c. Trade Acknowledgment and Verification Condition
    The use of the information associated with the trade
acknowledgement and verification condition would be the same as the use
of information associated with the currently extant security-based swap
dealer trade acknowledgment and verification requirements, given that
the relevant condition simply would expand the existing requirements to
apply to transactions where they currently do not apply. In general,
the trade acknowledgment would serve as a written record by which the
counterparties to the transaction may memorialize the terms of a
transaction, and the verification requirements are intended to ensure
that the written record of the transaction accurately reflects the
terms of the transaction as understood by the respective
counterparties.\511\
---------------------------------------------------------------------------

    \511\ See Trade Acknowledgement Adopting Release, 81 FR at
39830.

---------------------------------------------------------------------------

d. Portfolio Reconciliation Condition
    The use of the information associated with the portfolio
reconciliation condition would be the same as the use of information
associated with the proposed security-based swap dealer portfolio
reconciliation requirement. In general, that proposed requirement is
intended to help ensure the accuracy of the data reported to SDRs, and
to help facilitate the ability of registered security-based swap data
repositories to comply with requirements that they verify the
information they receive.\512\
---------------------------------------------------------------------------

    \512\ See Risk Mitigation Proposing Release, 83 FR at 4641.
---------------------------------------------------------------------------

e. Recordkeeping Condition
    The proposed condition requiring the registered entity to obtain
and maintain trading relationship documentation involving the non-U.S.
person relying on the exception and its counterparty is intended to
help the Commission obtain a full view of the dealing activities
connected with transactions relying on the proposed exception,
including such activities that occur in the non-U.S. person taking
advantage of the exception. Absent such access, the Commission may be
impeded in identifying fraud and abuse in connection with transactions
that have been arranged, negotiated or executed in the United States,
where such fraud or abuse may be apparent only in light of relevant
information obtained from the non-U.S. person relying on the exception
or its associated persons.
f. Consent to Service Condition
    The proposed use of the consent to service condition is to
facilitate the Commission's ability to serve process on the non-U.S.
person relying on the exception, to assist the Commission in
efficiently taking action to address potential violations of the
federal securities laws in connection with the transactions at issue.
g. ``Listed Jurisdiction'' Condition
    The proposed use of information provided by applicants in
connection with ``listed jurisdiction'' applications is to assist the
Commission in evaluating the effectiveness of the financial
responsibility requirements of jurisdictions regulating non-U.S.
persons taking advantage of the exception. This is intended to help
avoid creating an incentive for persons engaged in a security-based
swap dealing business in the United States to book their transactions
into entities that solely are subject to the regulation of
jurisdictions that do not effectively require security-based swap
dealers or comparable entities to meet certain financial responsibility
standards. That should help avoid providing an unwarranted competitive
advantage to non-U.S. persons that conduct security-based swap dealing
activity in the United States without being subject to strong financial
responsibility standards. The condition also is consistent with the
view that applying financial responsibility requirements to such
transactions between two non-U.S. persons can help mitigate the
potential for financial contagion to spread to U.S. market participants
and to the U.S. financial system more generally.
3. Respondents
    As discussed above, the Commission preliminarily estimates that up
to 24 entities that engage in security-based swap dealing activity may
rely on the proposed conditional exception from having to count dealing
transactions with non-U.S. counterparties against the de minimis
thresholds.\513\ To satisfy the proposed exception, each of those up to
24 entities would make use of an affiliated registered security-based
swap dealer and/or registered broker that would be required to comply
with--and incur collections of information in connection with--
conditions related to compliance with relevant Title VII security-based
swap dealer requirements related to business conduct, trade
acknowledgment and verification, and portfolio reconciliation. Each of
those up to 24 registered entities also would have to provide
disclosures to counterparties of the non-U.S. persons relying on the
exception, to obtain and maintain trading relationship documentation
involving the non-U.S. persons relying on the proposed exception and
their counterparties, and to comply with the condition that the
registered entity obtain from the non-U.S. person a consent to service
of process.
---------------------------------------------------------------------------

    \513\ This estimate is based on data (see part VII.A.7, supra)
indicating that: (1) Six U.S. entities are engaged in security-based
swap dealing activity above the de minimis thresholds may have the
incentive to book future security-based swaps with non-U.S.
counterparties into U.S. affiliates to make use of the proposed
exception in connection with those transactions. (2) One non-U.S.
entity would fall below the $3 billion de minimis threshold if its
transactions with non-U.S. counterparties were not counted. (3) The
``arranged, negotiated, or executed'' counting standard would result
in five additional non-U.S. entities incurring assessment costs in
connection with the de minimis exception.
    The analysis has doubled those numbers--to up to twelve U.S.
persons that may change its booking practices involving security-
based swaps to make use of the exception, plus up to twelve
additional non-U.S. persons--to address potential growth of the
security-based swap market and to account for uncertainty associated
with the availability of data, leading to the final estimate of 24
entities. See id.
---------------------------------------------------------------------------

    Applications for listed jurisdiction determinations may be
submitted by the up to 24 non-U.S. persons that would rely on the
proposed exception. In practice the Commission expects that the greater
portion of such listed jurisdiction applications will be submitted by
foreign financial authorities, given their expertise in connection with
the relevant financial responsibility requirements and information
access provisions, and in connection with their supervisory and
enforcement oversight with regard to the financial responsibility
requirements.\514\
---------------------------------------------------------------------------

    \514\ As discussed below, the Commission estimates that three
non-U.S. persons will submit listed jurisdiction applications.
---------------------------------------------------------------------------

4. Total Annual Reporting and Recordkeeping Burdens (Summarized in
Table 3)
a. Disclosure of Limited Title VII Applicability
    The Commission preliminarily estimates that the up to 12 U.S.
entities that may book transactions into their non-U.S. affiliates to
make use of the proposed conditional exception in the aggregate would
annually engage in nearly 76,000 security-based swap dealing
transactions with non-U.S. counterparties.\515\ Here--and in connection
with the other two groups addressed below--the analysis doubles that
amount to estimate the number of total disclosures, recognizing that
there will be situations in which the registered entity engaged in
arranging, negotiating or executing activity in the United States makes
the required disclosures but a transaction does not result.\516\
---------------------------------------------------------------------------

    \515\ Available data indicates that the six U.S. entities that
are engaged in security-based swap dealing activity above the de
minimis thresholds in the aggregate annually engage in 37,827
transactions with non-U.S. counterparties. To address potential
growth in the market and data-related uncertainty, the analysis
doubles that estimate to 75,654 transactions annually (and, as noted
above, have doubled the estimated number of entities).
    \516\ This produces an estimate of 151,308 (75,654 x 2) annual
disclosures pursuant to the proposed condition.
---------------------------------------------------------------------------

    The Commission also preliminary estimates that the two non-U.S.
persons that may fall below the de minimis thresholds due to the
proposed conditional exception in the aggregate would annually engage
approximately 20,000 security-based swap dealing transactions with non-
U.S. counterparties,\517\ doubled here to

account for disclosures that are not followed by a transaction.\518\
---------------------------------------------------------------------------

    \517\ Available data indicates that the one non-U.S. entity that
would fall below the de minimis thresholds due to the exception
annually engages in 10,064 transactions with non-U.S.
counterparties. To address potential growth in the market and data-
related uncertainty, the analysis doubles that estimate to 20,128
transactions annually (and, as noted above, have doubled the
estimated number of entities).
    \518\ This produces an estimate of 40,256 (20,128 x 2) annual
disclosures pursuant to the proposed condition.
---------------------------------------------------------------------------

    The Commission further preliminarily estimates that the additional
ten non-U.S. entities that may rely on the proposed conditional
exception in the aggregate would annually engage in approximately 2,100
security-based swap dealing transactions, with non-U.S. persons, that
may be subject to the proposed exception,\519\ doubled here to account
for disclosures that are not followed by a transaction.\520\
---------------------------------------------------------------------------

    \519\ Available data indicates that would result in five
additional non-U.S. persons that would be expected to incur
assessment costs due to the ``arranged, negotiated, or executed''
counting standard engage in a total of 1,056 annual security-based
swap transactions with non-U.S. counterparties. To address potential
growth in the market and data-related uncertainty, the analysis
doubles that estimate to 2,112 transactions annually (and have
doubled the estimated number of entities).
    \520\ This produces an estimate of 4,224 (2,112 x 2) annual
disclosures pursuant to the proposed condition.
---------------------------------------------------------------------------

    In light of the limited contents of those contemporaneous
disclosures, the Commission preliminarily believes that each such
disclosure on average would be expected to take no more than five
minutes.\521\ Accordingly, the Commission preliminarily estimates that
the 12 U.S. entities that may book transactions into their non-U.S.
affiliates to make use of the proposed conditional exception in the
aggregate will annually spend a total of approximately 12,609 hours to
provide the disclosures required by the conditions.\522\ The Commission
further preliminarily estimates that the two non-U.S. entities that may
fall below the de minimis thresholds due to the exception in the
aggregate will annually spend a total of approximately 3,355 hours to
provide the disclosures required by the conditions,\523\ while the
other ten non-U.S. entities that may rely on the proposed conditional
exception in the aggregate will annually spend a total of approximately
352 hours to provide the disclosures required by the conditions.\524\
---------------------------------------------------------------------------

    \521\ Given that the disclosure must be provided
contemporaneously with the market-facing activity by the registered
entity engaged in market-facing activity in the United States, the
disclosure could not reasonably be provided via inclusion in
standard trading documentation and would require the creation of
specific disclosure documentation.
    \522\ 151,308 aggregate annual disclosures x 5 minutes per
transaction. This averages to approximately 1,050.75 hours for each
of those 12 firms.
    \523\ 40,256 aggregate annual disclosures x 5 minutes per
transaction. This averages to approximately 1,677 hours for each of
those two firms.
    \524\ 4,224 aggregate annual disclosures x 5 minutes per
transaction. This averages to 35.2 hours for each of those ten
firms.
---------------------------------------------------------------------------

    The Commission also preliminarily believes that each of those 24
total entities would initially spend 100 hours and incur approximate
costs of $29,715 to develop policies and procedures to help ensure that
appropriate disclosures are provided.\525\
---------------------------------------------------------------------------

    \525\ Applied to the estimated 24 entities at issue here, this
would amount to 2,400 hours and $713,160.
    These estimates are based on prior estimates, made in connection
with the adoption of the ``arranged, negotiated, or executed''
counting standard, that non-U.S. persons would incur 100 hours and
$28,300 to establish policies and procedures to restrict
communications with U.S. personnel in connection with the non-U.S.
persons' dealing activity. See ANE Adopting Release, 81 FR at 8628.
That $28,300 estimate has been adjusted to $29,715 in current
dollars (28,300 x 1.05).
---------------------------------------------------------------------------

b. Business Conduct Condition
    The Commission estimated the reporting and recordkeeping burdens
associated with the relevant security-based swap dealer business
conduct requirements under Title VII when it adopted those
requirements. The Commission believes that those estimates are
instructive for calculating the per-entity reporting and recordkeeping
burdens associated with the proposed business conduct condition, given
that the condition in effect would require compliance with those
business conduct requirements.
     Disclosures of material risks, characteristics, and
conflicts and incentives. When the Commission earlier considered the
compliance burdens associated with those disclosure requirements (along
with clearing rights and daily mark disclosure requirements not
applicable under this proposal),\526\ the Commission estimated that
implementation of those requirements: (i) Initially would require three
persons from trading and structuring, three persons from legal, two
persons from operations and four persons from compliance, for 100 hours
each; \527\ (ii) half of those persons would be required to spend 20
hours annually to re-evaluate and modify disclosures and systems
requirements; \528\ and (iii) those entities would require eight full-
time persons for six months of systems development, programming and
testing,\529\ along with two full-time persons annually for maintenance
of this system.\530\
---------------------------------------------------------------------------

    \526\ See Business Conduct Adopting Release, 81 FR at 30091-92.
In connection with those prior estimates, the Commission noted that
entities that are dually registered with the CFTC already provide
their counterparties with similar disclosures.
    \527\ Applied to the 24 entities at issue here, this would
amount to an aggregate initial burden of 28,800 hours (24 entities x
12 persons x 100 hours).
    \528\ Applied to the 24 entities at issue here, this would
amount to an aggregate annual burden of 2,880 hours (24 entities x 6
persons x 20 hours).
    \529\ Applied to the 24 entities at issue here, this would
amount to an aggregate initial burden of 192,000 hours (24 entities
x 8 persons x 1,000 hours).
    \530\ Applied to the 24 entities at issue here, this would
amount to an aggregate annual burden of 96,000 hours (24 entities x
2 persons x 2,000 hours).
    In adopting those disclosure requirements, the Commission also
incorporated an estimate of one hour per security-based swap for an
entity to evaluate whether more particularized disclosures are
necessary and to develop additional disclosures. See Business
Conduct Adopting Release, 81 FR at 30092. The Commission does not
believe that particular category of costs would be applicable in the
context of the transactions at issue here.
    Under the proposed exception, the disclosure condition extends
not only to incentives and conflicts of the registered entity, but
also disclosures and conflicts of its non-U.S. affiliate. The
Commission believes, however, that the existing burden estimates are
sufficient to account for this aspect of the disclosure, given that
the two entities' affiliation should facilitate the transfer of any
relevant incentive and conflict information for the registered
entity to convey.
---------------------------------------------------------------------------

     Suitability of recommendations. When the Commission
previously analyzed the burdens associated with the security-based swap
dealer recommendation suitability requirement, it estimated that most
security-based swap dealers would obtain representations from
counterparties to comply with the institutional suitability provisions
of the requirement.\531\ The Commission further particularly estimated:
(i) That for security-based swap market participants that also are swap
market participants, most of the requisite representations have been
drafted for the swaps context, and that to the extent that any
modifications are necessary to adapt those representations to the
security-based swap context, each market participant would require two
hours to assess the need for modifications and make any required
modifications; \532\

and (ii) other market participants (apart from special entities not
relevant here) would require five hours for each market participant to
review and agree to the relevant representations.\533\
---------------------------------------------------------------------------

    \531\ See id. at 30092-93.
    \532\ Analysis of current data indicates that the six U.S.
entities engaged in security-based swap dealing activity above the
de minimis thresholds in the aggregate have 161 unique non-U.S.
counterparties that are swap market participants, and 70 unique non-
U.S. counterparties that are not swap market participants. The one
non-U.S. entity that may fall below the de minimis threshold due to
the exception has 391 unique non-U.S. counterparties that are swap
market participants, and 178 unique non-U.S. counterparties that are
not swap market participants. The five additional non-U.S. persons
that would be expected to incur assessment costs in connection with
the ``arranged, negotiated, or executed'' counting standard in the
aggregate have six unique non-U.S. counterparties that are swap
market participants, and one unique non-U.S. counterparty that are
not swap market participants. Adding together those estimates and
then doubling them (in light of the uncertainty associated with the
estimate and to account for potential growth of the security-based
swap market) produces a total estimate of 1,116 unique non-U.S
counterparties that are swap market participants, and 498 that are
not. Only non-U.S. counterparties are relevant for purposes of this
analysis because the proposed exception does not address security-
based swap transactions involving U.S. person counterparties.
    Consistent with these assumptions, the potential burden
associated with such modifications in connection with the proposed
condition would amount to 2,232 hours (1,116 non-U.S. security-based
swap market participants that also are swap market participants x
two hours).
    \533\ Consistent with the above assumptions, the potential
burden associated with such modifications in connection with the
proposed condition would amount to 2,490 hours (498 non-U.S.
security-based swap market participants that are not also swap
market participants x five hours).
---------------------------------------------------------------------------

     Fair and balanced communications. The Commission's earlier
analysis of the burdens associated with the fair and balanced
communications requirement \534\ took the view that each registered
entity would incur: (i) $6,000 in initial legal costs to draft or
review statements of potential opportunities and corresponding risks in
marketing materials; \535\ (ii) an additional initial six hours for
internal review of other communications such as emails and Bloomberg
messages; \536\ and (iii) $8,400 in initial legal costs associated with
marketing materials for more bespoke transactions.\537\
---------------------------------------------------------------------------

    \534\ See Business Conduct Adopting Release, 81 FR at 30093.
    \535\ In connection with the proposed exception, the potential
burden associated with such drafting or review would amount to
$151,200 (24 entities x $6,000 x 1.05 adjustment to current
dollars).
    \536\ In connection with the proposed exception, the potential
burden associated with such internal review would amount to 144
hours (24 entities x 6 hours).
    \537\ In connection with the proposed exception, the potential
burden associated with such drafting or review would amount to
$211,680 (24 entities x $8,400 x 1.05 adjustment to current
dollars).
     In adopting the fair and balanced communication requirement,
the Commission also incorporated an estimate of ongoing compliance
costs (associated with review of email communications sent to
counterparties) over the term of the security-based swap. See
Business Conduct Adopting Release, 81 FR at 30093. Those costs are
not incorporated into this estimate because the registered entity
that engaged in market-facing activity in the United States in
connection with the transactions at issue here would not be expected
to have ongoing communications with the counterparty to the
security-based swap.
---------------------------------------------------------------------------

c. Trade Acknowledgment and Verification Condition
    The Commission estimated the reporting and recordkeeping burdens
associated with the trade acknowledgment and verification requirements
under Title VII when it adopted those requirements.\538\ The Commission
believes that those estimates are instructive for calculating the per-
entity reporting and recordkeeping burdens associated with the proposed
trade acknowledgment and verification condition, given that the
condition in effect would require compliance with that trade
acknowledgment and verification requirement by additional persons and/
or in additional circumstances.
---------------------------------------------------------------------------

    \538\ See id. at 39830-31.
---------------------------------------------------------------------------

    When the Commission earlier considered the compliance burdens
associated with the trade acknowledgement and verification
requirements, the Commission estimated that each applicable entity
would incur: (i) 355 hours initially to develop an internal order and
trade management system; \539\ (ii) 436 hours annually for day-to-day
technical support, as well as amortized annual burden associated with
system or platform upgrades and updates; \540\ (iii) 80 hours initially
for the preparation of written policies and procedures to obtain
verification of transaction terms; \541\ and (iv) 40 hours annually to
maintain those policies and procedures.\542\
---------------------------------------------------------------------------

    \539\ In connection with the proposed exception, the potential
burden associated with such system development would amount to 8,520
hours (24 entities x 355 hours).
    \540\ In connection with the proposed exception, the potential
annual burden associated with such support and updates would amount
to 10,464 hours (24 entities x 436 hours).
    \541\ In connection with the proposed exception, the potential
burden associated with such preparation would amount to 1,920 hours
(24 entities x 80 hours).
    \542\ In connection with the proposed exception, the potential
annual burden associated with such policies and procedures would
amount to 960 hours (24 entities x 40 hours).
---------------------------------------------------------------------------

d. Portfolio Reconciliation Condition
    The Commission estimated the recordkeeping burdens associated with
the portfolio reconciliation requirements under Title VII when it
proposed those requirements.\543\ The Commission believes that those
estimates are instructive for calculating the per-entity recordkeeping
burdens associated with the proposed portfolio reconciliation
condition, given that the condition in effect would require compliance
with that portfolio reconciliation requirement by additional persons
and/or in additional circumstances.
---------------------------------------------------------------------------

    \543\ See Risk Mitigation Proposing Release, 84 FR at 4642-43.
---------------------------------------------------------------------------

    When the Commission considered the recordkeeping burden associated
with the portfolio reconciliation requirement, it estimated that each
respondent on average would incur an annual burden of 190 hours in
connection with proposed Rule 15Fi-3(a), which addresses portfolio
reconciliation obligations in connection with transactions where the
counterparty to the registered entity is a security-based swap dealer
and major security-based swap participant.\544\ The Commission further
estimated that each respondent on average would incur an annual burden
of 227.5 hours in connection with proposed Rule 15Fi-3(b), which
addresses portfolio reconciliation obligations in connection with
transactions where the counterparty to the registered entity is not a
security-based swap dealer and major security-based swap
participant,\545\ for a total of 417.5 hours.
---------------------------------------------------------------------------

    \544\ See Risk Mitigation Proposing Release, 84 FR at 4642. That
was based on estimates regarding the time to perform each
reconciliation, and the number of counterparties associated with
each required frequency of portfolio reconciliation (i.e., daily
reconciliations for portfolios with more than 500 security-based
swaps, weekly reconciliations for portfolios with more than 50 but
fewer than 500 security-based swaps, and quarterly reconciliations
for portfolios with no more than 50 security-based swaps).
    \545\ See id. at 4642-43. That was based on estimates regarding
the time to perform each reconciliation, and the number of
counterparties associated with each required frequency of portfolio
reconciliation (i.e., quarterly reconciliations for portfolios with
more than 100 security-based swaps, and annual reconciliations for
portfolios with no more than 100 security-based swaps).
---------------------------------------------------------------------------

    While recognizing that the proposed condition requires only the
initial reconciliation of any particular instrument, the Commission
nonetheless believes that these estimates provide a useful upper bound
for the per-entity burden associated with this condition.\546\
---------------------------------------------------------------------------

    \546\ In connection with the proposed exception, the estimated
aggregate annual burden associated with this condition would be
10,020 hours (24 entities x 417.5 hours).
    The Commission believes that the above estimate of 10,020
appropriately reflects the burden associated with the portfolio
reconciliation condition. At the same time, the Commission
recognizes that, depending on the applicable facts and
circumstances, the registered entity engaged in arranging,
negotiating or executing conduct in the United States may need to
obtain, from the non-U.S. affiliate relying on the transaction,
information needed to perform the initial portfolio reconciliation.
The Commission typically would not expect such transfers of
information to constitute an independent collection of information,
because the registered entity generally would be expected to possess
that information to comply with regulatory reporting obligations
pursuant to Regulation SBSR (leading any resulting burdens to be
subsumed within the collection of information associated with
Regulation SBSR).
    Nonetheless, in the event that the registered entity is not
otherwise subject to regulatory reporting obligations pursuant to
Regulation SBSR, such transfers of information from the non-U.S.
affiliate to the registered entity may constitute an independent
collection of information. In those circumstances, and consistent
with the Paperwork Reduction Act analysis associated with Regulation
SBSR, the Commission anticipates that the upper bound on the initial
burden for each non-U.S. affiliate to construct an infrastructure to
provide for the transfer of this information would amount to 1,394
hours (see Exchange Act Release No. 74244 (Feb. 11, 2015), 80 FR
14564, 14676 (Mar. 19, 2015)), or 33,456 hours in the aggregate (24
non-U.S. entities x 1,394 hours). Also, based on prior estimates
that it would take 0.005 hours to report each security-based swap
transaction (see id.), and the estimate that this proposed exception
in the aggregate would address 97,894 transactions annually (see
notes 515, 517 and 519 supra), the Commission estimates that the
upper bound on the aggregate annual burden associated with such
transfers of information would amount to approximately 489 hours
(97,894 transactions x 0.005 hours).
    Such burdens likely would be mitigated if, for example, the
registered entity and its non-U.S. affiliate jointly make use of
unified back-office systems, or if the counterparty relationship
largely is managed by personnel of the registered entity, or if the
non-U.S. entity independently is subject to Regulation SBSR or has
developed similar types of systems to comply with foreign reporting
requirements.

---------------------------------------------------------------------------

e. Recordkeeping Condition
    To comply with the proposed condition that the affiliated
registered entity obtain from the non-U.S. person, and maintain, copies
of trading relationship documentation the registered entity and the
non-U.S. person jointly would need to develop policies and procedures
to provide for the identification of such records and for their
transfer to the registered affiliate. For each use of the proposed
exception, the Commission preliminarily estimates that such policies
and procedures would impose require a one-time initial burden of 20
hours.\547\
---------------------------------------------------------------------------

    \547\ Across the 24 potential uses of the proposed exception,
this would amount to a total of 480 hours (24 entities x 20 hours).
---------------------------------------------------------------------------

    The Commission also preliminarily estimates that the non-U.S.
person relying on this exception also would need to expend two hours
per week to identify such records and to electronically convey the
records to its registered affiliate.\548\ The Commission further
preliminarily estimates that the registered affiliate would need to
expend one hour per week in connection with the receipt and maintenance
of those records.\549\
---------------------------------------------------------------------------

    \548\ Across the 24 potential uses of the proposed exception,
this would amount to a total of 2,496 hours annually (24 entities x
2 hours x 52 weeks).
    \549\ Across the 24 potential uses of the proposed exception,
this would amount to a total of 1,248 hours annually (24 entities x
1 hour x 52 weeks).
     The recordkeeping condition also specifies that, for the
exception to be available, the registered entity must create and
maintain books and records as required by applicable rules,
including any books and records requirements relating to the
provisions specified in paragraph (d)(1)(ii)(B) (i.e., relating to
disclosure of risks, characteristics, incentives and conflicts;
suitability; fair and balanced communications; trade acknowledgment
and verification; and portfolio reconciliation). Because that part
of the condition subsumes the collection of information that we
would expect to be associated with the final rules adopting those
security-based swap dealer books and records requirements, it does
not constitute a separate collection of information. See note 493,
supra.
---------------------------------------------------------------------------

f. Consent to Service Condition
    To comply with the proposed condition that the affiliated
registered entity obtain from the non-U.S. person relying on the
exception written consent to service of process for civil actions, one
or the other of those parties would have to draft such a consent or use
an industry-standard consent provision, and the registered entity must
obtain that consent from the non-U.S. person. The Commission
preliminarily estimates that the parties jointly must expend [two]
hours in connection with this process.\550\
---------------------------------------------------------------------------

    \550\ Across the 24 expected uses of the proposed exception,
this would amount to a total of 48 hours (24 entities x 2 hours).
---------------------------------------------------------------------------

g. ``Listed Jurisdiction'' Condition
    The Commission believes that burden estimates associated with
applications for substituted compliance determinations are instructive
with regard to the burdens that would be associated with applications
by market participants in connection with ``listed jurisdiction''
status.\551\
---------------------------------------------------------------------------

    \551\ Notwithstanding the substantive differences between the
standards associated with listed jurisdiction determinations and
substituted compliance assessments, see part III.B.5, supra, the two
sets of applications will be submitted pursuant to Rule 0-13 and may
be expected to address certain analogous elements.
---------------------------------------------------------------------------

    When the Commission initially adopted Rules 0-13 and 3a71-6,
providing for substituted compliance in connection with security-based
swap dealer business conduct requirements, the Commission concluded
that the ``great majority'' of substituted compliance applications
would be submitted by foreign authorities, and that ``very few''
applications would be submitted by security-based swap dealers (or
major security-based swap participants), and the Commission concluded
that three such registered entities would submit substituted compliance
applications.\552\ The Commission further estimated that the one-time
paperwork burden associated with preparing and submitting all three
substituted compliance requests in connection with those requirements
would be approximately 240 hours, plus $240,000 for the services of
outside professionals.\553\ The Commission subsequently relied on those
estimates in connection with the paperwork burdens associated with
amendments to Rule 3a71-6 related to trade acknowledgement and
verification.\554\
---------------------------------------------------------------------------

    \552\ See Business Conduct Adopting Release, 81 FR at 30097.
    \553\ This was based on the estimate that each request would
require approximately 80 hours of in-house counsel time, plus
$80,000 for the services of outside professionals (based on 200
hours of outside time x $400/hour). See id.
    \554\ See Trade Acknowledgement Adopting Release, 81 FR at
39832.
---------------------------------------------------------------------------

    The Commission similarly believes that the majority of ``listed
jurisdiction'' applications would be made by foreign authorities rather
than by the up to 24 non-U.S. persons that potentially would rely on
the exception. Consistent with the estimates in connection with the
substituted compliance rule, moreover, the Commission estimates that
three non-U.S. persons that seek to rely on the exception would file
listed jurisdiction applications, and that in the aggregate those three
persons would incur initial paperwork burdens, associated with
preparing and submitting the requests, of approximately 240 hours, plus
$252,000 for the services of outside professionals (incorporating a
five percent addition to reflect current dollars).

               Table 3--Proposed Rule 3a71-3 Amendment--Summary of Paperwork Reduction Act Burdens
----------------------------------------------------------------------------------------------------------------
                                                  Initial burden                           Annual burden
           Burden type           -------------------------------------------------------------------------------
                                         Per-firm                Aggregate         Per-firm (hr)  Aggregate (hr)
----------------------------------------------------------------------------------------------------------------
Disclosure of limited Title VII
 applicability: *
    disclosure by 12 U.S.         ......................  ......................        1,050.75          12,609
     dealing entities (A).
    disclosure by 2 non-U.S.      ......................  ......................         1,677.3           3,355
     dealing entities (B).
    disclosure by other non-U.S.  ......................  ......................            35.2             352
     entities (C).
    related policies and          100 hr................  2,400 hr..............
     procedures (same).           $29,715...............  $713,160..............
Disclosure of risks,
 characteristics et al.:
    structuring, legal,           1,200 hr..............  28,800 hr.............
     operations, compliance.

    re-evaluation and             ......................  ......................             120           2,880
     modification.
    systems development,          8,000 hr..............  192,000 hr............
     programming, testing.
    system maintenance..........  ......................  ......................           4,000          96,000
Suitability:
    reps. by participants also    2 hr..................  2,232 hr..............
     in swap market.
    representations by other      5 hr..................  2,490 hr..............
     counterparties.
Fair and balanced
 communications:
    1statement drafting.........  $6,300................  $151,200..............
    additional internal review..  6 hr..................  144 hr................
    legal costs.................  $8,820................  $211,680..............
Trade acknowledgement and
 verification:
    internal order and trade      355 hr................  8,520 hr..............
     mgt. systems.
    daily tech. support/          ......................  ......................             436          10,464
     amortized upgrades.
    initial preparation of        80 hr.................  1,920 hr..............
     policies and procedures.
    maintenance of policies and   ......................  ......................              40             960
     procedures.
Portfolio reconciliation:
    initial reconciliation of     ......................  ......................           417.5          10,020
     transactions.
Copies of trading relationship
 documentation:
    joint development of          20 hr.................  480 hr................
     policies/procedures.
    non-US entity identification  ......................  ......................             104           2,496
     and conveyance.
    registered entity receipt     ......................  ......................           52 hr        1,248 hr
     and maintenance.
Consent to service of process:
    joint drafting/transfer to    2 hr..................  48 hr.................
     registered entity.
``Listed jurisdiction''
 applications:
    applications by non-          80 hr.................  240 hr................
     regulators.
    (same)......................  $84,000...............  $252,000
----------------------------------------------------------------------------------------------------------------
* (A) Twelve U.S. dealing entities may book future security-based swaps with non-U.S. counterparties into non-
  U.S. affiliates. (B) Two non-U.S. entities may fall below the de minimis threshold if ``arranged, negotiated,
  or executed'' transactions are not counted. (C) Ten additional non-U.S. entities may make use of the exception
  to avoid incurring assessment costs in connection with the ``arranged, negotiated, or executed'' de minimis
  test.

5. Collection of Information Is Mandatory
    The collections of information associated with the proposed
amendments to Rule 3a71-3 are mandatory to the availability of the
exception.
6. Confidentiality
    Any disclosures to be provided in connection with the arranging,
negotiating or executing of a registered security-based swap dealer or
of a registered broker (depending on the alternative adopted) in
compliance with the requirements of the proposed exception would be
provided to the non-U.S. counterparties of the non-U.S. person relying
on this exception; therefore, the Commission would not typically
receive confidential information as a result of this collection of
information. To the extent that the Commission receives records related
to such disclosures from a registered security-based swap dealer or
registered broker through the Commission's examination and oversight
program, or through an investigation, or some other means, such
information would be kept confidential, subject to the provisions of
applicable law.
    Any applications for listed jurisdiction status will be made
public.
7. Retention Period of Recordkeeping Requirements
    By virtue of being registered as a security-based swap dealer and/
or as a broker (depending on the alternative), the entity-engaged in
market facing conduct in the United States will be required to retain
the records and information required under the proposed amendment to
Rule 3a71-3 for the retention periods specified in Exchange Act Rules
17a-4 and 18a-6, as applicable.\555\
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    \555\ The registered entity would have to create and/or maintain
certain records in connection with the following proposed conditions
(in conjunction with proposed Commission books and record rules and
rule amendments related to Title VII): Disclosure of limited Title
VII applicability; business conduct; trade acknowledgement and
verification; portfolio reconciliation; obtaining and maintaining
relationship documentation and questionnaires; consent to service of
process.
     The proposed conditions do not require the non-U.S. person
relying on the exception to make or retain any particular types of
records (although that non-U.S. person will be required to convey
existing trading relationship documentation to its registered
affiliate).
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B. Proposed Modifications to Proposed Rule 18a-5

1. Summary of Collections of Information To Be Modified
    The Commission is proposing to modify proposed Rule 18a-5--which is
modeled on Exchange Act Rule 17a-3, as amended--with respect to the
requirement that stand-alone and bank SBS Entities make and keep
current certain records.\556\ The proposed modifications to proposed
Rule 18a-5 would reduce the burden associated with Rule 18a-5, as
originally proposed, by providing generally that a stand-alone or bank
SBS Entity need not: (i) Make and keep current a questionnaire or
application for employment for an associated person if the SBS Entity
is excluded from the prohibition under Exchange Act Section 15F(b)(6)
with respect to such associated person (e.g., the exclusion proposed in
Rule of Practice 194(c)(2)), and (ii) include the information generally
required to be included on the questionnaire or application for
employment executed by an associated person if the associated person is
not a U.S. person and the receipt of that information, or the creation
or maintenance of records reflecting that information, would result in
a violation of applicable law in the jurisdiction in which the
associated person is employed or located.
---------------------------------------------------------------------------

    \556\ See proposed Rule 18a-5, Recordkeeping and Reporting
Proposing Release.
---------------------------------------------------------------------------

2. Use of Information
    Proposed Rule 18a-5, as proposed to be modified, is designed, among
other things, to promote the prudent operation of SBS Entities, and to
assist the Commission, SROs, and state securities regulators in
conducting

effective examinations.\557\ Thus, the collections of information under
proposed Rule 18a-5 are expected to facilitate inspections and
examinations of SBS Entities.
---------------------------------------------------------------------------

    \557\ As noted above, proposed Rule 18a-5 is patterned after
Exchange Act Rule 17a-3, the recordkeeping rule for registered
broker-dealers. See, e.g., Books and Records Requirements for
Brokers and Dealers Under the Securities Exchange Act of 1934,
Exchange Act Release No. 47910 (Oct. 26, 2001), 66 FR 55818 (Nov. 2,
2001) (``The Commission has required that broker-dealers create and
maintain certain records so that, among other things, the
Commission, [SROs], and State Securities Regulators . . . may
conduct effective examinations of broker-dealers'' (footnote
omitted)).
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3. Respondents
    The Commission estimated the number of respondents in the
Recordkeeping and Reporting Proposing Release. The Commission received
no comment on these estimates and continues to believe they are
appropriate.
    Consistent with the Recordkeeping and Reporting Proposing Releases,
based on available data regarding the single-name CDS market--which the
Commission believes will comprise the majority of security-based
swaps--the Commission estimates that the number of major security-based
swap participants likely will be five or fewer and, in actuality, may
be zero.\558\ Therefore, to capture the likely number of major
security-based swap participants that may be subject to the collections
of information for purposes of this PRA, the Commission estimates for
purposes of this PRA that five entities will register with the
Commission as major security-based swap participants. Also consistent
with the Recordkeeping and Reporting Proposing Release, the Commission
estimates that approximately four major security-based swap
participants will be stand-alone entities.\559\
---------------------------------------------------------------------------

    \558\ See Recordkeeping and Reporting Proposing Release, 79 FR
at 25260; see also Registration Process for Security-Based Swap
Dealers and Major Security-Based Swap Participants; Final Rule, 80
FR at 48990; Further Definition of ``Swap Dealer,'' ``Security-Based
Swap Dealer,'' ``Major Swap Participant,'' ``Major Security-Based
Swap Participant'' and ``Eligible Contract Participant'' Exchange
Act Release No. 66868 (Apr. 27, 2012), 77 FR 30596 at 30727 (May 23,
2012).
    \559\ See Recordkeeping and Reporting Proposing Release, 79 FR
at 25260.
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    Consistent with prior releases, the Commission estimates that 50 or
fewer entities ultimately may be required to register with the
Commission as security-based swap dealers, of which 16 are broker-
dealers that will likely seek to register as security-based swap-
dealers.560 561 The Commission continues to estimate that
approximately 75% of the 34 non-broker-dealer security-based swap
dealers (i.e., 25 firms) will register as bank security-based swap
dealers, and the remaining 25% (i.e., 9 firms) will register as stand-
alone security-based swap dealers.\562\
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    \560\ See Recordkeeping and Reporting Proposing Release, 79 FR
at 25260.
    \561\ See Registration Process for Security-Based Swap Dealers
and Major Security-Based Swap Participants; Final Rule, 80 FR at
79002.
    \562\ See Recordkeeping and Reporting Proposing Release, 79 FR
at 25261. The Commission does not anticipate that any firms will be
dually registered as a broker-dealer and a bank.
---------------------------------------------------------------------------

    Further, the Commission continues to estimate that each security-
based swap dealer will employ approximately 420 associated persons that
are natural persons and each major security-based swap participant will
employ approximately 62 associated persons that are natural
persons.\563\ The Commission has no data regarding how many associated
persons of SBS Entities who are non-U.S. natural persons may: (a) Not
effect or be involved in effecting security-based swap transactions
with or for counterparties that are U.S. persons (other than a
security-based swap transaction conducted through a foreign branch of a
counterparty that is a U.S. person); (b) effect or be involved in
effecting security-based swap transactions with or for counterparties
that are U.S. persons, but who may be employed or located in
jurisdictions where the receipt of information required by the
questionnaire or employment application, or the creation or maintenance
of records reflecting that information, would result in a violation of
applicable law; or (c) effect or be involved in effecting security-
based swap transactions with or for counterparties that are U.S.
persons, who are employed or located in jurisdictions where local law
would not restrict the receipt, creation or maintenance of information
required by the questionnaire or employment application. Given that,
the Commission will estimate, for purposes of this Paperwork Reduction
Act analysis, that non-U.S. associated persons are evenly split into
each of these categories.
---------------------------------------------------------------------------

    \563\ Id.
    1 See Rule of Practice 194 Adopting Release, 84 FR at 4926.
Commission staff also checked with the staff at the National Futures
Association regarding an approximate number of associated persons
employed by registered swap dealers. NFA staff provided anecdotal
information indicating that the number of natural persons that are
associated persons of swap dealers is substantially similar to
Commission staff estimates. NFA staff further indicated that they
believe about half of the total number of natural persons that are
associated persons of swap dealers are located in the U.S. and the
other half are located in foreign jurisdictions.
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4. Total Initial and Annual Recordkeeping and Reporting Burden
    As indicated in the Recordkeeping and Reporting Proposing Release,
proposed Rule 18a-5 will impose collection of information requirements
that result in initial and annual burdens for SBS Entities. The
proposed modifications to Rule 18a-5 will decrease these burdens for
certain SBS Entities.
    In the Recordkeeping and Reporting Proposing Release, the
Commission indicated that proposed Rule 18a-5 would require that stand-
alone SBS Entities make and keep current 13 types of records, including
records on associated persons,\564\ and estimated that those 13
paragraphs would impose on each firm an initial burden of 260 hours and
an ongoing annual burden of 325 hours.\565\ In addition, the Commission
indicated that proposed Rule 18a-5 would require that bank SBS Entities
make and keep current 10 types of records, including records on
associated persons,\566\ and estimated that these ten paragraphs will
impose on each firm an initial burden of 200 hours per firm and an
ongoing burden of 250 hours per firm.\567\ The Commission further
stated that while proposed Rule 18a-5 would impose a burden to make and
keep current these records, it would not require the firm to perform
the underlying task.\568\
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    \564\ See paragraph (a)(10) of proposed Rule 18a-5,
Recordkeeping and Reporting Proposing Release, 79 FR at 25308.
    \565\ See Recordkeeping and Reporting Proposing Release, 79 FR
at 25264. Of these total initial and ongoing annual burdens for the
13 types of records a firm would be required to make and keep
current under paragraph (a)(10) of proposed Rule 18a-5, Commission
staff believes that the burdens associated with making and keeping
current questionnaires or applications for employment would be an
initial burden of 20 hours (or 260/13) and an ongoing burden of 25
hours (or 325/13).
    \566\ See paragraph (b)(8) of proposed Rule 18a-5; Recordkeeping
and Reporting Proposing Release, 79 FR at 25309-10.
    \567\ See id. at 25264. Of these total initial and ongoing
annual burdens for the 10 types of records a firm would be required
to make and keep current under paragraph (b)(8) of proposed Rule
18a-5, Commission staff believes that the burdens associated with
making and keeping current questionnaires or applications for
employment would be an initial burden of 20 hours (or 200/10) and an
ongoing burden of 25 hours (or 250/10).
    \568\ In estimating the burden associated with Rule 18a-5, the
Commission recognizes that entities that will register stand-alone
SBS Entities likely make and keep current some records today as a
matter of routine business practice, but the Commission does not
have information about the records that such entities currently
keep. Therefore, the Commission assumes that these entities
currently keep no records when it estimates the PRA burden for these
entities.
---------------------------------------------------------------------------

    The Commission received no comments regarding its hour and cost
burden estimates for proposed Rule

18a-5 and continues to believe they are appropriate.
    The proposed modifications to paragraphs (a)(10) and (b)(8) of
proposed Rule 18a-5 would (a) exempt stand-alone and bank SBS Entities
from the requirement to make and keep current a questionnaire or
application for employment for an associated person if the SBS Entity
is excluded from the prohibition in section 15F(b)(6) of the Exchange
Act with respect to the associated person (e.g., the exclusion proposed
in Rule of Practice 194(c)(2)), and (b) allow SBS Entities to exclude
certain information from their associated person records if receipt of
that information or the creation or maintenance of records reflecting
that information would result in a violation of applicable law in the
jurisdiction where the associated person is employed or located.
Proposed Addition of Paragraphs (a)(10)(iii)(A) and (b)(8)(iii)(A)
    The Commission estimates that the proposed modification to add
paragraphs (a)(10)(iii)(A) and (b)(8)(iii)(A) to proposed Rule 18a-5
would eliminate the paperwork burden for stand-alone and bank security-
based swap dealers and major security-based swap participants
associated with making and keeping current questionnaires or
applications for employment records, otherwise required by proposed
Rule 18a-5, with respect to any associated person if the SBS Entity is
excluded from the prohibition in Exchange Act Section 15F(b)(6),
including the exclusion proposed in Rule of Practice 194(c)(2) with
respect to a natural person who is (i) not a U.S. person and (ii) does
not effect and is not involved in effecting security-based swap
transactions with or for counterparties that are U.S. persons (other
than a security-based swap transaction conducted through a foreign
branch of a counterparty that is a U.S. person).
    As indicated above, the Commission estimates that there will be
approximately 4 stand-alone major security-based swap participants, 9
stand-alone security-based swap dealers and 25 bank security-based swap
dealers. Further, as indicated above, each security-based swap dealer
would have approximately 420 associated persons and half of those
associated persons, or 210, would not be employed or located in the
U.S. The Commission estimates that stand-alone and bank SBS dealers
would not need to obtain the questionnaire or application for
employment for one third of those associated persons, or 70, because
proposed Rule of Practice 194(c)(2) would provide an exclusion from the
prohibition in Section 15F(b)(6) of the Exchange Act with respect to
associated persons who are not located in the U.S. and do not effect
and are not involved in effecting security-based swap transactions with
or for counterparties that are U.S. persons (other than a security-
based swap transaction conducted through a foreign branch of a
counterparty that is a U.S. person).\569\ Similarly, as indicated
above, each major security-based swap participant would have
approximately 62 associated persons and half of those associated
persons, or 31, would not be employed or located in the U.S. The
Commission estimates that stand-alone and bank major security-based
swap participants would not need to obtain the questionnaire or
application for employment for one third of those associated persons,
or 10, because proposed Rule of Practice 194(c)(2) would provide an
exclusion from the prohibition in Section 15F(b)(6) of the Exchange Act
with respect to those associated persons.\570\
---------------------------------------------------------------------------

    \569\ 70 associated persons/420 associated persons per security-
based swap dealer = a reduction of approximately 16.7%. Security-
based swap dealers would be able to utilize this paragraph relative
to other exclusions from the requirements of Exchange Act Section
15F(b)(6) that the Commission may provide, however the analysis is
focusing solely on the exclusion provided by proposed new paragraph
(c)(2) to Rule of Practice 194 for purposes of the Paperwork
Reduction Act estimate.
    \570\ 10 associated persons/62 associated persons per major
security-based swap participant = a reduction of approximately
16.1%. Major security-based swap participants would be able to
utilize this paragraph relative to other exclusions from the
requirements of Exchange Act Section 15F(b)(6) that the Commission
may provide, however the analysis is focusing solely on the
exclusion provided by proposed new paragraph (c)(2) to Rule of
Practice 194 for purposes of this Paperwork Reduction Act estimate.
---------------------------------------------------------------------------

    Given this, the addition of paragraphs (a)(10)(iii)(A) and
(b)(8)(iii)(A) to proposed Rule 18a-5 would reduce the initial burden
associated with proposed Rule 18a-5 by 127 hours \571\ and it would
reduce the ongoing burden associated with proposed Rule 18a-5 by 158
hours.\572\
---------------------------------------------------------------------------

    \571\ Initial burden hours associated with paragraphs (a)(10)
and (b)(8) of proposed Rule 18a-5 for stand-alone and bank security-
based swap dealers and major security-based swap participants, as
proposed--
    20 hours x [9 stand-alone security-based swap dealers + 25 bank
security-based swap dealers] = 20 hours x 34 security-based swap
dealers = 680 initial burden hours for security-based swap dealers.
    20 hours x 4 stand-alone major security-based swap participants
= 80 initial burden hours for major security-based swap
participants.
    Initial burden hour reduction:
    680 initial burden hours for security-based swap dealers x 16.7%
(see supra note 569) = 114 hours. 80 initial burden hours for major
security-based swap participants x 16.1% (see supra note 570) = 13
hours. A 114 hour reduction in the initial burden for security-based
swap dealers + a 13 hour reduction in the initial burden for major
security-based swap participants = a 127 hour reduction in initial
burden hours across all entities able to rely on paragraphs (a)(10)
and (b)(8) of proposed Rule 18a-5.
    \572\ Ongoing burden hours associated with paragraph (a)(10) and
(b)(8) of proposed Rule 18a-5 for stand-alone and bank security-
based swap dealers and major security-based swap participants, as
proposed--
    25 hours x [9 stand-alone security-based swap dealers + 25 bank
security-based swap dealers] = 20 hours x 34 security-based swap
dealers = 850 ongoing burden hours for security-based swap dealers.
    25 hours x 4 stand-alone major security-based swap participants
= 100 ongoing burden hours for major security-based swap
participants.
    Ongoing burden hour reduction:
    850 ongoing burden hours for security-based swap dealers x 16.7%
(see supra note 569) = 142 hours. 100 ongoing burden hours for major
security-based swap participants x 16.1% (see supra note 570) = 16
hours. A 142 hour reduction in the ongoing burden for security-based
swap dealers + a 16 hour reduction in the ongoing burden for major
security-based swap participants = a 158 hour reduction in ongoing
burden hours across all entities able to rely on paragraphs (a)(10)
and (b)(8) of proposed Rule 18a-5.
---------------------------------------------------------------------------

Proposed Addition of Paragraphs (a)(10)(iii)(B) and (b)(8)(iii)(B)
    The Commission estimates that the proposed modification to add
paragraphs (a)(10)(iii)(B) and (b)(8)(iii)(B) to proposed Rule 18a-5
would decrease the paperwork burden for stand-alone and bank SBS
Entities by permitting the exclusion of certain information mandated by
the questionnaire requirement with respect to associated natural
persons who effect or are involved in effecting security-based swap
transactions with U.S. counterparties where the receipt of that
information, or the creation or maintenance of records reflecting such
information, would result in a violation of applicable law in the
jurisdiction where the associated person is employed or located.
    As indicated above, the Commission estimates that there will be
approximately 4 stand-alone major security-based swap participants, 9
stand-alone security-based swap dealers and 25 bank security-based swap
dealers. Further, as indicated above, each security-based swap dealer
would have approximately 420 associated persons and half of those
associated persons, or 210, would not be employed or located in the
U.S. The Commission estimates that these new paragraphs would permit
stand-alone and bank security-based swap dealers to exclude certain
information mandated by the questionnaire requirement for approximately
one third of those

associated persons, or 70.\573\ Similarly, as indicated above, each
major security-based swap participant would have approximately 62
associated persons and half of those associated persons, or 31, would
not be employed or located in the U.S. The Commission estimates that
these new paragraphs would permit stand-alone and bank major security-
based swap participants to exclude certain information mandated by the
questionnaire requirement for approximately one third of those
associated persons, or 10.\574\
---------------------------------------------------------------------------

    \573\ See note 569, supra.
    \574\ See note 570, supra.
---------------------------------------------------------------------------

    The Commission estimates that this will reduce the burdens
associated with obtaining the information specified in the
questionnaire requirement by 50% for the affected associated persons.
Given this, the addition of paragraphs (a)(10)(iii)(B) and
(b)(8)(iii)(B) to proposed Rule 18a-5 would reduce the initial burden
associated with proposed Rule 18a-5 by 63 hours \575\ and would reduce
the ongoing burden associated with proposed Rule 18a-5 by 79
hours.\576\
---------------------------------------------------------------------------

    \575\ Initial burden hours associated with paragraphs (a)(10)
and (b)(8) of proposed Rule 18a-5 for stand-alone and bank security-
based swap dealers and major security-based swap participants, as
proposed--
    20 hours x [9 stand-alone security-based swap dealers + 25 bank
security-based swap dealers] = 20 hours x 34 security-based swap
dealers = 680 initial burden hours for security-based swap dealers.
    20 hours x 4 stand-alone major security-based swap participants
= 80 initial burden hours for major security-based swap
participants.
    Initial burden hour reduction:
    [680 initial burden hours for security-based swap dealers x
16.7% (see supra note 569 x 50%] = 57 hours. [80 initial burden
hours for major security-based swap participants x 16.1% (see supra
note 570) x 50%] = 6 hours. A 57 hour reduction in the initial
burden for security-based swap dealers + a 6 hour reduction in the
initial burden for major security-based swap participants = a 63
hour reduction in initial burden hours across all entities able to
rely on paragraphs (a)(10) and (b)(8) of proposed Rule 18a-5.
    \576\ Ongoing burden hours associated with paragraph (a)(10) and
(b)(8) of proposed Rule 18a-5 for stand-alone and bank security-
based swap dealers and major security-based swap participants, as
proposed--
    25 hours x [9 stand-alone security-based swap dealers + 25 bank
security-based swap dealers] = 20 hours x 34 security-based swap
dealers = 850 ongoing burden hours for security-based swap dealers.
    25 hours x 4 stand-alone major security-based swap participants
= 100 ongoing burden hours for major security-based swap
participants.
    Ongoing burden hour reduction:
    [850 ongoing burden hours for security-based swap dealers x
16.7% (see supra note 569) x 50%] = 71 hours. [100 ongoing burden
hours for major security-based swap participants x 16.1% (see supra
note 570) x 50%] = 8 hours. A 71 hour reduction in the ongoing
burden for security-based swap dealers + a 8 hour reduction in the
ongoing burden for major security-based swap participants = a 79
hour reduction in ongoing burden hours across all entities able to
rely on paragraphs (a)(10) and (b)(8) of proposed Rule 18a-5.
---------------------------------------------------------------------------

    Thus, in total, the addition of both paragraphs (a)(10)(iii)(A) and
(b)(8)(iii)(A) and paragraphs (a)(10)(iii)(B) and (b)(8)(iii)(B) would
reduce the initial burden associated with the questionnaire requirement
in proposed Rule 18a-5 by 190 hours,\577\ and the ongoing burden
associated with the questionnaire requirement in proposed Rule 18a-5 by
237 hours.\578\
---------------------------------------------------------------------------

    \577\ A 127 hour reduction in initial burden hours associated
with the addition of paragraphs (a)(10)(iii)(A) and (b)(8)(iii)(A)
and a 63 hour reduction in initial burden hours associated with the
addition of paragraphs (a)(10)(iii)(B) and (b)(8)(iii)(B) = a 190
hour reduction in initial burden hours.
    \578\ A 158 hour reduction in ongoing burden hours associated
with the addition of paragraphs (a)(10)(iii)(A) and (b)(8)(iii)(A)
and a 79 hour reduction in ongoing burden hours associated with the
addition of paragraphs (a)(10)(iii)(B) and (b)(8)(iii)(B) = a 237
hour reduction in ongoing burden hours.
---------------------------------------------------------------------------

5. Collection of Information Is Mandatory
    The collections of information pursuant to the proposed
modifications to the proposed new rule would be mandatory, as
applicable, for SBS Entities.
6. Confidentiality
    Information that an SBS Entity would be required to make and keep
current under proposed Rule 18a-5 would be maintained by the firm. To
the extent that the Commission collects such records during an
inspection or examination of a registered SBS Entity, or through some
other means, such records would generally be kept confidential, subject
to the provisions of applicable law.\579\
---------------------------------------------------------------------------

    \579\ See, e.g., 5 U.S.C. 552 et seq.; 15 U.S.C. 78x (governing
the public availability of information obtained by the Commission).
---------------------------------------------------------------------------

7. Retention Period for Recordkeeping Requirements
    Proposed Rule 18a-6 would establish the required retention periods
for SBS Entities to maintain records collected in accorded with
proposed Rule 18a-5.\580\ Under paragraph (d)(1) of proposed Rule 18a-
6, an SBS Entity would be required to maintain and preserve in an
easily accessible place the records required under paragraphs (a)(10)
and (b)(8) of proposed Rule 18a-5 until at least three years after the
associated person's employment and any other connection with the SBS
Entity has terminated.
---------------------------------------------------------------------------

    \580\ See proposed Rule 18a-6, Recordkeeping and Reporting
Proposing Release.
---------------------------------------------------------------------------

C. Request for Comment

    Pursuant to 44 U.S.C. 3506(c)(2)(B), the Commission solicits
comment to:
     Evaluate whether the proposed collection of information is
necessary for the proper performance of the Commission's functions,
including whether the information shall have practical utility;
     Evaluate the accuracy of the Commission's estimate of the
burden of the proposed collection of information;
     Determine whether there are ways to enhance the quality,
utility, and clarity of the information to be collected; and
     Evaluate whether there are ways to 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.
    In addition, the Commission requests comment, including empirical
data in support of comments, in response to the following questions:
     Are the Commission's estimates regarding the numbers of
respondents relative to the proposed modifications to proposed Rule
18a-5 accurate? If so, please provide empirical support for the
Commission's estimate. If not, please provide a suggested estimate and
empirical support for it.
     Are the Commission's estimates regarding the amount of
time it would take to make and keep current the questionnaire or
application for employment or other related records accurate? If so,
please provide empirical support for the Commission's estimate. If not,
please provide a suggested estimate and empirical support for it.
     Do stand-alone SBS Entities already have established
record making and record preservation systems? If so, please explain
those systems so they can be taken into account in the Commission's
burden estimates.
    Persons submitting comments on the collection of information
requirements should direct them to the Office of Management and Budget,
Attention: Desk Officer for the Securities and Exchange Commission,
Office of Information and Regulatory Affairs, Washington, DC 20503, and
should also send a copy of their comments to [ ], Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090,
with reference to File Number [ ]. Requests for materials submitted to
OMB by the Commission with regard to this collection of information
should be in writing, with reference to File Number [ ] and be
submitted to the Securities and Exchange Commission, Office of FOIA/PA
Services, 100 F Street NE, Washington, DC 20549-2736. As OMB is
required to make a decision concerning the collection of information

between 30 and 60 days after publication, a comment to OMB is best
assured of having its full effect if OMB receives it within 30 days of
publication.

IX. Consideration of Impact on the Economy

    For purposes of the Small Business Regulatory Enforcement Fairness
Act of 1996 (``SBREFA'') \581\ the Commission requests comment on the
potential effect of this proposal on the United States economy on an
annual basis. The Commission also requests comment on any potential
increases in costs or prices for consumers or individual industries,
and any potential effect on competition, investment, or innovation.
Commenters are requested to provide empirical data and other factual
support for their views to the extent possible.
---------------------------------------------------------------------------

    \581\ Public Law 104-121, Title II, 110 Stat. 857 (1996)
(codified in various sections of 5 U.S.C., 15 U.S.C. and as a note
to 5 U.S.C. 601).
---------------------------------------------------------------------------

X. Regulatory Flexibility Act Certification

    Section 3(a) of the Regulatory Flexibility Act of 1980 (``RFA'')
\582\ requires the Commission to undertake an initial regulatory
flexibility analysis of the impact of the proposed rule amendments on
small entities unless the Commission certifies that the rule, if
adopted, would not have a significant impact on a substantial number of
``small entities.'' \583\
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    \582\ 5 U.S.C. 603(a).
    \583\ 5 U.S.C. 605(b).
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    For purposes of Commission rulemaking in connection with the
RFA,\584\ a small entity includes: (1) When used with reference to an
``issuer'' or a ``person,'' other than an investment company, an
``issuer'' or ``person'' that, on the last day of its most recent
fiscal year, had total assets of $5 million or less; \585\ or (2) a
broker-dealer with total capital (net worth plus subordinated
liabilities) of less than $500,000 on the date in the prior fiscal year
as of which its audited financial statements were prepared pursuant to
Rule 17a-5(d) under the Exchange Act,\586\ or, if not required to file
such statements, a broker-dealer with total capital (net worth plus
subordinated liabilities) of less than $500,000 on the last day of the
preceding fiscal year (or in the time that it has been in business, if
shorter); and is not affiliated with any person (other than a natural
person) that is not a small business or small organization.\587\ Under
the standards adopted by the Small Business Administration, small
entities in the finance and insurance industry include the following:
(i) For entities engaged in credit intermediation and related
activities, entities with $175 million or less in assets; \588\ (ii)
for entities engaged in non-depository credit intermediation and
certain other activities, entities with $7 million or less in annual
receipts;-\589\ (iii) for entities engaged in financial investments and
related activities, entities with $7 million or less in annual
receipts; \590\ (iv) for insurance carriers and entities engaged in
related activities, entities with $7 million or less in annual
receipts; \591\ and (v) for funds, trusts, and other financial
vehicles, entities with $7 million or less in annual receipts.\592\
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    \584\ Although Section 601(b) of the RFA defines the term
``small entity,'' the statute permits agencies to formulate their
own definitions. The Commission has adopted definitions for the term
``small entity'' for the purposes of Commission rulemaking in
accordance with the RFA. Those definitions, as relevant to this
proposed rulemaking, are set forth in Rule 0-10 under the Exchange
Act, 17 CFR 240.0-10. See Exchange Act Release No. 18451 (Jan. 28,
1982), 47 FR 5215 (Feb. 4, 1982) (File No. AS-305).
    \585\ See 17 CFR 240.0-10(a).
    \586\ See 17 CFR 240.17a-5(d).
    \587\ See 17 CFR 240.0-10(c).
    \588\ See 13 CFR 121.201 (Subsector 522).
    \589\ See id. at Subsector 522.
    \590\ See id. at Subsector 523.
    \591\ See id. at Subsector 524.
    \592\ See id. at Subsector 525.
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    For purposes of the proposed exception to Exchange Act rule 3a71-3,
the Commission continues to believe that the types of entities that
would engage in more than a de minimis amount of dealing activity
involving security-based swaps would not be ``small entities'' for
purposes of the RFA.\593\ Moreover, based on feedback from market
participants and information about the security-based swap markets, the
Commission expects that all of the firms that are likely to make use of
the proposed exception to Rule 3a71-3--are part of large financial
institutions that exceed the thresholds defining ``small entities'' as
set forth above.\594\
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    \593\ See Cross-Border Adopting Release, 79 FR at 47368.
    \594\ See part VII.A.7, supra (discussing persons potentially
likely to use the proposed exception to Rule 3a71-3); see also U.S.
Activity Proposing Release, 80 FR at 27508 (``we believe that firms
that are likely to engage in security-based swap dealing activity at
levels that may lead them to perform de minimis calculations under
the ``security-based swap dealer'' definition are large financial
institutions that exceed the thresholds defining ``small
entities'').
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    As discussed, the proposed exception to Exchange Act Rule 3a71-3
would be subject to conditions requiring arranging, negotiating or
executing activity to be conducted by affiliated registered security-
based swap dealers (under alternatives 1 or 2) or by affiliated
registered brokers or security-based swap dealers (under alternative 2)
that are affiliated with the non-U.S. persons relying on the exception.
It is possible that some non-U.S. persons may set up new security-based
swap dealers or new brokers to make use of the exception, while
recognizing that other non-U.S. persons that seek to make use of the
proposed exception instead may make use of affiliated security-based
swap dealers that have an additional business of engaging in dealing
activity above the de minimis thresholds with U.S. counterparties
(under either alternative), or would make use of existing affiliated
registered broker-dealers (under alternative 2).\595\ By definition,
any such affiliated existing or new broker-dealer would not be a
``small entity.'' \596\ Moreover, even in the unlikely event that some
non-U.S. persons were to satisfy the exception's conditions via the use
of affiliated registered security-based swap dealers that fall within
the definition of ``small entity'' for purposes of the RFA,\597\ the
Commission preliminarily believes that there would not be a substantial
number of such entities.\598\
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    \595\ See part VII.A.7, supra (discussing likely broker-dealer
or security-based swap dealer affiliates of persons expected to rely
on exemption).
    \596\ The ``small entity'' definition applied to broker-dealers
excludes broker-dealers that are affiliated with a person that is
not a ``small entity.'' See Exchange Act Rule 0-10(c)(2), (i)(1)
(basing affiliation on an 25 percent ownership standard that is
narrower than the majority ownership standard used in connection
with this proposed conditional exception). Because the non-U.S.
persons relying on this exception would not be ``small entities,''
any such affiliated broker also would not be a ``small entity.''
    \597\ As noted, if the person engaged in market-facing activity
in the United States is a registered security-based swap dealer (as
required by alternative 1 and permitted by alternative 2) that has
an additional business of engaging in dealing activity above the de
minimis thresholds with U.S. counterparties, the Commission
preliminarily believes that the person would not be a ``small
entity.''
    \598\ Similarly, the Commission preliminarily believes that
there would not be a significant number of ``small entities'' that
may file ``listed jurisdiction'' applications pursuant to the
proposed amendments to Exchange Act Rule 0-13. This conclusion
reflects the same reasons, as well as the expectation that the
majority of such applications would be filed by foreign authorities.
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    Based on feedback from industry participants about the security-
based swap markets, the Commission continues to believe that entities
that will qualify as SBS Entities exceed the thresholds defining
``small entities.'' Thus, the Commission believes that any SBS Entities
that may seek to rely on the proposed amendment to Rule 15Fb2-1

would not be ``small entities'' for purposes of the RFA.\599\
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    \599\ See Registration Adopting Release, 80 FR at 49013.
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    The Commission also continues to believe that any SBS Entities--
i.e., registered security-based swap dealers and registered major
security-based swap participants--with associated persons that may be
the subject of the proposed amendments to Rule of Practice 194 would
not be ``small entities'' for purposes of the RFA.\600\
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    \600\ We previously have concluded, based on feedback from
market participants and the Commission's information regarding the
security-based swap market, that the types of entities that may have
security-based swap positions above the level required to register
as SBS Entities would not be ``small entities'' for purposes of the
RFA. See Cross-Border Adopting Release, 79 FR at 47368; see also
``Applications by Security-based Swap Dealers or Major Security-
Based Participants for Statutorily Disqualified Associated Persons
to Effect or Be Involved in Effecting Security-Based Swaps,'' 80 FR
51684 (Aug 25, 2015), at 51718, and Rule of Practice 194 Adopting
Release, 84 FR at 4944.
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    The Commission further continues to believe that it is unlikely
that the requirements applicable to SBS Entities that would be
established under the proposed modifications to proposed Rule 18a-5
would have a significant economic impact on any small entity because no
SBS Entity will be a small entity.\601\
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    \601\ See Recordkeeping and Reporting Proposing Release, 79 FR
at 25296.
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    Accordingly, the Commission preliminarily believes that it is
unlikely that the proposed amendments regarding the security-based swap
dealer cross-border de minimis counting requirement and regarding
associated persons of SBS Entities would have a significant economic
impact on a substantial number of small entities.\602\
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    \602\ See also parts VI (Economic Analysis) and VII (Paperwork
Reduction Act) (discussing, among other things, the economic impact,
including the estimated compliance costs and burdens, of the
amendments).
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    For the foregoing reasons, the Commission certifies that the
proposed amendments to Exchange Act Rules 3a71-3, 15Fb2-1, 0-13, and
Rule of Practice 194 and the proposed modifications to proposed Rule
18a-5 would not have a significant economic impact on a substantial
number of small entities for purposes of the RFA. The Commission
encourages written comments regarding this certification, and requests
that commenters describe the nature of any impact on small entities and
provide empirical data to illustrate the extent of the impact.

XI. Statutory Basis and Text of Proposed Rules

    Pursuant to the Exchange Act, 15 U.S.C. 78a et seq., and
particularly Sections 3(a)(71), 3(b), 15F (as added by Section 764(a)
of the Dodd-Frank Act), 17(a), 23(a), and 30(c) thereof, and Section
761(b) of the Dodd-Frank Act, the Commission is proposing to amend Rule
of Practice 194 and Rules 0-13, 3a71-3, 15Fb2-1, and proposing to
modify proposed Rule 18a-5 under the Exchange Act.

List of Subjects

17 CFR Part 201

    Administrative practice and procedure, Brokers, Claims,
Confidential business information, Equal access to justice, Lawyers,
Penalties, Securities.

17 CFR Part 240

    Brokers, Confidential business information, Fraud, Reporting and
recordkeeping requirements, Securities.

Text of Proposed Rules

    For the reasons stated in the preamble, the SEC is proposing to
amend Title 17, Chapter II of the Code of the Federal Regulations as
follows:

PART 201--RULES OF PRACTICE

0
1. The general authority citation for Subpart D is revised to read as
follows:

    Authority:  15 U.S.C. 77f, 77g, 77h, 77h-1, 77j, 77s, 77u,
77sss, 77ttt, 78(c)(b), 78d-1, 78d-2, 78l, 78m, 78n, 78o(d), 78o-3,
78o-10(b)(6), 78s, 78u-2, 78u-3, 78v, 78w, 80a-8, 80a-9, 80a-37,
80a-38, 80a-39, 80a-40, 80a-41, 80a-44, 80b-3, 80b-9, 80b-11, 80b-
12, 7202, 7215, and 7217.
* * * * *
0
 2. Amend Sec.  201.194 by re-designating paragraph (c) as paragraph
(c)(1), adding a new heading to paragraph (c) and paragraph (c)(2) to
read as follows:

Sec.  201.194   Applications by Security-Based Swap Dealers or Major
Security-Based Swap Participants for Statutorily Disqualified
Associated Persons To Effect or Be Involved In Effecting Security-Based
Swaps.

* * * * *
    (c) Exclusions. (1) * * *.
    (2) Exclusion for Certain Associated Natural Persons. A security-
based swap dealer or major security-based swap participant shall be
excluded from the prohibition in Section 15F(b)(6) of the Exchange Act
(15 U.S.C. 78o-10(b)(6)) with respect to an associated person who is a
natural person who (i) is not a U.S. person (as defined in 17 CFR
240.3a71-3(a)(4)(i)(A)) and (ii) does not effect and is not involved in
effecting security-based swap transactions with or for counterparties
that are U.S. persons (as defined in 17 CFR 240.3a71-3(a)(4)), other
than a security-based swap transaction conducted through a foreign
branch (as that term is defined in 17 CFR 240.3a71-3(a)(3)) of a
counterparty that is a U.S. person; provided, however, that this
exclusion shall not be available if the associated person of that
security-based swap dealer or major security-based swap participant is
currently subject to any order described in subparagraphs (A) and (B)
of Section 3(a)(39) of the Exchange Act, with the limitation that an
order by a foreign financial regulatory authority described in
subparagraphs (B)(i) and (B)(iii) of Section 3(a)(39) (15 U.S.C.
78c(a)(39)(B)(i) and (B)(iii)) shall only apply to orders by a foreign
financial regulatory authority in the jurisdiction where the associated
person is employed or located.
* * * * *

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF
1934

0
3. The general authority citation for part 240 continues to read as
follows:

     Authority:  15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3,
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78c-3, 78c-5, 78d, 78e, 78f,
78g, 78i, 78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78n-1, 78o, 78o-4,
78o-10, 78p, 78q, 78q-1, 78s, 78u-5, 78w, 78x, 78ll, 78mm, 80a-20,
80a-23, 80a-29, 80a-37, 80b-3, 80b-4, 80b-11, 7201 et seq.; and
8302; 7 U.S.C. 2(c)(2)(E); 12 U.S.C. 5221(e)(3); 18 U.S.C. 1350; and
Pub. L. 111-203, 939A, 124 Stat. 1887 (2010); and secs. 503 and 602,
Pub. L. 112-106, 126 Stat. 326 (2012), unless otherwise noted.
* * * * *
0
4. Amend Sec.  240.0-13 by revising the heading and paragraphs (a), (b)
and (e) to read as follows:

Sec.  240.0-13   Commission procedures for filing applications to
request a substituted compliance or listed jurisdiction order under the
Exchange Act.

    (a) The application shall be in writing in the form of a letter,
must include any supporting documents necessary to make the application
complete, and otherwise must comply with Sec.  240.0-3. All
applications must be submitted to the Office of the Secretary of the
Commission, by a party that potentially would comply with requirements
under the Exchange Act pursuant to a substituted compliance or listed
jurisdiction order, or by the relevant foreign financial regulatory
authority or authorities. If an application is incomplete, the
Commission may request that the application be withdrawn unless the
applicant can justify, based on all the facts and circumstances, why
supporting materials have not been submitted and

undertakes to submit the omitted materials promptly.
    (b) An applicant may submit a request electronically. The
electronic mailbox to use for these applications is described on the
Commission's website at www.sec.gov in the ``Exchange Act Substituted
Compliance and Listed Jurisdiction Applications'' section. In the event
electronic mailboxes are revised in the future, applicants can find the
appropriate mailbox by accessing the ``Electronic Mailboxes at the
Commission'' section.
* * * * *
    (e) Every application (electronic or paper) must contain the name,
address, telephone number, and email address of each applicant and the
name, address, telephone number, and email address of a person to whom
any questions regarding the application should be directed. The
Commission will not consider hypothetical or anonymous requests for a
substituted compliance or listed jurisdiction order. Each applicant
shall provide the Commission with any supporting documentation it
believes necessary for the Commission to make such determination,
including information regarding applicable requirements established by
the foreign financial regulatory authority or authorities, as well as
the methods used by the foreign financial regulatory authority or
authorities to monitor and enforce compliance with such rules.
Applicants should also cite to and discuss applicable precedent.
* * * * *
0
5. Amend Sec.  240.3a71-3 by adding paragraphs (a)(10), (a)(11), and
(a)(12), amending paragraph (b)(1)(iii)(C), and adding paragraph (d) to
read as follows:

Sec.  240.3a71-3  Cross-border security-based swap dealing activity.

    (a) * * *
    (10) An entity is a majority-owned affiliate of another entity if
the entity directly or indirectly owns a majority interest in the
other, or if a third party directly or indirectly owns a majority
interest in both entities, where ``majority interest'' is the right to
vote or direct the vote of a majority of a class of voting securities
of an entity, the power to sell or direct the sale of a majority of a
class of voting securities of an entity, or the right to receive upon
dissolution, or the contribution of, a majority of the capital of a
partnership.
    (11) Foreign associated person means a natural person domiciled
outside the United States who--with respect to a non-U.S. person
relying on the exception set forth in paragraph (d) of this section--is
a partner, officer, director, or branch manager of such non-U.S. person
(or any person occupying a similar status or performing similar
functions), any person directly or indirectly controlling, controlled
by, or under common control with such non-U.S. person, or any employee
of such non-U.S. person.
    (12) Listed jurisdiction means any jurisdiction that the Commission
by order has designated as a listed jurisdiction for purposes of the
exception specified in paragraph (d) of this section.
    (b) * * *
    (1) * * *
    (iii) * * *
    (C) Except as provided in paragraph (d) of this section, or unless
such person is a person described in paragraph (a)(4)(iii) of this
section, security-based swap transactions connected with such person's
security-based swap dealing activity that are arranged, negotiated, or
executed by personnel of such non-U.S. person located in a U.S. branch
or office, or by personnel of an agent of such non-U.S. person located
in a U.S. branch or office; and
* * * * *

Alternative 1

    (d) Exception from counting certain transactions. The counting
requirement described by paragraph (b)(1)(iii)(C) of this section will
not apply to the security-based swap dealing transactions of a non-U.S.
person if the conditions of paragraph (d)(1) of this section have been
satisfied.
    (1) Conditions. (i) Entity conducting U.S. activity. All activity
that otherwise would cause a security-based swap transaction to be
described by paragraph (b)(1)(iii)(C) of this section--namely, all
arranging, negotiating or executing activity that is conducted by
personnel of the entity (or its agent) located in a branch or office in
the United States--is conducted by such U.S. personnel in their
capacity as persons associated with an entity that:
    (A) Is registered with the Commission as a security-based swap
dealer; and
    (B) Is a majority-owned affiliate of the non-U.S. person relying on
this exception.
    (ii) Compliance with specified security-based swap dealer
requirements. (A) Compliance required. In connection with such
transactions, the registered entity described in paragraph (d)(1)(i) of
this section complies with the requirements described in paragraph
(d)(1)(ii)(B) of this section as if the counterparties to the non-U.S.
person relying on this exception also were counterparties to the
registered entity.
    (B) Applicable requirements. The compliance obligation described in
paragraph (d)(1)(ii)(A) of this section applies to the following
provisions of the Act and the rules and regulations thereunder:
    (1) Section 15F(h)(3)(B)(i), (ii) and rule 15Fh-3(b) thereunder,
including in connection with material incentives and conflicts of
interest associated with the non-U.S. person relying on the exception;
    (2) Rule 15Fh-3(f);
    (3) Section 15F(h)(3)(C) of the Act and rule 15Fh-3(g) thereunder;
    (4) Rules 15Fi-1 and 15Fi-2; and
    (5) Rule 15Fi-3, provided, however, that the registered entity
described in paragraph (d)(1)(i) of this section will not be required
to comply with rule 15Fi-3 in connection with the transaction following
the initial portfolio reconciliation of the security-based swap
resulting from the transaction.
    (C) Other compliance requirements. The compliance obligation
described in paragraph (d)(1)(ii)(A) of this section does not apply to
the following provisions of the Act and the rules and regulations
thereunder:
    (1) Section 15F(h)(3)(A) of the Act and rule 15Fh-3(a)(1)
thereunder;
    (2) Section 15F(h)(3)(B)(iii) and rule 15Fh-3(c) thereunder; and
    (3) Rule 15Fh-3(d);
    (4) Rule 15Fh-3(e);
    (5) Rule 15Fi-4; and
    (6) Rule 15Fi-5.
    (iii) Commission access to books, records and testimony. (A) The
non-U.S. person relying on this exception promptly provides
representatives of the Commission (upon request of the Commission or
its representatives or pursuant to a supervisory or enforcement
memorandum of understanding or other arrangement or agreement reached
between any foreign securities authority, including any foreign
government, as specified in section 3(a)(50) of the Act, and the
Commission or the U.S. Government) with any information or documents
within the non-U.S. person's possession, custody, or control, promptly
makes its foreign associated persons available for testimony, and
provides any assistance in taking the evidence of other persons,
wherever located, that the Commission or its representatives requests
and that relates to transactions subject to this exception, provided,
however, that if, after exercising its best efforts, the non-U.S.
person is prohibited by applicable foreign law or regulations from
providing such information, documents, testimony, or assistance, the
non-U.S.

person may continue to rely on this exception until the Commission
issues an order modifying or withdrawing an associated ``listed
jurisdiction'' determination pursuant to paragraph (d)(2)(iii) of this
section.
    (B) The registered entity described in paragraph (d)(1)(i) of this
section:
    (1) Creates and maintains books and records relating to the
transactions subject to this exception that are required, as
applicable, by rules 17a-3 and 17a-4, or by rules 18a-5 and 18a-6,
including any books and records requirements relating to the provisions
specified in paragraph (d)(1)(ii)(B) of this section;
    (2) Obtains from the non-U.S. person relying on the exception, and
maintains, documentation encompassing all terms governing the trading
relationship between the non-U.S. person and its counterparty relating
to the transactions subject to this exception, including, without
limitation, terms addressing payment obligations, netting of payments,
events of default or other termination events, calculation and netting
of obligations upon termination, transfer of rights and obligations,
allocation of any applicable regulatory reporting obligations,
governing law, valuation, and dispute resolution; and
    (3) Obtains from the non-U.S. person relying on this exception
written consent to service of process for any civil action brought by
or proceeding before the Commission, providing that process may be
served on the non-U.S. person by service on the registered entity in
the manner set forth in the registered entity's current Form SBSE,
SBSE-A or SBSE-BD, as applicable.
    (iv) Disclosures. In connection with the transaction, the
registered entity described in paragraph (d)(1)(i) of this section
notifies the counterparties of the non-U.S. person relying on this
exception that the non-U.S. person is not registered with the
Commission as a security-based swap dealer, and that certain Exchange
Act provisions or rules addressing the regulation of security-based
swaps would not be applicable in connection with the transaction,
including provisions affording clearing rights to counterparties. Such
disclosure shall be provided contemporaneously with, and in the same
manner as, the arranging, negotiating, or executing activity at issue.
This disclosure will not be required if the identity of that
counterparty is not known to that registered entity at a reasonably
sufficient time prior to the execution of the transaction to permit
such disclosure.
    (v) Subject to regulation of a listed jurisdiction. The non-U.S.
person relying on this exception is subject to the margin and capital
requirements of a listed jurisdiction when engaging in transactions
subject to this exception.
    (2) Order for listed jurisdiction designation. The Commission by
order, may conditionally or unconditionally determine that a foreign
jurisdiction is a listed jurisdiction for purposes of this section. The
Commission may make listed jurisdiction determinations in response to
applications, or upon the Commission's own initiative.
    (i) Applications. Applications for an order requesting listed
jurisdiction status may be made by a party or group of parties that
potentially would seek to rely on the exception provided by paragraph
(d) of this section, or by any foreign financial regulatory authority
or authorities supervising such a party or its security-based swap
activities. Applications must be filed pursuant to the procedures set
forth in Sec.  240.0-13.
    (ii) Criteria considered. In considering a foreign jurisdiction's
potential status as a listed jurisdiction, the Commission may consider
factors relevant for purposes of assessing whether such an order would
be in the public interest, including:
    (A) Applicable margin and capital requirements of the foreign
financial regulatory system; and
    (B) The effectiveness of the supervisory compliance program
administered by, and the enforcement authority exercised by, the
foreign financial regulatory authority in connection with such
requirements, including the application of those requirements in
connection with an entity's cross-border business.
    (iii) Withdrawal or modification of listed jurisdiction status. The
Commission may, on its own initiative, by order after notice and
opportunity for comment, modify or withdraw a jurisdiction's status as
a listed jurisdiction, if the Commission determines that continued
listed jurisdiction status no longer would be in the public interest,
based on:
    (A) The criteria set forth in paragraph (d)(2)(ii) of this section;
    (B) Any laws or regulations that have had the effect of preventing
the Commission or its representatives, on request, to promptly access
information or documents regarding the activities of persons relying on
the exception provided by this paragraph (d), to obtain the testimony
of foreign associated persons, and to obtain the assistance of persons
relying on this exception in taking the evidence of other persons,
wherever located, as described in paragraph (d)(1)(iii)(A) of this
section; and
    (C) Any other factor the Commission determines to be relevant to
whether continued status as a listed jurisdiction would be in the
public interest.

Alternative 2

    (d) Exception from counting certain transactions. The counting
requirement described by paragraph (b)(1)(iii)(C) of this section will
not apply to the security-based swap dealing transactions of a non-U.S.
person if the conditions of paragraph (d)(1) of this section have been
satisfied.
    (1) Conditions. (i) Entity conducting U.S. activity. All activity
that otherwise would cause a security-based swap transaction to be
described by paragraph (b)(1)(iii)(C) of this section--namely, all
arranging, negotiating or executing activity that is conducted by
personnel of the entity (or its agent) located in a branch or office in
the United States--is conducted by such U.S. personnel in their
capacity as persons associated with an entity that:
    (A) Is registered with the Commission as a broker or as a security-
based swap dealer; and
    (B) Is a majority-owned affiliate of the non-U.S. person relying on
this exception.
    (ii) Compliance with specified security-based swap dealer
requirements. (A) Compliance required. In connection with such
transactions, the registered entity described in paragraph (d)(1)(i) of
this section complies with the requirements described in paragraph
(d)(1)(ii)(B) of this section: (a) As if the counterparties to the non-
U.S. person relying on this exception also were counterparties to that
entity; and (b) as if that entity were registered with the Commission
as a security-based swap dealer, if it is not so registered.
    (B) Applicable requirements. The compliance obligation described in
paragraph (d)(1)(ii)(A) of this section applies to the following
provisions of the Act and the rules and regulations thereunder:
    (1) Section 15F(h)(3)(B)(i), (ii) and rule 15Fh-3(b) thereunder,
including in connection with material incentives and conflicts of
interest associated with the non-U.S. person relying on the exception;
    (2) Rule 15Fh-3(f);
    (3) Section 15F(h)(3)(C) of the Act and rule 15Fh-3(g) thereunder;
    (4) Rules 15Fi-1 and 15Fi-2; and
    (5) Rule 15Fi-3, provided, however, that the registered entity
described in paragraph (d)(1)(i) will not be required to comply with
rule 15Fi-3 in connection with the transaction following the initial
portfolio

reconciliation of the security-based swap resulting from the
transaction.
    (C) Other compliance requirements. The compliance obligation
described in paragraph (d)(1)(ii)(A) of this section does not apply to
the following provisions of the Act and the rules and regulations
thereunder:
    (1) Section 15F(h)(3)(A) of the Act and rule 15Fh-3(a)(1)
thereunder;
    (2) Section 15F(h)(3)(B)(iii) and rule 15Fh-3(c) thereunder;
    (3) Rule 15Fh-3(d);
    (4) Rule 15Fh-3(e);
    (5) Rule 15Fi-4; and
    (6) Rule 15Fi-5.
    (iii) Commission access to books, records and testimony. (A) The
non-U.S. person relying on this exception promptly provides
representatives of the Commission (upon request of the Commission or
its representatives or pursuant to a supervisory or enforcement
memorandum of understanding or other arrangement or agreement reached
between any foreign securities authority, including any foreign
government, as specified in section 3(a)(50) of the Act, and the
Commission or the U.S. Government) with any information or documents
within the non-U.S. person's possession, custody, or control, promptly
makes its foreign associated persons available for testimony, and
provides any assistance in taking the evidence of other persons,
wherever located, that the Commission or its representatives requests
and that relates to transactions subject to this exception, provided,
however, that if, after exercising its best efforts, the non-U.S.
person is prohibited by applicable foreign law or regulations from
providing such information, documents, testimony, or assistance, the
non-U.S. person may continue to rely on this exception until the
Commission issues an order modifying or withdrawing an associated
``listed jurisdiction'' determination pursuant to paragraph (d)(2)(iii)
of this section.
    (B) The registered entity described in paragraph (d)(1)(i) of this
section:
    (1) Creates and maintains books and records relating to the
transactions subject to this exception that are required, as
applicable, by rules 17a-3 and 17a-4, or by rules 18a-5 and 18a-6,
including any books and records requirements relating to the provisions
specified in paragraph (d)(1)(ii)(B) of this section;
    (2) Obtains from the non-U.S. person relying on the exception, and
maintains, documentation encompassing all terms governing the trading
relationship between the non-U.S. person and its counterparty relating
to the transactions subject to this exception, including, without
limitation, terms addressing payment obligations, netting of payments,
events of default or other termination events, calculation and netting
of obligations upon termination, transfer of rights and obligations,
allocation of any applicable regulatory reporting obligations,
governing law, valuation, and dispute resolution; and
    (3) Obtains from the non-U.S. person relying on this exception
written consent to service of process for any civil action brought by
or proceeding before the Commission, providing that process may be
served on the non-U.S. person by service on the registered entity in
the manner set forth in the registered entity's current Form BD, SBSE,
SBSE-A or SBSE-BD, as applicable.
    (iv) Disclosures. In connection with the transaction, the
registered entity described in paragraph (d)(1)(i) of this section
notifies the counterparties of the non-U.S. person relying on this
exception that the non-U.S. person is not registered with the
Commission as a security-based swap dealer, and that certain Exchange
Act provisions or rules addressing the regulation of security-based
swaps would not be applicable in connection with the transaction,
including provisions affording clearing rights to counterparties. Such
disclosure shall be provided contemporaneously with, and in the same
manner as, the arranging, negotiating, or executing activity at issue.
This disclosure will not be required if the identity of that
counterparty is not known to that registered entity at a reasonably
sufficient time prior to the execution of the transaction to permit
such disclosure.
    (v) Subject to regulation of a listed jurisdiction. The non-U.S.
person relying on this exception is subject to the margin and capital
requirements of a listed jurisdiction when engaging in the transactions
subject to this exception.
    (2) Order for listed jurisdiction designation. The Commission by
order, may conditionally or unconditionally determine that a foreign
jurisdiction is a listed jurisdiction for purposes of this section. The
Commission may make listed jurisdiction determinations in response to
applications, or upon the Commission's own initiative.
    (i) Applications. Applications for an order requesting listed
jurisdiction status may be made by a party or group of parties that
potentially would seek to rely on the exception provided by paragraph
(d) of this section, or by any foreign financial regulatory authority
or authorities supervising such a party or its security-based swap
activities. Applications must be filed pursuant to the procedures set
forth in Sec.  240.0-13.
    (ii) Criteria considered. In considering a foreign jurisdiction's
potential status as a listed jurisdiction, the Commission may consider
factors relevant for purposes of assessing whether such an order would
be in the public interest, including:
    (A) Applicable margin and capital requirements of the foreign
financial regulatory system; and
    (B) The effectiveness of the supervisory compliance program
administered by, and the enforcement authority exercised by, the
foreign financial regulatory authority in connection with such
requirements, including the application of those requirements in
connection with an entity's cross-border business.
    (iii) Withdrawal or modification of listed jurisdiction status. The
Commission may, on its own initiative, by order after notice and
opportunity for comment, modify or withdraw a jurisdiction's status as
a listed jurisdiction, if the Commission determines that continued
listed jurisdiction status no longer would be in the public interest,
based on:
    (A) The criteria set forth in paragraph (d)(2)(ii) of this section;
    (B) Any laws or regulations that have had the effect of preventing
the Commission or its representatives, on request, to promptly access
information or documents regarding the activities of persons relying on
the exception provided by this paragraph (d), to obtain the testimony
of their foreign associated persons, and to obtain the assistance of
persons relying on this exception in taking the evidence of other
persons, wherever located, as described in paragraph (d)(1)(iii)(A) of
this section; and
    (C) Any other factor the Commission determines to be relevant to
whether continued status as a listed jurisdiction would be in the
public interest.
    (4) Exception for person that engages in arranging, negotiating or
executing activity as agent. The registered entity described in
paragraph (d)(1)(i) of this section need not count, against the de
minimis thresholds described in Sec.  240.3a71-2(a)(1), the
transactions described by paragraph (d) of this section.
* * * * *
0
6. Amend Section 240.15Fb2-1 by revising paragraphs (d) and (e) to read
as follows:
    The additions read as follows.

Sec.  240.15Fb2-1   Registration of security-based swap dealers and
major security-based swap participants.

* * * * *
    (d) Conditional registration. (1) An applicant that has submitted a
complete Form SBSE-C (Sec.  249.1600c of this chapter) and a complete
Form SBSE (Sec.  249.1600 of this chapter) or Form SBSE-A (Sec.
249.1600a of this chapter) or Form SBSE-BD (Sec.  249.1600b of this
chapter), as applicable, in accordance with paragraph (b) within the
time periods set forth in Sec.  240.3a67-8 (if the person is a major
security-based swap participant) or Sec.  240.3a71-2(b) (if the person
is a security-based swap dealer), and has not withdrawn its
registration shall be conditionally registered.
    (2) Notwithstanding paragraph (d)(1) of this section, an applicant
that is a nonresident security-based swap dealer or nonresident major
security-based swap participant (each as defined in Rule 15Fb2-4(a))
that is unable to provide the certification and opinion of counsel
required by Rule 15Fb2-4(c)(1) shall be conditionally registered, for
up to 24 months after the compliance date for Rule 15Fb2-1, if the
nonresident applicant submits a Form SBSE-C (Sec.  249.1600c of this
chapter) and a Form SBSE (Sec.  249.1600 of this chapter), SBSE-A
(Sec.  249.1600a of this chapter) or SBSE-BD (Sec.  249.1600b of this
chapter), as applicable, in accordance with paragraph (b) within the
time periods set forth in Rule 3a67-8 (if the person is a major
security-based swap participant) or Rule 3a71-2(b) (if the person is a
security-based swap dealer), that is complete in all respects but for
the failure to provide the certification and the opinion of counsel
required by Rule 15Fb2-4(c)(1), and has not withdrawn from
registration.
    (e) Commission decision. (1) The Commission may deny or grant
ongoing registration to a security-based swap dealer or major security-
based swap participant based on a security-based swap dealer's or major
security-based swap participant's application, filed pursuant to
paragraph (a) of this section. The Commission will grant ongoing
registration if it finds that the requirements of Section 15F(b) of the
Securities Exchange Act of 1934 (15 U.S.C. 78o-10(b)) are satisfied.
The Commission may institute proceedings to determine whether ongoing
registration should be denied if it does not or cannot make such
finding or if the applicant is subject to a statutory disqualification
(as described in Sections 3(a)(39)(A) through (F) of the Securities
Exchange Act of 1934 (15 U.S.C. 78c(a)(39)(A)-(F)), or the Commission
is aware of inaccurate statements in the application. Such proceedings
shall include notice of the grounds for denial under consideration and
opportunity for hearing. At the conclusion of such proceedings, the
Commission shall grant or deny such registration.
    (2) If an applicant that is a nonresident security-based swap
dealer or nonresident major security-based swap participant (each as
defined in Rule 15Fb2-4(a)) has become conditionally registered in
reliance on paragraph (d)(2) of this section and provides the
certification and opinion of counsel required by Rule 15Fb2-4(c)(1)
within 24 months of the compliance date for Rule 15Fb2-1, the applicant
will remain conditionally registered until the Commission acts to grant
or deny ongoing registration in accordance with (e)(1) of this section.
If such applicant fails to provide the certification and opinion of
counsel required by Rule 15Fb2-4(c)(1) within 24 months of the
compliance date for Rule 15Fb2-1, the Commission may institute
proceedings to determine whether ongoing registration should be denied,
in accordance with paragraph (e)(1) of this section.
0
7. Section 240.18a-5, as proposed to be added at 79 FR 25193, May 2,
2014, is further amended by adding paragraphs (a)(10)(iii) and
(b)(8)(iii) to read as follows:

Sec.  240.18a-5   Records to be made by certain security-based swap
dealers and major security-based swap participants.

* * * * *
    (a) * * *
    (10) * * *
    (iii) Notwithstanding paragraph (a)(10)(i) of this section:
    (A) A security-based swap dealer or major security-based swap
participant is not required to make and keep current a questionnaire or
application for employment executed by an associated person if the
security-based swap dealer or major security-based swap participant is
excluded from the prohibition in Section 15F(b)(6) of the Exchange Act
(15 U.S.C. 78o-10(b)(6)) with respect to such associated person; and
    (B) a questionnaire or application for employment executed by an
associated person who is not a U.S. person (as that term is defined in
Sec.  240.3a71-3(a)(4)(i)(A)) need not include the information
described in paragraphs (a)(10)(i)(A) through (H) of this section if
the receipt of that information, or the creation or maintenance of
records reflecting that information, would result in a violation of
applicable law in the jurisdiction in which the associated person is
employed or located; provided, however, the security-based swap dealer
or major security-based swap participant must comply with Section
15F(b)(6) of the Exchange Act (15 U.S.C. 78o-10(b)(6)).
* * * * *
    (b) * * *
    (8) * * *
    (iii) Notwithstanding paragraph (b)(8)(i) of this section;
    (A) a security-based swap dealer or major security-based swap
participant is not required to make and keep current a questionnaire or
application for employment executed by an associated person if the
security-based swap dealer or major security-based swap participant is
excluded from the prohibition in Section 15F(b)(6) of the Exchange Act
(15 U.S.C. 78o-10(b)(6)) with respect to such associated person; and
    (B) a questionnaire or application for employment executed by an
associated person who is not a U.S. person (as that term is defined in
Sec.  240.3a71-3(a)(4)(i)(A)) need not include the information
described in paragraphs (b)(8)(i)(A) through (H) of this section if the
receipt of that information, or the creation or maintenance of records
reflecting that information, would result in a violation of applicable
law in the jurisdiction in which the associated person is employed or
located; provided, however, the security-based swap dealer or major
security-based swap participant must comply with Section 15F(b)(6) of
the Exchange Act (15 U.S.C. 78o-10(b)(6)).

    By the Commission.

    Dated: May 10, 2019.
Vanessa A. Countryman,
Acting Secretary.
[FR Doc. 2019-10016 Filed 5-23-19; 8:45 am]
 BILLING CODE 8011-01-P