Rule 15c3-5 would require brokers or
dealers with access to trading directly on an exchange or ATS,
including those providing sponsored or direct market access to
customers or other persons, to implement risk management controls
and supervisory procedures designed to manage the financial,
regulatory, and other risks of this business activity.
Specifically, Rule 15c3-5 would require that brokers or dealers
with access to trading securities on an exchange or ATS, as a
result of being a member or subscriber thereof, establish,
document, and maintain a system of risk management controls and
supervisory procedures that, among other things, are reasonably
designed to (1) systematically limit the financial exposure of the
broker or dealer that could arise as a result of market access, and
(2) ensure compliance with all regulatory requirements that are
applicable in connection with market access. Each such broker or
dealer would be required to preserve a copy of its supervisory
procedures and a written description of its risk management
controls as part of its books and records in a manner consistent
with Rule 17a-4(e)(7) under the Exchange Act. The financial and
regulatory risk management controls and supervisory procedures
required by Rule 15c3-5 generally must be under the direct and
exclusive control of the broker or dealer with market access.
Broker-dealers with market access are permitted to reasonably
allocate certain required risk management controls and supervisory
procedures to other broker-dealers that are participants in a
particular market access arrangement. Regardless of how the risk
management controls and supervisory procedures are allocated to
other parties, the Rule affirms that the broker-dealer providing
market access retains the ultimate responsibility over its market
access business activity. In addition, a broker or dealer with
market access would be required to establish, document, and
maintain a system for regularly reviewing the effectiveness of the
risk management controls and supervisory procedures and for
promptly addressing any issues. Among other things, the broker or
dealer would be required to review, no less frequently than
annually, the business activity of the broker or dealer in
connection with market access to assure the overall effectiveness
of such risk management controls and supervisory procedures and
document that review. Such review would be required to be conducted
in accordance with written procedures and would be required to be
documented. The broker or dealer would be required to preserve a
copy of such written procedures, and documentation of each such
review, as part of its books and records in a manner consistent
with Rule 17a-4(e)(7) under the Exchange Act, and Rule 17a-4(b)
under the Exchange Act, respectively. In addition, the Chief
Executive Officer (or equivalent officer) of the broker or dealer
would be required, on an annual basis, to certify that the risk
management controls and supervisory procedures comply with Rule
15c3-5, and that the regular review described above has been
conducted. Such certifications would be required to be preserved by
the broker or dealer as part of its books and records in a manner
consistent with Rule 17a-4(b) under the Exchange Act.
The estimates of burden under
Rule 15c3-5 have decreased since the prior submission. The total
estimated hourly burden of compliance with the rule has been
reduced from 102,400 hours to 91,200 hours, and the estimated
dollar cost expenses have been reduced from $13,120,000 to
$11,685,000, in each case because the Commission has reduced its
estimate of the number of broker-dealers with market access.
$0
No
No
No
No
No
No
Uncollected
Andrew Sherman 202
551-7255
No
On behalf of this Federal agency, I certify that
the collection of information encompassed by this request complies
with 5 CFR 1320.9 and the related provisions of 5 CFR
1320.8(b)(3).
The following is a summary of the topics, regarding
the proposed collection of information, that the certification
covers:
(i) Why the information is being collected;
(ii) Use of information;
(iii) Burden estimate;
(iv) Nature of response (voluntary, required for a
benefit, or mandatory);
(v) Nature and extent of confidentiality; and
(vi) Need to display currently valid OMB control
number;
If you are unable to certify compliance with any of
these provisions, identify the item by leaving the box unchecked
and explain the reason in the Supporting Statement.
3235-0673 60 day notice.pdf
Rule 15c3-5: Risk Management Controls for Brokers or Dealers with Market Access