2012-27166. Agency Information Collection Activities: Notice of Intent To Extend Collection 3038-0098: Exemptive Order Regarding Compliance With Certain Swap Regulations

AGENCY:

Commodity Futures Trading Commission.

ACTION:

Notice.

SUMMARY:

The Commodity Futures Trading Commission (“Commission” or “CFTC”) is announcing an opportunity for public comment on the proposed extension of its current approval from the Office of Management and Budget (“OMB ”) of an information collection request (“ICR”) titled “Exemptive Order Regarding Compliance with Certain Swap Regulations,” OMB Control No. 3038-0098. OMB approved the Commission's initial ICR request on August 13, 2012, utilizing emergency review procedures in accordance with the Paperwork Reduction Act of 1995 (“PRA”), 44 U.S.C. 3501 et seq., and Office of Management and Budget (“OMB”) regulation 5 CFR 1320.13. The Commission's notice of its initial submission for OMB emergency review of the ICR was published in the Federal Register, 77 FR 43271, on July 24, 2012.

The Commission is inviting interested parties to comment on the proposed extension of the currently approved ICR, relating to the proposed Exemptive Order Regarding Compliance with Certain Swap Regulations (“Proposed Exemptive Order”) pursuant to Section 4(c) of the Commodity Exchange Act (“CEA”).^[1] If approved, the collection of information will be required to obtain or retain a benefit.

DATES:

Comments must be submitted on or before January 7, 2013.

ADDRESSES:

You may submit written comments on the burden estimated or any other aspect of the proposed extension of the information collection to the addresses below. Please refer to OMB Control No. 3098-0098—“Exemptive Order Regarding Compliance with Certain Swap Regulations” in any correspondence.

• Office of Information and Regulatory Affairs, Office of Management and Budget, Attention: Desk Officer for CFTC, 725 17th Street, Washington, DC 20503, or via electronic mail to [e-mail]. Comments also may be submitted to the Commission by any of the following methods:
• The Agency's Web site, at http://comments.cftc.gov/​. Follow the instructions for submitting comments through the Web site.
• Mail: David A. Stawick, Secretary of the Commission, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street NW., Washington, DC 20581.
• Hand Delivery/Courier: Same as mail above.
• Federal eRulemaking Portal: http://www.regulations.gov.

Please submit your comments to the CFTC using only one method.

All comments must be submitted in English, or if not, accompanied by an English translation. Comments will be posted as received to www.cftc.gov. If you wish the Commission to consider information that you believe is exempt from disclosure under the Freedom of Information Act, a petition for confidential treatment of the exempt information may be submitted according to the procedures established in § 145.9 of the Commission's regulations.^[2]

FOR FURTHER INFORMATION CONTACT:

Laura B. Badian, Counsel, at 202-418-5969, [e-mail], Gail Scott, Counsel, at 202-418-5139, [e-mail], Office of General Counsel, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street NW., Washington, DC 20581.

SUPPLEMENTARY INFORMATION:

I. Background on Proposed Extension of Information Collection Activities

A. Overview

Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), Public Law 111-203, 124 Stat. 1376 (2010) amended the CEA to establish a new statutory framework for swaps. To implement the Dodd-Frank Act, the Commission has promulgated, or proposed, rules and regulations pursuant to the various new provisions of the CEA, including those specifically applicable to swap dealers (“SDs”) and major swap participants (“MSPs”). The Dodd-Frank Act requires all swap dealers and major swap participants to be registered with the Commission. It contains definitions of “swap,” “swap dealer” and “major swap participant” but directs the Commission to adopt regulations that further define those terms. On July 23, 2012, the Commission's final regulations further defining the terms “swap dealer” and “major swap participant” became effective. On October 12, 2012, the Commission's final regulations further defining the term “swap” and “security-based swap” in sections 712(d) and 721(c) of the Dodd-Frank Act (the “Products Definitions Final Rule”) became effective.^[3] The SD and MSP registration regulations also became effective on October 12, 2012. An entity that has more than the specified de minimis levels of dealing (swaps entered into after October 12) is required to register by no later than two months after the end of the month in which it surpasses either of the two de minimis thresholds in the rules defining the term “swap dealer.” ^[1] Similarly, effective as of October 12, 2012, a person that meets the criteria to be an MSP as a result of its swap activities in a fiscal quarter must register as an MSP by no later than two months after the end of that quarter.

On July 12, 2012, the Commission published for public comment a proposed interpretive guidance and policy statement (“Cross-Border Interpretive Guidance”) on the application of the CEA's swap provisions and the implementing Commission regulations to cross-border activities and transactions.^[4] On July 12, 2012, the Commission also published for public comment, pursuant to section 4(c) of the CEA, the Proposed Exemptive Order.^[5]

The Proposed Exemptive Order would grant market participants temporary conditional relief from certain provisions of the CEA, as amended by Title VII of the Dodd-Frank Act. Specifically, the proposed relief would allow non-U.S. SDs and non-U.S. MSPs to delay compliance with certain entity-level requirements of the CEA (and Commission regulations promulgated thereunder), subject to specified conditions. Additionally, with respect to transaction-level requirements of the CEA (and Commission regulations promulgated thereunder), the relief would allow non-U.S. SDs and non-U.S. MSPs, as well as foreign branches of U.S. SDs and MSPs, to comply only with those requirements as may be required in the home jurisdiction of such non-U.S. SDs and non-U.S. MSPs (or in the case of foreign branches of a U.S. SD or U.S. MSP, the foreign location of the branch) for swaps with non-U.S. counterparties, subject to specified conditions. The Proposed Exemptive Order states that this relief would become effective concurrently with the date upon which SDs and MSPs must first apply for registration and expire 12 months following the publication of the Proposed Exemptive Order in the Federal Register.

The conditions for relief set forth in the Proposed Exemptive Order are discussed in the Federal Register release published on July 24, 2012, 77 FR 43271.

B. Request for Public Comments

Under the PRA, Federal agencies must obtain OMB approval for each collection of information they conduct or sponsor. “Collection of Information” is defined in 44 U.S.C. 3502(3) and 5 C.F.R. 1320.3 and includes agency requests or requirements that members of the public submit reports, keep records, or provide information to a third party. Section 3506(c)(2)(A) of the PRA, 44 U.S.C. 3506(c)(2)(A), requires Federal agencies to provide a 60-day notice in the Federal Register concerning each proposed collection of information, including each proposed extension of an existing collection of information, before submitting the collection to OMB for approval. To comply with this requirement, the CFTC is publishing notice of the proposed collection of information listed below. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number. If adopted, the collection of information would be required in order for the registrant to rely on the exemptive relief. The Commission would protect proprietary information in accordance with the Freedom of Information Act and 17 CFR part 145, “Commission Records and Information.” In addition, § 8(a)(1) of the Act strictly prohibits the Commission, unless specifically authorized by the Act, from making public “data and information that would separately disclose the business transactions or market positions of any person and trade secrets or names of customers.” ^[6] The Commission is also required to protect certain information contained in a government system of records according to the Privacy Act of 1974, 5 U.S.C. 552a.

With respect to the proposed extension of the collection of information described herein, the CFTC invites comments on:

• Whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information will have a practical use;
• The accuracy of the Commission's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
• Ways to enhance the quality, usefulness, and clarity of the information to be collected; and
• Ways to minimize the burden of collection of information on those who are to respond, including through the use of appropriate automated electronic, mechanical, or other technological collection techniques or other forms of information technology; e.g., permitting electronic submission of responses.

II. Purpose and Proposed Use of Information Collected

The subject information collection ensures that non-U.S. SDs and non-U.S. MSPs claiming an exemption from certain entity-level and transaction-level requirements under the CEA (and Commission regulations promulgated thereunder) would be actively and demonstrably considering and planning for compliance with such entity-level and transaction-level requirements, as may be applicable, by requiring the filing of a compliance plan (and any amendments thereto). In addition, the subject information collection ensures that U.S. SDs and U.S. MSPs claiming an exemption, on behalf of their foreign branches, with respect to transaction-level requirements under the CEA are similarly making a good-faith effort to comply with these requirements by requiring the filing of a compliance plan (and any amendments thereto).

On July 24, 2012, the Commission invited interested parties to comment on any aspect of the information collection titled “Exemptive Order Regarding Compliance with Certain Swap Regulations,” OMB Control No. 3038-0098. See 77 FR 43271. The Commission did not receive any comments on its burden estimates or on any other aspect of the information collection requirements contained in the PRA Exemptive Order Comment Request. The Commission requested and obtained OMB approval under the PRA emergency clearance process for the subject information collection because the exemptive relief process is essential to the mission of the agency and must be in place before the date the registration requirements for SDs and MSPs under other Dodd-Frank Act implementing regulations become mandatory. This notice requests extension of OMB's original approval for a period of three (3) years utilizing OMB's standard clearance procedures in accordance with the Paperwork Reduction Act of 1995.

III. Burden Statement

The Commission estimates that 60 to 125 SDs and MSPs (including 40 to 80 non-U.S. SDs and MSPs and 20 to 45 U.S. SDs and MSPs) will submit initial compliance plans. The Commission further estimates that, on average, between 60 and 125 SDs and MSPs (including 40 to 80 non-U.S. SDs and MSPs and 20 to 45 U.S. SDs and MSPs) will prepare and submit one amendment annually.

The Commission anticipates that compliance plans would be updated on a periodic basis as new regulations (including in foreign jurisdictions) are adopted and/or come into effect. It is possible that one or more amendments will be submitted within the same year as the initial compliance plan, but it is difficult to predict when new regulations (including in foreign jurisdictions) will be adopted and/or become effective. The Commission is therefore providing estimates based on an initial submission and one amendment on the assumption that one amendment will be filed in the same year as the initial submission.

The respondent burden hour costs for this collection for non-U.S. SDs and MSPs is estimated on average to be $31,190 per submission of an initial compliance plan (rounded to the nearest dollar), and an additional $31,190 per amendment. The aggregate cost burden for non-U.S. SDs and MSPs (which the Commission estimates to be 40 to 80 non-U.S. SDs/MSPs) is estimated to be approximately $1,247,600 to $2,495,200 for initial plans and $1,247,600 to $2,495,200 for amendments.

The respondent burden hour costs for this collection for U.S. SDs and MSPs is estimated on average to be $18,714 per submission of an initial compliance plan and an additional $18,714 per amendment. The aggregate cost burden for U.S. SDs and MSPs (which the Commission estimates to be 20 to 45 U.S. SDs/MSPs) is estimated to be approximately $374,280 to $842,130 for initial plans and $374,280 to $842,130 for amendments.

The aggregate cost burden for all SDs and MSPs (both U.S. and non-U.S., which the Commission estimates to be 60 to 125 SDs/MSPs) is estimated to be approximately $1,621,880 to $3,337,330 for initial compliance plans and $1,621,880 to $3,337,330 for amendments. The aggregate cost burden for all SDs and MSPs (both U.S. and non-U.S.) for both initial compliance plans and one amendment is estimated to be approximately $3,243,760 to $6,674,660.

The Commission estimates the average burden of this collection of information as follows:

Itemized Burden Hours and Cost Table

	1	2	3	4	5	6	7
	Number of registrants estimated to submit plans	Number of plans per registrant	Aggregate number of responses (Column 1 × Column 2)	Average number of hours per response	Cost burden per hour	Cost burden per plan	Aggregate cost burden (Based on min-max range in column 3 × column 6)
1. Initial Submission by a non-U.S. SD or MSP	40 to 80 non-U.S. SDs and MSPs 7	1	40 to 80	8 9 70	10 $445.57	11 $31,190	$1,247,600 to $2,495,200.
2. Amended Submission by a non-U.S. SD or MSP	40 to 80 non-U.S. SDs and MSPs	1 (assumes that on average, each non-U.S. applicant will prepare and submit one amendment annually) 12	40 to 80	13 14 70	15 445.57	16 31,190	$1,247,600 to $2,495,200.
3. Initial Submission by a U.S. SD or MSP	20 to 45 U.S. SDs and MSPs 17	1	20 to 45	18 19 42	20 445.57	21 18,714	$374,280 to $842,130.
4. Amended Submission by a U.S. SD or MSP	20 to 45 U.S. SDs and MSPs	1 (assumes that on average, each U.S. applicant will prepare and submit one amendment annually) 22	20 to 45	23 24 42	25 445.57	26 18,714	$374,280 to $842,130.

Total Aggregate Burden Hours and Costs Table

	1	2	3	4	5	6
	Aggregate hours, initial plan	Aggregate hours, amended plan	Total hours, initial and amended plans (Columns 1 + 2)	Aggregate costs, initial plan	Aggregate costs, amended plan	Total costs, initial and amended plans (Columns 4 + 5)
1. Non-U.S. SDs and MSPs	2,800 to 5,600	2,800 to 5,600	5,600 to 11,200	$1,247,600 to $2,495,200	$1,247,600 to $2,495,200	$2,495,200 to $4,990,400.
2. U.S. SD or MSP	840 to 1,890	840 to 1,890	1,680 to 3,780.	$374,280 to $842,130	$374,280 to $842,130	$748,560 to $1,684,260.
3. All SDs and MSPs (Rows 1 + 2)	3,640 to 7,490	3,640 to 7,490	7,280 to 14,980	$1,621,880 to $3,337,330	$1,621,880 to $3,337,330	$3,243,760 to $6,674,660.

Initial Compliance Plan—Cost Burden Estimates for non-U.S. SDs and MSPs:

Estimated number of respondents/affected entities: 40 to 80.

Estimated number of responses per entity: 1.

Estimated aggregate number of responses: 40 to 80.

Estimated total average burden hour per respondent: 70 hours.

Estimated total average burden hour cost burden for all respondents: $1,247,600 to $2,495,200 (average of $1,871,400).

Amended Compliance Plan—Cost Burden Estimates for non-U.S. SDs and MSPs:

Estimated number of respondents/affected entities: 40 to 80.

Estimated number of amended plans per registrant: 1 annually.

Estimated aggregate number of responses: 40 to 80.

Estimated total average burden hour per respondent: 70 hours.

Estimated total average burden hour cost burden for all respondents: $1,247,600 to $2,495,200 (average of $1,871,400).

Initial Compliance Plan—Cost Burden Estimates for U.S. SDs and MSPs:

Estimated Number of respondents/affected entities: 20 to 45.

Estimated number of responses per entity: 1.

Estimated aggregate number of responses: 20 to 45.

Estimated total average burden hour per respondent: 42 hours.

Estimated total average burden hour cost for all respondents: $374,280 to $842,130 (average of $608,205).

Amended Compliance Plan—Cost Burden Estimates for non-U.S. SDs and MSPs:

Estimated Number of respondents/affected entities: 20 to 45.

Estimated number of amended plans per registrant: 1 annually.

Estimated aggregate number of responses: 20 to 45.

Estimated total average burden hour per respondent: 42 hours.

Estimated total average burden hour cost burden for all respondents: $374,280 to $842,130 (average of $608,205).

Aggregate Burden Hours and Costs for all SDs and MSPs (U.S. and non-U.S.):

Estimated number of respondents/affected entities: 60 to 125.

Estimated number of plans per registrant: initial and one amended (estimates are provided based on the assumption that one amendment will be filed in the same year as the initial submission).

Estimated aggregate hourly burden (initial plans): 3,640 to 7,490 hrs.

Estimated aggregate hourly burden (amendments): 3,640 to 7,490 hrs.

Estimated aggregate hourly burden (initial plans and one amendment): 7,280 to 14,980 hours.

Estimated aggregate costs (initial plan): $1,621,880 to $3,337,330.

Estimated aggregate costs (amendments): $1,621,880 to $3,337,330.

Estimated aggregate costs (initial plans and one amendment): $3,243,760 to $6,674,660 (average of $4,959,210).

Frequency of collection (for all of the above categories): Occasional.

There are no capital costs or operating and maintenance costs associated with this collection.

Dated: November 2, 2012.

Sauntia S. Warfield,

Assistant Secretary of the Commission.

Footnotes

1.  See Exemptive Order Regarding Compliance with Certain Swap Regulations, 77 FR 41110, July 12, 2012.

2.  See 17 CFR 145.9.

3.  See CFTC and Securities and Exchange Commission (“SEC”), Further Definition of “Swap,” “Security-Based Swap,” and “Security-Based Swap Agreement”; Mixed Swaps; Security-Based Swap Agreement Recordkeeping, 77 FR 48207, Aug. 13, 2012.

1.  For example, if an entity reaches either of two specified de minimis thresholds in swap dealing the day after October 12, 2012, then the entity would be required to register within two months after the end of October, or by December 31, 2012. As another example, if an entity does not reach the specified de minimis level in swap dealing until November 20, 2012, then the entity would be required to register by January 31, 2013 (i.e., two months after the end of the month in which the person first exceeded either of two specified de minimis thresholds). Commission rules also specify that swap dealing activity engaged in before the effective date of the “swap dealer” and “swap” definition rules (i.e., October 12, 2012) do not count toward the de minimis thresholds.

4.  See Cross-Border Application of Certain Swaps Provisions of the Commodity Exchange Act, 77 FR 41213, July 12, 2012.

5.  See Exemptive Order Regarding Compliance with Certain Swap Regulations, 77 FR 41110, July 12, 2012.

6.  7 U.S.C. 12(a)(1).

7.  The Commission currently estimates that approximately 125 entities will be covered by the definitions of the terms “swap dealer” and “major swap participant.” See Further Definition of “Swap Dealer,” “Security-Based Swap Dealer,” “Major Swap Participant,” “Major Security-Based Swap Participant” and “Eligible Contract Participant”; Final Rule, 77 FR 30596, 30713 (May 23, 2012). However, not all of these entities are eligible for or will seek exemptive relief. Although there is significant uncertainty in the number of swap entities that will seek to register as SDs and MSPs, as well as the number of swap entities that will submit a compliance plan in order to obtain exemptive relief, the Commission believes it is reasonable to estimate that between 40 and 80 non-U.S. SDs and MSPs will submit compliance plans.

8.  This estimate is based on the hourly cost of personnel that are capable of evaluating both Commission and home country regulations in light of the non-U.S. persons' operations. Although different registrants may choose to staff preparation of the compliance plan with different personnel, Commission staff estimates that, on average, an initial compliance plan could be prepared and submitted with 70 hours of attorney time, as follows: 10 hours for a senior attorney at $830/hour, 30 hours for a mid-level attorney at $418/hour, and 30 hours for a junior attorney at $345/hour. The total cost of a submission, rounded to the nearest dollar, is estimated to be $31,190. To estimate the hourly cost of senior and junior-level attorney time, Commission staff consulted with a law firm that has substantial expertise in advising clients on similar regulations. For the hourly cost of the mid-level attorney, Commission staff reviewed data contained in Securities Industry and Financial Markets Association (“SIFMA”), Report on Management and Professional Earnings in the Securities Industry, Oct. 2011, for New York, and adjusted by a factor for overhead and other benefits, which the Commission has estimated to be 1.3.

9.  The aggregate hourly burden for initial submissions (Column 3 x Column 4) would be 2,800 to 5,600 hours.

10.  See note 8, supra.

11.  See note 8, supra.

12.  The Commission anticipates that compliance plans would be updated on a periodic basis as new regulations (including in foreign jurisdictions) are adopted and come into effect. It is possible that one or more amendments will be submitted within the same year as the initial compliance plan, but it is difficult to predict when new regulations (including in foreign jurisdictions) will be adopted and become effective. The Commission is therefore providing estimates based on an initial submission and one amendment on the assumption that one amendment will be filed in the same year as the initial submission.

13.  The Commission estimates that in most cases the cost of submitting a revised plan or plans will be the same as the cost of preparing and submitting the initial plan. See supra note 8 for additional information.

14.  The aggregate hourly burden for amended submissions (Column 3 × Column 4) would be 2,800 to 5,600 hours.

15.  See note 8, supra.

16.  See note 8, supra.

17.  Although there is significant uncertainty in the number of swap entities that will seek to register as SDs and MSPs, as well as the number of swap entities that will submit a compliance plan in order to obtain exemptive relief, the Commission estimates that 20 to 45 U.S. SDs or U.S. MSPs whose foreign branch seeks to rely on the exemptive relief with respect to swaps with non-U.S. counterparties will submit a compliance plan.

18.  This estimate is based on the hourly cost of personnel that are capable of evaluating both Commission and home country regulations in light of the U.S. persons' foreign branch operations. Although different registrants may choose to staff preparation of the compliance plan with different personnel, Commission staff estimates that, on average, an initial compliance plan could be prepared and submitted by U.S. SDs and MSPs with 42 hours of attorney time, as follows: 6 hours for a senior attorney at $830/hour, 18 hours for a mid-level attorney at $418/hour, and 18 hours for a junior attorney at $345/hour. The total dollar cost of a submission is estimated to be $18,714, at a blended hourly rate of $445.57 per hour. To estimate the hourly cost of senior and junior-level attorney time, Commission staff consulted with a law firm that has substantial expertise in advising clients on similar regulations. For the hourly cost of the mid-level attorney, Commission staff reviewed data contained in Securities Industry and Financial Markets Association (“SIFMA”), Report on Management and Professional Earnings in the Securities Industry, Oct. 2011, for New York, and adjusted by a factor for overhead and other benefits, which the Commission has estimated to be 1.3.

19.  The aggregate hourly burden for initial submissions (Column 3 x Column 4) would be 840 to 1,890 hours.

20.  See note 18, supra.

21.  See note 18, supra.

22.  The Commission anticipates that compliance plans would be updated on a periodic basis as new regulations (including in foreign jurisdictions) are adopted and come into effect. It is possible that one or more amendments will be submitted within the same year as the initial compliance plan, but it is difficult to predict when new regulations (including in foreign jurisdictions) will be adopted and become effective. The Commission is therefore providing estimates based on an initial submission and one amendment on the assumption that one amendment will be filed in the same year as the initial submission.

23.  The Commission estimates that in most cases the cost of submitting a revised plan or plans will be the same as the cost of preparing and submitting the initial plan. See supra note 18 for additional information.

24.  The aggregate hourly burden for amended submissions (Column 3 × Column 4) would be 840 to 1,890 hours.

25.  The Commission estimates that in most cases the cost of submitting a revised plan or plans will be the same as the cost of preparing and submitting the initial plan. See note 18, supra.

26.  The Commission estimates that in most cases the cost of submitting a revised plan or plans will be the same as the cost of preparing and submitting the initial plan. See note 18, supra.