their counterparties (or the counterparties' agents) engage in relevant
activity in the United States.\274\ Accordingly, the assessment costs
arising from the final rule should be lower than under an approach that
required a dealer to consider both the location of its own personnel
(or the personnel of its agents) and of the personnel of its
counterparties (or their agents).
---------------------------------------------------------------------------

    \272\ Although firms that would already be registered under
existing Exchange Act rule 3a71-3 may not establish systems to count
these transactions for purposes of the de minimis exception because
they would already be registered, for purposes of the following
analysis, we assume that they would also incur these costs. In the
Cross-Border Adopting Release, we identified 71 persons that would
incur systems and analysis costs, but based on 2014 data, as noted
above, we have identified only 57 firms that are likely to incur
these costs pursuant to current rules. See Section II.A.2.e, supra.
We continue to believe it is reasonable to increase this estimate by
a factor of two, to account for any potential growth in the
security-based swap market and to account for the fact that we are
limited to observing transaction records for activity between non-
U.S. persons that reference U.S. underliers. See U.S. Activity
Proposing Release, 80 FR 27491.
    \273\ See U.S. Activity Proposing Release, 80 FR 27467, supra
(discussing cost concerns about initially proposed approach).
    \274\ See ICI Global Letter at 5.
---------------------------------------------------------------------------

    The costs these persons incur under the final rule will, to a
significant extent, be influenced by the business structures employed
by non-U.S. persons to engage in this dealing activity, and it is
reasonable to expect that non-U.S. persons will generally choose a
business structure that reflects, among other things, a careful
consideration of their regulatory costs for both compliance and
assessment. In this section, we discuss the approaches that these
market participants may use to determine which transactions must be
counted towards dealer de minimis thresholds under our approach and, to
the extent possible, estimate the per-entity assessment costs they
would incur.
    First, non-U.S. persons may perform assessments on a per-
transaction basis. We continue to believe that the approach reflected
in our final rule should be less costly to implement than the approach
that we initially proposed in the Cross-Border Proposing Release, which
looked to whether a transaction was conducted, by either counterparty,
within the United States. At the same time, we recognize that
performing these assessments could involve significant costs for
persons engaged in dealing activity in the United States. These costs
likely would include one-time costs associated with developing computer
systems to capture information about the location of personnel involved
with each transaction in addition to ongoing costs of analyzing these
data and modifying classification of transaction activity as personnel
or offices change locations over time.\275\
---------------------------------------------------------------------------

    \275\ See note 261, supra.
---------------------------------------------------------------------------

    Based on analogous situations dealing with the development and
modification of information technology (IT) systems that track the
location of firm inputs, we estimate the start-up costs associated with
developing and modifying these systems to track the location of persons
with dealing activity will be $410,000 for the average non-U.S. entity.
To the extent that non-U.S. persons already employ such systems, the
costs of modifying such IT systems may be lower than our estimate. In
addition to the development or modification of IT systems, we believe
that entities would incur the cost of $6,500 per location per year on
an ongoing basis for training, compliance, and verification costs.\276\
We believe a reasonable estimate of these costs in aggregate is
$8,710,000.\277\
---------------------------------------------------------------------------

    \276\ Calculated as Internal Cost, 90 hours x $50 per hour =
$4,500 plus Consulting Costs, 10 hours x $200 per hour = $2000, for
a total cost of $6,500.
    \277\ Calculated as 134 entities x 10 market centers as
identified in TIW x $6,500 per location, for a total cost of
$8,710,000. This estimate assumes that each of the 134 persons that
we believe are likely to incur costs to identify transactions that
they are required to include in their de minimis thresholds under
Exchange Act rules 3a71-3(b)(1)(iii)(C) and 3a71-5(c) perform
assessments on a per-transaction basis and further assumes that each
person has personnel located in each market center identified in the
TIW. See supra Section II.A.2.c.
---------------------------------------------------------------------------

    Second, non-U.S. firms might instead restrict personnel located in
a U.S. branch or office from arranging, negotiating, or executing
security-based

swaps in connection with the non-U.S. firm's dealing activity with non-
U.S.-person counterparties.\278\ Such restrictions on communication and
staffing for the purposes of avoiding certain Title VII requirements
would reduce the costs of assessing the location of personnel involved
in arranging, negotiating, or executing each trade, and may entirely
remove the need for a system that assesses the location of personnel on
a trade-by-trade basis. However, this reduction in assessment costs may
be offset by the additional costs and inefficiencies of duplicating
personnel in foreign and U.S. locations.\279\ Accordingly, we believe
that non-U.S. persons that primarily trade with non-U.S. persons on
non-U.S. reference entities may be most likely to undertake this
approach. However, because our access to TIW transactions data is
limited to transactions in which at least one counterparty is U.S.-
domiciled or the reference entity or security is a U.S. entity or
security, we cannot at this time estimate the size of this set of
participants.
---------------------------------------------------------------------------

    \278\ See SIFMA/FSR Letter at 2, 6; IIB Letter at 2-3; ISDA
Letter at 5.
    \279\ See IIB Letter at 2-3.
---------------------------------------------------------------------------

    While we do not currently have data necessary to precisely estimate
these costs in total,\280\ we can estimate the costs of establishing
policies and procedures to restrict communication between personnel
located in the United States employed by non-U.S. persons (or their
agents) and other personnel involved in dealing activity. Based on
staff experience, we estimate that establishing policies would take a
non-U.S. person approximately 100 hours and would cost approximately
$28,300 for each entity that chooses this approach.\281\ Further, we
believe that the total costs incurred by entities that choose to
restrict communication between personnel would be determined by the
number of entities that choose such an approach as well as the number
of additional personnel that these entities must hire as a result of
restricted communication.
---------------------------------------------------------------------------

    \280\ The aggregate cost of this rule will ultimately depend on
how the affected non-U.S. persons adjust their security-based swap
activity because of this rule. For example, if a non-U.S. person
chooses to relocate its operations abroad, it will not incur any
direct assessment costs as a result of this rule, but it will incur
the costs to relocate its operations. The cost of relocation will
depend on many factors, such as the number of positions being
relocated, the location of new operations, the costs of operating at
the new location, and other factors. These factors in turn will
depend on the relative volumes of dealing activity that a firm
carries out on different underliers and with counterparties in
different jurisdictions. As a result of these dependencies, we
cannot reliably quantify the costs of these alternative approaches
to compliance. However, we believe that firms would rely on these
approaches only if they expect them to result in higher net profits
than assessments on a per-transaction basis.
    \281\ Calculated as Compliance Manager, 100 hours x $283 per
hour = $28,300. We use salary figures from SIFMA's Management &
Professional Earnings in the Securities Industry 2013, modified by
SEC staff to account for an 1800-hour work-year and multiplied by
5.35 to account for bonuses, firm size, employee benefits, and
overhead.
    The costs of policies and procedures are based on burden
estimates in the recent Nationally Recognized Statistical Rating
Organizations; Final Rule, Exchange Act Release No. 72936 (August
27, 2014), 79 FR 55078 (September 15, 2015) (``NRSRO Adopting
Release''). Specifically, we assume that the policies and procedures
required to restrict communication between personnel located in a
U.S. branch or office and personnel not located in a U.S. branch or
office are similar to policies and procedures required to eliminate
conflicts of interest under Rule 17g-5(c)(8). See NRSRO Adopting
Release, 79 FR 55239, 55249.
---------------------------------------------------------------------------

    Third, a dealer may choose to count all transactions with other
non-U.S. persons towards its de minimis threshold, regardless of
whether counting them is required, to avoid the cost of assessing the
locations of personnel involved with each transaction. This strategy
may be preferred by a non-U.S. person engaged in dealing activity that
expects few transactions involving other non-U.S. persons to be
arranged, negotiated, and executed by personnel located outside the
United States, such as a non-U.S. person that primarily transacts in
security-based swaps on U.S. reference entities or securities, and
generally relies on personnel located in the United States to perform
market-facing activities. For these non-U.S. persons, the expected
benefits of identifying a few transactions that do not involve dealing
activity by personnel from a location in the United States, which would
not be required to be counted toward the person's de minimis threshold,
might be lower than the costs of implementing a system to track the
locations of personnel on a trade-by-trade basis.
    We believe that the same principles apply to non-U.S. persons that
rely on agents to arrange, negotiate, or execute security-based swaps
on their behalf. We anticipate that non-U.S. persons may employ any of
the strategies above to comply with the final rules through the choice
of their agents. For example, a non-U.S. person may choose agents that
do not use U.S.-based personnel to avoid the assessment and
programmatic costs of this rule. We also anticipate that a non-U.S.
person might rely on representations from its agents about whether
transactions conducted on its behalf involved relevant dealing activity
by personnel from a location in the United States. This may occur on a
transaction-by-transaction basis, or, if the agent uses personnel
located in the United States in all or none of its transactions, it may
choose to make a representation about the entirety of the agent's
business.
    We believe that all the methods described above are likely to
involve an initial one-time review of security-based swap business
lines to help each entity determine which of the business structures
outlined above is optimal. This review likely will encompass both
employees of potential registrants as well as employees of agents used
by potential registrants and identify whether these personnel are
involved in arranging, negotiating, or executing security-based swaps.
The information gathered as a result of this review would allow a
foreign security-based swap dealer to assess the revenues it expects to
flow from transaction activity performed by personnel located in a U.S.
branch or office. This information would also help these market
participants form preliminary estimates about the costs associated with
various alternative structures, including the trade-by-trade analysis
outlined above. This initial review may be followed with reassessment
at regular intervals or subsequent to major changes in the market
participant's security-based swap business, such as acquisition or
divestiture of business units. We estimate that the per-entity initial
costs of a review of business lines would be approximately
$104,000.\282\ Further, we believe that periodic reassessment of
business lines would cost, on average, $52,000 per year, per
entity.\283\
---------------------------------------------------------------------------

    \282\ Calculated as (Senior Accountant, 500 hours x $198 per
hour) + (Outside Counsel, 5 hours x $400 per hour) + (Compliance
Attorney, 2 hours x $334 per hour) + (Compliance Manager, 8 hours x
$283 per hour) = $103,932.
    \283\ This estimate is based on previous experience with cost
estimates for financial statements for a large financial
institution. An entity's assessment costs may require it to
determine the amount of profits that it expected to flow from
transaction activity performed by personnel located in the United
States and compare it to the flow of profits from transaction
activity performed by personnel not located in a U.S. branch or
office. To the extent that the preparation of financial statements
also involves analysis of the flow of profits from an entity's
different business lines, we believe that the cost of preparing
financial statements provide a reasonable estimate of assessment
costs. However, we acknowledge that costs associated with assessment
and compliance for a given firm will depend on the firm's size and
structure. Calculated as (Senior Accountant, 250 hours x $198 per
hour) + (Compliance Attorney, 4 hours x $334 per hour) + (Compliance
Manager, 4 hours x $283 per hour) = $51,968. We use salary figures
from SIFMA's Management & Professional Earnings in the Securities
Industry 2013, modified by SEC staff to account for an 1800-hour
work-year and multiplied by 5.35 to account for bonuses, firm size,
employee benefits and overhead.

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

B. Programmatic Costs and Benefits

    Programmatic costs and benefits arise from applying substantive
regulation to those transactions and entities that fall within the
scope of the Title VII regulatory regime.\284\ Commenters raised a wide
range of concerns about costs, both the direct costs of compliance with
Title VII dealer requirements on the part of persons required to
register and broader costs to the market as a whole. With respect to
the former, commenters generally argued that the proposed rules would
impose significant additional and unwarranted costs on firms that are
required to register as security-based swap dealers, given that the
proposed rules are not likely to generate significant benefits.\285\
Several commenters specifically urged the Commission to perform
``additional cost-benefit analysis'' that reflects the ease with which
market participants can move their business out of the United
States.\286\ Some commenters noted that the proposed approach may
impose disproportionate costs on certain market participants that carry
out their dealing business using separately incorporated subsidiaries
or affiliates in other jurisdictions.\287\
---------------------------------------------------------------------------

    \284\ See Intermediary Definitions Adopting Release, 77 FR
30722.
    \285\ According to commenters, costs include those associated
with compliance with the various requirements that apply to
registered security-based swap dealers under Title VII, and costs
arising from relocation of personnel and operations to avoid
application of Title VII requirements and any market fragmentation
that results. See, e.g., ISDA Letter at 6 (arguing that the proposed
approach ``will result in the unnecessary application of onerous and
costly U.S. regulatory requirements to non-U.S. entities''); HSBC
Letter at 3 (arguing that costs of requiring firms to register on
the basis of U.S. activity would exceed the benefits and cause both
non-U.S. subsidiaries and the Commission to incur significant
costs); IIB Letter at 3-4, 6-7 (arguing that the proposed rules
would not only result in costs to the market such as market
fragmentation, decentralized risk management, and home country
compliance costs, but also significant costs to the Commission in
overseeing the additional registered security-based swap dealers);
SIFMA Sequencing Letter at 5 (arguing that the Commission's approach
should accommodate the risk management and operational structures
that market participants already have in place). See also ISDA
Letter at 9 (suggesting that by not leveraging existing broker-
dealer recordkeeping requirements to include access to the books and
records relating to SBS transaction between non-U.S. persons in
their dealing capacity, the proposal ``only adds complexity and cost
without offering any corresponding benefit'').
    \286\ See IIB Letter at 4 (stating, among other things, that
non-U.S. persons can opt not to do business with U.S. security-based
swap dealers or with non-U.S. security-based swap dealers that use
personnel in the United States, and non-U.S. security-based swap
dealers may feel compelled to move personnel out of the United
States, limiting the security-based swap dealers' ability to
centralize risk management and increase costs and affect pricing to
non-U.S. persons); ISDA Letter at 6 (urging the Commission to
complete its cost-benefit analysis, including by providing a
quantitative account of the benefits that would result from adoption
of the proposal and comparing the costs of regulatory approaches
that may be less burdensome).
    \287\ See SIFMA/FSR Letter at 6-7; HSBC Letter at 2 (stating
also that firms may be required to register multiple foreign
affiliates as security-based swap dealers to the extent that they
rely on personnel of affiliates located in the United States to
interact with the foreign customers of these foreign subsidiaries,
in part because it may not be practicable for counterparties to
shift their trading relationship to an affiliate of its dealer,
given that security-based swap transactions may represent only a
small portion of their overall trading relationship with the
dealer).
---------------------------------------------------------------------------

    Several commenters expressed concerns that our approach would
create a strong incentive to move dealing business out of the United
States, and that this exit would have negative effects on market
structure, risk management, and market efficiency.\288\ Some commenters
also suggested that foreign counterparties of non-U.S. persons engaged
in dealing activity may be reluctant to devote the resources necessary
to comply with Title VII rules, and may instead opt to exit the U.S.
security-based-swap market.\289\
---------------------------------------------------------------------------

    \288\ See IIB Letter at 2-3; ISDA Letter at 5; SIFMA/FSR Letter
at 6. Commenters argued that exit from U.S. market centers would
potentially interfere with efficient pricing and prudent risk
management, as this depends on centralization of pricing, hedging,
and other risk-management functions with trading personnel,
preferably ``in the region of the underlying asset.'' One commenter
also argued that centralizing these functions in the United States,
where the traders are located ``also helps promote U.S. market
liquidity by integrating trading interest from non-U.S.
counterparties into the U.S. market.'' See IIB Letter at 2.
    \289\ See, e.g., IIB Letter at 4 (stating that ``[n]on-U.S.
counterparties have shown great reluctance to undertake significant
documentation changes due to the costs and resources necessary to
obtain familiarity with a complicated body of foreign law'').
---------------------------------------------------------------------------

    In the following sections, we discuss the costs and benefits of
requiring a non-U.S. person to include in its de minimis threshold
calculations any transaction that it, in connection with its dealing
activity, arranges, negotiates, or executes using personnel located in
a U.S. branch or office.
1. Benefits and Costs of the Final Rules
    Because the set of market participants that are subject to
security-based swap dealer regulation under Title VII will determine
the allocation and flow of programmatic costs and benefits arising from
these Title VII requirements, the inclusion of additional transactions
that must be counted under Exchange Act rule 3a71-3(b), as amended,
will affect the ultimate costs and benefits of our transaction-level
and entity-level rules. At this time, we are unable to precisely
estimate the number of potential new dealers that would be required to
register because we cannot observe in the data the location of
entities' dealing activity. However, even if we assume that all North
American single-name CDS security-based swap dealing activity takes
place in the United States, currently available data suggest that no
additional entities above the baseline would be required to
register.\290\
---------------------------------------------------------------------------

    \290\ In Section V.A, supra, we have identified, as a result of
this rule, approximately 10 non-U.S. entities that would exceed the
$2 billion threshold we used in 2014 to identify entities that may
incur assessment costs and thus would be likely to assess their
transactions to determine whether they are required to register as a
dealer. Of these 10 entities, we believe that none would exceed the
$3 billion dealer de minimis threshold and thus be required to
register as a security-based swap dealer. Given that we have
multiplied our estimates by two to take into account portions of the
security-based swap market we are unable to observe with our data,
we estimate that 20 additional entities would incur assessment costs
as a result of relevant activity exceeding the $2 billion threshold,
and that zero additional entities will exceed the $3 billion dealer
de minimis threshold.
---------------------------------------------------------------------------

    At the same time, we believe it is important to acknowledge the
potential for a change in the number of registrants as a result of,
among other things, security-based swap dealing activity located in the
United States that is not reflected in the data, including equity swaps
transactions that are not in our available data, transactions on non-
U.S. underliers that non-U.S.-person dealers carry out in the United
States that are not accounted for under the assumptions underlying this
analysis, and the aggregation of the transactions of affiliated
entities that do not themselves exceed the de minimis thresholds but
must count transactions that involve market-facing activity by
personnel located in a U.S. branch or office.\291\ The notional amounts
of these additional types of transactions may cause some additional
non-U.S. entities to exceed the de minimis threshold as a result of
this rule.
---------------------------------------------------------------------------

    \291\ Under Exchange Act rules 3a71-2(a) and 3a71-4, a person
engaged in dealing activity must aggregate the notional amount of
its dealing activity that must be counted toward the de minimis
threshold with that of any person controlling, controlled by, or
under common control with such person, unless that person is
registered with the Commission as a security-based swap dealer or
deemed not to be a security-based swap dealer pursuant to Exchange
Act rule 3a71-2(b). Cf. IIB Letter at 3 (stating that the proposed
approach to the de minimis counting requirement could impose
prohibitive costs on non-U.S.-person dealers that intend to operate
under the de minimis threshold).
---------------------------------------------------------------------------

    However, it is unclear how market participants might react to the
final rules. Some non-U.S. entities, including those that might be
required to register as a result of this rule because of transactions
that lie beyond the scope of our available data, may instead prefer to
restructure or relocate to avoid

registration as a result of this rule.\292\ Other non-U.S. entities may
otherwise alter their behavior in response to these amendments, given
the potential change in costs of conducting dealing activity using
personnel or their agents located in a U.S. branch or office. Although
we are able to provide some estimates of the direct programmatic costs
of these amendments, the extent to which market participants'
activities are sensitive to these costs is difficult to quantify.
---------------------------------------------------------------------------

    \292\ See note 286, supra.
---------------------------------------------------------------------------

    Notwithstanding these uncertainties, we believe the rules being
considered for adoption today represent an important step towards
treating substantially all dealing activity occurring in the United
States similarly for purposes of determining whether a market
participant is subject to the Title VII security-based swap dealer
regime. We expect the final rules to yield benefits by reducing
differences in the treatment of similar activity by U.S. persons and
non-U.S. persons in the United States and potential gaps in the Title
VII regulatory regime for security-based swap entities.
    Additionally, we expect consistent treatment of dealing activity
carried out within the United States to affect competition and market
fragmentation. As discussed elsewhere in this release,\293\ we believe
these amendments may mitigate the competitive disparities that would
result from application of the Title VII dealer requirements under
existing rules and that would permit non-U.S. persons to carry out
significant volumes of dealing activity using personnel located in the
United States without being required to register as a security-based
swap dealer. The competitive disparities would create an incentive for,
among other things, financial groups that carry out their security-
based swap dealing business in a U.S.-person dealer to restructure a
potentially significant proportion of this business to be carried out
in a non-U.S.-person dealer.
---------------------------------------------------------------------------

    \293\ See Section IV.B.2, supra; Section V.B.2, infra.
---------------------------------------------------------------------------

    Even if the non-U.S.-person dealers continued using personnel
located in a U.S. branch or office to arrange, negotiate, or execute
security-based swap transactions, this type of restructuring could
fragment the market into two pools, as the non-U.S.-person dealers that
engage in dealing activity with other non-U.S. persons (whether dealers
or otherwise) would have a strong incentive not to engage in dealing
activity with U.S.-person counterparties. To the extent that the
interdealer business and other dealing business with non-U.S.-person
counterparties is moved to non-U.S.-person dealers, a significant
majority of security-based swap dealing activity carried out in the
United States could be inaccessible to U.S. persons. These
counterparties would instead be limited to a much smaller pool of
liquidity consisting of U.S. persons and dealers (whether U.S. persons
or non-U.S. persons) that are willing to face U.S.-person
counterparties.
    However, under these amendments, non-U.S. dealers that carry out a
large volume of transaction activity using personnel located in a U.S.
branch or office would not be able to avoid registration obligations
under Title VII unless they relocate these personnel to locations
outside the United States or restructure operations to use different
personnel that are located outside the United States. Because these
forms of restructuring, and the resulting market fragmentation, would
impose costs on non-U.S. dealers associated with moving personnel
outside the United States and/or foregoing the expertise of sales,
trading, and other personnel located in a U.S. branch or office, these
amendments should reduce the likelihood or extent of market
fragmentation and associated distortions.\294\
---------------------------------------------------------------------------

    \294\ See note 108, supra.
---------------------------------------------------------------------------

    Given that the ultimate number of non-U.S. entities that are
required to register as a result of this rule will depend on several
factors that are beyond the scope of our available data or are
inherently difficult to quantify, we believe that it is appropriate for
purposes of this analysis to assume that it is possible that more
entities will register as SBS dealers.\295\ We also note that we expect
a significant benefit of this rule to be its role in preventing
significant volumes of dealing activity from being carried out in the
United States without being subject to Title VII dealer
requirements.\296\
---------------------------------------------------------------------------

    \295\ We do not believe that the exception for certain
international organizations in the final rule will have any effect
on the number of security-based swap dealers, as such entities do
not appear to engage in dealing activity to any significant extent.
See Sullivan and Cromwell Letter at 2, note 5. Similarly, given our
current understanding of the market, we do not believe it likely
that final Exchange Act rule 3a71-5(c) will increase the number of
security-based swap dealers, as any non-U.S. persons engaged in
significant dealing activity in cleared, anonymous transactions are
likely to already be required to register on the basis of their
other dealing activity.
    \296\ See Section IV.B.2, supra.
---------------------------------------------------------------------------

    If these final rules regarding the de minimis exception result in
an increased number of non-U.S. persons that eventually register as
security-based swap dealers or if they prevent firms from carrying on
dealing activity in the United States without complying with Title VII
dealer requirements, requirements applicable to registered dealers
under Title VII (including, among others, capital requirements,
recordkeeping requirements, and designation of a chief compliance
officer) would apply to a larger number of dealers than without these
rules.\297\ Additionally, an increase in the number of registered
dealers would also mean that business conduct requirements and
Regulation SBSR would apply to a larger number of transactions, as well
as to a larger notional volume of transactions.\298\
---------------------------------------------------------------------------

    \297\ See IIB Letter at 5-7, 10 (arguing that registration with
the Commission would subject certain non-U.S. market participants to
various requirements despite posing no risk to the U.S. financial
system; arguing that not adopting the proposed approach would permit
the Commission to avoid expending resources on overseeing non-U.S.
persons that may be required to register solely on the basis of
aggregation with other affiliates); ISDA Letter at 6 (arguing that
the proposed approach ``will result in the unnecessary application
of onerous and costly U.S. regulatory requirements to non-U.S.
entities''); HSBC Letter at 2-3 (arguing that costs of requiring
firms to register on the basis of U.S. activity would exceed the
benefits and cause both non-U.S. subsidiaries and the Commission to
incur significant costs).
    \298\ Under rule 901(a)(2)(ii), all transactions that include a
registered security-based swap dealer on a transaction side are
subject to regulatory reporting requirements.
    We note that our conclusion that the adopted approach will
result in these requirements being applied to a larger number of
transactions and notional volume of transactions requires the
assumption that the demand for liquidity from security-based swap
dealers is not very sensitive to price. Put another way, so long as
market participants' demand for risk sharing opportunities provided
by security-based swap transactions is relatively inelastic, any
reduction in transaction volume due to the costs of Title VII
regulation is unlikely to fully offset the increase in the scope of
security-based swap transactions subject to Title VII regulation
under the final rules. If, on the other hand, demand for liquidity
is elastic, then the effects of higher costs may dominate any
increase in the scope of external business conduct and regulatory
reporting requirements, resulting in these requirements being
applied to a smaller number and lower notional value of
transactions.
---------------------------------------------------------------------------

    In addition, these final rules may mitigate the risk that might
flow into U.S. financial markets by requiring the inclusion in dealer
de minimis calculations of transactions that, while less likely to
directly expose U.S. persons to counterparty risk, may allow financial
risk to spill over into U.S. markets. As noted above,\299\ reputational
risk and liquidity spillovers represent two channels by which risks in
foreign security-based swap markets may manifest in U.S. financial
markets without the involvement of U.S. persons as counterparties. By
requiring that all non-U.S. persons that use personnel located in a
U.S. branch or office to

arrange, negotiate, or execute security-based swaps in connection with
their dealing activity include such transactions in their de minimis
threshold calculations, the final rules should mitigate risk from both
channels. The final rules should increase the likelihood that the Title
VII dealer framework, including capital and margin requirements,
applies both to the foreign affiliates of U.S. persons and to other
foreign dealers that engage in dealing activity in U.S. security-based
swap markets. Increasing the likelihood that this activity, which may
represent the overwhelming majority of security-based swap dealing
activity in the United States, is carried out by firms subject to Title
VII capital, margin, and other security-based swap dealer requirements
should mitigate the likelihood of the types of firm failures that may
be likely to give rise to such risks.
---------------------------------------------------------------------------

    \299\ See Section II.B, supra.
---------------------------------------------------------------------------

    We recognize that compliance with these requirements will impose
direct costs on persons that are required to register as a result of
these amendments, and that some firms may be required to register
multiple entities because of how they have chosen to structure their
business.\300\ Other firms may be required to register as security-
based swap dealers even though they use personnel located in a U.S.
branch or office in connection with dealing activity only for certain
asset classes in which they carry on a dealing business.\301\ We also
understand that firms may incur other costs associated with maintaining
separate sales and trading operations, in part because non-U.S.-person
counterparties are reluctant to trade with dealers that are required to
register under Title VII,\302\ or in connection with otherwise
accommodating the preferences of non-U.S.-person counterparties. In
some cases, these adjustments may reduce the efficiency of a non-U.S.-
person's operations and increase operational risks, depending on the
response of a particular firm to the final rules.\303\
---------------------------------------------------------------------------

    \300\ See note 287, supra.
    \301\ See SIFMA/FSR Letter at 7. We note, however, that this is
true of any dealer that exceeds the de minimis threshold with
respect to only one asset class in which it carries on a dealing
business: In the Intermediaries Definitions Adopting Release, the
Commission and the CFTC stated that the final rules reflected the
presumption that ``a person who meets one of the dealer definitions
will be deemed to be a dealer with regard to all of its swaps or
security-based swaps activities'' absent a limitation on this
designation in response to application from the registrant. See
Intermediaries Definition Adopting Release, 77 FR 30644-645.
    \302\ See note 289, supra.
    \303\ See, e.g., IIB Letter at 2-3.
---------------------------------------------------------------------------

    At the same time, we continue to believe that, notwithstanding
these costs, the final rules will produce significant benefits to the
U.S. financial markets and participants in those markets, in terms of
promoting uniform application of Title VII dealer requirements,
reducing competitive disparities, mitigating the likelihood or extent
of market fragmentation, and mitigating the risk of spillovers and
contagion, as we have discussed in detail above.\304\ Given these
benefits, particularly in light of the magnitude of the potential
competitive disparities that a more consistent application of Title VII
dealer regulation may be expected to mitigate, we believe that the
approach reflected in the final rules is appropriate even in light of
the potential costs described by commenters.
---------------------------------------------------------------------------

    \304\ See, e.g., Sections II.B and IV.B.2, supra.
---------------------------------------------------------------------------

2. Effects of Rule Amendments on Efficiency, Competition, and Capital
Formation
    The final rules are likely to affect efficiency, competition and
capital formation in the security-based swap market through their
effect on the scope of participants subject to dealer requirements
under Title VII. In particular, the amendments may increase the
likelihood that certain non-U.S. dealers would exceed de minimis levels
of dealing activity and be required to register with the Commission. At
the same time, they may make it more difficult to continue engaging in
dealing activity in U.S. market centers while avoiding Title VII dealer
requirements.
    Accordingly, the final rules and amendments will affect the
security-based swap market in a number of ways. A number of the
potential effects that we discuss below are related to price
efficiency, liquidity, and risk sharing. These effects are difficult to
quantify for a number of reasons. First, in many cases the effects are
contingent upon strategic responses of market participants. For
instance, several commenters have noted that non-U.S. persons may
choose to relocate personnel, which may make it more difficult for U.S.
counterparties to access liquidity in security-based swaps.\305\ The
magnitude of these effects on liquidity and on risk sharing depend upon
a number of factors that we cannot estimate, including the likelihood
of relocation, the availability of substitute liquidity suppliers, and
the availability of substitute hedging assets. Therefore, much of the
discussion below is qualitative in nature, although we try to describe,
where possible, the direction of these effects.
---------------------------------------------------------------------------

    \305\ See IIB Letter at 2-3; ISDA Letter at 5; SIFMA/FSR Letter
at 6. See also HSBC Letter at 2. See Section II.B, supra, for a
discussion of potential effects of the final rules on non-U.S.
persons' incentives to use personnel located in U.S. branches or
offices to arrange, negotiate, or execute security-based swap
transactions in the context of our economic considerations in
formulating these rules. But see Citadel Letter at 12 (arguing that
other commenters are overstating the possibility that U.S. personnel
will be relocated outside of the United States in reaction to the
adopted rules).
---------------------------------------------------------------------------

    Moreover, there are many cases in which a rule could have two
opposing effects, making it difficult to estimate a net impact on
efficiency, competition, or capital formation. For example, while non-
U.S. person dealers may have an incentive to relocate their operations
outside of the United States to avoid the potential costs of dealer
registration and requirements as a result of these rules, we assume
that dealers would prefer to relocate their operations only if the
benefits to the dealer of avoiding Title VII dealer registration and
requirements exceed the cost of relocation.\306\ By defining the scope
of transactions that must be counted toward a non-U.S. person's de
minimis threshold, this final approach not only affects the set of
entities that would be subject to dealer registration and regulatory
requirements, but also affects the extent--and cost--of relocation
necessary to avoid dealer registration. The magnitude of these two
opposing effects will depend on factors such as the sensitivity of
traders to information about order flow, the impact of public
dissemination of transaction information on the execution costs of
large orders, and the ease with which non-U.S. persons can find
substitutes that avoid contact with personnel located in a U.S. branch
or office.\307\ Each of these factors is difficult to quantify
individually, which makes the net impact on efficiency difficult to
quantify.
---------------------------------------------------------------------------

    \306\ See Citadel Letter at 12; Section II.A.2.c, supra. But see
IIB Letter at 2-3 (stating that non-U.S. security-based swap dealers
may need to relocate front office personnel from the United States
in response to a U.S. activity test); ISDA Letter at 5 (stating that
to continue to transact in U.S. products dealers will have
incentives to move market-facing employees outside the United
States); SIFMA/FSR Letter at 6 (explaining that dealers may move
experts in U.S.-listed products outside of the United States to
avoid the SEC's registration and regulatory requirements).
    \307\ See notes 57-59 and accompanying text, supra.
---------------------------------------------------------------------------

    Notwithstanding this uncertainty, the amendments related to the
treatment of transactions arranged, negotiated, or executed by
personnel located in a U.S. branch or office for the purposes of de
minimis calculations likely broaden the scope of security-based swap
transactions and entities to which the Title VII regulatory regime for
security-

based swap dealers applies. As a result, the amendments may amplify the
effects on efficiency, competition, and capital formation of rules
already adopted as well as of future substantive rulemakings that place
responsibilities on registered security-based swap dealers to carry out
entity- or transaction-level requirements applicable to security-based
swap dealers under Title VII.\308\
---------------------------------------------------------------------------

    \308\ See Cross-Border Adopting Release, 79 FR 47361.
---------------------------------------------------------------------------

    Our amendments reflect consideration of the potentially inefficient
restructuring and reduced access to the security-based swap markets by
U.S. persons on the one hand \309\ and, on the other, advancing the
objectives of Title VII as discussed in detail above.\310\ Requiring
these transactions to be included in their de minimis calculations may
cause these non-U.S. dealers to incur registration costs (or prevent
them from avoiding these costs while continuing to engage in dealing
activity in the United States) and costs arising from dealer
requirements under the Title VII regulatory regime, such as certain
business conduct requirements, as well as under other Title VII
requirements, such as Regulation SBSR. These costs may represent
barriers to entry for non-U.S. persons that contemplate engaging in
dealing activity using their own personnel or personnel of their agents
located in a U.S. branch or office or may provide incentives for non-
U.S. persons that currently engage in relevant activity using personnel
or personnel of their agents located in a U.S. branch or office to
restructure their business and move operations abroad or use agents
with personnel outside of the United States.\311\ The barriers to entry
and incentives to exit the market may reduce the number of security-
based swap dealers willing to trade with U.S. person counterparties,
which may impede the incorporation of new information into prices.
---------------------------------------------------------------------------

    \309\ See note 102, supra.
    \310\ See Section IV.B.2, supra. In particular, these final
rules potentially reduce the risk of financial contagion and
fraudulent or manipulative conduct by applying security-based swap
dealer regulation to the appropriate set of entities whose
activities raise these concerns. See id.
    \311\ See Cross-Border Adopting Release, 79 FR 47362.
---------------------------------------------------------------------------

    The application of this approach to agents acting on behalf of non-
U.S. persons may have similar effects on efficiency, competition, and
capital formation. For example, the regulatory costs stemming from
dealer registration may provide direct incentives for non-U.S. persons
to avoid using personnel of agents located in a U.S. branch or office
(or agents with such personnel) to arrange, negotiate, or execute
security-based swaps on their behalf. By reducing the ability of these
agents to compete for business from non-U.S. persons, the final rules
may reduce entry by potential agents because of this competitive
disadvantage, or cause existing agents to relocate or restructure their
business to minimize contact with the United States.\312\ In addition,
to the extent that using agents with personnel located in a U.S. branch
or office might result in substantial regulatory costs to non-U.S.-
person dealers, such non-U.S.-person dealers might prefer and primarily
use agents located outside the United States, while U.S. dealers might
continue to use agents located in the United States. This incentive to
split dealer and agent relationships on the basis of the location of
personnel, as with the potential relocation of personnel discussed
above, might also adversely affect the efficiency of risk sharing by
security-based swap market participants.
---------------------------------------------------------------------------

    \312\ We also note that, under the final rules, non-U.S. persons
may be willing to pay higher prices for higher quality services
provided by non-U.S.-person counterparties that use personnel or
agents located in the United States because the ability of these
counterparties to meet the standards set by Title VII may be a
credible signal of high quality. See Cross-Border Adopting Release,
79 FR 47362 n.762.
---------------------------------------------------------------------------

    Reduced market entry or restructuring by non-U.S. persons and their
agents, and efforts by non-U.S. persons to choose agents, solely for
the purposes of avoiding Title VII regulation in response to our final
rules, may be inefficient, may raise costs to market participants, and
may reduce the level of participation by personnel of non-U.S. persons
located in the United States, or personnel of their agents located in
the United States.\313\
---------------------------------------------------------------------------

    \313\ See id. at 47364.
---------------------------------------------------------------------------

    We also believe that the amendments will affect competition among
security-based swap dealers. Several commenters noted this possibility.
One commenter argued that the competitive issues arising from the
Commission's proposal were very complex and did not depend solely on
the scope of application of Title VII regulatory requirements.\314\ For
example, many, if not all, foreign security-based swap dealers are
likely to be subject to regulatory requirements in their home
jurisdiction and may, therefore, already be subject to a competitive
disparity with respect to U.S. firms, entirely independent of whether
they are also required to register as security-based swap dealers.\315\
This commenter also argued that the proposal would generate competitive
disparities between U.S. and non-U.S. personnel of foreign security-
based swap dealers.\316\ Another commenter supported the re-proposed
approach over the original proposal, arguing that it would prevent
foreign funds that have a U.S. asset manager from being put at a
competitive disadvantage compared to foreign funds with a foreign asset
manager and would therefore avoid driving business overseas (as the
commenter believed that the original proposal would have done).\317\
---------------------------------------------------------------------------

    \314\ See IIB Letter at 4.
    \315\ See id.
    \316\ See id. One commenter argued that the Commission's
proposed approach likely would impose a particularly significant
burden on firms that carry out their business, and book their
security-based swap transactions, through local affiliates. See HSBC
Letter. This commenter argued that this would create a ``severe and
disparate'' impact on such firms, even though they have organized
their business using this structure ``for bona fide commercial
reasons.'' Id. at 3.
    \317\ See ICI Global Letter at 2, 5. The commenter stated that
``the Commission's modified approach would no longer incentivize
non-U.S. dealers to avoid engaging in swaps transactions with a non-
U.S. regulated fund with a U.S. manager to stay under the [de
minimis] threshold''. Id. at 2.
---------------------------------------------------------------------------

    As noted in Section II.B, in the absence of these amendments, a
U.S. person engaged in dealing activity and facing a non-U.S.-person
counterparty or its agent would face different regulatory treatment
under Title VII from a non-U.S. person engaged in the same activity
with the same counterparty or its agent, even if both are arranging,
negotiating, or executing the security-based swap using personnel
located in a U.S. branch or office. As a result, and as some commenters
argue, current rules may introduce different costs for U.S. security-
based swap dealers and foreign security-based swap dealers, as well as
their respective agents, that seek to supply liquidity to non-U.S.
persons as a result of Title VII regulation. Under the current rules,
non-U.S. persons seeking or supplying liquidity may also be reluctant
to transact with a U.S. person because of the additional expected costs
of dealer regulation and of future substantive regulations under Title
VII that rest on the U.S.-person status of counterparties.\318\
---------------------------------------------------------------------------

    \318\ See note 289, supra.
---------------------------------------------------------------------------

    These differences could introduce competitive disparities between
U.S. persons and non-U.S. persons or their respective agents even if
both, in connection with their dealing activity, use personnel located
in the United States.\319\ As a result, to the extent that dealers may
have the flexibility to restructure their operations in response

to competitive disparities in regulation, a significant portion of the
security-based swap market may exit from the Title VII regime, and a
significant portion of the market may be susceptible to fragmentation
as a result.\320\ We believe that a significant portion of the costs of
such a fragmentation would be borne by U.S.-person counterparties
through higher spreads and by U.S. security-based swap dealers through
the loss of non-U.S. person customers. The amendments may mitigate
these competitive frictions because non-U.S. persons would be required
to count transactions arranged, negotiated, or executed by personnel
located in a U.S. branch or office towards their de minimis thresholds
in a way that is identical to their U.S.-person competitors.\321\
---------------------------------------------------------------------------

    \319\ See section II.B, supra. See also IIB Letter at 2-3; ISDA
Letter at 5; SIFMA/FSR Letter at 6.
    \320\ As noted in Section II.A.3, supra, analysis of TIW data
shows that 79.5 percent of North American corporate single-name CDS
transactions in 2014 involved either two ISDA-recognized dealers or
an ISDA-recognized dealer and a non-U.S.-person non-dealer. We
believe that restructuring as a response to competitive disparities
stemming from Title VII regulation is more likely to occur within
this subset of the market because these dealers currently operate
from locations throughout the world and enjoy a volume of business
that is more likely to make such restructuring profitable.
    \321\ See Cross-Border Adopting Release, 79 FR 39152; Cross-
Border Proposing Release, 78 FR 31127.
---------------------------------------------------------------------------

    At the same time, we acknowledge that this account of competitive
impacts is complicated by the fact that many non-U.S. persons are
likely to be subject to foreign regulatory frameworks that may, in
certain respects, be similar to the Title VII dealer requirements.\322\
To the extent that these requirements achieve comparable regulatory
outcomes, we note that we have proposed rules for a substituted
compliance mechanism, which should mitigate this source of competitive
disparity to the extent that we make substituted compliance
determinations and the other prerequisites to substituted compliance
have been satisfied. At the same time, we recognize that there will be
limits to the availability of substituted compliance, including the
possibility that substituted compliance may be permitted with regard to
some requirements and not others, or that, in certain circumstances,
substituted compliance may not be permitted with respect to any
requirements with regard to a particular jurisdiction, depending on our
assessment of the comparability of the relevant foreign requirements
and the availability of supervisory and enforcement arrangements among
the Commission and relevant foreign financial regulatory authorities.
As we have noted above, however, we do not believe it would be
appropriate to permit foreign security-based swap dealers to satisfy
their obligations under Title VII by complying with foreign
requirements when the prerequisites to substituted compliance have not
been satisfied.\323\
---------------------------------------------------------------------------

    \322\ See Section II.A.4, supra.
    \323\ See Section IV.B.3, supra.
---------------------------------------------------------------------------

    The amendment to rule 3a71-5 provides that its exception for
cleared, anonymous transactions does not apply to non-U.S. persons that
arrange, negotiate or execute transactions using personnel located in a
U.S. branch or office or using agents with personnel located in a U.S.
branch or office. Although non-U.S. persons engaged in dealing activity
in the United States may also, as some commenters have suggested, find
it more difficult to access foreign trading platforms,\324\ this
amendment may also reduce the competitive frictions that would exist if
the final rules retained the exception for such non-U.S. person
dealers. Such an exception would provide such non-U.S.-person dealers a
potential competitive advantage relative to U.S. persons through lower
regulatory compliance and assessment costs, as the non-U.S. persons
would be able to avoid including these transactions in their de minimis
calculations, while U.S. persons would be required to count all such
transactions towards their de minimis thresholds.
---------------------------------------------------------------------------

    \324\ See note 231, supra.
---------------------------------------------------------------------------

    However, we also note that, to the extent that non-U.S. persons
otherwise would have relied upon this exception to engage in cleared,
anonymous transactions using personnel located in a U.S. branch or
office, our final approach may impair efficiency and capital formation
by reducing liquidity in anonymous markets, increasing transaction
costs, and reducing opportunities for risk-sharing among security-based
swap market participants as non-U.S. persons reduce their security-
based swap activity or switch to alternative methods to hedge
risk.\325\
---------------------------------------------------------------------------

    \325\ See Cross-Border Adopting Release, 79 FR 47363.
---------------------------------------------------------------------------

    As some commenters have argued,\326\ the final rule may result in
inefficient restructuring to move the arrangement, negotiation, and
execution of cleared, anonymous transactions abroad, in order to avoid
activities that would require counting towards de minimis thresholds.
This shift in the market could reduce the expected programmatic
benefits described above.\327\ It also may have adverse consequences
for the availability of liquidity and the amount of transaction costs
for U.S. persons seeking to hedge risk using security-based swaps. If
non-U.S. persons relocate their dealing activity abroad in ways that
make it more difficult for U.S. persons to find liquidity in the United
States, those U.S. persons that might otherwise use security-based
swaps to hedge financial and commercial risks may reduce their hedging
activity and assume an inefficient amount of risk, or engage in
precautionary savings by accumulating capital to mitigate the effects
of market risks, which would inhibit capital formation. To the extent
that non-U.S. persons use personnel located in a U.S. branch or office
to engage in dealing activity only in particular categories of
security-based swaps, such as those involving U.S. reference entities,
we believe that the potential consequences of relocation on liquidity
and risk sharing would be most concentrated in those categories.
---------------------------------------------------------------------------

    \326\ See note 102, supra (citing comment letters asserting that
the final rules may result in inefficient restructuring of business
generally).
    \327\ See IIB Letter at 4 (arguing that avoidance of U.S.
personnel by non-U.S. counterparties would likely reduce the
transparency benefits of the proposed approach).
---------------------------------------------------------------------------

    Finally, we note that relocation of dealing activity by non-U.S.
persons in response to today's amendments may produce the same type of
market fragmentation we seek to avoid under existing rules. However, we
expect fewer non-U.S. entities may exit U.S. markets under the
amendments than in their absence. As noted above, in the absence of
these amendments, non-U.S. entities that wished to avoid Title VII
regulation would incur potentially lower costs, as they would not have
to relocate their personnel and would only need to change the booking
entity for their U.S.-facing business above the de minimis thresholds.
This type of restructuring would likely lead to market fragmentation,
as described above, given that non-U.S.-person dealers would have a
strong incentive not to engage in dealing activity with U.S.-person
counterparties, even if they continued to use personnel located in a
U.S. branch or office to arrange, negotiate, or execute their
transactions. On the other hand, the amendments being adopted today
likely will increase the costs of the types of restructuring that would
lead to market fragmentation. As noted above, in addition to the costs
of relocating personnel who arrange, negotiate, or execute security-
based swap transactions, non-U.S. persons who choose to relocate
dealing activity as a result of the amendments would forgo

the benefits of access to local expertise in security-based swaps based
on U.S. reference entities. As a result, we believe that the likelihood
or extent of market fragmentation should be lower under the amendments
being adopted today.

C. Alternatives Considered

    In developing these amendments we considered a number of
alternative approaches.\328\ This section outlines these alternatives
and discusses the potential economic effects of each.
---------------------------------------------------------------------------

    \328\ Cf. ISDA Letter at 6 (urging the Commission to complete a
cost-benefit analysis of the proposed approach that considers the
benefits and costs that would apply to non-U.S. persons, taking into
account alternative approaches that would achieve the goals
preventing fraud and manipulation).
---------------------------------------------------------------------------

1. Retention of the Definition of ``Transaction Conducted Within the
United States''
    In the Cross-Border Proposing Release, we originally proposed the
definition ``transaction conducted within the United States'' and used
it to identify (i) transactions that should be included in an entity's
de minimis threshold calculations, and (ii) transactions that, subject
to certain exceptions, would be subject to business conduct, clearing,
trade execution, regulatory reporting, and public dissemination
requirements under Title VII. The original objective of the initially
proposed definition was identical to this rule: To capture relevant
dealing activity within the United States in order to mitigate
competitive frictions and prevent a non-U.S. person from shifting its
security-based swap dealing activity to a non-U.S. person and
continuing to carry out this dealing activity in the United States
while avoiding application of the Title VII requirements. That initial
approach would have looked to whether dealing activity involved a
``transaction conducted within the United States,'' which, as defined
in that proposal, turned on the location of personnel on both sides of
the transaction.
    Most commenters supported the narrower approach set forth in our
U.S. Activity Proposing Release, which focused only on the location of
relevant activity of a counterparty acting in a dealing capacity in the
transaction \329\ and the limitation of relevant activity to ``market-
facing'' activity of that counterparty.\330\ One commenter stated that
the modified approach created ``a definable standard that will bring
clarity to the application of security-based swap requirements to
security-based swap dealers, and is appropriate and consistent with the
expectations of parties as to when U.S. security-based swap
requirements will apply.'' \331\ Although one commenter argued that a
non-U.S. person should be required to include a transaction with
another non-U.S. person in its dealer de minimis threshold calculations
if either counterparty is engaged in relevant activity in the United
States,\332\ we have determined to adopt the approach proposed in our
U.S. Activity Proposing Release in part because we agree with other
commenters that the initially proposed approach likely would have
increased assessment costs significantly without materially enhancing
the benefits of our Title VII dealer framework.\333\ Under the rule as
initially proposed, gathering the information regarding the location of
the personnel of the counterparty (or its agent), communicating it to
relevant counterparties, and keeping records of this information on a
per-transaction basis could be costly. We believe that our approach,
which focuses only on the location of the personnel of the dealer or
its agent, achieves similar programmatic benefits while likely
resulting in lower assessment costs.
---------------------------------------------------------------------------

    \329\ See ICI Global Letter at 1-2, 5-6 (stating that the
modified proposal would enable non-U.S. dealers to enter into
transactions with non-U.S. persons that may use a U.S. fund manager
without requiring the non-U.S. dealer to include the transaction in
its de minimis calculations).
    \330\ See IIB Letter at 17; SIFMA/FSR Letter at 3.
    \331\ SIFMA/FSR Letter at 2-3 (stating also that the commenters
``strongly believe that the Commission has taken the correct
approach in focusing on market-facing activity of sales and trading
personnel in defining the `arrange, negotiate, or execute' nexus
that subjects security-based swap activity to the Commission's
regulations based on location of conduct'').
    \332\ See Better Markets Letter at 3, 6 (urging that the
Commission ``strengthen its proposal by requiring that if either
non-U.S. counterparty uses U.S.-based personnel, then the
transaction must be included within U.S./Foreign Personnel
Activity,'' explaining that the involvement of personnel in the
United States would be consistent with Morrison and that a
counterparty engaged in dealing activity can reasonably be required
to consider the location of its counterparty's activity, as well as
its own (emphasis in original)).
    \333\ See U.S. Activity Proposing Release, 80 FR 27461
(discussing commenters' concerns related to costs of the initially
proposed approach).
---------------------------------------------------------------------------

2. Limited Exception From Title VII Requirements for Transactions
Arranged, Negotiated, and Executed by Personnel Subject to Existing
Domestic or Foreign Regulatory Requirements
    In response to suggestions from several commenters,\334\ we
reconsidered providing an exception from the requirement to include a
transaction in a person's de minimis threshold calculations if it is
arranged, negotiated, or executed in the United States solely using
personnel of a registered broker-dealer acting in their capacity as
associated persons of that broker-dealer, of a registered security-
based swap dealer, or of a U.S. branch of a non-U.S. person, pursuant
to certain conditions.
---------------------------------------------------------------------------

    \334\ See IIB Letter at 7; HSBC Letter at 3; SIFMA/FSR Letter at
7-8.
---------------------------------------------------------------------------

    Such an exception could reduce programmatic and assessment costs
associated with engaging in customer-facing activity in connection with
dealing activity in security-based swaps in the United States, which
may mitigate incentives for inefficient relocation by financial groups
that use a non-U.S. dealer to carry out their dealing activity in the
United States. However, financial groups that use a U.S. dealer may
respond to the incentives created by this exception by restructuring
their security-based swap dealing business so that it is carried out by
a non-U.S. person that relies on a registered broker-dealer, a
registered security-based swap dealer, or a U.S. branch, that meets the
conditions of the exception.
    However, as described in more detail above,\335\ such an exception
could significantly reduce the expected benefits of our Title VII
dealer framework: It could create potentially significant compliance
gaps in the Title VII framework, impeding our effective enforcement of
Title VII and other federal securities laws, by permitting non-U.S.
persons to continue to carry out significant dealing activity--
including dealing activity accounting for most or all of the
interdealer market in security-based swaps on U.S. underliers--in the
United States but outside the scope of Title VII dealer
requirements.\336\
---------------------------------------------------------------------------

    \335\ See Section IV.B.3, supra.
    \336\ Quantifying the programmatic and assessment costs of this
alternative is challenging given that we cannot observe the
propensity of non-U.S. persons to use the limited exception.
---------------------------------------------------------------------------

3. Non-Inclusion of Security-Based Swap Transactions Involving Dealing
Activity in the United States in the De Minimis Threshold Calculations
    Another alternative to the final rules would be not to require any
transactions other than those required in Exchange Act rule 3a71-3 as
adopted in June 2014 to be counted toward a person's dealer de minimis
threshold.\337\
---------------------------------------------------------------------------

    \337\ See SIFMA/FSR Letter at 5; IIB Letter at 5.
---------------------------------------------------------------------------

    As with the alternative just discussed, this alternative could
reduce programmatic and assessment costs associated with engaging in
customer-facing activity in connection with dealing activity in
security-based swaps in the United States, which may mitigate any
incentives for inefficient

relocation by financial groups that use a non-U.S. dealer to carry out
their dealing activity in the United States. However, as with the
preceding alternative, financial groups that use a U.S. dealer may
respond to the incentives created under the currently existing rules by
restructuring their security-based swap dealing business so that it is
carried out by a non-U.S. person, in which case none of its
transactions with other non-U.S. persons would be counted toward the de
minimis thresholds.
    In our view, in the absence of some form of activity-based test,
the current scope of Exchange Act rule 3a71-3 raises the full range of
concerns arising from the ability of non-U.S. persons to continue to
engage in security-based swap dealing activity in the United States
without complying with Title VII dealer requirements, as described in
detail above.\338\ Moreover, to the extent that there are no
limitations on a non-U.S. person's ability to exclude these
transactions from its de minimis calculations, it is possible that a
significant portion of that activity, including potentially all
interdealer activity, eventually would occur entirely outside the scope
of Title VII security-based swap dealer regulation, to the extent that
financial groups restructure their dealing business in response to the
incentives created by the resulting competitive disparities and market
fragmentation. As we have already noted, this alternative would not
only reduce the current volume of security-based swap transactions by
non-U.S. persons included in such persons' dealer de minimis threshold
calculations, but financial groups that currently use U.S. persons to
carry out their dealing business in the United States may have an
incentive to migrate that business to affiliated non-U.S. persons to
stay competitive with their non-U.S. competitors.\339\
---------------------------------------------------------------------------

    \338\ See Section IV.B.2, supra.
    \339\ For additional discussion of the likely effects of this
alternative, see the discussion in Sections IV.B.2 and IV.B.3,
supra.
---------------------------------------------------------------------------

    The absence of an activity-based test might also be costly because
of its adverse competitive effects between U.S. and non-U.S. persons.
Under current rules, the disparity in regulatory treatment means U.S.
and non-U.S. persons would face disparate regulatory costs even if both
engage in dealing activity using personnel located in a U.S. office.
Given these cost differences, non-U.S. persons or their agents
transacting with other non-U.S. persons or their agents in the United
States would potentially be able to provide liquidity at lower cost
than U.S. persons because of differing regulatory treatment in other
jurisdictions. As a result, non-U.S. persons could prefer to transact
with non-U.S. persons or their agents, and a substantial portion of
liquidity from non-U.S. persons might become unavailable to U.S.
persons.
4. Exception for Transactions Entered Into Anonymously on an Exchange
and Cleared
    Another alternative to these amendments would be to not require
transactions that are entered into anonymously on an exchange and are
cleared to be counted towards an entity's dealer de minimis
threshold.\340\ As we noted in the U.S. Activity Proposing Release, the
purpose of the exception was to avoid putting market participants in a
position where they are required to determine the treatment of the
transaction under the de minimis exception in circumstances where the
information necessary to that determination is unavailable to
them.\341\ We do not believe that anonymous trades raise these concerns
in the context of the amendment to Exchange Act rule 3a71-3(b), given
that it does not require non-U.S. persons to look to the location or
status of their counterparty but only at that of its own personnel. We
do, however, believe that allowing such an exception would have adverse
consequences for competition between U.S. and non-U.S. dealers in the
United States. If non-U.S. dealers could transact in the United States
with non-U.S. counterparties but not be required to apply those
transactions to their de minimis thresholds because their transactions
were entered into anonymously on an exchange and cleared, non-U.S.
dealers would be able to continue to operate in the U.S. without being
subject to the dealer requirements of Title VII. The disparate costs
generated by the unequal application of Title VII dealer requirements
may further fragment liquidity into U.S. and non-U.S. pools, reducing
the liquidity available to participants in the U.S. security-based swap
market.
---------------------------------------------------------------------------

    \340\ See ISDA Letter at 7-8; SIFMA/FSR Letter at 7 (stating
that transactions should not be counted towards the de minimis
calculations if executed anonymously on an exchange and cleared).
See also ISDA Letter at 5 (stating that the Commission correctly
noted that electronic execution ``does not eliminate the possibility
of abusive or manipulative conduct,'' but expressing concern that
the proposed rules did not provide sufficient guidance regarding
application of this test to electronic trading).
    \341\ See U.S. Activity Proposing Release, 80 FR 27472; Cross-
Border Adopting Release 79 FR 47325.
---------------------------------------------------------------------------

5. Exception for Transactions Cleared Through Foreign Clearing Agencies
    One commenter suggested that we should not apply Title VII
requirements to any transaction between two non-U.S. persons that is
cleared outside the United States. \342\ As we have noted elsewhere,
however, clearing of security-based swaps reduces counterparty risk and
operational risk, but the benefits of Title VII dealer regulations
extend beyond the concerns addressed by clearing, to concerns about
contagion, market fragmentation, and counterparty protection, among
others. Because clearing these transactions does not address these
concerns, whether a transaction is cleared does not appear to provide a
useful basis for determining whether a transaction should be excepted
from the de minimis counting requirement.\343\ It is also important to
note that such an exception would allow non-U.S. security-based swap
dealers to operate using personnel or personnel of agents located in
the United States, without being subject to Title VII dealer
requirements by clearing their transactions through a foreign clearing
agency. This disparity, as already discussed, could cause security-
based swap liquidity to fragment into two pools, and reduce the amount
of liquidity available to U.S. security-based swap market
participants.\344\
---------------------------------------------------------------------------

    \342\ See ISDA Letter at 3, 8 (stating that transactions cleared
outside the United States should not be subject to Title VII, as
they ``are subject to regulatory oversight in the clearing
jurisdiction and are subject to reporting and recordkeeping
requirements in that jurisdiction'').
    \343\ See text accompanying note 259, supra.
    \344\ See Section II.B, supra.
---------------------------------------------------------------------------

6. Exception for Transactions Arranged, Negotiated, or Executed in the
United States Merely To Accommodate Foreign Clients' Needs When Foreign
Markets Are Closed
    Another alternative would be to provide an exception for
transactions arranged, negotiated, or executed in the United States
merely to accommodate foreign clients' needs when foreign markets are
closed. For example, one commenter argued that the U.S. Activity Test
should not include security-based swaps in which U.S. personnel are
involved only to accommodate a non-U.S. counterparty outside of
operating hours in the counterparty's time zone.\345\ Under these
amendments, a

non-U.S. person is required to include in its dealer de minimis
threshold calculations transactions that it arranges, negotiates, or
executes using personnel located in the United States even if it does
so for the sole purpose of accommodating a foreign client's needs when
foreign markets are closed.\346\ Commenters have argued that requiring
these transactions to be included in a dealer's de minimis threshold
calculations may discourage non-U.S.-person dealers from providing
these services to their non-U.S.-person clients, which may increase the
transaction costs and the time necessary to execute their clients'
transactions.\347\ An exception for these types of transactions might
improve the liquidity available to non-U.S. security-based swap market
participants by allowing non-U.S. dealers to use personnel or personnel
of their agents located in the United States to arrange, negotiate, or
execute certain transactions when foreign markets are closed.
---------------------------------------------------------------------------

    \345\ See IIB Letter at 18-19 (arguing that the dealing activity
of the U.S. personnel in the trade is solely based on the hour of
the day and thus incidental and that maintaining the proposed
approach would be difficult as it would require non-U.S. persons to
hire staff to work after-hours in the non-U.S. offices); HSBC Letter
at 2.
    \346\ See Section IV.C.2, supra.
    \347\ See note 236, supra.
---------------------------------------------------------------------------

    However, the implementation of such an exception might have several
adverse consequences. For example, such an exception might create an
incentive for non-U.S. person dealers to claim such an exception for
trades that, at any other time of day, they would still have arranged,
negotiated, or executed using personnel located in the United States.
In addition, non-U.S. person dealers may have incentives to
artificially delay or advance the timing of trades to claim such an
exception. By abusing such an exception, non-U.S. dealers might create
a significant disparity in the way that they account for transactions
that they arrange, negotiate, or execute using personnel located in the
United States under the dealer de minimis exception. As a result, non-
U.S. dealers might not exceed a de minimis threshold and therefore may
not be required to register with the Commission, even if these non-U.S.
dealers continue with substantial amounts of dealing activity located
within the United States. The subsequent difference in the application
of dealer requirements between U.S. and non-U.S. dealers operating in
the United States may have the adverse market fragmentation and
competition effects discussed earlier.\348\
---------------------------------------------------------------------------

    \348\ See Section V.C.3, supra.
---------------------------------------------------------------------------

VI. Regulatory Flexibility Act Certification

    The Regulatory Flexibility Act (``RFA'') \349\ requires Federal
agencies, in promulgating rules, to consider the impact of those rules
on small entities. The Commission certified in the U.S. Activity
Proposing Release, pursuant to Section 605(b) of the RFA,\350\ that the
proposed amendments to Exchange Act rule 3a71-3 and 3a71-5 would not,
if adopted, have a significant impact on a substantial number of
``small entities.'' \351\ The Commission received no comments on this
certification.
---------------------------------------------------------------------------

    \349\ 5 U.S.C. 601 et seq.
    \350\ 5 U.S.C. 605(b).
    \351\ Although Section 601(b) of the RFA defines the term
``small entity,'' the statute permits agencies to formulate their
own definitions. The Commission has adopted definitions for the term
small entity for the purposes of Commission rulemaking in accordance
with the RFA. Those definitions, as relevant to this rulemaking, are
set forth in Rule 0-10, 17 CFR 240.0-10. See Statement of Management
on Internal Control, Exchange Act Release No. 18451 (January 28,
1982), 47 FR 5215 (February 4, 1982).
---------------------------------------------------------------------------

    For purposes of Commission rulemaking in connection with the RFA, a
small entity includes: (1) When used with reference to an ``issuer'' or
a ``person,'' other than an investment company, an ``issuer'' or
``person'' that, on the last day of its most recent fiscal year, had
total assets of $5 million or less; \352\ or (2) a broker-dealer with
total capital (net worth plus subordinated liabilities) of less than
$500,000 on the date in the prior fiscal year as of which its audited
financial statements were prepared pursuant to Rule 17a-5(d) under the
Exchange Act,\353\ or, if not required to file such statements, a
broker-dealer with total capital (net worth plus subordinated
liabilities) of less than $500,000 on the last day of the preceding
fiscal year (or in the time that it has been in business, if shorter);
and is not affiliated with any person (other than a natural person)
that is not a small business or small organization.\354\ Under the
standards adopted by the Small Business Administration, small entities
in the finance and insurance industry include the following: (i) For
entities in credit intermediation and related activities,\355\ entities
with $550 million or less in assets or; (ii) for non-depository credit
intermediation and certain other activities,\356\ entities engaged in
non-depository credit intermediation and related activities, $38.5
million or less in annual receipts; (iii) for entities in financial
investments and related activities,\357\ entities with $38.5 million or
less in annual receipts; (iv) for insurance carriers and entities in
related activities,\358\ entities with $38.5 million or less in annual
receipts, or 1,500 employees for direct property and casualty insurance
carriers; and (v) for funds, trusts, and other financial vehicles,\359\
entities with $32.5 million or less in annual receipts.\360\ Based on
feedback from market participants and our information about the
security-based swap markets, the Commission continues to believe that
the types of entities that would engage in more than a de minimis
amount of dealing activity involving security-based swaps--which
generally would be large financial institutions--would not be ``small
entities'' for purposes of the RFA.\361\
---------------------------------------------------------------------------

    \352\ See 17 CFR 240.0-10(a).
    \353\ See 17 CFR 240.17a-5(d).
    \354\ See 17 CFR 240.0-10(c).
    \355\ Including commercial banks, savings institutions, credit
unions, firms involved in other depository credit intermediation,
credit card issuing, sales financing, consumer lending, real estate
credit, and international trade financing. 13 CFR 121.201 at
Subsector 522.
    \356\ Including firms involved in secondary market financing,
all other non-depository credit intermediation, mortgage and
nonmortgage loan brokers, financial transactions processing,
reserve, and clearing house activities, and other activities related
to credit intermediation. 13 CFR 121.201 at Subsector 522.
    \357\ Including firms involved in investment banking and
securities dealing, securities brokerage, commodity contracts
dealing, commodity contracts brokerage, securities and commodity
exchanges, miscellaneous intermediation, portfolio management,
providing investment advice, trust, fiduciary and custody
activities, and miscellaneous financial investment activities. 13
CFR 121.201 at Subsector 523.
    \358\ Including direct life insurance carriers, direct health
and medical insurance carriers, direct property and casualty
insurance carriers, direct title insurance carriers, other direct
insurance (except life, health and medical) carriers, reinsurance
carriers, insurance agencies and brokerages, claims adjusting, third
party administration of insurance and pension funds, and all other
insurance related activities. 13 CFR 121.201 at Subsector 524.
    \359\ Including pension funds, health and welfare funds, other
insurance funds, open-end investment funds, trusts, estates, and
agency accounts, real estate investment trusts and other financial
vehicles. 13 CFR 121.201 at Subsector 525.
    \360\ See 13 CFR 121.201.
    \361\ See U.S. Activity Proposing Release, 80 FR 27505-08;
Cross-Border Adopting Release, 79 FR 47368.
---------------------------------------------------------------------------

    For the foregoing reasons, the Commission certifies that the final
amendments, as adopted, would not have a significant economic impact on
a substantial number of small entities for purposes of the RFA.

VII. Effective Date and Implementation

    These final rules will be effective April 19, 2016.
    Three commenters requested that we provide market participants
adequate time to comply with any final rule that would require them to
monitor the location of personnel engaged in relevant activity with
respect to security-based swap transactions. One commenter stated that
we should provide a 12-month transition period and clarify that the de
minimis counting would only apply prospectively to security-based swap
transactions executed after the transition period.\362\

Two commenters urged the Commission to defer the compliance date until
it has made comparability determinations for a number of jurisdictions
so that non-U.S. dealers can rely on substituted compliance.\363\
---------------------------------------------------------------------------

    \362\ See HSBC Letter at 3-4.
    \363\ See IIB Letter at 19; SIFMA/FSR Letter at 15.
---------------------------------------------------------------------------

    In the SBS Entity Registration Adopting Release, we established a
compliance date for the final rules adopted in that release as the
later of: Six months after the date of publication in the Federal
Register of a final rule release adopting rules establishing capital,
margin and segregation requirements for security-based swap dealers and
major security-based swap participants (``SBS Entities''); the
compliance date of final rules establishing recordkeeping and reporting
requirements for SBS Entities; the compliance date of final rules
establishing business conduct requirements under Exchange Act sections
15F(h) and 15F(k); or the compliance date for final rules establishing
a process for a registered SBS Entity to make an application to the
Commission to permit an associated person who is subject to a statutory
disqualification to effect or be involved in effecting security-based
swaps on its behalf (such date referred to as the ``Registration
Compliance Date'').
    In addition, we noted that, for purposes of complying with the
registration and other requirements, persons engaged in dealing
activity are not required to begin calculating whether their
transactions meet or exceed the thresholds established in Exchange Act
rule 3a71-2 until two months prior to the Registration Compliance Date
(``SBS Entity Counting Date''). Accordingly, a person engaged in
security-based swap dealing activity will not be required to include in
its dealer de minimis threshold calculations any transactions entered
into prior to the SBS Entity Counting Date. However, given the
potential complexities of implementing the amendments being adopted
today, we believe it is appropriate to establish a compliance date
solely for Exchange Act rule 3a71-3(b)(1)(iii)(C) of the later of (a)
February 21, 2017, or (b) the SBS Entity Counting Date.

Statutory Basis and Text of Final Rules

    Pursuant to the Exchange Act, 15 U.S.C. 78a et seq., and
particularly sections 3(a)(71), 3(b), 23(a)(1), and 30(c) thereof, and
section 761(b) of the Dodd-Frank Act, the SEC is amending rules 3a71-3
and 3a71-5 under the Exchange Act.

List of Subjects in 17 CFR Part 240

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

Text of Final Rules

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

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

0
1. The authority citation for part 240 continues to read, and a
sectional authority is added in numerical order to read as follows:

    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3,
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78c-3, 78c-5, 78d, 78e, 78f,
78g, 78i, 78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78n-1, 78o, 78o-4,
78o-10, 78p, 78q, 78q-1, 78s, 78u-5, 78w, 78x, 78dd, 78ll, 78mm,
80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4, 80b-11, 7201 et seq.,
and 8302; 7 U.S.C. 2(c)(2)(E); 12 U.S.C. 5221(e)(3); 18 U.S.C. 1350;
and Pub. L. 111-203, 939A, 124 Stat. 1376 (2010), unless otherwise
noted.
* * * * *
    Sections 240.3a71-3 and 240.3a71-5 are also issued under Pub. L.
111-203, sec. 761(b), 124 Stat. 1754 (2010), and 15 U.S.C. 78dd(c).
* * * * *

0
2. Sec.  240.3a71-3 is amended by adding paragraph (b)(1)(iii)(C) to
read as follows:

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

* * * * *
    (b) * * *
    (1) * * *
    (iii) * * *
    (C) Unless such person is a person described in paragraph
(a)(4)(iii) of this section, security-based swap transactions connected
with such person's security-based swap dealing activity that are
arranged, negotiated, or executed by personnel of such non-U.S. person
located in a U.S. branch or office, or by personnel of an agent of such
non-U.S. person located in a U.S. branch or office; and
* * * * *

0
3. Sec.  240.3a71-5 is amended by adding paragraph (c) to read as
follows:

Sec.  240.3a71-5  Exception for cleared transactions executed on a swap
execution facility.

* * * * *
    (c) The exceptions in paragraphs (a) and (b) of this section shall
not apply to any security-based swap transactions of a non-U.S. person
or of an affiliated non-U.S. person connected with the person's
security-based swap dealing activity that are arranged, negotiated, or
executed by personnel of such non-U.S. person located in a U.S. branch
or office, or by personnel of an agent of such non-U.S. person located
in a U.S. branch or office.

    By the Commission.

    Dated: February 10, 2016.
Brent J. Fields,
Secretary.
[FR Doc. 2016-03178 Filed 2-18-16; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 79, Number 178 (Monday, September 15, 2014)]
[Notices]
[Page 54977]
[FR Doc No: 2014-21861]

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

DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. CP14-544-000]

MIGC LLC; Notice of Request Under Blanket Authorization

    Take notice that on August 27, 2014, MIGC LLC (MIGC), 1099 18th
Street, Suite 1800, Denver, Colorado 80202 filed a prior notice request
pursuant to sections 157.205 and 157.216(b) of the Commission's
regulations under the Natural Gas Act for authorization to abandon by
sale two compressor units located in Campbell County, Wyoming in
connection with an amended air quality permit issued by the Division of
Air Quality of the Wyoming Department of Environmental Quality, all as
more fully set forth in the application which is on file with the
Commission and open to public inspection.
    The filing may also be viewed on the Web at http://www.ferc.gov
using the ``eLibrary'' link. Enter the docket number excluding the last
three digits in the docket number field to access the document. For
assistance, contact FERC at<EMAIL_ADDRESS>or call toll-
free,<PHONE_NUMBER> or TTY,<PHONE_NUMBER>.
    Any questions regarding this application should be directed to
Brian Binford, Commercial Development Regional Manager, MIGC LLC, 1099
18th Street, Suite 1800, Denver, CO 80202, by phone at<PHONE_NUMBER>,
by fax<PHONE_NUMBER>, or by email at<EMAIL_ADDRESS>    Any person may, within 60 days after the issuance of the instant
notice by the Commission, file pursuant to Rule 214 of the Commission's
Procedural Rules (18 CFR 385.214) a motion to intervene or notice of
intervention. Any person filing to intervene or the Commission's staff
may, pursuant to section 157.205 of the Commission's Regulations under
the NGA (18 CFR 157.205) file a protest to the request. If no protest
is filed within the time allowed therefore, the proposed activity shall
be deemed to be authorized effective the day after the time allowed for
protest. If a protest is filed and not withdrawn within 30 days after
the time allowed for filing a protest, the instant request shall be
treated as an application for authorization pursuant to section 7 of
the NGA.
    Pursuant to section 157.9 of the Commission's rules, 18 CFR 157.9,
within 90 days of this Notice the Commission staff will either:
Complete its environmental assessment (EA) and place it into the
Commission's public record (eLibrary) for this proceeding; or issue a
Notice of Schedule for Environmental Review. If a Notice of Schedule
for Environmental Review is issued, it will indicate, among other
milestones, the anticipated date for the Commission staff's issuance of
the final environmental impact statement (FEIS) or EA for this
proposal. The filing of the EA in the Commission's public record for
this proceeding or the issuance of a Notice of Schedule for
Environmental Review will serve to notify federal and state agencies of
the timing for the completion of all necessary reviews, and the
subsequent need to complete all federal authorizations within 90 days
of the date of issuance of the Commission staff's FEIS or EA.
    Persons who wish to comment only on the environmental review of
this project should submit an original and two copies of their comments
to the Secretary of the Commission. Environmental commenter's will be
placed on the Commission's environmental mailing list, will receive
copies of the environmental documents, and will be notified of meetings
associated with the Commission's environmental review process.
Environmental commenter's will not be required to serve copies of filed
documents on all other parties. However, the non-party commentary, will
not receive copies of all documents filed by other parties or issued by
the Commission (except for the mailing of environmental documents
issued by the Commission) and will not have the right to seek court
review of the Commission's final order.
    The Commission strongly encourages electronic filings of comments,
protests, and interventions via the Internet in lieu of paper. See 18
CFR 385.2001(a)(1)(iii) and the instructions on the Commission's Web
site (www.ferc.gov) under the ``e-Filing'' link. Persons unable to file
electronically should submit original and 5 copies of the protest or
intervention to the Federal Energy Regulatory Commission, 888 First
Street NE., Washington, DC 20426.

    Dated: September 3, 2014.
Kimberly D. Bose,
Secretary.
[FR Doc. 2014-21861 Filed 9-12-14; 8:45 am]
BILLING CODE 6717-01-P