Jake,

there is currently a thread called "Sftp jcl" which discusses exactly your 
question. The IBM provided OpenSSH doesn't support data set access. You need to 
copy the data set to a file in USS first.
If you use something like Co:Z it will work: Co:Z Toolkit - Co:Z 
SFTP<https://coztoolkit.com/products/sftp.html> (According to Kirk, it's free 
w/o support; support can also be bought. I'm not affiliated with Co:Z.)

Cheers - David

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