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Postal Service
Final rule.
The Postal Service will revise the
Charles Hunt at 901-681-4651, or Bill Chatfield at 202-268-7278.
On September 4, 2012, the Postal Service published a proposed rule in the
The termination date for
The Postal Service adopts the following changes to
Administrative practice and procedure, Postal Service.
Accordingly, 39 CFR part 111 is amended as follows:
5 U.S.C. 552(a); 13 U.S.C. 301-307; 18 U.S.C. 1692-1737; 39 U.S.C. 101, 401, 403, 404, 414, 416, 3001-3011, 3201-3219, 3403-3406, 3621, 3622, 3626, 3632, 3633, and 5001.
The following methods are authorized for meeting the Move Update standard:
b. National Change of Address Linkage System (NCOALink). This includes both pre-mail NCOALink processing systems and the physical mailpiece processing equipment system: National Change of Address Linkage System Mail Processing Equipment (NCOALink MPE). See the NCOALink page (NCOALink MPE Solutions) on
We will publish an appropriate amendment to 39 CFR part 111 to reflect these changes.
Environmental Protection Agency (EPA).
Direct final rule.
EPA is promulgating significant new use rules (SNURs) under the Toxic Substances Control Act (TSCA) for 20 chemical substances which were the subject of premanufacture notices (PMNs). Eight of these chemical substances are subject to TSCA section 5(e) consent orders issued by EPA. This action requires persons who intend to manufacture, import, or process any of these 20 chemical substances for an activity that is designated as a significant new use by this rule to notify EPA at least 90 days before commencing that activity. The required notification will provide EPA with the opportunity to evaluate the intended use and, if necessary, to prohibit or limit that activity before it occurs.
This rule is effective on January 2, 2013. For purposes of judicial review, this rule shall be promulgated at 1 p.m. (e.s.t.) on November 16, 2012.
Written adverse or critical comments, or notice of intent to submit adverse or
For additional information on related reporting requirement dates, see Units I.A., VI., and VII. of the
Submit your comments, identified by docket identification (ID) number EPA-HQ-OPPT-2012-0740, by one of the following methods:
•
•
•
You may be potentially affected by this action if you manufacture, import, process, or use the chemical substances contained in this rule. The following list of North American Industrial Classification System (NAICS) codes is not intended to be exhaustive, but rather provides a guide to help readers determine whether this document applies to them. Potentially affected entities may include:
• Manufacturers, importers, or processors of one or more subject chemical substances (NAICS codes 325 and 324110), e.g., chemical manufacturing and petroleum refineries.
This action may also affect certain entities through pre-existing import certification and export notification rules under TSCA. Chemical importers are subject to the TSCA section 13 (15 U.S.C. 2612) import certification requirements promulgated at 19 CFR 12.118 through 12.127 and 19 CFR 127.28. Chemical importers must certify that the shipment of the chemical substance complies with all applicable rules and orders under TSCA. Importers of chemicals subject to these SNURs must certify their compliance with the SNUR requirements. The EPA policy in support of import certification appears at 40 CFR part 707, subpart B. In addition, any persons who export or intend to export a chemical substance that is the subject of this rule are subject to the export notification provisions of TSCA section 12(b) (15 U.S.C. 2611(b)) (see § 721.20), and must comply with the export notification requirements in 40 CFR part 707, subpart D.
1.
2.
i. Identify the document by docket ID number and other identifying information (subject heading,
ii. Follow directions. The Agency may ask you to respond to specific questions or organize comments by referencing a Code of Federal Regulations (CFR) part or section number.
iii. Explain why you agree or disagree; suggest alternatives and substitute language for your requested changes.
iv. Describe any assumptions and provide any technical information and/or data that you used.
v. If you estimate potential costs or burdens, explain how you arrived at your estimate in sufficient detail to allow for it to be reproduced.
vi. Provide specific examples to illustrate your concerns and suggest alternatives.
vii. Explain your views as clearly as possible, avoiding the use of profanity or personal threats.
viii. Make sure to submit your comments by the comment period deadline identified.
EPA is promulgating these SNURs using direct final procedures. These SNURs will require persons to notify EPA at least 90 days before commencing the manufacture, import, or processing of a chemical substance for any activity designated by these SNURs as a significant new use. Receipt of such notices allows EPA to assess risks that may be presented by the intended uses and, if appropriate, to regulate the proposed use before it occurs. Additional rationale and background to these rules are more fully set out in the preamble to EPA's first direct final SNUR published in the
Section 5(a)(2) of TSCA (15 U.S.C. 2604(a)(2)) authorizes EPA to determine that a use of a chemical substance is a “significant new use.” EPA must make this determination by rule after considering all relevant factors, including the four bulleted TSCA section 5(a)(2) factors listed in Unit III. Once EPA determines that a use of a chemical substance is a significant new use, TSCA section 5(a)(1)(B) requires persons to submit a significant new use notice (SNUN) to EPA at least 90 days before they manufacture, import, or process the chemical substance for that use. Persons who must report are described in § 721.5.
General provisions for SNURs appear in 40 CFR part 721, subpart A. These provisions describe persons subject to the rule, recordkeeping requirements, exemptions to reporting requirements, and applicability of the rule to uses occurring before the effective date of the rule. Provisions relating to user fees appear at 40 CFR part 700. According to § 721.1(c), persons subject to these SNURs must comply with the same SNUN requirements and EPA regulatory procedures as submitters of PMNs under TSCA section 5(a)(1)(A). In particular, these requirements include the information submission requirements of TSCA section 5(b) and 5(d)(1), the exemptions authorized by TSCA section 5(h)(1), (h)(2), (h)(3), and (h)(5), and the regulations at 40 CFR part 720. Once EPA receives a SNUN, EPA may take regulatory action under TSCA section 5(e), 5(f), 6, or 7 to control the activities for which it has received the SNUN. If EPA does not take action, EPA is required under TSCA section 5(g) to explain in the
Section 5(a)(2) of TSCA states that EPA's determination that a use of a chemical substance is a significant new use must be made after consideration of all relevant factors, including:
• The projected volume of manufacturing and processing of a chemical substance.
• The extent to which a use changes the type or form of exposure of human beings or the environment to a chemical substance.
• The extent to which a use increases the magnitude and duration of exposure of human beings or the environment to a chemical substance.
• The reasonably anticipated manner and methods of manufacturing, processing, distribution in commerce, and disposal of a chemical substance.
In addition to these factors enumerated in TSCA section 5(a)(2), the statute authorized EPA to consider any other relevant factors.
To determine what would constitute a significant new use for the 20 chemical substances that are the subject of these SNURs, EPA considered relevant information about the toxicity of the chemical substances, likely human exposures and environmental releases associated with possible uses, and the four bulleted TSCA section 5(a)(2) factors listed in this unit.
EPA is establishing significant new use and recordkeeping requirements for 20 chemical substances in 40 CFR part 721, subpart E. In this unit, EPA provides the following information for each chemical substance:
• PMN number.
• Chemical name (generic name, if the specific name is claimed as CBI).
• Chemical Abstracts Service (CAS) Registry number (if assigned for non-confidential chemical identities).
• Basis for the TSCA section 5(e) consent order or, for non-section 5(e) SNURs, the basis for the SNUR (i.e., SNURs without TSCA section 5(e) consent orders).
• Toxicity concerns.
• Tests recommended by EPA to provide sufficient information to evaluate the chemical substance (see Unit VIII. for more information).
• CFR citation assigned in the regulatory text section of this rule.
The regulatory text section of this rule specifies the activities designated as significant new uses. Certain new uses, including production volume limits (i.e., limits on manufacture and importation volume) and other uses designated in this rule, may be claimed as CBI. Unit IX. discusses a procedure companies may use to ascertain whether a proposed use constitutes a significant new use.
This rule includes 8 PMN substances that are subject to “risk-based” consent orders under TSCA section 5(e)(1)(A)(ii)(I) where EPA determined that activities associated with the PMN substances may present unreasonable risk to human health or the environment. Those consent orders require protective measures to limit exposures or otherwise mitigate the potential unreasonable risk. The so-called “5(e) SNURs” on these PMN substances are promulgated pursuant to § 721.160, and are based on and consistent with the provisions in the underlying consent orders. The 5(e) SNURs designate as a “significant new use” the absence of the protective measures required in the corresponding consent orders.
Where EPA determined that the PMN substance may present an unreasonable risk of injury to human health via inhalation exposure, the underlying TSCA section 5(e) consent order usually requires, among other things, that potentially exposed employees wear specified respirators unless actual measurements of the workplace air show that air-borne concentrations of the PMN substance are below a New Chemical Exposure Limit (NCEL) that is established by EPA to provide adequate protection to human health. In addition to the actual NCEL concentration, the comprehensive NCELs provisions in TSCA section 5(e) consent orders, which are modeled after Occupational Safety and Health Administration (OSHA) Permissible Exposure Limits (PELs) provisions, include requirements
This rule also includes SNURs on 12 PMN substances that are not subject to consent orders under TSCA section 5(e). In these cases, for a variety of reasons, EPA did not find that the use scenario described in the PMN triggered the determinations set forth under TSCA section 5(e). However, EPA does believe that certain changes from the use scenario described in the PMN could result in increased exposures, thereby constituting a “significant new use.” These so-called “non-section 5(e) SNURs” are promulgated pursuant to § 721.170. EPA has determined that every activity designated as a “significant new use” in all non-section 5(e) SNURs issued under § 721.170 satisfies the two requirements stipulated in § 721.170(c)(2), i.e., these significant new use activities, “(i) are different from those described in the premanufacture notice for the substance, including any amendments, deletions, and additions of activities to the premanufacture notice, and (ii) may be accompanied by changes in exposure or release levels that are significant in relation to the health or environmental concerns identified” for the PMN substance.
1. Use of personal protective equipment including dermal protection when there is potential dermal exposure and a National Institute for Occupational Safety and Health (NIOSH)-certified respirator with an assigned protection factor (APF) of at least 10,000, or compliance with a NCEL of 0.32 mg/m
2. No use of the substances resulting in surface water concentrations exceeding 5 ppb of the combination of these PMN substances.
3. Establishment and use of a hazard communication program.
1. Use of the substance only as described in the PMN.
2. Establishment and use of a hazard communication program.
3. No use of the substance that results in releases to surface water.
EPA has also determined that a prenatal developmental toxicity study (OPPTS Test Guideline 870.3700 or OECD 414) using oral (gavage) in the rat would help characterize the human health effects of the PMN substance. The order does not require the submission of the prenatal developmental toxicity study at any specified time or production volume. However, the order's restrictions on manufacture, import, processing, distribution in commerce, use, and disposal of the PMN substance will remain in effect until the order is modified or revoked by EPA based on submission of that or other relevant information.
As described in the PMN, releases of the substance are not expected to result in surface water concentrations that exceed 1 ppb. Therefore, EPA has not determined that the proposed manufacturing, processing, or use of the substance may present an unreasonable risk. EPA has determined, however, that any use of the substance resulting in surface water concentrations exceeding 1 ppb may cause significant adverse environmental effects. Based on this information, the PMN substance meets the concern criteria at § 721.170(b)(4)(ii).
During review of the PMNs submitted for the chemical substances that are subject to these SNURs, EPA concluded that for 8 of the 20 chemical substances, regulation was warranted under TSCA section 5(e), pending the development of information sufficient to make reasoned evaluations of the health or environmental effects of the chemical substances. The basis for such findings is outlined in Unit IV. Based on these findings, TSCA section 5(e) consent orders requiring the use of appropriate exposure controls were negotiated with the PMN submitters. The SNUR provisions for these chemical substances are consistent with the provisions of the TSCA section 5(e) consent orders. These SNURs are promulgated pursuant to § 721.160 (see Unit II.).
In the other 12 cases, where the uses are not regulated under a TSCA section 5(e) consent order, EPA determined that one or more of the criteria of concern established at § 721.170 were met, as discussed in Unit IV.
EPA is issuing these SNURs for specific chemical substances which have undergone premanufacture review because the Agency wants to achieve the following objectives with regard to the significant new uses designated in this rule:
• EPA will receive notice of any person's intent to manufacture, import, or process a listed chemical substance for the described significant new use before that activity begins.
• EPA will have an opportunity to review and evaluate data submitted in a SNUN before the notice submitter begins manufacturing, importing, or processing a listed chemical substance for the described significant new use.
• EPA will be able to regulate prospective manufacturers, importers, or processors of a listed chemical substance before the described significant new use of that chemical substance occurs, provided that regulation is warranted pursuant to TSCA sections 5(e), 5(f), 6, or 7.
• EPA will ensure that all manufacturers, importers, and processors of the same chemical substance that is subject to a TSCA section 5(e) consent order are subject to similar requirements.
Issuance of a SNUR for a chemical substance does not signify that the chemical substance is listed on the TSCA Chemical Substance Inventory (TSCA Inventory). Guidance on how to determine if a chemical substance is on the TSCA Inventory is available on the Internet at
EPA is issuing these SNURs as a direct final rule, as described in § 721.160(c)(3) and § 721.170(d)(4). In accordance with § 721.160(c)(3)(ii) and § 721.170(d)(4)(i)(B), the effective date of this rule is January 2, 2013 without further notice, unless EPA receives written adverse or critical comments, or notice of intent to submit adverse or critical comments before December 3, 2012.
If EPA receives written adverse or critical comments, or notice of intent to submit adverse or critical comments, on one or more of these SNURs before December 3, 2012, EPA will withdraw the relevant sections of this direct final rule before its effective date. EPA will then issue a proposed SNUR for the chemical substance(s) on which adverse or critical comments were received, providing a 30-day period for public comment.
This rule establishes SNURs for a number of chemical substances. Any person who submits adverse or critical comments, or notice of intent to submit adverse or critical comments, must identify the chemical substance and the new use to which it applies. EPA will not withdraw a SNUR for a chemical substance not identified in the comment.
Significant new use designations for a chemical substance are legally established as of the date of publication of this direct final rule, November 2, 2012.
To establish a significant “new” use, EPA must determine that the use is not ongoing. The chemical substances
As discussed in the April 24, 1990 SNUR, EPA has decided that the intent of TSCA section 5(a)(1)(B) is best served by designating a use as a significant new use as of the date of publication of this direct final rule rather than as of the effective date of the rule. If uses begun after publication were considered ongoing rather than new, it would be difficult for EPA to establish SNUR notification requirements because a person could defeat the SNUR by initiating the significant new use before the rule became effective, and then argue that the use was ongoing before the effective date of the rule. Thus, persons who begin commercial manufacture, import, or processing of the chemical substances regulated through this SNUR will have to cease any such activity before the effective date of this rule. To resume their activities, these persons would have to comply with all applicable SNUR notification requirements and wait until the notice review period, including any extensions, expires.
EPA has promulgated provisions to allow persons to comply with this SNUR before the effective date. If a person meets the conditions of advance compliance under§ 721.45(h), the person is considered exempt from the requirements of the SNUR.
EPA recognizes that TSCA section 5 does not require developing any particular test data before submission of a SNUN. The two exceptions are:
1. Development of test data is required where the chemical substance subject to the SNUR is also subject to a test rule under TSCA section 4 (see TSCA section 5(b)(1)).
2. Development of test data may be necessary where the chemical substance has been listed under TSCA section 5(b)(4) (see TSCA section 5(b)(2)).
In the absence of a TSCA section 4 test rule or a TSCA section 5(b)(4) listing covering the chemical substance, persons are required only to submit test data in their possession or control and to describe any other data known to or reasonably ascertainable by them (see § 720.50). However, upon review of PMNs and SNUNs, the Agency has the authority to require appropriate testing. In cases where EPA issued a TSCA section 5(e) consent order that requires or recommends certain testing, Unit IV. lists those tests. Unit IV. also lists recommended testing for non-5(e) SNURs. Descriptions of tests are provided for informational purposes. EPA strongly encourages persons, before performing any testing, to consult with the Agency pertaining to protocol selection. To access the OCSPP and OPPTS test guidelines referenced in this document electronically, please go to
In the TSCA section 5(e) consent orders for several of the chemical substances regulated under this rule, EPA has established production volume limits in view of the lack of data on the potential health and environmental risks that may be posed by the significant new uses or increased exposure to the chemical substances. These limits cannot be exceeded unless the PMN submitter first submits the results of toxicity tests that would permit a reasoned evaluation of the potential risks posed by these chemical substances. Under recent TSCA section 5(e) consent orders, each PMN submitter is required to submit each study at least 14 weeks (earlier TSCA section 5(e) consent orders required submissions at least 12 weeks) before reaching the specified production limit. Listings of the tests specified in the TSCA section 5(e) consent orders are included in Unit IV. The SNURs contain the same production volume limits as the TSCA section 5(e) consent orders. Exceeding these production limits is defined as a significant new use. Persons who intend to exceed the production limit must notify the Agency by submitting a SNUN at least 90 days in advance of commencement of non-exempt commercial manufacture, import, or processing.
The recommended tests specified in Unit IV. may not be the only means of addressing the potential risks of the chemical substance. However, submitting a SNUN without any test data may increase the likelihood that EPA will take action under TSCA section 5(e), particularly if satisfactory test results have not been obtained from a prior PMN or SNUN submitter. EPA recommends that potential SNUN submitters contact EPA early enough so that they will be able to conduct the appropriate tests.
SNUN submitters should be aware that EPA will be better able to evaluate SNUNs which provide detailed information on the following:
• Human exposure and environmental release that may result from the significant new use of the chemical substances.
• Potential benefits of the chemical substances.
• Information on risks posed by the chemical substances compared to risks posed by potential substitutes.
By this rule, EPA is establishing certain significant new uses which have been claimed as CBI subject to Agency confidentiality regulations at 40 CFR part 2 and 40 CFR part 720, subpart E. Absent a final determination or other disposition of the confidentiality claim under 40 CFR part 2 procedures, EPA is required to keep this information confidential. EPA promulgated a procedure to deal with the situation where a specific significant new use is CBI, at 40 CFR 721.1725(b)(1).
Under these procedures a manufacturer, importer, or processor may request EPA to determine whether
If EPA determines that the use identified in the
According to § 721.1(c), persons submitting a SNUN must comply with the same notification requirements and EPA regulatory procedures as persons submitting a PMN, including submission of test data on health and environmental effects as described in § 720.50. SNUNs must be submitted on EPA Form No. 7710-25, generated using e-PMN software, and submitted to the Agency in accordance with the procedures set forth in §§ 721.25 and 720.40. E-PMN software is available electronically at
EPA has evaluated the potential costs of establishing SNUN requirements for potential manufacturers, importers, and processors of the chemical substances subject to this rule. EPA's complete economic analysis is available in the docket under docket ID number EPA-HQ-OPPT-2012-0740.
This rule establishes SNURs for several new chemical substances that were the subject of PMNs and, in some cases, TSCA section 5(e) consent orders. The Office of Management and Budget (OMB) has exempted these types of actions from review under Executive Order 12866, entitled “Regulatory Planning and Review” (58 FR 51735, October 4, 1993).
According to PRA (44 U.S.C. 3501
The information collection requirements related to this action have already been approved by OMB pursuant to PRA under OMB control number 2070-0012 (EPA ICR No. 574). This action does not impose any burden requiring additional OMB approval. If an entity were to submit a SNUN to the Agency, the annual burden is estimated to average between 30 and 170 hours per response. This burden estimate includes the time needed to review instructions, search existing data sources, gather and maintain the data needed, and complete, review, and submit the required SNUN.
Send any comments about the accuracy of the burden estimate, and any suggested methods for minimizing respondent burden, including through the use of automated collection techniques, to the Director, Collection Strategies Division, Office of Environmental Information (2822T), Environmental Protection Agency, 1200 Pennsylvania Ave. NW., Washington, DC 20460-0001. Please remember to include the OMB control number in any correspondence, but do not submit any completed forms to this address.
On February 18, 2012, EPA certified pursuant to RFA section 605(b) (5 U.S.C. 601
1. A significant number of SNUNs would not be submitted by small entities in response to the SNUR.
2. The SNUR submitted by any small entity would not cost significantly more than $8,300.
A copy of that certification is available in the docket for this rule.
This rule is within the scope of the February 18, 2012, certification. Based on the Economic Analysis discussed in Unit XI. and EPA's experience promulgating SNURs (discussed in the certification), EPA believes that the following are true:
• A significant number of SNUNs would not be submitted by small entities in response to the SNUR.
• Submission of the SNUN would not cost any small entity significantly more than $8,300.
Based on EPA's experience with proposing and finalizing SNURs, State, local, and Tribal governments have not been impacted by these rulemakings, and EPA does not have any reasons to believe that any State, local, or Tribal government will be impacted by this rule. As such, EPA has determined that this rule does not impose any enforceable duty, contain any unfunded mandate, or otherwise have any effect on small governments subject to the requirements of UMRA sections 202, 203, 204, or 205 (2 U.S.C. 1501
This action will not have a substantial direct effect on States, on the
This rule does not have Tribal implications because it is not expected to have substantial direct effects on Indian Tribes. This rule does not significantly nor uniquely affect the communities of Indian Tribal governments, nor does it involve or impose any requirements that affect Indian Tribes. Accordingly, the requirements of Executive Order 13175, entitled “Consultation and Coordination with Indian Tribal Governments” (65 FR 67249, November 9, 2000), do not apply to this rule.
This action is not subject to Executive Order 13045, entitled “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997), because this is not an economically significant regulatory action as defined by Executive Order 12866, and this action does not address environmental health or safety risks disproportionately affecting children.
This action is not subject to Executive Order 13211, entitled “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001), because this action is not expected to affect energy supply, distribution, or use and because this action is not a significant regulatory action under Executive Order 12866.
This action does not involve any technical standards, so NTTAA section 12(d) (15 U.S.C. 272 note) does not apply to this action.
This action does not entail special considerations of environmental justice related issues as delineated by Executive Order 12898, entitled “Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations” (59 FR 7629, February 16, 1994).
Pursuant to the Congressional Review Act (5 U.S.C. 801
Environmental protection, Reporting and recordkeeping requirements.
Environmental protection, Chemicals, Hazardous substances, Reporting and recordkeeping requirements.
Therefore, 40 CFR parts 9 and 721 are amended as follows:
7 U.S.C. 135
15 U.S.C. 2604, 2607, and 2625(c).
(a)
(2) The significant new uses are:
(i) Industrial, commercial and consumer activities. Requirements as specified in § 721.80(f) and (j)
(ii) [Reserved]
(b)
(1)
(2)
(3)
(a)
(2) The significant new uses are:
(i)
(A) As an alternative to the respiratory requirements listed in paragraph (a)(2)(i), a manufacturer, importer, or processor may choose to follow the new chemical exposure limit (NCEL) provisions listed in the TSCA section 5(e) consent order for this substance. The NCEL is 0.32 milligram/cubic meter (mg/m
(B) [Reserved]
(ii)
(iii)
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(A) As an alternative to the respiratory requirements listed in paragraph (a)(2)(i), a manufacturer, importer, or processor may choose to follow the new chemical exposure limit (NCEL) provisions listed in the TSCA section 5(e) consent order for this substance. The NCEL is 0.32 milligram/cubic meter (mg/m
(B) [Reserved]
(ii)
(iii)
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(A) As an alternative to the respiratory requirements listed in paragraph (a)(2)(i), a manufacturer, importer, or processor may choose to follow the new chemical exposure limit (NCEL) provisions listed in the TSCA section 5(e) consent order for this substance. The NCEL is 0.32 milligram/cubic meter (mg/m
(B) [Reserved]
(ii)
(iii)
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(A) As an alternative to the respiratory requirements listed in paragraph (a)(2)(i), a manufacturer, importer, or processor may choose to follow the new chemical exposure limit (NCEL) provisions listed in the TSCA section 5(e) consent order for this substance. The NCEL is 0.32 milligram/cubic meter (mg/m
(B) [Reserved]
(ii)
(iii)
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(A) As an alternative to the respiratory requirements listed in paragraph (a)(2)(i), a manufacturer, importer, or processor may choose to follow the new chemical exposure limit (NCEL) provisions listed in the TSCA section 5(e) consent order for this substance. The NCEL is 0.32 milligram/cubic meter (mg/m
(B) [Reserved]
(ii)
(iii)
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(A) As an alternative to the respiratory requirements listed in paragraph (a)(2)(i), a manufacturer, importer, or processor may choose to follow the new chemical exposure limit (NCEL) provisions listed in the TSCA section 5(e) consent order for this substance. The NCEL is 0.32 milligram/cubic meter (mg/m
(B) [Reserved]
(ii)
(iii)
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(ii)
(iii)
(b)
(1)
(2)
(3)
(a)
(2) The significant new uses are:
(i)
(A) If as a result of the test data required under the TSCA section 5(e) consent order for this substance, the employer becomes aware that this substance may present a risk of injury to human health or the environment, the employer must incorporate this new information, and any information on methods for protecting against such risk, into a Material Safety Data Sheet (MSDS) as described in § 721.72(c) within 90 days from the time the employer becomes aware of the new information. If this substance is not being manufactured, imported, processed, or used in the employer's workplace, the employer must add the new information to a MSDS before the substance is reintroduced into the workplace.
(B) The employer must ensure that persons who will receive the PMN substance from the employer, or who have received the PMN substance from the employer within 5 years from the date the employer becomes aware of the new information described in paragraph (a)(2)(i)(A) of this section, are provided an MSDS containing the information required under paragraph (a)(2)(i)(A) within 90 days from the time the
(ii)
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(ii)
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(ii) [Reserved]
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(ii) [Reserved]
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(ii) [Reserved]
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(ii) [Reserved]
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(ii) [Reserved]
(b)
(1)
(2)
(3)
(a)
(2) The significant new uses are:
(i)
(ii) [Reserved]
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(ii) [Reserved]
(b)
(1)
(2)
(3)
(a)
(2) The significant new uses are:
(i) Industrial, commercial, and consumer activities. Requirements as specified in § 721.80(j) and (s).
(ii) [Reserved]
(b)
(1)
(2)
(3)
Federal Emergency Management Agency, DHS.
Proposed rule; withdrawal.
The Federal Emergency Management Agency (FEMA) is withdrawing its proposed rule concerning proposed flood elevation determinations for Scotland County, North Carolina, and Incorporated Areas.
This withdrawal is effective on November 2, 2012.
You may submit comments, identified by Docket No. FEMA-B-1158, to Luis Rodriguez, Chief, Engineering Management Branch, Federal Insurance and Mitigation Administration, Federal Emergency Management Agency, 500 C Street SW., Washington, DC 20472, (202) 646-4064, or (email)
Luis Rodriguez, Chief, Engineering Management Branch, Federal Insurance and Mitigation Administration, Federal Emergency Management Agency, 500 C Street SW., Washington, DC 20472, (202) 646-4064, or (email)
On December 16, 2010, FEMA published a proposed rulemaking at 75 FR 78654, proposing flood elevation determinations along one or more flooding sources in Scotland County, North Carolina. FEMA is withdrawing the proposed rulemaking and intends to publish a Notice of Proposed Flood Hazard Determinations in the
42 U.S.C. 4104; 44 CFR 67.4.
Surface Transportation Board (the Board or STB), DOT.
Notice of proposed rulemaking.
Through this Notice of Proposed Rulemaking (NPR), the Board is proposing a rule establishing additional disclosure requirements for notices and petitions for exemption where the underlying lease or line sale includes an interchange commitment.
Comments are due by December 3, 2012. Reply comments are due by January 2, 2013.
Comments and replies may be submitted either via the Board's e-filing format or in the traditional paper format. Any person using e-filing should attach a document and otherwise comply with the instructions at the E-FILING link on the Board's Web site, at
Amy C. Ziehm at (202) 245-0391. Assistance for the hearing impaired is available through the Federal Information Relay Service (FIRS) at (800) 877-8339.
Interchange commitments are “contractual provisions included with a sale or lease of a rail line that limit the incentive or the ability of the purchaser or tenant carrier to interchange traffic with rail carriers other than the seller or lessor railroad.”
As a result of both the Railroad Revitalization and Regulatory Reform Act of 1976 and the Staggers Rail Act of 1980, it has become easier for rail carriers to abandon, sell, or lease a line or part of a line by utilizing exemptions from regulatory procedures. This flexibility has helped to revitalize the railroad industry. In 1998, the Board held two days of hearings to examine rail access and competition.
In September 1998, the American Short Line and Regional Railroad Association and the Association of American Railroads entered into a Railroad Industry Agreement (RIA), which stipulated, among other things, that “[l]egitimate paper barriers are those that are designed as fair payment for the sale or rental value of the line that created the Short Line.”
In 2005, in response to a renewed petition filed by WCTL, the Board initiated a rulemaking proceeding to consider regulations restricting interchange commitment provisions included with a sale or lease of a rail line.
To facilitate its review of transactions that include interchange commitments, the Board proposed new disclosure requirements in 2007 to ensure appropriate advance regulatory scrutiny of sale and lease agreements containing interchange commitments,
Since its May 2008 decision adopting disclosure rules, the Board has reviewed 10 notices or petitions for exemption involving interchange commitments.
The Board and interested parties have availed themselves of the information required in transactions containing interchange commitments. For instance, in four of those cases, third parties filed petitions to revoke the exemptions based on the interchange commitment.
In this rulemaking, the Board proposes to require that additional information be provided in notices and petitions for exemption to include, among other things, specific details regarding the impact the interchange commitment will have on shippers and the purchaser or lessee railroad. The Board's goal is to ensure that both the agency and other interested parties have sufficient information to judge whether the exemption process is appropriate for a transaction. In particular, because the notice of exemption process involves very short deadlines, the Board proposes to require disclosure of information about the transaction at the time of the notice itself, rather than during any subsequent requests to reject or revoke the exemption.
(1) A list of shippers that currently use or have used the line in question within the last two years;
(2) The number of carloads those shippers specified in paragraph (1) originated or terminated (submitted under seal);
(3) A certification that the railroad has provided notice of the proposed transaction and interchange commitment to the shippers identified in paragraph (1);
(4) A list of third party railroads that could physically interchange with the line sought to be acquired or leased;
(5) The percentage of the purchasing/leasing railroad's revenue projected to be derived from operations on the line with the interchange commitment (submitted under seal);
(6) An estimate of the difference between the sale or lease price with and without the interchange commitment (submitted under seal);
(7) An estimate of the discounted annual value of the interchange commitment to the Class I (or other incumbent carrier) leasing or selling the line (submitted under seal); and
(8) A change in the case caption so that the existence of an interchange commitment is apparent from the case title.
The Board's goal is to encourage transactions that are in the public interest, while ensuring that it has sufficient information about transactions to determine whether they are appropriate for the exemption process or, on the other hand, raise competitive issues that require a more detailed examination. The Board has already indicated that interchange commitments that last in perpetuity or completely eliminate the ability of the lessee/purchaser railroad to interchange with a third-party carrier raise significant concerns. Long-term interchange commitments, often embodied in lengthy, renewable leases, also have the potential to control the competitive environment—thus affecting rates and service—for years to come. To this end, the Board believes that it will benefit the parties to the transaction, shippers, and the public for the Board to be provided with the above-outlined information simultaneously with the filing of a notice or petition for exemption. This additional information will aid the Board in its review of petitions for and notices of exemption and allow the Board to evaluate contracts involving interchange commitments without the delay involved with seeking additional information. Furthermore, parties objecting to a petition for exemption or those filing a petition to revoke an exemption will have access to this relevant information up front, thus minimizing the length of time spent on the process of filing and deciding a petition to revoke.
The regulations proposed here would affect railroads negotiating contracts that contain interchange commitments. As noted below, the Board estimates that a total of four respondents will be affected by these additional reporting requirements annually, and that the additional time required by each respondent is no more than eight hours. The Board believes that an additional eight hours in the context of putting together the relevant documents and filings does not create a significant impact. Moreover, as only four respondents per year will be affected, the proposed rule would not impact a substantial number of small entities.
This action will not significantly affect either the quality of the human environment or the conservation of energy resources.
This rulemaking will affect the following subject: Parts 1121, 1150, and 1180 of title 49, chapter X, of the Code of Federal Regulations. It is issued subject to the Board's authority under 49 U.S.C. 721(a).
1. The Board proposes to amend its rules as set forth in this decision. Notice of the proposed rules will be published in the
2. Comments are due by December 3, 2012. Reply comments are due by January 2, 2013.
3. This decision is effective on the day of service.
Administrative practice and procedure, Railroads.
Administrative practice and procedure, Railroads.
Administrative practice and procedure, Railroads, Reporting and record keeping requirements.
Decided: October 29, 2012.
By the Board, Chairman Elliott, Vice Chairman Mulvey, and Commissioner Begeman. Vice Chairman Mulvey commented with a separate expression.
I commend the Board for proposing additional rules and soliciting comments regarding interchange commitment disclosures requirements. As explained in the decision, the goal of the proposed rules is to provide the Board and interested parties early access to a wide range of information regarding newly proposed interchange commitments. The impact of interchange commitments on competition remains a serious concern for many stakeholders. As we continue to grapple with questions raised by interchange commitments established decades ago, the Board must also be vigilant about the impact of any new restrictions on competition. In responding to the proposed rules, I hope that stakeholders will assist the Board in crafting a regime that provides appropriate scrutiny to transactions that have the potential to adversely impact competition.
For the reasons set forth in the preamble, the Surface Transportation Board proposes to amend parts 1121, 1150, and 1180 of title 49, chapter X, of the Code of Federal Regulations as follows:
1. The authority citation for part 1121 continues to read as follows:
49 U.S.C. 10502 and 10704.
2. Amend § 1121.3 by revising paragraph (d)(1) introductory text and by adding paragraphs (d)(1)(iii) through (x) to read as follows:
(d)
(iii) A list of shippers that currently use or have used the line in question within the last two years;
(iv) The number of carloads those shippers specified in paragraph (d)(1)(iii) of this section originated or terminated (submitted under seal);
(v) A certification that the railroad has provided notice of the proposed transaction and interchange commitment to the shippers identified in paragraph (d)(1)(iii) of this section;
(vi) A list of third party railroads that could physically interchange with the line sought to be acquired or leased;
(vii) The percentage of the purchasing/leasing railroad's revenue projected to be derived from operations on the line with the interchange commitment (submitted under seal);
(viii) An estimate of the difference between the sale or lease price with and without the interchange commitment (submitted under seal);
(ix) An estimate of the discounted annual value of the interchange commitment to the Class I (or other incumbent carrier) leasing or selling the line (submitted under seal); and
(x) A change in the case caption so that the existence of an interchange commitment is apparent from the case title.
3. The authority citation for part 1150 continues to read as follows:
49 U.S.C. 721(a), 10502, 10901, and 10902.
4. Amend § 1150.33 by revising paragraph (h)(1) introductory text and by adding paragraphs (h)(1)(iii) through (x) to read as follows:
(h)
(iii) A list of shippers that currently use or have used the line in question within the last two years;
(iv) The number of carloads those shippers specified in paragraph (iii) originated or terminated (submitted under seal);
(v) A certification that the railroad has provided notice of the proposed transaction and interchange commitment to the shippers identified in paragraph (iii);
(vi) A list of third party railroads that could physically interchange with the line sought to be acquired or leased;
(vii) The percentage of the purchasing/leasing railroad's revenue projected to be derived from operations on the line with the interchange commitment (submitted under seal);
(viii) An estimate of the difference between the sale or lease price with and without the interchange commitment (submitted under seal);
(ix) An estimate of the discounted annual value of the interchange commitment to the Class I (or other incumbent carrier) leasing or selling the line (submitted under seal); and
(x) A change in the case caption so that the existence of an interchange commitment is apparent from the case title.
5. Amend § 1150.43 by revising paragraphs (h)(1) introductory text and by adding paragraphs (h)(1)(iii) through (x) to read as follows:
(h)
(iii) A list of shippers that currently use or have used the line in question within the last two years;
(iv) The number of carloads those shippers specified in paragraph (h)(1)(iii) of this section originated or terminated (submitted under seal);
(v) A certification that the railroad has provided notice of the proposed transaction and interchange commitment to the shippers identified in paragraph (h)(1)(iii) of this section;
(vi) A list of third party railroads that could physically interchange with the line sought to be acquired or leased;
(vii) The percentage of the purchasing/leasing railroad's revenue projected to be derived from operations on the line with the interchange commitment (submitted under seal);
(viii) An estimate of the difference between the sale or lease price with and without the interchange commitment (submitted under seal);
(ix) An estimate of the discounted annual value of the interchange commitment to the Class I (or other incumbent carrier) leasing or selling the line (submitted under seal); and
(x) A change in the case caption so that the existence of an interchange commitment is apparent from the case title.
6. The authority citation for part 1180 continues to read as follows:
5 U.S.C. 553 and 559; 11 U.S.C. 1172; 49 U.S.C. 721, 10502, 11323-11325.
7. Amend § 1180.4 by revising paragraph (g)(4)(i) introductory text and by adding paragraphs (g)(4)(i)(C) through (J) to read as follows:
(g) * * *
(4)
(C) A list of shippers that currently use or have used the line in question within the last two years;
(D) The number of carloads those shippers specified in paragraph (g)(4)(i)(C) of this section originated or terminated (submitted under seal);
(E) A certification that the railroad has provided notice of the proposed transaction and interchange commitment to the shippers identified in paragraph (g)(4)(i)(C) of this section;
(F) A list of third party railroads that could physically interchange with the line sought to be acquired or leased;
(G) The percentage of the purchasing/leasing railroad's revenue projected to be derived from operations on the line with the interchange commitment (submitted under seal);
(H) An estimate of the difference between the sale or lease price with and without the interchange commitment (submitted under seal);
(I) An estimate of the discounted annual value of the interchange commitment to the Class I (or other incumbent carrier) leasing or selling the line (submitted under seal); and
(J) A change in the case caption so that the existence of an interchange commitment is apparent from the case title.
The following appendix will not appear in the Code of Federal Regulations.
The additional information below is included to assist those who may wish to submit comments pertinent to review under the Paperwork Reduction Act:
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Proposed rule; request for comments.
NMFS proposes regulations to implement Amendment 19 to the Northeast Multispecies Fishery Management Plan, if approved. The New England Fishery Management Council developed Amendment 19 to modify management measures that currently govern the small-mesh multispecies fishery, including the accountability measures, the year-round possession limits and total allowable landings process.
Written comments must be received no later than 5 p.m. eastern standard time, on December 3, 2012.
An environmental assessment (EA) was prepared for Amendment 19 that describes the proposed action and other considered alternatives, and provides an analysis of the impacts of the proposed measures and alternatives. Copies of the Amendment, including the EA and the Initial Regulatory Flexibility Analysis (IRFA), are available on request from Paul J. Howard, Executive Director, New England Fishery Management Council, 50 Water Street, Newburyport, MA 01950. These documents are also available online at
You may submit comments, identified by NOAA-NMFS-2012-0170, by any one of the following methods:
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•
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Moira Kelly, Fishery Policy Analyst, (978) 281-9218.
Amendment 19 to the Northeast (NE) Multispecies Fishery Management Plan (FMP) affects the part of the New England groundfish fishery known as the small-mesh fishery. The small-mesh fishery is composed of a complex of five stocks of three species of hakes (northern silver hake, southern silver hake, northern red hake, southern red hake, and offshore hake), and is managed through a series of exemptions from the other provisions of the NE Multispecies FMP. It is managed separately from the other stocks of groundfish such as cod, haddock, and flounder, primarily because it is prosecuted with much smaller mesh and does not generally result in the catch of these other stocks.
The New England Fishery Management Council (Council) initiated Amendment 19 to bring the small-mesh multispecies portion of the NE Multispecies FMP into compliance with the annual catch limit (ACL) and accountability measure (AM) requirements of the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act). However, development of Amendment 19 was delayed, and it became apparent that the amendment would not be submitted until well after the 2011 statutory deadline for implementing mechanisms for establishing ACLs and AMs. To ensure that ACLs and AMs for the small-mesh fishery were implemented closer to the statutory deadline, NOAA initiated, developed, and implemented, with the concurrence of the Council, a Secretarial Amendment on March 30, 2012 (77 FR 19138). The Secretarial Amendment was based on the preliminary work the Council completed up to that point, including the overfishing limits (OFL), acceptable biological catches (ABC), and ACLs.
The Council, through Amendment 19, is adopting those limits (Table 1) and the process that describes how those values are calculated as implemented in the Secretarial Amendment. As described in the Secretarial Amendment, the ABCs are based on the OFLs and, to account for scientific uncertainty, are set equal to the 40th percentile of the OFL distribution for both red hake stocks, and the 25th percentile for both silver hake stocks. In order to account for offshore hake, which are caught incidentally in the southern silver hake fishery and are marketed together as “whiting,” the southern silver hake ABC is increased by 4 percent. The ACLs are then set equal to 95 percent of the respective ABC, to account for management uncertainty.
However, in Amendment 19, the Council recommended changes to some measures implemented in the Secretarial Amendment, as well as changes to management measures that the Secretarial Amendment did not address. This rule proposes these changes, which are discussed in detail below.
The overfishing definitions were derived from the most recent stock assessment for the small-mesh multispecies that was conducted in November 2010 (SAW 51). The Council prefers using the new overfishing definitions because they are based on the best available science. There is no overfishing definition for offshore hake because there is insufficient information for a stock assessment. The proposed new overfishing definitions for red hake and silver hake would be as follows:
Red hake is overfished when the 3-yr moving arithmetic average of the spring survey weight per tow (i.e., the biomass threshold) is less than one-half of the B
Overfishing occurs when the ratio between catch and spring survey biomass exceeds 0.163 kt/kg and 3.038 kt/kg, respectively, derived from An Index Method (AIM) analyses from 1980-2009.
Silver hake is overfished when the 3-yr moving average of the fall survey weight per tow (i.e., the biomass threshold) is less than one-half the B
Overfishing occurs when the ratio between the catch and the arithmetic mean fall survey biomass index from the most recent three years exceeds the overfishing threshold. The most recent
This rule proposes to modify the specifications process and the list of measures that may be changed in a Framework Adjustment implemented by the Secretarial Amendment, and also proposes to modify the process by which the fishery is monitored. The proposed specifications process would specify the date by which the Council would need to make a recommendation on the catch limits, possession limits, and other measures deemed to be part of the specifications package. In addition, the list of items that could be considered for adjustment in a framework would be modified slightly.
This rule also proposes a measure that would require NMFS to prepare, and the appropriate Council technical group (such as a plan development team (PDT)) to review, a report on the small-mesh multispecies fishery, including trends in the fishery and changes in stock size. The PDT would be responsible for making recommendations to the Council, should any management changes be deemed necessary.
Finally, this rule proposes to require vessels fishing for small-mesh multispecies to send their vessel trip reports (VTRs) to NMFS on a weekly basis. Amendment 16 to the NE Multispecies FMP implemented the requirement that vessels fishing with a NE multispecies permit have a weekly VTR requirement; however, that amendment had no other small-mesh multispecies measures associated with it. As a result, the Council and the Whiting Oversight Committee wanted to ensure that the weekly submission of VTRs is a requirement for small-mesh multispecies vessels through this action, in order to facilitate more effective monitoring of the stock-area based TALs.
The Secretarial Amendment implemented annual, stock-wide TALs for northern and southern red hake, as well as for northern silver hake and southern “whiting” (i.e., silver and offshore hake, combined). The TALs are calculated by deducting the most recent 3-year moving average of discards from the ACL. From that resulting value, 3 percent is deducted to account for state-waters landings.
This rule proposes to maintain the annual, stock-wide TAL for the northern area, instead of the other considered alternative of sub-dividing the TALs by exemption area. The annual, stock-wide TAL was the Council's preferred alternative because it would be less costly to monitor and the small-mesh exemption area targets may not provide the intended benefits of ensuring full trip limits for the different fleets that fish seasonally in the exemption areas.
In the southern stock area, the TALs would be monitoring annually initially, until two-thirds of a TAL is harvested in a given year. The Council prefers this alternative to implementing quarterly TALs at this time because the quarterly allocations are unnecessary unless and until landings begin to approach the TALs. In addition, the quarterly TALs, as opposed to the annual quota, would, if implemented, prevent long directed fishery closures, possibly affecting the ability to target whiting in the winter and spring.
If landings in a given year exceed two-thirds of the TAL, NMFS would consult with the Council during the following year, and if the Council agrees, NMFS would implement a rule to switch the TAL to a quarterly system for the next year. For example, if two-thirds of the red hake TAL were landed in 2013, and the Council agreed, the quarterly TALs would be implemented for the start of the 2015 fishing year and would be maintained until the Council chooses, through specifications or a Framework Adjustment, to revert back to an annual TAL. The incidental possession limit trigger (as described in the in-season AM section, below) would be applied for each quarter. The quarterly allocations would be based on the average proportion of dealer-reported landings from 2008-2010, as follows:
Included in this proposed measure is a “roll-up” procedure that would be used for in-season monitoring of the quarterly TALs. In each quarter, the cumulative landings to date that fishing year would be monitored against a quarterly TAL represented by the sum of that quarter's allocation, plus the allocations from prior quarters (e.g., during quarter 2, the cumulative landings of southern red hake to date would be monitored against a quota equal to 58.6 percent of the annual TAL, which is the sum of the quarter 1 allocation of 33.3 percent plus the quarter 2 allocation of 25.3 percent). The possession limit trigger for each stock would apply in each quarter when cumulative landings reach 90 percent of the rolled-up quarterly allocation, and the incidental possession limit would remain in effect until the end of that quarter. At the start of the next quarter, the possession limit would reset to the
The Secretarial Amendment implemented two types of AMs for the small-mesh multispecies fishery. The in-season AM would reduce the possession limit to an incidental amount for a stock if 90 percent of that stock's TAL were projected to be harvested. For both red hake stocks, the possession limit would be reduced to 400 lb (181.4 kg), and for northern silver hake and southern whiting, the possession limit would be reduced to 1,000 lb (453.6 kg). In the event that an ACL is exceeded in a given year, the post-season AM implemented in the Secretarial Amendment would reduce a subsequent year's ACL by the exact amount, by weight, by which the ACL were exceeded. For example, if an ACL in fishing year 2013 were exceeded by 15,000 lb (6,803. 9 kg), the ACL for that stock in fishing year 2015 would be reduced by 15,000 lb (6,803.9 kg).
This rule proposes to maintain the overall structure of the in-season AM (i.e., the 90-percent trigger, with a reduced possession limit), but proposes to change the incidental possession limit for northern silver hake and southern whiting. This rule proposes to maintain the 400-lb (181.4-kg) incidental possession limit for red hake and to raise the incidental possession limit for silver and offshore hake, combined, from 1,000 lb (453.6 kg) to 2,000 lb (907.2 kg). This limit is proposed because analysis by the Whiting PDT indicates that it is likely to be effective in keeping landings below the TAL, without increasing discards. There is no meaningful contrast in the effectiveness of lower incidental possession limits, but the lower incidental possession limits are estimated to cause an unacceptable increase in discards.
This rule proposes to replace the post-season AM implemented by the Secretarial Amendment, described above, with a post-season AM that would decrease the TAL trigger by the same percentage by which the ACL were exceeded. That is, if an ACL were exceeded by 5 percent in fishing year 2013, the incidental possession limit trigger of 90 percent would be reduced by 5 percent to 85 percent, starting in fishing year 2015. This reduction in the TAL trigger would remain in effect until the Council chooses to modify it through the specifications process or in a framework adjustment. This AM is intended to permanently account for the management uncertainty that caused the overage. The Council chose this AM because it more directly reduces the trips targeting small-mesh multispecies, and, as a result, the overall landings by the directed fishery.
Currently, there is no year-round possession limit for red hake in both the northern or southern stock area, and the possession limit for silver and offshore hake, combined, is based on mesh size throughout the region. This rule proposes changes to both of these management measures.
This rule is proposing to implement a 5,000-lb (2,268-kg) trip limit for red hake in both the northern and southern stock areas for all gear types. The Council had considered mesh-size based trip limits, similar to silver hake, but prefers the same trip limit for all gear types because it is more enforceable and compliance would likely be higher. The intention of this trip limit is to prevent significant increases in catch beyond what is currently landed. Analysis shows that no trips from 2008-2010 landed more than 5,000 lb (2,268 kg), so the measure is unlikely to restrict existing fishing effort, but is intended to act as a deterrent to increasing fishing effort to target red hake.
This rule proposes to increase the southern whiting (southern silver hake and offshore hake, combined) trip limit from 30,000 lb (13,607.8 kg) to 40,000 lb (18,143.7 kg) for vessels fishing in the Southern New England and Mid-Atlantic Exemption Areas using mesh that is 3 inches (7.6 cm) or greater. The Council had considered implementing this trip limit increase in only a portion of the southern exemption areas; however, as a result of public comment and enforceability concerns, the Council prefers that the increase be applicable throughout the southern area. The Council selected a 40,000-lb (18,143.7-kg) possession limit to retain the delicate balance between allowing a moderate increase in landings while trying not to attract excessive fishing effort to an open access fishery, which could cause landings to rapidly increase and potentially cause the incidental possession limit to be triggered earlier in the fishing year. The Council also constrained this possession limit increase to vessels using trawls having 3-inch (7.6 cm) or larger mesh to maintain optimum size selectivity by the fishery and discourage increases in fishing for smaller whiting.
As required under section 303(c) of the Magnuson-Stevens Act, the Council reviewed the draft regulations and deemed them necessary and appropriate for implementation of Amendment 19. Technical changes to the regulations deemed necessary by the Secretary for clarity may be made, as provided under section 304(b) of the Magnuson-Stevens Act.
NMFS is proposing to clarify some of the regulations governing the small-mesh multispecies fishery through this rulemaking. The proposed language of the regulations pertaining to the small-mesh multispecies exemption programs would clarify that only a raised footrope trawl is allowed in the Small Mesh Area I and II Exemption Programs, and the Gulf of Maine Grate Raised Footrope Trawl Area Exemption Program, and that no other fishing gears are permitted to be used while a vessel is fishing in these exemption programs. NMFS is also proposing language to clarify the incidental catch limits for other species in the small-mesh multispecies exemption programs by adding the citation for each species, as appropriate. NMFS is also proposing to correct an incorrect citation in the regulations pertaining to small-mesh multispecies transfers-at-sea.
Pursuant to section 304(b)(1)(A) of the Magnuson-Stevens Act, the NMFS Assistant Administrator has preliminarily determined that this proposed rule is consistent with the Northeast Multispecies FMP, other provisions of the Magnuson-Stevens Act, and other applicable law, subject to further consideration after public comment.
The Office of Management and Budget has determined that this proposed rule is not significant for the purposes of Executive Order 12866.
The Council prepared an IRFA, as required by section 603 of the Regulatory Flexibility Act (RFA), which is included in Amendment 19 and supplemented by information contained in the preamble to this proposed rule. The IRFA describes the economic impact this proposed rule, if adopted, would have on small entities. A description of the action, why it is being considered, and the legal basis for this
All of the entities (fishing vessels) affected by this action are considered small entities under the Small Business Administration size standards for small fishing businesses ($4.0 million in annual gross sales). Therefore, there are no disproportionate effects on small versus large entities. Information on costs in the fishery is not readily available and individual vessel profitability cannot be determined directly; therefore, expected changes in gross revenues were used as a proxy for profitability.
This action does not introduce any new reporting, recordkeeping, or other compliance requirements. This proposed rule does not duplicate, overlap, or conflict with other Federal rules.
In order to fish for small-mesh multispecies, a vessel owner must be issued either a limited access NE multispecies permit or an open access category K NE multispecies permit; however, there are many vessels issued both of these types of permits that may not actually fish for small-mesh multispecies. Although some firms own more than one vessel, available data make it difficult to reliably identify ownership control over more than one vessel. For this analysis, the number of permitted vessels landing small-mesh multispecies is considered to be a maximum estimate of the number of small business entities that may be impacted. The average number of permitted vessels landing at least 1 lb (0.5 kg) of silver hake or red hake from 2005-2010 was 562 vessels per year.
In general, the economic impacts of the proposed actions vary from positive to slightly negative, compared to the status quo/no action alternatives and the other alternatives considered. The proposed measures that have positive economic impacts include the specifications process; including the modification of the southern area TAL structure that would implement quarterly TALs if two-thirds of the TAL is landed; both year-round trip limit alternatives are expected to result in positive economic impacts. The proposed AMs are more likely to result in slightly negative impacts, if triggered. Although analysis indicates that the preferred post-season AM of a percent reduction in the incidental possession limit trigger would have a less negative impact than the status quo.
The proposed alternatives that would most likely have an impact in the foreseeable future is the status quo alternative that proposed to maintain 90-percent trigger AM for northern red hake with a 400-lb (181.4-kg) incidental possession limit, as was described in the Secretarial Amendment. Using vessel trip report data from 2006-2010, a 400-lb (181.4-kg) incidental possession limit in the northern stock area, implemented when 90 percent of the northern red hake TAL is projected to be harvested, would have impacted approximately 23 trips per year, and an average of 7 vessels per year. At a loss of approximately $282 per trip, this AM would have cost the fleet $6,486 per year in lost northern red hake revenue. This may not be a true revenue loss, however. Red hake is rarely the primary target species and vessel owners are likely to shift effort onto another routinely landed incidental species, such as skates or dogfish, to finish their trip. The other in-season AM alternatives considered for this amendment included incidental possession limits of 200 lb (90.7 kg) or 300 lb (136.1 kg). Both of these alternatives would have an increased negative impact, affecting more trips than the 400-lb (181.4-kg) possession limit. Furthermore, the long-term impacts would likely be negative for these alternatives as well, due to increased discarding. The impacts from alternatives for the in-season AM for northern silver hake, southern whiting, and southern red hake are difficult to quantify because the TALs are significantly higher than recent catch and they are unlikely to be implemented. For southern red hake, the proposed alternative is the status quo alternative and for southern whiting and northern silver hake, the proposed alternative is an increase in the incidental trip limit from 1,000 lb (453.6 kg) to 2,000 lb (907.2 kg). In general, the lower incidental trip limits (200 and 300 lb (90.7 and 136.1 kg) for red hake; and 500 and 1,000 lb (226.8 and 453.6 kg) for southern whiting and northern silver hake) can be assumed to have a more negative economic impact than the higher incidental trip limits (400 lb (181.4 kg) for southern red hake, and 2,000 lb (907.2 kg) for southern whiting and northern red hake).
Another alternative that may have impact in the near-future is the post-season AM for northern red hake. The status quo alternative would implement a pound-for-pound payback system for any overage. The proposed alternative would reduce the incidental possession limit trigger by the same percentage by which the ACL was exceeded. As an example, the 2010 fishing year northern red hake catch exceeds the ACL and can be used to illustrate the potential impacts of the two alternatives. Northern red hake catch was 311 mt in 2010, 17% or 45 mt above the fishing year 2012 ACL of 266 mt. For this example, we assume that the discard rate and state water landings proportion remain constant. Assuming that the discard rate and state waters portion remain constant, the status quo alternative results in a TAL of 144,094 lb (65.4 mt), with a 90 percent incidental trigger limit of 129,685 lb (58.8 mt). The proposed alternative, on the other hand results in a TAL of 199,077 lb (90.3 mt), with a 73 percent incidental trigger limit of 145,326 lb (65.9 mt). This example demonstrates that the reduction in the possession limit trigger would have a less negative impact on the fleet than the status quo alternative of a pound-for-pound payback because it provides for a higher directed fishery target.
Because the current TAL is significantly higher than recent catch for southern red hake, northern silver hake, and southern whiting, it is difficult to quantify the impact that either the status quo or the possession limit trigger reduction would have. However, it can be assumed that the impacts would be similar to those described above.
It is expected that the year-round possession limit changes would also have an immediate economic impact. The year-round red hake limit of 5,000 lb (2268 kg), versus the status quo alternative of an unlimited possession limit, is intended to act as a restriction on potential increases in red hake landings, and very few recent trips would have been impacted by this trip limit. It is possible that there could be a negative effect on the price of red hake if vessels start landing larger quantities, which is possible under the status quo of no trip limit in this open access fishery. It is expected that this alternative would help maintain a satisfactory price for red hake and have a positive economic impact, as opposed to the other, lower possession limits considered in the Amendment.
In addition, the increase in the southern whiting possession limit for vessels using mesh that is 3 inches (7.6 cm) or greater is also expected to have a positive economic impact for vessels fishing in the southern area, but may have a slightly negative economic impact for vessels fishing in the northern area. If the possession limit is increased in the southern area, there may be a reduced demand, and therefore a reduced price, for whiting. This reduced price would be offset by the increased volume for vessels fishing in the southern area, but would not be offset for vessels fishing in the northern area. Analysis indicates that increasing daily landings could cause a decline of 0.6 cents for each 1-percent increase in landings. Therefore, the revenue for a 30,000-lb (13607.8-kg) trip in the northern stock area would decline by approximately $450, while the revenue for a southern area trip landing 40,000 lb (18143.7 kg) of whiting would increase by $5,318. The other alternatives considered for this measure would limit the increase to a portion of the southern area, which would have less economic benefit than the proposed alternative. The status quo alternative would not increase the trip limit and would be less economically beneficial than the proposed alternative.
Fisheries, Fishing, Recordkeeping and reporting requirements.
For the reasons stated in the preamble, 50 CFR part 648 is proposed to be amended as follows:
1. The authority citation for part 648 continues to read as follows:
16 U.S.C. 1801
2. In § 648.7, paragraph (f)(2)(i) is revised to read as follows:
(f) * * *
(2)
3. In § 648.13, paragraph (e) is revised to read as follows:
(e) Vessels issued a letter of authorization from the Regional Administrator to transfer small-mesh multispecies at sea for use as bait will automatically have 500 lb (226.8 kg) deducted from the vessel's combined silver hake and offshore hake possession limit, as specified under § 648.86(d), for every trip during the participation period specified on the letter of authorization, regardless of whether a transfer of small-mesh multispecies at sea occurred or whether the actual amount that was transferred was less than 500 lb (226.8 kg). This deduction shall be noted on the transferring vessel's letter of authorization from the Regional Administrator.
4. In § 648.80, paragraphs (a)(6)(i)(B), (a)(6)(i)(F), (a)(9)(i)(A), (a)(9)(ii), (a)(15)(i)(B), (a)(16)(i)(A), and (a)(16)(ii)(A) are revised to read as follows:
(a) * * *
(6) * * *
(i) * * *
(B) An owner or operator of a vessel fishing in this area may not fish for, possess on board, or land any species of fish other than whiting and offshore hake combined—in excess of 30,000 lb (13,608 kg), except for the following, with the restrictions noted, as allowable incidental species: Atlantic herring, up to the amount specified in § 648.204; longhorn sculpin; squid, butterfish, and Atlantic mackerel, up to the amounts specified in § 648.26; spiny dogfish, up to the amount specified in § 648.235; red hake, up to the amount specified in § 648.86(d), monkfish and monkfish parts—up to 10 percent, by weight, of all other species on board or up to 50 lb (23 kg) tail-weight/166 lb (75 kg) whole-weight of monkfish per trip, as specified in § 648.94(c)(4), whichever is less; and American lobster—up to 10 percent, by weight, of all other species on board or 200 lobsters, whichever is less, unless otherwise restricted by landing limits specified in § 697.17 of this chapter.
(F) A vessel fishing in the Cultivator Shoal Whiting Fishery Exemption Area may fish for small-mesh multispecies in exempted fisheries outside of the Cultivator Shoal Whiting Fishery Exemption Area, provided that the vessel complies with the more restrictive gear, possession limit, and other requirements specified in the regulations of that exempted fishery for the entire participation period specified on the vessel's letter of authorization and consistent with paragraph (a)(15)(i)(G) of this section. For example, a vessel may fish in both the Cultivator Shoal Whiting Fishery Exemption Area and the Southern New England or Mid-Atlantic Exemption Areas, and would be restricted to a minimum mesh size of 3 inches (7.6 cm) and a maximum trip limit of 30,000 lb (13,607.8 kg) for silver hake and offshore hake, combined, as required in the Cultivator Shoal Whiting Fishery Exemption Area.
(9) * * *
(i) * * *
(A) Unless otherwise prohibited in § 648.81, a vessel subject to the minimum mesh size restrictions specified in paragraphs (a)(3) or (4) of this section may fish with or possess nets with a mesh size smaller than the minimum size, provided the vessel complies with the requirements of paragraphs (a)(5)(ii) or (a)(9)(ii) of this section, and § 648.86(d), from July 15 through November 15, when fishing in Small Mesh Area 1; and from January 1 through June 30, when fishing in Small Mesh Area 2. While lawfully fishing in these areas with mesh smaller than the minimum size, an owner or operator of any vessel may not fish for, possess on board, or land any species of fish other than: Silver hake and offshore hake, combined, and red hake—up to the amounts specified in § 648.86(d); butterfish, Atlantic mackerel, squid, up the amounts specified in § 648.26; spiny dogfish, up to the amount specified in § 648.235; Atlantic herring, up to the amount specified in § 648.204; and scup, up to the amount specified in § 648.128.
(ii)
(15) * * *
(i) * * *
(B) All nets must be no smaller than a minimum mesh size of 2.5-inch (6.4-cm) square or diamond mesh, subject to the restrictions as specified in paragraph (a)(15)(i)(D) of this section. An owner or operator of a vessel enrolled in the raised footrope whiting fishery may not fish for, possess on board, or land any species of fish other than silver hake, offshore hake, and red hake, subject to the applicable possession limits as specified in § 648.86(d), except for the following allowable incidental species: Butterfish, Atlantic mackerel, and squid, up to the amounts specified in § 648.26; scup, up to the amount specified in § 648.128; spiny dogfish, up to the amount specified in § 648.235, and Atlantic herring, up to the amount specified in § 648.204.
(16) * * *
(i) * * *
(A) All nets must comply with a minimum mesh size of 2.5-inch (6.4-cm) square or diamond mesh, subject to the restrictions specified in paragraph (a)(16)(i)(B) of this section. An owner or operator of a vessel participating in the GOM Grate Raised Footrope Trawl Exempted Whiting Fishery may not fish for, possess on board, or land any species of fish, other than silver hake and offshore hake, subject to the applicable possession limits as specified in paragraph (a)(16)(i)(C) of this section, and red hake, subject to the possession limit specified in § 648.86, except for the following allowable incidental species: Butterfish, Atlantic mackerel, and squid, up to the amounts specified in § 648.26; Atlantic herring, up to the amount specified in § 648.204; and alewife.
(ii) * * *
(A) An owner or operator of a vessel fishing in the GOM Grate Raised Footrope Trawl Exempted Whiting Fishery must configure the vessel's gear with a raised footrope trawl as specified in paragraphs (a)(9)(ii)(A) through (C) of this section. In addition, the restrictions specified in paragraphs (a)(16)(ii)(B) and (C) of this section apply to vessels fishing in the GOM Grate Raised Footrope Trawl Exempted Whiting Fishery.
4. In § 648.86, (d)(1)(i) introductory text, (d)(1)(ii) introductory text, (d)(1)(iii) introductory text, and paragraph (d)(4)(ii) are revised to read as follows:
(d) * * *
(1) * * *
(i)
(ii)
(iii)
(4) * * *
(ii)
5. In § 648.90, paragraphs (b)(1), (b)(2), (b)(2)(i)(C), (b)(2)(ii)(C), (b)(3), (b)(4), (b)(5)(ii), and (c)(1) are revised to read as follows:
(b) * * *
(1)
(i) At least every 3 years, based on the annual review, described below in paragraph (b)(3) of this section, and/or the specifications package, described in paragraph (b)(4) of this section, recommendations for ABC from the Scientific and Statistical Committee (SSC), and any other relevant information, the Whiting PDT shall recommend to the Whiting Oversight Committee and Council specifications including the OFL, ABC, ACL, and TAL for each small-mesh multispecies stock for a period of at least 3 years. The Whiting PDT and the Council shall follow the process in paragraph (b)(2) of this section for setting these specifications.
(ii) The Whiting PDT, after reviewing the available information on the status of the stock and the fishery, may recommend to the Council any measures necessary to assure that the specifications will not be exceeded, as well as changes to the appropriate specifications.
(iii) Taking into account the annual review and/or specifications package described in paragraphs (b)(2) and (b)(4), respectively, of this section, the advice of the SSC, and any other relevant information, the Whiting PDT may also recommend to the Whiting Oversight Committee and Council changes to stock status determination criteria and associated thresholds based on the best scientific information available, including information from peer-reviewed stock assessments of small-mesh multispecies. These adjustments may be included in the Council's specifications for the small-mesh multispecies fishery.
(iv)
(2)
(i) * * *
(C)
(
(ii) * * *
(C)
(
(3)
(ii) If new and/or additional information becomes available, the Whiting PDT shall consider it during this annual review. Based on this review, the Whiting PDT shall provide guidance to the Whiting Oversight Committee and the Council regarding the need to adjust measures for the small-mesh multispecies fishery to better achieve the FMP's objectives. After considering this guidance, the Council may submit to NMFS its recommendations for changes to management measures, as appropriate, through the specifications process described in this section, the process specified in paragraph (c) of this
(4)
(ii) In any year in which a specifications package, including a SAFE Report, is not completed by the Whiting PDT, the annual review process described in paragraph (a) of this section shall be used to recommend any necessary adjustments to specifications and/or management measures in the FMP.
(5)
(i) * * *
(ii)
(c) * * *
(1)
(ii) The Council's recommendation on adjustments or additions to management measures pertaining to small-mesh NE multispecies, other than to address gear conflicts, must come from one or more of the following categories: Quotas and appropriate seasonal adjustments for vessels fishing in experimental or exempted fisheries that use small mesh in combination with a separator trawl/grate (if applicable); modifications to separator grate (if applicable) and mesh configurations for fishing for small-mesh NE multispecies; adjustments to whiting stock boundaries for management purposes; adjustments for fisheries exempted from minimum mesh requirements to fish for small-mesh NE multispecies (if applicable); season adjustments; declarations; participation requirements for any of the Gulf of Maine/Georges Bank small-mesh multispecies exemption areas; OFL and ABC values; ACL, TAL or TAL allocations, including the proportions used to allocate by season or area; small-mesh multispecies possession limits, including in-season AM possession limits; changes to reporting requirements and methods to monitor the fishery; and biological reference points, including selected reference time series, survey strata used to calculate biomass, and the selected survey for status determination.
(iii)
The Department of Commerce will submit to the Office of Management and Budget (OMB) for clearance the following proposal for collection of information under the provisions of the Paperwork Reduction Act (44 U.S.C. Chapter 35).
The International Billfish Angler Survey began in 1969 and is an integral part of the Billfish Research Program at the National Oceanic and Atmospheric Administration's (NOAA) Southwest Fisheries Science Center (SWFSC). The survey tracks recreational angler fishing catch and effort for billfish in the Pacific and Indian Oceans in support of the Pacific and Western Pacific Fishery Management Councils, authorized under the Magnuson-Stevens Fishery Management and Conservation Act (MSA). The data may be used by scientists and fishery managers to assist with assessing the status of billfish stocks. The survey is intended for anglers cooperating in the Billfish Program and is entirely voluntary. This survey is specific to recreational anglers fishing for Istiophorid and Xiphiid billfish in the Pacific and Indian Oceans; as such it provides the only estimates of catch per unit of effort for recreational billfish fishing in those areas.
Copies of the above information collection proposal can be obtained by calling or writing Jennifer Jessup, Departmental Paperwork Clearance Officer, (202) 482-0336, Department of Commerce, Room 6616, 14th and Constitution Avenue NW., Washington, DC 20230 (or via the Internet at
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
The Department of Commerce will submit to the Office of Management and Budget (OMB) for clearance the following proposal for collection of information under the provisions of the Paperwork Reduction Act (44 U.S.C. Chapter 35).
Reporting injury to and/or mortalities of marine mammals is mandated under Section 118 of the Marine Mammal Protection Act. This information is required to determine the impacts of commercial fishing on marine mammal populations. This information is also used to categorize commercial fisheries into Categories I, II, or III. Participants in the first two categories must be authorized to take marine mammals, while those in Category III are exempt from that requirement. All categories must report injuries or mortalities on a National Marine Fisheries Service form.
Copies of the above information collection proposal can be obtained by calling or writing Jennifer Jessup, Departmental Paperwork Clearance Officer, (202) 482-0336, Department of Commerce, Room 6616, 14th and Constitution Avenue NW., Washington, DC 20230 (or via the Internet at
Written comments and recommendations for the proposed information collection should be sent within 30 days of publication of this notice to
The Sensors and Instrumentation Technical Advisory Committee (SITAC) will meet on November 8, 2012, 9:30 a.m., in the Herbert C. Hoover Building, Room 6087B, 14th Street between Constitution and Pennsylvania Avenues NW., Washington, DC. The Committee advises the Office of the Assistant Secretary for Export Administration on technical questions that affect the level of export controls applicable to sensors
1. Welcome and Introductions.
2. Remarks from the Bureau of Industry and Security Management.
3. Industry Presentations.
4. New Business.
5. Discussion of matters determined to be exempt from the provisions relating to public meetings found in 5 U.S.C. app. 2 10(a)(1) and 10(a)(3).
The open session will be accessible via teleconference to 20 participants on a first come, first serve basis. To join the conference, submit inquiries to Ms. Yvette Springer at
A limited number of seats will be available during the public session of the meeting. Reservations are not accepted. To the extent that time permits, members of the public may present oral statements to the Committee. The public may submit written statements at any time before or after the meeting. However, to facilitate distribution of public presentation materials to the Committee members, the Committee suggests that the materials be forwarded before the meeting to Ms. Springer.
The Assistant Secretary for Administration, with the concurrence of the General Counsel, formally determined on September 27, 2011 pursuant to Section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. app. 2 10(d), that the portion of this meeting dealing with pre-decisional changes to the Commerce Control List and U.S. export control policies shall be exempt from the provisions relating to public meetings found in 5 U.S.C. app. 2 10(a)(1) and 10(a)(3). The remaining portions of the meeting will be open to the public.
For more information contact Yvette Springer on (202) 482-2813.
International Trade Administration, U.S. Department of Commerce.
Notice of extension of the application period for membership on the manufacturing council.
On September 14, 2012, the Department of Commerce's International Trade Administration published a notice in the
All applications must be received by the Office of Advisory Committees by close of business on Friday, November 16, 2012.
Please submit application information to Jennifer Pilat, Office of Advisory Committees, Manufacturing Council Executive Secretariat, U.S. Department of Commerce, Room 4043, 1401 Constitution Avenue NW., Washington, DC 20230.
Jennifer Pilat, ManufacturingCouncil Executive Secretariat, Room 4043, 1401 Constitution Avenue NW., Washington, DC 20230, telephone: 202-482-4501, email:
Please visit the Manufacturing Council Web site at:
The Office of Advisory Committees is extending the application deadline for the appointment of 25 members of the Council for a two-year term to begin fall 2012. The Council was rechartered most recently on April 5, 2012. The criteria and procedures for selecting the members contained in the September 14, 2012 notice continue to apply and are republished herein for convenience.
Members will be selected in accordance with applicable Department of Commerce guidelines based on his or her ability to advise the Secretary of Commerce on matters relating to the U.S. manufacturing sector, to act as a liaison among the stakeholders represented by the membership, and to provide a forum for those stakeholders on current and emerging issues in the manufacturing sector. In assessing this ability, the Department will consider such factors as, but not limited to, the candidate's proven experience in promoting, developing and marketing programs in support of manufacturing industries, job creation in the manufacturing sector, or the candidate's proven abilities to manage manufacturing organizations. Given the duties and objectives of the Council, the Department particularly seeks applicants who are active manufacturing executives (Chief Executive Officer, President, or a comparable level of responsibility) that are leaders within their local manufacturing communities and industry sectors. The Council's membership shall reflect the diversity of American manufacturing by representing a balanced cross-section of the U.S. manufacturing industry in terms of industry sectors, geographic locations, demographics, and company size, particularly seeking the representation of small- and medium-sized enterprises.
During the 2012-2014 charter term of the Manufacturing Council, the Assistant Secretary of Commerce for Manufacturing and Services intends to establish a new Economic Security Commission Subcommittee. The purpose of this subcommittee will be to examine factors that impact the long-term strategic challenges faced by the manufacturing sector in the United States. As indicated below, applicants are encouraged to highlight in their submissions any interest in and experience relevant to the work of this subcommittee.
The Secretary of Commerce appoints all Council members. All Council members serve at the discretion of the Secretary of Commerce. Council members shall serve in a representative capacity, representing the views and interests of a U.S. entity in the manufacturing industry and its particular sector. For the purposes of eligibility, a U.S. entity is defined as a firm incorporated in the United States (or an unincorporated firm with its
As noted above, Council members serve in a representative capacity, expressing the views and interests of a U.S. entity; they are, therefore, not Special Government Employees. Council members receive no compensation for their participation in Council activities. Members participating in Council meetings and events are responsible for their travel, living and other personal expenses. Meetings are held regularly and not less than annually, usually in Washington, DC Members are required to attend a majority of the Council's meetings.
To be considered for membership, please provide the following:
1. Name and title of the individual requesting consideration.
2. A sponsor letter from the applicant on his or her entity's letterhead or, if the applicant is to represent an entity other than his or her employer, a letter from the entity to be represented, containing a brief statement of why the applicant should be considered for membership on the Council. This sponsor letter should also address the applicant's manufacturing-related experience, including any manufacturing trade policy experience.
3. The applicant's personal resume.
4. An affirmative statement that the applicant meets all eligibility criteria.
5. An affirmative statement that the applicant is not required to register as a foreign agent under the Foreign Agents Registration Act of 1938, as amended.
6. An affirmative statement that the applicant is not a federally registered lobbyist, and that the applicant understands that, if appointed, the applicant will not be allowed to continue to serve as a Council member if the applicant becomes a federally registered lobbyist.
7. Information regarding the control of the entity to be represented, including the governing structure and stock holdings, as appropriate, demonstrating compliance with the criteria set forth above.
8. The entity's size, place of incorporation or principal place of business, ownership, product or service line and major markets in which the entity operates.
9. Please include all relevant contact information such as mailing address, fax, email, phone number, and support staff information where relevant.
10. Please indicate if the applicant has an interest in serving on the Economic Security Commission subcommittee, if appointed, and highlight any experience relevant to the work of the subcommittee.
International Trade Administration, U.S. Department of Commerce.
Notice.
The U.S. Secretary of Commerce and the Iraq Minister of Trade in July 2006 established the U.S.-Iraq Business Dialogue (Business Dialogue or Dialogue) as a bilateral forum to facilitate private sector business growth in Iraq and to strengthen trade and investment ties between the United States and Iraq. This notice announces four open membership opportunities for representatives of American industry to join the U.S. section of the Dialogue following the end of term for existing members.
Applications must be received no later than November 15, 2012; 5:00 p.m. EST.
Please send requests for consideration to Ms. Susan Hamrock Mann, Director, Iraq Investment and Reconstruction Task Force, U.S. Department of Commerce, either by fax on 202-482-0980 or by mail to U.S. Department of Commerce, 14th and Constitution Avenue NW., Mail Stop 3421, Washington, DC 20230.
Kevin M. Reichelt, Office of the Middle East, U.S. Department of Commerce, Room 2029-B, Washington, DC 20230. Phone: 202-482-2896.
The U.S. Secretary of Commerce and the Iraqi Minister of Trade co-chair the Dialogue. The Dialogue consists of a U.S. Section and an Iraqi Section. Each Section consists of members from the private sector, representing the views and interests of the private sector business community. Each Party appoints the members to its respective Section. The Sections provide policy advice and counsel to the U.S. Secretary of Commerce and to Iraq's Minister of Trade that reflect private sector views, needs, and concerns regarding private sector business development in Iraq and enhanced bilateral commercial ties that would form the basis for expanded trade between the United States and Iraq. The Dialogue will exchange information and encourage bilateral discussions that address the following areas:
Applications to represent any sector will be considered. The U.S. section will represent a cross-section of American businesses.
Members serve in a representative capacity representing the views and interests of their particular industries. Members are not special government employees, and receive no compensation for their participation in Dialogue activities. Only appointed members may participate in Dialogue meetings; substitutes and alternates will not be permitted. Section members serve for three-year terms, but may be reappointed. U.S. Section members serve at the discretion of the Secretary of Commerce.
Candidates will be evaluated based on: Their interest in the Iraqi market; export/investment experience; contribution to diversity based on size of company, geographic location, and sector; and ability to initiate and be responsible for activities in which the Business Dialogue will be active.
In order to be eligible for membership in the U.S. section, potential candidates shall be:
Members will be selected on the basis of who best will carry out the objectives of the Business Dialogue as described above and as stated in the Terms of Reference for the Dialogue. (The Terms of Reference are available from the point of contact listed above.) Recommendations for appointment will be made to the Secretary of Commerce. All candidates will be notified of whether they have been selected.
To be considered for membership, please submit the following information as instructed in the addresses and dates captions above: Name(s) and title(s) of the individual(s) requesting consideration; name and address of company or non-profit entity to be represented; size of the company or non-profit entity; description of relevant product, service, or technical expertise; size of company's export trade, investment, and/or international program experience; nature of operations or interest in Iraq; responsibilities of the candidate within the company or non-profit entity; and a brief statement of why the candidate should be appointed, including information about the candidate's ability to initiate and be responsible for activities in which the Business Dialogue will be active.
Committee for Purchase From People Who Are Blind or Severely Disabled.
Proposed Deletions from the Procurement List.
The Committee is proposing to delete products from the Procurement List that were furnished by nonprofit agencies employing persons who are blind or have other severe disabilities.
Committee for Purchase From People Who Are Blind or Severely Disabled, Jefferson Plaza 2, Suite 10800, 1421 Jefferson Davis Highway, Arlington, Virginia, 22202-3259.
This notice is published pursuant to 41 U.S.C. 8503 (a)(2) and 41 CFR 51-2.3. Its purpose is to provide interested persons an opportunity to submit comments on the proposed actions.
The following products are proposed for deletion from the Procurement List:
Committee for Purchase From People Who Are Blind or Severely Disabled.
Additions to the Procurement List.
This action adds products and services to the Procurement List that will be furnished by nonprofit agencies employing persons who are blind or have other severe disabilities.
DATES:
Committee for Purchase From People Who Are Blind or Severely Disabled, Jefferson Plaza 2, Suite 10800, 1421 Jefferson Davis Highway, Arlington, Virginia, 22202-3259.
Barry S. Lineback, Telephone: (703) 603-7740, Fax: (703) 603-0655, or email
On 8/31/2012 (77 FR 53179-53180) and 9/14/2012 (77 FR 56813-56814), the Committee for Purchase From People Who Are Blind or Severely Disabled published notices of proposed additions to the Procurement List.
After consideration of the material presented to it concerning capability of qualified nonprofit agencies to provide the products and services and impact of the additions on the current or most recent contractors, the Committee has determined that the products and services listed below are suitable for procurement by the Federal Government under 41 U.S.C. 8501-8506 and 41 CFR 51-2.4.
I certify that the following action will not have a significant impact on a substantial number of small entities. The major factors considered for this certification were:
1. The action will not result in any additional reporting, recordkeeping or other compliance requirements for small entities other than the small organizations that will furnish the products and services to the Government.
2. The action will result in authorizing small entities to furnish the products and services to the Government.
3. There are no known regulatory alternatives which would accomplish the objectives of the Javits-Wagner-O'Day Act (41 U.S.C. 8501-8506) in
Accordingly, the following products and services are added to the Procurement List:
Office of the Secretary, DoD.
Notice of an extension to the TRICARE Over-the-Counter Drug Demonstration Project.
This notice is to advise interested parties of a 2-year extension of the demonstration project in which the Department of Defense (DoD) evaluates allowing selected over-the-counter (OTC) drugs to be included on the TRICARE uniform formulary. The Department will continue to evaluate the costs/benefits and beneficiary satisfaction of providing OTC drugs under the pharmacy benefits program when the selected OTC drugs are determined to be clinically effective.
This demonstration project will continue through November 4, 2014.
Colonel George Jones, TRICARE Management Activity, Pharmaceutical Operations Directorate, telephone (703) 681-2890.
Section 705 of the John Warner National Defense Authorization Act for 2007 directed the Secretary to conduct a demonstration project under 10 U.S.C. 1092 to allow certain over-the-counter (OTC) medications to be included on the uniform formulary under 10 U.S.C. 1074g. On June 15, 2007, the Department of Defense published a notice in the
Office of the Deputy Secretary, Department of Education.
Notice reopening the Race to the Top—District competition.
The Secretary reopens the Race to the Top—District competition to extend the deadline for submitting applications. Hurricane Sandy prevented many applicants from submitting their applications by the October 30, 2012, deadline. The hurricane also closed Federal Government offices in Washington, DC, on October 29 and 30, 2012. The Department, therefore, could not receive applications on those days.
For local educational agencies located in States affected by Hurricane Sandy and for which the President has issued a major disaster declaration or an emergency declaration, the new deadline is 4:30 p.m. Washington, DC time on Wednesday, November 7, 2012. For local educational agencies everywhere else, the new deadline is 4:30 p.m. Washington, DC time on Friday, November 2, 2012.
For local educational agencies located in States affected by Hurricane Sandy and for which the President has issued either a major disaster declaration or an emergency declaration: November 7, 2012. For local educational agencies located everywhere else: November 2, 2012.
Meredith Farace, U.S. Department of Education, 400 Maryland Avenue SW., room 7e208, Washington, DC 20202-4260. Telephone: (202) 453-6800. Fax: (202) 401-1557.
If you use a telecommunications device for the deaf (TDD) or a text telephone (TTY), call the Federal Relay Service (FRS), toll free, at 1-800-877-8339.
On August 16, 2012, we published in the
An eligible applicant that submitted an application by the October 30, 2012, deadline does not need to re-submit its application but may choose to do so. If you re-submit your application, we will consider the most recently submitted complete application.
All information in the August 16, 2012, notice for this competition remains the same, except for the change in the deadline for submitting applications. Information about the Race to the Top—District program is available on the Department's Web site at
Applications for grants under this competition must be submitted in electronic format on a CD or DVD, with CD-ROM or DVD-ROM preferred, by mail or hand delivery. For complete information about how to submit an application, please refer to the
Individuals with disabilities can obtain this document and a copy of the application package in an accessible format (e.g., braille, large print, audiotape, or compact disc) by contacting the program person listed in this section.
You may also access documents of the Department published in the
Pursuant to 40 CFR 1506.9.
As of October 1, 2012, EPA will not accept paper copies or CDs of EISs for filing purposes; all submissions on or after October 1, 2012 must be made through e-NEPA.
While this system eliminates the need to submit paper or CD copies to EPA to meet filing requirements, electronic submission does not change requirements for distribution of EISs for public review and comment. To begin using e-NEPA, you must first register with EPA's electronic reporting site—
Federal Election Commission.
Thursday, November 1, 2012 at 10:00 a.m.
999 E Street NW., Washington, DC (Ninth Floor).
This Meeting Will Be Open To The Public.
Changes In The Meeting—This meeting has been cancelled.
Judith Ingram, Press Officer. Telephone: (202) 694-1220.
Office of the Assistant Secretary for Community Planning and Development, HUD.
Notice.
This Notice identifies unutilized, underutilized, excess, and surplus Federal property reviewed by HUD for suitability for use to assist the homeless.
Juanita Perry, Department of Housing and Urban Development, 451 Seventh Street SW., Room 7266, Washington, DC 20410; telephone (202) 402-3970; TTY number for the hearing- and speech-impaired (202) 708-2565 (these telephone numbers are not toll-free), or call the toll-free Title V information line at 800-927-7588.
In accordance with 24 CFR part 581 and section 501 of the Stewart B. McKinney Homeless Assistance Act (42 U.S.C. 11411), as amended, HUD is publishing this Notice to identify Federal buildings and other real property that HUD has reviewed for suitability for use to assist the homeless. The properties were reviewed using information provided to HUD by Federal landholding agencies regarding unutilized and underutilized buildings and real property controlled by such agencies or by GSA regarding its inventory of excess or surplus Federal property. This Notice is also published in order to comply with the December 12, 1988 Court Order in
Properties reviewed are listed in this Notice according to the following categories: Suitable/available, suitable/unavailable, suitable/to be excess, and unsuitable. The properties listed in the three suitable categories have been reviewed by the landholding agencies, and each agency has transmitted to HUD: (1) Its intention to make the property available for use to assist the homeless, (2) its intention to declare the property excess to the agency's needs, or (3) a statement of the reasons that the property cannot be declared excess or made available for use as facilities to assist the homeless.
Properties listed as suitable/available will be available exclusively for homeless use for a period of 60 days from the date of this Notice. Where property is described as for “off-site use only” recipients of the property will be required to relocate the building to their own site at their own expense. Homeless assistance providers interested in any such property should send a written expression of interest to HHS, addressed to Theresa Ritta, Division of Property Management, Program Support Center, HHS, room 5B-17, 5600 Fishers Lane, Rockville, MD 20857; (301) 443-2265. (This is not a toll-free number.) HHS will mail to the interested provider an application packet, which will include instructions for completing the application. In order to maximize the opportunity to utilize a suitable property, providers should submit their written expressions of interest as soon as possible. For complete details concerning the processing of applications, the reader is encouraged to refer to the interim rule governing this program, 24 CFR part 581.
For properties listed as suitable/to be excess, that property may, if subsequently accepted as excess by GSA, be made available for use by the homeless in accordance with applicable law, subject to screening for other Federal use. At the appropriate time, HUD will publish the property in a Notice showing it as either suitable/available or suitable/unavailable.
For properties listed as suitable/unavailable, the landholding agency has decided that the property cannot be declared excess or made available for use to assist the homeless, and the property will not be available.
Properties listed as unsuitable will not be made available for any other purpose for 20 days from the date of this Notice. Homeless assistance providers interested in a review by HUD of the determination of unsuitability should call the toll free information line at 1-800-927-7588 for detailed instructions or write a letter to Ann Marie Oliva at the address listed at the beginning of this Notice. Included in the request for review should be the property address (including zip code), the date of publication in the
For more information regarding particular properties identified in this Notice (i.e., acreage, floor plan, existing sanitary facilities, exact street address), providers should contact the appropriate landholding agencies at the following addresses:
Bureau of Ocean Energy Management, Interior.
Notice of the availability of an environmental assessment.
Bureau of Ocean Energy Management (BOEM) has prepared an environmental assessment (EA) considering the reasonably foreseeable environmental impacts and socioeconomic effects of issuing
BOEM will conduct public information meetings on Tuesday, November 13, 2012, in Boston and New Bedford, Wednesday, November 14, 2012, in Vineyard Haven on Martha's Vineyard, and Thursday, November 15, 2012, on Nantucket, in Massachusetts to explain the proposed activities and provide additional opportunities for public input on the EA. Details on the meeting locations and times, as well as the EA, can be found online at
Michelle Morin, BOEM Office of Renewable Energy, 381 Elden Street, HM 1328, Herndon, Virginia 20170-4817, (703) 787-1340 or
On February 6, 2012, BOEM published a Notice of Intent (NOI) to prepare an EA, which requested public comments on important environmental issues and alternatives to be considered in the EA; measures (e.g., limitations on activities based on technology, distance from shore, or timing) that would minimize impacts to environmental resources; and socioeconomic conditions that could result from leasing, site characterization, and site assessment in and around the Call Area (77 FR 5830). The Call Area is located offshore Massachusetts. Issues and impacts associated with potential project development will be considered in subsequent environmental analyses after the submittal of project proposals, if any. Comments received in response to the NOI can be viewed at:
On May 30, 2012, BOEM announced the identification of the MA WEA, which excluded high value sea duck habitat and some fishing grounds in the Call Area. The proposed action considered by this EA, under the National Environmental Policy Act (NEPA) (42 U.S.C. 4321-4370f), is leasing and approval of site assessment plans for the entire WEA. BOEM also identified alternatives to the proposed action that would exclude certain portions of the WEA from leasing because of environmental and cultural concerns. Additional information on the MA area identification process can be found at:
BOEM is seeking public input on the EA, including comments on the completeness and adequacy of the environmental analysis and on the measures and operating conditions described in the EA and designed to reduce or eliminate potential environmental impacts. BOEM will consider public comments on the EA in determining whether to issue a Finding of No Significant Impact (FONSI), or conduct additional analysis under NEPA.
Federal, state, and local government agencies, tribal governments, and other interested parties are requested to submit their written comments on the EA in one of the following ways:
1. Electronically:
2. In written form, delivered by hand or by mail, enclosed in an envelope labeled “Comments on Commercial Wind Lease Issuance and Site Assessment Activities on the Atlantic OCS Offshore MA” to: Program Manager, Office of Renewable Energy, Bureau of Ocean Energy Management, 381 Elden Street, HM 1328, Herndon, Virginia 20170-4817.
Comments must be received or postmarked no later than December 3, 2012. All written comments received or postmarked during the comment period will be made available to the public.
This Notice of the Availability (NOA) of an EA is published pursuant to 43 CFR 46.305.
Pursuant to the authority contained in Section 512 of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. 1142, the 164th open meeting of the Advisory Council on Employee Welfare and Pension Benefit Plans (also known as the ERISA Advisory Council) will be held on November 26-27, 2012. This meeting originally was scheduled for October 30-31, but has been re-scheduled due to the threat of severe weather.
The meeting will take place in C5521 Room 4, U.S. Department of Labor, 200 Constitution Avenue NW., Washington, DC 20210 on November 26, from 1 p.m. to approximately 5:00 p.m. On November 27, the meeting will start at 8:30 a.m. and conclude at approximately 4:00 p.m., with a break for lunch. The morning session on November 27 will be in Suite 400 at 122 C Street NW. The afternoon session on November 27 will take place in Room S-2508 at the same address. The purpose of the open meeting on November 26 and the morning of November 27 is for the Advisory Council members to finalize the recommendations they will present to the Secretary. At the November 27 afternoon session, the Council members will receive an update from the Assistant Secretary of Labor for the Employee Benefits Security Administration (EBSA) and present their recommendations.
The Council recommendations will be on the following issues: (1) Current Challenges and Best Practices Concerning Beneficiary Designations in Retirement and Life Insurance Plans; (2) Examining Income Replacement During Retirement Years in a Defined Contribution Plan System; and (3) Managing Disability Risks in an Environment of Individual Responsibility. Descriptions of these topics are available on the Advisory Council page of the EBSA Web site at
Organizations or members of the public wishing to submit a written statement may do so by submitting 30 copies on or before November 19, 2012 to Larry Good, Executive Secretary, ERISA Advisory Council, U.S. Department of Labor, Suite N-5623, 200 Constitution Avenue NW., Washington, DC 20210. Statements also may be submitted as email attachments in text or pdf format transmitted to
Individuals or representatives of organizations wishing to address the Advisory Council should forward their requests to the Executive Secretary or telephone (202) 693-8668. Oral presentations will be limited to ten minutes, time permitting, but an extended statement may be submitted for the record. Individuals with disabilities who need special accommodations should contact the Executive Secretary by November 19, 2012 at the address indicated.
National Science Foundation.
Notice of permit issued under the Antarctic Conservation of 1978, Public Law 95-541.
The National Science Foundation (NSF) is required to publish notice of permits issued under the Antarctic Conservation Act of 1978. This is the required notice.
Nadene G. Kennedy, Permit Office, Office of Polar Programs, Rm. 755, National Science Foundation, 4201 Wilson Boulevard, Arlington, VA 22230.
On August 6, 2012, the National Science Foundation published a notice in the
Office of Personnel Management.
30-Day Notice and request for comments.
The Retirement Services, Office of Personnel Management (OPM) offers the general public and other Federal agencies the opportunity to comment on an extension, without change, of a currently approved information collection request (ICR) 3206-0212, Rollover Election (RI 38-117), Rollover Information (RI 38-118), and Special Tax Notice Regarding Rollovers (RI 37-22). As required by the Paperwork Reduction Act of 1995, (Pub. L. 104-13, 44 U.S.C. chapter 35) as amended by the Clinger-Cohen Act (Pub. L. 104-106), OPM is soliciting comments for this collection. This information collection was previously published in the
1. Evaluate whether the proposed collection of information is necessary for the proper performance of functions of the agency, including whether the information will have practical utility;
2. Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
3. Enhance the quality, utility, and clarity of the information to be collected; and
4. Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g., permitting electronic submissions of responses.
Comments are encouraged and will be accepted until December 3, 2012. This process is conducted in accordance with 5 CFR 1320.1.
Interested persons are invited to submit written comments on the proposed information collection to the Office of Information and Regulatory Affairs, Office of Management and Budget, 725 17th Street NW., Washington, DC 20503, Attention: Desk Officer for the Office of Personnel Management or sent via electronic mail to
A copy of this ICR with applicable supporting documentation, may be obtained by contacting the Office of Information and Regulatory Affairs, Office of Management and Budget, 725 17th Street NW., Washington, DC 20503, Attention: Desk Officer for the Office of Personnel Management or sent via electronic mail to
RI 38-117, Rollover Election, is used to collect information from each payee affected by a change in the tax code so that OPM can make payment in accordance with the wishes of the payee. RI 38-118, Rollover Information, explains the election. RI 37-22, Special Tax Notice Regarding Rollovers, provides more detailed information.
U.S. Office of Personnel Management.
30-Day Notice and request for comments.
The Retirement Services, Office of Personnel Management (OPM) offers the general public and other federal agencies the opportunity to comment on a revised information collection request (ICR) 3206-0138, Reinstatement of Disability Annuity Previously Terminated Because of Restoration to Earning Capacity, RI 30-9. As required by the Paperwork Reduction Act of 1995, (Pub. L. 104-13, 44 U.S.C. chapter 35) as amended by the Clinger-Cohen Act (Pub. L. 104-106), OPM is soliciting comments for this collection. This information collection was previously published in the
1. Evaluate whether the proposed collection of information is necessary for the proper performance of functions of the agency, including whether the information will have practical utility;
2. Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
3. enhance the quality, utility, and clarity of the information to be collected; and
4. Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g., permitting electronic submissions of responses.
Comments are encouraged and will be accepted until December 3, 2012. This process is conducted in accordance with 5 CFR 1320.1.
Interested persons are invited to submit written comments on the proposed information collection to the Office of Information and Regulatory Affairs, Office of Management and Budget, 725 17th Street NW., Washington, DC 20503, Attention: Desk Officer for the Office of Personnel Management or sent via electronic mail to
A copy of this ICR with applicable supporting documentation, may be obtained by contacting the Office of Information and Regulatory Affairs, Office of Management and Budget, 725 17th Street NW., Washington, DC 20503, Attention: Desk Officer for the Office of Personnel Management or sent via electronic mail to
RI 30-9 informs former disability annuitants of their right to request restoration under title 5, U.S.C. Sections 8337 and 8455. It also specifies the conditions to be met and the documentation required for a person to request reinstatement.
U.S. Office of Personnel Management.
60-Day Notice and request for comments.
The Retirement Services, Office of Personnel Management (OPM) offers the general public and other federal agencies the opportunity to comment on a revised information collection request (ICR) 3206-0143, Request to Disability Annuitant for Information on Physical Condition and Employment, RI 30-1. As required by the Paperwork Reduction Act of 1995, (Pub. L. 104-13, 44 U.S.C. chapter 35) as amended by the Clinger-Cohen Act (Pub. L. 104-106), OPM is soliciting comments for this collection. The Office of Management and Budget is particularly interested in comments that:
1. Evaluate whether the proposed collection of information is necessary for the proper performance of functions of the agency, including whether the information will have practical utility;
2. Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
3. Enhance the quality, utility, and clarity of the information to be collected; and
4. Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g., permitting electronic submissions of responses.
Comments are encouraged and will be accepted until January 2, 2013. This process is conducted in accordance with 5 CFR 1320.1.
Interested persons are invited to submit written comments on the proposed information collection to U.S. Office of Personnel Management, Retirement Services, Union Square 370, 1900 E Street NW., Washington, DC 20415-3500, Attention: Alberta Butler or sent via electronic mail to
A copy of this ICR, with applicable supporting documentation, may be obtained by contacting the U.S. Office of Personnel Management, Retirement Services Publications Team, 1900 E Street NW., Room 4332, Washington, DC 20415, Attention: Cyrus S. Benson, or sent via electronic mail to
RI 30-1 is used by persons who are not yet age 60 and who are receiving a disability annuity and are subject to inquiry regarding their medical condition as OPM deems reasonably necessary. RI 30-1 collects information as to whether the disabling condition has changed.
U.S. Office of Personnel Management.
60-Day Notice and request for comments.
The Retirement Services, Office of Personnel Management (OPM) offers the general public and other federal agencies the opportunity to comment on an extension without change, of a currently approved information collection request (ICR) 3206-0228, CSRS/FERS Documentation in Support of Disability Retirement Application. As required by the Paperwork Reduction Act of 1995 (Pub. L. 104-13, 44 U.S.C. chapter 35) as amended by the Clinger-Cohen Act (Pub. L. 104-106), OPM is soliciting comments for this collection. The Office of Management and Budget is particularly interested in comments that:
1. Evaluate whether the proposed collection of information is necessary for the proper performance of functions of the agency, including whether the information will have practical utility;
2. Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
3. Enhance the quality, utility, and clarity of the information to be collected; and
4. Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g., permitting electronic submissions of responses.
Comments are encouraged and will be accepted until January 2, 2013. This process is conducted in accordance with 5 CFR 1320.1.
Interested persons are invited to submit written comments on the proposed information collection to U.S. Office of Personnel Management, Retirement Services, Union Square 370, 1900 E Street NW., Washington, DC 20415-3500, Attention: Alberta Butler or sent via electronic mail to
A copy of this ICR with applicable supporting documentation may be obtained by contacting the Retirement Services Publications Team, Office of Personnel Management, 1900 E Street NW., Room 4332, Washington, DC 20415, Attention: Cyrus S. Benson, or sent via electronic mail to
SF 3112 collects information from applicants for disability retirement so that OPM can determine whether to approve a disability retirement. The applicant will only complete Standard Forms 3112A and 3112C. Standard Forms 3112B, 3112D and 3112E will be completed by the immediate supervisor and the employing agency of the applicant.
U.S. Office of Personnel Management.
60-Day Notice and request for comments.
The Retirement Services, Office of Personnel Management (OPM) offers the general public and other federal agencies the opportunity to comment on an existing information collection request (ICR) 3206-0211, Reemployment of Annuitants. As required by the Paperwork Reduction Act of 1995 (Pub. L. 104-13, 44 U.S.C. chapter 35) as amended by the Clinger-Cohen Act (Pub. L. 104-106), OPM is soliciting comments for this collection. The Office of Management and Budget is particularly interested in comments that:
1. Evaluate whether the proposed collection of information is necessary for the proper performance of functions of the agency, including whether the information will have practical utility;
2. Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
3. Enhance the quality, utility, and clarity of the information to be collected; and
4. Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g., permitting electronic submissions of responses.
Comments are encouraged and will be accepted until January 2, 2013. This process is conducted in accordance with 5 CFR 1320.1.
Interested persons are invited to submit written comments on the proposed information collection to U.S. Office of Personnel Management, Retirement Services, Union Square 370, 1900 E Street NW., Washington, DC 20415-3500, Attention: Alberta Butler or sent via electronic mail to
A copy of this ICR with applicable supporting documentation, may be obtained by contacting the Retirement Services Publications Team, Office of Personnel Management, 1900 E Street NW., Room 4332, Washington, DC
5 CFR 837.103, Reemployment of Annuitants, requires agencies to collect information from retirees who become employed in Government positions. Agencies need to collect timely information regarding the type and amount of annuity being received so the correct rate of pay can be determined. Agencies provide this information to OPM so a determination can be made whether the reemployed retiree's annuity must be terminated.
U.S. Office of Personnel Management.
30-Day Notice and request for comments.
The Retirement Services, Office of Personnel Management (OPM) offers the general public and other Federal agencies the opportunity to comment on a revised information collection request (ICR) 3206-0034, Annuitant's Report of Earned Income, RI 30-2. As required by the Paperwork Reduction Act of 1995, (Pub. L. 104-13, 44 U.S.C. chapter 35) as amended by the Clinger-Cohen Act (Pub. L. 104-106), OPM is soliciting comments for this collection. The information collection was previously published in the
1. Evaluate whether the proposed collection of information is necessary for the proper performance of functions of the agency, including whether the information will have practical utility;
2. Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
3. Enhance the quality, utility, and clarity of the information to be collected; and
4. Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g., permitting electronic submissions of response.
Comments are encouraged and will be accepted until December 7, 2012. This process is conducted in accordance with 5 CFR 1320.1.
Interested persons are invited to submit written comments on the proposed information collection to the Office of Information and Regulatory Affairs, Office of Management and Budget, 725 17th Street NW., Washington, DC 20503, Attention: Desk Officer for the Office of Personnel Management or sent via electronic mail to
A copy of this ICR with applicable supporting documentation, may be obtained by contacting the Office of Information and Regulatory Affairs, Office of Management and Budget, 725 17th Street NW., Washington, DC 20503, Attention: Desk Officer for the Office of Personnel Management or sent via electronic mail to
RI 30-2 is used annually to determine if disability retirees under age 60 have earned income which will result in the termination of their annuity benefits.
U.S. Office of Personnel Management.
60-Day Notice and request for comments.
The Retirement Services, Office of Personnel Management (OPM) offers the general public and other Federal agencies the opportunity to comment on a revised information collection request (ICR) 3206-0226, It's Time To Sign up for Direct Deposit or Direct Express. As required by the Paperwork Reduction Act of 1995, (Pub. L. 104-13, 44 U.S.C. chapter 35) as amended by the Clinger-Cohen Act (Pub. L. 104-106), OPM is soliciting comments for this collection. The Office of Management and Budget is particularly interested in comments that:
1. Evaluate whether the proposed collection of information is necessary for the proper performance of functions of the agency, including whether the information will have practical utility;
2. Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
3. Enhance the quality, utility, and clarity of the information to be collected; and
4. Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g., permitting electronic submissions of responses.
Comments are encouraged and will be accepted until January 2, 2013. This process is conducted in accordance with 5 CFR 1320.1.
Interested persons are invited to submit written comments on the proposed information collection to U.S. Office of Personnel Management,
A copy of this ICR, with applicable supporting documentation, may be obtained by contacting the Retirement Services Publications Team, U.S. Office of Personnel Management, 1900 E Street NW., Room 4332, Washington, DC 20415, Attention: Cyrus S. Benson or sent via electronic mail to
RI 38-128 is primarily used by OPM to give recent retirees the opportunity to waive Direct Deposit of their annuity payments. The form is sent only if the separating agency did not give the retiring employee this election opportunity. This form may also be used to enroll in Direct Deposit, which was its primary use before Public Law 104-134 was passed. This law requires OPM to make all recurring benefits payments electronically to beneficiaries who live where Direct Deposit is available. Beneficiaries who do not enroll in the Direct Deposit Program will be enrolled in Direct Express.
Office of Personnel Management.
Notice.
Notice is hereby given of the appointment of members of the OPM Performance Review Board.
Sara Saphos, OPM Human Resources, Office of Personnel Management, 1900 E Street NW., Washington, DC 20415, (202) 606-1402.
Section 4314(c)(1) through (5) of Title 5, U.S.C., requires each agency to establish, in accordance with regulations prescribed by the Office of Personnel Management, one or more SES performance review boards. The board reviews and evaluates the initial appraisal of a senior executive's performance by the supervisor, and considers recommendations to the appointing authority regarding the performance of the senior executive.
The following have been designated as members of the Performance Review Board of the U.S. Office of Personnel Management:
Postal Regulatory Commission.
Notice.
The Commission is noticing a recent Postal Service filing concerning the addition of First-Class Package Service Contract 25 to the competitive product list. This notice informs the public of the filing, invites public comment, and takes other administrative steps.
Submit comments electronically via the Commission's Filing Online system at
Stephen L. Sharfman, General Counsel, at 202-789-6820.
In accordance with 39 U.S.C. 3642 and 39 CFR 3020.30
The Postal Service contemporaneously filed a redacted contract related to the proposed new product under 39 U.S.C. 3632(b)(3) and 39 CFR 3015.5.
• Attachment A—a redacted copy of Governors' Decision No. 11-6, authorizing the new product;
• Attachment B—a redacted copy of the contract;
• Attachment C—proposed changes to the Mail Classification Schedule competitive product list with the addition underlined;
• Attachment D—a Statement of Supporting Justification as required by 39 CFR 3020.32;
• Attachment E—a certification of compliance with 39 U.S.C. 3633(a); and
• Attachment F—an application for non-public treatment of materials to maintain redacted portions of the contract and related financial information under seal.
In the Statement of Supporting Justification, Dennis R. Nicoski, Manager, Field Sales Strategy and Contracts, asserts that the contract will cover its attributable costs, make a
The Commission establishes Docket Nos. MC2013-12 and CP2013-12 to consider the Request pertaining to the proposed First-Class Package Service Contract 25 product and the related contract, respectively.
Interested persons may submit comments on whether the Postal Service's filings in the captioned dockets are consistent with the policies of 39 U.S.C. 3632, 3633, or 3642, 39 CFR 3015.5, and 39 CFR part 3020, subpart B. Comments are due no later than November 5, 2012. The public portions of these filings can be accessed via the Commission's Web site (
The Commission appoints James F. Callow to serve as Public Representative in these dockets.
1. The Commission establishes Docket Nos. MC2013-12 and CP2013-12 to consider the matters raised in each docket.
2. Pursuant to 39 U.S.C. 505, James F. Callow is appointed to serve as an officer of the Commission (Public Representative) to represent the interests of the general public in these proceedings.
3. Comments by interested persons in these proceedings are due no later than November 5, 2012.
4. The Secretary shall arrange for publication of this order in the
By the Commission.
Postal Regulatory Commission.
Notice.
The Commission is noticing a recent Postal Service filing concerning the addition of Parcel Select Contract 6 to the competitive product list. This notice informs the public of the filing, invites public comment, and takes other administrative steps.
Submit comments electronically via the Commission's Filing Online system at
Stephen L. Sharfman, General Counsel, at 202-789-6820.
In accordance with 39 U.S.C. 3642 and 39 CFR 3020.30
The Postal Service contemporaneously filed a redacted contract related to the proposed new product under 39 U.S.C. 3632(b)(3) and 39 CFR 3015.5.
• Attachment A—a redacted copy of Governors' Decision No. 11-6, authorizing the new product;
• Attachment B—a redacted copy of the contract;
• Attachment C—proposed changes to the Mail Classification Schedule competitive product list with the addition underlined;
• Attachment D—a Statement of Supporting Justification as required by 39 CFR 3020.32;
• Attachment E—a certification of compliance with 39 U.S.C. 3633(a); and
• Attachment F—an application for non-public treatment of materials to maintain redacted portions of the contract and related financial information under seal.
In the Statement of Supporting Justification, Dennis R. Nicoski, Manager, Field Sales Strategy and Contracts, asserts that the contract will cover its attributable costs, make a positive contribution to covering institutional costs, and increase contribution toward the requisite 5.5 percent of the Postal Service's total institutional costs.
The Postal Service filed much of the supporting materials, including the related contract, under seal.
The Commission establishes Docket Nos. MC2013-13 and CP2013-13 to consider the Request pertaining to the proposed Parcel Select Contract 6 product and the related contract, respectively.
Interested persons may submit comments on whether the Postal Service's filings in the captioned dockets are consistent with the policies of 39 U.S.C. 3632, 3633, or 3642, 39 CFR 3015.5, and 39 CFR part 3020, subpart B. Comments are due no later than November 5, 2012. The public portions of these filings can be accessed via the Commission's Web site (
The Commission appoints James F. Callow to serve as Public Representative in these dockets.
1. The Commission establishes Docket Nos. MC2013-13 and CP2013-13 to consider the matters raised in each docket.
2. Pursuant to 39 U.S.C. 505, James F. Callow is appointed to serve as an officer of the Commission (Public Representative) to represent the interests of the general public in these proceedings.
3. Comments by interested persons in these proceedings are due no later than November 5, 2012.
4. The Secretary shall arrange for publication of this order in the
By the Commission.
Wednesday, November 14, 2012, at 10:00 a.m.; Thursday, November 15, at 8:30 a.m. and 10:30 a.m.
Washington, DC, at U.S. Postal Service Headquarters, 475 L'Enfant Plaza SW., in the Benjamin Franklin Room.
Wednesday, November 14, at 10:00 a.m.—Closed; Thursday, November 15, at 8:30 a.m.—Open; and at 10:30 a.m.—Closed
1. Strategic Issues.
2. Financial Matters.
3. Pricing.
4. Personnel Matters and Compensation Issues.
5. Governors' Executive Session—Discussion of prior agenda items and Board Governance.
1. Approval of Minutes of Previous Meetings.
2. Remarks of the Chairman of the Board.
3. Remarks of the Postmaster General and CEO.
4. Committee Reports.
5. FY2012 10K and Financial Statements.
6. FY2013 IFP and Financing Resolution.
7. FY2014 Appropriations Request.
8. Quarterly Service Performance Report.
9. Approval of Annual Report and Comprehensive Statement.
10. Tentative Agenda for the December 11, 2012, meeting in Washington, DC.
11. Election of the Chairman and Vice Chairman of the Board of Governors.
1. Continuation of Wednesday's closed session agenda.
Julie S. Moore, Secretary of the Board, U.S. Postal Service, 475 L'Enfant Plaza SW., Washington, DC 20260-1000. Telephone (202) 268-4800.
Postal Service
Notice.
The Postal Service gives notice of filing a request with the Postal Regulatory Commission to add a domestic shipping services contract to the list of Negotiated Service Agreements in the Mail Classification Schedule's Competitive Products List.
Elizabeth A. Reed, 202-268-3179.
The United States Postal Service® hereby gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), on October 25, 2012, it filed with the Postal Regulatory Commission a
Postal Service
Notice.
The Postal Service gives notice of filing a request with the Postal Regulatory Commission to add a domestic shipping services contract to the list of Negotiated Service Agreements in the Mail Classification Schedule's Competitive Products List.
Elizabeth A. Reed, 202-268-3179.
The United States Postal Service® hereby gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), on October 25, 2012, it filed with the Postal Regulatory Commission a
The following is a notice of applications for deregistration under section 8(f) of the Investment Company Act of 1940 for the month of October 2012. A copy of each application may be obtained via the Commission's Web site by searching for the file number, or for an applicant using the Company name box, at
Diane L. Titus at (202) 551-6810, SEC, Division of Investment Management, Office of Investment Company Regulation, 100 F Street NE., Washington, DC 20549-8010.
For the Commission, by the Division of Investment Management, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”),
CBOE proposes to make a technical amendment to Interpretation and Policy
In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements.
The Commission recently noticed the Exchange's proposal to amend Interpretation and Policy .07 to Rule 4.11 to eliminate position and exercise limits for physically-settled SPY options purpose to a pilot program (“Program”).
In addition, in the filing to establish the Program, CBOE committed to perform an analysis of the Program after the first twelve (12) months of the pilot program (the “Pilot Report”).
The basis under the Securities Exchange Act of 1934 (the “Act”) for this proposed rule change is the requirement under Section 6(b)(5)
CBOE does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.
No written comments were solicited or received with respect to the proposed rule change.
Because the proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative prior to 30 days from the date on which it was filed, or such shorter time as the Commission may designate, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act
A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the Act
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Elizabeth M. Murphy, Secretary,
All submissions should refer to File Number SR-CBOE-2012-099 and should be submitted on or before November 23, 2012.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
On August 30, 2012, the Options Clearing Corporation (“OCC”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change and Advance Notice SR-OCC-2012-14 pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
Section 806(e)(1)(G) of the Payment, Clearing, and Settlement Supervision Act of 2010 (“Clearing Supervision Act”)
Pursuant to Section 806(e)(1)(H) of the Clearing Supervision Act,
The Commission finds it is appropriate to extend the review period for the Advance Notice. In particular, the Advance Notice is novel because OCC does not currently provide clearing services for OTC products and because no registered clearing agency currently provides clearing services for OTC S&P 500 Index options.
Accordingly, the Commission, pursuant to 806(e)(1)(H) of the Clearing Supervision Act,
By the Commission.
On September 5, 2012, the Options Clearing Corporation (“OCC”) filed with the Securities and Exchange Commission (“SEC” or “Commission”) the proposed rule change SR-OCC-2012-15 pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
The proposed rule change would make technical “housekeeping” changes to OCC's By-Laws and Rules relating to financial reporting by Canadian clearing members to reflect the Investment Industry Regulatory Organization of Canada's (“IIROC”) adoption of the International Financial Reporting Standards.
OCC Rule 310, through cross-references to interpretive provisions of OCC Rule 306—Financial Reports and
OCC, as part of its financial surveillance program, requires Canadian clearing members to submit their JRFQR, a financial report similar to SEC Form X-17A-5, to OCC at the end of each month. OCC also monitors the financial health of such clearing members using the capital levels reported on their JRFQRs. In 2011, IIROC replaced the JRFQR with Form 1. Among other things, Form 1 aligns the reporting of certain financial liabilities to U.S. Generally Accepted Accounting Principles (“GAAP”). Canadian clearing members that use Form 1 report the same, and in some cases more conservative, amounts of regulatory capital to OCC as they had using the JRFQR. Moreover, OCC believes that the change does not impair OCC's ability to conduct diligent financial surveillance of Canadian clearing members. Accordingly, OCC proposes to replace references to the “JRFQR” within its By-Laws and Rules with references to “Form 1.”
The IIROC also altered how its regulated entities report capital withdrawals. IIROC previously required capital withdrawals to be reported on monthly financial reports; however, IIROC amended its standards and now requires firms to obtain approval for withdrawals of capital following notice thereof. OCC had, when applicable, adjusted Canadian clearing member's reported capital levels in light of withdrawals reflected in financial reports in order to determine if the firm's capital falls within OCC's standards. With the change implemented by IIROC, that information is no longer be available to OCC via monthly financial reports submitted by Canadian clearing members. To ensure it is aware of such capital withdrawals, OCC proposes to add an Interpretation and Policy to Rule 304, which would require Canadian clearing members to submit capital withdrawal notifications to OCC when such requests are submitted to IIROC.
Section 17A(b)(3) (F) of the Act
On the basis of the foregoing, the Commission finds that the proposal is consistent with the requirements of the Act and in particular with the requirements of Section 17A of the Act
For the Commission by the Division of Trading and Markets, pursuant to delegated authority.
On July 23, 2012, The NASDAQ Stock Market LLC (“Nasdaq” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
Pursuant to existing Nasdaq Rule 4626(a), Nasdaq and its affiliates are not liable for any losses, damages, or other claims arising out of the Nasdaq Market Center or its use.
As set forth in more detail in the Notice, Nasdaq proposes to add subsection (3) to Nasdaq Rule 4626(b) to establish a voluntary accommodation program for certain claims arising from the initial public offering (“IPO”) of Facebook, Inc. (“Facebook”) on May 18, 2012 (collectively “Facebook IPO”).
According to proposed Nasdaq Rule 4626(b)(3)(B), the measure of loss for the Cross orders described in (i), (iii), and (iv) above would be the lesser of: (a) The differential between the expected execution price of the orders in the Cross process that established an opening print of $42.00 and the actual execution price received; or (b) the differential between the expected execution price of the orders in the Cross process that established an opening print of $42.00 and a benchmark price of $40.527.
With respect to the process for submitting claims pursuant to proposed Nasdaq Rule 4626(b)(3), all claims must be submitted in writing no later than seven days after this accommodation proposal is approved by the Commission.
Furthermore, as proposed, in order to receive payment under proposed Nasdaq Rule 4626(b)(3), not later than seven days after the effective date of the proposed rule change setting forth the amount of eligible claims, the member must submit to Nasdaq an attestation detailing the amount of customer compensation
With respect to the priority of payment under proposed Nasdaq Rule 4626(b)(3), payments would be made in two tranches.
As previously noted, the Commission received 11 comment letters on the accommodation proposal and one response letter from Nasdaq.
Commenters raised concerns in the following areas, each of which is discussed in greater detail below: (1) The requirement that market participants release all other potentially valid claims as a condition to participation in the accommodation program; (2) Nasdaq's calculation and use of a benchmark price of $40.527; (3) the categories of claim-eligible trading losses; (4) the amount of the accommodation pool; (5) regulatory immunity from private suits and limitations on liability; (6) the applicability of Nasdaq Rule 4626; (7) the impact of approval of the accommodation proposal on pending litigation; and (8) two procedural issues.
Several commenters expressed concerns that payment to eligible claimants are conditioned upon the member firm executing a release of claims by the firm or its affiliates against Nasdaq for losses associated with the Facebook IPO on May 18, 2012.
In response, Nasdaq asserted that the release requirement is fair, reasonable, and furthers the objectives of Section 6(b)(5) of the Act
Several commenters expressed concern with Nasdaq's calculation and use of the uniform benchmark price of $40.527 to determine the amount of compensation owed to a member under the accommodation proposal.
In its response letter, Nasdaq reasserted that the use of the VWAP of Facebook stock during the 45 minute window after 1:50 p.m. is appropriate as the benchmark price because 45 minutes provided members enough time to identify and mitigate any unexpected losses or unanticipated positions.
Several commenters stated that the types of orders eligible to receive compensation under the accommodation proposal are too narrowly defined.
Another commenter observed that the accommodation proposal provides no direct compensation to “ordinary retail investors” and does not guarantee that retail investors would receive any compensation for losses.
Nasdaq responded that the question before the Commission is only whether the proposal is consistent with the requirements of the Act.
Several commenters argued that the proposed $62 million accommodation pool is an insufficient amount to compensate market participants harmed by Nasdaq's systems issues.
Nasdaq responded that commenters' objections to the amount of compensation are “unpersuasive” because the Commission has already determined that rules, such as existing Nasdaq Rule 4626, limiting exchange liability are consistent with the Act.
Several commenters stated that Nasdaq is not entitled to immunity from liability because it was acting in its “for profit” capacity in its handling of the Facebook IPO, rather than acting in its “regulatory capacity” as a self-regulatory organization.
Nasdaq responded that the Commission's task with regard to the accommodation proposal is only to determine whether the proposed rule change is consistent with the Act, and the Commission does not need to address the issue of regulatory immunity to do so.
According to one commenter, market participants' losses “resulted not from the type of ordinary system failures contemplated by Rule 4626 * * *, but rather from a known design flaw that resulted in a similar technology issue dating back to Fall 2011, as well as Nasdaq's high-risk, profit-oriented behavior prior to and during the IPO * * *”
Nasdaq emphasized in response that Rule 4626 is a pre-existing Commission approved rule and that the rule squarely applies to Nasdaq's systems issues related to the Facebook IPO.
Two commenters expressed concern that Commission approval of the accommodation proposal might negatively impact other adjudications of disputes with Nasdaq regarding the Facebook IPO.
Several commenters raised procedural concerns regarding the implementation of the accommodation proposal.
Nasdaq responded that commenters' requests to extend the one-year time limit for members to bring claims against Nasdaq improperly ask the Commission to interfere with existing contractual relationships that have no bearing on whether Nasdaq Rule 4626 should be amended.
The Commission is instituting proceedings pursuant to Section 19(b)(2)(B) of the Act
Pursuant to Section 19(b)(2)(B) of the Act,
As discussed above, Nasdaq's accommodation proposal would amend its existing Rule 4626 to provide $62 million to compensate certain types of claims arising in connection with the Facebook IPO Cross on May 18, 2012. Further, as proposed, a Nasdaq member must execute a release of all claims by the member or its affiliates against Nasdaq or its affiliates for losses that arise out of, are associated with, or relate in any way to the Facebook IPO Cross or to any actions or omissions related in any way to that Cross in order to receive any payment under proposed Nasdaq Rule 4626(b)(3). The concerns articulated by commenters, including the limited categories of claims eligible for compensation, the method of determining losses for certain categories of eligible claims, and the requirement that a member waive all claims against
Accordingly, in light of the concerns raised by commenters, the Commission believes that questions are raised as to whether Nasdaq's accommodation proposal is consistent with the requirements of Section 6(b)(5) of the Act, including whether the accommodation proposal would promote just and equitable principles of trade, protect investors and the public interest, and not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers.
The Commission requests that interested persons provide written submissions of their views, data, and arguments with respect to the concerns identified above, as well as any other concerns they may have with the accommodation proposal. In particular, the Commission invites the written views of interested persons concerning whether the accommodation proposal is consistent with Section 6(b)(5)
Interested persons are invited to submit written data, views, and arguments regarding whether the accommodation proposal should be approved or disapproved by November 23, 2012. Any person who wishes to file a rebuttal to any other person's submission must file that rebuttal by December 7, 2012. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
October 26, 2012.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
The text of the proposed rule change is below.
Rule 100-80203—No Change.
Rule 80301-End—No change
In its filing with the Commission, CME included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. CME has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
CME offers clearing services for certain credit default swap index products. Currently, CME offers clearing of the Markit CDX North American Investment Grade Index Series 9, 10, 11, 12, 13, 14, 15, 16, 17, 18 and 19 and also offers clearing of the Markit CDX North
The proposed rule changes would expand CME's Markit CDX North American Investment Grade (“CDX IG”) Index product offerings by adding Series 8 to the current product set.
The proposed rule changes are immediately effective upon filing but will become operational on October 15, 2012. CME notes that it will also certify the proposed rule changes that are the subject of this filing to its primary regulator, the Commodity Futures Trading Commission (“CFTC”). The text of the CME proposed rule amendments is included above, with additions italicized and deletions in brackets.
The proposed CME rule amendments merely incorporate one additional series to CME's existing offering of broad-based Markit CDX North American Investment Grade credit default swaps. As such, the proposed amendments simply effect changes to an existing service of a registered clearing agency that (1) do not adversely affect the safeguarding of securities or funds in the custody or control of the clearing agency or for which it is responsible and (2) do not significantly affect the respective rights or obligations of the clearing agency or persons using its clearing agency services. Therefore, the proposed rule change is properly filed under Section 19(b)(3)(A) and Rule 19b-4(f)(4)(i) thereunder.
CME does not believe that the proposed rule change will have any impact, or impose any burden, on competition.
CME has not solicited, and does not intend to solicit, comments regarding this proposed rule change. CME has not received any unsolicited written comments from interested parties.
The foregoing proposed rule change has become effective upon filing pursuant to Section 19(b)(3)(A)
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-CME-2012-40 and should be submitted on or before November 23, 2012.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
BX is filing with the Commission a proposal to modify Chapter VII, Section 6 (Market Maker Quotations), to eliminate market maker pre-opening obligations on BX Options. The Exchange also proposes to modify Chapter VII, Section 5 (Obligations of Market Makers) to conform it to Section 6.
The Exchange requests that the Commission waive the 30-day operative
The text of the proposed rule change is available at
In its filing with the Commission, the Exchange included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
The purpose of the proposed rule change is to modify Chapter VII, Section 6 of the BX Options rulebook to remove obligations imposed on BX Options market makers (“Market Makers”)
The Exchange notes that its proposal is similar to a recent rule change to Chapter VII, Section 6 of the NASDAQ Options Market (“NOM”) rulebook.
Currently, Section 6 of Chapter VII requires that a Market Maker must enter continuous bids and offers in options in which the Market Maker is registered on BX Options, an all-electronic market. Specifically, Section 6(d)i. requires that on a daily basis a Market Maker must: (1) Participate in the pre-opening phase; and (2) thereafter make markets consistent with the applicable quoting requirements specified in BX Options rules, on a continuous basis in at least sixty percent (60%) of the series in options in which the Market Maker is registered. Additionally, subsection 6(d)(i.1) indicates that to satisfy the Section 6(d)i. requirement with respect to quoting a series, a Market Maker must: (3) quote such series 90% of the trading day (as a percentage of the total number of minutes in such trading day) or such higher percentage as BX Options may announce in advance.
For continuous quotation requirements on BX Options generally,
Subsequent to this proposal, a Market Maker will continue to have all of the other quoting obligations that the Market Maker now has pursuant to Section 6, and pursuant to Section 6(d)i., during regular market hours will be responsible to quote on a continuous basis in at least sixty percent (60%) of the series in options in which the Market Maker is registered for 90% of the trading day (as a percentage of the total number of minutes in such trading day). The change that the Exchange is proposing to Section 6(d)i. is removal of the Market Maker pre-opening quoting obligation and the insertion of text clarifying that the quoting obligation is during regular market hours.
i. On a daily basis, a Market Maker must participate in the pre-opening phase and thereafter make markets consistent with the applicable quoting requirements specified in these rules, on a continuous basis in at least sixty percent (60%) of the series in options in which the Market Maker is registered.
Phlx, ISE, and NOM have a continuous quoting obligation during their regular market hours, which are similar to BX Options' market hours.
Recognizing the requirement to maintain a two-sided market during trading hours per Section 5(a)i., the Exchange is removing reference in Section 5(a)ii. to a Market Maker having to enter two-sided quotes before market open by participating in opening the market. This is done for purposes of conforming Section 5(a)ii. with proposed Section 6(d)i., which eliminates quoting obligations in the pre-opening phase before the market opens.
Exchange Market Makers have noted that unlike BX Options, other options exchanges do not have a pre-opening quoting obligation for their market makers, and have requested the Exchange to eliminate the pre-opening obligation so that BX Options rules are similar to those of other options exchanges such as, for example, NOM and Phlx. This proposed rule change levels the playing field in respect of pre-opening obligations while leaving all other BX Options quoting requirements intact.
Moreover, the Exchange believes that its proposal to put BX Options market makers in the same position as market makers on other exchanges will not have a negative effect on BX Options investors and traders (“BX Options participants”). In particular, the Exchange believes the removal of pre-opening market maker obligations on BX Options will have no impact on the functioning of the BX Options opening process and in turn will not negatively impact BX Options participants. The Exchange generally requires two other option markets to be open prior to BX Options initiating an opening process.
The Exchange believes further that the proposed rule change eliminating pre-opening obligations should be pro-competitive in that it will attract more Market Makers, and additional liquidity, onto BX Options. This should be advantageous to traders and investors executing trading and hedging strategies on the Exchange.
The Exchange believes that its proposal is consistent with Section 6(b) of the Act
Additionally, the Exchange believes the proposal removes a market maker quoting requirement that is unnecessary, as evidenced by the fact that it does not exist on other competitive markets. The Exchange operates in a highly competitive market comprised of ten U.S. options exchanges in which sophisticated and knowledgeable market participants can, and do, send order flow to competing exchanges if they deem trading practices at a particular exchange to be onerous or cumbersome. With this proposal, the Market Maker will be relieved of a market maker requirement that does not materially improve the quality of the markets. On the contrary, the pre-open phase obligation creates an additional obligation and burden on BX Options Market Makers that does not exist on numerous other competitive markets. The Exchange believes that in this competitive marketplace, the impact of the pre-open trading practice that exists on the Exchange today compels this proposal. It will allow Market Makers on the Exchange to follow rules that are similar to the rules of other options exchanges that do not impose pre-opening obligations on their market makers, and will allow Market Makers to focus on aspects of their operations that contribute to the market in a more efficient and meaningful way.
The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. To the contrary, BX Options' proposal to eliminate the pre-opening obligation on Market Makers is consistent with the market maker obligations on other options exchanges, which do not impose pre-opening obligations on market makers. The Exchange believes that its proposal is pro-competitive and should serve to attract market making activity and increase liquidity provision on BX Options.
No written comments were either solicited or received.
Because the proposed rule change does not (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act
A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the Act
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”)
The Exchange proposes to amend certain of the fees included in the NYSE MKT Company Guide and to make technical and conforming changes. The text of the proposed rule change is available on the Exchange's Web site at
In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements.
The Exchange proposes to amend Sections 140 and 141 of its Company Guide to amend certain of the fees included therein and to make technical and conforming changes. The Exchange proposes to immediately reflect the proposed changes in the Company Guide, but not to implement the proposed changes until January 1, 2013.
The Exchange proposes to amend Section 140 of its Company Guide, which provides for Original Listing Fees. The Exchange proposes to increase the Original Listing Fee charged in connection with the listing of new shares of common stock or common stock equivalents, including securities issued by non-U.S. companies, for issuers with outstanding shares in excess of 15,000,000. The Original Listing Fee for such issuers would increase from $70,000 to $75,000.
The Exchange also proposes to amend Section 141 of its Company Guide to increase its Annual Fees for stock issues as follows:
(i) for issuers with 50,000,000 shares outstanding or less, the Annual Fee would be increased by $2,500 (or 9.1%), from $27,500 to $30,000;
(ii) for issuers with 50,000,001 to 75,000,000 shares outstanding, the
(iii) for issuers with shares outstanding in excess of 75,000,000, the Annual Fee would be increased by $5,000 (or 12.5%), from $40,000 to $45,000.
The Exchange also proposes certain non-substantive changes. Specifically, the Exchange proposes to remove the asterisks and accompanying text that states that the Annual Fees are applicable as of January 1, 2010 because this text is obsolete and unnecessary.
The proposed changes to the Company Guide are intended to increase the overall revenue that the Exchange collects relating to listings from the issuers described above and to add clarity to the Company Guide. The Exchange's Original Listing Fees and Annual Fees have not been increased since 2009.
The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Securities Exchange Act of 1934 (the “Act”),
The Exchange believes that amending Section 140 of the Company Guide to increase the Original Listing Fee for issuers with outstanding shares in excess of 15,000,000 and amending Section 141 of the Company Guide to increase the Annual Fees is reasonable because the resulting fees would help to offset the Exchange's costs related to listings. The fee increases also would reflect the value that listings provide to the issuers, and the Exchange does not believe the increases to be material. In this regard, the Exchange notes that it has not recently increased these fees, but continually enhances and upgrades the level of service it provides in the listings area, including with respect to technology, compliance, and other regulatory matters related to listings.
The Exchange also believes that the proposed Original Listing Fee increase for issuers with outstanding shares in excess of 15,000,000 is equitable and not unfairly discriminatory because the Exchange wants to continue to incentivize small and large issuers that are qualified to list on the Exchange to do so, and not raising the Original Listing Fees for smaller issuers will help maintain that incentive, as such issuers generally are more cost-conscious. The Exchange does not believe the proposed increase in the Original Listing Fee for issuers with outstanding shares in excess of 15,000,000 will be a disincentive to list on the Exchange or unfairly discriminatory because it is the same as the entry fee charged by another national securities exchange for such issuers.
The Exchange believes that the proposed increases in Annual Fees also are equitably allocated and not unfairly discriminatory because all issuers will pay an increased amount in a narrow range of $2,500-$5,000 (or 9.1% to 12.5%) based on total shares outstanding.
The Exchange believes its tiered fee structure, with issuers with more total shares outstanding paying relatively higher Original Listing Fees and Annual Fees, is equitable and not unfairly discriminatory. Total shares outstanding provides a simple, objective, and efficient metric to take into account the relative size of issuers so that the Exchange can continue to incentivize listing by both large and small qualified companies; other exchanges also use such a metric.
The Exchange further notes that it operates in a highly competitive market in which issuers can readily favor competing venues. In such an environment, the Exchange must continually review, and consider adjusting, its fees and services to remain competitive with other exchanges. For the reasons described above, the Exchange believes that the proposed
Additionally, the Exchange believes that the non-substantive changes that are proposed, which are technical and conforming changes, are reasonable because they will result in the removal of unnecessary and obsolete text from the Company Guide. These changes are also equitable and not unfairly discriminatory because they will benefit all issuers and all other readers of the Company Guide.
The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.
No written comments were solicited or received with respect to the proposed rule change.
The foregoing rule change is effective upon filing pursuant to Section 19(b)(3)(A)
At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
The purpose of the proposed rule change is to provide for the clearing of Western European Sovereign CDS contracts in connection with Paragraph 13 of ICE Clear Europe's CDS Procedures on the following sovereign reference entities: Republic of Ireland, Italian Republic, Hellenic Republic, Portuguese Republic, and Kingdom of Spain (the “New Sovereign Contracts”).
In its filing with the Commission, ICE Clear Europe included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. ICE Clear Europe has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of these statements.
ICE Clear Europe has identified Western European Sovereign CDS
ICE Clear Europe's risk management framework has several features designed to address particular risks of the New Sovereign Contracts. To address so-called “wrong way risk” involving correlation between the risk of default of an underlying sovereign and the risk of default of a clearing member that has written credit protection on such a sovereign, the New Sovereign Contracts are denominated in U.S. dollars, rather than Euro (and related margin and guaranty fund requirements are denominated in U.S. dollars). In addition, the rules contain limitations on self-referencing trades (i.e., trades where the clearing member is an affiliate of the underlying sovereign reference entity). Such trades may not be submitted for clearing, and if a clearing member subsequently becomes affiliated with the underlying reference entity, the rules applicable to New Sovereign Contracts provide for the termination of relevant positions.
The margin model applicable to New Sovereign Contracts will use a combination of ICE Clear Europe's spread risk margin calculation methodology used for other CDS trades and a separate margin calculation using a Monte Carlo simulation. The initial margin requirement will reflect the higher of the two calculations.
ICE Clear Europe believes that the proposed rule change to add New Sovereign Contracts for clearing are consistent with the requirements of Section 17A of the Act and the CDS procedures and regulations thereunder applicable to it.
ICE Clear Europe does not believe the proposed rule change would have any impact, or impose any burden, on competition.
Written comments relating to the proposed rule change have not been solicited or received. ICE Clear Europe will notify the Commission of any written comments received by ICE Clear Europe.
Within 45 days of the date of publication of this notice in the
(A) By order approve or disapprove the proposed rule change or
(B) Institute proceedings to determine whether the proposed rule change should be disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. In addition, the Commission seeks comment generally on the following issues.
(1) What would be the effect on the promotion of efficiency, competition, and capital formation of ICE Clear Europe clearing New Sovereign Contracts?
(2) Would the clearing of New Sovereign Contracts create incentives among market participants to initiate trades that they otherwise would not? If so, would this increase or create new risks to the financial system or to the central counterparty that would offset the potential benefits of centralized clearing of New Sovereign Contracts?
(3) Would ICE Clear Europe's risk management framework, as described above, appropriately address risks arising from ICE Clear Europe's clearing of New Sovereign Contracts, including but not limited to “wrong-way risk”?
(4) Is the information set forth in this notice or otherwise available to the public sufficient to allow the public to provide meaningful comment on the proposed rule change?
Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-ICEEU-2012-08 and should be submitted on or before November 23, 2012.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
CME is proposing to amend certain rules in connection with its status as a “deemed registered” clearing agency for purposes of clearing security-based swap products. The proposed changes are designed to comply with certain requirements in the Act. The text of the proposed changes is available on the CME's Web site at
In its filing with the Commission, CME included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. CME has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
CME began clearing credit default swaps prior to the passage of the Dodd-Frank Act. These activities were facilitated by temporary exemptive relief granted by the Commission to CME. This temporary exemptive relief expired on July 16, 2011. At that time, certain provisions in the Dodd-Frank Act became effective that were intended to ensure that derivatives clearing organizations such as CME that were clearing credit default swaps prior to the passage of Dodd-Frank based on exemptions granted by the Commission could continue to do so without interruption. These provisions provided that CME became “deemed registered” as a clearing agency solely for the limited purpose of clearing security-based swaps. Commission staff has interpreted this Dodd-Frank “deemed registered” provision to mean that CME Inc., the legal entity that houses all of CME's futures and swap businesses, is generally subject to all of the requirements of the Act that apply to clearing agencies, including the obligation to submit rule filings of CME Inc. under SEC Rule 19b-4.
To-date, CME has not offered any products for clearing that fall under the Commission's jurisdiction since the passage of the Dodd-Frank Act.
Commission staff has reviewed CME's rulebook and requested that CME make certain changes in accordance with existing Commission interpretive guidance.
The financial statements would, at a minimum include: (i) The balance of the clearing fund and the breakdown of the fund balance between the various forms of contributions to the fund, e.g., cash and secured open account indebtedness; (ii) the types and amounts of investments made with respect to the cash balance; (iii) the amounts charged to the clearing fund during the year in excess of a defaulting clearing member's Guaranty Fund contribution; and (iv) any other charges to the fund during the year not directly related and chargeable to a specific clearing member's Guaranty Fund contribution. CME also would make available to CDS Clearing Members clearing security-based swaps a report of CME Group Inc. by independent public accountant regarding its system of internal accounting control, describing any material weaknesses discovered and any corrective action taken or proposed to be taken.
CME would also furnish to all CDS Clearing Members engaged in security-based swap clearing activities, within 40 days following the close of each fiscal quarter, unaudited quarterly financial statements. These unaudited quarterly financial statements shall at a minimum consist of: (i) A statement of financial position as of the end of the most recent fiscal quarter and as of the end of the corresponding period of the preceding fiscal year; (ii) a statement of changes in financial position for the period between the end of the last fiscal year and the end of the most recent fiscal quarter and for the corresponding period of the preceding fiscal year; and (iii) a statement of results of operations, which may be condensed, for the most recent fiscal quarter and for the period between the end of the last fiscal year and the end of the most recent fiscal quarter and for the corresponding periods of the preceding fiscal year.
Commission staff has asked CME to provide an explanation of how CME's current governance arrangements relating to its CDS clearing offering should be viewed in light of the requirements of Section 17A(b)(3)(C) of the Act. This provision requires that the rules of a clearing agency assure a “fair representation” of its participants in the selection of its directors and administration of its affairs.
As an initial matter, CME notes that the Board of Directors of the CME Group Inc., the parent of CME, also serves as the Board of the CME. CME Group is a public company whose stock is listed on
CME is also subject to governance and conflict of interest provisions under the core principles set out in the Commodity Exchange Act (“CEA”) for a derivatives clearing organization (“DCO”). The CFTC reviews CME for compliance with these principles. For example, Section 5b(c)(2)(O) of the CEA sets out governance fitness standards that apply to DCOs, including transparent governance arrangements, that are designed to ensure the consideration of views of owners and participants. Further, Section 5b(c)(2)(Q) of the CEA requires a DCO's board to include market participants. CFTC regulations also require a DCO's governance arrangements to be clear and transparent and “to support the objectives of relevant stakeholders”.
CME also believes it is relevant that CDS participants will have a meaningful input into decisions affecting the clearing operations for CDS through participation on the CME CDS Risk Committee. Under CME Rule 8H27, the CDS Risk Committee was formed to provide guidance and oversight to CME Clearing on matters relating to CDS Products. The CDS Risk Committee, among other things, is responsible for reviewing CDS financial safeguards, and CDS clearing member requirements, risk management policies and practices, review of CDS rule changes, etc.
The Charter of the CDS Risk Committee sets forth certain composition requirements that ensure the perspectives of CDS Clearing Members are represented. More specifically, the Charter requires that at all times the CDS Risk Committee is populated with up to nine and no fewer than five individuals who are representative of CDS Clearing Members. Because of these composition requirements of the CDS Risk Committee, and the scope of its responsibilities, CME believes the Commission could find that its current governance arrangements meet the requirements of the Act.
Further, CME also notes that the Charter of the CDS Risk Committee specifically provides that its Chairman shall be a member of the CME Inc. Board of Directors. In this capacity, the Chairman of the CDS Risk Committee serves as a liason to the full board of directors of CME. He or she can relay any concerns addressed by the CDS Risk Committee to the full CME Board. CME notes that the CDS Risk Committee is required to reassess the adequacy of this Charter on an annual basis and submit any recommended changes to the full CME Board for approval. CME believes these features provide a concrete nexus between the activities of the CDS Risk Committee and the full CME Board and ensure that there will be a “fair representation” of CDS Clearing Members in accordance with the spirit and letter of the Act.
The CME believes the proposed rule changes are consistent with the requirements of the Act, including Section 17A of the Act. The changes are specifically designed to meet Section 17A requirements as interpreted by Commission staff for clearing agencies.
CME does not believe that the proposed rule change will have any impact, or impose any burden, on competition.
CME has presented these proposed changes to the representatives of its CDS Risk Committee. CME has not otherwise solicited, and does not intend to solicit, comments regarding this proposed rule change. CME has not received any unsolicited written comments from interested parties.
Within 45 days of the date of publication of this notice in the
(A) By order approve or disapprove the proposed rule change or
(B) Institute proceedings to determine whether the proposed rule change should be disapproved.
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-CME-2012-26 and should be submitted on or before November 23, 2012.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
U.S. Small Business Administration.
Notice.
This is a notice of an Administrative declaration of a disaster for the Commonwealth of Massachusetts dated 10/22/2012.
Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155.
A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street SW., Suite 6050, Washington, DC 20416.
Notice is hereby given that as a result of the Administrator's disaster declaration, applications for disaster loans may be filed at the address listed above or other locally announced locations.
The following areas have been determined to be adversely affected by the disaster:
The Interest Rates are:
The number assigned to this disaster for physical damage is 13348 6 and for economic injury is 13349 0.
The States which received an EIDL Declaration # are Massachusetts, Rhode Island.
Susquehanna River Basin Commission.
Notice.
As part of its regular business meeting held on September 20, 2012, in Harrisburg, Pennsylvania, the Commission took the following actions: approved or tabled the applications of certain water resources projects; and took additional actions, as set forth in the Supplementary Information below.
September 20, 2012
Susquehanna River Basin Commission, 1721 N. Front Street, Harrisburg, PA 17102-2391.
Richard A. Cairo, General Counsel, telephone: (717) 238-0423, ext. 306; fax: (717) 238-2436; email:
In addition to its related actions on projects identified in the summary above and the listings below, the following items were also presented or acted on at the business meeting: (1) Approved/ratified grants involving the Chesapeake Bay Nutrient Monitoring Program, the development of Total Maximum Daily Loads (TMDLs) studies, and the Public Water System Assistance Initiative Project with the PA Dept. of Environmental Protection; (2) amended the Water Quality Protection and Pollution Prevention Grant (known as the 106 grant); (3) authorized expansion of the SRBC Remote Water Quality Monitoring Network; (4) approved two listing agreements with Latus Commercial Realty for sale of the current headquarters building and leasing of space in the new headquarters building now under construction; (5) approved the partial waiver of application fees when a project sponsor withdraws an application prior to SRBC beginning its technical review; (6) approved a request by Talon Holdings, LLC for a conditional transfer extension related to the Hawk Valley Golf Course, Lancaster County, Pa.; and (7) approved issuance of a corrective docket to Nature's Way Purewater Systems, Inc. to correct an error misidentifying a project feature for which monitoring is required.
The Commission approved the following project applications:
1. Project Sponsor and Facility: Borough of Adamstown, Adamstown Borough, Lancaster County, Pa. Renewal of groundwater withdrawal of up to 0.069 mgd (30-day average) from Well 4 (Docket No. 19801104).
2. Project Sponsor and Facility: Anadarko E&P Company LP (Second Fork Larrys Creek), Mifflin Township, Lycoming County, Pa. Surface water withdrawal of up to 0.200 mgd (peak day).
3. Project Sponsor and Facility: Cabot Oil & Gas Corporation (Susquehanna River), Susquehanna Depot Borough, Susquehanna County, Pa. Renewal of surface water withdrawal of up to 1.500 mgd (peak day) (Docket No. 20080908).
4. Project Sponsor and Facility: Cabot Oil & Gas Corporation (Susquehanna River), Great Bend Township, Susquehanna County, Pa. Renewal of surface water withdrawal of up to 2.000 mgd (peak day) (Docket No. 20080905).
5. Project Sponsor and Facility: Carrizo (Marcellus), LLC (Muddy Run), Gulich Township, Clearfield County, Pa. Surface water withdrawal of up to 0.720 mgd (peak day).
6. Project Sponsor and Facility: East Hempfield Township Municipal Authority, East Hempfield Township, Lancaster County, Pa. Surface water withdrawal of up to 0.070 mgd (30-day average) from S-1 (Baker Spring); and Groundwater withdrawal of up to 0.268 mgd (30-day average) from Well W-1, 0.673 mgd (30-day average) from Well W-2, 0.264 mgd (30-day average) from Well W-3, 0.321 mgd (30-day average)
7. Project Sponsor and Facility: Enerplus Resources (USA) Corporation (West Branch Susquehanna River), East Keating Township, Clinton County, Pa. Surface water withdrawal of up to 2.000 mgd (peak day).
8. Project Sponsor and Facility: EXCO Resources (PA), LLC (Larrys Creek), Mifflin Township, Lycoming County, Pa. Renewal of surface water withdrawal with modification, for a total of 0.200 mgd (peak day) (Docket No. 20080936).
9. Project Sponsor and Facility: Forest Springs Water Company, Wayne Township, Schuylkill County, Pa. Groundwater withdrawal of up to 0.075 mgd (30-day average) from Borehole BH-1, and modification to consumptive water use approval removing previous sources Spring 1 and Spring 2 and adding new source Borehole BH-1 (Docket No. 20010206).
10. Project Sponsor: Hydro Recovery-Antrim LP. Project Facility: Antrim Treatment Plant, Duncan Township, Tioga County, Pa. Modification to project features and to increase surface water withdrawal by an additional 1.152 mgd, for a total of 1.872 mgd (peak day) (Docket No. 20090902).
11. Project Sponsor and Facility: Keystone Clearwater Solutions, LLC (Lycoming Creek), Lewis Township, Lycoming County, Pa. Modification to increase surface water withdrawal, for a total of 2.125 mgd (peak day) (Docket No. 20110616).
12. Project Sponsor and Facility: Keystone Clearwater Solutions, LLC (Moshannon Creek), Snow Shoe Township, Centre County, Pa. Renewal of surface water withdrawal of up to 1.000 mgd (peak day) (Docket No. 20080946).
13. Project Sponsor and Facility: Keystone Clearwater Solutions, LLC (West Branch Susquehanna River), Goshen Township, Clearfield County, Pa. Renewal of surface water withdrawal of up to 1.000 mgd (peak day) (Docket No. 20080944).
14. Project Sponsor and Facility: Roaring Spring Water—Division of Roaring Spring Blank Book, Roaring Spring Borough, Blair County, Pa. Modification to increase consumptive water use by an additional 0.125 mgd, for a total of 0.255 mgd (peak day) (Docket No. 20120309), and to increase surface water withdrawal by an additional 0.131 mgd, for a total of 0.302 mgd (peak day) (Docket No. 20120309).
15. Project Sponsor and Facility: Talisman Energy USA Inc. (Susquehanna River), Sheshequin Township, Bradford County, Pa. Renewal of surface water withdrawal of up to 1.500 mgd (peak day) (Docket No. 20080909).
The following project applications were tabled by the Commission:
1. Project Sponsor and Facility: Caernarvon Township Authority, Caernarvon Township, Berks County, Pa. Application for renewal of groundwater withdrawal of up to 0.035 mgd (30-day average) from Well 6 (Docket No. 19820912).
2. Project Sponsor and Facility: EQT Production Company (Pine Creek), Porter Township, Lycoming County, Pa. Application for surface water withdrawal of up to 1.000 mgd (peak day).
3. Project Sponsor and Facility: Falling Springs Water Works, Inc. (Falling Springs Reservoir), Ransom Township, Lackawanna County, Pa. Application for surface water withdrawal of up to 0.800 mgd (peak day).
4. Project Sponsor and Facility: Gaberseck Brothers (Odin Pond 2), Keating Township, Potter County, Pa. Application for surface water withdrawal of up to 0.249 mgd (peak day).
5. Project Sponsor and Facility: Houtzdale Municipal Authority (Beccaria Springs), Gulich Township, Clearfield County, Pa. Application for surface water withdrawal of up to 10.000 mgd (peak day).
6. Project Sponsor and Facility: Southwestern Energy Production Company (Middle Lake), New Milford Township, Susquehanna County, Pa. Application for surface water withdrawal of up to 0.720 mgd (peak day).
Pub. L. 91-575, 84 Stat. 1509
In notice document 2012-26799, appearing on page 65929 in the issue of Wednesday, October 31, 2012, make the following correction:
On page 65929, in the first column, under the
Federal Highway Administration (FHWA), DOT.
Notice of limitation on claims for judicial review of actions by FHWA and other federal agencies.
By this notice, the FHWA is advising the public of final agency actions subject to 23 U.S.C. 139(l)(1). The actions relate to a proposed project to improve the Brent Spence Bridge over the Ohio River, as well as improvements to Interstate Routes 71 and 75 and interchanges in the City of Cincinnati, Hamilton County, State of Ohio and City of Covington, Kenton County, Commonwealth of Kentucky, including a new bridge over the Ohio River. This notice covers those Federal agency actions to grant licenses, permits, and approvals for the project.
A claim seeking judicial review of the Federal agency actions on the highway project will be barred unless the claim is filed on or before May 1, 2013. If the Federal law that authorizes judicial review of a claim provides a time period of less than 180 days for filing such claim, then that shorter time period still applies.
Noel F. Mehlo Jr., Environmental Program Manager, Federal Highway Administration, 200 North High Street, Room 328, Columbus, Ohio 43215, Telephone: (614) 280-6896; or Stefan Spinosa, PE, Ohio Department of Transportation (ODOT), 505 South State Route 741, Lebanon, Ohio 45036, Telephone: (513) 933-6639.
Notice is hereby given that the FHWA and other Federal agencies including, but not limited to; the United States Coast Guard, United States Army Corps of Engineers, United States Fish and Wildlife Service, Advisory Council on
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23 U.S.C. 139(l)(1).
Union Railroad Company (URR) and McKeesport Connecting Railroad Company (MCK) (collectively, applicants) have jointly filed a verified notice of exemption under 49 CFR 1180.2(d)(3) for a corporate family transaction pursuant to which MCK would be merged into URR.
URR and MCK are both Delaware corporations and Class III rail carriers. United States Steel Corporation (USS), a noncarrier, owns all of the issued and outstanding stock of Transtar, Inc. (Transtar), a noncarrier holding company, which owns all of the issued and outstanding stock of six Class III rail carriers (collectively, the Transtar railroads), including URR and MCK.
URR is a switching and terminal railroad that operates approximately 27.8 route miles, extending from an interchange with the Bessemer & Lake Erie Railroad at North Bessemer, PA, south to an interchange with Wheeling & Lake Erie Railway at Mifflin Junction, PA, with branches to Clairton, South Duquesne and Munhall, PA. URR connects at the intermediate point of Bessemer, PA, with CSX Transportation, Inc. (CSXT) and at Kenny and Clarion, PA, with Norfolk Southern Railway. MCK is a switching and terminal railroad that operates at McKeesport, PA. It connects with CSXT and serves USS' McKeesport Tubular Operations.
Applicants state that, pursuant to the provisions of a Plan of Merger executed by the parties, MCK will be merged into URR upon the effective date of the merger, with URR as the surviving corporation. According to applicants, the corporate existence of the surviving corporation will continue unimpaired and unaffected by the merger.
Unless stayed, the exemption will be effective on November 18, 2012. Applicants state that the merger of MCK into URR is expected to become effective as of January 1, 2013, and that the transaction will be consummated as of that date.
According to applicants, the purpose of the corporate transaction is to simplify the corporate structure of the Transtar railroads by reducing the number of subsidiary railroads controlled by Transtar to five which will reduce the administrative, accounting, reporting, and related burdens associated with the maintenance of the two separate corporate entities.
This is a transaction within a corporate family of the type specifically exempted from prior review and approval under 49 CFR 1180.2(d)(3). Applicants state that the transaction will not result in adverse changes in service levels, significant operational changes, or any changes in the competitive balance with carriers outside the corporate family. Applicants further state that the service presently provided by the involved carriers will be continued by URR and all current connections of the involved carriers will be continued.
Under 49 U.S.C. 10502(g), the Board may not use its exemption authority to relieve a rail carrier of its statutory obligation to protect the interests of its employees. Section 11326(c), however, does not provide for labor protection for transactions under sections 11324 and 11325 that involve only Class III rail carriers. Accordingly, the Board may not impose labor protective conditions here, because all of the carriers involved are Class III rail carriers.
If the notice contains false or misleading information, the exemption is void
An original and 10 copies of all pleadings, referring to Docket No. FD 35679, must be filed with the Surface Transportation Board, 395 E Street SW., Washington, DC 20423-0001. In addition, one copy of each pleading must be served on John A. Vuono, Vuono & Gray, LLC, 310 Grant Street, Suite 2310, Pittsburgh, PA 15219.
Board decisions and notices are available on our Web site at
By the Board, Rachel D. Campbell, Director, Office of Proceedings.
Under 49 CFR 1011.7(a)(2)(x)(A), the Director of the Office of Proceedings (Director) is delegated the authority to determine whether to issue notices of exemption under 49 U.S.C. 10502 for lease and operation transactions under 49 U.S.C. 10902. However, the Board reserves to itself the consideration and disposition of all matters involving issues of general transportation importance. 49 CFR 1011.2(a)(6). Accordingly, the Board revokes the delegation to the Director with respect to issuance of the notice of exemption for lease and operation of the rail lines at issue in this case. The Board determines that this notice of exemption should be issued, and does so here.
According to Arkansas-Oklahoma Railroad, Inc. (AOK), a Class III rail carrier, AOK and Union Pacific Railroad Company (UP) have entered into a new Lease Agreement (Agreement). AOK has filed a verified notice of exemption under 49 CFR 1150.41
Pursuant to 49 CFR 1150.43(h), AOK states that, although the Agreement contains no direct restrictions on interchange, the lease fee is based upon the percentage of traffic AOK interchanges with UP. AOK states that this arrangement is unchanged from the original lease agreement covering the lines.
AOK certifies that its projected annual revenues as a result of this transaction will not exceed those that would qualify it as a Class III rail carrier and will not exceed $5 million.
AOK states that consummation of the transaction will occur on or about November 19, 2012. The earliest the transaction can be consummated is November 18, 2012, the effective date of the exemption (30 days after the verified notice was filed).
If the verified notice contains false or misleading information, the exemption is void
An original and 10 copies of all pleadings, referring to Docket No. FD 35667, must be filed with the Surface Transportation Board, 395 E Street SW., Washington, DC 20423-0001. In addition, one copy of each pleading must be served on Daniel A. LaKemper, General Counsel, Arkansas-Oklahoma Railroad, Inc., P.O. Box 185, Morton, IL 61550.
Board decisions and notices are available on our Web site at
1. The delegation of authority to the Director of the Office of Proceedings under 49 CFR 1011.7(a)(2)(x)(A) to determine whether to issue a notice of exemption in this proceeding is revoked.
2. Notice of the exemption will be published in the
3. This decision is effective on the date of service.
Decided: October 29, 2012.
By the Board, Chairman Elliott, Vice Chairman Mulvey, and Commissioner Begeman. Vice Chairman Mulvey dissented with a separate expression.
Vice Chairman Mulvey, dissenting.
According to AOK's notice, AOK has been leasing a line of railroad from UP since 1997 under an agreement that gives AOK a financial incentive to interchange its traffic with UP, rather than with Kansas City Southern (KCS). The shippers whose traffic was subject to the interchange commitment contained in the 1997 lease may or may not have been aware of it, given that the notice authorizing that lease made no mention of the presence of a special lease fee arrangement.
In support of its desire to continue a lease credit arrangement encouraging interchange with UP rather than KCS—one that has already been in place for more than 15 years—AOK argues that the interchange commitment does not materially change its interchange practices. That argument, of course, begs the question as to why such a provision
On November 1, 2012, the Board announced that it was proposing new rules to require carriers to disclose more information when proposing transactions, such as this one, that contain an interchange commitment.
Securities and Exchange Commission.
Final rule.
The Securities and Exchange Commission (“SEC” or “Commission”) is adopting a new rule in accordance with the Securities Exchange Act of 1934 (“Exchange Act”), and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”). The new rule establishes minimum requirements regarding how registered clearing agencies must maintain effective risk management procedures and controls as well as meet the statutory requirements under the Exchange Act on an ongoing basis.
Jeffrey Mooney, Assistant Director; Katherine Martin, Senior Special Counsel; Doyle Horn, Special Counsel; Stephanie Park, Special Counsel; or Justin Byrne, Attorney-Advisor; Office of Clearance and Settlement, Division of Trading and Markets, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-7010 at (202) 551-5710.
The Commission is adopting rules for the operation of a registered clearing agency that identify minimum standards designed to enhance the regulatory framework for clearing agency supervision.
Congress directed the Commission to facilitate the establishment of a national system for the prompt and accurate clearance and settlement of securities transactions when it added Section 17A to the Exchange Act as part of the Securities Acts Amendments of 1975.
The Commission used this experience with regulating clearing agencies to help address developments recently in the over-the-counter (“OTC”) derivatives markets. In December 2008, the Commission acted to facilitate the central clearing of credit default swaps (hereinafter referred to as “credit default swaps” or “CDS”), the largest category of OTC security-based swaps, by permitting certain entities that performed central counterparty (“CCP”) services to clear and settle credit default swaps on a temporary, conditional basis.
Section 17A of the Exchange Act
On July 21, 2010, President Barack Obama signed the Dodd-Frank Act into law.
Title VII of the Dodd-Frank Act (“Title VII”) provides the Commission and the Commodity Futures Trading Commission (“CFTC”) with enhanced authority to regulate certain OTC derivatives in response to the recent financial crisis.
Title VII was designed to provide greater certainty that, wherever possible and appropriate, swap and security-based swap contracts formerly traded exclusively in the OTC market are centrally cleared.
In addition to the provisions from Title VII that expand the Commission's authority under the Exchange Act to include activities related to security-based swaps, Title VIII of the Dodd-Frank Act, entitled the Payment, Clearing, and Settlement Supervision Act of 2010 (“Clearing Supervision Act”), establishes an enhanced supervisory and risk control system for systemically important clearing agencies and other financial market utilities (“FMUs”).
The definition of “financial institution,” which is contained in Section 803(5) of the Clearing Supervision Act, outlines numerous exclusions but defines financial institution as a branch or agency of a foreign bank, an organization operating under Section 25 or 25A of the Federal Reserve Act, a credit union, a broker or dealer, an investment company, an insurance company, an investment adviser, a futures commission merchant, commodity trading advisor or commodity pool operator and any company engaged in activities that are financial in nature or incidental to a financial activity. 12 U.S.C. 5462(5)(A).
Section 17A(i) of the Exchange Act provides that the Commission, in establishing clearing agency standards and in its oversight of clearing agencies, may conform such standards and such oversight to reflect evolving international standards.
The Board applies these standards in its supervisory process and expects systemically important systems, as determined by the Board and subject to its authority, to complete a self-assessment against the standards set forth in the policy.
On March 3, 2011, the Commission proposed for comment a series of rules related to standards for the operation and governance of clearing agencies (“Proposing Release”).
(1) Proposed Rule 17Ad-22, which would require certain minimum standards for all clearing agencies registered with the Commission;
(2) Proposed Rule 17Aj-1, which would require dissemination of pricing and valuation information by security-based swap CCPs;
(3) Proposed Rule 17Ad-23, which would require all clearing agencies to have adequate safeguards and procedures to protect the confidentiality of trading information of clearing agency participants;
(4) Proposed Rule 17Ad-24, which would exempt certain security-based swap dealers and security-based swap execution facilities from the definition of clearing agency;
(5) Proposed Rule 17Ab2-1, which would amend an existing Commission rule concerning registration of clearing agencies to account for security-based swap clearing agencies and to make other technical changes;
(6) Proposed Rule 17Ad-25, which would require all clearing agencies to have procedures that identify and address conflicts of interest;
(7) Proposed Rule 17Ad-26, which would require clearing agencies to set standards for all members of their boards of directors or committees; and
(8) Proposed Rule 3Cj-1, which is modeled on Section 3C(j) of the Exchange Act and would require all clearing agencies to designate a chief compliance officer.
The Commission also noted in the Proposing Release that the definition of clearing agency under Section 3(a)(23)(A) of Exchange Act includes any person who:
• Acts as an intermediary in making payments or deliveries or both in connection with transactions in securities;
• Provides facilities for the comparison of data regarding the terms of settlement of securities transactions, to reduce the number of settlements of securities transactions, or for the allocation of securities settlement responsibilities;
• Acts as a custodian of securities in connection with a system for the central handling of securities whereby all securities of a particular class or series of any issuer deposited within the system are treated as fungible and may be transferred, loaned, or pledged by bookkeeping entry, without physical delivery of securities certificates (such as a securities depository); or
• Otherwise permits or facilitates the settlement of securities transactions or the hypothecation or lending of securities without physical delivery of securities certificates (such as a securities depository).
Since the publication of the Proposing Release, the Commission has received 25 comment letters on the Proposing Release from a broad range of market participants, and the Commission and staff also had discussions with representatives of clearing agencies, trade associations, public interest groups and other interested parties.
After careful review and consideration of the comments, the Commission is today adopting Rule 17Ad-22, with certain modifications discussed below, to address comments received. As adopted, Rule 17Ad-22 is meant to establish minimum requirements for registered clearing agency risk management practices and operations with due consideration given to equivalent standards of other regulators in the United States
The Proposing Release was published in the
Set forth below is a description of the comments received by the Commission that express concerns about the general approach to clearing agency reform reflected in the Proposing Release. The Commission has carefully considered these general comments that were provided concerning the larger framework for our rule making efforts involving clearing agencies.
Three commenters asked for the implementation of the proposed rules to be subject to appropriate phase-in periods.
One commenter asked the Commission to publish any modifications it may make to the proposed rules for an additional comment period.
One commenter stated that clearing agency rules such as those related to governance, conflicts of interest, registration, and financial resources should be adopted early in the implementation of rules for the security-based swap market.
In light of the request by commenters for a phased approach to implementation of the clearing agency standards set forth in the Proposing Release,
• In the first stage, the Commission is adopting only Rule 17Ad-22. The compliance date for Rule 17Ad-22 will be sixty days from publication in the
• The second planned stage in the implementation of standards for clearing agencies is the consideration by the Commission of rules that correspond to proposed Rules 17Aj-1; 17Ad-23; 17Ad-24; 17Ab2-1 and 3Cj-1 as well as the clearing agency governance and conflict of interest concerns that its previous proposal addressed through its proposal of Rule 17Ad-25, Rule 17Ad-26 and Regulation MC.
• The third planned stage is for the Commission to consider rules tailored to clearing agencies that perform certain post-trade processing services. The Commission sought comment concerning these types of clearing agencies in the Proposing Release and preliminarily intends to propose rules addressed to them as described in more detail in Sections II.B.4 and III.A below. As appropriate, the Commission may
The Commission believes the phased approach to implementation provides clearing agencies with the benefit of additional time with respect to some of the requirements contemplated in the Proposing Release, while putting into place minimum standards for operational and risk management practices of registered clearing agencies. This approach will allow the Commission to consider further the comments received on the Proposing Release and evolution of clearance and settlement activity in light of the requirements of Title VII and Title VIII of the Dodd-Frank Act, including the implementation of the mandatory clearing requirements with respect to security-based swaps mandated by the Dodd-Frank Act. Because the Commission is adopting 17Ad-22 largely as proposed, the Commission is not republishing Rule 17Ad-22 for additional comments.
We believe that the implementation of these standards is an important first step in crafting regulatory changes contemplated by Title VII and Title VIII of the Dodd-Frank Act as intended by Congress. The adoption of Rule 17Ad-22 will also allow the Commission to coordinate its activities as the supervisory agency for clearing agencies designated as systemically important financial market utilities under Title VIII of the Dodd-Frank Act with the complementary responsibilities of the Federal Reserve.
Generally, commenters supported the requirements of proposed Rules 17Ad-22(b)(1)-(4) that would govern the risk management standards and practices of registered clearing agencies that perform CCP services or CCPs.
For instance, proposed Rule 17Ad-22(b)(1) would require a CCP to establish, implement, maintain and enforce written policies and procedures reasonably designed to measure credit exposures to participants at least once a day and limit exposures to potential losses from defaults by its participants in normal market conditions so that the operations of the clearing agency would not be disrupted and non-defaulting participants would not be exposed to losses that they cannot anticipate or control. Of those commenters who asked the Commission to consider modifications to the proposed rule, two suggested that public disclosure requirements should accompany any choice made by a CCP to reduce margin requirements on the basis of an inverse or offsetting correlation between participants' positions.
Proposed Rule 17Ad-22(b)(2) would require a CCP to establish, implement, maintain and enforce written policies and procedures reasonably designed to use margin requirements to limit its credit exposures to participants under normal market conditions and use risk-based models
With respect to proposed Rule 17Ad-22(b)(3), commenters asked the Commission to give further consideration to whether it is appropriate to create different financial resources standards for a security-based swap CCP. As proposed, the rule would require a CCP to establish, implement, maintain and enforce written policies and procedures reasonably designed to maintain sufficient financial resources to withstand, at a minimum, a default by the participant to which it has the largest exposure in extreme but plausible market conditions, provided that a security-based swap clearing agency would be required to maintain sufficient financial resources to withstand, at a minimum, a default by the two participants to which it has the largest exposures in extreme but plausible market conditions. One commenter argued that characteristics of the instruments traded in the security-based swap market support differentiating the requirements of the rule
Similarly, some commenters asked the Commission to reconsider how prescriptive it should be in its approach to the requirements of Rule 17Ad-22(b)(4).
A more complete discussion of these comments and others that pertain to Rules 17Ad-22(b)(1)-(4) is contained in Section III.C below.
The Commission acknowledges the many thoughtful comments we received regarding the risk management standards and practices reflected in the Proposing Release and agrees that the topic deserves particular care and attention.
• Many of the risk management standards and practices underlying proposed Rule 17Ad-22 require relatively significant judgments to be made and at times there are no established or definitive sources of guidance to aid decision-making. Therefore, for a CCP's risk management practices to be most effective, the CCP must have some degree of flexibility to tailor the practices appropriately to meet the demands of the specific financial markets it serves, and the Commission's interpretation of Rule 17Ad-22 should not be rigidly applied as uniform standards without variation.
• The specific risk management practices most appropriate for any individual CCP and for registered clearing agencies generally are unlikely to remain static.
For example, the Commission recognizes that a less prescriptive approach can help promote efficient practices and encourage regulated entities to consider how to manage their regulatory obligations and risk management practices in a way that complies with Commission rules while accounting for the particular characteristics of their business and believes the approach reflected in proposed Rule 17Ad-22 is consistent with this perspective.
The Commission believes that one outgrowth of this less prescriptive approach is that there may be additional questions from the clearing agencies regarding how various regulatory requirements apply with regard to clearance and settlement services for particular instruments or products having different market characteristics. Commenters were particularly concerned with the application of Rules 17Ad-22(b)(1)-(4) and with particular risk management standards, including, but not limited to, the proper amount of financial resources, measurement and management of credit exposures, back testing, model validation, use of concentration, liquidity and other factors to determine margin requirements, and the appropriate meaning of “extreme but plausible market conditions.”
We note that the Commission or its staff may from time to time issue additional guidance to the extent necessary to address questions arising from the dynamic nature of clearing agency risk management practices, changing market practices, and technological advances.
To date, the Exchange Act and the related regulations promulgated by the Commission have not established particularized requirements regarding clearing agencies' risk management practices.
To meet this standard, the current practice of registered CCPs is to calculate daily margin requirements using risk-based models to ensure coverage at a 99% confidence interval over a designated time horizon.
Furthermore, the Commission notes that a CCP can develop rules and
Three commenters strongly encouraged the Commission and the CFTC to coordinate and cooperate in the development of their parallel regulation of clearing agencies and derivatives clearing organizations (“DCOs”) to build a harmonized U.S. framework for OTC derivatives and to bring appropriate consistency to the two agencies' regulation of similar products, practices and markets.
One commenter stressed that rules applicable to clearance and settlement of single name credit default swaps should be comparable to the final requirements applicable to clearance and settlement of index-based credit default swaps because clearinghouses will undoubtedly service both and therefore different sets of compliance standards could lead to unnecessary operational inefficiencies and may have the unintended consequence of tilting the market in favor of one class of instruments.
Three commenters urged the Commission to incorporate specific requirements for processing, clearing and transfer of customer positions.
Three commenters expressed a preference for principles-based rather than prescriptive rules.
One commenter strongly encouraged the Commission to avoid final action on its proposed rules before it has clarity on what clearinghouse regulations are ultimately adopted by European and United Kingdom regulators and what approaches to regulation are embraced by the final FMI Report.
We recognize that both domestic and foreign regulators may be undertaking similar regulatory initiatives with respect to risk management and operation of clearing agencies. We believe that adopting Rule 17Ad-22 now, largely in the form proposed, and the phased implementation schedule set forth above
In the Proposing Release, the Commission identified certain services in the area of post-trade securities processing that may be captured by the definition of a clearing agency in the Exchange Act. Two commenters generally supported the distinctions the Commission proposed for rules that should apply to all types of clearing agencies versus those that should apply only to CCPs.
We are not persuaded by commenters who suggested that post-trade processing services should be automatically excluded from the definition of a clearing agency in the Exchange Act.
On July 1, 2011, the Commission published a conditional, temporary exemption from clearing agency registration for entities that perform certain post-trade processing services for security-based swap transactions.
The Commission preliminarily agrees with commenters that it is appropriate to consider a tailored framework of regulation for clearing agencies that perform certain post-trade processing services because such activities do not involve the same credit, market and operational risk concerns that are presented by clearing agencies that perform CCP or CSD services.
(1) Calculation and communication of unsettled financial transactions between counterparties;
(2) netting of transactions;
(3) provision and maintenance of trade, contract, or instrument information;
(4) management of risks and activities associated with continuing financial transactions;
(5) transmittal and storage of payment instructions;
(6) movement of funds;
(7) final settlement of financial transactions; and
(8) other similar functions that the Council may determine.
Accordingly, at this time, the Commission does not intend for Rule 17Ad-22 to apply to clearing agencies that perform post-trade processing services. The scope of Rule 17Ad-22 will be limited to clearing agencies that are registered with the Commission and the rule will not apply to any clearing agencies operating pursuant to an exemption from registration as a clearing agency granted by the Commission, unless the terms of future exemptions specifically contemplate its application, in whole or in part. The Commission has clarified this as part of the final Rule 17Ad-22 adopted today by adding the word “registered” before the term “clearing agency” appearing in the first instance in paragraphs (b), (c)(1), (c)(2), and (d). For this reason, references to the term “clearing agency” in this release are generally intended to capture only registered clearing agencies, unless the context suggests otherwise. The Commission may consider at a later time whether rules tailored to clearing agencies that provide post-trade processing services would be appropriate.
The Commission is adopting Rule 17Ad-22 with minor modifications from the proposal to implement the statutory provisions for clearing agencies under the Exchange Act. Rule 17Ad-22 requires registered clearing agencies to establish, implement, maintain and enforce written policies and procedures that are reasonably designed to meet certain minimum requirements for their operations and risk management practices on an ongoing basis. These minimum requirements will work in tandem with the requirements in
The Commission anticipates that the clearing agency's rules and procedures will likely continue to evolve so that the clearing agency can adequately respond to changes in technology, legal requirements, trading volume, trading practices, linkages between financial markets and the financial instruments traded in the markets that a clearing agency serves. Accordingly, registered clearing agencies must evaluate continually and make appropriate updates and improvements to their operations and risk management practices to facilitate the prompt and accurate clearance and settlement of securities transactions and to safeguard securities and funds in their custody or control.
Rule 17Ad-22 consists of the following parts: (1) Rule 17Ad-22(a) provides definitions for certain terms; (2) Rule 17Ad-22(b) contains risk management and participation requirements for registered CCPs; (3) Rule 17Ad-22(c) establishes a reporting requirement for registered clearing agencies with respect to certain matters including financial resources and methodologies used to calculate financial requirements; and (4) Rule 17Ad-22(d) requires registered clearing agencies, as applicable, to meet certain minimum standards.
As noted above, at this time, the Commission intends for Rule 17Ad-22 to apply only to registered clearing agencies. The Commission may consider at a later time whether any additional rules tailored to clearing agencies that perform post-trade processing services would be appropriate. In addition, Rule 17Ad-22 will not apply to any clearing agencies operating pursuant to an exemption from registration as a clearing agency granted by the Commission unless the terms of future exemptions specifically contemplate its application, in whole or in part.
Proposed Rule 17Ad-22(a) contains five definitions. Proposed Rule 17Ad-22(a)(1) would define “central counterparty” as a clearing agency that interposes itself between counterparties to securities transactions to act functionally as the buyer to every seller and as the seller to every buyer. Proposed Rule 17Ad-22(a)(2) would define “central securities depository services” to mean services of a clearing agency that is a securities depository as described in Section 3(a)(23) of the Exchange Act.
Commenters generally supported proposed Rule 17Ad-22(a)(3) because it would require a clearing agency to take account of an entire group of affiliated entities when complying with the financial resources requirements of proposed Rule 17Ad-22(b)(3), as well as the requirements in proposed Rule 17Ad-22(d)(14) for risk controls to address participants' failures to settle.
One commenter expressed concern about the definition of “normal market conditions” as conditions in which the expected movement of the price of cleared securities would produce changes in a clearing agency's exposures to its participants that would be expected to breach margin requirements or other risk control mechanisms only one percent of the time.
The Commission received no comments on proposed Rules 17Ad-22(a)(1), (2) and (5).
As described more fully below, the Commission is adopting Rules 17Ad-22(a)(1), (2), (4) and (5) as proposed. We are also adopting Rule 17Ad-22(a)(3) with certain modifications to address concerns of commenters.
We agree with commenters who suggested that in the interest of clarity and to avoid confusion with use of the term “participant” elsewhere in Exchange Act regulations, Rule 17Ad-22(a)(3) should be modified so that the term defined by the rule is “participant family” instead of “participant.” We are also modifying Rule 17Ad-22(a)(3) with respect to the language that describes the test for determining when a sufficient relationship of control exists between participants to qualify them as a “participant family.” The definition has been expanded to include entities controlled by a participant and to cover direct and indirect relationships. Accordingly, Rule 17Ad-22(a)(3) now provides that participants will be deemed to be a “participant family” for purposes of Rules 17Ad-22(b)(3) and 17Ad-22(d)(14) when “a participant directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, another participant.” This modification is intended to respond to the recommendation of commenters and more closely conform the text of Rule 17Ad-22(a)(3) to the language in which this standard appears in other contexts within the U.S. federal securities
The Commission agrees with the commenter that well-designed margin models include factors that adjust to periods of market turbulence. The Commission, however, is not persuaded by the argument that the definition of normal market conditions in Rule 17Ad-22(a)(4) is at odds with the concept of certain periods of market turbulence.
The definition of “normal market conditions” in Rule 17Ad-22(a)(4) is also modeled on relevant and analogous international standards. The RCCP stipulates that a CCP should limit its exposures to potential losses from defaults by its participants in normal market conditions and defines “normal market conditions” as price movements that produce changes in exposures that are expected to breach margin requirements or other risk controls only 1% of the time.
Rules 17Ad-22(b)(1)-(4) contain several requirements that address risk management practices by registered CCPs. Specifically, the proposed rules would create standards with respect to: (1) Measurement and management of credit exposures; (2) margin requirements; (3) financial resources; and (4) annual evaluations of the performance of the clearing agency's margin models.
During the comment period, commenters pointed out that to properly frame these requirements requires a great deal of technical expertise and that a failure to properly allow that expertise to influence final rules adopted by the Commission could result in inefficient requirements that lack the proper degree of flexibility to achieve prudent risk management practices without being overly burdensome. In some cases, commenters argued that personnel at the clearing agencies possess the requisite levels of experience and expertise to help the Commission shape CCP risk management standards.
As an initial matter, the Commission believes that Rules 17Ad-22(b)(1)-(4) are appropriate minimum standards for registered CCPs and that they are consistent with existing international standards of practice. However, we agree that the process of evaluating, testing and refining CCP risk management standards will be ongoing and necessarily include an open dialogue among the CCPs, investors, the Commission and various other interested parties. In particular, the Commission will carefully consider further input from interested parties obtained through outreach to various constituencies and in response to any rules or rule amendments that may be proposed by the Commission upon considering the international standards developed by CPSS-IOSCO in the FMI Report.
Further, Rules 17Ad-22(b)(1), (2), and (3) establish targets for clearing agencies to meet without prescribing a particular method. Accordingly, the rules provide clearing agencies with the flexibility to establish risk management procedures (
Proposed Rule 17Ad-22(b)(1), as proposed, would require a CCP to establish, implement, maintain and enforce written policies and procedures reasonably designed to measure its credit exposures to its participants at least once each day, and limit its exposures to potential losses from defaults by its participants under normal market conditions
Three commenters urged the Commission to consider adopting a more prescriptive version of the rule.
The Commission is adopting Rule 17Ad-22(b)(1) as proposed, except for the clarification discussed in Sections II.B.4 and III.A regarding the application of the rule only to registered clearing agencies. We agree with commenters that the risks CCPs face are subject to change over time due to the potential for significant changes in the risk profiles of participants and if those risks are not appropriately measured and managed by the CCP, they can result in the accrual of significant liabilities.
The Commission agrees with commenters that clearing agencies may need to measure credit exposures more frequently than once each day in order to ensure that the CCP can facilitate the prompt and accurate clearance and settlement of securities transactions and ensure that they operate safely and efficiently. That point of view is reflected in the rule requirement that the measurement must be performed at least once each day. However, the Commission believes that a less prescriptive and more flexible rule sets a more appropriate baseline standard. Each CCP is exposed to participants in different markets characterized by different trading patterns, volumes, liquidity, transparency and other unique market characteristics. Rather than prescribing a specific frequency for risk exposure measurements (other than the once daily minimum), the Commission believes that CCPs should monitor exposure and margin coverage on an intraday basis depending on the individual risk characteristics of their members and businesses, and adjust their risk management processes as needed. This stance is also consistent with our understanding that the practice at many CCPs is to measure credit exposures more than once daily.
While the Commission also agrees with commenters who expressed the view that a CCP should provide reductions in initial margin requirements based on offsetting or inversely correlated positions only if the CCP can demonstrate a robust correlation between those positions—including under stressed market conditions,
As adopted, Rule 17Ad-22(b)(1) does not require that a registered CCP publicly disclose its correlation methodology and related margin requirements.
We are also adopting Rule 17Ad-22(b)(1), as it was proposed, to require registered CCPs to establish, implement, maintain, and enforce written policies and procedures reasonably designed to limit their exposures to potential losses from participant defaults. By collecting sufficient margin and having other liquid resources at its disposal, the Commission expects that a clearing agency will be able to limit its exposures to potential losses from defaults by clearing members in normal market conditions.
Proposed Rule 17Ad-22(b)(2) would require a CCP to establish, implement, maintain and enforce written policies and procedures reasonably designed to: (i) Use margin requirements to limit its credit exposures to participants under normal market conditions;
One commenter recommended that the rule be amended to require that the CCP's margin requirements must be sufficient to limit credit exposures to both the CCP's participants and the clients of the CCP's participants.
In response to a question asked by the Commission in the Proposing Release, one commenter stated that adopting Rule 17Ad-22(b)(2) as proposed is unlikely to create the risk that CCPs will lower margin standards to compete for business.
One commenter contended that certain aspects of a CCP's margin methodology, such as choice of confidence levels (used to estimate expected shortfall), the number of days' data relied on, and the various weights used to determine stress test charges do not need to be reviewed on a monthly basis.
One commenter focused more narrowly on the appropriate confidence level that should be applied to initial margin collected by a clearing agency.
The Commission is adopting Rule 17Ad-22(b)(2) as proposed, except for the clarification discussed in Sections II.B.4 and III.A regarding the application of the rule only to registered clearing agencies. This requirement recognizes that the collection of assets (
The Commission does not believe it is necessary to amend the rule to state that a registered CCP's margin requirements must limit credit exposures to customers of participants as well as participants.
The Commission is aware that some CCPs may already have the ability to measure credit exposures to customers of participants as well as to participants. To the extent that such margin practices are already in place or develop over time to help ensure prompt and accurate clearance and settlement in the market the clearing agency serves, we believe those practices can be effective in limiting aggregate credit exposures of clearing agencies. We agree that the ability to limit credit exposures to customers of participants using margin may help inform and shape appropriate credit risk management practices in certain cases—for example, where (i) direct access to a clearing agency by some participants may be relatively more constrained by the operational or financial demands commensurate with participation; (ii) open interest periods associated with the instruments cleared by the clearing agency are relatively significant; or (iii) customer margin requirements are established independently from the CCP (
The Commission is not amending Rule 17Ad-22(b)(2) to specify which aspects or components of the CCP's risk-based models must be reviewed in the context of the CCP's monthly review.
The Commission notes that, to the extent a CCP believes that an assumption in a model or parameter does not lend itself to empirical testing, a review of that assumption can in some cases be accomplished by the CCP performing a theoretical assessment of that assumption compared to alternative assumptions. For example, a CCP may evaluate the appropriateness of the number of days of market data used in its margin model or the expected amount of time needed to liquidate a security in an event of default by comparing the performance of the margin model when a range of representative values is input.
Also consistent with the intent of preserving appropriate flexibility for clearing agencies to tailor their methods of achieving compliance, the Commission is not prescribing a particular confidence level for initial margin in Rule 17Ad-22(b)(2).
We agree with commenters who asserted that a CCP's disclosure of its margin-setting methodology to customers facilitates prompt and accurate clearance and settlement by enabling market participants to better plan for margin costs associated with the use of the clearing agency.
Proposed Rule 17Ad-22(b)(3) would require a CCP to establish, implement, maintain and enforce written policies and procedures reasonably designed to maintain sufficient financial resources to withstand, at a minimum, a default by the participant to which it has the largest exposure in extreme but plausible market conditions, provided that a security-based swap clearing agency would be required to maintain sufficient financial resources to withstand, at a minimum, a default by the two participants (also referred to as the “cover two” standard) to which it has the largest exposures in extreme but plausible market conditions.
Commenters expressed a wide range of views concerning proposed Rule 17Ad-22(b)(3). Some commenters generally supported the proposed rule.
A commenter also suggested that CCPs should consider the simultaneous default of multiple clearing members when sizing their financial resources but that a simultaneous default of the two largest clearing members is an extremely implausible occurrence, and accordingly it is not a scenario that should be embedded as a fixed requirement in the Commission's rules.
One commenter disagreed with assertions in the Proposing Release that the performance of CCP services for security-based swaps entails risks that are unique to those products and that those unique risks support the proposed “cover two” requirement.
Commenters supported the position that the Commission's regulatory standards for CCPs should be modified where appropriate to account for the relevant work of international standard setters such as the CPSS and IOSCO.
Commenters disagreed over what role the Commission should play in defining the term “extreme but plausible market conditions” as that term appears in proposed Rule 17Ad-22(b)(3).
The Commission is adopting Rule 17Ad-22(b)(3) with certain modifications to address concerns raised by commenters, including but not limited to the clarification discussed in Sections II.B.4 and III.A regarding the application of the rule only to registered clearing agencies and clarifications relating to the term “participant family” as discussed above.
While the Commission is sensitive to the consequences of establishing a different standard for CCPs that clear security-based swaps, the Commission believes that the financial resources of the entity must be robust enough to accommodate the risks that are particular to each market served—irrespective of whether such analysis results in different standards. The Commission believes that requiring a security-based swap CCP to cover its two largest potential exposures is the appropriate standard due to the nature of these products. Security-based swaps pose unique risk management issues. In particular, credit default swaps, a subset of security-based swaps, are non-linear financial instruments subject to additional risk factors such as jump-to-default risk
The Commission does not believe that changes in the security-based swap market resulting from the Dodd-Frank Act (
The Commission notes that current industry participants recognize the need for more stringent financial resource requirements for CCPs that clear credit default swaps.
Given that both of the registered CCPs providing clearing services for security-based swap transactions already meet the proposed standard, and that CME, which proposes to provide such services, is currently following a “cover two” standard in index credit default swap clearing, the Commission believes that Rule 17Ad-22(b)(3) does not represent a change in existing market practices and would not hinder the growth of existing security-based swap CCPs.
We are adopting Rule 17Ad-22(b)(3) with modifications intended to recognize different types of structures currently employed by CCPs clearing security-based swaps and similar structures that may be developed in the future. The final rule allows that the policies and procedures may provide that the additional financial resources required to be held under the “cover two” standard may be maintained for the entire CCP or in separately maintained funds. This modification from the proposal recognizes that clearing agencies' practices may be structured as (i) conducting security-based swap clearing activities in a separate legal entity or (ii) maintaining within one legal entity separate rules, membership requirements, risk management practices, and financial resources specifically designed to cover the CCP's exposures to a separate pool of instruments that includes security-based swaps. The Commission also believes that as security-based swap CCPs introduce new products for clearing on an incremental basis in the future, the adopted rule will provide them with appropriate flexibility to organize their operations to obtain additional financial resources to cover exposures for each new security-based swap product in the manner most appropriate for their organization.
Some commenters argued that the Commission should not adopt a standard for the level of financial resources that may be inconsistent with the FMI Report and that there should be industry and regulatory consensus on the level of financial resources that must be maintained.
The Commission also is not persuaded that the “cover two” standard reflects an implausible occurrence that therefore should not be embedded into the Commission's rules. The financial crisis of 2008 demonstrated the plausibility of the default of two large participants in a clearing agency over a brief period. One large investment bank was saved from the brink of default in March 2008.
One clearing agency commented that since its modeling assumptions for simultaneous default of two participants assume significant market volatility but its modeling assumptions for the default of the largest participant assume low volatility, it is possible that a requirement for financial resources to cover the default of the largest two participants may result in only a slightly higher or even a lower requirement than one for financial resources to cover the default of the largest participant.
Finally, the Commission does not believe that Rule 17Ad-22(b)(3) will require major changes to the practices that have been developed to measure the sufficiency of financial resources at registered CCPs. The Commission understands that all CCPs currently registered with the Commission maintain enough financial resources to withstand the default of their largest participant under extreme but plausible market conditions.
The Commission agrees with the commenter who suggested that it is important for the Commission to provide concrete guidance regarding the meaning of “extreme but plausible market conditions” to assure consistent treatment of that term across clearing CCPs. In general, “extreme but plausible market conditions” are tail event conditions in which the price movement of a cleared security results in losses exceeding expectations at a 99% confidence interval, causing a clearing agency's exposures to its participants to breach margin requirements or other risk controls (
Rule 17Ad-22(b)(4), as proposed, would require a CCP to establish, implement, maintain and enforce written policies and procedures reasonably designed to provide for an annual model validation process consisting of evaluating the performance of the CCP's margin models and the related parameters and assumptions associated with such models by a qualified person who does not perform functions associated with the clearing agency's margin models (except as part of the annual model validation) and does not report to a person who performs these functions.
Commenters generally supported proposed Rule 17Ad-22(b)(4)
Commenters also argued that the CCP is in the best position to determine how to conduct a candid assessment free from outside influence concerning its margin models and that qualified internal personnel at the CCP are capable of validating the models if reasonable steps are taken to ensure objectivity (
One commenter recommended that the Commission should replace the text in proposed Rule 17Ad-22(b)(4) that addresses independence with language from the Proposing Release that “the person validating the clearing agency's model should be sufficiently free from outside influences so that he or she can be completely candid in their [sic] assessment of the model.”
Another commenter stated that requiring a CCP to bring independence to the model review process by detaching it from the model development process would effectively require maintenance of two quantitative teams.
The same commenter suggested that proposed Rule 17Ad-22(b)(4) should be revised to require a CCP to do the following: (1) Maintain a culture of commitment to quality where correcting and improving models is career-enhancing; (2) adopt sound policies and procedures that create a transparent and auditable model review process; and (3) require that reporting lines must come together at a person who is well-versed in technical quantitative matters.
The Commission is adopting Rule 17Ad-22(b)(4) with certain modifications to address concerns raised by commenters, including the clarification discussed in Sections II.B.4 and III.A regarding the application of the rule only to registered clearing agencies. In light of comments asking the Commission to clarify the standard of independence of the qualified person who performs the model validation, the Commission is revising the text of Rule 17Ad-22(b)(4) so that the annual model validation must be performed by a qualified person who is free from influence from the persons responsible for development or operation of the systems and models being validated. Generally, the Commission would consider that a person was free from influence when that person does not, including but not limited to, perform functions associated with the clearing agency's margin models (except as part of the annual model validation) and does not report to a person who performs these functions. The Commission believes that the change from the proposal addresses the concerns raised by commenters.
As proposed, Rule 17Ad-22(b)(4) would not have permitted the model validation to be performed by a person performing functions associated with the CCP's margin models (except as part of the annual model validation), or who reports to a person who performs those functions.
The Commission also notes that the “sufficiently free from influence” standard is consistent with the FMI Report, which does not prescribe a specific method to assure the effectiveness of the validation process,
The Commission is not persuaded that the model validation must be performed by an outside independent expert.
The Commission is not persuaded that the frequency of the model validation should be left to the discretion of the CCP. Current model validation practices vary among CCPs. Some CCPs conduct annual validations, while other conduct them on an ad hoc basis. Because of the role margin plays in a default, a CCP needs assurance of its value in the event of liquidation, as well as the capacity to draw upon its margin promptly. The Commission believes, especially considering its statutory responsibilities and the importance of model validation in limiting systemic risk, that it is important to create a consistent and uniformly applied minimum standard across all clearing CCPs. The Commission believes that requiring model validation at least annually is appropriate because model performance is not ordinarily expected to vary significantly over short periods but should be reevaluated as market conditions change. Furthermore, the Commission does not think the standard of an annual model validation is too burdensome, particularly given the fact that the Commission is not prescribing any specific qualifications or credentials of the person performing the model validation and is not requiring the person performing the model validation to be independent of the clearing agency and given how important understanding of the margin methodology is to the risk management framework.
The requirement for an annual model validation does not preclude the CCP from adjusting its model any time it has reason to believe that the model is no longer adequate. In fact, as noted above, Rule 17Ad-22(b)(2) requires a CCP to review its risk-based models to set margin requirements at least monthly.
The Commission continues to believe that clearing agencies that provide CCP services must have a qualified person conduct a review of models that are used to set margin levels, along with related parameters and assumptions, to assure that the models perform in a manner that facilitates prompt and accurate clearance and settlement of transactions. In determining whether a person is qualified to conduct the model validation, registered CCPs may consider several factors, including the person's experience in validating margin models, expertise in risk management generally, and understanding of the clearing agency's particular operations and procedures.
While the Commission agrees with the commenter who suggested that CCPs should strive to create a culture of commitment to quality where improving models is career-enhancing and to adopt sound policies and procedures to create a transparent and auditable model review process,
Section 17A of the Exchange Act requires that a clearing agency shall not be registered unless the Commission determines, among other things, that the clearing agency's rules do not impose burdens on competition that are unnecessary or inappropriate to promote the purposes of the Exchange Act
Rules 17Ad-22(b)(5), (6) and (7) introduce certain requirements regarding access to registered CCPs. Respectively, the rules would require a registered CCP to do the following: (1) Provide the opportunity for a person who does not perform any dealer or security-based swap Dealer services to obtain membership; (2) refrain from using minimum portfolio size and minimum volume transaction thresholds as conditions to membership; and (3) provide the ability to obtain membership to persons who maintain net capital equal to or greater than $50 million.
Rules 17Ad-22(b)(5), (6) and (7) each address the common topic of access to and participation in CCPs. Several commenters provided general comments on that shared focus. Those comments represent a wide range of views and are reflected immediately below.
Some commenters expressed their general support for the ways that Rules 17Ad-22(b)(5), (6), and (7) would promote fair and open access to CCP services through CCP participation
Two commenters urged the Commission not to adopt proposed Rules 17Ad-22(b)(5), (6) and (7).
The second commenter, while not opposed to the substance of proposed Rules 17Ad-22(b)(5), (6) and (7), generally questioned the need to hard wire these requirements into the Commission's rules.
In the “Final Rule and Guidance” sections for Rules 17Ad-22(b)(5), (6) and (7) below, we address these more general comments in the context of a discussion of the more specific comments the Commission received on the proposed rules.
Rule 17Ad-22(b)(5), as proposed, would require a registered CCP to establish, implement, maintain and enforce written policies and procedures reasonably designed to provide the opportunity for a person that does not perform any dealer
Some commenters generally supported the goals of Rule 17Ad-22(b)(5),
The Commission is adopting Rule 17Ad-22(b)(5) as proposed, except for the clarification discussed in Sections II.B.4 and III.A regarding the application of the rule only to registered clearing agencies.
While the Commission understands concerns raised by commenters, the Commission ultimately believes that the benefits of Rule 17Ad-22(b)(5) are critical to maintaining fairness and open access to central clearing for all market participants, including security-based swaps participants. The Commission believes that no registered CCP should deny membership solely because a person does not perform any dealer or security-based swap dealer services and that such a requirement unfairly discriminates against certain market participants and should be prohibited. The Commission does not believe that performing dealer or security-based swap dealer services is, by itself, a sufficient indicator of whether an applicant should be admitted to a clearing agency.
Dealer and security-based swap dealer services generally involve services designed to facilitate securities transactions by buying and selling securities for a person's own account.
In situations where direct access to clearing agencies is limited by reasonable participation standards, firms that do not meet these standards may still be able to access clearing agencies through correspondent clearing arrangements with direct participants.
Also, the Commission is not persuaded by the comment that Rule 17Ad-22(b)(5) is likely to undermine the impartial development and application of risk-based standards for membership.
Because the factors that each CCP considers when establishing membership criteria differ based on the particular characteristics of the relevant clearing agency and the markets it serves, the Commission believes that it would be counterproductive to modify Rule 17Ad-22(b)(5) to make it more specific and therefore more constraining. One commenter, however, requested that the Commission provide additional clarity in terms of what is required to be considered “otherwise qualified” for membership at a CCP.
The Commission believes that the incentives of persons who do not perform dealer or security-based swap dealer services to promote access at a CCP in general would tend to be consistent with increased competition in the market for the relevant securities. These persons do not execute securities trades for their own account. Instead, they provide correspondent clearing services for market participants.
Rule 17Ad-22(b)(6), as proposed, would prohibit a CCP from having membership standards that require participants to maintain a portfolio of any minimum size or to maintain a minimum transaction volume.
Some commenters expressed general support for the goals of proposed Rule 17Ad-22(b)(6).
The Commission is adopting Rule 17Ad-22(b)(6) as proposed, except for the clarification discussed in Sections II.B.4 and III.A regarding the application of the rule only to registered clearing agencies.
We believe that imposing minimum thresholds on the size or transaction volume of a participant's portfolio would not function as a good indicator of whether the participant is able to meet its obligations to a CCP.
New participants to a CCP that do not, at least initially, intend to transact in substantial size or volume may nevertheless have the operational and financial capacity to perform the activities that other participants are able to perform. Therefore, the Commission believes that Rule 17Ad-22(b)(6) will help facilitate compliance with the requirement in Section 17A of the Exchange Act that the rules of a CCP must permit fair and open access.
For the same reasons discussed in connection with Rule 17Ad-22(b)(5), the Commission is not persuaded by the comment that Rule 17Ad-22(b)(6) is likely to undermine the impartial development and application of risk-based standards for membership.
Proposed Rule 17Ad-22(b)(7) would require a CCP to establish, implement, maintain and enforce written policies and procedures reasonably designed to provide a person that maintains net capital
Some commenters supported proposed Rule 17Ad-22(b)(7).
Another commenter supportive of Rule 17Ad-22(b)(7) urged the Commission to modify the rule to eliminate the ability of a CCP to raise its minimum net capital threshold above $50 million.
One commenter stated that net capital, without regard to other risk factors, does not conclusively establish creditworthiness or any of the other generally accepted qualifications for becoming a member of a CCP.
Several commenters expressed concern over proposed Rule 17Ad-22(b)(7).
Another commenter expressed concern that because not all market participants use a net capital computation, the proposed rule could give unfair advantages to some market participants over others in terms of gaining and retaining membership at a CCP.
One commenter noted the Commission's reference in the Proposing Release to the tiered membership standards of the FICC as an example of capital-related requirements that differentiate between types of participants.
The Commission is adopting Rule 17Ad-22(b)(7) with certain modifications, including the clarification discussed in Sections II.B.4 and III.A regarding the application of the rule only to registered clearing agencies. As noted by the commenters expressing support for the rule,
The Commission also does not believe that $50 million net capital standard contained in Rule 17Ad-22(b)(7) would give an advantage to some prospective members at a CCP over others. Further, the rule explicitly is not intended in any way to create an “entitlement” to membership for firms with more than $50 million in capital. Upon adoption of Rule 17Ad-22, a registered CCP cannot restrict access because a participant does not have a net capital level of $50 million or more; however, the CCP's policies and procedures can prescribe other reasonable membership standards and can be reasonably designed to limit the activities of the participant in comparison to the activities of other participants that maintain a higher net capital level. For example, as a way to help make its requirements scalable, a registered CCP may elect to place limits on its potential exposure to participants operating at certain net capital thresholds by restricting the maximum size of the portfolio such participants are permitted to maintain at the CCP.
Rule 17Ad-22(b)(7) also permits a registered CCP to provide for a higher net capital requirement (
Finally, the Commission did not make any changes to Rule 17Ad-22(b)(7) in response to suggestions that the rule could create margin call risk because a participant with the minimum net capital level might access multiple clearing agencies.
Proposed Rule 17Ad-22(c)(1) would provide that each fiscal quarter (based on calculations made as of the last business day of the clearing agency's fiscal quarter), or at any time upon Commission request, a CCP shall calculate and maintain a record
Commenters generally supported proposed rule 17Ad-22(c)(1).
We are adopting Rule 17Ad-22(c)(1) as proposed, except for the clarification discussed in Sections II.B.4 and III.A regarding the application of the rule only to registered clearing agencies. The Commission believes that it is appropriate to require registered clearing agencies to make these calculations quarterly or at any time based on the request of the Commission because it provides a periodic update of the financial resources that are needed by the clearing agencies as market conditions change. The structure of Rule 17Ad-22(c)(1) also provides flexibility for the Commission to request such calculations on a real-time basis, which we believe to be useful during periods of market stress or other circumstances where more timely information is desired. The Commission believes that these calculations and related documentation will also help our oversight of compliance by clearing agencies with Rule 17Ad-22(b)(3) by providing a clear record of the method used by the clearing agency to maintain sufficient financial resources.
Rule 17Ad-22(c)(2), as proposed, would require a clearing agency to post on its Web site an annual audited financial report. Each financial report would be required to: (i) Be a complete set of financial statements of the clearing agency for the most recent two fiscal years of the clearing agency and be prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”), except that for a clearing agency that is a corporation or other organization incorporated or organized under the laws of any foreign country, the financial statements may be prepared according to U.S. GAAP or International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”); (ii) be audited in accordance with standards of the Public Company Accounting Oversight Board by a registered public accounting firm that is qualified and independent in accordance with Rule 2-01 of Regulation S-X (17 CFR 210.2-01); and (iii) include a report of the registered public accounting firm that complies with paragraphs (a) through (d) of Rule 2-02 of Regulation S-X (17 CFR 210.2-02).
Commenters generally supported proposed Rule 17Ad-22(c)(2).
We are adopting Rule 17Ad-22(c)(2) as proposed, except for the clarification discussed in Sections II.B.4 and III.A regarding the application of the rule only to registered clearing agencies. We have also changed references to “annual audited financial report” to “annual audited financial statements” to be consistent with the term used in Regulation S-X. Furthermore, we have clarified that a registered clearing agency will be required to post its financial statements of income, changes in stockholders' equity and other comprehensive income and cash flows
Consistent with recommendations from commenters, we are adopting Rule 17Ad-22(c)(2) in a form that does not require a reconciliation to U.S. GAAP for clearing agency reports that are prepared using IFRS.
Rule 17Ad-22(d) sets forth certain minimum standards regarding the operations of registered clearing agencies providing CCP or CSD services. The standards established in Rule 17Ad-22 address areas including: (1) Transparent and enforceable rules and procedures; (2) participation requirements; (3) custody of assets and
Like Rules 17Ad-22(b) and (c), Rule 17Ad-22(d) is designed to work in tandem with the Commission's existing mandate under Section 17A of the Exchange Act by establishing minimum standards for clearing agency operations. In particular, Congress directed the Commission to facilitate the establishment of (1) a national system for the prompt and accurate clearance and settlement of transactions in securities (other than exempt securities) and (2) linked or coordinated facilities for clearance and settlement of transactions in securities, securities options, contracts of sale for future delivery and options thereon, and commodity options.
• The prompt and accurate clearance and settlement of securities transactions, including the transfer of record ownership and the safeguarding of securities and funds related thereto, are necessary for the protection of investors and persons facilitating transactions by and acting on behalf of investors.
• Inefficient procedures for clearance and settlement impose unnecessary costs on investors and persons facilitating transactions by and acting on behalf of investors.
• New data processing and communications techniques create the opportunity for more efficient, effective, and safe procedures for clearance and settlement.
• The linking of all clearance and settlement facilities and the development of uniform standards and procedures for clearance and settlement will reduce unnecessary costs and increase the protection of investors and persons facilitating transactions by and acting on behalf of investors.
These findings serve as objectives in the Commission's ongoing efforts to enhance efficiency and reduce risk in the operation of the U.S. clearance and settlement system. Over the years, the Commission's view of the actions by a clearing agency that are necessary to meet these objectives as well as the other requirements in Section 17A has changed with prevailing market conditions and as new technologies are developed. For example, in the years after the October 1987 market break, the Commission worked to implement a number of changes in the securities markets, including the reduction of the standard settlement time frame for a securities transaction to the third day after the securities trade date (
Over time, changes to the U.S. legal framework have also led to enhancements in the operation of the U.S. clearance and settlement system. For example, the adoption of Revised Article 8 of the Uniform Commercial Code in 1995 strengthened the laws governing the holding and transfer of securities.
Consistent with these examples of how the Commission's approach to administrative oversight and practices by clearing agencies have changed over time to meet the objectives of Section 17A, the Commission believes that Rule 17Ad-22(d) creates standards for various aspects of the payment, clearance and settlement process and that to meet these standards clearing agencies will likely need to update their rules and procedures as market conditions evolve (
Rule 17Ad-22(d)(1), as proposed, would require clearing agencies to establish, implement, maintain and enforce written policies and procedures reasonably designed to provide for a well-founded, transparent and enforceable structure for each aspect of their activities in all relevant jurisdictions.
Commenters generally supported Rule 17Ad-22(d)(1).
The Commission is adopting Rule 17Ad-22(d)(1) as proposed, except for the clarification discussed in Sections II.B.4 and III.A regarding the application of the rule only to registered clearing agencies. We believe that well-founded, transparent and enforceable policies and procedures established to underpin a clearing agency's operational and business activities are essential to reduce legal risks and enhance a clearing agency's ability to facilitate the prompt and accurate clearance and settlement of securities transactions and safeguard securities and funds as required for the protection of investors by Section 17A of the Exchange Act.
To achieve compliance with Rule 17Ad-22(d)(1), a clearing agency must have written policies and procedures
Rule 17Ad-2(d)(2), as proposed, would require clearing agencies to establish, implement, maintain and enforce written policies and procedures reasonably designed to require participants to have sufficient financial resources and robust operational capacity to meet obligations arising from participation in the clearing agency; have procedures in place to monitor that participation requirements are met on an ongoing basis; and have participation requirements that are objective, publicly disclosed, and permit fair and open access.
Some commenters supported proposed Rule 17Ad-22(d)(2).
One commenter stated its specific preference for proposed Rule 17Ad-22(d)(2) to facilitate the Commission's regulation of access at clearing agencies compared to Rules 17Ad-22(b)(5), (6) and (7) for CCPs.
One commenter recommended that the Commission should take an expansive, prescriptive approach to its rule requirements for clearing agency participation and participant monitoring.
One commenter supported the requirement in Rule 17Ad-22(d)(2) for clearing members to have written policies and procedures for risk management but also emphasized the importance of placing emphasis on practical experience in risk management.
One commenter encouraged the Commission to prohibit clearing agencies from imposing rules or engaging in conduct that is prejudicial to indirect clearing participants compared to direct clearing participants (
Some commenters expressed concern that clearing agency participants may rely on the resources and services of a third party to meet the requirements developed by clearing agencies pursuant to Rule 17Ad-22(d)(2).
Several commenters argued that Rule 17Ad-22(d)(2) is only appropriate for CCPs.
The Commission is adopting Rule 17Ad-22(d)(2) as proposed, except for the clarification discussed in Sections II.B.4 and III.A regarding the application of the rule only to registered clearing agencies.
Rule 17Ad-22(d)(2) is intended to reduce the likelihood of defaults by participants, while also providing flexibility for clearing agencies to tailor standards that are linked to the obligations of the participant. The Commission believes the rule fosters compliance with the requirement under Section 17A of the Exchange Act that the rules of a clearing agency must not be designed to permit unfair discrimination in the admission of participants by requiring standards that are designed to be measurable, open and fair.
We agree with those commenters who supported Rule 17Ad-22(d)(2) as a mechanism to help ensure that clearing agencies meet the Exchange Act requirements in their participation standard practices.
We agree with commenters that comprehensive and explicit requirements are an appropriate part of a clearing agency's risk management framework, including participation standards.
We agree with commenters that credit facility arrangements represent a contractual right to funds and that enforcement of that contractual right may become more difficult during stressed market conditions.
We agree with commenters who stated that clearing agencies should not process trades differently on the sole basis of whether the trade is between direct clearing members or involves participants that access the clearing agency through those clearing members, and so the Commission does not find it necessary to create disparate standards for the treatment of direct and indirect participants.
Proposed Rule 17Ad-22(d)(3) would require clearing agencies to establish, implement, maintain and enforce written policies and procedures reasonably designed to hold assets in a manner whereby risk of loss or of delay in access to them is minimized, and invest in instruments with minimal credit, market and liquidity risks. Compliance with the requirement is intended to improve the ability of the clearing agency to meet its settlement
Some commenters expressed concerns about the application and scope of proposed Rule 17Ad-22(d)(3). One commenter stated that proposed Rule 17Ad-22(d)(3) is not sufficiently clear in its scope.
However, another commenter asked the Commission to clarify that proposed Rule 17Ad-22(d)(3) applies to customer assets only and not to the assets of the clearing agency (or its sponsor).
The Commission is adopting Rule 17Ad-22(d)(3) as proposed, except for the clarification discussed in Sections II.B.4 and III.A regarding the application of the rule only to registered clearing agencies. The Commission believes that Rule 17Ad-22(d)(3) strengthens the requirement in Section 17A(b)(3)(F) of the Exchange Act that the rules of a clearing agency must be designed to ensure the safeguarding of securities and funds in the custody or control of the clearing agency or for which the clearing agency is responsible.
We appreciate the concerns expressed by commenters who asked the Commission to clarify how Rule 17Ad-22(d)(3) applies in the context of the different services that a clearing agency may perform, and note that Rule 17Ad-22 only applies to registered clearing agencies and does not apply to entities that are exempt from registration as a clearing agency.
Rule 17Ad-22(d)(4), as proposed, would require clearing agencies to establish, implement, maintain and enforce written policies and procedures reasonably designed to identify sources of operational risk and minimize these risks through the development of appropriate systems, controls, and procedures; implement systems that are reliable, resilient and secure and have adequate scalable capacity; and have business continuity plans that allow for timely recovery of operations and ensure the fulfillment of a clearing agency's obligations.
Rule 17Ad-22(d)(4) should help to ensure that clearing agencies are able to operate with minimal disruptions, even during times of market stress when there may be greater demands on their systems due to higher volume. In addition, the rule would require that clearing agencies have business continuity plans that allow for timely recovery of operations and ensure the fulfillment of a clearing agency's obligations. This requirement would be relevant in the event of, among other things, deficiencies in information systems or internal controls, human errors, management failures, unauthorized intrusions into corporate or production systems, or disruptions from external events such as natural disasters.
Several commenters recommended that the rule should not apply to the activities of clearing agencies that perform post trade processing services. For example, one commenter reasoned that the application of proposed Rule 17Ad-22(d)(4) to a clearing agency that performs post-trade comparison services is unnecessary if that clearing agency is operating pursuant to a conditional exemptive order from the Commission.
Another commenter expressed its view that operational risk management and disaster recovery systems are critical to any well-founded compression service or collateral management service.
The Commission is adopting Rule 17Ad-22(d)(4) as proposed, except for the clarification discussed in Sections II.B.4 and III.A regarding the application of the rule only to registered clearing agencies. We believe that Rule 17Ad-22(d)(4) complements the existing guidance provided by the Commission in its Automation Review Policy Statements
As discussed above, Rule 17Ad-22 applies only to registered clearing agencies. It does not apply to entities that perform post-trade processing services or that are exempt from registration as a clearing agency. As discussed above, entities that perform certain post trade processing services, and that fall within the definition of clearing agency, may be subject to different rulemaking by the Commission at a later time.
Proposed Rule 17Ad-22(d)(5) would require clearing agencies to establish, implement, maintain and enforce written policies and procedures reasonably designed to employ money settlement arrangements that eliminate or strictly limit the clearing agency's settlement bank risks, that is, its credit and liquidity risks from the use of banks to effect money settlements with its participants, and require funds transfers to the clearing agency to be final when effected. Money settlement arrangements, among other things, are meant to reduce the risk that financial obligations related to the activities of the clearing agency are not timely settled or discharged with finality. Generally, money settlement by a clearing agency and its participants involves the use of a settlement bank
The Commission is providing clearing agencies with flexibility to implement arrangements in a manner fit for them to meet the requirement of the rule. The Commission notes that there are a number of arrangements that clearing agencies could establish to comply with the rule, including criteria for use of settlement banks that address the banks' creditworthiness, access to liquidity, and operational reliability, and legal agreements with settlement banks to ensure that funds transfers to the clearing agency are final when affected.
One commenter stressed that if the Commission adopts Rule 17Ad-22(d)(5) as proposed then the Commission should clarify that a clearing agency cannot eliminate all exposure to settlement bank risk.
The same commenter stressed that the Commission should not mandate a minimum number of settlement banks and that the requirements of Rule 17Ad-22(d)(5) should focus on providing clearing agencies with discretion to select settlement banks with care, diversifying risk among those settlement banks to the extent practicable, and monitoring their financial status.
Two commenters argued that proposed Rule 17Ad-22(d)(5) should be applicable only to clearing agencies that take in or process securities or funds from users.
The Commission is adopting Rule 17Ad-22(d)(5) as proposed, except for the clarification discussed in Sections II.B.4 and III.A regarding the application of the rule only to registered clearing agencies. We believe Rule 17Ad-22(d)(5) limits the potential that a clearing agency's money settlement arrangements will cause the clearing agency to face higher levels of credit and liquidity risks. In addition, the Commission believes that the rule is consistent with the requirement of Section 17A(b)(3)(F) of the Exchange Act, which requires the rules of a clearing agency to be designed to assure the safeguarding of securities and funds that are in the custody or control of the clearing agency or for which it is responsible.
As noted, some commenters pointed out that a clearing agency may not be positioned to eliminate all exposure to credit and liquidity risks from the use of banks to effect money settlements.
As discussed above, Rule 17Ad-22 only applies to registered clearing agencies and does not apply to entities that are exempt from registration as a clearing agency except to the extent specifically contemplated by the terms of a future exemption.
Rule 17Ad-22(d)(6), as proposed, would require clearing agencies to establish, implement, maintain and enforce written policies and procedures reasonably designed to be cost-effective in meeting the requirements of participants while maintaining safe and secure operations.
Having clearing agencies be mindful of the costs that are incurred by their participants, while maintaining such compliance, should help to reduce inefficiencies in the provision of clearing agency services. This point is particularly important in circumstances where clearing agencies may not be subject to strong competitive forces (such as when there is only one clearing agency for an asset class) for the provision of their services and therefore may have less of an incentive to be cost-effective in meeting the requirements of participants. Accordingly, the Commission believes the rule should potentially help reduce the costs incurred for clearing agency services while also maintaining appropriate standards for a clearing agency's operations.
Two commenters expressed reservations about the rule.
Another commenter stressed that unless a provider of compression or collateral management services is systemically important, or market participants are obliged to purchase its services, then it should be free to set fees in a fair and commercial manner that encourages broad participation while permitting sufficient flexibility to offer favorable rates to high-volume users, early adopters, magnet clients and other key participants.
The Commission is adopting Rule 17Ad-22(d)(6) as proposed, except for the clarification discussed in Sections II.B.4 and III.A regarding the application of the rule only to registered clearing agencies. As discussed above, the Commission believes Rule 17Ad-22(d)(6) is appropriate and serves to advance the statutory goals of prompt and accurate clearance and settlement.
With regard to suggestions that Rule 17Ad-22(d)(6) should not apply to entities that perform certain post-trade services (
Rule 17Ad-22(d)(7), as proposed, would require clearing agencies to establish, implement, maintain and enforce written policies and procedures reasonably designed to evaluate the potential sources of risks that can arise when the clearing agency establishes links either cross-border or domestically to clear or settle trades, and to ensure that these risks are managed prudently on an ongoing basis. Tying the operations of different clearing agencies together by link arrangements potentially exposes a clearing agency and its members to the risk that the other entity may experience a financial loss or is otherwise unable to meet its settlement obligations that causes the clearing agency or its members to fail to meet their obligations.
Three commenters expressed concerns about the rule.
The Commission is adopting Rule 17Ad-22(d)(7) as proposed, except for the clarification discussed in Sections II.B.4 and III.A regarding the application of the rule only to registered clearing agencies. We believe the rule is consistent with and furthers the purposes of the Exchange Act. Section 17A(a)(1)(D) of the Exchange Act states that the linking of all clearance and settlement facilities and the development of uniform standards and procedures for clearance and settlement will reduce unnecessary costs and increase the protection of investors and persons facilitating transactions by and acting on behalf of investors.
The Commission agrees with the suggestion from some commenters that the specific type of link arrangements contemplated by Rule 17Ad-22(d)(7) is link arrangements between clearing agencies.
Rule 17Ad-22 only applies to registered clearing agencies and does not apply to entities that are exempt from registration as a clearing agency, unless the terms of future exemptions specifically contemplate its application, in whole or in part.
Proposed Rule 17Ad-22(d)(8) would require clearing agencies to establish, implement, maintain and enforce written policies and procedures reasonably designed to have governance arrangements that are clear and transparent to fulfill the public interest requirements in Section 17A of the Exchange Act applicable to clearing agencies,
Two commenters registered their preference for what they regard as the principles-based approach in proposed Rule 17Ad-22(d)(8) to regulation of clearing agency governance rather than the prescriptive rules set forth in the Commission's proposed Regulation MC applicable to the security-based swap clearing agencies.
One commenter urged the Commission to ensure that Rule 17Ad-22(d)(8) as well as any requirements adopted from the Commission's proposed Regulation MC pertaining to the mitigation of conflicts of interest are designed to ensure that buy-side market participants have a meaningful voice in the operating committees of clearing agencies because that representation is critical to promoting robust governance arrangements at clearing agencies and serving the best interests of the U.S. financial system.
One commenter urged the Commission to consider complementing proposed Rule 17Ad-22(d)(8) with a minimum board independence requirement so that at least two-thirds of all board directors would be required to be independent.
Several commenters made recommendations to the Commission concerning the application of Rule 17Ad-22(d)(8) to clearing agencies that perform post-trade processing services.
The Commission is adopting Rule 17Ad-22(d)(8) as proposed, except for the clarification discussed in Sections II.B.4 and III.A regarding the application of the rule only to registered clearing agencies. Rule 17Ad-22(d)(8) is designed to promote these types of arrangements and the ability of a clearing agency to serve the interests of its various constituents and the interests of the general public while maintaining prudent risk management processes to promote prompt and accurate clearance and settlement.
Governance arrangements have the potential to play an important role in making sure that clearing agencies fulfill the Exchange Act requirements that the rules of a clearing agency be designed to protect investors and the public interest and to support the objectives of owners and participants. Similarly, governance arrangements may promote the effectiveness of a clearing agency's risk management procedures by creating an oversight framework that fosters a focus on the critical role that risk management plays in promoting prompt and accurate clearance and settlement.
We appreciate the perspective of commenters who prefer the more general policies and procedures design of Rule 17Ad-22(d)(8) to any more prescriptive rulemaking by the Commission in the area of clearing agency governance.
At this time, the Commission also is not acting on the recommendation of some commenters to structure Rule 17Ad-22(d)(8) so that it would require at least two-thirds of a clearing agency's board of directors to be independent.
With regard to suggestions that Rule 17Ad-22(d)(8) should not apply to entities that perform certain post-trade services (
We are not persuaded by the argument that the operation of a clearing agency through a utility model negates the need for Rule 17Ad-22(d)(8) because regardless of the business model adopted, the board should reflect the interests of the full range of stakeholders in order to effective.
Proposed Rule 17Ad-22(d)(9) would require clearing agencies to establish, implement, maintain and enforce written policies and procedures reasonably designed to provide market participants with sufficient information for them to identify and evaluate the risks and costs associated with using the clearing agency's services.
The Commission believes that requiring a clearing agency to disclose information sufficient for participants to identify risks and costs associated with using the clearing agency will allow participants to make informed decisions about the use of the clearing agency and take appropriate actions to mitigate their risks and costs associated with the use of the clearing agency.
One commenter stated that it does not believe that the proposed rule is necessary because among other things a clearing agency's fees, collateral deposits, and operational requirements are already included in the clearing agency's rules and its published procedures and are already required to be sufficiently available to market participants and the public at large.
Two commenters expressed that application of proposed Rule 17Ad-22(d)(9) to clearing agencies that do not handle securities or funds is unnecessary.
We are adopting Rule 17Ad-22(d)(9) as proposed, except for the clarification discussed in Sections II.B.4 and III.A regarding the application of the rule only to registered clearing agencies We believe that requiring a clearing agency to have policies and procedures that require a clearing agency to disclose
Because clearing agencies are SROs, their rules are published by Commission and are generally available on each clearing agency's Web site. Nevertheless, discrete rule proposals do not necessarily provide a complete picture of a clearing agency's operations and the risk mitigation procedures. Accordingly, the rule is intended to promote a better understanding among market participants of a clearing agency's operations. A better understanding should foster confidence in the clearing agency's ability to manage those risks and costs, including, but not limited to, any margin requirements, restrictions or limitations of the clearing agency's obligations, and conditions used by the clearing agency to test the adequacy of its financial resources.
We acknowledge that existing requirements address the need for clearing agencies to incorporate matters such as the clearing agency's fees, collateral deposits, and operational requirements in its rules and procedures, which are already made available to market participants and the public.
We agree with commenters who recommended that Rule 17Ad-22(d)(9) should only apply categorically to clearing agencies that take in or process securities or funds. Rule 17Ad-22 only applies to registered clearing agencies and does not apply to entities exempt from registration as a clearing agency except to the extent specifically contemplated by a future exemption.
Proposed Rule 17Ad-22(d)(10) would require clearing agencies to establish, implement, maintain and enforce written policies and procedures reasonably designed to immobilize
The Commission believes that the immobilization and dematerialization of securities and their transfer by book entry results in reduced costs and risks associated with securities settlements and custody by removing the need to hold and transfer many, if not most, physical certificates.
One commenter expressed concern that proposed Rule 17Ad-22(d)(10) places responsibilities on clearing agencies that perform CSD services to immobilize or dematerialize securities that are beyond the clearing agency's control. Therefore, the commenter requested that the rule be revised to reflect the need for cooperation from market participants and regulators.
Another commenter stated its belief that the proposed Rule 17Ad-22(d)(10) should not apply to portfolio compression and collateral management services for security-based swaps.
The Commission is adopting Rule 17Ad-22(d)(10) as proposed, except for the clarification discussed in Sections II.B.4 and III.A regarding the application of the rule only to registered clearing agencies. Rule 17Ad-22(d)(10) does not require a clearing agency to take any actions that are beyond the scope of its rules, procedures and operations. We agree that collaboration between regulators, market participants, and clearing agencies is necessary to achieve total immobilization or dematerialization of securities
In response to comments about the application of the rule to portfolio compression and collateral management services, the Commission notes that Rule 17Ad-22 only applies to registered clearing agencies and does not apply to entities exempt from registration as a clearing agency, unless the terms of future exemptions specifically contemplate its application, in whole or in part.
Proposed Rule 17Ad-22(d)(11) would require clearing agencies to establish, implement, maintain and enforce written policies and procedures reasonably designed to make key aspects of their default procedures publicly available and establish default procedures that ensure that the clearing agency can take timely action to contain losses and liquidity pressures and to continue meeting its obligations in the event of a participant default.
The Commission believes that the rule would provide certainty and predictability to market participants about the measures a clearing agency will take in the event of a participant default because default procedures, among other things, are meant to reduce the likelihood that a default by a participant, or multiple participants, will disrupt the clearing agency's operations. By creating a framework of default procedures that are designed to permit a clearing agency to take actions to contain losses and liquidity pressures it faces while continuing to meet its obligations, the clearing agency should be in a better position to continue providing its services in a manner that promotes accurate clearance and settlement during times of market stress.
The Commission also believes that the requirements in Rule 17Ad-22(d)(11) would increase the possibility that defaults by participants, should they occur, would proceed in an orderly and transparent manner. In particular, the rule would help to ensure that all participants are aware of the default process and are able to plan accordingly and that clearing agencies would have sufficient time to take corrective actions to mitigate potential losses.
One commenter urged the Commission to place additional requirements on clearing agencies to conduct and document a test of their default management plans.
One commenter responded to a question asked by the Commission in the Proposing Release about how much flexibility clearing agencies should have in the amount of time they are permitted to manage a default and perform a liquidation of positions. The commenter recommended that in the context of security-based swaps the time permitted should be the time necessary for the clearing agency to actually liquidate a security-based swap portfolio rather than establishing a predetermined period by rule.
Two commenters argued that proposed Rule 17Ad-22(d)(11) should not apply to entities that perform post-trade processing services such as comparison of data,
The Commission is adopting Rule 17Ad-22(d)(11) as proposed, except for the clarification discussed in Sections II.B.4 and III.A regarding the application of the rule only to registered clearing agencies. The Commission believes that the requirements in Rule 17Ad-22(d)(11) increase the possibility that defaults by participants, should they occur, will proceed in an orderly and transparent manner because Rule 17Ad-22(d)(11) helps to ensure that all participants are able to plan for the default process and that clearing agencies will have sufficient time to take corrective action to mitigate potential losses.
As an initial matter, we believe that how frequently a clearing agency conducts default management tests should be determined by each individual clearing agency, in consultation with, and subject to oversight by, the Commission.
With respect to the commenter who advised the Commission not to establish a particular period in Rule 17Ad-22(d)(11) during which a clearing agency would be required to manage and complete a default liquidation process for security-based swaps, we are not adopting specifically bounded timing requirements in Rule 17Ad-22(d)(11) for a clearing agency to achieve compliance with the rule. Instead, our current belief is that the more general approach we are adopting in Rule 17Ad-22(d)(11) allows clearing agencies to establish, implement, maintain and enforce policies and procedures that comply with Rule 17Ad-22(d)(11) and take into account the particular characteristics of the financial instruments and market dynamics involved in a default at a particular clearing agency. We believe this is the best approach to allow clearing agencies to contain losses and the liquidity pressures that they face while continuing to meet their obligations.
We also agree with commenters who suggested that it is appropriate for clearing agencies to consider concentration risk in margin practices and that if certain concentrations indicate that liquidation of the concentrated positions could not be performed within the parameters of the clearing agency's default management plan, then the clearing agency should consider extra initial margin charges to account for that occurrence.
With regard to suggestions that Rule 17Ad-22(d)(11) categorically should not apply to entities that perform certain post-trade services (
Proposed Rule 17Ad-22(d)(12) would require clearing agencies to establish, implement, maintain and enforce written policies and procedures reasonably designed to ensure that final settlement occurs no later than the end of the settlement day and that intraday or real-time finality is provided where necessary to reduce risks. The Commission believes that settlement finality should occur not later than the end of the settlement day because it will help to limit the volume of outstanding obligations that are subject to settlement at any one time and thereby reduce the settlement risk exposure of participants and the clearing agency.
One commenter that operates several clearing agencies expressed concern that the second clause of proposed Rule 17Ad-22(d)(12), which reads “and require that intraday or real-time finality be provided where necessary to reduce risks” could be interpreted to require intraday or real-time settlement finality beyond what its clearing agencies currently provide and are capable of providing without significant systems and process changes.
One commenter expressed general support for proposed Rule 17Ad-22(d)(12) but requested that the Commission provide clarification regarding how the rule is compatible with correction of errors and also clarify that “title transfer” of initial margin may not occur when it is posted to a clearing agency.
One commenter expressed concern that proposed Rule 17Ad-22(d)(12) fails to provide clear standards for real-time trade processing and therefore does not provide a workable framework for trade processing and clearing of security-based swaps.
Two commenters argued that proposed Rule 17Ad-22(d)(11) should not apply to entities that perform post-trade processing services such as comparison of data,
The Commission is adopting Rule 17Ad-22(d)(12) as proposed, except for the clarification discussed in Sections II.B.4 and III.A regarding the application of the rule only to registered clearing agencies. Rule 17Ad-22(d)(12) does not require a clearing agency that has policies and procedures in place to facilitate final settlement by the end of the settlement day to alter its rules and procedures. As stated in the Proposing Release, “intraday or real-time finality may be necessary to reduce risk in circumstances where the lack of intraday or real-time finality may impede the clearing agency's ability to facilitate prompt and accurate clearance and settlement, cause the clearing agency's participants to fail to meet their obligations, or cause significant disruptions in the securities markets.”
We agree with commenters that the timing of the effective transfer of initial margin is an important consideration related to achieving settlement finality in an event of default.
With respect to the commenter who said that the rules in 17Ad-22(d)(12): “Fail to provide clear standards for real time trade processing,” the Commission does not intend for the rule to provide standards for security-based swaps that are centrally cleared to be confirmed, accepted for clearing and guaranteed by a clearing agency at the point of trade execution.
We agree with commenters that Rule 17Ad-22(d)(12) should not apply if a clearing agency's services do not involve the handling of securities or funds to facilitate settlement of obligations. As discussed above, Rule 17Ad-22 applies only to registered clearing agencies and does not apply to entities exempt from registration as a clearing agency, unless the terms of future exemptions specifically contemplate its application, in whole or in part.
Proposed Rule 17Ad-22(d)(13) would require clearing agencies to establish, implement, maintain and enforce written policies and procedures reasonably designed to eliminate principal risk by linking securities transfers to funds transfers to achieve delivery versus payment (“DVP”).
DVP eliminates the risk that a party would lose some or its entire principal because payment is made only if securities are delivered. The Commission believes that clearing agencies should be required to use this payment method to reduce the potential that delivery of the security is not appropriately matched with payment for a security, thereby impeding the clearing agency's ability to facilitate prompt and accurate clearance and settlement.
One commenter pointed out that the Commission previously approved an SRO rule change which eliminated the commenter's right to reject matched trades that are reported to it by an exchange even if the purchasing clearing member eventually fails to pay the purchase price of the option.
Two commenters argued that proposed Rule 17Ad-22(d)(13) should not apply to entities that perform post-trade processing services such as comparison of data,
The Commission is adopting Rule 17Ad-22(d)(13) as proposed, except for the clarification discussed in Sections II.B.4 and III.A regarding the application of the rule only to registered clearing agencies. As described in the Proposing Release, DVP is achieved in the settlement process when the mechanisms facilitating settlement ensure that delivery occurs if and only if payment occurs.
The elimination by a clearing agency of its right to reject matched trades and subsequently relying on mutualization of resources to make settlement if necessary does not violate Rule 17Ad-22(d)(13), as mutualization of risk by participants is an acceptable means of eliminating principal risk that would otherwise exist for a clearing agency. The rule requires a clearing agency to establish policies and procedures to link the transfer of securities and funds in a manner that mitigates principal risk in the event of a participant default. The rule does not govern when a clearing agency guarantees a transaction or the clearing agency's loss allocation procedures in the event of a default.
We agree with commenters who suggested that Rule 17Ad-22(d)(13) is not applicable to clearing agencies that do not handle securities or funds to perform settlement. As discussed above, Rule 17Ad-22 only applies to registered clearing agencies and does not apply to entities exempt from registration as a clearing agency, unless the terms of future exemptions specifically contemplate its application, in whole or in part.
Proposed Rule 17Ad-22(d)(14) requires clearing agencies to establish, implement, maintain and enforce written policies and procedures reasonably designed to institute risk controls, including collateral requirements and limits to cover the clearing agency's credit exposure to each participant exposure fully, that ensure timely settlement in the event that the participant with the largest payment obligation is unable to settle when the clearing agency provides CSD services
The Commission believes it is important for clearing agencies that provide CSD services to institute risk controls, including collateral requirements and limits, to cover the clearing agency's credit exposure to each participant exposure fully, that
One commenter asked the Commission to revise Rule 17Ad-22(d)(14) to expressly state that the rule applies to a clearing agency that provides CSD services and extends intraday credit through the operation of a net settlement system.
Responding to a question posed by the Commission in the Proposing Release, the same commenter stated its belief that clearing agencies that provide CSD services should not be required to maintain enough financial resources to be able to withstand a settlement failure by the two participant families with the largest settlement obligations to the clearing agency that performs central depository services.
One commenter stated that the requirements of proposed Rule 17Ad-22(d)(14) should not apply to portfolio compression or collateral management service providers for security-based swaps.
We are adopting Rule 17Ad-22(d)(14) as proposed, except for the clarification discussed in Sections II.B.4 and III.A regarding the application of the rule only to registered clearing agencies. The Commission believes it is important for clearing agencies that provide CSD services to institute risk controls, including collateral requirements and limits to cover the clearing agency's credit exposure to each participant exposure fully, that ensure timely settlement in these circumstances to address the risk that the participant may fail to settle after credit has been extended. The Commission also believes that requiring the controls that ensure timely settlement in the event that the participant with the largest payment obligation is unable to settle, in such circumstances, reduces the likelihood of disruptions at the clearing agency.
The Commission considered the concerns of commenters who asked the Commission to abstain from any action that would modify Rule 17Ad-22(d)(14) to require a clearing agency that performs CSD services and extends intraday credit to participants to maintain enough financial resources to be able to withstand a settlement failure by the two participant families with the largest settlement obligations to the clearing agency.
We understand the request for clarification from some commenters who asked the Commission to revise Rule 17Ad-22(d)(14) to apply solely to a clearing agency that performs CSD services and extends intraday credit to participants through a net settlement system.
We agree with commenters who argued that Rule 17Ad-22(d)(14) does not apply to clearing agencies that do not perform CSD services and do not extend intraday credit to participants.
Proposed Rule 17Ad-22(d)(15) would require clearing agencies to establish, implement, maintain and enforce written policies and procedures reasonably designed to disclose to their participants the clearing agency's obligations with respect to physical deliveries.
The Commission believes that such policies and procedures will help to ensure that participants have information that is likely to enhance the participants' understanding of their rights and responsibilities with respect to using the clearance and settlement services of the clearing agency. The Commission also believes that providing such information to participants would promote a shared understanding regarding physical delivery practices between the clearing agency and its participants that could help reduce the potential for fails and thereby facilitate prompt and accurate clearance and settlement.
The rule also would require clearing agencies to reasonably design their operations to identify and manage the risks that arise in connection with their obligations for physical deliveries. The risks associated with physical deliveries could stem from, among other factors, operational limitations with respect to assuring receipt of physical deliveries and processing of physical deliveries.
One commenter stated that the requirements of proposed Rule 17Ad-22(d)(15) should not apply to portfolio compression or collateral management service providers for security-based swaps.
The Commission is adopting Rule 17Ad-22(d)(15) as proposed, except for the clarification discussed in Sections II.B.4 and III.A regarding the application of the rule only to registered clearing agencies. The Commission believes that Rule 17Ad-22(d)(15) helps ensure that participants will have information that enhances their understanding of their rights and responsibilities with respect to using the physical delivery services of a clearing agency which will help reduce the potential for fails. Accordingly, the Commission believes this requirement should help facilitate prompt and accurate clearance and settlement consistent with Section 17A of the Exchange Act.
As discussed above, Rule 17Ad-22 only applies to registered clearing agencies and does not apply to entities exempt from registration as a clearing agency, unless the terms of future exemptions specifically contemplate its application, in whole or in part.
Certain provisions of the final rules contain new “collection of information” requirements within the meaning of the Paperwork Reduction Act of 1995 (“PRA”).
As an initial matter, we note that the PRA burden estimates in this adopting release are significantly lower than the PRA burden estimates in the Proposing Release.
Additionally, the Proposing Release estimated that the proposed rules would have applied to seventeen entities. A number of these entities—in particular those providing post-trade processing services for security-based swap transactions—would have been completely unfamiliar with the Commission's registration process for clearing agencies. Further, these entities typically do not have written rule books to govern their relationship with their users. As a result, they would have experienced significant initial burdens associated with the proposed rules.
In contrast, the final rules being adopted today apply only to the seven clearing agencies currently registered with the Commission that provide CCP or CSD services, as discussed above in Section II.B.4.
Finally, the Commission has revised the PRA burden estimates in recognition that many parts of Rule 17Ad-22—specifically Rules 17Ad-22(b)(1)-(3) and Rules 17Ad-22(d)(1)-(15)—reflect usual and customary practices of registered clearing agencies. Since registered clearing agencies already comply with significant aspects of Rule 17Ad-22 in the normal course of their activities, many aspects of Rule 17Ad-22 impose minimal PRA burdens on registered clearing agencies limited to the review of the rule and their existing policies and procedures. As discussed below, because certain rules would involve adjustments to a registered clearing agency's rule book and its policies and procedures rather than the creation of entirely separate policies and procedures to support entirely new operations and practices, the Commission recognizes that some aspects of Rule 17Ad-22 will impose incremental new PRA burdens on registered clearing agencies.
Accordingly, the estimated PRA burdens discussed below reflect these updated assessments of the likely PRA burdens.
The discussion of the PRA burdens and costs associated with Rule 17Ad-22 is organized in the following manner:
Rules 17Ad-22(b)(1)-(3) and Rules 17Ad-22(d)(1)-(15) are discussed together because these rules represent usual and customary practices already being implemented by registered clearing agencies. Because Rules 17Ad-22(b)(4), (b)(5)-(7) and (c), respectively establish new minimum practices for registered clearing agencies with regard to model validation, membership practices and certain financial information, the adopting release discusses these rules separately. The burden discussion for Rules 17Ad-22(c)(1) and (2) has been split into sections to account for the different information collection requirements for varying numbers of respondents.
As noted earlier, the Commission received 25 comment letters concerning the proposed rules.
The rules in the adopting release contain requirements subject to the PRA. Rules 17Ad-22(b)(1)-(3) and (d)(1)-(15) contain “collection of information requirements” within the meaning of the PRA. These rules would require a registered clearing agency to have policies and procedures to adequately document all material aspects of its liquidity risk management processes and its compliance with their requirements. The information collected by virtue of written policies and procedures requirements contained in Rules 17Ad-22(b)(1)-(3) and Rules 17Ad-22(d)(1)-(15) generally codify usual and customary practices at CCPs and registered clearing agencies, and thus the PRA burden would be expected to be minimal. Rules 17Ad-22(b)(1)-(3) require written policies and procedures that address risk management practices by CCPs. Specifically, the rules would create standards with respect to: (1) Measurement and management of credit exposures; (2) margin requirements; and (3) financial resources. The Commission did not receive comments on the burdens associated with Rules 17Ad-22(b)(1)-(3).
Rule 17Ad-22(d) sets forth certain minimum standards regarding the operations of registered clearing agencies. The standards established in 17Ad-22(d) address areas including: (1) Transparent and enforceable rules and procedures; (2) participation requirements; (3) custody of assets and investment risk; (4) operational risk; (5) money settlement risk; (6) cost-effectiveness; (7) links; (8) governance; (9) information on services; (10) immobilization and dematerialization of securities certificates; (11) default procedures; (12) timing of settlement finality; (13) delivery versus payment; (14) risk controls to address participants' failures to settle; and (15) physical delivery risks. Commenters did not comment on the burdens associated with Rule 17Ad-22(d).
Rule 17Ad-22(b)(4) contains “collection of information requirements” within the meaning of the PRA. Rule 17Ad-22(b)(4) will require a CCP to establish, implement, maintain and enforce written policies and procedures reasonably designed to provide for an annual model validation consisting of evaluating the performance of the clearing agency's margin models and the related parameters and assumptions associated with such models by a qualified person who is free from influence so that he can be candid in his assessment of the model.
One commenter stated that “a regulatory requirement of model validation on an annual basis is unnecessary (and may be overly burdensome) * * *. [and] can be achieved in a less directive manner.”
The Commission is not persuaded by the position that the frequency of the model validation should be left to the discretion of the CCP.
Rules 17Ad-22(b)(5)-(7) contain “collection of information requirements” within the meaning of the PRA. The information collection under the written policies and procedures requirements contained in Rules 17Ad-22(b)(5)-(7) would establish requirements regarding access to CCPs.
One commenter expressed that proposed Rules 17Ad-22(b)(5)-(7) providing for mandatory access to CCPs in certain circumstances goes “beyond anything in current or proposed global standards * * *. [and is, therefore,] unnecessary and counterproductive to the goal of fair and open access within a framework of safe and sound operation.”
While the Commission understands the concerns raised, the Commission ultimately believes that the benefits of Rules 17Ad-22(b)(5)-(7) are critical to maintaining fairness and open access to central clearing for all market participants, including security-based swaps participants.
Rule 17Ad-22(c)(1)-(2) contains “collection of information requirements” within the meaning of the PRA. The information collection under the written policies and procedures requirements contained in Rule 17Ad-22(c) establishes a recordkeeping requirement for CCPs regarding their responsibilities under Rule 17Ad-22(b)(3) and for registered clearing agencies with respect to posting on their respective Web sites annual audited financial statements.
Commenters did not specifically comment on the burdens associated with Rule 17Ad-22(c)(1)-(2).
The requirements to develop written policies and procedures in Rules 17Ad-22(b)(1)-(3) and Rules 17Ad-22(d)(1)-(15) impose a PRA burden. The requirements in Rules 17Ad-22(b)(1)-(3) will apply to CCPs that are registered clearing agencies. The Commission estimates that a total of nine CCPs
As noted above, registered clearing agencies already have written policies and procedures that meet the standards set forth in Rules 17Ad-22(b)(1)-(3) and (d)(1)-(15) as part of their usual and customary business practice. Accordingly, the Commission believes that the registered clearing agencies would not need to build new infrastructure or modify operations to continue to meet Rule 17Ad-22(b)(1)-(3) and (d)(1)-(15). The Commission believes that registered clearing agencies will incur the incremental burdens of reviewing existing policies and procedures for compliance and updating existing policies and procedures where appropriate. The requirements would impose an aggregate one-time burden of approximately 1,750 hours for all registered clearing agencies.
For each respondent clearing agency, the estimated annualized burden for Rules 17Ad-22(b)(1)—(3) and (d)(1)—(15) is 98 hours (figure calculated as follows: 175 hours (Year 1 burden) + 60 hours (Year 2 burden) + 60 hours (Year 3 burden) = 295 hours (estimated total burden over 3 years) ÷ 3 years = 98 hours).
The requirement to develop written policies and procedures in Rule 17Ad-22(b)(4) imposes a PRA burden. The requirement in Rule 17Ad-22(b)(4) will apply to all CCPs. As discussed above, the Commission estimates that nine CCPs will be subject to the burdens under Rule 17Ad-22(b)(4).
Based on the analogous policies and procedures requirements and the corresponding burden estimates in Regulation NMS, the Commission has preserved the burden estimates from the Proposing Release. The Commission estimates that Rule 17Ad-22(b)(4) would impose a one-time burden on each respondent CCP of 210 hours, corresponding to an aggregate one-time burden on all respondent CCPs of 1,890 hours.
Rule 17Ad-22(b)(4) would require one-time systems adjustments related to the capability to perform an annual model validation. These adjustments would amount to an aggregate one-time burden of approximately 900 hours.
CCPs would be required to collect information relating to their model validation standards required by Rule 17Ad-22(b)(4) on an ongoing basis. The Commission expects that the exact burden of administering the procedures for model validation standards would vary depending on how frequently each CCP may need to update its procedures. Based on the analogous policies and procedures requirements and the corresponding burden estimates in Regulation NMS, the Commission estimates that the ongoing requirements of this rule would impose an annual burden of 60 hours on each respondent CCP, corresponding to an aggregate annual burden for all respondent CCPs of 540 hours.
For each respondent CCP, the estimated annualized burden for Rule 17Ad-22(b)(4) is 143 hours (figure calculated as follows: 210 hours + 100 hours (Year 1 burden) + 60 hours (Year 2 burden) + 60 hours (Year 3 burden) = 430 hours (estimated total burden over 3 years) ÷ 3 years = 143 hours).
Based on its oversight of clearing agencies, the Commission estimates that Rule 17Ad-22(b)(4) would impose an annual cost on all respondent CCPs for work on model validation. The Commission believes clearing agencies would hire a consulting firm that dedicates two consultants to the project. Consistent with the Proposing Release,
The requirements to develop written policies and procedures in Rules 17Ad-22(b)(5)-(7) impose a PRA burden. These PRA burdens will apply to all CCPs. As discussed above, the Commission estimates that nine CCPs will be subject to the burdens under Rules 17Ad-22(b)(5)-(7). The Commission believes that CCPs are more likely to be able to address the changes required by Rules 17Ad-22(b)(5)-(7) in an integrated, not piecemeal, review and drafting process to implement policies and procedures responsive to these rules. Therefore, the revised PRA burden estimates no longer account for each requirement as a separate burden.
Based on the analogous policies and procedures requirements and the corresponding burden estimates in Regulation NMS, the Commission has preserved the burden estimates from the Proposing Release. The Commission estimates that Rules 17Ad-22(b)(5)-(7) would impose a one-time burden on each respondent CCP of 210 hours, corresponding to an aggregate one-time burden on all respondent CCPs of 1,890 hours.
CCPs would be required to collect information relating to standards of Rules 17Ad-22(b)(5)-(7) on an ongoing basis. Based on the analogous policies and procedures requirements and the corresponding burden estimates in Regulation NMS, the Commission estimates that the ongoing requirements of this rule would impose an annual burden of 60 hours on each respondent CCP, corresponding to an aggregate annual burden for all respondent CCPs of 540 hours.
For each respondent CCP, the estimated annualized burden for Rules 17Ad-22(b)(5)-(7) is 110 hours (figure calculated as follows: 210 hours (Year 1 burden) + 60 hours (Year 2 burden) + 60 hours (Year 3 burden) = 330 hours (estimated total burden over 3 years) ÷ 3 years = 110 hours).
The standards in Rule 17Ad-22(c) impose a PRA burden.
The Commission believes the one-time burden imposed would involve adjustments needed to synthesize and format existing information in a manner sufficient to explain the methodology the clearing agency uses to meet the requirement of Rule 17Ad-22(c). The Commission believes these adjustments would impose a one-time burden of 100 hours on each clearing agency, corresponding to an aggregate one-time
Clearing agencies would be required to collect information relating to standards of Rule 17Ad-22(c) on an ongoing basis. Based on the analogous policies and procedures requirements and the corresponding burden estimates in Regulation NMS, the Commission estimates that the ongoing requirements of this rule would impose an annual burden of 60 hours on each respondent clearing agency, corresponding to an aggregate annual burden for all respondent clearing agencies of 600 hours.
For each respondent clearing agency, the estimated annualized burden for Rule 17Ad-22(c) is 137 hours (figure calculated as follows: 191 hours + 100 hours (Year 1 burden) + 60 hours (Year 2 burden) + 60 hours (Year 3 burden) = 411 hours (estimated total burden over 3 years) ÷ 3 years = 137 hours).
The standards in Rule 17Ad-22(c)(1) impose a PRA burden. In contrast to the Proposing Release's burden estimates for proposed Rule 17Ad-22(c)(2), which accounted for 17 clearing agencies, the burden estimate in the adopting release for Rule 17Ad-22(c)(1) reflects a smaller number of clearing agencies. The requirements of Rule 17Ad-22(c)(1) will apply to nine CCPs.
On an ongoing basis, the Commission estimates that for a CCP to generate the required reports concerning its financial resources would impose a burden of three hours per respondent CCP per quarter. This amounts to an annual burden of 12 hours for each CCP and corresponds to an aggregate annual burden of 108 hours for all respondent CCP.
For each respondent CCP, the estimated annualized burden for Rule 17Ad-22(c)(1) is 8 hours (figure calculated as follows: 0 hours (Year 1 burden) + 12 hours (Year 2 burden) + 12 hours (Year 3 burden) = 24 hours (estimated total burden over 3 years) ÷ 3 years = 8 hours).
The standards in Rule 17Ad-22(c)(2) impose a PRA burden. In contrast to the Proposing Release's burden estimates for proposed Rule 17Ad-22(c)(2), which accounted for 17 clearing agencies, the burden estimate in the adopting release for Rule 17Ad-22(c)(2) reflects a smaller number of clearing agencies. The requirements of Rule 17Ad-22(c)(2) will apply to all registered clearing agencies, a total of ten respondents.
The Commission expects that the exact burden of collecting information relating to the procedures for facilitating an annual audited financial statement of the clearing agency and posting that annual audited financial statement to the clearing agency's Web site would vary depending on how frequently each clearing agency may need to update its procedures. Also, the Commission estimates based on its experience with entities of similar size to the respondents to this collection, that the initial burden of generating annual audited financial statements would generally require on average 500 hours per respondent clearing agency.
Clearing agencies also would be required to collect information relating to any procedures used to support compliance with Rule 17Ad-22(c)(2) on an ongoing basis. Based on the analogous policies and procedures requirements and the corresponding burden estimates in Regulation NMS, the Commission estimates that the ongoing requirements of this rule would impose an annual burden of 250 hours on each respondent clearing agency for collecting information relating to administering policies and procedures for facilitating an annual audited financial statement of the clearing agency and posting that annual audited financial statement to the clearing agency's Web site for an aggregate burden of 2,500 hours.
Annualized, the estimated burden for Rule 17Ad-22(c)(2) is 333 hours (figure calculated as follows: 500 hours (Year 1 burden) + 250 hours (Year 2 burden) + 250 hours (Year 3 burden) = 1,000 hours (estimated total burden over 3 years) ÷ 3 years = 333 hours). This figure represents a weighted average for 10 respondent clearing agencies. The burden will be higher for clearing agencies that have not yet implemented Rule 17Ad-22(c)(2). The burden will be less for clearing agencies that have already implemented the requirement as part of their usual and customary practices.
The requirement also would require the services of a registered public accounting firm. The Commission estimates those services would on average cost approximately $500,000 annually.
The total initial burden for Rule 17Ad-22 is 11,340 hours.
The collection of information relating to Rule 17Ad-22(b) and Rule 17Ad-22(c)(1) will be mandatory for all CCPs. The collection of information relating to Rule 17Ad-22(c)(2) and Rule 17Ad-22(d) will be mandatory for all registered clearing agencies.
The Commission expects that the written policies and procedures that will be generated pursuant to Rules 17Ad-22(b)(1)-(7), Rule 17Ad-22(c)(2), and Rules 17Ad-22(d)(1)-(15) will be communicated to the members, subscribers, and employees (as applicable) of all entities covered by the Rule. To the extent that this information is made available to the Commission, it will not be kept confidential. Any records generated in connection with the requirement of Rules 17Ad-22(b)(1)-(3), Rules 17Ad-22(b)(5)-(7), Rule 17Ad-22(c)(2), and Rules 17Ad-22(d)(1)-(15) to establish written policies and procedures will be required to be preserved in accordance with, and for the periods specified in, Exchange Act Rules 17a-1
The information collected pursuant to Rule 17Ad-22(c)(1) relating to the calculation and maintenance of a record of the financial resources necessary to meet the requirements of Rule 17Ad-22(b)(3) will be retained by the registered clearing agencies that perform CCP services and will be available to the Commission. To the extent that the Commission receives confidential information pursuant to this collection of information, such information would be kept confidential, subject to the provisions of applicable law.
The rules that we are adopting today are designed to enhance the substantive regulation of securities clearing agencies. The Commission is sensitive to the economic effects of the rules it is adopting today, including their costs and benefits. Some of these costs and benefits stem from statutory mandates, while others are affected by the discretion we exercise in implementing the mandates. We requested comment on all aspects of the costs and benefits of the proposal, including any effect our proposed rules may have on efficiency, competition, and capital formation.
As required by Title VII and Title VIII of the Dodd Frank Act, Rule 17Ad-22 will establish a regulatory framework for CCPs for security-based swap transactions and clearing agencies that are designated as systemically important by the Council. In so doing, Rule 17Ad-22 will help ensure that clearing agencies maintain effective operational and risk management procedures as well as meet the statutory requirements under the Exchange Act on an ongoing basis. Rule 17Ad-22 is consistent with the Dodd-Frank Act and the Congressional findings in the adoption of Section 17A. Specifically, Congress found that:
(A) The prompt and accurate clearance and settlement of securities transactions, including the transfer of record ownership and the safeguarding of securities and funds related thereto, are necessary for the protection of investors and persons facilitating transactions by and acting on behalf of investors.
(B) Inefficient procedures for clearance and settlement impose unnecessary costs on investors and persons facilitating transactions by and acting on behalf of investors.
(C) New data processing and communications techniques create the opportunity for more efficient, effective, and safe procedures for clearance and settlement.
(D) The linking of all clearance and settlement facilities and the development of uniform standards and procedures for clearance and settlement will reduce unnecessary costs and increase the protection of investors and persons facilitating transactions by and acting on behalf of investors.
Section 17A of the Exchange Act was adopted in direct response to the paperwork crisis of the late 1960's that nearly brought the securities industry to a standstill and directly or indirectly resulted in the failure of large numbers of broker-dealers
Economic characteristics of FMIs,
While the Commission believes that the U.S. clearance and settlement system currently works well, it is important that the operations of clearing agencies evolve with the securities markets, especially as clearing agencies affect a wider array of market participants. A clearing agency's direct participants, such as broker-dealers, banks and other types of financial intermediaries, use clearing agencies to clear and settle proprietary trading activity. They also use clearing agencies as intermediaries for institutional investors, retail investors, and proprietary trading firms,
Because clearing agencies concentrate risk, a disruption in a clearing agency's operations or the failure of a clearing agency to meet its obligations could cause a systemic disruption that can be costly for more than just the clearing agency and its members. For example, a significant dollar value of financial transactions pending for clearance or to be cleared in the future through the clearing agency could fail to settle on time or at the original contract terms. If the clearing agency acting as a CCP does not have the funds to cover the fail, members of the clearing agency would suffer losses and liquidity constraints due to their inability to access their clearing fund contributions and the clearing agency's inability to honor its obligations.
The standards adopted today as part of Rule 17Ad-22 are intended to help mitigate these risks by requiring measures that would reinforce the safety of clearing agencies. Safe and reliable clearing agencies are essential not only to the stability of the securities markets they serve but often also to payment systems, which may be used by a clearing agency or may themselves use a clearing agency to transfer collateral. The safety of securities settlement arrangements and post-trade custody arrangements is also critical to the goal of protecting the assets of investors from claims by creditors of intermediaries and other entities that perform various functions in the operation of the clearing agency. Investors are more likely to participate in markets when they have confidence in the safety and reliability of clearing agencies; therefore the rule being adopted today should promote capital formation.
In addition, the rule seeks to promote the efficiency of clearing agencies. As described below, the structure of the clearing agency market and the structure of the clearing agencies themselves may not provide the competitive incentives necessary to promote transparency, fair access, and efficient operations. Transparency helps to ensure that clearing members can make more informed decisions and that market participants in general have better information about the stability of the system. In turn, transparency promotes competition by facilitating comparisons across clearing agencies. Fair access ensures that a variety of market participants can gain access to clearing and settlement services and thus promotes competition by lowering barriers to entry for clearing agency participants.
The analysis below examines the projected economic effects of the adopted rules. The analysis starts with a baseline discussion of the current regulatory landscape and existing industry practices of clearing agencies relating to their operations and risk management procedures and membership policies. This discussion provides a point of comparison for the second half of the economic analysis, which is a discussion of the benefits and costs of the rules, as well as alternative approaches to the rules that were considered by the Commission.
Rule 17Ad-22 impacts the market for clearing agency services in securities, with an emphasis on CCP services. There are currently seven clearing agencies registered with the Commission that provide CCP or CSD services. Six of these clearing agencies offer CCP services, and one is a CSD. Together, they processed over $1 quadrillion in financial market transactions in 2011.
Central clearing facilitates the management of counterparty credit risk among dealers and other institutions by shifting that risk from individual counterparties to CCPs, thereby helping protect counterparties from each other's potential failures and preventing the buildup of risk in such entities, which could be systemically important. Central clearing generally reduces the counterparty risk of market participants, including market makers and dealers. If market makers and dealers cannot diversify this counterparty risk, they generally pass the costs on to their clients in the form of higher transaction costs. In order for central clearing to reduce risk, mark-to-market pricing and margin requirements need to be applied in a consistent manner.
The market for CCP services in the United States tends to be segmented by financial instrument, with clearing agencies often specializing in particular instruments. As such, some market segments may have characteristics of natural monopolies capable of being sustained despite the presence of competitors with the potential to enter the market segment in question.
The following sections set the baseline for comparison in our analysis of the economic effects. In particular, they describe the legal framework under which registered clearing agencies operate and the current practices of clearing agencies as they relate to the rules being adopted today.
In recognition of the risks posed by the concentration of clearance and settlement activity at clearing agencies, the Exchange Act and Titles VII and VIII of the Dodd-Frank Act provide a framework for enhanced regulation and supervision of clearing agencies by the Commission.
Section 17A of the Exchange Act
As described in Section I above, the Dodd-Frank Act was enacted to, among other things, mitigate systemic risk and promote the financial stability of the United States by improving accountability and transparency in the financial system and by providing for enhanced regulation and oversight of institutions designated as systemically important.
In addition to the provisions in Title VII that expand the Commission's authority under the Exchange Act to include security-based swap activities, Title VIII of the Dodd-Frank Act, entitled the Clearing Supervision Act, establishes an enhanced supervisory and risk control system for systemically important clearing agencies and other FMUs.
In part, the Clearing Supervision Act provides that the Commission, considering relevant international standards and existing prudential requirements, may prescribe regulations that set risk management standards for the operations related to PCS Activities
As noted above, the final FMI Report was published on April 16, 2012 to replace the earlier CPSS-IOSCO
Rule 17Ad-22 and the rules for DCOs adopted by the CFTC
First, Rule 17Ad-22(b)(1) requires a CCP to measure its credit exposures to its participants at least once a day while the CFTC's DCO rules require that DCOs perform that function periodically throughout the day. Second, consistent with the current practice at registered CCPs providing clearing of security-based swaps, Rule 17Ad-22(b)(3) requires CCPs for security-based swaps to maintain enough financial resources to withstand a default by the two largest participant families.
The CFTC applies the latter standard to all DCOs. In its October 2010 rule proposal, the CFTC proposed requiring that systemically important DCOs maintain sufficient financial resources to meet their financial obligations to their clearing members notwithstanding a default by the two clearing members creating the largest combined financial exposure for the systemically important DCO in extreme but plausible market conditions.
Third, Rule 17Ad-22(b)(4) requires model validations to be performed “annually” by a person who is free from influence from the persons responsible for development or operation of the systems and models being validated so that he or she can be candid in his or her assessment of the model. The CFTC rule requires an “independent” validation on a “regular basis.”
Fourth, Rule 17Ad-22(b)(7) provides for scalability of net capital requirements in proportion to the riskiness of the participants' activities and permits CCPs to seek Commission approval to impose a net capital requirement on participants that is higher than $50 million. In contrast, the CFTC's DCO rules do not provide for scalability and do not allow DCOs the option to seek approval for a higher net capital requirement.
Finally, a DCO is required to publicly disclose its margin-setting methodology and default procedures on its Web site. Rule 17Ad-22(d)(11) requires a clearing agency to make key aspects of its default procedures publicly available, but nothing in the rules the Commission is adopting today would require publication of the clearing agency's margin methodology.
An overview of the risk management practices, operations, policies and procedures of registered clearing agencies is set forth below. The discussions under the headings “Risk Management—Measurement of credit exposures,” “—Margin” “—Financial Resources” and under the heading “Other Clearing Services” are based upon public representations
CCPs have a range of tools that can be used to manage the financial risks to which they are exposed, and the tools that an individual CCP uses will depend upon the nature of its obligations. Nonetheless, there is a common set of procedures that are implemented by many CCPs to manage counterparty credit and liquidity risks. Broadly, these procedures enable CCPs to manage their risks by limiting the likelihood of defaults, by limiting the potential losses and liquidity pressures if a default should occur, and by ensuring that there are adequate resources to cover losses and meet payment obligations on schedule.
To manage its counterparty credit exposures to its participants effectively, a clearing agency must be able to measure those exposures. A clearing agency can ascertain its current credit exposure to each participant by marking each participant's outstanding contracts to current market prices and (to the extent permitted by a clearing agency's rules and supported by law) netting any gains against any losses. A clearing agency faces the risk that its exposure to
The current practice of each CCP registered with the Commission includes these procedures: (1) Measuring credit exposures at least once a day; (2) setting margin coverage at a 99% confidence level over some set period; (3) using risk-based models; (4) establishing a fund that mutualizes losses of defaults by one or more participants that exceed margin coverage; and (5) maintaining sufficient financial resources to withstand the default of at least the largest participant,
Currently, registered clearing agencies measure credit exposures at least once per day. Clearing agencies that guarantee trades on the trade date, such as the FICC/GSD and OCC, measure credit exposures multiple times per day. NSCC does not guarantee trades until midnight of T+1, and it only measures credit exposures daily, though it is considering an accelerated trade guarantee proposal that would potentially revise these practices.
Clearing agencies use risk-based models to set initial and variation margin. Inputs to the margin calculation include, among other things, portfolio size, asset price volatility, current asset values, the likely liquidity of the asset should a particular market maker fail (market-maker domination charges), the likely time it would take to liquidate the assets, potential correlations between the value of assets posted as collateral and the assets being cleared, and the correlation of the prices in the portfolio of assets being cleared by the participant.
The current practice of many CCPs registered as clearing agencies is to calculate daily margin requirements using risk-based models to ensure coverage at a 99% confidence interval over a designated time horizon. Losses beyond this level are typically covered by the CCP's guaranty fund. This standard is consistent with