Calculation Acceleration: Why Daily 15c-3-3 for More Broker-Dealers is a Sign of the Regulatory Times

Recent changes to the U.S. Securities and Exchange Commission (SEC) Customer Protection Rule (Rule 15c-3-3) mark a notable regulatory shift – and a sizable operational impact to a wide swath of the broker-dealer community.

Bottom line, the expansion of the Rule will lead to a significant acceleration in the frequency of reserve calculations for customer and proprietary accounts of broker-dealers (PAB) — from being done on a weekly basis to a daily basis. Existing 15c-3-3 processes are already intensive and deadline-driven, requiring considerable time, resources and labor, especially for firms reliant on manual work, emails and spreadsheets. Mandatory compliance with this change is currently December 31, 2025, but earlier adoption will be permitted with the approval of Regulators.

While the expansion of Rule 15c-3-3 is the headline here, there’s more to the story. The broader takeaway is that the regulatory scope continues to expand, affecting more firms and increasing the complexity and scale of compliance operations. In order to adapt, firms need to have a platform that both efficiently and accurately produces calculation results but also the ability to analyze, review and sign-off those results. With this, they can create a foundation of provable, dependable processes and controls that not only support operations but align with key regulatory expectations.

The evolution of Rule 15c-3-3

The history of Rule 15c-3-3 traces back to the 1970s and a push for greater investor protections amid growing volumes and insufficient bookkeeping. Applying to certain registered broker-dealers, the Rule was designed (and later amended) to regulate the safe custody and segmentation of customer assets from those of the Firm. Importantly, these carrying brokers-dealers that maintain custody of customer securities and cash must have a “Special Reserve Bank Account(s) for the Exclusive Benefit of Customers of…” (and also for PAB ...”) to hold cash and/or qualified securities and which is accessible in the case of insolvency.  As noted by the SEC:
 

Rule 15c-3-3 is a complement to Rule 15c-3-1, which addresses net capital requirements, to broadly manage broker-dealer and systemic market risk. There rules are the backbone of the SEC’s “Financial Responsibility Rules”.

As part of a years-long process, the SEC sought to adjust Rule 15c-3-3 to address growing reserve amounts as well as mitigate the risks of mismatching the required deposits from the computation. In its proposal, the SEC said the largest required additional deposits into the customer reserve accounts in 2022 ranged from approximately $1.6 billion to over $6 billion following the customer reserve computation. At the same time, the largest required additional deposits into PAB reserve accounts ranged from approximately $350 million to over $4 billion.

As of the December 2024 final amendment to the now-adopted Rule, the SEC has mandated that carrying broker-dealers with an average total credit threshold equal to or greater than $500 million must perform the reserve calculation daily and make required deposits no later than one hour after the open of banking business on the second following business day.

Acceleration exposes unsustainable processes

Compression of the compliance function will naturally bring the fault lines in processes and controls to light. For broker-dealers that had previously only done the reserve computation weekly, the operational demands of performing a daily calculation are likely to strain what has been a painstaking, manual and complicated process. A working situation that until now had been merely sustainable but not optimized and certainly not tenable amid an accelerating regulatory environment.

Consider the touchpoints typically involved and the level of resources and time required on a daily frequency:

• Processing large volumes of data, often culled from disparate and siloed systems
• Compiling computation results through manual inputs
• Making adjustments and then running and re-running allocations and reserve calculations based on such adjustments

In many cases, firms rely on spreadsheets, emails and PDFs. But manual methods are time consuming and prone to error, creating a shaky foundation to support this crucial function. Additionally, there is often no audit trail for the adjustments that have been made, subjecting a Firm to regulatory scrutiny upon audit.  Missing the deadline for a deposit means firms must report a technical or hindsight deficiency to the regulators.

The future of regulatory velocity

Taken along with developments throughout global capital markets regulation, the Rule 15c-3-3 change is yet another strong signal that the regulatory scope is widening and quickening, requiring financial institutions to report more and staff to do more. The true question facing firms then is whether complex calculations, large-volume data management and allocation hierarchy rules are really where they want to be focusing time, resources and expertise.

As broker-dealers gauge their preparedness for daily reserve calculations—including those who do not currently exceed the threshold but who may—now becomes the perfect time to consider a solution that can seamlessly integrate with existing data sources and operations processes while enabling full end-to-end automation. The transparency, agility and control of such a solution can put the business in a ready position to onboard and realize new regulatory regimes as they come into force without the traditional pains and disruption.

Establishing this foundation requires treating regulatory reporting technology as a strategic consideration that prioritizes:

• Encompassing the entire computations on one platform, not solely the allocation portion of the computations.
• Condensing computations into a single, unified platform that provides transparency, accuracy and efficiency.
• Aggregating the collection of records across ledgers and balances, loading them directly into calculations.
• Automating the data management cycle, from processing and formatting to enrichment, storage and auditability.
• Leveraging an end-to-end system that also acts as a single source of truth across platforms.

Finding the right technology partner to achieve this readiness will be crucial to the long-term success of firms. Automation benefits both compliance through ironclad processes and controls, as well as the business in the return of time and resources to core activities. Beyond that, firms need a proven vendor with a track record and experience. Regulatory expectations can be dynamic, and firms need a partner who can deliver over time. This is what Nasdaq AxiomSL can deliver: An end-to-end system for regulatory compliance that boasts robust tooling and functionality across reporting, data lineage, audibility, integrated data and business rules and definitions. And with support for 110 regulators across more than 50 jurisdictions, Nasdaq can pair local knowledge with global best practices to help your firm.  Contact us today to learn more about AxiomSL and how it can help support your compliance operations.