segregation requirements for broker-dealers and 

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

to customer money, securities, and property related 

to security-based swaps. See Capital, Margin, and 

Segregation Requirements for Security-Based Swap 

Dealers and Major-Security-Based Swap 

Participants and Capital and Segregation 

Requirements for Broker-Dealers, Exchange Act 

Release No. 86175 (June 21, 2019) [84 FR 43872, 

43930–43 (Aug. 22, 2019)] (‘‘SBS Segregation 

Adopting Release’’). 

252See SIFMA Letter at 11–12. 

253See SIFMA Letter at 11. This commenter also 

stated the Commission previously proposed a daily 

reserve computation requirement for security-based 

swap activity and did not adopt the proposed 

approach. The commenter stated that there is no 

need for the Commission to revisit this conclusion. 

Id. at 11–12. 

254This is based on FOCUS Report data for 

calendar year 2023. The Commission notes that staff 

has stated its views in Question 1 of Responses to 

Frequently Asked Questions Regarding Financial 

Responsibility Requirements as Applied to SecurityBased Swap Activities of Broker-Dealers and 

Security-Based Swap Dealers (Oct. 8, 2021), 

available at https://www.sec.gov/tm/faqs-financialresponsibility-req-applied-sbs (‘‘SBS FAQ 1’’). 

Based on FOCUS data for December 31, 2023, no 

broker-dealer reported Total Credits greater than $0 

(Line 12089) in its security-based swap customer 

reserve computation. 

255These SBSDs are not SIPC members. 

256See Proposing Release, 88 FR at 46846–45847. 

257SIFMA Letter at 12; Raymond James Letter at 

4; ASA Letter at 5–6; ASA Letter 2 at 1; Letter from 

ASA (Oct. 3, 2024) (‘‘ASA Letter 4’’). 

258See SIFMA Letter at 12. 

259See ASA Letter 4 at 1. 

260See Raymond James Letter at 4; ASA Letter at 

6; ASA Letter 2 at 1. 

261See SIPC Letter at 2. 

262See SIFMA Letter at 12; Raymond James Letter 

at 3–4; ASA Letter at 6; ASA Letter 2 at 1. 

263See SIFMA Letter at 12. 

264See, e.g., ASA Letter 2 at 1; SIFMA Letter at 

12; Raymond James Letter at 4; ASA Letter at 6. 

265ASA Letter at 6. 

266See id. In determining compliance dates, the 

Commission considers the benefits of the rules as 

well as the costs of delayed compliance dates, and 

potential overlapping compliance dates. For the 

reasons discussed throughout the release, to the 

extent that there are costs from overlapping 

compliance dates, the benefits of the rule justify the 

costs. See infra sections IV.B.1. and D. in the 

Economic Analysis for a discussion of the 

interaction of the final rule with certain other 

Commission rules. 

additional day to complete their 

customer and PAB reserve computations 

and deposits.250 Finally, when a deposit 

requirement falls on a day that banks are 

closed, the carrying broker-dealer 

should make the deposit by 10 a.m. of 

the next business day that the banks are 

open. 

F. Reserve Account Requirements for 

Security-Based Swaps 

The Commission sought comment in 

the proposal on whether carrying 

broker-dealers should perform the 

security-based swap customer reserve 

computation daily (rather than 

weekly).251 One commenter stated that 

the Commission should not change the 

reserve account requirements for 

SBSDs.252 The commenter stated that it 

is unnecessary to make any changes 

because as the Proposing Release stated 

that almost all carrying broker-dealers 

that have security-based swap credits 

already take those credits into account 

and stand-alone SBSDs generally 

operate under an exemption from 

reserve computation requirements 

under 17 CFR 240.18a–4(f) (‘‘Rule 18a– 

4(f)’’). Therefore, the commenter stated 

requiring a daily computation for 

security-based swap activity would have 

virtually no benefit.253

The Commission agrees with the 

commenter that amending Rule 15c3–3 

to require a broker-dealer (including a 

broker-dealer (other than an OTC 

derivatives dealer) also registered as an 

SBSD) to perform a security-based swap 

customer reserve computation daily 

would have virtually no impact because 

the credits related to security-based 

swap activity for security-based swap 

customers generally are being included 

in the customer reserve computation.254

The Commission also agrees with the 

commenter that there would be virtually 

no benefit to requiring stand-alone 

SBSDs to perform a reserve computation 

daily since all of them operate under the 

exemption under Rule 18a–4(f).255

Therefore, the Commission is not 

adopting a daily reserve requirement for 

the security-based swap customer 

reserve computation under Rule 15c3–3 

or 17 CFR 240.18a–4 as part of the final 

amendments. 

III. Compliance Date 

In the Proposing Release, the 

Commission sought input from 

commenters on the appropriate 

compliance date or implementation 

schedule for the proposed amendments. 

Specifically, the Commission requested 

comment regarding various aspects of 

the proposal that would impact a 

carrying broker-dealer’s ability to 

comply with the new amendments, 

including the amount of time a carrying 

broker-dealer would need to comply 

with the requirement to perform a 

customer and PAB reserve computation 

daily, whether there are any 

technological or operational issues that 

should be considered, or whether a 

staggered compliance date depending 

on the size of the average total credits 

would be appropriate, among other 

things.256

The Commission received a few 

comments relating to the compliance 

date.257 Stating that there are 

complexities associated with moving 

from weekly to daily customer and PAB 

reserve computations, commenters 

requested various time periods for 

implementation of the daily customer 

and PAB reserve computation 

requirements. These commenters 

suggested computing the 12-month 

rolling average starting one year after 

publication of the final rule,258 a 

compliance timeline of at least 18 

months from the final rule,259 as well as 

implementation dates of no earlier than 

January 2025 and mid- to late-2025.260

One commenter stated that carrying 

broker-dealers do not need an additional 

compliance period beyond the six 

months prescribed in the proposed rule 

after a carrying broker-dealer exceeds 

the proposed $250 Million 

Threshold.261 Commenters stated the 

proposal would require significant time, 

experience, and expense to implement, 

would present significant operational 

challenges, and that the transition to a 

daily computation would require 

significant time to find, hire and train 

new staff to conduct the computation as 

well as complete the extensive systems 

and operations changes.262 One 

commenter also stated that third party 

data providers, such as service bureaus, 

would need to be able to provide 

carrying broker-dealers with more 

timely information than is currently 

available.263

Commenters also suggested that the 

Commission consider the cumulative 

burdens of implementing the 

amendments and other regulatory 

obligations with potentially overlapping 

compliance dates.264 Specifically, one 

commenter stated that the same carrying 

broker-dealers who will be required to 

move to a daily computation are also 

managing multiple other regulatory 

requirements.265 The commenter further 

stated that unless the Commission 

provides adequate time to manage the 

new regulatory requirements together, 

carrying broker-dealers will face an 

unmanageable clash of compliance 

requirements all converging at the same 

time.266 Commenters also stated that 

many finance, operations, and 

information technology employees of 

carrying broker-dealers needed to create 

and test new programs and systems, 

among other requirements, are also 

involved in the implementation of other 

large-scale, complex initiatives 


ddrumheller on DSK120RN23PROD with RULES2
2812 Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 

267See SIFMA Letter at 12; Raymond James Letter 

at 4; ASA Letter at 6. New requirements or 

regulations commenters highlighted included T+1 

initiatives, amendments to FINRA Rule 4210 about 

margin requirements for covered agency 

transactions, and compliance with requirements of 

the national Consolidated Audit Trail or ‘‘CAT.’’ 268See SIFMA Letter at 12; see also Raymond 

James Letter at 4. 269See paragraph (e)(3)(i)(B)(1) of Rule 15c3–3, as 

amended. 

270See paragraph (e)(3)(i)(B)(1) of Rule 15c3–3, as 

amended. 

271The carrying broker-dealers subject to the final 

amendments file the FOCUS Report electronically 

on the FINRA eFOCUS system. These carrying 

broker-dealers file the FOCUS Report pursuant to a 

plan established by the carrying broker-dealer’s selfregulatory organization, the procedures and 

provisions of which have been submitted to and 

declared effective by the Commission pursuant to 

paragraph (a)(3) of Rule 17a–5. 17 CFR 240.17a– 

5(a)(3). 

272See 15 U.S.C. 78c(f). 

273See 15 U.S.C. 78w(a)(2). 

mandated by other new regulations.267

Commenters stated that these initiatives 

call on the same personnel, technology, 

and monetary resources to implement 

them properly.268

After consideration of the comments, 

the Commission agrees that carrying 

broker-dealers need sufficient time to 

comply with the requirement to perform 

daily customer and PAB reserve 

computations beyond the six months 

provided in the rule after a carrying 

broker-dealer exceeds the $500 Million 

Threshold.269 Carrying broker-dealers 

must begin calculating their average 

total credits using the 12 most recently 

filed month-end FOCUS Reports ending 

with the FOCUS Report for June 30, 

2025. As a result, carrying brokerdealers that exceed the $500 Million 

Threshold using each of the 12 filed 

month-end FOCUS Reports from July 

31, 2024, through June 30, 2025, must 

perform customer and PAB 

computations daily beginning no later 

than December 31, 2025. This aligns 

with the requirements of the final 

amendments, as carrying broker-dealers 

are provided six months under 

paragraph (e)(3)(i)(B)(1) of Rule 15c3–3, 

as amended, to begin performing 

customer and PAB reserve computations 

daily after exceeding the $500 Million 

Threshold. 

While one commenter stated that the 

12-month rolling average for total 

credits should start one year after 

publication of the final rule, given the 

importance of addressing the mismatch 

risk the final amendments are designed 

to address, it is important for carrying 

broker-dealers to comply with the 

requirement to perform customer and 

PAB reserve computations daily as soon 

as practicable, while also having 

sufficient time to modify and/or 

upgrade existing technology, to employ 

additional staff, and to adjust internal 

processes to comply with the daily 

reserve computation requirement. The 

Commission agrees with commenters 

that stated an implementation date no 

sooner than January 2025 is appropriate. 

Thus, as described above in this section, 

by requiring carrying broker-dealers to 

begin computing a daily customer and 

PAB reserve computation beginning no 

later than December 31, 2025, carrying 

broker dealers will have sufficient time 

to perform the tasks necessary to be able 

to begin daily customer and PAB reserve 

computations as required by the final 

amendments. 

Further, the additional six month 

compliance period provided for carrying 

broker-dealers in this section beyond 

the six month compliance period in the 

rule is appropriate (for a total 

compliance period of approximately one 

year) and recognizes that numerous 

carrying broker-dealers will prepare to 

transition to a daily customer and PAB 

reserve computation at the same 

time.270 This additional time considers 

that these carrying broker-dealers may 

need to interview and hire new 

employees and may use common 

service providers. Therefore, the extra 

six months will apply to all affected 

carrying broker-dealers, and a common 

transition period will be easier to 

administer and more equitable. 

The Commission also recognizes the 

need for third-party data providers to 

provide data for a customer or PAB 

reserve computation on a timelier basis. 

Although commenters did not specify a 

period of time necessary for third-party 

service providers to transition to a more 

frequent provision of information, 

carrying broker-dealers will have 

approximately one year from adoption 

to make arrangements with such thirdparty service providers. As multiple 

carrying broker-dealers already perform 

daily customer and PAB reserve 

computations on a voluntary basis, to 

the extent third-party service providers 

supply needed data to these carrying 

broker-dealers, they should be in a 

position to implement the processes and 

agreements necessary to provide 

additional carrying broker-dealers with 

the necessary data. The requirement to 

begin daily customer and PAB reserve 

computations beginning no later than 

December 31, 2025, is an adequate time 

period to accomplish these tasks. 

Further, the compliance period also 

will provide carrying broker-dealers 

whose average total credits may hover 

close to the $500 Million Threshold a 

sufficient period of time between the 

date the amendments are adopted and 

the June 30, 2025 calculation date for 

average total credits to determine if they 

will be subject to the requirement to 

perform a customer and PAB reserve 

computation daily or whether they will 

manage their customer and PAB credits 

to remain below the $500 Million 

Threshold. Because the requirement to 

calculate average total credits ends with 

the FOCUS Report for June 30, 2025, 

part of this time period is forward 

looking to enable carrying brokerdealers to make these determinations or 

adjustments after the Commission 

adopts the final amendments. 

A carrying broker-dealer that elects 

the alternative method for net capital 

and voluntarily elects to perform the 

customer reserve computation daily 

pursuant to paragraph (e)(3)(v) of Rule 

15c3–3, as amended, and reduces 

aggregate debit items by 2% may do so 

on or after the effective date of the final 

amendments, provided that the required 

notification to the carrying brokerdealer’s DEA has been made at least 30 

days prior to beginning the daily 

computation (with the 2% debit 

reduction). 

Finally, the compliance date for the 

amendments to the Form X–17A–5, Part 

II (i.e., Part II of the FOCUS Report) is 

March 1, 2026. This will allow carrying 

broker-dealers the opportunity to 

become familiar with the changes and 

make any necessary updates to their 

policies, procedures, systems, and 

practices. In addition, it allows FINRA 

to develop and test these updates to its 

eFOCUS system.271

IV. Economic Analysis 

A. Introduction 

The Commission is mindful of the 

economic effects, including the benefits 

and costs, of the final amendments. 

Section 3(f) of the Exchange Act 

provides that when engaging in 

rulemaking that requires the 

Commission to consider or determine 

whether an action is necessary or 

appropriate in the public interest, to 

also consider, in addition to the 

protection of investors, whether the 

action will promote efficiency, 

competition, and capital formation.272

Section 23(a)(2) of the Exchange Act 

also requires the Commission to 

consider the effect that the rules and 

rule amendments would have on 

competition, and it prohibits the 

Commission from adopting any rule that 

would impose a burden on competition 

not necessary or appropriate in 

furtherance of the Exchange Act.273 The 

analysis below addresses the likely 

economic effects of the final 

amendments, including the anticipated 


ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 2813 

274See section I.A of this release (discussing the 

risk of a mismatch of funds owed and funds 

reserved under Rule 15c3–3). 

275See section I.C.1. of this release (discussing 

customer protection requirements of Rule 15c3–3 

for customers and PAB account holders). 

276See section I.C.2. of this release (discussing 

broker-dealer liquidations and SIPA, including the 

funding and balance of the SIPC Fund). For an 

example of a customer reserve bank account 

mismatch, one carrying broker-dealer had a deficit 

in its customer reserve bank account equal to $5 

billion, yet the level of the SIPC Fund at the time 

was at $2 billion. See Merrill Lynch, Pierce, Fenner 

& Smith Incorporated and Merrill Lynch 

Professional Clearing Corp., Order Instituting 

Administrative and Cease-and-Desist Proceedings, 

Pursuant to sections 15(b) and 21C of the Securities 

Exchange Act of 1934, Making Findings, and 

Imposing Remedial Sanctions and a Cease-andDesist Order, Exchange Act Rel. No. 78141 (June 23, 

2016). 

277The Proposing Release contained a 

typographical error stating that the largest carrying 

broker-dealers with average total credits of at least 

$500 billion (instead of $500 million) had 

mismatches of between 10 and 18% in 2022. 

Despite this typographical error in the text, the 

Proposing Release correctly calculated the 

mismatches using the carrying broker-dealers with 

at least $500 million average total credits. 

278Based on FOCUS Report data for 2023. A 

mismatch is calculated as a carrying broker-dealer’s 

deposit (FOCUS Report Line 4520) divided by its 

reserve account balance from any month (Line 

4530). These data are discussed in detail in section 

IV.B.2 of this release, see table 5 in that section and 

related discussion. 

279 If the SIPC Fund is used to advance money to 

customers, reducing its balance, this reduction may 

trigger increased contributions from member 

broker-dealers, as displayed in table 1 in section 

I.C.2. of this release. 

benefits and costs of the amendments 

and their likely effects on efficiency, 

competition, and capital formation. The 

Commission also discusses the potential 

economic effects of certain alternatives 

to the approaches taken in this 

adoption. 

As part of their business, carrying 

broker-dealers regularly receive cash 

related to customers’ and PAB account 

holders’ securities transactions, such as 

cash realized from sales of securities. 

While it is common that customers’ and 

PAB account holders’ cash is quickly reinvested or swept out to a bank account 

or money market fund by the customer 

or PAB account holder, it is also 

common for this cash to remain 

undeployed for or on behalf of 

customers and PAB account holders for 

several days or longer prior to the next 

required customer and PAB reserve 

computations and deposits into the 

customer and PAB reserve bank 

accounts.274

Under preexisting paragraph (e)(3)(i) 

of Rule 15c3–3, the required balances in 

customer and PAB reserve bank 

accounts (net cash owed to customers or 

PAB account holders) are required to be 

calculated weekly, and the resulting 

amount must be held in the customer 

and PAB reserve bank accounts until the 

date of next required deposit.275

However, the value of the net cash owed 

to customers or PAB account holders 

may change daily due to customers’ and 

PAB account holders’ transactions and 

re-deployment of undeployed funds. On 

a weekly basis, this could result in a 

large intra-week mismatch between the 

customer or PAB reserve bank account 

balances and actual net cash owed to 

customers or PAB account holders. This 

intra-week mismatch introduces several 

potential risks that are not internalized 

by carrying broker-dealers. 

First, the mismatch between the 

calculated and the actual amounts of net 

cash owed to customers and PAB 

account holders introduces a risk to 

other SIPC members. More specifically, 

if a liquidation of a carrying brokerdealer with a large mismatch of cash in 

its customer and PAB reserve bank 

accounts is carried out under SIPA, it 

increases the risk that the SIPC Fund 

balance would be used if there are not 

enough assets in the carrying brokerdealer’s estate to cover the difference 

between the net cash owed to customers 

and the amount in the reserve bank 

account,276 which may trigger a 

subsequent increase in contributions 

from other SIPC members. This risk may 

be exacerbated for carrying brokerdealers experiencing large aggregate 

intra-week mismatches. As a result, the 

SIPC Fund may be at a higher risk of 

depletion. For example, as discussed in 

section IV.B.2. below, mismatches are 

common among carrying broker-dealers 

of all sizes (as measured by average total 

credits). The largest carrying brokerdealers with average total credits of at 

least $500 million 277 had mismatches of 

between 11% and 20% during 2023.278

Second, this mismatch introduces a 

risk to customers and PAB account 

holders of carrying broker-dealers. To 

the extent that there is mismatch of 

funds in the customer or PAB reserve 

bank account, a failure of a carrying 

broker-dealer may result in the delayed 

reimbursement of customer or PAB 

securities and cash. In this scenario, the 

funds owed to customers or PAB 

account holders may be tied up in 

liquidation proceedings and these 

customers or PAB account holders 

would have to wait to receive their 

funds back until the broker-dealer 

liquidation process is carried out under 

SIPA, which may take a significant 

amount of time. In addition, customers 

and PAB account holders may not 

receive their funds in full if the 

liquidation proceedings do not result in 

a full recovery of funds owed to 

customers and PAB account holders. 

This risk may be exacerbated for 

potential failures of carrying brokerdealers with large amounts of customer 

or PAB reserve bank account balances, 

such as when these carrying brokerdealers experience large aggregate intraweek mismatches between the reserve 

bank account balances and actual net 

cash owed to customers or PAB account 

holders. 

The requirement to perform daily 

customer and PAB reserve computations 

for carrying broker-dealers with large 

amounts of total credits is aimed to 

address these risks and is expected to 

benefit customers, PAB account holders, 

and other stakeholders of the affected 

carrying broker-dealers by more 

dynamically matching the net cash 

owed to customers or PAB account 

holders and the customer and PAB 

reserve bank account balances. More 

specifically, the daily customer and 

PAB reserve computations will 

safeguard customers and PAB account 

holders of the affected carrying brokerdealers by covering the mismatches 

promptly, and hence neutralizing the 

potential of some of these mismatches to 

build over the week, and thereby 

reducing the risk of a potential delay in 

the return of cash and securities in the 

event of a failure of the affected carrying 

broker-dealer. Daily computations will 

also decrease the risk that other 

stakeholders, such as contributors to the 

SIPC Fund, would need to provide 

additional resources (e.g., in the form of 

increased assessments) to address a 

failure of a carrying broker-dealer.279

The final amendments may result in 

increased compliance costs for the 

affected carrying broker-dealers. To the 

extent that each customer or PAB 

reserve computation takes a significant 

amount of time or involves manual 

processes, affected carrying brokerdealers will experience a one-time set 

up cost related to switching to a daily 

computation, as well as an increase in 

ongoing costs related to more frequent 

computations. These costs, like the 

aforementioned benefits, may ultimately 

be passed through to customers and 

PAB account holders of the affected 

carrying broker-dealers. 

Below, the Commission discusses 

many of the benefits and costs that are 

likely to result from the adoption of 

these amendments. To the extent 

practicable, the effects are quantified 

based on available data. Although the 

Commission is providing estimates of 

direct compliance costs where possible, 

customer and PAB account holders’ may 

modify their activity in accounts 

maintained by the affected carrying 

broker-dealers and customers and PAB 


ddrumheller on DSK120RN23PROD with RULES2
2814 Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 

280See Proposing Release, 88 FR at 45859. 

281See, e.g., Nasdaq v. SEC, 34 F.4th 1105, 1111– 

15 (D.C. Cir. 2022). This approach also follows 

Commission staff guidance on economic analysis 

for rulemaking. See Commission staff’s ‘‘Current 

Guidance on Economic Analysis in SEC 

Rulemaking’’ (Mar. 16, 2012), available at https:// 

www.sec.gov/divisions/riskfin/rsfi_guidance_econ_

analy_secrulemaking.pdf (‘‘The economic 

consequences of proposed rules (potential costs and 

benefits including effects on efficiency, 

competition, and capital formation) should be 

measured against a baseline, which is the best 

assessment of how the world would look in the 

absence of the proposed action. The baseline 

includes both the economic attributes of the 

relevant market and the existing regulatory 

structure.’’). The best assessment of how the world 

would look in the absence of the proposed or final 

action typically does not include recently proposed 

actions, because doing so would improperly assume 

the adoption of those proposed actions. 

282See, e.g., ASA Letter 2 at 2 (stating ‘‘Our 

concern is that many of the same resources in the 

business and technology groups are delivering 

against other core regulatory obligations including 

T+1, CAT CAIS and others with 2024 compliance 

dates causing resource strain to effectively deliver 

the necessary analysis and technology solutions 

needed to move to a daily calculation’’). See also 

SIFMA Letter at 12; Raymond James Letter at 6. 283Shortening the Securities Transaction 

Settlement Cycle, Exchange Act Release No. 96930 

(Feb. 15, 2023) [88 FR 13872 (Mar. 6, 2023)] 

(‘‘Settlement Cycle Adopting Release’’). The rules 

and rule amendments adopted in the Settlement 

Cycle Adopting Release shorten the standard 

settlement cycle for most broker-dealer transactions 

from two business days after the trade date to one 

business day after the trade date. To facilitate 

orderly transition to a shorter settlement cycle, a 

new rule also establishes requirements related to 

completing allocations, confirmations, and 

affirmations no later than the end of trade date for 

the processing of institutional transactions subject 

to the rule; requires registered investment advisers 

to make and keep records of each confirmation 

received, and of any allocation and each affirmation 

sent or received, with a date and time stamp for 

each indicating when it was sent or received; and 

requires clearing agencies that provide a central 

matching service (‘‘CMSPs’’) to establish, 

implement, and enforce policies and procedures 

reasonably designed to facilitate straight-through 

processing (‘‘STP’’) and to file an annual report 

regarding progress with respect to STP. The rule has 

a compliance date of May 28, 2024. Settlement 

Cycle Adopting Release, sections VII, VII.B.3. 

284See, e.g., ASA Letter 2 at 2 (stating ‘‘Our 

concern is that many of the same resources in the 

business and technology groups are delivering 

against other core regulatory obligations including 

T+1, CAT CAIS and others with 2024 compliance 

dates causing resource strain to effectively deliver 

the necessary analysis and technology solutions 

needed to move to a daily calculation’’); SIFMA 

Letter at 12 (stating that the implementation of the 

final amendments will ‘‘call on the same personnel, 

technology, and monetary resources as [the T+1 

initiative, the implementation of the changes to 

margin requirements under FINRA Rule 4210 and 

the implementation of the CAIS requirements] to 

implement them properly’’; Raymond James Letter 

at 6 (noting that other broker-dealers are 

implementing systems to comply with the new 

requirements and regulations for the amendments 

to FINRA Rule 4210 and the standards of the 

national Consolidated Audit Trail (‘‘CAT’’), each of 

which will become effective in May 2024). 

285The date of the settlement requirements for the 

transition set forth in the Settlement Cycle 

Adopting Release as well as the requirements under 

FINRA Rule 4210 and CAT CAIS have passed. See 

supra note 283 discussing the relevant filing and 

compliance dates for the Settlement Cycle Adopting 

Release. For compliance dates for the FINRA Rule 

4210 requirements, see FINRA, Regulatory Notice 

23–14 (Aug. 18, 2023); see also Exchange Act 

Release No. 98349 (Sept. 11, 2023) [88 FR 63633 

(Sept. 15, 2023)] (Notice of filing for immediate 

effectiveness File No. SR–FINRA–2023–011). For 

compliance dates for the CAT CAIS requirements, 

see Interim Reporting Obligation 4 and Full CAIS 

Go-Live (Jan. 22, 2024), available at https://

www.catnmsplan.com/sites/default/files/2024-01/ 

01.22.24-CAT-Alert-2023-01.pdf (establishing May 

31, 2024 as the compliance date for compliance 

with the CAT CAIS requirements). 

286Reporting of Securities Loans, Exchange Act 

Release No. 98737 (Oct. 13, 2023) [88 FR 75644 

(Nov. 3, 2023)] (‘‘Rule 10c–1a Adopting Release’’). 

This rule is designed to increase the transparency 

of information available to brokers, dealers, and 

investors with respect to loans or borrowing 

securities, and requires any covered person who 

agrees to a covered securities loan on behalf of itself 

or another person to report specified information 

about the covered securities loan to a registered 

national securities association (currently FINRA is 

the only registered national securities association)— 

or rely on a reporting agent to do so—and requires 

the registered national securities association to 

make certain information it receives available to the 

public. Covered persons will include market 

intermediaries, securities lenders, and brokerdealers, while reporting agents include certain 

brokers, dealers, or registered clearing agencies. The 

rule’s compliance dates require that the registered 

national securities association propose rules 

pursuant to Rule 10c–1a(f) by May 2, 2024, and the 

proposed rules shall be effective no later than 

January 2, 2025; that covered persons report Rule 

10c–1a information to a registered national 

securities association on or by January 2, 2026 

(which requires that the registered national 

securities association have implemented data 

retention and availability requirements such for 

reporting); and that the registered national 

securities association publicly report Rule 10c–1a 

information by April 2, 2026. Rule 10c–1a Adopting 

Release, section VIII. 287Standards for Covered Clearing Agencies for 

U.S. Treasury Securities and Application of the 

Broker-Dealer Customer Protection Rule with 

Respect to U.S. Treasury Securities, Exchange Act 

Release No. 99149 (Dec. 13, 2023) [89 FR 2714 (Jan. 

16, 2024)] (‘‘Treasury Clearing Release’’). Among 

other things, the amendments require covered 

clearing agencies for U.S. Treasury securities to 

have written policies and procedures reasonably 

designed to require that every direct participant of 

the covered clearing agency submit for clearance 

and settlement all eligible secondary market 

transactions in U.S. Treasury securities to which it 

is a counterparty. The compliance date is March 18, 

2024, for covered clearing agencies to file any 

proposed rule changes pursuant to final Rule 17Ad– 

22(e)(6)(i), 17Ad–22(e)(18)(iv)(c), and 15c3–3, 

which must be effective by March 31, 2025. With 

respect to the changes to Rule 17Ad– 

22(e)(18)(iv)(A) and (B), (i) covered clearing 

agencies will be required to file any proposed rule 

changes regarding those amendments no later than 

June 14, 2024, and those changes must be effective 

by December 31, 2025, for cash market transactions 

encompassed by section (ii) of the definition of an 

eligible secondary market transaction, and by June 

30, 2026 for repo transactions encompassed by 

section (i) of the definition of an eligible secondary 

market transactions. Compliance by the direct 

participants of a U.S. Treasury securities covered 

clearing agency with the requirement to clear 

eligible secondary market transactions would not be 

required until December 31, 2025, and June 30, 

2026, respectively, for cash and repo transactions. 

See Treasury Clearing Release, section III. Finally, 

the Commission amended the broker-dealer 

customer protection rule to permit margin required 

and on deposit with covered clearing agencies for 

U.S. Treasury securities to be included as a debit 

in the reserve formulas for accounts of customers 

account holders of non-affected carrying 

broker-dealers might shift their capital 

to the affected carrying broker-dealers 

due to such increased protections; and 

carrying broker-dealers near the $500 

Million Threshold may adjust their 

business activities as a result of the final 

amendments. Moreover, the complexity 

of customers’ and PAB account holders’ 

activities for different carrying brokerdealers makes it challenging for the 

Commission to estimate the potential 

costs for various groups of the affected 

carrying broker-dealers. While the 

Commission has attempted to quantify 

economic effects where possible, much 

of the discussion of economic effects is 

qualitative in nature. The Commission 

sought comment on all aspects of the 

economic analysis,280 especially any 

data or information that would enable a 

quantification of the proposal’s 

economic effects and the analysis below 

takes into consideration relevant 

comments received. 

B. Baseline 

1. Regulatory Baseline 

The baseline against which the costs, 

benefits, and the effects on efficiency, 

competition and capital formation of the 

final amendments are measured consists 

of current requirements for carrying 

broker-dealers under the customer 

protection rule and the current market 

structure and regulatory framework. As 

discussed in detail below, the economic 

analysis appropriately considers 

existing regulatory requirements as part 

of its economic baseline against which 

the benefits and costs of the final 

amendments are measured.281

Several commenters expressed 

concern about the need to concurrently 

comply with the final amendments and 

‘‘other core regulatory obligations.’’ 282

Specifically, commenters mentioned the 

rule and amendments adopted in the 

Settlement Cycle Adopting Release 283

and two other regulatory obligations, 

namely the new margin requirements 

under FINRA Rule 4210 and the CAT 

CAIS amendments.284 Although the 

specific regulatory obligations 

mentioned by commenters have been 

implemented,285 the Commission has 

considered the potential effects on 

entities affected by the final 

amendments that are implementing 

other recently adopted rules during the 

compliance period for these 

amendments. These recently adopted 

rules include the Rule 10c–1a Adopting 

Release,286 the Treasury Clearing 

Release,287 the Rule 605 Adopting 


ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 2815 

and proprietary accounts of broker-dealers, subject 

to certain conditions. 

288 Disclosure of Order Execution Information, 

Exchange Act Release No. 99679 (Mar. 6, 2024) [89 

FR 26428 (Apr. 15, 2024)] (‘‘Rule 605 Adopting 

Release’’). The Commission adopted amendments to 

rules requiring disclosures for order executions in 

NMS stocks, including expanding the scope of 

reporting entities, modifying the scope of orders 

covered by the rule, and modifying the information 

required to be reported under the rule. The rule has 

an effective date of June 14, 2024 and, with a few 

exceptions, a compliance date of December 14, 

2025. See Rule 605 Adopting Release, section VII. 

289Electronic Submission of Certain Materials 

Under the Securities Exchange Act of 1934; 

Amendments Regarding the FOCUS Report, Release 

Nos. 33–11342; 34–101925; IC–35420 (Dec. 16, 

2024) (‘‘Electronic Submission Adopting Release’’). 

Under the amendments, certain forms and other 

filings or submissions must be filed or submitted 

electronically on the Commission’s Electronic Data 

Gathering, Analysis, and Retrieval (‘‘EDGAR’’) 

system, using structured data where appropriate. 

This includes certain forms, reports, notices, 

schedules and exhibits provided by broker-dealers, 

security-based swap dealers, self-regulatory 

organizations (‘‘SROs’’) and major security-based 

swap participants. The amendments also require 

the information currently contained in Form 19b– 

4(e) to be publicly posted on the SRO’s website, and 

they remove the manual signature requirements for 

SRO proposed rule change filings. The amendments 

are effective 60 days after publication in the Federal 

Register, and the compliance dates range from June 

30, 2025, to June 30, 2028, depending on the type 

of filing or submission and on whether the filing 

firm’s minimum fixed dollar net capital 

requirement is less than $250,000 as of Dec. 31, 

2024. Electronic Submission Adopting Release, 

section VIII. 

290Regulation S–P: Privacy of Consumer 

Financial Information and Safeguarding Customer 

Information, Release Nos. 34–100155; IA–6604; IC– 

35193 (May 15, 2024) [89 FR 47688 (June 3, 2024)] 

(‘‘Customer Notification Adopting Release’’). The 

Commission amended Regulation S–P to require 

brokers, dealers, funding portals, investment 

companies, registered investment advisers, and 

transfer agents to adopt written policies and 

procedures for incident response programs to 

address unauthorized access to or use of customer 

information. These must include procedures for 

providing timely notification to individuals affected 

by an incident involving sensitive customer 

information with details about the incident and 

information designed to help affected individuals 

respond appropriately. Among other things, the 

amendments also extended to transfer agents the 

requirements to safeguard customer records and 

information, and they broadened the scope of the 

information covered by those requirements. The 

compliance date for larger entities is December 3, 

2025, and June 3, 2026, for smaller entities. 

Customer Notification Adopting Release, section 

II.F. 

291See infra section IV.C.3. of this release. 292See section I.C.1. of this release (describing the 

purposes of Rule 15c3–3). 

293See section I.C.1. of this release (describing 

possession and control requirements for customers’ 

securities). 

294Some carrying broker-dealers choose to 

perform a daily computation. See paragraph 

(e)(3)(iv) of Rule 15c3–3. Further, the rule permits 

carrying broker-dealers in certain limited 

circumstances to perform a monthly computation. 

See paragraph (e)(3)(i) of Rule 15c3–3. See also 

section I.C.1. of this release (describing the 

customer reserve bank account and customer 

reserve computation). 

295See SIFMA Letter at 4. 

296See paragraph (e) of Rule 15c3–3. See also 

section I.C.1. of this release (describing the 

customer reserve bank account and customer 

reserve computation). 

297See paragraph (e)(3)(v) of Rule 15c3–3. Each 

record must be preserved in accordance with Rule 

17a–4. Id. 

298See section I.C.1. of this release (describing 

Rule 15c3–3 and PAB accounts). 

299See section I.C.2. of this release (describing 

broker-dealer liquidations and SIPA). 

300See section I.C.1. of this release (describing 

Rule 15c3–3 and customer accounts). 

301See section I.C.1. of this release (describing 

Rule 15c3–3 and PAB accounts). 

302See 15 U.S.C. 78ccc(a)(1) and 78ddd(a)(1). 

303See 2023 SIPC Annual Report, table 2, at 10. 

304As of the end of 2023. See section I.C.2. of this 

release, describing broker-dealer liquidations and 

SIPA. The volume of proceedings was highest in the 

1970s (15 per year), while between 1980 and 2003 

the number averaged about seven per year. Since 

2003 the average has been one per year (with the 

highest number, five, occurring in 2008, while there 

were 10 years with none). See 2023 SIPC Annual 

Report, Figure 1, at 8. 

Release,288 the Electronic Submission 

Adopting Release,289 and the Customer 

Notification Adopting Release.290 These 

adopted rules were not included as part 

of the baseline in the Proposing Release 

because they were not yet adopted at 

that time, but they are part of the 

baseline against which this economic 

analysis considers the benefits and costs 

of the final amendments. Accordingly, 

this economic analysis also considers 

potential economic effects arising from 

any overlap that may exist between the 

compliance period for the final 

amendments and the compliance 

periods for these other adopted rules.291

a. Rule 15c3–3 

Carrying broker-dealers are brokerdealers that maintain custody of 

customer securities and cash. Rule 

15c3–3, known as the broker-dealer 

customer protection rule, is designed to 

give specific protection to customer 

funds and securities. For example, a 

broker-dealer is ‘‘virtually’’ precluded 

from using customer funds to buy 

securities for its own account.292

Preexisting Rule 15c3–3 specifies that 

a carrying broker-dealer must undertake 

two primary steps to safeguard these 

customer assets. First, carrying brokerdealers are required to maintain 

physical possession or control over 

customers’ fully paid and excess margin 

securities.293 Second, a carrying brokerdealer must maintain a customer reserve 

bank account that must hold funds and/ 

or qualified securities that are at least 

equal in value to the net cash owed to 

customers. The amount of net cash 

owed to customers is computed weekly 

as of the close of the last business day 

of the week pursuant to the customer 

reserve computation.294 Performing a 

customer reserve computation requires a 

carrying broker-dealer to add up 

customer credit items and then subtract 

from that amount customer debit items. 

To ensure accuracy of the computations, 

these credit and debit items are 

reconciled with other firm data and the 

computations pass through preestablished internal controls.295 If credit 

items exceed debit items, the net 

amount must be on deposit in the 

customer reserve bank account.296 A 

carrying broker-dealer also is required to 

make and maintain a record of each 

computation.297 Rule 15c3–3 also 

specifies the way a carrying brokerdealer carries accounts that hold 

proprietary securities and cash of other 

broker-dealers, known as PAB 

accounts.298 Broker-dealers are not 

within the definition of ‘‘customer’’ for 

purposes of Rule 15c3–3, however, the 

definition of ‘‘customer’’ under SIPA, 

includes broker-dealers with a 

proprietary securities account at a 

carrying broker-dealer. As discussed in 

more detail in section I.C.2. of this 

release, broker-dealers—as SIPA 

customers—have the right to share pro 

rata with other customers in the 

customer property in a SIPA liquidation 

if there is a shortfall in the amount the 

failed broker-dealer owes its customers. 

Because broker-dealers that are SIPA 

customers are entitled to a pro rata 

share of customer property,299 Rules 

15c3–3 and 15c3–3a require carrying 

broker-dealers to: (1) perform a PAB 

reserve computation in addition to the 

customer reserve computation; 300 (2) 

establish and hold cash and/or qualified 

securities in their PAB reserve bank 

account in an amount determined by the 

PAB reserve computation; and (3) obtain 

and maintain physical possession or 

control of securities carried for a PAB 

account holder, unless the carrying 

broker-dealer has provided written 

notice to the PAB account holder that it 

may use those securities in the ordinary 

course of its securities business and has 

provided opportunity for the PAB 

account holder to object to such use.301

b. SIPA and the SIPC Fund 

As described in section I.C.2. of this 

release, SIPA established SIPC and 

directed SIPC to establish the SIPC 

Fund.302 At the end of 2023, SIPC 

reported 3,297 members.303 The SIPC 

Fund totaled approximately $4.47 

billion as of December 31, 2023, and 

currently the objective is to build it to 

a level of $5 billion. To date, SIPC has 

carried out 330 liquidations since its 

inception with approximately $141.6 

billion in assets distributed to 

customers.304 Of that, about $141.6 

billion came from debtors’ estates (i.e., 

SIPC broker-dealer members’ estates), 


ddrumheller on DSK120RN23PROD with RULES2
2816 Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 

305See 2023 SIPC Annual Report at 8–9, for the 

statistics in this paragraph. SIPC refers to 

distributions to customers as ‘‘advances,’’ though 

the 2023 SIPC Annual Report does not detail the 

timing of those advances in the 330 proceedings. 306See SBS Segregation Adopting Release. See 

also section II.F. of this release (discussing reserve 

account requirements for security-based swaps). 307See paragraph (p) of Rule 15c3–3; 17 CFR 

240.15c3–3b. See also section II.F. of this release 

(discussing reserve account requirements for 

security-based swaps, and SBS FAQ 1 for staff 

views). SBSDs that are not broker-dealers (other 

than OTC derivatives dealers) are subject to the 

segregation requirements of Exchange Act Rules 

18a–4 and 18a–4a. 308See id. See also section I.C.1. of this release 

(discussing the requirements of Rules 15c3–3 and 

15c3–3a). 

309Based on monthly FOCUS Report data for the 

reporting year 2023. The Commission assumes that 

broker-dealers that did not file FOCUS Reports for 

the last month of 2023 are no longer in business. 

310PAB account holders are not considered 

customers under paragraph (a)(1) of Rule 15c3–3. 

See section I.C.1. of this release (describing Rule 

15c3–3 and PAB accounts). 

311There are three exemptions to Rule 15c3–3, 

each related to the procedure broker-dealers follow 

when they receive customer funds and securities. 

The first exemption is for broker-dealers that 

partake in limited mutual fund and insurancerelated business. The exemption allows such firms 

to briefly handle customer funds, but not maintain 

indefinite custody of those funds or securities. The 

second exemption applies to broker-dealers that 

clear their transactions on what is known as a 

‘‘receive versus payment/delivery versus payment 

(RVP/DVP) basis.’’ In an RVP/DVP settlement, a 

broker-dealer executes simultaneous exchanges of 

an equal value of funds for securities. As such, the 

broker-dealer does not end up holding any residual 

customer funds or securities. The third exemption 

is also available to broker-dealers that temporarily 

handle customer funds. This broker-dealer, called 

an ‘‘introducing broker,’’ establishes accounts in the 

name of its customers at another broker-dealer, a 

‘‘clearing broker.’’ The clearing broker then 

maintains custody of those customers’ cash and 

securities in those accounts on a fully disclosed 

basis. See paragraph (k) of Rule15c3–3. 

312Total assets are reported on Line 940 of the 

FOCUS Report. 

313The Commission uses monthly FOCUS 

Reports to calculate total credits and total debits. 

For each carrying broker-dealer, total credits are 

calculated as the sum of customer credits reported 

on Line 4430 and the PAB credits reported on Line 

2170. Similarly, for each carrying broker-dealer, 

total debits are calculated as the sum of the 

customer debits reported on Line 4472 and the PAB 

debits reported on Line 2230. 

while $915.7 million came from the 

SIPC Fund.305

c. Reserve Account Requirement for 

Security-Based Swaps 

In 2019, the Commission adopted 

customer segregation requirements for 

broker-dealers and SBSDs with respect 

to customer money, securities, and 

property related to security-based 

swaps.306 Under these requirements, 

broker-dealers (including broker-dealers 

that are also SBSDs) are required to 

perform a separate weekly securitybased swap customer reserve 

computation and have a separate 

security-based swap customer reserve 

account that must hold the net amount 

of cash owed to security-based swap 

customers.307 These requirements were 

based in part on the requirements of 

Rules 15c3–3 and 15c3–3a discussed 

above.308

2. Affected Broker-Dealers 

Table 2 presents the universe of 

broker-dealers by presence of carrying 

activities.309 As of December 2023, 157 

broker-dealers identified in Line 40 of 

the FOCUS Report reported that they 

carry their own customer accounts. 

Among these, 64 reported having only 

customer credits, 64 reported having 

both customer and PAB credits, none 

reported having only PAB credits,310

and 14 broker-dealers reported having 

no customer credits or debits. Further, 

15 broker-dealers reported having 

exemptions from the requirements of 

Rule 15c3–3, including performing a 

customer reserve computation.311 In 

addition, 34 broker-dealers that did not 

identify themselves as those that carry 

their own customer accounts in Line 40 

of the FOCUS Report reported customer 

and/or PAB credits in their customer or 

PAB reserve computations. Among 

these, five broker-dealers had both 

customer and PAB credits, 28 brokerdealers had customer credits only, and 

one broker-dealer had PAB account 

credits only. 

When the Commission computed 

average total credits using data for 

January 2023 through December 2023, 

the Commission estimated that there are 

191 broker-dealers (‘‘carrying brokerdealers’’) that currently fall within the 

scope of the Rule 15c3–3 (though of this 

group, 29 carrying broker-dealers 

reported zero customer or PAB credits 

in 2023). In aggregate, these carrying 

broker-dealers hold approximately 83% 

of all broker-dealer assets,312 and report 

approximately $1.1 trillion in total 

credits and approximately $0.93 trillion 

in total debits, as of December 2023.313

TABLE 2—BROKER-DEALERS BY CARRYING ACTIVITY, 2023 a

Broker-dealer type Number 

Total 

assets, 

$B 

Total credits, $B Total debits, $B 

Monthly 

average Year-end Monthly average Year-end 

Carrying its own customer accounts ............................... 157 4,782.7 1,027.4 1,102.7 825.7 922.4 

—with positive customer and PAB credits ............... 64 4,143.0 993.8 1,079.0 794.5 901.1 

—with positive customer credits only ....................... 64 570.6 33.5 23.7 31.2 21.3 

—with zero reported credits ..................................... 14 64.2 0 0 0 0 

—with reporting exemptions ..................................... 15 5.0 .................... .................... .................... ....................

Not carrying its own customer accounts ......................... 34 110.1 20.5 21.9 6.3 7.8 

—with positive customer and PAB credits ............... 5 49.6 2.0 2.4 1.8 2.3 

—with positive customer credits only ....................... 28 59.7 18.4 19.2 4.4 5.2 

—with positive PAB credits only ............................... 1 0.8 0.06 0.4 0.07 0.4 

Without any carrying activities ......................................... 3,208 1013.8 .................... .................... .................... ....................

Total .......................................................................... 3,399 5,906.6 1,047.9 1,124.6 832.0 930.2 

a Data are for calendar year 2023. The Commission uses monthly FOCUS Reports to calculate average monthly total credits and total debits. 

For each carrying broker-dealer, total credits are calculated as the sum of the average monthly amount of customer credits reported on Line 

4430 and the average monthly amount of PAB credits reported on Line 2170. Similarly, for each broker-dealer, total debits are calculated as the 

sum of the average monthly amount of customer debits reported on Line 4472 and the average monthly amount of PAB debits reported on Line 

2230. 


ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 2817 

314The grouping is based on the average monthly 

amount of customer credits reported on Line 4430 

and the average monthly amount of PAB credits 

reported on Line 2170. 

315Figure created from monthly FOCUS Reports, 

from January 2023 through May 2024. The first 12- 

month computation period is January 2023 to 

December 2023, the second period is February 2023 

through January 2024, and so on. The total number 

of carrying broker-dealers that reported positive 

total credits in each of the six rolling periods shown 

in Figure 1 equaled 162, 160, 160, 159, 158 and 160, 

respectively. 

Table 3 displays the carrying brokerdealers that reported positive customer 

or PAB credits in 2023 into groups 

based on the size of their average 

monthly total customer and PAB credits 

(averaged over January 2023 to 

December 2023).314

TABLE 3—CARRYING BROKER-DEALERS BY SIZE OF AVERAGE TOTAL CREDITS, 2023 

Number 

Total 

assets 

($B) 

Total customer credits, 

$MM 

Total PAB credits, 

$MM 

Total credits, 

$MM 

Number Mean Median Number Mean Median Mean Median 

>$0–100MM ............. 87 272.2 87 13.6 1.9 22 0.9 0 14.5 2.2 

$100–250MM ........... 14 132.3 14 157.1 152.3 8 3.2 0 160.3 153.9 

$250–500MM ........... 12 341.6 12 296.1 296.6 8 61.0 13.5 357.2 315.3 

$500MM–1B ............. 8 122.7 8 673.6 633.1 7 24.1 2.5 697.7 633.2 

$1–5B ....................... 17 337.3 17 2,239.8 2,103.3 15 104.6 6.3 2,344.3 2,136.5 

$5–10B ..................... 6 122.9 6 6,554.2 6,702.3 6 646.8 64.8 7,201.0 6,734.2 

≥$10B ....................... 18 3,494.7 18 46,919.0 33,591.7 16 5,939.0 183.0 52,858.1 36,846.2 

Total a ................ 162 4,823.6 162 5,767.1 57.7 82 701.3 0.0 6,468.4 63.0 

aTable excludes carrying broker-dealers with zero reported credits in 2023. 

The final amendments modify the 

proposal by raising the proposed $250 

Million Threshold to $500 million. 

Thus, the daily computation 

requirement applies only to carrying 

broker-dealers whose average total 

credits are above the $500 Million 

Threshold. Therefore, the Commission 

estimates that, based on data for January 

2023 through December 2023, the scope 

of affected entities was 49 carrying 

broker-dealers, which held 99.3% of 

aggregate total credits of all carrying 

broker-dealers. 

The number of affected carrying 

broker-dealers may vary month to 

month since a 12-month rolling average 

is used for the calculation of the $500 

Million Threshold. To provide 

information on how the number of 

entities may thus vary over time, Figure 

1 displays the number of affected 

carrying broker-dealers for a sequence of 

12-month rolling averages beginning 

with January 2023 and extending 

through May 2024.315

BILLING CODE 8011–01–P 


ddrumheller on DSK120RN23PROD with RULES2
2818 Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 

316One of the carrying broker-dealers above the 

$500 Million Threshold withdrew its broker-dealer 

registration from the Commission in February 2024. 

This carrying broker-dealer is excluded from the 

number of affected carrying broker-dealers in each 

of the three rolling periods following the rolling 

period that covers March 2023 to February 2024. 317 Data from monthly FOCUS Reports filed for 

the 2023 calendar year. A small number of carrying 

broker-dealers did not identify any customer or 

PAB reserve computation frequency (for example, 

for broker-dealers reporting positive credits in 

customer accounts, one failed to report reporting 

frequency in its FOCUS Report). Therefore, the total 

number of carrying broker-dealers exceeds the sum 

of the number of broker-dealers who identified a 

daily, weekly, or monthly computation frequency. 

BILLING CODE 8011–01–C 

As shown in Figure 1, the number of 

affected carrying broker-dealers varied 

monthly from 49 to 48 over the period 

from January 2023 through May 2024. 

There was little variation, however, in 

the identity of the affected carrying 

broker-dealers. The same 47 carrying 

broker-dealers met the $500 Million 

Threshold in each month, and from one 

to two additional carrying brokerdealers met the $500 Million Threshold 

in any given month.316 In total, over this 

period, 50 different carrying broker 

dealers would have been affected. 

With respect to the frequency of 

computation, based on the January 2023 

to December 2023 period (12-month 

period), table 4 displays the number of 

carrying broker-dealers performing their 

computations daily, weekly, and 

monthly in each size category for 

average total credits.317

TABLE 4—RESERVE FORMULA COMPUTATION FREQUENCY, 2023 

Average total credits Number 

Customer reserve formula PAB reserve formula 

Number Daily Weekly Monthly Number Daily Weekly Monthly 

>$0–100MM ............... 87 87 1 72 11 22 0 18 1 

$100–250MM ............. 14 14 0 14 0 8 0 6 0 

$250–500MM ............. 12 12 0 12 0 8 0 8 0 

$500MM–1B .............. 8 8 0 8 0 7 0 7 0 

$1–5B ........................ 17 17 1 16 0 15 1 14 0 


ddrumheller on DSK120RN23PROD with RULES2ER13JA25.000</GPH>

Figure 1. Number of Affected Broker-Dealers under 12-Month Rolling Average, Over the 

Period from January 2023 - May 2024 

50 

"t, 

:g 49 

49 49 49 

Ill 

CII 

... 

.c 

IC 

.2 

~ 48 

0 

0 

in 

-v,. 

CII 

> 0 

-g 47 Ill 

... 

.S! 

111 

CII 

C I 

... 

CII 

~ 46 ... 

al 

-

0 

... 

CII 

.a 

E 

::::s 45 z 

JAN '23 to DEC FEB '23 to JAN MAR '23 to FEB APR '23 to MAR MAY '23 to APR JUNE '23 to MAY 

'23 '24 '24 '24 '24 '24 

12-month rolling computation period 
Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 2819 

318Calculated from monthly FOCUS Reports for 

2023. 319The carrying broker-dealers identified as 

computing daily in the January 2023 to December 

2023 sample were also computing daily in the June 

2023 to May 2024 period (for both customer and 

PAB accounts). The June 2023 to May 2024 sample 

included one additional carrying broker-dealer with 

average total credits below the $500 Million 

Threshold that performed customer reserve 

computations on a daily basis. 

320Calculated from monthly FOCUS Reports for 

2023. The Commission isolated deposits (equal to 

or greater than zero) from any month (Line 4520), 

relative to the reserve account balance, (Line 4530). 

For PAB reserve bank accounts, deposits and 

amount in reserve account are FOCUS Lines 2290 

and 2300, respectively. The distribution of the 

averages of the monthly deposits, withdrawals, and 

reserve account balances (over 2023) are presented 

in columns ‘Average Deposit’, ‘Average 

Withdrawal’, and ‘Average Reserve Balance’ of table 

5. The Commission also recalculated by defining 

the deposit category as only values greater than 

zero, but the average mismatch did not change very 

much for each category, nor did the pattern seen in 

the table. 

321A deposit represents the amount that a 

carrying broker-dealer needs to deposit to close the 

gap between the amount prescribed by the reserve 

computation and the actual reserve balance in the 

bank account. 

322The Commission isolated the largest monthly 

deposit amount in 2023 (Line 4520), relative to the 

reserve account balance for that month (Line 4530). 

The same was done for PAB reserve accounts 

(FOCUS Lines 2290 and 2300, respectively). 

323Calculated from monthly FOCUS Reports for 

2023. The aggregated average mismatch of 15.7% is 

calculated as an average of the average mismatches 

for all carrying broker-dealers that met the $500 

Million Threshold. The same was done for carrying 

broker-dealers below the $500 Million Threshold. 

324Calculated from monthly FOCUS Reports for 

2023. The maximum mismatch of 36.1% was 

calculated as an average of the maximum 

mismatches for all carrying broker-dealers above the 

$500 Million Threshold. The same was done for 

carrying broker-dealers below the $500 Million 

Threshold. 

TABLE 4—RESERVE FORMULA COMPUTATION FREQUENCY, 2023—Continued 

Average total credits Number 

Customer reserve formula PAB reserve formula 

Number Daily Weekly Monthly Number Daily Weekly Monthly 

$5–10B ...................... 6 6 0 6 0 6 0 6 0 

≥10B .......................... 18 18 8 10 0 16 8 8 0 

Total .................... 162 162 10 138 11 82 9 67 1 

As shown in table 4, out of 162 

carrying broker-dealers that reported the 

frequency of their customer reserve 

computations, 10 carrying brokerdealers performed the customer reserve 

computation daily, among which 9 also 

performed the PAB reserve computation 

daily and one which does not report 

carrying PAB accounts. Among carrying 

broker-dealers performing the customer 

reserve computation daily, 9 had total 

credits above the $500 Million 

Threshold. These 9 carrying brokerdealers accounted for 61.9% of the total 

amount of average total credits among 

all carrying-broker dealers with positive 

customer or PAB credits reported in 

2023.318 All the carrying broker-dealers 

performing the PAB reserve 

computation daily had total credits 

above the $500 Million Threshold.319

Based on the January 2023 to 

December 2023 period, there were 40 

carrying broker-dealers with average 

total credits equal to $500 million or 

above performing the customer reserve 

computation weekly and there were no 

carrying broker-dealers with average 

total credits equal to $500 million or 

above performing the customer reserve 

computation monthly. Among the 40 

carrying broker-dealers performing a 

weekly customer reserve computation, 

there were 35 carrying broker-dealers 

that performed the PAB reserve 

computation weekly and there were no 

carrying broker-dealers with average 

total credits equal to $500 million or 

above that performed the PAB reserve 

computation monthly. Based on the data 

for 2023, the Commission estimates that 

40 carrying broker-dealers will be 

affected by the final amendments. 

Table 5 below shows the distribution 

of deposits required to be put into the 

customer and PAB reserve bank 

accounts or permitted withdrawals after 

the reserve computation performed at 

the end of the reporting period relative 

to the reserve bank account balance.320

These metrics provide a picture of the 

‘‘mismatch’’ that occurs with respect to 

customer and PAB accounts. 

Specifically, this mismatch is calculated 

as a carrying broker-dealer’s deposit 

divided by its reserve account balance 

from any month.321 The average of these 

mismatches for each broker-dealer over 

2023 is computed to determine the 

‘‘average mismatches.’’ For the 

‘‘maximum mismatches,’’ each brokerdealer’s largest deposit amount in 2023 

is divided by its reserve account balance 

for that month.322 The distributions of 

the average and maximum mismatches 

are presented in the columns ‘‘Average 

Mismatch’’ and ‘‘Maximum Mismatch’’ 

of table 5. 

The average mismatches and 

maximum mismatches were generally 

lower for carrying broker-dealers below 

the $500 Million Threshold, than for 

carrying broker-dealers above the $500 

Million Threshold. 

With respect to customer reserve 

accounts, shown in panel A, the 

mismatches were larger for the groups of 

carrying broker-dealers with over $500 

million in average total credits, with the 

largest occurring for carrying brokerdealers within the $5 to $10 billion 

range. On the aggregate level, for 

carrying broker-dealers above the $500 

Million Threshold, the average 

mismatch was 15.7%, while it was only 

6.4% for carrying broker-dealers below 

the $500 Million Threshold.323

Similarly, the maximum mismatch for 

carrying broker-dealers above the $500 

Million Threshold was 36.1%, while it 

was 20.9% for carrying broker-dealers 

below the $500 Million Threshold.324

For PAB reserve accounts, shown in 

panel B, the largest average mismatches 

and the maximum mismatches occurred 

for the groups of carrying broker-dealers 

with over $250 million in average total 

credits, with the largest occurring for 

carrying broker-dealers with over $10 

billion in average total credits. 

Panels C and D of table 5 display the 

average mismatch and maximum 

mismatch metrics comparing the large 

carrying broker-dealers (over $1 billion 

in average total credits) that currently 

compute their reserve accounts daily 

versus those that do so weekly. With 

respect to customer reserve accounts 

(panel C), carrying broker-dealers that 

compute daily have larger average 

reserve balances and deposits, and 

lower average and maximum 

mismatches than those that compute 

weekly. 

For PAB reserve accounts (panel D), 

the average or maximum mismatch do 

not appear as correlated with daily 

versus weekly filing. 


ddrumheller on DSK120RN23PROD with RULES2
2820 Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 

325See SIFMA Letter at 5; Raymond James Letter 

at 2; ASA Letter at 5; ASA Letter 2 at 1. 

326See SIFMA Letter at 6. 

327 Id. 

328 Id. 

TABLE 5—BROKER-DEALER DEPOSITS AND WITHDRAWALS AS A SHARE OF RESERVE ACCOUNT BALANCE, 2023 

Broker-dealer group Number 

Average 

reserve 

balance MM 

Average 

deposit MM 

Average 

withdrawal MM 

Average 

mismatch 

(%) 

Maximum 

mismatch 

(%) 

Panel A: Customer Reserve Accounts 

>$0–100MM ......................................... 87 $9.9 $0.5 ¥$3.0 6.5 19.8 

$100–250MM ....................................... 14 69.7 3.5 ¥18.4 6.5 26.5 

250–500MM ......................................... 12 194.7 11.2 ¥25.6 5.0 22.1 

500MM–1B ........................................... 8 190.8 15.8 ¥24.1 20.8 42.0 

1–5B ..................................................... 17 697.3 56.6 ¥62.9 15.8 37.9 

5–10B ................................................... 6 2,848.8 512.5 ¥142.9 24.3 52.1 

≥10B ..................................................... 18 11,626.0 784.7 ¥785.1 10.8 26.7 

Panel B: PAB Reserve Accounts 

>0–100 MM .......................................... 22 1.3 0.03 ¥0.3 1.7 11.3 

100–250 MM ........................................ 8 10.8 0.2 ¥2.0 1.3 7.1 

250–500 MM ........................................ 8 87.6 3.9 ¥21.8 4.5 25.4 

500MM–1 B .......................................... 7 3.2 0.3 ¥0.7 4.8 21.4 

1–5 B .................................................... 15 45.6 5.8 ¥20.0 9.8 40.4 

5–10 B .................................................. 6 79.3 12.8 ¥85.7 4.9 37.6 

≥10 B .................................................... 16 528.0 101.8 ¥245.7 12.5 49.4 

Panel C: Customer Reserve Accounts 

All (weekly and daily): 

≥1B ................................................ 41 5,810.1 443.0 ¥395.0 14.8 35.1 

Daily: 

≥1B ................................................ 9 13,028.4 423.9 ¥978.5 3.8 15.2 

Weekly: 

≥1B ................................................ 32 3,780.0 448.3 ¥200.5 17.9 40.6 

Panel D: PAB Reserve Accounts 

All (weekly and daily): 

≥1B ................................................ 37 259.7 48.4 ¥141.5 10.1 43.8 

Daily: 

≥1B ................................................ 9 778.3 148.4 ¥278.2 10.5 49.7 

Weekly: 

≥1B ................................................ 28 93.0 16.3 ¥77.1 10.0 41.7 

3. Debit Reduction in the Customer 

Reserve Computation for Certain BrokerDealers 

Several commenters suggested that 

the Commission reduce the aggregate 

debit items charge that certain carrying 

broker-dealers must take when 

performing their customer reserve 

computation under Rule 15c3–3.325

Rule 15c3–1 requires broker-dealers to 

maintain a minimum level of net capital 

at all times. Carrying broker-dealers 

using the alternative method for 

computing their net capital must 

maintain minimum net capital of the 

greater of $250,000 or 2% of their 

aggregate debit items computed under 

the customer reserve computation. In 

addition, a broker-dealer that uses the 

alternative method to compute its net 

capital must provide the Commission 

with an ‘‘early warning’’ notice when its 

aggregate debit items in its customer 

reserve computation fall below 5%. All 

carrying broker-dealers with total 

credits more than $500 million in their 

customer reserve computation as of 

December 31, 2023, use the alternative 

method. A carrying broker-dealer using 

the alternative method to compute its 

minimum net capital requirement must 

reduce aggregate debit items by 3% 

when performing its customer reserve 

computation under Rule 15c3–3. This 

provision serves to increase the amount 

of funds a carrying broker-dealer must 

deposit into its customer reserve bank 

account. 

Commenters recommended that the 

Commission eliminate the 3% debit 

reduction and instead apply the 1% 

debit reduction that currently applies to 

carrying broker-dealers using the basic 

method to compute their net capital. 

One commenter stated a reduction of 

the 3% debit reduction is warranted 

because under a daily customer reserve 

computation the value of debit items 

and amounts carrying broker-dealers 

owe customers on any given day are 

accounted for in the next day’s customer 

reserve computation and the difference 

is protected in the next day’s deposit 

into the customer reserve bank 

account.326 This commenter stated that 

the new requirement to perform a 

customer reserve computation daily 

would reduce the need for any cushion 

to account for a mismatch and, 

consequently, would increase liquidity 

and lower costs for customer financing 

by allowing carrying broker-dealers to 

use assets that would otherwise be 

locked up (in their customer reserve 

bank account).327 This commenter 

further stated that carrying brokerdealers could use the added liquidity to 

provide customers with more financing 

at a lower cost, and (reducing the debit 

reduction) would thereby benefit 

customers as well as carrying brokerdealers.328

Another commenter stated that when 

the Commission adopted the 3% debit 

reduction in 1975 it stated that the 


ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 2821 

329See Raymond James Letter at 2. 

330 Id. 

331See section I.C.2. of this release (discussing 

broker-dealer liquidations and SIPA). 

332For example, it has been the case that 

customers of a liquidated carrying broker-dealer 

have had to wait up to six months or more to access 

their assets during the liquidation period. See 

Michael P. Jamroz, The Customer Protection Rule, 

Continued 

purpose was to provide, in the event of 

a liquidation, an additional cushion of 

secured debit items which will be 

available to satisfy customers with 

whom the carrying broker-dealer effects 

transactions.329 This commenter stated 

that a shift to a daily customer reserve 

computation enabled by technological 

advancements since 1975 would result 

in a more precise and up-to-date 

computation, thereby mitigating the risk 

that the 3 debit reduction addresses in 

the customer reserve computation.330

The commenter went on to state that ‘‘a 

1% debit reduction in line with that 

applied to other broker-dealers seems 

appropriate for firms that calculate net 

capital under the alternative method.’’ 

The Commission agrees that 

performing a customer and PAB reserve 

computation daily will reduce the 

mismatch risk and more dynamically 

match the amount a carrying brokerdealer owes its customers and PAB 

account holders and the amount on 

deposit in its customer reserve bank 

account. When the mismatch risk is 

reduced by moving from weekly to daily 

calculations, the aggregate debit items 

need not be reduced by the 3%. 

However, the Commission disagrees 

with commenters that performing a 

daily customer reserve computation 

merits a decrease of the 3% debit 

reduction to 1% of customer margin 

loan balances. The 1% debit reduction 

applies to carrying broker-dealers that 

use the basic method to calculate their 

minimum net capital requirements. Net 

capital requirements are formulated 

differently under the alternative and 

basic methods. While the basic method 

targets the overall leverage of a carrying 

broker-dealer directly, under the 

alternative method, the net capital rule 

is formulated as a percentage of total 

customer receivables. Under the weeklycomputation regime, the 3% debit 

reduction has been designed to 

compensate for the potential lower 

minimum net capital requirement 

resulting from carrying broker-dealers 

electing the alternative method in lieu 

of the basic method. Consequently, the 

Commission strengthened the customer 

reserve computation requirements for 

carrying broker-dealers using the 

alternative method. A 1% debit 

reduction could lead to inadequate 

combined levels of liquidity and capital 

buffers at carrying broker-dealers that 

use the alternative method to calculate 

their minimum net capital 

requirements. 

The Commission is modifying the 

final rule amendments to permit 

carrying broker-dealers that use the 

alternative method to reduce aggregate 

debit items by 2% rather than 3% if 

they perform a daily customer reserve 

computation. This amendment will 

apply to both carrying broker-dealers 

that are required to perform a daily 

customer reserve computation because 

they exceed the $500 Million Threshold 

and carrying broker-dealers below the 

$500 Million Threshold that voluntarily 

perform a daily computation. 

Performing a daily customer reserve 

computation reduces the risk that the 

net amount of cash owed to customers 

will be substantially greater than the net 

amount on deposit in a carrying brokerdealer’s customer reserve bank account. 

A daily computation requirement 

allows for cash owed to customers from 

a particular day to be included in that 

day’s customer reserve computation, 

computed the next business day and 

any required deposits made the 

following business day. Therefore, 

under a daily customer reserve 

computation, the amount on deposit in 

the customer reserve bank account will 

more quickly reflect the net amount of 

cash the carrying broker-dealer owes its 

customers, and therefore, reduces the 

need for the current 3% ‘‘cushion.’’ 

Performing a daily customer reserve 

computation will reduce the maximum 

time between required deposits into a 

customer reserve bank account to two 

business days. 

A 2% debit reduction is reasonable 

given the lower mismatch risk under a 

daily customer reserve computation. 

This 2% ‘‘buffer’’ also will provide 

carrying broker-dealers with a safeguard 

to ensure a carrying broker-dealer 

maintains adequate balances in its 

customer reserve bank account to ensure 

that the customer securities and cash 

should be readily available to return to 

customers and PAB account holders in 

the event the carrying broker-dealer fails 

financially. Further, carrying brokerdealers will be able to use this extra 

liquidity to pay the initial and ongoing 

compliance costs to transition from a 

weekly to daily customer reserve 

computation under the final rule 

amendments. Carrying broker-dealers 

below the $500 Million Threshold also 

may choose to voluntarily perform a 

daily customer reserve computation to 

use the 2% debit reduction. The 

combined requirement of a daily 

customer reserve computation and a 2% 

debit reduction will provide this 

additional flexibility while enhancing 

customer protection requirements under 

Rule 15c3–3. 

C. Economic Effects of the Final 

Amendments 

1. Benefits 

Customers and PAB account holders 

of the affected carrying broker-dealers 

are expected to benefit from the 

requirement to perform daily customer 

and PAB reserve computations. As 

reflected in the discussion in section 

I.A. of this release noting the large 

amounts of deposits carrying brokerdealers may receive, and as evidenced 

from the information in table 5, a 

weekly customer and PAB reserve 

computation can result in a carrying 

broker-dealer owing a net amount of 

cash to customers or PAB account 

holders for a number of days that is 

greater than the current amounts 

deposited into the customer and PAB 

reserve bank accounts. Hence, if a 

carrying broker-dealer fails before the 

next reserve account computation and 

the reserve bank account balances do 

not represent the actual net amount of 

cash owed to customers or PAB account 

holders, these customers and PAB 

account holders may be at risk of having 

their funds tied up in a liquidation 

proceeding. Performing daily customer 

and PAB reserve computations would 

likely decrease this risk. 

Under the scenario where a carrying 

broker-dealer does not have sufficient 

funds to repay what it owes to 

customers or PAB account holders, SIPC 

likely would need to initiate a 

liquidation of the carrying broker-dealer 

under SIPA.331 Although the SIPC Fund 

can be used to advance funds to 

customers that are owed money, PAB 

account holders are not entitled to such 

advances; therefore, they may not 

receive the funds owed to them by a 

failed carrying broker-dealer as 

promptly as other customers of such 

broker-dealer may. In addition, there is 

a limit on advances to customers in the 

amount of $500,000 per customer (of 

which $250,000 can be used to cover 

cash claims). If some customers are 

owed more than such limit, these 

customers would have to wait along 

with PAB account holders until a 

trustee is appointed who would 

consequently attempt to recover assets 

of the failed carrying broker-dealer via 

asset sales or other recovery methods. 

This recovery process may, in some 

cases, be lengthy.332 In an extreme case, 


ddrumheller on DSK120RN23PROD with RULES2
2822 Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 

57 Bus. Law. 1069 (May 2002), available at https:// 

www.jstor.org/stable/40688076. 

333The Commission notes that, with daily 

computing, there will still be a mismatch between 

the actual net cash owed to customers and the 

reserve account balance because of the deposit 

timing delay, which is the morning of the second 

business day after the day of calculation. Should a 

carrying broker-dealer computing daily fail, and the 

amount of the mismatch is lower than in the case 

of a weekly computation, the customer may receive 

their funds more promptly from the carrying brokerdealers’ available assets than in the case where 

mismatches are larger (which may imply a longer 

liquidation process), underscoring the potential 

benefit from daily computing. 

334With respect to each customer reserve 

computation required pursuant to Rule 15c3–3, a 

broker-dealer must not accept or use any of the 

amounts under items comprising total credits under 

the customer reserve formula except for the 

specified purposes indicated under items 

comprising total debits under the formula. See 

paragraph (e)(2) of Rule 15c3–3. 

335See table 3. 

336See discussion in section IV.B.2. of this release 

for more details on table 5. 

337See SIFMA Letter at 5; Raymond James Letter 

at 2; ASA Letter at 5; ASA Letter 2 at 1. 

the amounts the trustee is able to 

recover may still be insufficient to make 

all customers and PAB account holders 

whole, which means that these 

customers and PAB account holders 

would absorb the loss. 

Based on these various circumstances, 

from the customer’s or PAB account 

holder’s perspective, there are varying 

degrees of risk related to a potential 

failure of a carrying broker-dealer, 

depending on whether it can promptly 

return cash and securities to customers 

and PAB account holders, or whether it 

has enough funds to make all customer 

and PAB account holders whole at the 

time of its failure. Therefore, 

maintaining levels of customer and PAB 

reserve bank account balances that more 

closely represent the actual amounts of 

net cash owed to customers and PAB 

account holders will benefit these 

customers and PAB account holders by 

decreasing the risk of not completely 

recovering their funds from the carrying 

broker-dealer or having these funds tied 

up in a liquidation proceeding.333

In addition, performing daily 

computations will benefit customers 

and PAB account holders of the affected 

carrying broker-dealers by more quickly 

applying the protective measures of the 

Rule 15c3–3 reserve requirements to 

cash of customers and PAB account 

holders that is newly deposited into the 

carrying broker-dealer. This reduces the 

likelihood of carrying broker-dealers 

inadvertently using customers’ or PAB 

account holders’ funds to finance any 

part of their business.334

Other carrying broker-dealers that are 

SIPC members may also benefit from the 

requirement to perform daily customer 

and PAB reserve computations. 

Specifically, if a failing carrying brokerdealer with a mismatch between the 

reserve bank account balances and 

actual cash owed to customers and PAB 

account holders is put into SIPA 

liquidation, SIPC may be required to use 

the SIPC Fund to advance money to 

customers from the SIPC Fund, reducing 

its balance and potentially depleting the 

SIPC Fund. Consequently, a reduction 

in the SIPC Fund balance and/or SIPC’s 

unrestricted net assets may trigger 

increased contributions from member 

broker-dealers, as displayed in table 1 in 

section I.C.2. of this release, with more 

substantive balance reductions requiring 

larger increases in assessments of 

member broker-dealers, which may be 

passed on to investors in the form of 

higher fees or commissions. Therefore, 

the requirement to perform daily 

computations will benefit SIPC member 

broker-dealers by reducing the risk of 

SIPC Fund depletion and a consequent 

increase in SIPC assessments. 

The requirement to perform daily 

computations will apply only to 

carrying broker-dealers whose average 

total credits exceed the $500 Million 

Threshold. Given the information from 

the 12-month average based on the 2023 

monthly FOCUS Reports as an example, 

the Commission estimates that 40 

carrying broker-dealers will be required 

to switch to a daily computation of the 

customer reserve formula and 35 

carrying broker-dealers will be required 

to switch to a daily computation of the 

PAB reserve formula.335 As shown in 

table 5, carrying broker-dealers with 

average total credits above the $500 

Million Threshold are more likely to 

experience larger mismatches and the 

dollar amounts underlying those 

mismatches are significantly larger.336

And as shown in panel C of table 5, 

those carrying broker-dealers that 

compute daily tend to have smaller 

mismatches than those that compute 

weekly. Hence, the final amendments 

may reduce the likelihood of 

mismatches, benefitting customers and 

PAB account holders of the affected 

carrying broker-dealers. 

Further, in cases where carrying 

broker-dealers with greater amounts of 

total credits are more interdependent 

with other carrying broker-dealers than 

carrying broker-dealers with smaller 

amounts of total credits, having 

additional large carrying broker-dealers 

computing daily may benefit financial 

markets overall without imposing the 

costs of daily computation onto carrying 

broker-dealers that do not have 

significant amounts of total credits. 

Carrying broker-dealers above the 

$500 Million Threshold are more likely 

to have PAB accounts, and these PAB 

accounts hold much greater amounts of 

total credits. To be specific, 89.8% of 

carrying broker-dealers above the $500 

Million Threshold hold PAB accounts, 

and they have an average value of $2.3 

billion in total PAB credits; whereas 

only 33.6% of carrying broker-dealers 

below the threshold hold PAB accounts, 

and they have an average value of $7.6 

million in total PAB credits. Therefore, 

the carrying broker-dealers above the 

$500 million threshold are likely to pose 

greater risk to other broker-dealers. That 

is, should a carrying broker-dealer fail 

and not have sufficient funds in its PAB 

reserve bank account to make whole its 

PAB account holders, a broker-dealer 

that is a PAB account holder of the 

failed carrying broker-dealer may 

experience delays in the reimbursement 

of its securities and cash and 

consequently be exposed to financial 

stress, which could further propagate to 

its PAB account holders, and so on. This 

risk is exacerbated for PAB account 

holders because they are not entitled to 

advances from the SIPC Fund. In that 

way, a failure of one large carrying 

broker-dealer with a mismatched PAB 

reserve bank account may result in other 

carrying broker-dealers experiencing 

financial stress and increased risk of 

liquidation. Insofar as a daily 

computation for carrying broker-dealers 

with total credits above the $500 

Million Threshold reduces the chance 

that a large carrying broker-dealer has 

mismatched funds in its PAB reserve 

bank account, the potential for stress 

propagation associated with a failure of 

a carrying broker-dealer will be reduced. 

As discussed in the baseline section, 

a carrying broker-dealer using the 

alternative method to compute its 

minimum net capital requirement must 

currently reduce aggregate debit items 

by 3% when performing its customer 

reserve computation under Rule 15c3–3. 

This provision serves to increase the 

amount of funds a carrying brokerdealer must deposit into its customer 

reserve bank account. Also, as 

mentioned in the baseline section, 

commenters recommended that the 

Commission eliminate the 3% debit 

reduction and instead apply the 1% 

debit reduction that currently applies to 

carrying broker-dealers using the basic 

method to compute their net capital.337

The Commission is modifying the 

final rule amendments to permit 

carrying broker-dealers to reduce 

aggregate debit items by 2% rather than 

3% if they perform a daily customer 

reserve computation. This amendment 

will apply to both carrying brokerVerDate Sep<11>2014 21:27 Jan 09, 2025 Jkt 265001 PO 00000 Frm 00034 Fmt 4701 Sfmt 4700 E:\FR\FM\13JAR2.SGM 13JAR2

ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 2823 

338See section II.C. of this release (discussing the 

2% debit reduction). 339See section I.A. of this release (discussing the 

mismatch risk). 340See Raymond James Letter at 4. 341See SIFMA Letter at 5 (stating ‘‘Firms required 

to conduct daily computations under any final rule 

will likely have to hire or train substantially more 

employees given this labor- and skill-intensive 

process.’’). 342See SIFMA Letter at 4 (stating ‘‘. . . firms 

must have internal controls over their reserve 

account computations in accordance with Exchange 

Act Rule 17a-5. These controls include checks, 

approval processes, data analytics, and data 

valuations to ensure accurate computations.’’) 

343See ASA Letter at 6; Raymond James Letter at 

4 (stating ‘‘the process of implementing the 

proposed changes to Rule 15c3–3 will itself require 

the firm to assign multiple staff members to the 

creation and testing of new programming and 

systems’’). 

344See SIFMA Letter at 4 (stating ‘‘Numerous 

personnel from various departments and groups, 

including regulatory reporting teams, treasury 

teams, operations teams, fixed income finance 

desks, cash management teams, various middle 

office teams, and business teams, are needed to 

complete the reserve account calculations’’) 

345See SIFMA Letter at 5. This is congruent with 

a statement from another commenter about the 

carrying broker-dealers that have also completed 

the shift. See ASA Letter at 6 (stating ‘‘these firms 

have shared that it took them approximately 25,000 

hours of staff and technology work’’). 

346See SIFMA Letter at 5. 

347As of December 2023, 9 out of 10 carrying 

broker-dealers, that performed computations on a 

daily basis, had over $1 billion in average total 

credits and held assets with an average value of 

$320 billion. 

348Using the stated cost estimate of $3 million as 

an upper bound of a carrying broker-dealer’s initial 

compliance costs, the upper bound of the total 

initial compliance costs for the 40 carrying brokerdealers can be estimated as $120 million. 

349See SIFMA Letter at 4. 

350See Raymond James Letter at 4. 

351See Raymond James Letter at 3. Another 

commenter stated that the daily computation 

processes may involve the participation of 

numerous departments, as well as up to 50 different 

people, depending on firm size. See ASA Letter at 

6. 

dealers that are required to perform a 

daily customer reserve computation 

because they exceed the $500 Million 

Threshold and carrying broker-dealers 

below the $500 Million Threshold that 

voluntarily perform a daily 

computation. This amendment creates 

an incentive for smaller carrying brokerdealers to voluntarily perform a daily 

customer reserve computation. To the 

extent that they do so, this would 

reduce the likelihood of a mismatch of 

funds in their customer and PAB reserve 

bank accounts, thereby also reducing 

the risk that customers and PAB account 

holders experience delays in recovering 

their funds from the carrying brokerdealer in case of its failure as well as 

other risks associated with the 

failure.338

For the 49 broker-dealers on Figure 1 

of the baseline section that met the 

threshold in 2023, the Commission used 

FOCUS data on aggregate debits to 

estimate that the change from 3% to 2% 

adopted by the rule amendments would 

have freed up a monthly average of 

$7.41 billion of liquidity. The reduction 

in aggregate debit items from 3% to 2% 

mitigates the additional costs to carrying 

broker dealers who change to a daily 

calculation while still being congruent 

with investor protection; the change to 

a daily calculation, which lowers 

mismatch risk,339 allows for this change. 

2. Costs 

Affected broker-dealers may 

experience an increase in costs resulting 

from the shift to the daily computation 

requirement. If under the weekly 

computation requirement, the carrying 

broker-dealers relied on staff who 

fulfilled other functions to also perform 

the weekly computations,340 under the 

daily computation requirement, these 

carrying broker-dealers will need to 

make operational changes in order to reallocate the effort of this staff across the 

week or hire new personnel who will be 

assigned the task of performing daily 

computing.341 The Commission also 

expects that the carrying broker-dealers 

may need to upgrade their systems and 

internal controls 342 or potentially create 

or purchase new programming and 

systems, and update the infrastructure 

of various functions,343 to facilitate the 

increased frequency of computations 

and accelerate the coordination of 

departments and groups involved in 

providing the necessary information on 

credit and debit items used to perform 

the computations.344 Implementing 

these operational changes, potential 

staff increases, and upgrades may 

require the carrying broker-dealers to 

incur initial start-up compliance costs. 

The Commission received comments 

offering estimates of these start-up costs. 

One commenter stated that for a 

carrying broker-dealer that currently 

performs daily reserve computations, it 

took over 25,000 man-hours to complete 

the shift from weekly to daily 

computing.345 This commenter also 

stated that it may require anywhere 

from 12,000 to 25,000 man-hours to 

complete the technology and systems 

changes necessary to make the shift, at 

cost estimates of $2 million to $3 

million.346 The estimated figure of the 

man-hours spent by a carrying brokerdealer that has already implemented the 

shift to daily computing reasonably 

represents the man-hours for a large 

carrying broker-dealer, and therefore 

can be interpreted as an upper bound of 

the effort required to implement the 

necessary technology and systems 

changes.347 The commenter did not 

provide additional information about 

assumptions or methodologies used to 

derive a cost of $2 to $3 million from 

the stated range of 12,000 to 25,000 

man-hours. Given that on average the 40 

of 49 affected broker-dealers who 

compute weekly have smaller amounts 

of total credits and assets than the 

carrying broker-dealers who currently 

perform daily reserve computations, the 

stated cost estimate of $3 million can be 

interpreted as an upper bound of the 

initial costs that a carrying broker-dealer 

may incur in the course of 

implementing the necessary technology 

and systems changes to comply with the 

final amendments.348 The Commission, 

however, will lower the 3% debit 

reduction to 2% for the carrying brokerdealers using the alternative method for 

net capital purposes, if they perform a 

daily customer reserve computation. 

This will free-up liquidity of these 

carrying broker-dealers, thus partially 

mitigating their compliance costs. 

The Commission received comments 

regarding the ongoing costs. One 

commenter stated that performing a 

weekly computation requires numerous 

personnel from various departments and 

groups to obtain thousands of credit and 

debit items, reconcile these items with 

other firm data, and ensure accurate 

computations.349 A different commenter 

stated that implementing the final 

amendments will require carrying 

broker-dealers to devote the full-time 

efforts of multiple new personnel in 

order to perform daily calculations and 

deposits.350 This commenter stated that 

when performing and documenting each 

weekly calculation, no fewer than 55 

employees are involved in some aspect 

of the reserve computations.351

The Commission acknowledges that 

the ongoing costs may increase as a 

result of implementing the final 

amendments. The Commission also 

agrees that completing a reserve 

computation requires a successful 

coordination of multiple personnel 

across various departments within a 

carrying broker-dealer, while the team 

responsible for performing the 

computation collects and validates 

information on credit and debit items 

ensuring the accuracy of computations. 

Thus, the estimate of 55 employees 

involved in various aspects of the 

reserve computations may be a 

reasonable approximation of the number 

of personnel that participate in 

providing and processing information 

about the credit and debit items for the 

reserve computations. However, as a 

result of implementing the operational 

changes and technology upgrades to 

comply with the final amendments, the 


ddrumheller on DSK120RN23PROD with RULES2
2824 Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 

352See ASA Letter at 6. 

353See SIFMA Letter at 4. 

354See infra section V. of this release (discussing 

PRA). For an additional discussion of the costs 

associated with the recordkeeping requirements 

related to customer and PAB reserve computations, 

including changes to (or the acquisition of) 

technology or systems, see infra section V.D.1. of 

this release. 

355The $184,000 estimate is based on the 

following calculations: $184,375 (hourly rate for 

financial reporting manager at $295 for 2.5 hours for 

250 business days) ≈ $184,000. This cost estimate 

is the same for daily customer and PAB reserve 

computations. It is not an estimate of the time it 

takes a carrying broker-dealer to perform the 

customer and PAB reserve computations or to fulfill 

current regulatory requirements. 

356The $11 million estimate is based on the 

following calculation: 46,875 of total burden hours 

under the final amendments minus the decrease of 

9,750 in burden hours (5,200 hours + 4,550 hours), 

multiplied by the hourly rate of $295 for financial 

reporting manager. For an additional discussion of 

the burden hours, see infra section V.D.1. of this 

release. 

357See SIFMA Letter at 4. 358See infra section V. of this release. 

increase in the carrying broker-dealers’ 

ongoing costs can be partially mitigated 

through automation and an accelerated 

coordination of departments and groups 

involved in providing the necessary 

information on credit and debit items. 

The Commission also recognizes that 

not all work related to performing the 

reserve computation can be 

automated.352 However, the workload 

associated with the manual verification 

and validation of the transactions 

underlying the reserve computations 

can be reallocated across the week, as a 

result of operational changes. For 

example, if a carrying broker-dealer 

performed the work of verifying and 

investigating all the transactions at the 

end of the week, when a weekly 

computation was conducted, under the 

daily computation requirement, this 

carrying broker-dealer will be verifying 

the transactions daily, as they happen, 

and hence this workload will be spread 

out across the week. If the effort of the 

existing staff cannot be reallocated 

across the week effectively, 

implementing the final amendments 

will require the carrying broker-dealers 

to hire new personnel. However, as the 

new personnel takes over the task of 

performing daily reserve computations, 

the workload of the staff previously 

involved in performing weekly reserve 

computations could be reduced. 

One commenter stated that a realistic 

estimate of the time it takes to complete 

a reserve computation runs into the 

dozens of hours, depending on the 

complexity of the carrying brokerdealer’s business, with some carrying 

broker-dealers spending 60 to 75 manhours per week on computations.353

This commenter concluded that moving 

to daily computing would mean a 

burden of over 400 man-hours a week 

for some carrying broker-dealers, 

meaning that the burden would increase 

more than five times. 

The Commission recognizes that it 

may take up to 60 to 75 man-hours per 

week to complete a (weekly) reserve 

computation for carrying broker-dealers 

with complex operations. However, the 

Commission does not expect a more 

than five times increase in man-hours 

for the carrying broker-dealers required 

to transition from weekly to daily 

reserve computations, as it was 

suggested by one of the commenters. 

To the extent that the carrying brokerdealers successfully implement the 

operational changes and technology 

upgrades discussed above, with 

automation, accelerated coordination of 

departments and groups involved in 

providing the information for the 

reserve computations, and staff effort 

being reallocated across the week, the 

number of man-hours spent on 

performing one reserve computation is 

unlikely to increase (and therefore stay 

below 75 man-hours). As a result, the 

weekly number of man-hours spent on 

complying with the final amendments is 

unlikely to increase more than five 

times for carrying broker-dealers making 

the shift from weekly to daily 

computations, as it was suggested by 

one of the commenters, and hence will 

be lower than 400 man-hours. 

The daily computation requirement 

will also lead to an increase in the 

recordkeeping costs.354 The 

Commission estimates that it will cost a 

carrying broker-dealer $184,000 

annually per reserve computation to 

prepare the records of that 

computation.355 The 9 carrying brokerdealers that already perform such 

computations daily (as shown in table 4, 

based on data for the period for January 

2023 through December 2023) may not 

experience an increase in recordkeeping 

costs, however. Given the 40 carrying 

broker-dealers required to switch to a 

daily computation of the customer 

reserve formula and the 35 carrying 

broker-dealers required to switch to a 

daily computation of the PAB reserve 

formula, that implies that the aggregate 

annual costs of preparing records of 

reserve computations will increase by 

approximately $11 million.356

One commenter stated that the 2.5 

hour burden provided in the Proposing 

Release significantly underestimated the 

costs associated with shifting to the 

daily computation requirement.357

Another commenter also stated that the 

Commission underestimated the staffing 

and time that will be needed to 

transition to daily computations and 

deposits. These commenters suggested 

that these costs are larger than the 

figures estimated in the Proposing 

Release. In response, the 2.5 hour 

burden reflects solely the costs of 

making a record of each customer or 

PAB reserve computation, only one of 

the components of the costs of 

implementing the final amendments. 

This estimate does not represent any 

other (initial or ongoing) economic costs 

that carrying broker-dealers may incur 

while fulfilling the daily computation 

requirements.358

To the extent that the affected 

carrying broker-dealers that are just 

above the $500 Million Threshold do 

not experience the same economies of 

scale as carrying broker-dealers that are 

well above the threshold, they may be 

disproportionately affected by the daily 

computation requirements and the 

related costs. If these costs are 

significant, some carrying broker-dealers 

may decide to alter their business to fall 

below the threshold and avoid the costs 

related to performing the customer and 

PAB reserve computations daily. If so, 

the benefits of the final amendments 

may be reduced. 

Carrying broker-dealers just below or 

above the $500 Million Threshold may 

also experience uncertainty related to 

being scoped into compliance with the 

daily computation requirement and may 

experience costs related to this 

uncertainty. As displayed in Figure 1, 

some carrying broker-dealers are likely 

to drop below the $500 Million 

Threshold over time, and then once 

again exceed the threshold in later 

months. The costs related to these 

fluctuations are uncertain, but are likely 

to add, for such carrying broker-dealers, 

to the costs cited above (for example, if 

additional staff is needed by these 

carrying broker-dealers to monitor their 

customer reserve accounts more closely 

than carrying broker-dealers well above 

the $500 Million Threshold). 

Furthermore, while switching back 

and forth between daily and weekly 

computations may tailor the compliance 

costs to the size of customer activity, 

these fluctuations may also be confusing 

for customers and PAB account holders 

of carrying broker-dealers who decide to 

switch. However, this potential cost or 

concern may be trivial as many 

customers may be unaware of, or 

unconcerned by, the switch. 

Finally, in order to avoid incurring 

the costs related to the uncertainty of 

having to switch back and forth between 

daily and weekly computations, some of 

these carrying broker-dealers may prefer 

to voluntarily perform daily 


ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 2825 

359See Better Markets Letter; SIPC Letter; NASAA 

Letter. 

360See Better Markets Letter at 8; Cory Letter; 

Letter from J.R. Rothwell (Sept. 8, 2023). 

361See Better Markets Letter at 8. 

362See Better Markets Letter at 9. 

363See section IV.E.3 of this release. 

364See ASA Letter at 5; NASAA Letter at 2; 

SIFMA Letter at 6. 

365See NASAA Letter at 2. 

366See ASA Letter at 5. 

367See SIFMA Letter at 6. 

368See SIFMA Letter at 6. 

369See section IV.E.2. of this release. 

370See Linder Letter; O’Donnel Letter; and Santos 

Letter. 

371See Raymond James Letter at 2. 

372See Raymond James Letter at 2. 

373See Raymond James Letter at 3. 

374See ASA Letter at 4. 

computations after being scoped into 

compliance for the first time and paying 

the start-up costs associated with the 

final amendments, even if their average 

total credits temporarily fall below the 

$500 Million Threshold. 

The Commission received several 

comments supporting the proposal to 

require carrying broker-dealers with 

large amounts of credits to perform 

daily customer and PAB reserve 

computations; 359 however, some of the 

commenters suggested modifications to 

the proposed threshold. 

For example, some commenters 

suggested that the Commission should 

apply the final rule requirements to all 

carrying broker-dealers.360 One 

commenter stated that customer 

protection rationale applies equally to 

clients of both small and large brokerdealers.361 Furthermore, the same 

commenter stated that requiring all 

carrying broker-dealers to perform daily 

computations eliminates the need for 

carrying broker-dealers to monitor their 

average total credits over the twelvemonth period.362

The final amendments do not extend 

to carrying broker-dealers with average 

total credits below the $500 Million 

Threshold. Applying the daily 

computation requirement to these 

carrying broker-dealers would impose 

compliance costs on 113 more brokerdealers with relatively less customer 

and PAB account activity.363

Furthermore, as shown in panels A and 

B of table 5, carrying broker-dealers 

with average total credits below the 

$500 Million Threshold are less likely to 

experience larger mismatches, and the 

dollar amounts of these mismatches are 

smaller, relative to carrying brokerdealers above the $500 Million 

Threshold. Thus, extending the daily 

computation requirement to these 

broker-dealers would subject them to 

increased compliance costs while they 

do not have potential for large mismatch 

risks. 

Several commenters also suggested 

establishing alternative thresholds.364

One commenter proposed that the 

Commission define the threshold as a 

formula that could be adjusted 

periodically to ensure that the systemic 

risk mitigation aims can be reevaluated 

if necessary.365 Another commenter 

suggested incorporating risk and 

liquidity factors into the threshold as 

they may be better predictors of a failing 

carrying broker-dealer.366

The Commission disagrees with these 

commenters’ recommendations to 

establish alternative thresholds. Setting 

formula-based thresholds that 

incorporate dynamic risk or liquidity 

factors instead of a fixed-dollar 

threshold would make the rule 

requirements less predictable and more 

complex to monitor for the carrying 

broker-dealers above the threshold. 

Furthermore, a dynamic formula-based 

threshold would increase the 

uncertainty of the carrying brokerdealers that would expect to be scoped 

into compliance with the requirements 

of the rule due to being just below the 

threshold, and, as a result, experience 

higher costs related to this uncertainty. 

As displayed in Figure 1 and discussed 

above, if the threshold is fixed, some 

carrying broker-dealers are likely to 

drop below it and then exceed the 

threshold again in later months. These 

fluctuations would be larger and more 

costly for the carrying broker-dealers if 

they are expected to comply with a 

formula-based threshold that 

incorporates dynamic factors. A uniform 

fixed-dollar threshold will make the 

rule requirements more predictable and 

easier to monitor over time for the 

carrying broker-dealers. Another 

commenter suggested to require carrying 

broker-dealers to perform daily 

computations if their average total 

credits exceed the proposed $250 

Million Threshold and their average net 

credits are more than $10 million.367

This commenter stated that including 

this additional metric would ensure that 

the rule requirements exclude brokerdealers without a large excess of credits 

over debits, as these carrying brokerdealers do not present a large mismatch 

risk.368 The Commission disagrees with 

this commenter’s suggestion. Although 

carrying broker-dealers may have lower 

average excess of credits over debits, 

these carrying broker-dealers remain at 

risk for a large mismatch.369 The net 

credit metric does not take into account 

fluctuations in the value of net cash 

owed to customers and PAB account 

holders, and hence lower average net 

credits do not necessarily indicate that 

the carrying broker-dealer is at a lower 

risk of large intra-week mismatches. 

Furthermore, the commenter did not 

provide any data supporting the 

suggestion that carrying broker-dealers 

with net credits below $10 million 

necessarily experience lower 

mismatches. 

The Commission is adopting a $500 

Million Threshold to narrow the scope 

of the final amendments to carrying 

broker-dealers that tend to have larger 

mismatches. The $500 Million 

Threshold excludes 12 carrying brokerdealers, as compared to the proposed 

$250 Million Threshold. The final 

amendments are designed to reduce the 

mismatch risk for carrying brokerdealers with large amounts of total 

credits by reducing the time between 

the inflows of customer funds and when 

the carrying broker-dealers perform 

their next reserve computations and 

fund their reserve accounts, as these 

carrying broker-dealers are more likely 

to have larger mismatches, and the 

dollar amounts underlying these 

mismatches are significantly larger. 

Also, as stated above, a uniform 

threshold will make it easier for the 

carrying broker-dealers to comply with 

the final amendments. 

Some commenters also suggested that 

carrying broker-dealers should perform 

the reserve computations in real time, 

given that the technical prerequisites for 

complex computational operations are 

already present.370 The Commission 

disagrees with these commenters. 

Performing the reserve computations in 

real time may not be feasible, as these 

computations are often accompanied by 

manual validations of the underlying 

transactions. Automating these 

components of computations is 

technically difficult and would be 

comparatively costlier for the carrying 

broker-dealers than the final 

amendments. 

One commenter suggested 

establishing conditions under which 

either the customer or PAB reserve 

computations would be exempt from the 

daily computation requirement.371 The 

commenter stated that if one of the 

computations (customer or PAB) has 

significantly less credits relative to the 

other, it may not be necessary or 

appropriate to require a daily reserve 

computation for the smaller category of 

account.372 The commenter’s suggestion 

included setting separate threshold 

requirements for each category of 

computations.373 One commenter also 

proposed to exempt PAB reserve 

computations from the rule 

requirements entirely.374 The 


ddrumheller on DSK120RN23PROD with RULES2
2826 Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 

375See ASA Letter at 1. 

376See ASA Letter at 1. 

377See, e.g., ASA Letter 2 at 2; SIFMA Letter at 

12; Raymond James Letter at 4; ASA Letter at 6. 

378See ASA Letter at 6. 

379 Id. 

380See, e.g., ASA Letter 2 at 2; SIFMA Letter at 

12; Raymond James Letter at 4; ASA Letter at 6. 

Although the date of the requirements for the T+1 

transition has passed, see supra note 283 for 

relevant compliance and filing dates, the 

Commission considers other recently adopted 

Commission rules in this analysis. 

381Commenters also mentioned the new margin 

requirements under FINRA Rule 4210 and the CAT 

CAIS amendments as two regulatory obligations 

that could potentially overlap with the obligations 

of these final amendments. See, e.g., ASA Letter 2 

at 2; SIFMA Letter at 12; Raymond James Letter at 

6. The requirements under both FINRA Rule 4210 

and the CAT CAIS amendments have been 

implemented such that there is no overlap with the 

requirements of these final amendments. 

382See supra section IV.B.1. (listing recent rule 

adoptions and their respective compliance dates) 

and section III. (listing compliance dates). 383See Rule 605 Adopting Release at 26496–97. 384See Rule 10c–1a Adopting Release at 75647, 

75717–18; Customer Notification Adopting Release 

at 47689, 47725. 385See Electronic Submission Adopting Release 

section VI. 386See Clearing Agency Governance Adopting 

Release at 84498; Treasury Clearing Release at 2717, 

2791. 

Commission disagrees with these 

commenters. As stated above, having a 

daily computation requirement with a 

uniform threshold that applies to 

average total credits will be less costly 

to monitor for carrying broker-dealers 

expecting to be scoped into compliance, 

than a requirement prescribing a more 

complex threshold. Furthermore, 

exempting PAB reserve computations 

from the rule requirements would 

increase the risks of the PAB account 

holders as they are not entitled to 

advances from the SIPC Fund in case of 

the carrying broker-dealer’s liquidation. 

One commenter stated that the 

Commission has not appropriately 

weighed the costs of implementing the 

rule requirements against any potential 

benefits that could derive from the 

rule.375 This commenter also suggested 

that these costs could be passed down 

to investors buying and selling 

securities.376

The Commission recognizes that 

complying with the rule requirements 

may be costly for the carrying brokerdealers. However, the customers and 

PAB account holders are expected to 

significantly benefit from the 

protections provided by the final 

amendments. Performing daily customer 

and PAB reserve computations will 

decrease the risk of delays in recovering 

their funds from the carrying brokerdealer in case of its failure. Moreover, 

maintaining customer and PAB reserve 

account balances that more closely 

represent the amounts of cash owed to 

customers and PAB account holders 

will reduce the risk of not completely 

recovering their funds from the carrying 

broker-dealer. These risks are 

exacerbated for PAB account holders as 

they are not entitled to advances from 

SIPC Fund, and hence their benefits 

from the protections provided by the 

final amendments are expected to be 

larger. Performing daily computations 

will also benefit customers and PAB 

account holders of carrying brokerdealers by more quickly applying the 

protective measures of the Rule 15c3–3 

reserve requirements to cash of 

customers and PAB account holders that 

is newly deposited into the carrying 

broker-dealer. This is expected to 

reduce the likelihood that customer 

funds may be inadvertently used to 

finance any part of the carrying brokerdealer’s business. In addition, other 

carrying broker-dealers may also benefit 

from the final amendments, since the 

requirement to perform daily 

computations may reduce the risk of 

SIPC Fund depletion. 

3. Other Compliance Costs 

Several commenters suggested that 

the Commission should consider the 

cumulative burdens of implementing 

the proposed rule amendments and 

other regulatory obligations with 

potentially overlapping compliance 

dates.377 Specifically, one commenter 

stated that ‘‘the same firms who will be 

required to move to a daily computation 

are also managing multiple other 

regulatory requirements.’’ 378 The 

commenter further stated that ‘‘unless 

the SEC provides adequate time to 

manage the new regulatory 

requirements together, firms will face an 

unmanageable clash of compliance 

requirements all converging at the same 

time.’’ 379 The Commission has 

considered the potential effects on 

carrying broker-dealers that are 

implementing other recently adopted 

Commission rules during the 

compliance period for these 

amendments. 

Consistent with its long-standing 

practice, the Commission’s economic 

analysis in each adopting release 

considers the incremental benefits and 

costs for the specific rule—that is, the 

benefits and costs stemming from that 

rule compared to the baseline. The 

Commission acknowledges the 

possibility that complying with more 

than one rule in the same time period 

may entail costs that could exceed the 

costs if the rules were to be complied 

with separately. One of the rules 

mentioned by commenters which 

culminated in the recent adoption of the 

rules and amendments in the Settlement 

Cycle Adopting Release has a 

compliance date that occurred before 

the effective date of the final 

amendments,380 such that there is no 

overlap in transition periods.381

With respect to the other recently 

adopted Commission rules discussed 

above, for which the compliance 

periods overlap, in part with the 

compliance period for the final 

amendments,382 carrying broker-dealers 

subject to the amendments will be 

subject to one or more of those other 

recently adopted rules only when those 

carrying broker-dealers’ activities fall 

within the scope of the other rules. 

Specifically, the rules and amendments 

adopted in the Rule 605 Adopting 

Release apply to market centers, which 

includes certain carrying brokerdealers.383 The Rule 10c–1a Adopting 

Release and the Customer Notification 

Adopting Release also apply to certain 

carrying broker-dealers, although due to 

differing requirements, these rules may 

not all apply to any given carrying 

broker-dealer.384 The Electronic 

Submission Adopting Release applies to 

entities that file FOCUS Reports, which 

includes all carrying broker-dealers.385

The Treasury Clearing Release applies 

to certain clearing agencies for U.S. 

Treasury securities and certain 

participants of the covered clearing 

agencies, which could include carrying 

broker-dealers.386 Where rules affecting 

the same entities have overlapping 

compliance periods, the Commission 

acknowledges that there may be 

additional costs on those carrying 

broker-dealers subject to one or more 

other rules. 

D. Effects on Efficiency, Competition, 

and Capital Formation 

The final amendments may affect 

competition among carrying brokerdealers. First, to the extent that 

compliance costs would be passed onto 

customers and PAB account holders, 

affected carrying broker-dealers that 

experience greater economies of scale 

may become more competitive than 

other affected carrying broker-dealers. 

Second, to the extent that customers of 

carrying broker-dealers value daily 

reserve computations more than the 

weekly computations, the affected 

carrying broker-dealers may become 

more competitive relative to the 

unaffected carrying broker-dealers. 

However, the Commission does not 

anticipate such an effect to be large. 

Given the fact that ten carrying brokerdealers already compute daily, if such a 

competitive advantage existed and was 

sufficiently large, and carrying brokerVerDate Sep<11>2014 21:27 Jan 09, 2025 Jkt 265001 PO 00000 Frm 00038 Fmt 4701 Sfmt 4700 E:\FR\FM\13JAR2.SGM 13JAR2

ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 2827 

387See supra section IV.C.3. (discussing 

potentially overlapping compliance dates and the 

potential costs to carrying broker-dealers subject to 

the final amendments). 

dealers performing weekly 

computations were losing customers, 

then more carrying broker-dealers 

would have likely already converted to 

daily computing. On the other hand, to 

the extent that the some of the affected 

carrying broker-dealers that are just 

above the $500 Million Threshold do 

not experience the same economies of 

scale as carrying broker-dealers that are 

well above the threshold, they may 

decide to alter their business or adjust 

the size of their activities to fall below 

the threshold and avoid incurring the 

compliance costs associated with 

implementing the final amendments, 

which may in turn adversely impact 

competition. 

As discussed above, the Commission 

acknowledges that overlapping 

compliance periods may in some cases 

increase costs.387 The Commission 

acknowledges that to the extent overlap 

occurs between the compliance periods 

of this rule and the compliance periods 

of other rules, there could be costs that 

could affect competition. However, the 

compliance date is spread over a period 

extending to December 2025. The 

Commission therefore does not expect 

the risk of negative competitive effects 

from increased compliance costs from 

overlapping compliance periods to be 

significant. 

The final amendments may increase 

liquidity in the securities markets, as 

they will promote confidence in the 

broker-dealer industry by increasing its 

resilience and result in an increase of 

customer and PAB account activities. As 

a consequence, market efficiency and 

capital formation in the underlying 

markets may increase. Under the 

baseline there is a greater chance of a 

larger mismatch with weekly reserve 

computations than with daily reserve 

computations, potentially suggesting a 

greater risk in doing business with a 

carrying broker-dealer that performs its 

customer and PAB reserve computations 

weekly. Also, to the extent that the 

mismatch reflects an overfunding, there 

may also be a greater cost to the carrying 

broker-dealer (and by extension its 

customers), since it ties up capital that 

the carrying broker-dealer could have 

put to more productive use. 

Therefore, should customers and PAB 

account holders have a concern over 

mismatch in reserve bank accounts and 

potential failures affect market 

participants’ willingness to expose 

themselves to carrying broker-dealers, 

there may be less capital committed to 

this market as otherwise. However, 

similar to the point above, if customers 

of carrying broker-dealers were aware 

and concerned of mismatches, the 

Commission might have already 

observed more carrying broker-dealers 

computing daily, in order to retain 

customers, than is currently the case 

under the baseline. Therefore, the 

Commission does not anticipate any 

effect on capital formation in this 

market to be significant. 

In addition, insofar as capital loss 

could arise in times of market stress due 

to an increased likelihood of carrying 

broker-dealer failures, market 

participants may become concerned 

with the possibility of not getting their 

cash promptly or not getting paid in full 

in an event of a carrying broker-dealer 

failure and reduce their exposure to 

carrying broker-dealers. To the extent 

that the daily computation requirement 

alleviates this concern, the risk of flight 

of capital from securities markets may 

decrease during stressed market 

conditions and capital inflow during 

normal market conditions may increase. 

Finally, the daily computation 

requirement may benefit the affected 

carrying broker-dealers by increasing 

their operational efficiency. For 

example, in a scenario where customer 

reserve or PAB reserve bank accounts 

are over-funded, a carrying brokerdealer that performs a weekly 

computation cannot withdraw excess 

cash from the customer reserve bank 

account until the following reserve 

computation date, even if the value of 

the account exceeds the actual net cash 

owed to customers, exposing this 

carrying broker-dealer to operational 

inefficiency. A daily computation 

would permit the affected carrying 

broker-dealers to withdraw these excess 

funds in a timely manner and would 

allow them to manage their funds and 

operations more effectively. 

Since the final amendments do not 

impact the scope of information 

available to investors, the Commission 

does not anticipate effects on 

informational efficiency to be 

significant. 

E. Reasonable Alternatives 

1. Over-Funding of the Customer and 

PAB Reserve Bank Accounts 

As an alternative to daily computation 

requirements, the Commission 

considered an over-funding approach 

which would have applied to the 

customer and PAB reserve bank 

accounts. For example, carrying brokerdealers would have performed the 

required reserve computations and 

deposits weekly and deposited a 

multiple of this amount (e.g., 105% or 

110%) into the customer or PAB reserve 

bank account. Under this alternative 

approach, carrying broker-dealers would 

have avoided an increase in compliance 

costs associated with a daily 

computation requirement (hence, this 

alternative would have applied to 

carrying broker-dealers choosing weekly 

funding). Insofar as the compliance 

costs associated with the daily 

computation would be passed onto 

customers and PAB account holders of 

the affected carrying broker-dealers, this 

alternative approach would have been 

more beneficial for these customers and 

PAB account holders because it would 

not have implied an operational change 

and compliance costs related to the 

customer and PAB reserve computation 

while offering extra protection for 

customers and PAB account holders. 

However, under this alternative the 

carrying broker-dealer would have 

needed to fund the excess with its own 

cash, which could have resulted in 

funding costs, decreased liquidity, and 

opportunity costs from not being able to 

deploy this cash in the carrying brokerdealer’s business. As a result, requiring 

carrying broker-dealers to place extra 

cash in a customer or PAB reserve bank 

account could have resulted in an 

operational efficiency decrease and 

potential reduction of carrying brokerdealers’ profits, which may be passed 

onto customers, PAB account holders, 

and other stakeholders. In addition, this 

approach would not have accounted for 

the actual net cash owed to customers 

and PAB account holders if reserve bank 

account mismatches exceeded the buffer 

that this alternative would have 

required. 

2. A Threshold Based on a Different 

Metric 

As an alternative, the Commission 

considered setting a threshold for 

compliance with a daily computation 

requirement based on a different metric. 

For example, the Commission could 

have set a threshold based on total 

assets of $1 billion or net capital of $50 

million. A threshold based on such 

metrics could have been more 

representative of the economies of scale 

that carrying broker-dealers experience 

and could have better indicated a 

carrying broker-dealer’s ability to 

comply with enhanced requirements 

without substantial increases in 

compliance costs that could have 

ultimately been passed onto their 

customers. 

Based on the monthly 2023 FOCUS 

Reports, the Commission estimates that 

under the alternative threshold of $1 

billion in total assets 78 carrying brokerVerDate Sep<11>2014 21:27 Jan 09, 2025 Jkt 265001 PO 00000 Frm 00039 Fmt 4701 Sfmt 4700 E:\FR\FM\13JAR2.SGM 13JAR2

ddrumheller on DSK120RN23PROD with RULES2
2828 Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 

388See table 7 below in section IV.E.6. of this 

release for numbers based on the June 2023 to May 

2024 period. 

389See SIFMA Letter at 6. 

390The average net credits are calculated as an 

average of excess total credits over total debits, 

where total debits exclude 3% of aggregate debits 

(i.e., based on the baseline 3% debit reduction). 391See table 7 below in section IV.E.6. of this 

release for numbers based on the June 2023 to May 

2024 period. 

392See table 7 below in section IV.E.6. of this 

release for numbers based on the June 2023 to May 

2024 period. 

dealers would have been required to 

perform the customer and PAB reserve 

computations daily. Of the 49 carrying 

broker-dealers that are at or above the 

$500 Million Threshold for average total 

credits, one has total assets below $1 

billion, while 30 carrying broker-dealers 

below the $500 Million Threshold have 

total assets over $1 billion. 

With respect to a $50 million net 

capital threshold, 100 carrying brokerdealers would have been required to 

perform the customer and PAB reserve 

computations daily. Of the carrying 

broker-dealers that are below $500 

Million Threshold for average total 

credits, 51 have net capital exceeding 

$50 million, while of the group above 

$500 Million Threshold for average total 

credits, none have net capital below $50 

million. 

If the alternative had stated that the 

carrying broker-dealer has over $1 

billion in total assets, or has over $50 

million net capital threshold, 101 

carrying broker-dealers would have 

been required to perform the customer 

and PAB reserve computations daily. 

A drawback to this alternative is that 

some large broker-dealers with minimal 

amounts of carrying activity would have 

borne the added cost of switching to a 

daily computation. For example, the 

group of 30 carrying broker-dealers 

below the $500 Million Threshold with 

$1 billion in assets or more, had a 

combined total of average total credits of 

approximately $4.6 billion as of the end 

of 2023. That amounted to only about 

0.44% of average total credits for all 

carrying broker-dealers for that year.388

The Commission received a comment 

suggesting the Commission require 

carrying broker-dealers to perform daily 

reserve computations if the average total 

credits exceed the proposed $250 

Million Threshold and average net 

credits exceed $10 million.389 This 

commenter stated that including this 

additional net credits metric would 

ensure that the rule requirements 

exclude carrying broker-dealers without 

a large excess of credits over debits, as 

these carrying broker-dealers do not 

present a large mismatch risk. 

Under this alternative, based on the 

monthly 2023 FOCUS Reports, 51 

carrying broker-dealers would have 

been required to perform the reserve 

computations daily, compared to the 49 

under the final amendments with the 

threshold set to $500 Million.390 The 

potential drawback to this alternative is 

that some of the carrying broker-dealers 

with large amounts of average total 

credits would have been excluded from 

the daily computation requirement. To 

be specific, out of 10 carrying brokerdealers above the $500 Million 

Threshold that would have been scoped 

out of the compliance under this 

alternative, 7 carrying broker-dealers 

have over $1 billion in average total 

credits. Given the information displayed 

in table 5, carrying broker-dealers in this 

group are more likely to have larger 

mismatches, which suggests that under 

this alternative approach, there is a 

potential for more carrying brokerdealers to have a large mismatch, than 

under the final amendments. 

3. Daily Computation Requirement for 

All Carrying Broker-Dealers 

As an alternative, the Commission 

considered requiring the daily 

computation requirement to apply to all 

carrying broker-dealers with positive 

average total credits. Under this 

alternative, a greater number of carrying 

broker-dealers would have performed 

their customer and PAB reserve 

computations daily, which would have 

benefitted more customers and PAB 

account holders compared to the final 

amendments. Specifically, under the 

zero threshold, 113 more carrying 

broker-dealers would have experienced 

the benefits and costs discussed in 

section IV.C. of this release (compared 

to the 49 affected based on the January 

2023 to December 2023 period). 

Further, to the degree that carrying 

broker-dealers with smaller amounts of 

total credits are interdependent with 

other broker-dealers to the same degree 

as carrying broker-dealers with larger 

amounts of total credits, this approach 

would have benefitted all PAB account 

holders equally and potentially reduced 

the systemic risk to a greater degree 

relative to the final amendments. The 

number of credits held in the PAB 

reserve bank accounts of the 44 carrying 

broker-dealers (with PAB accounts) 

above the $500 Million Threshold 

makes up approximately 99% of the 

total amount held in PAB reserve bank 

accounts (of the 82 broker-dealers that 

reported carrying PAB accounts in 

2023).391

In particular, insofar as a daily 

computation for all carrying brokerdealers reduces the chance that any 

carrying broker-dealer has funds in its 

PAB reserve bank account that are less 

than the net amount of cash owed to 

PAB account holders, the potential for 

stress propagation associated with a 

failure of a carrying broker-dealer could 

be reduced. 

However, this alternative would have 

imposed compliance costs on a greater 

number of carrying broker-dealers, 

which could have been passed onto 

customers and PAB account holders. In 

addition, customer protection benefits 

may have been not justified by the 

reduction in operational efficiency of 

carrying broker-dealers with little 

customer and PAB account activity that 

may arise from disproportional 

dedication of resources towards a de 

minimis business activity. Finally, this 

alternative would have also imposed 

significant economic impact on small 

businesses. 

4. A Higher or Lower Threshold for 

Daily Computation 

As an alternative, the Commission 

considered a threshold higher or lower 

than $500 million in average total 

credits. Under these alternatives, fewer 

or more carrying broker-dealers would 

have been required to perform their 

customer and PAB reserve computations 

daily. For example, if the threshold was 

set at $100 million, a total of 75 carrying 

broker-dealers would have been scoped 

into the new requirements compared to 

the 49 under the final amendments. 

Similarly, if the threshold was set at $1 

billion, only 41 carrying broker-dealers 

would have been scoped into the new 

requirements.392

If the threshold were $100 million, 

more carrying broker-dealers would 

perform daily computations, which 

would mean that fewer broker-dealers 

would have a mismatch between the net 

cash owed to the carrying brokerdealer’s customers and the amounts 

deposited in their customer or PAB 

reserve bank accounts. On the other 

hand, more broker-dealers would have 

incurred the burden of performing their 

customer and PAB reserve computations 

daily. If the threshold were set at $1 

billion, fewer carrying broker-dealers 

would face the costs of a daily 

computation than under the final 

amendments. However, there would 

have been fewer carrying broker-dealers 

computing daily, suggesting the 

potential for more carrying brokerdealers having a mismatch than under 

the final amendments. 


ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 2829 

393This means, for example, if a carrying brokerdealer is required to file 12 FOCUS Reports for a 

calendar year, the carrying broker-dealer adds up 

the Total Credits reported in both the customer and 

PAB reserve formulas in each of the 12 FOCUS 

Reports filed, and divides the total by 12 to 

compute the arithmetic mean. 

5. Calculation Based on the Maximum 

Value Over the Past Year 

The $500 Million Threshold is the 

arithmetic mean of the total credits in 

the customer and PAB reserve 

computations reported on the twelve 

most recently filed month-end FOCUS 

Reports.393 As an alternative, the 

Commission considered a threshold 

based on the maximum value for total 

credits during the most recently ended 

calendar year. This alternative may have 

more appropriately accounted for the 

implied capacity of the carrying brokerdealer’s reserve bank accounts. For 

example, if total credits related to 

customers or PAB account holders’ 

activity fluctuated throughout a year or 

based on economic cycles and such 

fluctuations are predictable, the 

maximum value of total credits may 

have been more representative of the 

customer transactions’ volume. As 

another example, if a carrying brokerdealer experiences trending growth of 

its customer base, the maximum value 

of total credits would have also been 

more representative of the current size 

of the customer base. 

Table 6 below regroups carrying 

broker-dealers based on the maximum 

number reported for total credits within 

a given year. Under this alternative, 59 

carrying broker-dealers would have 

been scoped into the final rule, 

compared to the 49 that are scoped into 

the rule under the final amendments. 

TABLE 6—THRESHOLD BASED ON MAXIMUM TOTAL CREDITS DURING 2023 

Number 

Total 

assets 

($B) 

Total customer credits, 

$MM 

Total PAB credits, 

$MM 

Total credits, 

$MM 

Number Mean Median Number Mean Median Mean Median 

>$0–100MM ............. 76 212.8 76 14.4 2.7 17 0.3 ................ 14.7 2.9 

$100–250MM ........... 16 91.3 16 159.0 140.2 7 0.1 ................ 159.1 140.2 

$250–500MM ........... 11 147.8 11 323.8 303.7 6 37.7 1.2 360.3 333.6 

$500MM–1B ............. 12 301.7 12 540.8 554.9 10 135.6 32.7 643.4 614.1 

$1–5B ....................... 22 412.7 22 2,386.7 2,257.6 19 168.8 12.4 2,491.6 2,516.9 

$5–10B ..................... 5 133.1 5 7,261.8 7,421.5 5 212.1 76.0 7,460.7 7,457.7 

≥10B ......................... 20 3,524.2 20 49,360.3 30,366.1 18 8,336.9 330.1 57,157.6 33,833.3 

Total a ................ 162 4,823.6 162 6,726.6 122.1 82 1,071.5 0 7,719.8 125.6 

aTable excludes carrying broker-dealers with zero reported credits in 2023. 

A benefit of this alternative is those 

carrying broker-dealers with the largest 

amounts of total credits would be 

scoped into daily computing, where the 

largest credits reported (as opposed to 

the average) could be more indicative of 

a potential mismatch between the net 

cash owed to customers and the reserve 

account balances. However, this 

alternative may also create uncertainty 

if any cyclical behavior of total credits 

that has occurred over some historical 

period, changes unexpectedly, leading 

to potential for a carrying broker-dealer 

oscillating between weekly and daily 

computations and deposits from year to 

year. 

Table 7 summarizes the number of 

affected broker-dealers under the 

alternatives thus far versus the final 

amendments, both for the rolling sample 

period defined from January 2023 to 

December 2023 and for the period 

defined from June 2023 to May 2024. 

TABLE 7—SUMMARY OF AFFECTED BROKER-DEALERS UNDER THE FINAL AMENDMENTS VERSUS ALTERNATIVES

Alternatives vs. final amendments 

Number of 

affected broker-dealers 

(based on period 

January 2023 to 

December 2023) 

Number of 

affected broker-dealers 

(based on period 

June 2023 to May 2024) 

Final Amendments ........................................................................................................... 49 48 

Alternatives: 

Alt 1 Over-Funding ................................................................................................... 162 160 

Alt 2 $1B in Total Assets .......................................................................................... 78 79 

Alt 2 $50MM in Net Capital ...................................................................................... 100 103 

Alt 2 $10MM in Net Credits and Average T.C. >$250MM ....................................... 51 51 

Alt 3 Daily for all ....................................................................................................... 162 160 

Alt 4 Average T.C. >$1B .......................................................................................... 41 40 

Alt 4 Average T.C. >$100MM ................................................................................... 75 76 

Alt 5 Maximum Total Credits .................................................................................... 59 57 

6. Daily Computation if an Average 

Required Deposit Exceeds a Threshold 

As an alternative to performing the 

customer and PAB reserve computations 

daily for carrying broker-dealers over a 

threshold (defined by average total 

credits), the Commission considered an 

approach that would have required a 

daily computation in the case where the 

required reserve bank account deposit 

as a share of the reserve bank account 

balance prior to such deposit exceeds a 


ddrumheller on DSK120RN23PROD with RULES2
2830 Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 

394See discussion related to table 5 in section 

IV.B.2. of this release. 395Computed by dividing the numbers in column 

four by the numbers in column three of panel A of 

table 5. 

396Per 15 U.S.C. 78fff–2(c), customers of a failed 

broker-dealer have the right to share pro rata with 

other SIPA customers in the customer property held 

by that broker-dealer. See section I.C.2. of this 

release for more details. 

397Calculated from monthly FOCUS Reports for 

2023. The Commission divided average total credits 

in 2023 for each carrying broker-dealer by the 

number of total customer and PAB accounts for 

each carrying broker-dealer (Lines 8080 and 8081, 

respectively), then computed the average of the per 

customer amount for each size category, and above 

and below the $500 Million Threshold. Lines 8080 

and 8081 are reported in the December FOCUS 

Report each year, hence those numbers are not yet 

available for the rolling averages beyond 2023. 

certain percentage threshold (e.g., 5% or 

10%).394

This alternative approach would have 

accounted for broker-dealer-specific 

trends related to customer transactions. 

If the customer base differed 

substantially between carrying brokerdealers, with customers of some 

carrying broker-dealers trading more 

often or doing account activities that 

increased the carrying broker-dealer’s 

total credits by more compared to the 

customer base of other broker-dealers, 

this alternative approach would have 

focused only on those carrying brokerdealers that typically experience larger 

reserve mismatches. However, given the 

information displayed in table 5, there 

does not appear to be a perfect 

correlation with carrying broker-dealer 

size (measured by average total credits), 

and the deposit ‘‘mismatch.’’ 395

Smaller-broker dealers can have an 

average mismatch of more than 5% 

(based on the January 2023 to December 

2023 period), implying the possibility of 

an undue burden with respect to 

compliance costs. That latter could have 

ultimately been passed onto the carrying 

broker-dealers’ customers and PAB 

account holders. 

7. Daily Computation Requirement 

Based on Average Total Credits per 

Number of Customer and PAB Accounts 

As an alternative to performing the 

customer and PAB reserve computations 

daily for carrying broker-dealers over a 

threshold (defined by average total 

credits), the Commission considered 

requiring daily computations based on 

average total credits per number of 

customer accounts. While a failure of 

carrying broker-dealers with smaller 

amounts of total credits may not have 

posed a significant risk of depletion to 

the SIPC Fund, a threshold based on the 

average total credits may have had 

limitations from an individual customer 

or PAB account holder prospective. This 

is because such a threshold does not 

account for the number of customers 

and PAB account holders a carrying 

broker-dealer might have and is 

disconnected from the per-customer 

protection approach that is used by 

SIPC.396

For example, consider two carrying 

broker-dealers, both with $150 million 

in total credits, which is below the $500 

Million Threshold. The first carrying 

broker-dealer has three customers, each 

contributing $50 million in credits 

towards the carrying broker-dealer’s 

aggregate value of total credits, and the 

second carrying broker-dealer has 100 

customers each contributing $1.5 

million in credits towards the carrying 

broker-dealer’s aggregate value of total 

credits. Recall that the maximum 

advance from the SIPC Fund is $500,000 

per customer. Consider a situation 

where both carrying broker-dealers fail 

and their reserve bank accounts are 

underfunded by more than 1% of what 

is owed to customers (i.e., the shortage 

is above $1.5 million). In this situation, 

the customers of the second carrying 

broker-dealer would be made whole 

promptly with an advance from the 

SIPC Fund, but the customers of the first 

carrying broker-dealer would not be 

made whole (because the per-customer 

loss is above maximum per-customer 

SIPC advance of $500,000) until SIPC 

recovers funds from the carrying brokerdealer, which may take some time. 

The above example notwithstanding, 

data from the FOCUS Reports for 2023 

suggests the potential for this concern is 

likely negligible. Table 8 displays the 

amounts of average total credits per total 

accounts for each size grouping of 

carrying broker-dealers. For the 162 

carrying broker-dealers that reported 

positive total credits in December 2023, 

the average amount of average total 

credits per account (with the number of 

customer accounts and PAB accounts 

combined) was notably larger for the 

carrying broker-dealers above the $500 

Million Threshold than for carrying 

broker-dealers below the threshold. 

Carrying broker-dealers above the $500 

Million Threshold had about $13 

million per customer account, while 

carrying broker-dealers below the $500 

Million Threshold had about $.5 million 

on average per customer account.397

TABLE 8—THRESHOLD BASED ON AVERAGE TOTAL CREDITS PER ACCOUNTS DURING 2023 

Number 

Number of 

accounts 

(cust + PAB) 

Total credits 

$MM 

Total credits 

per account 

$MM 

Mean Mean Mean 

>$0–100MM ..................................................................................................... 87 214,951 14.5 0.6 

$100–250MM ................................................................................................... 14 480,321 160.3 0.1 

$250–500MM ................................................................................................... 12 469,612 357.2 0.4 

$500MM–1B ..................................................................................................... 8 141,807 697.7 1.3 

$1–5B ............................................................................................................... 17 1,964,257 2,344.3 33.6 

$5–10B ............................................................................................................. 6 11,133,250 7,201.0 2.1 

≥10B ................................................................................................................. 18 7,783,768 52,858.1 2.1 

Total .......................................................................................................... 162 1,682,066 6,468.4 5.1 

8. Daily Computation Based on Average 

Total Credits From the Most Recent 

Calendar Year 

As an alternative to performing the 

customer and PAB reserve computations 

daily based on a 12-month rolling 

average of total credits, the Commission 

considered requiring computation based 

on the arithmetic mean of the sum of 

total credits over the 12 months in the 

most recent calendar year. For example, 

whether a carrying-broker dealer 

exceeded the $500 Million Threshold at 

any point in 2024, would have been 

based on the average total credits from 

January 2023 through December 2023. 

The potential benefit of basing the 

average total credit amount on the most 

recent calendar year is that carrying 


ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 2831 

398See infra section V. of this release (discussing 

PRA). 

399See SIFMA Letter at 5; Raymond James Letter 

at 2; ASA Letter at 5; ASA Letter 2 at 1. 

400See ASA Letter 2 at 1. 

401See ASA Letter at 2; SIFMA Letter at 7; ASA 

Letter 3. 

402However, this scenario of having to account 

for cash that is no longer held by the carrying 

broker-dealer also can occur under the existing 

weekly reserve computation requirement. For 

example, customer cash deposited at the brokerdealer on Friday after the time when it can be swept 

to a money market fund or bank must be accounted 

for in the customer reserve computation performed 

the following Monday (using numbers as of the 

close of business Friday) and, to the extent it creates 

a deposit requirement, the required deposit must be 

made by 10 a.m. on Tuesday even though by that 

time the customer cash has been swept to the 

money market fund or bank. Moreover, unless the 

carrying broker-dealer performs an intra-week 

reserve computation, the cash must remain in the 

customer reserve bank account until the following 

Tuesday. Thus, the new cost arises from the fact 

that a daily customer reserve computation can 

increase the frequency of having to account for 

customer cash that is no longer held by the carrying 

broker-dealer, but—as discussed below—the daily 

requirement also shortens the time that the cash 

must be held in the customer reserve bank account. 

403See 44 U.S.C. 3501 et seq. 

404See 17 CFR 240.15c3–3(e)(3)(v). 

405See 44 U.S.C. 3507; 5 CFR 1320.11. 

broker-dealers would have known with 

certainty if they fell above or below the 

$500 Million Threshold and would have 

been subject to daily or weekly 

computing for the entirety of the next 

calendar year. This potential benefit 

contrasted with the possible uncertainty 

that the rolling average computation 

would have introduced for carrying 

broker-dealers that are close to the $500 

Million Threshold. That uncertainly 

may have created an added cost for 

those carrying broker-dealers as they 

would have needed to constantly 

monitor their standing with respect to 

the $500 Million Threshold. This 

monitoring may have involved 

additional staff, or existing staff 

devoting additional time to that task, 

and suggests the cost of the final 

amendments may be marginally higher 

for some carrying broker-dealers than 

the cost estimates cited earlier in this 

release.398 Or, wishing to avoid this 

monitoring cost, the carrying brokerdealer may have had to decide to switch 

to daily (or weekly) once and for all, 

which may have also implied additional 

costs. 

However, a potential cost of this 

alternative was that, over the course of 

a year, a carrying broker-dealer 

computing weekly (for example) may 

exceed the $500 Million Threshold. 

This may have resulted in a situation 

where a carrying broker-dealer with 

average total credits above the $500 

Million Threshold would not have been 

engaging in daily computation—as it 

would have with a timelier and up-todate rolling average—and the risks of 

weekly computing discussed in this 

release would have remained present for 

that carrying broker-dealer. 

9. Reduction of the Aggregate Debit 

Items Charge From 3% to 1% 

The Commission could have 

implemented a debit-items charge 

reduction from 3% to 1%, as suggested 

by some commenters.399 This change 

would have freed up double the amount 

of liquidity ($14.82 billion) compared to 

the reduction from 3% to 2% finally 

chosen by the Commission. 

As mentioned in the baseline, 

however, a 1% debit reduction already 

applies to firms that use the basic 

method to calculate their net capital 

requirements. Net capital requirements 

are formulated differently under the 

alternative and basic methods. While 

the basic method targets the leverage of 

a carrying broker-dealer directly, under 

the alternative method, the net capital 

rule is formulated as a percentage of 

total customer receivables. The 1% 

debit reduction should not be applied to 

firms that calculate their net capital 

requirements under the alternative 

method. Otherwise, their combined 

levels of liquidity and capital buffers 

under the customer protection and net 

capital rules may fall below adequate 

levels. The 2% debit reduction will be 

appropriate because moving from 

weekly to daily computations, the 

mismatch risk, which has been 

discussed earlier, will be reduced, and 

so the original 3% debit reduction will 

not be required in the new regime. 

10. Exemption for Cash in Motion 

The Commission could have adopted 

an alternative that exempts from the 

reserve computations cash that has been 

‘‘directed off of the [carrying broker 

dealer’s] balance sheet,’’ 400 for example, 

cash that is subject to a sweep program 

in accordance with paragraph (j)(2)(ii) of 

Rule 15c3–3.401 Commenters raised the 

following scenario: a customer deposits 

cash with the carrying broker-dealer 

near the close of the business (say, 

Monday for example). It is sufficiently 

late in the day that the carrying brokerdealer cannot sweep the cash into the 

money market fund or bank; however, 

according to the customer’s preset 

instructions, the carrying broker-dealer 

will automatically sweep the funds into 

the money market fund or bank account 

the first thing next morning (Tuesday). 

Such funds would become part of the 

customer reserve computation and 

would need to be deposited in the 

customer reserve bank account on 

Wednesday, even though, as of the next 

morning (on Tuesday), they are no 

longer held by the carrying brokerdealer. Thus, the carrying broker-dealer 

would need to fund the customer 

reserve bank account from its own 

reserves. Commenters stated that this 

situation creates new costs in the daily 

versus the weekly computation. Under 

the weekly computation, cash deposited 

on Monday would be swept out on 

Tuesday, and therefore would not be 

subject to the weekly reserve 

computation the next Monday (using 

numbers as of the close of business the 

previous Friday).402

The Commission recognizes that this 

alternative would lower costs for 

carrying broker-dealers in that it would 

reduce the amount of cash they would 

need to set aside. However, the 

Commission does not believe the 

relative cost savings to be substantial, as 

the carrying broker-dealer would only 

be required to fund the reserve bank 

account overnight (in the example above 

from Wednesday to Thursday), because, 

under the commenter’s assumption, the 

cash is swept out as of Tuesday morning 

and therefore would not be required to 

be held (in the customer reserve bank 

account) as of Thursday. Moreover, the 

cost only applies to cash that is received 

before close of business and yet after the 

sweep deadline. Any cash received 

before the sweep deadline on Monday 

would not be part of the reserve 

computation as of Monday afternoon. 

On the other hand, retaining this 

requirement maintains the current level 

of customer protection, providing a 

buffer against the situation where the 

funds in the customer reserve bank 

account turn out to be insufficient to 

pay customers in the event of brokerdealer failure. 

V. Paperwork Reduction Act 

Paragraph (e) of Rule 15c3–3 contains 

‘‘collection of information’’ 

requirements within the meaning of the 

Paperwork Reduction Act (‘‘PRA’’).403

Specifically, paragraph (e) of Rule 15c3– 

3 requires carrying broker-dealers to 

make and maintain a record of each 

customer and PAB reserve computation 

and to preserve each such record in 

accordance with Rule 17a–4.404 The 

Commission has submitted the final 

collection of information to the Office of 

Management and Budget (‘‘OMB’’) for 

review and approval in accordance with 

the PRA and its implementing 

regulations.405 For the amendments, the 

title of the existing information 

collection is ‘‘Customer Protection— 

Reserves and Custody of Securities’’ 


ddrumheller on DSK120RN23PROD with RULES2
2832 Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 

406See 5 CFR 1320.11(l). 

407See Proposing Release, 88 FR at 45859–62. 

408 44 U.S.C. 3507(d); 5 CFR 1320.11. 

409The PRA estimates derived from FOCUS 

Reports have been updated in this final release to 

reflect more recently available information, 

including FOCUS Report data for the 2023 calendar 

year. The estimates in the Proposing Release were 

based on FOCUS Report data for the 2022 calendar 

year. 

410See the Economic Analysis in section IV. of 

this release. 

411See paragraph (e) of Rule 15c3–3. See also 

section I.C.1. of this release (discussing the 

customer reserve requirements of Rule 15c3–3 in 

more detail). 

412See paragraph (e) of Rule 15c3–3. 

413See paragraph (e) of Rule 15c3–3. Rule 15c3– 

3 also permits certain carrying broker-dealers to 

perform their reserve computations monthly. See 

paragraphs (e)(3)(i) and (iii) of Rule 15c3–3. Some 

carrying broker-dealers also elect to perform daily 

customer and PAB reserve computations. See 

paragraph (e)(3)(iv) of Rule 15c3–3. 

414See paragraph (e)(3)(v) of Rule 15c3–3. This 

paragraph is being re-designated as paragraph (vi) 

as part of the final amendments. 

415See paragraph (e)(3)(i)(B)(1) of Rule 15c3–3, as 

amended. 

416See paragraph (e)(3)(i)(B)(2) of Rule 15c3–3, as 

amended. 

417See paragraph (e)(3)(v) of Rule 15c3–3, as 

amended. 

418The OMB Control No. for Rule 15c3–1 (17 CFR 

240.15c3–1) is 3235–0200. 

419See supra section II.C.2. of this release 

(discussing the conforming amendments to the 

FOCUS Report). 

(OMB Control No. 3235–0078), and the 

amendments revise that collection. 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.406 The Commission published 

notice soliciting comments on the 

collection of information requirements 

in the Proposing Release 407 and 

submitted the proposed collections of 

information to OMB for review in 

accordance with the PRA.408 The initial 

burden estimates from the Proposing 

Release have been adjusted, as 

discussed below, to reflect updated 

information used to make the current 

estimates, including updated FOCUS 

Report data.409

The burden estimates contained in 

this section are recordkeeping and 

notification burdens. The recordkeeping 

burden relates solely to the requirement 

for carrying broker-dealers to make and 

maintain a record of the customer and 

PAB reserve computations and do not 

include any other possible costs or 

economic effects beyond the burdens 

required to be calculated for PRA 

purposes.410

A. Summary of Collections of 

Information Under the Final 

Amendments 

Rule 15c3–3 requires each carrying 

broker-dealer to maintain a reserve of 

cash and/or qualified securities in a 

customer reserve bank account that is at 

least equal in value to the net cash owed 

to customers.411 Carrying broker-dealers 

also maintain a reserve of cash and/or 

qualified securities in a PAB reserve 

bank account in an amount that is at 

least equal in value to the net cash owed 

to PAB account holders.412 In order to 

determine the amount required to be 

deposited in the customer and PAB 

reserve bank accounts, Rule 15c3–3 

requires carrying broker-dealers to 

perform weekly customer and PAB 

reserve computations as of the close of 

the last business day of each week.413

The rule requires carrying brokerdealers to make and maintain a record 

of each such computation, and to also 

preserve each such record in accordance 

with Rule 17a–4.414 This recordkeeping 

requirement represents a collection of 

information for PRA purposes. This is 

an existing PRA burden. As described in 

this section below, the estimated hourly 

burden associated with this collection of 

information is not changing. Instead, the 

total burden is being revised to reflect 

that the number of respondents subject 

to the estimated burden will change as 

a result of the amendments to Rule 

15c3–3 adopted by the Commission. 

As a result of the amendments, 

carrying broker-dealers with average 

total credits equal to or greater than the 

$500 Million Threshold must perform 

the customer and PAB reserve 

computations daily instead of weekly, 

and must make and maintain a record 

of each such daily computation, and 

also preserve each such record.415 The 

amendments also provide that a 

carrying broker-dealer performing daily 

customer and PAB reserve computations 

may elect to perform weekly 

computations if its average total credits 

fall below the $500 Million Threshold 

and it notifies its DEA, in writing, of 

this election at least 60 calendar days 

prior to starting weekly 

computations.416 This notification 

requirement represents a collection of 

information for the purposes of the PRA. 

Further, as a result of the amendments 

to Rule 15c3–3, carrying broker-dealers 

that elect to voluntarily perform the 

customer reserve computation daily and 

seek to reduce aggregate debit items in 

the customer reserve computation by 

2% instead of 3% must provide 

notification to their DEA 30 calendar 

days prior to operating under this 

provision.417 This notification 

requirement represents a collection of 

information for PRA purposes. 

In addition, as a result of the 

amendment to paragraph (a)(1)(ii)(A) of 

Rule 15c3–1,418 a carrying broker-dealer 

required to perform a daily customer 

reserve computation may reduce 

aggregate debit items in such 

computation by 2% rather than 3%. 

This paragraph does not contain an 

information collection requirement. 

Therefore, the Commission is not 

estimating any new collection of 

information burdens, or revising any 

existing burden estimates, in connection 

with this amendment. 

Finally, the Commission is adopting 

technical amendments to Part II of the 

FOCUS Report (OMB Control No. 3235– 

0123) to conform it to the amendments 

with respect to the lowering of the debit 

reduction from 3% to 2%.419 Because 

these amendments, as described above 

in section II.C.2 of this release, add only 

two additional lines to a lengthy form, 

carrying broker-dealers can quickly 

familiarize themselves with them. 

Accordingly, the addition of the two 

new line items will not affect the 

current estimated burden. 

B. Use of the Information 

Rule 15c3–3 is an integral part of the 

Commission’s financial responsibility 

program for broker-dealers. The 

requirement to document in writing the 

customer and PAB reserve computations 

facilitates the process by which the 

Commission and the carrying brokerdealer’s DEA examine the brokerdealer’s compliance with Rule 15c3–3. 

The purpose of the 60-day written 

notice requirement is to provide the 

DEA with prior notice that the carrying 

broker-dealer is switching from daily to 

weekly customer and PAB reserve 

computations and provide the DEA the 

opportunity to contact the carrying 

broker-dealer and ask how it intends to 

implement the change. This will assist 

the DEA in monitoring the carrying 

broker-dealer. Similarly, the 30-day 

notification requirement for carrying 

broker-dealers electing to voluntarily 

perform a daily customer reserve 

computation and deduct 2% of 

aggregate debit items is to ensure that 

the carrying broker-dealer’s DEA is 

aware of the carrying broker-dealer’s 

election and is able to monitor its 

compliance with those requirements. 

C. Respondents 

1. Recordkeeping Requirements 

Under the amendments, respondents 

are carrying broker-dealers with average 

total credits equal to or exceeding the 

$500 Million Threshold. The 

Commission estimates there are 

approximately 49 carrying brokerdealers that will have average total 

credits equal to or exceeding the $500 


ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 2833 

420Based on FOCUS data for the year ending 

December 31, 2023, the Commission estimates that 

10 carrying broker-dealers perform daily customer 

reserve computations. Of these 10 carrying brokerdealers, the Commission estimates that 9 exceed the 

$500 Million Threshold. The one carrying brokerdealer that does not exceed the $500 Million 

Threshold also does not compute net capital 

pursuant to Rule 15c3–1(a)(ii)(A), and therefore 

would not be eligible to avail itself of the 2% debit 

reduction. 

421See paragraph (e)(v) of Rule 15c3–3 and 17 

CFR 240.17a–4 (‘‘Rule 17a–4’’). Paragraph (e)(3)(v) 

of preexisting Rule 15c3–3 will be renumbered as 

paragraph (e)(3)(vi) of Rule 15c3–3 as part of the 

final amendments. Rule 17a–4 sets forth record 

preservation requirements for physical records as 

well as for records maintained in electronic format 

but does not specify the format in which a carrying 

broker-dealer must maintain required records, 

though certain requirements related to electronic 

recordkeeping systems are set forth in the rule. See, 

e.g., paragraph (f)(2) of Rule 17a–4 (establishing 

minimum requirements for an electronic 

recordkeeping system). The costs for these 

electronic recordkeeping systems are contained in 

the PRA collection for Rule 17a–4. 

422As discussed in the Economic Analysis in 

section IV.C. of this release, carrying broker-dealers 

may be required to incur increased initial start-up 

compliance costs to comply with the requirement 

to perform a daily customer and PAB reserve 

computation under the final amendments. A 

carrying broker-dealer may incur these initial startup compliance costs while implementing 

operational changes, potentially increasing staff, 

and upgrading systems and internal controls and 

infrastructure in order to facilitate the increased 

frequency of computations and accelerate the 

coordination of staff involved in providing the 

required information. These economic effects are 

not in the PRA and are discussed in the Economic 

Analysis in section IV.C. of this release. 

Million Threshold based on a review of 

FOCUS Report data for the calendar 

year 2023. Of these carrying brokerdealers, the Commission estimates that 

9 already perform the customer reserve 

computation daily, and therefore 

already make, maintain, and preserve a 

record of each such computation. Of the 

49 carrying broker-dealers that would 

have average total credits equal to or 

exceed the $500 Million Threshold, the 

Commission estimates that 44 perform a 

PAB reserve computation, with 9 of 

these carrying broker-dealers already 

performing the PAB reserve 

computation daily, and therefore 

already make, maintain, and preserve a 

record of each such computation. 

Consequently, for the purposes of the 

PRA, the Commission estimates that 

there are 40 respondents for the 

requirement to make, maintain, and to 

preserve a record of each customer 

reserve computation, and 35 

respondents for the requirement to 

make, maintain, and to preserve a 

record of each PAB reserve 

computation. These respondents are 

currently included in the collection of 

information associated with Rule 15c3– 

3 related to weekly computations for the 

customer and PAB reserve computations 

and the requirement to make, maintain, 

and to preserve a record of each such 

computation. However, as a result of the 

amendments, these respondents will 

need to perform daily customer and 

PAB reserve computations rather than 

weekly computations, and make, 

maintain, and preserve a record of each 

such computation. 

2. Notification Requirement To Revert to 

Weekly Computations 

Based on a review of FOCUS Report 

data for the calendar year 2023, the 

Commission estimates that one carrying 

broker-dealer per year will provide 

notice to their DEA that the carrying 

broker-dealer’s average total credits has 

fallen below the $500 Million 

Threshold, and that such carrying 

broker-dealer will switch from a daily 

computation to a weekly computation. 

3. Notification Requirement To 

Voluntarily Perform Daily Customer 

Reserve Computation With 2% Debit 

Reduction 

Based on a review of FOCUS Report 

data for the calendar year 2023, the 

Commission estimates that 9 carrying 

broker-dealers that are above the $500 

Million Threshold already voluntarily 

perform daily customer reserve 

computations.420 The Commission 

estimates that these nine carrying 

broker-dealers will notify their DEA of 

their intent to continuing to perform 

daily customer reserve computations 

voluntarily pursuant to paragraph 

(e)(3)(v) of Rule 15c3–3. Additionally, 

the Commission estimates that an 

additional 6 carrying broker-dealers that 

have significant debit balances may 

voluntarily elect to perform daily 

customer reserve computations in order 

to deduct 2% of aggregate debit items 

instead of 3% in connection with the 

computation. Consequently, the 

Commission estimates that there are 15 

respondents associated with this 

collection of information. 

D. Total Annual Burden Estimate 

1. Recordkeeping Requirements 

Carrying broker-dealers subject to the 

requirement to perform daily customer 

and PAB reserve computations under 

the final amendments were previously 

required to perform such computations 

weekly. Under preexisting paragraph 

(e)(3)(v) of Rule 15c3–3, carrying brokerdealers subject to the requirement to 

perform customer and PAB reserve 

computations are also subject to the 

requirement to make and maintain a 

record of each such computation and to 

preserve it in accordance with Rule 

17a–4.421 Carrying broker-dealers are 

able to elect to maintain the required 

record of the customer and PAB reserve 

computation in a physical (i.e., paper 

format) or electronic format under the 

record preservation requirements of 

Rule 17a–4, but given the size and 

sophistication of carrying broker-dealers 

subject to the requirement to perform 

daily customer and PAB reserve 

computations, and the nature of the 

actual computations, based on staff 

experience with carrying broker-dealer 

operations, the Commission estimates 

that carrying broker-dealers subject to 

the requirement to perform daily 

customer and PAB reserve computations 

will likely have electronic systems, 

including electronic recordkeeping 

systems meeting the record preservation 

requirements of Rule 17a–4, in place 

and will use those systems to make and 

maintain, and preserve the record of the 

computations in electronic format. 

Because these electronic recordkeeping 

systems are part of the record 

preservation requirements of Rule 17a– 

4, the costs of those systems are 

accounted for in the collection of 

information for Rule 17a–4 because 

broker-dealers use these systems for 

their overall recordkeeping. 

Because carrying broker-dealers 

already have in place processes, 

personnel, and the systems and 

technology necessary to meet the record 

preservation requirements of Rule 17a– 

4, including for the purpose of making 

and maintaining the record of the 

customer and PAB reserve 

computations, and preserving such 

records in compliance with Rule 17a–4, 

they will not need to hire additional 

staff or upgrade or develop new 

technology or systems, and have already 

expended the time, effort, and/or 

financial resources to generate and 

maintain the required records.422

Therefore, the Commission estimates 

that the amendments will not impose 

any new one-time burdens or start-up 

costs (e.g., hardware acquisition, cloud 

storage costs, systems/tech upgrades, 

tech services, etc.) on carrying brokerdealers to set up the process of creating 

the required record of such 

computations. 

Instead, the amendments will impose 

increased ongoing burdens on the 

respondent carrying broker-dealers 

because they must increase the 

frequency of the customer and PAB 

reserve computations and, therefore, 

must make, maintain, and preserve 

additional records of the computations. 

Specifically, there will be an increase in 

the burdens associated with the 

collections of information titled ‘‘Rule 

15c3–3(e)(3)—daily computations’’ for 


ddrumheller on DSK120RN23PROD with RULES2
2834 Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 

423This is consistent with the current collection 

of information for the customer and PAB reserve 

computations, available at https://www.reginfo.gov/ 

public/do/DownloadDocument?objectID=

132914201. The estimate is also based on the 

Commission’s experience with other recordkeeping 

requirements. For example, the current estimated 

burden related to the requirement to maintain 

records pursuant to Rule 17a–3 (17 CFR 240.17a– 

3)(‘‘Rule 17a–3’’) is 1 hour per day, or 249 hours 

per year (based on 249 business days for that year) 

for each registered broker-dealer. This includes the 

requirement that a broker-dealer make a record of 

the broker-dealer’s computations for aggregate 

indebtedness and net capital. See Supporting 

Statement for Rule 17a–3, available at https://

www.reginfo.gov/public/do/DownloadDocument

?objectID=123585601. See also paragraph (a)(11) of 

Rule 17a–3. 

424See Raymond James Letter at 3, n.9. See also 

SIFMA Letter at 4. These commenters stated the 

2.5-hour figure underestimates the actual burden 

associated with fulfilling current requirements. Id. 

These commenters also stated that carrying brokerdealers subject to the requirement to perform daily 

customer and PAB reserve computations will be 

required to hire and train additional employees, 

devote the full-time efforts of these personnel to 

performing the required daily computations, and to 

update or implement new systems and processes to 

comply with the daily computation requirements. 

See Raymond James Letter at 4. See also SIFMA 

Letter at 5. The costs associated with increases in 

personnel and changes or upgrades to systems and 

processes are not recordkeeping burdens for the 

purposes of this PRA analysis and are instead 

discussed as part of the Economic Analysis. See 

supra section IV.C. of this release. 

425This estimated burden involves the time it 

takes an employee such as a financial reporting 

manager to make, maintain, and preserve a record 

of the reserve computation and the supporting 

details of each credit and debit in the applicable 

reserve computation. The estimated range of 1 to 5 

hours considers that smaller carrying broker-dealers 

may choose to print out paper copies of the 

computation and supporting details on a computer 

to comply with the recordkeeping requirement. 

Larger carrying broker-dealers may need additional 

time to make the record in their preexisting 

electronic recordkeeping system to maintain and 

preserve it in a format to meet the electronic 

preservation requirements of Rule 17a–4. 

Consequently, a 2.5 hour estimate is used. 

Therefore, the increase in the recordkeeping burden 

is accounted for in the 2.5 hour estimate and the 

increase in respondents for the daily reserve 

computations. 

426Costs of the amendments outside of the PRA 

are discussed in the Economic Analysis in section 

IV.C of this release. 

427This figure was calculated as follows: 40 

respondent carrying broker-dealers that are required 

to perform daily customer reserve computations × 

2.5 hours/day × 250 business days = 25,000 hours, 

plus 35 respondent carrying broker-dealers that are 

required to perform daily PAB reserve 

computations × 2.5 hours/day × 250 business days 

= 21,875 hours. Therefore, the total estimated 

burden is 25,000 hours + 21,875 hours = 46,875 

hours. See also supra note 355 and the 

accompanying text (discussing the annual economic 

cost for one carrying broker-dealer associated with 

the recordkeeping requirements of the amendments 

to Rule 15c3–3). 

428This figure was calculated as follows: 161 

respondents currently approved under the 

information collection related to weekly customer 

reserve computations titled ‘‘Rule 15c3–3(e)(3)— 

weekly computations’’ minus the 40 respondent 

carrying broker-dealers that are required under the 

adopted amendments to perform daily customer 

reserve computations = 121 respondents × 2.5 hours 

× 52 responses annually = 15,730 hours. 

429This figure was calculated as follows: 20,930 

burden hours currently approved with respect to 

the collection of information related to weekly 

customer reserve computations minus the revised 

estimate of 15,730 hours resulting from fewer 

respondents performing weekly computations = 

5,200 hours. 

430This figure was calculated as follows: 77 

respondents currently approved under the 

information collection related to weekly PAB 

reserve computations titled ‘‘Rule 15c3–3(e)(3)— 

weekly computations’’ minus the 35 respondent 

carrying broker-dealers that are required under the 

adopted amendments to perform daily PAB reserve 

computations = 34 respondents × 2.5 hours × 52 

responses annually = 5,460 hours. 

431This figure was calculated as follows: 10,010 

burden hours currently approved with respect to 

the collection of information related to weekly PAB 

reserve computations minus the revised estimate of 

5,460 hours resulting from fewer respondents 

performing weekly computations = 4,550 hours. 

both the customer and PAB reserve 

computations, and a corresponding 

decrease in the burdens associated with 

the collections of information titled 

‘‘Rule 15c3–3(e)(3)—weekly 

computations’’ for the customer and 

PAB reserve computations as certain 

carrying broker-dealers will shift from 

weekly to daily computations in 

connection with the amendments. Based 

on experience with customer and PAB 

reserve computations, the Commission 

estimates that it takes between one and 

five hours to make a record of each such 

computation, and that the average time 

spent across all carrying broker-dealers 

is 2.5 hours.423

The Commission received one 

comment on this estimate stating that 

the Proposing Release does not state a 

basis for this 2.5 hour estimate and that 

the estimate is so wide of the mark that 

it cannot support the Commission’s 

analysis of paperwork burdens (or costs, 

burdens, and effects on competition of 

the proposal). This commenter stated 

that each weekly calculation takes 

approximately 10 hours and that during 

these 10 hours more than 50 employees 

are involved in some part of the data 

collection, performing calculations, 

verifying figures, and transferring funds 

to banks that are part of performing the 

reserve computations.424 In response, 

the specific tasks the commenter listed 

do not specify what amount of the 10 

hours is dedicated to making, 

maintaining, and preserving a record of 

the computation, as required by Rule 

15c3–3. Instead, the tasks the 

commenter listed relate to the steps 

necessary to perform a computation. 

The 2.5 hours is based on staff 

experience with customer and PAB 

reserve computations and recordkeeping 

requirements and staff’s understanding 

that these records are made, maintained, 

and preserved either in an electronic 

format or as a paper copy. Some 

carrying broker-dealers may take more 

time, while others may take less time to 

make, maintain and preserve a record of 

the computations. As a result, the 2.5 

hour burden estimate is the estimate of 

the time it takes a carrying broker-dealer 

to make a record of the computation for 

purposes of the PRA.425 As noted above, 

carrying broker-dealers already have in 

place the personnel, systems, and 

technology in place to make, maintain, 

and preserve the required records and to 

comply with the record preservation 

requirements of Rule 17a–4. As a result, 

the Commission is retaining the 

estimate of 2.5 hours for purposes of the 

PRA.426

Consequently, the Commission 

estimates that the amendments will 

impose aggregate annual ongoing 

burdens on respondent carrying brokerdealers required to perform daily 

customer and PAB reserve computations 

of 25,000 hours and 21,875 hours, 

respectively, or a total of 46,875 

hours.427 When added to the currently 

approved burden hours of 9,375 hours 

and 6,875 hours for the customer and 

PAB reserve computations, respectively, 

the revised burden hour estimates are 

34,375 hours for the daily customer 

reserve computation, and 28,750 hours 

for the daily PAB reserve computation. 

In addition to this increase, the 

Commission estimates that there will be 

a corresponding decrease in the 

collections of information titled ‘‘Rule 

15c3–3(e)(3)—weekly computations’’ for 

both the customer and PAB reserve 

computations. Specifically, the 

Commission estimates that the 

amendments will result in a revised 

burden hour estimate of 15,730 hours 

with respect to weekly customer reserve 

computations 428 (a decrease of 5,200 

hours 429), and 5,460 hours with respect 

to the weekly PAB reserve 

computations 430 (a decrease of 4,550 

hours 431). 

2. Notification Requirement To Revert to 

Weekly Computations 

Based on its experience with other 

notification requirements, in the 

Proposing Release, the Commission 

estimated that it will take a carrying 

broker-dealer 30 minutes to prepare and 

send the notification regarding its 

election to perform weekly customer 

and PAB reserve computations to its 

DEA. The Commission did not receive 

comments on the estimate and is 

adopting it as proposed. This burden 

represents a new collection of 

information. The Commission estimates 

that relatively few carrying brokerdealers will send the notice either 

because their average total credits will 

be substantially greater than the $500 


ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 2835 

432One response per year × 0.5 hours per 

response = 0.5 hours. 

433 (Nine responses in year 1 × 0.5 hours per 

response) + (3 responses in year 2 × 0.5 hours per 

response) + (3 responses in year 3 × 0.5 hours per 

response) or 4.5 hours + 1.5 hours + 1.5 hour = 7.5 

hours. Over three years the annualized burden 

would be 7 hours/3 years = 2.5 hours per year. 

Alternatively, (5 respondents per year × 0.5 hours 

per response) = 2.5 hours per year. 

434OMB Control No. 3235–0078 for Rule 15c3–3 

includes thirty separate information collections. 

This summary shows only those information 

collections that are being revised as a result of the 

amendments. 

435See supra notes 354–356 and the 

accompanying text (discussing the economic costs 

associated with the recordkeeping requirements of 

the amendments to Rule 15c3–3). The net increase 

in estimated annual burdens associated with the 

requirement to make, maintain, and preserve a 

record of the daily customer and reserve 

computations is estimated to be hours (25,000 hours 

+ 21,875 hours)¥(5,200 hours + 4,550 hours) = 

37,125 hours. The 37,125 net increase, plus the 

increase in 3 hours (0.5 hours and 2.5 hours) for the 

new notification requirement totals a net increase 

in estimated annual burden hours of 37,128 hours. 

436See 17 CFR 200.83. Information regarding 

requests for confidential treatment of information 

submitted to the Commission is available on the 

Commission’s website at https://www.sec.gov/foia/ 

howfo2.htm#privacy. 

437See, e.g., 15 U.S.C. 78x (governing the public 

availability of information obtained by the 

Commission); 5 U.S.C. 552 et seq. 

438See paragraph (e)(3)(v) of Rule 15c3–3; Rule 

17a–4. 

Million Threshold or because they will 

continue to perform daily computations, 

even if their average total credits fall 

below the $500 Million Threshold, 

given the liquidity benefits of 

performing a daily computation. 

Consequently, the Commission 

estimates that one carrying brokerdealer per year will send the notice for 

a burden of 0.5 hours per year.432

3. Notification Requirement To 

Voluntarily Perform Daily Customer 

Reserve Computation With 2% Debit 

Reduction 

Based on its experience with other 

notification requirements, the 

Commission estimates that it will take a 

carrying broker-dealer 30 minutes to 

prepare and send the notification 

regarding its election to voluntarily 

perform a daily customer reserve 

computation. This burden represents a 

new collection of information. The 

Commission estimates that there are 15 

respondents: 9 in the first year; 3 in the 

second year; and 3 in the third year, or 

alternatively, 5 respondents per year on 

average. Consequently, the Commission 

estimates that this will result in an 

annualized burden of approximately 2.5 

hours per year.433

4. Summary of the Burden Revisions 434

As a result of the amendments, the 

Commission estimates that the burdens 

associated with the requirement to 

make, maintain, and preserve a record 

of the daily customer reserve 

computations will increase by 25,000 

hours and the burdens associated with 

the requirement to make, maintain, and 

preserve a record of the daily PAB 

reserve computations will increase by 

21,875 hours. This increase will be 

accompanied by a decrease in burdens 

associated with the recordkeeping 

requirement for weekly customer and 

PAB reserve computations of 5,200 

hours and 4,550 hours,435 respectively, 

as carrying broker-dealers with average 

total credits that exceed the $500 

Million Threshold shift from performing 

the customer and PAB reserve 

computations weekly to daily. 

Additionally, a new collection of 

information related to the notification 

requirement for carrying broker-dealers 

reverting to weekly customer and PAB 

reserve computations will result in an 

additional 0.5 burden hours per year. 

Lastly, a new collection of 

information related to the notification 

requirement for carrying broker-dealers 

electing to voluntarily perform daily 

customer reserve computations and to 

reduce aggregate debit items by 2% 

instead of 3% will result in an 

additional 2.5 burden hours per year. 

The net increase in estimated annual 

burdens associated with the 

amendments to Rule 15c3–3, as 

adopted, is estimated to be 37,128 

hours. The table below summarizes 

these changes. 

Name of information 

collection 

Currently approved 

estimated annual 

industry burden 

(hours) 

Estimated 

increase/decrease 

in annual 

industry burden 

(hours) 

Revised annual 

industry burden 

(hours) 

Rule 15c3–3(e)(3)—daily computations for customer reserve account 1 ...... 9,375 25,000 34,375 

Rule 15c3–3(e)—daily computations for PAB reserve account .................... 6,875 21,875 28,750 

Rule 15c3–3(e)(3)—weekly computations for customer reserve account 2 .. 20,930 (5,200) 15,730 

Rule 15c3–3(3)(3)—weekly computations for PAB reserve account ............ 10,010 (4,550) 5,460 

Rule 15c3–3(e)(i)(B)(2) notification ............................................................... N/A 0.5 0.5 

Rule 15c3–3(e) .............................................................................................. N/A 2.5 2.5 

Total Change: ......................................................................................... .................................... 37,128 

1 In the most recently approved supporting statement for Rule 15c3–3, the titles of the collections of information related to daily customer and 

PAB reserve computations are both listed as ‘‘Rule 15c3–3(e)(3)—daily computations.’’ The Commission is revising the titles of these collections 

of information as set forth in this table in order to clarify that they are distinct collections of information. 2 In the most recently approved supporting statement for Rule 15c3–3, the titles of the collections of information related to weekly customer 

and PAB reserve computations are both listed as ‘‘Rule 15c3–3(e)(3)—weekly computations.’’ The Commission is revising the titles of these collections of information as set forth in this table in order to clarify that they are distinct collections of information. 

E. Collections of Information Are 

Mandatory 

The collections of information under 

the amendments to Rule 15c3–3 are 

mandatory as to the carrying brokerdealers that are subject to them. 

F. Confidentiality of Response to 

Collections of Information 

The Commission expects to receive 

confidential information in connection 

with the collections of information. A 

carrying broker-dealer requested by the 

Commission to produce records related 

to the amendments under Rule 15c3–3 

could request confidential treatment of 

the information.436 If a confidential 

treatment request were made, the 

Commission anticipates that it would 

keep the information confidential 

subject to applicable law.437

G. Retention Period for Recordkeeping 

Requirements 

The record of the customer and PAB 

reserve computations must be preserved 

in accordance with the requirements of 

Rule 17a–4.438 Written notifications 

from carrying broker-dealers electing to 

compute the customer and PAB reserve 

computations weekly after being subject 

to the daily requirement, and 

notifications from carrying brokerVerDate Sep<11>2014 21:27 Jan 09, 2025 Jkt 265001 PO 00000 Frm 00047 Fmt 4701 Sfmt 4700 E:\FR\FM\13JAR2.SGM 13JAR2

ddrumheller on DSK120RN23PROD with RULES2
2836 Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 

439See paragraph (b)(4) of Rule 17a–4. 

440See 5 U.S.C. 601 et seq. 

441 5 U.S.C. 603(a). 

442Section 601(b) of the RFA permits agencies to 

formulate their own definitions of ‘‘small entities.’’ 

See 5 U.S.C. 601(b). The Commission has adopted 

definitions for the term ‘‘small entity’’ for the 

purposes of rulemaking in accordance with the 

RFA. These definitions, as relevant to this 

rulemaking, are set forth in 17 CFR 240.0–10 (‘‘Rule 

0–10’’). 

443See 5 U.S.C. 605(b). 

444See Proposing Release, 88 FR at 45862. 

445 17 CFR 240.17a–5(d). 446See 17 CFR 240.0–10(c). 

dealers that elect to perform a daily 

customer reserve computation and use 

the 2% debit reduction will be 

submitted to the carrying broker-dealer’s 

DEA. These notices constitute 

communications relating to a carrying 

broker-dealer’s ‘‘business as such’’ and, 

therefore, will need to be retained for 

three years.439

VI. Regulatory Flexibiliy Act 

Certification 

The Regulatory Flexibility Act 

(‘‘RFA’’) requires the Commission, in 

promulgating rules, to consider the 

impact of those rules on small 

entities.440 Section 603(a) of the 

Administrative Procedure Act,441 as 

amended by the RFA, generally requires 

the Commission to undertake a 

regulatory flexibility analysis of all 

proposed rules to determine the impact 

of such rulemaking on ‘‘small 

entities.’’ 442 Section 605(b) of the RFA 

states that this requirement shall not 

apply to any proposed rule which, if 

adopted, would not have a significant 

economic impact on a substantial 

number of small entities.443 In the 

Proposing Release, the Commission 

certified that the proposed amendments 

to Rule 15c3–3 would not have a 

significant economic impact on a 

substantial number of small entities for 

purposes of the RFA.444 The Proposing 

Release solicited comment on the 

certification. The Commission received 

no comments on this certification. 

For purposes of Commission 

rulemaking in connection with the RFA, 

a small entity includes a broker-dealer 

that: (1) had total capital (net worth plus 

subordinated liabilities) of less than 

$500,000 on the date in the prior fiscal 

year as of which its audited financial 

statements were prepared pursuant to 

paragraph (d) of 17 CFR 240.17a–5 

(‘‘Rule 17a–5(d)’’),445 or, if not required 

to file such statements, a broker-dealer 

with total capital (net worth plus 

subordinated liabilities) of less than 

$500,000 on the last business day of the 

preceding fiscal year (or in the time that 

it has been in business, if shorter); and 

(2) is not affiliated with any person 

(other than a natural person) that is not 

a small business or small 

organization.446

The amendments to Rule 15c3–3 will 

require certain carrying broker-dealers 

to perform the customer and PAB 

reserve computations daily rather than 

weekly. The amendments to Rule 15c3– 

3 also will permit carrying brokerdealers below the $500 Million 

Threshold to voluntarily perform a daily 

customer reserve computation and to 

reduce aggregate debit items in such 

computation by 2% instead of 3%. 

Further, the amendments to Rule 15c3– 

1 will permit carrying broker-dealers 

that are required to perform a daily 

customer reserve computation to reduce 

aggregate debit items in such 

computation by 2% instead of 3%. 

Finally, the Commission is adopting 

technical amendments to the FOCUS 

Report to conform it to the amendments 

with respect to the lowering of the debit 

reduction from 3% to 2%. The 

amendments to Rules 15c3–3 and 15c3– 

1 and the FOCUS Report only will 

impact carrying broker-dealers. 

Based on FOCUS Report data, the 

Commission estimates that as of 

December 31, 2023, there were 

approximately 735 broker-dealers that 

were ‘‘small’’ for the purposes of Rule 

0–10. The Commission estimates that 

none of these small broker-dealers is a 

carrying broker-dealer. As a result, the 

amendments likely will not apply to 

small broker-dealers. Therefore, the 

amendments will not have a significant 

impact on a substantial number of small 

broker-dealers. 

For the foregoing reasons, the 

Commission certifies that the 

amendments will not have a significant 

economic impact on a substantial 

number of small entities for purposes of 

the RFA. 

VII. Other Matters 

The Commission considers the 

provisions of the final amendments to 

be severable to the fullest extent 

permitted by law. ‘‘If parts of a 

regulation are invalid and other parts 

are not,’’ courts ‘‘set aside only the 

invalid parts unless the remaining ones 

cannot operate by themselves or unless 

the agency manifests an intent for the 

entire package to rise or fall together.’’ 

Bd. of Cnty. Commissioners of Weld 

Cnty. v. EPA, 72 F.4th 284, 296 (D.C. 

Cir. 2023); see K Mart Corp. v. Cartier, 

Inc., 486 U.S. 281, 294 (1988). ‘‘In such 

an inquiry, the presumption is always in 

favor of severability.’’ Cmty. for Creative 

Non-Violence v. Turner, 893 F.2d 1387, 

1394 (D.C. Cir. 1990). Consistent with 

these principles, while the Commission 

believes that all provisions of the final 

amendments are fully consistent with 

governing law, if any of the provisions 

of these rules, or the application thereof 

to any person or circumstance, is held 

to be invalid, such invalidity shall not 

affect other provisions or application of 

such provisions to other persons or 

circumstances that can be given effect 

without the invalid provision or 

application. 

Pursuant to the Congressional Review 

Act, the Office of Information and 

Regulatory Affairs has designated these 

rules as a ‘‘major rule,’’ as defined by 5 

U.S.C. 804(2). 

Statutory Authority 

The Commission is adopting 

amendments contained in this release 

under the Commission’s rulemaking 

authority pursuant to the Exchange Act, 

15 U.S.C. 78a et seq., and particularly, 

sections 15 and 23(a) (15 U.S.C. 78o and 

78w(a)), thereof. 

List of Subjects 

17 CFR Part 240 

Reporting and recordkeeping 

requirements, Securities. 

17 CFR Part 249 

Brokers, Investment companies, 

Reporting and recordkeeping 

requirements, Securities. 

Text of Amendments 

In accordance with the foregoing, title 

17, chapter II of the Code of Federal 

Regulations is amended as follows: 

PART 240—GENERAL RULES AND 

REGULATIONS, SECURITIES 

EXCHANGE ACT OF 1934 

■ 1. The authority citation for part 240 

continues to read, in part, as follows: 

Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 

77s, 77z–2, 77z–3, 77eee, 77ggg, 77nnn, 

77sss, 77ttt, 78c, 78c–3, 78c–5, 78d, 78e, 78f, 

78g, 78i, 78j, 78j–1, 78j–4, 78k, 78k–1, 78l, 

78m, 78n, 78n–1, 78o, 78o–4, 78o–10, 78p, 

78q, 78q–1, 78s, 78u–5, 78w, 78x, 78dd, 78ll, 

78mm, 80a–20, 80a–23, 80a–29, 80a–37, 80b– 

3, 80b–4, 80b–11, 1681w(a)(1), 6801–6809, 

6825, 7201 et seq., and 8302; 7 U.S.C. 

2(c)(2)(E); 12 U.S.C. 5221(e)(3); 18 U.S.C. 

1350; Pub. L. 111–203, 939A, 124 Stat. 1376 

(2010); and Pub. L. 112–106, sec. 503 and 

602, 126 Stat. 326 (2012), unless otherwise 

noted. 

* * * * * 

Section 240.15c3–3 is also issued under 15 

U.S.C. 78c–5, 78o(c)(2), 78(c)(3), 78q(a), 

78w(a); sec. 6(c), 84 Stat. 1652; 15 U.S.C. 

78fff. 

* * * * * 

■ 2. Section 240.15c3–1 is amended by 

revising paragraph (a)(1)(ii)(A) to read as 

follows: 


ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 2837 

§ 240.15c3–1 Net capital requirements for 

brokers or dealers. 

(a) * * * 

(1) * * * 

(i) * * * 

(ii) * * * 

(A) Make the computation required by 

§ 240.15c3–3(e) and set forth in Exhibit 

A, § 240.15c3–3a, on a weekly basis and, 

in lieu of the 1% reduction of certain 

debit items required by Note E (3) in the 

computation of its Exhibit A 

requirement, reduce aggregate debit 

items in such computation by 3%; 

provided, however, that, if a broker or 

dealer is required to make the 

computation required by § 240.15c3– 

3(e) and set forth in Exhibit A, 

§ 240.15c3–3a, on a daily basis, the 

broker or dealer may reduce aggregate 

debit items in such computation by 2%; 

* * * * * 

■ 3. Section 240.15c3–3 is amended by 

revising paragraphs (e)(3)(i), (iv), and (v) 

and adding paragraph (e)(3)(vi) to read 

as follows: 

§ 240.15c3–3 Customer protection— 

reserves and custody of securities. 

* * * * * 

(e) * * * 

(3) * * * 

(i)(A) Except as provided in 

paragraphs (e)(3)(i)(B)(1) and (C) of this 

section, computations necessary to 

determine the amount required to be 

deposited in the Customer Reserve Bank 

Account and PAB Reserve Bank 

Account as specified in paragraph (e)(1) 

of this section must be made weekly, as 

of the close of the last business day of 

the week, and the deposit so computed 

must be made no later than one hour 

after the opening of banking business on 

the second following business day. 

(B)(1) A broker or dealer with average 

total credits that are equal to or greater 

than $500 million must make the 

computations necessary to determine 

the amount required to be deposited in 

the Customer Reserve Bank Account 

and PAB Reserve Bank Account, as 

specified in paragraph (e)(1) of this 

section, daily as of the close of the 

previous business day, and the deposit 

so computed must be made no later than 

one hour after the opening of banking 

business on the second following 

business day. A broker or dealer must 

comply with this paragraph 

(e)(3)(i)(B)(1) no later than six months 

after having average total credits equal 

to or greater than $500 million and until 

such time as it has average total credits 

of less than $500 million and 60 days 

after having provided the 60-day notice 

required by paragraph (e)(3)(i)(B)(2) of 

this section. For purposes of this 

paragraph (e)(3), average total credits 

means the arithmetic mean of the sum 

of Total Credits in the Customer Reserve 

Bank Account computation and the PAB 

Reserve Bank Account computation 

reported in the 12 most recently filed 

month-end Forms X–17A–5. 

(2) A broker or dealer computing the 

Customer Reserve Bank Account 

computation and the PAB Reserve Bank 

Account computation daily under 

paragraph (e)(3)(i)(B)(1) of this section 

whose average total credits falls below 

$500 million may elect to compute the 

Customer Reserve Bank Account and 

the PAB Reserve Bank Account 

computation weekly under paragraph 

(e)(3)(i)(A) of this section. Such broker 

or dealer must notify its designated 

examining authority, in writing, of this 

election at least 60 calendar days before 

computing the Customer Reserve Bank 

Account and the PAB Reserve Bank 

Account computation weekly under 

paragraph (e)(3)(i)(A) of this section. 

(C) A broker or dealer which has 

aggregate indebtedness not exceeding 

800% of net capital (as defined in 

§ 240.15c3–1) and which carries 

aggregate customer funds (as defined in 

paragraph (a)(10) of this section), as 

computed at the last required 

computation pursuant to this section, 

not exceeding $1,000,000, may in the 

alternative make the Customer Reserve 

Bank Account computation monthly, as 

of the close of the last business day of 

the month, and, in such event, must 

deposit not less than 105% of the 

amount so computed no later than one 

hour after the opening of banking 

business on the second following 

business day. 

* * * * * 

(iv) Computations in addition to the 

computations required in this paragraph 

(e)(3), other than computations made 

under paragraph (e)(3)(i)(B)(1) of this 

section, may be made as of the close of 

any business day, and the deposits so 

computed must be made no later than 

one hour after the opening of banking 

business on the second following 

business day. 

(v) A broker or dealer may elect to 

voluntarily compute the Customer 

Reserve Bank Account computation 

daily under paragraph (e)(3)(iv) of this 

section and reduce aggregate debit items 

in such computation by 2% under 

§ 240.15c3–1(a)(ii)(A). Such broker or 

dealer must notify its designated 

examining authority, in writing, of its 

election to operate under this paragraph 

(e)(3)(v) at least 30 calendar days before 

beginning such computation. If a broker 

or dealer has notified the broker or 

dealer’s designated examining authority 

of its election to operate under this 

paragraph (e)(3)(v), the broker or dealer 

must continue to compute the Customer 

Reserve Bank Account computation 

daily unless a change is approved by its 

designated examining authority. 

(vi) The broker or dealer must make 

and maintain a record of each such 

computation made pursuant to this 

paragraph (e)(3) or otherwise and 

preserve each such record in accordance 

with § 240.17a–4. 

* * * * * 

PART 249—FORMS, SECURITIES 

EXCHANGE ACT OF 1934 

■ 4. The authority citation for part 249 

continues to read, in part, as follows: 

Authority: 15 U.S.C. 78a et seq. and 7201 

et seq.; 12 U.S.C. 5461 et seq.; 18 U.S.C. 1350; 

Sec. 953(b) Pub. L. 111–203, 124 Stat. 1904; 

Sec. 102(a)(3) Pub. L. 112–106, 126 Stat. 309 

(2012), Sec. 107 Pub. L. 112–106, 126 Stat. 

313 (2012), Sec. 72001 Pub. L. 114–94, 129 

Stat. 1312 (2015), and secs. 2 and 3 Pub. L. 

116–222, 134 Stat. 1063 (2020), unless 

otherwise noted. 

* * * * * 

Section 249.617 is also issued under Pub. 

L. 111–203, 939, 939A, 124. Stat. 1376 (2010) 

(15 U.S.C. 78c, 15 U.S.C. 78o–7 note). 

* * * * * 

■ 5. Amend Part II of the Form X–17A– 

5 (referenced in § 249.617) by revising 

the Computation for Determination of 

Customer Reserve Requirements section 

as shown in Appendix 1. 

Note: The Computation for Determination 

of Customer Reserve Requirements in Part II 

of Form X–17A–5 is attached as Appendix 1 

to this document. Form X–17A–5 will not 

appear in the Code of Federal Regulations. 

By the Commission. 

Dated: December 20, 2024. 

Vanessa A. Countryman, 

Secretary. 

Note: The following appendix containing 

the text of Part II of Form X–17A–5 and the 

instructions thereto do not, and these 

amendments will not, appear in the Code of 

Federal Regulations. 

Appendix 1 

* * * * * 

BILLING CODE 8011–01–P 


ddrumheller on DSK120RN23PROD with RULES2
2838 Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 


ddrumheller on DSK120RN23PROD with RULES2ER13JA25.001</GPH>

COMPUTATION FOR DETERMINATION OF CUSTOMER RESERVE REQUIREMENTS 

FOCUS 

Report 

Part II 

CREDIT BALANCES 

Items on this page lo be reported by a: Stand-Alone Broker-Dealer 

Broker-Dealer SBSD 

Broker-Dealer MSBSP 

1. Free credit balances and other credit balances in custtmers' security accounts (see 

Note A) ...................................................................................................................................................... $ ______ ~ 

2. Monies borrowed collateralized by securities carried for the accounts of customers (see Note B) ........ $ ~ 

3. Monies payable against customers' securities loaned (see Note C) ........................................................ $ ~ 

4. CustaTiers' securities failed to receive (see Note D) ................................................................................ $ ~ 

5. Credit balances in firm accounts which are atbibutable to principal sales to custaTiers ......................... $ ~ 

6. Market value of stock dividends, stock splits and sinilar distributions receivable outstanding 

over 30 calendar days .............................................................................................................................. $ ~ 

7. "Market value of short security count differences over 30 calendar days old ........................................ $ ~ 

8. "Market value of short securities and credits (not to be offset by longs or by 

debits) in all suspense accounts over 30 calendar days .......................................................................... $ IHJ:9 

9. Market value of securities which are in transfer in excess of 40 calendar days and have not been 

confirmed to be in transfer by the transfer agent or the issuer during the 40 days ................................. $ ________ ~ 

10. Other(List ........................ $ _______ ~ 

11. TOTAL CREDITS (sum of lines 1-10) ......................................................................................................................................................................... $ _______ ~ 

DEBIT BALANCES 

12. "Debit balances in customers' cash and margin accounts, excludilg unsecured accounts and 

accounts doubtful of collection (see Note E) ........................................................................................... $ ________ ~ 

13. Securities borrowed to effecbJate short sales by customers and securities borrowed to make 

delr,ery on cus!aTiers' securities failed to deliver ................................................................................... $ ________ ~ 

14. Failed to deliver of customers' securities not older than 30 calendar days ............................................. $ ________ ~ 

15. Margin required and on deposi with the Options Clearing Corporation for all option contracts 

written or purchased in cus!aTier accounts (see Note F) ........................................................................ $ ________ ~ 

16. Margin required and on deposi with a clearing agency registered w~ the Commission under 

section 17A of the Exchange Act (15 U.S.C. 78q-1) or a derivatives clearing organization ragistered 

with the Commodity Futures Trading Commission under section 5b of the Commodity Exchange 

Act (7 U.S.C. 7a-1) related to the following types of posiions written, purchased or sold in customer 

accounts: (1) security futures products and (2) futuras contracts (and options thereon) carried in a 

securities account pursuant to an SRO portfolio margining rule (see Note G) ....................................... $ ________ [ill 

17. Margin requirad and on deposit with a clearing agency registered with the Commission under 

section 17A of the Exchange Act (15 U.S.C. 78q-1) resulting from the following types of transactions 

in U.S. Treasury securities in customer accounts that have been cleared, settled, and novated by the 

clearing agency: (1) purchases and sales of U.S. Traasury securities; and (2) U.S. Treasury securities 

repurchase and reverse repurchase agreements (see Note H) ............................................................... $ _______ ~ 

18. Other(List ........................ $ _______ ~ 

19. "AggregatedebiMms(sum of Lines 12-18) .............................................................................................................................................................. $ -------~ 

20. "Aggregate debit Mms reduction (for alternative method only) 

A. Less 3%01 applicable) (See Rule 15c3-1(a)(1)00) (3%x Lile Item 4470) .................................................................................................... $ _______ ~ 

B. Less 2%01 applicable) (See Rules 15c3-1(a)(1)(ii) and 15c3-3(e)(3)(v)) (2%x Line Item 4470) .................................................................. $ ~ 

21. "TOTAL DEBITS (Line 19 less [Line 20A or 208, as applicableD .............................................................................................................................. $ ~ 

RESERVE COMPUTATION 

22. Excess of total debits over total credits (Line 21 less Line 11) .................................................................................................................................... $ --------~ 

23. Excess of total credits over total debits (Line 11 less Line 21) .................................................................................................................................... $ ~ 

24. If computation is made monthly as pe,mitled, enter 105%of excess of total credits over total debits ....................................................................... $ ~ 

25. Amount held on deposit in 'Reseive Bank Account(s)," including$ ________ ~ value of qualified securities, 

at end of reporting period ............................................................................................................................................................................................... $ ________ ~ 

26. Amount of deposit (orwithdrawa~ including$ ________ ~value of qualified securities .. ............................................... $ ------~ 

27. New amount in Reseive Bank Account(s) after adding deposi or subtracting withdrawal incklding 

$ ________ ~value of qualified securities .................................................................................................................................. $ ________ ~ 

28. Date of deposi (MMIDD/YY) ........................................................................................................................................................................................ $ ~ 

Name of Firm: _____________ _ 

Asof: _______________ _ 
Federal Register / Vol. 90, No. 7 / Monday, January 13, 2025 / Rules and Regulations 2839 

* * * * * 

[FR Doc. 2024–31178 Filed 1–10–25; 8:45 am] 

BILLING CODE 8011–01–C 


ddrumheller on DSK120RN23PROD with RULES2ER13JA25.002</GPH>

FOCUS 

Report 

Part II 

COMPUTATION FOR DETERMINATION OF CUSTOMER RESERVE REQUIREMENTS 

Items on this page lo be reported by a: Stand-Alone Broker-Dealer 

Broker-Dealer SBSD 

Broker-Dealer MSBSP 

FREQUENCY OF COMPUTATION 

29. Daily------~ Weekly------~ Monthly ______ lfil1 

30. If the reserve fo,mula is computed daiy, and the net capital requirement is computed under the alternative method, check the applicable aggregate debit items 

reduction percentage used: 

3% ______ ~ 2% ______ lgml 

"See Rules 15c3-1(a)(1)0i) and 15c3-3(e)(3)(v). In the event the net capital requirement is computsd under the alternative method, th~ reserve fo,mula must be 

prepared in accordance with the requirements of paragraphs (a)(1)0i) of Rule 15c3-1 and (e)(3)(v) of Rule 15c3-3, as applicable. 

References ID notes in lhisseclion refer lo the notes lo 17 CFR 240.15c3-1a. 

Name of Finn: ____________ _ 

Asof: ______________ _