calculated in 2010 that Form 1 takes 47 hours to complete.\430\
Although the requirements of Form 1 are not identical to the
requirements of proposed Form SB SEF, the Commission preliminarily
believes that they are substantially similar for PRA purposes. Similar
to Form 1, the information that would be required on Form SB SEF
generally would consist of copies of existing documents that would be
prepared by a SB SEF in the ordinary course of its business. As noted
above, no SB SEFs currently are registered with the Commission and no
framework for registration of SB SEFs currently exists. Therefore, the
Commission preliminarily believes that, during the initial
implementation period of

Regulation SB SEF, it could take a SB SEF more time to compile the
necessary documents and information required by the exhibits to Form SB
SEF than it would for an applicant to become a national securities
exchange to compile documents and information to comply with
requirements of Form 1. The procedures for registration as a national
securities exchange are well-settled and, therefore, an entity that
intends to register as national securities exchange could anticipate
the form of the documents and other information that it would need to
compile to register on Form 1.\431\ Based on these factors, the
Commission preliminarily estimates that an applicant would incur an
average burden of 100 hours to prepare and file an initial Form SB SEF,
including all exhibits thereto, except Exhibits F and H requiring
certain financial reports, and Exhibit P requiring certain opinions of
counsel, which are discussed separately below.\432\ Therefore, the
Commission preliminarily estimates that the aggregate one-time burden
for all respondents to file the initial Form SB SEF, including all
exhibits thereto, except Exhibits F and H requiring certain financial
reports and Exhibit P requiring opinions of counsel, would be 2,000
hours.\433\ The Commission preliminarily believes that SB SEFs would
prepare Form SB SEF internally. The Commission requests comment on the
accuracy of this estimate.
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    \430\ See 75 FR 32824 (June 9, 2010) (outlining the most recent
Commission calculations regarding the PRA burdens for Form 1 and
Rules 6a-1 and 6a-2 under the Exchange Act).
    \431\ For example, because an entity seeking to register as a
national securities exchange would know that Exhibit E to Form 1
requires an applicant to describe the manner and operation of the
electronic trading system to be used to effect transactions on the
exchange, such entity likely would prepare such a description in the
ordinary course of its business in anticipation of applying for
registration as a national securities exchange on Form 1. However,
because the requirements of Form SB SEF would be set forth for the
first time in connection with this proposed rulemaking, a SB SEF
previously may not have prepared a description of the manner and
operation of its trading system in the ordinary course of business
and would have to do so to comply with Exhibit I to Form SB SEF.
    \432\ As discussed above, proposed Rule 801(d) would require a
SB SEF to designate and authorize on Form SB SEF an agent in the
U.S. to accept notice or service of process, pleadings, or other
documents in any action or proceedings brought against it to enforce
the Federal securities laws and the rules and regulations
thereunder. Proposed Rule 801(e) would require an applicant that is
controlled by any other person to certify on Form SB SEF that any
person that controls such SB SEF would consent to and could, as a
matter of law, provide the Commission with prompt access to its
books and records, to the extent such books and records are related
to the activities of the SB SEF, and submit to onsite inspection and
examination by representatives of the Commission with respect to the
activities of the SB SEF. Proposed Rule 801(f) would require a non-
resident person applying for registration to certify on Form SB SEF
that it could, as a matter of law, provide the Commission with
prompt access to its books and records and submit to onsite
inspection and examination by representatives of the Commission.
Proposed Rule 814(b)(4) would require a SB SEF to certify at the
time of registration on Form SB SEF that the SB SEF would have the
capacity to fulfill its obligations under international information
sharing agreements to which it is a party. The Commission
preliminarily believes that the burden associated with these
requirements would be included in the 100-hour burden associated
with the initial registration on Form SB SEF required by proposed
Rule 801(a). These proposed requirements currently are not included
on Form 1. In addition, proposed Rules 801(e) and (f) would require
SB SEFs that are controlled by other persons and non-resident SB
SEFs to provide certain opinions of counsel. The Commission
preliminarily believes that the burden associated with these
requirements would be included in the burden associated with Exhibit
P to Form SB SEF discussed below.
    \433\ 2,000 hours = 20 (number of SB SEF respondents) x 100
hours (initial hourly burden to comply with Form SB SEF, except for
Exhibits F, H and P).
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    Exhibits F and H to proposed Form SB SEF would require an applicant
to submit an annual financial report that would have to satisfy a
number of requirements, including the requirement that a registered
public accounting firm that is qualified and independent in accordance
with Rule 2-01 of Regulation S-X \434\ audit each financial report
relating to the SB SEF (unaudited for certain affiliated entities). The
Commission preliminarily believes that it is unlikely that, during the
initial implementation period of Regulation SB SEF, a SB SEF would have
prepared such reports in the ordinary course of business prior to
applying for registration on Form SB SEF. Therefore, in connection with
its efforts to register as a SB SEF with the Commission on proposed
Form SB SEF, an applicant would incur an initial burden to generate
such financial reports. Based on conversations with operators of
current trading platforms and the Commissions experience with entities
of similar size, the Commission preliminarily estimates that the
financial reports relating to the SB SEF would generally require, on
average, 500 hours per respondent to complete and cost $500,000 for
independent public accounting services per respondent.
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    \434\ See 17 CFR 210.2-01.
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    The Commission believes that the unaudited reports required for
certain affiliated entities and to be made available upon request by
the Commission for other affiliated entities would not be overly time
consuming to produce because, based on the Commission's experience with
Form 1 filers, a respondent's accounting system should have this
information available. Furthermore, because the information would not
have to be audited, a respondent would be able to compile the required
information using a computer and commercially available software that
it generally would own for pre-existing accounting purposes and then
would submit the information to the Commission. Based on the number of
unaudited financial statements the Commission receives from filers of
Form 1 and the substance contained in these reports, the Commission
estimates that it would take 40 hours to compile, review, and submit
these reports.
    However, as proposed, all of these reports would be required to be
provided in XBRL, as required in Rules 405(a)(1), (a)(3), (b), (c), (d)
and (e) of Regulation S-T.\435\ This would create an additional burden
on respondents. The Commission preliminarily estimates, based on its
experience with other data tagging initiatives, that these requirements
would add an additional burden of an average of 54 hours and $23,000 in
outside software and other costs per respondent. Thus, for complying
with the financial statement requirements under Exhibits F and H in
connection with an initial application on proposed Form SB SEF, the
Commission estimates an aggregate total initial burden of 11,880 hours
\436\ and $10,460,000 for all respondents.\437\ The Commission solicits
comments as to the accuracy of these estimates.
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    \435\ See 17 CFR 232.405.
    \436\ 11,880 hours = 20 (number of SB SEF respondents) x 594
hours (500 hours for audited SB SEF financial statements + 40 hours
for unaudited financial statements of affiliated entities + 54 hours
for XBRL formatting of submission).
    \437\ $10,460,000 = 20 (number of SB SEF respondents) x $523,000
($500,000 for outside accounting services for auditing SB SEF's
financial statements + $23,000 in outside software and other cost
for formatting financial statement submissions in XBRL format).
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    Pursuant to the requirements of proposed Rule 801(e), Exhibit P to
proposed Form SB SEF would require an applicant that is controlled by
any other person to provide an opinion of counsel that any person that
controls such SB SEF has consented to and can, as a matter of law,
provide the Commission with prompt access to its books and records, to
the extent such books and records are related to the activities of the
SB SEF, and submit to onsite inspection and examination by
representatives of the Commission with respect to the activities of the
SB SEF. This creates an additional burden for SB SEFs controlled by
other persons. Based on similar requirements on Form 20-F, the
Commission preliminarily estimates that this additional burden would
add 1 hour and $900 in outside legal costs for each affected SB
SEF.\438\ For PRA

purposes and in order to provide an estimate that is not under-
inclusive, the Commission preliminarily estimates that all respondents
applying for registration as a SB SEF pursuant to proposed Rule 801, or
20 SB SEFs, may be controlled by other persons and therefore subject to
the additional burden imposed on SB SEF's controlled by other persons
by Exhibit P. Thus, the Commission preliminarily estimates a total
additional burden for all SB SEFs that are controlled by other persons
to comply with the opinion of counsel requirements of Exhibit P of 20
hours \439\ and $18,000.\440\ The Commission solicits comments as to
the accuracy of these estimates.
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    \438\ See Securities Exchange Act Release No. 49616 (Apr. 26,
2004), 69 FR 24016 (Apr. 30, 2004) (outlining the Commission's
calculations regarding the PRA burdens resulting from having to
provide a legal opinion and additional disclosure required by
Instruction 3 to Item 7.B to Form 20-F). The Commission calculated
that such requirements would result in an additional burden to
affected foreign private issuers of 3 hours, of which 25%, or
approximately 1 hour, would be incurred by the foreign private
issuers themselves, and 75% would be incurred by outside firms,
including legal counsel, which would cost approximately $900 ($900 =
3 hours (estimated burden to comply with proposed Rule 801(f)) x
0.75 (portion of estimated burden incurred by outside legal counsel
x $400 (hourly rate for an outside attorney)). The Commission
preliminarily continues to estimate the hourly rate for an outside
attorney at $400 per hour, based on industry sources. See Securities
Exchange Act Release No. 62184A (May 27, 2010), 75 FR 33100 at note
505 (June 10, 2010) (``Municipal Securities Disclosure Release'').
    \439\ 20 hours = 20 (number of SB SEF respondents controlled by
other persons) x 1 (hourly burden to comply with Exhibit P).
    \440\ $18,000 = 20 (number of SB SEF respondents controlled by
other persons) x $900 (cost for outside legal services to comply
with Exhibit P).
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    Pursuant to the requirements of proposed Rule 801(f), Exhibit P to
proposed Form SB SEF would require a non-resident SB SEF to provide an
opinion of counsel that the SB SEF can, as a matter of law, provide the
Commission with access to the books and records of the SB SEF and
submit to onsite inspection and examination by representatives of the
Commission. This creates an additional burden for non-resident SB SEFs.
Based on similar requirements on Form 20-F, the Commission
preliminarily estimates that this additional burden would add 1 hour
and $900 in outside legal costs per respondent.\441\ For PRA purposes,
the Commission preliminarily estimates that one out of the 20 estimated
persons applying for registration as a SB SEF pursuant to proposed Rule
801 may be ``non-resident'' SB SEFs and therefore subject to the
additional burden imposed on non-resident SB SEFs by Exhibit P. Thus,
the Commission preliminarily estimates a total additional burden for
all non-resident SB SEFs to comply with the opinion of counsel
requirements of Exhibit P of 1 hour \442\ and $900.\443\
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    \441\ See supra note 438.
    \442\ 1 hour = 1 (number of non-resident SB SEF respondents) x 1
(hourly burden to comply with Exhibit P).
    \443\ $900 = 1 (number of non-resident SB SEF respondents) x
$900 (cost for outside legal services to comply with Exhibit P).
---------------------------------------------------------------------------

    Therefore, the Commission preliminarily estimates that the total
one-time burden for a SB SEF to prepare and file the initial Form SB
SEF, including all exhibits thereto except for Exhibit P, would be 694
hours \444\ and $523,000.\445\ In addition, SB SEFs controlled by other
persons and non-resident SB SEFs would incur an additional one-time
burden of 1 hour and $900 to prepare and file Exhibit P to proposed
Form SB SEF. This would result in a total initial burden for all SB
SEFs of 13,901 hours \446\ and $10,478,900.\447\ The Commission
requests comment on the accuracy of these estimates.
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    \444\ 694 hours = 100 hours to comply with Form SB SEF except
for Exhibits F, H and P + 500 hours for audited SB SEF financial
statements + 40 hours for unaudited financial statements of
affiliated entities + 54 hours for XBRL formatting of submission.
    \445\ $523,000 = $500,000 for outside accounting services for
auditing SB SEF's financial statements + $23,000 in outside software
and other cost for formatting financial statement submission in XBRL
format.
    \446\ 13,901 = (20 (number of SB SEF respondents) x 694 hours
(total initial burden to comply with Form SB SEF except for Exhibit
P)) + (20 (number of SB SEF respondents controlled by other persons)
x 1 hour (total initial burden to comply with Exhibit P)) + (1
(number of non-resident SB SEF respondents) x 1 hour (total initial
burden to comply with Exhibit P).
    \447\ $10,478,900 = (20 (number of SB SEF respondents) x
$523,000 (total initial cost to comply with Form SB SEF except for
Exhibit P)) + (20 (number of SB SEF respondents controlled by other
persons) x $900 (total initial cost to comply with Exhibit P)) + (1
(number of non-resident SB SEF respondents) x $900 (total initial
cost to comply with Exhibit P)).
---------------------------------------------------------------------------

    The Commission preliminarily estimates that each SB SEF would file
four amendments to Form SB SEF pursuant to proposed Rules 802(a) and
(b) per year, and that each SB SEF would incur an average burden of 25
hours to prepare each amendment pursuant to proposed Rules 802(a) and
(b), for a total annual burden of 100 hours. The Commission bases this
estimate on previous Commission estimates relating to amendments to
Form 1 filed by national securities exchanges pursuant to Rule 6a-2
under the Exchange Act.\448\ The Commission preliminarily believes that
SB SEFs would prepare these amendments to Form SB SEF internally.
---------------------------------------------------------------------------

    \448\ The Commission calculated in 2010 that national securities
exchanges file four amendments or periodic updates to Form 1 per
year, incurring an average burden of 25 hours per amendment to
comply with Rule 6a-2. See 75 FR 32824, supra note 430. While the
requirements of Rule 6a-2 are not identical to the requirements of
proposed Rules 802(a) and (b), the Commission believes that there is
sufficient similarity for PRA purposes that the burden would be
equivalent.
---------------------------------------------------------------------------

    The Commission preliminarily believes that two registered SB SEFs
that are controlled by other persons out of all registered SB SEFs that
are controlled by other persons per year would be required to file an
amendment to Exhibit P to Form SB SEF pursuant to proposed Rule 802(c)
due to changes in the legal or regulatory framework of any person that
controls such SB SEFs. The Commission preliminarily believes that a SB
SEF controlled by another person would incur the same burden to prepare
an amended Exhibit P as it would to prepare the initial Exhibit P.
Therefore, the Commission preliminarily estimates that a SB SEF
controlled by another person would incur an average burden of 1 hour
and $900 to prepare an amended Exhibit P pursuant to proposed Rule
802(c) per year,\449\ and that all SB SEFs controlled by other persons
would incur an aggregate burden of 2 hours \450\ and $1,800 per year
\451\ to prepare amended Exhibit Ps pursuant to proposed Rule 802(c).
---------------------------------------------------------------------------

    \449\ See supra note 438 and accompanying text.
    \450\ 2 = 2 (number of SB SEFs controlled by other persons
required to file an amended Exhibit P pursuant to proposed Rule
802(c) per year) x 1 hour (total annual burden to file an amended
Exhibit P).
    \451\ $1,800 = 2 (number of SB SEFs controlled by other persons
required to file an amended Exhibit P pursuant to proposed Rule
802(c) per year) x $900 (total annual cost burden to file an amended
Exhibit P).
---------------------------------------------------------------------------

    The Commission preliminarily believes that one non-resident SB SEF
would be required to file one amendment to Exhibit P to Form SB SEF
pursuant to proposed Rule 802(d) per year. The Commission preliminarily
believes that a non-resident SB SEF would incur the same burden to
prepare an amended Exhibit P as it would to prepare the initial Exhibit
P. Therefore, the Commission preliminarily estimates that a non-
resident SB SEF would incur an average burden of 1 hour and $900 to
prepare each amended Exhibit P pursuant to proposed Rule 802(d) per
year,\452\ and that this estimate represents the aggregate burden for
all non-resident SB SEFs per year.
---------------------------------------------------------------------------

    \452\ See supra note 441 and accompanying text.
---------------------------------------------------------------------------

    The Commission believes that each SB SEF would file one update to
Form SB SEF pursuant to proposed Rule 802(f) per year, and that it
would take a SB SEF a longer time to file an annual update to Form SB
SEF pursuant to proposed Rule 802(f) than it would take a SB SEF to
file an amendment to Form SB SEF pursuant to proposed Rules

802(a) and (b), but less time than it would take a SB SEF to prepare an
initial application on Form SB SEF. For each annual update to Form SB
SEF, the SB SEF should be able to compile and submit the information
more readily than it would take for the initial Form SB SEF submission
because the SB SEF should already have much of the information required
by the annual update in its possession. Therefore, the Commission
preliminarily estimates that each SB SEF would incur an average burden
of 50 hours to prepare each annual update to the Form SB SEF pursuant
to proposed Rule 802(f).\453\
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    \453\ Proposed Rules 811(b)(4) and 811(g)(2) would require SB
SEFs to report information regarding grants, denials and limitations
of access on Form SB SEF and to disclose all disciplinary actions
taken annually on an amendment to Form SB SEF, respectively. In
addition, proposed Rule 804(a) would require that a SB SEF intending
to file a notice of withdrawal from registration as a SB SEF with
the Commission file an amended Form SB SEF to update any inaccurate
information at the time of such notice of withdrawal. The Commission
preliminarily believes that the burdens associated with these
requirements would be included in the burden associated with the
annual update to Form SB SEF required by proposed Rule 802(f).
    The Commission notes that, pursuant to proposed Rules 823(e)(1)
and (2), the CCO of a SB SEF would be required to prepare annual
updates to the financial reports required by Exhibits F and H.
Therefore, the Commission preliminarily believes that any burden
resulting from the requirement to update Exhibits F and H annually
pursuant to proposed Rule 802(f) would be included in the burden
associated with proposed Rule 823(e)(1) and (2) discussed in the
sections of this PRA analysis relating to the duties of the SB SEF's
CCO.
---------------------------------------------------------------------------

    The Commission estimates that the annual burden for all respondents
to file amendments and periodic updates to the Form SB SEF pursuant to
proposed Rule 802 would be 3,003 hours \454\ and $2,700.\455\ The
Commission requests comment on the accuracy of its estimates.
---------------------------------------------------------------------------

    \454\ 3,003 hours = (20 (number of SB SEF respondents) x 4
(number of filings pursuant to proposed Rules 802(a) and (b)) x 25
hours (burden per filing)) + (2 (number of respondents) x 1 (number
of filings pursuant to proposed Rule 802(c)) x 1 hour (burden per
filing)) + (1 (number of respondents) x (1 (number of filings
pursuant to proposed Rule 802(d)) x 1 hour (burden per filing)) +
(20 (number of SB SEF respondents) x (1 (number of filings pursuant
to proposed Rule 802(f)) x 50 hours (burden per filing)).
    \455\ $2,700 = (2 (number of respondents) x 1 (number of filings
pursuant to proposed Rule 802(c)) x $900 (burden per filing)) + (1
(number of respondents) x 1 (number of filings pursuant to proposed
Rule 802(d)) x $900 (burden per filing)).
---------------------------------------------------------------------------

    The Commission preliminarily estimates that the preparation and
filing of supplemental information pursuant to proposed Rule 803(a)
generally would involve photocopying existing documents and therefore
should take less than one-half hour per response. The Commission
similarly preliminarily estimates that where a SB SEF chooses to comply
with the requirements of proposed Rule 803(b), which relates to
supplemental information being made available continuously on the SB
SEF's Web site, instead of proposed Rule 803(a), which relates to
filing of the actual supplemental information, the response required by
proposed Rule 803(b) should take less than one-half hour as well. The
Commission preliminarily estimates that each SB SEF would make
approximately 15 filings on an annual basis pursuant to proposed Rules
803(a) and (b) combined. The Commission bases these estimates on
previous Commission estimates relating to supplemental material filed
by national securities exchanges pursuant to Rule 6a-3.\456\ Therefore,
the Commission estimates that the total annual reporting burden under
proposed Rule 803 for all SB SEFs would be 150 hours.\457\ The
Commission requests comment on the accuracy of this estimate.
---------------------------------------------------------------------------

    \456\ The Commission calculated in 2010 that Rule 6a-3 would
require national securities exchanges to make 25 filings per year at
a burden of 0.5 hours per filing. 75 FR 32822 (June 9, 2010)
(outlining the most recent Commission calculations regarding the PRA
burdens for Rule 6a-3). While the requirements of Rule 6a-3 are not
identical to those of proposed Rule 803, the Commission believes
that there is sufficient similarity for PRA purposes that the burden
would be equivalent. However, Rule 6a-3 contains a requirement for
national securities exchanges to file certain monthly reports, while
proposed Rule 803 contains no such requirement with respect to SB
SEFs. Therefore, the Commission preliminarily estimates that a SB
SEF would make 15 filings per year pursuant to proposed Rule 803,
rather than 25 filings as estimated in connection with Rule 6a-3.
    \457\ 150 hours = 20 (number of SB SEF respondents) x 15 (number
of filings per respondent) x .5 hours (burden per filing).
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    Proposed Rule 804 would require that a SB SEF provide the
Commission notice of withdrawal of registration and file an amended
Form SB SEF to update any inaccurate information at the time of such
notice of withdrawal. The Commission preliminarily estimates that one
SB SEF per year would seek to withdraw its registration with the
Commission and therefore be subject to the collection of information
requirements in proposed Rule 804. The Commission preliminarily
estimates that a SB SEF would incur an average burden of 1 hour to
prepare and file with the Commission a notice of withdrawal of
registration. The Commission preliminarily believes that the burden
incurred by a SB SEF withdrawing its registration to file an amended
Form SB SEF pursuant to proposed Rule 804 would be included in the
estimated burden under proposed Rule 802(f) requiring annual updates to
Form SB SEF. Therefore, the Commission estimates that the annual burden
for all respondents pursuant to proposed Rule 804 would be 1 hour.
    The Commission preliminarily estimates that the total annual hourly
burden for all SB SEFs combined to comply with the registration
requirements under Regulation SB SEF would be 3,154 hours \458\ and the
total one time hourly burden would be 13,901 hours.\459\ The Commission
preliminarily estimates that the total annual cost burden for all SB
SEFs to comply with the registration requirements under Regulation SB
SEF would be $2,700,\460\ and the total one-time cost burden for all SB
SEFs would be $10,478,900.\461\ The Commission requests comment on the
accuracy of these estimates.
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    \458\ 3,154 hours = 3,003 (estimated hourly burden to comply
with proposed Rule 802) + 150 (estimated hourly burden to comply
with proposed Rule 803) + 1 (estimated hourly burden to comply with
proposed Rule 804).
    \459\ See supra note 446.
    \460\ See supra note 455.
    \461\ See supra note 447.
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2. Rule-Writing Requirements for SB SEFs
    The proposed rules that would require a SB SEF to establish rules,
policies and procedures to meet the requirements of various proposed
rules in Regulation SB SEF are summarized in Section XXII.A.2. above.
Based on its experience with the rule-writing process conducted by
national securities exchanges and applicants to become national
securities exchanges, the Commission believes that a SB SEF would spend
an average of 10 hours to draft each rule, policy or procedure required
to be established under Regulation SB SEF and that the SB SEF would
handle this work internally. The Commission recognizes that in some
cases, the SB SEF may take longer than 10 hours to draft a particular
rule, policy or procedure, but in other cases, the SB SEF may take
fewer than 10 hours to draft a particular rule, policy or procedure.
Therefore, the Commission preliminarily believes that the 22 proposed
rules, policies and procedures that a SB SEF would be required to draft
under proposed Regulation SB SEF would carry a one-time paperwork
burden of 220 hours per respondent, for a maximum total of 4,400
hours.\462\ The estimated 220 hours per respondent also would include
the time expended for review of the draft rules, policies or procedures
by the SB SEF's management. The Commission requests

comment on the accuracy of this estimate.
---------------------------------------------------------------------------

    \462\ 4,400 hours = 20 (number of SB SEF respondents) x 220
hours (one-time burden to draft 22 proposed rules, policies and
procedures).
---------------------------------------------------------------------------

    The Commission preliminarily estimates that once a SB SEF has
drafted the written rules, policies and procedures that it is required
to establish pursuant to Regulation SB SEF, a SB SEF would spend
approximately 10 hours per month to review its written rules, policies
and procedures to ensure that they are up-to-date and remain in
compliance with proposed Regulation SB SEF and to prepare any necessary
new or amended rules, policies and procedures.\463\ Therefore, the
Commission preliminarily estimates that the provisions of proposed
Regulation SB SEF requiring that a SB SEF establish certain rules,
policies and procedures would result in an ongoing annual burden of 120
hours per respondent,\464\ for a total estimated ongoing annual burden
of 2,400 hours.\465\ The Commission requests comment on the accuracy of
this estimate.
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    \463\ This burden estimate does not include the burden that
would be incurred by a SB SEF in connection with submitting rule
filings in connection with new rules or rule amendments to the
Commission, which burden would be included in the burden for
proposed Rules 805 and 806 discussed in the sections of this PRA
relating to the rule filing processes for SB SEFs.
    \464\ 120 hours = 10 hours (monthly burden) x 12 (months per
year).
    \465\ 2,400 hours = 20 (number of SB SEF respondents) x 120
hours (annual burden to update rules, policies and procedures
required by proposed Regulation SB SEF).
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3. Reporting Requirements for SB SEFs
    Proposed Rule 814: Proposed Rule 814(a) would require a SB SEF to
require its participants to provide information or documents to the SB
SEF upon request. Proposed Rule 814(a) also would require the SB SEF to
require its participants to provide information or documents to any
representative of the Commission upon request.
    As noted above, the Commission estimates that each SB SEF would
have 275 participants.\466\ Based on industry sources, the Commission
believes it is likely that each participant would elect to be a member
of each SB SEF. The Commission therefore estimates that each of these
estimated 275 participants would be a participant of each SB SEF. The
Commission therefore estimates that there would be a total of 275 SB
SEF participants subject to the collection of information requirements
of proposed Rule 814(a). The Commission requests comment on the
accuracy of this estimate.
---------------------------------------------------------------------------

    \466\ See supra note 429.
---------------------------------------------------------------------------

    Based on its experience in requesting information from exchanges
and exchange members for various purposes, the Commission estimates
that it would require an average of 25 hours per response for a SB SEF
participant to compile and transmit documents and information requested
pursuant to proposed Rule 814(a) and that such requests would occur a
total of 4 times each year per SB SEF participant.\467\ Thus, the
Commission estimates that the annual burden on each SB SEF participant
to report documents or information pursuant to proposed Rule 814(a)
would be 100 hours.\468\ The Commission therefore estimates that the
annual aggregate burden on SB SEF participants for all SB SEFs would be
27,500 hours.\469\ The Commission believes that this work, should it be
required, would be conducted internally. The Commission seeks comment
on these proposed estimates.
---------------------------------------------------------------------------

    \467\ The estimate of 4 annual requests assumes that each SB SEF
participant would receive, on average, one request for information
per calendar quarter.
    \468\ 100 hours = 4 (number of requests annually) x 25 (annual
hourly burden for each participant to comply with SB SEF rules
imposed pursuant to proposed Rule 814(a)).
    \469\ 27,500 hours = 4 (total number of annual requests made of
a SB SEF participant directly or indirectly) x 25 (hours per
respondent) x 275 (number of SB SEF participants required to comply
with proposed rules imposed by a SB SEF pursuant to proposed Rule
814(a)).
---------------------------------------------------------------------------

    Proposed Rule 814(b)(2) would require a SB SEF to provide
information or documents to any representative of the Commission upon
request. For PRA purposes, the Commission estimates that it would
request information or documents under proposed Rule 814(b)(2) two
times per year, per respondent. The amount of time that it would take
for a respondent to comply with a request would vary depending on the
nature and extent of the request. Based on its experience in requesting
information from exchanges for a variety of purposes, the Commission
estimates that it would require an average of 25 hours per response for
a SB SEF to compile and transmit documents and information requested by
the Commission, for an annual hourly burden of 50 hours per respondent.
Thus, the Commission preliminarily estimates the aggregate annual
burden on a SB SEF to comply with requests for documents or information
pursuant to proposed Rule 814(b)(2) would be 1,000 hours.\470\ The
Commission believes that this work, should it be required, would be
conducted internally. The Commission solicits comment as to the
accuracy of these estimates.
---------------------------------------------------------------------------

    \470\ 1,000 hours = 50 (annual hourly burden to comply with
proposed Rule 814(b)(2)) x 20 (number of SB SEF respondents).
---------------------------------------------------------------------------

    Proposed Rule 814(b)(3) would require a SB SEF to have the capacity
to carry out such international information-sharing agreements as the
Commission may require. If so directed by the Commission, a SB SEF
could be required to carry out one or more international-information
sharing agreements. It is difficult to estimate how many international
information-sharing agreements the Commission may direct a SB SEF to
carry out or what the reporting requirements under such agreements may
be.
    The Commission estimates, for PRA purposes only, that SB SEFs would
need to carry out such an agreement, on average, once per year. The
Commission further estimates that each such agreement could require 40
hours per respondent to prepare, review and finalize. The Commission
therefore preliminarily estimates that the paperwork burden for SB SEFs
associated with having the capacity to carry out international
information-sharing agreements as the Commission may require pursuant
to proposed Rule 814(b)(3) would be 800 hours.\471\ The Commission
believes that these agreements initially would be created or reviewed
internally, but also reviewed by outside counsel. The Commission
estimates that the SB SEF's outside counsel would require 10 hours to
review these documents for a cost of $4,000 per respondent, and a total
cost of $80,000 for all respondents.\472\ The Commission solicits
comment as to the accuracy of these estimates.
---------------------------------------------------------------------------

    \471\ 800 hours = 40 (annual hourly burden to enter into an
international information-sharing agreement pursuant to proposed
Rule 814(b)(3) x 20 (number of SB SEF respondents). The Commission
believes there would be no separate initial burden.
    \472\ These figures are based on an hourly cost of outside
counsel at $400. See Municipal Securities Disclosure Release, supra
note 438.
---------------------------------------------------------------------------

    In addition, the Commission preliminarily estimates that a SB SEF
would be required to provide information pursuant to an international
information-sharing agreement a total of twice per year and that,
similar to complying with a Commission request for information pursuant
to other provisions of proposed Rule 814, it would require 25 hours per
response to comply with a request for information, for a total annual
burden of 50 hours per year per SB SEF. The Commission believes that
this work, should it be required, would be conducted internally. The
Commission therefore estimates that aggregate annual paperwork burden
on SB SEFs associated with reporting under international information-
sharing agreements entered into under proposed

Rule 814(b)(3) would be 1,000 hours.\473\ The Commission solicits
comment as to the accuracy of these estimates.
---------------------------------------------------------------------------

    \473\ 1,000 hours = 50 (annual hourly burden to comply with
reporting requirements pursuant to international information-sharing
agreements x 20 (number of SB SEF respondents).
---------------------------------------------------------------------------

    The Commission therefore estimates the aggregate annual paperwork
burden associated with proposed Rule 814 to be 27,500 hours for SB SEF
participant respondents and 2,800 \474\ hours and $80,000 for SB SEF
respondents.
---------------------------------------------------------------------------

    \474\ 2,800 hours = 1,000 (aggregate burden on SB SEF
respondents to comply with proposed Rule 814(b)(2)) + 1,800 hours
(aggregate burden on SB SEF respondent to comply with proposed Rule
814(b)(3)).
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    Proposed Rule 816: Proposed Rule 816 would require a SB SEF to
notify the Commission of any exercise of its emergency authority, and
within two weeks following cessation of an emergency, submit to the
Commission a report explaining the basis for declaring an emergency,
how conflicts of interest were minimized, and the extent to which the
SB SEF considered the effect of its emergency action on the markets for
the SB swap and any security or securities underlying the SB swap. The
collection of information associated with proposed Rule 816 would apply
only during and following an emergency.\475\
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    \475\ Proposed Rule 816(d)(2) provides that if a SB SEF
implements any rule or rule amendment in the exercise of its
emergency authority, it must file such rule or rule amendment with
the Commission pursuant to proposed Rule 806 prior to the
implementation of such rule or rule amendment, or, if not
practicable, within 24 hours after implementation of such rule or
rule amendment. The annual hourly burden to comply with proposed
Rule 816(d)(2) is included in the estimated annual hourly burden for
a SB SEF to comply with proposed Rule 806.
---------------------------------------------------------------------------

    The Commission notes that emergencies in the securities markets are
rare, but when they do occur, they require significant time and
resources to address. For PRA purposes only, the Commission estimates
that a SB SEF would exercise its emergency authority once per year.
Based on its experience with national securities exchanges, the
Commission estimates that the time that would be necessary for a SB SEF
to prepare and transmit the notice and report regarding emergency
authority pursuant to proposed Rule 816 would be 40 hours per
respondent. Thus, the Commission estimates that the total annual
reporting burden associated with proposed Rule 816 would be 800
hours.\476\ The Commission believes that this work, should it be
required, would be conducted internally. The Commission solicits
comment on these estimates.
---------------------------------------------------------------------------

    \476\ 800 hours = 40 (annual hourly burden to comply with
proposed Rule 816) x 20 (number of SB SEF respondents).
---------------------------------------------------------------------------

    Proposed Rule 818: Proposed Rule 818(e) would require a SB SEF to
report to the Commission such information as the Commission may, from
time to time, determine to be necessary to perform the duties of the
Commission. For PRA purposes only, the Commission estimates that the
Commission may request such information from a SB SEF once each year.
For PRA purposes only, the Commission estimates that any request for
information would be information easily accessible to the SB SEF, but
could require an analysis of such information by the SB SEF. Based on
the Commission's experience with information requested of other
registered entities, the Commission preliminarily estimates that each
request pursuant to proposed Rule 818 would require 20 hours to
collect, review, draft any accompanying analysis or report, and
transmit, which would result in an annual hourly burden of 20 hours per
SB SEF respondent. Thus, the Commission estimates that the aggregate
annual reporting burden on SB SEFs associated with proposed Rule 818(e)
would be 400 hours.\477\ The Commission solicits comment on these
estimates.
---------------------------------------------------------------------------

    \477\ 400 hours = 20 (annual hourly burden to comply with
proposed Rule 818(e)) x 20 (number of SB SEF respondents). The
Commission believes there would be no separate initial burden.
---------------------------------------------------------------------------

    Proposed Rule 818(f) would require a SB SEF to provide to any
representative of the Commission, upon request, copies of documents
required to be kept and preserved pursuant to the recordkeeping
requirements of proposed Rule 818. For PRA purposes only, the
Commission preliminarily estimates that it would request information or
documents under proposed Rule 818(f) twice per year and would require
no more than 25 hours per response to compile and transmit, resulting
in an annual hourly burden of 50 hours per SB SEF respondent.\478\ The
Commission therefore estimates the annual aggregate paperwork burden
associated with proposed Rule 818(f) would be 1,000 hours.\479\ The
Commission solicits comment on these estimates.
---------------------------------------------------------------------------

    \478\ Based on its experience in requesting information from
exchanges for a variety of purposes, the Commission estimates that
it would require an average of 25 hours per response for a SB SEF to
compile and transmit documents and information requested by the
Commission.
    \479\ 1,000 hours = 25 (annual hourly burden to comply with
proposed Rule 818(f)) x 20 (number of SB SEF respondents).
---------------------------------------------------------------------------

    The Commission therefore estimates the total annual reporting
burden on SB SEFs associated with proposed Rule 818 would be 1,400
hours.\480\
---------------------------------------------------------------------------

    \480\ 1,400 hours = 400 (hourly burden to comply with proposed
Rule 818(e)) + 1,000 (hourly burden to comply with proposed Rule
818(f)).
---------------------------------------------------------------------------

    Proposed Rule 822: Proposed Rule 822(a)(2) would require a SB SEF
to submit to the Commission an annual objective review of the
capability of SB SEF systems that support or are integrally related to
the performance of the SB SEF's activities. If the objective review is
performed by an internal department, an objective, external firm would
be required to assess the internal department's objectivity,
competency, and work performance. Based on its experience with its ARP
program, the Commission believes that the annual burden per respondent
of conducting an internal audit would be approximately 625 hours.\481\
Further, the Commission's experience with the ARP program has indicated
that an additional 200 hours per respondent per year would be required
on average to oversee and establish the independent review of these
audits. \482\ Thus, the Commission estimates the aggregate annual
burden on SB SEFs to comply with requirement to submit these reports
would be 16,500 hours.\483\ In addition, based on its experience with
the ARP program,\484\ the Commission estimates that the annual cost to
hire an objective, external firm to be approximately $90,000 per
respondent annually. For this reason, the Commission estimates the
total annual cost of hiring an objective, external firm to review
internal audits as $1,800,000 for all respondents.\485\ The Commission
solicits comment as to the accuracy of this information.
---------------------------------------------------------------------------

    \481\ See SDR Release, supra note 6.
    \482\ Id.
    \483\ 16,500 hours = 825 (annual hourly burden to comply
proposed Rule 822(a)(2)) x 20 (number of SB SEF respondents).
    \484\ Under the Commission's ARP inspection program of SROs and
certain ATSs, the Commission staff conducts on-site inspections and
attends periodic technology briefings presented by SRO and ATS staff
for the Commission's ARP staff, which generally covers systems
capacity and testing, review of system vulnerability, review of
planned system development, and business continuity planning. Under
the ARP inspection program, the Commission staff also monitors
system failures and planned system changes on a daily basis.
    \485\ $1,800,000 = $90,000 (annual external dollar cost per
respondent to comply with proposed Rule 822(a)(2)) x 20 (number of
SB SEF respondents).
---------------------------------------------------------------------------

    In addition, proposed Rule 822(a)(3) would require a SB SEF to
promptly notify the Commission in writing of material systems outages
and submit to the Commission within five business days of when the
outage occurred a written description and analysis of the outage and
any remedial measures that have been implemented or are

contemplated. The Commission estimates, based on its experience with
the ARP program, that the burden imposed by these requirements would be
15.4 hours on average per respondent per year, for a total estimated
burden of 308 hours per year for all respondents.\486\ The Commission
believes that this work would be conducted internally. The Commission
solicits comments as to the accuracy of this estimate.
---------------------------------------------------------------------------

    \486\ 308 hours = 15.4 annual hourly burden per respondent to
comply proposed Rule 822(a)(3)) x 20 (number of SB SEF respondents).
This annual hourly burden comports with the Commission's estimate
for similar proposed requirements to be imposed on SDRs to comply
with similar proposed requirements. See SDR Release, supra note 6.
---------------------------------------------------------------------------

    Proposed Rule 822(a)(4) would require a SB SEF to notify the
Commission in writing at least thirty calendar days before
implementation of any planned material systems changes. The Commission
estimates that there would be an average of 60 such events per
respondent per year.\487\ Based on the Commission's experience with the
ARP program, the Commission estimates that each of these notices would
require an average of 2 hours for a total burden for all respondents of
2,400 hours annually.\488\ The Commission believes that this work would
be conducted internally. The Commission solicits comments as to the
accuracy of this estimate.
---------------------------------------------------------------------------

    \487\ This estimate would account for any weekly maintenance
that would meet the standard of a ``material systems change,'' as
well as for any software upgrades, throughout the year, that would
meet such standard.
    \488\ 2,400 hours = 60 (notices per SB SEF) x 2 (annual hourly
burden per notice) x 20 (number of SB SEF respondents). See SDR
Release, supra note 6.
---------------------------------------------------------------------------

    The Commission therefore preliminarily estimates that the total
annual hourly reporting burden associated with proposed Rule 822 would
be 19,208 hours \489\ and $1,800,000.\490\
---------------------------------------------------------------------------

    \489\ 19,208 hours = 16,500 (annual hourly burden to comply with
proposed Rule 822(a)(2)) + 308 (annual hourly burden to comply with
proposed Rule 822(a)(3)) + 2,400 (annual hourly burden to comply
with proposed Rule 822(a)(4)).
    \490\ See supra note 485.
---------------------------------------------------------------------------

    The Commission preliminarily estimates that the total annual hourly
burden for all SB SEFs combined for reporting would be 24,208
hours.\491\ There is no one time initial hourly burden associated with
the proposed reporting requirements. The Commission preliminarily
estimates that the total annual cost burden for all SB SEFs combined
for reporting would be $1,880,000.\492\ In addition, the Commission
preliminarly estimates that the total annual hourly burden on all SB
SEF participants for reporting under proposed Regulation SB SEF would
be 28,000 hours.
---------------------------------------------------------------------------

    \491\ 24,208 = 2,800 (annual hourly burden to comply with
proposed Rule 814) + 800 (annual hourly burden to comply with
proposed Rule 816) + 1,400 (annual hourly burden to comply with
proposed Rule 818) + 19,208 (annual hourly burden to comply with
proposed Rule 822).
    \492\ $1,880,000 = $80,000 (annual cost burden to comply with
proposed Rule 814(b)(3)) + $1,800,000 (annual cost burden to comply
with proposed Rule 822(a)(2)).
---------------------------------------------------------------------------

4. Recordkeeping Required Under Regulation SB SEF
    The annual recordkeeping requirements that are contained in
proposed Rules 818(a) and (b) are similar to the requirements that
apply to SROs pursuant to Rules 17a-1(a) and (b) under the Exchange
Act.\493\ The Commission currently estimates that an SRO, including a
national securities exchange, would expend approximately 50 hours per
year to comply with the collection of information requirement of Rule
17a-1.\494\ Based on the Commission's experience with Rule 17a-1(a) and
(b), the Commission believes that 50 hours would be an appropriate
estimate for the hourly burden that would apply to SB SEFs to comply
with proposed Rule 818(a) and (b). The Commission notes that SB SEFs
generally would be electronic platforms and that the vast preponderance
of its records thus should be retained electronically in the ordinary
course of its business. Therefore, the Commission preliminarily
estimates that it would take a SB SEF approximately 50 hours annually
to comply with proposed Rule 818(a) and (b) for an aggregate annual
burden of 1,000 hours.\495\ This estimated amount includes, but is not
limited to, the annual hourly burden to generate, collect, organize and
preserve all of the documents and other records required under proposed
Rule 818(a) and (b). The Commission requests comment on the accuracy of
this estimate.
---------------------------------------------------------------------------

    \493\ 17 CFR 240.17a-1(a) and (b). In addition, proposed Rule
811(b)(3) would require that a SB SEF make and keep records relating
to all grants and denials of access to the SB SEF and proposed Rule
811(g) would require a SB SEF to make and keep records relating to
all disciplinary proceedings. The records required by proposed Rules
811(b)(3) and 811(g) would be included in the business records
required to be kept pursuant to proposed Rule 818. Therefore, the
Commission preliminarily believes that the paperwork burden for
these rules would be included in the estimated burden for proposed
Rule 818. See supra note 417 and accompanying text.
    \494\ Rule 17a-1 also states generally that SROs shall, upon the
request of any representative of the Commission, promptly furnish
copies of documents required to be kept and preserved under the
rule. See 17 CFR. 240.17a-1. The Commission's estimated burden of 50
hours per respondent reflects compliance with all of the
recordkeeping provisions of this rule. See 2010 Extension of Rule
17a-1 Supporting Statement, Office of Management and Budget,
available at http://www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=201007-3235-003.
    \495\ 1,000 hours = 20 (number of SB SEF respondents) x 50 hours
(annual hourly burden to comply with proposed Rule 818(a) and (b)).
---------------------------------------------------------------------------

    In addition, proposed Rule 818(c) would require a SB SEF to keep
certain records with respect to trading activity on and through the SB
SEF. Specifically, a SB SEF would be required to make and keep
accurate, time-sequenced records of all trading interest and
transactions that are received by, originated on, or executed on the SB
SEF. This recordkeeping rule is similar to the audit trail requirement
that applies to ATSs pursuant to Rule 302 of Regulation ATS under the
Exchange Act.\496\ The Commission currently estimates that an ATS would
expend approximately 130 hours per year to comply with the collection
of information requirements of Rule 302 of Regulation ATS. Based on the
Commission's experience with Rule 302 of Regulation ATS, which contains
the requirement that an ATS make and keep records necessary to create a
meaningful audit trail, the Commission preliminarily estimates that the
annual hourly paperwork burden for a SB SEF to comply with proposed
Rule 818(c) would be approximately 130 hours, which would result in an
aggregate annual burden of 2,600 hours.\497\ The Commission requests
comment on the accuracy of this estimate.
---------------------------------------------------------------------------

    \496\ Rule 302 of Regulation ATS under the Exchange Act
generally requires an ATS to keep a record of subscribers, daily
summaries of trading and time sequenced records of order information
in the ATS. See 17 CFR 242.302. The Commission's estimated burden of
130 hours per respondent reflects compliance with all of the
recordkeeping provisions of this rule. See 2010 Extension of Rule
302 Supporting Statement, Office of Management and Budget, available
at http://www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=201006-3235-008.
    \497\ 2,600 hours = 20 (number of SB SEF respondents) x 130
hours (annual hourly burden to comply with proposed Rule 818(c)).
---------------------------------------------------------------------------

    The Commission preliminarily believes that the records that a SB
SEF would have to keep and preserve to comply with proposed Rule 818
would be the same records that a SB SEF would already have to keep and
preserve in the ordinary course of its business. A SB SEF would be
required to keep and preserve these records to, among other things, pay
taxes, defend against legal actions, resolve conflicts between
participants, and generally to ensure the smooth functioning of the SB
SEF's business operations. Therefore, the Commission preliminarily
believes that, while there would be a collection of information
required by proposed

Rule 818 related to recordkeeping, there would not be a paperwork
burden for PRA purposes associated with the SB SEF's complying with
proposed Rule 818 aside from establishing or modifying recordkeeping
systems as noted below, because these records would be maintained in
the ordinary course of its business.\498\
---------------------------------------------------------------------------

    \498\ See 5 CFR 1320.3(b)(2). This section generally provides
that the time, effort, and financial resources necessary to comply
with a collection of information that would be incurred by persons
in the normal course of their activities (e.g., in compiling and
maintaining business records) are excluded from the definition of
``burden'' in the PRA if they are usual and customary.
---------------------------------------------------------------------------

    For purposes of the PRA, however, the Commission preliminarily
estimates that a SB SEF could incur a one-time burden to set up or
modify an existing recordkeeping system to comply with the proposed
Rule 818. Based on the Commission's experience with recordkeeping costs
and consistent with prior burden estimates for similar recordkeeping
provisions,\499\ the Commission estimates that setting up or modifying
a recordkeeping system would create an initial burden of 345 hours
\500\ and $1,800 in information technology costs per respondent to
purchase recordkeeping software,\501\ for a total initial burden of
6,900 hours \502\ and $36,000.\503\ The Commission requests comment on
the accuracy of this estimate.
---------------------------------------------------------------------------

    \499\ See Securities Exchange Act Release No. 59342 (February 2,
2009); 74 FR 6456 (February 9, 2009) (Amendments to Rules for
Nationally Recognized Statistical Rating Organizations) (``NRSRO
Adopting Release'').
    \500\ See NRSRO Adopting Release, supra note 499, 74 FR at 6472,
n. 154 (estimated average one-time hourly burden of 345 hours for
each nationally recognized statistical ratings organization
(``NRSRO'') to implement a recordkeeping system to comply with Rule
17g-2 under the Exchange Act, 17 CFR 240.17g-2).
    \501\ See NRSRO Adopting Release, id., 74 FR at 6472 (estimated
average cost of $1,800 for each NRSRO to purchase recordkeeping
software).
    \502\ 6,900 hours = 345 hours (estimated hourly burden for each
SB SEF to implement a recordkeeping system) x 20 (number of SB SEF
respondents).
    \503\ $36,000 = $1,800 (estimated cost to purchase recordkeeping
software) x 20 (number of SB SEF respondents).
---------------------------------------------------------------------------

    Additionally, the Commission preliminarily estimates that each SB
SEF may have a one-time burden to upgrade its existing systems to
ensure that the audit trail component of their systems complies with
proposed Rule 818(c). Based on industry sources, the Commission
preliminarily believes that this work would be done internally by two
programmers over the course of approximately four weeks. Therefore, the
Commission preliminarily estimates that it would take a total of 320
hours for a SB SEF to upgrade its existing systems for an aggregate
one-time hourly burden of 6,400 hours.\504\
---------------------------------------------------------------------------

    \504\ 6,400 hours = 320 hours (estimated one-time hourly burden
for two senior programmers working 40 hours per week for four weeks
at each SB SEF to upgrade systems to comply with proposed Rule
818(c)) x 20 (number of SB SEF respondents).
---------------------------------------------------------------------------

    Therefore, the Commission preliminarily believes that the total
aggregate annual hourly burden for 20 SB SEFs to comply with proposed
Rule 818(a) through (c) would be approximately 3,600 hours.\505\ The
total one time hourly burden for 20 SB SEFs to comply with proposed
Rule 818 would be approximately 13,300 hours \506\ and $36,000. The
Commission requests comment on the accuracy of this estimate.
---------------------------------------------------------------------------

    \505\ 3,600 hours = 1,000 hours (estimated annual hourly burden
to comply with proposed Rule 818(a) and (b)) + 2,600 hours
(estimated annual hourly burden to comply with proposed Rule
818(c)).
    \506\ 13,300 hours = 6,900 hours (total estimated one-time
hourly burden for all SB SEF respondents combined to set-up or
modify recordkeeping software to comply with proposed Rule 818) +
6,400 hours (total estimated one-time hourly burden for all SB SEF
respondents combined to modify existing systems to comply with audit
trail requirements of proposed Rule 818(c)).
---------------------------------------------------------------------------

    As discussed above, proposed Rule 813(c)(1) would require a SB SEF
to establish rules requiring any participant that enters any trading
interest or executes any transaction on the SB SEF to maintain books
and records of any such trading interest or transaction and of any
position in any security-based swap that is the result of any such
trading interest or transaction. The Commission preliminarily believes
that proposed Rule 813(c)(1) could impose a collection of information
burden on some SB SEF participants.\507\ However, the Commission also
preliminarily believes that the records that many SB SEF participants
would have to maintain pursuant to proposed Rule 813(c)(1) would be the
same records that these participants would have to maintain under other
Commission recordkeeping provisions to the extent they are regulated
entities or in the ordinary course of their business.\508\ Therefore,
the Commission preliminarily believes that the paperwork burden for a
number of SB SEF participants is either already encompassed in the
collection of information for other recordkeeping obligations that they
must comply with or would not be required to be calculated for purposes
of this PRA analysis because such burden relates to the maintenance of
records that are usually or customarily maintained.\509\
---------------------------------------------------------------------------

    \507\ The Commission also notes that proposed 809(c)(2)(i) would
require non-registered ECPs to meet the recordkeeping and reporting
requirements established by the SB SEF pursuant to proposed Rule
813. The collection of information associated with 809(c)(2)(i) is
encompassed in the burden estimates for the collection of
information associated with proposed Rule 813.
    \508\ Section 764 of the Dodd-Frank Act requires the Commission
to adopt rules governing reporting and recordkeeping for SB swap
dealers and major SB swap participants. See Public Law 111-203,
Sec.  764. The Commission is proposing reporting and recordkeeping
rules for SB swap dealers and major SB swap participants as part of
a separate Commission rulemaking. See also, e.g., Rules 17a-3
(records to be made by certain exchange members, brokers and
dealers) and 17a-4 (records to be preserved by certain exchange
members, brokers and dealers) under the Exchange Act, 17 CFR
240.17a-3 and 17 CFR 240.17a-4.
    \509\ See 5 CFR 1320.3(b)(2).
---------------------------------------------------------------------------

    However, the Commission believes that proposed Rule 813(c)(1) could
impose a new obligation to maintain books and records on those ECPs
that would become participants of the SB SEF. For PRA purposes the
Commission believes that it is appropriate to estimate that all 210
ECPs would be subject to the collection of information requirement of
proposed Rule 813(c)(1).\510\ Based on the Commission's experience with
similar recordkeeping rules,\511\ the Commission preliminarily
estimates that it would take each ECP that is a SB SEF participant
approximately 40 hours on an annual basis to comply with the collection
of information requirement of proposed Rule 813(c)(1) for a total
annual burden for all ECP respondents combined of 8,400 hours.\512\ The
Commission requests comment on the accuracy of this estimate.
---------------------------------------------------------------------------

    \510\ See supra note 429 and accompanying text.
    \511\ See, e.g., 17 CFR 240.17a-3 and 17 CFR 240.17a-4.
    \512\ 8,400 hours = 210 (estimated number of ECPs that could be
subject to the collection of information under proposed Rule
813(c)(1)) x 40 hours (estimated annual burden for each ECPs to
comply with the collection of information under proposed Rule
813(c)(1)).
---------------------------------------------------------------------------

    For purposes of the PRA, the Commission also preliminarily
estimates that ECPs that would be SB SEF participants could incur a
one-time burden to set up or modify an existing recordkeeping system to
comply with the proposed Rule 813(c)(1). Based on the Commission's
experience with recordkeeping costs and consistent with prior burden
estimates for similar recordkeeping provisions,\513\ the Commission
estimates that setting up or modifying a recordkeeping system would
create an initial burden of 345 hours \514\ and $1,800 in information
technology costs per ECP to purchase

recordkeeping software,\515\ for a total initial burden of 72,450 hours
\516\ and $378,000 for all ECPs combined.\517\ The Commission requests
comment on the accuracy of this estimate.
---------------------------------------------------------------------------

    \513\ See NRSRO Adopting Release supra note 499.
    \514\ See NRSRO Adopting Release, supra note 499, 74 FR at 6472,
n. 154 (estimated average one-time hourly burden of 345 hours for
each NRSRO to implement a recordkeeping system to comply with Rule
17g-2 under the Exchange Act).
    \515\ See NRSRO Adopting Release, supra note 499, 74 FR at 6472
(estimated average cost of $1,800 for each NRSRO to purchase
recordkeeping software).
    \516\ 72,450 hours = 345 hours (estimated hourly burden for each
SB SEF participant to implement a recordkeeping system) x 210
(estimated number of ECP SB SEF participants that could seek to set
up or modify a recordkeeping system to comply with proposed Rule
813(c)(1)).
    \517\ $378,000 = $1,800 (estimated cost to purchase
recordkeeping software) x 210 (estimated number of ECP SB SEFs that
could seek to purchase recordkeeping software to comply with
proposed Rule 813(c)(1)).
---------------------------------------------------------------------------

5. Timely Publication of Trading Information Requirement for SB SEFs
    Proposed Rule 817(a) would require a SB SEF to: (1) have the
capacity to electronically capture, transmit, and disseminate
information on price, trading volume, and other trading data on all SB
swaps executed on or through the SB SEF; and (2) make public timely
information on price, trading volume, and other trading data on SB
swaps to the extent required by the Commission. The Commission notes
that proposed Rule 817(a)(1) would incorporate Section 3D(d)(8) of the
Exchange Act but would not otherwise require a SB SEF to report SB swap
transactions to a registered SDR or make public timely information on
price, trading volume, and other trading data on SB swaps. Rather, the
Commission has proposed that other parties be responsible for reporting
of SB swap transactions to a registered SDR and for the public
dissemination of certain SB swap transaction information.\518\
---------------------------------------------------------------------------

    \518\ See Reporting and Dissemination Release supra note 6.
---------------------------------------------------------------------------

    However, because proposed Rule 817(a) would require a SB SEF to
have the capacity to electronically capture, transmit, and disseminate
information on price, trading volume, and other trading data on all SB
swaps executed on or through the SB SEF so that it could make such
information public if required, the Commission preliminarily believes
that each SB SEF could have a one-time hourly burden to modify its
systems so that they have this functionality.\519\ The Commission
believes that for a SB SEF to ensure it has the capacity to
electronically capture, transmit, and disseminate information on price,
trading volume, and other trading data on all SB swaps executed on or
through the SB SEF, as required by Section 3D(d)(8) and as proposed to
be incorporated in proposed Rule 817(a), a SB SEF would need two
computer programmers, each working four weeks. This would result in a
one-time hourly burden of 320 hours \520\ per SB SEF respondent, for a
total annual burden on all SB SEFs of 6,400 hours.\521\ The Commission
solicits comment on the accuracy of these estimates.
---------------------------------------------------------------------------

    \519\ The Commission believes that a SB SEF would seek to ensure
that it has the capacity to electronically capture, transmit, and
disseminate information on price, trading volume, and other trading
data on all SB swaps executed on or through its facilities in the
ordinary course of its business. Therefore the Commission is not
including the one-time burden of developing and implementing systems
having the capacity to electronically capture, transmit, and
disseminate information on price, trading volume, and other trading
data on all SB swaps executed on or through the SB SEF in its
paperwork burden estimate for proposed Rule 817(a). See 5 CFR
1320.3(b)(2).
    \520\ 320 hours = 2 (number of senior programmers) x 40 (hours
in a standard full-time work week) x 4 (number of weeks required).
    \521\ 6,400 hours = 320 (estimated one-time hourly burden per SB
SEF respondent pursuant to proposed Rule 817(a)) x 20 (number of SB
SEF respondents).
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6. Rule Filing and Product Filing Processes for SB SEFs
    Under proposed Rules 805 and 806, a SB SEF would be required to
submit rule filings for new rules or rule amendments, including changes
to a product's terms or conditions. As noted above, the Commission
estimates a total of 20 SB SEF respondents for this requirement. The
proposed rules are modeled on the rule filing and product filing
processes proposed by the CFTC.\522\ Based on the Commission staff's
consultation with CFTC staff,\523\ the Commission estimates that on
average these requirements would require 2.5 hours of work per rule
filing, with an estimated average of 60 responses per year per
respondent. This would result in a total estimated burden of 150 hours
per respondent \524\ and 3,000 hours for all the respondents
annually.\525\ Based on the Commission staff's consultation with CFTC
staff, the Commission believes that the SB SEF would handle the rule
filing process internally. The Commission solicits comments regarding
the accuracy of its estimates.
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    \522\ See 75 FR 67282 (November 2, 2010) (CFTC proposal to amend
17 CFR 40.2-40.5).
    \523\ See id.
    \524\ 150 hours = 60 (number of responses per year per
respondent) x 2.5 hours (burden per response).
    \525\ 3,000 hours = 150 hours (annual burden per respondent
pursuant to proposed Rules 805 and 806) x 20 (number of
respondents).
---------------------------------------------------------------------------

    Under proposed Rules 807 and 808, a SB SEF would be required to
submit filings for new products that it makes available for trading. As
outlined above, the Commission estimates a total of 20 SB SEF
respondents for this requirement. Based on the Commission staff's
consultation with CFTC staff,\526\ the Commission estimates that on
average these requirements would require 2.5 hours of work per product
filing, with an estimated average of 34 responses per year per
respondent. The Commission estimates that this would result in a total
burden of 85 hours per respondent \527\ and 1,700 hours for all the
respondents annually.\528\ Based on the Commission staff's consultation
with the CFTC staff, the Commission believes that the SB SEF would
handle product filings internally. The Commission solicits comments
regarding the accuracy of its estimates.
---------------------------------------------------------------------------

    \526\ See 75 FR 67282 (November 2, 2010) (CFTC proposal to amend
17 CFR 40.2-40.5).
    \527\ 85 hours = 34 (number of responses per year per
respondent) x 2.5 hours (burden per response).
    \528\ 1,700 hours = 85 hours (annual burden per respondent
pursuant to proposed Rules 807 and 808) x 20 (number of SB SEF
respondents).
---------------------------------------------------------------------------

    The Commission preliminarily estimates that the total annual hourly
burden for all SB SEFs to prepare and submit rule filings under
proposed Rules 805 and 806 would be 3,000 hours. The Commission
preliminarily estimates that the total annual hourly burden for all SB
SEFs to prepare and submit product filings under proposed Rules 807 and
808 would be 1,700 hours.
7. Requirements Relating to the SB SEF's CCO
    The SB SEF's CCO would have several initial and annual paperwork
burdens under proposed Rule 823(b)(6) and (7) and also under proposed
Rule 823(c) through (e).
    Under proposed Rule 823(b)(6) and (7), the CCO would be responsible
for: (1) Establishing procedures for the remediation of noncompliance
issues identified by the CCO identified through any compliance office
review, look-back, internal or external audit finding, self-reported
error or validated complaint, and (2) establishing appropriate
procedures for the handling, management response, remediation,
retesting, and closing of noncompliance issues. As noted above, the
Commission estimates a total of 20 respondents for this requirement.
Based on the Commission's paperwork burden estimates for compliance
program rules adopted under the Investment Company Act of 1940
(``ICA'') and the Investment Advisers Act of 1940,\529\ the

Commission estimates that, on average, the requirements of proposed
Rule 823(b)(6) and (7) would mean that each SB SEF would expend 160
hours initially \530\ to create the required two policies and
procedures, for a total estimated burden for all respondents of 3,200
hours initially.\531\ Also, due to the novel nature of the CCO
requirements in the SB SEF industry and the new requirements under the
Dodd-Frank Act, the Commission estimates that an initial one-time
burden of $40,000 in outside legal costs \532\ would be incurred per
respondent, for a total outside cost burden for all respondents of
$800,000.\533\ The Commission solicits comments regarding the accuracy
of these estimates.
---------------------------------------------------------------------------

    \529\ Rule 38a-1 under the ICA (17 CFR 270.38a-1) requires each
registered investment company and business development company to
adopt and implement policies and procedures reasonably designed to
prevent violations of the Federal securities laws. See Investment
Company Act Release No. IC-26299 (December 17, 2003); 68 FR 74714
(December 24, 2003) (adopting release) and see 2010 Extension of
Rule 38a-1 Supporting Statement, Office of Management and Budget,
available at: http://www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=201002-3235-028 (``ICA PRA''). The ICA PRA estimates a burden of
80 hours initially for the creation of such policies and procedures.
    \530\ 160 hours = 80 hours (burden per policy and procedure
requirement) x 2 (number of policy and procedure requirements).
    \531\ 3,200 hours = 160 hours (initial burden per respondent) x
20 (number of SB SEF respondents).
    \532\ $40,000 = $400 (estimated hourly cost for outside counsel)
x 50 hours (estimated amount of external legal work require per
policy and procedure requirement) x 2 (number of policy and
procedure requirements). The estimate of 50 hours of external legal
work is from the Commission's estimate for external legal costs for
complying with the requirements of Rule 611 of Regulation NMS for
establishing polices and procedures thereunder. See Securities
Exchange Act Release No. 51808 (June 9, 2005); 70 FR 37496 (June 29,
2005). See also 2008 Extension of Rule 611, Supporting Statement,
Office of Management and Budget, available at: http://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=200802-3235-021. The
Commission preliminarily estimates an hourly cost of outside counsel
at $400. See Municipal Securities Disclosure Release, supra note
438.
    \533\ $800,000 = $40,000 (initial burden per respondent) x 20
(number of SB SEF respondents).
---------------------------------------------------------------------------

    A CCO also would be required under proposed Rule 823(c) and (d) to
prepare and submit an annual compliance report to the Commission and to
the SB SEF's Board. Based upon the Commission's estimates for similar
annual reviews and reports by CCOs of investment companies, the
Commission estimates that these reports would require an average of 92
hours per respondent per year.\534\ Thus, the Commission estimates a
total annual burden of 1,840 hours for all respondents.\535\ Because
the report would be submitted by the CCO, the Commission does not
expect that the SB SEF would incur any external costs. The Commission
solicits comments on the accuracy of its estimates.
---------------------------------------------------------------------------

    \534\ The ICA PRA estimated that CCOs of investment companies
would expend 42 hours annually to conduct the annual review and
prepare the annual compliance report under Rule 38a-1 under the ICA.
See ICA PRA supra note 529. Because proposed Rule 823 would require
slightly more than double the information that is required for CCO
annual reports under Rule 38a-1, the Commission preliminarily
estimates that the burden associated with the CCO's annual
compliance report requirements of proposed Rule 823(c) and (d) would
be 220% that of Rule 38a-1, which estimate would be approximately 92
hours.
    \535\ 1,840 hours = 92 hours (annual burden per respondent) x 20
(number of SB SEF respondents).
---------------------------------------------------------------------------

    A CCO would be required under proposed Rule 823(e)(1) and (2) and
Exhibits F and H to proposed Form SB SEF to submit an annual financial
report that would need to satisfy a number of requirements, including
the requirement that a registered public accounting firm that is
qualified and independent in accordance with Rule 2-01 of Regulation S-
X (17 CFR 210.2-01) audit each financial report relating to the SB SEF
(unaudited for certain affiliated entities). Based on conversations
with operators of current trading platforms and the Commission's
experience with entities of similar size, the Commission preliminarily
estimates that the reports relating to the SB SEF generally would
require, on average, 500 hours per respondent to complete and cost
$500,000 for independent public accounting services per respondent. The
Commission believes that the unaudited reports required for certain
affiliated entities and available upon request by the Commission for
other affiliated entities would not be overly time consuming to produce
because, based on the Commission's experience with Form 1 filers, a
respondent's accounting system should have this information available.
Furthermore, because the information would not have to be audited, a
respondent would only have to compile the information using a computer
and commercially available software that it generally would own for
pre-existing accounting purposes and then submit the information to the
Commission. Based on the number of unaudited financial statements that
the Commission receives from filers of Form 1 and the substance in
these reports, the Commission estimates that it would take a SB SEF 40
hours to compile, review, and submit these reports. However, all of
these reports would need to be provided in XBRL, as required in Rules
405(a)(1), (a)(3), (b), (c), (d) and (e) of Regulation S-T.\536\ This
would create an additional burden on respondents. The Commission
preliminarily estimates that, based on its experience with other data
tagging initiatives, these requirements would add an additional burden
of an average of 54 hours and $23,000 in outside software and other
costs per respondent per year. Thus, for purposes of complying with the
financial statement requirements under proposed Rule 823(e)(1) and (2)
and Exhibits F and H to proposed Form SB SEF, the Commission estimates
a total annual burden of 11,880 hours \537\ and $10,460,000 for
respondents.\538\ The Commission solicits comments as to the accuracy
of this information.
---------------------------------------------------------------------------

    \536\ See 17 CFR 232.405.
    \537\ 11,880 hours = 20 (number of SB SEF respondents) x 594
hours (500 hours for audited SB SEF financial statements + 40 hours
for unaudited financial statements of affiliated entities + 54 hours
for XBRL formatting of submission).s
    \538\ $10,460,000 = 20 (number of SB SEF respondents) x $523,000
($500,000 for outside accounting services for auditing SB SEF's
financial statements + $23,000 in outside software and other cost
for formatting financial statement submission in XBRL format).
---------------------------------------------------------------------------

    As a result, the Commission estimates that the total burdens for
compliance with proposed Rule 823 would be: (1) Initially, for the
creation of the policies and procedures required in proposed Rule
823(b)(6) and (7), 160 hours and $40,000, per respondent, and 3,200
hours and $800,000, for all respondents; and (2) on an annual basis,
for the annual compliance report and financial reports required under
proposed Rule 823(c) through (e), 686 hours \539\ and $523,000, per
respondent, and 13,720 \540\ hours and $10,460,000,\541\ for all
respondents.
---------------------------------------------------------------------------

    \539\ 686 hours = 594 hours for financial report + 92 hours for
annual compliance report.
    \540\ 13,720 hours = 686 hours (burden per respondent) x 20
(number of SB SEF respondents).
    \541\ $10,460,000 = 20 (number of SB SEF respondents) x $523,000
($500,000 for outside accounting services for auditing SB SEF's
financial statements + $23,000 in outside software and other cost
for formatting financial statement submission in XBRL format).
---------------------------------------------------------------------------

    The Commission preliminarily estimates that the total annual hourly
burden for all SB SEFs combined for the CCO requirements in proposed
Rule 823 would be 13,720 hours and the total one-time hourly burden
would be 3,200. The Commission preliminarily estimates that the total
annual cost burden for all SB SEFs to comply with the CCO requirements
in proposed Rule 823 would be $10,460,000 and the total one-time cost
burden would be $800,000.
8. Surveillance Systems Requirements for SB SEFs
    As discussed above, proposed Rule 813(b) requires SB SEFs to have
the capacity and resources to electronically monitor trading in SB
swaps on its market by establishing an automated surveillance system,
including through real-time monitoring of trading and use of automated
alerts, to, among other things, detect and deter fraudulent or
manipulative acts or practices, detect

and deter market distortions or disruptions of trading, conduct real-
time monitoring of trading to provide for comprehensive and accurate
trade reconstruction, and collect and assess data to allow SB SEFs to
respond to market abuses and disruptions.\542\
---------------------------------------------------------------------------

    \542\ Proposed Rule 811(i) would require a SB SEF to have the
capacity to capture information that may be used in establishing
whether rule violations have occurred, including through the use of
automated surveillance systems as set forth in proposed Rule 813(b).
Proposed Rule 813(a)(2) would require a SB SEF to monitor trading in
SB swaps to prevent manipulation, price distortion, and disruptions
of the delivery or cash settlement practices and procedures,
including methods for conducting real-time monitoring of trading and
comprehensive and accurate trade reconstructions. The Commission
preliminarily believes that the information collection burden
associated with these requirements would be included in the
information collection burden for proposed Rule 813(b).
---------------------------------------------------------------------------

    Based on industry sources, the Commission preliminarily estimates
that establishing an automated surveillance system would require one
senior programmer and three additional programmers working for a year
to create and implement such a system. Assuming a 1,800 hour work year,
the Commission preliminarily estimates that the average one-time
initial burden per respondent of establishing an automated surveillance
system compliant with these requirements, would be 7,200 hours.\543\ In
addition, the Commission believes that a one-time capital expenditure
of $1,500,000 in information technology costs would be necessary to
establish such a system. This estimate is based on the Commission's
discussions with market participants currently operating platforms that
trade OTC swaps. Based on the estimated number of 20 SB SEF
respondents, the Commission estimates a total start-up cost of 144,000
hours \544\ and $30,000,000 in information technology costs.\545\ Based
on discussions with operators of current trading platforms, the
Commission further estimates that to maintain these systems, a SB SEF
would have to employ two programmer/analysts. Therefore, assuming a
1,800 hour work year, the Commission preliminarily estimates the
average ongoing annual costs of these systems to be 3,600 hours per
respondent \546\ for a total of 72,000 hours for all respondents.\547\
In addition, the Commission estimates that these systems may incur an
ongoing information technology cost of and $500,000 per respondent, for
a total ongoing annual burden of $10,000,000\548\ The Commission
solicits comments on the accuracy of its estimates.
---------------------------------------------------------------------------

    \543\ 7,200 hours = 1,800 (initial hours burden per employee) x
4 (number of employees).
    \544\ 144,000 hours = 7,200 hours (initial burden per
respondent) x 20 (number of SB SEF respondents).
    \545\ $30,000,000 = $1,500,000 (initial cost burden per
respondent) x 20 (number of SB SEF respondents).
    \546\ 3,600 hours = 1,800 (annual hours burden per employee) x 2
(number of employees).
    \547\ 72,000 hours = 3,600 hours (annual burden per respondent)
x 20 (number of SB SEF respondents).
    \548\ $10,000,000 = $500,000 (annual cost burden per respondent)
x 20 (number of SB SEF respondents).
---------------------------------------------------------------------------

9. Access by Non-Registered Eligible Contract Participants
    As discussed above, proposed Rule 809(d)(1) would require a SB SEF
that permits non-registered ECPs to be participants in the SB SEF to
establish, document, and maintain a system of risk management controls
and supervisory procedures reasonably designed to manage the financial,
regulatory, and other risks of this business activity.\549\ Proposed
Rule 809(d)(2) would require that the risk management controls and
supervisory procedures for granting access to certain ECPs as
participants of the SB SEF be reasonably designed to ensure compliance
with all regulatory requirements.\550\ The Commission notes that
proposed Rule 809(d) is modeled on recently adopted Rule 15c3-5 under
Exchange Act.\551\ The PRA analysis prepared in connection with that
rule has informed the Commission's estimates of the paperwork burdens
that would apply to SB SEFS under the proposed Rule 809(d).\552\
Although the Commission reviewed the burden estimates it prepared in
connection with Rule 15c3-5 to inform its burden estimates of the
proposed Rule 809(d), the Commission recognizes that a number of
entities that seek to become SB SEFs may not currently be regulated
entities.
---------------------------------------------------------------------------

    \549\ See proposed Rule 809(d)(1).
    \550\ See proposed Rule 809(d)(2).
    \551\ See 17 CFR.240.15c3-5. Though the Commission is relying on
the PRA estimates it prepared in connection with Rule 15c3-5 to
inform its PRA estimates for this proposed rule, the Commission
notes that some of the specific requirements, controls and
procedures in Rule 15c3-5 are not contained in the proposed Rule
809(d) for SB SEFs.
    \552\ See Securities Exchange Act Release No. 63241 (November 3,
2010), 75 FR 69792 (November 15, 2010).
---------------------------------------------------------------------------

    The Commission preliminarily believes that proposed Rule 809(d)(1)
and (2) would impose a one-time collection of information burden on SB
SEFs to establish or modify risk management systems, if they permit
access by non-registered ECPs. The Commission preliminarily believes
that the majority of entities that would seek to become SB SEFs would
already have some risk management systems and supervisory procedures
and controls to protect the integrity of their business and to comply
with other requirements already specified, analyzed and accounted for
herein (e.g., requirements relating to surveillance systems,
recordkeeping, reporting, and the CCO). However, some entities that
seek to become SB SEFs could have to change their systems and
procedures and other entities that currently do not have such systems
and procedures could have to establish new systems and procedures to
comply with the requirement of proposed Rule 809(d).
    The Commission preliminarily believes that each SB SEF would have a
one-time burden to establish or modify its technology and systems to
add the controls necessary to comply with the requirement of the
proposed Rule 809(d). The Commission estimates that each SB SEF would
spend an average of 225 hours to develop or modify their systems to
bring them into compliance with the proposed rule for a total one-time
burden for all SB SEFs combined of 4,500 hours.\553\ Based on industry
sources, the Commission preliminarily believes that the development or
modification of the required technology and systems would be performed
internally.
---------------------------------------------------------------------------

    \553\ 4,500 hours = 225 (estimated average one-time burden to
set up or modify systems to comply with collection of information
under proposed Rule 809(d)) x 20 (number of SB SEF respondents).
---------------------------------------------------------------------------

    The Commission also preliminarily believes that proposed Rules
809(d)(1) and (2) would impose an annual paperwork burden on each SB
SEF to maintain its risk management system. The Commission
preliminarily estimates that the ongoing annual burden for a SB SEF to
maintain its risk management system would be 172.5 hours on average for
a total annual burden for all SB SEFs combined of 3,450 hours.\554\ The
Commission believes that the ongoing burden of complying with the
proposed rule's collection of information burden would include, among
other things, updating systems to address any issues detected, updating
risk management controls to reflect changes in the SB SEF's business
model, and documenting and preserving its written description of risk
management controls. Based on industry sources, the Commission
preliminarily believes that the

maintenance of a SB SEF's risk management systems would performed
internally by one or more programmers.
---------------------------------------------------------------------------

    \554\ 3,450 hours = 225 hours (estimated average annual burden
to establish or maintain risk management systems to comply with
collection of information under proposed Rule 809(d)) x 20 (number
of SB SEF respondents).
---------------------------------------------------------------------------

    The Commission preliminarily believes that proposed Rule 809(d)
would impose a one-time legal and compliance burden on each SB SEF to
comply with the requirement to establish, document, and maintain risk
management controls and supervisory procedures. Based on the
Commission's experience with broker-dealers and ATSs, the Commission
preliminarily estimates that the average initial one-time legal and
compliance burden would be approximately 52.5 hours per SB SEF for a
total one-time legal and compliance burden for all SB SEFs combined of
1,050 hours.\555\ The Commission preliminarily estimates that one
internal compliance attorney and one internal compliance manager would
spend on average 7.5 hours each to evaluate appropriate access controls
and procedures. The Commission also preliminarily estimates that one
internal compliance attorney and one compliance manager would each
require approximately 15 hours, and the CCO would require approximately
7.5 hours, to set up or modify compliance policies and procedures to
comply with the proposed rule, which includes establishing written
policies and procedures for reviewing the overall effectiveness of risk
management controls and supervisory procedures.
---------------------------------------------------------------------------

    \555\ 1,050 hours = 52.5 hours (estimated average one-time
burden to establish, document, and maintain risk management controls
and supervisory procedures to comply with collection of information
under proposed Rule 809(d)) x 20 (number of SB SEF respondents).
---------------------------------------------------------------------------

    The Commission also preliminarily believes that proposed Rule
809(d) would impose an annual paperwork burden on SB SEFs to review and
document their written risk management controls and supervisory
procedures. Based on the Commission's experience with broker-dealers
and ATSs, the Commission believes that a SB SEF's ongoing annual burden
would be approximately 75 hours on average for a total annual burden
for all SB SEFs combined of 1,500 hours.\556\ This estimate includes an
average of 30 hours per year for each of an internal compliance
attorney and compliance manager, and 15 hours per year for the CCO, to
review, document and updated these policies and procedures.
---------------------------------------------------------------------------

    \556\ 1,500 hours = 75 hours (estimated average annual burden to
establish, document, and maintain risk management controls and
supervisory procedures to comply with collection of information
under proposed Rules 809(d)(1) and (2)) x 20 (estimated number of SB
SEF respondents).
---------------------------------------------------------------------------

    Therefore, the Commission preliminarily estimates that the total
one-time burden for all SB SEFs to comply with the collection of
information requirements of proposed Rule 809(d) would be 5,550 hours
\557\ and the total annual burden to comply with the proposed Rule
would be 4,950 hours.\558\
---------------------------------------------------------------------------

    \557\ See supra notes 553 and 555 and accompanying text for
calculations of total one-time burden to comply with collection of
information under proposed Rules 809(d).
    \558\ See supra notes 554 and 556 and accompanying text for
calculations of total annual burden to comply with collection of
information under proposed Rules 809(d).
---------------------------------------------------------------------------

10. Composite Indicative Quote and Executable Bids and Offers
    Proposed Rule 811(e) would require a SB SEF that operates an RFQ
platform to create and disseminate through the SB SEF a composite
indicative quote, made available to all participants, for SB swaps
traded on or through the SB SEF and the Commission's proposed
interpretation of SB SEF would require each SB SEF, at the minimum, to
provide any participant with the ability to make and display executable
bids or offers accessible to all participants on the SB SEF, if the
participant wishes to do so. The Commission preliminarily believes that
most if not all of the respondents that operate RFQ platforms already
have systems that collect and disseminate a composite indicative quote
for other securities traded on or through the respondents' platforms.
The Commission also preliminarily believes that SB SEFs currently have
the capability to offer the executable bids and offers function to its
participants. Thus, the Commission preliminarily believes that the
composite indicative quote and the executable bids and offers
requirements would result in little or no collection of information
burden for such entities. The Commission recognizes, however, that some
SB SEFs may have a one-time burden to establish or update their systems
to collect and disseminate composite indicative quote information and
to offer the executable bids and offers function and an ongoing annual
burden to determine that such composite indicative quote mechanisms and
executable bids and offers function are operating properly. The
Commission does not know how many SB SEFs would have to establish or
update their systems to collect and disseminate composite indicative
quote information or to provide the executable bids and offer function.
Therefore, for PRA purposes the Commission estimates that all of the
estimated 20 SB SEF respondents would incur the paperwork burdens
associated with these requirements.
    The Commission preliminarily believes that this work would be
performed internally by one senior programmer and one programmer. The
Commission preliminarily believes that one senior programmer and one
programmer would spend approximately 40 hours each to establish or
update the SB SEF's systems to include the composite indicative quote
and executable bids and offers functions. The total one-time burden, on
average, for a SB SEF to establish or update its system to include
these functions would be 80 hours for a total one-time burden for all
SB SEFs combined of 1,600 hours.\559\ Further, the Commission
preliminarily believes that one programmer would spend approximately 50
hours annually, on average, monitoring and updating the system to
determine that the composite indicative quote and the executable bids
and offers functions would be operating appropriately. The total annual
burden to all SB SEFs combined for monitoring and updating these
mechanisms would be 1,000 hours.\560\
---------------------------------------------------------------------------

    \559\ 1,600 hours = 80 hours (estimated one-time collection of
information burden to establish or update systems to comply with
proposed Rule 811(e) and the Commission's proposed interpretation of
the definition of SB SEF as it relates to executable bids and offers
functions) x 20 (estimated number of SB SEF respondents).
    \560\ 1,000 hours = 50 hours (estimated annual collection of
information burden to comply with proposed Rules 811(e)) x 20
(estimated number of SB SEF respondents).
---------------------------------------------------------------------------

11. Total Paperwork Burden Under Regulation SB SEF
    Based on the foregoing, the Commission preliminarily believes that
the total one-time hourly burden for all SB SEFs and SB SEF
participants combined pursuant to the requirements under Regulation SB
SEF is equal to 264,801 hours \561\ and $41,692,900.\562\
---------------------------------------------------------------------------

    \561\ 263,201 hours = 13,901 hours (registration) + 4,400 hours
(rule-writing) + 13,300 (SB SEF recordkeeping) + 72,450 (SB SEF
participant recordkeeping) + 6,400 (timely publication of trading
information) + 3,200 (CCO requirements) + 144,000 (surveillance
systems) + 5,550 (access by ECPs) + 1,600 (composite indicative
quote).
    \562\ $41,692,900 = $10,478,900 (registration) + $36,000 (SB SEF
recordkeeping) + $378,000 (SB SEF participant recordkeeping) +
$800,000 (CCO requirements) + $30,000,000 (surveillance systems).
---------------------------------------------------------------------------

    The Commission preliminarily believes that annual ongoing burden
for all SB SEFs and SB SEF participants combined pursuant to the
requirements

under Regulation SB SEF are equal to 165,632 hours \563\ and
$22,342,700.\564\
---------------------------------------------------------------------------

    \563\ 164,632 hours = 3,154 (registration) + 2,400 hours (rule-
writing) + 24,208 hours (SB SEF reporting) + 27,500 hours (SB SEF
participant reporting) + 3,600 hours (SB SEF recordkeeping) + 8,400
hours (SB SEF participant recordkeeping) + 4,700 hours (rule and
product filings) + 13,720 hours (CCO requirements) + 72,000 hours
(surveillance systems) + 4,950 (access by ECPs) + 1,000 (composite
indicative quote).
    \564\ $22,342,700 = $2,700 (registration) + $1,880,000 (SB SEF
reporting) + $10,460,000 (CCO requirements) + $10,000,000
(surveillance systems).
---------------------------------------------------------------------------

E. Collection of Information Is Mandatory

    The collections of information pursuant to Regulation SB SEF would
be mandatory for all registered SB SEFs and SB SEF participants, as
applicable.

F. Responses to Collection of Information Will Not Be Confidential

    Other than information for which a SB SEF or a SB SEF participant
requests confidential treatment, or as may otherwise be kept
confidential by the Commission, and which may be withheld from the
public in accordance with the provisions of the Freedom of Information
Act (``FOIA''), 5 U.S.C. 522, the collection of information pursuant to
the proposed rules would not be confidential and would be publicly
available.

G. Retention Period of Recordkeeping Requirements

    Although recordkeeping and retention requirements have not yet been
established for SB SEFs under the Exchange Act provisions added by the
Dodd-Frank Act, the Commission is authorized to adopt such rules under
proposed Regulation SB SEF as part of this proposed rulemaking.\565\
Proposed Rule 818 under Regulation SB SEF would require a SB SEF to
maintain records of all documents made or received by it in the conduct
of its business for a period of not less than five years, the first two
years in an easily accessible place.
---------------------------------------------------------------------------

    \565\ As discussed above, new Section 3D of the Exchange Act
sets forth 14 Core Principles that a SB SEF would need to satisfy,
including one relating to recordkeeping and reporting, and provides
the Commission with rulemaking authority with respect to
implementation of these Core Principles. See Public Law 111-203,
Sec.  763(c) (adding Section 3D of the Exchange Act).
---------------------------------------------------------------------------

H. Request for Comment

    Pursuant to 44 U.S.C. 3505(c)(2)(B), the Commission solicits
comment to:
    1. Evaluate whether the proposed collection of information is
necessary for the performance of the functions of the agency, including
whether the information shall have practical utility;
    2. Evaluate the accuracy of the agency's estimate of the burden of
the proposed collection of information;
    3. Determine whether there are ways to enhance the quality,
utility, and clarity of the information to be collected; and
    4. Minimize the burden of collection of information on those who
are to respond, including through the use of automated collection
techniques or other forms of information technology.
    Persons wishing to submit comments on the collection of information
requirements should direct them to the following persons: (1) Desk
Officer for the Securities and Exchange Commission, Office of
Information and Regulatory Affairs, OMB, Room 3208, New Executive
Office Building, Washington, DC 20503; and (2) Secretary, Securities
and Exchange Commission, Station Place, 100 F Street, NE., Washington,
DC 20549-1090 with reference to File No. S7-06-11. OMB is required to
make a decision concerning the collection of information between 30 and
60 days after publication, so a comment to OMB is best assured of
having its full effect if OMB receives it within 30 days of
publication. The Commission has submitted the proposed collection of
information to OMB for approval. Requests for the materials submitted
to OMB by the Commission with regard to this collection of information
should be in writing, refer to File No. S7-06-11, and be submitted to
the Securities and Exchange Commission, Office of Investor Education
and Advocacy, Station Place, 100 F Street, NE., Washington, DC 20549-
0213.

XXVIII. Consideration of Costs and Benefits

A. Overview

    To increase the transparency and oversight of the OTC derivatives
market, Title VII of the Dodd-Frank Act requires the Commission to
undertake a number of rulemakings to implement the regulatory framework
for SB swaps that is set forth in the legislation, including the
registration and regulation of SB SEFs.\566\ Pursuant to Section 763(c)
of the Dodd-Frank Act, the Commission is required to adopt rules
providing for: (1) The registration and regulation of SB SEFs; and (2)
the compliance by SB SEFs with the Core Principles set forth
thereunder.\567\ To satisfy this statutory mandate, the Commission is
proposing Regulation SB SEF, which would contain several rules setting
forth the requirements for a platform or system to register with the
Commission, and to maintain that registration, as a SB SEF, and Form SB
SEF, which would contain the application form and the materials that an
applicant would have to provide as part of the registration process. In
addition, proposed Regulation SB SEF would contain a series of rules
that are designed to implement the 14 Core Principles with which a SB
SEF is statutorily required to comply. The proposed registration form
and rules contained in Regulation SB SEF are designed to promote the
goals of the Dodd-Frank Act of having SB swaps trade on a regulated
market. In conjunction with other rulemakings proposed by the
Commission under the Dodd-Frank Act, including rule proposals relating
to SB swap trade reporting,\568\ SB swap data repositories,\569\ the
mitigation of conflicts of interest relating to SB SEFs, SBS exchanges
and SB swap clearing agencies,\570\ and SB swap anti-fraud and anti-
manipulation prohibitions,\571\ the proposed registration form and
rules governing SB SEFs are intended to lead to a more robust,
transparent, and competitive environment for the market for SB swaps.
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    \566\ See Public Law 111-203 Preamble.
    \567\ The Core Principles applicable to SB SEFs are captioned:
(1) Compliance with Core Principles; (2) Compliance with Rules; (3)
Security-Based Swaps Not Readily Susceptible to Manipulation; (4)
Monitoring of Trading and Trade Processing; (5) Ability to Obtain
Information; (6) Financial Integrity of Transactions; (7) Emergency
Authority; (8) Timely Publication of Trading Information; (9)
Recordkeeping and Reporting; (10) Antitrust Considerations; (11)
Conflicts of Interest; (12) Financial Resources; (13) System
Safeguards; and (14) Designation of Chief Compliance Officer.
    \568\ See Reporting and Dissemination Release, supra note 6.
    \569\ See SDR Release, supra note 6.
    \570\ See Regulation MC Proposing Release, supra note 82.
    \571\ See Prohibition Against Fraud, Manipulation, and Deception
in Connection with Security-Based Swaps, Exchange Act Rel. No.
63236, proposed on Nov. 3, 2010.
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    Currently, SB swaps trade in the OTC market, rather than on
regulated markets. The existing market for SB swaps is opaque, with
little, if any, pre-trade or post-trade transparency. A key goal of the
Dodd-Frank Act is to bring more transparency to the OTC derivatives
markets and to bring the trading of SB swaps onto regulated
markets.\572\ The Commission, in drafting rules to implement the SB SEF
provisions of the Dodd-Frank Act, is proposing to put in place a
regulatory structure that will foster a transparent, fair, and
competitive market for the

trading of SB swaps. Considering the early stage of regulatory
development and the existing structure of the SB swaps market, however,
the Commission is mindful that the proposed rules could have unforeseen
consequences, either beneficial or undesirable, with respect to the
shape that this market will take. In the Commission's view, it is
important that the regulatory structure provides incentives for the
trading of SB swaps on regulated markets that are designed to foster
greater transparency and competition and are subject to Commission
oversight, while at the same time allowing for the continued efficient
innovation and evolution of the SB swaps market. In this regard, rather
than proposing a rule that establishes a prescribed format for the
system or platform that constitutes a SB SEF, the Commission is
proposing to provide baseline principles, consistent with the
requirements of the Exchange Act, that any potential SB SEF would need
to meet as a condition to registration as a SB SEF. Such an approach
would allow flexibility to those trading venues that plan to register
as SB SEFs and would permit the continued development of organized
markets for the trading of SB swaps. This more flexible approach also
would allow the Commission to monitor the market for SB swaps and
propose adjustments, as necessary, as this market evolves.
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    \572\ See Public Law 111-203 Preamble. See also Section 3C(h) of
the Exchange Act, Public Law 111-203, requiring that, subject to
certain exceptions, any SB swap subject to mandatory clearing must
be traded on a SB SEF or an exchange.
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    The Commission believes that the proposed registration form and
rules under Regulation SB SEF would create a comprehensive structure
for the registration and regulation of SB SEFs, but would also impose
costs on market participants. The Commission is sensitive to the costs
and benefits that would result from proposed Regulation SB SEF and has
identified certain costs and benefits of these proposals, as described
more fully below. The Commission requests comment on the costs and
benefits associated with the proposed registration form and rules
contained in proposed Regulation SB SEF, and its cost-benefit analysis
thereof, including identification and assessments of any costs and
benefits not discussed in this analysis. The Commission also seeks
comment on the accuracy of any of the benefits and costs it has
identified below and also welcomes comments on the accuracy of any of
its cost estimates. Finally, the Commission encourages commenters to
identify, discuss, analyze, and supply relevant data, information, or
statistics regarding any such costs or benefits.
    Because the structure of the SB swaps market and the behavior of
its market participants is likely to change after the effective date of
the Dodd-Frank Act and implementation of the Commission's rules
promulgated thereunder, the impact of--and the costs and benefits that
may result from--proposed Regulation SB SEF may change over time. As
commenters review proposed Regulation SB SEF, they are urged to
consider generally the role that regulation may play in fostering or
limiting the development of the market for SB swaps.

B. Benefits

    SB SEFs are expected to play a critical role in enhancing the pre-
trade transparency and oversight of the market for SB swaps. SB SEFs
should help further the statutory objective of financial stability and
greater transparency for SB swaps \573\ by providing a venue for
counterparties to execute trades in SB swaps and also by serving as a
conduit for information regarding trading interest in SB swaps. In
addition, because the proposed rules would impose certain regulatory
responsibilities on SB SEFs, such as monitoring trading, assuring the
ability to obtain information, and establishing and enforcing rules and
procedures to ensure the financial integrity of SB swaps entered on or
though the SB SEF, SB SEFs would be charged with an important role in
helping to oversee trading in the market for SB swaps on an ongoing
basis and allowing regulators to quickly assess information regarding
the potential for systemic risk across trading venues.
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    \573\ See Public Law 111-203 Preamble.
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    Broadly, the Commission anticipates that Regulation SB SEF may
bring several overarching benefits to the SB swap market. These include
the following:
    Improved Transparency. The proposed rules on the registration and
regulation of SB SEFs could have significant benefits to the market for
SB swaps. The trading of SB swaps on regulated markets, i.e., SB SEFs,
should bring more transparency to the currently opaque market for SB
swaps. In addition, the Commission's proposed interpretation of the
definition of a SB SEF, combined with the proposed rules relating to
pre-trade transparency, should increase overall transparency in the
market for SB swaps. Increased pre-trade price transparency should help
alleviate informational asymmetries that may exist today in the SB
swaps markets and allow an increased number of market participants to
be able to see the trading interest of other market participants prior
to trading, which should lead to increased price competition among
market participants.\574\ The Commission preliminarily believes that
the proposed requirements with respect to pre-trade price transparency
should lead to more efficient pricing in the SB swaps market,\575\ but
is mindful that, under certain circumstances, pre-trade price
transparency could also discourage the provision of liquidity by some
market participants.\576\
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    \574\ See, e.g., Ananth Madhavan, Market Microstructure: A
Practitioner's Guide, Fin. Analysts J., Vol. 58, at 38 (2002)
(nondisclosure of pre-trade price information benefits dealers by
reducing price competition).
    \575\ See, e.g., Ekkehart Boehmer, et al., Lifting the Veil: An
Analysis of Pre-trade Transparency at the NYSE, J. of Fin., Vol. LX
(2005) (greater pre-trade price transparency leads to more efficient
pricing).
    \576\ See, e.g., Ananth Madhavan, et al., Should Securities
Markets Be Transparent? J. of Fin. Markets, Vol. 8 (2005) (finding
that an increase in pre-trade price transparency leads to lower
liquidity and higher execution costs, because limit-order traders
are reluctant to submit orders given that their orders essentially
represent free options to other traders).
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    The Commission preliminarily believes that proposed Rule 811(e),
which would require a SB SEF that operates an RFQ platform to create
and disseminate through the SB SEF a composite indicative quote, made
available to all participants, for SB swaps traded on or through the SB
SEF, would provide a certain level of pre-trade transparency for an RFQ
platform. Displaying the composite indicative quote would include
displaying both composite indicative bids and composite indicative
offers for SB swaps traded on or through the SB SEF. As a result of
this proposal, an average indicative pricing interest would be
available to all of the SB SEF's participants. The Commission also
believes that including RFQ responses in the composite indicative quote
would be an appropriate method to inform SB SEF participants of changes
in the average level of pricing interest due to responses.\577\ At the
same time, the dissemination of a composite indicative quote would
provide a greater level of anonymity for the execution of trades on an
RFQ platform compared with the dissemination of an individual
participant's indications of interest or responses to an RFQ.
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    \577\ See supra Section VIII.C.1.
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    In addition, the Commission preliminary believes that proposed Rule
817(c), which prohibits a SB SEF from making any information regarding
a SB swap transaction publicly available prior to the time that a SDR
would be permitted to disseminate the trade information, could
positively impact the market for block trades. Under proposed Rule
817(c), a SB SEF could not

publicly disseminate complete transaction reports for block trades
(i.e., including the transaction ID and the full notional size) prior
to the time SDRs would be permitted to do so. The Commission believes
that proposed Rule 817(c) would provide parties to block trades some
flexibility in timing their transactions. Based on discussions with
market participants, the Commission believes that parties to block
trades favor a consistent approach to the timing of the public
reporting of such trades. Therefore, the Commission preliminary
believes that parties to block trades, especially dealers, would be
able to have more flexibility in effecting a block trade and any
associated hedging transactions, because trade information about the
block could not be made publicly available by the SB SEF prior to the
time that it is permitted to be disseminated by a SDR.\578\
Furthermore, if the market participants choose to utilize this
functionality, the display of executable bids or offers should also
improve pre-trade price transparency.
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    \578\ See Reporting and Dissemination Release, supra note 6, and
proposed Rule 904(d) of Regulation SBSR. See also proposed Rule
817(c) of Regulation SB SEF.
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    Improved Oversight. The proposed rules would require SB SEFs to
maintain an audit trail and surveillance systems to monitor trading.
Regulation SB SEF also would require comprehensive reporting and
recordkeeping by SB SEFs. These requirements would put in place a
structure that would provide the SB SEF with information to better
enable it to oversee trading on its market by its participants,
including detecting and deterring fraudulent and manipulative acts.
Regulation SB SEF would also provide the Commission with greater access
to information on the trading of SB swaps to support its
responsibilities to oversee the SB swaps market. Further, Regulation SB
SEF would enable the Commission to share that information with other
Federal financial regulators in instances of broad market turmoil.
    This framework could in turn lead to increased confidence in a
well-regulated market among SB swaps market participants. To the extent
market participants consider a well-regulated market as significant to
their investment decisions, trust, which is a component of investor
confidence, is improved and market participants may be more willing to
participate in the SB swaps market. An increase in participation in the
SB swaps market can potentially benefit the SB swaps market as a whole.
Further, to the extent that market participants utilize SB swaps to
better manage their risk with respect to a position in underlying
securities or assets, the extent they are willing to participate in the
SB swaps market may impact their willingness to participate in the
underlying asset's market. Thus, the Commission preliminarily believes
that the proposal could benefit the securities markets overall by
encouraging a more efficient, and potentially higher, level of capital
investment.
    Improved Access and Competition. Currently, the market for SB swaps
is dominated by a small group of dealers.\579\ The Dodd-Frank Act's
mandate to bring SB swaps that are subject to the mandatory clearing
requirement onto regulated markets, unless the SB swap is not made
available to trade,\580\ and proposed Regulation SB SEF, which is
intended to help implement the statutory directive, should help foster
greater competition in the trading of SB swaps by increasing access to
SB swap trading venues. The proposed rules would provide a framework to
allow a number of trading platforms or systems to register as SB SEFs
and thus more effectively compete for business in SB swaps. Proposed
Rule 809(b) would require a SB SEF's rules to permit all eligible
persons that meet the requirements for becoming a participant as set
forth in the SB SEF's rules to become participants in the SB SEF.\581\
Proposed Rule 809(b) would also give a SB SEF the option to not permit
any non-registered ECP to become participants in the SB SEF. As such,
proposed Rule 809(b) provides SB SEFs with flexibility in choosing
whether or not to provide access to non-registered ECPs. Proposed Rule
809(d) would require that, if a SB SEF chooses to permit non-registered
ECPs to become participants, it would be responsible for establishing
risk management controls and supervisory procedures reasonably designed
to manage financial, regulatory, and other risks associated with the
non-registered ECP's access. These proposed requirements should reduce
risks associated with access to SB SEFs by non-registered ECPs (e.g.,
if they enter into trades that exceed appropriate credit or capital
limits or submit erroneous orders). In addition, the Commission
preliminarily believes that a SB SEF is best positioned to implement
the proposed controls and procedures.
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    \579\ See supra note 81.
    \580\ See Section 3C(h) of the Exchange Act.
    \581\ Proposed Rule 809(a) would require SB SEFs to only permit
a person to become a participant in the security-based swap
execution facility if such person is registered with the Commission
as a security-based swap dealer, major security-based swap
participant, or broker (as defined in section 3(a)(4) of the Act, 15
U.S.C. 78c(a)(4)), or if such person is an eligible contract
participant (as defined in section 3(a)(65) of the Act, 15 U.S.C.
78c(a)(65)).
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    Proposed Rule 811(b)(1) would require every SB SEF to establish
fair, objective and not unreasonably discriminatory standards for
granting impartial access to trading on the SB SEF. In addition,
proposed Rule 811(b)(3)-(4) would require every SB SEF to make and keep
records of all denials, or limitations, of access to the SB SEF, and to
report such information to the Commission. These proposed requirements
would further the requirement in the Exchange Act that SB SEFs provide
market participants with impartial access.\582\ Taken together, these
proposed rules should foster greater direct access to SB SEFs by
dealers, major SB swap participants, brokers and ECPs. This impartial
access should, in turn, promote greater participation by liquidity
providers and competition on each SB SEF. Increased participation could
lead to reduced information asymmetries among market participants,
while increased competition could lead to more efficient and better
pricing in the SB swaps market. Further, a more competitive environment
should lead to lower trading costs, which may lead to increased
participation in the SB swaps market. Impartial access requirements
also would help guard against situations where certain participants in
a SB SEF (who also might be owners of the SB SEF) might seek to limit
the number of other participants in the SB SEF in order to limit
competition and increase their own profits. Thus, the impartial access
should, in turn, promote greater participation by liquidity providers
and competition on each SB SEF.
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    \582\ See Section 3D(d)(2)(B)(i) of the Exchange Act.
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    As proposed, SB SEFs would remain free to establish standards for
impartial access consistent with the requirement that they be fair and
objective and do not unfairly discriminate, and that they do not apply
the standards in an unfair or unreasonably discriminatory manner.
Therefore, SB SEFs could choose the most cost-effective methods to
ensure that all their participants and would-be participants are
evaluated on a fair and impartial basis.
    To address the problem of restricting the scope of SB swaps that
trade on SB SEFs, the Commission is proposing to require that each SB
SEF have a swap review committee that would determine which SB swaps
would trade on the SB SEF, as well as the SB swaps that should no
longer trade on the SB

SEF.\583\ Proposed Rule 811(c)(2) would require that the composition of
the swap review committee must provide for the fair representation of
participants of the SB SEF as well as other market participants such
that each class of participant and other market participants would be
given the right to participate in such swap review committee and that
no single class of participant or category of market participant would
predominate. Having a swap review committee that provides for the fair
representation of participants and other market participants should
help assure that the process of determining those SB swaps that should
trade on the SB SEF would be fair and that various classes of
participants in the SB SEF, as well as other market participants, would
have a voice in those decisions.
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