such information must be kept confidential, subject to the provisions
of applicable law.
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    \1100\ See SDR Adopting Release, Sections VI(D)(2) and VI(I)(1).
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D. Coded Information--Rule 903

    Regulation SBSR, as adopted, permits or, in some instances,
requires security-based swap counterparties to report coded information
to registered SDRs using UICs. These UICs will be used to identify
products, transactions, and persons, as well as certain business units
and employees of legal persons.\1101\ Rule 903 establishes standards
for assigning and using coded information in security-based swap

reporting and dissemination to help ensure that codes are assigned in
an orderly manner and that relevant authorities, market participants,
and the public are able to interpret coded information stored and
disseminated by registered SDRs.
---------------------------------------------------------------------------

    \1101\ See supra Section II (describing UICs that must be
reported to registered SDRs pursuant to Regulation SBSR).
---------------------------------------------------------------------------

    In the Regulation SBSR Proposing Release, the Commission stated its
belief that Rule 903 would not be a ``collection of information''
within the meaning of the PRA because the rule would merely permit
reporting parties and registered SDRs to use codes in place of certain
data elements, subject to certain conditions.\1102\ In re-proposing
Rule 903 in the Cross-Border Proposing Release, the Commission made
only technical and conforming changes to Rule 903 to incorporate the
use of the term ``side.'' \1103\ Rule 903, as adopted, includes a
requirement that, if the Commission has recognized an IRSS that assigns
UICs to persons, each participant of a registered SDR shall obtain a
UIC from or through that IRSS.\1104\ Because the Commission also is
recognizing the GLEIS--which issues LEIs--as an IRSS, any person who is
a participant of one or more registered SDRs will have to obtain an LEI
from or through the GLEIS. Therefore, the Commission now believes that
Rule 903 constitutes a ``collection of information'' within the meaning
of the PRA. The title of this collection is ``Rule 903--Coded
Information.''
---------------------------------------------------------------------------

    \1102\ See Regulation SBSR Proposing Release, 75 FR 75252-53.
    \1103\ See Cross-Border Proposing Release, 78 FR 31117.
    \1104\ See supra Section X(B)(2).
---------------------------------------------------------------------------

1. Summary of Collection of Information
    Rule 903(a) provides that, if an IRSS that meets certain criteria
is recognized by the Commission and has assigned a UIC to a person,
unit of a person, or product (or has endorsed a methodology for
assigning transaction IDs), all registered SDRs must use that UIC in
carrying out their responsibilities under Regulation SBSR. If no such
system has been recognized by the Commission, or if such a system has
not assigned a UIC to a particular person, unit of a person, or product
(or has not endorsed a methodology for assigning transaction IDs), the
registered SDR must assign a UIC to that person, unit of a person, or
product using its own methodology (or endorse a methodology for
assigning transaction IDs). The following UICs are contemplated by
Regulation SBSR: Branch ID, broker ID, counterparty ID, execution agent
ID, platform ID, product ID, trader ID, trading desk ID, transaction
ID, and ultimate parent ID. UICs are intended to allow registered SDRs
and the Commission and other relevant authorities to aggregate
transaction information across a variety of vectors. For example, the
trader ID will allow the Commission and other relevant authorities to
identify all trades carried out by an individual trader. The product ID
will allow the Commission and other relevant authorities to identify
all transactions in a particular security-based swap product. The
transaction ID will allow counterparties and the registered SDR to link
a series of life cycle events to each other and to the original
transaction. As discussed in Section X(B)(2), supra, the Commission has
recognized the GLEIS as an IRSS that meets the criteria of Rule 903.
Therefore, if an entity has an LEI issued by or through the GLEIS, that
LEI must be used for all purposes under Regulation SBSR. Furthermore,
each participant that acts as a guarantor of a direct counterparty's
performance of any obligation under a security-based swap that is
subject to Sec.  242.908(a) shall, if the direct counterparty has not
already done so, obtain a UIC for identifying the direct counterparty
from or through that system, if that system permits third-party
registration without a requirement to obtain prior permission of the
direct counterparty.
2. Use of Information
    The information provided pursuant to Rule 903 is necessary to for
any person who is a participant of at least one registered SDR to be
identified by an LEI for reporting purposes under Regulation SBSR.
3. Respondents
    Rule 903 applies to any person who is a participant of at least one
registered SDR. The Commission estimates that there may be up to 4,800
security-based swap counterparties that are participants of one or more
registered SDRs.\1105\ The Commission recognizes that, since the
publication of the Regulation SBSR Proposing Release, many persons who
are likely to become participants of one or more registered SDRs
already have LEIs issued by or through the GLEIS. As a result, the
burdens and costs actually incurred by participants as a result of the
adoption of Regulation SBSR are likely to be less than the burdens and
costs calculated herein. Specifically, as discussed in further detail
in Section XXII(C)(4)(b), infra, based on transaction data from DTCC-
TIW, the Commission believes that no fewer than 3,500 of approximately
4,800 accounts that participated in the market for single-name CDS in
2013 currently have LEIs.\1106\ The Commission assumes that no market
participants that currently have LEIs would continue to maintain their
LEIs in the absence of Rule 903(a) in order to arrive at an upper bound
on the ongoing costs associated with Rule 903(a). The Commission
believes that this is a conservative approach, since regulators in
certain other jurisdictions mandate the use of an LEI.\1107\
Consequently, the Commission estimates, for purposes of the PRA, that
there may be as many as 1,300 participant respondents who will need to
obtain an LEI and as many as 4,800 participants who will need to
maintain an LEI.\1108\
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    \1105\ As noted in Section XXII(B)(1), infra, the available data
do not include transactions between two foreign security-based swap
market participants on foreign underlying reference entities. As a
result, this estimate may not include certain foreign counterparties
to security-based swaps.
    \1106\ Some counterparties reported in the transaction data may
be guarantors of other non-U.S.-person-direct counterparties and, if
so, may be responsible for obtaining and maintaining more than one
LEI. As such, precisely quantifying the number of LEIs required by
Rule 903(a) is not possible at this time. However, because many of
these direct non-U.S.-person counterparties are likely from
jurisdictions where regulators mandate the use of LEIs, the
Commission believes that these counterparties will already have
registered LEIs and will continue to maintain them.
    \1107\ The European Market Infrastructure Regulation requires
use of codes to identify counterparties. See ``Trade Reporting''
(available at: http://www.esma.europa.eu/page/Trade-reporting) (last
visited January 10, 2015).
    \1108\ In the Regulation SBSR Proposing Release, the Commission
used an estimate of 5,000 participant respondents that might incur
reporting duties under Regulation SBSR. This estimate included an
estimated 1,000 entities regularly engaged in the CDS marketplace as
well as 4,000 potential security-based swap counterparties that were
expected to transact security-based swaps less frequently but that
nonetheless would be considered ``participants.'' See Regulation
SBSR Proposing Release, 75 FR 75254. Based on more recent data, the
Commission has revised the estimated number of participant
respondents to 4,800. The Commission notes that registered security-
based swap dealers and major security-based swap participants will,
for some transactions, be the non-reporting side and are therefore
included in this estimate.
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 4. Total Initial and Annual Reporting and Recordkeeping Burdens
    The Commission estimates that first-year aggregate burden imposed
by Rule 903 will be 1,300 hours, which corresponds to 1 hour per
participant, to account for the initial burdens of obtaining an
LEI.\1109\ The Commission estimates that the ongoing burden imposed by
Rule 903 will be 4,800 hours, which corresponds to 1 hour per
participant, to account for ongoing

administration of the LEI.\1110\ In addition, for these participants,
the assignment of an LEI will entail both one-time and ongoing costs
assessed by local operation units (``LOUs'') of the GLEIS. The current
cost for registering a new LEI is approximately $220, with an
additional cost of $120 per year for maintaining an LEI.\1111\ For
those participants that do not already have an LEI, the initial one-
time cost would be $286,000, or $220 per participant.\1112\ All
participants would be required to maintain their LEI resulting in an
annual cost of $576,000, or $120 per participant.\1113\
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    \1109\ This figure is based on the following: [Compliance
Attorney at 1 hour/year) x (1,300 participants)] = 1,300 burden
hours.
    \1110\ This figure is based on the following: [(Compliance
Attorney at 1 hour/year) x (4,800 participants)] = 4,800 burden
hours.
    \1111\ See ``GMEI Utility: Frequently Asked Questions''
(available at: https://www.gmeiutility.org/frequentlyAskedQuestions.jsp, detailing registration and maintenance
costs for LEIs issued by GMEI, an endorsed pre-LOU of the interim
GLEIS) (last visited January 4, 2015).
    \1112\ This figure is based on the following: [($220
registration cost) x (1,300 participants not currently registered)]
= $286,000.
    \1113\ This figure is based on the following: [($120 annual
maintenance cost) x (4,800 participants not currently registered)] =
$576,000. The Commission notes that, for those participants
obtaining an LEI in the first year, the annual maintenance cost will
be incurred beginning in the year following registration.
---------------------------------------------------------------------------

5. Recordkeeping Requirements
    The applications that participants must complete in order to obtain
an LEI issued by or through the GLEIS are not subject to any specific
recordkeeping requirements for participants, to the extent that these
participants are non-registered persons.\1114\ The Commission expects,
however, that in the normal course of their business a participant of a
registered SDR would keep records of the information entered in
connection with its LEI application, such as the participant's legal
name, registered address, headquarters address, and the entity's legal
form.
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    \1114\ See Securities Exchange Act Release No. 71958 (April 17,
2014), 79 FR 25193 (May 2, 2014) (``SD/MSP Recordkeeping Proposing
Release'') (proposing recordkeeping and reporting requirements for
security-based swap dealers, major security-based swap participants,
and broker-dealers).
---------------------------------------------------------------------------

6. Collection of Information Is Mandatory
    Each collection of information discussed above is mandatory.
7. Confidentiality of Responses to Collection of Information
    The Commission believes that information submitted by participants
in order to obtain an LEI issued by or through the GLEIS generally will
be public.

E. Operating Hours of Registered SDRs--Rule 904

    Rule 904, as adopted, requires a registered SDR to have systems in
place to continuously receive and disseminate information regarding
security-based swap data with certain exceptions. Certain provisions of
Rule 904 contain ``collection of information requirements'' within the
meaning of the PRA. The title of this collection is ``Rule 904--
Operating Hours of Registered SDRs.''
1. Summary of Collection of Information
    Rule 904 requires a registered SDR to operate continuously, subject
to two exceptions. First, under Rule 904(a) a registered SDR may
establish normal closing hours during periods when, in its estimation,
the U.S. market and major foreign markets are inactive. A registered
SDR is required to provide reasonable advance notice to participants
and to the public of its normal closing hours. Second, under Rule
904(b) a registered SDR may declare, on an ad hoc basis, special
closing hours to perform system maintenance that cannot wait until
normal closing hours. A registered SDR is required, to the extent
reasonably possible under the circumstances, to avoid scheduling
special closing hours during when, in its estimation, the U.S. market
and major foreign markets are most active; and provide reasonable
advance notice of its special closing hours to participants and to the
public.
    Rule 904(c) specifies requirements for handling and disseminating
reported data during a registered SDR's normal and special closing
hours. During normal closing hours and, to the extent reasonably
practicable, during special closing hours, a registered SDR is required
to have the capability to receive and hold in queue transaction data it
receives.\1115\ Pursuant to Rule 904(d), immediately upon system re-
opening, the registered SDR is required to publicly disseminate any
transaction data required to be reported under Rule 901(c) that it
received and held in queue, in accordance with the requirements of Rule
902. Pursuant to Rule 904(e), if a registered SDR cannot hold in queue
transaction data to be reported, immediately upon re-opening the SDR is
required to send a message to all participants that it has resumed
normal operations. Thereafter, any participant that had an obligation
to report transaction information to the registered SDR, but could not
due to the registered SDR's inability to receive and hold in queue such
transaction information, must promptly report the information to the
registered SDR.\1116\
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    \1115\ See Rule 904(c).
    \1116\ See Rule 904(e).
---------------------------------------------------------------------------

    The Commission originally stated its belief that there were not any
costs or burdens applicable to participants as a result of Rule
904(e).\1117\ The Commission continues to believe that this conclusion
is appropriate. Specifically, the Commission believes that the process
by which the registered SDR will notify participants that it has
resumed operations would be automated. As a result, the Commission
believes that the costs associated with building out the systems
necessary for such notifications have already been accounted for in the
costs of developing the registered SDRs systems associated with the
receipt of security-based swap information under Rule 901.\1118\ As a
result, the Commission continues to believe that Rule 904(e) is not a
collection of information for participants.
---------------------------------------------------------------------------

    \1117\ See Regulation SBSR Proposing Release, 75 FR 75253.
    \1118\ See id.
---------------------------------------------------------------------------

2. Use of Information
    The information provided pursuant to Rule 904 is necessary to allow
participants and the public to know the normal and special closing
hours of the registered SDR, and to allow participants to take
appropriate action in the event that the registered SDR cannot accept
security-based swap transaction reports from participants.\1119\
---------------------------------------------------------------------------

    \1119\ The Commission does not believe that Rule 904(c) will
result in any burden within the meaning of the PRA. Rule 904(c) does
not create new or additional duties to report security-based swap
transactions.
---------------------------------------------------------------------------

3. Respondents
    Rule 904 applies to all registered SDRs. As noted above, the
Commission estimates that there will be ten registered SDRs.
4. Total Initial and Annual Reporting and Recordkeeping Burdens
    The Commission continues to estimate that that the one-time,
initial burden, as well as ongoing annualized burden for each
registered SDR associated with Rule 904 will be only minor additional
burden beyond that necessary to ensure its basic operating capability
under both Regulation SBSR and the SDR Registration Rules. The
Commission estimates that the annual aggregate burden (first-year and
ongoing) imposed by Rule 904 will be

360 hours, which corresponds to 36 hours per registered SDR.\1120\
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    \1120\ See Regulation SBSR Proposing Release, 75 FR 75253. This
figure is based on the following: [(Operations Specialist at 3
hours/month) x (12 months/year) x (10 registered SDRs)] = 360 burden
hours.
---------------------------------------------------------------------------

    One commenter asserted that the proposed requirement for a
registered SDR to receive and hold in the queue the data required to be
reported during its closing hours ``exceeds the capabilities of
currently-existing reporting infrastructures.'' \1121\ However, the
Commission notes that this comment was submitted in January 2011; since
the receipt of this comment, provisionally registered CFTC SDRs that
are likely also to register as SDRs with the Commission appear to have
developed the capability of receiving and holding data in queue during
their closing hours.\1122\ Thus, the Commission continues to believe
that requiring registered SDRs to hold data in queue during their
closing hours would not create a significant burden for registered
SDRs.
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    \1121\ Markit I at 4.
    \1122\ See, e.g., DDR Rulebook, Section 7.1 (DDR System
Accessibility) (``Data submitted during DDR System down time is
stored and processed once the service has resumed''), available at
http://www.dtcc.com/~/media/Files/Downloads/legal/rules/
DDR_Rulebook.pdf (last visited October 7, 2014).
---------------------------------------------------------------------------

    The Commission does not believe Rule 904 imposes any separate
collection of information on participants of registered SDRs not
already accounted for under Rule 901.\1123\ Any respondent unable to
report to a registered SDR, because such registered SDR was unable to
receive the transaction report, would have to delay the submission of
the transaction report. The Commission does not believe that the number
of transaction reports impacted by this requirement would impact the
burdens contained in this PRA.
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    \1123\ The requirement in Rule 904(e) for participants to report
information to the registered SDR upon receiving a notice that the
registered SDR resumed its normal operations is already considered
as part of the participant's reporting obligations under Rule 901
and thus is already included in the burden estimate for Rule 901.
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5. Recordkeeping Requirements
    Rule 13n-7(b) under the Exchange Act requires an SDR to keep and
preserve at least one copy of all documents, including all documents
and policies and procedures required by the Exchange Act and the rules
or regulations thereunder, for a period of not less than five years,
the first two years in a place that is immediately available to
representatives of the Commission for inspection and examination.\1124\
This requirement encompasses notices issued by a registered SDR to its
participants under Rule 904.
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    \1124\ See SDR Adopting Release, Section VI(G)(2)
---------------------------------------------------------------------------

6. Collection of Information Is Mandatory
    Each collection of information discussed above is mandatory.
7. Confidentiality of Responses to Collection of Information
    Any notices issued by a registered SDR to its participants, such as
the notices required under Rule 904, would be publicly available.

F. Correction of Errors in Security-Based Swap Information--Rule 905

    Rule 905, as adopted, establishes procedures for correcting errors
in reported and disseminated security-based swap information.
    Certain provisions of Rule 905 of Regulation SBSR contain
``collection of information requirements'' within the meaning of the
PRA. The title of this collection is ``Rule 905--Correction of Errors
in Security-Based Swap Information.''
 1. Summary of Collection of Information
    Rule 905 establishes duties for security-based swap counterparties
and registered SDRs to correct errors in information that previously
has been reported.
    Counterparty Reporting Error. Under Rule 905(a)(1), where a side
that was not the reporting side for a security-based swap transaction
discovers an error in the information reported with respect to such
security-based swap, the counterparty must promptly notify the
reporting side of the error. Under Rule 905(a)(2), where a reporting
side for a security-based swap transaction discovers an error in the
information reported with respect to a security-based swap, or receives
notification from its counterparty of an error, the reporting side must
promptly submit to the entity to which the security-based swap was
originally reported an amended report pertaining to the original
transaction. The amended report must be submitted to the registered SDR
in a manner consistent with the policies and procedures of the
registered SDR required pursuant to Rule 907(a)(3).
    Duty of Registered SDR to Correct. Rule 905(b) sets forth the
duties of a registered SDR relating to corrections. If the registered
SDR either discovers an error in a transaction on its system or
receives notice of an error from a reporting side, Rule 905(b)(1)
requires the registered SDR to verify the accuracy of the terms of the
security-based swap and, following such verification, promptly correct
the erroneous information contained in its system. Rule 905(b)(2)
further requires that, if such erroneous information relates to a
security-based swap that the registered SDR previously disseminated and
falls into any of the categories of information enumerated in Rule
901(c), the registered SDR must publicly disseminate a corrected
transaction report of the security-based swap promptly following
verification of the trade by the counterparties to the security-based
swap, with an indication that the report relates to a previously
disseminated transaction.
 2. Use of Information
    The security-based swap transaction information required to be
reported pursuant to Rule 905 will be used by registered SDRs,
participants, the Commission, and other relevant authorities.
Participants will be able to use such information to evaluate and
manage their own risk positions and satisfy their duties to report
corrected information to a registered SDR. A registered SDR will need
the required information to correct security-based swap transaction
records, in order to maintain an accurate record of a participant's
positions as well as to disseminate corrected information. The
Commission and other relevant authorities will need the corrected
information to have an accurate understanding of the market for
surveillance and oversight purposes.
 3. Respondents
    Rule 905 applies to all participants of registered SDRs. As noted
above, the Commission estimates that there will be approximately 300
reporting sides that incur the duty to report security-based swap
transactions pursuant to Rule 901. In addition, the Commission
estimates that there may be up to 4,800 security-based swap
counterparties that are participants of one or more registered SDRs.
Because any of these counterparties who are participants could become
aware of errors in their reported transaction data, the Commission
estimates that there may be as many as 4,800 respondents for purposes
of the PRA.
    Rule 905 also applies to registered SDRs. As noted above, the
Commission estimates there will be ten registered SDRs.

 4. Total Initial and Annual Reporting and Recordkeeping Burdens
    The duty to promptly submit amended transaction reports to the
appropriate registered SDR after discovery of an error, as required
under Rule 905(a)(2), will impose burdens on reporting sides. The duty
to promptly notify the relevant reporting side after discovery of an
error, as required under Rule 905(a)(1), will impose burdens on non-
reporting-side participants.
    With respect to reporting sides, the Commission believes that Rule
905(a) will impose an initial, one-time burden associated with
designing and building the reporting side's reporting system to be
capable of submitting amended security-based swap transactions to a
registered SDR. The Commission believes that designing and building
appropriate reporting system functionality to comply with Rule
905(a)(2) will be a component of, and represent an incremental ``add-
on'' to, the cost to build a reporting system and develop a compliance
function as required under Rule 901. Based on discussions with industry
participants, the Commission estimates this incremental burden to be
equal to 5% of the one-time and annual burdens associated with
designing and building a reporting system that is in compliance with
Rule 901, plus 10% of the corresponding one-time and annual burdens
associated with developing the reporting side's overall compliance
program required under Rule 901. This estimate is based on similar
calculations contained in the Regulation SBSR Proposing Release,\1125\
updated to reflect new estimates relating to the number of reportable
events and the number of reporting sides. Thus, for reporting sides,
the Commission estimates that Rule 905(a) will impose an initial
(first-year) aggregate burden of 15,015 hours, which is 50.0 burden
hours per reporting side,\1126\ and an ongoing aggregate annualized
burden of 7,035 hours, which is 23.5 burden hours per reporting
side.\1127\
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    \1125\ See Regulation SBSR Proposing Release, 75 FR 75254.
    \1126\ See Regulation SBSR Proposing Release, 75 FR 75254-55.
This figure is calculated as follows: [(((172 burden hours for one-
time development of reporting system) x (0.05)) + ((33 burden hours
annual maintenance of reporting system) x (0.05)) + ((180 burden
hours one-time compliance program development) x (0.1)) + ((218
burden hours annual support of compliance program) x (0.1))) x (300
reporting sides)] = 15,015 burden hours, which is 50 burden hours
per reporting side. The burden hours for annual maintenance of the
reporting system has been updated to reflect new information on the
number of reportable events. See supra note 1075.
    \1127\ See Regulation SBSR Proposing Release, 75 FR 75254-55.
This figure is calculated as follows: [(((33 burden hours annual
maintenance of reporting system) x (0.05)) + ((218 burden hours
annual support of compliance program) x (0.1))) x (300 reporting
sides)] = 7,035 burden hours, which is 23.5 burden hours per
reporting side. The burden hours for annual maintenance of the
reporting system has been updated to reflect new information on the
number of reportable events. See supra note 1075.
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    The Commission believes that the actual submission of amended
transaction reports required under Rule 905(a)(2) will not result in a
material burden because this will be done electronically though the
reporting system that the reporting side must develop and maintain to
comply with Rule 901. The overall burdens associated with such a
reporting system are addressed in the Commission's analysis of Rule
901.
    With regard to non-reporting-side participants, the Commission
believes that Rule 905(a) will impose an initial and ongoing burden
associated with promptly notifying the relevant reporting party after
discovery of an error as required under Rule 905(a)(1). The Commission
estimates that the annual burden will be 998,640 hours, which
corresponds to 208.05 burden hours per non-reporting-side
participant.\1128\ This figure is based on the Commission's estimate of
(1) 4,800 participants; and (2) 1 transaction per day per non-
reporting-side participant.\1129\ The burdens of Rule 905 on reporting
sides and non-reporting-side participants will be reduced to the extent
that complete and accurate information is reported to registered SDRs
in the first instance pursuant to Rule 901.
---------------------------------------------------------------------------

    \1128\ This burden was calculated using the same methodology as
was used in the Regulation SBSR Proposing Release, updated to
account for new estimates of the number of error notifications
resulting from updates in the number of reportable events. See
Regulation SBSR Proposing Release, 75 FR 75255. This figure is based
on the following: [(1.14 error notifications per non-reporting-side
participant per day) x (365 days/year) x (Compliance Clerk at 0.5
hours/report) x (4,800 participants)] = 998,640 burden hours, which
corresponds to 208.05 burden hours per non-reporting-side
participant.
    \1129\ This figure is based on the following: [((2,000,000
estimated annual security-based swap transactions) / (4,800
participants)) / (365 days/year)] = 1.14 transactions per day, on
average.
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    Rule 905(b) requires a registered SDR to develop protocols
regarding the reporting and correction of erroneous information. The
Commission believes, however, that this duty would represent only a
minor extension of other duties for which the Commission is estimating
burdens, and consequently, will not impose substantial additional
burdens on a registered SDR. A registered SDR will be required to have
the ability to collect and maintain security-based swap transaction
reports and update relevant records under the rules adopted in the SDR
Adopting Release. Likewise, a registered SDR must have the capacity to
disseminate additional, corrected security-based swap transaction
reports under Rule 902. The burdens associated with Rule 905--including
systems development, support, and maintenance--are addressed in the
Commission's analysis of those other rules. Thus, the Commission
believes that Rule 905(b) will impose only an incremental additional
burden on registered SDRs. The Commission estimates that developing and
publicly providing the necessary procedures will impose on each
registered SDR an initial one-time burden on each registered SDR of
approximately 730 burden hours.\1130\ The Commission estimates that to
review and update such procedures on an ongoing basis will impose an
annual burden on each SDR of approximately 1,460 burden hours.\1131\
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    \1130\ See Regulation SBSR Proposing Release, 75 FR 75255. This
figure is based on the following: [(Sr. Programmer at 80 hours) +
(Compliance Manager at 160 hours) + (Compliance Attorney at 250
hours) + (Compliance Clerk at 120 hours) + (Sr. System Analyst at 80
hours) + (Director of Compliance at 40 hours)] = 730 burden hours.
    \1131\ See Regulation SBSR Proposing Release, 75 FR 75255. This
figure is based on the following: [(Sr. Programmer at 160 hours) +
(Compliance Manager at 320 hours) + (Compliance Attorney at 500
hours) + (Compliance Clerk at 240 hours) + (Sr. System Analyst at
160 hours) + (Director of Compliance at 80 hours)] = 1,460 burden
hours.
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    Accordingly, the Commission estimates that the initial (first-year)
aggregate annualized burden on registered SDRs under Rule 905 will be
21,900 burden hours, which corresponds to 2,190 burden hours for each
registered SDR.\1132\ The Commission further estimates that the ongoing
aggregate annualized burden on registered SDRs under Rule 905 will be
14,600 burden hours, which corresponds to 1,460 burden hours for each
registered SDR.\1133\ This estimated burden is consistent with what the
Commission proposed in the Regulation SBSR Proposing Release.
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    \1132\ This figure is based on the following: [(730 burden hours
to develop protocols) + (1,460 burden hours annual support)) x (10
registered SDRs)] = 21,900 burden hours, which corresponds to 2,190
burden hours per registered SDR.
    \1133\ This figure is based on the following: [(1,460 burden
hours annual support) x (10 registered SDRs)] = 14,600 burden hours,
which corresponds to 1,460 burden hours per registered SDR.
---------------------------------------------------------------------------

5. Recordkeeping Requirements
    Security-based swap transaction reports received pursuant to Rule
905 are subject to Rule 13n-5(b)(4) under the Exchange Act. This rule
requires an SDR to maintain the transaction data and related
identifying information for not less than five years after the

applicable security-based swap expires and historical positions for not
less than five years.\1134\
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    \1134\ See SDR Adopting Release, Section VI(E)(4).
---------------------------------------------------------------------------

    With respect to information disseminated by a registered SDR in
compliance with Rule 905(b)(2), Rule 13n-7(b) under the Exchange Act
requires an SDR to keep and preserve at least one copy of all
documents, including all policies and procedures required by the
Exchange Act and the rules or regulations thereunder, for a period of
not less than five years, the first two years in a place that is
immediately available to representatives of the Commission for
inspection and examination.\1135\ This requirement encompasses amended
security-based swap transaction reports disseminated by the registered
SDR.
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    \1135\ See SDR Adopting Release, Section VI(G)(2).
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6. Collection of Information Is Mandatory
    Each collection of information discussed above is mandatory.
7. Confidentiality of Responses to Collection of Information
    Information collected pursuant to Rule 905 will be widely available
to the extent that it corrects information previously reported pursuant
to Rule 901(c) and incorporated into security-based swap transaction
reports that are publicly disseminated by a registered SDR pursuant to
Rule 902. Most of the information required under Rule 902 will be
widely available to the public to the extent it is incorporated into
security-based swap transaction reports that are publicly disseminated
by a registered SDR pursuant to Rule 902. However, Rule 902(c)
prohibits public dissemination of certain kinds of transactions and
certain kinds of transaction information. An SDR, pursuant to Sections
13(n)(5) of the Exchange Act and Rules 13n-4(b)(8) and 13n-9 thereunder
is required to maintain the privacy of this security-based swap
information. To the extent that the Commission receives confidential
information pursuant to this collection of information, such
information will be kept confidential, subject to the provisions of
applicable law.

G. Other Duties of Participants--Rule 906

    Rule 906(a), as adopted, establishes procedures designed to ensure
that a registered SDR obtains UICs for both counterparties to a
security-based swap. Rule 906(b) requires each participant of a
registered SDR to provide to the registered SDR information sufficient
to identify its ultimate parent(s) and any affiliate(s) of the
participant that also are participants of the registered SDR. Rule
906(c) requires each participant that is a registered security-based
swap dealer or registered major security-based swap participant to
establish, maintain, and enforce written policies and procedures
(updated at least annually) that are reasonably designed to ensure
compliance with any security-based swap transaction reporting
obligations in a manner consistent with Regulation SBSR.
    Certain provisions of Rule 906 of Regulation SBSR contain
``collection of information requirements'' within the meaning of the
PRA. The title of this collection is ``Rule 906--Duties of All
Participants.''
    Although the Commission is adopting Rule 906 with certain minor
changes from the version re-proposed in the Cross-Border Proposing
Release, these changes do not increase the number of respondents to
Rule 906 or affect the estimated burdens on respondents to Rule 906.
Therefore, the Commission is not revising its estimate of the burdens
associated with Rule 906.
1. Summary of Collection of Information
    Rule 906(a) sets forth a procedure designed to ensure that a
registered SDR obtains relevant UICs for both sides of a security-based
swap, not just of the reporting side. Rule 906(a) requires a registered
SDR to identify any security-based swap reported to it for which the
registered SDR does not have a counterparty ID and (if applicable)
broker ID, trading desk ID, and trader ID of each counterparty. Rule
906(a) further requires the registered SDR, once a day, to send a
report to each participant identifying, for each security-based swap to
which that participant is a counterparty, the security-based swap(s)
for which the registered SDR lacks counterparty ID and (if applicable)
broker ID, trading desk ID, and trader ID. A participant that receives
such a report must provide the missing ID information to the registered
SDR within 24 hours.
    Rule 906(b) requires each participant of a registered SDR to
provide the registered SDR with information sufficient to identify the
participant's ultimate parent(s) and any affiliate(s) of the
participant that are also participants of the registered SDR.
    Rule 906(c) requires each participant that is a registered
security-based swap dealer or registered major security-based swap
participant to establish, maintain, and enforce written policies and
procedures that are reasonably designed to ensure compliance with any
security-based swap transaction reporting obligations in a manner
consistent with Regulation SBSR. In addition, Rule 906(c) requires each
such participant to review and update its policies and procedures at
least annually.
 2. Use of Information
    The information required to be provided by participants pursuant to
Rule 906(a) will complete missing elements of security-based swap
transaction reports so that the registered SDR has, and can make
available to the Commission and other relevant authorities, accurate
and complete records for reported security-based swaps.
    Rule 906(b) will be used to ensure that the registered SDR has, and
can make available to the Commission and other relevant authorities,
group-wide security-based swap position information. This information
will assist the Commission and other relevant authorities with
monitoring systemic risks in the security-based swap market.
    The policies and procedures required under Rule 906(c) will be used
by participants to aid in their compliance with Regulation SBSR, and
also used by the Commission as part of its ongoing efforts to monitor
and enforce compliance with the federal securities laws, including
Regulation SBSR.
 3. Respondents
    Rules 906(a) and 906(b) apply to all participants of registered
SDRs. Based on the information currently available to the Commission,
the Commission now believes that there may be up to 4,800
participants.\1136\ Rule 906(c) applies to participants that are
registered security-based swap dealers or registered major security-
based swap participants. The Commission estimates that there will be 55
registered security-based swap dealers and registered major security-
based swap dealers.
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    \1136\ The Commission originally estimated that there would be
up to 5,000 participants. As discussed above, based on more updated
and granular information available to the Commission, this estimate
has been revised. See Regulation SBSR Proposing Release, 75 FR
75256.
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    Rule 906 also imposes certain duties on registered SDRs. As noted
above, the Commission estimates that there will be ten registered SDRs.
 4. Total Initial and Annual Reporting and Recordkeeping Burdens
a. For Registered SDRs
    Rule 906(a) requires a registered SDR, once a day, to send a report
to each participant identifying, for each security-based swap to which
that

participant is a counterparty, any security-based swap(s) for which the
registered SDR lacks counterparty ID and (if applicable) broker ID,
trading desk ID, and trader ID. The Commission estimates that there
will be a one-time, initial burden of 112 burden hours for a registered
SDR to create a report template and develop the necessary systems and
processes to produce a daily report required by Rule 906(a).\1137\
Further, the Commission estimates that there will be an ongoing
annualized burden of 308 burden hours for a registered SDR to generate
and issue the daily reports, and to enter into its systems the ID
information supplied by participants in response to the daily
reports.\1138\
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    \1137\ See Regulation SBSR Proposing Release, 75 FR 75256. The
Commission has derived the total estimated burdens based on the
following estimates, which are based on the information provided to
the Commission: (Senior Systems Analyst at 40 hours) + (Sr.
Programmer at 40 hours) + (Compliance Manager at 16 hours) +
(Director of Compliance at 8 hours) + (Compliance Attorney at 8
hours) = 112 burden hours.
    \1138\ See Regulation SBSR Proposing Release, 75 FR 75256-57.
The Commission has derived the total estimated burdens based on the
following estimates, which are based on the information provided to
the Commission: (Senior Systems Analyst at 24 hours) + (Sr.
Programmer at 24 hours) + (Compliance Clerk at 260 hours) = 308
burden hours.
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    Accordingly, the Commission estimates that the initial aggregate
annualized burden for registered SDRs under Rule 906(a) will be 4,200
burden hours for all SDR respondents, which corresponds to 420 burden
hours per registered SDR.\1139\ The Commission estimates that the
ongoing aggregate annualized burden for registered SDRs under Rule
906(a) will be 3,080 burden hours, which corresponds to 308 burden
hours per registered SDR.\1140\
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    \1139\ See Regulation SBSR Proposing Release, 75 FR 75256-57.
The Commission derived its estimate from the following: [(112 + 308
burden hours) x (10 registered SDRs)] = 4,200 burden hours, which
corresponds to 420 burden hours per registered SDR.
    \1140\ See Regulation SBSR Proposing Release, 75 FR 75256-57.
The Commission derived its estimate from the following: [(308 burden
hours) x (10 registered SDRs)] = 3,080 burden hours, which
corresponds to 308 burden hours per registered SDR.
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b. For Participants
i. Rule 906(a)
    Rule 906(a) requires any participant of a registered SDR that
receives a report from that registered SDR to provide the missing UICs
to the registered SDR within 24 hours. Because all SDR participants
will likely be the non-reporting side for at least some transactions to
which they are a counterparty, the Commission believes that all
participants will be impacted by Rule 906(a). The Commission estimates
that the initial and ongoing annualized burden under Rule 906(a) for
all participants will be 199,728 burden hours, which corresponds to
41.6 burden hours per participant.\1141\ This figure is based on the
Commission's estimates of (1) 4,800 participants; and (2) approximately
1.14 transactions per day per participant.\1142\
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    \1141\ This burden was calculated using the same methodology as
was used in the Regulation SBSR Proposing Release, updated to
account for new estimates of the number of missing information
reports resulting from updates in the number of reportable events.
See Regulation SBSR Proposing Release, 75 FR 75256-57. This figure
is based on the following: [(1.14 missing information reports per
participant per day) x (365 days/year) x (Compliance Clerk at 0.1
hours/report) x (4,800 participants) = 199,728 burden hours, which
corresponds to 41.6 burden hours per participant.
    \1142\ This figure is based on the following: [((2,000,000
estimated annual security-based swap transactions) / 4,800
participants)) / (365 days/year)] = 1.14 transactions per day, or
approximately 1 transaction per day.
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ii. Rule 906(b)
    Rule 906(b) requires every participant to provide the registered
SDR an initial parent/affiliate report and subsequent reports, as
needed. The Commission estimates that there will be 4,800 participants,
that each participant will connect to two registered SDRs on average,
and that each participant will submit two reports each year.\1143\
Accordingly, the Commission estimates that the initial and ongoing
aggregate annualized burden associated with Rule 906(b) will be 9,600
burden hours, which corresponds to 2 burden hours per
participant.\1144\ The aggregate burden represents an upper estimate
for all participants; the actual burden will likely decrease because
certain larger participants are likely to have multiple affiliates, and
one member of the group could report ultimate parent and affiliate
information on behalf of all of its affiliates at the same time.
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    \1143\ The Commission estimates that, during the first year,
each participant will submit an initial report and one update report
and, in subsequent years, will submit two update reports.
    \1144\ See Regulation SBSR Proposing Release, 75 FR 75257. This
figure is based on the following: [(Compliance Clerk at 0.5 hours
per report) x (2 reports/year/SDR connection) x (2 SDR connections/
participant) x (4,800 participants)] = 9,600 burden hours, which
corresponds to 2 burden hours per participant.
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b. For Covered Participants
    Rule 906(c) requires each participant that is a registered
security-based swap dealer or registered major security-based swap
participant (each, a ``covered participant'') to establish, maintain,
and enforce written policies and procedures that are reasonably
designed to ensure compliance with any security-based swap transaction
reporting obligations in a manner consistent with Regulation. Rule
906(c) also requires the review and updating of such policies and
procedures at least annually. The Commission estimates that the one-
time, initial burden for each covered participant to adopt written
policies and procedures as required under Rule 906(c) will be
approximately 216 burden hours.\1145\ As discussed in the Regulation
SBSR Proposing Release,\1146\ this figure is based on the estimated
number of hours to develop a set of written policies and procedures,
program systems, implement internal controls and oversight, train
relevant employees, and perform necessary testing. In addition, the
Commission estimates the burden of maintaining such policies and
procedures, including a full review at least annually, as required by
Rule 906(c), will be approximately 120 burden hours for each covered
participant.\1147\ This figure includes an estimate of hours related to
reviewing existing policies and procedures, making necessary updates,
conducting ongoing training, maintaining internal controls systems, and
performing necessary testing. Accordingly, the Commission estimates
that the initial aggregate annualized burden associated with Rule
906(c) will be 18,480 burden hours, which corresponds to 336 burden
hours per covered participant.\1148\ The Commission estimates that the
ongoing aggregate annualized burden associated with Rule 906(c) will be
6,600 burden hours, which corresponds to 120 burden hours per covered
participant.\1149\
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    \1145\ See Regulation SBSR Proposing Release, 75 FR 75257. This
figure is based on the following: [(Sr. Programmer at 40 hours) +
(Compliance Manager at 40 hours) + (Compliance Attorney at 40 hours)
+ (Compliance Clerk at 40 hours) + (Sr. Systems Analyst at 32 hours)
+ (Director of Compliance at 24 hours)] = 216 burden hours per
covered participant.
    \1146\ See Regulation SBSR Proposing Release, 75 FR 75257.
    \1147\ See Regulation SBSR Proposing Release, 75 FR 75257. This
figure is based on the following: [(Sr. Programmer at 8 hours) +
(Compliance Manager at 24 hours) + (Compliance Attorney at 24 hours)
+ (Compliance Clerk at 24 hours) + (Sr. Systems Analyst at 16 hours)
+ (Director of Compliance at 24 hours)] = 120 burden hours per
covered participant.
    \1148\ This figure is based on the following: [(216 + 120 burden
hours) x (55 covered participants)] = 18,480 burden hours.
    \1149\ This figure is based on the following: [(120 burden
hours) x (55 covered participants)] = 6,600 burden hours.
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    Therefore, the Commission estimates that the total initial
aggregate annualized burden associated with Rule 906 will be 232,008
burden hours,\1150\

and the total ongoing aggregate annualized burden will be 219,008
burden hours for all participants.\1151\
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    \1150\ This figure is based on the following: [(4,200 burden
hours for registered SDRs under Rule 906(a)) + (199,728 burden hours
for participants under Rule 906(a)) + (9,600 burden hours for
participants under Rule 906(b)) + (18,480 burden hours for covered
participants under Rule 906(c))] = 232,008 burden hours.
    \1151\ This figure is based on the following: [(3,080 burden
hours for registered SDRs under proposed Rule 906(a)) + (199,728
burden hours for participants under proposed Rule 906(a)) + (9,600
burden hours for participants under proposed Rule 906(b)) + (6,600
burden hours for covered participants under proposed Rule 906(c))] =
219,008 burden hours.
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5. Recordkeeping Requirements
    The daily reports that participants complete in order to provide
missing UICs to a registered SDR pursuant to Rule 906(a) and the
initial parent/affiliate reports and subsequent reports required by
Rule 906(b) are not subject to any specific recordkeeping requirements
for participants to the extent that these participants are non-
registered persons.\1152\ With regard to these reports, as well as any
other information that a registered SDR may receive from participants
pursuant to Rule 906, Rule 13n-5(b)(4) requires an SDR to maintain this
information for not less than five years after the applicable security-
based swap expires.\1153\
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    \1152\ See Securities Exchange Act Release No. 71958 (April 17,
2014), 79 FR 25193 (May 2, 2014) (``SD/MSP Recordkeeping Proposing
Release'') (proposing recordkeeping and reporting requirements for
security-based swap dealers, major security-based swap participants,
and broker-dealers).
    \1153\ See SDR Adopting Release, Section VI(E)(4).
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    The Commission has proposed but not yet adopted recordkeeping
requirements for registered security-based swap dealers and registered
major security-based swap participants.\1154\
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    \1154\ See SD/MSP Recordkeeping Proposing Release, 79 FR 25193.
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6. Collection of Information Is Mandatory
    Each collection of information discussed above is mandatory.
7. Confidentiality of Responses to Collection of Information
    The collection of information required by Rule 906 will not be
widely available. To the extent that the Commission receives
confidential information pursuant this collection of information, such
information will be kept confidential, subject to applicable law.

H. Policies and Procedures of Registered SDRs--Rule 907

    Rule 907, as adopted, requires each registered SDR to establish and
maintain policies and procedures addressing various aspects of
Regulation SBSR compliance. Certain provisions of Rule 907 of
Regulation SBSR contain ``collection of information requirements''
within the meaning of the PRA. The title of this collection is ``Rule
907--Policies and Procedures of Registered SDRs.''
1. Summary of Collection of Information
    Rule 907(a) requires a registered SDR to establish and maintain
written policies and procedures that detail how it will receive and
publicly disseminate security-based swap transaction information. Rule
907(a)(4) requires policies and procedures for assigning ``special
circumstances'' flags to the necessary transaction reports.
    Rule 907(c) requires a registered SDR to make its policies and
procedures available on its Web site. Rule 907(d) requires a registered
SDR to review, and update as necessary, the policies and procedures
that it is required to have by Regulation SBSR at least annually. Rule
907(e) requires a registered SDR to provide to the Commission, upon
request, information or reports related to the timeliness, accuracy,
and completeness of data reported to it pursuant to Regulation SBSR and
the registered SDR's policies and procedures established thereunder.
2. Use of Information
    The policies and procedures required under Rules 907(a) and 907(b)
will be used by reporting sides to understand the specific data
elements of security-based swap transactions that they must report and
the specific data formats and other reporting protocols that they will
be required to use. These policies and procedures will be used
generally by registered SDRs to aid in their compliance with Regulation
SBSR, and also by the Commission as part of its ongoing efforts to
monitor and enforce compliance with the federal securities laws,
including Regulation SBSR. Finally, any information or reports provided
to the Commission pursuant to Rule 907(e) will be used by the
Commission to assess the timeliness, accuracy, and completeness of
reported transaction data and assist the Commission's efforts to
enforce applicable security-based swap reporting rules.
3. Respondents
    Rule 907 applies to registered SDRs. As noted above, the Commission
estimates that there will be ten registered SDRs.
4. Total Initial and Annual Reporting and Recordkeeping Burdens
    The Commission estimates that the one-time, initial burden for a
registered SDR to adopt written policies and procedures as required
under Rule 907 will be approximately 15,000 hours.\1155\ As discussed
in the Regulation SBSR Proposing Release, this figure is based on the
estimated number of hours to develop a set of written policies and
procedures, program systems, implement internal controls and oversight,
train relevant employees, and perform necessary testing.\1156\ In
addition, the Commission estimates the annual burden of maintaining
such policies and procedures, including a full review at least
annually, making available its policies and procedures on the
registered SDR's Web site, and information or reports on non-
compliance, as required under Rule 907(e), will be approximately 30,000
hours for each registered SDR.\1157\ As discussed in the Regulation
SBSR Proposing Release, this figure includes an estimate of hours
related to reviewing existing policies and procedures, making necessary
updates, conducting ongoing training, maintaining relevant systems and
internal controls systems, performing necessary testing, monitoring
participants, and compiling data.
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    \1155\ See Regulation SBSR Proposing Release, 75 FR 75259. This
figure is based on the following: [(Sr. Programmer at 1,667 hours) +
(Compliance Manager at 3,333 hours) + (Compliance Attorney at 5,000
hours) + (Compliance Clerk at 2,500 hours) + (Sr. System Analyst at
1,667 hours) + (Director of Compliance at 833 hours)] = 15,000
burden hours per registered SDR. These burdens are the result of
Rule 907 only and do not account for any burdens that result from
the SDR Rules. Such burdens are addressed in a separate release. See
SDR Adopting Release, Section VII.
    \1156\ See Regulation SBSR Proposing Release, 75 FR 75259. This
figure also includes time necessary to design and program systems
and implement policies and procedures to assign certain UICs, as
required by Rule 907(a)(5).
    \1157\ See Regulation SBSR Proposing Release, 75 FR 75259. This
figure is based on the following: [(Sr. Programmer at 3,333 hours) +
(Compliance Manager at 6,667 hours) + (Compliance Attorney at 10,000
hours) + (Compliance Clerk at 5,000 hours) + (Sr. System Analyst at
3,333 hours) + (Director of Compliance at 1,667 hours)] = 30,000
burden hours per registered SDR.
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    The Commission estimates that the initial annualized burden
associated with Rule 907 will be approximately 45,000 hours per
registered SDR, which corresponds to an initial annualized aggregate
burden of approximately 450,000 hours.\1158\ The Commission

estimates that the ongoing annualized burden associated with Rule 907
will be approximately 30,000 hours per registered SDR,\1159\ which
corresponds to an ongoing annualized aggregate burden of approximately
300,000 hours.\1160\
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    \1158\ This figure is based on the following: [((15,000 burden
hours per registered SDR) + (30,000 burden hours per registered
SDR)) x (10 registered SDRs)] = 450,000 initial annualized aggregate
burden hours during the first year.
    \1159\ See Regulation SBSR Proposing Release, 75 FR 75259. This
figure is based on the following: [(Sr. Programmer at 3,333 hours) +
(Compliance Manager at 6,667 hours) + (Compliance Attorney at 10,000
hours) + (Compliance Clerk at 5,000 hours) + (Sr. System Analyst at
3,333 hours) + (Director of Compliance at 1,667 hours)] = 30,000
burden hours per registered SDR.
    \1160\ See Regulation SBSR Proposing Release, 75 FR 75259. This
figure is based on the following: [(30,000 burden hours per
registered SDR) x (10 registered SDRs)] = 300,000 ongoing,
annualized aggregate burden hours.
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5. Recordkeeping Requirements
    Rule 13n-7(b) under the Exchange Act requires an SDR to keep and
preserve at least one copy of all documents, including all documents
and policies and procedures required by the Exchange Act and the rules
or regulations thereunder, for a period of not less than five years,
the first two years in a place that is immediately available to
representatives of the Commission for inspection and examination. This
requirement will encompass policies and procedures established by a
registered SDR pursuant to Rule 907, and any information or reports
provided to the Commission pursuant to Rule 907(e).
6. Collection of Information Is Mandatory
    Each collection of information discussed is mandatory.
7. Confidentiality of Responses to Collection of Information
    All of the policies and procedures required by Rule 907 will have
to be made available by a registered SDR on its Web site and will not,
therefore, be confidential. Any information obtained by the Commission
from a registered SDR pursuant to Rule 907(e) relating to the
timeliness, accuracy, and completeness of data reported to the
registered SDR will be kept confidential subject to the provisions of
applicable law.

I. Cross-Border Matters--Rule 908

    Rule 908(a), as adopted, defines when a security-based swap
transaction will be subject to regulatory reporting and/or public
dissemination. Specifically, Rule 908(a)(1)(i), as adopted, provides
that a security-based swap shall be subject to regulatory reporting and
public dissemination if ``[t]here is a direct or indirect counterparty
that is a U.S. person on either or both sides of the transaction.''
Rule 908(a)(1)(ii), as adopted, provides that a security-based swap
shall be subject to regulatory reporting and public dissemination if
``[t]he security-based swap is submitted to a clearing agency having
its principal place of business in the United States.'' Rule 908(a)(2),
as adopted, provides that a security-based swap not included within the
above provisions would be subject to regulatory reporting but not
public dissemination ``if there is a direct or indirect counterparty on
either or both sides of the transaction that is a registered security-
based swap dealer or a registered major security-based swap
participant.''
    Regulation 908(b), as adopted, defines when a person might incur
obligations under Regulation SBSR. Specifically, Rule 908(b) provides
that, notwithstanding any other provision of Regulation SBSR, a person
shall not incur any obligation under Regulation SBSR unless it is a
U.S. person, a registered security-based swap dealer or registered
major security-based swap participant.
    Rules 908(a) and 908(b) do not impose any collection of information
requirements. To the extent that a security-based swap transaction or
counterparty is subject to Rule 908(a) or 908(b), respectively, the
collection of information burdens are calculated as part of the
underlying rule (e.g., Rule 901, which imposes the basic duty to report
security-based swap transaction information).
    Rule 908(c), as adopted, sets forth the requirements surrounding
requests for substituted compliance. As adopted, Rule 908(c)(1) sets
forth the general rule that compliance with the regulatory reporting
and public dissemination requirements in sections 13(m) and 13A of the
Act (15 U.S.C. 78m(m) and 78m-1), and the rules and regulations
thereunder, may be satisfied by compliance with the rules of a foreign
jurisdiction that is the subject of a Commission order described in
Rule 908(c)(2), provided that at least one of the direct counterparties
is either a non-U.S. person or a foreign branch.
    Rule 908(c) contains ``collection of information requirements''
within the meaning of the PRA. The title of this collection is ``Rule
908(c)--Substituted Compliance.''
1. Summary of Collection of Information
    A party that potentially would comply with requirements under
Regulation SBSR pursuant to a substituted compliance order or any
foreign financial regulatory authority or authorities supervising such
a person's security-based swap activities, may file an application
requesting that the Commission make a substituted compliance
determination pursuant to Rule 0-13 under the Exchange Act.\1161\ Such
entity will be required to provide the Commission with any supporting
documentation as the Commission may request, in addition to information
that the entity believes is necessary for the Commission to make a
determination, such as information demonstrating that the requirements
applied in the foreign jurisdiction are comparable to the Commission's
and describing the methods used by relevant foreign financial
regulatory authorities to monitor compliance with those requirements.
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    \1161\ See 17 CFR 200.0-13; Cross-Border Adopting Release, 79 FR
47357-60.
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2. Use of Information
    The Commission will use the information collected pursuant to Rule
908(c)(2)(ii) to evaluate requests for substituted compliance with
regard to regulatory reporting and public dissemination of security-
based swaps.
3. Respondents
    In the Cross-Border Proposing Release, the Commission preliminarily
estimated that requests for substituted compliance determinations might
arise in connection with security-based swap market participants and
transactions in up to 30 discrete jurisdictions.\1162\ Because only a
small number of jurisdictions have substantial OTC derivatives markets
and are implementing OTC derivatives reforms, the Commission
preliminarily estimated that it would receive approximately ten
requests in the first year for substituted compliance determinations
with respect to regulatory reporting and public dissemination pursuant
to Rule 908(c)(2)(ii), and two requests each subsequent year.\1163\
Although the range of entities that are allowed to submit applications
for substituted compliance has increased, the Commission does not
believe that this warrants a change in its estimate of the number of
requests that the Commission will receive. The Commission continues to
believe that other considerations will determine the number of
applications that it will receive, such as which jurisdictions have
regulatory structures similar enough to the Commission's as to merit

a request and the number of entities potentially impacted by Regulation
SBSR.
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    \1162\ See Cross-Border Proposing Release, 78 FR 31109-10.
    \1163\ See id. at 31110. Rule 908(c)(2)(ii), as adopted, allows
``[a] party that potentially would comply with requirements under
[Regulation SBSR] . . . or any foreign financial regulatory
authority or authorities supervising such a person's security-based
swap activities may file an application.''
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4. Total Initial and Annual Reporting and Recordkeeping Burdens
    Rule 908(c)(2)(ii), as adopted, applies to any person that requests
a substituted compliance determination with respect to regulatory
reporting and public dissemination of security-based swaps. In
connection with each request, the requesting party must provide the
Commission with any supporting documentation that the entity believes
is necessary for the Commission to make a determination, including
information demonstrating that the requirements applied in the foreign
jurisdiction are comparable to the Commission's and describing the
methods used by relevant foreign financial regulatory authorities to
monitor compliance with those requirements. The Commission initially
estimated, in the Cross-Border Proposing Release, that the total
paperwork burden associated with submitting a request for a substituted
compliance determination with respect to regulatory reporting and
public dissemination will be approximately 1,120 hours, plus $1,120,000
for 14 requests.\1164\ This estimate includes all collection burdens
associated with the request, including burdens associated with
analyzing whether the regulatory requirements of the foreign
jurisdiction impose a comparable, comprehensive system for the
regulatory reporting and public dissemination of all security-based
swaps. Furthermore, this estimate assumes that each request will be
prepared de novo, without any benefit of prior work on related
subjects. The Commission notes, however, that as such requests are
developed with respect to certain jurisdictions, the cost of preparing
such requests with respect to other foreign jurisdictions could
decrease.\1165\
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    \1164\ The Commission staff estimates that the paperwork burden
associated with making a substituted compliance request pursuant to
Rule 908(c)(2)(ii) will be approximately 80 of in-house counsel
time, plus $80,000 for the services of outside professionals (based
on 200 hours of outside counsel time x $400). See id., Cross-Border
Proposing Release, 78 FR 31110
    \1165\ If and when the Commission grants a request for
substituted compliance, subsequent applications might be able to
leverage work done on the initial application. However, the
Commission is unable to estimate the amount by which the cost could
decrease without knowing the extent to which different jurisdictions
have similar regulatory structures.
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    Assuming ten requests in the first year, the Commission staff
estimated an aggregated burden for the first year will be 800 hours,
plus $800,000 for the services of outside professionals.\1166\ The
Commission preliminarily estimated that it would receive 2 requests for
substituted compliance determinations pursuant to Rule 908(c)(2)(ii) in
each subsequent year. Assuming the same approximate time and costs, the
aggregate burden for each year following the first year will be up to
160 hours of company time and $160,000 for the services of outside
professionals.\1167\
---------------------------------------------------------------------------

    \1166\ The Commission staff estimates that the paperwork burden
associated with making a substituted compliance request pursuant to
Rule 242.908(c)(2)(ii) will be up to approximately 800 hours (80
hours of in-house counsel time x 10 respondents), plus $800,000 for
the services of outside professionals (based on 200 hours of outside
counsel time x $400 x 10 respondents). See Cross-Border Proposing
Release, 78 FR 31110.
    \1167\ The Commission staff estimates that the paperwork burden
associated with making a substituted compliance request pursuant to
Rule 242.908(c)(2)(ii) would be up to approximately 160 hours (80
hours of in-house counsel time x 2 respondents) + plus $160,000 for
the services of outside professionals (based on 200 hours of outside
counsel time x $400 x 2 respondents). See Cross-Border Proposing
Release, 78 FR 31110.
---------------------------------------------------------------------------

5. Recordkeeping Requirements
    Rule 908(c)(2)(ii) does not impose any recordkeeping requirements
on entities that submit requests for a substituted compliance
determination. The Commission has proposed but not yet adopted
recordkeeping requirements for registered security-based swap dealers.
6. Collection of Information Is Mandatory
    The collection of information discussed above is mandatory for any
entity seeking a substituted compliance determination from the
Commission regarding regulatory reporting and public dissemination of
security-based swaps.
7. Confidentiality of Responses to Collection of Information
    The Commission generally intends to make public the information
submitted to it pursuant to any request for a substituted compliance
determination under Rule 908(c)(2)(ii), including supporting
documentation provided by the requesting party. However, a requesting
party may submit a confidential treatment request pursuant to Rule 24b-
2 under the Exchange Act to object to public disclosure.

J. Registration of SDRs as Securities Information Processors--Rule 909

    Rule 909 requires a registered SDR also to register with the
Commission as a SIP on Form SDR. Previously, in the Regulation SBSR
Proposing Release, the Commission had proposed the use of a separate
form, Form SIP. Based on the use of that form, the Commission stated in
the Regulation SBSR Proposing Release that Rule 909 contained
``collection of information requirements'' within the meaning of the
PRA and thus, the Commission preliminarily estimated certain burdens on
registered SDRs that would result from Rule 909.\1168\ As a result of
the consolidation of SDR and SIP registration on a single form, the
Commission now believes that Rule 909 does not constitute a separate
``collection of information'' within the meaning of the PRA.\1169\
---------------------------------------------------------------------------

    \1168\ See Regulation SBSR Proposing Release, 75 FR 75261.
    \1169\ See SDR Adopting Release, Section VI(A)(1)(c).
---------------------------------------------------------------------------

XXII. Economic Analysis

    The Commission is sensitive to the economic consequences and
effects, including costs and benefits, of its rules. Some of these
costs and benefits stem from statutory mandates, while others are
affected by the discretion exercised in implementing the mandates. The
following economic analysis identifies and considers the costs and
benefits--including the effects on efficiency, competition, and capital
formation--that may result from the rules, as adopted . These costs and
benefits are discussed below and have informed the policy choices
described throughout this release.
    The Dodd-Frank Act amended the Exchange Act to require the
regulatory reporting and public dissemination of all security-based
swaps. To implement these requirements, Regulation SBSR requires that
all security-based swaps to be reported to a registered SDR, and
requires the registered SDR immediately to disseminate a subset of that
information to the public. Regulation SBSR specifies the security-based
swap information that must be reported, who has the duty to report, and
the timeframes for reporting and disseminating information. Regulation
SBSR also requires registered SDRs to establish policies and procedures
governing the reporting and dissemination process, including procedures
for utilizing unique identification codes for legal entities, units of
legal entities (such as branches, trading desks, and individual
traders), products, and transactions. In the Regulation SBSR Proposing
Release, the Commission highlighted certain overarching benefits to the
security-based swap markets that it preliminarily believed would result
from the adoption of Regulation SBSR. These potential

benefits include, generally, improved market quality, improved risk
management, greater efficiency, and improved Commission
oversight.\1170\
---------------------------------------------------------------------------

    \1170\ See Regulation SBSR Proposing Release, 75 FR 75261-62.
---------------------------------------------------------------------------

    In the Cross-Border Proposing Release, the Commission re-proposed
Regulation SBSR in its entirety and considered the changes to the
initial assessments of costs and benefits associated with the re-
proposed rules. In doing so, the Commission explained that Regulation
SBSR is intended to further the goals highlighted in the Regulation
SBSR Proposing Release, while further limiting, to the extent
practicable, the overall costs to the security-based swap market
associated with regulatory reporting and public dissemination in cross-
border situations.\1171\ The adopted rules are designed to limit
overall costs by imposing reporting duties and the associated costs on
those parties who are most likely to have the necessary infrastructure
in place to carry out the reporting function.\1172\ As the Commission
noted, many of the revisions set forth in the re-proposal were
suggested by commenters to the initial proposal and were designed,
among other things, to better align reporting duties with larger
entities that have greater resources and capability to report and to
reduce the potential for duplicative reporting. The Commission stated
that the revisions should help to limit, to the extent practicable, the
overall costs to the security-based swap market associated with
reporting in cross-border situations.\1173\
---------------------------------------------------------------------------

    \1171\ See Cross-Border Proposing Release, 78 FR 31196-97.
    \1172\ While certain parties that generally will have the
heaviest duties to report transactions (e.g., registered security-
based swap dealers and registered major security-based swap
participants) will incur costs, the costs of those parties generally
will be lower than they would be for other parties (e.g., non-
dealers) because those parties may already have the necessary
infrastructure in place to report transactions and they will benefit
from economies of scale due to the high volume of transactions that
flows through them compared to other parties. Although security-
based swap dealers and major security-based swap participants might
pass on these costs, at least in part, to their non-reporting
counterparties, the costs that are passed on to non-reporting
parties are likely to be lower than the costs that the non-reporting
parties would face if they had direct responsibility to report these
transactions.
    \1173\ See Cross-Border Proposing Release, 78 FR 31192.
---------------------------------------------------------------------------

    The Commission is now adopting Regulation SBSR, with certain
revisions discussed in Sections I through XVII, supra.
    In assessing the economic impact of the rules, the Commission
refers to the broader costs and benefits associated with the
application of the adopted rules as ``programmatic'' costs and
benefits. These include the costs and benefits of applying the
substantive Title VII requirements to the reporting of transactions by
market participants, as well as to the functions performed by
infrastructure participants (such as SDRs) in the security-based swap
market. In several places the Commission also considers how the
programmatic costs and benefits might change when comparing the adopted
approach to other alternatives suggested by comment letters. The
Commission's analysis also considers ``assessment'' costs--those that
arise from current and future market participants expending resources
to determine whether they are subject to Regulation SBSR, and could
incur expenses in making this determination even if they ultimately are
not subject to rules for which they made an assessment.
    The Commission's analysis also recognizes that certain market
participants are subject to Regulation SBSR while potentially also
being subject to requirements imposed by other regulators. Concurrent,
and potentially duplicative or conflicting, regulatory requirements
could be imposed on persons because of their resident or domicile
status or because of the place their security-based swap transactions
are conducted. Rule 908(c) establishes a mechanism whereby market
participants who would be subject to both Regulation SBSR and a foreign
regulatory regime could, subject to certain conditions, ``substitute
compliance'' with the foreign regulatory regime for compliance with
Regulation SBSR.

A. Broad Economic Considerations

    Among the primary economic considerations for promulgating the
rules on the regulatory reporting and public dissemination of security-
based swap information are the risks to financial stability posed by
security-based swap activity and exposures and the effect that the
level of transparency in the security-based swap market may have on
market participants' ability to efficiently execute trades. For
example, on one hand, an increased level of transparency may make
trading more efficient since market participants have additional
information on which to base their trading decisions. On the other
hand, if post-trade transparency makes hedging of large trades or
trades in illiquid securities more difficult, it may make execution of
these trades less efficient.\1174\
---------------------------------------------------------------------------

    \1174\ See Analysis of Post-Trade Transparency, in which
Commission staff describes the effects of post-trade transparency on
relatively illiquid swaps.
---------------------------------------------------------------------------

    As the Commission has noted previously,\1175\ the security-based
swap market allows participants opportunities for efficient risk
sharing. By transacting in security-based swaps, firms can lay off
financial and commercial risks that they are unwilling to bear to
counterparties who may be better-equipped to bear them. Risk transfer
is accomplished through contractual obligations to exchange cash flows
with different risk characteristics. These opportunities for risk
sharing, however, also represent opportunities for risk transmission
through a variety of channels. For instance, a credit event that
triggers a large payout to one counterparty by a seller of credit
protection, may render that protection seller unable to meet other
payment obligations, placing its other counterparties under financial
strain. In addition to the risk of sequential counterparty default,
security-based swap relationships can transmit risks across asset
classes and jurisdictional boundaries through liquidity and asset price
channels.
---------------------------------------------------------------------------

    \1175\ See Cross-Border Adopting Release, 79 FR 47283-85.
---------------------------------------------------------------------------

    Unlike most other securities transactions, security-based swaps
entail ongoing financial obligations between counterparties during the
life of a transaction that could span several years. As a result of
these ongoing obligations, market participants are exposed not only to
the market risk of assets that underlie a security-based swap contract,
but also to the credit risk of their counterparties until the
transaction is terminated. These exposures create a web of financial
relationships in which the failure of a single large firm active in the
security-based swap market can have consequences beyond the firm
itself. A default by such a firm, or even the perceived lack of
creditworthiness of that firm, could produce contagion through
sequential counterparty default or reductions in liquidity, willingness
to extend credit, and valuations for financial instruments.\1176\
---------------------------------------------------------------------------

    \1176\ See, e.g., Markus K. Brunnermeier and Lasse Heje
Pedersen, ``Market Liquidity and Funding Liquidity,'' Review of
Financial Studies (2009); Denis Gromb and Dimitri Vayanos, ``A Model
of Financial Market Liquidity,'' Journal of the European Economic
Association (2010).
---------------------------------------------------------------------------

    Currently, the security-based swap market is an OTC market without
standardized reporting or public

dissemination requirements.\1177\ Market participants observe only the
details of transactions for which they are a counterparty, and there is
no comprehensive and widely available source of information about
transactions after they occur (post-trade transparency). As a result,
the ability of a market participant to evaluate a potential transaction
depends on its own transaction history and indicative (non-binding)
quotes that it may obtain through fee-based services, and OTC market
participants with the largest order flow have an informational
advantage over other market participants. The value of private
information to large dealers may, in part, explain why security-based
swap market participants do not have sufficient incentive to
voluntarily implement post-trade transparency.\1178\ Additionally,
unless all market participants are subject to reporting rules, market
participants who may prefer a more transparent market structure may not
believe that the benefits of disseminating data about their own limited
order flow justifies the costs associated with building and paying for
the necessary infrastructure to support public dissemination of
transaction information.
---------------------------------------------------------------------------

    \1177\ There is voluntary reporting as well as voluntary
clearing, as discussed in Section XXII(B). However, transaction
level information is not made public through these channels. Only
limited information (e.g., trading volume and notional outstanding)
is available publicly on an aggregate basis, and often with a delay.
    \1178\ Throughout Section XXII, the term ``dealers'' refers to
security-based swap market participant that engage in dealing
activities while the term ``registered dealers'' are those required
to register with the Commission. See Intermediary Definitions
Adopting Release, 77 FR 30596; Cross-Border Adopting Release, 79 FR
47277.
---------------------------------------------------------------------------

    The discussion below presents an overview of the OTC derivatives
markets, a consideration of the general costs and benefits of the
regulatory reporting and public dissemination requirements, and a
discussion of the costs and benefits of each rule within Regulation
SBSR. The economic analysis concludes with a discussion of the
potential effects of Regulation SBSR, as adopted, on efficiency,
competition, and capital formation.

B. Baseline

    To assess the economic impact of the final rules described in this
release, the Commission is using as a baseline the security-based swap
market as it exists at the time of this release, including applicable
rules adopted by the Commission but excluding rules that have been
proposed but not yet finalized. The analysis includes the statutory and
regulatory provisions that currently govern the security-based swap
market pursuant to the Dodd-Frank Act. The Commission also has
considered, where appropriate, the impacts on market practice of other
regulatory regimes.
1. Current Security-Based Swap Market
    The Commission's analysis of the state of the current security-
based swap market is based on data obtained from DTCC-TIW, particularly
data regarding the activity of market participants in the single-name
credit default swap (CDS) market during the period from 2008 to 2013.
Some of the Commission staff's analysis regarding the impact of CFTC
trade reporting rules entails the use of open positions and transaction
activity data for index credit default swap (index CDS) and single-name
CDS during the period from July 1, 2011 to June 30, 2013, obtained from
the DTCC-TIW and through the DTCC public Web site of weekly stock and
volume reports.\1179\ The data for index CDS encompasses CDS on both
broad-based security indices and narrow-based security indices, and
``security-based swap'' in relevant part encompasses swaps based on
single securities or on narrow-based security indices.\1180\
---------------------------------------------------------------------------

    \1179\ The DTCC public Web site can be found at http://www.dtcc.com/repository-otc-data.aspx, last visited September 22,
2014. See also Analysis of Post-Trade Transparency.
    \1180\ See Section 3(a)(68) of the Exchange Act. See also
Product Definitions Adopting Release, 77 FR 48208.
---------------------------------------------------------------------------

    While other trade repositories may collect data on transactions in
total return swaps on equity and debt, the Commission does not
currently have access to such data for these products (or other
products that are security-based swaps). As such, the Commission is
unable to analyze security-based swaps other than those described
above. However, the Commission believes that the single-name CDS data
are representative of the market and therefore can directly inform the
analysis of the state of the current security-based swap market.\1181\
---------------------------------------------------------------------------

    \1181\ See Cross-Border Proposing Release, 78 FR 31120.
---------------------------------------------------------------------------

    The Commission believes that the data underlying its analysis
provides reasonably comprehensive information regarding the single-name
CDS transactions and composition of the single-name CDS market
participants. The Commission notes that the data available from DTCC-
TIW do not encompass those CDS transactions that both: (1) Do not
involve U.S. counterparties \1182\; and (2) are based on reference
entities domiciled outside the United States (non-U.S. reference
entities). Notwithstanding this limitation, the Commission believes
that the DTCC-TIW data provide information that is sufficient for the
purpose of identifying the types of market participants active in the
security-based swap market and the general characteristics of
transactions within that market.\1183\
---------------------------------------------------------------------------

    \1182\ The Commission notes that DTCC-TIW's entity domicile
determinations may not reflect the definition of ``U.S. person'' in
Rule 900(ss).
    \1183\ Commission staff estimates, using data from 2013, that
the transaction data include 77% of all single-name CDS transactions
reported to DTCC-TIW.
---------------------------------------------------------------------------

a. Security-Based Swap Market Participants
    The available data supports the characterization of the security-
based swap market as one that relies on intermediation by a small
number of entities that engage in dealing activities. In addition to
this small number of dealing entities, thousands of other participants
appear as counterparties to security-based swap contracts in the
sample, and include, but are not limited to, investment companies,
pension funds, private (hedge) funds, sovereign entities, and
industrial companies. Most non-dealer users of security-based swaps do
not directly engage in the trading of swaps with other non-dealers, but
use dealers, banks, or investment advisers as intermediaries or agents
to establish their positions. Based on an analysis of the
counterparties to trades reported to the DTCC-TIW, there are 1,800
entities that engaged directly in trading between November 2006 and
December 2013.
    Table 1, below, highlights that close to three-quarters of these
entities (DTCC-defined ``firms'' shown in DTCC-TIW, which are referred
to here as ``transacting agents'') were identified as investment
advisers, of which approximately 40% (about 30% of all transacting
agents) were registered investment advisers under the Investment
Advisers Act of 1940.\1184\ Although investment advisers comprise the
vast majority of transacting agents, the transactions that they
executed account for only 9.7% of all single-name CDS trading activity
reported to the DTCC-TIW, measured by number of

transaction-sides.\1185\ The vast majority of transactions (84.1%)
measured by number of transaction-sides were executed by ISDA-
recognized dealers.\1186\
---------------------------------------------------------------------------

    \1184\ See 15 U.S.C. 80b1-80b21. Transacting agents engage in
the security-based swap market, without relying on an intermediary,
on behalf of principals. For example, a university endowment may
hold a position in a security-based swap that is built up by an
investment adviser that transacts on the endowment's behalf. In this
case, the university endowment is a principal that uses the
investment adviser as a transacting agent.
    \1185\ Each transaction has two transaction sides, i.e., two
transaction counterparties.
    \1186\ The 1,800 entities included all DTCC-defined ``firms''
shown in DTCC-TIW as transaction counterparties that report at least
one transaction to DTCC-TIW as of December 2013. The staff in the
Division of Economic and Risk Analysis classified these firms, which
are shown as transaction counterparties, by machine matching names
to known third-party databases and by manual classification. This is
consistent with the methodology used in the re-proposal. See Cross-
Border Proposing Release, 78 FR 31120 note 1304. Manual
classification was based in part on searches of the EDGAR and
Bloomberg databases, the Commission's Investment Adviser Public
Disclosure database, and a firm's public Web site or the public Web
site of the account represented by a firm. The staff also referred
to ISDA protocol adherence letters available on the ISDA Web site.

 Table 1--The Number of Transacting Agents by Counterparty Type and the
 Fraction of Total Trading Activity, From November 2006 Through December
               2013, Represented by Each Counterparty Type
------------------------------------------------------------------------
                                                            Transaction
      Transacting agents          Number       Percent       share  (%)
------------------------------------------------------------------------
Investment Advisers..........        1,347           74.8            9.7
--SEC registered.............          529           29.4            5.9
Banks........................          256           14.2            5.0
Pension Funds................           29            1.6            0.1
Insurance Companies..........           36            2.0            0.2
ISDA-Recognized Dealers                 17            0.9           84.1
 \1187\......................
Other........................          115            6.4            1.0
                              ------------------------------------------
    Total....................        1,800          100            100
------------------------------------------------------------------------

    Principal  holders of CDS risk exposure are represented by
``accounts'' in the DTCC-TIW.\1188\ The staff's analysis of these
accounts in DTCC-TIW shows that the 1,800 transacting agents classified
in Table 1 represent over 10,054 principal risk holders. Table 2,
below, classifies these principal risk holders by their counterparty
type and whether they are represented by a registered or unregistered
investment adviser.\1189\ For instance, 256 banks in Table 1 allocated
transactions across 369 accounts, of which 30 were represented by
investment advisers. In the remaining 339 instances, banks traded for
their own accounts. Meanwhile, 17 ISDA-recognized dealers in Table 1
allocated transactions across 69 accounts.
---------------------------------------------------------------------------

    \1187\ For the purpose of this analysis, the ISDA-recognized
dealers are those identified by ISDA as belonging to the G14 or G16
dealer group during the period: JP Morgan Chase NA (and Bear
Stearns), Morgan Stanley, Bank of America NA (and Merrill Lynch),
Goldman Sachs, Deutsche Bank AG, Barclays Capital, Citigroup, UBS,
Credit Suisse AG, RBS Group, BNP Paribas, HSBC Bank, Lehman
Brothers, Soci[eacute]t[eacute] G[eacute]n[eacute]rale, Credit
Agricole, Wells Fargo, and Nomura. See, e.g., http://www.isda.org/c_and_a/pdf/ISDA-Operations-Survey-2010.pdf (last visited September
22, 2014).
    \1188\ ``Accounts'' as defined in the DTCC-TIW context are not
equivalent to ``accounts'' in the definition of ``U.S. person''
provided by Rule 3a71-3(a)(4)(i)(C) under the Exchange Act. They
also do not necessarily represent separate legal persons. One entity
or legal person may have multiple accounts. For example, a bank may
have one DTCC account for its U.S. headquarters and one DTCC account
for one of its foreign branches.
    \1189\ Unregistered investment advisers include all investment
advisers not registered under the Investment Advisers Act and may
include investment advisers registered with a state or a foreign
authority.
---------------------------------------------------------------------------

    Among the accounts, there are 1,086 special entities \1190\ and 636
investment companies registered under the Investment Company Act.\1191\
Private funds comprise the largest type of account holders that the
Commission was able to classify, and although not verified through a
recognized database, most of the funds that could not be classified
appear to be private funds.\1192\
---------------------------------------------------------------------------

    \1190\ See Section 15F(h)(2)(C) of the Exchange Act, 15 U.S.C.
78o-10(h)(2)(C) (defining ``special entity'' to include a federal
agency; a state, state agency, city, county, municipality, or other
political subdivision of a state; any employee benefit plan; any
governmental plan; or any endowment).
    \1191\ There remain over 4,000 DTCC ``accounts'' unclassified by
type. Although unclassified, each was manually reviewed to verify
that it was not likely to be a special entity and instead was likely
to be an entity such as a corporation, an insurance company, or a
bank.
    \1192\ Private funds for the purpose of this analysis encompass
various unregistered pooled investment vehicles, including hedge
funds, private equity funds, and venture capital funds.

    Table 2--The Number and Percentage of Account Holders--by Type--Who Participate in the Security-Based Swap Market Through a Registered Investment
                Adviser, an Unregistered Investment Adviser, or Directly as a Transacting Agent, From November 2006 Through December 2013
--------------------------------------------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------------------------------------------
                   Account holders by type                        Number        Represented by a
                                                                              registered investment
                                                                                adviser
                                                                   Represented by an
                                                                unregistered investment
                                                                        adviser
                                                                    Participant is
                                                               transacting agent \1193\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Private Funds................................................        2,914        1,395          48%        1,496          51%           23           1%
DFA Special Entities.........................................        1,086        1,050          97%           12           1%           24           2%
Registered Investment Companies..............................          636          620          97%           14           2%            2           0%
Banks (non-ISDA-recognized dealers)..........................          369           25           7%            5           1%          339          92%
Insurance Companies..........................................          224          144          64%           21           9%           59          26%
ISDA-Recognized Dealers......................................           69            0           0%            0           0%           69         100%
Foreign Sovereigns...........................................           63           45          71%            2           3%           16          25%
Non-Financial Corporations...................................           57           39          68%            3           5%           15          26%
Finance Companies............................................           10            5          50%            0           0%            5          50%
Other/Unclassified...........................................        4,626        3,130          68%        1,294          28%          200           4%
                                                              ------------------------------------------------------------------------------------------
    All......................................................       10,054        6,453          64%        2,847          28%          752           7%
--------------------------------------------------------------------------------------------------------------------------------------------------------

i. Participant Domiciles
    The security-based swap market is global in scope, with
counterparties located across multiple jurisdictions. A U.S.-based
holding company may conduct dealing activity through a foreign
subsidiary that faces both U.S. and foreign counterparties, and the
foreign subsidiary may be guaranteed by its parent, making the parent
responsible for performance under these security-based swaps.
---------------------------------------------------------------------------

    \1193\ This column reflects the number of participants who are
also trading for their own accounts.

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

[GRAPHIC] [TIFF OMITTED] TR19MR15.003

    As depicted in Figure 1, over time a greater share of accounts
entering the market either have a foreign domicile, or have a foreign
domicile while being managed by a U.S. person. The increase in foreign
accounts may reflect an increase in participation by foreign
accountholders while the increase in foreign accounts managed by U.S.
persons may reflect the flexibility with which market participants can
restructure their market participation in response to regulatory
intervention, competitive pressures, and other stimuli. There are,
however, alternative explanations for the shifts in new account
domicile that can be observed in Figure 1. Changes in the domicile of
new accounts through time may reflect improvements in reporting by
market participants to DTCC-TIW.\1195\ Additionally, because the data
include only accounts that are domiciled in the United States, transact
with U.S.-domiciled counterparties, or transact in single-name CDS with
U.S. reference entities, changes in the domicile of new accounts may
reflect increased transaction activity between U.S. and non-U.S.
counterparties.
---------------------------------------------------------------------------

    \1194\ Following publication of the Warehouse Trust Guidance on
CDS data access, DTCC-TIW surveyed market participants, asking for
the physical address associated with each of their accounts (i.e.,
where the account is organized as a legal entity). This is
designated the registered office location by the DTCC-TIW. When an
account does not report a registered office location, the Commission
has assumed that the settlement country reported by the investment
adviser or parent entity to the fund or account is the place of
domicile. This treatment assumes that the registered office location
reflects the place of domicile for the fund or account.
    \1195\ See supra note 3.
---------------------------------------------------------------------------

ii. Current Estimates of Dealers and Major Participants
    In its economic analysis of rules defining ``security-based swap
dealer'' and ``major security-based swap participant,'' the Commission
noted, using DTCC-TIW data for the year ending in December 2012, that
it expected 202 entities to engage in dealer de minimis analysis.\1196\
Further, the Commission's analysis of single-name CDS transactions data
suggested that only a subset of these entities engage in dealing
activity and estimated 50 registered dealers as an upper bound based on
the threshold for the de minimis exception adopted in that
release.\1197\ The Commission also undertook an analysis of the number
of security-based swap market participants likely to register as major
security-based swap participants, and estimated a range of between zero
and five such participants.\1198\ Based on data for the

year ending in December 2013, the Commission continues to believe that
50 represents an upper bound on the number of dealers expected to
register and between zero and five major participants will register. As
a result of further experience with the DTCC-TIW data, the Commission
now estimates, based on data for the year ending in December 2013, that
the number of participants likely to engage in dealer de minimis
analysis is approximately 170. Forty-eight of these participants are
domiciled outside of the United States and have $2 billion in
transactions with U.S. counterparties or that otherwise may have to be
counted for purposes of the de minimis analysis.
---------------------------------------------------------------------------

    \1196\ See Cross-Border Adopting Release, 79 FR 47331.
    \1197\ Id. at 47296, note 150 (describing the methodology
employed by the Commission to estimate the number of potential
security-based swap dealers).
    \1198\ Id. at 47297, note 153 (describing the methodology
employed by the Commission to estimate the number of potential major
security-based swap participants).
---------------------------------------------------------------------------

iii. Security-Based Swap Data Repositories
    There are currently no SDRs registered with the Commission.
However, the CFTC has provisionally registered four swap data
repositories to accept credit derivatives. The Commission believes that
these entities may register with the Commission as SDRs. Because most
participants in the security-based swap market also participate in the
swap market,\1199\ other persons might, in the future, seek to register
with both the CFTC and the Commission as SDRs. In addition, once a swap
data repository has established infrastructure sufficient to allow it
to register with the CFTC, the costs for it to also register with the
Commission as an SDR and adapt its business for security-based swap
activity will likely be low relative to the costs for a wholly new
entrant.
---------------------------------------------------------------------------

    \1199\ See infra Section XXII(B)(3).
---------------------------------------------------------------------------

b. Security-Based Swap Transaction Activity
    Single-name CDS contracts make up the vast majority of security-
based swap products and most are written on corporate issuers,
corporate debt securities, sovereign countries, or sovereign debt
securities (reference entities and reference securities). Figure 2,
below, describes the percentage of global, notional transaction volume
in U.S. single-name CDS reported to the DTCC-TIW between January 2008
and December 2013, separated by whether transactions are between two
ISDA-recognized dealers (interdealer transactions) or whether a
transaction has at least one non-dealer counterparty.
    The level of trading activity with respect to U.S. single-name CDS
in terms of notional volume has declined from more than $6 trillion in
2008 to less than $3 trillion in 2013.\1200\ While notional volume has
declined over the past six years, the share of interdealer transactions
has remained fairly constant and interdealer transactions continue to
represent the bulk of trading activity, whether measured in terms of
notional value or number of transactions (see Figure 2).
---------------------------------------------------------------------------

    \1200\ The start of this decline predates the enactment of the
Dodd-Frank Act and the proposal of rules thereunder. For the purpose
of establishing an economic baseline, this seems to indicate that
CDS market demand shrank prior to the enactment of the Dodd-Frank
Act, and therefore the causes of trading volume declines may be
independent of those related to the development of security-based
swap market regulation. If the security-based swap market
experiences further declines in trading activity, it would be
difficult to identify the effects of the newly-developed security-
based swap market regulation apart from changes in trading activity
that may be due to natural market forces or the anticipation of (or
reaction to) proposed (or adopted) Title VII requirements. These
estimates differ from previous estimates as a result of staff
experience with transaction-level data provided by DTCC-TIW. First,
the aggregate level of transaction activity presented in Figure 2
more accurately reflects the notional amounts associated with
partial assignments and terminations of existing security-based swap
contracts. Second, the treatment of assignments in Figure 2 includes
the counterparty type (dealer or non-dealer) of counterparties
vacating trades in assignments as well as those entering.
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    The high level of interdealer trading activity reflects the central
position of a small number of dealers who each intermediate trades
among many hundreds of counterparties. While the Commission is unable
to quantify the current level of trading costs for single-name CDS, it
appears that the market power enjoyed by dealers as a result of their
small number and the large proportion of order flow they privately
observe is a key determinant of trading costs in this market.

[GRAPHIC] [TIFF OMITTED] TR19MR15.004

    Against this backdrop of declining North American corporate single-
name CDS activity, about half of the trading activity in North American
corporate single-name CDS reflected in the set of data that the
Commission analyzed was between counterparties domiciled in the United
States and counterparties domiciled abroad. Basing counterparty
domicile on the self-reported registered office location of the DTCC-
TIW accounts, the Commission estimates that only 13% of the global
transaction volume by notional volume between 2008 and 2013 was between
two U.S.-domiciled counterparties, compared to 48% entered into between
one U.S.-domiciled counterparty and a foreign-domiciled counterparty
and 39% entered into between two foreign-domiciled counterparties (see
Figure 3).\1201\
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    \1201\ See supra notes 788 and 1183.
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    When the domicile of DTCC-TIW accounts are instead defined
according to the domicile of their ultimate parents, headquarters, or
home offices (e.g., classifying a foreign branch or foreign subsidiary
of a U.S. entity as domiciled in the United States), the fraction of
transactions entered into between two U.S.-domiciled counterparties
increases to 29%, and to 53% for transactions entered into between a
U.S.-domiciled counterparty and a foreign-domiciled counterparty.
    Differences in classifications across different definitions of
domicile illustrate the effect of participant structures that operate
across jurisdictions. Notably, the proportion of activity between two
foreign-domiciled counterparties drops from 39% to 18% when domicile is
defined as the ultimate parent's domicile. As noted earlier, foreign
subsidiaries of U.S. persons, foreign branches of U.S. persons, and
U.S. subsidiaries of foreign persons, and U.S. branches of foreign
persons may transact with U.S. and foreign counterparties. However,
this decrease in share suggests that the activity of foreign
subsidiaries of U.S. persons and foreign branches of U.S. persons is
generally higher than the activity of U.S. subsidiaries of foreign
persons and U.S. branches of foreign persons.
    By either of those definitions of domicile, the data indicate that
a large fraction of North American corporate single-name CDS
transaction volume is entered into between counterparties domiciled in
two different jurisdictions or between counterparties domiciled outside
the United States. For the purpose of establishing an economic
baseline, this observation indicates that a large fraction of security-
based swap activity would be affected by the scope of any cross-border
approach we take in applying the Title VII requirements. Further, the
large fraction of North American corporate single-name CDS transactions
between U.S.-domiciled and foreign-domiciled counterparties also
highlights the extent to which security-based swap activity transfers
risk across geographical boundaries, both facilitating risk sharing
among market participants and allowing for risk transmission between
jurisdictions.

[GRAPHIC] [TIFF OMITTED] TR19MR15.005

[GRAPHIC] [TIFF OMITTED] TR19MR15.006

    Figures 4 and 5 present the frequency distribution of trades by
size for two subsamples of transactions observed in 2013. A salient
feature of the trade size distribution is that trades tend to be
clustered at ``round'' numbers: $1 million, $5 million, $10 million,
etc. While large and very large trades do occur, less than 1% of the
transactions in our sample were for notional amounts greater than $100
million.
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    \1202\ The left-most bar, labeled ``0'', represents the number
of trades with notional values greater than $0 and less than $1
million, while the next bar represents the number of trades with
notional values greater than or equal to $1 million and less than $2
million, and so on. The right-most bar, labeled ``30'', represents
the number of trades with notional values of exactly $30 million.

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[GRAPHIC] [TIFF OMITTED] TR19MR15.007

c. Counterparty Reporting
    While there is no mandatory reporting requirement for the single-
name CDS market yet, virtually all market participants voluntarily
report their trades to DTCC-TIW, in some cases with the assistance of
post-trade processors, which maintains a legal record of
transactions.\1204\ Among other things, this centralized record-keeping
facilitates settlement of obligations between counterparties when a
default event occurs as well as bulk transfers of positions between
accounts at a single firm or between firms. In addition, while there is
not yet a mandatory clearing requirement in the single-name CDS market,
market participants may choose to clear transactions voluntarily.
However, neither voluntary reporting nor voluntary clearing results in
data that are available to the public on a trade-by-trade basis.
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    \1203\ The left-most bar, labeled ``30'', represents the number
of trades with notional values greater than $30 and less than $50
million, while the next bar represents the number of trades with
notional values greater than or equal to $50 million and less than
$70 million, and so on. The right-most bar, labeled ``710'',
represents the number of trades with notional value greater than
$710 million.
    \1204\ See ``ISDA CDS Marketplace: Exposures and Activity''
(available at http://www.isdacdsmarketplace.com/exposures_and_activity (last visited September 22, 2014).
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    In the Regulation SBSR Proposing Release, the Commission
preliminarily estimated that there would be 1,000 reporting parties
\1205\ and 15.5 million reportable events per year.\1206\ In the Cross-
Border Proposing Release, the Commission revised its estimate of the
number of reporting sides from 1,000 to 300 and revised its estimate of
the number of reportable events from 15.5 million to approximately 5
million.\1207\ These revised estimates were a result of the Commission
obtaining additional and more granular data regarding participation in
the security-based swap market from DTCC-TIW. As discussed above, since
issuing the Cross-Border Proposing Release, the Commission has obtained
additional and even more granular data regarding participation in the
security-based swap market from DTCC-TIW. As a result, the Commission
is now further revising its estimate of the number of reportable
events. Accordingly, the Commission now estimates that 300 reporting
sides will be required to report an aggregate total of approximately 3
million reportable events per year under Rule 901, as adopted.\1208\
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    \1205\ See 75 FR 75247.
    \1206\ See id. at 75248.
    \1207\ See 78 FR 31114.
    \1208\ See supra note 1070.

            Table 3--Trade Reports by Transaction Type, 2013
------------------------------------------------------------------------
                                                               Count
------------------------------------------------------------------------
Interdealer.............................................       1,231,796
Dealer--Non-Dealer......................................         482,860
Clearinghouse...........................................         546,041
                                                         ---------------
    Total...............................................       2,260,577
------------------------------------------------------------------------

d. Sources of Security-Based Swap Information
    There currently is no robust, widely accessible source of
information about individual security-based swap transactions.
Nevertheless, market participants can gather certain limited
information for the single-name CDS \1209\ market from a variety of
sources. First, indicative quotes can be obtained through market data
vendors such as Bloomberg or Markit. These quotes typically do not
represent firm commitments to buy or sell protection on particular
reference entities. Since there is no commitment to buy or sell
associated with indicative quotes, there are fewer incentives for
market participants that post indicative quotes to quote prices that
accurately reflect the fundamental value of the asset to be traded.
However, market participants can glean information from indicative
quotes that may inform their trading.
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    \1209\ Regulation SBSR would also cover equity swaps (other than
broad-based equity index swaps). However, the Commission has access
to limited information concerning the equity swap market. As a
result, the Commission's analysis is largely focused on the single-
name CDS market, for which the Commission has information.
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    Second, there is limited, publicly-disseminated information about
security-based swap market activity presented at an aggregate level. As
mentioned above, market participants sometimes voluntarily clear their
transactions, e.g., through ICE Clear Credit.\1210\ To support their
risk management activities, clearing agencies compute and disseminate
information such as end-of-day prices and aggregated volume to their
clearing members. ICE Clear Credit also provides aggregated volume
data.\1211\ Additionally, some large multilateral organizations
periodically report measures of market activity. For example, the Bank
for International Settlements (``BIS'') reports gross notional
outstanding for single-name CDS and equity forwards and swaps
semiannually.\1212\
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    \1210\ Based on the transaction data from the DTCC-TIW,
Commission staff has estimated that, during the three-year period
from January 2011 until December 2013, approximately 21% of all
transactions in CDS with North American single-name corporate
reference entities and approximately 21% of all transactions in CDS
with European single-name corporate reference entities were cleared.
    \1211\ Available at https://www.theice.com/marketdata/reports/98
(last visited October 20, 2014).
    \1212\ Available at http://www.bis.org/statistics/derstats.htm
(last visited October 20, 2014).
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    Finally, market intermediaries may draw inferences about security-
based swap market activity from observing their customers' order flow
or through inquiries made by other market participants who seek
liquidity. This source of information is most useful for market
participants with a large market share. As noted above, the ability to
observe a larger amount of order flow allows for more precise estimates
of demand.
    The paucity of publicly-available security-based swap data suggests
a number of frictions that likely characterize the current state of
efficiency, competition, and capital formation in the security-based
swap market. As noted in Section XXII(A), without public dissemination
of transaction information, security-based swap market participants
with the largest order flow have an informational advantage over
smaller competitors and counterparties. Moreover, as suggested by Table
1, there is a great deal of heterogeneity in the level of order flow
observed by market participants, with a small group of large dealers
participating in most transactions. These large market participants can
use this advantage to consolidate their own market power by
strategically filling orders when it is to their advantage and leaving
less profitable trades to competitors.
    Asymmetric information and dealer market power can result in
financial market inefficiencies. With only a small number of liquidity
suppliers competing for order flow, bid-ask spreads in the market may
be wider than they would be under perfect competition between a larger
number of liquidity suppliers. If this is the case, then it is possible
that certain non-dealers who might otherwise benefit from risk-sharing
afforded by security-based swap positions may avoid participating in
the market because it is too costly for them to do so. For instance, if
wide bid-ask spreads in the CDS market reduced the level of credit risk
hedging by market participants, the result could be an inefficient
allocation of credit risk in the economy as a whole. Additionally,
financial market participants may avoid risk-sharing opportunities in
the security-based swap market if they determine that lack of oversight
by relevant authorities leaves the market prone to disruption. For
example, if the threat of sequential counterparty default reduces
security-based swap dealers' liquidity, then market participants may
reduce their participation if they perceive a high risk that they will
be unable to receive the contractual cash flows associated with their
security-based swap positions. These sources of inefficiency can
adversely affect capital formation if an inability for lenders and
investors to efficiently hedge their economic exposures diminishes
their willingness to fund certain borrowers and issuers with risky but
profitable investing opportunities.
    Lack of publicly-available transaction information could affect
capital formation in other ways. Information about security-based swap
transactions can be used as input into valuation models. For example,
the price of a single-name CDS contract can be used to produce
estimates of default risk for a particular firm and these estimates
can, in turn, be used by managers and investors to value the firm's
projects. In the absence of last-sale information in the CDS market,
market participants may build models of default risk using price data
from other markets. They may, for instance, look to the firm's bond and
equity prices, the prices of swaps that may have similar default risk
exposure, or to the prices of comparable assets more generally.
2. Global Regulatory Efforts
a. Dealer and Major Swap Participant Definitions for Cross-Border
Security-Based Swaps
    The Commission adopted final rules governing the application of the
``security-based swap dealer'' and ``major security-based swap
participant'' definitions with respect to cross-border security-based
swap activity and exposures.\1213\ The final rules generally require,
among other things, that non-U.S. persons assess whether their dealing
activities with and exposures against U.S. persons or with recourse
guarantees against U.S. persons rise above de minimis levels.\1214\ In
the Cross-Border Adopting Release, the Commission discussed the costs
that non-U.S. persons would incur in order to perform this assessment
and the likely number of participants whose activity and exposures
would likely be large enough to make such an assessment prudent.\1215\
These costs included amounts related to collecting, analyzing, and
monitoring representations about the U.S.-person status of
counterparties, and whether particular transactions had recourse
guarantees against U.S. persons.\1216\
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    \1213\ See Cross-Border Adopting Release, 79 FR 47278.
    \1214\ See id. at 47301.
    \1215\ See id. at 47315.
    \1216\ See id. at 47332.
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b. International Regulatory Developments
    International efforts to coordinate the regulation of the OTC
derivatives markets are underway, and suggest that many foreign
participants will face

substantive regulation of their security-based swap activities that