Norma final: Presentación electrónica de información sobre transacciones de valores por parte de miembros, corredores y distribuidores del mercado cambiario COMISIÓN DE VALORES Y CAMBIOS 17 CFR Partes 200 y 240 Publicación No. 34-44494 Expediente No. S7-12-00 Presentación electrónica de información sobre transacciones de valores por parte de miembros del intercambio , Brokers, and Dealers AGENCIA: Comisión de Valores y Bolsa. ACCIÓN: Regla final. RESUMEN: La Comisión de Valores y Cambios (quotCommission) está adoptando la Regla 17a-25 en virtud de la Sección 17 de la Securities Exchange Act de 1934 (ex Exchange Actquot), para exigir a los corredores y comerciantes que presenten electrónicamente a la Comisión, Firme de negociación de valores. La Regla 17a-25 tiene por objeto mejorar la capacidad de la Comisión para analizar los envíos electrónicos de información sobre transacciones, facilitando así las investigaciones de la Comisión en materia de ejecución y otras reconstrucciones comerciales. FECHA EFECTIVA. Insertar la fecha 30 después de la publicación en el Registro Federal, excepto el artículo 240.17a-25 (b), que entrará en vigencia en la fecha de inserción 180 días después de su publicación en el Registro Federal. PARA MÁS INFORMACIÓN: Alton Harvey, Jefe de Oficina, al (202) 942-4167 o Anitra Cassas, Asesora Especial, al (202) 942-0089, División de Regulación del Mercado, Comisión de Valores y Bolsa, 450 Fifth Street, N. W. Washington, D. C. 20549-1001. El 2 de mayo de 2000, la Comisión propuso que se formularan observaciones a la Regla 17a-25 1 de la Ley de Intercambio para exigir a los corredores y comerciantes que presentaran electrónicamente a la Comisión, previa solicitud, información sobre la negociación de valores de clientes y firmas. 2 La norma está diseñada para tener en cuenta más plenamente las estrategias comerciales cambiantes utilizadas principalmente por los comerciantes institucionales y profesionales, mejorando así la capacidad de la Comisión para analizar el comercio en reconstrucciones complejas de todo el mercado y las investigaciones de cumplimiento. Sobre la base de la experiencia adquirida por la Comisión en el análisis de la información sobre las operaciones con valores, y tras un cuidadoso examen de las observaciones presentadas en respuesta a la norma propuesta, la Comisión está adoptando la Regla 17a-25. La industria de valores ha sido testigo de un tremendo cambio en las últimas dos décadas, tanto en los tipos de participantes en el mercado como en la variedad de estrategias y productos comerciales. En particular, un número cada vez mayor de comerciantes institucionales y profesionales ahora realizan sus operaciones de valores a través de múltiples cuentas mantenidas en diferentes corredores de bolsa. Estos participantes del mercado incluyen inversores institucionales tales como fondos de pensiones, compañías de seguros, fundaciones, dotaciones, fondos mutuos y fondos de cobertura. Para identificar a los compradores y vendedores de valores en la aplicación de la ley o en otras investigaciones reglamentarias, el personal de la Comisión envía periódicamente solicitudes de registros de negociación de valores a las empresas de compensación más activas en la garantía correspondiente. Se ruega a las empresas que presenten, dentro de diez días hábiles, información relativa a las transacciones de todas las cuentas propietarias y de clientes que compraron o vendieron un valor durante un período de revisión especificado. Durante varios decenios, la Comisión solicitó esta información enviando por correo formularios de cuestionario (conocidos como hojas de color azul por el color en el que se imprimieron los formularios) a los corredores-intermediarios para que se completen manualmente y se enviaran por correo a la Comisión. A finales de los años ochenta, a medida que aumentaba espectacularmente el volumen de transacciones comerciales y de valores, la Comisión y los organismos de auto-regulación de valores (quotSROsquot) trabajaron juntos para desarrollar e implementar un sistema con formato electrónico universal, comúnmente llamado blue sheet QuotEBSquot, para reemplazar el proceso manual. 3 El formato EBS universal permite a la Comisión ya los SRO llevar a cabo investigaciones oportunas y exhaustivas sobre la vigilancia y la aplicación de la ley. Las empresas suelen usar software para escanear los registros de sus cuentas y descargar la información apropiada en el formato EBS estándar, y luego transmitir los datos a la Securities Industry Automation Corporation (quotSIACquot). A su vez, SIAC encamina el archivo electrónicamente a la computadora mainframe de la Comisión. 4 En general, la Comisión utiliza el sistema EBS para obtener información sobre transacciones de valores con uno de los dos propósitos siguientes: (1) ayudar en el examen e investigación de posibles violaciones de la ley de valores, principalmente relacionadas con información privilegiada o manipulación del mercado; Para llevar a cabo reconstrucciones de mercado, principalmente tras una volatilidad significativa del mercado. Desde su creación, el sistema EBS ha actuado eficazmente como una herramienta de aplicación para analizar la negociación de uno o dos valores durante un período de tiempo limitado. Sin embargo, cuando se utilizan para investigaciones a gran escala o reconstrucciones del mercado en las que intervienen numerosas existencias durante los períodos de pico de volumen de operaciones, la información proporcionada por el sistema EBS ha sido insuficiente. En concreto, la Comisión ha tenido dificultades para reunir eficazmente la información sobre transacciones de EBS por parte de los participantes en el mercado. 5 Para garantizar la continuidad de la eficacia de los programas de aplicación y reglamentación de la Comisión que se basan en la información EBS, la Comisión propuso el artículo 17a-25. Tal como se propone, la Regla 17a-25 obligaría a los intermediarios a presentar electrónicamente la información sobre transacciones de valores, incluidos los identificadores de los acuerdos de corretaje principal, las cuentas de precios medios y las instituciones depositarias, en un formato estandarizado, Los propósitos. Además, la regla exigiría a los agentes de bolsa presentar y mantener actualizada la información de la persona de contacto para las solicitudes de EBS. La Regla 17a-25 propuesta se basaba en gran medida en las reglas existentes de SRO. 6 III. Resumen de comentarios La Comisión recibió observaciones de la Asociación de la Industria de Valores (quotSIAquot) y de la Bolsa de Valores del Pacífico (quicPCXquot) sobre la regla propuesta. 7 La SIA manifestó en general que entendía que la Comisión necesitaba la propuesta de Reglas 17a-25, pero señaló que habría dificultades para aplicar determinados aspectos de la propuesta. El PCX pidió aclaraciones sobre la aplicación de la regla propuesta a las regulaciones de NASD nuevo sistema basado en web EBS. 8 A. Información sobre la transacción La SIA tenía una preocupación con respecto a la información de la transacción estándar requerida según la subsección (a) (2) de la regla propuesta. Uno de los elementos de datos requeridos en la sub-sección (a) (2) (ii) de la Regla 17a-25 propuesta y las reglas 9 de SRO existentes es el nombre del patrono de un cliente que compró o vendió un valor que está siendo revisado. La EIS indicó que muchas empresas no podrían acceder fácilmente a esta información en sus sistemas relacionados con EBS. 10 Como resultado, estas firmas tendrían que introducir manualmente esta información, o rediseñar sus sistemas de registro para insertar automáticamente la identificación del empleador de los clientes. El SIA también expresó su preocupación por la información adicional requerida bajo la subsección (b) de la regla propuesta. La SIA observó que, aunque la Propuesta de Liberación dejó en claro que el inciso (b) (1) (i) de la Regla 17a-25 propuesta está diseñado para arreglos de corretaje principal, el lenguaje genérico podría cubrir otros tipos de transacciones que implican el cambio de posición De una empresa a otra. Estas transacciones incluyen quotgive-upsquot (el corredor-corredor ejecutor provee el número de compensación de otro corredor-negociante al reportar una transacción para el proceso de comparación) y quotstep-outsquot (el intermediario ejecutor provee el número de compensación de otro corredor - Presentación de una transacción para el proceso de comparación). El SIA solicitó un lenguaje de reglas adaptado más estrechamente a los arreglos de corretaje principal. 11 El inciso (b) (1) (ii) de la Regla 17a-25 propuesta requiere que el primer broker indique el número de cámara de compensación o símbolo alfa de cada corredor de bolsa que envió parte o toda la transacción. La SIA indicó que la información relativa a los arreglos de corretaje principal es típicamente más fácil para ejecutar a los corredores para obtener automáticamente sus sistemas que para los corredores de bolsa. Como resultado, los corredores de primera necesidad estarían obligados a implementar más cambios de sistemas que ejecutar corredores. 12 La SIA también pidió aclaraciones sobre la cantidad de información requerida por el inciso (b) (2) de la Regla 17a-25, que se refiere a los identificadores de las cuentas de precio promedio. Citando las dificultades de formateo y los costos de programación, la SIA instó a la Comisión a permitir que un identificador único denota que una cuenta forma parte de un acuerdo de precio promedio, en lugar de exigir que los intermediarios generen identificadores separados para la cuenta maestra y cada subcuenta . B. Otra información En la propuesta de publicación, la Comisión solicitó comentarios sobre la viabilidad de exigir que los informes EBS incluyeran tiempos de ejecución u otros indicadores, como los números de secuencia de orden para las transacciones realizadas a través de un sistema automatizado de encaminamiento de órdenes. En respuesta, la EIS identificó una serie de problemas prácticos en la implementación de estos elementos de datos y sugirió que el costo de reformatear los sistemas de intermediarios o de construir nuevos sistemas superaría la necesidad regulatoria de esta información. 14 Por último, la SIA subrayó que podrían requerirse retrasos en la aplicación del artículo 17 bis 25 debido a otros desafíos de sistemas que afronta la industria de valores durante los próximos meses, como los preparativos para la plena aplicación de los precios decimales. 15 IV. Discusión y bases para la adopción Hoy en día, la Comisión está adoptando la Regla 17a-25 sustancialmente como se propone, con ciertos cambios diseñados para reflejar los comentarios. La regla se aplica a todos los miembros de intercambio, corredores y distribuidores sujetos a la Regla 17a-3 de la Exchange Act. 16 La Regla 17a-25 no impondrá ningún requisito adicional de mantenimiento de registros para corredores intermediarios. Los corredores-corredores ya mantienen toda la información requerida para los informes EBS de conformidad con el Artículo 17 (a) (1) y las Reglas 17a-3 y 17a-4 bajo La Ley de Intercambio. 17 La Regla 17a-25 pretende cumplir tres objetivos. En primer lugar, la norma codifica el requisito de que los corredores y los distribuidores deben presentar electrónicamente a la Comisión, previa solicitud, información sobre la información sobre las transacciones de valores de los clientes y de los propietarios. En segundo lugar, la norma debería mejorar la eficacia de los programas de aplicación y reglamentación de la Comisión mediante la mejora de ciertos aspectos del sistema EBS para tener en cuenta la evolución de las estrategias comerciales utilizadas principalmente por los comerciantes institucionales y profesionales. Específicamente, la subsección (b) de la Regla 17a-25 requiere que las empresas, a petición, proporcionen tres elementos de datos adicionales que ayudarán a la Comisión a agregar transacciones de valores a entidades que negocian a través de múltiples cuentas en más de un corredor. 18 Por último, al exigir a los agentes de bolsa que proporcionen información actualizada sobre las personas de contacto, la norma propuesta debería ayudar a garantizar que la Comisión pueda dirigir efectivamente sus solicitudes de EBS a los intermediarios. A. Información sobre transacciones estándar La subsección (a) de la regla propuesta requiere la presentación de la misma información estándar de clientes y transacciones propietarias que las SRO solicitan en relación con sus investigaciones de vigilancia del mercado o de aplicación de la ley. 19 Para una transacción patentada, el corredor de bolsa debe incluir la siguiente información: (1) número de cámara de compensación o símbolo alfa usado por el corredor que envía la información (2) número (s) de cámara de compensación o símbolo (s) alfa de (3) identificador de la seguridad (4) fecha de ejecución (5) cantidad ejecutada (6) precio de la transacción (7) número de la cuenta y (8) identidad de la bolsa o mercado donde Cada transacción se ejecutó. Bajo la regla propuesta, si se realizó una transacción para una cuenta de cliente (en contraposición a una cuenta propietaria), el corredor de bolsa habría tenido que incluir también el nombre del cliente, la dirección del cliente, el nombre del empleador del cliente, Número de identificación y otra información relacionada con la cuenta. Como se indica a continuación, la Comisión ha modificado algunos de estos requisitos en respuesta a observaciones. Por último, si la transacción se efectuó para un cliente de otra empresa o corredor de bolsa, el corredor-comerciante debe indicar si el otro corredor-corredor estaba actuando como principal o agente en la transacción. La SIA citó dos preocupaciones con respecto a la presentación de esta información de transacción estándar. En primer lugar, la SIA señaló las dificultades prácticas con que se enfrentan las empresas para obtener fácilmente el nombre del empleador de los clientes en sus sistemas relacionados con EBS. La Comisión considera que la identidad de un empleador de los clientes, si es precisa, sería sumamente útil para muchas investigaciones, en particular las relativas a las operaciones con información privilegiada. Sin embargo, la Comisión, si es necesario, puede obtener esta información del broker-dealer específico y del cliente durante las consultas de seguimiento. Por consiguiente, la Comisión suprime este requisito de la subdivisión (a) (2) (ii) de la Regla 17a-25, tal como fue adoptada. En segundo lugar, la SIA pidió aclaraciones sobre si el número de identificación fiscal es el del cliente o el empleador de los clientes. 20 El inciso a) 2) ii) de la Regla 17a-25, tal como se aprueba, deja claro que se trata de capturar el número de identificación fiscal de los clientes y no el de los clientes empleadores. B. Información Adicional sobre la Transacción El inciso (b) de la Regla 17a-25 propuesta requiere que los corredores-corredores, a solicitud del personal de la Comisión, proporcionen identificadores de corretaje, identificadores de cuentas de precio promedio e identificadores de instituciones depositarias. Como se describe en detalle a continuación, estos elementos de datos adicionales son necesarios para agregar el comercio de los clientes que utilizan varias cuentas mantenidas en diferentes corredores de bolsa. La Comisión está adoptando estos elementos de datos adicionales en la Regla 17a-25 (b) con ciertas modificaciones sugeridas por la EIS. La SIA solicitó información adicional sobre la forma en que la Comisión estimó que menos de 100 corredores de bolsa tendrían que hacer modificaciones a su software existente de EBS. La Comisión estima que las solicitudes de EBS para la información de corretaje principal y la información de la cuenta de precio promedio se harán casi exclusivamente a agentes de compensación activos. La Comisión basó su estimación de menos de 100 empresas de compensación en nuestra experiencia con el sistema EBS - específicamente, las solicitudes de información de la División de Reglamentos de Mercado para reconstrucciones de mercado en 1994 y 1997 y la División de Enforcements uso diario del sistema EBS para La última década. En consecuencia, la Comisión sigue considerando que sus estimaciones son razonables. 1. Identificadores de Corretaje Primario Es común que un comerciante institucional o profesional enruta los pedidos de compra o venta a través de diferentes corredores de bolsa que, a su vez, envían órdenes ejecutadas a un solo broker-dealer-el broker de quotprime. Una cuenta maestra para la institución o comerciante profesional, que simplifica la gestión de registros y la supervisión de la actividad comercial. Debido a que los intermediarios utilizan diferentes medios para identificar las cuentas de corretaje principal en las presentaciones de EBS, la Comisión ha tenido dificultades para identificar casos en los que una transacción fue reportada dos veces - por el agente corredor ejecutor y por el agente principal. Como resultado, cuando la Comisión llevó a cabo análisis de negociación, puede haber sin darse cuenta doble de algunas operaciones. Para analizar mejor esta actividad cada vez más frecuente y para evitar el doble recuento de estas transacciones, la Comisión propuso dos nuevos elementos de datos para identificar de manera uniforme las operaciones de corretaje principal. En primer lugar, en el inciso (b) (1) (i) de la Regla 17a-25, si un intermediario que efectúa la notificación efectúa transacciones para un cliente y transmite las transacciones de cuentas a un intermediario principal, entonces la presentación de EBS deberá incluir un Identificador para este tipo de transacción según lo especificado por su SRO designada bajo la Regla 17d-1 de la Ley de Intercambio. La SIA expresó su preocupación por el hecho de que el texto del inciso (b) (1) (i) de la regla propuesta pueda abarcar otros tipos de transacciones que impliquen el cambio de una posición de una empresa a otra, como por ejemplo quotgive-upsquot o quotstep-outs. Quot La Comisión reitera que el inciso (b) (1) (i) tiene como propósito dar cuenta de los arreglos de corretaje principal. 22 En segundo lugar, según lo propuesto, el inciso ii) del apartado b) 1) de la Regla 17a-25 requeriría que un broker principal recibiera transacciones de múltiples corredores de bolsa para incluir en su oferta EBS el número de cámara de compensación o símbolo alfa utilizado por Cada uno de los corredores ejecutores. Sin embargo, tanto la SIA como las SRO 23 expresaron su preocupación por el hecho de que este requisito de presentación de informes plantearía problemas de formato. La Comisión considera que el marco de presentación de informes propuesto en el inciso ii) del apartado b) del párrafo 1 de la Regla 17a-25 habría proporcionado al personal de la Comisión la capacidad de comprobación cruzada óptima para las transacciones que implicaran acuerdos de corretaje principal. Sin embargo, en respuesta a las inquietudes planteadas por la SIA y las SRO, la Comisión ha modificado el texto de la Regla 17a-25 de la subsección (b) (1) (ii), tal como fue adoptado, para exigir que los principales intermediarios informen utilizando un identificador Para este tipo de transacción según lo especificado por su SRO designado bajo la Regla 17d-1 de la Ley de Intercambio. 24 La Comisión trabajará con los SRO para desarrollar un identificador universal que ayude a la Comisión a identificar un acuerdo de corretaje principal. 2. Identificadores de cuentas de precio promedio Los intermediarios de bolsa usan frecuentemente cuentas de precios de cuota como un mecanismo para comprar o vender grandes cantidades de un determinado valor para sus clientes. Bajo este acuerdo, una cuenta de precio promedio de intermediarios puede comprar o vender un valor en pequeños incrementos a lo largo de una sesión de negociación y luego transferir la posición larga o corta acumulada a una o más cuentas por un precio medio o un precio promedio ponderado por volumen después El cierre del mercado. De manera similar a las transacciones que implican acuerdos de corretaje principal, en la actualidad no existe uniformidad en la forma en que los intermediarios de bolsa identifican estas transacciones en las presentaciones de EBS. En consecuencia, los análisis de las operaciones de la Comisión pueden haber contabilizado estas transacciones de forma inadvertida, una vez en la presentación EBS para la cuenta media de las empresas y otra vez en la presentación EBS para las cuentas que reciben posiciones de la cuenta media. Por consiguiente, la Comisión propuso dos nuevos elementos de datos en la subsección (b) (2) de la Regla 17a-25 para identificar de manera uniforme las transacciones de las cuentas de precios medios. Como se propone, en virtud de la subsección (b) (2) (i), un informe EBS para una cuenta de cliente que recibe transacciones de precio promedio tendría que incluir identificadores para cada cuenta de precio promedio relevante. Con arreglo a la subdivisión b) 2) ii), tal como se había propuesto, un informe de EBS para una cuenta de precios medios de una empresa tendría que incluir identificadores para cada una de las cuentas que reciben posiciones de la cuenta de precios medios. Tanto la SIA como las SRO 25 mencionaron dificultades de formateo y costos de programación si se adoptó la subsección (b) (2) según lo propuesto. Si bien la Comisión considera que el marco de presentación de informes propuesto en la subsección (b) (2) de la Regla 17a-25 habría proporcionado la capacidad óptima de comprobación cruzada para las transacciones con cuentas de precios promedio, la Comisión ha modificado el texto de las subsecciones b) I) yb) 2) ii) obligar a una empresa a distinguir el régimen de la cuenta media de los precios con un identificador para este tipo de transacción, según lo especificado por los intermediarios designados SRO con arreglo a la Regla 17d-1 de la Ley de cambios . 26 La Comisión colaborará con los SRO en el desarrollo de identificadores universales sencillos que ayudarán a la Comisión a establecer un acuerdo de precios medios. 3. Identificadores utilizados por las instituciones de depósito La Comisión no recibió comentarios sobre el inciso (b) (3) de la propuesta Regla 17a-25, que requiere que un corredor-negociante que procese una transacción para una cuenta a través de una institución depositaria informe las cuentas Identificador de depósito. La inclusión de un identificador de cuenta de depósito en los informes de EBS debería acelerar en gran medida los esfuerzos del personal de la Comisión para agrupar el comercio al realizar reconstrucciones comerciales complejas. C. Información para facilitar las solicitudes de EBS La Comisión no recibió observaciones sobre el párrafo c) de la propuesta de regla 17a-25. El párrafo (c) requiere que los intermediarios de corretaje presenten a la Comisión, previa solicitud, cierta información sobre sus personas de contacto y que mantengan esta información actualizada. La Comisión propuso esta parte de la regla porque se ha topado con un problema recurrente, debido a la frecuente rotación del personal ya las reorganizaciones de los corredores de bolsa, al dirigir las solicitudes de EBS al personal apropiado de los corredores de bolsa. La Comisión prevé pedir inicialmente únicamente a los intermediarios que hayan recibido recientemente solicitudes de EBS de la Comisión que proporcionen información de contacto actual. D. Otra información En la propuesta de publicación, la Comisión solicitó explícitamente comentarios sobre otros tipos de información que pudieran ser útiles para analizar el comercio en reconstrucciones comerciales más complejas y en investigaciones de ejecución. Por ejemplo, la Comisión señaló que los tiempos de ejecución serían útiles en las reconstrucciones comerciales, en particular aquellas que se centran en el comercio durante las bruscas oscilaciones del mercado. Hasta la fecha, sin embargo, los tiempos de ejecución no han sido incluidos en los informes de EBS porque esta información generalmente no ha estado disponible a través de los sistemas de registros de cuentas de broker-dealer que se usan para preparar los informes EBS (aunque la información del tiempo de ejecución puede estar disponible en otro broker - Mantenimiento de registros). La Comisión también observó en la Propuesta de Resolución que algunos representantes del sector de valores han indicado anteriormente a la Comisión que, al menos para las transacciones realizadas mediante sistemas automatizados de encaminamiento de órdenes, podrían utilizarse identificadores de secuencia secuencial para los informes EBS en lugar de la ejecución real veces. 28 La inclusión de identificadores de secuencia de órdenes en los informes EBS permitiría al personal de la Comisión obtener tiempos de entrada de órdenes para determinados oficios. Una vez que se aislan tales transacciones, los números de secuencia de órdenes de transacción pueden ser emparejados con informes de entrada de órdenes cronometrados capturados por los sistemas internos de los intermediarios o con pistas de auditoría cronometradas e informes de SRO relacionados. El SIA identificó una serie de problemas con la ampliación del sistema EBS para incluir tiempos de ejecución o identificadores de secuencia de órdenes. Por ejemplo, la SIA observó que muchas firmas de compensación que manejan cuentas propietarias de un corredor de introducción no suelen mantener este tipo de información acerca de la empresa introductora. Además, muchos intermediarios no tienen un vínculo automatizado entre el archivo de pedido, donde se guardaría este tipo de información, en el archivo comercial, que interactúa con el sistema EBS. 29 La Comisión sigue creyendo que, habida cuenta del gran número de operaciones que se enrutan y ejecutan utilizando sistemas automatizados, la captura de los identificadores apropiados de la secuencia de pedidos en los informes EBS podría acelerar considerablemente las reconstrucciones comerciales en las que el calendario preciso de una determinada actividad comercial sea crítico. Sin embargo, debido a la configuración actual de los sistemas de broker-dealers, los broker-dealers incurrirían en ciertos costos y dificultades prácticas para capturar tiempos de ejecución o identificadores de secuencia de pedidos. En consecuencia, la Comisión no modifica la Regla 17a-25 para exigir este tipo de información en este momento. La Comisión observa que tradicionalmente ha sido flexible al trabajar con pequeños intermediarios que necesitan proporcionar informes de transacciones. En los casos en que un pequeño broker-dealer no tenga ya la capacidad de presentar la información sobre el sistema EBS, el personal de la Comisión ha aceptado transmisiones manuales. La Regla 17a-25 propuesta no pretende ni cambiará este enfoque flexible para obtener los informes de transacción necesarios de los pequeños corredores de bolsa. Además, la Comisión puede basarse en su facultad general de exención con arreglo al artículo 36 de la Ley de Bolsas 30 para eximir a determinados corredores cuando la aplicación de los requisitos de presentación de informes de la Regla 17a-25 no sea necesaria o apropiada por el interés público, La protección de los inversionistas, o de otra manera en la promoción de los propósitos de la regla. 31 Los intermediarios remitirán la información requerida de conformidad con la Regla 17a-25 en el formato especificado por los corredores-distribuidores SRO designados de acuerdo con la Regla 17d-1 de la Ley de Intercambio, a menos que se especifique lo contrario por la norma de la Comisión. En la actualidad, entendemos que las SRO tienen la intención de que sus especificaciones técnicas sean revisadas 120 días antes de la fecha de vigencia de la Regla 17a-25 (b). En ausencia de las especificaciones técnicas SRO necesarias para implementar este párrafo 120 días antes de la fecha de vigencia, la Comisión promulgará reglas especificando el formato de presentación técnica para las presentaciones de EBS. 32 El PCX preguntó cómo la implementación del nuevo sistema EBS basado en la web de NASDR alteraría el alcance y las metas de la Regla 17a-25. La Comisión considera que el marco del artículo 17a-25 ofrece flexibilidad suficiente para permitir a los agentes de bolsa notificar las transacciones en cualquier formato EBS que establezcan sus SRO designadas. En particular, los sistemas informáticos de la Comisión están preparados para dar cabida al nuevo sistema NASDR. Las disposiciones de la Regla 17a-25 entrarán en vigencia 30 días después de su publicación en el Registro Federal, con excepción de la subsección (b) de la Regla 17a-25, que entrará en vigencia 180 días después de su publicación en el Registro Federal. La SIA solicitó que la Comisión, al adoptar y aplicar la Regla 17a-25, tenga presentes los retos de sistemas en curso en el sector de los valores, incluida la conversión del ciclo comercial de un ciclo de tres días a un día y la plena aplicación del Precios decimales en acciones y opciones. La Comisión es consciente de los retos tecnológicos a los que se enfrentará la industria de valores durante los próximos meses. Por lo tanto, la Comisión está retrasando la fecha de vigencia de la subsección (b) de la Regla 17a-25 y se compromete a trabajar con los SROs y la industria de valores en el desarrollo de una estrategia para reformatear el sistema EBS de manera que no perturbe En los próximos meses. VI. Ley de Reducción de Trámites Como se describe en la Propuesta de Liberación, la Regla 17a-25 contiene una cierta colección de requisitos de información en el sentido de la Ley de Reducción de Trámites de 1995 33, y la Comisión los sometió a la Oficina de Administración y Presupuesto (quotOMBquot) para su revisión. La OMB aprobó la recopilación de información y se le asignó el número de control 3235-0540. La recopilación de información está de acuerdo con los requisitos de autorización de 44 U. S.C. 3507. El título para la recopilación de información es: Regla 17a-25, Presentación electrónica de información sobre transacciones de valores por parte de miembros, corredores y distribuidores. La regla final no contiene modificaciones substantivas o materiales a las colecciones de información originalmente establecidas en la Propuesta de Liberación. La recopilación de obligaciones de información impuesta por la Regla 17a-25 es obligatoria. Los períodos de retención para la recolección de información ya están especificados en la Regla 17a-4 de la Ley de Intercambio. 34 La información presentada de conformidad con la Regla 17a-25 se mantendrá confidencial, sujeto a las disposiciones de la Ley de Libertad de Información, 5 U. S.C. 552. Una agencia no puede conducir ni patrocinar, y una persona no está obligada a responder a una recopilación de información a menos que muestre un número de control actualmente válido. La Comisión solicitó comentarios públicos sobre la recopilación de los requisitos de información contenidos en la propuesta de liberación. Como se discute a continuación, la SIA presentó un comentario sobre el número de corredores que tendrán que modificar su software relacionado con EBS para capturar e informar los nuevos elementos de datos de acuerdo con la subsección (b) de la Regla 17a-25. A. Resumen de la recolección de información de conformidad con la Regla 17a-25 La regla 17a-25 requiere que los intermediarios de corretaje presenten electrónicamente la información sobre transacciones de valores, incluidos los identificadores de los acuerdos de corretaje principal, las cuentas de precios medios y las instituciones depositarias, Personal de la Comisión para el cumplimiento y otros fines reglamentarios. Además, la norma también exigirá que los intermediarios de corretaje presenten y mantengan actualizada la información de la persona de contacto para las solicitudes de EBS. B. Utilización de la información La Comisión utilizará la información recopilada de conformidad con la Regla 17a-25 propuesta para las investigaciones o investigaciones de aplicación de la ley y las reconstrucciones comerciales, así como para las inspecciones y exámenes. Como se explica en la Propuesta de Liberación, aunque la Regla 17a-25 se aplicará a todos los aproximadamente 7,700 corredores que actualmente están registrados en la Comisión, la mayoría de las provisiones se aplicarán solamente a los 5.500 corredores que hacen negocios con el público en general. La Comisión estimó además en la propuesta que el requisito de presentar identificadores para los acuerdos de corretaje principal, las cuentas de precios medios y las instituciones depositarias afectaría a un número significativamente menor de intermediarios, estimados en menos de 100 empresas. En su carta de comentarios, la SIA pidió una explicación más detallada de la base de la estimación de la Comisión de que menos de 100 empresas tendrían que realizar una modificación única de su software relacionado con EBS para capturar e informar los nuevos elementos de datos. Como se ha mencionado anteriormente, la Comisión ha utilizado el sistema EBS durante más de una década. Por ejemplo, la División de Regulación del Mercado utilizó los informes de EBS para reconstruir el mercado en 1994 y 1997, y la División de Ejecución envía peticiones EBS casi diariamente. Sobre la base de esta experiencia, la Comisión estimó el número de empresas de compensación activas que reciben regularmente solicitudes de EBS. En consecuencia, la Comisión sigue creyendo que su estimación de menos de 100 empresas es razonable. D. Carga total de informes anuales y mantenimiento de registros Como se indica en la Propuesta de Liberación, la Regla 17a-25 no debe imponer cargas adicionales a la gran mayoría de los corredores. El personal de la Comisión trabajará con los pocos intermediarios que podrían no contar con sistemas EBS para desarrollar medios rentables de obtener información sobre transacciones de valores solicitados, ya sea utilizando el sistema EBS u otros mecanismos. Además, si la notificación electrónica de la información sobre transacciones de valores no es factible o no resulta excesivamente costosa para un determinado corredor de bolsa, la Comisión puede utilizar su facultad general de exención en virtud del artículo 36 de la Ley de Bolsas. Como se discute en la Propuesta de Liberación, la carga horaria anual de la regla propuesta para corredores de bolsa individuales varía ampliamente debido a las diferencias en los niveles de actividades de los encuestados y debido a las diferencias en la corriente Registros de los encuestados. However, it is estimated that electronic response firms would spend approximately 8 minutes and manual response firms would spend 1 1/2 hours responding to an average blue sheet request. Based on its experience with the EBS system, the Commission estimates that it sends approximately 14,000 electronic blue sheet requests per year, of which approximately 350 are sent to manual response firms. Accordingly, the annual aggregate hour burden for electronic response firms is estimated to be 1,820 hours (13,650 x 8 247 60). The annual aggregate hour burden for manual response firms is estimated to be 525 hours (350 x 90 247 60). In addition, the Commission estimates that it will request 1,400 broker-dealers to supply the contact information identified in proposed Rule 17a-25(c), and the submission should take each broker-dealer approximately 5 minutes to prepare. To be conservative, the Commission estimates that each of these broker-dealers will revise the contact information twice a year, and each revision will also take approximately 5 minutes to prepare (10 minutes total). The annual aggregate burden for supplying the information requested in proposed Rule 17a-25(c) is 350 hours (1400 x 15 247 60). Overall, the annual aggregate burden for all respondents to the collection of information requirements of Rule 17a-25 is estimated to be 2,695 hours (1,820 525 350). 2. Capital Cost to Broker-Dealers and SROs 36 As stated in the Proposing Release, the Commission estimates that less than 100 broker-dealers will have to perform a one-time modification of their EBS-related software to capture and report new data elements. On average, each of these broker-dealers will incur capital or start-up costs of 150,000 to modify their EBS systems . The Commission also estimates that there will be no additional costs associated with the operation and maintenance of the modified EBS systems. Accordingly, the total cost burden for broker-dealers to modify their EBS systems is estimated to be 15 million (100 x 150,000). In addition, based on its discussions with the SROs, the Commission estimates that three SROs will each incur approximately 29,500 in capital costs to make their systems compatible with the broker-dealers. The Commission also estimates that the SROs will not incur additional costs for the operation and maintenance of the modified EBS systems. VII. Costs and Benefits of the Rule The Commission identified several benefits and costs to investors and market participants in the Proposing Release. To assist the Commission in its evaluation of the costs and benefits that may result from Rule 17a-25, commenters were requested to provide analyses and data relating to the costs and benefits associated with the proposal. As previously noted, the SIA questioned the Commissions estimate of the number of broker-dealers that must modify their existing EBS software to capture prime brokerage identifiers, average price account identifiers, and depository institution identifiers. However, as explained above, the Commission continues to believe that its estimates, including its costs estimates, are reasonable. The Commission is not making any changes to Rule 17a-25, as adopted, which will increase the cost estimates for broker-dealers or SROs. In particular, subsection (a) of Rule 17a-25 merely codifies existing SRO requirements for EBS. The estimated annual aggregate hour burden for all respondents to the collection of information requirements is 2,695 hours. The total annualized cost burden for those broker-dealers to modify their existing EBS software is estimated to be 15 million in capital or start-up costs. And the estimated total annualized cost burden for SROs is 88,500. The Commission believes that neither the broker-dealers nor the SROs will incur additional costs for the operation and maintenance of the modified EBS systems. The Commission continues to believe that any costs to market participants are justified by the overall benefits of Rule 17a-25. The rule will significantly assist the Commissions ability to conduct timely and accurate trading analyses for market reconstructions and complex enforcement inquiries or investigations, as well as inspections and examinations. The current system severely limits the Commissions ability to aggregate transactions effected by entities that use multiple accounts at broker-dealers, and can produce trading compilations that double-count these transactions. Augmented trading analyses will improve the Commissions ability to monitor the securities markets, and, thereby, promote investor protection. VIII. Consideration of Burden on Competition, and Promotion of Efficiency, Competition, and Capital Formation Section 23(a)(2) of the Exchange Act 37 requires the Commission, when promulgating rules under the Exchange Act, to consider the impact any rule would have on competition, and not adopt any rule that would impose a burden on competition that is not necessary or appropriate in furtherance of the Exchange Act. Section 3(f) of the Exchange Act 38 requires the Commission, when engaging in rulemaking that requires it to consider or determine whether an action is necessary or appropriate in the public interest, to consider whether the action will promote efficiency, competition, and capital formation. In the Proposing Release, the Commission solicited comments on the effects of Rule 17a-25 on competition, efficiency, and capital formation. The Commission did not receive any comments regarding these specific issues. The Commission has considered Rule 17a-25 in light of the standards cited in Sections 3(f) and 23(a)(2) of the Exchange Act, and believes that the rule will not impose any significant burden on competition not necessary or appropriate in furtherance of the Exchange Act. As discussed in the cost-benefit section, only some broker-dealers will incur capital or start-up costs to modify their EBS-related software. However, the Commission believes the modifications are necessary to promote efficiency in the blue-sheeting process, and promote investor protection. IX. Summary of Final Regulatory Flexibility Act Analysis A Final Regulatory Flexibility Analysis (quotFRFAquot) has been prepared in accordance with Section 4 of the Regulatory Flexibility Act (quotRFAquot), to provide a description and estimate of the number of small entities that will be affected by Rule 17a-25. The following summarizes the FRFA. The Commission estimates that approximately 12 of registered broker-dealers, or approximately 1,000 broker-dealers, qualify as small broker-dealers. 39 As discussed more fully in the FRFA, Rule 17a-25 will affect these small broker-dealers because all broker-dealers will be required to submit securities transaction information to the Commission, upon request. However, the Commission believes that only a relatively few EBS requests are sent to small broker-dealers. Generally, EBS requests are sent to large clearing firms or those broker-dealers that self-clear. These entities fall outside the definition of a small broker-dealer. In addition, the Commissions experience with the EBS system over the last ten years indicates that entities that trade through multiple accounts at different firms generally do not effect their trades through quotsmallquot broker-dealers. Accordingly, the Commission does not believe that any small broker-dealer will be required to modify its EBS-related software to capture and report the new data elements in subsection (b) of Rule 17a-25. The FRFA further states that proposed Rule 17a-25 would not impose any additional recordkeeping requirements for small broker-dealers. The elements of trade information required for EBS reports to the Commission are already maintained by broker-dealers pursuant to Rules 17a-3 and 17a-4 of the Exchange Act and SRO rules. When small broker-dealers receive the occasional EBS request, they will incur some costs when they report transaction information pursuant to requests by the Commission staff for enforcement purposes. The Commission believes, however, that any new costs associated with Rule 17a-25 will be minimal because broker-dealers are already required to have in place adequate systems and procedures to submit transaction reports to the appropriate SRO. Moreover, the Commission staff has traditionally been flexible when working with small broker-dealers who need to supply transaction reports. In cases in which a small broker-dealer does not already have the capacity to submit information over the EBS system, the Commission staff has accepted manual transmissions. Proposed Rule 17a-25 is not intended to change this flexible approach in obtaining necessary transaction reports from small broker-dealers. The FRFA also discusses the various alternatives considered by the Commission in connection with the proposed rule that might minimize the effect on small entities. These include, among others, creating differing compliance or reporting requirements or timetables that take into account the resources available to small entities, and whether such entities could be exempted from the proposed rule, or any part thereof. The Commission has drafted the proposal to be consistent with the concerns of small entities. For example, as discussed above, the Commission has often permitted small broker-dealers to submit the transaction information manually, rather than electronically. The Commission may also use its exemptive authority under Section 36 of the Exchange Act. A wholesale exemption from the proposed rule for small broker-dealers, however, would prevent the Commission from fully protecting investors and maintaining the fair and orderly operation of the nations securities markets. The Commission received no comments on the Initial Regulatory Flexibility Analysis (quotIRFAquot) prepared in connection with the Proposing Release. A copy of the FRFA may be obtained by contacting Anitra Cassas, Division of Market Regulation, Securities and Exchange Commission, 450 Fifth Street, N. W. Washington, D. C. 20549-1001 (202) 942-0089. X. Statutory Authority Rule 17a-25 under the Exchange Act is being adopted pursuant to 15 U. S.C. 78a et s eq . particularly Sections 17(a) and 23(a) of the Act, unless otherwise noted. List of Subjects Administrative practice and procedure, Authority delegations (Government agencies). Broker-dealers , Reporting and recordkeeping requirements, Securities. Text of the Final Rule and Amendments In accordance with the foregoing, Title 17, Chapter II of the Code of Federal Regulations is amended as follows: PART 200 - ORGANIZATON CONDUCT AND ETHICS AND INFORMATION AND REQUESTS 1. The authority citation for Part 200 continues to read, in part, as follows: Authority . 15 U. S.C. 77s, 78d-1, 78d-2, 78w, 78 ll (d), 78mm, 79t, 77sss, 80a-37, 80b-11, unless otherwise noted. 2. Section 200.30-3 is amended by adding paragraph (a)(69) to read as follows: sect200.30-3 Delegation of authority to Director of Division of Market Regulation. (74) Pursuant to section 36 of the Act (15 U. S.C. 78mm) to review and, either unconditionally or on specified terms and conditions, grant, or deny exemptions from rule 17a-25 of the Act (sect240.17a-25 of this chapter). 3. Section 200.30-4 is amended by adding paragraph (a)(12) to read as follows: sect200.30-4 Delegation of authority to Director of Division of Enforcement. (12) Pursuant to Section 36 of the Securities Exchange Act of 1934 (15 U. S.C. 78mm) to review and, either unconditionally or on specified terms and conditions, grant, or deny exemptions from rule 17a-25 of the Act (sect240.17a-25 of this chapter), provided that the Division of Market Regulation is notified of any such granting or denial of an exemption. 4. Section 200.30-18 is amended by redesignating paragraphs (h) and (i) as paragraphs (i) and (j) and by adding new paragraph (h) to read as follows: sect200.30-18 Delegation of authority to Director of the Office of Compliance Inspections and Examinations. (h) Pursuant to Section 36 of the Exchange Act (15 U. S.C. 78mm) to review and, either unconditionally or on specified terms and conditions, grant, or deny exemptions from rule 17a-25 of the Act (sect240.17a-25 of this chapter), provided that the Division of Market Regulation is notified of any such granting or denial of an exemption. PART 240 -- GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 1934 5. The authority citation for Part 240 continues to read, in part, as follows: Authority . 15 U. S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78f, 78i, 78j, 78j-1, 78k, 78k-1, 78 l . 78m, 78n, 78o, 78p, 78q, 78s, 78u-5, 78w, 78x, 78 ll (d), 78mm, 79q, 79t, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4 and 80b-11, unless otherwise noted. 6. Section 240.17a-25 is added to read as follows: sect240.17a-25 Electronic submission of securities transaction information by exchange members, brokers, and dealers. (a) Every member, broker, or dealer subject to sect240.17a-3 shall, upon request, electronically submit to the Commission the securities transaction information as required in this section: (1) If the transaction was a proprietary transaction effected or caused to be effected by the member, broker, or dealer for any account in which such member, broker, or dealer, or person associated with the member, broker, or dealer, is directly or indirectly interested, such member, broker or dealer shall submit the following information: (i) Clearing house number, or alpha symbol of the member, broker, or dealer submitting the information (ii) Clearing house number(s), or alpha symbol(s) of the member(s), broker(s) or dealer(s) on the opposite side of the transaction (iii) Identifying symbol assigned to the security (iv) Date transaction was executed (v) Number of shares, or quantity of bonds or options contracts, for each specific transaction whether each transaction was a purchase, sale, or short sale and, if an options contract, whether open long or short or close long or short (vi) Transaction price (vii) Account number and (viii) The identity of the exchange or other market where the transaction was executed. (2) If the transaction was effected or caused to be effected by the member, broker, or dealer for any customer account, such member, broker, or dealer shall submit the following information: (i) Information contained in paragraphs (a)(1)(i) through (a)(1)(viii) of this section (ii) Customer name, address(es), branch office number, registered representative number, whether the order was solicited or unsolicited, date account opened, and the customers tax identification number(s) and (iii) If the transaction was effected for a customer of another member, broker, or dealer, whether the other member, broker, or dealer was acting as principal or agent on the transaction. (b) In addition to the information in paragraph (a) of this section, a member, broker, or dealer shall, upon request, electronically submit to the Commission the following securities transaction information for transactions involving entities that trade using multiple accounts: (1) (i) If part or all of an accounts transactions at the reporting member, broker, or dealer have been transferred or otherwise forwarded to one or more accounts at another member, broker, or dealer, an identifier for this type of transaction and (ii) If part or all of an accounts transactions at the reporting member, broker, or dealer have been transferred or otherwise received from one or more other members, brokers, or dealers, an identifier for this type of transaction. (2) (i) If part or all of an accounts transactions at the reporting member, broker, or dealer have been transferred or otherwise received from another account at the reporting member, broker, or dealer, an identifier for this type of transaction and (ii) If part or all of an accounts transactions at the reporting member, broker, or dealer have been transferred or otherwise forwarded to one or more other accounts at the reporting member, broker, or dealer, an identifier for this type of transaction. (3) If an accounts transaction was processed by a depository institution, the identifier assigned to the account by the depository institution. (c) Every member, broker, or dealer shall, upon request, submit to the Commission and, keep current, information containing the full name, title, address, telephone number(s), facsimile number(s), and electronic-mail address(es) for each person designated by the member, broker, or dealer as responsible for processing securities transaction information requests from the Commission. (d) The member, broker, or dealer should comply with the format for the electronic submission of the securities transaction information described in paragraphs (a) and (b) of this section as specified by the member, broker, or dealers designated self-regulatory organization under sect240.17d-1, unless otherwise specified by Commission rule. Por la Comisión. Jonathan G. Katz Secretary Footnotes Section 17(a)(1) of the Exchange Act requires registered broker-dealers to make, keep, furnish, and disseminate records and reports prescribed by the Commission quotas necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes ofquot the Exchange Act. 15 U. S.C. 78q(a)(1). Rules 17a-3 and 17a-4 under the Exchange Act specify minimum requirements with respect to the records that must be maintained by broker-dealers, as well as the periods during which these records and other documents relating to a broker-dealers business must be preserved. 17 CFR 240.17a-3 and 240.17a-4. As noted in the Proposing Release, the Commission believes that an enhanced EBS system will provide a more efficient and cost-effective way to conduct timely and accurate reviews of the activities of large traders for regulatory or enforcement purposes, than would further efforts to design and implement the large trader reporting system authorized by the Market Reform Act of 1990, and incorporated into section 13(h) of the Exchange Act. 15 U. S.C. 78m(h). See Proposing Release, at 7. SIA Letter, at 6. If a broker-dealer has a question concerning whether a transaction should be reported under Rule 17a-25(b), as adopted, the broker-dealer can request interpretive guidance from the Commission staff. Commission staff discussed THE FEASIBILITY OF CAPTURING THE PRIME BROKERAGE IDENTIFIERS, AVERAGE PRICE ACCOUNT IDENTIFIERS, AND DEPOSITORY INSTITUTION IDENTIFIERS, INCLUDING COST ESTIMATES, WITH THE INTERMARKET SURVEILLANCE GROUP AND THE SIA ON MAY 10, 2000 AND MAY 16, 2000, RESPECTIVELY. See supra note 23. The Commission has determined that the most efficient means of obtaining EBS contact information from the appropriate broker-dealers is by request, rather than imposing a general reporting obligation on all broker-dealers. Thousands of broker-dealers who clear their trades through other firms never receive EBS data requests from the Commission. In addition, firms who do not trade with the public or are otherwise inactive traders are rarely asked to supply transaction information. Accordingly, the Commission believes it would be most cost-effective to maintain its list of EBS contacts based on the staffs experience with the types of broker-dealers that are likely to be recipients of future EBS requests. Firms use these identifiers to trace orders routed through automated systems. These identifiers are also routinely captured by some audit trail systems and other recordkeeping systems, such as the NYSEs daily program trading reports from member firms. The Commission further noted in the Proposing Release that other types of information captured by the SROs audit trail systems, such as the NASDs Order Audit Trail System, may also be useful to the Commission in its trading analyses. For example, these systems generally capture the date and time of origination or receipt of the order, and information on when the order is transmitted to another department within the member firm, to another member firm, or to a non-member. The SIA noted, however, that connecting information maintained under OATS to the EBS system would raise difficulties and costs. SIA Letter, at 6-7. 15 U. S.C. 78mm. Procedures for filing applications for orders for exemptive relief under Section 36 are found in the Commissions Rules of General Application, 17 CFR 240.0-12. The Commission is amending Rules 30-3, 30-4, and 30-18 of its Rules of Practice to add new paragraphs (a)(69), (a)(12), and (h), respectively. 17 CFR 200.30-3, 200.30-4, and 200.30-18. These paragraphs delegate the authority to the Directors of the Division of Market Regulation, the Division of Enforcement, and the Office of Compliance Inspections and Examinations to grant or deny, in whole or in part, exemptions from the requirements of Rule 17a-25. The Office of Compliance Inspections and Examinations uses the EBS system as part of its inspections and examinations. If the Commission sets the technical filing requirements for EBS submissions, we anticipate adopting these requirements using a similar approach to that used by the Commission in specifying the technical formatting requirements for electronic filings through the EDGAR system. Securities Act Release No. 7858 (May 16, 2000), 65 FR 34079 (May 26, 2000). 44 U. S.C. 3501 et seq. Final Rule: Electronic Submission of Securities Transaction Information by Exchange Members, Brokers, and Dealers SECURITIES AND EXCHANGE COMMISSION 17 CFR Parts 200 and 240 Release No. 34-44494 File No. S7-12-00 Electronic Submission of Securities Transaction Information by Exchange Members, Brokers, and Dealers AGENCY: Securities and Exchange Commission. ACTION: Final rule. SUMMARY: The Securities and Exchange Commission (quotCommissionquot) is adopting Rule 17a-25 under Section 17 of the Securities Exchange Act of 1934 (quotExchange Actquot), to require brokers and dealers to submit electronically to the Commission, upon request, information on customer and firm securities trading. Rule 17a-25 is designed to improve the Commissions capacity to analyze electronic submissions of transaction information, thereby facilitating Commission enforcement investigations and other trading reconstructions. EFFECTIVE DATE . Insert date 30 after publication in the Federal Register , except sect240.17a-25(b), which shall become effective on insert date 180 days after publication in the Federal Register . FOR FURTHER INFORMATION CONTACT: Alton Harvey, Office Chief, at (202) 942-4167 or Anitra Cassas, Special Counsel, at (202) 942-0089, Division of Market Regulation, Securities and Exchange Commission, 450 Fifth Street, N. W. Washington, D. C. 20549-1001. On May 2, 2000, the Commission proposed for comment Rule 17a-25 1 under the Exchange Act to require brokers and dealers to submit electronically to the Commission, upon request, information on customer and firm securities trading. 2 The rule is designed to more fully account for evolving trading strategies used primarily by institutional and professional traders, thereby improving the Commissions ability to analyze trading in complex market-wide reconstructions and enforcement investigations. Based on the Commissions experience in analyzing securities transaction information, and after careful consideration of the comments submitted in response to the proposed rule, the Commission is adopting Rule 17a-25 with certain changes discussed below. The securities industry has witnessed tremendous change in the past two decades, both in the types of market participants and in the variety of trading strategies and products. In particular, increasing numbers of institutional and professional traders now conduct their securities trading through multiple accounts maintained at different broker-dealers. These market participants include institutional investors such as pension funds, insurance companies, foundations, endowments, mutual funds, and hedge funds. To identify buyers and sellers of securities in enforcement or other regulatory inquiries, the Commission staff regularly sends requests for securities trading records to the most active clearing firms in the relevant security. Firms are requested to submit, within ten business days, information concerning transactions by all proprietary and customer accounts that bought or sold a security during a specified review period. For several decades, the Commission requested this information by mailing questionnaire forms (known as quotblue sheetsquot because of the color on which the forms were printed) to broker-dealers to be manually completed and mailed back to the Commission. In the late 1980s, as the volume of trading and securities transactions dramatically increased, the Commission and the securities self-regulatory organizations (quotSROsquot) worked together to develop and implement a system with a universal electronic format, commonly known as the quotelectronic blue sheetquot or quotEBSquot system, to replace the manual process. 3 The universal EBS format permits the Commission and the SROs to conduct timely and thorough surveillance and enforcement inquiries. Firms generally use software to scan their account records and download the appropriate information into the standard EBS format, and then transmit the data to the Securities Industry Automation Corporation (quotSIACquot). In turn, SIAC routes the file electronically to the Commissions mainframe computer. 4 In general, the Commission uses the EBS system to obtain securities transaction information for one of two purposes: (1) to assist in the examination for and investigation of possible federal securities law violations, primarily involving insider trading or market manipulation and (2) to conduct market reconstructions, primarily following significant market volatility. Since its inception, the EBS system has performed effectively as an enforcement tool for analyzing trading in one or two securities over a limited time period. When used for large-scale investigations or market reconstructions involving numerous stocks during peak trading volume periods, however, the information provided by the EBS system has been insufficient. Specifically, the Commission has found it difficult to effectively aggregate EBS transaction information by market participants. 5 To ensure the continued effectiveness of the Commissions enforcement and regulatory programs that rely on EBS information, the Commission proposed Rule 17a-25. As proposed, Rule 17a-25 would require broker-dealers to electronically submit securities transaction information, including identifiers for prime brokerage arrangements, average price accounts, and depository institutions, in a standardized format, when requested by the Commission staff for enforcement and other regulatory purposes. In addition, the rule would require broker-dealers to submit, and keep current, contact person information for EBS requests. Proposed Rule 17a-25 was largely patterned after existing SRO rules. 6 III. Summary of Comments The Commission received comments from the Securities Industry Association (quotSIAquot) and the Pacific Exchange (quotPCXquot) on the proposed rule. 7 The SIA generally stated that it understood the Commissions need for proposed Rule 17a-25, but noted that there would be difficulties in implementing certain aspects of the proposal. The PCX asked for clarification on the application of the proposed rule to NASD Regulations new web-based EBS system. 8 A. Transaction Information The SIA had a concern with respect to the standard transaction information required under subsection (a)(2) of the proposed rule. One of the data elements required under subsection (a)(2)(ii) of proposed Rule 17a-25 and existing SRO rules 9 is the employers name of a customer who bought or sold a security that is under review. The SIA indicated that many firms would not be able to readily access this information on their EBS-related systems. 10 As a result, these firms would either have to manually enter this information, or redesign their recordkeeping systems to automatically insert the customers employer identification. The SIA also expressed concern about the additional information required under subsection (b) of the proposed rule. The SIA noted that, although the Proposing Release made it clear that subsection (b)(1)(i) of proposed Rule 17a-25 is designed for prime broker arrangements, the generic language might cover other types of transactions that involve shifting a position from one firm to another. These transactions include quotgive-upsquot (the executing broker-dealer provides the clearing number of another broker-dealer when reporting a transaction for the comparison process) and quotstep-outsquot (the executing broker-dealer provides the clearing number of another broker-dealer after submission of a transaction for the comparison process). The SIA requested rule language tailored more closely to prime brokerage arrangements. 11 Subsection (b)(1)(ii) of proposed Rule 17a-25 requires the prime broker to indicate the clearinghouse number or alpha symbol of each executing broker-dealer that forwarded part or all of the transaction. The SIA indicated that information concerning prime brokerage arrangements is typically easier for executing brokers to automatically pull up on their systems than for prime brokers. As a result, prime brokers would be required to implement more systems changes than executing brokers. 12 The SIA also asked for clarification on the amount of information required by subsection (b)(2) of Rule 17a-25, which pertains to average price account identifiers. Citing formatting difficulties and programming costs, the SIA urged the Commission to allow a single identifier to denote that an account is part of an average price account arrangement, rather than requiring broker-dealers to generate separate identifiers for the master account and each sub-account. 13 B. Other Information In the Proposing Release, the Commission solicited comments on the feasibility of requiring EBS reports to include execution times or other indicators, such as quotorder sequence numbersquot for transactions effected through an automated order routing system. In response, the SIA identified a number of practical problems in implementing these data elements, and suggested that the cost of reformatting broker-dealers systems or building new systems would outweigh the regulatory need for this information. 14 Finally, the SIA stressed that delays in implementing Rule 17a-25 may be required due to other systems challenges facing the securities industry over the coming months, such as preparations for the full implementation of decimal pricing. 15 IV. Discussion and Basis for Adoption Today, the Commission is adopting Rule 17a-25 substantially as proposed, with certain changes designed to reflect the comments. The rule applies to all exchange members, brokers and dealers subject to Rule 17a-3 of the Exchange Act. 16 Rule 17a-25 will not impose any additional recordkeeping requirements for broker-dealers broker-dealers already maintain all of the information required for the EBS reports pursuant to Section 17(a)(1) and Rules 17a-3 and 17a-4 under the Exchange Act. 17 Rule 17a-25 is intended to accomplish three objectives. First, the rule codifies the requirement that brokers and dealers must electronically submit to the Commission, upon request, information on customer and proprietary securities transaction information. Second, the rule should improve the effectiveness of the Commissions enforcement and regulatory programs by enhancing certain aspects of the EBS system to take into account evolving trading strategies used primarily by institutional and professional traders. Specifically, subsection (b) of Rule 17a-25 requires firms, upon request, to supply three additional data elements that will assist the Commission in aggregating securities transactions by entities trading through multiple accounts at more than one broker-dealer. 18 Finally, by requiring broker-dealers to provide current contact person information, the proposed rule should help ensure that the Commission can effectively direct its EBS requests to broker-dealers. A. Standard Transaction Information Subsection (a) of the proposed rule requires submission of the same standard customer and proprietary transaction information the SROs request in connection with their market surveillance or enforcement inquiries. 19 For a proprietary transaction, the broker-dealer must include the following information: (1) clearing house number or alpha symbol used by the broker-dealer submitting the information (2) clearing house number(s) or alpha symbol(s) of the broker-dealer(s) on the opposite side to the trade (3) security identifier (4) execution date (5) quantity executed (6) transaction price (7) account number and (8) identity of the exchange or market where each transaction was executed. Under the proposed rule, if a transaction was effected for a customer account (as opposed to a proprietary account), the broker-dealer would have been required to also include the customers name, customers address, name of the customers employer, the customers tax identification number, and other related account information. As noted below, the Commission has modified certain of these requirements in response to comments. Finally, if the transaction was effected for a customer of another firm or broker-dealer, the broker-dealer must state whether the other broker-dealer was acting as principal or agent on the transaction. The SIA cited two concerns regarding submission of this standard transaction information. First, the SIA noted the practical difficulties faced by firms in readily obtaining the name of the customers employer on their EBS-related systems. The Commission believes that the identity of a customers employer, if accurate, would be extremely useful for many investigations, particularly those involving insider trading. However, the Commission, if necessary, can obtain this information from the specific broker-dealer and customer during follow-up inquiries. Accordingly, the Commission is deleting this requirement from subsection (a)(2)(ii) of Rule 17a-25, as adopted. Second, the SIA asked for clarification as to whether the tax identification number is that of the customer or the customers employer. 20 Subsection (a)(2)(ii) of Rule 17a-25, as adopted, makes it clear that it is intended to capture the customers tax identification number, not that of the customers employer. B. Additional Transaction Information Subsection (b) of proposed Rule 17a-25 requires broker-dealers, upon request by Commission staff, to provide prime brokerage identifiers, average price account identifiers, and depository institution identifiers. As described in detail below, these additional data elements are needed to aggregate trading by customers that use multiple accounts maintained at different broker-dealers. The Commission is adopting these additional data elements in Rule 17a-25(b) with certain modifications suggested by the SIA. The SIA asked for additional information on how the Commission estimated that less than 100 broker-dealers would have to make modifications to their existing EBS software. The Commission estimates that EBS requests for prime-brokerage and average price account information will be made almost exclusively to active clearing broker-dealers. The Commission based its estimate of less than 100 clearing firms upon our experience with the EBS system -- specifically, the Division of Market Regulations requests for information for market reconstructions in 1994 and 1997, and the Division of Enforcements daily use of the EBS system for the last decade. Accordingly, the Commission continues to believe that its estimates are reasonable. 1. Prime Brokerage Identifiers It is common for an institutional or professional trader to route buy or sell orders through different broker-dealers, who, in turn, forward executed orders to a single broker-dealer-the quotprime broker. quot The prime broker maintains a master account for the institution or professional trader, which simplifies recordkeeping and oversight of trading activity. Because broker-dealers use different means to identify prime brokerage accounts in EBS submissions, the Commission has had difficulty identifying instances where a transaction was reported twice -- by the executing broker-dealer and by the prime broker. As a result, when the Commission performed trading analyses, it may have inadvertently double-counted some trades. To better analyze this increasingly frequent activity and to avoid inadvertently double-counting these transactions, the Commission proposed two new data elements to uniformly identify prime brokerage transactions. First, under subsection (b)(1)(i) of Rule 17a-25, if a reporting broker-dealer effects trades for a customer, and forwards the accounts transactions to a prime broker, then the EBS submission will have to include an identifier for this type of transaction as specified by its designated SRO under Rule 17d-1 of the Exchange Act. 21 The SIA expressed concern that the language in subsection (b)(1)(i) of the proposed rule may cover other types of transactions that involve shifting a position from one firm to another, such as quotgive-upsquot or quotstep-outs. quot The Commission reiterates that subsection (b)(1)(i) is intended to account for prime brokerage arrangements. 22 Second, as proposed, subsection (b)(1)(ii) of Rule 17a-25 would have required a prime broker receiving transactions from multiple executing broker-dealers to include in its EBS submission the clearing house number or alpha symbol used by each of the executing brokers. Both the SIA and the SROs 23 raised concerns, however, that this reporting requirement would pose formatting problems. The Commission believes that the reporting framework as proposed in subsection (b)(1)(ii) of Rule 17a-25 would have provided the Commission staff with the optimal crosschecking capabilities for transactions involving prime brokerage arrangements. Nevertheless, in response to the concerns raised by the SIA and the SROs, the Commission has modified the language in subsection (b)(1)(ii) of Rule 17a-25, as adopted, to require prime brokers to report using an identifier for this type of transaction as specified by their designated SRO under Rule 17d-1 of the Exchange Act. 24 The Commission will work with the SROs to develop a universal identifier that will help the Commission identify a prime brokerage arrangement. 2. Average Price Account Identifiers Broker-dealers often use quotaverage price accountsquot as a mechanism to buy or sell large amounts of a given security for their customers. Under this arrangement, a broker-dealers average price account may buy or sell a security in small increments throughout a trading session, and then transfer the accumulated long or short position to one or more accounts for an average price or volume-weighted average price after the market close. Similar to transactions involving prime brokerage arrangements, there currently is no uniformity in how broker-dealers identify these transactions in EBS submissions. As a result, the Commissions trading analyses may have inadvertently double-counted these transactions -- once in the EBS submission for the firms average price account, and again in the EBS submission for the accounts receiving positions from the average price account. Therefore, the Commission proposed two new data elements in subsection (b)(2) of Rule 17a-25 to uniformly identify average price account transactions. As proposed, under subsection (b)(2)(i), an EBS report for a customer account receiving average price transactions would have had to include identifiers for each relevant average price account. Under subsection (b)(2)(ii), as proposed, an EBS report for a firms average price account would need to include identifiers for each of the accounts receiving positions from the average price account. Both the SIA and the SROs 25 cited formatting difficulties and programming costs if subsection (b)(2) was adopted as proposed. While the Commission believes that the reporting framework as proposed in subsection (b)(2) of Rule 17a-25 would have provided the optimal crosschecking capabilities for transactions involving average price accounts, the Commission has modified the language in subsections (b)(2)(i) and (b)(2)(ii) to require a firm to distinguish average price account arrangements with an identifier for this type of transaction as specified by the broker-dealers designated SRO under Rule 17d-1 of the Exchange Act. 26 The Commission will work with the SROs to develop simple universal identifiers that will help the Commission identify an average price account arrangement. 3. Identifiers Used by Depository Institutions The Commission did not receive any comments on subsection (b)(3) of proposed Rule 17a-25, which requires a broker-dealer that processes a trade for an account through a depository institution to report the accounts depository identifier. The inclusion of a depository account identifier in EBS reports should greatly expedite efforts by the Commission staff to aggregate trading when conducting complex trading reconstructions. C. Information to Facilitate EBS Requests The Commission did not receive any comments on paragraph (c) of proposed Rule 17a-25. Paragraph (c) requires broker-dealers to submit to the Commission, upon request, certain information about their contact persons, and to keep this information current. The Commission proposed this portion of the rule because it has encountered a recurring problem, due to frequent staff turnover and reorganizations at broker-dealers, in directing EBS requests to the appropriate personnel at broker-dealers. The Commission contemplates initially asking only those broker-dealers that have recently received EBS requests from the Commission to supply current contact information. 27 D. Other Information In the Proposing Release, the Commission specifically requested comment on other types of information that could be useful in analyzing trading in more complex market-wide trading reconstructions and enforcement investigations. For example, the Commission noted that execution times would be useful in trading reconstructions, particularly those that focus on trading during sharp market swings. To date, however, execution times have not been included in EBS reports because this information generally has not been available through the broker-dealer account records systems that are used to prepare EBS reports (although execution time information may be available in other broker-dealer recordkeeping systems). The Commission also noted in the Proposing Release that some representatives of the securities industry have previously indicated to the Commission staff that, at least for transactions effected through automated order-routing systems, quotorder sequencequot identifiers might be used for EBS reports in lieu of actual execution times. 28 The inclusion of order sequence identifiers in EBS reports would enable the Commission staff to derive order entry times for particular trades. Once such trades are isolated, the transactions order sequence numbers could be matched with timed order entry reports captured by either the broker-dealers internal systems or with timed audit trails and related SRO reports. The SIA identified a number of problems with expanding the EBS system to include execution times or order sequence identifiers. For example, the SIA noted that many clearing firms that handle proprietary accounts of an introducing broker do not typically keep this type of information about the introducing firm. Further, many broker-dealers do not have an automated link between the order file, where this type of information would be kept, to the trade file, which interfaces with the EBS system. 29 The Commission continues to believe that, in view of the large number of trades that are routed and executed using automated systems, the capture of the appropriate order sequence identifiers in EBS reports could greatly expedite trading reconstructions in which precise timing of particular trading activity is critical. Nevertheless, due to the current configuration of broker-dealers systems, broker-dealers would incur certain costs and practical difficulties in capturing execution times or order sequence identifiers. Accordingly, the Commission is not modifying Rule 17a-25 to require this type of information at this time. The Commission notes that it has traditionally been flexible when working with small broker-dealers who need to supply transaction reports. In cases in which a small broker-dealer does not already have the capacity to submit the information over the EBS system, the Commission staff has accepted manual transmissions. Proposed Rule 17a-25 is neither intended to, nor will it, change this flexible approach in obtaining necessary transaction reports from small broker-dealers. In addition, the Commission may rely on its general exemptive authority under Section 36 of the Exchange Act 30 to exempt particular broker-dealers when the application of the reporting requirements of Rule 17a-25 would not be necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the rule. 31 Broker-dealers will submit the information required under Rule 17a-25 in the format specified by the broker-dealers SRO that is designated under Rule 17d-1 of the Exchange Act, unless otherwise specified by Commission rule. At the current time, we understand that the SROs intend to have their technical specifications revised by 120 days before the effective date for Rule 17a-25(b). In the absence of the necessary SRO technical specifications to implement this paragraph by 120 days before the effective date, the Commission will promulgate rules specifying the technical filing format for EBS submissions. 32 The PCX asked how the implementation of the NASDRs new web-based EBS system would alter the scope and goals of Rule 17a-25. The Commission believes that the framework for Rule 17a-25 provides sufficient flexibility to allow broker-dealers to report transactions in whatever EBS formats are established by their designated SROs. In particular, the Commissions computer systems are prepared to accommodate the new NASDR system. The provisions of Rule 17a-25 will be effective on insert 30 days after publication in the Federal Register , except for subsection (b) of Rule 17a-25, which shall become effective on insert 180 days after publication in the Federal Register . The SIA requested that, in adopting and implementing Rule 17a-25, the Commission be mindful of the ongoing systems challenges in the securities industry, including conversion of the trading cycle from a three-day to a one-day cycle and the full implementation of decimal pricing in stocks and options. The Commission is cognizant of the technological challenges that will be faced by the securities industry over the next few months. Thus, the Commission is delaying the effective date of subsection (b) of Rule 17a-25, and is committed to working with the SROs and the securities industry in developing a strategy for reformatting the EBS system in a manner that does not disrupt other critical systems initiatives in the coming months. VI. Paperwork Reduction Act As described in the Proposing Release, Rule 17a-25 contains quotcollection of informationquot requirements within the meaning of the Paperwork Reduction Act of 1995, 33 and the Commission submitted them to the Office of Management and Budget (quotOMBquot) for review. OMB approved the collection of information, and assigned control number 3235-0540. The collection of information is in accordance with the clearance requirements of 44 U. S.C. 3507. The title for the collection of information is: Rule 17a-25, Electronic Submission of Securities Transaction Information by Exchange Members, Brokers, and Dealers. The final rule does not contain substantive or material modifications to the collections of information originally set forth in the Proposing Release. The collection of information obligations imposed by Rule 17a-25 is mandatory. The retention periods for the collection of information are already specified in Rule 17a-4 of the Exchange Act. 34 The information filed pursuant to Rule 17a-25 will be kept confidential, subject to the provisions of the Freedom of Information Act, 5 U. S.C. 552. 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. The Commission solicited public comment on the collection of information requirements contained in the Proposing Release. As discussed below, the SIA submitted one comment concerning the number of broker-dealers that will have to modify their EBS-related software to capture and report the new data elements pursuant to subsection (b) of Rule 17a-25. A. Summary of Collection of Information Under Rule 17a-25 Rule 17a-25 requires broker-dealers to electronically submit securities transaction information, including identifiers for prime brokerage arrangements, average price accounts, and depository institutions, in a standardized format when requested by the Commission staff for enforcement and other regulatory purposes. In addition, the rule will also require broker-dealers to submit, and keep current, contact person information for EBS requests. B. Use of Information The Commission will use the information collected pursuant to proposed Rule 17a-25 for enforcement inquiries or investigations and trading reconstructions, as well as for inspections and examinations. As explained in the Proposing Release, although Rule 17a-25 will apply to all of the approximately 7,700 broker-dealers that are currently registered with the Commission, most provisions would apply only to the 5,500 broker-dealers who do business with the general public. The Commission further estimated in the Proposing Release that the requirement for submission of identifiers for prime brokerage arrangements, average price accounts, and depository institutions would affect a significantly smaller number of broker-dealers, estimated at less than 100 firms. In its comment letter, the SIA asked for further explanation of the basis for the Commissions estimate that less than 100 firms would need to perform a one-time modification of their EBS-related software to capture and report the new data elements. As previously discussed, the Commission has used the EBS system for over a decade. For example, the Division of Market Regulation used the EBS reports for market reconstructions in 1994 and 1997, and the Division of Enforcement sends out EBS requests almost on a daily basis. Based on this experience, the Commission estimated the number of active clearing firms that regularly receive EBS requests. Accordingly, the Commission continues to believe that its estimate of less than 100 firms is reasonable. D. Total Annual Reporting and Recordkeeping Burden As stated in the Proposing Release, Rule 17a-25 should not impose additional burdens on the vast majority of broker-dealers. The Commission staff will work with the few broker-dealers who might not have EBS systems in place to develop cost-effective means of obtaining requested securities transaction information, whether using the EBS system or other mechanisms. In addition, if electronic reporting of securities transaction information is not feasible or is unreasonably expensive for a particular small broker-dealer, the Commission may use its general exemptive authority under Section 36 of the Exchange Act. 1. Burden-Hours for Broker-Dealers 35 As discussed in the Proposing Release, the annual hour burden of the proposed rule for individual broker-dealers varies widely because of differences in the levels of activities of the respondents and because of differences in the current recordkeeping systems of the respondents. However, it is estimated that electronic response firms would spend approximately 8 minutes and manual response firms would spend 1 1/2 hours responding to an average blue sheet request. Based on its experience with the EBS system, the Commission estimates that it sends approximately 14,000 electronic blue sheet requests per year, of which approximately 350 are sent to manual response firms. Accordingly, the annual aggregate hour burden for electronic response firms is estimated to be 1,820 hours (13,650 x 8 247 60). The annual aggregate hour burden for manual response firms is estimated to be 525 hours (350 x 90 247 60). In addition, the Commission estimates that it will request 1,400 broker-dealers to supply the contact information identified in proposed Rule 17a-25(c), and the submission should take each broker-dealer approximately 5 minutes to prepare. To be conservative, the Commission estimates that each of these broker-dealers will revise the contact information twice a year, and each revision will also take approximately 5 minutes to prepare (10 minutes total). The annual aggregate burden for supplying the information requested in proposed Rule 17a-25(c) is 350 hours (1400 x 15 247 60). Overall, the annual aggregate burden for all respondents to the collection of information requirements of Rule 17a-25 is estimated to be 2,695 hours (1,820 525 350). 2. Capital Cost to Broker-Dealers and SROs 36 As stated in the Proposing Release, the Commission estimates that less than 100 broker-dealers will have to perform a one-time modification of their EBS-related software to capture and report new data elements. On average, each of these broker-dealers will incur capital or start-up costs of 150,000 to modify their EBS systems . The Commission also estimates that there will be no additional costs associated with the operation and maintenance of the modified EBS systems. Accordingly, the total cost burden for broker-dealers to modify their EBS systems is estimated to be 15 million (100 x 150,000). In addition, based on its discussions with the SROs, the Commission estimates that three SROs will each incur approximately 29,500 in capital costs to make their systems compatible with the broker-dealers. The Commission also estimates that the SROs will not incur additional costs for the operation and maintenance of the modified EBS systems. VII. Costs and Benefits of the Rule The Commission identified several benefits and costs to investors and market participants in the Proposing Release. To assist the Commission in its evaluation of the costs and benefits that may result from Rule 17a-25, commenters were requested to provide analyses and data relating to the costs and benefits associated with the proposal. As previously noted, the SIA questioned the Commissions estimate of the number of broker-dealers that must modify their existing EBS software to capture prime brokerage identifiers, average price account identifiers, and depository institution identifiers. However, as explained above, the Commission continues to believe that its estimates, including its costs estimates, are reasonable. The Commission is not making any changes to Rule 17a-25, as adopted, which will increase the cost estimates for broker-dealers or SROs. In particular, subsection (a) of Rule 17a-25 merely codifies existing SRO requirements for EBS. The estimated annual aggregate hour burden for all respondents to the collection of information requirements is 2,695 hours. The total annualized cost burden for those broker-dealers to modify their existing EBS software is estimated to be 15 million in capital or start-up costs. And the estimated total annualized cost burden for SROs is 88,500. The Commission believes that neither the broker-dealers nor the SROs will incur additional costs for the operation and maintenance of the modified EBS systems. The Commission continues to believe that any costs to market participants are justified by the overall benefits of Rule 17a-25. The rule will significantly assist the Commissions ability to conduct timely and accurate trading analyses for market reconstructions and complex enforcement inquiries or investigations, as well as inspections and examinations. The current system severely limits the Commissions ability to aggregate transactions effected by entities that use multiple accounts at broker-dealers, and can produce trading compilations that double-count these transactions. Augmented trading analyses will improve the Commissions ability to monitor the securities markets, and, thereby, promote investor protection. VIII. Consideration of Burden on Competition, and Promotion of Efficiency, Competition, and Capital Formation Section 23(a)(2) of the Exchange Act 37 requires the Commission, when promulgating rules under the Exchange Act, to consider the impact any rule would have on competition, and not adopt any rule that would impose a burden on competition that is not necessary or appropriate in furtherance of the Exchange Act. Section 3(f) of the Exchange Act 38 requires the Commission, when engaging in rulemaking that requires it to consider or determine whether an action is necessary or appropriate in the public interest, to consider whether the action will promote efficiency, competition, and capital formation. In the Proposing Release, the Commission solicited comments on the effects of Rule 17a-25 on competition, efficiency, and capital formation. The Commission did not receive any comments regarding these specific issues. The Commission has considered Rule 17a-25 in light of the standards cited in Sections 3(f) and 23(a)(2) of the Exchange Act, and believes that the rule will not impose any significant burden on competition not necessary or appropriate in furtherance of the Exchange Act. As discussed in the cost-benefit section, only some broker-dealers will incur capital or start-up costs to modify their EBS-related software. However, the Commission believes the modifications are necessary to promote efficiency in the blue-sheeting process, and promote investor protection. IX. Summary of Final Regulatory Flexibility Act Analysis A Final Regulatory Flexibility Analysis (quotFRFAquot) has been prepared in accordance with Section 4 of the Regulatory Flexibility Act (quotRFAquot), to provide a description and estimate of the number of small entities that will be affected by Rule 17a-25. The following summarizes the FRFA. The Commission estimates that approximately 12 of registered broker-dealers, or approximately 1,000 broker-dealers, qualify as small broker-dealers. 39 As discussed more fully in the FRFA, Rule 17a-25 will affect these small broker-dealers because all broker-dealers will be required to submit securities transaction information to the Commission, upon request. However, the Commission believes that only a relatively few EBS requests are sent to small broker-dealers. Generally, EBS requests are sent to large clearing firms or those broker-dealers that self-clear. These entities fall outside the definition of a small broker-dealer. In addition, the Commissions experience with the EBS system over the last ten years indicates that entities that trade through multiple accounts at different firms generally do not effect their trades through quotsmallquot broker-dealers. Accordingly, the Commission does not believe that any small broker-dealer will be required to modify its EBS-related software to capture and report the new data elements in subsection (b) of Rule 17a-25. The FRFA further states that proposed Rule 17a-25 would not impose any additional recordkeeping requirements for small broker-dealers. The elements of trade information required for EBS reports to the Commission are already maintained by broker-dealers pursuant to Rules 17a-3 and 17a-4 of the Exchange Act and SRO rules. When small broker-dealers receive the occasional EBS request, they will incur some costs when they report transaction information pursuant to requests by the Commission staff for enforcement purposes. The Commission believes, however, that any new costs associated with Rule 17a-25 will be minimal because broker-dealers are already required to have in place adequate systems and procedures to submit transaction reports to the appropriate SRO. Moreover, the Commission staff has traditionally been flexible when working with small broker-dealers who need to supply transaction reports. In cases in which a small broker-dealer does not already have the capacity to submit information over the EBS system, the Commission staff has accepted manual transmissions. Proposed Rule 17a-25 is not intended to change this flexible approach in obtaining necessary transaction reports from small broker-dealers. The FRFA also discusses the various alternatives considered by the Commission in connection with the proposed rule that might minimize the effect on small entities. These include, among others, creating differing compliance or reporting requirements or timetables that take into account the resources available to small entities, and whether such entities could be exempted from the proposed rule, or any part thereof. The Commission has drafted the proposal to be consistent with the concerns of small entities. For example, as discussed above, the Commission has often permitted small broker-dealers to submit the transaction information manually, rather than electronically. The Commission may also use its exemptive authority under Section 36 of the Exchange Act. A wholesale exemption from the proposed rule for small broker-dealers, however, would prevent the Commission from fully protecting investors and maintaining the fair and orderly operation of the nations securities markets. The Commission received no comments on the Initial Regulatory Flexibility Analysis (quotIRFAquot) prepared in connection with the Proposing Release. A copy of the FRFA may be obtained by contacting Anitra Cassas, Division of Market Regulation, Securities and Exchange Commission, 450 Fifth Street, N. W. Washington, D. C. 20549-1001 (202) 942-0089. X. Statutory Authority Rule 17a-25 under the Exchange Act is being adopted pursuant to 15 U. S.C. 78a et s eq . particularly Sections 17(a) and 23(a) of the Act, unless otherwise noted. List of Subjects Administrative practice and procedure, Authority delegations (Government agencies). Broker-dealers , Reporting and recordkeeping requirements, Securities. Text of the Final Rule and Amendments In accordance with the foregoing, Title 17, Chapter II of the Code of Federal Regulations is amended as follows: PART 200 - ORGANIZATON CONDUCT AND ETHICS AND INFORMATION AND REQUESTS 1. The authority citation for Part 200 continues to read, in part, as follows: Authority . 15 U. S.C. 77s, 78d-1, 78d-2, 78w, 78 ll (d), 78mm, 79t, 77sss, 80a-37, 80b-11, unless otherwise noted. 2. Section 200.30-3 is amended by adding paragraph (a)(69) to read as follows: sect200.30-3 Delegation of authority to Director of Division of Market Regulation. (74) Pursuant to section 36 of the Act (15 U. S.C. 78mm) to review and, either unconditionally or on specified terms and conditions, grant, or deny exemptions from rule 17a-25 of the Act (sect240.17a-25 of this chapter). 3. Section 200.30-4 is amended by adding paragraph (a)(12) to read as follows: sect200.30-4 Delegation of authority to Director of Division of Enforcement. (12) Pursuant to Section 36 of the Securities Exchange Act of 1934 (15 U. S.C. 78mm) to review and, either unconditionally or on specified terms and conditions, grant, or deny exemptions from rule 17a-25 of the Act (sect240.17a-25 of this chapter), provided that the Division of Market Regulation is notified of any such granting or denial of an exemption. 4. Section 200.30-18 is amended by redesignating paragraphs (h) and (i) as paragraphs (i) and (j) and by adding new paragraph (h) to read as follows: sect200.30-18 Delegation of authority to Director of the Office of Compliance Inspections and Examinations. (h) Pursuant to Section 36 of the Exchange Act (15 U. S.C. 78mm) to review and, either unconditionally or on specified terms and conditions, grant, or deny exemptions from rule 17a-25 of the Act (sect240.17a-25 of this chapter), provided that the Division of Market Regulation is notified of any such granting or denial of an exemption. PART 240 -- GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 1934 5. The authority citation for Part 240 continues to read, in part, as follows: Authority . 15 U. S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78f, 78i, 78j, 78j-1, 78k, 78k-1, 78 l . 78m, 78n, 78o, 78p, 78q, 78s, 78u-5, 78w, 78x, 78 ll (d), 78mm, 79q, 79t, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4 and 80b-11, unless otherwise noted. 6. Section 240.17a-25 is added to read as follows: sect240.17a-25 Electronic submission of securities transaction information by exchange members, brokers, and dealers. (a) Every member, broker, or dealer subject to sect240.17a-3 shall, upon request, electronically submit to the Commission the securities transaction information as required in this section: (1) If the transaction was a proprietary transaction effected or caused to be effected by the member, broker, or dealer for any account in which such member, broker, or dealer, or person associated with the member, broker, or dealer, is directly or indirectly interested, such member, broker or dealer shall submit the following information: (i) Clearing house number, or alpha symbol of the member, broker, or dealer submitting the information (ii) Clearing house number(s), or alpha symbol(s) of the member(s), broker(s) or dealer(s) on the opposite side of the transaction (iii) Identifying symbol assigned to the security (iv) Date transaction was executed (v) Number of shares, or quantity of bonds or options contracts, for each specific transaction whether each transaction was a purchase, sale, or short sale and, if an options contract, whether open long or short or close long or short (vi) Transaction price (vii) Account number and (viii) The identity of the exchange or other market where the transaction was executed. (2) If the transaction was effected or caused to be effected by the member, broker, or dealer for any customer account, such member, broker, or dealer shall submit the following information: (i) Information contained in paragraphs (a)(1)(i) through (a)(1)(viii) of this section (ii) Customer name, address(es), branch office number, registered representative number, whether the order was solicited or unsolicited, date account opened, and the customers tax identification number(s) and (iii) If the transaction was effected for a customer of another member, broker, or dealer, whether the other member, broker, or dealer was acting as principal or agent on the transaction. (b) In addition to the information in paragraph (a) of this section, a member, broker, or dealer shall, upon request, electronically submit to the Commission the following securities transaction information for transactions involving entities that trade using multiple accounts: (1) (i) If part or all of an accounts transactions at the reporting member, broker, or dealer have been transferred or otherwise forwarded to one or more accounts at another member, broker, or dealer, an identifier for this type of transaction and (ii) If part or all of an accounts transactions at the reporting member, broker, or dealer have been transferred or otherwise received from one or more other members, brokers, or dealers, an identifier for this type of transaction. (2) (i) If part or all of an accounts transactions at the reporting member, broker, or dealer have been transferred or otherwise received from another account at the reporting member, broker, or dealer, an identifier for this type of transaction and (ii) If part or all of an accounts transactions at the reporting member, broker, or dealer have been transferred or otherwise forwarded to one or more other accounts at the reporting member, broker, or dealer, an identifier for this type of transaction. (3) If an accounts transaction was processed by a depository institution, the identifier assigned to the account by the depository institution. (c) Every member, broker, or dealer shall, upon request, submit to the Commission and, keep current, information containing the full name, title, address, telephone number(s), facsimile number(s), and electronic-mail address(es) for each person designated by the member, broker, or dealer as responsible for processing securities transaction information requests from the Commission. (d) The member, broker, or dealer should comply with the format for the electronic submission of the securities transaction information described in paragraphs (a) and (b) of this section as specified by the member, broker, or dealers designated self-regulatory organization under sect240.17d-1, unless otherwise specified by Commission rule. Por la Comisión. Jonathan G. Katz Secretary Footnotes Section 17(a)(1) of the Exchange Act requires registered broker-dealers to make, keep, furnish, and disseminate records and reports prescribed by the Commission quotas necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes ofquot the Exchange Act. 15 U. S.C. 78q(a)(1). Rules 17a-3 and 17a-4 under the Exchange Act specify minimum requirements with respect to the records that must be maintained by broker-dealers, as well as the periods during which these records and other documents relating to a broker-dealers business must be preserved. 17 CFR 240.17a-3 and 240.17a-4. As noted in the Proposing Release, the Commission believes that an enhanced EBS system will provide a more efficient and cost-effective way to conduct timely and accurate reviews of the activities of large traders for regulatory or enforcement purposes, than would further efforts to design and implement the large trader reporting system authorized by the Market Reform Act of 1990, and incorporated into section 13(h) of the Exchange Act. 15 U. S.C. 78m(h). See Proposing Release, at 7. SIA Letter, at 6. If a broker-dealer has a question concerning whether a transaction should be reported under Rule 17a-25(b), as adopted, the broker-dealer can request interpretive guidance from the Commission staff. Commission staff discussed THE FEASIBILITY OF CAPTURING THE PRIME BROKERAGE IDENTIFIERS, AVERAGE PRICE ACCOUNT IDENTIFIERS, AND DEPOSITORY INSTITUTION IDENTIFIERS, INCLUDING COST ESTIMATES, WITH THE INTERMARKET SURVEILLANCE GROUP AND THE SIA ON MAY 10, 2000 AND MAY 16, 2000, RESPECTIVELY. See supra note 23. The Commission has determined that the most efficient means of obtaining EBS contact information from the appropriate broker-dealers is by request, rather than imposing a general reporting obligation on all broker-dealers. Thousands of broker-dealers who clear their trades through other firms never receive EBS data requests from the Commission. In addition, firms who do not trade with the public or are otherwise inactive traders are rarely asked to supply transaction information. Accordingly, the Commission believes it would be most cost-effective to maintain its list of EBS contacts based on the staffs experience with the types of broker-dealers that are likely to be recipients of future EBS requests. Firms use these identifiers to trace orders routed through automated systems. These identifiers are also routinely captured by some audit trail systems and other recordkeeping systems, such as the NYSEs daily program trading reports from member firms. The Commission further noted in the Proposing Release that other types of information captured by the SROs audit trail systems, such as the NASDs Order Audit Trail System, may also be useful to the Commission in its trading analyses. For example, these systems generally capture the date and time of origination or receipt of the order, and information on when the order is transmitted to another department within the member firm, to another member firm, or to a non-member. The SIA noted, however, that connecting information maintained under OATS to the EBS system would raise difficulties and costs. SIA Letter, at 6-7. 15 U. S.C. 78mm. Procedures for filing applications for orders for exemptive relief under Section 36 are found in the Commissions Rules of General Application, 17 CFR 240.0-12. The Commission is amending Rules 30-3, 30-4, and 30-18 of its Rules of Practice to add new paragraphs (a)(69), (a)(12), and (h), respectively. 17 CFR 200.30-3, 200.30-4, and 200.30-18. These paragraphs delegate the authority to the Directors of the Division of Market Regulation, the Division of Enforcement, and the Office of Compliance Inspections and Examinations to grant or deny, in whole or in part, exemptions from the requirements of Rule 17a-25. The Office of Compliance Inspections and Examinations uses the EBS system as part of its inspections and examinations. If the Commission sets the technical filing requirements for EBS submissions, we anticipate adopting these requirements using a similar approach to that used by the Commission in specifying the technical formatting requirements for electronic filings through the EDGAR system. Securities Act Release No. 7858 (May 16, 2000), 65 FR 34079 (May 26, 2000). 44 U. S.C. 3501 et seq .
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