__.20(d), Appendix A).        trading assets and    significant trading
                               liabilities the       assets and
                               average gross sum     liabilities.
                               of which over the
                               previous
                               consecutive four
                               quarters, as
                               measured as of the
                               last day of each of
                               the four prior
                               calendar quarters,
                               is $10 billion or
                               greater, if the
                               banking entity
                               engages in
                               proprietary trading
                               activity permitted
                               under subpart B.
                                  Any
                                  other banking
                                  entity notified
                                  in writing by
                                  the Agency.
Additional covered fund       Banking entities      Banking entities
 documentation requirements    with more than $10    with significant
 (Section __.20(e)).           billion in total      trading assets and
                               consolidated assets   liabilities.
                               as reported on
                               December 31 of the
                               previous two
                               calendar years.
Simplified program for        Banking entities      Banking entities
 banking entities with no      that do not engage    that do not engage
 covered activities (Section   in activities or      in activities or
 __.20(f)(1)).                 investments           investments
                               pursuant to subpart   pursuant to subpart
                               B or subpart C        B or subpart C
                               (other than trading   (other than trading
                               activities            activities
                               permitted pursuant    permitted pursuant
                               to Sec.   __.6(a)     to Sec.   __.6(a)
                               of subpart B).        of subpart B).
Simplified program for        Banking entities      Banking entities
 banking entities with         with $10 billion or   with moderate
 modest activities (Section    less in total         trading assets and
 __.20(f)(2)).                 consolidated assets   liabilities.
                               as reported on
                               December 31 of the
                               previous two
                               calendar years that
                               engage in
                               activities or
                               investments
                               pursuant to subpart
                               B or subpart C
                               (other than trading
                               activities
                               permitted pursuant
                               to Sec.   __.6(a)
                               of subpart B).
No compliance program         Not applicable......  Banking entities
 requirement unless Agency                           with limited
 directs otherwise (N/A).                            trading assets and
                                                     liabilities subject
                                                     to the presumption
                                                     of compliance.
------------------------------------------------------------------------

E. Appendix to Part []--Reporting and Recordkeeping
Requirements

1. Overview of the Proposal and Significant Changes From the 2013 Final
Rule
    As provided in the preamble to the 2013 final rule, the Agencies
have assessed the metrics data for its effectiveness in monitoring
covered trading activities for compliance with section 13 of the BHC
Act and for its costs.\215\ The Agencies have also considered whether
all of the quantitative measurements are useful for all asset classes
and markets, as well as for all the trading activities subject to the
metrics requirement, or whether modifications are appropriate.\216\ As
a result of this evaluation, and as described in detail below, the
Agencies are proposing the following amendments to Appendix A of the
2013 final rule:\217\
---------------------------------------------------------------------------

    \215\ See 79 FR at 5772.
    \216\ Id.
    \217\ In connection with the Appendix, the following documents
have also been published and made available on each Agency's
respective website: Instructions for Preparing and Submitting
Quantitative Measurement Information (``Instructions''), Technical
Specifications Guidance, and an eXtensible Markup Language Schema
(``XML Schema'').
---------------------------------------------------------------------------

     Limit the applicability of certain metrics only to market
making and underwriting desks.
     Replace the Customer-Facing Trade Ratio with a new
Transaction Volumes metric to more precisely cover types of trading
desk transactions with counterparties.
     Replace Inventory Turnover with a new Positions metric,
which measures the value of all securities and derivatives positions.

     Remove the requirement to separately report values that
can be easily calculated from other quantitative measurements already
reported.
     Streamline and make consistent value calculations for
different product types, using both notional value and market value to
facilitate better comparison of metrics across trading desks and
banking entities.
     Eliminate inventory aging data for derivatives because
aging, as applied to derivatives, does not appear to provide a
meaningful indicator of potential impermissible trading activity or
excessive risk-taking.
     Require banking entities to provide qualitative
information specifying for each trading desk the types of financial
instruments traded, the types of covered trading activity the desk
conducts, and the legal entities into which the trading desk books
trades.
     Require a Narrative Statement describing changes in
calculation methods, trading desk structure, or trading desk
strategies.
     Remove the paragraphs labeled ``General Calculation
Guidance'' from the regulation. The Instructions generally would
provide calculation guidance.\218\
---------------------------------------------------------------------------

    \218\ The Instructions are available on each Agency's respective
website at the addresses specified in the Paperwork Reduction Act
section of this Supplementary Information. For the SEC and CFTC,
this document represents the views of SEC staff and CFTC staff, and
neither Commission has approved nor disapproved the Staff
Instructions for Preparing and Submitting Quantitative Measurement
Information.
---------------------------------------------------------------------------

     Remove the requirement that banking entities establish and
report limits on Stressed Value-at-Risk at the trading desk-level
because trading desks do not typically use such limits to manage and
control risk-taking.
     Require banking entities to provide descriptive
information about their reported metrics, including information
uniquely identifying and describing certain risk measurements and
information identifying the relationships of these measurements within
a trading desk and across trading desks.
     Require electronic submission of the Trading Desk
Information, Quantitative Measurements Identifying Information, and
each applicable quantitative measurement in accordance with the XML
Schema specified and published on each Agency's website.\219\
---------------------------------------------------------------------------

    \219\ The staff-level Technical Specifications Guidance
describes the XML Schema. The Technical Specifications Guidance and
the XML Schema are available on each Agency's respective website at
the addresses specified in the Paperwork Reduction Act section of
this Supplementary Information.
---------------------------------------------------------------------------

    Taken together, these changes--particularly limiting the
applicability of certain metrics requirements only to trading desks
engaged in certain types of covered trading activity--are designed to
reduce compliance-related inefficiencies relative to the 2013 final
rule. The proposed amendments to Appendix A of the 2013 final rule
should allow collection of data that permits the Agencies to better
monitor compliance with section 13 of the BHC Act.\220\
---------------------------------------------------------------------------

    \220\ As previously noted in the section entitled ``Enhanced
Minimum Standards for Compliance Programs,'' the Agencies are
proposing to eliminate Appendix B of the 2013 final rule. If that
aspect of the proposal is adopted, current Appendix A, as modified
by the proposal, would be re-designated as the ``Appendix.''
---------------------------------------------------------------------------

2. Summary of the Proposal
a. Purpose
    Paragraph I.c of Appendix A of the 2013 final rule provides that
the quantitative measurements that are required to be reported under
the rule are not intended to serve as a dispositive tool for
identifying permissible or impermissible activities. The Agencies
propose to expand paragraph I.c of Appendix A of the 2013 final rule to
cover all information that must be furnished pursuant to the appendix,
rather than only to the quantitative measurements themselves. \221\
---------------------------------------------------------------------------

    \221\ The proposed amendment to paragraph I.c. of Appendix A
would make clear that none of the information that a banking entity
would be required to report under the proposal is intended to serve
as a dispositive tool for identifying permissible or impermissible
activities. Currently, that qualifying language only applies to the
quantitative measurements. As proposed, that information would
continue to be used to monitor patterns and identify activity that
may warrant further review.
---------------------------------------------------------------------------

    The Agencies propose to remove paragraph I.d. in Appendix A of the
2013 final rule, which provides for an initial review by the Agencies
of the metrics data and revision of the collection requirement as
appropriate. The Agencies have conducted this preliminary evaluation of
the effectiveness of the quantitative measurements collected to date
and are proposing modifications to Appendix A of the 2013 final rule
where appropriate. The Agencies are, however, requesting comment on
whether the rule should provide for a subsequent Agency review within a
fixed period of time after adoption to consider whether further changes
are warranted. The Agencies further note that they continue to monitor
and review the effectiveness of the data as part of their ongoing
oversight of the banking entities and will continue to do so should the
proposed changes to Appendix A be adopted.
b. Definitions
    The Agencies are proposing a clarifying change to the definition of
``covered trading activity.'' The Agencies are proposing to add the
phrase ``in its covered trading activity'' to clarify that the term
``covered trading activity,'' as used in the proposed appendix, may
include trading conducted under Sec. Sec.  __.3(e), __.6(c), __.6(d),
or __.6(e) of the proposal. The proposed change would simply clarify
that banking entities would have the discretion (but not the
obligation) to report metrics with respect to a broader range of
activities.
    In addition, the proposal defines two additional terms for purposes
of the appendix, ``applicability'' and ``trading day,'' that were not
defined in the 2013 final rule. In particular, the proposal provides:
     Applicability identifies the trading desks for which a
banking entity is required to calculate and report a particular
quantitative measurement based on the type of covered trading activity
conducted by the trading desk.
     Trading day means a calendar day on which a trading desk
is open for trading.
    ``Applicability'' is defined in this proposal to clarify when
certain metrics are required to be reported for specific trading desks.
As described further below, this proposal would make several metrics
applicable only to desks engaged in market making or underwriting.
    The Agencies are proposing to create a definition of ``trading
day'' to clarify the meaning of a term that is used throughout Appendix
A of the 2013 final rule. Appendix A provides that the calculation
period for each quantitative measurement is one trading day. The
proposal would make clear that a banking entity would be required to
calculate each metric for each calendar day on which a trading desk is
open for trading.\222\ If a trading desk books positions to a banking
entity on a calendar day that is not a business day (e.g., a day that
falls on a weekend), then the desk is considered open for trading on
that day. Even if a trading desk does not conduct any trades on a
business day, the banking entity would be required to report metrics on
the trading desk's existing positions for that calendar day because the
trading desk is open to conduct trading. Similarly, if a trading desk
spans a U.S. entity and a

foreign entity and a national holiday occurs on a business day in the
United States but not in the foreign jurisdiction (or vice versa), the
banking entity would be required to report metrics for the trading desk
on that calendar day because the trading desk is open to conduct
trading in at least one jurisdiction. The Agencies believe that the
proposed definition of trading day is both objective and transparent,
while also providing flexibility to banking entities by tying the
definition directly to the schedule in which they operate their trading
desks.
---------------------------------------------------------------------------

    \222\ As a general matter, a trading desk is not considered to
be open for trading on a weekend.
---------------------------------------------------------------------------

    The Agencies request comments on the definitions in this proposal,
including comments on the following questions:
    Question 215. Is the proposed definition of ``Applicability''
effective and clear? If not, what alternative definition would be more
effective and/or clearer?
    Question 216. Is the proposed definition of ``Trading day''
effective and clear? If not, what alternative definition would be more
effective and/or clearer?
    Question 217. Is the proposed modification of ``Covered trading
activity'' effective and clear? If not, what alternative definition
would be more effective and/or clearer?
    Question 218. Should any other terms be defined? If so, are there
existing definitions in other rules or regulations that could be used
in this context? Why would the use of such other definitions be
appropriate?
c. Reporting and Recordkeeping
i. Scope of Required Reporting
    The Agencies are proposing several modifications to paragraph III.a
of Appendix A of the 2013 final rule. The Agencies are proposing to
remove the Inventory Turnover and Customer-Facing Trade Ratio metrics
and replace them with the Positions and Transaction Volumes
quantitative measurements, respectively. In addition, as discussed
below, the proposal provides that the Inventory Aging metric would only
apply to securities, and would not apply to derivatives or securities
that also meet the 2013 final rule's definition of a derivative.\223\
As a result, the Agencies are proposing to change the name of the
Inventory Aging quantitative measurement to the Securities Inventory
Aging metric. Moreover, as described in more detail below, the Agencies
are proposing amendments to Appendix A that would limit the application
of certain quantitative measurements to trading desks that engage in
specific covered trading activities.\224\ As a result, the Agencies are
proposing to add the phrase ``as applicable'' to paragraph III.a.\225\
Finally, the Agencies are proposing to add references in paragraph
III.a to the proposed Trading Desk Information, Quantitative
Measurements Identifying Information, and Narrative Statement
requirements.\226\
---------------------------------------------------------------------------

    \223\ See infra Part III.E.2.i.v (discussing the Securities
Inventory Aging quantitative measurement). The definition of
``security'' and ``derivative'' are set forth in Sec.  __.2 of the
2013 final rule. See 2013 final rule Sec. Sec.  __.2 (h), (y).
    \224\ As discussed below, the proposed Positions, Transaction
Volumes, and Securities Inventory Aging quantitative measurements
generally apply only to trading desks that rely on Sec.  __.4(a) or
Sec.  __.4(b) to conduct underwriting activity or market making-
related activity, respectively. See infra Part III.E.2.i.iii
(discussing the Positions, Transaction Volumes, and Securities
Inventory Aging quantitative measurements).
    \225\ See 79 FR at 5616.
    \226\ In addition, the Agencies propose to add to paragraph
III.a. a requirement that banking entities include file identifying
information in each submission to the relevant Agency pursuant to
Appendix A of the 2013 final rule. File identifying information
reflects administrative information needed to identify the reporting
requirement that is being met and distinguish between files
submitted pursuant to Appendix A. File identifying information must
include the name of the banking entity, the RSSD ID assigned to the
top-tier banking entity by the Board, the reporting period, and the
creation date and time.
---------------------------------------------------------------------------

d. Trading Desk Information
    The Agencies are proposing to add new paragraph III.b to Appendix A
to require banking entities to report certain descriptive information
regarding each trading desk engaged in covered trading activity:
i. Trading Desk Name and Trading Desk Identifier
    Under paragraph III.b. of the proposed Appendix, the banking entity
would be required to provide the trading desk name and trading desk
identifier for each desk engaged in covered trading activities. While
this proposed requirement may affect the banking entity's overall
reporting obligations, this identifying information should enable the
Agencies to track a banking entity's trading desk structure over time,
which the Agencies believe will help identify situations when a
significant data change is the result of a structural change and assist
the Agencies' ability to monitor patterns in the quantitative
measurements. The Agencies also believe that the proposed qualitative
information, including the items identified in the sections below,
potentially could provide the Agencies with enough contextual basis to
facilitate the examination and supervisory processes. Such context also
could potentially lessen the need for Agency follow-up in when a red
flag is identified.
    The trading desk name must be the name of the trading desk used
internally by the banking entity. The trading desk identifier is a
unique identification label that should be permanently assigned to a
desk by the banking entity. A trading desk at a banking entity may not
have the same trading desk identifier as another desk at that banking
entity. The trading desk identifier that is assigned to each desk
should remain the same for each submission of quantitative
measurements. In the event a banking entity restructures its operations
and merges two or more trading desks, the banking entity should assign
a new trading desk identifier to the merged desk (i.e., the merged
desk's identifier should not replicate a trading desk identifier
assigned to a previously unmerged trading desk) and permanently retire
the unmerged desks' identifiers. Similarly, if a banking entity
eliminates a trading desk, the trading desk identifier assigned to the
eliminated desk should be permanently retired (i.e., the eliminated
desk's identifier should not be reassigned to a current or future
trading desk).
    Question 219. Should the Agencies require banking entities to
report changes in desk structure in the XML reporting format in
addition to a description of the changes in the Narrative Statement?
For example, a ``change event'' element could be added to the proposal
that would link the trading desk identifiers of predecessor and
successor desks before and after trading desk mergers and splits. Would
the modifications improve the banking entities' and the Agencies'
ability to track changes in trading desk structure and strategy across
reporting periods? How significant are any potential costs relative to
the potential benefits in facilitating the tracking of trading desk
changes? Please quantify your answers, to the extent feasible.
ii. Type of Covered Trading Activity
    Proposed paragraph III.b. would require a banking entity to
identify each type of covered trading activity that the trading desk
conducts. As previously discussed, the proposal defines ``covered
trading activity,'' in part, as trading conducted by a trading desk
under Sec. Sec.  __.4, __.5, __.6(a), or __.6(b).\227\ To the extent a
trading desk relies on one or more of these permitted activity
exemptions, the banking entity would be required to identify the
type(s)

of covered trading activity (e.g., underwriting, market making, risk-
mitigating hedging, etc.) in which the trading desk is engaged.
---------------------------------------------------------------------------

    \227\ See supra Part III.E.2.b (discussing the covered trading
activity definition).
---------------------------------------------------------------------------

    The proposed definition of ``covered trading activity'' also
provides that a banking entity may include in its covered trading
activity trading conducted under Sec. Sec.  __.3(e), __.6(c), __.6(d),
or __.6(e). If a trading desk relies on any of the exclusions discussed
in Sec.  __.3(e) or the permitted activity exemptions discussed in
Sec. Sec.  __.6(c) through __.6(e) and the banking entity includes such
activity as ``covered trading activity'' for the desk under the
proposed Appendix, the banking entity would need to identify these
activity types (e.g., securities lending, liquidity management,
fiduciary transactions, etc.) for the trading desk.
    While this proposed requirement may impact a firm's overall
reporting obligations, the Agencies believe the identification of each
desk's covered trading activity will help the relevant Agency establish
the appropriate scope of examination of such activity and assist with
identifying the relevant exemptions or exclusions for a particular
trading desk, which in turn enables an evaluation of a desk's reported
data in the context of those exemptions or exclusions.
iii. Trading Desk Description
    Proposed paragraph III.b. would require a banking entity to provide
a description of each trading desk engaged in covered trading
activities. Specifically, the banking entity would be required to
provide a brief description of the trading desk's general strategy
(i.e., the method for conducting authorized trading activities). The
Agencies believe this descriptive information would improve the
Agencies ability to assess the risks associated with a given covered
trading activity and would further assist the relevant Agency in
determining the appropriate frequency and scope of examination of such
activity.
iv. Types of Financial Instruments and Other Products
    Proposed paragraph III.b. would require a banking entity to provide
descriptive information regarding the financial instruments and other
products traded by each desk engaged in covered trading activities.
Under the proposal, a banking entity would be required to prepare a
list identifying all the types of financial instruments purchased and
sold by the trading desk.\228\ The banking entity may include other
products that are not defined as financial instruments under Sec.
__.3(c)(1) of the 2013 final rule in this list. In addition, the
proposal requires a banking entity to indicate which of these financial
instruments and other products (if applicable) are the main instruments
and products purchased and sold by the trading desk. If the trading
desk relies on the permitted activity exemption for market making-
related activities, the banking entity would be required to specify
whether each type of financial instrument included in the listing of
all financial instruments is or is not included in the trading desk's
market-making positions.\229\
---------------------------------------------------------------------------

    \228\ For example, a banking entity may specify that its high
grade credit trading desk purchases and sells the following types of
financial instruments: U.S. corporate debt, convertible bonds,
credit default swaps, and credit default swap indices.
    \229\ The term ``market-maker positions'' means all of the
positions in the financial instruments for which the trading desk
stands ready to make a market in accordance with paragraph Sec.
__.4(b)(2)(i) of the proposal, that are managed by the trading desk,
including the trading desk's open positions or exposures arising
from open transactions. See proposal Sec.  __.4(b)(5).
---------------------------------------------------------------------------

    The proposal also addresses ``excluded products'' traded by desks
engaged in covered trading activities. The definition of the term
``financial instrument'' in the 2013 final rule does not include loans,
spot commodities, and spot foreign exchange or currency (collectively,
``excluded products'').\230\ While positions in excluded products are
not subject to the 2013 final rule's restrictions on proprietary
trading, a banking entity may decide to include exposures in excluded
products that are related to a trading desk's covered trading
activities in its quantitative measurements.\231\ A banking entity
generally should use a consistent approach for including or excluding
positions in products that are not financial instruments when
calculating metrics for a trading desk.\232\
---------------------------------------------------------------------------

    \230\ See 2013 final rule Sec.  __.3(c)(2).
    \231\ The Agencies note that banking entities are not required
to calculate quantitative measurements based on positions in
products that are not ``financial instruments,'' as defined under
Sec.  __.3(c)(2) of the 2013 final rule, or positions that do not
represent ``covered trading activity.'' However, a banking entity
may decide to include exposures in products that are not financial
instruments in a trading desk's calculations where doing so provides
a more accurate picture of the risks associated with the trading
desk. For example, a market maker in foreign exchange forwards or
swaps that mitigates the risks of its market-maker inventory with
spot foreign exchange may include spot foreign exchange positions in
its metrics calculations.
    \232\ A banking entity generally should not incorporate excluded
products in the quantitative measurements of a trading desk one
month, and omit these products from the trading desk's measurements
the following month. Excluded products generally should be reported
consistently from period to period. Any change in reporting practice
for excluded products must be identified in the banking entity's
Narrative Statement for the relevant trading desk(s). See infra Part
III.E.2.f (discussing the Narrative Statement).
---------------------------------------------------------------------------

    In recognition that a banking entity may include excluded products
in its quantitative measurements, proposed paragraph III.b. would
require a banking entity to indicate whether each trading desk engaged
in covered trading activities is including excluded products in its
quantitative measurements. If excluded products are included in a
trading desk's metrics, the banking entity would have to identify the
specific products that are included.
    This information should enable the Agencies to better understand
the scope of covered trading activities, and thus help in identifying
the profile of particular covered trading activities of a banking
entity and its individual trading desks. Such identification is
necessary to establish the appropriate frequency and scope of
examination by the relevant Agency of such activity, evaluate whether a
banking entity's covered trading activity is consistent with the 2013
final rule, and assess the risks associated with the activity.
v. Legal Entities the Trading Desk Uses
    As discussed in the preamble to the 2013 final rule, the Agencies
recognize that a trading desk may book positions into a single legal
entity or into multiple affiliated legal entities.\233\ To assist in
establishing the appropriate scope of examination by the relevant
Agency of a banking entity's covered trading activities, the Agencies
are proposing to require each banking entity to identify each legal
entity that serves as a booking entity for each trading desk engaged in
covered trading activities, and to indicate which of these legal
entities are the main booking entities for covered trading activities
of each desk. The banking entity would have to provide the complete
name for each legal entity (i.e., the banking entity could not use
abbreviations or acronyms), and the banking entity would have to
provide any applicable entity identifiers.\234\
---------------------------------------------------------------------------

    \233\ 79 FR at 5591.
    \234\ The Agencies are not proposing to require each legal
entity that serves as a booking entity to obtain an entity
identifier to comply with the proposed appendix. If a legal entity
does not have an applicable entity identifier, it should report
``None'' in the appropriate field.
---------------------------------------------------------------------------

vi. Legal Entity Type Identification
    The Agencies are proposing to require each banking entity to
specify any applicable entity type for each legal entity that serves as
a booking entity for

trading desks engaged in covered trading activities. The proposal
provides a list of key entity types for this purpose. For example, if a
trading desk books trades into a legal entity that is a U.S.-registered
broker-dealer, the banking entity would indicate ``U.S.-registered
broker-dealer'' in the entity type identification field for that
particular trading desk. If more than one entity type applies to a
particular legal entity that serves as a booking entity, the banking
entity must specify any applicable entity type for that legal entity.
For example, if a trading desk books trades into a legal entity that is
a U.S.-registered broker-dealer and a registered futures commission
merchant, the banking entity would indicate ``U.S.-registered broker-
dealer'' and ``futures commission merchant'' in the entity type
identification field for that particular trading desk.
    The proposal also requires that a banking entity identify entity
types that are not otherwise enumerated in the proposed Appendix,
including a subsidiary of a legal entity that is listed where the
subsidiary itself is not included in the list. For example, the
Agencies understand that a trading desk may book some or all of its
positions into a legal entity that is incorporated under foreign law.
In this situation, the banking entity should provide a brief
description of the entity (e.g., foreign-registered securities dealer)
in the entity type identification field for that trading desk. The
Agencies believe that the information collected under this section
would assist banking entities and the Agencies in monitoring and
understanding the scope of covered trading activities. In particular,
the proposed entity type information, in conjunction with the
identification of legal entities used by the trading desk (discussed
above), would facilitate the Agencies' ability to coordinate with each
other, as appropriate.\235\
---------------------------------------------------------------------------

    \235\ See 79 FR at 5758. The Agencies expect to continue to
coordinate their efforts related to section 13 of the BHC Act and to
share information as appropriate in order to effectively implement
the requirements of that section and the 2013 final rule. See id.
---------------------------------------------------------------------------

vii. Trading Day Indicator
    In order to facilitate metrics reporting, paragraph III.b. of the
proposed Appendix requires a banking entity to indicate whether each
calendar date is a trading day or not a trading day for each trading
desk engaged in covered trading activities. The Agencies believe that
this information would assist banking entities and the Agencies in
monitoring covered trading activities. Specifically, the identification
of trading days and non-trading days will allow the Agencies to
understand why metrics may not be reported on a particular day for a
particular trading desk. In addition, the Agencies expect that this
information would improve consistency in metrics reports by requiring
banking entities to determine whether metrics are, or are not, required
to be reported for each calendar day.
viii. Currency Reported and Currency Conversion Rate
    In recognition that a banking entity may report quantitative
measurements for a trading desk engaged in covered trading activities
in a currency other than U.S. dollars, paragraph III.b. of the proposed
Appendix requires a banking entity to specify the currency used by that
trading desk as well as the conversion rate to U.S. dollars. Under the
proposal, the banking entity would be required to provide the currency
reported on a monthly basis and the currency conversion rate for each
trading day. The Agencies believe this information would assist banking
entities and the Agencies in monitoring covered trading activities by
facilitating the identification of quantitative measurements reported
in a currency other than U.S. dollars and the conversion of such
measurements to U.S. dollars. The ability to convert a banking entity's
reported quantitative measurements into one consistent currency
enhances the ability of the Agencies to evaluate the metrics and
facilitates cross-desk comparisons.
    Question 220. Is the description of the proposal's Trading Desk
Information requirement effective and sufficiently clear? If not, what
alternative would be more effective or clearer? Is more or less
specific guidance necessary? If so, what level of specificity is needed
to prepare the proposed Trading Desk Information? If the proposed
Trading Desk Information is not sufficiently specific, how should it be
modified to reach the appropriate level of specificity? If the proposed
Trading Desk Information is overly specific, why is it too specific and
how should it be modified to reach the appropriate level of
specificity?
    Question 221. Is the proposed Trading Desk Information helpful to
understanding the scope, type, and profile of a trading desk's covered
trading activities and associated risks? Why or why not? Does the
proposed Trading Desk Information appropriately highlight relevant
changes in a banking entity's trading desk structure and covered
trading activities over time? Why or why not? Do banking entities
expect that the proposed Trading Desk Information would reduce,
increase, or have no effect on the number of information requests from
the Agencies regarding the quantitative measurements? Please explain.
    Question 222. Is any of the information required by the proposed
Trading Desk Information already available to banking entities? Please
explain.
    Question 223. Does the proposed Trading Desk Information strike the
appropriate balance between the potential benefits of the reporting
requirements for monitoring and assuring compliance and the potential
costs of those reporting requirements? If not, how could that balance
be improved?
    Question 224. Are there burdens or costs associated with preparing
the proposed Trading Desk Information, and if so, how burdensome or
costly would it be to prepare such information? What are the additional
burdens or costs associated with preparing this information for
particular trading desks? How significant are those potential costs
relative to the potential benefits of the information in understanding
the scope, type, and profile of a trading desk's covered trading
activities and associated risks? Are there potential modifications that
could be made to the proposed Trading Desk Information that would
reduce the burden or cost while achieving the purpose of the proposal?
If so, what are those modifications? Please quantify your answers, to
the extent feasible.
    Question 225. In light of the size, scope, complexity, and risk of
covered trading activities, do commenters anticipate the need to hire
new staff with particular expertise in order to prepare the proposed
Trading Desk Information (e.g., collect data and map legal entities)?
Do commenters anticipate the need to develop additional infrastructure
to obtain and retain data necessary to prepare this schedule? Please
explain and quantify your answers, to the extent feasible.
    Question 226. What operational or logistical challenges might be
associated with preparing the proposed Trading Desk Information and
obtaining any necessary informational inputs?
    Question 227. How might the proposed Trading Desk Information
affect the behavior of banking entities? To what extent and in what
ways might uncertainty as to how the Agencies will review and evaluate
the proposed Trading Desk Information affect the behavior of banking
entities?
    Question 228. Is the meaning of the term ``main,'' as that term is
used in the proposed Trading Desk Information (e.g., main financial
instruments or

products, main booking entities), effective and sufficiently clear? If
not, how should the Agencies define this term such that it is more
effective and/or clearer? Should the meaning of the term ``main'' be
the same with respect to: (i) Main financial instruments or other
products; and (ii) main booking entities? Why or why not?
    Question 229. In addition to reporting ``main'' financial
instruments or products and ``main'' booking entities, should banking
entities be required to report the amount of profit and loss
attributable to each ``main'' financial instrument or product and/or
``main'' booking entity utilized by the trading desk in the Trading
Desk Information? Why or why not?
    Question 230. Is the proposal's requirement that a banking entity
identify all financial instruments or other products traded on a desk
effective and clear? Why or why not? Should the Agencies provide a
specific list of financial instruments or other product types from
which to choose when identifying financial instruments or other
products traded on a desk? If so, please provide examples.
    Question 231. Should banking entities be required to report at
least one valid unique entity identifier (e.g., LEI, CRD, RSSD, or CIK)
for each legal entity identified as a booking entity for covered
trading activities of a desk? How burdensome and costly would it be for
a banking entity to obtain an entity identifier for each legal entity
serving as a booking entity that does not already have an identifier?
What are the additional burdens or costs associated with obtaining an
entity identifier for particular legal entities? How significant are
those potential costs relative to the potential benefits in
facilitating the identification of legal entities? Please quantify your
answers, to the extent feasible.
    Question 232. Is more guidance needed on what a banking entity
should report in response to the proposed requirement to specify the
applicable entity type(s) for each legal entity that serves as a
booking entity for covered trading activities of a trading desk? If so,
please explain.
    Question 233. How burdensome and costly would it be for banking
entities to report which Agencies receive reported quantitative
measurements for each specific trading desk?
e. Quantitative Measurements Identifying Information
    The Agencies are proposing to add new paragraph III.c. to the
proposed Appendix to require banking entities to prepare and report
descriptive information regarding their quantitative measurements. This
information would have to be reported collectively for all relevant
trading desks. For example, a banking entity would report one Risk and
Position Limits Information Schedule, rather than separate Risk and
Position Limits Information Schedules for each of those trading desks.
i. Risk and Position Limits Information Schedule
    The proposed Risk and Position Limits Information Schedule requires
banking entities to provide detailed information regarding each limit
reported in the Risk and Position Limits and Usage quantitative
measurement, including the unique identification label for the limit,
the limit name, limit description, whether the limit is intraday or
end-of-day, the unit of measurement for the limit, whether the limit
measures risk on a net or gross basis, and the type of limit. The
unique identification label for the limit should be a character string
identifier that remains consistent across all trading desks and
reporting periods. When reporting the type of limit, the banking entity
would identify which of the following categories best describes the
limit: Value-at-Risk, position limit, sensitivity limit, stress
scenario, or other. If ``other'' is reported, the banking entity would
provide a brief description of the type of limit. The Agencies believe
this more detailed limit information would enable the Agencies to
better understand how banking entities assess and address risks
associated with their covered trading activities.
ii. Risk Factor Sensitivities Information Schedule
    The proposed Risk Factor Sensitivities Information Schedule
requires banking entities to provide detailed information regarding
each risk factor sensitivity reported in the Risk Factor Sensitivities
quantitative measurement, including the unique identification label for
the risk factor sensitivity, the name of the risk factor sensitivity, a
description of the risk factor sensitivity, and the risk factor
sensitivity's risk factor change unit. The unique identification label
for the risk factor sensitivity should be a character string identifier
that remains consistent across all trading desks and reporting periods.
The risk factor change unit is the measurement unit of the risk factor
change that impacts the trading desk's portfolio value.\236\ This
proposed schedule should enable the Agencies to better understand the
exposure of a banking entity's trading desks to individual risk
factors.
---------------------------------------------------------------------------

    \236\ For example, the risk factor change unit for the dollar
value of a one-basis point change (DV01) could be reported as
``basis point.'' Similarly, the risk factor change unit for equity
delta could be reported as ``dollar change in equity prices'' or
``percentage change in equity prices.''
---------------------------------------------------------------------------

iii. Risk Factor Attribution Information Schedule
    The proposed Risk Factor Attribution Information Schedule requires
banking entities to provide detailed information regarding each
attribution of existing position profit and loss to risk factor
reported in the Comprehensive Profit and Loss Attribution quantitative
measurement, including the unique identification label for each risk
factor or other factor attribution, the name of the risk factor or
other factor, a description of the risk factor or other factor, and the
risk factor or other factor's change unit. The unique identification
label for the risk factor or other factor attribution should be a
character string identifier that remains consistent across all trading
desks and reporting periods. The factor change unit is the measurement
unit of the risk factor or other factor change that impacts the trading
desk's portfolio value.\237\ This proposed schedule should improve the
Agencies' understanding of the individual risk factors and other
factors that contribute to the daily profit and loss of trading desks
engaged in covered trading activities.
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    \237\ See supra note 236.
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iv. Limit/Sensitivity Cross-Reference Schedule
    The Agencies recognize that risk factor sensitivities that are
reported in the Risk Factor Sensitivities quantitative measurement
frequently relate to, or are associated with, risk and position limits
that are reported in the Risk and Position Limits and Usage metric. In
recognition of the relationship between risk and position limits and
associated risk factor sensitivities, the Agencies propose an amendment
to Appendix A of the 2013 final rule that would require banking
entities to prepare a Limit/Sensitivity Cross-Reference Schedule.
Specifically, banking entities would be required to cross-reference, by
unique identification label, a limit reported in the Risk and Position
Limits Information Schedule to any associated risk factor sensitivity
reported in the Risk Factor Sensitivities Information Schedule.
    Highlighting the relationship between limits and risk factor
sensitivities should provide a broader picture of a

trading desk's covered trading activities and improve the Agencies'
understanding of the quantitative measurements. For example, the
proposed Limit/Sensitivity Cross-Reference Schedule should help the
Agencies better evaluate a reported limit on a risk factor sensitivity
by allowing the Agencies to efficiently identify additional contextual
information about the risk factor sensitivity in the banking entity's
metrics submission.
v. Risk Factor Sensitivity/Attribution Cross-Reference Schedule
    The Agencies note that the specific risk factors and other factors
that are reported in the Comprehensive Profit and Loss Attribution
quantitative measurement may relate to the risk factor sensitivities
reported in the Risk Factor Sensitivities metric. As a result, the
Agencies are proposing an amendment to Appendix A of the 2013 final
rule that would require banking entities to prepare a Risk Factor
Sensitivity/Attribution Cross-Reference Schedule. Specifically, banking
entities would be required to cross-reference, by unique identification
label, a risk factor sensitivity reported in the Risk Factor
Sensitivities Information Schedule to any associated risk factor
attribution reported in the Risk Factor Attribution Information
Schedule. This proposed cross-reference schedule is intended to clarify
the relationship between risk factors that serve as sensitivities and
the profit and loss that is attributed to those risk factors. In
conjunction with the Limit/Sensitivity Cross-Reference Schedule, the
Risk Factor Sensitivity/Attribution Cross-Reference Schedule should
assist the Agencies in understanding the broader scope, type, and
profile of a banking entity's covered trading activities and assessing
associated risks, and facilitate the relevant Agency's efforts in
monitoring those covered trading activities. For example, the proposed
Risk Factor Sensitivity/Attribution Cross-Reference Schedule should
help the Agencies compare the variables that a banking entity has
identified as significant sources of its trading desks' profitability
and risk for purposes of the Risk Factor Sensitivities metric to the
factor(s) that account for actual changes in the banking entity's
trading desk-level profit and loss, as reported in the Comprehensive
Profit and Loss Attribution metric. This comparison will allow the
Agencies to evaluate whether a banking entity has identified risk
factors in the Risk Factor Sensitivities metric of a trading desk that
help explain the trading desk's profit and loss.
    Question 234. Is the information required by the proposed
Quantitative Measurements Identifying Information effective and
sufficiently clear? If not, what alternative would be more effective or
clearer? Is more or less specific guidance necessary? If so, what level
of specificity is needed to prepare the relevant schedule? If the
proposed Quantitative Measurements Identifying Information is not
sufficiently specific, how should it be modified to reach the
appropriate level of specificity? If the proposed Quantitative
Measurements Identifying Information is overly specific, why is it too
specific and how should it be modified to reach the appropriate level
of specificity?
    Question 235. Is the information required by the proposed
Quantitative Measurements Identifying Information helpful or not
helpful to understanding a banking entity's covered trading activities
and associated risks? Identify which specific pieces of information are
helpful or not helpful and explain why. Does the information provide
necessary clarity about a banking entity's risk measures and how such
risk measures relate to one another over time and within and across
trading desks? Do banking entities expect that the schedules will
reduce, increase, or have no effect on the number of information
requests from the Agencies regarding the quantitative measurements?
Please explain.
    Question 236. Is the information required by the proposed
Quantitative Measurements Identifying Information already available to
banking entities? Please explain.
    Question 237. Does the proposed Quantitative Measurements
Identifying Information strike the appropriate balance between the
potential benefits of the reporting requirements for monitoring and
assuring compliance and the potential costs of those reporting
requirements? If not, how could that balance be improved?
    Question 238. How burdensome and costly would it be to prepare each
schedule within the proposed Quantitative Measurements Identifying
Information? What are the additional burdens costs associated with
preparing these schedules for particular trading desks? How significant
are those potential costs relative to the potential benefits of the
schedules in monitoring covered trading activities and assessing risks
associated with those activities? Are there potential modifications
that could be made to these schedules that would reduce the burden or
cost? If so, what are those modifications? Please quantify your
answers, to the extent feasible.
    Question 239. In light of the size, scope, complexity, and risk of
covered trading activities, do commenters anticipate the need to hire
new staff with particular expertise in order to prepare the information
required by the proposed Quantitative Measurements Identifying
Information (e.g., to program information systems and collect data)? Do
commenters anticipate the need to develop additional infrastructure to
obtain and retain data necessary to prepare these schedules? Please
explain and quantify your answers, to the extent feasible.
    Question 240. What operational or logistical challenges might be
associated with preparing the information required by the proposed
Quantitative Measurements Identifying Information and obtaining any
necessary informational inputs?
    Question 241. How might the proposed Quantitative Measurements
Identifying Information affect the behavior of banking entities? To
what extent and in what ways might uncertainty as to how the Agencies
will review and evaluate the proposed Quantitative Measurements
Identifying Information affect the behavior of banking entities?
f. Narrative Statement
    The proposed paragraph III.d. requires a banking entity to submit a
Narrative Statement in a separate electronic document to the relevant
Agency that describes any changes in calculation methods used for its
quantitative measurements and to indicate when this change occurred. In
addition, a banking entity would have to prepare and submit a Narrative
Statement when there are any changes in the banking entity's trading
desk structure (e.g., adding, terminating, or merging pre-existing
desks) or trading desk strategies. Under these circumstances, the
Narrative Statement would have to describe the change, document the
reasons for the change, and specify when the change occurred.
    Under the proposal, the banking entity would have to report in a
Narrative Statement any other information the banking entity views as
relevant for assessing the information schedules or quantitative
measurements, such as a further description of calculation methods that
the banking entity is using. In addition, a banking entity would have
to explain its inability to report a particular quantitative
measurement in the Narrative Statement. A banking entity also would
have to provide notice in its Narrative Statement if a trading desk
changes its approach to including or

excluding products that are not financial instruments in its metrics.
    If a banking entity does not have any information to report in a
Narrative Statement, the banking entity would have to submit an
electronic document stating that it does not have any information to
report in a Narrative Statement.
    Question 242. Should the Narrative Statement be required? If so,
why? Should the proposed requirement apply to all changes in the
calculation methods a banking entity uses for its quantitative
measurements or should the proposed rule text be revised to apply only
to changes that rise to a certain level of significance? Please
explain.
    Question 243. Is the proposed Narrative Statement requirement
effective and sufficiently clear? If not, what alternative would be
more effective or clearer? Are there other circumstances in which a
Narrative Statement should be required? If so, what are those
circumstances?
    Question 244. How burdensome or costly is the proposed Narrative
Statement to prepare? Are there potential benefits of the Narrative
Statement to banking entities, particularly as it relates to the
ability of banking entities and the Agencies to monitor a firm's
covered trading activities?
g. Frequency and Method of Required Calculation and Reporting
    The 2013 final rule established a reporting schedule in Sec.  __.20
that required banking entities with $50 billion or more in trading
assets and liabilities to report the information required by Appendix A
of the 2013 final rule within 10 days of the end of each calendar
month. The Agencies are proposing to adjust this reporting schedule to
extend the time to be within 20 days of the end of each calendar
month.\238\ Experience with implementing the 2013 final rule has shown
that the information submitted within ten days is often incomplete or
contains errors. Banking entities must regularly provide resubmissions
to correct or complete their initial information submission. This
extension of the time for reporting is expected to reduce compliance
costs as the additional time would allow the required workflow to be
conducted under less time pressure and with greater efficiency and
fewer resubmissions should be necessary. The schedule for banking
entities with less than $50 billion in trading assets and liabilities
would remain unchanged.
---------------------------------------------------------------------------

    \238\ See Sec.  __.20(d) of the proposal.
---------------------------------------------------------------------------

    Question 245. Is the proposed frequency of reporting the Trading
Desk Information, Quantitative Measurements Identifying Information,
and Narrative Statement appropriate and effective? If not, what
frequency would be more effective? Should the information be required
to be reported quarterly, annually, or upon the request of the
applicable Agency and, if so, why?
    Question 246. Would providing banking entities with additional time
to report quantitative measurements meaningfully reduce resubmissions?
If so, would the additional time reduce burdens on banking entities?
Please provide quantitative data to the extent feasible.
    Question 247. Is there a calculation period other than daily that
would provide more meaningful data for certain metrics? For example,
would weekly inventory aging instead of daily inventory aging be more
effective? Why or why not?
    Appendix A of the 2013 final rule did not specify a format in which
metrics should be reported. As a technical matter, banking entities may
currently report quantitative measurements to the relevant Agency using
various formats and conventions. After consultation with staffs of the
Agencies, the reporting banking entities submitted their quantitative
measurement data electronically in a pipe-delimited flat file format.
However, this flat file format has proved to be unwieldy and its
syntactical requirements have been unclear. There has been no easy way
for banking entities to validate that their data files are in the
correct format before submitting them, and so banking entities have
often needed to resubmit their quantitative measurements to address
formatting issues.
    To make the formatting requirements for the data submissions
clearer, and to help ensure the quality and consistency of data
submissions across banking entities, the Agencies are proposing to
require that the Trading Desk Information, the Quantitative
Measurements Identifying Information, and each applicable quantitative
measurement be reported in accordance with an XML Schema to be
specified and published on the relevant Agency's website.\239\ By
requiring the XML Schema, the Agencies look to establish a structured
model through which reported data can be recognized and processed by
standard computer code or software (i.e., made machine-readable). The
proposed reporting format should promote complete and intelligible
records of covered trading activities and facilitate the reporting of
key identifying and descriptive information. Submissions structured
according to the XML Schema should enhance the Agencies' ability to
normalize, aggregate, and analyze reported metrics. In turn, the
proposed reporting format should facilitate monitoring of covered
trading activities and enable the relevant Agency to more efficiently
interpret and evaluate reported metrics. For example, the proposed
reporting format should enhance the Agencies' ability to compare data
across trading desks and analyze data over different time horizons.
---------------------------------------------------------------------------

    \239\ To the extent the XML Schema is updated, the version of
the XML Schema that must be used by banking entities would be
specified on the relevant Agency's website. A banking entity must
not use an outdated version of the XML Schema to report the Trading
Desk Information, Quantitative Measurements Identifying Information,
and applicable quantitative measurements to the relevant Agency.
---------------------------------------------------------------------------

    Question 248. How burdensome and costly would it be to develop new
systems, or modify existing systems, to implement the proposed
Appendix's electronic reporting requirement and XML Schema? How
significant are those potential costs relative to the potential
benefits of electronic reporting and the XML Schema in facilitating
review and analysis of a banking entity's covered trading activities?
Are there potential modifications that could be made to the proposal's
electronic reporting requirement or XML Schema that would reduce the
burden or cost? If so, what are those modifications? Please quantify
your answers, to the extent feasible.
    Question 249. Is the proposed XML reporting format for submission
of the Trading Desk Information, applicable quantitative measurements,
and the Quantitative Measurements Identifying Information appropriate
and effective? Why or why not?
    Question 250. Is there a reporting format other than the XML Schema
that the Agencies should consider as acceptable? Should the Agencies
allow banking entities to develop their own reporting formats? If so,
are there any general reporting standards that should be included in
the rule to facilitate the Agencies' ability to normalize, aggregate,
and analyze data that is reported pursuant to different electronic
formats or schemas? Please explain in detail.
    Question 251. What would be the costs to a banking entity to
provide quantitative measurements data according to the proposed XML
reporting format? Please quantify your answers, to the extent feasible.
    Question 252. For a banking entity currently reporting quantitative

measurements in some other electronic format, what would be the costs
(such as equipment, systems, training, or ongoing staffing or
maintenance) to convert current systems to use the proposed XML
reporting format? Please quantify your answers, to the extent feasible.
    Question 253. Is there a more effective way to distribute the XML
Schema than the current proposal of having each Agency host a copy of
the XML Schema on its respective website? For example, would it be more
effective for all Agencies to point to only one location where the XML
Schema will be hosted? If so, please identify how the alternative would
improve data quality and accessibility. How long should the
implementation period be?
    Question 254. Currently banking entities are reporting quantitative
measurements separately to each Agency using tailored data files
containing only the measurements for the trading desks that book into
legal entities for which an Agency is the primary supervisor. Would it
be more effective for all Agencies to use a single point of collection
for the quantitative measurements? If so, would there be any impact on
Agencies ability to review and analyze a banking entity's covered
trading activities? How significant are the costs of reporting
separately to each Agency? Please quantify your answers, to the extent
feasible. Are there any other ways to make the metrics requirements
more efficient? For example, are any banking entities subject to any
separate or related data reporting requirements that could be leveraged
to make the proposal more efficient?
h. Recordkeeping
    Under paragraph III.c. of Appendix A of the 2013 final rule, a
banking entity's reported quantitative measurements are subject to the
record retention requirements provided in the appendix. Under the
proposal, this provision would be in paragraph III.f. of the appendix.
The Agencies propose to expand this provision to include the Narrative
Statement, the Trading Desk Information, and the Quantitative
Measurements Identifying Information in the appendix's record retention
requirements.
    Question 255. Is the proposed application of Appendix A's record
retention requirement to the Trading Desk Information, Quantitative
Measurements Identifying Information, and Narrative Statement
appropriate? If not, what alternatives would be more appropriate? What
costs would be associated with retaining the Narrative Statements and
information schedules on that basis, and how could those costs be
reduced or eliminated? Please quantify your answers, to the extent
feasible.
    Question 256. Should the proposed Trading Desk Information,
Quantitative Measurements Identifying Information, and Narrative
Statement be subject to the same five-year retention requirement that
applies to the quantitative measurements? Why or why not? If not, how
long should the information schedules and Narrative Statements be
retained, and why?
i. Quantitative Measurements
    Section IV of Appendix A of the 2013 final rule sets forth the
individual quantitative measurements required by the appendix. The
Agencies are proposing to add an ``Applicability'' paragraph to each
quantitative measurement that identifies the trading desks for which a
banking entity would be required to calculate and report a particular
metric based on the type of covered trading activity conducted by the
desk. In addition, the Agencies are proposing to remove the ``General
Calculation Guidance'' paragraphs that appear in section IV of Appendix
A of the 2013 final rule for each quantitative measurement. Content of
these General Calculation Guidance paragraphs would instead generally
be addressed in the Instructions.
i. Risk-Management Measurements

A. Risk and Position Limits and Usage

    The Agencies are proposing to remove references to Stressed Value-
at-Risk (Stressed VaR) in the Risk and Position Limits and Usage
metric. Eliminating the requirement to report desk-level limits for
Stressed VaR should reduce reporting obligations for banking entities
without reducing the Agencies' ability to monitor proprietary trading.
    The proposal clarifies in new ``Applicability'' paragraph
IV.a.1.iv. that, as in the 2013 final rule, the Risk and Position
Limits and Usage metric applies to all trading desks engaged in covered
trading activities. For each trading desk, the proposal requires that a
banking entity report the unique identification label for each limit as
listed in the Risk and Position Limits Information Schedule, the limit
size (distinguishing between the upper bound and lower bound of the
limit, where applicable), and the value of usage of the limit.\240\ The
unique identification label should allow the Agencies to efficiently
obtain the descriptive information regarding the limit that is
separately reported in the Risk and Position Limits Information
Schedule.\241\ The proposal requires a banking entity to report this
descriptive information in the Risk and Position Limits Information
Schedule for the entire banking entity's covered trading activity,
rather than multiple times in the Risk and Position Limits and Usage
metric for different trading desks, to help alleviate inefficiencies
associated with reporting redundant information and reduce electronic
file submission sizes.
---------------------------------------------------------------------------

    \240\ If a limit is introduced or discontinued during a calendar
month, the banking entity must report this information for each
trading day that the trading desk used the limit during the calendar
month.
    \241\ Such information includes the name of the limit, a
description of the limit, whether the limit is intraday or end-of-
day, the unit of measurement for the limit, whether the limit
measures risk on a net or gross basis, and the type of limit.
---------------------------------------------------------------------------

    Unlike the 2013 final rule, the proposal requires a banking entity
to report the limit size of both the upper bound and the lower bound of
a limit if a trading desk has both an upper and lower limit. The
Agencies understand that, based on a review of the collected data and
discussions with banking entities, trading desks may have upper and
lower limits. An upper limit means the value of risk cannot go above
the limit, while a lower limit means the value of risk cannot go below
the limit. This proposed amendment is intended to help identify when a
trading desk has both an upper limit and a lower limit and avoid
incomplete or unclear reporting under these circumstances. In addition,
receipt of information about upper and lower limits, where applicable,
should allow the Agencies to better evaluate the constraints that a
banking entity places on the risks of a trading desk. For example, if a
trading desk has both upper and lower limits but only one such limit is
reported, the Agencies would not have complete information about the
desk's limits or the usage of such limits, including potential limit
breaches that may warrant further review.
    The proposal also clarifies the 2013 final rule's requirement to
separately report a trading desk's usage of its limit. As noted above,
usage is the value of the trading desk's risk or positions that are
accounted for by the current activity of the desk. The value of the
usage generally should be reported as of the end of the day for limits
that are accounted for at the end of the day; conversely, banking
entities generally should report the maximum value of the usage for
limits accounted for intraday.

    Question 257. Should Stressed VaR limits be removed as a reporting
requirement for desks engaged in permitted market making-related
activity or risk-mitigating hedging activity? Are VaR limits without
accompanying Stressed VaR limits adequate for these desks? Should
another type of limit be required to replace Stressed VaR, such as
expected shortfall? Should Stressed VaR limits instead be required for
other types of covered trading activities besides market making-related
activity or risk-mitigating hedging activity?
    Question 258. Should VaR limits be removed as a reporting
requirement for trading desks engaged in permitted market making-
related activity or risk-mitigating hedging activity? Why or why not?
    Question 259. The proposal requires a banking entity to report the
limit size of both the upper bound and the lower bound of a limit if a
trading desk has both an upper and lower limit. Should banking entities
be required to report both the upper bound and the lower bound of a
limit (if applicable) or should the requirement only apply to the upper
limit? Please discuss the anticipated costs and other burdens of this
new requirement and how they compare to the benefits.

B. Risk Factor Sensitivities

    The proposed ``Applicability'' paragraph IV.a.2.iv. provides that,
as in the 2013 final rule, the Risk Factor Sensitivities metric applies
to all trading desks engaged in covered trading activities. Under the
proposal, a banking entity would have to report for each trading desk
the unique identification label associated with each risk factor
sensitivity of the desk, the magnitude of the change in the risk
factor, and the aggregate change in value across all positions of the
desk given the change in risk factor.\242\
---------------------------------------------------------------------------

    \242\ If a risk factor sensitivity is introduced or discontinued
during a calendar month, the banking entity must report this
information for each trading day that the trading desk used the
sensitivity during the calendar month.
---------------------------------------------------------------------------

    The proposed unique identification label should allow the Agencies
to efficiently obtain the descriptive information for the Risk Factor
Sensitivity that is separately reported in the Risk Factor
Sensitivities Information Schedule.\243\ The proposal requires a
banking entity to report this descriptive information in the Risk
Factor Sensitivities Information Schedule for the entire banking
entity's covered trading activity, rather than multiple times in the
Risk Factor Sensitivities metric for different trading desks, to help
alleviate inefficiencies associated with reporting redundant
information and reduce electronic file submission sizes.
---------------------------------------------------------------------------

    \243\ Such information includes the name of the sensitivity, a
description of the sensitivity, and the sensitivity's risk factor
change unit.
---------------------------------------------------------------------------

C. Value-at-Risk and Stressed Value-at-Risk

    The proposal modifies the description of Stressed VaR to align its
calculation with that of Value-at-Risk and removes the General
Calculation Guidance. A new ``Applicability'' paragraph IV.a.3.iv.
provides that Stressed VaR is not required to be reported for trading
desks whose covered trading activity is conducted exclusively to hedge
products excluded from the definition of financial instrument in Sec.
__.3(d)(2) of the proposal. The Agencies believe that limiting the
applicability of the Stressed VaR metric in this manner may reduce
burden without impacting the ability of the Agencies to monitor for
prohibited proprietary trading. In particular, the Agencies believe
that applying Stressed VaR to trading desks whose covered trading
activity is conducted exclusively to hedge excluded products does not
provide meaningful information about whether the trading desk is
engaged in proprietary trading. For example, when Stressed VaR is
applied to hedges of loans held-to-maturity on a trading desk, Stressed
VaR is unlikely to provide an accurate indication of the risk taken on
that desk. Thus, the Agencies are providing that Stressed VaR need not
be reported under these circumstances.
    Question 260. Is Stressed VaR a useful metric for monitoring
covered trading activity for trading desks engaged in permitted market
making-related activity or underwriting activity? Why or why not? Are
there other covered trading activities for which Stressed VaR is useful
or not useful?
ii. Source-of-Revenue Measurements

A. Comprehensive Profit and Loss Attribution

    It is unnecessary for banking entities to calculate and report
volatility of comprehensive profit and loss because the measurement can
be calculated from the profit and loss amounts reported under the
Comprehensive Profit and Loss Attribution metric. Thus, the proposed
Appendix would remove this requirement.
    With respect to the profit and loss attribution to individual risk
factors and other factors, the Agencies are proposing to add to the
proposed Appendix a new paragraph IV.b.1.B. Under the proposal, a
banking entity would be required to provide, for one or more factors
that explain the preponderance of the profit or loss changes due to
risk factor changes, a unique identification label for the factor and
the profit or loss due to the factor change. The proposal requires a
banking entity to report a unique identification label for the factor
so the Agencies can efficiently obtain the descriptive information
regarding the factor that is separately reported in the Risk Factor
Attribution Information Schedule.\244\ The proposal requires a banking
entity to report this descriptive information in the Risk Factor
Attribution Information Schedule for the entire banking entity's
covered trading activity, rather than multiple times in the
Comprehensive Profit and Loss Attribution metric for different trading
desks, to help alleviate inefficiencies associated with reporting
redundant information and reduce electronic file submission sizes.
---------------------------------------------------------------------------

    \244\ Such information includes the name of the risk factor or
other factor, a description of the risk factor or other factor, and
the change unit of the risk factor or other factor.
---------------------------------------------------------------------------

    A new ``Applicability'' paragraph IV.b.1.iv provides that, as in
the 2013 final rule, the Comprehensive Profit and Loss Attribution
metric applies to all trading desks engaged in covered trading
activities.
    Question 261. Appendix A of the 2013 final rule specified under
Source-of-Revenue Measurements that Comprehensive Profit and Loss be
divided into three categories: (i) Profit and loss attributable to
existing positions; (ii) profit and loss attributable to new positions;
and (iii) residual profit and loss that cannot be specifically
attributed to existing positions or new positions. The sum of (i),
(ii), and (iii) must equal the trading desk's comprehensive profit and
loss at each point in time. Appendix A of the 2013 final rule further
required that the portion of comprehensive profit and loss that cannot
be specifically attributed to known sources must be allocated to a
residual category identified as an unexplained portion of the
comprehensive profit and loss. The proposed Appendix does not change
these specifications. However, the Agencies' experience implementing
the 2013 final rule has shown that the two statements about residual
profit and loss can give rise to conflicting interpretations. The
Agencies see value in monitoring any profit and loss that cannot be
attributed to existing or new positions. The Agencies also see value in
monitoring the profit and loss

attribution to risk factors, and the Agencies' experience is that many
reporters of quantitative measurements include the remainder from
profit and loss attribution in the item for Residual Profit and Loss.
In practice, however, profit and loss attribution is performed on
existing position profit and loss, so this interpretation breaks the
additivity of (i), (ii), and (iii) above. A potential resolution of
this conflict would be to clarify in the Instructions for Preparing and
Submitting Quantitative Measurements Information that Residual Profit
and Loss is only profit and loss that cannot be attributed to existing
or new positions, and to add a separate reporting item for Unexplained
Profit and Loss from Existing Positions. The Agencies are seeking
comment on how beneficial for institutions and regulators this
additional item would be to show and assess banking entities' profit
and loss attribution analysis. How much would adding this item consume
additional compliance resources of reporters?
    Question 262. Appendix A of the 2013 final rule specified that
profit and loss from existing positions be further attributed to (i)
the specific risk factors and other factors that are monitored and
managed as part of the trading desk's overall risk management policies
and procedures; and (ii) any other applicable elements, such as cash
flows, carry, changes in reserves, and the correction, cancellation, or
exercise of a trade. The metrics reporting instructions further
specified that the preponderance of profit and loss due to risk factor
changes should be reported as profit and loss attributions to
individual factors. The proposed Appendix and metrics instructions do
not change these requirements. However, experience implementing the
2013 final rule has shown that the definition of Profit and Loss Due to
Changes in Risk Factors is vague and open to multiple interpretations.
The Agencies see value in monitoring the total profit and loss
attribution to risk factors that banking entities use to monitor their
sources of revenue, which may go beyond the preponderance of profit and
loss that is reported as attributions to individual factors. Moreover,
in practice profit and loss attribution is often sensitivity-based and
an approximation. Banking entities also routinely calculate
``hypothetical'' or ``clean'' profit and loss, which is the full
revaluation of existing positions under all risk factor changes, and is
used in banking entities' risk management to compare to VaR. The
Agencies are seeking comment on how best to specify the calculation for
Profit and Loss Due to Risk Factor Changes. Do commenters expect that
``hypothetical'' profit and loss can be derived from other items
already reported? If not, what are the costs and benefits of clarifying
the definition of Profit and Loss Due to Risk Factor Changes to make it
align with ``hypothetical'' or ``Clean P&L'' as prescribed by market
risk capital rules? Alternatively, what are the costs and benefits of
clarifying the definition to be the sum of all profit and loss
attributions regardless of whether they are reported individually? What
would be the additional compliance costs of requiring that both
``hypothetical'' profit and loss and the sum of all profit and loss
attributions be reported as separate items in the quantitative
measurements?
iii. Positions, Transaction Volumes, and Securities Inventory Aging
Measurements

A. Positions and Inventory Turnover

    Paragraph IV.c.1. of Appendix A of the 2013 final rule requires
banking entities to calculate and report Inventory Turnover. This
metric is required to be calculated on a daily basis for 30-day, 60-
day, and 90-day calculation periods. The Agencies are proposing to
replace the Inventory Turnover metric with the daily data underlying
that metric, rather than proposing specific calculation periods,
because the Agencies may choose to use different inventory turnover
calculation periods depending on the particular trading desk or covered
trading activity under review. The proposal replaces Inventory Turnover
with the daily Positions quantitative measurement. In conjunction with
the proposed Transaction Volumes metric (discussed below), the proposed
Positions metric would provide the Agencies with flexibility to
calculate inventory turnover ratios over any period of time, including
a single trading day.
    Based on an evaluation of the information collected pursuant to the
Inventory Turnover quantitative measurement, the Agencies are proposing
to limit the scope of applicability of the Positions metric to trading
desks that rely on Sec.  __.4(a) or Sec.  __.4(b) to conduct
underwriting activity or market making-related activity, respectively.
As a result, a trading desk that does not rely on Sec.  __.4(a) or
Sec.  __.4(b) would not be subject to the proposed Positions
metric.\245\ The proposed Positions metric would require a banking
entity to report the value of securities and derivatives positions
managed by an applicable trading desk. Thus, if a trading desk relies
on Sec.  __.4(a) or Sec.  __.4(b) and engages in other covered trading
activity, the reported Positions metric would have to reflect all of
the covered trading activities conducted by the desk.\246\
---------------------------------------------------------------------------

    \245\ For example, a trading desk that relies solely on Sec.
__.5 to conduct risk-mitigating hedging activity is not subject to
the proposed Positions metric.
    \246\ For example, if a trading desk relies on Sec.  __.4(b) and
Sec.  __.5 to conduct market making-related activity and risk-
mitigating hedging activity, respectively, the reported Positions
metric for the desk would be required to reflect its risk-mitigating
hedging activity in addition to its market making-related activity.
The Agencies note, however, that a trading desk would not be
required to include trading activity conducted under Sec. Sec.
__.3(e), __6(c), __.6(d), or __.6(e) in the proposed Positions
metric, unless the banking entity includes such activity as
``covered trading activity'' for the desk under the appendix. This
is consistent with the proposed definition of ``covered trading
activity,'' which provides that a banking entity may include in its
covered trading activity trading conducted under Sec. Sec.  __.3(e),
__.6(c), __.6(d), or __.6(e).
---------------------------------------------------------------------------

    The proposal provides that banking entities subject to the appendix
would have to separately report the market value of all long securities
positions, the market value of all short securities positions, the
market value of all derivatives receivables, the market value of all
derivatives payables, the notional value of all derivatives
receivables, and the notional value of all derivatives payables.\247\
---------------------------------------------------------------------------

    \247\ The Agencies note that banking entities must report the
effective notional value of derivatives receivables and derivatives
payables for those derivatives whose stated notional amount is
leveraged. For example, if an exchange of payments associated with a
$2 million notional equity swap is based on three times the return
associated with the underlying equity, the effective notional amount
of the equity swap would be $6 million.
---------------------------------------------------------------------------

    Finally, the proposal addresses the classification of securities
and derivatives for purposes of the proposed Positions quantitative
measurement. The Agencies recognize that the 2013 final rule's
definition of ``security'' and ``derivative'' overlap.\248\ For
example, under the 2013 final rule a security-based swap is both a
``security'' and a ``derivative.'' \249\ The proposed Positions
quantitative measurement would require banking entities to separately
report the value of all securities and derivatives positions managed by
a

trading desk. To avoid double-counting financial instruments, the
proposed Positions metric would require banking entities subject to the
appendix to not include in the Positions calculation for ``securities''
those securities that are also ``derivatives,'' as those terms are
defined under the final rule. Instead, securities that are also
derivatives under the final rule are required to be reported as
``derivatives'' for purposes of the proposed Positions metric.
---------------------------------------------------------------------------

    \248\ See 2013 final rule Sec. Sec.  __.2(h), (y).
    \249\ The term ``security'' is defined in the 2013 final rule by
reference to section 3(a)(10) of the Securities Exchange Act of 1934
(the ``Exchange Act''). See 2013 final rule Sec.  __.2(y). Under the
Exchange Act, the term ``security'' means, in part, any security-
based swap. See 15 U.S.C. 78c(a)(10). The term ``security-based
swap'' is defined in section 3(a)(68) of the Exchange Act. See 15
U.S.C. 78c(a)(68). Under the 2013 final rule, the term
``derivative'' means, in part, any security-based swap as that term
is defined in section 3(a)(68) of the Exchange Act. See 2013 final
rule Sec.  __.2(h).
---------------------------------------------------------------------------

    Question 263. Should the Agencies eliminate the Inventory Turnover
quantitative measurement? Why or why not? Should the Agencies replace
Inventory Turnover with the proposed Positions metric in the proposed
Appendix? Why or why not? Should the Agencies modify the Inventory
Turnover metric rather than remove it from the proposed Appendix? If
so, what modifications should the Agencies make to the Inventory
Turnover metric, and why?
    Question 264. What are the current benefits and costs associated
with calculating the Inventory Turnover metric? To what extent would
the removal of this metric reduce the costs of compliance with the
proposed Appendix? Please quantify your answers, to the extent
feasible.
    Question 265. Is the use of the proposed Positions metric to help
distinguish between permitted and prohibited trading activities
effective? If not, what alternative would be more effective? What
factors should be considered in order to further refine the proposed
Positions metric to better distinguish prohibited proprietary trading
from permitted trading activity? Does the proposed Positions metric
provide any additional information of value relative to other
quantitative measurements?
    Question 266. Is the use of the proposed Positions metric to help
determine whether an otherwise-permitted trading strategy is consistent
with the requirement that such activity not result, directly or
indirectly, in a material exposure by the banking entity to high-risk
assets and high-risk trading strategies effective? If not, what
alternative would be more effective?
    Question 267. Is the proposed Positions metric substantially likely
to frequently produce false negatives or false positives that suggest
that prohibited proprietary trading is occurring when it is not, or
vice versa? If so, why? If so, how should the Agencies modify this
quantitative measurement, and why? If so, what alternative quantitative
measurement would better help identify prohibited proprietary trading?
    Question 268. How beneficial is the information that the proposed
Positions metric provides for evaluating underwriting activity or
market making-related activity? Does the proposed Positions metric,
alone or coupled with other required metrics, provide information that
is useful in evaluating the customer-facing activity of a trading desk?
Do any of the other quantitative measurements provide the same level of
beneficial information for underwriting activity or market making-
related activity? Would the proposed Positions metric be useful to
evaluate other types of covered trading activity?
    Question 269. How burdensome and costly would it be to calculate
the proposed Positions metric at the specified calculation frequency
and calculation period? What are the additional burdens or costs
associated with calculating the measurement for particular trading
desks? How significant are those potential costs relative to the
potential benefits of the measurement in monitoring for impermissible
proprietary trading? Are there potential modifications that could be
made to the measurement that would reduce the burden or cost? If so,
what are those modifications? Please quantify your answers, to the
extent feasible.
    Question 270. How will the proposed Positions and Inventory
Turnover requirements impact burdens as compared to benefits? Would the
proposed changes affect a firm's confidential business information?
iv. Transaction Volumes and the Customer-Facing Trade Ratio
    Paragraph IV.c.3. of Appendix A of the 2013 final rule requires
banking entities to calculate and report a Customer-Facing Trade Ratio
comparing transactions involving a counterparty that is a customer of
the trading desk to transactions with a counterparty that is not a
customer of the desk. Appendix A of the 2013 final rule requires the
Customer-Facing Trade Ratio to be computed by measuring trades on both
a trade count basis and value basis. In addition, Appendix A of the
2013 final rule provides that the term ``customer'' for purposes of the
Customer-Facing Trade Ratio is defined in the same manner as the terms
``client, customer, and counterparty'' used in Sec.  __.4(b) of the
2013 final rule describing the permitted activity exemption for market
making-related activities. This metric is required to be calculated on
a daily basis for 30-day, 60-day, and 90-day calculation periods.
    While the Customer-Facing Trade Ratio may provide directionally
useful information in some circumstances regarding the extent to which
trades are conducted with customers, the Agencies are proposing to
replace this metric with the daily Transaction Volumes quantitative
measurement, set out in paragraph IV.c.2. of the proposed Appendix, for
two reasons. First, the information provided by the Customer-Facing
Trade Ratio metric has not been sufficiently granular to permit the
Agencies to effectively assess the extent to which a trading desk's
covered trading activities are focused on servicing customer demand.
Reviewing and analyzing data representing trading activity that occurs
over a single trading day should be more effective. The proposed
Transaction Volumes metric will provide the Agencies with flexibility
to calculate customer-facing trade ratios over any period of time,
including a single trading day. This will assist banking entities and
the Agencies in monitoring covered trading activities. The Agencies are
proposing to replace the Customer-Facing Trade Ratio with the daily
data underlying that metric rather than proposing a daily calculation
period for the Customer-Facing Trade Ratio because the Agencies may
choose to use different customer-facing trade ratio calculation periods
depending on the particular trading desk or covered trading activity
under review.
    Second, based on a review of the collected data, the Agencies
recognize that the current Customer-Facing Trade Ratio metric does not
provide meaningful information when a trading desk only conducts
customer-facing trading activity. The numerator of the ratio represents
transactions with counterparties that are customers, while the
denominator represents transactions with counterparties that are not
customers. If a trading desk only trades with customers, it will not be
able to calculate this ratio because the denominator will be zero. The
proposed Transaction Volumes metric enables the analysis of customer-
facing activity using more meaningful and appropriate calculations.
    The proposed Transaction Volumes metric measures the number and
value \250\ of all securities and derivatives transactions conducted by
a trading desk engaged in permitted underwriting activity or market
making-related activity under the 2013 final rule with

four categories of counterparties: (i) Customers (excluding internal
transactions); (ii) non-customers (excluding internal transactions);
(iii) trading desks and other organizational units where the
transaction is booked into the same banking entity; and (iv) trading
desks and other organizational units where the transaction is booked
into an affiliated banking entity. To avoid double-counting
transactions, these four categories are exclusive of each other (i.e.,
a transaction must only be reported in one category). The proposal
requires this quantitative measurement to be calculated each trading
day.
---------------------------------------------------------------------------

    \250\ For purposes of the proposed Transaction Volumes metric,
value means gross market value with respect to securities. For
commodity derivatives, value means the gross notional value (i.e.,
the current dollar market value of the quantity of the commodity
underlying the derivative). For all other derivatives, value means
the gross notional value.
---------------------------------------------------------------------------

    As described above, the Agencies have evaluated the data collected
under Appendix A of the 2013 final rule to determine whether certain
quantitative measurements should be tailored to specific covered
trading activities. The Customer-Facing Trade Ratio metric has
primarily been used to assist in the evaluation of a trading desk's
customer-facing activity, which is a relevant consideration for desks
engaged in underwriting or market making-related activity under Sec.
__.4 of the 2013 final rule. Such analysis is less relevant to, for
example, desks that use only the risk-mitigating hedging exemption
under Sec.  __.5 of the 2013 final rule. Based on an evaluation of the
information collected under the Customer-Facing Trade Ratio, the
Agencies are proposing to limit the applicability of the proposed
Transaction Volumes metric.
    Specifically, the proposal provides that a banking entity would be
required to calculate and report the proposed Transaction Volumes
metric for all trading desks that rely on Sec.  __.4(a) or Sec.
__.4(b) to conduct underwriting activity or market making-related
activity, respectively. This means that a trading desk that does not
rely on Sec.  __.4(a) or Sec.  __.4(b) would not be subject to the
proposed Transaction Volumes metric.\251\ The proposed Transaction
Volumes metric measures covered trading activity conducted by an
applicable trading desk with specific categories of counterparties.
Thus, if a trading desk relies on Sec.  __.4(a) or Sec.  __.4(b) and
engages in other covered trading activity, the reported Transaction
Volumes metric would have to reflect all of the covered trading
activities conducted by the desk.\252\ Limiting the scope of the
Transaction Volumes metric to only those trading desks engaged in
market-making activity or underwriting activity may reduce reporting
inefficiencies for banking entities.
---------------------------------------------------------------------------

    \251\ For example, a trading desk that relies solely on Sec.
__.5 to conduct risk-mitigating hedging activity would not be
subject to the proposed Transaction Volumes metric.
    \252\ For example, if a trading desk relies on Sec.  __.4(b) and
Sec.  __.5 to conduct market making-related activity and risk-
mitigating hedging activity, respectively, the reported Transaction
Volumes metric for the desk would have to reflect its risk-
mitigating hedging activity in addition to its market making-related
activity. The Agencies note, however, that a trading desk would not
be required to include trading activity conducted under Sec. Sec.
__.3(e), __.6(c), __.6(d), or __.6(e) in the proposed Transaction
Volumes metric, unless the banking entity includes such activity as
``covered trading activity'' for the desk under the proposed
Appendix. The Agencies note that this is consistent with the
definition of ``covered trading activity,'' which provides that a
banking entity may include in its covered trading activity trading
conducted under Sec. Sec.  __.3(e), __.6(c), __.6(d), or __.6(e).
---------------------------------------------------------------------------

    This metric should provide meaningful information regarding the
extent to which a trading desk facilitates demand for each category of
counterparty. While the Agencies recognize that the requirement to
provide additional granularity may require banking entities to expend
additional compliance resources, the Agencies believe the information
would enhance compliance efficiencies. In particular, by requiring
transactions to be separated into these four categories, the
information collected under this metric will facilitate better
classification of internal trades, and thus, will assist banking
entities and the Agencies in evaluating whether the covered trading
activities of desks engaged in underwriting or market making-related
activities are consistent with the final rule's requirements governing
those activities. For example, the Agencies believe that this metric
could be helpful in evaluating the extent to which a market making desk
routinely stands ready to purchase and sell financial instruments
related to its financial exposure, as well as the extent to which a
trading desk engaged in underwriting or market making-related activity
facilitates customer demand in accordance with the reasonably expected
near term demand requirements under the relevant exemption.\253\
---------------------------------------------------------------------------

    \253\ See 2013 final rule Sec. Sec.  __.4(a)(2)(ii) and
__.4(b)(2)(ii).
---------------------------------------------------------------------------

    The definition of the term ``customer'' that is used for purposes
of this quantitative measurement depends on the type of covered trading
activity a desk conducts. For a trading desk engaged in market making-
related activity pursuant to Sec.  __.4(b) of the 2013 final rule, the
desk must construe the term ``customer'' in the same manner as the
terms ``client, customer, and counterparty'' used for purposes of the
market-making exemption under the 2013 final rule. For a trading desk
engaged in underwriting activity pursuant to Sec.  __.4(a) of the 2013
final rule, the desk must construe the term ``customer'' in the same
manner as the terms ``client, customer, and counterparty'' used for
purposes of the underwriting exemption under the final rule.\254\
---------------------------------------------------------------------------

    \254\ Under the proposal, the calculation guidance regarding
reporting of transactions with another banking entity with trading
assets and liabilities of $50 billion or more would be moved from
Appendix A of the 2013 final rule into the reporting instructions.
The proposed instructions for the Transaction Volumes quantitative
measurement would clarify that any transaction with another banking
entity with trading assets and liabilities of $50 billion or more
would be included in one of the four categories noted above,
including: (i) Customers (excluding internal transactions); (ii)
non-customers (excluding internal transactions); (iii) trading desks
and other organizational units where the transaction is booked into
the same banking entity; and (iv) trading desks and other
organizational units where the transaction is booked into an
affiliated banking entity.
---------------------------------------------------------------------------

    Similar to the proposed Positions metric, the proposed Transaction
Volumes metric addresses the classification of securities and
derivatives for purposes of the proposed Transaction Volumes
quantitative measurement. The proposed Transaction Volumes metric
requires banking entities to separately report the value and number of
securities and derivatives transactions conducted by a trading desk
with the four categories of counterparties described above. To avoid
double-counting financial instruments, the proposed Transaction Volumes
metric would require banking entities subject to the appendix to not
include in the Transaction Volumes calculation for ``securities'' those
securities that are also ``derivatives,'' as those terms are defined
under the 2013 final rule.\255\ Instead, securities that are also
derivatives under the final rule would be required to be reported as
``derivatives'' for purposes of the proposed Transaction Volumes
metric.
---------------------------------------------------------------------------

    \255\ See 2013 final rule Sec. Sec.  __.2(h), (y). See also
supra Part III.E.2.i (discussing the classification of securities
and derivatives for purposes of the proposed Positions quantitative
measurement).
---------------------------------------------------------------------------

    Question 271. Should the Agencies eliminate the Customer-Facing
Trade Ratio? Why or why not? Should the Agencies replace the Customer-
Facing Trade Ratio with the proposed Transaction Volumes metric in the
proposed Appendix? Why or why not? Should the Agencies modify the
Customer-Facing Trade Ratio rather than remove it from the proposed
Appendix? If so, what modifications should the Agencies make to the
Customer-Facing Trade Ratio, and why?
    Question 272. What are the current benefits and costs associated
with

calculating the Customer-Facing Trade Ratio? To what extent would the
removal of this metric reduce the costs of compliance with the proposed
Appendix? Please quantify your answers, to the extent feasible.
    Question 273. Would the use of the proposed Transaction Volumes
metric to help distinguish between permitted and prohibited trading
activities be effective? If not, what alternative would be more
effective? What factors should be considered in order to further refine
the proposed Transaction Volumes metric to better distinguish
prohibited proprietary trading from permitted trading activity? Does
the proposed Transaction Volumes metric provide any additional
information of value relative to other quantitative measurements?
    Question 274. Is the scope of the four categories of counterparties
set forth in the proposed Transaction Volumes metric appropriate and
effective? Why or why not?
    Question 275. Is the proposed Transaction Volumes metric
substantially likely to frequently produce false negatives or false
positives that suggest that prohibited proprietary trading is occurring
when it is not, or vice versa? If so, why? If so, how should the
Agencies modify this quantitative measurement, and why? If so, what
alternative quantitative measurement would better help identify
prohibited proprietary trading?
    Question 276. How beneficial is the information that the proposed
Transaction Volumes metric provides for evaluating underwriting
activity or market making-related activity? Could these changes affect
legitimate underwriting activity or market making-related activity? If
so, how? Do any of the other quantitative measurements provide the same
level of beneficial information for underwriting activity or market
making-related activity? Would this metric be useful to evaluate other
types of covered trading activity?
    Question 277. What operational or logistical challenges might be
associated with performing the calculation of the proposed Transaction
Volumes metric and obtaining any necessary informational inputs? Please
explain.
    Question 278. How burdensome and costly would it be to calculate
the proposed Transaction Volumes metric at the specified calculation
frequency and calculation period? What are the additional burdens or
costs associated with calculating the measurement for particular
trading desks? How significant are those potential costs relative to
the potential benefits of the measurement in monitoring for
impermissible proprietary trading? Are there potential modifications
that could be made to the measurement that would reduce the burden or
cost? If so, what are those modifications? Please quantify your
answers, to the extent feasible.
    Question 279. Should the Agencies develop and publish more detailed
instructions for how different transaction life cycle events such as
amendments, novations, compressions, maturations, allocations, unwinds,
terminations, option exercises, option expirations, and partial
amendments affect the calculation of Transaction Volumes and the
Comprehensive Profit and Loss Attribution? Please explain.
v. Securities Inventory Aging
    The Agencies have evaluated whether the Inventory Aging metric is
useful for all financial instruments, as well as for all covered
trading activities. Based on this evaluation and a review of the data
collected under this quantitative measurement, the Agencies understand
that, with respect to derivatives, Inventory Aging is not easily
calculated and does not provide useful risk or customer-facing activity
information. Thus, the Agencies are proposing several modifications to
the Inventory Aging metric.
    First, the scope of the proposed Securities Inventory Aging metric,
set forth in proposed paragraph IV.c.3., would be limited to a trading
desk's securities positions. Under the proposal, banking entities
subject to the Appendix would be required to measure and report the age
profile of a trading desk's securities positions through a security-
asset aging schedule and a security liability-aging schedule. The
proposed Securities Inventory Aging metric would not require banking
entities to prepare an aging schedule for derivatives or include in its
securities aging schedules those ``securities'' that are also
``derivatives,'' as those terms are defined under the 2013 final
rule.\256\
---------------------------------------------------------------------------

    \256\ See 2013 final rule Sec. Sec.  __.2(h), (y). See also
supra Part III.E.2.i (discussing the classification of securities
and derivatives for purposes of the proposed Positions quantitative
measurement).
---------------------------------------------------------------------------

    Second, the Agencies are proposing to limit the applicability of
the Securities Inventory Aging metric to trading desks that engage in
specific covered trading activities. Consistent with the proposed
Positions and Transaction Volumes metrics, the proposal provides that a
banking entity would be required to calculate and report the Securities
Inventory Aging metric for all trading desks that rely on Sec.  __.4(a)
or Sec.  __.4(b) to conduct underwriting activity or market making-
related activity, respectively. This means that a trading desk that
does not rely on Sec.  __.4(a) or Sec.  __.4(b) would not be subject to
the proposed Securities Inventory Aging metric.\257\ The proposal would
require that the Securities Inventory Aging metric measure the age
profile of an applicable trading desk's securities positions. Thus, if
a trading desk relies on Sec.  __.4(a) or Sec.  __.4(b) and engages in
other covered trading activity, the reported Securities Inventory Aging
metric would have to reflect all of the covered trading activities in
securities \258\ conducted by the desk.\259\ Narrowing the scope of the
Inventory Aging metric to securities inventory and to desks that engage
in market-making and underwriting activities should reduce reporting
inefficiencies for banking entities without reducing the usefulness of
the metric, as it has proved to be of limited utility for derivative
positions or trading desks that engage in other types of covered
trading activity.
---------------------------------------------------------------------------

    \257\ For example, a trading desk that relies solely on Sec.
__.5 to conduct risk-mitigating hedging activity would not be
subject to the proposed Securities Inventory Aging metric.
    \258\ The Agencies note that a banking entity would not be
required to prepare an Inventory Aging schedule for any derivatives
traded by a trading desk, including ``securities'' that are also
``derivatives'' as those terms are defined under the 2013 final
rule, in the event the trading desk relies on Sec.  __.4(a) or Sec.
__.4(b) and another permitted activity exemption.
    \259\ For example, if a trading desk relies on Sec.  __.4(b) and
Sec.  __.5 to conduct market making-related activity and risk-
mitigating hedging activity, respectively, the reported Securities
Inventory Aging metric for the desk would have to reflect the risk-
mitigating hedging activity and market making-related activity
associated with the desk's securities positions. The Agencies note,
however, that a trading desk would not be required to include
trading activity conducted under Sec. Sec.  __.3(e), __.6(c),
__.6(d), or __.6(e) in the proposed Securities Inventory Aging
metric, unless the banking entity includes such activity as
``covered trading activity'' for the desk under the proposed
Appendix. The Agencies note that this is consistent with the
definition of ``covered trading activity,'' which provides that a
banking entity may include in its covered trading activity trading
conducted under Sec. Sec.  __.3(e), __.6(c), __.6(d), or __.6(e).
---------------------------------------------------------------------------

    Finally, the proposal would require a banking entity to calculate
and report the Securities Inventory Aging metric according to a
specific set of age ranges. Specifically, banking entities would have
to calculate and report the market value of security assets and
security liabilities over the following holding periods: 0-30 calendar
days; 31-60 calendar days; 61-90 calendar days; 91-180 calendar days;
181-360 calendar days; and greater than 360 calendar days.
    Question 280. How beneficial is the information that the proposed
Securities Inventory Aging metric provides for evaluating underwriting
activity or

market making-related activity? Do any of the other quantitative
measurements provide the same level of beneficial information for
underwriting activity or market making-related activity?
    Question 281. Is inventory aging of derivatives a useful metric for
monitoring covered trading activity at trading desks? Why or why not?
    Question 282. Is inventory aging of futures a useful metric for
monitoring covered trading activity at trading desks? Why or why not?
    Question 283. Would it reduce the calculation burden on banking
entities to limit the scope of the Inventory Aging metric to securities
inventory and to trading desks engaged in market-making and
underwriting activities? Why or why not?
    Question 284. Should the Agencies require banking entities to
report the Securities Inventory Aging metric according to a specific
set of age ranges? Why or why not? If so, taken together, are the
proposed age ranges appropriate and effective, or should the proposed
Securities Inventory Aging metric require different age ranges? Do
banking entities already routinely measure their securities positions
using the same, or similar, age ranges?
j. Request for Comment
    The Agencies request comment on the costs and benefits of the
proposal's revised approach under revisions to Appendix A of the 2013
final rule. In particular, the Agencies request comment on the
following questions:
    Question 285. Are the quantitative measurements, both as currently
existing and as proposed to be modified, appropriate in general? If
not, is there an alternative(s) approach that the banking entities and
the Agencies could use to more effectively and efficiently identify
potentially prohibited proprietary trading? If so, being as specific as
possible, please describe that alternative. Should certain proposed
quantitative measurements be eliminated? If so, which requirements, and
why? Should additional quantitative measurements be added? If so, which
measurements, and why? How would those additional measurements be
described and calculated?
    Question 286. What are the current annual compliance costs for
banking entities to comply with the requirements in Appendix A of the
2013 final rule to calculate and report certain quantitative
measurements to the Agencies? Please discuss the benefits of the
proposal, including but not limited to the benefits derived from
qualitative information, such as narratives and trading desk
information, as compared to the costs and burdens of preparing such
information. How would those annual compliance costs change if the
modifications described in the proposal were adopted? Please be as
specific as possible and, where feasible, provide quantitative data
broken out by requirement. Would this proposal affect certain types of
banking entities, such as broker-dealers and registered investment
advisers, differently as compared to other banking entities in terms of
annual compliance costs?
    Question 287. In addition to the proposed changes to the
requirement to calculate and report quantitative measurements to the
Agencies, the proposed Appendix contains new qualitative requirements
that are not currently required in Appendix A of the 2013 final rule,
including, but not limited to, trading desk information, quantitative
measurements identifying information, and a narrative statement. Please
discuss the benefits and costs associated with such proposed
requirements. How would the overall burden change, in terms of both
costs and benefits, as a result of the proposal, taken as a whole, as
compared to the existing requirements under Appendix A? Please provide
quantitative data to the extent feasible.
    Question 288. Which of the proposed quantitative measurements do
banking entities currently use? What are the current benefits, and
would the proposed revisions result in increased compliance costs
associated with calculating such quantitative measurements? Would the
reporting and recordkeeping requirements in the proposed Appendix for
such quantitative measurements generate any significant, additional
benefits or costs? Please quantify your answers, to the extent
feasible.
    Question 289. How are the ongoing costs of compliance associated
with the requirements of Appendix A of the 2013 final rule allocated
among the different steps in the process (e.g., calculating
quantitative measurements, preparing reports, delivering reports to the
relevant Agencies, etc.)?
    Question 290. Which requirements of Appendix A of the 2013 final
rule are costliest to comply with, and what are those burdens? Please
be as specific as possible. Does the proposal meaningfully reduce these
aspects? Why or why not? Please quantify your answers, to the extent
feasible.
    Question 291. Which of the proposed quantitative measurements do
banking entities currently not use? What are the potential benefits and
costs of calculating these quantitative measurements and complying with
the proposed reporting and recordkeeping requirements? Please quantify
your answers, to the extent feasible.
    Question 292. For each individual quantitative measurement that is
proposed, is the description sufficiently clear? Is there an
alternative that would be more appropriate or clearer? Is the
description of the quantitative measurement appropriate, or is it
overly broad or narrow? If it is overly broad, what additional
clarification is needed? If the description is overly narrow, how
should it be modified to appropriately describe the quantitative
measurement, and why? Should the Agencies provide any additional
clarification to the Appendix's description of the quantitative
measurement, and why?
    Question 293. For each individual quantitative measurement that is
proposed, is the calculation guidance provided in the proposal
effective and sufficiently clear? If not, what alternative would be
more effective or clearer? Is more or less specific calculation
guidance necessary? If so, what level of specificity is needed to
calculate the quantitative measurement? If the proposed calculation
guidance is not sufficiently specific, how should the calculation
guidance be modified to reach the appropriate level of specificity? If
the proposed calculation guidance is overly specific, why is it too
specific and how should it be modified to reach the appropriate level
of specificity?
    Question 294. Does the use of the proposed Appendix as part of the
multi-faceted approach to implementing the prohibition on proprietary
trading continue to be appropriate? Why or why not?
    Question 295. Should a trading desk be permitted not to furnish a
quantitative measurement otherwise required under the proposed Appendix
if it can demonstrate that the measurement is not, as applied to that
desk, calculable or useful in achieving the purposes of the Appendix
with respect to the trading desk's covered trading activities? How
might a banking entity make such a demonstration?
    Question 296. Where a trading desk engages in more than one type of
covered trading activity, such as activity conducted under the
underwriting and risk-mitigating hedging exemptions, should the
quantitative measurements be calculated, reported, and recorded
separately for trading activity conducted under each exemption relied
on by the trading desk? What are the costs and benefits of such an
approach? Please explain.

    Question 297. How much time do banking entities need to develop new
systems and processes, or modify existing systems and processes, to
implement for banking entities that are subject to the proposed
Appendix's reporting and recordkeeping requirements, and why? Does the
amount of time needed to develop or modify information systems to
comply with proposed Appendix, including the electronic reporting and
XML Schema requirements, vary based on the size of a banking entity's
trading assets and liabilities? Why or why not? What are the costs
associated with such requirements?
    Question 298. Under both the 2013 final rule and the proposal,
banking entities that, together with their affiliates and subsidiaries,
have significant trading assets and liabilities are required to
calculate, maintain, and report a number of quantitative measurements.
Should the Agencies eliminate this metrics reporting requirement and
instead require banking entities to: (1) Calculate the required
quantitative measurements data, in the same form, manner, and
timeframes as they would otherwise be required to under the rule; (2)
maintain the required quantitative measurements data; and (3) provide
the relevant Agency or Agencies with the data upon request for
examination and review?
    Question 299. Should the requirement to calculate and report
quantitative metrics be eliminated and replaced by a different method
for assisting banking entities and the Agencies in monitoring covered
trading activities for compliance with section 13 of the BHC Act and
the 2013 final rule? If so, what alternative approaches should the
Agencies consider?
    Question 300. Should some or all reported quantitative measurements
be made publicly available? Why or why not? If so, which quantitative
measurements should be made publicly available, and what are the
benefits and costs of making such measurements publicly available? If
so, how should quantitative measurements be made publicly available?
Should quantitative measurements be made publicly available in the same
form they are furnished to the Agencies, or should information be
aggregated before it is made publicly available? If information should
be aggregated, how should it be aggregated, and what are the benefits
and costs associated with aggregate data being available to the public?
Should quantitative measurements be made publicly available at-or-near
the same time such measurements are reported to the Agencies, or should
information be made publicly available on a delayed basis? If
information should be made public on a delayed basis, how much time
should pass before information is publicly available, and what are the
benefits and costs associated with non-current metrics information
being available to the public? Are there other approaches the Agencies
should consider to make the quantitative measurements publicly
available, and if so, what are the benefits and costs associated with
each approach? What are the costs and benefits of such an approach?
Please discuss and provide detailed examples of any costs or benefits
identified.
    Question 301. Do commenters have concerns about the potential for
the inadvertent exposure of confidential business information, either
as part of the reporting process or to the extent that any of the
quantitative measurements (or related information) are made publicly
available? If so, what are the risks involved and how might they be
mitigated? Are certain quantitative measurements more likely to contain
confidential information? If so, which ones and why?

IV. The Economic Impact of the Proposal Under Section 13 of the BHC
Act--Request for Comment

    The Agencies are proposing a number of changes to the 2013 final
rule that are intended to reduce the costs of compliance while
continuing the rule's effectiveness in limiting prohibited activities.
In what follows, the key proposed changes to the regulation that are
expected to have a material impact on the costs of implementing the
regulation are discussed as is the rationale for expecting a material
reduction in the costs associated with compliance. The Agencies seek
broad comment from the public on any and all aspects of the proposed
changes to the regulation and the extent to which these changes will
reduce compliance costs and improve the effectiveness of the
implementing regulations. The Agencies also seek comment on whether
there are any additional ways to reduce compliance costs while
effectively implementing the statute. Finally, commenters are
encouraged to provide the Agencies with any specific data or
information that could be useful for quantifying the reductions or
increases in costs associated with the proposed changes.
    A key proposed change to the rule relates to the treatment of
banking entities with limited trading activities, which under the 2013
final rule can face compliance costs that are disproportionately high
relative to the amount of trading activity typically undertaken and the
amount of risk the activities of these firms that are subject to
section 13 pose to financial stability. More specifically, the Agencies
are proposing to identify those banking entities with total
consolidated trading assets and liabilities (excluding trading assets
and liabilities involving obligations of, or guaranteed by, the United
States or any agency of the United States) the average gross sum of
which (on a worldwide consolidated basis) over the previous consecutive
four quarters, as measured as of the last day of each of the four
previous calendar quarters, is less than $1 billion. These banking
entities with limited trading assets and liabilities would be subject
to a presumption of compliance under the proposal, while remaining
subject to the rule's prohibitions in subparts B and C. The relevant
Agency may rebut the presumption of compliance by providing written
notice to the banking entity that it has determined that one or more of
the banking entity's activities violates the prohibitions under
subparts B or C.
    The Agencies expect that this presumption would materially reduce
the costs associated with complying with the rule for two reasons.
First, as a result of presumed compliance, these banking entities would
not be required to demonstrate compliance with many of the rule's
specific requirements on an ongoing basis. As a specific example,
entities with limited trading assets and liabilities would not be
required to comply with the documentation requirements associated with
the hedging exemption. Additionally, these entities would not be
required to specify and maintain trading risk limits to comply with the
rule's market making exemption. As a result, this proposed change is
expected to meaningfully reduce the costs associated with rule
compliance for smaller banking entities that do not engage in the types
of trading the rule seeks to address.
    Second, these banking entities would not be subject to the express
requirement to maintain a compliance program pursuant to Sec.  __.20
under the proposal to demonstrate compliance with the rule. The
presumption would be rebuttable, so firms may need to maintain a
certain level of resources to respond to supervisory requests for
information in the event that the Agencies exercise their authority to
rebut the presumption of compliance for any activity that they
determine to violate prohibitions under subparts B and C. The amount of
resources required for such purposes is expected to be significantly
smaller than the

amount of resources that would be required to maintain and execute an
ongoing compliance program.
    Question 302. Do commenters agree that the proposed establishment
of a presumption of compliance for certain banking entities would
meaningfully reduce the compliance costs associated with the rule
relative to the requirements of the 2013 final rule?
    Question 303. Have commenters quantified the extent to which such
costs are reduced? If so, could this information be provided to the
Agencies during the notice and comment period?
    Question 304. Do commenters believe that any aspect of the proposed
establishment of a presumption of compliance would increase the costs
associated with rule compliance? If so, which aspects of the