2019 Supporting Statement 17a-25 - revised

SUPPORTING STATEMENT
For the Paperwork Reduction Act Information Collection
Submission for Rule 17a-25
A.

JUSTIFICATION
1.

Information Collection Necessity
Rule 17a-25 (17 CFR 240.17a-25) under the Securities Exchange Act of 1934
(15 U.S.C. 78a et. seq.), requires registered broker-dealers to submit electronically
to the Commission, upon request, information on customer and firm securities
trading in a standardized format. In addition, the Rule requires broker-dealers to
submit, and keep current, contact information for the person responsible for
processing such requests. The Rule is necessary to support the Commission’s
efforts to analyze electronic submissions of transaction information, thereby
facilitating Commission enforcement investigations and other trading
reconstructions.

2.

Information Collection Purpose and Use
Rule 17a-25 requires registered broker-dealers to submit securities trading data in a
uniform electronic format, preferably using the electronic blue sheets (“EBS”)
reporting system utilized by the Commission, when requested by the Commission
staff for enforcement and other regulatory purposes.1 Rule 17a-25 requires the
electronic submission of trading information to include data elements that assist
the Commission staff in conducting complex enforcement inquiries and
investigations. Additionally, the Rule requires broker-dealers to submit and
keep current, contact person information for EBS requests. The Commission
uses the information collected from EBS requests for enforcement inquiries or
investigations and trading reconstructions, as well as for inspections and
examinations.

3.

Consideration Given to Information Technology
The EBS system is designed to reduce the burden of collecting and transmitting
securities trading data. This technology increases the speed, accuracy, and
availability of trading information, thereby generating benefits to both investors
and the financial markets.

4.

Duplication
Not applicable. There is no apparent duplication of information.

1

In July 2017, the Commission retired its custom built EBS system and began using the Blue Sheets as a
Service (“BSS”) system operated by the Financial Industry Regulatory Authority (“FINRA”).

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5.

Effect on Small Entities.
The Commission believes that Rule 17a-25 has a minimal effect on the
approximately 985 broker-dealers who qualify as a small business or organization.
As discussed in Item 12 below, the Commission primarily sends EBS requests to
the 198 brokers that operate as clearing brokers as they, by nature of their role in
clearing securities transactions for themselves and for other broker-dealers, are
the repository for the trading data. Further, the vast majority of the information
required in Rule 17a-25 involves collections of information that broker-dealers
already maintain in compliance with existing regulations, and the rules of the selfregulatory organizations (the registered securities exchanges and FINRA)
currently require broker-dealers to have adequate systems and procedures to
submit the EBS transaction reports.

6.

Consequences of Not Conducting Collection
The Commission requests securities trading data only when necessary for a
specific enforcement inquiry or other regulatory purpose.

7.

Inconsistencies with Guidelines in 5 CFR 1320.5(d)(2)
There are no special circumstances. This collection is consistent with the guidelines
in 5 CFR 1320.5(d)(2).

8.

Consultations Outside the Agency
The required Federal Register notice with a 60-day comment period soliciting
comments on this collection of information was published. No public comments
were received.

9.

Payment or Gift
The respondents receive no payments or gifts.

10.

Confidentiality
The information in the collections of information discussed above will not be
made publicly available, except as provided by the Privacy Act of 1974 (5
U.S.C. 552a).

11.

Sensitive Questions
The Rule requires exchange members, brokers, and dealers to electronically
submit securities transaction information upon request by the Commission. The
transaction information submitted includes personally identifiable information
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(“PII”) such as customer names, addresses, tax identification numbers, account
numbers, and related transaction information. In addition, Rule 17a-25 requires
broker-dealers to submit and keep current, contact person information for
electronic blue sheets requests. The agency has determined that the information
collection constitutes a system of record for purposes of the Privacy Act and is
covered under System of Records Notice (“SORN”) SEC- 42, Enforcement
Files. In accordance with Section 208 of the E-Government Act of 2002, the
agency has conducted a Privacy Impact Assessment (“PIA") of the EBS system,
in connection with this collection of information. The EBS PIA, published on
September 15, 2006 is available at https://www.sec.gov/privacy. This PIA is
currently being updated to reflect the changes in the collection of this
information.
12.

Information Collection Burden
The annual hour burden of Rule 17a-25 for individual broker-dealers varies widely
due to differences in the levels of activities of the respondents and because of
differences in the current recordkeeping systems of the respondents. While Rule
17a-25 requires all registered broker-dealers to be able to provide transaction data
to the Commission, the Commission focuses its requests on clearing brokers as
they are the repository for the trading data. Accordingly, all 198 clearing brokers
respond electronically through the EBS system, except in rare instances where
they respond manually. Manual submissions are allowed if there are no other
means for the firm to submit responses electronically. It is estimated that the
broker-dealers that respond electronically will take 8 minutes, and the brokerdealers that respond manually will take 1½ hours to prepare and submit the
securities trading data requested by the Commission.
Based on EBS data compiled by the Commission for the period October 1, 2016 to
October 23, 2018, the Commission estimates that it sent 13,493 electronic blue
sheet requests to clearing broker-dealers, who in turn submitted 528,551 responses,
for an average of 253,705 responses per year.2 On average, each of the 198
clearing firms electronically submitted approximately 1,281 responses per year
(253,705 ÷ 198 = 1,281.34). Accordingly, the annual aggregate hour reporting
burden for electronic responses is estimated to be 33,827 (253,705 x 8 ÷ 60 =
33,827 hours).

2

A single EBS request has a unique number assigned to it (e.g., "0900001"). However, the
number of broker-dealer submissions transmitted in response to one EBS request can range from
one to thousands. EBS requests are sent directly to clearing firms, as the clearing firm is the
repository for trading data for securities transactions information provided by the clearing firm
and the correspondent firms. Clearing brokers respond for themselves and other firms for which
they clear. There were 528,551 responses during the 25 month period, for an average of 21,142
responses per month or an average of 253,705 annual responses.
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The Commission received 798 manual submissions between July 24, 2017 (when it
began using the BSS system) and February 28, 2019, or an average of 500 manual
submissions per year. On average, each of the 198 clearing firms submitted
approximately 2.5 manual responses per year (500 ÷ 198 = 2.525).
Accordingly, the annual aggregate hour reporting burden for manual responses is
estimated to be 750 (500 x 1.5 = 750 hours). 3
Further, while Rule 17a-25 requires broker-dealers to submit, and keep current,
contact information for the person responsible for processing such requests, the
Commission retired its EBS system and began using the BSS system operated by
FINRA. Because FINRA separately requires broker-dealers to submit, and keep
current, contact information directly to FINRA, firms no longer have to submit that
information to the Commission. Accordingly, the Commission has eliminated the
collection of information burden for that aspect of Rule 17a-25.
Thus, the total number of responses is 254,205 ((253,705 electronic responses +
500 manual responses). The annual aggregate reporting burden for all respondents
to the collection of information requirements of Rule 17a-25 is estimated at 34,577
(253,705 electronic responses x 8 minutes per response ÷ 60 minutes in an hour =
33,827 hours) + (500 manual responses x 1.5 hours per response= 750 hours).
Summary of Hourly Burdens
Burden
Type

Number of
Respondents

Number of
Annual
Responses
per
Respondent

Time per
Response
(Hours)

Total
Burden
(Hours)

198
198

1,281.34
2.525

.13333
1.5

33,827
750

Electronic
Manual

34,577

Total Aggregate Burden
13.

Costs to Respondents
The Commission believes that there will be no additional costs to the respondents
associated with the operation and maintenance of the EBS system. In addition,
Rule 17a-25 will not impose any additional recordkeeping requirements for

3

Manual submissions most frequently occur when an analyst requests transaction information
that is older than 6 years (the required retention period). The number of manual submissions
(approximately 500 per year) has a minimal effect on the total annual burden hours.
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broker-dealers because broker-dealers already maintain all of the information
required for EBS reports. Therefore the annualized cost burden is $0.
14.

Costs to Federal Government
The annual cost to the Federal Government for this collection of information is
estimated to be $1,136,640. As noted above, the Commission retired its EBS
system and now uses the BSS system operated by FINRA to send electronic
requests for trading data. As such, the Commission no longer incurs a cost to
maintain its own separate EBS system. Instead, it incurs costs to use the BSS
system. In particular, to help administer the BSS system and ensure that
submissions are timely and accurate, the Commission employs three full-time
contractors. We estimate an average of $76 for contractors per hour for those
persons, multiplied by a full-time (40 hours per week) working schedule
($474,240 annually). In addition, two other contracted staff devote
approximately 10% of their time to facilitate this collection of information. At
$150 per hour, those costs are estimated to be $62,400. Infrastructure and
support costs to maintain the EBS system are estimated to be
$600,000. Accordingly, total costs for staff, BSS contract and system costs
(including system access, staff training, and system development and enhancement
costs), and dedicated infrastructure costs are thus estimated to be
$1,136,640. Other expenses, including the professional staff that utilize the
information collected as part of their regulatory reviews, as well as general
technology and overhead expenses, would have been incurred without this
specific collection of information and are part of the Commission’s normal labor
costs for staff and facilities.

15.

Changes in Burden
The increases in burden reflect an increase in (1) the number of electronic EBS
requests sent (13,493 versus 7,697 from the prior comparable 25-month figure
reported in 2015); (2) an increase in the number of electronic responses received
(528,551 versus 124,912 from the prior comparable 25-month figure reported in
2015); and (3) an increase in the number of manual responses received (5004
versus 80 from the prior annual figure reported in 2015).
In addition, there was a decrease in the burden hours resulting from the elimination
of the previously reported 2-hour burden (8 broker-dealers x 15 minutes per year) to
supply and update contact information in response to a Commission request. As
noted in footnote 1, the Commission now uses the BSS system operated by FINRA
to manage its EBS requests. Because FINRA already collects firm contact
information, the Commission has reduced the potential for duplication and no longer
needs to request this information. Therefore, we have removed this information
collection.

4

As noted in Section 12, the Commission received 798 manual submissions over a 19 month period (July 24,
2017 through February 28, 2019), for an average of 500 submissions received per year.

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Accounting for all of these changes, the annual aggregate hour reporting burden
has increased from 8,116 in 2015 to 34,577 currently. This increase reflects
additional regulatory and enforcement inquiries and investigations using the EBS
system, as well as the increased complexity of some of the trading activity involved
in those inquiries that are contained in a higher number of multiple responses to a
single request.
16.

Information Collection Planned for Statistical Purposes.
Not applicable. The information collection is not used for statistical purposes.

17.

Approval to Omit OMB Expiration Date
The Commission is not seeking approval to omit the expiration date.

18.

Exceptions to Certification for Paperwork Reduction Act Submissions
This collection complies with the requirements in 5 CFR 1320.9.

B.

COLLECTIONS OF INFORMATION EMPLOYING STATISTICAL
METHODS
The collection of information does not involve statistical methods.

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