SDR that the SDR can, as a matter of law, and will provide the
Commission with prompt access to the SDR's books and records and can,
as a matter of law, and will submit to onsite inspection and
examination by the Commission and (ii) provide an opinion of counsel
that the SDR can, as a matter of law, provide the Commission with
prompt access to the SDR's books and records can, as a matter of law,
and submit to onsite inspection and examination will be 1 hour and $900
per SDR.\1266\ Assuming a maximum of three non-resident SDRs,\1267\ the
aggregate one-time estimated dollar cost will be $3,840.\1268\
---------------------------------------------------------------------------

    \1266\ See Section VII.D.1 of this release discussing the cost
of non-resident SDRs' certification on Form SDR and opinion of
counsel.
    \1267\ See Section VII.C.1 of this release discussing the number
of non-resident SDRs.
    \1268\ The Commission estimates that an SDR will assign these
responsibilities to an Attorney. Data from SIFMA's Management &
Professional Earnings in the Securities Industry 2013, modified by
Commission staff to account for an 1800-hour work-year and
multiplied by 5.35 to account for bonuses, firm size, employee
benefits, and overhead, suggest that the cost of an Attorney is $380
per hour. Thus, the total estimated dollar cost of complying with
the requirements of Rule 13n-1(f) is $1,280 per year per SDR and
$3,840 per year for all SDRs, calculated as follows: ($900 for
outside legal services + (Attorney at $380 per hour for 1 hour)) x
(3 non-resident registrants) = $3,840.
---------------------------------------------------------------------------

    The Commission believes that the costs of filing Form SDR in a
tagged data format beyond the costs of collecting the required
information, will be minimal. The Commission does not believe that
these costs will be significant, as large-scale changes will likely not
be necessary for most modern data management systems to output
structured data files, particularly for widely used file formats such
as XML. XML is a widely used file format, and

based on the Commission's understanding of current practices, it is
likely that most reporting persons and third party service providers
have systems in place to accommodate the use of XML.
    The Commission solicited comment on the estimated costs associated
with the registration-related rules and Form SDR.\1269\ The Commission
specifically requested comment on the estimated number of respondents
that would be filing Form SDR and the initial costs associated with
completing the registration form and the ongoing annual costs of
completing the required amendments.\1270\
---------------------------------------------------------------------------

    \1269\ See Proposing Release, 75 FR at 77355, supra note 2.
    \1270\ See Proposing Release, 75 FR at 77355, supra note 2.
---------------------------------------------------------------------------

    One commenter expressed concern about non-resident SDRs being
subject to a stricter regime than resident SDRs because of the non-
resident SDRs' obligation to provide a certification and opinion of
counsel under Rule 13n-1(f).\1271\ The Commission acknowledges that
non-resident SDRs may incur costs in providing the certification and
opinion of counsel. The Commission believes, however, that these costs
may be avoided to the extent that non-resident SDRs are able to take
advantage of the SDR Exemption.
---------------------------------------------------------------------------

    \1271\ ESMA, supra note 19.
---------------------------------------------------------------------------

    The Commission did not receive any other comments on the estimated
costs associated with the registration-related rules and Form
SDR.\1272\
---------------------------------------------------------------------------

    \1272\ Although one commenter expressed concern that non-
resident SDRs would be subject to a stricter regulatory regime
because of the certification and opinion of counsel requirements,
the commenter did not comment specifically on the Commission's
estimates of the costs of providing such an opinion. See ESMA, supra
note 19.
---------------------------------------------------------------------------

c. Alternatives
    Following one commenter's suggestion, the Commission considered
requiring an SDR applicant to submit its rulebook \1273\ with its
initial Form SDR. As discussed above, the Commission has not adopted
this approach because an SDR is already required to provide policies
and procedures on Form SDR, and the Commission believes that most of
the information that would be contained in a rulebook would be filed as
part of an SDR's policies and procedures.\1274\ If an SDR's rulebook is
broader than its policies and procedures, however, an SDR may submit
its rulebook to the Commission to assist the Commission in better
understanding the context of the SDR's policies and procedures or how
the policies and procedures relate to one another.
---------------------------------------------------------------------------

    \1273\ See DTCC 3, supra note 19.
    \1274\ See Section VI.A.1.c of this release discussing
rulebooks.
---------------------------------------------------------------------------

    In accordance with one commenter's suggestion,\1275\ the Commission
amended Form SDR to accommodate SIP registration, as discussed
above.\1276\ The Commission considered requiring persons to register as
an SDR and SIP on two separate forms, but determined not to do so
because the costs to SDRs to make multiple filings of separate Form SDR
and Form SIP would not provide any measureable benefits to the
Commission.
---------------------------------------------------------------------------

    \1275\ See DTCC 2, supra note 19; see also DTCC 3, supra note 19
(suggesting adopting a joint registration form with the CFTC that
would include SIP registration).
    \1276\ See Section VI.A.1.c of this release discussing Form SDR.
---------------------------------------------------------------------------

    The Commission considered, in accordance with one commenter's
suggestion,\1277\ adopting a joint form with the CFTC for SDR and swap
data repository registration. As discussed above, the Commission
believes that it is necessary to maintain separate registration so that
each agency's form remains tailored to the particular needs of that
agency.\1278\ For example, the Commission is revising Form SDR to
accommodate SIP registration, while the CFTC's form accommodates only
swap data repository registration. Moreover, adopting a joint form may
impose costs and cause uncertainty for dual registrants because the
CFTC would be required to amend its form, which it has already adopted,
at a time when the industry is still in the implementation phase and
some swap data repositories are already provisionally registered with
the CFTC. Finally, because the CFTC's registration form for swap data
repositories is substantially similar to the Commission's Form SDR, the
Commission does not anticipate that filing with each commission
separately will entail a significant cost for a dual registrant. The
Commission is sensitive to the potential costs imposed by duplicative
forms, but believes that these costs are justified by the need of
having a form specifically tailored to the SDR registration scheme.
---------------------------------------------------------------------------

    \1277\ See DTCC 3, supra note 19.
    \1278\ See Section VI.A.1.c of this release discussing Form SDR.
---------------------------------------------------------------------------

    The Commission considered the request of one commenter, which is
provisionally registered with the CFTC as a swap data repository, for
expedited review of the commenter's application for registration as an
SDR.\1279\ Although it is not clear what the commenter means by
``expedited review,'' the Commission believes that it is necessary to
conduct a review of an SDR's application for registration independent
of the CFTC's review of a swap data repository's application for
registration. Moreover, the Commission believes that the procedures for
reviewing applications for registration as an SDR that the Commission
is adopting in this release provide reasonable timeframes for the
Commission's review of the applications. These procedures are
consistent with how the Commission reviews the applications of other
registrants, such as SIPs and registered clearing agencies. The
Commission believes that each SDR applicant, including an applicant who
is provisionally registered with the CFTC, needs to demonstrate that it
is so organized, and has the capacity, to be able to assure the prompt,
accurate, and reliable performance of its functions as an SDR, comply
with any applicable provision of the federal securities laws and the
rules and regulations thereunder, and carry out its functions in a
manner consistent with the purposes of Exchange Act Section 13(n) and
the rules and regulations thereunder.
---------------------------------------------------------------------------

    \1279\ See ICE CB, supra note 26.
---------------------------------------------------------------------------

    Finally, the Commission considered providing a method for temporary
registration, as proposed.\1280\ As discussed above, the Commission
believes that the exemptive relief provided by the Commission in the
Effective Date Order, which was effective on June 15, 2011, addressed
the primary purpose for temporary registration.\1281\ The Commission
also believes that the Compliance Date for the SDR Rules\1282\ should
provide sufficient time for SDRs to analyze and understand the final
SDR Rules, to develop and test new systems required to comply with the
Dodd-Frank Act's provisions governing SDRs and the SDR Rules, to
prepare and file Form SDR, to demonstrate their ability to meet the
criteria for registration set forth in Rule 13n-1(c)(3), and to obtain
registration with the Commission.\1283\ For these reasons, the
Commission no longer believes that a temporary registration regime for
SDRs is necessary or appropriate.
---------------------------------------------------------------------------

    \1280\ See Proposing Release, 75 FR at 77314, supra note 2.
    \1281\ See Effective Date Order, 76 FR at 36306, supra note 9.
    \1282\ See Section V.C of this release discussing the Compliance
Date.
    \1283\ See Section VI.A.3 of this release discussing temporary
registration.

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

2. SDR Duties, Data Collection and Maintenance, and Direct Electronic
Access
    Rules 13n-4(b)(2)-(7), 13n-5, and 13n-6 include various
requirements relating to SDRs' information technology systems. Rules
13n-4(b)(2)-(7), 13n-5, and 13n-6 set forth the duties of an SDR,
including an SDR's collection, maintenance, and analysis of transaction
data and other records.\1284\
---------------------------------------------------------------------------

    \1284\ See Sections VI.D.2.c, VI.E, and VI.F.3 of this release
discussing Rules 13n-4(b)(2) and (4), 13n-5, and 13n-6,
respectively.
---------------------------------------------------------------------------

    Under Rules 13n-4(b)(2) and (4), an SDR is required to accept data
as prescribed in Regulation SBSR and maintain transaction data and
related identifying information as required by Rule 13n-5(b)(4). Rule
13n-4(b)(5) states that each SDR must provide direct electronic access
to the Commission or any of its designees.\1285\
---------------------------------------------------------------------------

    \1285\ See also Exchange Act Section 13(n)(5)(D)(i), 15 U.S.C.
78m(n)(5)(D)(i) (requiring an SDR to provide direct electronic
access to the Commission or any of its designees).
---------------------------------------------------------------------------

    Rule 13n-5 establishes requirements for data collection and
maintenance.\1286\ Rule 13n-5(b) requires, among other things, an SDR
to promptly record transaction data and to establish, maintain, and
enforce written policies and procedures reasonably designed (1) for
reporting complete and accurate transaction data to the SDR; (2) to
satisfy itself that the transaction data submitted to it is complete
and accurate; (3) to calculate positions for all persons with open SBSs
for which the SDR maintains records; (4) to ensure that the transaction
data and positions that it maintains are complete and accurate; and (5)
to prevent any provision in a valid SBS from being invalidated or
modified through the procedures or operations of the SDR. Rule 13n-
5(b)(4) establishes requirements related to the formats in which and
time periods for which an SDR must maintain transaction data, related
identifying information, and positions. Rule 13n-5(b)(7) requires an
SDR that ceases doing business, or ceases to be registered pursuant to
Exchange Act Section 13(n), to preserve, maintain, and make accessible
the transaction data and historical positions for the remainder of the
time period required by Rule 13n-5. Rule 13n-5(b)(8) requires an SDR to
make and keep current a plan to ensure that the transaction data and
positions that are recorded in the SDR continue to be maintained in
accordance with Rule 13n-5(b)(7).
---------------------------------------------------------------------------

    \1286\ See Section VI.E of this release discussing Rule 13n-5.
---------------------------------------------------------------------------

    Rule 13n-6 requires SDRs, with respect to those systems that
support or are integrally related to the performance of their
activities, establish, maintain, and enforce written policies and
procedures reasonably designed to ensure that their systems provide
adequate levels of capacity, integrity, resiliency, availability, and
security.\1287\
---------------------------------------------------------------------------

    \1287\ See Section VI.F.3 of this release discussing Rule 13n-6.
---------------------------------------------------------------------------

a. Benefits
    The rules discussed in this section will enhance the Commission's
ability to oversee the SBS market beyond that in the current voluntary
reporting system. The Commission's ability to oversee the SBS market
and benefits of SDRs to the market depend on the accuracy and
reliability of the data maintained by SDRs. Exchange Act Section
13(n)(4)(B) specifically instructs the Commission to ``prescribe data
collection and maintenance standards for'' SDRs.\1288\ The rules
related to an SDR's information technology and related policies and
procedures are designed to facilitate accurate data collection and
retention with respect to SBSs in order to promote transparency with
respect to the SBS market.
---------------------------------------------------------------------------

    \1288\ 15 U.S.C. 78m(n)(4)(B).
---------------------------------------------------------------------------

    The ability of the Commission to oversee the SBS market and detect
fraudulent activity depends on the Commission having access to accurate
current and historical market data. In particular, the direct
electronic access requirement described in Rule 13n-4(b)(5) will permit
the Commission to carry out these responsibilities in a more effective
and more efficient manner. The requirement that each SDR make and keep
current a plan to ensure that SBS data recorded in such SDR continues
to be maintained is essential to ensure that the Commission will
continue to have access to and the ability to analyze SBS data in the
event that the SDR ceases to do business.
    The requirements in the rules discussed in this section are likely
to create benefits that will follow from providing the Commission with
access to SBS market information. Pursuant to the rules discussed in
this section, in conjunction with Regulation SBSR,\1289\ SDRs will
receive and maintain systemically important SBS transaction data from
multiple market participants. This data will increase transparency
about activity in the SBS market. In addition, this data will enhance
the ability of the Commission to respond to market developments.
---------------------------------------------------------------------------

    \1289\ See Regulation SBSR Adopting Release, supra note 13.
---------------------------------------------------------------------------

    Benefits also may accrue from the Commission's ability to use SBS
data in order to oversee the SBS market for illegal conduct. For
example, data collected by SDRs will enhance the Commission's ability
to detect and deter fraudulent and manipulative activity and other
trading abuses in connection with the SBS market, conduct inspections
and examinations to evaluate the financial responsibility and soundness
of market participants, and verify compliance with the statutory
requirements and duties of SDRs. This data may also help the Commission
identify fraudulent or other predatory market activity. Increasing
market participants' confidence that the likelihood of illegal or
fraudulent activity is low and that the likelihood that they will
suffer economic loss from such illegal or fraudulent activity is low
will reduce the prices at which they are willing to use SBS to hedge
market risks to which they are exposed, which should, in turn,
encourage participation in the SBS market.
    The richness of data collected by SDRs also may facilitate market
analysis. For example, the Commission may review market activity
through the study of SBS transactions, which may help assess the
effectiveness of the Commission's regulation of the SBS market. Such
reviews can inform the Commission on the need for modifications to
these and other rules as the market evolves.
    The Commission recognizes that these benefits may be reduced to the
extent that SBS market data is fragmented across multiple SDRs.
Fragmentation of SBS market data may impose costs on any user of this
data associated with consolidating, reconciling, and aggregating that
data. As discussed above, the Commission believes that the form and
manner with which an SDR provides the data to the Commission should not
only permit the Commission to accurately analyze the data maintained by
a single SDR, but also allow the Commission to aggregate and analyze
data received from multiple SDRs.\1290\
---------------------------------------------------------------------------

    \1290\ See Section VI.D.2.c.ii of this release discussing direct
electronic access.
---------------------------------------------------------------------------

    SDRs also may create economic benefits for market participants by
providing non-core services, such as facilitating the reporting of life
cycle events, asset servicing, or payment calculations. These
activities may be less costly to perform when SBS market data is
centrally located and accessible.
    The Commission solicited comment on the benefits related to Rules
13n-4(b)(2)-(7), 13n-5, and 13n-6.\1291\ The

Commission specifically requested comment on whether any additional
benefits would accrue if the Commission imposed further, more specific
technology-related requirements.\1292\ The Commission received no
comments on the estimated benefits of the rules discussed in this
section.
---------------------------------------------------------------------------

    \1291\ See Proposing Release, 75 FR at 77357, supra note 2.
    \1292\ See Proposing Release, 75 FR at 77357, supra note 2.
---------------------------------------------------------------------------

b. Costs
    The Commission anticipates that the primary costs to SDRs,
particularly those that are not already registered with the CFTC or
operating as trade repositories, are from the rules described in this
section that relate to the cost of developing and maintaining systems
to collect and store SBS transaction data. SDRs also need to develop,
maintain, and enforce compliance with related policies and procedures
and provide applicable training. Changes in the cost of developing and
maintaining such systems are likely to be passed on to market
participants; similarly, compliance costs incurred by SDRs are likely
to be passed on to market participants.
    As discussed above, the Commission estimates that the cost
associated with creating SDR information technology systems will be
42,000 hours and $10,000,000 for each SDR and the average ongoing
paperwork cost will be 25,200 hours and $6,000,000 per year for each
SDR.\1293\ Assuming a maximum of ten SDRs, the aggregate one-time
estimated dollar cost will be $210,810,000\1294\ and the aggregate
ongoing estimated dollar cost per year will be $126,486,000\1295\ to
comply with the rules. Based on Commission staff's conversations with
industry representatives, the Commission estimates that the cost
imposed on SDRs to provide direct electronic access to the Commission
should be minimal as SDRs likely have or will establish comparable
electronic access mechanisms to enable market participants to provide
data to SDRs and review transactions to which such participants are
parties.\1296\
---------------------------------------------------------------------------

    \1293\ See Section VII.D.2 of this release discussing the costs
of creating SDR information technology systems.
    \1294\ The Commission estimates that an SDR will assign these
responsibilities to an Attorney, a Compliance Manager, a Programmer
Analyst, and a Senior Business Analyst. Data from SIFMA's Management
& Professional Earnings in the Securities Industry 2013, modified by
Commission staff to account for an 1800-hour work-year and
multiplied by 5.35 to account for bonuses, firm size, employee
benefits, and overhead, suggest that the cost of a Compliance
Manager is $283 per hour, a Programmer Analyst is $220 per hour, and
a Senior Business Analyst is $251 per hour. Thus, the total initial
estimated dollar cost will be $21,081,000 per SDR and $210,810,000
for all SDRs, calculated as follows: ($10,000,000 for information
technology systems + (Attorney at $380 per hour for 7,000 hours) +
(Compliance Manager at $283 per hour for 8,000 hours) + (Programmer
Analyst at $220 per hour for 20,000 hours) + (Senior Business
Analyst at $251 per hour for 7,000 hours)) x 10 registrants =
$210,810,000.
    \1295\ The Commission estimates that an SDR will assign these
responsibilities to an Attorney, a Compliance Manager, a Programmer
Analyst, and a Senior Business Analyst. Thus, the total ongoing
estimated dollar cost will be $12,648,600 per SDR and $126,486,000
for all SDRs, calculated as follows: ($6,000,000 for information
technology systems + (Attorney at $380 per hour for 4,200 hours) +
(Compliance Manager at $283 per hour for 4,800 hours) + (Programmer
Analyst at $220 per hour for 12,000 hours) + (Senior Business
Analyst at $251 per hour for 4,200 hours)) x 10 registrants =
$126,486,000.
    \1296\ See SDR Proposing Release, 75 FR at 77357, supra note 2.
Indeed, the Commission notes that one commenter, which currently
operates a trade repository, stated that ``[t]he Commission's
proposed required practices are generally consistent with those of''
the commenter's trade repository. DTCC 2, supra note 19.
---------------------------------------------------------------------------

    As discussed above, the Commission estimates that the average
initial paperwork cost associated with developing policies and
procedures necessary to comply with Rules 13n-5(b)(1), (2), (3), and
(5) and 13n-6 will be 1,050 hours and $100,000 for each SDR and the
average ongoing paperwork cost will be 300 hours per year for each
SDR.\1297\ Assuming a maximum of ten SDRs, the aggregate one-time
estimated dollar cost will be $4,185,300\1298\ and the aggregate
ongoing estimated dollar cost per year will be $965,400\1299\ to comply
with the rules.
---------------------------------------------------------------------------

    \1297\ See Section VII.D.2 of this release discussing the costs
of developing policies and procedures necessary to comply with Rules
13n-5(b)(1), (2), (3), and (5) and 13n-6.
    \1298\ The Commission estimates that an SDR will assign these
responsibilities to a Compliance Manager, an Attorney, a Senior
Systems Analyst, and an Operations Specialist. Data from SIFMA's
Management & Professional Earnings in the Securities Industry 2013,
modified by Commission staff to account for an 1800-hour work-year
and multiplied by 5.35 to account for bonuses, firm size, employee
benefits, and overhead, suggest that the cost of a Senior Systems
Analyst is $260 per hour and the cost of an Operation Specialist is
$125 per hour. Thus, the total initial estimated dollar cost will be
$418,530 per SDR and $4,185,300 for all SDRs, calculated as follows:
($100,000 for outside legal services + (Compliance Manager at $283
per hour for 385 hours) + (Attorney at $380 per hour for 435 hours)
+ (Senior Systems Analyst at $260 per hour for 115 hours) +
(Operations Specialist at $125 per hour for 115 hours)) x 10
registrants = $4,185,300.
    \1299\ The Commission estimates that an SDR will assign these
responsibilities to a Compliance Manager and an Attorney. Thus, the
total ongoing estimated dollar cost will be $96,540 per SDR and
$965,400 for all SDRs, calculated as follows: ((Compliance Manager
at $283 per hour for 180 hours) + (Attorney at $380 per hour for 120
hours)) x 10 registrants = $965,400.
---------------------------------------------------------------------------

    The Commission believes that existing SDRs may have already
developed and implemented information technology systems and related
policies and procedures.\1300\ Such persons are currently not subject
to regulation by the Commission, and therefore, may need to enhance
their information technology systems and related policies and
procedures to comply with the SDR Rules. Thus, such persons may
experience costs in enhancing their information technology systems and
related policies and procedures to comply with the SDR Rules. Moreover,
because the costs discussed above represent the costs of creating
information technology systems and related policies and procedures
without any existing information technology systems or policies and
procedures in place, existing SDRs that already have information
technology systems and related policies and procedures may experience
initial costs lower than those estimated above. The Commission believes
that after such persons bring their technology systems and related
policies and procedures into compliance with the SDR Rules, however,
the ongoing annual costs for such persons will likely be consistent
with the estimates provided above.\1301\
---------------------------------------------------------------------------

    \1300\ Cf. DTCC 2, supra note 19 (stating that ``[t]he
Commission's proposed required practices are generally consistent
with those of'' the commenter's trade repository).
    \1301\ See Section VII.D.2 of this release discussing the costs
of Rules 13n-4(b)(2)-(7), 13n-5, and 13n-6.
---------------------------------------------------------------------------

    Multiple SDRs may register with the Commission, potentially within
the same asset class, with each SDR collecting data from a subset of
market participants. While multiple SDRs per asset class will allow for
market competition to decide how data is collected, it may hinder
market-wide data aggregation due to coordination costs, particularly if
market participants adopt incompatible reporting standards and
practices. The SDR Rules do not specify a particular reporting format
or structure, which may create the possibility that persons reporting
to SDRs or other market participants accessing SBS data, will have to
accommodate different data standards and develop different systems to
accommodate each. This may result in increased costs for reporting
persons and users of SBS data.
    Furthermore, the costs associated with aggregating data across
multiple SDRs by the Commission and other users of such data will
increase to the extent that SDRs choose to use different identifying
information for transactions, counterparties, and products. Data
aggregation costs also could accrue to the extent that there is
variation in the quality of data maintained across SDRs.

Each SDR has discretion over how to implement its policies and
procedures in the recording of reportable data, and variations in
quality may result. Since aggregated data used for surveillance and
risk monitoring requires that the underlying components are provided
with the same level of accuracy, variations in the quality of data
could be costly if subsequent interpretations of analysis based on the
data suffer from issues of integrity. To the extent that market
competition among SDRs impacts profit margins and the level of
resources devoted to collecting and maintaining transaction data, there
is an increased likelihood of variations in the quality of reported
data, which could make the aggregation of data across multiple SDRs
more difficult.
    In the Proposing Release the Commission solicited comment on the
costs related to Rules 13n-4(b)(2)-(7), 13n-5, and 13n-6.\1302\ The
Commission specifically requested comment on the initial and ongoing
costs associated with establishing and maintaining the technology
systems and related policies and procedures; additional costs to
creating an SDR that the Commission should consider; alternatives that
the Commission should consider; whether the estimates accurately
reflect the cost of storing data in a convenient and usable electronic
format for the required retention period; and a description and, to the
extent practicable, quantification of the costs associated with any
comments that are submitted.\1303\ The Commission received no comments
on the estimated costs of the rules discussed in this section.
---------------------------------------------------------------------------

    \1302\ See Proposing Release, 75 FR at 77358, supra note 2.
    \1303\ See Proposing Release, 75 FR at 77358, supra note 2.
---------------------------------------------------------------------------

c. Alternatives
    Commenters suggested that an SDR's duties should include reporting
SBS data to a single SDR that would consolidate the data.\1304\
Specifically, one commenter recommended that the Commission ``designate
one SDR as the recipient of the information of the other SDRs to ensure
the efficient consolidation of data.''\1305\ The commenter further
stated that the designated SDR would need to have ``the organization
and governance structure that is consistent with being a financial
market utility serving a vital function to the entire
marketplace.''\1306\ The Commission recognizes, as asserted by the
commenter, that fragmentation of data among SDRs would ``leave to
regulators the time consuming, complicated and expensive task of
rebuilding complex data aggregation and reporting mechanisms.''\1307\
If the Commission were to designate one SDR as the data consolidator,
however, such an action could be deemed as the Commission's endorsement
of one regulated person over another, discourage new market entrants,
and interfere with competition, resulting in a perceived government-
sponsored monopoly. In addition, such a requirement would likely impose
an additional cost on market participants to cover the SDR's cost for
acting as the data consolidator. The Commission does not believe that,
at this time, the benefits of such a requirement, in terms of saving
other SDRs the costs of having to make data available to the Commission
and saving the costs of consolidating the data itself, would be
substantial enough to justify this potential negative effect on
competition among SDRs. The Commission, however, may revisit this issue
if, for example, there is data fragmentation among SDRs that is
creating substantial difficulties for relevant authorities to get a
complete and accurate view of the market.
---------------------------------------------------------------------------

    \1304\ See DTCC 1*, supra note 20; Better Markets 1, supra note
19; see also FINRA SBSR, supra note 27 (urging the Commission to
mandate the consolidation of disseminated SBS data to the public).
    \1305\ DTCC 1*, supra note 20; see also Better Markets 1, supra
note 19 (making similar comments); DTCC 2, supra note 19 (``The role
of an aggregating SDR is significant in that it ensures regulators
efficient, streamlined access to consolidated data, reducing the
strain on limited agency resources.'').
    \1306\ DTCC 1*, supra note 20.
    \1307\ DTCC 3, supra note 19.
---------------------------------------------------------------------------

    The Commission considered directing, under Rule 13n-4(b)(7), all
SDRs to establish automated systems for monitoring, screening, and
analyzing SBS data, a position urged by one commenter.\1308\ The
Commission believes that mandating automated systems for monitoring,
screening, and analyzing SBS data at this time would impose an
additional cost on SDRs. The Commission believes that it should avoid
imposing the cost of automated systems on SDRs until the Commission can
better determine what information it needs through such automated
systems in addition to the information that it can obtain from SDRs
through other rules applicable to SDRs, such as Rule 13n-4(b)(5).
---------------------------------------------------------------------------

    \1308\ See Better Markets 1, supra note 19. Similarly, another
commenter suggested that the Commission ``provide additional details
on the anticipated requirements in order to better manage the
expectations of SDRs and wider market participants concerning their
duties in this area.'' Barnard, supra note 19.
---------------------------------------------------------------------------

    The Commission considered requiring every SDR to maintain
transaction data and related identifying information for not less than
five years after the applicable SBS expires or ten years after the
applicable SBS is executed, whichever is greater, as an alternative to
the time period in Rule 13n-5(b)(4) (for not less than five years after
the applicable SBS expires). The Commission understands, however, that
the alternative time period does not fit current industry practices and
therefore would be costly to implement. The five-year period is
consistent with the record retention period for other Commission
registrants and the statutory requirement for SB SEFs.
    The Commission also considered, as an alternative to Rule 13n-
5(b)(4)(i), prescribing a particular data format in which an SDR must
maintain transaction data and positions, as suggested by three
commenters.\1309\ The Commission believes that SDRs should have the
flexibility to choose their own data format, based on what works best
in practice.\1310\ The Commission is also concerned that a format that
it mandates would eventually become outdated, necessitating either a
rule change to keep pace with technological innovation or a requirement
that SDRs use outdated technology. Market participants may incur the
increased costs of converting their transaction data to a format that
is no longer an industry standard. Although the Commission recognizes
that a commonly-mandated format for all SBS data has the potential to
facilitate aggregation of data across different SDRs, the Commission
believes that not imposing a particular format saves SDRs the costs
associated with using and implementing one data format chosen by the
Commission. The Commission believes that SDRs, working with market
participants, will be in the best position to choose and upgrade
formats as needed.\1311\ For these reasons, the Commission does not
believe that mandating a particular format in which an SDR must
maintain transaction data, related identifying information, and
positions is, at this time, an appropriate alternative to the flexible
approach of Rule 13n-5(b)(4)(i) and the lower compliance costs.
---------------------------------------------------------------------------

    \1309\ See Better Markets 1, supra note 19; ISDA Temp Rule,
supra note 28; Barnard, supra note 19.
    \1310\ See Section VI.E.4.c of this release discussing Rule 13n-
5(b)(4).
    \1311\ As discussed above, when an SDR is deciding the format in
which it will maintain transaction data and positions, it may want
to consider whether it will need to reformat or translate the data
to reflect any formats and taxonomies that the Commission may adopt
pursuant to Exchange Act Section 13(n)(5)(D) and Rule 13n-4(b)(5).
See Section VI.E.4.c of this release.
---------------------------------------------------------------------------

    Finally, the Commission considered, as suggested by one commenter,

requiring SDRs to keep records of data indefinitely.\1312\ This
commenter asserted that there was ``no technological or practical
reason for limiting the retention period,'' \1313\ but the Commission
believes that given the volume of data and transactions SDRs may
handle, prohibiting SDRs from ever eliminating records may result in
SDRs retaining a large volume of records for which there may be little
or no use. Having to maintain records secure and accessible for an
indefinite period of time may impose significant costs to SDRs,
particularly as storage and access technology evolves. Because the
Commission believes that requiring transaction data to be maintained
for not less than five years after the applicable SBS expires is more
reasonable, and because that approach is consistent with the record
retention period for other Commission registrants and the statutory
requirement for SB SEFs, the Commission does not believe that risks and
costs that could come with imposing an unlimited time period for
retention are justified. Accordingly, the Commission is not adopting
the alternative suggested by the commenter.
---------------------------------------------------------------------------

    \1312\ See Barnard, supra note 19.
    \1313\ Barnard, supra note 19.
---------------------------------------------------------------------------

3. Recordkeeping
    Rule 13n-7 requires an SDR to make and keep certain records
relating to its business and retain a copy of records made or received
by the SDR in the course of its business for a period of not less than
five years, the first two years in a place that is immediately
available to representatives of the Commission for inspection and
examination. The rule also requires an SDR that ceases doing business
or ceases to be registered as an SDR to preserve, maintain, and make
accessible the records required to be collected, maintained, and
preserved pursuant to the rule for the remainder of the time period
required by Rule 13n-7.\1314\
---------------------------------------------------------------------------

    \1314\ See Section VI.G of this release discussing Rule 13n-7.
---------------------------------------------------------------------------

a. Benefits
    Rule 13n-7 is designed to further the Dodd-Frank Act's goals by
enhancing the Commission's ability to oversee SDRs, which are critical
components of the new regulatory scheme governing SBSs. The rule will
assist the Commission in determining whether an SDR is complying with
the federal securities laws and the rules and regulations thereunder.
In addition, the recordkeeping requirements contained in the rule will
permit the Commission to evaluate the financial responsibility and
soundness of SDRs.
    To the extent that the rule standardizes the business recordkeeping
practices of SDRs, the Commission will be better able to perform
efficient, targeted inspections and examinations with an increased
likelihood of identifying improper conduct. To the extent that
standardized recordkeeping requirements will allow the Commission to
perform more efficient, targeted inspections and examinations, SDRs may
incur less costs in responding to targeted inspections and examinations
(as opposed to inspections and examinations that are broader in scope).
In addition, both the Commission and SDRs should benefit from
standardized recordkeeping requirements to the extent that uniform
records will enable the Commission and SDRs to know what records the
SDRs are required to maintain.
    The Commission solicited comment on the benefits related to Rule
13n-7.\1315\ The Commission did not receive any comments on the
benefits related to Rule 13n-7.
---------------------------------------------------------------------------

    \1315\ See Proposing Release, 75 FR at 77358, supra note 2.
---------------------------------------------------------------------------

b. Costs
    As discussed above, the Commission estimates that the average
initial paperwork cost associated with making, keeping and preserving
certain records and developing and maintaining information technology
systems to ensure compliance with the recordkeeping requirements will
be 346 hours and $1,800 for each SDR and the average ongoing paperwork
cost associated with compliance with the recordkeeping requirements
will be 279.17 hours per year for each SDR.\1316\ Assuming a maximum of
ten SDRs, the aggregate one-time estimated dollar cost will be $986,600
\1317\ and the aggregate ongoing estimated dollar cost per year will be
$790,051.10 \1318\ to comply with Rule 13n-7.
---------------------------------------------------------------------------

    \1316\ See Section VII.D.3 of this release discussing the cost
associated with Rule 13n-7.
    \1317\ The Commission estimates that an SDR will assign these
responsibilities primarily to a Compliance Manager as well as a
Senior Systems Analyst. Thus, the total initial estimated dollar
cost will be $98,660 per SDR and $986,600 for all SDRs, calculated
as follows: ($1,800 in information technology costs + (Compliance
Manager at $283 per hour for 300 hours) + (Senior Systems Analyst at
$260 per hour for 46 hours)) x 10 registrants = $986,600.
    \1318\ The Commission estimates that an SDR will assign these
responsibilities to a Compliance Manager. Thus, the total ongoing
estimated dollar cost will be $79,005.11 per SDR and $790,051.10 for
all SDRs, calculated as follows: (Compliance Manager at $283 per
hour for 279.17 hours) x 10 registrants = $790,051.10.
---------------------------------------------------------------------------

    The Commission believes that existing SDRs may already maintain
business records as part of their day-to-day operations.\1319\ Such
persons are currently not subject to regulation by the Commission, and
therefore, may need to enhance their maintenance of business records to
comply with Rule 13n-7. Thus, such persons may experience costs in
enhancing their recordkeeping to comply with Rule 13n-7. Moreover,
because the costs discussed above represent the costs of establishing a
recordkeeping system without any existing recordkeeping system in
place, existing SDRs that already have a recordkeeping system may
experience initial costs lower than those estimated above. The
Commission believes that after such persons bring their recordkeeping
into compliance with Rule 13n-7, however, the ongoing annual costs for
such persons will likely be consistent with the estimates provided
above.
---------------------------------------------------------------------------

    \1319\ Cf. DTCC 2, supra note 19 (stating that ``[t]he
Commission's proposed required practices are generally consistent
with those of'' the commenter's trade repository).
---------------------------------------------------------------------------

    The Commission solicited comment on the costs related to Rule 13n-
7.\1320\ The Commission specifically requested comment on the initial
and ongoing costs associated with establishing and maintaining the
recordkeeping systems and related policies and procedures, including
whether currently-operating SDRs would incur different recordkeeping
costs.\1321\ The Commission did not receive any comments on the costs
related to Rule 13n-7.
---------------------------------------------------------------------------

    \1320\ See Proposing Release, 75 FR at 77359, supra note 2.
    \1321\ See Proposing Release, 75 FR at 77359, supra note 2.
---------------------------------------------------------------------------

4. Reports
    Rule 13n-8 requires SDRs to report promptly to the Commission, in a
form and manner acceptable to the Commission, such information as the
Commission determines necessary or appropriate for the Commission to
perform its duties.\1322\
---------------------------------------------------------------------------

    \1322\ See Section VI.H.3 of this release discussing Rule 13n-8.
---------------------------------------------------------------------------

a. Benefits
    Title VII establishes a regulatory framework for the OTC
derivatives market that depends on the Commission's access to
information regarding the current and historical operation of the SBS
market to verify compliance with the statute and to provide for
effective monitoring for market abuse. In addition, specific provisions
of Title VII require routine,

targeted monitoring of certain types of events. Access to such
information will enable the Commission to oversee the SBS market, which
is critical to the continued integrity of the markets, and detect and
deter fraudulent and manipulative activity and other trading abuses in
connection with the derivatives markets.
    The Commission solicited comment on the benefits related to the
requirements contained in Rule 13n-8.\1323\ The Commission did not
receive any comments on the benefits related to the requirements
contained in Rule 13n-8.
---------------------------------------------------------------------------

    \1323\ See Proposing Release, 75 FR at 77359, supra note 2.
---------------------------------------------------------------------------

b. Costs
    The Commission anticipates that the initial costs to SDRs from Rule
13n-8 relate to the cost of developing and maintaining systems to
respond to requests for information and provide the necessary reports
and establishing related policies and procedures. In addition, SDRs
will need to employ staff to maintain systems to provide the requested
reports as well as to respond to ad hoc requests that cannot be
satisfied using such systems.\1324\ The information technology costs
associated with this rule are included in the overall information
technology costs discussed above.\1325\
---------------------------------------------------------------------------

    \1324\ The Commission understands that some existing trade
repositories may have dedicated personnel who are responsible for
responding to and providing ad hoc report requests from relevant
authorities, including the Commission. To the extent that Rule 13n-8
may result in more automated reporting, the need for such dedicated
personnel resources may be reduced.
    \1325\ See Section VIII.D.2.b of this release.
---------------------------------------------------------------------------

    Furthermore, as discussed above, the Commission estimates that SDRs
will incur costs in compiling the information requested under Rule 13n-
8, which the Commission estimates will be limited to information
already compiled under the SDR Rules, and thus, require only 1 hour per
response to compile and transmit per year for each SDR.\1326\ Assuming
a maximum of ten SDRs, the aggregate ongoing estimated dollar cost per
year will be $2,510 to comply with the rule.\1327\
---------------------------------------------------------------------------

    \1326\ See Section VII.D.4 of this release discussing the cost
associated with Rule 13n-8.
    \1327\ The Commission estimates that an SDR will assign these
responsibilities to a Senior Business Analyst. Thus, the total
ongoing estimated dollar cost will be $251 per SDR and $2,510 for
all SDRs, calculated as follows: (Senior Business Analyst at $251
per hour for 1 hour) x 10 registrants = $2,510.
---------------------------------------------------------------------------

    The Commission solicited comment on the costs related to Rule 13n-
8.\1328\ The Commission specifically requested comment on the initial
and ongoing costs associated with establishing and providing the
reports required under the rule.\1329\ The Commission did not receive
any comments on the estimated costs related to this rule.
---------------------------------------------------------------------------

    \1328\ See Proposing Release, 75 FR at 77360, supra note 2.
    \1329\ See Proposing Release, 75 FR at 77360, supra note 2.
---------------------------------------------------------------------------

5. Disclosure
    Under Rule 13n-10, before accepting any SBS data from a market
participant or upon the market participant's request, each SDR is
required to furnish to the market participant a disclosure document
containing certain information that reasonably will enable the market
participant to identify and evaluate the risks and costs associated
with using the services of the SDR.\1330\ An SDR's disclosure document
must include the SDR's criteria for providing others with access to
services offered and data maintained by the SDR; the SDR's criteria for
those seeking to connect to or link with the SDR; a description of the
SDR's policies and procedures regarding safeguarding of data and
operational reliability; a description of the SDR's policies and
procedures reasonably designed to protect the privacy of SBS
transaction information; a description of the SDR's policies and
procedures regarding its non-commercial and/or commercial use of SBS
transaction information; a description of the SDR's dispute resolution
procedures; a description of all of the SDR's services, including
ancillary services; the SDR's updated schedule of dues, unbundled
prices, rates, or other fees for all of its services, and any discounts
or rebates; and a description of the SDR's governance arrangements.
---------------------------------------------------------------------------

    \1330\ See Section VI.I.2 of this release discussing Rule 13n-
10.
---------------------------------------------------------------------------

a. Benefits
    Rule 13n-10 is intended to provide certain information regarding an
SDR to market participants prior to their entering into an agreement to
provide SBS data to the SDR. To the extent that multiple SDRs accept
data for the same asset class, the disclosure document should enable
market participants to make an informed choice among SDRs. The
disclosure document is necessary to inform market participants of the
nature of the services provided by the SDR and the conditions and
obligations that are imposed on market participants in order for them
to report data to the SDR.
    Rule 13n-10 is designed to further the Dodd-Frank Act's goals by
providing market participants with applicable information regarding the
operation of SDRs. The Commission solicited comment,\1331\ but did not
receive any comments on the benefits related to this rule.
---------------------------------------------------------------------------

    \1331\ See Proposing Release, 75 FR at 77360, supra note 2.
---------------------------------------------------------------------------

b. Costs
    The Commission anticipates that the primary costs to SDRs to
complying with Rule 13n-10 relate to the development and dissemination
of the disclosure document. As discussed above, the Commission
estimates that the average initial paperwork cost associated with
developing the disclosure document and related policies and procedures
will be 97.5 hours and $9,400 for each SDR and the average ongoing
paperwork cost will be 1 hour per year for each SDR.\1332\ Assuming a
maximum of ten registered SDRs, the aggregate one-time estimated dollar
cost will be $263,162.5 \1333\ and the aggregate ongoing estimated
dollar cost per year will be $1,735 \1334\ to comply with the rule.
---------------------------------------------------------------------------

    \1332\ See Section VII.D.5 of this release discussing the cost
associated with Rule 13n-10.
    \1333\ The Commission estimates that an SDR will assign these
responsibilities to a Compliance Manager and a Compliance Clerk.
Thus, the total initial estimated dollar cost will be $26,316.25 per
SDR and $263,162.5 for all SDRs, calculated as follows: ($4,400 for
external legal costs + $5,000 for external compliance consulting
costs + (Compliance Manager at $283 per hour for 48.75 hours) +
(Compliance Clerk at $64 per hour for 48.75 hours)) x 10 registrants
= $263,162.5.
    \1334\ The Commission estimates that an SDR will assign these
responsibilities to a Compliance Manager and a Compliance Clerk.
Thus, the total ongoing estimated dollar cost will be $173.5 per SDR
and $1,735 for all SDRs, calculated as follows: ((Compliance Manager
at $283 per hour for 0.5 hours) + (Compliance Clerk at $64 per hour
for 0.5 hours)) x 10 registrants = $1,735.
---------------------------------------------------------------------------

    The Commission solicited comment on the costs related to Rule 13n-
10.\1335\ The Commission specifically requested comment on the initial
and ongoing costs associated with drafting, reviewing, and providing
the required disclosure document.\1336\ The Commission did not receive
any comments on the costs related to this rule.
---------------------------------------------------------------------------

    \1335\ See Proposing Release, 75 FR at 77360, supra note 2.
    \1336\ See Proposing Release, 75 FR at 77360, supra note 2.
---------------------------------------------------------------------------

6. Chief Compliance Officer and Compliance Functions; Compliance
Reports and Financial Reports
    Rules 13n-4(b)(11) and 13n-11 and the amendments to Regulation S-T
require each registered SDR to identify on Form SDR a person who has
been designated by the board to serve as CCO whose duties include
preparing an annual compliance report, which will

be filed with the Commission along with a financial report.\1337\ The
CCO's appointment must be approved by the majority of the SDR's board
and the CCO must report directly to the senior officer of the SDR or
the board. As discussed above, the CCO is responsible for, among other
things, establishing procedures for the remediation of noncompliance
issues identified by the CCO and establishing and following appropriate
procedures for the handling, management response, remediation,
retesting, and closing of noncompliance issues.\1338\ No officer,
director, or employee may directly or indirectly take any action to
coerce, manipulate, mislead, or fraudulently influence the CCO in the
performance of his or her duties under Rule 13n-11.\1339\ The CCO is
required to prepare and sign an annual compliance report and submit the
report to the board for its review prior to the report being filed with
the Commission. Finally, the annual compliance report must be filed
along with the financial report, which must be prepared pursuant to
Rule 13n-11(f) and filed with the Commission. The compliance report
must be filed in a tagged data format in accordance with the
instructions contained in the EDGAR Filer Manual,\1340\ and the
financial report must be provided as an official filing in accordance
with the EDGAR Filer Manual and include, as part of the official
filing, an Interactive Data Financial Report filed in accordance with
Rule 407 of Regulation S-T.\1341\
---------------------------------------------------------------------------

    \1337\ See Section VI.J of this release discussing Rule 13n-11.
    \1338\ See Section VI.J.3.c of this release discussing the
duties of CCOs.
    \1339\ See Section VI.J.6 of this release discussing the
prohibition of undue influence on CCOs.
    \1340\ See 17 CFR 232.301.
    \1341\ See Section VI.J.5.c of this release discussing Rule 407
of Regulation S-T.
---------------------------------------------------------------------------

a. Benefits
    Rules 13n-4(b)(11) and 13n-11 are designed to help ensure that SDRs
comply with the federal securities laws, including Exchange Act Section
13(n), and the rules and regulations thereunder. Although existing SDRs
may already have CCOs in place, the rules will make this standard
practice for all registered SDRs, as mandated by the Exchange
Act.\1342\
---------------------------------------------------------------------------

    \1342\ See Exchange Act Section 13(n)(6), 15 U.S.C. 78m(n)(6).
---------------------------------------------------------------------------

    As a result of Rules 13n-4(b)(11) and 13n-11, the Commission
believes that data and other records maintained by each SDR are more
likely to be accurate and reliable. The Commission believes that strong
internal compliance programs lower the likelihood of non-compliance
with securities rules and regulations.\1343\ The designation of a CCO,
who will, among other things, take reasonable steps to ensure
compliance with the rules and regulations thereunder relating to SBSs,
including each rule prescribed by the Commission, will help ensure that
each SDR complies with the Exchange Act and the rules and regulations
thereunder. The prohibition against an SDR's officer, director, or
employee from directly or indirectly taking any action to coerce,
manipulate, mislead, or fraudulently influence its CCO increases the
probability that the CCO's actions are based on accurate information
and the compliance reports reflect the independent judgment of the CCO;
however, these prohibitions may also cause some SDRs or SDR officers,
directors and employees to implement additional controls in their
interactions with the CCO, potentially limiting the scope or timeliness
of the information made available to the CCO. To the extent that
compliance with the Exchange Act and the rules and regulations
thereunder results in more accurate data being maintained, publicly
disseminated, and reported to the Commission, the ability of the
Commission to rely on the SBS data will improve. Finally, strong
compliance programs may help reduce non-compliance with the SDR Rules
by SDRs; non-compliance with, for example, the privacy requirements
(Rules 13n-4(b)(8) and 13n-9), have the potential of negatively
impacting confidence in the overall SBS market.
---------------------------------------------------------------------------

    \1343\ See DTCC 2, supra note 19 (agreeing with the Commission
that ``a robust internal compliance function plays an important role
in facilitating an SDR's monitoring of, and compliance with, the
requirements of the Exchange Act (and rules thereunder) applicable
to SDRs'').
---------------------------------------------------------------------------

    Rule 13n-11(f) requires SDRs to file annual audited financial
reports to the Commission. This rule will enhance the Commission's
oversight of SDRs by facilitating the Commission's evaluation of an
SDR's financial and managerial resources. The financial reports will
also assist the Commission in assessing potential conflicts of
interests of a financial nature arising from the operation of an SDR.
    Benefits will also accrue from requiring SDRs to file financial
reports in an interactive data format. This requirement will enable the
Commission and, to the extent that the data is made public, the public
to analyze the reported information more quickly, more accurately, and
at a lower cost. In particular, the tagged data will make it easier to
aggregate information collected from SDRs and compare across SDRs and
over time, which the Commission believes is important to perform its
regulatory mandate and legal responsibilities.
    The Commission solicited comment on the benefits related to Rules
13n-4(b)(11) and 13n-11.\1344\ The Commission specifically requested
comment on the benefits that would accrue from designating a CCO who
would be responsible for preparing and signing an annual compliance
report and reporting annually to the board and on the benefits
associated with the financial reports.\1345\ The Commission did not
receive any comments on the benefits of these rules.
---------------------------------------------------------------------------

    \1344\ See Proposing Release, 75 FR at 77361, supra note 2.
    \1345\ See Proposing Release, 75 FR at 77361, supra note 2.
---------------------------------------------------------------------------

b. Costs
    The establishment of a designated CCO and compliance with the
accompanying responsibilities of a CCO will impose certain costs on
SDRs. As discussed above, the Commission estimates that the average
initial paperwork cost associated with establishing procedures for the
remediation of noncompliance issues identified by the CCO and
establishing and following appropriate procedures for the handling,
management response, remediation, retesting, and closing of
noncompliance issues will be 420 hours and $40,000 for each SDR and the
average ongoing paperwork cost will be 120 hours for each SDR.\1346\ In
addition, each SDR is required to retain a CCO in order to comply with
the SDR Rules, at an annual cost of $873,000.\1347\ Assuming a maximum
of ten SDRs, the aggregate initial estimated dollar cost per year will
be $1,802,000 \1348\ and the aggregate ongoing estimated dollar cost
per year will be $9,130,800 \1349\ to comply with the rules.
---------------------------------------------------------------------------

    \1346\ See Section VII.D.6 of this release discussing the costs
of Rule 13n-11.
    \1347\ Data from SIFMA's Management & Professional Earnings in
the Securities Industry 2013, modified by Commission staff to
account for an 1800-hour work-year and multiplied by 5.35 to account
for bonuses, firm size, employee benefits, and overhead, suggest
that the cost of a CCO is $485 per hour. Thus, the total ongoing
estimated dollar cost will be $873,000 per SDR and $8,730,000 for
all SDRs, calculated as follows: (CCO at $485 per hour for 1800
hours) x 10 registrants = $8,730,000.
    \1348\ The Commission estimates that an SDR will assign these
responsibilities to a Compliance Attorney. Thus, the total initial
estimated dollar cost will be $180,280 per SDR and $1,802,800 for
all SDRs, calculated as follows: ($40,000 for outside legal services
+ (Compliance Attorney at $334 per hour for 420 hours)) x 10
registrants = $1,802,800.
    \1349\ The Commission estimates that an SDR will assign these
responsibilities to a Compliance Attorney. Thus, the total ongoing
estimated dollar cost will be $913,080 per SDR and $9,130,800 for
all SDRs, calculated as follows: ($873,000 for a CCO + (Compliance
Attorney at $334 per hour for 120 hours)) x 10 registrants =
$9,130,800.

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

    As discussed above, the Commission estimates that the average
ongoing paperwork cost associated with preparing and submitting annual
compliance reports to the SDR's board pursuant to Rules 13n-11(d) and
(e) will be 5 hours.\1350\ Assuming a maximum of ten SDRs, the
aggregate ongoing estimated dollar cost per year will be $16,700 to
comply with the rules.\1351\
---------------------------------------------------------------------------

    \1350\ See Section VII.D.6 of this release discussing the costs
of Rule 13n-11.
    \1351\ The Commission estimates that an SDR will assign these
responsibilities to a Compliance Attorney. Thus, the total ongoing
estimated dollar cost will be $1,670 per SDR and $16,700 for all
SDRs, calculated as follows: (Compliance Attorney at $334 per hour
for 5 hours) x 10 registrants = $16,700.
---------------------------------------------------------------------------

    As discussed above, the Commission estimates that the average
ongoing paperwork cost associated with preparing and filing financial
reports pursuant to Rule 13n-11(f) and (g) and the amendments to
Regulation S-T will be 500 hours and $500,000 for each registered
SDR.\1352\ Assuming a maximum of ten SDRs, the aggregate ongoing
estimated dollar cost per year will be $5,990,000 to comply with the
rules.\1353\
---------------------------------------------------------------------------

    \1352\ See Section VII.D.6 of this release discussing the costs
of Rule 13n-11.
    \1353\ The Commission estimates that an SDR will assign these
responsibilities to a Senior Accountant. Data from SIFMA's
Management & Professional Earnings in the Securities Industry 2013,
modified by Commission staff to account for an 1800-hour work-year
and multiplied by 5.35 to account for bonuses, firm size, employee
benefits, and overhead, suggest that the cost of a Senior Accountant
is $198 per hour. Thus, the total ongoing estimated dollar cost will
be $599,000 per SDR and $5,990,000 for all SDRs, calculated as
follows: ($500,000 for independent public accounting services +
(Senior Accountant at $198 per hour for 500 hours)) x 10 registrants
= $5,990,000.
---------------------------------------------------------------------------

    As discussed above, the Commission estimates that the average
ongoing paperwork cost associated with filing annual compliance and
financial reports with the Commission in a tagged data format pursuant
to Rules 13n-11(d), (f), and (g), and in accordance with the amendments
to Regulation S-T, will be 54 hours and $22,772 for each registered
SDR.\1354\ Assuming a maximum of ten SDRs, the aggregate ongoing
estimated dollar cost per year will be $368,120 to comply with the
rules.\1355\
---------------------------------------------------------------------------

    \1354\ See Section VII.D.6 of this release discussing the costs
of Rule 13n-11.
    \1355\ The Commission estimates that an SDR will assign these
responsibilities to a Senior Systems Analyst. Thus, the total
ongoing estimated dollar cost will be $36,812 per SDR and $368,120
for all SDRs, calculated as follows: ($22,772 for information
technology services + (Senior Systems Analyst at $260 per hour for
54 hours)) x 10 registrants = $368,120.
---------------------------------------------------------------------------

    The Commission believes that existing SDRs may already maintain
compliance programs that are overseen by a CCO or an individual who
effectively serves as a CCO.\1356\ In addition, CCOs may prepare
compliance reports presented to senior management and/or the SDRs'
boards as part of their current business practice. SDRs are currently
not subject to regulation by the Commission, and therefore, may need to
enhance their compliance programs and compliance reports to comply with
Rules 13n-4(b)(11) and 13n-11. Thus, SDRs may experience costs in
enhancing their compliance programs and compliance reports to comply
with Rules 13n-4(b)(11) and 13n-11. Moreover, because the costs
discussed above represent the costs of complying with Rules 13n-
4(b)(11) and 13n-11 without any existing compliance programs in place
that are overseen by a CCO or an individual who effectively serves as a
CCO, existing SDRs that already maintain such compliance programs may
experience initial costs lower than those estimated above. However,
even if an SDR has an existing compliance program overseen by a CCO, it
is possible that officers, directors, and employees concerned about the
prohibition in Rule 13n-11(h) (prohibiting officers, directors, and
employees of an SDR from directly or indirectly taking any action to
coerce, manipulate, mislead, or fraudulently influence the CCO) may
want expanded liability insurance coverage. In response, an SDR may
seek to acquire additional insurance coverage. The Commission
acknowledges that it is possible, therefore, that Rule 13n-11(h) may
result in liability insurance rates that are above what they would have
been in the absence of the rule. The Commission is unable to estimate
these costs given that it lacks specific information regarding current
insurance costs for SDRs, the amount of the demand that there will be
for increased coverage, and thereby the potential increases associated
with the rule. The Commission believes that after SDRs bring their
compliance programs and compliance reports into compliance with Rules
13n-4(b)(11) and 13n-11, however, the ongoing annual costs for SDRs
will likely be consistent with the estimates provided above.
---------------------------------------------------------------------------

    \1356\ Cf. DTCC 2, supra note 19 (stating that it ``has an
established compliance infrastructure for its businesses . . . which
includes processes for establishing and implementing required
compliance policies and procedures and overseeing adherence to those
procedures and a mechanism for reporting, tracking, remediating and
closing compliance issues whether self-identified or identified
through internal or external examinations'' and that ``[t]he
Commission's proposed required practices are generally consistent
with those of'' the commenter's trade repository).
---------------------------------------------------------------------------

    The Commission solicited comment on these estimates related to
Rules 13n-4(b)(11) and 13n-11.\1357\ The Commission specifically
requested comment on the initial and ongoing costs associated with
designating a CCO and the costs associated with any personnel who may
be necessary to support the CCO and create the annual compliance and
financial reports.\1358\ One commenter stated that it is difficult to
assess the incremental costs to SDRs of implementing Rule 13n-11
regarding designation of a CCO and that even with an established
compliance infrastructure, the commenter believed that ``it is likely
that the new requirements of Rule 13n-11 will entail additional costs,
potentially including additional personnel and systems'' and the
``compliance responsibilities in an SDR will evolve (and likely
increase) as the scope of transactions reported to that SDR increase,
which may also result in additional incremental costs.'' \1359\ The
Commission agrees with the commenter's views; nevertheless the
Commission has attempted to quantify the costs of compliance with the
rule, as discussed above.
---------------------------------------------------------------------------

    \1357\ See Proposing Release, 75 FR at 77362, supra note 2.
    \1358\ See Proposing Release, 75 FR at 77362, supra note 2.
    \1359\ DTCC 2, supra note 19.
---------------------------------------------------------------------------

c. Alternatives
    The Commission considered requiring that the compensation,
appointment, and termination of a CCO be approved by a majority of
independent board members of an SDR, a position urged by two
commenters.\1360\ As discussed above, the Commission believes that the
rules that are intended to minimize an SDR's potential and existing
conflicts of interest and to help ensure that SDRs meet core principles
are sufficient at this time. Consequently, the Commission does not
believe that requiring SDRs to have independent directors, and imposing
the associated costs on SDRs, is warranted at this time. For these same
reasons, the Commission does not believe that approval of a CCO's
compensation, appointment, and termination by a majority of independent
directors will provide

substantially greater benefits than having a majority of the board
approve compensation, appointment, and termination.
---------------------------------------------------------------------------

    \1360\ See Better Markets 1, supra note 19 (recommending that
the CCO's compensation and termination be approved by independent
board members of an SDR). Similarly, one commenter suggested that
only public independent directors or directors with an ``Independent
Perspective,'' and not the full board, have ``the authority and sole
responsibility to appoint or remove the CCO, or to materially change
its duties and responsibilities.'' Barnard, supra note 19.
---------------------------------------------------------------------------

    Similarly, the Commission considered requiring CCOs to report
directly to independent directors, as suggested by one commenter.\1361\
For the reasons stated above, the Commission does not believe that
requiring independent directors, and therefore requiring CCOs to report
to independent directors, is warranted at this time.\1362\
---------------------------------------------------------------------------

    \1361\ See Better Markets 1, supra note 19.
    \1362\ See Section VI.D.3.b.iii of this release discussing
prescriptive governance requirements and limitations.
---------------------------------------------------------------------------

    The Commission considered whether it should prohibit a CCO from
being the general counsel of an SDR or a member of the SDR's legal
department, as suggested by two commenters.\1363\ The Commission is not
adopting this prohibition because, as discussed above, the Commission
believes that any potential conflicts of interest can be adequately
addressed by the SDR's conflicts of interest policies and procedures,
which are required to be established under Rule 13n-4(c)(3).\1364\ The
Commission believes that SDRs should have flexibility in appointing
their CCOs and that these conflicts of interest provisions are
sufficient to mitigate any risks from not adopting the prohibition
suggested by the commenter. Further, the Commission believes that
imposing such a prohibition could impose additional costs on SDRs by
requiring that they employ two different persons as general counsel and
CCO, each position with its own compensation.
---------------------------------------------------------------------------

    \1363\ See Better Markets 1, supra note 19; Barnard, supra note
19.
    \1364\ See Section VI.J.1.c of this release discussing Rule 13n-
11(a).
---------------------------------------------------------------------------

    The Commission considered reducing the amount of information
required on the annual compliance report. For example, the Commission
could have not required any discussion of recommendations for material
changes to policies and procedures, as suggested by one
commenter.\1365\ The Commission believes, however, that the benefits of
obtaining all of the information required by Rule 13n-11(d) justify any
burdens associated with providing such information on the annual
compliance report. The information will assist Commission staff in
assessing an SDR's compliance with the federal securities laws and the
rules and regulations thereunder, and information about recommendations
for material changes to an SDR's policies and procedures may alert the
staff to material compliance issues at an SDR. Moreover, only
recommendations for material changes will have to be described, which
will impose a lesser burden than requiring disclosure of every
recommendation.
---------------------------------------------------------------------------

    \1365\ See DTCC 2, supra note 19.
---------------------------------------------------------------------------

    The Commission considered, as suggested by one commenter,\1366\
harmonizing with the CFTC's approach \1367\ and not adopting Rule 13n-
11(f)(2)'s requirement that each financial report be audited in
accordance with the PCAOB's standards by a registered public accounting
firm that is qualified and independent. Although the Commission
understands that SDRs will incur costs in hiring and retaining
qualified public accounting firms, the Commission believes that
obtaining audited financial reports from SDRs is important given the
significant role the Commission believes that SDRs will play in the SBS
market. The Commission believes that SDRs will provide transparency to,
and increase the efficiency of, the SBS market. The Commission believes
that SDRs will also be an important source of market data for
regulators. Given the critical nature of their role in the marketplace,
the Commission believes that it is important to obtain audited
financial reports from SDRs in order to determine whether or not they
have sufficient financial resources to continue operations. While the
Commission recognizes that Rule 13n-11(f)(2) may, in some cases, be
more costly than the CFTC's requirement of quarterly unaudited
financial statements, the Commission believes that the additional
burden, where it exists, is justified by the benefits of requiring
audited financial reports.
---------------------------------------------------------------------------

    \1366\ See DTCC 5, supra note 19.
    \1367\ See CFTC Rule 49.25, 17 CFR 49.25.
---------------------------------------------------------------------------

    Finally, the Commission considered one commenter's suggestion that
there should be ``[c]ompetency standards to ensure that CCOs have the
background and skills necessary to fulfill their responsibilities.''
\1368\ The Commission believes that, as discussed above, such standards
do not need to be adopted by rule, but rather that SDRs should have
flexibility in determining what standards their CCOs should meet.\1369\
The Commission believes that SDRs are in the best position to judge the
competency of their CCOs and select them accordingly.
---------------------------------------------------------------------------

    \1368\ See Better Markets 3, supra note 19.
    \1369\ See Section VI.J.1.c of this release discussing Rule 13n-
11(a).
---------------------------------------------------------------------------

7. Other Policies and Procedures Relating to an SDR's Business
    The SDR Rules require SDRs to develop and maintain various policies
and procedures.\1370\ Rules 13n-4(b)(8) and 13n-9 require each SDR to
comply with certain requirements pertaining to the privacy of SBS
transaction information.\1371\ Rule 13n-4(c) requires each SDR to
comply with certain core principles pertaining to market access to
services and data, governance arrangements, and conflicts of interest,
including developing policies and procedures related to these core
principles.\1372\ Rule 13n-5(b)(6) requires SDRs to establish
procedures and provide facilities to effectively resolve
disputes.\1373\
---------------------------------------------------------------------------

    \1370\ See Section VIII.D.2 of this release discussing the cost
and benefits associated with the policies and procedures that SDRs
must develop and maintain with respect to their information systems.
    \1371\ See Section VI.I.1 of this release discussing Rule 13n-9.
    \1372\ See Section VI.D.3 of this release discussing Rule 13n-
4(c).
    \1373\ See Section VI.E.6 of this release discussing Rule 13n-
5(b)(6).
---------------------------------------------------------------------------

a. Benefits
    The privacy requirements set forth in Rules 13n-4(b)(8) and 13n-9
are intended to safeguard transaction information provided to SDRs by
market participants. These privacy requirements make it less likely
that the transaction information that market participants are required
to report will expose their trading strategies or unhedged positions,
which could subject them to predatory trading.
    Rule 13n-4(c)(1), which relates to market access to services and
data, requires that SDRs impose fair, reasonable, and consistently
applied fees and maintain objective access and participation criteria.
This rule is designed to help ensure that SDRs do not engage in
anticompetitive behavior and assuming that the SDR Rules promote
competition among SDRs, that the cost of an SDR's core and ancillary
services that are passed on to market participants are competitive.
Furthermore, the Commission believes that by requiring each SDR to
permit market participants to access specific services offered by the
SDR separately, Rule 13n-4(c)(1)(ii) may promote efficiency to the
extent that it saves market participants from having to purchase
ancillary services that they do not want and will not use as a
condition to using an SDR's data collection and maintenance services.
Rule 13n-4(c)(1)(ii) may also promote efficiency and lower costs to the
extent that it promotes competition among SDRs and

among SDRs and third party service providers offering ancillary
services.
    The governance requirements in Rule 13n-4(c)(2) are designed to
reduce conflicts of interest in the management of SDRs. In addition, by
requiring fair representation of market participants on the board with
the opportunity to participate in the process for nominating directors
and the right to petition for alternative candidates, the rule will
help reduce the likelihood that an incumbent market participant will
exert undue influence on the board.
    While the above requirements are designed to prevent and constrain
potential conflicts of interest, Rule 13n-4(c)(3) directly addresses
conflicts of interest through targeted policies and procedures and an
obligation to establish a process for resolving conflicts of interest.
This rule will help mitigate the possibility that SDRs' business
practices and internal structures might disadvantage a particular group
of market participants.
    The requirement in Rule 13n-5(b)(6) is designed to help ensure that
SDRs maintain accurate records relating to SBSs.\1374\ In addition to
helping to ensure the accuracy of data maintained by SDRs, the
requirement will provide a facility through which market participants
could correct inaccuracies in SBS data regarding transactions to which
they are a party.
---------------------------------------------------------------------------

    \1374\ See Exchange Act Section 13(n)(5)(B), 15 U.S.C.
78m(n)(5)(B) (requiring an SDR to confirm, as prescribed in Rule
13n-5, with both counterparties to the SBS the accuracy of the data
that was submitted); Exchange Act Section 13(n)(5)(C), 15 U.S.C.
78m(n)(5)(C) (requiring SDRs to maintain SBS data).
---------------------------------------------------------------------------

    Collectively, the rules described in this section will help ensure
that SDRs operate consistently with the objectives set forth in the
Exchange Act by providing fair, open, and not unreasonably
discriminatory access to market participants without taking advantage
of the SDRs' access to transaction data that market participants are
required to report to the SDRs.
    The Commission solicited comment on the benefits related to Rules
13n-4(c), 13n-5(b)(6), 13n-4(b)(8), and 13n-9.\1375\ Other than one
commenter noting that Rule 13n-5(b)(6) is a key step in the effort to
have accurate data at SDRs,\1376\ the Commission did not receive any
comments on the estimated benefits of these rules.
---------------------------------------------------------------------------

    \1375\ See Proposing Release, 75 FR at 77363, supra note 2.
    \1376\ MFA 1, supra note 19; see also MFA SBSR, supra note 27.
---------------------------------------------------------------------------

b. Costs
    The Commission anticipates that the costs to SDRs from Rules 13n-
4(c), 13n-5(b)(6), 13n-4(b)(8), and 13n-9 will derive primarily from
the costs of establishing, maintaining, and enforcing the required
policies and procedures.
    The governance requirements in Rule 13n-4(c)(2) could impose costs
resulting from educating senior management and each director about SBS
trading and reporting and the new regulatory structure that will govern
SBSs, which could slow management or board processes at least
initially. Existing SDRs may experience lower costs, however, to the
extent that they have already educated senior management and each
director about SBS trading and reporting and the new regulatory
structure that will govern SBSs.
    The requirement in Rule 13n-5(b)(6) will also impose costs on SDRs
because SDRs are required to establish procedures and provide
facilities through which market participants can challenge the accuracy
of the transaction data and positions recorded in the SDRs.
    Rule 13n-4(c)(1)(ii) may also impose costs on SDRs by requiring
SDRs to offer services separately. If SDRs would otherwise bundle their
ancillary services with their data collection and maintenance services,
or vice versa, then the requirement that they offer services separately
may impose costs on SDRs. These costs include the cost of building the
infrastructure to offer services separately, the potential losses of
economies of scope in providing bundled services, and lost revenue from
fees for services that market participants would otherwise be required
to purchase. Similarly, the rule may impose costs on third party
service providers that would be prevented from bundling their services
with the services of an SDR.
    As discussed above, the Commission estimates that the average
initial paperwork cost associated with Rule 13n-4(c)(1) will be 367.5
hours and $35,000 and the average ongoing cost will be 105 hours per
year for each SDR.\1377\ Assuming a maximum of ten SDRs, the aggregate
one-time estimated dollar cost will be $1,465,550 \1378\ and the
aggregate ongoing estimated dollar cost per year will be $320,890
\1379\ to comply with the rule.
---------------------------------------------------------------------------

    \1377\ See Section VII.D.7 of this release discussing costs of
Rules 13n-4(c)(1)(iii) and (iv).
    \1378\ The Commission estimates that an SDR will assign these
responsibilities to a Compliance Manager, an Attorney, a Senior
Systems Analyst, and an Operations Specialist. Thus, the total
initial estimated dollar cost will be $146,555 per SDR and
$1,465,550 for all SDRs, calculated as follows: ($35,000 for outside
legal services + (Compliance Manager at $283 per hour for 135 hours)
+ (Attorney at $380 per hour for 152.5 hours) + (Senior Systems
Analyst at $260 per hour for 40 hours) + (Operations Specialist at
$125 per hour for 40 hours)) x 10 registrants = $1,465,550.
    \1379\ The Commission estimates that an SDR will assign these
responsibilities to a Compliance Manager, an Attorney, a Senior
Systems Analyst, and an Operations Specialist. Thus, the total
ongoing estimated dollar cost will be $32,089 per SDR and $320,890
for all SDRs, calculated as follows: ((Compliance Manager at $283
per hour for 38 hours) + (Attorney at $380 per hour for 45 hours) +
(Senior Systems Analyst at $260 per hour for 11 hours) + (Operations
Specialist at $125 per hour for 11 hours)) x 10 registrants =
$320,890.
---------------------------------------------------------------------------

    As discussed above, the Commission estimates that the average
initial paperwork cost associated with Rule 13n-4(c)(2) will be 210
hours and $20,000 for each SDR and the average ongoing paperwork cost
will be 60 hours per year for each SDR.\1380\ Assuming a maximum of ten
SDRs, the aggregate one-time estimated dollar cost will be $901,400
\1381\ and the aggregate ongoing estimated dollar cost per year will be
$200,400 \1382\ to comply with the rule.
---------------------------------------------------------------------------

    \1380\ See Section VII.D.7 of this release discussing costs of
Rule 13n-4(c)(2)(iv).
    \1381\ The Commission estimates that an SDR will assign these
responsibilities to a Compliance Attorney. Thus, the total initial
estimated dollar cost will be $90,140 per SDR and $901,400 for all
SDRs, calculated as follows: ($20,000 for outside legal services +
(Compliance Attorney at $334 per hour for 210 hours)) x 10
registrants = $901,400.
    \1382\ The Commission estimates that an SDR will assign these
responsibilities to a Compliance Attorney. Thus, the total ongoing
estimated dollar cost will be $20,040 per SDR and $200,400 for all
SDRs, calculated as follows: (Compliance Attorney at $334 per hour
for 60 hours) x 10 registrants = $200,400.
---------------------------------------------------------------------------

    As discussed above, the Commission estimates that the average
initial paperwork cost associated with Rule 13n-4(c)(3) will be 420
hours and $40,000 for each SDR and the average ongoing paperwork cost
will be 120 hours per year for each SDR.\1383\ Assuming a maximum of
ten SDRs, the aggregate one-time estimated dollar cost will be
$1,802,800 \1384\ and the aggregate ongoing estimated dollar cost per
year will be $400,800 \1385\ to comply with the rule.
---------------------------------------------------------------------------

    \1383\ See Section VII.D.7 of this release discussing costs of
Rule 13n-4(c)(3).
    \1384\ The Commission estimates that an SDR will assign these
responsibilities to a Compliance Attorney. Thus, the total initial
estimated dollar cost will be $180,280 per SDR and $1,802,800 for
all SDRs, calculated as follows: ($40,000 for outside legal services
+ (Compliance Attorney at $334 per hour for 420 hours)) x 10
registrants = $1,802,800.
    \1385\ The Commission estimates that an SDR will assign these
responsibilities to a Compliance Attorney. Thus, the total ongoing
estimated dollar cost will be $40,080 per SDR and $400,800 for all
SDRs, calculated as follows: (Compliance Attorney at $334 per hour
for 120 hours) x 10 registrants = $400,800.
---------------------------------------------------------------------------

    As discussed above, the Commission estimates that the average
initial paperwork cost associated with Rule 13n-5(b)(6) will be 315
hours and $30,000 for each SDR and the average

ongoing paperwork cost will be 90 hours per year for each SDR.\1386\
Assuming a maximum of ten SDRs, the aggregate one-time estimated dollar
cost will be $1,352,100 \1387\ and the aggregate ongoing estimated
dollar cost per year will be $300,600 \1388\ to comply with the rule.
---------------------------------------------------------------------------

    \1386\ See Section VII.D.7 of this release discussing costs of
Rule 13n-5(b)(6).
    \1387\ The Commission estimates that an SDR will assign these
responsibilities to a Compliance Attorney. Thus, the total initial
estimated dollar cost will be $135,210 per SDR and $1,352,100 for
all SDRs, calculated as follows: ($30,000 for outside legal services
+ (Compliance Attorney at $334 per hour for 315 hours)) x 10
registrants = $1,352,100.
    \1388\ The Commission estimates that an SDR will assign these
responsibilities to a Compliance Attorney. Thus, the total initial
estimated dollar cost will be $30,060 per SDR and $300,600 for all
SDRs, calculated as follows: (Compliance Attorney at $334 per hour
for 90 hours) x 10 registrants = $300,600.
---------------------------------------------------------------------------

    As discussed above, the Commission estimates that the average
initial paperwork cost associated with Rules 13n-4(b)(8) and 13n-9 will
be 630 hours and $60,000 for each SDR and the average ongoing paperwork
cost will be 180 hours per year for each SDR.\1389\ Assuming a maximum
of ten SDRs, the aggregate one-time estimated dollar cost will be
$2,704,200 \1390\ and the aggregate ongoing estimated dollar cost per
year will be $601,200 \1391\ to comply with the rules.
---------------------------------------------------------------------------

    \1389\ See Section VII.D.7 of this release discussing costs of
Rules 13n-4(b)(8), 13n-9(b)(1), and 13n-9(b)(2).
    \1390\ The Commission estimates that an SDR will assign these
responsibilities to a Compliance Attorney. Thus, the total initial
estimated dollar cost will be $270,420 per SDR and $2,704,200 for
all SDRs, calculated as follows: ($60,000 for outside legal services
+ (Compliance Attorney at $334 per hour for 630 hours)) x 10
registrants = $2,704,200.
    \1391\ The Commission estimates that an SDR will assign these
responsibilities to a Compliance Attorney. Thus, the total ongoing
estimated dollar cost will be $60,120 per SDR and $601,200 for all
SDRs, calculated as follows: (Compliance Attorney at $334 per hour
for 180 hours) x 10 registrants = $601,200.
---------------------------------------------------------------------------

    The Commission solicited comment on the costs related to Rules 13n-
4(c), 13n-5(b)(6), 13n-4(b)(8), and 13n-9.\1392\ The Commission
specifically requested comment on the initial and ongoing costs
associated with establishing and maintaining the policies and
procedures required by the rules, particularly as the costs apply to
persons currently operating as SDRs.\1393\ One commenter believed that
an interpretation of Rule 13n-4(c)(1)(i) that prohibits the use of the
``dealer pays'' or ``sell-side pays'' model ``would have the unintended
consequence of significantly increasing the costs for buy-side
participants . . . .'' \1394\ Because, as discussed above, Rule 13n-
4(c)(1)(i) is not intended to prohibit an SDR from utilizing any one
particular model, including a ``dealer pays'' or ``sell-side pays''
model, the Commission does not believe that the rule will necessarily
increase costs for buy-side participants, as stated by the
commenter.\1395\ The Commission further believes that if there is
significant demand by buy-side participants with reporting
responsibility for a ``dealer pays'' model, then an SDR is likely to
provide such a service.
---------------------------------------------------------------------------

    \1392\ See Proposing Release 75 FR at 77364, supra note 2.
    \1393\ See Proposing Release 75 FR at 77364, supra note 2.
    \1394\ MarkitSERV, supra note 19.
    \1395\ See Section VI.D.3.a.iii(1) of this release discussing
Rule 13n-4(c)(1)(i).
---------------------------------------------------------------------------

    A commenter to proposed Regulation SBSR suggested that SDRs should
not be permitted to charge fees to third parties acting on behalf of
counterparties for accepting SBS transaction information, as such fees
would increase the cost of using an SB SEF or other third party.\1396\
Although the Commission agrees that an SB SEF or other third party
could pass along fees charged by SDRs, the Commission does not believe
that it is appropriate to determine who an SDR can charge for its
services. Rather, the Commission believes that SDRs should have
flexibility in determining how and whom to charge for their services,
and that any costs associated with such flexibility are justified by
the benefits of allowing SDRs to develop sustainable business models in
an open, competitive environment.
---------------------------------------------------------------------------

    \1396\ Tradeweb SBSR, supra note 27.
---------------------------------------------------------------------------

    The Commission believes that existing SDRs may already have in
place policies and procedures similar to the policies and procedures
required by Rules 13n-4(c), 13n-5(b)(6), 13n-4(b)(8), and 13n-9. Such
persons are currently not subject to regulation by the Commission, and
therefore, may need to enhance their policies and procedures to comply
with Rules 13n-4(c), 13n-5(b)(6), 13n-4(b)(8), and 13n-9. Thus, such
persons may experience costs in enhancing their policies and procedures
to comply with Rules 13n-4(c), 13n-5(b)(6), 13n-4(b)(8), and 13n-9.
Moreover, because the costs discussed above represent the costs of
creating policies and procedures without any existing policies and
procedures in place, existing SDRs that already have policies and
procedures may experience initial costs lower than those estimated
above. The Commission believes that after such persons bring their
policies and procedures into compliance with Rules 13n-4(c), 13n-
5(b)(6), 13n-4(b)(8), and 13n-9, however, the ongoing annual costs for
such persons will likely be consistent with the estimates provided
above.
c. Alternatives
    As suggested by a commenter, the Commission considered (1) adding
safeguards specifically related to confidentiality of trading positions
and (2) requiring SDRs to adopt policies and procedures to limit access
to confidential information to directors, officers, employees, agents,
and representatives who need to know such information in order to
fulfill their regulatory obligations.\1397\ As discussed above, the
Commission believes that Rules 13n-4(b)(8) and 13n-9, as adopted, are
broad enough to cover information about trading positions, so no
specific requirement regarding confidentiality of trading positions is
necessary.\1398\ The Commission also believes that the rules are broad
enough to allow SDRs, if they choose, to adopt policies and procedures
to limit access to confidential information to directors, officers,
employees, agents, and representatives who need to know such
information in order to fulfill their regulatory obligations. The
Commission believes that the adoption of the specific policies that
were suggested by the commenter would prevent an SDR's management from
finding the most cost effective method of meeting the privacy
requirements in these rules.
---------------------------------------------------------------------------

    \1397\ See MFA 1, supra note 19.
    \1398\ See Sections VI.D.2.c and VI.I.1.c of this release
discussing Rules 13n-4(b)(8) and 13n-9, respectively.
---------------------------------------------------------------------------

    The Commission considered, as an alternative to Rules 13n-4(c)(2)
and (3), adopting, as suggested by two commenters, prescriptive rules
relating to governance (e.g., ownership or voting limitations,
independent directors, nominating committees composed of a majority of
independent directors).\1399\ As discussed above, the Commission
believes that rules that are intended to minimize an SDR's potential
and existing conflicts of interest and to help ensure that an SDR meets
its core principles are sufficient and that prescriptive governance
requirements are not warranted at this time.\1400\ If the Commission
were to impose additional governance requirements and limitations, SDRs
would likely incur costs in addition to the costs already imposed by
the SDR Rules, which do not seem to be warranted at this time. For
these reasons, the Commission is

not adopting the alternative to Rules 13n-4(c)(2) and (3) of more
prescriptive governance arrangements.
---------------------------------------------------------------------------

    \1399\ See Barnard, supra note 19; Better Markets 1, supra note
19; see also Better Markets 2, supra note 19.
    \1400\ See Sections VI.D.3.b.iii and VI.D.3.c.iii of this
release discussing Rules 13n-4(c)(2) and 13n-4(c)(3), respectively.
---------------------------------------------------------------------------

    The Commission considered whether the resolution of disputes should
be left primarily to the SBS counterparties and third party service
providers, which one commenter suggested.\1401\ The Commission believes
that the benefits of a dispute resolution procedure in Rule 13n-5(b)(6)
justify the possible issues cited by the commenter, such as duplication
of services already provided by third party service providers. As
discussed above, there may be instances where a third party service
provider cannot resolve a dispute, and, in those situations, the cost
of dispute resolution through the SDR will be necessary to maintain the
accuracy and quality of the SBS data.\1402\ The value of the SBS data
depends on its accuracy and quality.
---------------------------------------------------------------------------

    \1401\ See DTCC 2, supra note 19.
    \1402\ See Section VI.E.6.c of this release discussing Rule 13n-
5(b)(6).
---------------------------------------------------------------------------

    The Commission also considered prohibiting the commercial use of
SBS data by SDRs unless the parties to the SBS provide written consent.
Three commenters, including two commenters to proposed Regulation SBSR,
also suggested that SDRs be prohibited from using SBS data for
commercial purposes.\1403\ As discussed above, the Commission believes
that limiting the commercial use of SBS data would potentially limit
the business models that SDRs may develop, thereby reducing
competition.\1404\ Decreased competition may result in higher costs for
SDR services. Limiting the commercial use of SBS data would reduce
SDRs' potential revenue streams, reducing the profitability and
stability of SDRs. Further, as discussed above, such a limitation may
decrease transparency by preventing an SDR from releasing to the public
anonymized, aggregated reports of SBS data.\1405\ Finally, the
Commission believes that the SDR Rules, including Rules 13n-4(c)(3) and
13n-9, are sufficient to reduce conflicts of interest and protect the
privacy of SBS data. For these reasons, the Commission is not adopting
the alternative of limiting the commercial use of SBS data.
---------------------------------------------------------------------------

    \1403\ See MFA 1, supra note 19; DTCC SBSR, supra note 27; WMBAA
SBSR, supra note 27.
    \1404\ See Section VI.D.3.c.iii of this release discussing Rule
13n-4(c)(3).
    \1405\ See Section VI.D.3.c.iii of this release discussing Rule
13n-4(c)(3).
---------------------------------------------------------------------------

8. Total Costs
    Based on the analyses described above, the Commission estimates
that Rules 13n-1 through 13n-11 and Form SDR will impose on registered
SDRs an aggregate total initial one-time estimated dollar cost of
$227,075,600.50.\1406\ The Commission further estimates that Rules 13n-
1 through 13n-11 and Form SDR will impose on registered SDRs a total
ongoing annualized aggregate dollar cost of $145,630,646.10.\1407\
Finally, the Commission estimates that certain non-U.S. persons may
incur an aggregate total initial one-time estimated dollar cost of
approximately $7,600 \1408\ in determining the availability of the SDR
Exemption (i.e., Rule 13n-12).
---------------------------------------------------------------------------

    \1406\ The Commission derived its estimate from the following:
($801,688 ($793,840 + $3,840 + $4,008) for Registration Requirements
and Form SDR) + ($214,995,300 ($210,810,000 + $4,185,300) for SDR
Duties, Data Collection and Maintenance, and Direct Electronic
Access) + ($986,600 for Recordkeeping) + ($263,162.50 for
Disclosure) + ($1,802,800 for Chief Compliance Officer and
Compliance Functions) + ($8,226,050 ($1,465,550 + $901,400 +
$1,802,800 + $1,352,100 + 2,704,200) for Other Policies and
Procedures Relating to an SDR's Business) = $227,075,600.50.
    \1407\ The Commission derived its estimate from the following:
($55,440 for Registration Requirements and Form SDR) + ($127,451,400
($126,486,000 + $965,400) for SDR Duties, Data Collection and
Maintenance, and Direct Electronic Access) + ($790,051.10 for
Recordkeeping) + ($2,510 for Reports) + ($1,735 for Disclosure) +
($15,505,620 ($9,130,800 + $16,700 + $5,990,000 + $368,120) for
Chief Compliance Officer and Compliance Functions) + ($1,823,890
($320,890 + $200,400 + $400,800 + $300,600 + $601,200) for Other
Policies and Procedures Relating to an SDR's Business) =
$145,630,646.10.
    \1408\ The Commission derived its estimate from the following:
($380 for one hour of an Attorney's time per person) x (20 non-U.S.
persons that perform the functions of an SDR using in-house legal
counsel to determine whether an applicable MOU or arrangement is in
place).
---------------------------------------------------------------------------

    Existing SDRs may experience costs lower than these estimates. Such
persons may have in place existing technology systems, policies and
procedures, personnel, and compliance regimes that they can use to
comply with the SDR Rules. Because the estimates discussed above
represent the costs of compliance starting from scratch, an existing
SDR will most likely experience costs lower than these estimates.
    Similarly, if such a person is registered with the CFTC as a swap
data repository, the person's costs of complying with the SDR Rules
will most likely be lower than the estimates provided above because the
person may be able to use its existing policies, procedures, and
operations to comply with the SDR Rules. As stated above, the
Commission believes that on the whole, the SDR Rules are largely
consistent with the rules adopted by the CFTC for swap data
repositories.\1409\ Consequently, a person registered with the CFTC as
a swap data repository may be able to use its existing policies,
procedures, and operations to comply with the SDR Rules and may not
need to create policies, procedures, and operations from scratch.
---------------------------------------------------------------------------

    \1409\ See Section I.D of this release.
---------------------------------------------------------------------------

IX. Regulatory Flexibility Act Certification

    The Regulatory Flexibility Act (``RFA'') \1410\ requires Federal
agencies, in promulgating rules, to consider the impact of those rules
on small entities. Section 603(a) \1411\ of the Administrative
Procedure Act,\1412\ as amended by the RFA, generally requires the
Commission to undertake a regulatory flexibility analysis of all
proposed rules, or proposed rule amendments, to determine the impact of
such rulemaking on ``small entities.'' \1413\ Section 605(b) of the RFA
states that this requirement does not apply to any final rule that an
agency certifies will not ``have a significant economic impact on a
substantial number of small entities.'' \1414\
---------------------------------------------------------------------------

    \1410\ 5 U.S.C. 601 et seq.
    \1411\ 5 U.S.C. 603(a).
    \1412\ 5 U.S.C. 551 et seq.
    \1413\ 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 rulemaking, are
set forth in Rule 0-10, 17 CFR 240.0-10. See Final Definitions of
``Small Business'' and ``Small Organization'' for Purposes of the
Regulatory Flexibility Act, Exchange Act Release No. 18451 (Jan. 28,
1982), 47 FR 5215 (Feb. 4, 1982).
    \1414\ See 5 U.S.C. 605(b).
---------------------------------------------------------------------------

    For purposes of Commission rulemaking in connection with the RFA, a
small entity includes: (1) An issuer or a person, other than an
investment company, that, on the last day of its most recent fiscal
year, had total assets of $5 million or less and (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 Exchange Act
Rule 17a-5(d), or, if not required to file such statements, a broker-
dealer with total capital (net worth plus subordinated liabilities) of
less than $500,000 on the last business day of the preceding fiscal
year (or in the time that it has been in business, if shorter); and is
not affiliated with any person (other than a natural person) that is
not a small entity.\1415\
---------------------------------------------------------------------------

    \1415\ 17 CFR 240.0-10.
---------------------------------------------------------------------------

    In the Proposing Release, the Commission stated that it did not
believe that any persons that would register as SDRs would be
considered small entities.\1416\ The Commission stated that it believed
that most, if not

all, SDRs would be part of large business entities with assets in
excess of $5 million and total capital in excess of $500,000. As a
result, the Commission certified that the proposed rules would not have
a significant impact on a substantial number of small entities and
requested comments on this certification.
---------------------------------------------------------------------------

    \1416\ Proposing Release, 75 FR at 77365, supra note 2.
---------------------------------------------------------------------------

    The Commission did not receive any comments that specifically
addressed whether Rules 13n-1 through 13n-12 and Form SDR would have a
significant economic impact on small entities. Therefore, the
Commission continues to believe that Rules 13n-1 through 13n-12 and
Form SDR will not have a significant economic impact on a substantial
number of small entities.\1417\ Accordingly, the Commission hereby
certifies that, pursuant to 5 U.S.C. 605(b), Rules 13n-1 through 13n-
12, Form SDR will not have a significant economic impact on a
substantial number of small entities.
---------------------------------------------------------------------------

    \1417\ See Proposing Release, 75 FR at 77365, supra note 2.
---------------------------------------------------------------------------

X. Statutory Authority

    Pursuant to the Exchange Act, and particularly Sections 13(n) and
23(a) thereof, 15 U.S.C. 78m(n) and 78w(a), the Commission is adopting
new Rules 13n-1 to 13n-12, which govern SDRs and a new form for
registration as an SDR. Additionally, the Commission is adopting new
Rule 407 and amendments to Regulation S-T under authority set forth in
Exchange Act Section 23(a).\1418\ The Commission is also adopting
amendments to Exchange Act Rule 24b-2 under authority set forth in
Exchange Act Section 23(a).\1419\ All the new rules and amendments are
adopted under Chapter II of Title 17 of the Code of Federal Regulations
in the manner set forth below.
---------------------------------------------------------------------------

    \1418\ 15 U.S.C. 78w(a).
    \1419\ 15 U.S.C. 78w(a).
---------------------------------------------------------------------------

List of Subjects

17 CFR Part 232

    Reporting and recordkeeping requirements.

17 CFR Parts 240 and 249

    Confidential business information, Reporting and recordkeeping
requirements, Securities.

    In accordance with the foregoing, Title 17, Chapter II of the Code
of Federal Regulations is amended as follows:

PART 232--REGULATION S-T--GENERAL RULES AND REGULATIONS FOR
ELECTRONIC FILINGS

0
1. The authority citation for part 232 continues to read, in part, as
follows:

    Authority:  15 U.S.C. 77f, 77g, 77h, 77j, 77s(a), 77z-3,
77sss(a), 78c(b), 78l, 78m, 78n, 78o(d), 78w(a), 78ll, 80a-6(c),
80a-8, 80a-29, 80a-30, 80a-37, and 7201 et seq.; and 18 U.S.C. 1350.
* * * * *

0
2. Section 232.11 is amended by adding the definitions of ``Interactive
Data Financial Report'' and ``Related Official Financial Report
Filing'' in alphabetical order to read as follows:

Sec.  232.11  Definition of terms used in part 232.

* * * * *
    Interactive Data Financial Report. The term Interactive Data
Financial Report means the machine-readable computer code that presents
information in eXtensible Business Reporting Language (XBRL) electronic
format pursuant to Sec.  232.407.
* * * * *
    Related Official Financial Report Filing. The term Related Official
Financial Report Filing means the ASCII or HTML format part of the
official filing with which an Interactive Data Financial Report appears
as an exhibit.
* * * * *

0
3. Section 232.101 is amended by:
0
a. Removing, in paragraph (a)(1)(xv), the word ``and'' after the
semicolon;
0
b. In paragraph (a)(1)(xvi), removing the period and adding in its
place a semicolon, and adding the word ``and'' after the semicolon;
0
c. Adding paragraph (a)(1)(xvii);
0
d. Revising paragraph (c) introductory text; and
0
e. Adding paragraph (d).
    The additions and revision read as follows:

Sec.  232.101  Mandated electronic submissions and exceptions.

    (a) * * *
    (1) * * *
    (xvii) Documents filed with the Commission pursuant to section
13(n) of the Exchange Act (15 U.S.C. 78m(n)) and the rules and
regulations thereunder, including Form SDR (17 CFR 249.1500) and
reports filed pursuant to Rules 13n-11(d) and (f) (17 CFR 240.13n-11(d)
and (f)) under the Exchange Act.
* * * * *
    (c) Documents to be submitted in paper only. Except as otherwise
specified in paragraph (d) of this section, the following shall not be
submitted in electronic format:
* * * * *
    (d) All documents, including any information with respect to which
confidential treatment is requested, filed pursuant to section 13(n) of
the Exchange Act (15 U.S.C. 78m(n)) and the rules and regulations
thereunder shall be filed in electronic format.

0
4. Section 232.305 is amended by revising paragraph (b) to read as
follows:

Sec.  232.305  Number of characters per line; tabular and columnar
information.

* * * * *
    (b) Paragraph (a) of this section does not apply to HTML documents,
Interactive Data Files (Sec.  232.11), Interactive Data Financial
Reports (Sec.  232.11) or XBRL-Related Documents (Sec.  232.11).

0
5. Section 232.407 is added to read as follows:

Sec.  232.407  Interactive data financial report filings.

    Section 407 of Regulation S-T (Sec.  232.407) applies to electronic
filers that file Interactive Data Financial Reports (Sec.  232.11) as
required by Rule 13n-11(f)(5) (Sec.  240.13n-11(f)(5) of this chapter).
Section 407 imposes content, format, and filing requirements for
Interactive Data Financial Reports, but does not change the substantive
content requirements for the financial and other disclosures in the
Related Official Financial Report Filing (Sec.  232.11). Rule 13n-
11(f)(5) specifies the circumstances under which an Interactive Data
Financial Report must be filed as an exhibit.
    (a) Content, format, and filing requirements--General. Interactive
Data Financial Reports must:
    (1) Comply with the content, format, and filing requirements of
this section;
    (2) Be filed only by an electronic filer that is required to file
an Interactive Data Financial Report pursuant to Rule 13n-11(f)(5)
(Sec.  240.13n-11(f)(5) of this chapter) as an exhibit to a filing; and
    (3) Be filed in accordance with the EDGAR Filer Manual and Rules
13n-11(f)(5) and (g) (Sec.  240.13n-11(f)(5) and (g) of this chapter).
    (b) Content--categories of information presented. An Interactive
Data Financial Report must consist of only a complete set of
information for all periods required to be presented in the
corresponding data in the Related Official Financial Report Filing, no
more and no less, for the following categories, as applicable:
    (1) The complete set of the electronic filer's financial statements
(which

includes the face of the financial statements and all footnotes); and
    (2) All schedules set forth in Article 12 of Regulation S-X
(Sec. Sec.  210.12-01 through 210.12-29 of this chapter) related to the
electronic filer's financial statements.

    Note to paragraph (b):  It is not permissible for the
Interactive Data Financial Report to present only partial face
financial statements, such as by excluding comparative financial
information for prior periods.

    (c) Format--Generally. An Interactive Data Financial Report must
comply with the following requirements, except as modified by paragraph
(d) or (e) of this section, as applicable, with respect to the
corresponding data in the Related Official Financial Report Filing
consisting of footnotes to financial statements or financial statement
schedules as set forth in Article 12 of Regulation S-X (Sec. Sec.
210.12-01 through 210.12-29 of this chapter):
    (1) Data elements and labels--(i) Element accuracy. Each data
element (i.e., all text, line item names, monetary values, percentages,
numbers, dates and other labels) contained in the Interactive Data
Financial Report reflects the same information in the corresponding
data in the Related Official Financial Report Filing;
    (ii) Element specificity. No data element contained in the
corresponding data in the Related Official Financial Report Filing is
changed, deleted or summarized in the Interactive Data Financial
Report;
    (iii) Standard and special labels and elements. Each data element
contained in the Interactive Data Financial Report is matched with an
appropriate tag from the most recent version of the standard list of
tags specified by the EDGAR Filer Manual. A tag is appropriate only
when its standard definition, standard label, and other attributes as
and to the extent identified in the list of tags match the information
to be tagged, except that:
    (A) Labels. An electronic filer must create and use a new special
label to modify a tag's existing standard label when that tag is an
appropriate tag in all other respects (i.e., in order to use a tag from
the standard list of tags only its label needs to be changed); and
    (B) Elements. An electronic filer must create and use a new special
element if and only if an appropriate tag does not exist in the
standard list of tags for reasons other than or in addition to an
inappropriate standard label; and
    (2) Additional mark-up related content. The Interactive Data
Financial Report contains any additional mark-up related content (e.g.,
the eXtensible Business Reporting Language tags themselves,
identification of the core XML documents used and other technology-
related content) not found in the corresponding data in the Related
Official Financial Report Filing that is necessary to comply with the
EDGAR Filer Manual requirements.
    (d) Format--Footnotes--Generally. The part of the Interactive Data
Financial Report for which the corresponding data in the Related
Official Financial Report Filing consists of footnotes to financial
statements must comply with the requirements of paragraphs (c)(1) and
(2) of this section, as modified by this paragraph (d). Each complete
footnote must be block-text tagged.
    (e) Format--Schedules--Generally. The part of the Interactive Data
Financial Report for which the corresponding data in the Related
Official Financial Report Filing consists of financial statement
schedules as set forth in Article 12 of Regulation S-X (Sec. Sec.
210.12-01 through 210.12-29 of this chapter) must comply with the
requirements of paragraphs (c)(1) and (2) of this section, as modified
by this paragraph (e). Each complete schedule must be block-text
tagged.

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

0
6. The general authority citation for Part 240 is revised 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. 1376 (2010), unless otherwise
noted.
* * * * *

0
7. Sections 240.13n-1 through 240-13n-12 are added to read as follows:

Sec.
240.13n-1 Registration of security-based swap data repository.
240.13n-2 Withdrawal from registration; revocation and cancellation.
240.13n-3 Registration of successor to registered security-based
swap data repository.
240.13n-4 Duties and core principles of security-based swap data
repository.
240.13n-5 Data collection and maintenance.
240.13n-6 Automated systems.
240.13n-7 Recordkeeping of security-based swap data repository.
240.13n-8 Reports to be provided to the Commission.
240.13n-9 Privacy requirements of security-based swap data
repository.
240.13n-10 Disclosure requirements of security-based swap data
repository.
240.13n-11 Chief compliance officer of security-based swap data
repository; compliance reports and financial reports.
240.13n-12 Exemption from requirements governing security-based swap
data repositories for certain non-U.S. persons.

Sec.  240.13n-1  Registration of security-based swap data repository.

    (a) Definitions. For purposes of this section --
    (1) Non-resident security-based swap data repository means:
    (i) In the case of an individual, one who resides in or has his
principal place of business in any place not in the United States;
    (ii) In the case of a corporation, one incorporated in or having
its principal place of business in any place not in the United States;
or
    (iii) In the case of a partnership or other unincorporated
organization or association, one having its principal place of business
in any place not in the United States.
    (2) Tag (including the term tagged) has the same meaning as set
forth in Rule 11 of Regulation S-T (17 CFR 232.11).
    (b) An application for the registration of a security-based swap
data repository and all amendments thereto shall be filed
electronically in a tagged data format on Form SDR (17 CFR 249.1500)
with the Commission in accordance with the instructions contained
therein. As part of the application process, each security-based swap
data repository shall provide additional information to any
representative of the Commission upon request.
    (c) Within 90 days of the date of the publication of notice of the
filing of such application (or within such longer period as to which
the applicant consents), the Commission shall -
    (1) By order grant registration; or
    (2) Institute proceedings to determine whether registration should
be granted or denied. Such proceedings shall include notice of the
issues under consideration and opportunity for hearing on the record
and shall be concluded within 180 days of the date of the publication
of notice of the filing of the application for registration under
paragraph (b) of this section. At the conclusion of such proceedings,
the Commission, by order, shall grant or deny such registration. The
Commission may extend the time for conclusion of such proceedings for
up to 90 days if it finds good cause for such extension and publishes
its reasons for so finding or for such longer period as to which the
applicant consents.

    (3) The Commission shall grant the registration of a security-based
swap data repository if the Commission finds that such security-based
swap data repository is so organized, and has the capacity, to be able
to assure the prompt, accurate, and reliable performance of its
functions as a security-based swap data repository, comply with any
applicable provision of the federal securities laws and the rules and
regulations thereunder, and carry out its functions in a manner
consistent with the purposes of section 13(n) of the Act (15 U.S.C.
78m(n)) and the rules and regulations thereunder. The Commission shall
deny the registration of a security-based swap data repository if it
does not make any such finding.
    (d) If any information reported in items 1 through 17, 26, and 48
of Form SDR (17 CFR 249.1500) or in any amendment thereto is or becomes
inaccurate for any reason, whether before or after the registration has
been granted, the security-based swap data repository shall promptly
file an amendment on Form SDR updating such information. In addition,
the security-based swap data repository shall annually file an
amendment on Form SDR within 60 days after the end of each fiscal year
of such security-based swap data repository.
    (e) Each security-based swap data repository shall designate and
authorize on Form SDR an agent in the United States, other than a
Commission member, official, or employee, who shall accept any notice
or service of process, pleadings, or other documents in any action or
proceedings brought against the security-based swap data repository to
enforce the federal securities laws and the rules and regulations
thereunder.
    (f) Any non-resident security-based swap data repository applying
for registration pursuant to this section shall:
    (1) Certify on Form SDR that the security-based swap data
repository can, as a matter of law, and will provide the Commission
with prompt access to the books and records of such security-based swap
data repository and can, as a matter of law, and will submit to onsite
inspection and examination by the Commission, and
    (2) Provide an opinion of counsel that the security-based swap data
repository can, as a matter of law, provide the Commission with prompt
access to the books and records of such security-based swap data
repository and can, as a matter of law, submit to onsite inspection and
examination by the Commission.
    (g) An application for registration or any amendment thereto that
is filed pursuant to this section shall be considered a ``report''
filed with the Commission for purposes of sections 18(a) and 32(a) of
the Act (15 U.S.C. 78r(a) and 78ff(a)) and the rules and regulations
thereunder and other applicable provisions of the United States Code
and the rules and regulations thereunder.

Sec.  240.13n-2  Withdrawal from registration; revocation and
cancellation.

    (a) Definition. For purposes of this section, tag (including the
term tagged) has the same meaning as set forth in Rule 11 of Regulation
S-T (17 CFR 232.11).
    (b) A registered security-based swap data repository may withdraw
from registration by filing a withdrawal from registration on Form SDR
(17 CFR 249.1500) electronically in a tagged data format. The security-
based swap data repository shall designate on Form SDR a person to
serve as the custodian of the security-based swap data repository's
books and records. When filing a withdrawal from registration on Form
SDR, a security-based swap data repository shall update any inaccurate
information.
    (c) A withdrawal from registration filed by a security-based swap
data repository shall become effective for all matters (except as
provided in this paragraph (c)) on the 60th day after the filing
thereof with the Commission, within such longer period of time as to
which such security-based swap data repository consents or which the
Commission, by order, may determine as necessary or appropriate in the
public interest or for the protection of investors, or within such
shorter period of time as the Commission may determine.
    (d) A withdrawal from registration that is filed pursuant to this
section shall be considered a ``report'' filed with the Commission for