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Consult the Reader Aids section at the end of this page for phone numbers, online resources, finding aids, reminders, and notice of recently enacted public laws.
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Federal Deposit Insurance Corporation.
Interim final rule with request for comments; correction.
The FDIC is correcting an interim final rule with request for comments that appeared in the
The correction is effective January 1, 2014.
Mark Handzlik, Counsel,
In FR Doc. 2013–21357, appearing on page 55518 in the
“(a) Except as provided in § 324.62, an FDIC-supervised institution described in § 324.61 must make the disclosures described in Tables 1 through 10 of this section. The FDIC-supervised institution must make these disclosures publicly available for each of the last three years (that is, twelve quarters) or such shorter period beginning on January 1, 2015.”
Import Administration, International Trade Administration, Commerce.
Final rule; nomenclature change.
Effective October 1, 2013, the Department of Commerce (Department), through internal department organizational orders, changed the name of “Import Administration” to “Enforcement and Compliance.” Consistent with this action, this rule makes appropriate conforming changes in the Code of Federal Regulations. The rule also sets forth a Savings Provision that preserves, under the new name, all actions taken under the name of Import Administration and provides that any references to Import Administration in any document or other communication shall be deemed to be references to Enforcement and Compliance.
This rule is effective October 21, 2013.
Robert Goodyear, Director, Office of Operations Support Enforcement & Compliance, Telephone: (202) 482–5194; Michele D. Lynch, Senior Counsel, Office of Chief Counsel for Trade Enforcement and Compliance, Telephone: (202) 482–2879.
This rule implements the decision by the Department, through internal Department Organizational Orders 10–3 (effective September 18, 2013) and Department Organizational Order 40–1, (effective September 19, 2013), to consolidate and reorganize certain department organizational functions and revise the name of “Import Administration” to “Enforcement and Compliance.” The revision more accurately reflects the breadth of the agency's activities with respect to the enforcement of, and compliance with, U.S. trade laws and agreements. Consistent with the consolidation and name change, this rule makes a number of changes in parts 351, 354, and 356 of title 19 of the Code of Federal Regulations. Specifically, this rule changes all references to “Import Administration” wherever they appear in parts 351, 354, and 356 of title 19, to “Enforcement and Compliance” with the exception of references to the “Chief Counsel for Import Administration,” which shall be changed to the “Chief Counsel for Trade Enforcement and Compliance.”
This rule shall constitute notice that all references to Import Administration in any documents, statements, or other communications, in any form or media, and whether made before, on, or after the effective date of this rule, shall be deemed to be references to Enforcement and Compliance. Any actions undertaken in the name of or on behalf of Import Administration, whether taken before, on, or after the effective date of this rule, shall be deemed to have been taken in the name of or on behalf of Enforcement and Compliance.
1. This final rule has been determined to be exempt from review for purposes of Executive Order 12866.
2. This rule does not impose information collection and recordkeeping requirements. Consequently, it need not be reviewed by the Office of Management and Budget under the provisions of the Paperwork Reduction Act of 1995.
3. This rule does not contain policies with Federalism implications as this term is defined in Executive Order 13132.
4. The provisions of the Administrative Procedure Act (5 U.S.C. 553) requiring notice of proposed rulemaking, the opportunity for public participation, and a delay in effective date, are inapplicable because this rule involves a rule of agency organization, procedure, or practice. 5 U.S.C. 553(b)(B). Further, no other law requires that a notice of proposed rulemaking and an opportunity for public comment be given for this final rule. Because a notice of proposed rulemaking and an opportunity for public comment are not required to be given for this rule under 5 U.S.C. or by any other law, the analytical requirements of the Regulatory Flexibility Act (5 U.S.C. 601, et seq.) are not applicable. Accordingly, this rule is issued in final form.
Antidumping and countervailing duties.
Procedures for imposing sanctions for violations of an antidumping or countervailing duty administrative protective order.
Procedures and rules for implementing Article 1904 of the North American Free Trade Agreement.
5 U.S.C. 301; 19 U.S.C. 1202 note; 19 U.S.C. 1303 note; 19 U.S.C. 1671 et seq.; and 19 U.S.C. 3538.
5 U.S.C. 301, and 19 U.S.C. 1677.
19 U.S.C. 1515a and 1677f(f).
Internal Revenue Service (IRS), Treasury.
Final regulations.
This document contains final regulations under section 382 of the Internal Revenue Code (Code). These regulations provide guidance regarding the application of the segregation rules to public groups of shareholders in determining owner shifts and ownership changes under section 382 of the Code. These regulations affect corporations.
Stephen R. Cleary, (202) 622–7750, or Marie C. Milnes-Vasquez, (202) 622–7530 (not toll-free numbers).
Section 382 imposes a limitation on a corporation's use of net operating loss carryovers and certain other attributes following a change in ownership of the corporation (loss corporation). A loss corporation has an ownership change if the percentage of stock of a loss corporation that is owned by one or more 5-percent shareholders has increased by more than 50 percentage points over the lowest percentage of stock of the loss corporation owned by such shareholders at any time during the testing period (generally, a three-year period). Pursuant to section 382(g)(4)(A), individual shareholders who own less than five percent of a loss corporation are aggregated and treated as a single 5-percent shareholder (a public group).
The regulations extend the public group concept to situations in which a loss corporation is owned by one or more entities, as defined in § 1.382–3(a) (generally, partnerships, corporations, estates, and trusts). If an entity directly or indirectly owns five percent or more of the loss corporation, that entity has its own public group if its owners who are not 5-percent shareholders own, in the aggregate, five percent or more of the loss corporation. An entity that owns a five-percent or more direct interest in a loss corporation at any time during a testing period is a “first tier entity,” and a “higher-tier entity” is any entity owning a five-percent or more direct interest in a first tier entity or any other higher tier entity at any time during a testing period. (Such entities are referred to as 5-Percent Entities in this preamble.)
The application of the segregation rules results in the creation of a new public group in addition to the one (or more) that existed previously. That new group is treated as a new 5-percent shareholder that increases its ownership interest in the loss corporation.
The segregation rules apply to transfers of loss corporation stock by an individual 5-percent shareholder to public shareholders and a 5-Percent Entity's transfer of loss corporation stock to public shareholders. In addition, the current segregation rules, subject to the cash issuance and small issuance exceptions (described in this preamble), treat issuances of stock under section 1032, redemptions, and redemption-like transactions as segregation events.
Generally, the small issuance exception exempts the total amount of stock issued during a taxable year to the extent it does not exceed 10 percent of the total value of the corporation's outstanding stock at the beginning of the taxable year or 10 percent of the class of stock issued and outstanding at the beginning of the taxable year (the 10-percent limitation). However, the small issuance exception does not apply to any issuance of stock that, by itself, exceeds the 10-percent limitation. If stock is issued solely for cash, the cash issuance exception exempts a percentage of the total stock issued equal to 50 percent of the aggregate percentage ownership interest of the public groups of the corporation immediately before the issuance. If the small issuance exception excludes only a portion of a stock issuance, the cash issuance exception may apply to the portion not excluded under the small issuance exception.
Notice 2010–49, 2010–27 IRB. 10, invited public comment relating to possible modifications to the regulations under section 382 regarding the treatment of shareholders who are not 5-percent shareholders (Small Shareholders). See § 601.601(d)(2)(ii)(
The proposed regulations provide exceptions, in addition to those in the current regulations, that would exempt from the segregation rules certain transactions involving the stock of loss corporations and 5-Percent Entities. The preamble to the proposed regulations explains that these additional exceptions are intended to reduce tax administration and compliance burdens with respect to transactions that do not bear indicia of loss trafficking, and thus do not implicate the policies underlying section 382.
The proposed regulations generally would render the segregation rules inoperative with respect to transfers of loss corporation stock to Small Shareholders by 5-Percent Entities or individuals who are 5-percent shareholders. In these cases, the stock transferred will be treated as being acquired proportionately by the public groups existing at the time of the transfer. This rule also applies to transfers of ownership interests in 5-Percent Entities to public owners and to 5-percent owners who are not 5-percent shareholders.
The proposed regulations provide an exception that would exempt small redemptions of the stock of a loss corporation from the segregation rules (small redemption exception) that is based upon the 10-percent limitation of the small issuance exception in the current regulations. The small redemption exception would annually exempt from the segregation rules, at the loss corporation's option, either redemptions of loss corporation stock equal to 10 percent of the total value of the loss corporation's stock at the beginning of the taxable year, or redemptions of loss corporation stock of up to 10 percent of the number of shares of the redeemed class of loss corporation stock outstanding at the beginning of the taxable year. Pursuant to this exception, each public group existing immediately before the redemption would be treated as redeeming its proportionate share of exempted stock.
Under the proposed regulations, the segregation rules would not apply to certain transactions involving a 5-Percent Entity (general exception). Under the general exception, the segregation rules would not apply if, on the date of the transaction at issue, (i) the 5-Percent Entity owns 10 percent or less (by value) of all the outstanding stock of the loss corporation (ownership limitation), and (ii) the direct or indirect investment in the stock of the loss corporation does not exceed 25 percent of the 5-Percent Entity's gross assets (asset threshold). For purposes of the asset threshold, the 5-Percent Entity's cash and cash items within the meaning of section 382(h)(3)(B)(ii) would not be taken into account.
The preamble to the proposed regulations describes the purpose of the general exception:
The IRS and the Treasury Department believe that the proposal strikes an appropriate balance between reducing complexity and safeguarding section 382 policies. The proposal will enable loss corporations to disregard indirect changes in its ownership that may, under the current regulations, require burdensome information gathering and may unnecessarily impede the loss corporation's ability to reorganize its affairs. At the same time, however, the proposal imposes criteria that protect the government's interests. The asset threshold makes it unlikely that the loss corporation's attributes motivate transactions in the equity of 5-Percent Entities. Additionally, like the small issuance exception and the relief for redemptions that appears elsewhere in this proposal, the ownership limitation makes it unlikely that transactions among Small Shareholders one or more tiers removed from the loss corporation implicate loss trafficking concerns. * * *
Comments were received in response to the proposed regulations. A public hearing was not requested, and none was held. The comments generally supported the provisions of the proposed regulations, but requested a number of revisions. After consideration of all the comments, the proposed regulations are adopted as amended by this Treasury decision. In general, the final regulations follow the approach of the proposed regulations, with some revisions. The more significant comments and revisions are discussed in this section.
The proposed regulations contain a clarification of the application of § 1.382–2T(j)(3) of the current regulations (secondary transfer segregation rule). Under the secondary transfer segregation rule, in general, the segregation rules apply to secondary public transfers of loss corporation stock (that is, transfers of loss corporation stock from 5-percent shareholders or first tier entities to public shareholders). Section 1.382–2T(j)(3) of the current regulations further provides that the “principles” of the foregoing rule apply to “transactions in which an ownership interest in a higher tier entity that owns five percent or more of the loss corporation (determined without regard to [§ 1.382–2T(h)(i)(A)]) or a first tier entity is transferred to a public owner or a 5-percent owner who is not a 5-percent shareholder.” The IRS and the Treasury Department became aware that it is unclear whether the secondary transfer segregation rule applies to transfers of higher tier entity stock by a transferor that does not indirectly own five percent or more in the relevant loss corporation. New § 1.382–3(i) of the proposed regulations would clarify that the secondary transfer segregation rule applies to a transfer of higher tier entity stock only if the seller indirectly owns five percent or more of the loss corporation.
After further considering the interaction between § 1.382–3(i) and the secondary transfer exception of § 1.382–3(j)(13) of the proposed regulations, the
Two commenters requested that the small redemption exception be expanded to exempt redemptions of up to 25 percent of the total value of stock or number of shares of a class of stock. The commenters argued that, because redemptions do not inject new capital into a loss corporation but rather contract the corporation's capital, the regulations should allow a more generous exemption from the segregation rules for redemptions than for stock issuances.
After consideration of the comments, the IRS and the Treasury Department have determined that the ceiling on the small redemption exception should remain at 10 percent. As discussed in greater detail in the preamble to the proposed regulations, the provisions of the proposed regulations were intended to reduce tax administration and compliance burdens with respect to transactions that do not implicate the policies of section 382. To that end, occasional redemptions of stock, which, in the aggregate, represent a small percentage of the issuer's equity, are unlikely to be used as a device to shift the ownership of a loss corporation. Accordingly, relief from application of the segregation rules is appropriate. Raising the ceiling on the size of redemptions to which the small redemption exception applies to 25 percent could be used to effectuate significant shifts in ownership contrary to the policies of section 382.
Commenters requested that the small redemption exception be extended to exempt redemptions of the stock of 5-Percent Entities from the segregation rules. These commenters noted that the secondary transfer exception provided in the proposed regulations exempts certain transfers of the stock of 5-Percent Entities from the segregation rules, as does the small issuance exception in the current regulations. Additionally, one commenter noted that if the small redemption exception were extended to redemptions by 5-Percent Entities, guidance should be provided to supply the baseline against which to measure the 10-percent limitation of the small redemption exception in such cases. Specifically, the commenter asked for clarification regarding whether the limitation would be calculated by reference to the stock of the redeeming corporation, or, alternatively, by reference to the stock of the loss corporation.
In response to these comments, the final regulations extend the small redemption exception to exempt redemptions of the stock of 5-Percent Entities from the segregation rules. Further, the IRS and the Treasury Department have concluded that the 10-percent limitation of the small redemption exception should be measured by reference to the stock of the entity engaging in the redemption. Calculating the 10-percent limitation by reference to the stock of the redeeming entity will ensure that this exception, consistent with its intended purpose, applies only to redemptions that are “small.” For example, assume that a first tier entity, the stock of which has a value of $150, owns an 8 percent stake in a loss corporation, the stock of which has an aggregate value of $750. If the 10-percent limitation were applied by reference to the value of the loss corporation's stock, then the first tier entity would be permitted to redeem an amount of stock equal to 50 percent of its pre-existing stock (that is, 10 percent of $750 ($75)/$150) without application of the segregation rules. This result is inappropriate. Accordingly, these final regulations provide that the 10-percent limitation of the small redemption exception applies by reference to the value of the entity (or to the classes of stock of the entity, as the case may be) that is engaging in the redemption.
In the preamble to the proposed regulations, the IRS and the Treasury Department requested comments as to whether further refinement of the small issuance exception in the current regulations might be warranted in the context of any potential expansion of the additional exceptions proposed therein. As discussed, these final regulations expand the small redemption exception to apply to redemptions of the stock of 5-Percent Entities, and provide that the stock of the 5-Percent Entity engaging in the redemption is the appropriate baseline for computing the 10-percent limitation for the small redemption exception in such cases. In comments received in response to the proposed regulations, one commenter noted that the small issuance exception in the current regulations applies to issuances of stock of 5-Percent Entities and contains a parallel 10-percent limitation on the amount of stock issued that qualifies for this exception. Further, the commenter pointed out that the same question of the appropriate baseline for applying the 10-percent limitation exists with regard to the small issuance redemption. The commenter requested that these final regulations supply clarification with regard to the appropriate baseline for applying the small issuance exception to issuances of stock of 5-Percent Entities.
After consideration of this comment, the IRS and the Treasury Department have determined that the same policy considerations discussed with regard to the application of the small redemption exception to 5-Percent Entities exist with regard to the application of the small issuance exception to 5-Percent Entities. Thus, these final regulations provide that the 10-percent limitation of the small issuance exception in the current regulations is calculated by reference to the same baseline used for the small redemption exception. Accordingly, these final regulations provide that the 10-percent limitation for the application of the small issuance exception to issuances of stock by a 5-Percent Entity is calculated by reference to the value of the stock of the issuing entity (or to the classes of stock of that entity, as the case may be).
Some commenters proposed increasing the ownership limitation for the general exception from 10 percent to a higher percentage (between 15 and 30 percent) to increase the number of 5-Percent Entities that would qualify for the general exception to the segregation rules. After consideration of these comments, the IRS and the Treasury Department have concluded that it is appropriate for the ownership limitation of the general exception to remain at 10
Several commenters expressed concern that loss corporations would not be able to verify that a 5-Percent Entity's ownership of loss corporation stock does not exceed the 25-percent asset threshold. Although the loss corporation could request such information from the 5-Percent Entity, there is no requirement that the 5-Percent Entity provide it (and it may be legally obliged not to provide such information). In response to that concern, some commenters suggested that a loss corporation should be able to apply the general exception if it determines in good faith that it has satisfied a duty of inquiry with regard to satisfaction of the asset threshold by a particular 5-Percent Entity. In addition, questions were raised whether the asset threshold could be replaced with an anti-avoidance rule designed to frustrate abuses that could arise in the absence of the asset threshold.
The preamble to the proposed regulations explains that the asset threshold was created to ensure that the segregation rules would continue to apply to transactions in the stock of 5-Percent Entities that were motivated by attempts to exploit the attributes of the loss corporation. In effect, the IRS and the Treasury Department imposed the combination of the ownership limitation and the asset threshold as the equivalent of an anti-avoidance rule, though formulated as an objective test. However, the comments received indicate that the asset threshold, as presented in the proposed regulations, would prevent the general exception to the segregation rules from achieving the goal of reducing complexity while safeguarding section 382 policies.
After consideration of the comments, the IRS and the Treasury Department have decided to replace the asset threshold test with an anti-avoidance rule. The anti-avoidance rule provides that the general exception to the segregation rules does not apply to a transaction involving an ownership interest in a 5-Percent Entity if the loss corporation, directly or through one or more persons, has participated in planning or structuring the transaction with a view to avoid the application of the segregation rules. This anti-avoidance rule will more directly address the tax avoidance concerns underlying the asset threshold included in the proposed regulations while reducing tax compliance burdens with regard to transactions with low tax avoidance potential. The existence of the 10-percent ownership limitation will ensure that the general exception applies only with regard to transactions involving holders who have relatively small ownership interests in the loss corporation and, therefore, are unlikely to be vehicles for avoidance planning. In addition, this anti-avoidance rule would not be violated in the common situation in which the loss corporation seeks and obtains (or seeks and cannot obtain) information about a proposed transaction that would change the ownership of a 5-Percent Entity, but the loss corporation does not take part in planning or structuring the transaction.
Commenters pointed out a technical error in one general exception example (Example 11 in § 1.382–3(j)(16) of the proposed regulations) and requested its correction. The commenters pointed out that the example mistakenly treats an entity as a first tier entity although its only interest in the loss corporation is preferred stock meeting the requirements of section 1504(a)(4). The IRS and the Treasury Department agree that the example is technically flawed because section 1504(a)(4) stock is disregarded for purposes of determining ownership shifts. We note that Example 11 assumes a modified version of the facts of Example 10. Therefore, in order to correct the illustration of the general exception by Example 11, these final regulations contain modifications to Examples 10 and 11, which provide that, in addition to the preferred stock, the shareholder entity owns sufficient common stock at the outset of the example to be tracked as a first tier entity.
The proposed regulations provide that the proposed exceptions to the segregation rules would apply to testing dates occurring on or after the date the regulations are published as final regulations in the
After consideration of the comments, the final regulations do not permit taxpayers to apply the final regulations to a testing date before October 22, 2013 if the application of the final regulations would result in an ownership change that did not occur, or would reverse an ownership change that did occur, on a date before October 22, 2013 under the regulations then in effect. The IRS and the Treasury Department believe that, in general, ownership change determinations from prior periods should remain fixed, and that the interests of tax administration are not served by permitting taxpayers to choose whether it is more advantageous to retain an ownership change result from a prior period or to reverse that result through the application of new regulations. For this reason, the final regulations retain the general effective date of the proposed regulations. The final regulations do, however, permit taxpayers to apply the provisions of the final regulations in their entirety to all testing dates that are included in a testing period beginning before and ending on or after October 22, 2013, subject to the limitations that (1) the final regulations may not be applied to any date on or before the date of any ownership change that occurred on a date before October 22, 2013 under the regulations in effect before October 22, 2013, and (2) they may not be applied if their application would result in an ownership change occurring on a date before October 22, 2013 that did not
For example, assume that a loss corporation experienced an ownership change on October 1, 2012, and the current testing period began on October 2, 2012. Following the publication of the final regulations on October 22, 2013, the loss corporation wishes to permissively apply the regulations to all dates of its testing period that begins before and ends on or after October 22, 2013. The regulations may be permissively applied beginning on October 2, 2012, but only if such application does not result in an ownership change occurring on a date before October 22, 2013 that did not occur under the regulations in effect during the period before October 22, 2013. Because the final regulations may not be applied to any date on or before the date of any ownership change that occurred before October 22, 2013 under the regulations in effect before that date, the final regulations may not be permissively applied to October 1, 2012, or any earlier date.
The preamble to the proposed regulations requested comments as to whether further refinement of either or both of the small issuance or cash issuance exceptions might be warranted in the context of any potential expansion of the exceptions contained in the proposed regulations. After consideration of the comments received, the IRS and the Treasury Department believe that no changes to the small issuance or cash issuance exceptions should be made, other than the clarification regarding the calculation of the 10-percent limitation for the small issuance exception.
Comments generally requested increasing the 10-percent limitation of the small issuance exception. Because the final regulations do not increase the 10-percent limitation for the small redemption exception, the IRS and the Treasury Department have determined that the 10-percent limitation of the small issuance exception should also not be increased in order to maintain parity with the small redemption exception. Furthermore, as discussed in the preamble to the proposed regulations, the IRS and the Treasury Department remain concerned that transactions infusing new capital into a loss corporation implicate section 382 policies because the capital infusion can accelerate the use of tax attributes. This is the case even if the new investors are Small Shareholders, especially in light of the dilutive effect of the cash issuance exception on owner shifts attributable to capital-raising transactions. Accordingly, the final regulations do not expand the 10-percent limitation of the small issuance exception.
Comments also suggested that the cash issuance exception should apply to issuances of stock for non-cash property, including debt. One commenter requested that the IRS and the Treasury Department consider expanding the definition of a “cash issuance” to include loss corporation stock issued in connection with the conversion of a convertible debt instrument issued by the loss corporation in exchange for cash. The commenter asserted that no meaningful distinction existed between loss corporation stock acquired by a Small Shareholder directly from the loss corporation in exchange for cash and loss corporation stock acquired as a result of the conversion of a debt instrument that was issued by the loss corporation in exchange for cash.
In general, the cash issuance exception is based upon an assumption that there is overlapping ownership between existing public shareholders and those shareholders who purchase additional stock of a loss corporation. In recognition of the fact that a loss corporation cannot establish this overlapping ownership in many cases, the cash issuance exception mitigates the owner shift that otherwise would result if the segregation rules were to apply in a manner that disregards the overlapping ownership that likely exists.
The IRS and the Treasury Department believe that the assumption of overlapping ownership does not necessarily extend to existing public shareholders and purchasers of convertible debt or transferors of non-cash property for stock. Stated differently, persons who lend money to a loss corporation or persons who transfer non-cash property for stock in many cases may be different from public shareholders of the loss corporation. Furthermore, because infusions of capital into the loss corporation directly implicate the policies of section 382, the IRS and the Treasury Department believe that the cash issuance exception should retain its current scope. Accordingly, these final regulations do not adopt the commenter's proposal.
The preamble to the proposed regulations requested comments as to the scope of § 1.382–3(a), which provides, in part, that a group of persons making a coordinated acquisition of stock can constitute an entity for purposes of section 382.
Comments were received requesting guidance that would identify specific situations in which stock purchases would not be treated as a coordinated acquisition. For example, one commenter asked for guidance to provide that a loss corporation may rely on the presence or absence of a filing with the Securities and Exchange Commission as a “group” to establish the presence or absence of a coordinated acquisition. After considering these comments, the IRS and the Treasury Department believe that further study of this issue is required, and that the development of a companion notice of proposed rulemaking to address this issue would significantly delay issuance of these final regulations. Accordingly, the coordinated acquisition rule is not addressed contemporaneously with these final regulations, but may be addressed in future guidance.
It has been determined that this Treasury decision is not a significant regulatory action as defined in Executive Order 12866, as supplemented by Executive Order 13563. Therefore, a regulatory assessment is not required. It is hereby certified that these regulations will not have a significant economic impact on a substantial number of small entities. The certification is based on the fact that this rule would not impose new burdens on small entities and, in fact, may reduce the recordkeeping burden on small entities. Therefore, a Regulatory Flexibility Analysis under the Regulatory Flexibility Act (5 U.S.C. chapter 6) is not required. Pursuant to section 7805(f) of the Code, the notice of proposed rulemaking that preceded this final regulation was submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business, and no comments were received.
The principal author of these regulations is Stephen R. Cleary of the Office of Associate Chief Counsel (Corporate). However, other personnel from the IRS and the Treasury Department participated in their development.
Income taxes, Reporting and recordkeeping requirements.
Accordingly, 26 CFR part 1 is amended as follows:
26 U.S.C. 7805 * * *
Section 1.382–3 also issued under 26 U.S.C. 382(g)(4)(C) and 26 U.S.C. 382(m). * * *
The revisions and additions read as follows:
(j)
(11)
(ii)
(13)
(14)
(ii)
(iii)
(
(
(B)
(C)
(D)
(E)
(iv)
(B)
(v)
(A) The redemptions occur at approximately the same time pursuant to the same plan or arrangement; or
(B) A principal purpose of redeeming the stock in separate redemptions rather than in a single redemption is to minimize or avoid an owner shift under the rules of this paragraph (j)(14).
(vi)
(vii)
(B)
(15)
(ii)
(iii)
(A) The amount of increase in the percentage of stock ownership of the continuing public group will be the sum of its increase and a proportionate amount of any increase by any public group that is combined with the continuing public group (the former public group); and
(B) The continuing public group's lowest percentage ownership will be the sum of its lowest percentage ownership and a proportionate amount of the former public group's lowest percentage ownership.
(iv)
(A) The rules of § 1.382–2T(h)(2) will not apply;
(B) The entity will be treated as owning the loss corporation stock that it actually owns, and any other loss corporation stock if that other stock would be attributed to the entity under section 318(a) (without regard to paragraph (4) thereof) unless an option is treated as exercised under § 1.382–4(d)); and
(C) The operating rules of paragraph (j)(15)(v) of this section will apply.
(v)
(A) Actual knowledge; or
(B) Absent actual knowledge to the contrary, the presumptions regarding stock ownership in § 1.382–2T(k)(1).
(16)
(ii)
(ii)
(ii)
(ii)
(ii)
(ii)
(ii)
(ii)
(17)
Internal Revenue Service (IRS), Treasury.
Correcting amendment.
This document contains corrections to final regulations and removal of temporary regulations (TD 9630) that were published in the
This correction is effective October 22, 2013, and is applicable beginning on or after December 19, 2011.
Mumal R. Hemrajani, at (202) 622–3800 (not a toll free number).
The final regulations and removal of temporary regulations (TD 9630) that are the subject of this correction are under section 482 of the Internal Revenue Code.
As published, the final regulations and removal of temporary regulations (TD 9630) contains an error that may prove to be misleading and is in need of clarification.
Income taxes, Reporting and recordkeeping requirements.
Accordingly, 26 CFR part 1 is corrected by making the following correcting amendment:
26 U.S.C. 7805 * * *
(g) * * *
(4) * * *
(vi) * * *
(F) * * *
(
Pension Benefit Guaranty Corporation.
Final rule.
This final rule amends the Pension Benefit Guaranty Corporation's regulation on Benefits Payable in Terminated Single-Employer Plans to prescribe interest assumptions under the regulation for valuation dates in November 2013. The interest assumptions are used for paying benefits under terminating single-employer plans covered by the pension insurance system administered by PBGC.
Effective November 1, 2013.
Catherine B. Klion (
PBGC's regulation on Benefits Payable in Terminated Single-Employer Plans (29 CFR Part 4022) prescribes actuarial assumptions—including interest assumptions—for paying plan benefits under terminating single-employer plans covered by title IV of the Employee Retirement Income Security Act of 1974. The interest assumptions in the regulation are also published on PBGC's Web site (
PBGC uses the interest assumptions in Appendix B to Part 4022 to determine whether a benefit is payable as a lump sum and to determine the amount to pay. Appendix C to Part 4022 contains interest assumptions for private-sector pension practitioners to refer to if they wish to use lump-sum interest rates determined using PBGC's historical methodology. Currently, the rates in Appendices B and C of the benefit payment regulation are the same.
The interest assumptions are intended to reflect current conditions in the financial and annuity markets. Assumptions under the benefit payments regulation are updated monthly. This final rule updates the benefit payments interest assumptions for November 2013.
The November 2013 interest assumptions under the benefit payments regulation will be 1.75 percent for the period during which a benefit is in pay status and 4.00 percent during any years preceding the benefit's placement in pay status. In comparison with the interest assumptions in effect for October 2013, these interest assumptions are unchanged.
PBGC has determined that notice and public comment on this amendment are impracticable and contrary to the public interest. This finding is based on the need to determine and issue new interest assumptions promptly so that the assumptions can reflect current market conditions as accurately as possible.
Because of the need to provide immediate guidance for the payment of benefits under plans with valuation dates during November 2013, PBGC finds that good cause exists for making the assumptions set forth in this amendment effective less than 30 days after publication.
PBGC has determined that this action is not a “significant regulatory action” under the criteria set forth in Executive Order 12866.
Because no general notice of proposed rulemaking is required for this amendment, the Regulatory Flexibility Act of 1980 does not apply. See 5 U.S.C. 601(2).
Employee benefit plans, Pension insurance, Pensions, Reporting and recordkeeping requirements.
In consideration of the foregoing, 29 CFR part 4022 is amended as follows:
29 U.S.C. 1302, 1322, 1322b, 1341(c)(3)(D), and 1344.
Office of the Secretary, Department of Defense.
Final rule.
The Department of Defense (DoD) is publishing this final rule to remove the exclusion of drug maintenance programs and allow TRICARE coverage of the substitution of a therapeutic drug, with addictive potential, for a drug of addiction when medically necessary and appropriate as part of a comprehensive treatment plan for an individual with substance use dependence. The current regulation prohibits coverage of drug maintenance programs where one addictive substance is substituted for another. The final rule allows TRICARE to cover, as part of otherwise authorized treatment of substance use disorder, utilization of a specific category of psychoactive agent when medically necessary and appropriate. Removal of the exclusion is based on recognition of the accumulated medical evidence supporting the use of certain pharmacotherapies as one component in the continuum of opioid treatment services. Medication assisted treatment, to include drug maintenance involving substitution of a therapeutic drug with addiction potential, for a drug of addiction, is now generally accepted by qualified professionals to be reasonable and adequate as a component in the safe and effective treatment of substance use disorders treatment services, and thus appropriate for inclusion as a component in the TRICARE authorized substance use disorder treatment for beneficiaries.
John Davison, Ph.D., TRICARE Management Activity, Office of the Chief Medical Officer, telephone (703) 681–0086.
The original implementing regulations for the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS), first issued in 1977, excluded drug maintenance programs from coverage. The DoD, consistent with chapter 55 of title 10, United States Code and other third party payors, covered medical services and supplies which were medically or psychologically necessary to prevent, diagnose, or treat a mental or physical illness, injury or bodily malfunction. At that time, drug maintenance programs were not the standard of care and were
This regulation is proposed under the authorities of 10 U.S.C. section 1073, which authorizes the Secretary of Defense to administer the medical and dental benefits provided in chapter 55 of title 10, United States Code. The Department is authorized to provide medically necessary and appropriate medical care for mental and physical illnesses, injuries and bodily malfunctions, including hospitalization, outpatient care and drugs under 10 U.S.C. 1077(a)(1)–(3). Although section 1077 defines benefits to be provided in the military treatment facilities (MTFs), these benefits are incorporated by reference for the benefits provided in the civilian health care sector to active duty family members and retirees and their dependents through section 1079 and 1086 respectively.
In this rule, the proposed regulatory language eliminates the specific regulatory exclusion of drug maintenance programs found at 32 CFR 199.4(e)(11)(ii). Further, this rule also revises both 32 CFR 199.4(e)(4)(ii) and (e)(11) to affirmatively include substitution of a therapeutic drug with addictive potential, for a drug of addiction as a component in an otherwise authorized substance use disorder treatment benefit, when medically necessary and appropriate medical care for a beneficiary undergoing medically supervised treatment for a substance use disorder.
This rule is not anticipated to have a significant impact on TRICARE costs. All services and supplies authorized under the TRICARE Basic Program must be determined to be medically necessary in the treatment of an illness, injury or bodily malfunction before the care can be cost shared by TRICARE. For this reason, DoD anticipates that TRICARE will have a marginal increase in cost associated with the inclusion of drug maintenance programs within the TRICARE substance use disorder treatment benefit. The benefit of this rule is to improve substance use disorder treatment under TRICARE.
The practice of medicine is constantly evolving, including in the area of substance use disorder treatment. At the implementation of the original CHAMPUS regulation, the Department of Defense, consistent with other third party payors, provided coverage based on what was generally accepted by qualified professionals to be reasonable and adequate in the treatment of substance use disorders. Based on current medical evidence, this exclusion of medication assisted treatment of substance use dependence utilizing a specific category of psychoactive agent is outdated and fails to recognize that the current standard of practice supports the medical necessity and appropriate medical care of certain drug maintenance programs as one component of the continuum of opioid treatment services that are medically or psychologically necessary for the effective treatment of substance dependence.
The Institute of Medicine (IOM) of the National Academies of Science completed a report in September 2012, entitled “Substance Use Disorders in the U.S. Armed Forces,”
Documented increases in the prescription of opioid pain medications throughout the United States have resulted in subsequent increases in opioid dependence and abuse in both the civilian and military populations. Service members are returning home from the wars in Iraq and Afghanistan with severe and painful injuries that require opioid pain management using medications that have the potential for addiction. The advances in battlefield injury protection and medicine have drastically reduced the number of battlefield deaths and have returned some of our Service members home, injured, but prepared to recover. For many, pain related to injuries must be treated for many months, and such long-term use of pain medications has put some of our Service members using those medicines at risk for opioid dependence. Many of the medical conditions that prevail in a heavily deployed force have also led to frequent prescriptions for controlled substances, which are high risk for addiction or misuse. Additionally, for our broader beneficiary population, the unintended consequence of compassionate pain management includes an escalation in the use of prescription opioid analgesics for medical purposes which can result in dependency and other adverse effects. This reality makes it ever more important to ensure that all medically or psychologically necessary and appropriate medical care for substance use disorder are available to our TRICARE beneficiaries; consistent with the authority to provide treatment for mental or physical illness.
The proposed rule was published in the
We also recognize that treatment must meet the specific patient's medical needs and is not necessarily amenable to a one-size-fits-all approach. Medication assisted treatment will not be medically necessary or appropriate in all cases. To clarify this, paragraph 32 CFR 199.4(e)(4)(ii) has been revised specifically to include, as a TRICARE covered service, the substitution of a therapeutic drug with addictive potential, for a drug addiction when medically or psychologically necessary and appropriate medical care for a beneficiary undergoing medically supervised treatment for a substance use disorder.
Several of the comments also made reference to approval for office-based practitioners as well. To the extent any of these comments were intended to seek to expand TRICARE authorized providers for substance use disorder inpatient and outpatient care, these comments fall outside the scope of the provisions of the proposed rule. We appreciate the comments and will take them into consideration in developing future rulemaking.
Section 801 of title 5, United States Code, and Executive Orders (EOs) 12866 and 13563 require certain regulatory assessments and procedures for any major rule or significant regulatory action, defined as one that would result in an annual effect of $100 million or more on the national economy or which would have other substantial impacts. It has been certified that this rule is not an economically significant rule, but it has been designated a significant regulatory action.
Section 202 of Public Law 104–4, “Unfunded Mandates Reform Act,”
Public Law 96–354, “Regulatory Flexibility Act” (RFA) (5 U.S.C. 601), requires that each Federal agency prepare a regulatory flexibility analysis when the agency issues a regulation which would have a significant impact on a substantial number of small entities. This rule is not an economically significant regulatory action, and it has been certified that it will not have a significant impact on a substantial number of small entities. Therefore, this rule is not subject to the requirements of the RFA.
This rule does not contain a “collection of information” requirement, and will not impose additional information collection requirements on the public under Public Law 96–511, “Paperwork Reduction Act” (44 U.S.C. Chapter 35).
E.O. 13132, “Federalism,” requires that an impact analysis be performed to determine whether the rule has federalism implications that would have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. It has been certified that this rule does not have federalism implications, as set forth in E.O. 13132.
Claims, Dental health, Health care, Health insurance, Individuals with disabilities, Military personnel.
Accordingly, 32 CFR Part 199 is amended as follows:
5 U.S.C. 301; 10 U.S.C. chapter 55.
(e) * * *
(4) * * *
(ii)
(11)
(ii) [Reserved]
Office of the DoD Chief Information Officer, DoD.
Final rule.
This final rule responds to public comments regarding the establishment of the DIB CS/IA program, a voluntary cyber security information sharing program between DoD and eligible DIB companies. The program enhances and supplements DIB participants' capabilities to safeguard DoD information that resides on, or transits, DIB unclassified information systems.
Mr. Dan Prieto at 703–571–5911, or the DIB Cyber Security and Information Assurance Program Office: (703) 604–3167, toll free (855) 363–4227, email
This final rule responds to public comments regarding the establishment of the DIB CS/IA program, a voluntary
The rule also provides the eligibility requirements for a company to participate in the DIB CS/IA program.
Costs for DIB participants include obtaining access to DoD's secure voice and data transmission systems supporting the DIB CS/IA program and acquiring DoD approved medium assurance certificates. There also are costs associated with the collection requirements for providing point of contact information and cyber incident reporting. Government costs include onboarding new companies and collecting and analyzing cyber incidents from DIB participants.
A foundational element of this bilateral information sharing model is the recognition that the information being shared between the parties includes extremely sensitive nonpublic information, which must be protected against unauthorized uses and disclosures in order to preserve the integrity of the program.
For additional information regarding the Government's safeguarding of information received from the DIB companies, with specific focus on PII, see the Privacy Impact Assessment (PIA) for the DIB CS/IA Program (
In addition, this rule and program are intended to be consistent and coordinated with, and updated as necessary to ensure consistency with and support for, other federal activities related to the handling and safeguarding of controlled unclassified information, such as those that are being led by the National Archives and Records Administration pursuant to Executive Order 13556 “Controlled Unclassified Information” (November 4, 2010) (see
This rule is not intended to implement the new requirements from section 941 of the National Defense Authorization Act for Fiscal Year 2013.
DoD published an interim final rule on May 11, 2012 (77 FR 27615). Fifty comments from twelve respondents were received and reviewed by the USG.
It has been certified that 32 CFR part 236 does not:
(a) Have an annual effect on the economy of $100 million or more, or adversely affect in a material way, the economy; a section of the economy; productivity; competition; jobs; the environment; public health or safety; or State, local, or tribal Governments or communities;
(b) Create a serious inconsistency, or otherwise interfere with, an action taken or planned by another Agency;
(c) Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs, or the rights and obligations of recipients thereof; or
(d) Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles as set forth in these Executive Orders.
It has been determined that 32 CFR part 236 is not a “major” rule under 5 U.S.C. 801, enacted by Public Law 104–121, because it will not result in an annual effect on the economy of $100 million or more; a major increase in costs or prices for consumers, individual industries, Federal, State, or local Government agencies, or geographic regions; or significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of United States-based enterprises to compete with foreign-based enterprises in domestic and export markets.
It has been certified that 32 CFR part 236 does not contain a Federal mandate that may result in expenditure by State, local and tribal Governments, in aggregate, or by the private sector, of $100 million or more in any one year.
It has been certified that 32 CFR part 236 is not subject to the Regulatory Flexibility Act (5 U.S.C. 601) because it would not, if promulgated, have a significant economic impact on a substantial number of small entities. DIB participation in the DIB CS/IA Program is voluntary.
Sections 236.4 and 236.5 and 236.7 of this final rule contain information collection requirements. These collection requirements were published in the preamble of the interim final rule that published on May 11, 2012 (77 FR 27617) for public comment. No comments were received on the collection requirements. OMB preapproved the collection requirements and assigned them OMB Controls Numbers 0704–0489 and0704–0490.
It has been certified that 32 CFR part 236 does not have federalism implications, as set forth in Executive Order 13132. This rule does not have substantial direct effects on:
(a) The States;
(b) The relationship between the National Government and the States; or
(c) The distribution of power and responsibilities among the various levels of Government.
Contracts, Security measures.
Accordingly 32 CFR part 236 is revised to read as follows:
10 U.S.C. 2224; 44 U.S.C. 3506; 44 U.S.C. 3544.
Cyber threats to DIB unclassified information systems represent an unacceptable risk of compromise of DoD information and pose an imminent threat to U.S. national security and economic security interests. DoD's voluntary DIB CS/IA program enhances and supplements DIB participants' capabilities to safeguard DoD information that resides on, or transits, DIB unclassified information systems.
As used in this part:
(a)
(b)
(c)
(1) Is:
(i) Provided by or on behalf of the DoD to the DIB participant in connection with an official DoD activity; or
(ii) Collected, developed, received, transmitted, used, or stored by the DIB participant in support of an official DoD activity; and
(2) Is:
(i) Controlled Technical Information means technical information with military or space application (see 10 U.S.C. 130(c)) that is subject to controls on the access, use, reproduction, modification, performance, display, release, disclosure, or dissemination. Controlled technical information is to be marked with one of the distribution statements B through F, in accordance with Department of Defense Instruction 5230.24, “Distribution Statements of Technical Documents.” The term does not include information that is lawfully publicly available without restrictions. “Technical Information” means technical data or computer software, as those terms are defined in Defense Federal Acquisition Regulation Supplement clause 252.227–7013, “Rights in Technical Data—Noncommercial Items” (48 CFR 252.227–7013). Examples of technical information include research and engineering data, engineering drawings, and associated lists, specifications, standards, process sheets, manuals, technical reports, technical orders, catalog-item identifications, data sets, studies and analyses and related information, and computer software executable code and source code;
(ii) Information subject to export control under the International Traffic in Arms Regulations (ITAR) (
(iii) Information designated as Critical Program Information (CPI) in accordance with DoD Instruction 5200.39, “Critical Program Information (CPI) Protection within the Department of Defense”;
(iv) Critical Information (Operations Security) includes specific facts identified through the Operations Security process about friendly intentions, capabilities, and activities vitally needed by adversaries for them to plan and act effectively so as to guarantee failure or unacceptable consequences for friendly mission accomplishment (part of Operations Security process as described in 5205.02–M, “DoD Operations Security (OPSEC Program Manual)”;
(v) Personally Identifiable Information (PII) that can be used to distinguish or trace an individual's identity in accordance with DoD Directive 5400.11, “DoD Privacy Program”;
(vi) Information bearing current and prior designations indicating controlled unclassified information (e.g., For Official Use Only, Sensitive But Unclassified, and Limited Official Use, DoD Unclassified Controlled Nuclear Information, Sensitive Information) that has not been cleared for public release in accordance with DoD Directive 5230.29, “Clearance of DoD Information for Public Release” (see also DoD 5200.01 M Volume 4, “DoD Information Security Program: Controlled Unclassified Information (CUI)”), ; or
(vii) Any other information that is exempt from mandatory public disclosure under DoD Directive 5400.07, “DoD Freedom of Information Act (FOIA) Program”, and DoD Regulation 5400.7–R, “DoD Freedom of Information Program”.
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)
(m)
(n)
(o)
It is DoD policy to:
(a) Establish a comprehensive approach for enhancing and supplementing DIB information assurance capabilities to safeguard covered defense information on covered DIB systems.
(b) Increase the Government and DIB situational awareness of the extent and severity of cyber threats to DoD information.
(a) The Government and each DIB participant will execute a voluntary standardized agreement, referred to as a Framework Agreement (FA), to share, in a timely and secure manner, on a recurring basis, and to the greatest extent possible, cyber security information relating to information assurance for covered defense information on covered DIB systems.
(b) Each such FA between the Government and a DIB participant must comply with and implement the requirements of this part, and will include additional terms and conditions as necessary to effectively implement the voluntary information sharing activities described in this part with individual DIB participants.
(c) DoD's DIB CS/IA Program Office is the overall point of contact for the program. The DoD Cyber Crime Center's DoD-DIB Collaborative Information Sharing Environment (DC3/DCISE) is the operational focal point for cyber threat information sharing and incident reporting under the DIB CS/IA program.
(d) The Government will maintain a Web site or other Internet-based capability to provide potential DIB participants with information about eligibility and participation in the program, to enable the online application or registration for participation, and to support the execution of necessary agreements with the Government.
(e) Prior to receiving GFI from the Government, each DIB participant shall provide the requisite points of contact information, to include security clearance and citizenship information, for the designated personnel within their company (e.g., typically 3–10 company designated points of contact) in order to facilitate the DoD–DIB interaction in the DIB CS/IA program. The Government will confirm the accuracy of the information provided as a condition of that point of contact being authorized to act on behalf of the DIB participant for this program.
(f) GFI will be issued via both unclassified and classified means. DIB participant handling and safeguarding of classified information shall be in compliance with the National Industrial Security Program Operating Manual (NISPOM) (DoD 5220.22–M). The Government shall specify transmission and distribution procedures for all GFI, and shall inform DIB participants of any revisions to previously specified transmission or procedures.
(g) Except as authorized in this part or in writing by the Government, DIB participants may use GFI to safeguard covered defense information only on covered DIB systems that are U.S. based; and share GFI only within their company or organization, on a need to know basis, with distribution restricted to U.S. citizens. However, in individual cases, upon request of a DIB participant that has determined that it requires the ability to share the information with a non U.S. citizen, or to use the GFI on a non-U.S. based covered DIB system, and can demonstrate that appropriate information handling and protection mechanisms are in place, the Government may authorize such disclosure or use under appropriate terms and conditions.
(h) DIB participants shall maintain the capability to electronically disseminate GFI within the Company in an encrypted fashion (e.g., using Secure/Multipurpose Internet Mail Extensions (S/MIME), secure socket layer (SSL), Transport Layer Security (TLS) protocol version 1.2, DoD-approved medium assurance certificates).
(i) The DIB participants shall not share GFI outside of their company or organization, regardless of personnel clearance level, except as authorized in this part or otherwise authorized in writing by the Government.
(j) If the DIB participant utilizes a third-party service provider (SP) for information system security services, the DIB participant may share GFI with that SP under the following conditions and as authorized in writing by the Government:
(1) The DIB participant must identify the SP to the Government and request permission to share or disclose any GFI with that SP (which may include a request that the Government share information directly with the SP on behalf of the DIB participant) solely for the authorized purposes of this program;
(2) The SP must provide the Government with sufficient information to enable the Government to determine whether the SP is eligible to receive such information, and possesses the capability to provide appropriate protections for the GFI;
(3) Upon approval by the Government, the SP must enter into a legally binding agreement with the DIB participant (and also an appropriate agreement with the Government in any case in which the SP will receive or share information directly with the Government on behalf of the DIB participant) under which the SP is subject to all applicable requirements of this part and of any supplemental terms and conditions in the DIB participant's FA with the Government, and which authorizes the SP to use the GFI only as authorized by the Government.
(k) The DIB participant may not sell, lease, license, or otherwise incorporate the GFI into its products or services, except that this does not prohibit a DIB participant from being appropriately designated an SP in accordance with paragraph (j) of this section.
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(a) Confidentiality of information that is exchanged under this program will be protected to the maximum extent authorized by law, regulation, and policy.
(b) The Government and DIB participants will conduct their respective activities under this program in accordance with applicable laws and regulations, including restrictions on the interception, monitoring, access, use, and disclosure of electronic communications or data. The Government and the DIB participant each bear responsibility for their own actions under this program.
(c) Prior to sharing any information with the Government under this program pursuant to the FA, the DIB participant shall perform a legal review of its policies and practices that support its activities under this program, and shall make a determination that such policies, practices, and activities comply with applicable legal requirements.
(d) This voluntary DIB CS/IA program is intended to safeguard covered defense information. None of the restrictions on the Government's use or sharing of information under the DIB CS/IA program shall limit the Government's ability to conduct law enforcement, counterintelligence activities, or other activities in the interest of national security; and participation does not supersede other regulatory or statutory requirements.
(e) Participation in the DIB CS/IA program is voluntary and does not obligate the DIB participant to utilize the GFI in, or otherwise to implement any changes to, its information systems. Any action taken by the DIB participant based on the GFI or other participation in this program is taken on the DIB participant's own volition and at its own risk and expense.
(f) A DIB participant's voluntary participation in this program is not intended to create any unfair competitive advantage or disadvantage in DoD source selections or competitions, or to provide any other form of unfair preferential treatment, and shall not in any way be represented or interpreted as a Government endorsement or approval of the DIB participant, its information systems, or its products or services.
(g) The DIB participant and the Government may each unilaterally limit or discontinue participation in this program at any time. Termination shall not relieve the DIB participant or the Government from obligations to continue to protect against the unauthorized use or disclosure of GFI, attribution information, contractor proprietary information, third-party proprietary information, or any other information exchanged under this program, as required by law, regulation, contract, or the FA.
(h) Upon termination of the FA, and/or change of Facility Security Clearance status below Secret, GFI must be returned to the Government or destroyed pursuant to direction of, and at the discretion of, the Government.
(i) Participation in this program does not abrogate the Government's or the DIB participants' rights or obligations regarding the handling, safeguarding, sharing, or reporting of information, or regarding any physical, personnel, or other security requirements, as required by law, regulation, policy, or a valid legal contractual obligation.
To be eligible to participate in this program, a DIB company must:
(a) Have or acquire DoD-approved medium assurance certificates to enable encrypted unclassified information sharing between the Government and DIB participants;
(b) Have an existing active Facility Security Clearance (FCL) granted under the National Industrial Security Program Operating Manual (NISPOM) (DoD 5220.22–M) with approved safeguarding for at least Secret information, and continue to qualify under the NISPOM for retention of its FCL and approved safeguarding (
(c) Have or acquire a Communication Security (COMSEC) account in accordance with the NISPOM Chapter 9, Section 4 (DoD 5220.22–M), which provides procedures and requirements for COMSEC activities;
(d) Obtain access to DoD's secure voice and data transmission systems supporting the DIB CS/IA program,
(e) Own or operate covered DIB system(s), and
(f) Execute the standardized FA with the Government (available during the application process), which implements the requirements set forth in §§ 236.4 through 236.6.
Department of the Navy, DoD.
Final rule.
The Department of the Navy (DoN) is amending its certifications and exemptions under the International Regulations for Preventing Collisions at Sea, 1972 (72 COLREGS), to reflect that the Deputy Assistant Judge Advocate General (DAJAG) (Admiralty and Maritime Law) has determined that USS AMERICA (LHA 6) is a vessel of the Navy which, due to its special construction and purpose, cannot fully comply with certain provisions of the 72 COLREGS without interfering with its special function as a naval ship. The intended effect of this rule is to warn mariners in waters where 72 COLREGS apply.
This rule is effective October 22, 2013 and is applicable beginning September 19, 2013.
Lieutenant Jocelyn Loftus-Williams, JAGC, U.S. Navy, Admiralty Attorney, (Admiralty and Maritime Law), Office of the Judge Advocate General, Department of the Navy, 1322 Patterson Ave. SE., Suite 3000, Washington Navy Yard, DC 20374–5066, telephone 202–685–5040.
Pursuant to the authority granted in 33 U.S.C. 1605, the DoN amends 32 CFR Part 706.
This amendment provides notice that the DAJAG (Admiralty and Maritime Law), under authority delegated by the Secretary of the Navy, has certified that USS AMERICA (LHA 6) is a vessel of the Navy which, due to its special construction and purpose, cannot fully comply with the following specific provisions of 72 COLREGS without interfering with its special function as a naval ship: Annex I, paragraph 3(a) pertaining to the horizontal distance between the forward and aft masthead lights; Rule 21(a) pertaining to placement of masthead lights over the fore and aft centerline of the vessel; Annex I, paragraph 2(g) pertaining to the placement of sidelights above the hull of the vessel; and Annex I paragraph 3(b) pertaining to the location of fixture of side lights. The DAJAG (Admiralty and Maritime Law) has also certified that the lights involved are located in closest possible compliance with the applicable 72 COLREGS requirements.
Moreover, it has been determined, in accordance with 32 CFR Parts 296 and 701, that publication of this amendment for public comment prior to adoption is impracticable, unnecessary, and contrary to public interest since it is based on technical findings that the placement of lights on this vessel in a manner differently from that prescribed herein will adversely affect the vessel's ability to perform its military functions.
Marine safety, Navigation (water), and Vessels.
For the reasons set forth in the preamble, amend part 706 of title 32 of the CFR as follows:
33 U.S.C. 1605.
Coast Guard, DHS.
Notice of temporary deviation from regulations; request for comments.
The Coast Guard has issued a temporary deviation from the operating schedules that govern the US 90 (Danzinger) Bridge across the Inner Harbor Navigational Canal (IHNC), mile 3.1, and the Senator Ted Hickey (Leon C. Simon Blvd./Seabrook) bridge across the IHNC, mile 4.6, both at New Orleans, LA. This deviation will test changes to the drawbridge operation schedule to determine whether a permanent change to the schedule is needed. These changes would allow for the safe navigation of vessels while reflecting the low volume of vessel traffic through the bridges thereby increasing efficiency of operations. The changes will allow the bridges to operate in a manner that will align the two operating schedules so the bridge owner will be able to use the same bridge crew personnel to operate both bridges with little to no affect on navigation through the bridges.
This deviation is effective from 12:01 a.m. on November 6, 2013 through 11:59 p.m. on December 6, 2013.
Comments and related material must be received by the Coast Guard on December 23, 2013.
You may submit comments identified by docket number USCG–2013–0562 using any one of the following methods:
(1)
(2)
(3)
See the “Public Participation and Request for Comments” portion of the
If you have questions on this test deviation, call or email the Coast Guard;
We encourage you to participate in this rulemaking by submitting comments and related materials. All comments received will be posted, without change, to
If you submit a comment, please include the docket number for this rulemaking (USCG–2013–0562), indicate the specific section of this document to which each comment applies, and provide a reason for each suggestion or recommendation. You may submit your comments and material online (
To submit your comment online, type the docket number [USCG–2013–0562] in the “SEARCH” box and click “SEARCH.” Click on “Submit a Comment” on the line associated with this rulemaking. If you submit your comments by mail or hand delivery, submit them in an unbound format, no larger than 8
To view comments, as well as documents mentioned in this preamble as being available in the docket, go to
Anyone can search the electronic form of comments received into any of our dockets by the name of the individual submitting the comment (or signing the comment, if submitted on behalf of an association, business, labor union, etc.). You may review a Privacy Act notice regarding our public dockets in the January 17, 2008, issue of the
We do not now plan to hold a public meeting. But you may submit a request for one using one of the four methods specified under
On June 05, 2013 the Coast Guard District Eight Commander received a request from Louisiana Department of Transportation and Development (LDOTD), on behalf of the Orleans Levee District, to modify the operating regulations of the U.S. 90 (Danziger) and the Senator Ted Hickey (Leon c. Simon Blvd./Seabrook) bridges on the Inner Harbor Navigational Canal (IHNC) past the Gulf Intra-Costal Waterway (GIWW).
The US 90 (Danzinger) Bridge across the IHNC, mile 3.1, at New Orleans, Orleans Parish, Louisiana is a Vertical lift bridge with a vertical clearance of 50 feet above Mean High Water (MHW), elevation 5.0 Mean Sea Level (MSL), in the closed-to-navigation position and 120 feet MHW, elevation 5.0 MSL, in the open-to-navigation position. The Senator Ted Hickey (Leon C. Simon Blvd./Seabrook) Bridge across the IHNC, mile 4.6, at New Orleans, Orleans Parish, Louisiana is a Bascule bridge with a vertical clearance of 46 feet above Mean High Water (MHW), elevation 5.0 Mean Sea Level (MSL), in the closed-to-navigation position and unlimited in the open-to-navigation position.
Under 33 CFR 117.458(b), the draw of the US 90 (Danzinger) Bridge, mile 3.1, shall open on signal; except that from 8 p.m. to 7 a.m. the draw shall open on signal if at least four hours notice is given, and the draw need not be opened from 7 a.m. to 8:30 a.m. and 5 p.m. to 6:30 p.m. Monday through Friday. Under 33 CFR 117.458(c), the draw of the Senator Ted Hickey (Leon C. Simon Blvd./Seabrook) Bridge, mile 4.6, shall open on signal; except that from 7 a.m. to 8:30 a.m. and 5 p.m. to 6:30 p.m. Monday through Friday, the draw need not be opened. This operating regulation has been in effect since 2003.
This regulation would allow LDOTD to improve the systematic efficiency of bridge operations for vessels using the portions of the IHNC that are not associated with the GIWW. The changes will do this by allowing bridge operations to be accomplished with the same personnel and allowing the regulations to work with one another thereby allowing for faster response times for openings and more efficient use of the waterway and ultimately more fiscal responsibility on behalf of the owner. This test will allow for comments on a current notice of proposed rule making (NPRM) that is being run in conjunction with this test. Comments on this test and the NPRM with the same docket number will be evaluated at the same time. The bridges will return to normal operations upon completion of the test to allow for evaluation of any and all comments.
Currently, there is minimal vessel traffic (nine per month and 32 per month, respectively) in this area and land traffic would not be adversely impacted by this test as the opening times would be minimized.
The test deviation will begin at 12:01 a.m. on the date 15 days after publication in the
In accordance with 33 CFR 117.35(e), the drawbridges must return to their regular operating schedules immediately at the end of the effective period of this temporary deviation. This deviation from the operating regulations is authorized under 33 CFR 117.35.
Department of Veterans Affairs.
Direct final rule.
The Department of Veterans Affairs (VA) is taking direct final action to amend its regulations related to the VA Dental Insurance Program (VADIP), a pilot program to offer premium-based dental insurance to enrolled veterans and certain survivors and dependents of veterans. Specifically, this rule will add language to clarify the limited preemptive effect of certain criteria in the VADIP regulations.
This rule is effective on December 23, 2013, without further notice, unless VA receives a significant adverse comment by November 21, 2013.
Written comments may be submitted through
Kristin Cunningham, Director, Business Policy, Chief Business Office (10NB), Veterans Health Administration, Department of Veterans Affairs, 810 Vermont Avenue NW., Washington, DC 20420; (202) 461–1599. (This is not a toll-free number.)
This rule amends 38 CFR 17.169 to add language to clarify the limited preemptive effect of certain criteria in the VA Dental Insurance Program (VADIP), a pilot program to offer premium-based dental insurance to enrolled veterans and certain survivors and dependents of veterans. Under VADIP, VA contracts with private insurers through the Federal contracting process to offer dental insurance, and the private insurer is then responsible for the administration of the dental insurance plan. VA's role under VADIP is primarily to form the contract with the private insurer and verify the eligibility of veterans, survivors, and dependents. VADIP is authorized, and its implementing regulations are required, by section 510 of the Caregivers and Veterans Omnibus Health Services Act of 2010, Public Law 111–163 (2010) (section 510).
“Preemption” refers to the general principle that Federal law supersedes conflicting State law. U.S. Const. art. VI, cl. 2;
For example, section 510(h) requires VA to determine and annually adjust VADIP insurance premiums. Determining premium rates is an important aspect of the “business of insurance.”
Applying these principles here, Congress specifically intended to legislate on the business of insurance under certain subsections of section 510. The following chart lists these subsections and their corresponding regulatory paragraphs.
Consequently, these subsections of section 510 and their relevant regulatory counterparts preempt conflicting State and local laws.
State and local laws, including laws relating to the business of insurance, are not preempted by section 510, however, in areas where section 510 is silent. Examples of such areas of law include claims processes, licensing, underwriting, and appeals related to involuntarily disenrollment. Additionally, if State or local laws, including laws relating to the business of insurance, are not in conflict with any portion of section 510, then such State or local law may coexist with section 510.
Preemption allows for the implementation of uniform benefits in all States and may reduce the overall cost of VADIP. We therefore amend § 17.169 to add preemption language in accordance with the discussion above.
Section 6(c) of Executive Order 13132 (entitled “Federalism”) requires an agency that is publishing a regulation that has federalism implications and that preempts State law to follow certain procedures. Regulations that have federalism implications, according to section 1(a) of Executive Order 13132, are those that have “substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.”
Because this regulation addresses a federalism issue, in particular preemption of State laws, VA conducted prior consultation with State officials in compliance with Executive Order 13132. VA solicited comment and input from State insurance regulators, through their representative national organization, the National Association of Insurance Commissioners (NAIC). In response to its request for comments, VA received a letter from the Chief Executive Officer of the NAIC, which agreed with VA's position that this rulemaking properly identifies the limited areas where the statutes and regulations implementing VADIP preempt state laws and regulations concerning the business of insurance. The NAIC also agreed with VA's position that state law and regulation should continue to apply where federal law and regulations are silent, including in the areas of licensing and claims processing. VA received no other comments from the NAIC on this rulemaking.
VA's promulgation of this regulation complies with the requirements of Executive Order 13132 by (1) in the absence of explicit preemption in the authorizing statute, identifying the clear evidence that Congress intended to preempt State law, or where the exercise of State authority conflicts with the exercise of Federal authority under a Federal statute; (2) limiting the preemption to only those areas where we find existence of a clear conflict or clear evidence of Congress' intention that Federal law preempt State law; (3) restricting the regulatory preemption to the minimum level necessary to achieve the objectives of the statute; (4) consulting with the State insurance regulators, as indicated above; and (5) providing opportunity for comment through this rulemaking and its companion proposed rulemaking, see RIN 2900–AO86.
VA believes this regulatory amendment is non-controversial and anticipates that this rule will not result in any significant adverse comment, and therefore is issuing it as a direct final rule. The preemptive effect of certain criteria in this rulemaking is limited, and we have conducted formal consultation on the issue of preemption, in compliance with Executive Order 13132, Federalism. However, in the “Proposed Rules” section of this
For purposes of the direct final rulemaking, a significant adverse comment is one that explains why the rule would be inappropriate, including challenges to the rule's underlying premise or approach, or why it would be ineffective or unacceptable without a change. In determining whether an adverse comment is significant and warrants withdrawing a direct final rule, we will consider whether the comment raises an issue serious enough to warrant a substantive response in a notice-and-comment process in accordance with section 553 of the Administrative Procedure Act (5 U.S.C. 553). Comments that are frivolous, insubstantial, or outside the scope of the rule will not be considered adverse under this procedure. For example, a comment recommending an additional change to the rule will not be considered a significant comment unless the comment states why the rule would be ineffective or unacceptable without the additional change.
Under direct final rule procedures, if no significant adverse comment is received within the comment period, the rule will become effective on the date specified above. After the close of the comment period, VA will publish a document in the
However, if any significant adverse comment is received, VA will publish in the
Title 38 of the Code of Federal Regulations, as revised by this rulemaking, represents VA's implementation of its legal authority on this subject. Other than future amendments to this regulation or governing statutes, no contrary guidance or procedures are authorized. All existing or subsequent VA guidance is read to conform with this rulemaking if possible or, if not possible, such guidance is superseded by this rulemaking.
This document contains no provisions constituting a collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501–3521).
The Secretary hereby certifies that this regulatory amendment will not have a significant economic impact on a substantial number of small entities as they are defined in the Regulatory Flexibility Act, 5 U.S.C. 601–612. Only States, dental insurers, certain veterans and their survivors and dependents, none of which are small entities, will be affected. Therefore, pursuant to 5 U.S.C. 605(b), this rulemaking is exempt from the initial and final regulatory flexibility
Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, and other advantages; distributive impacts; and equity). Executive Order 13563 (Improving Regulation and Regulatory Review) emphasizes the importance of quantifying both costs and benefits, reducing costs, harmonizing rules, and promoting flexibility. Executive Order 12866 (Regulatory Planning and Review) defines a “significant regulatory action,” which requires review by the Office of Management and Budget (OMB), as “any regulatory action that is likely to result in a rule that may: (1) Have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities; (2) Create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; (3) Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in this Executive Order.”
The economic, interagency, budgetary, legal, and policy implications of this regulatory action have been examined and it has been determined not to be a significant regulatory action under Executive Order 12866. VA's impact analysis can be found as a supporting document at
The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C. 1532, that agencies prepare an assessment of anticipated costs and benefits before issuing any rule that may result in expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more (adjusted annually for inflation) in any one year. This rule will have no such effect on State, local, and tribal governments, or on the private sector.
The Catalog of Federal Domestic Assistance numbers and titles for the programs affected by this document are 64.009 Veterans Medical Care Benefits and 64.011 Veterans Dental Care.
The Secretary of Veterans Affairs, or designee, approved this document and authorized the undersigned to sign and submit the document to the Office of the Federal Register for publication electronically as an official document of the Department of Veterans Affairs. Jose D. Riojas, Chief of Staff, Department of Veterans Affairs, approved this document on September 16, 2013, for publication.
Administrative practice and procedure, Dental health, Government contracts, Health care, Health professions, Health records, Veterans.
For the reasons stated in the preamble, VA amends 38 CFR part 17 as follows:
38 U.S.C. 501, and as noted in specific sections.
(g)
Environmental Protection Agency (EPA).
Final rule.
Under the Toxic Substances Control Act (TSCA), EPA is amending a significant new use rule (SNUR) for perfluoroalkyl sulfonate (PFAS) chemical substances to add PFAS chemical substances that have completed the TSCA new chemical review process, but have not yet commenced production or import and is designating (for all listed PFAS chemical substances) processing as a significant new use. EPA is also finalizing a SNUR for long-chain perfluoroalkyl carboxylate (LCPFAC) chemical substances that designates manufacturing (including importing) and processing for use as part of carpets or for treating carpet (e.g., for use in the carpet aftercare market) as a significant new use, except for use of two chemical substances as a surfactant in carpet cleaning products. For this SNUR, EPA is also making an exemption inapplicable to persons who import or process the LCPAC chemical substances as part of an article. Persons subject to these SNURs will be required to notify EPA at least 90 days before commencing any significant new use. The required notifications will provide EPA with the opportunity to evaluate the intended use and, if necessary, to prohibit or limit that activity before it occurs.
This final rule is effective December 23, 2013.
The docket for this action, identified by docket identification (ID) number EPA–HQ–OPPT–2012–0268, is available at
You may be potentially affected by this action if you manufacture (including import) or process any of the chemical substances listed in Table 4 of the regulatory text in this document or that meet the LCPFAC chemical category definition as described in this rule.
Potentially affected entities may include, but are not limited to:
• Manufacturers (including importers) of one or more of subject chemical substances (North American Industrial Classification System (NAICS) codes 325 and 324110); e.g., chemical manufacturing and petroleum refineries.
• Carpet and rug mills (NAICS code 314110).
• Fiber, yarn, and thread mills (NAICS code 31311).
• Home furnishing merchant wholesalers (NAICS code 423220).
• Carpet and upholstery cleaning services (NAICS code 561740).
This listing is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely to be affected by this action. Other types of entities not listed in this unit could also be affected. The NAICS codes have been provided to assist you and others in determining whether this action might apply to certain entities. To determine whether you or your business may be affected by this action, you should carefully examine the applicability provisions in 40 CFR 721.5, 40 CFR 721.9582, and 40 CFR 721.10536, which is in the regulatory text of this document. If you have any questions regarding the applicability of this action to a particular entity, consult the technical person listed under
This action may also affect certain entities through pre-existing import certification and export notification rules under TSCA. Persons who import any chemical substance governed by a final SNUR are subject to the TSCA section 13 (15 U.S.C. 2612) import certification requirements and the corresponding regulations at 19 CFR 12.118 through 12.127; see also 19 CFR 127.28. Those persons must certify that the shipment of the chemical substance complies with all applicable rules and orders under TSCA, including any 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 40 CFR 721.20), and must comply with the export notification requirements in 40 CFR part 707, subpart D.
In the
This final rule requires persons who intend to manufacture (including import) or process one or more of the PFAS chemical substances listed in Table 4 of the regulatory text for the uses identified in 40 CFR 721.9582(a)(2) to submit a Significant New Use Notice (SNUN) at least 90 days before commencing manufacture (including import) or processing. Given the structural similarity of these chemicals to the PFAS chemicals covered under 40 CFR 721.9582 and EPA's health and environmental concerns associated with them, EPA has concluded that today's action on these PFAS chemicals is warranted and any manufacturing (including importing) or processing for any use of these uncommenced PFAS chemicals would be a significant new use.
EPA is also finalizing a SNUR for LCPFAC chemical substances that requires persons to notify the Agency at least 90 days before commencing manufacture (including import) or processing for use as part of carpets or for treating carpet (e.g., for use in the carpet aftercare market) as a significant new use, except for use of two LCPFAC chemical substances as surfactants in carpet cleaning products. Comments submitted to the docket after the comment period indicated use of two LCPFAC chemical substances as a surfactant in aftermarket carpet cleaning products as an ongoing use. The use of these two chemical substances is not included as a significant new use in this final rule.
For this SNUR, EPA is also making the article exemption at 40 CFR 721.45(f) inapplicable to persons who import LCPFAC chemical substances as part of carpets. The article exemption at 40 CFR 721.45(f) is based on an assumption that people and the environment will generally not be exposed to chemical substances in articles (see 49 FR 35014; September 5, 1984). However, as stated in Unit IV. of the proposed rule (77 FR 48928; August 15, 2012), exposure to LCPFAC chemical substances may occur both during the carpet manufacture process and during the lifetime of the finished carpet. Therefore, exposure would increase if in the future LCPFAC chemical substances are incorporated in carpets and then imported. The article exemption at 40 CFR 721.45(f) remains in effect, however, for persons who import LCPFAC chemical substances as part of other types of articles. The article exemption at 40 CFR 721.45(f) also remains in effect for processing of LCPFAC chemical substances as part of an article (i.e., carpet) since EPA is aware that this is an ongoing use. This final action does not affect the exemption at 40 CFR 721.45(f) for PFAS chemical substances, which remains in effect for persons who import or process these chemical substances.
The term PFAS refers to a general category of perfluorinated sulfonate chemical substances of any chain
The term LCPFAC refers to the long-chain category of perfluorinated carboxylate chemical substances with perfluorinated carbon chain lengths equal to or greater than seven carbons and less than or equal to 20 carbons. Based on comments filed on the proposed SNUR and all information available to EPA, the category definition of LCPFAC chemical substances differs in this final rule from the definition described in the proposed SNUR. The upper limit of the perfluorinated carbon chain length is now 20 carbons. In the proposed SNUR, there was no upper limit. Also, the LCPFAC chemical subgroup described in 40 CFR 721.10536(b)(1)(vi) of the proposed rule is removed from the definition in this final SNUR.
LCPFAC chemical substances are synthetic chemicals that do not occur naturally in the environment. The LCPFAC chemical substances subject to this SNUR are identified as follows, where 5 < n < 21 or 6 < m < 21:
a. CF
b. CF
c. CF
d. CF
e. CF
The category of LCPFAC chemical substances, based on the chemical structures delineated in 40 CFR 721.10536 (b)(1)(i) through (b)(1)(v) of this final rule, also includes the salts and precursors of these perfluorinated carboxylates. LCPFAC precursors may be simple derivatives of perfluorooctanoic acid (PFOA) and higher homologues or certain polymers that may degrade to PFOA or higher homologues. These precursors include all fluorotelomers.
It is important to note that any LCPFAC chemical substance identified by paragraphs (b)(1)(i) through (b)(1)(v) of this final rule that is intentionally used during fluoropolymer formulation, such as an emulsion stabilizer in aqueous dispersions, is subject to reporting for the significant new uses described in 40 CFR 721.10536(b)(2). For example, ammonium perfluorooctanoate (APFO)—when used as an aqueous dispersion agent in fluoropolymer production—is subject to this SNUR if the final fluoropolymer product is used as part of carpets or to treat carpets.
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 those listed in TSCA section 5(a)(2). 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 SNUN to EPA at least 90 days before they manufacture (including import) or process the chemical substance for that use (15 U.S.C. 2604(a)(1)(B)). As described in Unit II.C., the general SNUR provisions are found at 40 CFR part 721, subpart A.
General provisions for SNURs appear under 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 final rule. However, EPA is making the exemption at 40 CFR 721.45(f) inapplicable to persons who import LCPFAC chemical substances as part of carpets under this SNUR. As a result, persons subject to the provisions of this rule would not be exempt from significant new use reporting if they import LCPFAC chemical substances as part of carpets. However, the articles exemption will remain in effect for persons who process chemical substances as part of an article because existing stocks of carpets may still contain LCPFAC substances.
Provisions relating to user fees appear at 40 CFR part 700. According to 40 CFR 721.1(c), persons subject to SNURs must comply with the same notice requirements and EPA regulatory procedures as submitters of premanufacture notices (PMNs) under TSCA section 5(a)(1)(A). In particular, these requirements include the information submissions 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 on which it has received the SNUN. If EPA does not take action, EPA is required under TSCA section 5(g) to explain in the
Persons who export or intend to export a chemical substance identified in a proposed or final SNUR are subject to the export notification provisions of TSCA section 12(b). The regulations that interpret TSCA section 12(b) appear at 40 CFR part 707, subpart D. Persons who import a chemical substance identified in a final SNUR are subject to the TSCA section 13 import certification requirements, codified at 19 CFR 12.118 through 12.127; see also 19 CFR 127.28. Such persons must certify that the shipment of the chemical substance complies with all applicable rules and orders under TSCA, including any SNUR requirements. The EPA policy in support of import certification appears at 40 CFR part 707, subpart B.
As discussed in Units III. and IV. of the proposed rule (77 FR 48924; August 15, 2012), PFAS and LCPFAC chemical substances are found world-wide in the environment, wildlife, and humans. They are bioaccumulative in wildlife and humans, and are persistent in the environment. They are toxic to laboratory animals, producing reproductive, developmental, and systemic effects in laboratory tests. The exact sources and pathways by which these chemicals move into and through the environment and allow humans and wildlife to become exposed are not fully understood, but are likely to include releases from manufacturing of the chemicals, processing of these chemicals into products like carpets and textiles, and aging and wear of products containing them.
Since the manufacture (including import) and processing of PFAS and LCPFAC chemical substances for these uses have been discontinued in the United States, EPA expects their presence in humans and the environment to decline over time as has been observed in the past when production and use of other persistent chemicals has ceased. EPA is concerned that the manufacturing (including import) or processing of these chemical substances, as well as importing these chemicals as part of articles, for the new uses identified in this rule could be reinitiated in the future. If reinitiated, EPA believes that such use would increase the magnitude and duration of human and environmental exposure to
EPA is adding processing of PFAS chemical substances (for any use in the United States, other than the uses listed under 40 CFR 721.9582 (a)(3), (a)(4), and (a)(5)) to the significant new uses of those chemical substances. EPA is concerned about the potential for PFAS chemical substances manufactured (including imported) for an ongoing use to be redirected to other uses without prior notice to the Agency. For example, a chemical substance could be initially manufactured for uses listed under 40 CFR 721.9582 (a)(3), (a)(4), or (a)(5), and then redirected for another use after its initial manufacture or import. For similar reasons, EPA is designating processing of LCPFAC chemical substances or use as part of carpets or to treat carpet as a significant new use, except for one specifically identified ongoing use of two LCPFAC chemical substances as a surfactant in aftermarket carpet cleaning products. As such, persons who process PFAS or LCPFAC chemical substances for a significant new use will be required to first notify EPA, even if they are not themselves manufacturers of the chemical substance. Note, the exemption at 40 CFR 721.45(f) is not applicable for persons who import these LCPFAC chemical substances as part of an article, but is applicable for persons who process these LCPFAC chemicals substances as part of an article. Pursuant to 40 CFR 721.45(f), processing of PFAS and LCPFAC chemical substances as part of articles remains exempt from notice requirements.
Accordingly, EPA will have the opportunity to evaluate and control, where appropriate, activities associated with those uses, if such manufacturing (including importing) or processing were to start or resume. The required notification provided by a SNUN will provide EPA with the opportunity to evaluate activities associated with a significant new use and an opportunity to protect against unreasonable risks, if any, from exposure to PFAS and LCPFAC chemical substances.
Consistent with EPA's past practice for issuing SNURs under TSCA section 5(a)(2), EPA's decision to promulgate a SNUR for a particular chemical use need not be based on an extensive evaluation of the hazard, exposure, or potential risk associated with that use. Rather, the Agency's action is based on EPA's determination that if the use begins or resumes, it may present a risk that EPA should evaluate under TSCA before the manufacturing or processing for that use begins. Since the new use does not currently exist, deferring a detailed consideration of potential risks or hazards related to that use is an effective use of resources. If a person decides to begin manufacturing or processing the chemical for the use, the notice to EPA allows the Agency to evaluate the use according to the specific parameters and circumstances surrounding that intended use.
With this action, the Agency is designating as significant new uses of LCPFAC chemical substances use as part of carpet or to treat carpet. The Agency believes the 2010/2015 PFOA Stewardship Program, in which companies committed to work toward eliminating facility emissions and product content of PFOA—a LCPFAC chemical substance—by 2015, will eliminate many other ongoing uses of LCPFAC chemical substances. As those uses are phased out in the United States, EPA anticipates taking additional regulatory actions to prevent resumption of the uses without prior notice to EPA.
Based on the considerations in Unit III.A. of this rule, EPA will achieve the following objectives with regard to the significant new use(s) that are designated in this rule:
1. EPA will receive notice of any person's intent to manufacture (including import) or process PFAS or LCPFAC chemical substances for the described significant new use before that activity begins.
2. EPA will have an opportunity to review and evaluate data submitted in a SNUN before the notice submitter begins manufacturing (including importing) or processing PFAS or LCPFAC chemical substances for the described significant new use.
3. EPA will be able to regulate prospective manufacturers (including importers) or processors of PFAS or LCPFAC chemical substances before the described significant new use of the chemical substance occurs, provided that regulation is warranted pursuant to TSCA sections 5(e), 5(f), 6 or 7.
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 authorizes EPA to consider any other relevant factors.
To determine what would constitute a significant new use of the PFAS and LCPFAC chemical substances subject to this rule, as discussed herein, EPA considered relevant information about the toxicity of these substances, likely human exposures and environmental releases associated with possible uses, and the four factors listed in TSCA section 5(a)(2).
Except for the ongoing uses specified in 40 CFR 721.9582 (a)(3) through (a)(5), the Agency believes the manufacture (including import) and processing of any of the PFAS chemical substances subject to this rule has been discontinued. Any new use of these chemicals, including processing, could change the type and form of exposure and/or the magnitude and duration of exposure to humans and the environment relative to what currently exists. Based on these considerations of the statutory factors discussed in this unit, EPA has determined that the manufacture (including import) or processing of any of the PFAS chemical substances subject to this rule, for any use except ongoing uses specified in 40 CFR 721.9582 (a)(3) through (a)(5), is a significant new use.
Exposure to LCPFAC chemical substances may occur both during the carpet manufacture process and during the lifetime of the finished carpet via inhalation and ingestion of dust generated from the abrasion of carpets. This is of particular concern for children since they engage in a variety of activities on carpets for longer periods of time and have a greater degree of hand-to-mouth activity in their earliest years. This will change both the magnitude of exposure and the duration of exposure. Except for one ongoing use specified in 40 CFR 721.10536(b)(3), the Agency believes the manufacture (including import) and processing of LCPFAC chemical substances as part of carpet or to treat carpet has been discontinued. EPA also believes LCPFAC chemicals substances are no longer imported as part of carpet. If reinitiated, EPA believes these uses of LCPFAC chemical substances would significantly increase the magnitude and duration of exposure to humans and the
As discussed in the
EPA recognizes that TSCA section 5 does not usually require developing any particular test data before submission of a SNUN. There are two exceptions: (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)); and (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 (15 U.S.C. 2604(d); 40 CFR 721.25; and 40 CFR 720.50). However, as a general matter, EPA recommends that SNUN submitters include data that would permit a reasoned evaluation of risks posed by the chemical substance during its manufacture (including import), processing, use, distribution in commerce, or disposal. EPA encourages persons to consult with the Agency before submitting a SNUN. As part of this optional pre-notice consultation, EPA would discuss specific data it believes may be useful in evaluating a significant new use. SNUNs submitted for significant new uses without any test data may increase the likelihood that EPA will take action under TSCA section 5(e) to prohibit or limit activities associated with this chemical.
SNUN submitters should be aware that EPA will be better able to evaluate SNUNs that provide detailed information on:
1. Human exposure and environmental releases that may result from the significant new uses of the chemical substance.
2. Potential benefits of the chemical substance.
3. Information on risks posed by the chemical substances compared to risks posed by potential substitutes.
EPA recommends that submitters consult with the Agency prior to submitting a SNUN to discuss what data may be useful in evaluating a significant new use. Discussions with the Agency prior to submission can afford ample time to conduct any tests that might be helpful in evaluating risks posed by the substance. According to 40 CFR 721.1(c), persons submitting a SNUN must comply with the same notice requirements and EPA regulatory procedures as persons submitting a PMN, including submission of test data on health and environmental effects as described in 40 CFR 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 40 CFR 721.25 and 40 CFR 720.40. E–PMN software is available electronically at
This action finalizes the SNUR proposed in the
It should be noted that the LCPFAC chemical substances category definition now delineates a perfluorinated carbon chain length upper limit of 20 carbons. The definition in the proposed rule contained no upper limit. Also, the LCPFAC chemical subgroup that was described in 40 CFR 721.10536(b)(1)(vi) of the proposal is removed from the definition in this final SNUR. The rationale for these changes is explained in greater detail in the response to comments below.
The Agency reviewed and considered all comments received related to the proposed rule. Copies of all non-CBI comments are available at
1.
2.
Since fluoropolymers are not subject to this SNUR, EPA will not include a definition of fluoropolymers. However, the Agency notes that it has distinguished fluoropolymer and fluorotelomer-based chemicals in two corresponding enforceable consent agreement test rules published on July 8, 2005 (70 FR 39630 and 70 FR 39623).
3.
4.
As a convenience to the regulated community, EPA has made available in the public docket an illustrative list of chemical substances subject to the rule. As part of that list, EPA has provided specific examples of chemicals that meet the various components of the LCPFAC category definition.
5.
6.
7.
8.
9.
EPA has evaluated the potential costs of establishing SNUR reporting requirements for potential manufacturers (including importers) and processors of the chemical substance included in this rule (Ref. 2). In the event that a SNUN is submitted, costs are estimated at $8,589 per SNUN submission for large business submitters and $6,189 for small business submitters. These estimates include the cost to prepare and submit the SNUN, and the payment of a user fee. Businesses that submit a SNUN would be subject to either a $2,500 user fee required by 40 CFR 700.45(b)(2)(iii), or, if they are a small business with annual sales of less than $40 million when combined with those of the parent company (if any), a reduced user fee of $100 (40 CFR 700.45(b)(1)). The costs of
The final SNUR will require importers of LCPFAC chemical substances as part of carpets to notify EPA at least 90 days before importing any such articles containing chemicals subject to the final rule. The final rule may also affect firms that do not currently import carpet containing the chemicals, but who may be interested in importing these articles in the future. Typically, firms have an understanding of the contents of the articles they import. However, EPA acknowledges that importers of articles may have varying levels of knowledge about the chemical content of the articles that they import.
While not required by the SNUR, these parties may incur costs to take additional steps to determine whether the articles they plan to import are covered by this SNUR. This determination may involve gathering information from suppliers along the supply chain, and/or testing samples of the article itself. EPA believes that the LCPFAC chemical substances included in this final rule are no longer being manufactured (including imported) for use as part of carpet or for treating carpet (e.g., for use in the carpet aftercare market) in the United States, except for use of two chemical substances in carpet cleaning solution, and that LCPFAC chemical substances are not being imported as part of carpets. Therefore, EPA believes that these costs would be minimal.
Under TSCA section 12(b) and the implementing regulations at 40 CFR part 707, subpart D, exporters must notify EPA if they export or intend to export a chemical substance or mixture for which, among other things, a rule has been proposed or promulgated under section 5. For persons exporting a substance the subject of a SNUR, a one-time notice must be provided for the first export or intended export to a particular country. The total costs of export notification will vary by chemical, depending on the number of required notifications (i.e., the number of countries to which the chemical is exported). EPA is unable to make any estimate of the likely number of export notifications for the chemical covered in this SNUR.
As indicated under
Under Executive Order 12866 (58 FR 51735, October 4, 1993), the Office of Management and Budget (OMB) has determined that this SNUR is not a “significant regulatory action,” because it does not meet the criteria in section 3(f) of the executive order. Accordingly, this action was not reviewed by OMB under Executive Orders 12866 and 13563 (76 FR 3821; January 21, 2011).
According to the PRA, 44 U.S.C. 3501
Pursuant to section 605(b) of the RFA, 5 U.S.C. 601
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 reason to believe that any State, local, or Tribal government would be impacted by this rulemaking. As such, EPA has determined that this regulatory action would not impose any enforceable duty, contain any unfunded mandate, or otherwise have any effect on small governments subject to the requirements of sections 202, 203, 204, or 205 of UMRA, 2 U.S.C. 1531–1538.
This action would not have a substantial direct effect on States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132 (64 FR 43255, August 10, 1999).
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 or uniquely affect the communities of Indian Tribal governments, nor involve or impose any requirements that affect Indian Tribes. Accordingly, the requirements of Executive Order 13175 (65 FR 67249, November 9, 2000) do not apply to this rule.
This action is not subject to Executive Order 13045 (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 rule is not subject to Executive Order 13211 (66 FR 28355, May 22, 2001), because this action is not expected to affect energy supply, distribution, or use.
Since this action does not involve any technical standards; section 12(d) of the NTTAA, 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 (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).
The revisions and addition read as follows:
(a)
(2) The significant new uses are:
(i) Manufacturing (including importing) or processing of any chemical substance listed in Table 1 of paragraph (a)(1) of this section for any use.
(ii) Manufacturing (including importing) or processing of any chemical substance listed in Table 2 of paragraph (a)(1) of this section for any
(iii) Manufacturing (including importing) or processing of any chemical substance listed in Table 3 of paragraph (a)(1) of this section for any use, except as noted in paragraphs (a)(3) through (5) of this section.
(iv) Manufacturing (including importing) or processing of any chemical substance listed in Table 4 of paragraph (a)(1) of this section for any use.
(3) Manufacturing (including importing) or processing of any chemical substance listed in Table 2 and Table 3 of paragraph (a)(1) of this section for the following specific uses shall not be considered as a significant new use subject to reporting under this section:
(i) Use as an anti-erosion additive in fire-resistant phosphate ester aviation hydraulic fluids.
(ii) Use as a component of a photoresist substance, including a photo acid generator or surfactant, or as a component of an anti-reflective coating, used in a photomicrolithography process to produce semiconductors or similar components of electronic or other miniaturized devices.
(iii) Use in coating for surface tension, static discharge, and adhesion control for analog and digital imaging films, papers, and printing plates, or as a surfactant in mixtures used to process imaging films.
(iv) Use as an intermediate only to produce other chemical substances to be used solely for the uses listed in paragraph (a)(3)(i), (ii), or (iii) of this section.
(4) Manufacturing (including importing) or processing of tetraethylammonium perfluorooctanesulfonate (CAS No. 56773–42–3) for use as a fume/mist suppressant in metal finishing and plating baths shall not be considered as a significant new use subject to reporting under this section. Examples of such metal finishing and plating baths include: Hard chrome plating; decorative chromium plating; chromic acid anodizing; nickel, cadmium, or lead plating; metal plating on plastics; and alkaline zinc plating.
(5) Manufacturing (including importing) or processing of: 1-Pentanesulfonic acid, 1,1,2,2,3,3,4,4,5,5,5-undecafluoro-, potassium salt (CAS No. 3872–25–1); Glycine, N-ethyl-N-[(tridecafluorohexyl)sulfonyl]-, potassium salt (CAS No. 67584–53–6); Glycine, N-ethyl-N-[(pentadecafluoroheptyl)sulfonyl]-, potassium salt (CAS No. 67584–62–7); 1-Heptanesulfonic acid, 1,1,2,2,3,3,4,4,5,5,6,6,7,7,7-pentadecafluoro-, ammonium salt (CAS No. 68259–07–4); 1-Heptanesulfonamide, N-ethyl-1,1,2,2,3,3,4,4,5,5,6,6,7,7,7-pentadecafluoro- (CAS No. 68957–62–0); Poly(oxy-1,2-ethanediyl), .alpha.-[2-[ethyl[(pentadecafluoroheptyl)sulfonyl]amino]ethyl]-.omega.-methoxy- (CAS No. 68958–60–1); or 1-Hexanesulfonic acid, 1,1,2,2,3,3,4,4,5,5,6,6,6-tridecafluoro-, compd. with 2,2′-iminobis[ethanol] (1:1) (CAS No. 70225–16–0) for use as a component of an etchant, including a surfactant or fume suppressant, used in the plating process to produce electronic devices shall not be considered a significant new use subject to reporting under this section.
(a)
(b)
(i) CF
(ii) CF
(iii) CF
(iv) CF
(v) CF
(2) The significant new use for chemical substances identified in paragraph (b)(1) of this section are: Manufacture (including import) or processing for use as part of carpets or to treat carpets (e.g., for use in the carpet aftercare market), except as noted in paragraph (b)(3) of this section.
(3) Manufacture (including import) or processing of the following two long-chain perfluoroalkyl carboxylate (LCPFAC) chemical substances for use as a surfactant in aftermarket carpet cleaning products shall not be considered a significant new use subject to reporting under this section:
(i) Phosphonic acid, perfluoro-C6-12-alkyl derivs. (CAS No. 68412–68–0) and
(ii) Phosphinic acid, bis(perfluoro-C6-C12-alkyl) derivs. (CAS No. 68412–69–1).
(c)
(1)
(2) [Reserved]
Environmental Protection Agency (EPA).
Final rule.
The EPA is taking final action to revise the regulatory definition of volatile organic compounds (VOCs) for purposes of preparing state implementation plans (SIPs) to attain the national ambient air quality standards (NAAQS) for ozone under title I of the Clean Air Act (CAA). This final action adds 2,3,3,3-tetrafluoropropene (also known as HFO–1234yf) to the list of compounds excluded from the regulatory definition of VOCs on the basis that this compound makes a negligible contribution to tropospheric ozone formation. As a result, if you are subject to certain federal regulations limiting emissions of VOCs, your emissions of HFO–1234yf may not be regulated for some purposes. This action may also affect whether HFO–1234yf is considered a VOC for state regulatory purposes, depending on whether the state relies on the EPA's regulatory definition of VOCs.
This rule is effective on November 21, 2013.
The EPA has established a docket for this action under Docket ID
David Sanders, Office of Air Quality Planning and Standards, Air Quality Policy Division, Mail Code C539–01, Research Triangle Park, NC 27711; telephone: (919) 541–3356; fax number: 919–541–0824; email address:
Entities potentially affected by this final rule include, but are not necessarily limited to, states (typically state air pollution control agencies) that control VOCs; manufacturers, importers or processors of this compound; and industries involved in the manufacture or servicing of automobiles or automotive air conditioning systems. This action has no substantial direct effects on industry because it does not impose any new mandates on these entities, but, to the contrary, removes HFO–1234yf from the regulatory definition of VOCs. The use of this compound is subject to restrictions under the CAA and the Toxic Substances Control Act (TSCA). Specifically, the use of this compound as an aerosol propellant, blowing agent, or refrigerant, or any other use in which it would substitute for chlorofluorocarbons, hydrochlorofluorocarbons or their substitutes, is prohibited unless such use has been approved under the Significant New Alternatives Policy (SNAP) program (CAA § 612; 40 CFR 82 subpart G). The SNAP program has issued a final approval for HFO–1234yf only as a substitute for use in the motor vehicle air conditioning end-use as a replacement for ozone depleting substances (76 FR 17488, March 29, 2011; revised at 77 FR 17344, March 26, 2012). Furthermore, any significant new use of HFO–1234yf is subject to a reporting requirement according to a significant new use rule (SNUR) established under TSCA (75 FR 65987, October 27, 2010; proposed for amendment at 78 FR 32617, May 31, 2013).
The information presented in this preamble is organized as follows:
Tropospheric ozone, commonly known as smog, is formed when VOCs and nitrogen oxides (NO
Section 302(s) of the CAA specifies that the EPA has the authority to define the meaning of “VOC,” and hence what compounds shall be treated as VOCs for regulatory purposes. The policy of excluding negligibly reactive compounds from the regulatory definition of VOCs was first set forth in the “Recommended Policy on Control of Volatile Organic Compounds” (42 FR 35314, July 8, 1977) and was supplemented most recently with the “Interim Guidance on Control of Volatile Organic Compounds in Ozone State Implementation Plans” (Interim Guidance) (70 FR 54046, September 13, 2005). The EPA uses the reactivity of ethane as the threshold for determining whether a compound has negligible reactivity. Compounds that are less reactive than, or equally reactive to, ethane under certain assumed conditions may be deemed negligibly reactive and therefore suitable for exemption from the regulatory definition of VOCs. Compounds that are more reactive than ethane continue to be considered VOCs for regulatory purposes and therefore are subject to control requirements. The selection of ethane as the threshold compound was based on a series of smog chamber experiments that underlay the 1977 policy.
The EPA has used three different metrics to compare the reactivity of a specific compound to that of ethane: (i) The reaction rate constant (known as k
Honeywell Inc. submitted a petition to the EPA on June 29, 2009, requesting that HFO–1234yf (CAS 754–12–1) be exempted from VOC control based on its low reactivity relative to ethane. The petitioner indicated that HFO–1234yf may be used as a refrigerant for refrigeration and air-conditioning. Honeywell also indicated that it expects HFO–1234yf to be widely used as a replacement for HFC–134a in motor vehicle air-conditioners (MVAC), and that it has been specifically developed for this purpose. Honeywell asserts that as a replacement for use in motor vehicle air conditioners, there will be an environmental advantage in that the global warming potential (GWP) of HFO–1234yf is 4, which is substantially lower than the GWP for HFC–134a (100-year GWP = 1430), which HFO–1234yf is designed to replace.
Detailed information on the ozone reactivity of HFO–1234yf was presented in the proposal notice for this action (76 FR 64059, October 17, 2011) and is summarized here.
HFO–1234yf has a higher k
Under the Interim Guidance, if a compound is equally or less reactive than ethane on any one or more of the three reactivity metrics, it is considered by the EPA to be negligibly reactive in forming ozone. The data submitted by Honeywell support the conclusion that the reactivity of HFO–1234yf is equal to or lower than that of ethane on a mass MIR basis. Thus, HFO–1234yf is eligible for exemption from the regulatory definition of VOCs under the terms of the Interim Guidance.
The EPA has also considered the results of a recent peer-reviewed study of the increase in ozone that may occur as a result of the substitution of HFO–1234yf for HFC–134a.
In summary, the EPA believes that this chemical qualifies as negligibly reactive with respect to its contribution to tropospheric ozone formation.
The preamble to the proposal notice for this action (76 FR 64059, October 17, 2011) provided background information on the Premanufacture Notice (PMN) and SNAP reviews of HFO–1234yf. This information is summarized and updated here.
After reviewing available information and public comments regarding its safety, health and environmental risks and benefits under the SNAP program, the EPA issued a final listing on March 29, 2011, for HFO–1234yf as an acceptable substitute for use of ozone depleting substances in MVAC, subject to specific use conditions, in place of CFC–12 and HFC–134a (76 FR 174888).
In the SNAP review, the EPA found that the use of HFO–1234yf in new passenger vehicle and light-duty truck MVAC systems, subject to the use conditions, does not present a significantly greater risk to human health and the environment compared to the currently approved MVAC alternatives. The 2011 SNAP rule for HFO–1234yf was amended on March 26, 2012, to incorporate by reference a revised standard for connecting fittings from SAE International (77 FR 17344).
Under the TSCA, the EPA in 2010 completed a pre-manufacture review for HFO–1234yf and issued a SNUR (75 FR 65987, October 27, 2010). The 2010 SNUR for HFO–1234yf requires significant new use notification to the EPA at least 90 days before manufacturing or processing for uses beyond air conditioning in new passenger cars and vehicles or commercial servicing of new passenger cars and vehicles originally designed for HFO–1234yf. In particular, under the 2010 rule, notification is required before HFO–1234yf can be sold directly to consumers for the purpose of servicing the MVAC system of their own vehicles. During the notification period, the EPA can take further action to prevent any unreasonable risk. This precautionary step was taken because of certain animal exposure studies indicating toxicity, and the possibility that consumers might be exposed to levels of HFO–1234yf that would cause an unreasonable health risk. However, based on information submitted subsequent to the 2010 rule that in the EPA's view resolves the issue pertaining to the potential risks from consumer exposure that was present in 2010, the EPA has proposed to amend the SNUR for HFO–1234yf such that notification would not be required prior to sale of HFO–1234yf-containing consumer products used to recharge the MVAC systems in passenger cars and vehicles originally designed for HFO–1234yf (78 FR 32617, May 31, 2013).
Based on the mass MIR value for HFO–1234yf being equal to or less than that of ethane, the EPA proposed to find that HFO–1234yf is “negligibly reactive” and to exempt HFO–1234yf from the regulatory definition of VOCs at 40 CFR 51.100(s) (76 FR 64059, October 17, 2011).
There were two comments regarding HFO–1234yf submitted to the docket during the public comment period. One comment was from the petitioner, Honeywell. Another comment came from the Alliance of Automobile Manufacturers. Both comments were in favor of exempting HFO–1234yf. The EPA acknowledges the commenters' support for the proposed action.
The EPA is taking final action to approve the petition for exemption of HFO–1234yf from the regulatory definition of VOCs.
If an entity uses or produces HFO–1234yf and is subject to the EPA
This action is consistent with the Interim Guidance in that one of the three reactivity metric values for HFO–1234yf compares favorably to the corresponding value for ethane. This action is also supported by the EPA's finding during PMN review that HFO–1234yf did not present an unreasonable risk to human health or the environment from the expected uses of the substance, our finding in the SNAP program review of this chemical that use of this chemical in currently-allowed applications poses lower or comparable overall risk to human health and the environment than other acceptable options for the same uses and our confidence that the SNAP program, and the requirements under TSCA will prevent the use of this chemical in any additional applications where such use would pose a significant risk to human health or the environment.
This action is not a “significant regulatory action” under the terms of Executive Order 12866 (58 FR 51735, October 4, 1993) and is therefore not subject to review under Executive Orders 12866 and 13563 (76 FR 3821, January 21, 2011).
This action does not impose an information collection burden under the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501
The Regulatory Flexibility Act (RFA) generally requires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedure Act or any other statute unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small organizations and small governmental jurisdictions.
For purposes of assessing the impacts of this action on small entities, small entity is defined as: (1) A small business as defined by the Small Business Administration (SBA) regulation (see 13 CFR 121.201); (2) a small governmental jurisdiction that is a government of a city, county, town, school district or special district with a population of less than 50,000; and (3) a small organization that is any not-for-profit enterprise which is independently owned and operated and is not dominant in its field.
After considering the economic impacts of today's final rule on small entities, I certify that this action will not have a significant economic impact on a substantial number of small entities. In determining whether a rule has a significant economic impact on a substantial number of small entities, the impact of concern is any significant adverse economic impact on small entities, since the primary purpose of the regulatory flexibility analyses is to identify and address regulatory alternatives “which minimize any significant economic impact of the rule on small entities.” 5 U.S.C. 603 and 604. Thus, an agency may certify that a rule will not have a significant economic impact on a substantial number of small entities if the rule relieves regulatory burden, or otherwise has a positive economic effect on all of the small entities subject to the rule. This final rule removes HFO–1234yf from the regulatory definition of VOCs and thereby relieves users from requirements to control emissions of the compound. We have, therefore, concluded that today's final rule will relieve regulatory burden for all affected small entities.
This action contains no federal mandates under the provisions of Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), 2 U.S.C. 1531–1538 for state, local or tribal governments or the private sector. The action imposes no enforceable duty on any state, local or tribal governments or the private sector. Therefore, this action is not subject to the requirements of sections 202 and 205 of the UMRA.
This action is also not subject to the requirements of section 203 of UMRA because it contains no regulatory requirements that might significantly or uniquely affect small governments. This final rule removes HFO–1234yf from the regulatory definition of VOCs and thereby relieves users of the compound from requirements to control emissions of the compound.
This action does not have federalism implications. It will not have substantial direct effects on the states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132. This final rule removes HFO–1234yf from the regulatory definition of VOCs and thereby relieves users from requirements to control emissions of the compound. Thus, Executive Order 13132 does not apply to this rule.
This action does not have tribal implications, as specified in Executive Order 13175 (65 FR 67249, November 9, 2000). It would not have substantial direct effects on tribal governments, on the relationship between the federal government and Indian Tribes, or on the distribution of power and responsibilities between the federal government and Indian Tribes, as specified in Executive Order 13175. Thus, Executive Order 13175 does not apply to this rule.
This action is not subject to EO 13045 (62 FR 19885, April 23, 1997) because it is not economically significant as defined in EO 12866. While this final rule is not subject to the Executive Order, the EPA has reason to believe that ozone has a disproportionate effect on active children who play outdoors (62 FR 38856; 38859, July 18, 1997). The
This action is not subject to Executive Order 13211 (66 FR 28355 (May 22, 2001)), because it is not a significant regulatory action under Executive Order 12866.
Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (“NTTAA”), Public Law 104–113, section 12(d), (15 U.S.C. 272 note) directs the EPA to use voluntary consensus standards in its regulatory activities unless to do so would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards (e.g., materials specifications, test methods, sampling procedures and business practices) that are developed or adopted by voluntary consensus standards bodies. The NTTAA directs the EPA to provide Congress, through OMB, explanations when the agency decides not to use available and applicable voluntary consensus standards. This rulemaking does not involve technical standards. Therefore, the EPA has not considered the use of any voluntary consensus standards.
Executive Order (EO) 12898 (59 FR 7629, February 16, 1994) establishes federal executive policy on environmental justice. Its main provision directs federal agencies, to the greatest extent practicable and permitted by law, to make environmental justice part of their mission by identifying and addressing, as appropriate, disproportionately high and adverse human health or environmental effects of their programs, policies and activities on minority populations and low-income populations in the United States.
The EPA has determined that this final rule will not have disproportionately high and adverse human health or environmental effects on minority or low-income populations because it will not affect the level of protection provided to human health or the environment.
The Congressional Review Act, 5 U.S.C. 801
Under section 307(b)(1) of the CAA, petitions for judicial review of this action must be filed in the United States Court of Appeals for the District of Columbia Circuit Court within 60 days from the date the final action is published in the
Filing a petition for review by the Administrator of this final action does not affect the finality of this action for the purposes of judicial review nor does it extend the time within which a petition for judicial review must be final, and shall not postpone the effectiveness of such action. Thus, any petitions for review of this action related to the exemption of HFO–1234yf from the regulatory definition of VOCs must be filed in the Court of Appeals for the District of Columbia Circuit within 60 days from the date final action is published in the
Environmental protection, Administrative practice and procedure, Air pollution control, Ozone, Reporting and recordkeeping requirements, Volatile organic compounds.
For reasons set forth in the preamble, part 51 of chapter I of title 40 of the Code of Federal Regulations is amended as follows:
42 U.S.C. 7401, 7411, 7412, 7413, 7414, 7470–7479, 7501–7508, 7601, and 7602.
Environmental Protection Agency (EPA).
Direct final rule.
EPA is taking direct final action to approve two State Implementation Plan (SIP) revisions submitted by the District of Columbia (hereafter “the District”) pursuant to the Clean Air Act (CAA). Whenever new or revised national ambient air quality standards (NAAQS) are promulgated, the CAA requires states to submit a plan for the implementation, maintenance, and enforcement of such NAAQS. The plan is required to address basic program elements including, but not limited to, regulatory structure, monitoring, modeling, legal authority, and adequate resources necessary to assure attainment and maintenance of the NAAQS. These elements are referred to as infrastructure requirements. The District made a submittal addressing the infrastructure requirements for the 2008 lead (Pb) NAAQS and a separate submittal addressing requirements in
This rule is effective on December 23, 2013 without further notice, unless EPA receives adverse written comment by November 21, 2013. If EPA receives such comments, it will publish a timely withdrawal of the direct final rule in the
Submit your comments, identified by Docket ID Number EPA–R03–OAR–2013–0499 by one of the following methods:
A.
B.
C.
D.
Emlyn Vélez-Rosa, (215) 814–2038, or by email at
On July 18, 2013, the District Department of the Environment (DDOE) submitted a revision to the District's SIP to satisfy the requirements of section 110(a)(2) of the CAA for the 2008 lead NAAQS (the infrastructure submittal). On this same date, DDOE submitted a revision to the District SIP addressing the State Board requirements under sections 128 and 110(a)(2)(E)(ii) of the CAA.
On October 15, 2008, EPA substantially strengthened the primary and secondary lead NAAQS, revising the level of the primary (health-based) standard from 1.5 micrograms per cubic meter (μg/m
Section 110(a) of the CAA requires states to submit SIPs to provide for the implementation, maintenance, and enforcement of a new or revised NAAQS within three years following the promulgation of such NAAQS or within such shorter period as EPA may prescribe. The contents of that submission may vary depending upon the facts and circumstances. In particular, the data and analytical tools available at the time the state develops and submits the SIP for a new or revised NAAQS affect the content of the submission. The contents of such SIP submission may also vary depending upon what provisions the state's existing SIP already contains.
Pursuant to section 110(a)(1) of the CAA, states are required to submit SIPs meeting the applicable requirements of section 110(a)(2) within three years after promulgation of a new or revised NAAQS or within such shorter period as EPA may prescribe. Section 110(a)(1) provides the procedural and timing requirements for SIPs and section 110(a)(2) requires states to address basic SIP elements such as requirements for monitoring, basic program requirements and legal authority that are designed to assure attainment and maintenance of the NAAQS. More specifically, section 110(a)(2) lists specific elements that states must meet for “infrastructure” SIP requirements related to a newly established or revised NAAQS.
For the 2008 lead NAAQS, states typically have met many of the basic program elements required in section 110(a)(2) through earlier SIP submissions in connection with previous NAAQS. Nevertheless, pursuant to section 110(a)(1), states have to review and revise, as appropriate, their existing SIPs to ensure that the SIPs are adequate to address the 2008 lead NAAQS. To assist states in meeting this statutory requirement, EPA issued a guidance on October 14, 2011, entitled, “Guidance on Infrastructure State Implementation Plan (SIP) Elements Required Under sections 110(a)(1) and 110(a)(2) for the 2008 Lead (Pb) National Ambient Air Quality Standards (NAAQS)” (hereafter the “2011 Lead Infrastructure Guidance”), which lists the basic elements that states should include in their SIPs for the 2008 lead NAAQS.
Section 110(a)(2)(E)(ii) requires the states to satisfy for each NAAQS the requirements of section 128 of the CAA in relation to State Boards. Section 128(a) requires SIPs to contain provisions that: (1) Any board or body which approves permits or enforcement orders under the CAA have at least a majority of its members represent the public interest and not derive any significant portion of their income from persons subject to permits or enforcement orders under the CAA; and (2) any potential conflict of interest by members of such board or body or the
On July 18, 2013, DDOE provided a submittal to satisfy the requirements of section 110(a)(2) of the CAA for the 2008 lead NAAQS. This submittal addresses the following infrastructure elements, which EPA is proposing to approve: CAA section 110(a)(2)(A), (B), (C), (D)(i)(I), (D)(i)(II), (D)(ii), (E)(i), (E)(iii), (F), (G), (H), (J), (K), (L), and (M), or portions thereof. The infrastructure element (E)(ii) requirements, pertaining to State Boards, are satisfied by a separate submittal which was received by EPA on the same date and it is addressed in section II.B of this rulemaking action. The District did not submit element (I) which pertains to the nonattainment requirements of part D, Title I of the CAA, since this element is not required to be submitted by the 3-year submission deadline of section 110(a)(1), and will be addressed in a separate process, if necessary.
While the District failed to submit a complete SIP addressing the portions of (C), (D)(i)(II), (D)(ii), and (J) relating to the part C, Title I of the CAA for the 2008 lead NAAQS, EPA recognizes that such requirements have already been addressed by a Federal Implementation Plan (FIP) that remains in place, containing the Prevention of Significant Deterioration (PSD) permit program. EPA concludes that such findings of incompleteness would not trigger any additional FIP obligation for the District with respect to these infrastructure requirements. Therefore, EPA is not taking any action for the 2008 lead NAAQS for elements (C), (D)(i)(II), (D)(ii), and (J), for the portions which relate to the PSD permit program required by part C, Title I of the CAA.
In accordance with the decision of the U.S. Court of Appeals for the D.C. Circuit, EPA at this time is not treating the 110(a)(2)(D)(i)(I) SIP submission from the District as a required SIP submission.
A detailed summary of EPA's review and rationale for approving the District's infrastructure submittal may be found in the Technical Support Document (TSD) for this rulemaking action, which is available online at
On July 18, 2013, DDOE also submitted a separate SIP revision addressing the requirements of CAA section 128 in relation to the State Board requirements. This submission also satisfies the State Board requirements under 110(a)(2)(E)(ii) for the 2008 lead NAAQS. The SIP revision consists of updating the existing provisions in the District SIP which satisfy the obligations under sections 128 and 110(a)(2)(E)(ii). In this SIP revision, DDOE states that the relevant section 128 requirements are currently found in chapter 11A “Government Ethics and Accountability” of title I “Government Organization” of the District of Columbia Official Code (2012 Supp.), which the District through DDOE is requesting EPA to approve as part of the District's SIP. The conduct of the DDOE Director, and that of his employees, is currently subject to the requirements of title I, chapter 11A of the District of Columbia Official Code. All District employees are required to follow the laws in title I, chapter 11A of the District of Columbia Official Code regarding employee conduct.
Specifically, the SIP revision consists of incorporating into the SIP the following provisions of title I, chapter 11A of the District of Columbia Official Code, specifically section 1–1161.01 (“Definitions”); section 1–1162.23 (“Conflicts of Interest”); section 1–1162.24 (“Public Reporting”); and section 1–1162.25 (“Confidential Disclosure of Financial Interest”). These provisions supersede the section 128 provisions previously approved in the SIP, and DDOE requests as part of this SIP revision the removal of the prior provisions which addressed section 128 requirements from the District's SIP.
The requirements of section 128(a)(1) are not applicable to the District because it does not have any board or body which approves air quality permits or enforcement orders. The requirements of section 128(a)(2), however, are applicable to the District because DDOE's Director (i.e., the head of an executive agency) has the similar powers discussed in section 128(a)(2). DDOE approves all CAA permits and enforcement orders in the District. DDOE is an executive agency that acts through its Director or a delegated state employee subordinate.
EPA finds that the measures in these provisions (sections 1–1161.01, 1–1162.23, 1–1162.24, and 1–1162.25 of the District of Columbia Official Code) are adequate to meet the District's obligations under section 128 as well as the infrastructure requirements of section 110(a)(2)(E)(ii). EPA also finds that the submittal specifically meets the infrastructure requirements of section 110(a)(2)(E)(ii) for the 2008 lead NAAQS.
EPA is approving the District's two SIP revisions. EPA is approving the District's SIP revision addressing the following section 110(a)(2) elements for the 2008 lead NAAQS: (A), (B), (C), (D)(i)(I), (D)(i)(II), (D)(ii), (E)(i), (E)(iii), (F), (G), (H), (J), (K), (L), and (M), or portions thereof. This SIP revision provides the basic program elements specified in section 110(a)(2) necessary to implement, maintain, and enforce the 2008 lead NAAQS. This action does not include section 110(a)(2)(I) of the CAA which pertains to the nonattainment requirements of part D, title I of the CAA. EPA is also approving the District's SIP revision addressing the requirements of section 128. This SIP revision, which consists of incorporating the relevant provisions of title I, chapter 11A of the District of Columbia Official Code (2012 Supp.) in the District SIP and removing superseded provisions in the SIP under 40 CFR 50.470(e), meets the requirements of section 128. EPA is also approving this SIP revision as meeting the infrastructure requirements of section 110(a)(2)(E)(ii) for the 2008 lead NAAQS. The SIP revisions were formally and individually submitted on July 18, 2013. EPA is publishing this rule without prior proposal because EPA views this as a noncontroversial amendment and anticipates no adverse comment. However, in the “Proposed Rules” section of today's
Under the CAA, the Administrator is required to approve a SIP submission that complies with the provisions of the CAA and applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the CAA. Accordingly, this action merely approves state law as meeting Federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this action:
• Is not a “significant regulatory action” subject to review by the Office of Management and Budget under Executive Order 12866 (58 FR 51735, October 4, 1993);
• does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501
• is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601
• does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104–4);
• does not have Federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);
• is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);
• is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);
• is not subject to requirements of Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the CAA; and
• does not provide EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).
In addition, this rule does not have tribal implications as specified by Executive Order 13175 (65 FR 67249, November 9, 2000), because the SIP is not approved to apply in Indian country located in the state, and EPA notes that it will not impose substantial direct costs on tribal governments or preempt tribal law.
The Congressional Review Act, 5 U.S.C. 801
Under section 307(b)(1) of the CAA, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by December 23, 2013. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this action for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. Parties with objections to this direct final rule are encouraged to file a comment in response to the parallel notice of proposed rulemaking for this action published in the proposed rules section of today's
Environmental protection, Air pollution control, Incorporation by reference, Intergovernmental relations, Lead, Reporting and recordkeeping requirements.
42 U.S.C. 7401
40 CFR part 52 is amended as follows:
42 U.S.C. 7401
The amendments read as follows:
(c) * * *
(e) * * *
Environmental Protection Agency (EPA).
Final rule.
EPA is approving, under the Clean Air Act (CAA), the state of Ohio's request to redesignate the Canton-Massillon nonattainment area (Canton), Stark County, to attainment of the 1997 annual and 2006 24-hour national ambient air quality standards (NAAQS or standards) for fine particulate matter (PM
This rule is effective October 22, 2013.
EPA has established a docket for this action under Docket Identification EPA–R05–OAR–2012–0564. All documents in these dockets are listed on the
Carolyn Persoon, Environmental Engineer, Control Strategies Section, Air Programs Branch (AR–18J), Environmental Protection Agency, Region 5, 77 West Jackson Boulevard,
Throughout this document whenever “we,” “us,” or “our” is used, we mean EPA. This supplementary information section is arranged as follows:
On June 26, 2012, OEPA submitted its request to redesignate the Canton nonattainment area to attainment for the 1997 annual and 2006 24-hour PM
EPA has determined that the entire Canton area is attaining the 1997 annual and 2006 24-hour PM
EPA is approving Ohio's PM
EPA is also approving the 2005 and 2008 emission inventories for primary PM
EPA also finds adequate and is approving Ohio's 2015 and 2025 primary PM
EPA received one supportive comment and no adverse comments on its proposed rulemaking. The comment has been added to the docket.
EPA has determined that the Canton area has attained the 1997 annual and 2006 24-hour PM
EPA is determining that the Canton area has attained the standards and that the area meets the requirements for redesignation to attainment of that standard under sections 107(d)(3)(E) and 175A of the CAA. Thus, EPA is granting the request from Ohio to change the legal designation of the Canton area from nonattainment to attainment for the 1997 annual and 2006 24-hour PM
In accordance with 5 U.S.C. 553(d), EPA finds there is good cause for this action to become effective immediately upon publication. This is because a delayed effective date is unnecessary due to the nature of a redesignation to attainment, which relieves the area from certain CAA requirements that would otherwise apply to it. The immediate effective date for this action is authorized under both 5 U.S.C. 553(d)(1), which provides that rulemaking actions may become effective less than 30 days after publication if the rule grants or recognizes an exemption or relieves a restriction, and section 553(d)(3), which allows an effective date less than 30 days after publication as otherwise provided by the agency for good cause found and published with the rule. The purpose of the 30-day waiting period prescribed in section 553(d) is to give affected parties a reasonable time to adjust their behavior and prepare before the final rule takes effect. Today's rule, however, does not create any new regulatory requirements such that affected parties would need time to prepare before the rule takes effect. Rather, today's rule relieves Ohio of various requirements for the Canton area. For these reasons, EPA finds good cause under 5 U.S.C. 553(d)(3) for this action to become effective on the date of publication of this action.
Under the CAA, redesignation of an area to attainment and the accompanying approval of the maintenance plan under CAA section 107(d)(3)(E) are actions that affect the status of geographical area and do not impose any additional regulatory requirements on sources beyond those required by state law. A redesignation to attainment does not in and of itself impose any new requirements, but rather results in the application of requirements contained in the CAA for areas that have been redesignated to attainment. Moreover, the Administrator is required to approve a SIP submission that complies with the provisions of the Act and applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the CAA. Accordingly, this action merely approves state law as meeting Federal requirements and does not impose additional requirements beyond those imposed by state law. For these reasons, this action:
• Is not a “significant regulatory action” subject to review by the Office
• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501
• Is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601
• Does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104–4);
• Does not have Federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);
• Is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);
• Is not significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);
• Is not subject to requirements of Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the CAA; and,
• Does not provide EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).
In addition, this final rule does not have tribal implications as specified by Executive Order 13175 (65 FR 67249, November 9, 2000), because the SIP is not approved to apply in Indian country located in the Commonwealth, and EPA notes that it will not impose substantial direct costs on tribal governments or preempt tribal law.
The Congressional Review Act, 5 U.S.C. 801
Under section 307(b)(1) of the CAA, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by December 23, 2013. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this action for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. (
Environmental protection, Air pollution control, Incorporation by reference, Intergovernmental relations, Particulate matter.
Environmental protection, Air pollution control, National parks, Wilderness areas.
40 CFR parts 52 and 81 are amended as follows:
42 U.S.C. 7401
(p) * * *
(8) The Canton-Massillon nonattainment area (Stark County). The maintenance plan establishes motor vehicle emissions budgets for the Canton-Massillon area of 204.33 tpy for primary PM
(q) * * *
(8) Ohio's 2005 and 2008 NO
(s) * * *
(3) The Canton-Massillon nonattainment area (Stark County). The maintenance plan establishes motor vehicle emissions budgets for the Canton-Massillon area of 204.33 tpy for primary PM
(t) * * *
(3) Ohio's 2005 and 2008 NO
42 U.S.C. 7401
Environmental Protection Agency (EPA).
Final rule.
In this final rule EPA is amending the definition of “heating oil” in the regulations for the Renewable Fuel Standard (RFS) program under section 211(o) of the Clean Air Act. This amendment expands the scope of renewable fuels that can be used to show compliance with the RFS renewable fuel volume obligations by adding an additional category of compliant renewable fuel referred to as “fuel oils,” produced from qualifying renewable biomass and used to generate heat to warm buildings or other facilities where people live, work, recreate, or conduct other activities. Producers or importers of fuel oil that meets the amended definition of heating oil will be allowed to generate Renewable Identification Numbers (RINs), provided that the fuel oil meets all other requirements specified in the RFS regulations. Fuel oils used to generate process heat, power, or other functions are not included in this additional category of heating oil. All fuels previously included in the definition of heating oil continue to be included as heating oil for purposes of the RFS program.
We are also finalizing specific registration, reporting, product transfer document, and recordkeeping requirements applicable specifically to these fuel oils, necessary to demonstrate that the fuel oil volume for which RINs were generated was or will be used to heat buildings for climate control for human comfort prior to generating RINs.
The final rule is being adopted with only minor changes from the rule proposed on October 9, 2012, and responses to public comments are provided.
This rule is effective on December 23, 2013.
EPA established a docket for this action under the Docket ID No. EPA–HQ–OAR–2012–0223. All documents in the docket are listed in the www.regulations.gov index. Although listed in the index, some information may not be publicly available (e.g., CBI or other information whose disclosure is restricted by statute). Certain other material, such as copyrighted material, will be publicly available only in hard copy. Publicly available docket materials are available either electronically at
Suzanne Bessette, Office of Transportation and Air Quality, U.S. Environmental Protection Agency, 2000 Traverwood Dr., Ann Arbor, MI 48105; telephone number: (734) 214–4703; fax number: (734) 214–4869; email address:
This final rule expands the regulatory definition of “heating oil” for purposes of the RFS program. This expansion of the types of fuel that can be considered heating oil under the RFS program furthers the goals of the Energy Independence and Security Act of 2007 (EISA) to reduce the use of fossil fuels and encourage increased production of renewable fuels. The EPA expects this rule to allow for the generation of additional advanced and cellulosic RINs, which will help enable obligated parties under the RFS to meet their renewable fuel obligations and offer their customers more alternative fuel products.
This rule amends the definition of “heating oil” in 40 CFR 80.1401 in the RFS program promulgated under section 211(o) of the Clean Air Act (CAA). This amendment expands the scope of renewable fuels that can generate RINs as heating oil by adding an additional category of fuel oils that will be used to generate heat to warm buildings or other facilities where people live, work, recreate, or conduct other activities. Fuel oils used to generate process heat, power, or other functions are not included in this additional category of heating oil. This rule will allow producers or importers of fuel oil that meets the amended definition of heating oil to generate RINs, provided that other requirements specified in the regulations are met. These include new registration, reporting, product transfer document, and recordkeeping requirements applicable specifically to these fuel oils, necessary to demonstrate that the fuel oil volume was or will be used to heat buildings for climate control for human comfort prior to generating RINs.
The amendment expands the fuels included in the definition of heating oil for purposes of the RFS program. All fuels previously included in the definition of heating oil continue to be included as heating oil under 40 CFR 80.1401 for purposes of the RFS program.
This amendment provides new opportunities for RIN generation under the RFS program. Therefore, EPA believes that this amendment will impose no new direct costs or burdens on regulated entities beyond the minimal costs associated with reporting and recordkeeping requirements. At the same time, EPA does not believe that this amendment will adversely impact emissions.
Entities potentially affected by this action include those involved with the production, distribution and sale of transportation fuels, including gasoline and diesel fuel, or renewable fuels such as ethanol and biodiesel, as well as those involved with the production, distribution and sale of other fuel oils that are not transportation fuel. Regulated categories and entities affected by this action include:
EPA is issuing this final rule to amend the definition of heating oil in 40 CFR 80.1401 in the RFS program promulgated under section 211(o) of the CAA.
The RFS program requires the production and use of renewable fuel to replace or reduce the quantity of fossil fuel present in transportation fuel. Under EPA's RFS program, producers or importers of qualified renewable fuel generate RINs which represent the volume of renewable fuel that has been produced or imported. RINs are transferred to the producers or importers of gasoline and diesel transportation fuel who then use the RINs to demonstrate compliance with their renewable fuel volume obligations. RINs also serve the function of credits under the RFS program for regulated
Congress provided that EPA could establish provisions for the generation of credits by producers of certain renewable fuel that was not used in transportation fuel, called “additional renewable fuel.”
EPA addressed the provision for additional renewable fuels in the final rule published on March 26, 2010 (74 FR 14670), specifically addressing the category of “home heating oil.” EPA determined that this term was ambiguous, and defined it by incorporating the existing definition of heating oil at 40 CFR 80.2(ccc). EPA stated that:
EISA uses the term “home heating oil” in the definition of “additional renewable fuel.” The statute does not clarify whether the term should be interpreted to refer only to heating oil actually used in homes, or to all fuel of a type that can be used in homes. We note that the term `home heating oil' is typically used in industry in the latter manner, to refer to a type of fuel, rather than a particular use of it, and the term is typically used interchangeably in industry with heating oil, heating fuel, home heating fuel, and other terms depending on the region and market. We believe this broad interpretation based on typical industry usage best serves the goals and purposes of the statute. If EPA interpreted the term to apply only to heating oil actually used in homes, we would necessarily require tracking of individual gallons from production through ultimate [use] in homes in order to determine eligibility of the fuel for RINs. Given the fungible nature of the oil delivery market, this would likely be sufficiently difficult and potentially expensive so as to discourage the generation of RINs for renewable fuels used as home heating oil. This problem would be similar to that which arose under RFS1 for certain renewable fuels (in particular biodiesel) that were produced for the highway diesel market but were also suitable for other markets such as heating oil and non-road applications where it was unclear at the time of fuel production (when RINs are typically generated under the RFS program) whether the fuel would ultimately be eligible to generate RINs. Congress eliminated the complexity with regards to non-road applications in RFS2 by making all fuels used in both motor vehicle and nonroad applications subject to the renewable fuel standard program. We believe it best to interpret the Act so as to also avoid this type of complexity in the heating oil context. Thus, under today's regulations, RINs may be generated for renewable fuel used as “heating oil,” as defined in existing EPA regulations at § 80.2(ccc). In addition to simplifying implementation and administration of the Act, this interpretation will best realize the intent of EISA to reduce or replace the use of fossil fuels.
The existing regulations do not allow a party to generate RINs for a non-petroleum fuel that is used as a heating oil unless the fuel contains at least 80 percent mono-alkyl esters of long chain fatty acids derived from vegetable oils or animal fats. Since the promulgation of the March 26, 2010 rule, we have received a number of requests from producers to consider expanding the scope of the home heating oil provision to include additional fuel oils that are produced from qualifying renewable biomass but do not meet the regulatory definition of heating oil because they are not #1 or #2 diesel and are not non-petroleum diesel containing at least 80 percent mono-alkyl esters. Parties raising this issue have suggested that limiting “home heating oil” to the fuel types defined in 40 CFR 80.2(ccc) disqualifies certain types of renewable fuel oils that could be used for home heating and that this limitation does not align with our reasoning in the preamble to take a broad interpretation of the term “home heating oil” in CAA section 211(o).
EPA considered this issue further and issued a direct final rule and parallel proposed rule to amend the definition of heating oil in the RFS program to expand the scope of fuels that can generate RINs as heating oil under the RFS program.
After considering the public comments, EPA is revising the definition of heating oil for purposes of the RFS program to include an additional category of fuel oil, as proposed. RINs may be generated for an additional category of renewable fuel that is fuel oil used to heat interior spaces of homes or buildings to control ambient climate for human comfort. This additional category will not include fuel oils used to generate process heat, power, or other functions. The fuel oil must be used to generate heat to warm buildings or other facilities where people live, work, recreate, or conduct other activities. The fuel oil must only be used in heating applications, where the sole purpose of the fuel is for heating and not for any other combined use such as process energy use. This is in addition to the fuel oils previously included in the definition of heating oil at 40 CFR 80.1401, which refers to section 80.2(ccc). All fuels previously included in the definition of heating oil continue to be included as heating oil under 40 CFR 80.1401 for purposes of the RFS program.
EPA believes this expansion of the scope of the home heating oil provision is appropriate and authorized under CAA section 211(o). As EPA described in the RFS final rule, Congress did not define the statutory term “home heating oil,” and it does not have a fixed or definite commercial meaning. In the March 26, 2010 final rule, EPA focused on whether the provision was limited to heating oil actually used in homes. EPA noted that the term home heating oil is usually used in the industry to refer to one type of fuel, and not to a specific
The expansion of the definition adopted in this rulemaking will add a category to the definition to include two types of fuel oils not included in the original definition of heating oil in section 80.1401. First, the new category will include additional fuel oils that do not meet the definition of heating oil in section 80.2(ccc) but are actually used to heat homes.
Second, the new category will include fuel oils that are used to heat facilities other than homes to control ambient climate for human comfort. Under the original definition of heating oil in section 80.1401, a fuel oil meets the definition of heating oil based on its physical properties, not whether it is actually used to heat a home. In the new category added in the amended definition, the additional qualifying fuel oils will be used for heating places where people live, work, or recreate, and not just their homes. It focuses more on what is getting heated—people—and not where the people are located. EPA believes this is a reasonable interpretation of the phrase “home heating oil.” This interpretation recognizes the ambiguity of the phrase used by Congress, which is not defined and does not have a clear and definite commercial meaning. It gives reasonable meaning to the term home heating oil, both by limiting the additional fuel oils to fuel oils used for heating facilities that people will occupy, and excluding the additional fuel oils when used for other purposes such as generation of energy used in the manufacture of products. It also focuses on the aspect of home that is most important here—the heating of people. This interpretation also promotes the purposes of the EISA in that it will increase the production and use of renewable fuels by introducing new sources of fuel producers to the RFS program. It will specifically promote the RFS programmatic goals by facilitating the generation of RINs for renewable fuels that reduce emissions of greenhouse gases compared to fossil fuels. For example, EPA has received information from Envergent Technologies (an alliance of Ensyn and UOP/Honeywell) that such an expanded definition of heating oil would result in nearly immediate production of 3.5 million gallons from their existing facilities, with an additional projected production of up to 45 million gallons per year within 24 months following regulatory action. Based on this information from Envergent Technologies and other parties who commented on the proposed rule, the application of the expanded definition of heating oil to the entire industry would result in the production of many more million additional gallons of RIN-generating renewable fuel.
EPA has also evaluated whether any revisions will need to be made to Table 1 to 40 CFR 80.1426. Table 1 lists the applicable D codes for each fuel pathway for use in generating RINs in the RFS regulations in light of the additional fuel oils included in the expanded definition of heating oil. As discussed below, EPA has determined that the existing D code entries for heating oil in Table 1 to 40 CFR 80.1426 will continue to be appropriate and will not need to be revised in light of the expanded definition of heating oil.
Under the RFS program, EPA must assess lifecycle greenhouse gas (GHG) emissions to determine which fuel pathways meet the GHG reduction thresholds for the four required renewable fuel categories. The RFS program requires a 20% reduction in lifecycle GHG emissions for conventional renewable fuel (except for grandfathered facilities and volumes), a 50% reduction for biomass-based diesel or advanced biofuel, and a 60% reduction for cellulosic biofuel. For the final March 2010 RFS rule, EPA assessed the lifecycle greenhouse gas emissions of multiple renewable fuel pathways and classified pathways based on these GHG thresholds, as compared to the EISA statutory baseline.
The fuel pathways consist of fuel type, feedstock, and production process requirements. GHG emissions are assessed at all points throughout the lifecycle pathway. For instance, emissions associated with sowing and harvesting of feedstocks and in the production, distribution and use of the renewable fuel are examples of what are accounted for in the GHG assessment. A full accounting of emissions is then compared with the petroleum baseline emissions for the conventional fuel being replaced. The lifecycle GHG emissions determination is one factor used to determine compliance with the regulations.
There are currently several fuel pathways that list heating oil as a fuel type with various types of feedstock and production processes used, qualifying the heating oil pathways as either biomass-based diesel, advanced, or cellulosic. The determinations for these different pathways were based on the current definition of heating oil. The pathways also include several types of distillate product including diesel fuel, jet fuel and heating oil.
The lifecycle calculations and threshold determinations are based on the GHG emissions associated with production of the fuel and processing of the feedstock. Converting biomass feedstocks such as triglycerides (if oils are used as feedstock) or hemi-cellulose, cellulose, lignin, starches, etc. (if solid biomass feedstock is used) into heating oil products can be accomplished through either a biochemical or thermochemical process converting those molecules into a fuel product. The existing heating oil pathways were based on the original definition of heating oil in section 80.1401, and were based on a certain level of processing to produce #1, #2, or a non-petroleum diesel blend and the related energy use and GHG emissions that were part of the lifecycle determination for those fuel pathways.
The main difference between the original definition of heating oil, which refers to #1, #2, or a non-petroleum diesel blend, and the new category added in the expanded definition adopted in this rulemaking is that the new category will include heavier types of fuel oil with larger molecules. Based on the type of conversion process, producing these heavier fuel oil products versus the #1, #2, or a non-petroleum diesel blend will affect the amount of energy used and therefore the GHG emissions from the process. There are two main paths for producing a fuel oil product from biomass. In one the biomass is converted into a biocrude which is further refined into lighter products. In this case, producing a heavier fuel oil product will require less processing energy and have lower GHG emissions than converting the same feedstock into a #1, #2, or non-petroleum diesel blend.
In the other type of process, the compounds in the biomass are changed into a set of intermediary products, such as hydrogen (H) and carbon monoxide
Based on these considerations, EPA believes the GHG emissions associated with producing the additional fuel oils included in the expanded definition will be the same or lower than the GHG emissions associated with producing a #1, #2, or non-petroleum diesel blend. Therefore, the original lifecycle analyses for heating oil support applying the existing pathways for heating oil in the RFS regulations to the expanded definition of heating oil. Once the regulatory change to the definition of heating oil is final, all of the pathways currently applicable to heating oil under Table 1 to 40 CFR 80.1426 will apply to the expanded definition of heating oil.
An important issue to address is how to implement such an expanded definition. EPA recognized in the March 26, 2010 rule that it would be difficult and expensive to track heating oil to make sure it was actually used in homes, and so decided to define home heating oil as a type of fuel with certain characteristics, rather than a fuel used in a certain way. This approach avoided the need to track heating oil to its actual end use, and the definition of heating oil at 40 CFR 80.1401 simply referred back to the 40 CFR 80.2(ccc) technical definition.
The expansion of the definition raises this same issue but in a more significant way. The original definition does not provide a way to assure that RINs are only generated for fuel oils used to heat buildings for climate control for human comfort, and not for those used to generate process heat or other purposes. Therefore, for the additional fuel oils other than those qualifying as heating oil based on the definition in 40 CFR 80.2(ccc), EPA is requiring that the renewable fuel producer or importer have adequate documentation to demonstrate that the fuel oil volume for which RINs were generated was or will be used to heat buildings for climate control for human comfort as a condition for generating RINs.
EPA recognizes that for fuels meeting the original definition of heating oil in section 80.1401, no tracking or other documentation of end use is required, and some heating oils that meet the original definition could end up being used for other purposes. However, fuel qualifying as heating oil under the original definition has to have the physical or other characteristics that make it the type of fuel oil normally used to heat homes. The additional fuel oils qualifying as heating oil under the new category of the expanded definition will be identified as heating oil not by their chemical specifications but instead by their actual use for heating for the purposes of climate control for human comfort. EPA is not requiring physical specifications for the additional fuel oil category, beyond the requirement that it be a “fuel oil”, meaning that it is a liquid at 60 degrees Fahrenheit and one atmosphere of pressure and contains no more than 2.5% mass solids. Solid or gaseous fuels, for example wood chips or unrefined waste fats or gases, would not qualify as heating oil capable of generating RINs under the RFS.
For informational purposes, there are industry standard specifications for fuel oils that could qualify as heating oils under the expanded definition of heating oil. For example, ASTM D396 covers grades of fuel oil intended for use in fuel oil burning equipment, ASTM D7666 covers two grades of burner fuel consisting of triglycerides and naturally occurring constituents of triglycerides including monoglycerides, diglycerides, and free fatty acids and distinguished by the pour point, and ASTM D7544 covers grades of pyrolysis liquid biofuel produced from biomass intended for use in fuel oil burner equipment. These and other fuel oils would also have to meet the requirements related to use of the fuel oil for heating, as well as any other regulatory requirements applicable under the RFS program.
In order to verify that the fuel oils are actually used to generate heat for climate control purposes, EPA is adopting the following registration, recordkeeping, product transfer document (PTD) and reporting requirements. These requirements will not apply to
Once the fuel producer has the appropriate affidavit from the end user certifying that it has used or intends to use the fuel for the proper purpose, the fuel producer may validly generate RINs for the fuel. We emphasize that subsequent improper end use would not invalidate any RINs generated by the fuel producer for that volume of fuel oil. We are not requiring that the RIN-generating producer track the fuel's actual end use; only that the fuel be sold for use as a heating oil and that the fuel producer receives the appropriate affidavit from the end user attesting that the fuel has or will actually be used as a heating oil prior to RIN generation. A RIN will not be considered valid unless the renewable producer can demonstrate by the end user's affidavit that the fuel has or will actually be used as heating oil. Parties that purchase RINs generated by renewable fuel producers that rely on this new definition will be able to evaluate whether the proper use requirement is
For the purpose of registration, EPA is allowing the producer of the expanded fuel oil types to establish its facility's baseline volume in the same manner as all other producers under the RFS program, e.g., based on the facility's permitted capacity or actual peak capacity. Additionally, we are requiring producers of the new category fuel oils to submit affidavits in support of their registrations, including a statement that the RIN generating fuel will be used for the purposes of heating interior spaces of homes or buildings to control ambient climate for human comfort, and no other purpose. We also require that producers submit secondary affidavits from the existing end users to verify that the fuel oil is actually being used for or is intended for a qualifying purpose. We are also adopting new reporting, product transfer documents (PTD), and recordkeeping requirements, discussed below, that will help assure that the qualifying fuel oil is being used in an approved application. These requirements are necessary to provide assurance that the fuel oil used to generate RINs is actually used for a qualifying purpose because these types of fuel may not have previously been used as heating oil, and may not be readily identifiable by their physical characteristics. Without such safeguards, EPA could not be confident that the fuel oil is used as heating oil, and end users might not have adequate notice that the fuel oil must be used as heating oil. EPA believes these requirements will place a small but necessary burden on producers and end users, and greatly benefit the integrity of the program.
For the purpose of continued verification after registration, EPA is adopting additional requirements for reporting in § 80.1451(b)(1)(ii)(T), PTDs in § 80.1453(d), and recordkeeping in § 80.1454(b), for the new category of fuel oils qualifying as heating oil.
The reporting, PTD, and recordkeeping requirements will help ensure that the new category of fuel oils used to generate RINs are actually used for the appropriate purpose of heating interior spaces for human comfort. For reporting, producers are required to file quarterly reports with EPA that identify certain information about the volume of fuel oil produced and used as heating oil. The additional reporting requirements stipulate that the producer of fuel oils submit affidavits to EPA reporting the total quantity of the fuel oils produced, the total quantity of the fuel oils sold to end users, and the total quantity of fuel oils sold to end users for which RINs were generated. Additionally, affidavits from each end user must be obtained by the producer and reported to EPA, describing the total quantity of fuel oils received from the producer, the total amount of fuel oil used for qualifying purposes, the date the fuel oil was received from the producer, the blend level of the fuel oil, quantity of assigned RINs received with the renewable fuel, and quantity of assigned RINs that the end user separated from the renewable fuel, if applicable.
The additional product transfer document requirement associated with the new category of heating oil is that a PTD must be prepared and maintained between the fuel oil producer and the final end user for the legal transfer of title and custody of a specific volume of fuel oil that is designated for use only for the purpose of heating interior spaces of buildings to control ambient climate for human comfort. This additional PTD requirement requires that the PTD used to transfer ownership and custody of the renewable fuel must contain the statement: “This volume of renewable fuel oil is designated and intended to be used to heat interior spaces of homes or buildings to control ambient climate for human comfort. Do NOT use for process heat or any other purpose, as these uses are prohibited pursuant to 40 CFR 80.1460(g).” EPA believes that this PTD requirement will help to ensure that each gallon of fuel oil that is transferred from the producer to the end user is used for qualifying purposes under the expanded definition of heating oil. If the fuel oil is used for some non-qualifying purpose instead of for generating heat for climate control purposes, then the end user of that fuel oil is subject to and liable for violations of the RFS regulations and the CAA, as are any parties that caused that violation.
The additional recordkeeping requirement for the new category of heating oil is that producers must keep copies of the contracts which describe the fuel oil under contract with each end user. If the producer is not selling the fuel oil directly to the end user, this may require the collection of one or more intermediate contracts showing the chain of custody of the fuel oil from the producer to the end user. Consistent with existing regulations, producers are required to maintain all documents and records submitted for registration, reporting, and PTDs as part of the producer's recordkeeping requirements. EPA believes the producer's maintenance of these records will allow for continued tracking and verification that the end use of the fuel oil is consistent with the meaning of “heating oil” intended under EISA.
EPA has provided a summary of the comments received and its response. EPA has developed a more thorough Response to Comments document that addresses each comment specifically and addresses requests for clarification to the extent appropriate for this rule.
Several commenters sought a variety of clarifications on changes being made to the existing definition of heating oil in section 80.1401.
As explained in this final rule and the October 9, 2012 proposal, this amendment does not modify, limit, or in any way change the inclusion of fuels covered by the existing definition of heating oil at section 80.1401. All fuels included in the original definition of heating oil at section 80.1401 (i.e., those fuels that meet the definition of heating oil at section 80.2(ccc)) will continue to be included as heating oil for purposes of section 80.1401 and the RFS program.
Several commenters expressed support for the expanded definition of heating oil. These commenters noted that the current definition is overly restrictive and inconsistent with the goals of the RFS program, and stated that the expanded definition will spur production of cellulosic biofuel from woody, biomass-based resources. Also, these commenters believe that the expanded definition will drive tens of millions of dollars of local investment and create jobs.
As explained in greater detail above, EPA believes this expansion of the scope of the definition of heating oil for purposes of the RFS program is appropriate and authorized under CAA section 211(o).
Commenters noted that the expanded definition of heating oil will not reference fuel quality standards, which they believed may present environmental and safety concerns. Specifically, one commenter (Global Renewable Strategies and Consulting (GRSAC)) asserted that the definition fails to consider the environment or safety, and should reference ASTM standards for fuel oils.
Section 211(o) of the Clean Air Act, as amended by EISA, requires all renewable fuels used in the RFS program to be derived from renewable biomass and to meet specified thresholds for reductions in lifecycle greenhouse gas emissions compared to a baseline fossil fuel. Adding fuel quality specifications for the fuel oils added to the definition of “heating oil” in this rule would not affect whether the fuel oil was derived from renewable biomass, and would not affect the analysis of lifecycle greenhouse gas emissions associated with the heating oils. Thus the additional specifications suggested by the commenters are not relevant to the issues needed to determine whether the fuel oils would qualify as renewable fuel for purposes of the RFS program.
The purpose this regulation is to further define what types and uses of renewable fuel qualify for RIN generation, not to set safety standards or limitations for renewable heating oil. Such standards and limitations may be imposed by other regulations and regulatory entities, and through private sales agreements, by manufacturers of heating equipment, and so on. For example, we expect that many of these fuel oils will meet ASTM specifications for fuel oils (e.g., ASTM D396, ASTM D7666, and ASTM D7544). The ASTM fuel oil specifications not only provide fuel quality specifications, they also indicate appropriate uses for the fuel oils meeting the specification. Because the specific use of a particular fuel oil is often dependent upon the fuel oil conforming to the ASTM specification for that fuel oil, industry specification and use would provide a de facto application of fuel oil specifications for fuel oil used as heating oil. This de facto control would occur naturally within the course of business; an added regulatory requirement in the RFS regulations would not add value or provide any benefit, and as noted above is not relevant to the issues needed to determine whether the fuel oil is a renewable fuel for purposes of the RFS program.
Several commenters recommended that the expanded definition of heating oil should also include fuel oils used for power generation.
The restriction on use for the additional fuel oils is necessary so that the additional fuel oils can reasonably be considered “home heating oil.” Congress allowed “home heating oil”, not any and all fuel oils, to be considered an additional renewable fuel for purposes of the RFS program. EPA's expanded definition of heating oil includes fuel oils that are used for heating places where people live, work, or recreate, and not just their homes. EPA believes this is a reasonable interpretation of the phrase “home heating oil” and recognizes the ambiguity of the phrase used by Congress, which is not defined and does not have a clear and definite commercial meaning. It gives reasonable meaning to the term home heating oil by limiting them to fuel oils used for heating of facilities that people will occupy, and excludes fuel oils used for other purposes such as generation of energy used in the manufacture of products. It also focuses on the aspect of home that is important here—the heating of people—recognizing that EPA has already determined that fuel oil can be included in the scope of home heating oil even if it is not actually used to heat a home.
We received several comments regarding the compliance provisions associated with the expanded definition, including the affidavit requirement for RFS registration, reporting requirements, PTD requirements, and end use tracking required for recordkeeping. Commenters who are ready to produce renewable fuel oils for use as heating oil expressed their understanding of the need for affidavits and their ability to comply with the requirements based on existing and prospective customers.
Other commenters believe that these requirements are not necessary and that they will not be able to comply with the affidavit requirements. For example, two biomass-based diesel producers asserted that they would be unable to submit affidavits because their fuel product does not currently qualify as heating oil under the RFS. These producers also commented that many of their potential customers will not sign the required affidavits out of fear of potential legal ramifications. At the same time, parties interested in blending No.4 and No.6 diesel to be used as heating oil asserted that the affidavit requirements will be unworkable for their existing commercial arrangements, which tend to be informal, with small customers whose employees are not sophisticated enough to comply with the tracking requirements.
EPA believes that the compliance provisions added by this final rule are necessary and appropriate to ensure, as far as is practicable, that the additional fuel oils under the expanded definition meet the requirements of heating oil for purposes of the RFS program. Fuel oils that generate RINs under this expanded definition are those that actually heat places where people live, work, or recreate, and are not used for other purposes such as generating process energy. These additional fuel oils are not readily identifiable based on their physical characteristics, so the additional registration, recordkeeping and reporting requirements are designed to ensure they in fact meet the expanded definition of heating oil as far as can practically be determined at the time of RIN generation. These requirements are tailored to be the least restrictive possible while reasonably ensuring compliance with the amended definition of heating oil.
Such requirements are necessary to ensure RFS programmatic integrity, specifically, that RINs generated for the additional fuel oils represent fuel oils that qualify under the amended definition. Therefore, EPA is requiring producers to identify the end users of their fuel oil at the time of registration. Producers who have not identified any end users for their product will not be able to produce fuel oil for use as heating oil and generate RINs. EPA is aware of producers who have customers willing to sign such affidavits. EPA believes it is reasonable and producers typically will be able to comply with such requirements. If a producer cannot
Similarly, the PTD requirements are necessary and tailored to be as least restrictive as possible while ensuring compliance. If a producer cannot meet the PTD requirements, that producer should not attempt to generate RINs using the amended definition of heating oil. PTDs must accompany the fuel oil from production to end use; sale contracts are not interchangeable with PTDs but are additionally required for recordkeeping.
One commenter suggested that the heating oil definition should identify feedstocks and applicable pathways for RIN generation.
EPA's existing pathways that refer to heating oil as the final RIN-generating renewable fuel, identified in Table 1 to 40 CFR 80.1426, continue to apply without change. This final rule does not change those pathways or add a new pathway. It merely adds a new category of fuel oils that can qualify as heating oil.
One commenter expressed concern that the new definition will create additional segregations of heating oil which will promote inefficiencies in the distribution system.
Based on the information we have received from renewable fuel oil producers, the renewable fuel oil qualifying under the expanded definition is likely to be a drop-in fuel. As such, it would not be distributed through the pipeline system and therefore EPA does not believe the amended definition will create any new inefficiencies for the pipeline distribution system.
Under Executive Order 12866 (58 FR 51735, October 4, 1993), this action is not a “significant regulatory action” and is therefore not subject to review under Executive Orders 12866 and 13563 (76 FR 3821, January 21, 2011).
The information collection requirements in this final rule have been submitted for approval to the Office of Management and Budget (OMB) under the Paperwork Reduction Act, 44 U.S.C. 3501
This action contains recordkeeping and reporting requirements (including registration and product transfer documentation) that may affect parties who produce or import renewable fuel oils subject to the revised definition of heating oil at 40 CFR 80.1401. EPA expects that very few parties will be subject to additional recordkeeping and reporting. We estimate that up to 11 parties (i.e., RIN generators, consisting of up to 10 producers and one importer) may be subject to the proposed information collection over the next several years.
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number. The OMB control numbers for EPA's regulations are listed in 40 CFR part 9. When this ICR is approved by OMB, the Agency will publish a technical amendment to 40 CFR part 9 in the
The Regulatory Flexibility Act (RFA) generally requires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedure Act or any other statute unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small organizations, and small governmental jurisdictions.
For purposes of assessing the impacts of today's rule on small entities, small entity is defined as: (1) A small business as defined by the Small Business Administration's (SBA) regulations at 13 CFR 121.201; (2) a small governmental jurisdiction that is a government of a city, county, town, school district or special district with a population of less than 50,000; and (3) a small organization that is any not-for-profit enterprise which is independently owned and operated and is not dominant in its field.
After considering the economic impacts of this action on small entities, I certify that this action will not have a significant economic impact on a substantial number of small entities. This final rule will not impose any significant new requirements on small entities.
This rule does not contain a Federal mandate that may result in expenditures of $100 million or more for State, local, and tribal governments, in the aggregate, or the private sector in any one year. We have determined that this action will not result in expenditures of $100 million or more for the above parties and thus, this rule is not subject to the requirements of sections 202 or 205 of UMRA.
This rule is also not subject to the requirements of section 203 of UMRA because it contains no regulatory requirements that might significantly or uniquely affect small governments. It only applies to gasoline, diesel, and renewable fuel producers, importers, distributors and marketers and makes relatively minor corrections and modifications to the RFS regulations.
This action does not have federalism implications. It will not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various
This rule does not have tribal implications, as specified in Executive Order 13175 (65 FR 67249 (November 9, 2000)). It applies to gasoline, diesel, and renewable fuel producers, importers, distributors and marketers. This action makes relatively minor corrections and modifications to the RFS regulations, and does not impose any enforceable duties on communities of Indian tribal governments. Thus, Executive Order 13175 does not apply to this action.
EPA interprets EO 13045 (62 FR 19885 (April 23, 1997)) as applying only to those regulatory actions that concern health or safety risks, such that the analysis required under section 5–501 of the EO has the potential to influence the regulation. This action is not subject to EO 13045 because it does not establish an environmental standard intended to mitigate health or safety risks.
This action is not subject to Executive Order 13211 (66 FR 28355 (May 22, 2001)), because it is not a significant regulatory action under Executive Order 12866.
Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (“NTTAA”), Public Law 104–113, 12(d) (15 U.S.C. 272 note) directs EPA to use voluntary consensus standards in its regulatory activities unless to do so will be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards (
This action does not involve technical standards. Therefore, EPA did not consider the use of any voluntary consensus standards.
Executive Order (EO) 12898 (59 FR 7629 (Feb. 16, 1994)) establishes Federal executive policy on environmental justice. Its main provision directs Federal agencies, to the greatest extent practicable and permitted by law, to make environmental justice part of their mission by identifying and addressing, as appropriate, disproportionately high and adverse human health or environmental effects of their programs, policies, and activities on minority populations and low-income populations in the United States.
EPA has determined that this final rule will not have disproportionately high and adverse human health or environmental effects on minority or low-income populations because it does not affect the level of protection provided to human health or the environment. These amendments will not relax the control measures on sources regulated by the RFS regulations and therefore will not cause emissions increases from these sources.
The Congressional Review Act, 5 U.S.C. 801
Statutory authority for the rule finalized today can be found in section 211(o) of the Clean Air Act, 42 U.S.C. 7545. Additional support for the procedural and compliance related aspects of today's rule, including the recordkeeping requirements, come from sections 114, 208, and 301(a) of the Clean Air Act, 42 U.S.C. 7414, 7542, and 7601(a).
Environmental protection, Administrative practice and procedure, Agriculture, Air pollution control, Confidential business information, Diesel, Energy, Forest and Forest Products, Fuel additives, Gasoline, Imports, Labeling, Motor vehicle pollution, Penalties, Petroleum, Reporting and Recordkeeping requirements.
For the reasons set forth in the preamble, 40 CFR part 80 is amended as follows:
42 U.S.C. 7414, 7542, 7545, and 7601(a).
(1) A fuel meeting the definition of heating oil set forth in § 80.2(ccc); or
(2) A fuel oil that is used to heat interior spaces of homes or buildings to control ambient climate for human comfort. The fuel oil must be liquid at 60 degrees Fahrenheit and 1 atmosphere of pressure, and contain no more than 2.5% mass solids.
(c) * * *
(7) For renewable fuel oil that is heating oil as defined in paragraph (2) of the definition of heating oil in § 80.1401, renewable fuel producers and importers shall not generate RINs unless they have received affidavits from the final end user or users of the fuel oil as specified in § 80.1451(b)(1)(ii)(T)(
(b) * * *
(1) * * *
(xi) For a producer of fuel oil meeting paragraph (2) of the definition of heating oil in § 80.1401:
(A) An affidavit from the producer of the fuel oil stating that the fuel oil for which RINs have been generated will be sold for the purposes of heating interior spaces of homes or buildings to control ambient climate for human comfort, and no other purpose.
(B) Affidavits from the final end user or users of the fuel oil stating that the fuel oil is being used or will be used for purposes of heating interior spaces of homes or buildings to control ambient climate for human comfort, and no other purpose, and acknowledging that any other use of the fuel oil would violate EPA regulations and subject the user to civil penalties under the Clean Air Act.
(b) * * *
(1) * * *
(ii) * * *
(T) Producers of fuel oil that meets paragraph (2) of the definition of heating oil in § 80.1401, shall report, on a quarterly basis, all the following for each volume of fuel oil:
(
(
(
(
(
(
(
(
(
(d) For fuel oil meeting paragraph (2) of the definition of heating oil in § 80.1401, the PTD of the fuel oil shall state: “This volume of renewable fuel oil is designated and intended to be used to heat interior spaces of homes or buildings to control ambient climate for human comfort. Do NOT use for process heat or any other purpose, as these uses are prohibited pursuant to 40 CFR 80.1460(g).”.
(b) * * *
(8) A producer of fuel oil meeting paragraph (2) of the definition of heating oil in § 80.1401 shall keep copies of all contracts which describe the fuel oil under contract with each end user.
(g)
In rule document 2013–24271 appearing on pages 61828 through 61838 in the issue of Friday, October 4, 2013, make the following correction:
1. On page 61828, in the second column, in the
Office of Energy Efficiency and Renewable Energy, Department of Energy.
Supplemental Notice of Proposed Rulemaking (SNOPR).
The U.S. Department of Energy (DOE) is proposing to revise and expand its existing regulations governing the use of particular methods as alternatives to testing for the purposes of certifying compliance with the applicable energy conservation standards and the reporting of related ratings for commercial and industrial equipment covered by EPCA. The proposals contained in this supplemental notice arose from a negotiated rulemaking effort on issues regarding certification of commercial heating, ventilating, air-conditioning (HVAC), water heating (WH), and refrigeration equipment. In addition, DOE is proposing to amend the compliance dates for the initial certification of commercial HVAC, WH, and refrigeration equipment.
DOE will accept comments, data, and information regarding this supplemental notice of proposed rulemaking (SNOPR) no later than November 21, 2013. See section VI, “Public Participation,” of this SNOPR for details.
Interested persons are encouraged to submit comments using the Federal eRulemaking Portal at
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Ms. Ashley Armstrong, U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Building Technologies Office, EE–2J, 1000 Independence Avenue SW., Washington, DC 20585–0121. Email:
Title III of the Energy Policy and Conservation Act of 1975, as amended (“EPCA” or, in context, “the Act”) sets forth a variety of provisions designed to improve energy efficiency. Part A of Title III (42 U.S.C. 6291–6309) provides for the Energy Conservation Program for Consumer Products Other Than Automobiles. The National Energy Conservation Policy Act (NECPA), Public Law 95–619, amended EPCA to add Part A–1 of Title III, which established an energy conservation program for certain industrial equipment. (42 U.S.C. 6311–6317)
Under EPCA, this program consists essentially of four parts: (1) Testing; (2) labeling; (3) Federal energy conservation
In addition, sections 6299–6305, and 6316 of EPCA authorize DOE to enforce compliance with the energy and water conservation standards (all non-product specific references herein referring to energy use and consumption include water use and consumption; all references to energy efficiency include water efficiency) established for certain consumer products and commercial equipment. (42 U.S.C. 6299–6305 (consumer products), 6316 (commercial equipment)) DOE has promulgated enforcement regulations that include specific certification and compliance requirements.
On March 7, 2011, DOE published a final rule in the
In response to the initial deadline for certifying compliance imposed on commercial heating, ventilation, and air conditioning (HVAC), water heater (WH), and commercial refrigeration equipment (CRE) manufacturers by the March 2011 Final Rule, certain manufacturers of particular types of commercial and industrial equipment stated that, for a variety of reasons, they would be unable to meet that deadline. DOE initially extended the deadline for certifications for commercial HVAC, WH, and refrigeration equipment in a final rule published June 30, 2011 (hereafter referred to as the June 2011 Final Rule). 76 FR 38287 (June 30, 2011). DOE subsequently extended the compliance date for certification by an additional 12 months to December 31, 2013, for these types of equipment (December 2012 Final Rule) to allow, among other things, the Department to explore the negotiated rulemaking process for this equipment. 77 FR 72763.
In the summer of 2012, DOE had an independent convener evaluate the likelihood of success, analyzing the feasibility of developing certification requirements for commercial HVAC, WH, and CRE (not including walk-in coolers and freezers) through consensus-based negotiations among affected parties. In October 2012, the convener issued his report based on a confidential interview process involving forty (40) parties from a wide range of commercial HVAC, WH, and refrigeration equipment interests. Ultimately, the convener recommended that, with the proper scope of issues on the table surrounding commercial HVAC, WH, and refrigeration equipment certification, a negotiated rulemaking appeared to have a reasonable likelihood of achieving consensus based on the factors set forth in the Negotiated Rulemaking Act because the interviewed parties believed the negotiated rulemaking was superior to notice and comment rulemaking for certification-related issues. Additional details of the report can be found at
On February 26, 2013, members of the Appliance Standards and Rulemaking Federal Advisory Committee (ASRAC) unanimously decided to form a working group to engage in a negotiated rulemaking effort on the certification of HVAC, WH, and commercial refrigeration equipment. A notice of intent to form the Commercial Certification Working Group was published in the
AEDMs are computer modeling or mathematical tools that predict the performance of non-tested basic models. They are derived from mathematical models and engineering principles that govern the energy efficiency and energy consumption characteristics of a type of covered equipment. These computer modeling and mathematical tools, when properly developed, can provide a relatively straight-forward and reasonably accurate means to predict the energy usage or efficiency characteristics of a basic model of a given covered product or equipment and reduce the burden and cost associated with testing.
Where authorized by regulation, AEDMs enable manufacturers to rate and certify their basic models by using the projected energy use or energy efficiency results derived from these simulation models in lieu of testing. DOE has authorized the use of AEDMs for certain covered products and equipment that are difficult or expensive to test in an effort to reduce the testing burden faced by manufacturers of expensive or highly customized basic models. DOE's regulations currently permit manufacturers of commercial HVAC, WHs, distribution transformers, electric motors, and small electric motors to use AEDMs to rate their non-tested combinations provided they meet the Department's regulations governing such use.
Initially, DOE undertook a conventional rulemaking to consider expanding and revising its regulations for AEDMs. On April 18, 2011, DOE published a Request for Information (hereafter referred to as the April 2011 RFI). 76 FR 21673. The April 2011 RFI requested suggestions, comments, and information relating to the Department's intent to expand and revise its existing AEDM and ARM requirements. In response to comments it received on the April 2011 RFI, DOE published a Notice of Proposed Rulemaking (NOPR) in the
During the Working Group's first meeting, Working Group members voted to expand the scope of the negotiated rulemaking efforts to include developing methods of estimating equipment performance based on AEDM simulations. The issues discussed by the the various participants during the negotiations with DOE were those raised by the commenters in response to the May 2012 NOPR. The discussion of those issues in the negotiated rulemaking and the consensus reached as proposed in this supplemental NOPR are summarized in two documents included in the docket of this proposal and constitute DOE's response to the comments on the May 2012 NOPR. The documents discuss the particular elements that the AEDM simulations for each equipment should address and other related considerations of note, including potential basic model definitions, test procedure issues, the treatment of certain features, and certification of these equipment. See
As required, the Working Group submitted an interim report to ASRAC on June 26
On May 14–15, 2013, the Commercial Certification Working Group held a two-day meeting at the U.S. Department of Energy's headquarters in Washington, DC. 69 interested parties, including members of the Working Group, attended. The Working Group's recommendations are presented in this notice of proposed rulemaking. A more detailed discussion of the discussions and recommendations can be found in the Commercial Certification Working Group meeting transcripts, which are located at
The Commercial Certification Working Group unanimously recommended that DOE not require pre-approval for AEDMs for commercial HVAC, WH, or refrigeration equipment. This recommendation is consistent with DOE's proposal in the May 21, 2012, notice of proposed rulemaking amending AEDM requirements. 77 FR 32038. Thus, DOE is not proposing to adopt a pre-approval process for AEDMs for the aforementioned equipment.
The Commercial Certification Working Group unanimously recommended the following types of covered equipment be allowed to use AEDMs.
DOE currently allows the use of AEDMs for commercial HVAC equipment and water heating equipment. In this notice of proposed rulemaking, DOE proposes, in alignment with the Working Group's recommendation, to also permit manufacturers to use AEDMs when certifying CRE.
Prior to use for certifying the energy efficiency or energy use of a basic model, DOE generally requires AEDMs to be validated. The Commercial Certification Working Group recommended the following validation process for AEDMs, which DOE proposes to adopt in today's notice.
To validate an AEDM, a manufacturer must select the minimum number of basic models, specified in Table II.1 through Table II.5, for each of the validation classes to which the AEDM is going to apply. Each selection represents a single test conducted in accordance with the DOE test procedure (TP) or applicable DOE TP waiver at a manufacturer's testing facility or a third-party testing facility, whose test result is directly compared to the result for that model from the AEDM.
A manufacturer may elect to develop multiple AEDMs per validation class and each AEDM may span multiple validation classes; however, the minimum number of tests must be maintained per validation class for each AEDM a manufacturer chooses to develop and use. An AEDM may be applied to any individual model within the applicable validation classes at the manufacturer's discretion. All documentation of test results for the models used to validate each AEDM, the AEDM results, and the subsequent comparisons to the AEDM must be maintained as part of both the test data underlying the certified rating and the AEDM validation package pursuant to 10 CFR 429.71. DOE requests comment on the minimum number of tests proposed for each validation class.
To validate the AEDM, the test results from each model required per the validation requirements described in the previous section must be compared to the simulated results from the applicable AEDM. The Commercial Certification Working Group recommended that for energy consumption metrics, the AEDM result for a model must be greater than or equal to 95 percent of the tested results for that same model. For energy efficiency metrics, the AEDM results for a model must be less than or equal to 105 percent of the tested results for that same model. DOE is proposing this one-sided 5 percent tolerance for AEDM validation for all commercial HVAC, WH, and refrigeration equipment. DOE requests comment on the proposed tolerances on the AEDM results as compared to the tested results for a given model.
For each basic model of commercial HVAC, WH, and refrigeration equipment distributed in commerce, manufacturers must determine the certified rating based on testing or use of a validated AEDM. DOE's current regulations provide manufacturers with some flexibility in rating each basic model by allowing the manufacturer the discretion to rate conservatively. The Working Group recommended that for energy consumption metrics each model's certified rating must be less than or equal to the applicable Federal standard and greater than or equal to the model's AEDM result. For energy efficiency metrics, each model's certified rating must be less than or equal to the model's AEDM result and greater than or equal to the applicable Federal standard. DOE is proposing to retain the flexibility provided by its current regulatory approach and is proposing the Working Group's recommendation without modification. DOE requests comment on this method of rating.
Once a basic model has been distributed in commerce, DOE may select any model and verify the equipment's performance at any time. 10 CFR 429.104. The Commercial Certification Working Group recommended the following process described in section II.C.1 through II.C.7 for DOE verification of certified ratings determined by an AEDM. In today's notice, DOE proposes to adopt these recommendations.
Currently, DOE's regulations do not require a manufacturer to be present for DOE-initiated testing to verify equipment performance of a given basic model. The Working Group considered two options for witness testing when certifying a basic model. A manufacturer may elect to have a DOE representative and a manufacturer's representative on-site for the initial verification test for up to 10 percent of the manufacturer's certified basic models rated with an AEDM. The 10 percent requirement applies to all of the basic models certified by a given manufacturer no matter how many AEDMs a manufacturer has used to develop its ratings. Manufacturers who elect to select 10 percent of their basic models must include this information as part of their certification prior to the unit being selected for verification testing. In general, DOE will perform testing without a manufacturer's representative present for all basic models DOE selects for assessment testing as long as the two following conditions are met: (1) A manufacturer has not elected a given basic model as part of its 10 percent election allowed for witness testing; and (2) the manufacturer does not require the basic model to be started only by a factory-trained installer per the installation manual instructions. For the basic models for which a manufacturer elected to have the initial verification test witnessed, the manufacturer cannot request the unit be retested. The results from this initial test would be used to make a definitive determination regarding the validity of the basic model's rating. For those basic models that are initially tested without the manufacturer present, a manufacturer is automatically eligible to request a retest for those basic models where the initial results indicate a potential rating issue. DOE requests comment on the proposal for witness testing.
The Working Group negotiated the process that DOE would use to assess a unit's performance through third party testing. Under this approach, DOE would begin the verification process by selecting a single unit of a given basic model for testing either from retail or by obtaining a sample from the manufacturer. DOE will select a third-party testing laboratory at its discretion to test the unit selected. The lab will adhere to the requirements recommended by the Commercial Certification Working Group described in section II.C.3 below. DOE will conduct the test in accordance with the witness testing arrangements discussed above. In the cases where a factory-trained installer is required per the installation manual instructions or the model is a variable refrigerant flow commercial HVAC system, the manufacturer's representative and DOE will only be on-site for test set up. In all cases, the Department will be responsible for the logistics of arranging a witnessed test, and the laboratory is not allowed to communicate directly with the manufacturer.
The manufacturer will provide any additional information needed regarding test set up or testing to DOE through the certification process in pdf format. (This provision will be addressed in a separate rulemaking.) DOE will provide this information to the test facility as long as the additional instructions are not in conflict with the DOE test procedure or applicable DOE test procedure waiver. The test facility may not use any additional information during the testing process that has not been approved by DOE or shipped in the packaging of the unit. If needed, the test facility may request from DOE additional information on test set up, installation, or testing. Upon receiving a request from the test facility for additional information, DOE may hold and coordinate a meeting with the manufacturer and the test facility to discuss the additional details needed for testing. Additional instructions may be given to the test facility as agreed upon by DOE and the manufacturer. At no time may the test facility discuss DOE verification testing with the manufacturer without the Department present.
If a unit is tested and determined to be outside the rating tolerances described in section II.C.4, DOE will notify the manufacturer. The manufacturer will receive all
The Commercial Certification Working Group recommended that all AEDM verification tests should be conducted in a third-party testing facility of DOE's choice. Commercial equipment that cannot be tested at an independent third-party facility may be tested at a manufacturer's facility upon DOE's request. DOE requests comment on this proposal.
To verify the certified rating of a given model, the test results from a single unit test of the model will be compared to the certified rating in accordance with the tolerances set forth below. For energy consumption metrics, the Commercial Certification Working Group recommended:
For energy efficiency metrics, the Commercial Certification Working Group recommended:
DOE requests comment on the proposed tolerances.
Once DOE has determined that a basic model is outside of the tolerances based on the verification process described in sections II.C.1 through II.C.4, the Commercial Working Group negotiated the following process for remedying the invalid rating. First, DOE will notify the manufacturer and the manufacturer would have 15 days to select and report one of the following pathways: (1) Conservatively rerate and recertify the model based on the DOE test data only, (2) discontinue the model through the certification process, or (3) conduct additional testing, rerate, and recertify the model using all additional manufacturer test data and the DOE test data. The manufacturer and DOE will determine the specific date by which the manufacturer must complete the process for correcting the invalid rating, but the process shall not take more than 180 days to complete. DOE requests comment on the proposed options for addressing invalid ratings.
The Commercial Working Group negotiated the consequences of DOE determining that a rating is invalid for a given basic model based on assessment testing. If the Department finds that within 24 rolling months a manufacturer has more than one basic model with an invalid rating whose results were derived from the same AEDM, then the manufacturer will be subject to the requirements listed in Table II.7. In general, to continue using the AEDM, if a manufacturer has
If, as a result of eight or more invalid ratings, a manufacturer has lost the privilege of using an AEDM for rating purposes, the manufacturer may regain the ability to use an AEDM by (1) Investigating the cause(s) for the failures, (2) identifying the root cause(s) for the failures, (3) taking corrective action to address the root cause(s), (4) validating the AEDM by performing six new tests per validation class with a minimum of two of the tests performed at a third-party test facility, and (5) obtaining DOE authorization to resume the use of the AEDM. At its discretion, DOE may reduce or waive these requirements, in which case DOE will provide public notice and a written explanation of the grounds for reducing or waiving the requirements. DOE requests comment on the proposed method for regaining the use of AEDMs.
The Working Group recommended amended basic model definitions for commercial refrigeration equipment; commercial warm air furnaces; commercial packaged boilers; and commercial water heaters. Additionally, the Working Group recommended distinct basic model definitions for each type of commercial HVAC equipment, such as packaged terminal air conditioners (PTACs) and heat pumps (PTHPs); small, large, and very large air-cooled commercial package air conditioning and heating equipment; small, large, and very large water-cooled, evaporatively-cooled, and water source commercial package air conditioning and heating equipment; single package vertical air conditioners and heat pumps (SPVUs); computer room air conditioner; and variable refrigerant flow multi-split air conditioner and heat pump with capacities greater than 65,000 Btu/h. DOE is proposing the basic model definitions by covered equipment type that were development by the Working Group except DOE has included several clarifications to harmonize the wording of the definitions for consistency purposes, but did not change the meaning of the definitions as agreed upon by the Working Group.
The Working Group recommended that certification reports must be initially submitted for all basic models distributed in commerce according to the schedule shown in Table IV.1. After the initial certification date, DOE's existing regulations require that manufacturers certify: (1) New basic models before distribution in commerce; (2) existing basic models, whose certified rating remains valid, annually; (3) existing basic models, whose design is altered resulting in a change in rating that is more consumptive or less efficient, at the time the design change is made; and (4) previously certified basic models that have been discontinued annually.
The Working Group also agreed to the following caveats on the schedule proposed above. If, in the separate, certification rulemaking, DOE adopts regulations that are significantly different from the remainder of the Working Group recommendations, then the initial certification compliance dates will be based on the final rule date for the separate rulemaking effort. The Working Group agreed that in no instance should the initial certification compliance date be less than two months after the issuance of the final rule adopting the remainder of the Working Group's recommendations. Additionally, the Working Group recommended that DOE allow a six-month grace period following each certification date during which DOE will not pursue civil penalties for certification violations. The Working Group emphasized that a grace period would allow manufacturers time to gain familiarity with the certification process and remedy any problems. DOE proposes to adopt this compliance schedule in its entirety and requests comment on this approach to establishing compliance deadlines.
The Office of Management and Budget has determined that test procedure rulemakings do not constitute “significant regulatory actions” under section 3(f) of Executive Order 12866, Regulatory Planning and Review, 58 FR 51735 (Oct. 4, 1993). Accordingly, this action was not subject to review under the Executive Order by the Office of Information and Regulatory Affairs (OIRA) in the Office of Management and Budget (OMB).
The Regulatory Flexibility Act (5 U.S.C. 601, et seq.) requires the preparation of an initial regulatory flexibility analysis (IRFA) for any rule that by law must be proposed for public comment, unless the agency certifies that the rule, if promulgated, will not have a significant economic impact on a substantial number of small entities. As required by Executive Order 13272, “Proper Consideration of Small Entities in Agency Rulemaking,” 67 FR 53461 (August 16, 2002), DOE published procedures and policies on February 19, 2003, to ensure that the potential impacts of its rules on small entities are properly considered during the DOE rulemaking process. 68 FR 7990. DOE has made its procedures and policies available on the Office of the General Counsel's Web site:
DOE reviewed the AEDM requirements being proposed under the provisions of the Regulatory Flexibility Act and the procedures and policies published on February 19, 2003. As discussed in more detail below, DOE found that because the provisions of this rule will not result in increased testing and/or reporting burden for manufacturers already eligible to use an AEDM and will extend AEDM use to a number of manufacturers, thus reducing their testing burden, manufacturers will not experience increased financial burden as a result of this rule.
Today's proposal, which presents voluntary methods for certifying compliance in lieu of conducting actual physical testing, would not increase the testing or reporting burden of manufacturers who currently use, or are eligible to use, an AEDM to certify their products. Furthermore, proposed requirements for validation of an AEDM do not require more testing than that required by the AEDM provisions included in the March 7, 2011 Certification, Compliance and Enforcement Final Rule (76 FR 12422) (“March 2011 Final Rule”), and would relax tolerances that tested products are required to meet in order to substantiate the AEDM.
DOE has also clarified in today's proposal how it intends to exercise its authority to validate AEDM performance and verify the performance of products certified using an AEDM. DOE negotiated the process with industry resulting in the proposal in today's proposed rule. Since any testing falling under this category would be DOE-initiated testing and DOE is outlining the process to determine an invalid rating in today's proposal which includes manufacturer involvement throughout, DOE does not believe that this will verification of ratings resulting from an AEDM will have a substantial impact on small businesses.
This notice of proposed rulemaking also proposes to permit the manufacturer of many other covered products who are currently not permitted to use an AEDM to certify or rate their products to have the option of doing so. Manufacturers not eligible to use AEDMs must currently test at least two units of every basic model that they produce in order to certify compliance to the Department pursuant to the March 2011 Final Rule. Today's proposal would reduce a manufacturer's testing burden by enabling these manufacturers to simulate testing based
Finally, DOE is proposing two aspects of regarding certification of commercial HVAC, WH, and refrigeration equipment, which should further decrease the burden of existing DOE regulations. First, DOE is proposing basic model definition that allows a manufacturer to group its individual models based on certain characteristics. The basic model definition provides the manufacturer with flexibility in making these groupings and was negotiated as part of the Working Group's meeting. Lastly, DOE is proposing to extend the initial compliance date for certification of commercial HVAC, WH, and refrigeration equipment from 6 months to 18 months from publication of this final rule as compared to the current date of December 31, 2013. This will allow manufacturer time to implement the proposals agreed to by the Working Group, if they are ultimately promulgated, prior to initially certifying their basic models.
For the reasons enumerated above, DOE is certifying that the proposed rule, if promulgated, would not have a significant impact on a substantial number of small entities.
Manufacturers of the covered products addressed in today's SNOPR must certify to DOE that their equipment comply with any applicable energy conservation standards. In certifying compliance, manufacturers must test their equipment according to the applicable DOE test procedures for the given equipment type, including any amendments adopted for those test procedures, or use the AEDMs to develop the certified ratings of the basic models. DOE has established regulations for the certification and recordkeeping requirements for all covered consumer products and commercial equipment, including the equipment at issue in this SNOPR. (76 FR 12422 (March 7, 2011)). The collection-of-information requirement for these certification and recordkeeping provisions is subject to review and approval by OMB under the Paperwork Reduction Act (PRA). This requirement has been approved by OMB under OMB Control Number 1910–1400. Public reporting burden for the certification is estimated to average 20 hours per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information.
Notwithstanding any other provision of the law, no person is required to respond to, nor shall any person be subject to a penalty for failure to comply with, a collection of information subject to the requirements of the PRA, unless that collection of information displays a currently valid OMB Control Number.
DOE has determined that this rule falls into a class of actions that are categorically excluded from review under the National Environmental Policy Act of 1969 (42 U.S.C. 4321, et seq.) and DOE's implementing regulations at 10 CFR part 1021. Specifically, this proposed rule would adopt changes for certifying certain covered products and equipment, so it would not affect the amount, quality or distribution of energy usage, and, therefore, would not result in any environmental impacts. Thus, this rulemaking is covered by Categorical Exclusion A6 under 10 CFR part 1021, subpart D. Accordingly, neither an environmental assessment nor an environmental impact statement is required.
Executive Order 13132, “Federalism,” 64 FR 43255 (August 4, 1999) imposes certain requirements on agencies formulating and implementing policies or regulations that preempt State law or that have Federalism implications. The Executive Order requires agencies to examine the constitutional and statutory authority supporting any action that would limit the policymaking discretion of the States and to carefully assess the necessity for such actions. The Executive Order also requires agencies to have an accountable process to ensure meaningful and timely input by State and local officials in the development of regulatory policies that have Federalism implications. On March 14, 2000, DOE published a statement of policy describing the intergovernmental consultation process it will follow in the development of such regulations. 65 FR 13735. DOE has examined this proposed rule and has determined that it would not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. EPCA governs and prescribes Federal preemption of State regulations as to energy conservation for the products that are the subject of today's proposed rule. States can petition DOE for exemption from such preemption to the extent, and based on criteria, set forth in EPCA. (42 U.S.C. 6297(d)) No further action is required by Executive Order 13132.
Regarding the review of existing regulations and the promulgation of new regulations, section 3(a) of Executive Order 12988, “Civil Justice Reform,” 61 FR 4729 (Feb. 7, 1996), imposes on Federal agencies the general duty to adhere to the following requirements: (1) Eliminate drafting errors and ambiguity; (2) write regulations to minimize litigation; (3) provide a clear legal standard for affected conduct rather than a general standard; and (4) promote simplification and burden reduction. Section 3(b) of Executive Order 12988 specifically requires that Executive agencies make every reasonable effort to ensure that the regulation: (1) Clearly specifies the preemptive effect, if any; (2) clearly specifies any effect on existing Federal law or regulation; (3) provides a clear legal standard for affected conduct while promoting simplification and burden reduction; (4) specifies the retroactive effect, if any; (5) adequately defines key terms; and (6) addresses other important issues affecting clarity and general draftsmanship under any guidelines issued by the Attorney General. Section 3(c) of Executive Order 12988 requires Executive agencies to review regulations in light of applicable standards in sections 3(a) and 3(b) to determine whether they are met or it is unreasonable to meet one or more of them. DOE has completed the required review and determined that, to the extent permitted by law, the proposed rule meets the relevant standards of Executive Order 12988.
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) requires each Federal agency to assess the effects
Section 654 of the Treasury and General Government Appropriations Act, 1999 (Pub. L. 105–277) requires Federal agencies to issue a Family Policymaking Assessment for any rule that may affect family well-being. This proposal would not have any impact on the autonomy or integrity of the family as an institution. Accordingly, DOE has concluded that it is not necessary to prepare a Family Policymaking Assessment.
DOE has determined, under Executive Order 12630, “Governmental Actions and Interference with Constitutionally Protected Property Rights” 53 FR 8859 (March 18, 1988), that this proposed regulation would not result in any takings that might require compensation under the Fifth Amendment to the U.S. Constitution.
Section 515 of the Treasury and General Government Appropriations Act, 2001 (44 U.S.C. 3516 note) provides for agencies to review most disseminations of information to the public under guidelines established by each agency pursuant to general guidelines issued by OMB. OMB's guidelines were published at 67 FR 8452 (Feb. 22, 2002), and DOE's guidelines were published at 67 FR 62446 (Oct. 7, 2002). DOE has reviewed today's proposed rule under the OMB and DOE guidelines and has concluded that it is consistent with applicable policies in those guidelines.
Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use,” 66 FR 28355 (May 22, 2001), requires Federal agencies to prepare and submit to OMB, a Statement of Energy Effects for any proposed significant energy action. A “significant energy action” is defined as any action by an agency that promulgated or is expected to lead to promulgation of a final rule, and that: (1) Is a significant regulatory action under Executive Order 12866, or any successor order; and (2) is likely to have a significant adverse effect on the supply, distribution, or use of energy; or (3) is designated by the Administrator of OIRA as a significant energy action. For any proposed significant energy action, the agency must give a detailed statement of any adverse effects on energy supply, distribution, or use should the proposal be implemented, and of reasonable alternatives to the action and their expected benefits on energy supply, distribution, and use.
Today's proposal to establish alternate certification requirements for certain covered equipment is not a significant regulatory action under Executive Order 12866. Moreover, it would not have a significant adverse effect on the supply, distribution, or use of energy, nor has it been designated as a significant energy action by the Administrator of OIRA. Therefore, it is not a significant energy action, and, accordingly, DOE has not prepared a Statement of Energy Effects.
Under section 301 of the Department of Energy Organization Act (Pub. L. 95–91; 42 U.S.C. 7101), DOE must comply with section 32 of the Federal Energy Administration Act of 1974, as amended by the Federal Energy Administration Authorization Act of 1977. (15 U.S.C. 788; FEAA) Section 32 essentially provides in relevant part that, where a proposed rule authorizes or requires use of commercial standards, the notice of proposed rulemaking must inform the public of the use and background of such standards. In addition, section 32(c) requires DOE to consult with the Attorney General and the Chairman of the Federal Trade Commission (FTC) concerning the impact of the commercial or industry standards on competition. Today's proposal to amend regulations relating to AEDMs does not propose the use of any commercial standards.
DOE will accept comments, data, and information regarding the proposed rule no later than the date provided at the beginning of this notice of proposed rulemaking. Comments, data, and information submitted to DOE's email address for this rulemaking should be provided in WordPerfect, Microsoft Word, PDF, or text (ASCII) file format. Interested parties should avoid the use of special characters or any form of encryption, and wherever possible, comments should include the electronic signature of the author. Absent an electronic signature, comments submitted electronically must be followed and authenticated by submitting a signed original paper document to the address provided at the beginning of this notice of proposed rulemaking. Comments, data, and information submitted to DOE via mail or hand delivery/courier should include one signed original paper copy. No telefacsimiles (faxes) will be accepted.
According to 10 CFR 1004.11, any person submitting information that he or she believes to be confidential and exempt by law from public disclosure should submit two copies: One copy of the document including all the information believed to be confidential and one copy of the document with the information believed to be confidential deleted. DOE will make its own determination as to the confidential status of the information and treat it according to its determination.
Factors of interest to DOE when evaluating requests to treat submitted information as confidential include (1) A description of the items, (2) whether and why such items are customarily treated as confidential within the industry, (3) whether the information is generally known by or available from
Although DOE welcomes comments on any aspect of this proposal, DOE is particularly interested in receiving comments and views of interested parties concerning the following issues:
1. DOE requests comment on its proposal to require manufacturers to test a minimum number of models, specified in Table II.1 through Table II.5, from each validation class to which the AEDM is going to apply in order to substantiate each AEDM.
2. DOE requests comment on its proposed tolerances on AEDM results as compared to the test results for a given model.
3. DOE requests comment on its proposal to certify models rated with an AEDM between the AEDM result and the Federal standard.
4. DOE requests comment on its proposal to allow manufacturers to witness the testing of a maximum of 10 percent of their certified basic models. If a basic model is not witness tested then it can be retested at the discretion of the manufacturer according to the process outlined in section II.C.1.
5. DOE requests comment on the proposed process for validation test. This process outlines when a model can be witness tested, how additional test information can be communicated to the test lab, and how a manufacturer can request a retest.
6. DOE requests comment on its proposal that verification testing should take place a third-party test lab unless the equipment is unable to be tested at a third-party facility in which case testing may occur the manufacturer's facility.
7. DOE requests comment on the tolerances proposed in Table II.6.
8. DOE requests comment on the proposed options manufacturers may select from in order to address an invalid rating.
9. DOE requests comment on the consequences listed in Table II.7 for manufacturers found to have invalid ratings.
10. DOE requests comment on the proposed process for regaining the use of AEDMs.
The Secretary of Energy has approved publication of today's SNOPR.
Administrative practice and procedure, Confidential business information, Energy conservation, Reporting and recordkeeping requirements.
Administrative practice and procedure, Confidential business information, Energy conservation, Reporting and recordkeeping requirements.
For the reasons set forth in the preamble, DOE proposes to amend parts 429 and 431 of chapter II, subchapter D, of title 10 of the Code of Federal Regulations, as set forth below:
42 U.S.C. 6291–6317.
(i)
(1) Commercial warm air furnaces, packaged terminal air conditioners, and packaged terminal heat pumps, [date 6 months after date of publication of the final rule in the
(2) Commercial gas-fired and oil-fired instantaneous water heaters less than 10 gallons and commercial gas-fired and oil-fired hot water supply boilers less than 10 gallons, [date 9 months after date of publication of the final rule in the
(3) All other types of covered commercial water heaters except those specified in paragraph (i)(2) of this section, commercial packaged boilers with input capacities less than or equal to 2.5 million Btu/h, and self-contained commercial refrigeration equipment with solid or transparent doors, [date 12 months after date of publication of the final rule in the
(4) Variable refrigerant flow air conditioners and heat pumps, [date 15 months after date of publication of the final rule in the
(5) Small, large, or very large air-cooled, water-cooled, evaporatively-cooled, and water-source commercial air conditioning and heating equipment, single package vertical units, computer room air conditioners, commercial packaged boilers with input capacities greater than 2.5 million Btu/h, and all other types of commercial refrigeration equipment except those specified in paragraph (i)(3) of this section, [date 18 months after date of publication of the final rule in the
(a)
(1)
(ii) For each basic model selected for testing, a sample of sufficient size shall be randomly selected and tested to ensure that—
(A) Any represented value of energy consumption or other measure of energy use of a basic model for which consumers would favor lower values shall be greater than or equal to the higher of:
(
(
(B) Any represented value of the energy efficiency or other measure of energy consumption of a basic model for which consumers would favor higher values shall be less than or equal to the lower of:
(
(
(2)
(i) Any represented value of energy consumption or other measure of energy use of a basic model for which consumers would favor lower values shall be greater than or equal to the output of the AEDM and less than or equal to the Federal standard for that basic model; and
(ii) Any represented value of energy efficiency or other measure of energy consumption of a basic model for which consumers would favor higher values shall be less than or equal to the output of the AEDM and greater than or equal to the Federal standard for that basic model.
(a)
(1)
(ii) For each basic model selected for testing, a sample of sufficient size shall be randomly selected and tested to ensure that—
(A) Any represented value of energy consumption or other measure of energy use of a basic model for which consumers would favor lower values shall be greater than or equal to the higher of:
(
(
(B) Any represented value of energy efficiency or other measure of energy consumption of a basic model for which consumers would favor higher values shall be less than or equal to the lower of:
(
(
(2)
(i) Any represented value of energy consumption or other measure of energy use of a basic model for which consumers would favor lower values shall be greater than or equal to the output of the AEDM and less than or equal to the Federal standard for that basic model; and
(ii) Any represented value of energy efficiency or other measure of energy consumption of a basic model for which consumers would favor higher values shall be less than or equal to the output of the AEDM and greater than or equal to the Federal standard for that basic model.
(a)
(1)
(ii) For each basic model selected for testing, a sample of sufficient size shall be randomly selected and tested to ensure that—
(A) Any represented value of energy consumption or other measure of energy use of a basic model for which consumers would favor lower values shall be greater than or equal to the higher of:
(
(
(B) Any represented value of energy efficiency or other measure of energy consumption of a basic model for which consumers would favor higher values shall be less than or equal to the lower of:
(
(
(2)
(i) Any represented value of energy consumption or other measure of energy use of a basic model for which consumers would favor lower values shall be greater than or equal to the output of the AEDM and less than or equal to the Federal standard for that basic model; and
(ii) Any represented value of energy efficiency or other measure of energy consumption of a basic model for which consumers would favor higher values shall be less than or equal to the output of the AEDM and greater than or equal to the Federal standard for that basic model.
(a)
(c)
(i) The AEDM is derived from a mathematical model that estimates the energy efficiency or energy consumption characteristics of the basic model as measured by the applicable DOE test procedure;
(ii) The AEDM is based on engineering or statistical analysis, computer simulation or modeling, or other analytic evaluation of performance data; and
(iii) The manufacturer has validated the AEDM, in accordance with paragraph (c)(2) of this section.
(2)
(i) For each identified validation class specified in paragraph (c)(2)(iv) of this section to which the particular AEDM applies, the minimum number of basic models must be tested as specified in paragraph (c)(2)(iv) of this section. Using the AEDM, calculate the energy use or efficiency for each of the selected basic models. Test a single unit of each selected basic model in accordance with paragraph (c)(2)(iii) of this section. Compare the results from the single unit test and the AEDM energy use or efficiency output according to paragraph (c)(2)(ii) of this section.
(ii)
(B) For those covered products with an energy-consumption metric, the predicted energy consumption for each model, calculated by applying the AEDM, may not be more than five percent less than the energy consumption determined from the corresponding test of the model.
(iii)
(B) Test results used to validate the AEDM must meet or exceed current, applicable Federal standards as specified in part 431 of this chapter; and
(C) Each test must have been performed in accordance with the DOE test procedure specified in parts 430 or 431 of this chapter or test procedure waiver for which compliance is required at the time the basic model is distributed in commerce.
(iv)
(B) Commercial water heater validation classes:
(C) Commercial packaged boilers validation classes:
(D) Commercial furnace validation classes:
(E) Commercial refrigeration equipment validation classes:
(4)
(A) The AEDM, including the mathematical model, the engineering or statistical analysis, and/or computer simulation or modeling that is the basis of the AEDM;
(B) Product information, complete test data, AEDM calculations, and the statistical comparisons from the units tested that were used to validate the AEDM pursuant to paragraph (c)(2) of this section; and
(C) Product information and AEDM calculations for each basic model to which the AEDM has been applied.
(5)
(A) Conduct simulations before representatives of the Department to predict the performance of particular basic models of the product to which the AEDM was applied;
(B) Provide analyses of previous simulations conducted by the manufacturer; or
(C) Conduct certification testing of basic models selected by the Department.
(6)
(i)
(ii)
(iii)
(A) The model is specifically required to be started only by a factory-trained installer per the installation manual instructions, in which case DOE and the manufacturer representative will only be on-site for the test set-up; or
(B) The manufacturer has elected, as part of their certification of that model, to witness testing. A manufacturer may elect to have a DOE representative and a manufacturer's representative on-site for the initial verification test for up to 10 percent of the manufacturer's certified basic models rated with an AEDM. The 10 percent requirement applies to all of the basic models certified by a given manufacturer no matter how many AEDMs a manufacturer has used to develop its ratings. Manufacturers who elect to select 10 percent of their basic models must include this information as part of their certification prior to the unit being selected for verification testing.; or
(C) The model is a variable refrigerant flow system, in which case DOE and the manufacturer representative will only be on-site for the test set-up.
(iv)
(A) Any active test procedure waivers that have been granted for the basic model;
(B) Any test procedure guidance that has been issued by DOE;
(C) The installation and operations manual that is shipped with the unit;
(D) Any additional information that was provided by the manufacturer in the pdf at the time of certification; and
(E) If during test set-up or testing, the lab indicates to DOE that it needs additional information regarding a given basic model in order to test in accordance with the applicable DOE test procedure, DOE may organize a meeting between DOE, the manufacturer and the lab to provide such information. At no time during the process may the lab communicate directly with the manufacturer without DOE present.
(v)
(A) Present all claims regarding testing validity; and
(B) If the manufacturer was not on site for the initial test, may request a retest of the previously tested unit with manufacturer and DOE representatives on-site. DOE will not retest a different unit of the same basic model unless DOE and the manufacturer determine it is necessary based on the test results, claims presented, and DOE regulations.
(vi)
(B) For efficiency metrics, the result from a DOE verification test must be greater than or equal to the certified rating × (1—the applicable tolerance).
(vii)
(A) Re-rate and re-certify the model based on DOE's test data alone; or
(B) Discontinue the model through the certification process; or
(C) Conduct additional testing and re-rate and re-certify the basic model based on all test data collected, including DOE's test data.
(viii)
(B) If, as a result of eight or more invalid ratings, a manufacturer has lost the privilege of using an AEDM for rating, the manufacturer may regain the ability to use an AEDM by:
(
(
(
(
42 U.S.C. 6291–6317.
(1)
(2)
(3)
(4)
(5)
(6)
Office of Energy Efficiency and Renewable Energy, Department of Energy.
Notice of proposed rulemaking.
The U.S. Department of Energy (DOE) proposes to revise the compliance date for the dehumidifier test procedures established under the Energy Policy and Conservation Act (EPCA). The proposed amendments would require manufacturers to test using only the active mode provisions in the test procedure for dehumidifiers currently found in the DOE regulations to determine compliance with the existing energy conservation standards, with the following exceptions. The appendix in its entirety would be required for use by manufacturers that make representations of standby mode or off mode energy use, and, after the compliance date for any amended energy conservation standards enacted in the future that incorporate measures of standby mode and off mode energy use, to demonstrate compliance with such amended standards. The proposed amendments would remove from use, 30 days after publication of the final rule in the
DOE will accept comments, data, and information regarding this notice of proposed rulemaking (NOPR) no later than November 21, 2013. See section IV, “Public Participation,” for details.
Any comments submitted must identify the NOPR for Test Procedures for Dehumidifiers and provide docket number EERE–2013–BT–TP–0044 and/or regulatory information number (RIN) number 1904–AD06. Comments may be submitted using any of the following methods:
1.
2.
3.
4.
For detailed instructions on submitting comments and additional information on the rulemaking process, see section IV of this document (Public Participation).
A link to the docket Web page can be found at:
For further information on how to submit a comment, or review other public comments and the docket, contact Ms. Brenda Edwards at (202) 586–2945 or by email:
Ashley Armstrong, U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Building Technologies Program, EE–2J, 1000 Independence Avenue SW., Washington, DC 20585–0121. Telephone: (202) 586–6590. Email:
James Silvestro, U.S. Department of Energy, Office of the General Counsel, GC–77, 1000 Independence Avenue SW., Washington, DC 20585–0121. Telephone: (202) 586–4224. Email:
Title III of the Energy Policy and Conservation Act of 1975 (42 U.S.C. 6291,
Under EPCA, the energy conservation program consists essentially of four parts: (1) Testing, (2) labeling, (3) Federal energy conservation standards, and (4) certification and enforcement procedures. The testing requirements consist of test procedures that manufacturers of products must use to: (1) Ensure that their products meet the applicable energy conservation standards adopted under EPCA; and (2) make representations about the efficiency of those products.
Under 42 U.S.C. 6293, EPCA sets forth the criteria and procedures DOE must follow when prescribing or amending test procedures for covered products. EPCA provides in relevant part that any test procedures prescribed or amended under section 6293 shall be reasonably designed to produce test results which measure energy efficiency, energy use, or estimated annual operating cost of a covered product during a representative average use cycle or period of use and shall not be unduly burdensome to conduct. (42 U.S.C. 6293(b)(3)) In addition, if DOE determines that a test procedure amendment is warranted, it must publish proposed test procedures and offer the public an opportunity to present oral and written comments on them. (42 U.S.C. 6293(b)(2)) Finally, in any rulemaking to amend a test procedure, DOE must determine to what extent, if any, the proposed test procedure would alter the measured energy efficiency of any covered product as determined under the existing test procedure. (42 U.S.C. 6293(e)(1)) If DOE determines that the amended test procedure would alter the measured efficiency of a covered product, DOE must amend the applicable energy conservation standard accordingly. (42 U.S.C. 6293(e)(2))
The Energy Policy Act of 2005 (EPACT) amended EPCA to specify that the dehumidifier test criteria used under the ENERGY STAR
On October 31, 2012, DOE published a final rule to establish a new test procedure for dehumidifiers that references ANSI/AHAM Standard DH–1–2008, “Dehumidifiers,” (ANSI/AHAM DH–1–2008) rather than the ENERGY STAR test criteria for both energy use and capacity measurements. 77 FR 65995 (Oct. 31, 2012). The final rule also adopted standby and off mode provisions that satisfy the requirement in the Energy Independence and Security Act of 2007 (EISA) for DOE to include measures of standby mode and off mode energy consumption in its test procedures for residential products, if technically feasible. (42 U.S.C. 6295(gg)(2)(A)) This new DOE test procedure, codified at 10 CFR part 430, subpart B, appendix X1 (“appendix X1”), establishes a new metric,
Manufacturers may currently test dehumidifiers using the test procedure set forth in either appendix X or appendix X1 to determine compliance with the existing energy conservation standards and to make representations related to active mode energy consumption. Although the version of ANSI/AHAM Standard DH–1 referenced in the test requirements set forth in appendix X for measuring energy use in active mode is not specified, DOE believes, based on its observations, that manufacturers and test laboratories typically use the current version, ANSI/AHAM DH–1–2008, when testing to determine compliance with the existing dehumidifier energy conservation standards. DOE further notes that this current version of ANSI/AHAM DH–1 is required to be used for other industry testing purposes, such as for the AHAM dehumidifier verification program.
DOE determined, in a supplemental notice of proposed rulemaking (SNOPR) in the previous dehumidifier test procedure rulemaking, that the use of either ANSI/AHAM DH–1–2008 or ANSI/AHAM DH–1–1992, would produce comparable results for active mode testing. 77 FR 31444, 31453–54 (May 25, 2012). Therefore, manufacturers that choose to measure EF and capacity according to appendix X using ANSI/AHAM DH–1–1992 obtain dehumidifier performance results that are generally comparable to the results using the active mode provisions of appendix X1. Because appendix X is functionally equivalent to the active mode provisions of appendix X1, DOE is proposing in today's notice that manufacturers would demonstrate compliance with existing energy conservation standards using appendix X1, and that appendix X would no longer be used.
In addition to the active mode provisions in sections 1, 2, 3.1, and 4.1, appendix X1 contains provisions for the measurement of standby mode and off mode energy consumption in sections 4.2, 4.2.1, and 4.2.2 and the calculation of IEF in section 5.2, which will not be mandatory until the compliance date of any amended standards. Because these provisions are not used for determining EF or capacity, manufacturers would incur an increased test burden when demonstrating compliance with existing standards by conducting the entire test procedure at appendix X1 rather than appendix X. To preclude this unnecessary testing burden, DOE is proposing to clarify in the introductory note in appendix X1 and in 10 CFR 430.23(z) that manufacturers that do not make representations with respect to standby mode and off mode energy consumption may perform only the active mode test provisions when testing to determine compliance with the existing energy conservation standards.
Because the April 29, 2013 effective date currently provided in the introductory notes in both appendix X and appendix X1 for representations of standby mode and off mode energy use has passed, DOE proposes to remove reference to that date in both appendices and require that manufacturers making representations of standby mode and off mode energy use must test their dehumidifier(s) in accordance with appendix X1 in its entirety.
Accordingly, under the proposed rule, 30 days after publication, all testing must be conducted using all or part of appendix X1, depending on whether a manufacturer makes representations about standby mode and off mode energy consumption. This includes testing by the manufacturer, DOE, and any third parties. Manufacturers will have 180 additional days to make any changes needed to representations, including labels, certification reports, marketing materials, etc. DOE does not expect that any modifications will be needed because this proposed test procedure modification does not change the measured consumption. (42 U.S.C. 6293(e)(2))
Finally, DOE proposes to amend the test procedures at 10 CFR 430.23(z) to require that EF, when measured, be determined according to the relevant active mode provisions of appendix X1, and IEF, when measured, be determined according to appendix X1 in its entirety.
DOE requests comment on all aspects of today's proposal, and in particular on the burden associated with the proposed requirement that the active mode provisions of appendix X1 be used rather than appendix X for demonstrating compliance with existing energy conservation standards.
The Office of Management and Budget (OMB) has determined that test procedure rulemakings do not constitute “significant regulatory actions” under section 3(f) of Executive Order 12866, Regulatory Planning and Review, 58 FR 51735 (Oct. 4, 1993). Accordingly, this action was not subject to review under the Executive Order by the Office of Information and Regulatory Affairs (OIRA) in the Office of Management and Budget.
The Regulatory Flexibility Act (5 U.S.C. 601
DOE reviewed today's proposal under the provisions of the Regulatory Flexibility Act and the procedures and policies published on February 19, 2003. DOE has tentatively concluded that the proposal would not have a significant impact on a substantial number of small entities. The factual basis for this certification is as follows:
The Small Business Administration (SBA) considers a business entity to be small business, if, together with its
Most of the manufacturers supplying residential dehumidifiers are large multinational corporations. DOE surveyed the AHAM member directory to identify manufacturers of residential dehumidifiers. DOE then consulted publicly-available data, purchased company reports from vendors such as Dun and Bradstreet, and contacted manufacturers, where needed, to determine if they meet the SBA's definition of a “small business manufacturing facility” and have their manufacturing facilities located within the United States. Based on this analysis, DOE identified five small businesses that manufacture residential dehumidifiers.
Today's proposal would amend DOE's test procedures for dehumidifiers by requiring an updated reference to the industry dehumidifier test method. This amendment could potentially require manufacturers to install a larger test chamber and different air handling equipment. However, some manufacturers may already be using ANSI/AHAM DH–1–2008 in certifying their products. DOE notes that one of the small businesses has products listed in AHAM's current dehumidifier database of verified products, indicating that those tests were conducted according to DH–1–2008. In addition, AHAM selected an independent test laboratory to conduct dehumidifier testing and verification for its certification program using DH–1–2008. It is likely that this laboratory also performs testing for manufacturers to determine compliance with energy conservation standards in the same facility as the AHAM verification testing. Therefore, DOE concludes that small businesses would not be likely to require investments in facility upgrades due to the requirement to use the DOE dehumidifier test procedure that references DH–1–2008.
For these reasons, DOE concludes and certifies that today's proposal would not have a significant economic impact on a substantial number of small entities. Accordingly, DOE has not prepared a regulatory flexibility analysis for this rulemaking. DOE will transmit the certification and supporting statement of factual basis to the Chief Counsel for Advocacy of the SBA for review under 5 U.S.C. 605(b).
Manufacturers of residential dehumidifiers must certify to DOE that their products comply with any applicable energy conservation standards. In certifying compliance, manufacturers must test their products according to the DOE test procedures for dehumidifiers, including any amendments adopted for those test procedures. DOE has established regulations for the certification and recordkeeping requirements for all covered consumer products and commercial equipment, including residential dehumidifiers. (76 FR 12422 (March 7, 2011)) The collection-of-information requirement for the certification and recordkeeping is subject to review and approval by OMB under the Paperwork Reduction Act (PRA). This requirement has been approved by OMB under OMB control number 1910–1400. Public reporting burden for the certification is estimated to average 20 hours per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information.
Notwithstanding any other provision of the law, no person is required to respond to, nor shall any person be subject to a penalty for failure to comply with, a collection of information subject to the requirements of the PRA, unless that collection of information displays a currently valid OMB Control Number.
In this proposed rule, DOE proposes test procedure amendments that it expects will be used to develop and implement future energy conservation standards for residential dehumidifiers. DOE has determined that this rule falls into a class of actions that are categorically excluded from review under the National Environmental Policy Act of 1969 (42 U.S.C. 4321
Executive Order 13132, “Federalism,” 64 FR 43255 (August 4, 1999), imposes certain requirements on agencies formulating and implementing policies or regulations that preempt State law or that have Federalism implications. The Executive Order requires agencies to examine the constitutional and statutory authority supporting any action that would limit the policymaking discretion of the States and to carefully assess the necessity for such actions. The Executive Order also requires agencies to have an accountable process to ensure meaningful and timely input by State and local officials in the development of regulatory policies that have Federalism implications. On March 14, 2000, DOE published a statement of policy describing the intergovernmental consultation process it will follow in the development of such regulations. (65 FR 13735) DOE has examined this proposed rule and has determined that it would not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. EPCA governs and prescribes Federal preemption of State regulations as to energy conservation for the products that are the subject of today's proposed rule. States can petition DOE for exemption from such preemption to the extent, and based on criteria, set forth in EPCA. (42 U.S.C. 6297(d)) No further action is required by Executive Order 13132.
Regarding the review of existing regulations and the promulgation of new regulations, section 3(a) of Executive Order 12988, “Civil Justice Reform,” 61 FR 4729 (Feb. 7, 1996), imposes on Federal agencies the general duty to adhere to the following requirements: (1) Eliminate drafting errors and ambiguity; (2) write regulations to minimize litigation; (3) provide a clear legal standard for affected conduct rather than a general standard; and (4) promote simplification and burden reduction. Section 3(b) of Executive Order 12988 specifically requires that Executive agencies make every reasonable effort to ensure that the regulation: (1) clearly specifies the preemptive effect, if any; (2) clearly specifies any effect on existing Federal law or regulation; (3) provides a clear
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) requires each Federal agency to assess the effects of Federal regulatory actions on State, local, and Tribal governments and the private sector. Public Law 104–4, sec. 201 (codified at 2 U.S.C. 1531). For a proposed regulatory action likely to result in a rule that may cause the expenditure by State, local, and Tribal governments, in the aggregate, or by the private sector of $100 million or more in any one year (adjusted annually for inflation), section 202 of UMRA requires a Federal agency to publish a written statement that estimates the resulting costs, benefits, and other effects on the national economy. (2 U.S.C. 1532(a), (b)) The UMRA also requires a Federal agency to develop an effective process to permit timely input by elected officers of State, local, and Tribal governments on a proposed “significant intergovernmental mandate,” and requires an agency plan for giving notice and opportunity for timely input to potentially affected small governments before establishing any requirements that might significantly or uniquely affect small governments. On March 18, 1997, DOE published a statement of policy on its process for intergovernmental consultation under UMRA. (62 FR 12820;
Section 654 of the Treasury and General Government Appropriations Act, 1999 (Pub. L. 105–277) requires Federal agencies to issue a Family Policymaking Assessment for any rule that may affect family well-being. This rule would not have any impact on the autonomy or integrity of the family as an institution. Accordingly, DOE has concluded that it is not necessary to prepare a Family Policymaking Assessment.
DOE has determined, under Executive Order 12630, “Governmental Actions and Interference with Constitutionally Protected Property Rights,” 53 FR 8859 (March 18, 1988), that this regulation would not result in any takings that might require compensation under the Fifth Amendment to the U.S. Constitution.
Section 515 of the Treasury and General Government Appropriations Act, 2001 (44 U.S.C. 3516 note) provides for agencies to review most disseminations of information to the public under guidelines established by each agency pursuant to general guidelines issued by OMB. OMB's guidelines were published at 67 FR 8452 (Feb. 22, 2002), and DOE's guidelines were published at 67 FR 62446 (Oct. 7, 2002). DOE has reviewed today's proposed rule under the OMB and DOE guidelines and has concluded that it is consistent with applicable policies in those guidelines.
Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use,” 66 FR 28355 (May 22, 2001), requires Federal agencies to prepare and submit to OMB, a Statement of Energy Effects for any proposed significant energy action. A “significant energy action” is defined as any action by an agency that promulgated or is expected to lead to promulgation of a final rule, and that: (1) Is a significant regulatory action under Executive Order 12866, or any successor order; and (2) is likely to have a significant adverse effect on the supply, distribution, or use of energy; or (3) is designated by the Administrator of OIRA as a significant energy action. For any proposed significant energy action, the agency must give a detailed statement of any adverse effects on energy supply, distribution, or use should the proposal be implemented, and of reasonable alternatives to the action and their expected benefits on energy supply, distribution, and use.
Today's regulatory action to amend the test procedure for measuring the energy efficiency of residential dehumidifiers is not a significant regulatory action under Executive Order 12866. Moreover, it would not have a significant adverse effect on the supply, distribution, or use of energy, nor has it been designated as a significant energy action by the Administrator of OIRA. Therefore, it is not a significant energy action, and, accordingly, DOE has not prepared a Statement of Energy Effects.
Under section 301 of the Department of Energy Organization Act (Pub. L. 95–91; 42 U.S.C. 7101), DOE must comply with section 32 of the Federal Energy Administration Act of 1974, as amended by the Federal Energy Administration Authorization Act of 1977 (FEAA). (15 U.S.C. 788; FEAA) Section 32 essentially provides in relevant part that, where a proposed rule authorizes or requires use of commercial standards, the notice of proposed rulemaking must inform the public of the use and background of such standards. In addition, section 32(c) requires DOE to consult with the Attorney General and the Chairman of the Federal Trade Commission (FTC) concerning the impact of the commercial or industry standards on competition.
DOE will accept comments, data, and information regarding this proposed rule before or after the public meeting, but no later than the date provided in the
However, your contact information will be publicly viewable if you include it in the comment or in any documents attached to your comment. Any information that you do not want to be publicly viewable should not be included in your comment, nor in any document attached to your comment. Persons viewing comments will see only first and last names, organization names, correspondence containing comments, and any documents submitted with the comments.
Do not submit to regulations.gov information for which disclosure is restricted by statute, such as trade secrets and commercial or financial information (hereinafter referred to as Confidential Business Information (CBI)). Comments submitted through regulations.gov cannot be claimed as CBI. Comments received through the Web site will waive any CBI claims for the information submitted. For information on submitting CBI, see the Confidential Business Information section.
DOE processes submissions made through regulations.gov before posting. Normally, comments will be posted within a few days of being submitted. However, if large volumes of comments are being processed simultaneously, your comment may not be viewable for up to several weeks. Please keep the comment tracking number that regulations.gov provides after you have successfully uploaded your comment.
Include contact information each time you submit comments, data, documents, and other information to DOE. If you submit via mail or hand delivery, please provide all items on a CD, if feasible. It is not necessary to submit printed copies. No facsimiles (faxes) will be accepted.
Comments, data, and other information submitted to DOE electronically should be provided in PDF (preferred), Microsoft Word or Excel, WordPerfect, or text (ASCII) file format. Provide documents that are not secured, written in English and free of any defects or viruses. Documents should not contain special characters or any form of encryption and, if possible, they should carry the electronic signature of the author.
Factors of interest to DOE when evaluating requests to treat submitted information as confidential include: (1) A description of the items; (2) whether and why such items are customarily treated as confidential within the industry; (3) whether the information is generally known by or available from other sources; (4) whether the information has previously been made available to others without obligation concerning its confidentiality; (5) an explanation of the competitive injury to the submitting person which would result from public disclosure; (6) when such information might lose its confidential character due to the passage of time; and (7) why disclosure of the information would be contrary to the public interest.
It is DOE's policy that all comments may be included in the public docket, without change and as received, including any personal information provided in the comments (except information deemed to be exempt from public disclosure).
The Secretary of Energy has approved publication of this proposed rule.
Administrative practice and procedure, Confidential business information, Energy conservation, Household appliances, Imports, Incorporation by reference, Intergovernmental relations, Small businesses.
For the reasons stated in the preamble, DOE is proposing to amend part 430 of chapter II of title 10, Code of Federal Regulations as set forth below:
42 U.S.C. 6291–6309; 28 U.S.C. 2461 note.
(z)
(2) When measuring the integrated energy factor for dehumidifiers (see the note at the beginning of appendix X), expressed in L/kWh, integrated energy factor shall be determined according to paragraph 5.2 of appendix X to this subpart.
Manufacturers conducting tests of dehumidifiers after [DATE 30 DAYS AFTER PUBLICATION OF THE FINAL RULE IN THE
On or after the compliance date for any amended energy conservation standards that incorporate standby mode and off mode energy consumption, all representations must be based on testing performed in accordance with this appendix in its entirety.
Office of Energy Efficiency and Renewable Energy, Department of Energy.
Request for information.
Through this Request for Information (RFI), the U.S. Department of Energy (DOE) seeks certain information to help inform its current rulemaking to consider setting energy conservation standards for ceiling fans. Specifically, DOE seeks information on the interaction between ceiling fan and air conditioning usage. To inform interested parties and to facilitate this process, DOE has identified several related issues in this RFI on which DOE particularly seeks to receive comment and data from stakeholders and the public.
Written comments and information are requested on or before November 21, 2013.
Interested persons are encouraged to submit comments using the Federal eRulemaking Portal at
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Requests for additional information may be sent to Ms. Lucy deButts, U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Building Technologies Office, EE–2J, 1000 Independence Avenue SW., Washington, DC 20585–0121. Telephone: (202) 287–1604. Email:
Mr. Eric Stas, U.S. Department of Energy, Office of the General Counsel, GC–71, 1000 Independence Avenue SW., Washington, DC 20585–0121. Telephone: (202) 586–9507. Email:
For information on how to submit or review comments, contact Ms. Brenda Edwards, U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Building Technologies Office, EE–2J, 1000 Independence Avenue SW., Washington, DC 20585–0121. Telephone (202) 586–2945. Email:
Title III, Part B
On March 15, 2013, DOE published in the
During the Framework Document comment period, ceiling fan manufacturers and their industry association stated that ceiling fans are inherently energy-saving appliances because they reduce the use of air conditioning. (American Lighting Association, No. 39 at p. 1)
In light of these comments, DOE requests information and data from the public regarding the interaction between ceiling fans and air conditioning products. Although DOE welcomes any relevant data on this topic, section II (Discussion) presents questions on which the agency is particularly interested in receiving public input.
DOE seeks information from interested parties on the following topics regarding the interaction between consumer use of ceiling fans and air-conditioning products. Specifically, DOE seeks information and data on how use of a ceiling fan affects the way that consumers set the thermostat of their central air conditioner or the frequency of use of a room air conditioner. Related questions include:
• What percentage of homes have a ceiling fan, a central air conditioner, room air conditioner(s), more than one of these products, or none of these products?
• What percentage of consumers who own both a ceiling fan and an air conditioner set the thermostat differently when a ceiling fan is operating than when a ceiling fan is not operating?
• What percentage of consumers who own both a ceiling fan and an air conditioner leave the thermostat at the same setting regardless of ceiling fan operation?
• For those consumers that do adjust their thermostat due to a ceiling fan, how much do they adjust the thermostat, and do they adjust it warmer or colder?
DOE seeks information and data on how use of a ceiling fan affects the operating duration, operating time (
• Do consumers with both a ceiling fan and an air conditioner operate their air conditioner for a different number of hours than consumers that have an air conditioner but do not have a ceiling fan? If so, what is the difference in operating duration?
• Do consumers with both a ceiling fan and an air conditioner operate their air conditioner at different times of day or in different months than consumers that have an air conditioner but do not have a ceiling fan? If so, how do these patterns differ?
• Based on the results to the previous questions, do consumers with both a ceiling fan and an air conditioner use a different amount of energy for air conditioning than consumers that have an air conditioner but do not have a ceiling fan? If so, what is the difference in energy consumption? Does this difference in energy consumption vary by region?
• For the above questions, are there differences between consumers with central air conditioners and consumers with room air conditioners?
DOE seeks information on how ceiling fan ownership affects consumers' decisions about purchasing air conditioning equipment. For example:
• How much more or less likely are consumers to own or purchase an air conditioner if they already have a ceiling fan?
• How much more or less likely are consumers to own or purchase a ceiling fan if they already have an air conditioner?
• Do consumers with a ceiling fan purchase different numbers or sizes of air conditioners than consumers without a ceiling fan? If so, how do these quantities and sizes vary?
• At what price point would consumers stop purchasing ceiling fans and purchase/use air conditioners instead?
DOE is also interested in input on other relevant issues that participants believe would affect energy conservation standards applicable to ceiling fans. DOE invites all interested parties to submit in writing by November 21, 2013, comments, information, and data on matters addressed in this notice and on other related matters relevant to DOE's consideration of energy conservation standards for ceiling fans.
After the close of the comment period, DOE will begin collecting data, conducting the analyses, and reviewing the public comments. These actions will be taken to aid in the development of energy conservation standards for ceiling fans. DOE will remain interested in these issues after the close of the comment period on this RFI, and any further comments, information, and data submitted at later stages of the rulemaking will be considered in the notice of proposed rulemaking (NOPR).
DOE considers public participation to be a very important part of the process for developing energy conservation standards. DOE actively encourages the participation and interaction of the public during the comment period at each stage of the rulemaking process. Interactions with and between members of the public provide a balanced discussion of the issues and assist DOE in the rulemaking process. Anyone who wishes to be added to the DOE mailing list to receive future notices and information about this rulemaking should contact Ms. Brenda Edwards at (202) 586–2945, or via email at
Federal Aviation Administration (FAA), DOT.
Notice of proposed special conditions.
This action proposes special conditions for the Learjet Model 35, 35A, 36, and 36A airplanes. These airplanes, as modified by Peregrine, 13000 E. Control Tower Road, Unit K–4, Englewood, CO, 80112, will have a novel or unusual design feature associated with rechargeable lithium-ion batteries and battery systems. These batteries have certain failure, operational, and maintenance characteristics that differ significantly from those of the nickel-cadmium and lead-acid rechargeable batteries currently approved for installation on large transport-category airplanes. The applicable airworthiness regulations do not contain adequate or appropriate safety standards for this design feature.
Send your comments on or before November 12, 2013.
Send comments, identified by docket number FAA–2013–0763, using any of the following methods:
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Nazih Khaouly, FAA, Airplane and Flight Crew Interface Branch, ANM–111, Transport Airplane Directorate, Aircraft Certification Service, 1601 Lind Avenue SW., Renton, Washington, 98057–3356; telephone 425–227–2432; facsimile 425–227–1149.
We invite interested people to take part in this rulemaking by sending written comments, data, or views. The most helpful comments reference a specific portion of the special conditions, explain the reason for any recommended change, and include supporting data.
We will consider all comments we receive on or before the closing date for comments. We may change these special conditions based on the comments we receive.
On June 29, 2012, Peregrine applied for a supplemental type certificate for installing equipment that uses rechargeable lithium-ion battery systems in Learjet Model 35, 35A, 36, and 36A airplanes. The Learjet Model 35, 35A, 36, and 36A airplanes are small transport-category airplanes powered by two turbojet engines, with maximum takeoff weights of up to 18,000 pounds. These airplanes operate with a two-pilot crew and can seat up to eight passengers. The Learjet Model 35, 35A, 36, and 36A airplanes are powered by two Garrett TF731–2–2B engines, and are equipped with an emergency power supply and software-configurable avionics.
Existing airworthiness regulations did not anticipate the use of lithium-ion batteries and battery systems on aircraft. Lithium-ion batteries and battery systems have new hazards that were not contemplated when the existing regulations were issued. In Title 14, Code of Federal Regulations (14 CFR) 25.1353, the FAA provided an airworthiness standard for lead-acid batteries and nickel-cadmium batteries. These special conditions provide an equivalent level of safety as that of the existing regulation. The current regulations are not adequate for rechargeable lithium-battery and battery system installations. Additional lithium-battery and battery system special conditions are required to ensure the same level of safety as set forth by the existing regulation intended for other battery technology.
Under the provisions of 14 CFR 21.17, Peregrine must show that the Learjet Model 35, 35A, 36, and 36A airplanes, as changed, continue to meet the applicable provisions of the regulations incorporated by reference in Type Certificate No. A10CE or the applicable regulations in effect on the date of application for the change. The regulations incorporated by reference in the type certificate are commonly referred to as the “original type certification basis.” The regulations incorporated by reference in Type Certificate No. A10CE are as follows:
Title 14, Code of Federal Regulations part 25, effective February 1, 1965, as amended by Amendments 25–1, 25–2, 25–4, 25–7, 25–18, and § 25.571(d) of Amendment 25–10; Special Conditions set forth in FAA letter to Learjet dated March 1, 1967; Special Conditions No. 25–50–CE–6 dated April 18, 1973, and Amendment 1 dated September 18, 1973. The certification basis for Models 35A and 36A also includes Special Conditions No. 25–72–CE–8 dated November 3, 1976, and Amendment 1 dated March 14, 1978. The certification basis for Model 35A, in addition to the basis listed above, includes Special Conditions 25–ANM–28 dated May 3, 1989. In addition, the certification basis includes certain later amended sections of the applicable part 25 regulations that are not relevant to these special conditions.
If the regulations incorporated by reference do not provide adequate standards regarding the change, the applicant must comply with certain regulations in effect on the date of application for the change.
If the Administrator finds that the applicable airworthiness regulations (i.e., 14 CFR part 25) do not contain adequate or appropriate safety standards for the Learjet Model 35, 35A, 36, and 36A airplanes because of a novel or unusual design feature, special conditions are prescribed under the provisions of § 21.16.
Special conditions are initially applicable to the model for which they are issued. Should the applicant apply for a supplemental type certificate to modify any other model included on the same type certificate, to incorporate the same or similar novel or unusual design feature, the special conditions would also apply to the other model under § 21.101.
In addition to the applicable airworthiness regulations and special conditions, the Learjet Model 35, 35A, 36, and 36A airplanes must comply with the fuel-vent and exhaust-emission requirements of 14 CFR part 34, and the noise-certification requirements of 14 CFR part 36.
The FAA issues special conditions, as defined in 14 CFR 11.19, in accordance with § 11.38, and they become part of the type-certification basis under § 21.101.
The Learjet Model 35, 35A, 36, and 36A airplanes will incorporate the
The current regulations governing installation of batteries in large transport-category airplanes were derived from Civil Air Regulations (CAR) part 4b.625(d) as part of the re-codification of CAR 4b that established 14 CFR part 25 in February 1965. The new battery requirements, § 25.1353(c)(1) through (c)(4), basically reworded the CAR requirements.
Increased use of nickel-cadmium batteries in small airplanes resulted in increased incidents of battery fires and failures which led to additional rulemaking affecting large transport-category airplanes as well as small airplanes. On September 1, 1977 and March 1, 1978, the FAA issued § 25.1353(c)(5) and (c)(6), respectively, governing nickel-cadmium battery installations on large transport-category airplanes.
The proposed use of lithium-ion batteries and battery systems for equipment and systems on the Learjet Model 35, 35A, 36, and 36A airplanes has prompted the FAA to review the adequacy of these existing regulations. Our review indicates that the existing regulations do not adequately address several failure, operational, and maintenance characteristics of lithium-ion batteries and battery systems that could affect the safety and reliability of the MD835–5 Emergency Power Supply installations.
At present, commercial aviation has limited experience with use of rechargeable lithium-ion batteries and battery systems in applications involving commercial aviation. However, other users of this technology, ranging from wireless telephone manufacturers to the electric-vehicle industry, have noted potential hazards with lithium-ion batteries and battery systems. These problems include overcharging, over-discharging, and flammability of cell components.
In general, lithium-ion batteries and battery systems are significantly more susceptible to internal failures that can result in self-sustaining increases in temperature and pressure (i.e., thermal runaway) than their nickel-cadmium or lead-acid counterparts. This condition is especially true for overcharging, which causes heating and destabilization of the components of the cell, leading to the formation (by plating) of highly unstable metallic lithium. The metallic lithium can ignite, resulting in a self-sustaining fire or explosion. Finally, the severity of thermal runaway, due to overcharging, increases with increasing battery capacity due to the higher amount of electrolyte in large batteries.
Discharge of some types of lithium-ion batteries and battery systems, beyond a certain voltage (typically 2.4 volts), can cause corrosion of the electrodes of the cell, resulting in loss of battery capacity that cannot be reversed by recharging. This loss of capacity may not be detected by the simple voltage measurements commonly available to flightcrews as a means of checking battery status—a problem shared with nickel-cadmium batteries.
Unlike nickel-cadmium and lead-acid batteries, some types of lithium-ion batteries and battery systems use liquid electrolytes that are flammable. The electrolyte can serve as a source of fuel for an external fire, if there is a breach of the battery container.
The problems lithium-ion battery and battery-system users experience raise concern about the use of these batteries in commercial aviation. The intent of the proposed special conditions is to establish appropriate airworthiness standards for lithium-ion battery installations in the Learjet Model 35, 35A, 36, and 36A airplanes and to ensure, as required by §§ 25.1309 and 25.601, that these lithium-ion batteries and battery systems are not hazardous or unreliable. To address these concerns, these special conditions adopt the following requirements:
• Those sections of 14 CFR 25.1353 that are applicable to lithium ion batteries.
• The flammable fluid fire protection requirements of 14 CFR 25.863. In the past, this rule was not applied to batteries of transport category airplanes, since the electrolytes used in lead-acid and nickel-cadmium batteries are not flammable.
• New requirements to address the hazards of overcharging and over-discharging that are unique to lithium ion batteries.
• New maintenance requirements to ensure that batteries used as spares are maintained in an appropriate state of charge.
These special conditions are similar to lithium-ion batteries and battery systems special conditions adopted for numerous other aircraft, including Boeing Model 787 (72FR57842; October 11, 2007).
As discussed above, these special conditions are applicable to the Learjet Model 35, 35A, 36, and 36A airplanes. Should Peregrine apply at a later date for a supplemental type certificate to modify any other model included on Type Certificate No. A10CE, to incorporate the same novel or unusual design feature, the special conditions would apply to that model as well.
This action affects only certain novel or unusual design features on one model of airplanes. It is not a rule of general applicability and it affects only the applicant who applied to the FAA for approval of these features on the airplane.
Aircraft, Aviation safety, Reporting and recordkeeping requirements.
The authority citation for these special conditions is as follows:
49 U.S.C. 106(g), 40113, 44701, 44702, 44704.
Accordingly, the Federal Aviation Administration (FAA) proposes the following special conditions as part of the type certification basis for the Learjet Model 35, 35A, 36, and 36A airplanes modified by Peregrine.
These proposed special conditions require that (1) all characteristics of the rechargeable lithium-ion batteries and battery systems, and their installation, that could affect safe operation of the Learjet Model 35, 35A, 36, and 36A airplanes, are addressed, and (2) appropriate Instructions for Continued Airworthiness, which include maintenance requirements, are established to ensure the availability of electrical power, when needed, from the batteries.
The FAA proposes that the following special conditions apply to all rechargeable lithium-ion batteries and battery systems on Learjet Model 35, 35A, 36, and 36A airplanes, in lieu of
Rechargeable lithium-ion batteries and battery systems on Learjet Model 35, 35A, 36, and 36A airplanes must be designed and installed as follows:
1. Safe cell temperatures and pressures must be maintained during any foreseeable charging or discharging condition, and during any failure of the charging or battery monitoring system not shown to be extremely remote. The rechargeable lithium-ion batteries and battery systems must preclude explosion in the event of those failures.
2. Design of the rechargeable lithium-ion batteries and battery systems must preclude the occurrence of self-sustaining, uncontrolled increases in temperature or pressure.
3. No explosive or toxic gases emitted by any rechargeable lithium-ion batteries and battery systems in normal operation, or as the result of any failure of the battery charging system, monitoring system, or battery installation that is not shown to be extremely remote, may accumulate in hazardous quantities within the airplane.
4. Installations of rechargeable lithium-ion batteries and battery systems must meet the requirements of § 25.863(a) through (d).
5. No corrosive fluids or gases that may escape from any lithium-ion batteries and battery systems may damage surrounding structure or any adjacent systems, equipment, or electrical wiring of the airplane in such a way as to cause a major or more severe failure condition, in accordance with § 25.1309(b) and applicable regulatory guidance.
6. Each lithium-ion battery and battery system must have provisions to prevent any hazardous effect on structure or essential systems caused by the maximum amount of heat the battery can generate during a short circuit of the battery or of its individual cells.
7. Rechargeable lithium-ion batteries and battery systems must have a system to automatically control the charging rate of the battery, so as to prevent battery overheating or overcharging, and:
i. A battery-temperature sensing and over-temperature warning system with a means for automatically disconnecting the battery from its charging source in the event of an over-temperature condition, or,
ii. A battery-failure sensing and warning system with a means for automatically disconnecting the battery from its charging source in the event of battery failure.
8. Any rechargeable lithium-ion batteries and battery systems, the function of which are required for safe operation of the airplane, must incorporate a monitoring and warning feature that will provide an indication to the appropriate flight crewmembers whenever the state-of-charge of the batteries has fallen below levels considered acceptable for dispatch of the airplane.
9. The Instructions for Continued Airworthiness required by § 25.1529 must contain maintenance requirements to assure that the lithium-ion batteries are sufficiently charged at appropriate intervals specified by the battery manufacturer and the equipment manufacturer of the rechargeable lithium-ion battery or rechargeable lithium-ion battery system. This is required to ensure that rechargeable lithium-ion batteries and battery systems will not degrade below specified ampere-hour levels sufficient to power the aircraft system, for intended applications. The Instructions for Continued Airworthiness must also contain procedures for the maintenance of batteries in spares storage to prevent the replacement of batteries with batteries that have experienced degraded charge-retention ability or other damage due to prolonged storage at a low state of charge. Replacement batteries must be of the same manufacturer and part number as approved by the FAA. Precautions should be included in the Instructions for Continued Airworthiness maintenance instructions to prevent mishandling of the rechargeable lithium-ion batteries and battery systems, which could result in short-circuit or other unintentional impact damage caused by dropping or other destructive means.
The term “sufficiently charged”' means that the battery will retain enough of a charge, expressed in ampere-hours, to ensure that the battery cells will not be damaged. A battery cell may be damaged by lowering the charge below a point where the battery experiences a reduction in the ability to charge and retain a full charge. This reduction would be greater than the reduction that may result from normal operational degradation.
These special conditions are not intended to replace § 25.1353(b) at Amendment 25–113 in the certification basis for Learjet Model 35, 35A, 36, and 36A airplanes. These special conditions apply only to rechargeable lithium-ion batteries and battery systems and their installations. The requirements of § 25.1353(b) at Amendment 25–113 remain in effect for batteries and battery installations on Learjet Model 35, 35A, 36, and 36A airplanes that do not use rechargeable lithium-ion batteries.
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
This action proposes to establish Class E airspace and modify Class E airspace at Salinas, CA, to accommodate aircraft departing and arriving under Instrument Flight Rules (IFR) at Salinas Municipal Airport. This action also would remove Class E airspace designated as surface area. The geographic coordinates of the airport also would be adjusted in the respective Class D and Class E airspace areas. This action, initiated by the biennial review of the Salinas airspace area, would enhance the safety and management of aircraft operations at the airport.
Comments must be received on or before December 6, 2013.
Send comments on this proposal to the U.S. Department of Transportation, Docket Operations, M–30, West Building Ground Floor, Room W12–140, 1200 New Jersey Avenue SE., Washington, DC 20590; telephone (202) 366–9826. You must identify FAA Docket No. FAA–2013–0708; Airspace Docket No. 13–AWP–11, at the beginning of your comments. You may also submit comments through the Internet at
Eldon Taylor, Federal Aviation Administration, Operations Support Group, Western Service Center, 1601 Lind Avenue SW., Renton, WA 98057; telephone (425) 203–4537.
Interested parties are invited to participate in this proposed rulemaking
Communications should identify both docket numbers (FAA Docket No. FAA 2013–0708 and Airspace Docket No. 13–AWP–11) and be submitted in triplicate to the Docket Management System (see
Commenters wishing the FAA to acknowledge receipt of their comments on this action must submit with those comments a self-addressed stamped postcard on which the following statement is made: “Comments to FAA Docket No. FAA–2013–0708 and Airspace Docket No. 13–AWP–11”. The postcard will be date/time stamped and returned to the commenter.
All communications received on or before the specified closing date for comments will be considered before taking action on the proposed rule. The proposal contained in this action may be changed in light of comments received. All comments submitted will be available for examination in the public docket both before and after the closing date for comments. A report summarizing each substantive public contact with FAA personnel concerned with this rulemaking will be filed in the docket.
An electronic copy of this document may be downloaded through the Internet at
You may review the public docket containing the proposal, any comments received, and any final disposition in person in the Dockets Office (see the
Persons interested in being placed on a mailing list for future NPRMs should contact the FAA's Office of Rulemaking, (202) 267–9677, for a copy of Advisory Circular No. 11–2A, Notice of Proposed Rulemaking Distribution System, which describes the application procedure.
The FAA is proposing an amendment to Title 14 Code of Federal Regulations (14 CFR) Part 71 by establishing Class E airspace extending upward from 700 feet above the surface within a 13.1-mile radius of Salinas Municipal Airport, Salinas, CA. Additionally, the 10-mile southeast segment of Class E airspace designated as an extension to Class D surface area would be modified from the 4.3-mile radius of the airport to 8 miles southeast of the airport to meet current standards for IFR departures and arrivals at the airport. This modification eliminates the need for Class E airspace designated as surface area, and, therefore, would be removed. Also, the geographic coordinates of the airport would be updated to coincide with the FAA's aeronautical database for the respective Class D and Class E airspace areas. This action, initiated by a biennial review of the airspace, is necessary for the safety and management of aircraft departing and arriving under IFR operations at the airport.
Class D airspace and Class E airspace designations are published in paragraphs 5000, 6002, 6004 and 6005, respectively, of FAA Order 7400.9X, dated August 7, 2013, and effective September 15, 2013, which is incorporated by reference in 14 CFR Part 71.1. The Class D airspace and Class E airspace designation listed in this document will be published subsequently in this Order.
The FAA has determined this proposed regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. Therefore, this proposed regulation (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified this proposed rule, when promulgated, would not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the U.S. Code. Subtitle 1, Section 106, describes the authority for the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of the airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it would amend controlled airspace at Salinas Municipal Airport, Salinas, CA.
This proposal will be subject to an environmental analysis in accordance with FAA Order 1050.1E, “Environmental Impacts: Policies and Procedures” prior to any FAA final regulatory action.
Airspace, Incorporation by reference, Navigation (air).
Accordingly, pursuant to the authority delegated to me, the Federal Aviation Administration proposes to amend 14 CFR Part 71 as follows:
49 U.S.C. 106(g), 40103, 40113, 40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959–1963 Comp., p. 389.
That airspace extending upward from the surface to but not including 2,500 feet MSL within a 4.3-mile radius of the Salinas Municipal Airport. This Class D airspace area is effective during the specific dates and times established in advance by a Notice to
That airspace extending upward from the surface within 1.8 miles each side of the 150° bearing of Salinas Municipal Airport extending from the 4.3-mile radius of the airport to 8 miles southeast of the airport. This Class E airspace area is effective during the specific dates and times established in advance by a Notice to Airmen. The effective date and time will thereafter be continuously published in the Airport/Facility Directory.
That airspace extending upward from 700 feet above the surface within a 13.1-mile radius of Salinas Municipal Airport.
Drug Enforcement Administration, Department of Justice.
Notice of proposed rulemaking.
The Drug Enforcement Administration (DEA) proposes to place the substance perampanel [2-(2-oxo-1-phenyl-5-pyridin-2-yl-1,2-dihydropyridin-3-yl) benzonitrile hydrate], including its salts, isomers, and salts of isomers, into Schedule III of the Controlled Substances Act (CSA). This proposed action is based on a recommendation from the Assistant Secretary for Health of the Department of Health and Human Services (HHS) and on an evaluation of all other relevant data by the DEA. If finalized, this action would impose the regulatory controls and administrative, civil, and criminal sanctions of Schedule III controlled substances on persons who handle (manufacture, distribute, dispense, import, export, engage in research, conduct instructional activities, and possess) or propose to handle perampanel.
Interested persons may file written comments on this proposal in accordance with 21 CFR 1308.43(g). Comments must be submitted electronically or postmarked on or before November 21, 2013. Commenters should be aware that the electronic Federal Docket Management System will not accept comments after midnight Eastern Time on the last day of the comment period.
Interested persons, defined as those “adversely affected or aggrieved by any rule or proposed rule issuable pursuant to section 201 of the Act (21 U.S.C. 811),” 21 CFR 1300.01, may file a request for hearing or waiver of participation pursuant to 21 CFR 1308.44 and in accordance with 21 CFR 1316.45 and 1316.47. Requests for hearing, notices of appearance, and waivers of an opportunity for a hearing or to participate in a hearing must be received on or before November 21, 2013.
To ensure proper handling of comments, please reference “Docket No. DEA–374” on all electronic and written correspondence. The DEA encourages that all comments be submitted through the Federal eRulemaking Portal, which provides the ability to type short comments directly into the comment field on the Web page or attach a file for lengthier comments. Go to
Ruth A. Carter, Chief, Policy Evaluation and Analysis Section, Office of Diversion Control, Drug Enforcement Administration; Mailing Address: 8701 Morrissette Drive, Springfield, Virginia 22152; Telephone: (202) 598–6812.
Please note that comments received in response to this docket are considered part of the public record and will be made available for public inspection and posted at
If you want to submit personal identifying information (such as your name, address, etc.) as part of your comment, but do not want it to be made public, you must include the phrase “PERSONAL IDENTIFYING INFORMATION” in the first paragraph of your comment. You must also place all the personal identifying information you do not want made publicly available in the first paragraph of your comment and identify what information you want redacted.
If you want to submit confidential business information as part of your comment, but do not want it to be made publicly available, you must include the phrase “CONFIDENTIAL BUSINESS INFORMATION” in the first paragraph of your comment. You must also prominently identify confidential business information to be redacted within the comment. If a comment has so much confidential business information that it cannot be effectively redacted, all or part of that comment may not be made publicly available.
Comments containing personally identifying information or confidential business information identified as directed above will be made publicly available in redacted form. The Freedom of Information Act (FOIA) applies to all comments received. If you wish to personally inspect the comments and materials received or the supporting documentation the DEA used in preparing the proposed action, these materials will be available for public inspection by appointment. To arrange
Pursuant to the provisions of the CSA (21 U.S.C. 811(a)), this action is a formal rulemaking “on the record after opportunity for a hearing.” Such proceedings are conducted pursuant to the provisions of the Administrative Procedure Act (APA) (5 U.S.C. 551–559), 21 CFR 1308.41–1308.45, and 21 CFR part 1316 subpart D. In accordance with 21 CFR 1308.44(a)–(c), requests for a hearing, notices of appearance, and waivers of an opportunity for a hearing or to participate in a hearing may be submitted only by interested persons, defined as those “adversely affected or aggrieved by any rule or proposed rule issuable pursuant to section 201 of the Act (21 U.S.C. 811).” 21 CFR 1300.01. Such requests or notices must conform to the requirements of 21 CFR 1308.44(a) or (b) and 1316.47 or 1316.48, as applicable, and include a statement of the interest of the person in the proceeding and the objections or issues, if any, concerning which the person desires to be heard. Any waiver must conform to the requirements of 21 CFR 1308.44(c) and 1316.49, including a written statement regarding the interested person's position on the matters of fact and law involved in any hearing.
Please note that pursuant to 21 U.S.C. 811(a), the purpose and subject matter of a hearing held in relation to this rulemaking is restricted to “(A) find[ing] that such drug or other substance has a potential for abuse, and (B) mak[ing] with respect to such drug or other substance the findings prescribed by subsection (b) of section 812 of [Title 21] for the schedule in which such drug is to be placed. . . .” Requests for hearing, notices of appearance at the hearing, and waivers of an opportunity for a hearing or to participate in a hearing must be submitted to the DEA using the address information provided above.
The DEA implements and enforces titles II and III of the Comprehensive Drug Abuse Prevention and Control Act of 1970 and the Controlled Substances Import and Export Act, as amended, and collectively referred to as the Controlled Substances Act (CSA) (21 U.S.C. 801–971). The DEA publishes the implementing regulations for these statutes in title 21 of the Code of Federal Regulations (CFR), parts 1300 to 1321. The CSA and its implementing regulations are designed to prevent, detect, and eliminate the diversion of controlled substances and listed chemicals into the illicit market while providing for legitimate medical, scientific, research, and industrial needs of the United States. Controlled substances have the potential for abuse and dependence and are controlled to protect the public health and safety.
Under the CSA, controlled substances are classified into one of five schedules based upon their potential for abuse, their currently accepted medical use, and the degree of dependence the substance may cause. 21 U.S.C. 812. The initial schedules of controlled substances established by Congress are found at 21 U.S.C. 812(c), and the current list of all scheduled substances is published at 21 CFR part 1308. Pursuant to 21 U.S.C. 811(a)(1), the Attorney General may, by rule, “add to such a schedule or transfer between such schedules any drug or other substance if he (A) finds that such drug or other substance has a potential for abuse, and (B) makes with respect to such drug or other substance the findings prescribed by [21 U.S.C. 812(b)] for the schedule in which such drug is to be placed . . . .” Pursuant to 28 CFR 0.100(b), the Attorney General has delegated this scheduling authority to the Administrator of the DEA who has further delegated this authority to the Deputy Administrator of the DEA under 28 CFR 0.104.
The CSA provides that scheduling of any drug or other substance may be initiated by the Attorney General (1) on his own motion; (2) at the request of the Secretary of the Department of Health and Human Services (HHS); or (3) on the petition of any interested party. 21 U.S.C. 811(a). If finalized, this action would impose the regulatory controls and administrative, civil, and criminal sanctions of Schedule III on the manufacture, distribution, dispensing, importation, exportation, research, instructional activities, and possession of perampanel.
Perampanel [2-(2-oxo-1-phenyl-5-pyridin-2-yl-1,2-dihydropyridin-3-yl) benzonitrile hydrate] is a new chemical entity with central nervous system (CNS) depressant and hallucinogenic properties. The HHS states that on October 22, 2012, the Food and Drug Administration (FDA) approved a new drug application for perampanel as an adjunctive therapy for the treatment of partial-onset seizures with or without secondarily generalized seizures in patients with epilepsy aged 12 years and older. Perampanel will initially be marketed in the United States under the trade name FYCOMPA®. Perampanel is a non-competitive AMPA (α-amino-3-hydroxy-5-methyl-4-isoxazolepropionic acid)-type glutamate receptor antagonist. Perampanel was approved in Europe in May 2012 and has been marketed there since July 2012.
Pursuant to 21 U.S.C. 811(a), proceedings to add a drug or substance to those controlled under the CSA may be initiated by request of the Secretary of the Department of Health and Human Services (HHS). On January 22, 2013, the HHS recommended that the DEA add perampanel to Schedule III of the CSA and provided the DEA with the scientific and medical evaluation document, “Basis for the Recommendation for Control of Perampanel and Its Salts in Schedule III of the Controlled Substances Act.” Following consideration of the eight factors determinative of control under the CSA, with findings related to the substance's abuse potential, legitimate medical use, and dependence liability, the HHS recommended that perampanel be controlled in Schedule III of the CSA. In response, the DEA reviewed the scientific and medical evaluation and scheduling recommendation provided by the HHS, and all other relevant data, and completed an eight factor review document pursuant to 21 U.S.C. 811(c). Included below is a brief summary of each factor as analyzed by the HHS and the DEA, and as considered by the DEA in its proposed scheduling decision. Please note that the DEA and HHS analyses are available in their entirety under “Supporting and Related Material” in the public docket for this proposed rule, at
1.
According to the HHS, perampanel is a non-competitive AMPA-type glutamate receptor antagonist, which has been demonstrated by various groups. Antagonism of the AMPA receptors has been shown to produce a broad-spectrum anti-convulsant activity of focal and generalized epilepsy in animal models.
The HHS states that monkeys self-administered perampanel at rates similar to or greater than those for pentobarbital (Schedule II). These data indicate that perampanel may have a high psychological dependence liability. It was demonstrated in rats that cessation of administration of perampanel produced withdrawal symptoms similar to those produced after cessation of diazepam (Schedule IV) administration.
According to the HHS, a clinical study of recreational drug abusers (with histories of abuse of sedative hypnotic and psychoactive drugs such as ketamine (Schedule III) and alprazolam (Schedule IV)) using ketamine (Schedule III), alprazolam (Schedule IV), and perampanel produced subjective effects indicative of abuse potential. The subjective effects reported were “euphoria,” “high,” and “drug-liking.” For the measures of “floating,” “spaced out,” and “detached,” perampanel produced similar responses to those of ketamine (Schedule III) and greater responses than those of alprazolam (Schedule IV). The study used 8, 24, and 36 mg doses of perampanel, 100 mg doses of ketamine (Schedule III), 1.5 and 3mg doses of alprazolam (Schedule IV), or a placebo. Those that received 24 and 36 mg doses of perampanel reported measures of “sedation,” “slowed down,” “confused,” “clear crisp vision,” and “attention span” at levels similar to or greater than alprazolam (Schedule IV) and greater than ketamine (Schedule III). Forty-six percent of the subjects reported euphoria-type adverse events (AEs) with the 24 and 36 mg perampanel doses, which was higher than the rate reported for 3 mg alprazolam (Schedule IV) (13 percent), and lower than that reported for 100 mg ketamine (Schedule III) (89 percent). The data from the study indicated that perampanel produces behavioral and subjective effects in humans similar to or greater than alprazolam (Schedule IV) and similar to ketamine (Schedule III).
According to the HHS, based on results from the clinical study with recreational drug users, it is reasonable to assume that perampanel will appeal to individuals who prefer to abuse drugs that elicit the subjective and behavioral effects of alprazolam (Schedule IV) and ketamine (Schedule III). The HHS anticipates that abuse will result in: diversions of perampanel from legitimate pharmaceutical distribution channels; significant use of perampanel contrary to or without medical advice; and a substantial capability to create hazards to the abuser's health and to the safety of the community.
2.
According to the HHS, based on electrophysiological assays performed on ion channels of GABA
The DEA further adds that perampanel has inhibited AMPA-induced increases in [Ca
According to the HHS, animal studies indicate that perampanel is a depressant. The Irwin test is an observational procedure that assesses and scores the effects of drugs on rodents' behavior and physiology. Perampanel (5 mg/kg), administered orally by gavage, decreased alertness, touch response, body position, limb tone, grip strength, body tone, spontaneous activity, and abdominal tone, and caused staggering and inhibition of palpebral opening (eyelid) in male rats.
The HHS reported on two human abuse potential studies that were performed in healthy, adult, recreational poly-drug users. In the first study, eight doses of perampanel (8, 12, 16, 20, 24, 28, 32, and 36 mg) were administered to the subjects. It was determined that 36 mg was the maximum tolerated dose (MTD). The most commonly reported AEs were psychiatric, in particular euphoria, which occurred at a rate of 22.6 percent in the higher dose group which received 24, 28, 32, and 36 mg doses of perampanel.
In the second human abuse potential study, perampanel produced subjective responses similar to or greater than those produced by alprazolam (Schedule IV) and ketamine (Schedule III). Perampanel (8, 24, and 36 mg), ketamine (Schedule III) (100 mg), alprazolam (Schedule IV) (1.5 and 3 mg), and placebo were administered to 34 subjects who were current recreational poly-drug users with histories of CNS depressant and psychedelic drug use. The effects of perampanel (24 and 36 mg) on the drug-liking Visual Analogue Scale (VAS) were higher than that of alprazolam (Schedule IV) (1.5 and 3 mg) and similar to ketamine (Schedule III) (100 mg). For the Addiction Research Center Inventory Morphine-Benzedrine Group (ARCI MBG) (euphoria) measure, the responses produced by perampanel (24 and 36 mg) were comparable to those produced by alprazolam (Schedule IV) (3 mg) and ketamine (Schedule III) (100 mg), indicating that perampanel produces euphoria comparable to that produced by alprazolam (Schedule IV) and ketamine (Schedule III). The rates reported for euphoria AEs were 37 percent for the 8 mg dose and 46 percent for the 24 and 36 mg doses of perampanel. The rates reported for euphoria AEs for 3 mg alprazolam (Schedule IV) and 100 mg ketamine (Schedule III), were 13 percent and 89 percent, respectively.
For the measure of feeling “high” on a VAS, perampanel (24 and 36 mg) produced responses that were comparable to those for ketamine (Schedule III) (100 mg) and alprazolam (Schedule IV) (1.5 and 3 mg). Perampanel (36 mg) was long-acting for the sedation and “high” effects. They lasted at least 22 hours. It was demonstrated that perampanel caused
According to the HHS, in clinical trials that were conducted to study the effect of perampanel on certain chronic diseases, e.g., epilepsy, Parkinson's disease, migraines, multiple sclerosis (MS), and peripheral neuropathy, perampanel caused CNS depressant effects including somnolence/sedation, dizziness, ataxia, confusion, amnesia and memory impairment, euphoria, depression, and suicidality. The AEs that are related to NMDA receptor antagonists were also associated with perampanel. These included psychotic disorder/psychosis, hallucinations, dissociation, delusional behavior, delirium, paranoia, euphoria, agitation, amnesia, confusion, and catatonia.
3.
Perampanel is rapidly and almost completely absorbed, slowly metabolized, and slowly eliminated after oral administration. In humans, the median T
4.
5.
6.
Clinical studies have demonstrated that perampanel does affect psychomotor performance. In a study of healthy volunteers, single and multiple doses of 8 and 12 mg perampanel dose-dependently impaired psychomotor performance. In the same study, healthy volunteers were given alcohol until their alcohol blood level reached 80–100 mg/100 ml, in addition to perampanel. The effects of perampanel on complex tasks, such as driving ability, were additive or supra-additive to the impairment effects of alcohol.
According to the HHS, the risk of perampanel to the public health was demonstrated by the AEs of aggression, anger, hostility, suicidal ideation and attempts, and homicidal ideation and threats associated with perampanel during the clinical trials. The FYCOMPA® drug label includes a boxed warning alerting prescribers and ultimate users to these public health risks. Approximately 50 subjects from the clinical trials, without previous relevant psychiatric histories, developed psychotic disorders, such as paranoia, delusion, delirium, schizophrenia, and catatonia while taking perampanel. This indicates that perampanel may cause users to display unpredictable or aggressive behavior towards themselves or others. Based on the AEs of perampanel summarized above, the HHS determined that the public health risks of perampanel are likely to be similar to other CNS drugs, such as ketamine (Schedule III).
7.
According to the HHS, the physical dependence of perampanel in humans
8.
The CSA outlines the findings required to place a drug or other substance in any particular schedule (I, II, III, IV or V). 21 U.S.C. 812(b). After consideration of the analysis and recommendation by the Assistant Secretary for Health of the HHS, and review of all available data, the Deputy Administrator of the DEA, pursuant to 21 U.S.C. 812(b)(3), finds that:
1. Perampanel has a potential for abuse less than the drugs or other substances in Schedules I and II;
2. Perampanel has a currently accepted medical use in treatment in the United States. Perampanel was approved for marketing by the FDA as an adjunctive treatment of partial-onset seizures with or without secondarily generalized seizures in patients with epilepsy aged 12 years and older; and
3. Abuse of perampanel may lead to moderate or low physical dependence or high psychological dependence.
Based on these findings, the Deputy Administrator of the DEA concludes that perampanel [2-(2-oxo-1-phenyl-5-pyridin-2-yl-1,2-dihydropyridin-3-yl) benzonitrile hydrate], including its salts, isomers, and salts of isomers, warrants control in Schedule III of the CSA. 21 U.S.C. 812(b)(3).
If this rule is finalized as proposed, perampanel would be subject to the CSA's Schedule III regulatory controls and administrative, civil, and criminal sanctions applicable to the manufacture, distribution, dispensing, importing, exporting, research, and conduct of instructional activities, including the following:
Any person who becomes registered with the DEA after the effective date of the final rule would be required to take an initial inventory of all stocks of controlled substances (including perampanel) on hand at the time of registration pursuant to 21 U.S.C. 827, 958(e), and in accordance with 21 CFR 1304.03, 1304.04, and 1304.11(a) and (b). After the initial inventory, every DEA registrant would be required to take a biennial inventory of all controlled substances (including perampanel) on hand, on a biennial basis, pursuant to 21 U.S.C. 827, 958(e) and in accordance with 21 CFR 1304.03, 1304.04, and 1304.11.
In accordance with 21 U.S.C. 811(a), this proposed scheduling action is subject to formal rulemaking procedures performed “on the record after opportunity for a hearing,” which are conducted pursuant to the provisions of 5 U.S.C. 556 and 557. The CSA sets forth the procedures and criteria for scheduling a drug or other substance. Such actions are exempt from review by the Office of Management and Budget (OMB) pursuant to Section 3(d)(1) of Executive Order 12866 and the principles reaffirmed in Executive Order 13563.
This proposed regulation meets the applicable standards set forth in Sections 3(a) and 3(b)(2) of Executive Order 12988 Civil Justice Reform to eliminate drafting errors and ambiguity, minimize litigation, provide a clear legal standard for affected conduct, and promote simplification and burden reduction.
This proposed rulemaking does not have federalism implications warranting the application of Executive Order 13132. The proposed rule does not have substantial direct effects on the States, on the relationship between the national government and the States, or the distribution of power and responsibilities among the various levels of government.
This proposed rule does not have tribal implications warranting the application of Executive Order 13175. It does not have substantial direct effects on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes.
The Deputy Administrator, in accordance with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601–612), has reviewed this proposed rule and by approving it certifies that it will not have a significant economic impact on a substantial number of small entities. The purpose of this proposed rule is to place perampanel, including its salts, isomers, and salts of isomers, into Schedule III of the CSA. No less restrictive measures (i.e., non-control) enable the DEA to meet its statutory obligations under the CSA. In preparing this certification, the DEA has assessed economic impact by size category and has considered costs with respect to the various DEA registrant business activity classes.
Perampanel is a new molecular entity, approved by the FDA on October 22, 2012. It was approved in Europe in May 2012, and has been marketed in Europe since July 2012. According to publicly available information reviewed by the DEA, perampanel is currently anticipated to enjoy patent protection for at least a decade before generic equivalents may be manufactured and marketed. Accordingly, the number of currently identifiable manufacturers, importers, and distributors for perampanel is extremely small. The publicly available materials also specify the readily identifiable persons subject to direct regulation by this proposed rule. Based on guidelines utilized by the Small Business Administration, the perampanel manufacturer/distributor/importer was determined not to be a small entity. Once generic equivalents are developed and approved for manufacturing and marketing, there may be additional manufacturers, importers, and distributors of perampanel, but whether they may qualify as small entities cannot be determined at this time.
There are approximately 1.5 million controlled substance registrants, approximately 381,559 of which are estimated to be businesses. The DEA estimates that 371,588 (97 percent) of the affected businesses are considered “small entities” in accordance with the RFA and Small Business Administration (SBA) standards. 5 U.S.C. 601(6) and 15 U.S.C. 632. However, due to the wide variety of unidentifiable and unquantifiable variables that could potentially influence the dispensing rates of new chemical entities, the DEA is unable to determine the number of small entities that might dispense (including administer and prescribe) perampanel (e.g., pharmacies and prescribers).
Despite the fact that the number of small businesses potentially impacted by this proposed rule could not be determined at this time, the DEA concludes that they would not experience a significant economic impact as a result of this rule. Currently, 98 percent of DEA registrants (most of which are small businesses) are authorized to handle Schedule III controlled substances. Even if we assume that all of the DEA registrants were to dispense perampanel, (e.g., practitioners prescribe, administer, or dispense the substance, and pharmacies dispense the prescriptions), the costs that they would incur as a result of perampanel scheduling would be minimal. Registrants that dispense (but not prescribe) would incur nominal additional security, inventory, recordkeeping, and labeling costs, as they have already established and implemented the required systems and processes to handle Schedule III controlled substances. For example, pharmacies and institutional practitioners may disperse Schedule II through V controlled substances throughout their stock of non-controlled substances in such a manner as to obstruct theft or diversion of the controlled substances. The inclusion of one additional substance to this system would result in little or no additional burden to such practitioners. In addition, because DEA-registered dispensers must label all Schedule II–V controlled substances dispensed, the requirement to label all controlled substances containing perampanel would not impose a significant economic burden upon DEA-registered dispensers (as the infrastructure and materials for doing so would already be in place). Accordingly, compliance would not require significant manpower, capital investments, or recordkeeping burdens.
Registrants who only prescribe perampanel by oral or written prescription would not incur any additional security, inventory, recordkeeping, or labeling costs as a result of this rule as they would not physically handle perampanel.
Because of these facts, this proposed rule will not result in significant economic impact on a substantial number of small entities.
In accordance with the Unfunded Mandates Reform Act (UMRA) of 1995 (2 U.S.C. 1501
This action does not impose a new collection of information requirement under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501–3521). This action would not impose recordkeeping or reporting requirements on State or local governments, individuals, businesses, or organizations. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number.
Administrative practice and procedure, Drug traffic control, Reporting and recordkeeping requirements.
For the reasons set out above, 21 CFR part 1308 is proposed to be amended as follows:
21 U.S.C. 811, 812, 871(b), unless otherwise noted.
(c) * * *
(11) Perampanel, and its salts, isomers, and salts of isomers 2261
Office of the Secretary, Department of Defense.
Proposed rule.
The Department of Defense (DoD) is publishing this proposed rule to allow coverage for otherwise covered services and supplies required in the treatment of complications (unfortunate sequelae), as well as medically necessary and appropriate follow-on care, resulting from a non-covered incident of treatment provided pursuant to a properly granted Supplemental Health Care Program waiver. This proposed rule is necessary to protect TRICARE beneficiaries from incurring financial hardships due to the current regulatory restrictions that prohibit TRICARE coverage of the treatment of complications resulting from non-covered medical procedures, even when those procedures were provided while the beneficiary was an active duty member and were authorized by the Director, TRICARE Management Activity (TMA), based on a determination that a waiver authorizing the original non-covered surgery or treatment was necessary to assure adequate availability of health care to the Active Duty member. Additionally, with respect to care that is related to a non-covered initial surgery or treatment, the proposed rule seeks to eliminate any confusion regarding what services and supplies will be covered by TRICARE and under what circumstances they will be covered.
Comments must be received on or before December 23, 2013. Do not submit comments directly to the point of contact or mail your comments to any address other than what is shown below. Doing so will delay the posting of the submission.
You may submit comments, identified by docket number and/or Regulatory Identification Number (RIN) and title, by any of the following methods:
•
•
Thomas Doss (703) 681–7512.
Under the TRICARE private sector health care program, certain conditions and treatments are excluded from coverage. For example, any drug, device, medical treatment, or procedure whose safety and efficacy has not been established by reliable evidence is considered unproven and excluded from coverage. This exclusion includes all services directly related to the unproven drug, device, medical treatment or procedure. Specifically, benefits for otherwise covered services and supplies that are required in the treatment of complications (unfortunate sequelae) resulting from a non-covered incident of treatment, are generally excluded from TRICARE coverage pursuant to title 32 of the Code of Federal Regulation (CFR) section 199.4(e)(9), unless the complication represents a separate medical condition such as a systemic infection, cardiac arrest, and acute drug reaction. TRICARE also excludes any needed follow-on care resulting from a non-covered condition or initial surgery or treatment pursuant to § 199.4(g)(63).
There is currently one exception to this general exclusion, published in the
Currently, Active Duty Service members (ADSMs) may receive non-covered TRICARE private sector health care services under the Supplemental Health Care Program (SHCP) if a waiver is submitted through the Service and approved by the Director, TMA, or designee, in accordance with § 199.6(f). While the Department wants to ensure that Service members have access to the latest, promising medical technologies and procedures, there must be assurance that the care is safe and effective, and that members are not subjected to undue risk, or rendered unfit for continued service, due to complications suffered as a result of unproven medical care. Consequently, requests for non-covered procedures and treatments, including unproven care, are carefully reviewed in conjunction with other available, proven treatments, if any exist, to determine whether or not approval of the requested care is necessary to assure the adequate availability of health care to the member. Currently, Service members are counseled that the treatment remains a non-covered TRICARE benefit, and that any follow-on care, including care for complications, will not be covered by TRICARE once the member separates or retires. Members are left to make a difficult choice between pursuing a SHCP waiver in an effort to remain fit for full duty while assuming the financial risk of any necessary follow-on care after discharge, or, electing not to receive the care and risk separation from the Service.
Like the existing exception at 32 CFR199.4(e)(9)(ii) for non-covered care provided in a MTF, this proposed exception is narrowly tailored to serve a similar government interest; namely, protecting former active duty members who have received private sector care pursuant to a SHCP waiver in an effort to ensure their fitness for duty and continued service.
Additionally, some confusion has arisen regarding the terms `complication” and “unfortunate sequelae” as these terms are not
This regulation is proposed under the authority of 10 U.S.C. section 1073, which authorizes the Secretary of Defense to administer the medical and dental benefits provided in chapter 55 of title 10, United States Code. The Department is authorized to provide medically necessary and appropriate treatment for mental and physical illnesses, injuries and bodily malfunctions, including hospitalization, outpatient care, drugs, treatment of medical and surgical conditions and other types of health care outlined in 10 U.S.C. 1077(a). Although section 1077 defines benefits to be provided in the MTFs, these benefits are incorporated by reference for the benefits provided in the civilian health care sector to active duty family members and retirees and their dependents through section 1079 and 1086 respectively.
The proposed rule amends the existing special benefit provision regarding complications (unfortunate sequelae) resulting from non-covered initial surgery, to more clearly address what services and supplies will be covered by TRICARE and under what circumstances they will be covered. The provision itself is relabeled “Care related to non-covered initial surgery or treatment” to eliminate any confusion regarding what constitutes a complication or unfortunate sequelae and how broadly or narrowly the exclusion and exceptions to the exclusion should be applied. As amended, the regulatory section will specifically address coverage of otherwise covered medically necessary treatment, to include (i) coverage of complications that represent a separate medical condition; (ii) treatment of complications and necessary follow-on care resulting from a non-covered incident of treatment provided in an MTF; and (iii) treatment of complications and necessary follow-on care resulting from a non-covered incident of treatment provided pursuant to an approved SHCP waiver. Inclusion of the third prong will support the provision of care necessary to allow members to return to full duty and/or reach their maximum rehabilitative potential without requiring the member to bear the sole financial risk for unfortunate sequelae once they are no longer on active duty. This amendment provides consistent treatment of unfortunate sequelae and necessary follow-on care when an original episode of non-covered care is provided for a valid governmental purpose, whether to support Graduate Medical Education (GME) and maintain provider skill levels within an MTF or an ADSM's fitness for duty through authorization of the purchase of otherwise non-covered care via an SHCP waiver. Additionally, the regulatory exclusion at 32 CFR 199.4(g)(63) is amended to clearly state that all services and supplies related to a non-covered condition or treatment, including any necessary follow-on care and treatment of complications, are excluded from coverage except as provided in 32 CFR 199.4(e)(9).
This proposed rule is not anticipated to have an annual effect on the economy of $100 million or more; therefore, it is not an economically significant rule under Executive Order 12866 and the Congressional Review Act. All services and supplies authorized under the TRICARE Basic Program must be determined to be medically necessary in the treatment of an illness, injury or bodily malfunction before the care can be cost shared by TRICARE. For this reason, DoD anticipates that TRICARE will have a marginal increase in cost associated with the inclusion of coverage for treatment of complications and necessary follow-on care for TRICARE beneficiaries who received previously authorized non-covered treatment pursuant to a SHCP waiver while on active duty.
Members of the uniformed services on active duty are entitled to medical and dental care pursuant to 10 U.S.C. 1074, including the provision of such care in private facilities. 32 CFR199.16 implements, with respect to the purchase of private sector health care services for ADSMs under the SCHP, the statutory authority at 10 U.S.C. 1074(c). As a general rule, the same rules that govern payment and administration of private sector health care claims under TRICARE apply to the SHCP and the care that members receive in private facilities is comparable to coverage for medical care under the TRICARE Prime program. 32 CFR 199.16(f) authorizes the Director of TRICARE Management Activity (TMA) discretionary authority to waive any requirements of TRICARE regulations, including any restrictions or limitations under the TRICARE Basic Program benefits, except those specifically set forth in statute, based on “a determination that such waiver is necessary to assure adequate availability of health care to Active Duty members.” ADSMs have access to non-covered care including experimental or unproven medical care and treatments in the purchased care sector on a case-by-case basis using the SHCP waiver process. These case-by-case treatment decisions are specifically approved by the Director or Deputy Director of the TRICARE Management Activity, resulting in a number of ADSMs receiving otherwise non-covered private sector care while serving.
If an ADSM is granted a waiver under the SCHP to receive an otherwise non-covered incident of treatment by a private sector provider, rather than in an MTF, and suffers complications from the care, SHCP funds can be used to cover necessary follow-on care and treatment of complications in the purchased care system as long as the member remains on active duty. Once
It has been determined that this proposed rule is not a significant regulatory action. This rule does not:
(1) Have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy; a section of the economy; productivity; competition; jobs; the environment; public health or safety; or State, local, or tribunal governments or communities;
(2) Create a serious inconsistency or otherwise interfere with an action taken or planned by another Agency;
(3) Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs, or the rights and obligations of recipients thereof; or
(4) Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in these Executive Orders.
It has been certified that this proposed rule does not contain a Federal mandate that may result in the expenditure by State, local and tribal governments, in aggregate, or by the private sector, of $100 million or more in any one year.
It has been certified that this proposed rule is not subject to the Regulatory Flexibility Act (5 U.S.C. 601) because it would not, if promulgated, have a significant economic impact on a substantial number of small entities. Set forth in the proposed rule are minor revisions to the existing regulation. The DoD does not anticipate a significant impact on the Program.
It has been certified that this proposed rule does not impose reporting or recordkeeping requirements under the Paperwork Act of 1995.
It has been certified that this proposed rule does not have federalism implications, as set forth in Executive Order 13132. This rule does not have substantial direct effects on:
(1) The States;
(2) The relationship between the National Government and the States; or
(3) The distribution of power and responsibilities among the various levels of Government.
Claims, Dental health, Health care, Health insurance, Individuals with disabilities, and Military personnel.
Accordingly, 32 CFR part 199 is proposed to be amended to read as follows:
5 U.S.C. 301; 10 U.S.C. chapter 55.
(e) * * *
(9)
(ii) Benefits are available for otherwise covered services and supplies required in the treatment of complications (unfortunate sequelae) and any necessary follow-on care resulting from a non-covered incident of treatment provided in an MTF, when the initial non-covered service has been authorized by the MTF Commander and the MTF is unable to provide the necessary treatment of the complications or required follow-on care, according to the guidelines adopted by the Director, TMA, or a designee.
(iii) Benefits are available for otherwise covered services and supplies required in the treatment of complications (unfortunate sequelae) and any necessary follow-on care resulting from a non-covered incident of treatment provided in the private sector pursuant to a properly granted waiver under § 199.16(f) of this chapter. The Director, TMA, or designee, shall issue guidelines for implementing this provision.
(g) * * *
(63)
Environmental Protection Agency (EPA).
Supplemental proposed rule and notice of public hearings.
On February 5, 2013, EPA published its proposed source-specific Federal Implementation Plan (FIP) requiring the Navajo Generating Station (NGS), located on the Navajo Nation, to reduce emissions of oxides of nitrogen (NO
Comments on EPA's February 5, 2013 proposal and today's Supplemental Proposal for NGS must be postmarked no later than January 6, 2014.
Submit comments, identified by docket number EPA–R09–OAR–2013–0009, by one of the following methods:
(1)
(2)
(3)
For more detailed instructions concerning how to submit comments on this supplemental proposed rule, and for more information on our proposed rule, please see the notice of proposed rulemaking, published in the
1. LeChee Chapter House (Navajo Nation), located in LeChee, Arizona, three miles south of Page on Coppermine Road (Navajo Route 20), (928) 698–2805, November 12, 2013, concurrent Open House and Public Hearing from 10 a.m.–1 p.m., local time;
2. Page High School Cultural Arts Building, 434 Lake Powell Boulevard, located in Page, Arizona, (928) 608–4138, November 12, 2013, Open House from 3–5 p.m., local time and Public Hearing from 6–9 p.m., local time;
3. Hopi Day School, Quarter-Mile East Main Street, located in Kykotsmovi, Arizona, (928) 734–2467, November 13, 2013, Open House from 3–5 p.m., local time and Public Hearing from 6–9 p.m., local time;
4. Phoenix Convention Center, 100 North 3rd Street, located in Phoenix, Arizona, (602) 262–6225, November 14, 2013, Open House from 3–5 p.m., local time and Public Hearing from 6–10 p.m., local time;
5. Proscenium Theatre, Pima Community College West Campus, Center for the Arts Building located two miles west of Interstate–10 on St. Mary's Road, (520) 206–6986, in Tucson, Arizona–November 15, 2013, Open House from 3–5 p.m., local time and Public Hearing from 6–9 p.m., local time.
EPA will provide oral interpretation services between English and Diné at the open houses and public hearings in LeChee and Page. EPA may provide oral interpretation services between English and the Hopi language at the open house and public hearing in Kykotsmovi, pending availability of a Hopi interpreter. To request additional oral interpretation services or to request reasonable accommodation for a disability, please contact the person listed in the
Oral testimony may be limited to five minutes or less for each commenter to address the proposal or supplemental proposed rule. We will not be providing equipment for commenters to show overhead slides or make computerized presentations. The public hearings for the four evening events are scheduled to close at 9 p.m. (in Page, Kykotsmovi, and Tucson) or 10 p.m. (in Phoenix), but may close later, if necessary, depending on the number of speakers wishing to participate.
Written statements and supporting information submitted electronically or by mail during the comment period will be considered with the same weight as any oral comments and supporting information presented at the public hearings. If you are unable to attend the hearings but wish to submit comments on the proposed rule, you may submit comments as indicated in the
Anita Lee, EPA Region 9, (415) 972–3958,
Throughout this document, “we”, “us”, and “our” refer to EPA.
NGS is a coal-fired power plant located on the Navajo Nation Indian Reservation, just east of Page, Arizona, approximately 135 miles north of Flagstaff, Arizona. Emissions of NO
NGS is co-owned by six entities: the U.S. Bureau of Reclamation (Reclamation)—24.3 percent, Salt River Project Agricultural Improvement and Power District (SRP), which also acts as the facility operator—21.7 percent, Los Angeles Department of Water and Power (LADWP)—21.2 percent, Arizona Public Service (APS)—14 percent, Nevada Energy (NV Energy, also known as Nevada Power Company)—11.3 percent, and Tucson Electric Power (TEP)—7.5 percent.
Federal participation in NGS was authorized in the Colorado River Basin Project Act of 1968 as a preferred alternative to building hydroelectric dams in the Grand Canyon for providing power to the Central Arizona Project (CAP).
Several tribes located in Arizona including the Gila River Indian Community, the Ak-Chin Indian Community, the Tohono O'odham Nation, the San Carlos Apache Tribe, the White Mountain Apache Indian Tribe, the Fort McDowell Yavapai Nation, the Salt River Pima-Maricopa Indian Community, the Navajo Nation, the Yavapai-Apache Nation, the Hopi Tribe, the Pascua Yaqui Tribe, the Yavapai-Prescott Tribe, and the Tonto Apache Nation, have CAP water allocations or contracts.
The coal used by NGS is supplied by the Kayenta Mine, operated by Peabody Energy and located on reservation lands of both the Navajo Nation and the Hopi Tribe. Taxes and royalties from NGS and the Kayenta Mine paid to the Navajo Nation and Hopi Tribe contribute to the annual revenues for both governments.
Given the extent of federal and tribal interests in NGS, on January 4, 2013, EPA, DOI, and the Department of Energy (DOE) signed a joint federal agency statement (Joint Statement) committing to collaborate on several short- and long-term goals, including analyzing and pursuing strategies for providing clean, affordable, and reliable power, affordable and sustainable water, and sustainable economic development to key stakeholders who currently depend on NGS.
As previously stated, NGS is subject to the BART requirements of the CAA and the RHR based on its age and its effects on visibility in Class I areas. Because NGS is located in Indian country, and because the Navajo Nation has not developed a Tribal Implementation Plan to implement the BART requirement for NGS, on February 5, 2013, EPA proposed a BART determination to require NGS to meet a NO
EPA's proposed “better than BART” framework established total emissions of NO
To calculate the value of the LNB/SOFA credit, EPA first calculated the total NO
EPA applied this framework to several alternatives we developed. In the February 2013 proposal, we proposed one Alternative to BART that would provide an additional three to five years to NGS in the schedule for the installation of new post-combustion control equipment to meet the proposed BART limit of 0.055 lb/MMBtu (i.e., Alternative 1 requiring compliance with the proposed BART limit on one unit per year in 2021, 2022, and 2023). Additional NO
In the February 2013 proposal, EPA also described, but did not propose, two additional alternatives (Alternatives 2 and 3) that would provide an additional five to eight years for NGS to meet the proposed BART limit of 0.055 lb/MMBtu (i.e., Alternatives 2 and 3 called for compliance with the BART limit on one unit per year over 2023–2025 and 2024–2026, respectively). Total NO
In both the February 2013 proposal and in the accompanying fact sheet, EPA encouraged a robust public discussion of our proposed BART determination, our proposed Alternative 1, as well as our proposed “better than BART” framework and other possible alternatives that meet the framework. In addition, we recognized the potential need for a supplemental proposal if other approaches developed by other parties are identified as meeting the requirements of the CAA.
After EPA published the proposed FIP on February 5, 2013, we received requests for a 90-day extension of the public comment period from the Navajo Nation, the Gila River Indian Community, SRP, and the Central Arizona Water Conservation District (CAWCD), the CAP operating entity, in order to allow stakeholders additional time to develop alternatives to BART for EPA's consideration. Recognizing the significant time and effort necessary to develop viable alternatives and the critical importance of active participation by affected parties in the development of alternatives to BART, on March 19, 2013, EPA extended the close of the public comment period to August 5, 2013 (78 FR 16825).
On June 10, 2013, EPA signed a notice, published on June 19, 2013, of our intent to hold five public hearings throughout the state of Arizona (78 FR 36716), at one location each on reservation lands of the Navajo Nation and Hopi Tribe, and in Page, Phoenix, and Tucson, Arizona.
On June 20, 2013, SRP submitted a letter, on behalf of itself and certain other stakeholders, requesting another extension of the comment period for NGS. The SRP letter described work that had been on-going for several months with representatives from several organizations (the TWG) to develop an Alternative to BART. On July 9, 2013, EPA extended the close of the public comment period again to October 4, 2013 (78 FR 41012). On September 16, 2013, EPA signed a notice extending the close of the public comment period a third time, to January 6, 2014.
On July 26, 2013, a group of stakeholders known as the TWG and composed of the Central Arizona Water Conservation District (CAWCD), the Environmental Defense Fund (EDF), the Gila River Indian Community (Gila River, or the Community), the Navajo Nation, SRP, on behalf of itself and the other non-federal Participants, the Department of the Interior, and Western Resource Advocates, submitted a document memorializing a multi-party agreement (the TWG Agreement) to EPA for consideration.
The TWG Agreement, in its entirety, is included in the docket for this proposed rulemaking. Appendix B to the TWG Agreement is the only component of the TWG Agreement that is applicable to today's action. EPA is not requesting comment on the provisions of the TWG Agreement unrelated to Appendix B, and will not be responding to comments on aspects of the TWG Agreement that are not related to our authority under section 169A of the CAA to require BART or an Alternative to BART.
In our proposed BART determination for NGS on February 5, 2013 (78 FR 8274), we provided a detailed discussion of the statutory and regulatory framework for addressing visibility, addressing sources located in Indian country under the Tribal Authority Rule (TAR), and developing BART determinations pursuant to the CAA and the BART Guidelines set forth in Appendix Y to 40 CFR Part 51. Please see 77 FR 8275–8277 for our discussion on these topics. In the following paragraphs, we describe the legal background and authority for evaluating Alternatives to BART and for providing additional compliance flexibility to NGS.
Under the CAA, compliance with emission limits determined as BART must be achieved “as expeditiously as practicable but in no event later than five years” after the effective date of the final BART determination (See CAA 169A(b)(2)(A) and (g)(4)). Therefore, the BART compliance date for NGS would be no later than 2019 if the rule is finalized in 2014. As discussed in greater detail in our proposed BART determination, EPA recognizes that the circumstances related to NGS create unusual and significant challenges for a five-year compliance schedule.
EPA's BART regulations allow an Alternative to BART provided the alternative results in greater reasonable progress than would have been achieved
In our February 5, 2013 proposal for NGS, EPA proposed an Alternative to BART (Alternative 1). In particular, EPA proposed that consideration of a compliance schedule beyond 2018 for Alternative 1 at NGS was appropriate for a number of reasons, including the importance of NGS to numerous Indian tribes located in Arizona and the federal government's reliance on NGS to meet the requirements of water settlements with several tribes. The timeframe for compliance would not, in itself, avoid or mitigate increases in water rates for tribes located in Arizona; however, it would provide time for the collaborating federal agencies to explore options to avoid or minimize potential impacts to tribes, including seeking funding to cover expenses for the federal portion of pollution control at NGS.
In developing this framework, EPA proposed to exercise its authority and discretion under section 301(d)(4) of the CAA, 42 U.S.C. 7601(d)(4), and the TAR, 40 CFR 49.11(a) and proposed an extended timeframe for an alternative measure under the RHR for NGS. EPA considered this extension of time to be consistent with the general programmatic requirements. States and regulated sources accordingly had almost 20 years under the RHR to design and implement alternative measures to BART. Because of the myriad stakeholder interests and complex governmental interests unique to NGS, we are only now addressing the BART requirements for NGS. For all the reasons explained above, we considered it appropriate to consider an extended compliance period for NGS.
Our proposal to require emission reductions beyond 2018 was supported by the Tribal Authority Rule codified at 40 CFR 49.11(a). The TAR reflects EPA's commitment to promulgate “such Federal implementation plan
The use of the term “provisions as are necessary or appropriate” indicates EPA's determination that it may only be necessary or appropriate to promulgate a FIP of limited scope. The United States Court of Appeals for the Tenth Circuit has previously endorsed the application of this approach in a challenge to the FIP for the Four Corners Power Plant, stating: “[40 C.F.R. 49.11(a)] provides the EPA discretion to determine what rulemaking is necessary or appropriate to protect air quality and requires the EPA to promulgate such rulemaking.”
Appendix B of the TWG Agreement contains the TWG Alternative that was submitted to EPA for consideration as a ”better than BART” Alternative.
The 2009–2044 NO
The TWG Alternative puts forth two main operating scenarios, with additional sub-options, for limiting NO
Each of the three scenarios under TWG Alternative A (i.e., A1, A2, or A3) requires two significant emission reductions, one to occur by December 31, 2019 and the other by December 31, 2030. The emission reductions in the first step, by December 31, 2019, under TWG Alternative A1 would be achieved through closure of one unit. Alternative A2 would entail closure of one unit with an increase in capacity, not to exceed 189 MW, at the remaining two units; Alternative A3 would entail the curtailment of energy production across all three units such that the emission reductions are equivalent to the closure of approximately one unit. The emission reductions to occur in the second step, under Alternatives A1–3, would occur by December 31, 2030, and would be achieved by compliance of two units at NGS with an emission limit of 0.07 lb/MMBtu, achievable with the installation of SCR. Under the TWG Alternative, although the 2009–2044 NO
Alternative A1 would be triggered if LADWP and NV Energy retire their ownership shares of NGS without selling, or if LADWP and NV Energy sell their ownership shares to an existing NGS participant and the Navajo Nation does not elect to purchase an interest in NGS. Alternative A2 is triggered if LADWP or NV Energy sell their ownership shares to an existing NGS participant, the Navajo Nation elects to purchase an interest in NGS, and the NGS participants can increase the capacity of NGS by no more than 189 MW
TWG Alternative B would be triggered if LADWP and/or NV Energy sell their ownership interest to a third party (i.e., a party that is not an existing NGS participant). TWG Alternative B establishes similar emission reductions to Alternative A by setting a second NO
EPA is proposing to include the TWG Alternative as a second “better than BART” Alternative to achieve compliance with the RHR.
As stated previously, the TWG Alternative establishes a 2009–2044 NO
As shown in our proposed rulemaking, EPA's proposed BART Benchmark was 358,974 tons of NO
Table 1 shows that the correction for EPA's transcription error, a revised BART compliance date, and the application of the LNB/SOFA credit to the BART Benchmark instead of alternatives, account for the full difference between EPA's BART Benchmark, as reported in our proposed rulemaking, and the example calculation from the TWG Alternative.
Using the value from Table 1 of 480,489 tons, representing total NO
As discussed previously, EPA anticipates that the compliance date for BART would be based on the effective date of the final rule, which is typically 60 days following publication of the final rule in the
In our proposed BART determination on February 5, 2013, we established a framework for evaluating other Alternatives to BART, centered on our proposed BART determination that calculated a BART benchmark for total NO
EPA's technical evaluation has also focused on whether the four potential operating scenarios in the TWG Alternative (Alternatives A1–A3 and B) provide a reasonable basis to ensure the NO
The four possible operating scenarios under the TWG Alternative (Alternatives A1, A2, A3, and B) are summarized in section III.A of this Supplemental Proposal. These four scenarios are also shown in Table 3 and compared against the 2009–2044 NO
The three operating scenarios under Alternative A represent emission reductions that occur during three distinct periods of time: over 2009–2011 (through the early installation of LNB/SOFA), by 2020 (from closure or curtailment of one unit, and by 2031 (through compliance with a NO
EPA notes that the closure or curtailment of one unit at NGS in 2020 would result not only in NO
In order to better understand whether the three potential operating scenarios under Alternative A provide reasonable assurance that emissions from NGS will remain below the 2009–2044 NO
As shown in Table 3, estimates for total NO
Consistent with 40 CFR 51.308(e), the enforceable 2009–2044 NO
As indicated in Table 3, and as discussed previously, the operating scenario under TWG Alternative B does not specify the exact process that would be used to comply with the 2009–2044 NO
To evaluate TWG Alternative B, EPA estimated potential emission reduction timeframes that would be needed to comply with the 2009–2029 and 2009–2044 NO
To ensure compliance, the annual reporting requirements that apply to TWG Alternative A would also apply under TWG Alternative B. In addition, if TWG Alternative B is triggered, the operator of NGS would be required to submit annual Emission Reduction Plans to EPA that would identify the potential emission reductions measures and operating scenarios to comply with the 2009–2029 or 2009–2044 NO
Consistent with 40 CFR 51.308(e), the enforceable 2009–2029 and 2009–2044 NO
Based on our analysis of the operating scenarios under TWG Alternatives A1–A3 and B, EPA is proposing to determine that the TWG Alternative meets EPA's “better than BART” framework outlined in our February 5, 2013 proposed BART determination for NGS.
In addition to our proposed BART determination and Alternative 1 for NGS dated February 5, 2013, in today's action, EPA is supplementing our proposal with the TWG Alternative submitted to EPA on July 26, 2013 as an additional “better than BART” Alternative. Because we are supplementing our February 5, 2013 proposed rulemaking with today's
EPA is proposing to determine that the TWG Alternative ensures that total emissions of NO
EPA is accepting public comment concurrently on our February 5, 2013 proposed BART determination and proposed Alterative 1 and the TWG Alternative put forth in today's Supplemental Proposal. From November 12–15, 2013, EPA will be holding five open house and public hearing events throughout Arizona to accept written and oral comment on our proposed rulemaking and Supplemental Proposal. The comment period for our February 5, 2013 proposed rulemaking and today's Supplemental Proposal closes on January 6, 2014.
This action supplements our proposed source-specific Federal Implementation Plan for the Navajo Generating Station to propose and take comment on an additional Alternative to BART that was developed by and agreed upon by a group of seven stakeholders. Under the terms of Executive Order (EO) 12866 (58 FR 51735, October 4, 1993) and EO 13563 (76 FR 3821, January 21, 2011), because this proposed rule applies to only one facility, it is not a rule of general applicability. This proposed rule, therefore, is exempt from review under EO 12866 and EO 13563.
This action does not impose an information collection burden under the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. Burden is defined at 5 CFR 1320.3(b). Under the Paperwork Reduction Act, a “collection of information” is defined as a requirement for “answers to * * * identical reporting or recordkeeping requirements imposed on ten or more persons * * *.” 44 U.S.C. 3502(3)(A). Because the Supplemental Proposal applies to a single facility, Navajo Generating Station, the Paperwork Reduction Act does not apply.
The Regulatory Flexibility Act (RFA) generally requires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedure Act or any other statute unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small organizations, and small governmental jurisdictions.
For purposes of assessing the impacts of today's proposed rule on small entities, small entity is defined as: (1) a small business as defined by the Small Business Administration's (SBA) regulations at 13 CFR 121.201; (2) a small governmental jurisdiction that is a government of a city, county, town, school district or special district with a population of less than 50,000; and (3) a small organization that is any not-for-profit enterprise which is independently owned and operated and is not dominant in its field.
After considering the economic impacts of this proposed action on small entities, I certify that this proposed action will not have a significant economic impact on a substantial number of small entities. The Navajo Generating Station is not a small entity and the FIP for Navajo Generating Station being proposed today does not impose any compliance requirements on small entities. See Mid-Tex Electric Cooperative, Inc. v. FERC, 773 F.2d 327 (D.C. Cir. 1985). We continue to be interested in the potential impacts of the proposed rule and this Supplemental Proposal on small entities and welcome comments on issues related to such impacts.
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), 2 U.S.C. 1531–1538, requires Federal agencies, unless otherwise prohibited by law, to assess the effects of their regulatory actions on State, local, and tribal governments and the private sector. Federal agencies must also develop a plan to provide notice to small governments that might be significantly or uniquely affected by any regulatory requirements. The plan must enable officials of affected small governments to have meaningful and timely input in the development of EPA regulatory proposals with significant Federal intergovernmental mandates and must inform, educate, and advise small governments on compliance with the regulatory requirements.
This rule does not contain a Federal mandate that may result in expenditures of $100 million or more for state, local, and tribal governments, in the aggregate, or the private sector in any one year. EPA anticipates the annual cost to the private sector of this Supplemental Proposal, which involves compliance with BART emission limits by two units, rather than three units, to be lower than the anticipated cost of EPA's proposed BART determination of $64 million per year (see Table 2 of EPA's proposed BART determination at 78 FR 8274, February 5, 2013). Thus, this Supplemental Proposal is not subject to the requirements of sections 202 or 205 of UMRA. This proposed rule will not impose direct compliance costs on state, local or tribal governments. This proposed action will, if finalized, reduce the emissions of NO
In developing this rule, EPA consulted with small governments pursuant to a plan established under section 203 of UMRA to address impacts
This action does not have federalism implications. It will not have substantial direct effects on the states, on the relationship between the national government and the states, or in the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132. This action proposes emission reductions of NO
Under Executive Order 13175 (65 FR 67249, November 9, 2000), EPA may not issue a regulation that has tribal implications, that imposes substantial direct compliance costs, and that is not required by statute, unless the federal government provides the funds necessary to pay the direct compliance costs incurred by tribal governments, or EPA consults with tribal officials early in the process of developing the proposed regulation and develops a tribal summary impact statement.
EPA has concluded that this proposed action will have tribal implications, and consequently EPA has consulted with tribal officials during the process of developing the proposed regulation and will continue to consult with tribal officials during the process to take final action. EPA notes that the TWG Alternative, on which this Supplemental Proposal is based, was developed by a group of seven stakeholders that included the Navajo Nation and the Gila River Indian Community. However, we also note that not all tribes that may be affected by this proposed alternative were among the stakeholders. Other tribes may have views on this alternative and EPA welcomes their comments. The proposed regulation will not pre-empt tribal law. The proposed regulation will also not impose
In addition to our consultation with tribes discussed in our February 5, 2013 proposed rulemaking, EPA has had additional meetings and conference calls with tribes at their request since the time we received the TWG Alternative, and during our process of evaluating the TWG Alternative. On August 22, 2013, we met with Governor Gregory Mendoza and other representatives from the Gila River Indian Community.
EPA recognizes that the Navajo Nation and the Gila River Indian Community participated in the development of the TWG Agreement on NGS and were signatories on the Agreement. However, EPA also understands from discussions with President Shelly and Governor Mendoza that concerns, related to potential impacts to their respective tribes from BART and the TWG Alternative, still exist. EPA understands that Chairman Shingoitewa has numerous concerns related to the TWG Agreement and Alternative, including the exclusion of the Hopi Tribe from the TWG and the development of the TWG Agreement, and the extended timeframe for the installation of new air pollution controls at NGS under the TWG Alternative. EPA will continue to consult with Tribal officials during and following the public comment period on the proposed FIP.
Executive Order 13045: Protection of Children from Environmental Health Risks and Safety Risks (62 FR 19885, April 23, 1997), applies to any rule that: (1) is determined to be economically significant as defined under Executive Order 12866, and (2) concerns an environmental health or safety risk that EPA has reason to believe may have a disproportionate effect on children. If the regulatory action meets both criteria, the Agency must evaluate the environmental health or safety effects of the planned rule on children, and explain why the planned regulation is preferable to other potentially effective and reasonably feasible alternatives considered by the Agency. This proposed rule is not subject to Executive Order 13045 because it requires emissions reductions of NO
This action is not subject to Executive Order 13211 (66 FR 28355 (May 22, 2001)), because it is exempt under Executive Order 12866.
Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (NTTAA), Public Law 104–113, 12 (10) (15 U.S.C. 272 note) directs EPA to use voluntary consensus standards (VCS) in its regulatory activities unless to do so would be inconsistent with applicable law or otherwise impractical. VCS are technical standards (e.g., materials specifications, test methods, sampling procedures and business practices) that are developed or adopted by the VCS bodies. The NTTAA directs EPA to provide Congress, through annual reports to OMB, with explanations when the Agency decides not to use available and applicable VCS.
Consistent with the NTTAA, the Agency conducted a search to identify potentially applicable VCS. For the measurements listed below, there are a number of VCS that appear to have possible use in lieu of the EPA test methods and performance specifications (40 CFR Part 60, Appendices A and B) noted next to the measurement requirements. It would not be practical to specify these standards in the current proposed rulemaking due to a lack of sufficient data on equivalency and validation and because some are still under development. However, EPA's Office of Air Quality Planning and Standards is in the process of reviewing all available VCS for incorporation by reference into the test methods and performance specifications of 40 CFR Part 60, Appendices A and B. Any VCS so incorporated in a specified test method or performance specification would then be available for use in determining the emissions from this facility. This will be an ongoing process designed to incorporate suitable VCS as they become available.
Executive Order 12898 (59 FR 7629, February 16, 1994), establishes federal executive policy on environmental justice. Its main provision directs federal agencies, to the greatest extent practicable and permitted by law, to make environmental justice part of their mission by identifying and addressing, as appropriate, disproportionately high and adverse human health or environmental effects of their programs, policies, and activities on minority populations and low-income populations in the United States.
EPA has determined that this proposed rule, if finalized, will not have disproportionately high and adverse human health or environmental effects on minority or low-income populations because it increases the level of environmental protection for all affected populations without having any disproportionately high and adverse human health or environmental effects on any population, including any minority or low-income population. This proposed rule requires emissions reductions of NO
Environmental protection, Air pollution control, Indians, Intergovernmental relations, Nitrogen Dioxide.
42 U.S.C. 7401
Title 40, chapter I of the Code of Federal Regulations is proposed to be amended as follows:
42 U.S.C. 7401, et seq.
(j) (1)
(2)
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vi)
(vii)
(ix)
(x)
(xi)
(xii)
(xiii)
(xiv)
(xv)
(xvi)
(xvii)
(xviii)
(3)
(i)
(A)
(1) By December 31, 2019, the owner/operator shall permanently cease operation of one coal-fired Unit.
(2) By December 31, 2030, the owner/operator shall comply with a NO
(B)
(1) By December 31, 2019, the owner/operator shall permanently cease operation of one coal-fired Unit.
(2) By December 31, 2019, the owner/operator may elect to increase net generating capacity of the remaining two coal-fired Units by a combined total of no more than 189 MW. The actual increase in net generating capacity shall be limited by the sum of 19 MW and the ownership interest, in net MW capacity, purchased by the Navajo Nation by December 31, 2019. The owner/operator shall ensure that any increase in the net generating capacity is in compliance with all pre-construction permitting requirements, as applicable.
(3) By December 31, 2030, the owner/operator shall comply with a NO
(C)
(1) By December 31, 2019, the owner/operator shall reduce the net generating capacity of NGS by no less than 561 MW. The actual reduction in net generating capacity of NGS shall be determined by the difference between 731 MW and the ownership interest, in net MW capacity, purchased by the Navajo Nation by December 31, 2019.
(2) By December 31, 2030, the owner/operator shall comply with a NO
(D)
(ii)
(A) Alternative A1 shall apply if both of the Departing Participants retire their ownership interests in NGS by December 31, 2019, and the Navajo Nation does not purchase an ownership share of NGS by December 31, 2019; or if both of the Departing Participants sell their ownership interests to Existing Participants, and the Navajo Nation does not purchase an ownership share of NGS by December 31, 2019; or if one of the Departing Participants retires its ownership interest and the other Departing Participant sells its ownership interest to an Existing Participant, and the Navajo Nation does not purchase an ownership share of NGS by December 31, 2019.
(B) Alternative A2 shall apply if both of the Departing Participants sell their ownership interests to Existing Participants, the Navajo Nation elects to purchase an ownership share of NGS by December 31, 2019, and the owner/operator elects to increase net generating capacity of the two remaining Units; or if one of the Departing Participants retires its ownership interest and the other Departing Participant sells its ownership interest to an Existing Participant, the Navajo Nation elects to purchase an ownership share of NGS by December 31, 2019, and the owner/operator elects to increase net generating capacity of the two remaining Units.
(C) Alternative A3 shall apply if both of the Departing Participants sell their ownership interests to Existing Participants, the Navajo Nation elects to purchase an ownership share of NGS by December 31, 2019, and the owner/operator does not elect to increase net generating capacity; or if one of the Departing Participants retires its ownership interest and the other Departing Participant sells its ownership interest to an Existing Participant, the Navajo Nation elects to purchase an ownership share of NGS by December 31, 2019, and the owner/operator does not elect to increase net generating capacity.
(D) Alternative B shall apply if, by December 31, 2019, any of the Departing Participants sell their ownership interests to a Party that is not an Existing Participant.
(4)
(i) No later than December 1, 2019, the owner/operator must notify EPA of the applicable Alternative for ensuring compliance with the 2009–2044 NO
(ii) Beginning January 31, 2015, and annually thereafter until the earlier of December 22, 2044 or the date on which the owner/operator ceases conventional coal-fired generation at NGS, the owner/operator shall submit to the Regional Administrator, a report summarizing the annual heat input, the annual emissions of sulfur dioxide, carbon dioxide, and annual and cumulative emissions of NO
(iii) No later than December 31, 2020, the owner/operator shall submit an application to revise its existing Part 71 Operating Permit to incorporate the requirements and emission limits of the applicable Alternative to BART under paragraph (j)(3).
(iv) In addition to the requirements of paragraphs (j)(4)(i), (ii) and (iii), if Alternative B applies, the owner/operator shall submit annual Emission Reduction Plans to the Regional Administrator.
(A) No later than December 31, 2019 and annually thereafter through December 31, 2028, the owner/operator shall submit an Emission Reduction Plan containing anticipated year-by-year emissions covering the period from 2020 to 2029 that will assure that the operation of NGS will result in emissions of NO
(B) No later than December 31, 2029 and annually thereafter, the owner/operator shall submit an Emission Reduction Plan containing year-by-year emissions covering the period from January 1, 2030 to December 31, 2044 that will assure that the operation of NGS will result in emissions of NO
(5)
(i) At all times, the owner/operator of each unit shall maintain, calibrate, and operate a CEMS, in full compliance with the requirements found at 40 CFR Part 75, to accurately measure NO
(ii) The owner/operator of each unit shall comply with the quality assurance procedures for CEMS found in 40 CFR Part 75. In addition to these Part 75 requirements, relative accuracy test audits shall be calculated for both the NO
(6)
(i) Compliance with the NO
(ii) If a valid NO
(7)
(i) All CEMS data, including the date, place, and time of sampling or measurement; parameters sampled or measured; and results as required by Part 75 and as necessary to calculate each unit's pounds of NO
(ii) Each calendar day rolling average group emission rates for NO
(iii) Each unit's 30 Boiler Operating Day pounds of NO
(iv) Records of quality assurance and quality control activities for emissions measuring systems including, but not limited to, any records required by 40 CFR Part 75.
(v) Records of the relative accuracy calculation of the NO
(vi) Records of all major maintenance activities conducted on emission units, air pollution control equipment, and CEMS.
(vii) Any other records required by 40 CFR Part 75.
(8)
(i) The owner/operator shall notify EPA within two weeks after completion of installation of NO
(ii) Within 30 days after the first applicable compliance date in paragraph (j)(3) of this section and within 30 days of every second calendar quarter thereafter (i.e., semi-annually), the owner/operator shall submit a report that lists for each calendar day, calculated in accordance with paragraph (j)(6) of this section, total lb of NO
(9)
(10)
(11)
Environmental Protection Agency (EPA).
Proposed rule.
EPA proposes to approve the State Implementation Plan (SIP) revision submitted by the District of Columbia (hereafter “the District”) pursuant to the Clean Air Act (CAA). Whenever new or revised national ambient air quality standards (NAAQS) are promulgated, the CAA requires states to submit a plan for the implementation, maintenance, and enforcement of such NAAQS. The plan is required to address basic program elements including, but not limited to, regulatory structure, monitoring, modeling, legal authority, and adequate resources necessary to assure attainment and maintenance of the NAAQS. These elements are referred to as infrastructure requirements. The District has made a submittal addressing the infrastructure requirements for the 2008 lead (Pb) NAAQS (“the infrastructure submittal”) and a separate submittal addressing requirements in relation to State Boards. This action is being taken under the CAA. In the Final Rules section of this
Comments must be received in writing by November 21, 2013.
Submit your comments, identified by Docket ID Number EPA–R03–OAR–2013–0499 by one of the following methods:
A.
B.
C.
D.
Emlyn Vélez-Rosa, (215) 814–2038, or by email at
For further information, please see the information provided in the direct final action, with the same title, that is located in the “Rules and Regulations” section of this
Fish and Wildlife Service, Interior.
Notice of 12-month petition finding.
We, the U.S. Fish and Wildlife Service, announce a 12-month finding on a petition to list the ashy storm-petrel (
The finding announced in this document was made on October 22, 2013.
This finding is available on the Internet at
Mike Chotkowski, Field Supervisor, Bay–Delta Fish and Wildlife Office (see
On October 16, 2007, we received a petition, dated October 15, 2007, from the Center for Biological Diversity, requesting that we list the ashy storm-petrel as a threatened or endangered species under the Act and that critical habitat be designated concurrently with listing. On May 15, 2008, the Service published in the
This finding is based upon the Species Report for ashy storm-petrel, a scientific analysis of available information prepared by a team of Service biologists from the Service's Bay–Delta, Carlsbad, Ventura, and Arcata Field Offices, the Farallon National Wildlife Refuge, the Region 8 Office, and National Headquarters Office. The purpose of the Species Report is to provide the best available scientific and commercial information about the species so that we can evaluate whether or not the species warrants protection under the Act. In it, we compiled the best scientific and commercial data available concerning the status of ashy storm-petrel, including the past, present and future threats to this species. As such, the Species Report provides the scientific basis that informs our regulatory decision in this document, which involves the further application of standards within the Act and its regulations and policies. The Species Report (including all references) and other materials relating to this finding can be found on the Bay–Delta Fish and Wildlife Web site at:
The reader is directed to section IV of the Species Report for a more detailed discussion of the biology, taxonomy, life history, distribution, and current conditions of the ashy storm-petrel (Service 2013;
The ashy storm-petrel (
Section 4 of the Act (16 U.S.C. 1533) and implementing regulations (50 CFR 424) set forth procedures for adding species to, removing species from, and reclassifying species on the Federal
(A) The present or threatened destruction, modification, or curtailment of its habitat or range;
(B) Overutilization for commercial, recreational, scientific, or educational purposes;
(C) Disease or predation;
(D) The inadequacy of existing regulatory mechanisms; or
(E) Other natural or manmade factors affecting its continued existence.
A species is an endangered species for purposes of the Act if it is in danger of extinction throughout all or a significant portion of its range, and is a threatened species if it is likely to become an endangered species within the foreseeable future throughout all or a significant portion of its range. For purposes of this analysis, we first evaluate the status of the species throughout all of its range, and then consider whether the species is in danger of extinction or likely to become so in any significant portion of its range.
In making this finding, information pertaining to the ashy storm-petrel in relation to the five factors provided in section 4(a)(1) of the Act is summarized below, based on the analysis of these issues contained in the Species Report. In considering what factors might constitute threats, we must look beyond the mere exposure of the species to the factor to determine whether the species responds to the factor in a way that causes actual impacts to the species. If there is exposure to a factor, but no response, or only a positive response, that factor is not a threat. If there is exposure and the species responds negatively, the factor may be a threat and we then attempt to determine the scope, severity, and impact of the potential threat. If the threat is significant, it may drive or contribute to the risk of extinction of the species such that the species warrants listing as endangered or threatened as those terms are defined by the Act. This does not necessarily require empirical proof of a threat. The combination of exposure and some corroborating evidence of how the species is likely impacted could suffice. The mere identification of factors that could impact a species negatively is not sufficient to compel a finding that listing is appropriate; we require evidence that these factors are operative threats that act on the species to the point that the species meets the definition of an endangered or threatened species under the Act.
The best available information does not show any differences between the current and historical range of the ashy storm-petrel (Service 2013, pp. 8–9). The known range of the ashy-storm petrel has expanded slightly in recent years, with the confirmation of breeding at new locations at the northern end of the breeding range. Ashy storm-petrels may have been present at these locations historically, but adequate surveys had not been done to determine presence. Therefore, we do not consider these new locations to be an expansion of the historical range. Thus, the Service considers the at-sea geographic distribution (marine range) of the ashy storm-petrel to include waters off the western coast of North America from latitude 42° N (approximately the California–Oregon State line) south to latitude 28° N (approximately Islas San Benitos, Mexico), and approximately 75 mi (120 km) out to sea from mainland and island coasts (Service 2013, p. 9).
The current total global (restricted to California and Mexico) population size of breeding ashy storm-petrels at all known locations is estimated at between 10,000 and 11,000 individuals (Service 2013, p. 16). We estimate a total current global population of breeding and nonbreeding individuals between about 18,700 and 20,600 birds (Service 2013, p. 16). These estimates account only for known population occurrences. Unconfirmed and potentially unknown locations are not included in the estimate; however, the existence of sizeable unknown populations (on the scale of SE Farallon or Channel Islands) is unlikely, given the considerable survey efforts that have occurred (Service 2013, p. 16).
Population size and productivity (nesting success) are two measures of population status, along with trends in those measures over time. Because over 90 percent of the estimated breeding population is restricted to SE Farallon Island and the Channel Islands, and most colony data are derived from those two locations, we will focus on those locations for population trends and productivity estimates. Research on productivity has been conducted only at SE Farallon Island and Santa Cruz Island (Service 2013, pp. 17).
We do not have any comparable colony size data for evaluating population trends before 1992, when standardized mist netting efforts began on SE Farallon Island (Service 2013, p. 22). The best data available are based on the mist net population index there, and show up and down variation from 1992 to about 2001. The Service's review of this data found a significant average increase in the ashy storm-petrel population index of 22.1 percent per year from 2000–2006, and a mean non-significant decrease in the ashy storm-petrel population index on SE Farallon Island of 7.19 percent per year from 2007 to 2012 (Service 2013, p. 21). We conclude that the population is currently experiencing fluctuations due to various factors, including avian predation. After assessing the best available scientific data, we have concluded that there is no consistent long-term trend in the species' population nesting on SE Farallon Island.
The Channel Islands population comprises an estimated 36 percent of the total ashy storm-petrel population (Service 2013, p. 26). We currently have no published studies of population trends on the Channel Islands. The best available scientific and commercial information consists of data collected using varying methods and incomplete analyses (Service 2013, p. 26). As a result, the available information does not allow us to conclude any trends for the Channel Islands population of the ashy storm-petrel. The Species Report has more detailed information on population trends and productivity for the ashy-storm petrel (Service 2013, pp. 16–28;
The Act requires that the Secretary determine whether a species is endangered or threatened because of any of the five factors enumerated in 16 U.S.C. 1533(a)(1). Our discussion of the threats categorized under each of these five factors is contained in the Species Report (Service 2013;
All potential threats currently acting upon the ashy storm-petrel or likely to affect the species in the foreseeable future (and consistent with the five listing factors identified above) are evaluated and addressed in the Species Report, and summarized in the following paragraphs. The reader is directed to section VI of the Species Report for a more detailed discussion of the threats summarized in this document (Service 2013;
The Species Report evaluates the biological status of the bird and each of the potential threats under the five statutory factors affecting its continued existence. It was based upon the best available scientific and commercial data and the expert opinion of the Species Report team members. Based on the analysis and discussion contained therein, we conclude that climate change (ocean acidification, ocean warming, and sea level rise) (Factor A); invasive species (Factor A); human activities (Factor A); military activities (Factor A); overutilization for commercial, recreational, scientific, or educational purposes (Factor B); house mouse predation (Factor C); skunk predation (Factor C); barn owl predation (Factor C); common raven predation (Factor C); artificial light pollution (Factor E); oil pollution (Factor E); organochlorine contaminants (Factor E); and ingestion of plastics (Factor E) are potential threats that are having a negligible to slight impact on the ashy storm-petrel within the scope of the threat, both now and in the foreseeable future. These factors may have minor impacts on individuals in some locations, but they are not impacting the species as a whole. The full analyses of these possible threats is documented in the Species Report. Based on the analysis contained within the Species Report, we conclude that the best available scientific and commercial information does not indicate that these threats are causing a decline in the species or its habitat, either now or in the foreseeable future.
In our threat evaluation in the Species Report, we did find that burrowing owl predation (Factor C) and western gull predation (Factor C) are likely having slight to moderate impacts on the ashy storm-petrel within the scope of the threats. Burrowing owls have been known to frequent SE Farallon Island since at least the late 1880s; since systematic recording of burrowing owls began on SE Farallon Island in 2000, the highest abundance of burrowing owls has occurred in the years 2009–2012 (Service 2013, p. 46). From 2003 through 2010, predation by burrowing owls accounted for 40 percent of ashy storm-petrel predation, and this predation has surpassed predation by western gulls in recent years (Service 2013, p. 46). In the Species Report, we concluded that the timing of burrowing owl predation is ongoing and the scope is large because all individuals on SE Farallon Island are potentially exposed to the threat of burrowing owl predation (Service 2013, p. 47). Using data collected on SE Farallon Island in the period 2003–2012, we made a rough estimate of the effect that burrowing owls could have on ashy storm-petrels. Our calculations showed that around 10 percent of the ashy storm-petrel population could be eliminated over the next 40 years. This method used to calculate owl predation may underestimate the effects that owl predation has on petrels. Because the ashy storm-petrel population growth rate is sensitive to adult survival and it is likely that not all predated wings are found and included in the calculations, it is possible that population declines could be greater (Service 2013, p. 47). While this potential loss is considered of slight/moderate severity on the Farallon Islands, we conclude that, overall, the current best available scientific and commercial information does not indicate that burrowing owl predation is resulting in a downward trend to the species as a whole.
The Species Report further examined western gull predation on ashy storm-petrels at the Farallon Islands (Service 2013, pp. 48–49). The Farallon Islands hosts the world's largest western gull breeding population, although the population of western gulls on the islands has recently undergone a slight decline, numbering around 17,500 gulls (Service 2013, p. 48). Western gulls predated over 75 ashy storm-petrels per year on SE Farallon Island during the period 2003–2009, but predation by gulls has recently decreased to less than 60 individuals per year during the period 2009–2012, possibly due to the increase during that time of burrowing owl predation on petrels (Service 2013, p. 49). In the Species Report, we concluded that the timing of western gull predation is ongoing and the scope is large because all individuals on SE Farallon Island are potentially exposed to the threat of western gull predation (Service 2013, p. 47). Using data collected on SE Farallon Island from 2003 through 2012, we made a rough estimate of the effects that western gulls could have on ashy storm-petrels over the next 40 years. Our calculations show that around 10 percent of the ashy storm-petrel population could be eliminated (Service 2013, p. 49). However, because the ashy storm-petrel population growth rate is sensitive to adult survival and it is likely that not all predated wings are found and included in our calculations, it is possible that population declines could be greater. While this potential loss is considered of slight/moderate severity on the Farallon Islands, we conclude that, overall, the current best available scientific and commercial information does not indicate that western gull predation is resulting in a downward trend in the species population. In addition, the available scientific information does not indicate that the effects of burrowing owl predation and western gull predation are additive; as burrowing owl predation has increased on the SE Farallon Island, western gull predation has decreased, as shown in the Species Report.
In summary, the threats to ashy storm-petrel from burrowing owl predation and western gull predation at present and in the foreseeable future do not pose a threat to the long-term persistence of ashy storm-petrel. The threats operating individually do not place the species at immediate risk of extinction, nor do they appear likely to cause the ashy storm-petrel to become endangered within the foreseeable future through all or a significant portion of its range.
A number of conservation measures have taken place or are ongoing that minimize the impact on ashy storm-petrels from the potential threats listed above. These conservation measures are detailed in the Species Report (Service 2013;
The Act requires that the Secretary assess available regulatory mechanisms in order to determine whether existing regulatory mechanisms are adequate to address threats to the species (Factor D). The Species Report includes a
Based on the analysis contained within the Species Report, we conclude that the best available scientific and commercial information does not indicate that the existing regulatory mechanisms are inadequate to address impacts from the identified potential threats.
When conducting our analysis about the potential threats affecting ashy storm-petrel, we also assess whether the species may be affected by a combination of factors. In the Species Report (Service 2013, pp. 74–75;
Oceanic foraging habitat is expected to provide declining food resources for the ashy storm-petrel into the future. A number of oceanic threats, including warming sea temperatures and ocean acidification (Factor A), that will affect food resources available to the ashy storm-petrel throughout its range are expected to increase into the future. As the abundance of plastics continues to increase into the future, ingestion of plastics (Factor E) by seabirds will increase in unison with the effects of climate change to habitat (Factor A). Less food in the ocean due to warming sea temperatures and ocean acidification (Factor A) combined with artificial food consumption of plastics in the ocean (Factor E) will result in less nutritional food availability for the ashy storm-petrel. Lights from offshore energy platforms and squid fishing vessels will continue to attract ashy storm-petrels within their vicinity and can result in direct collisions and mortality (Factor E); moreover, ashy storm-petrels may be more vulnerable to predation by gulls after being attracted to artificial lights (Factor C), where they concentrate around lighted boats to feed on squid. The best available scientific and commercial information at this time does not indicate that less nutritional food availability will lead to more collisions with lights that result in mortality. Nor does it indicate that less food, combined with habitat changes due to climate change, will lead to increased vulnerability to predation, or otherwise result in losses to the population.
Sea level rise at the Channel Islands is predicted to inundate portions of sea caves, causing the future loss of nesting habitat in areas used by nesting petrels, potentially resulting in some storm-petrels not nesting, or reducing nesting populations in those caves (Factor A). In the event of future skunk predation causing reproductive failure at any one of the caves (Factor C), and sea level rise reducing habitat for nesting populations in caves (Factor A), the Channel Islands population could suffer direct losses of populations and future breeding ability, a loss exacerbated by the lingering presence of organochlorine contaminants that have resulted in thinning of eggshells and thus impacts to hatching success (Factor E). Mortality may result from collisions with artificial light at Offshore Energy Platforms near the Channel Islands (Factor E). The best available scientific and commercial information at this time does not indicate that sea level rise in combination with skunk predation or collisions with lights will result in a decline to the species. Although we cannot fully quantify these future effects on ashy storm-petrel populations, they may be negative and may exacerbate other threats such as avian predation (Factor C) or an oil spill (Factor E) in any location where the species aggregates. However, at this point in time, the best available scientific and commercial information does not indicate that these threats in combination will result in a decline to the species.
All or some of the potential threats could act in concert to result in cumulative stress on the ashy storm-petrel population. However, the best available scientific and commercial information currently does not indicate that these threats singularly or cumulatively are resulting or will in the future result in a substantial decline of the total population of the species or have large impacts to the ashy storm-petrel at the species level. Therefore, we do not consider the cumulative impact of these threats to the ashy storm-petrel to be substantial at this time, nor into the future.
As required in section 4(a)(1) of the Act, we conducted a review of the status of the ashy storm-petrel and assessed the five factors in consideration of whether the ashy storm-petrel is endangered or threatened throughout all of its range. We have carefully assessed the best scientific and commercial information available regarding the past, present, and future threats to the ashy storm-petrel. We reviewed information presented in the 2007 petition, information available in our files, our 2008 90-day and 2009 12-month findings in response to the petition, and other available published and unpublished information, including information submitted subsequent to our 2009 finding. We also consulted with species experts and land managers at the areas where ashy storm-petrels occur.
We evaluated each of the potential threats in the Species Report for the ashy storm-petrel, and we determined that climate change (ocean acidification, ocean warming, and sea level rise); invasive species; human activities; military activities; overutilization for commercial, recreational, scientific, or educational purposes; house mouse predation; skunk predation; barn owl predation; common raven predation; artificial light pollution; oil pollution; organochlorine contaminants; and ingestion of plastics are potential threats that are having a negligible to slight impact on the ashy storm-petrel within the scope of the threat. In addition, our Species Report evaluated existing regulatory mechanisms and did not reveal an inadequacy of existing
The Act defines an endangered species as any species that is “in danger of extinction throughout all or a significant portion of its range” and a threatened species as any species “that is likely to become endangered throughout all or a significant portion of its range within the foreseeable future.” Based on our analysis conducted in the Species Report and summarized in this finding, and using the best scientific and commercial information available, we find that the magnitude and imminence of threats do not indicate that the ashy storm-petrel is in danger of extinction (endangered), or likely to become endangered within the foreseeable future (threatened), throughout its range. As described in the Species Report, the average lifespan of the ashy storm-petrel is unknown and reproduction is known to commence by age 6 (Service 2013, p. 3). Assuming the average age of first breeding is 5.5 years and adult survivorship is 0.88, then an ashy storm-petrel generation time would be 12.8 years, based on a published method of calculating generation time for birds (Service 2013, p. 29). Using a standard 3-generation (past, present, and future) timeframe to assess risk (
Therefore, based on our assessment of the best available scientific and commercial information, we find that listing the ashy storm-petrel throughout all or a significant portion of its range as a threatened or an endangered species is not warranted at this time.
Because we determine here that the ashy storm-petrel does not warrant listing throughout its range as an endangered or threatened species, we next assess whether the ashy storm-petrel is an endangered or threatened species throughout a portion of its range. We consider whether a distinct vertebrate population segment (DPS) or any significant portion of the ashy storm-petrel's range meets the definition of an endangered species or is likely to become endangered in the foreseeable future (threatened). Under the Service's Policy Regarding the Recognition of Distinct Vertebrate Population Segments Under the Endangered Species Act (61 FR 4722, February 7, 1996), three elements are considered in the decision concerning the establishment and classification of a possible DPS. These are applied similarly for additions to or removal from the Federal List of Endangered and Threatened Wildlife. These elements include:
(1) The discreteness of a population in relation to the remainder of the species to which it belongs;
(2) The significance of the population segment to the species to which it belongs; and
(3) The population segment's conservation status in relation to the Act's standards for listing, delisting, or reclassification (i.e., is the population segment endangered or threatened).
Under the DPS policy, a population segment of a vertebrate taxon may be considered discrete if it satisfies either one of the following conditions:
(1) It is markedly separated from other populations of the same taxon as a consequence of physical, physiological, ecological, or behavioral factors. Quantitative measures of genetic or morphological discontinuity may provide evidence of this separation.
(2) It is delimited by international governmental boundaries within which differences in control of exploitation, management of habitat, conservation status, or regulatory mechanisms exist that are significant in light of section 4(a)(1)(D) of the Act.
We determine, based on a review of the best available information, that there are no population segments of the ashy storm-petrel that meet the discreteness conditions of the 1996 DPS policy. As stated in the Species Report, ashy storm-petrels are known to regularly forage up to 220 miles (mi) (354 kilometers (km)) from their breeding grounds and one individual has been located 466 mi (750 km) from its capture site (Service 2013, p. 7;
The DPS policy is clear that significance is analyzed only when a population segment has been identified as discrete. Since we found that no population segments meet the discreteness element, we need not conduct an evaluation of significance for the ashy storm-petrel.
Therefore, no population segments of the ashy storm-petrel qualify as a DPS under our policy and no population segments for the ashy storm-petrel are considered a listable entity under the Act.
In determining whether a species is threatened or endangered in a significant portion of its range, we first identify any portions of the range of the species that warrant further consideration. The range of a species can theoretically be divided into portions an infinite number of ways. However, there is no purpose to analyzing portions of the range that are not reasonably likely to be both (1) significant and (2) threatened or endangered. To identify only those portions that warrant further consideration, we determine whether substantial information indicates that: (1) the portions may be significant, and (2) the species may be in danger of extinction there or likely to become so within the foreseeable future. In practice, a key part of this analysis is whether the threats are geographically concentrated in some way. If the threats to the species are essentially uniform throughout its range, no portion is likely to warrant further consideration. Moreover, if any concentration of threats applies only to portions of the species' range that are not significant,
If we identify portions that warrant further consideration, we then determine whether the species is threatened or endangered in these portions of its range. Depending on the biology of the species, its range, and the threats it faces, the Service may address either the significance question or the status question first. Thus, if the Service considers significance first and determines that a portion of the range is not significant, the Service need not determine whether the species is threatened or endangered there. Likewise, if the Service considers status first and determines that the species is not threatened or endangered in a portion of its range, the Service need not determine if that portion is significant. However, if the Service determines that both a portion of the range of a species is significant and the species is threatened or endangered there, the Service will specify that portion of the range as threatened or endangered under section 4(c)(1) of the ESA.
We evaluated the current range of the ashy storm-petrel to determine if there is any apparent geographic concentration of potential threats for the species. We examined potential threats from climate change (ocean acidification, ocean warming, and sea level rise); invasive species; human activities; military activities; overutilization for commercial, recreational, scientific, or educational purposes; burrowing owl, western gull, house mouse, skunk, barn owl, and common raven predation; artificial light pollution; oil pollution; organochlorine contaminants; and ingestion of plastics. While some threats are affecting the species in only a portion of its range (for example, gull predation at SE Farallon Island or sea level rise affecting sea cave nesting sites at the Channel Islands), these threats are not having substantial impacts to the populations of ashy storm-petrels at those sites and are not resulting in a decline of the species. Therefore, we found no concentration of threats that suggests that the ashy storm-petrel may be in danger of extinction in a portion of its range. In addition, the 32 known breeding sites of the ashy storm-petrel stretch from Mendocino County, California, to Ensenada, Mexico, and these breeding sites provide for representation, redundancy, and resiliency for the ashy storm-petrel. Therefore, we find that no portion of the range of ashy storm-petrel warrants further consideration of possible endangered or threatened status under the Act. No available information indicates that there has been a range contraction for ashy storm-petrel, and, therefore, we find that lost historical range does not constitute a significant portion of the range for this species.
Our review of the best available scientific and commercial information indicates that the ashy storm-petrel is not in danger of extinction (endangered) nor likely to become endangered within the foreseeable future (threatened), throughout all or a significant portion of its range. Therefore, we find that listing this species as an endangered or threatened species under the Act is not warranted at this time.
We request that you submit any new information concerning the status of, or threats to, the ashy storm-petrel to our Bay–Delta Fish and Wildlife Office (see
A complete list of references cited in this finding is available on the Internet at
The primary authors of this finding are the staff members of the Pacific Southwest Regional Office and the Bay–Delta Fish and Wildlife Office (see
The authority for this section is section 4 of the Endangered Species Act of 1973, as amended (16 U.S.C. 1531
Signed:
Fish and Wildlife Service, Interior.
Proposed rule.
We, the U.S. Fish and Wildlife Service (Service), propose to designate critical habitat for three Caribbean plants,
We will accept comments received or postmarked on or before December 23, 2013. Comments submitted electronically using the Federal eRulemaking Portal (see
You may submit comments by one of the following methods:
(1)
(2)
We request that you send comments only by the methods described above. We will post all comments on
The coordinates or plot points or both from which the critical habitat maps are generated are included in the administrative record for this rulemaking and are available at
Marelisa Rivera, Deputy Field Supervisor, U.S. Fish and Wildlife Service, Caribbean Ecological Services Field Office, P.O. Box 491, Road 301 Km. 5.1, Boquerón, PR 00622; by telephone (787) 851–7297; or by facsimile (787) 851–7440. Persons who use a telecommunications device for the deaf (TDD) may call the Federal Information Relay Service (FIRS) at 800–877–8339.
• Designate approximately 50.6 acres (ac) (20.5 hectares (ha)) of critical habitat for
• Designate approximately 198 ac (80.1 ha) for
• Designate approximately 6,547 ac (2,648 ha) for
We intend that any final action resulting from this proposed rule will be based on the best scientific and commercial data available and be as accurate and as effective as possible. Therefore, we request comments or information from the public, other concerned governmental agencies, Native American tribes, the scientific community, industry, or any other interested parties concerning this proposed rule. We particularly seek comments concerning:
(1) The reasons why we should or should not designate habitat as “critical habitat” under section 4 of the Act (16 U.S.C. 1531
(2) Specific information on:
(a) The amount and distribution of
(b) What areas, that were occupied at the time of listing (or are currently occupied) and that contain features essential to the conservation of the species, should be included in the designation and why;
(c) Special management considerations or protection that may be needed in critical habitat areas we are proposing, including managing for the potential effects of climate change; and
(d) What areas not occupied at the time of listing are essential for the conservation of the species and why.
(3) Land use designations and current or planned activities in the areas occupied by the species or proposed to be designated as critical habitat, and possible impacts of these activities on this species and proposed critical habitat.
(4) Information on the projected and reasonably likely impacts of climate change on the three Caribbean plants and proposed critical habitat.
(5) Any foreseeable economic, national security, or other relevant impacts that may result from designating any area that may be included in the final designation. We are particularly interested in any impacts on small entities, and the benefits of including or excluding areas from the proposed designation that are subject to these impacts.
(6) Whether any specific areas we are proposing for critical habitat designation should be considered for exclusion under section 4(b)(2) of the Act, and whether the benefits of potentially excluding any specific area outweigh the benefits of including that area under section 4(b)(2) of the Act.
(7) Whether we could improve or modify our approach to designating critical habitat in any way to provide for greater public participation and understanding, or to better accommodate public concerns and comments.
Include sufficient information with your submission (such as scientific journal articles or other publications) to allow us to verify any scientific or commercial information you include.
Note that submissions merely stating support for or opposition to the action under consideration without providing supporting information, although noted, will not be considered in making a determination, as section 4(b)(2) of the Act directs that determinations as to whether to designated critical habitat for any listed species must be made “on the basis of the best scientific and commercial data available.”
You may submit your comments and materials concerning this proposed rule by one of the methods listed in the
Comments and materials we receive, as well as supporting documentation we used in preparing this proposed rule, will be available for public inspection on
All previous Federal actions are described in the proposal to list the
Critical habitat is defined in section 3 of the Act as:
(1) The specific areas within the geographical area occupied by the species, at the time it is listed in accordance with the Act, on which are found those physical or biological features:
(a) Essential to the conservation of the species, and
(b) Which may require special management considerations or protection; and
(2) Specific areas outside the geographical area occupied by the species at the time it is listed, upon a determination that such areas are essential for the conservation of the species.
Conservation, as defined under section 3 of the Act, means to use and the use of all methods and procedures that are necessary to bring an endangered or threatened species to the point at which the measures provided pursuant to the Act are no longer necessary. Such methods and procedures include, but are not limited to, all activities associated with scientific resources management such as research, census, law enforcement, habitat acquisition and maintenance, propagation, live trapping, and transplantation, and, in the extraordinary case where population pressures within a given ecosystem cannot be otherwise relieved, may include regulated taking.
Critical habitat receives protection under section 7 of the Act through the requirement that Federal agencies ensure, in consultation with the Service, that any action they authorize, fund, or carry out is not likely to result in the destruction or adverse modification of critical habitat. The designation of critical habitat does not affect land ownership or establish a refuge, wilderness, reserve, preserve, or other conservation area. Such designation does not allow the government or public to access private lands. Such designation does not require implementation of restoration, recovery, or enhancement measures by non-Federal landowners. Where a landowner requests Federal agency funding or authorization for an action that may affect a listed species or critical habitat, the consultation requirements of section 7(a)(2) of the Act would apply, but even in the event of a destruction or adverse modification finding, the obligation of the Federal action agency and the landowner is not to restore or recover the species, but to implement reasonable and prudent alternatives to avoid destruction or adverse modification of critical habitat.
Under the first prong of the Act's definition of critical habitat, areas within the geographical area occupied by the species at the time it was listed are included in a critical habitat designation if they contain physical or biological features (1) essential to the conservation of the species, and (2) which may require special management considerations or protection. For these areas, critical habitat designations identify, to the extent known using the best scientific and commercial data available, those physical or biological features essential to the conservation of the species (such as space, food, cover, and protected habitat). In identifying those physical or biological features within an area, we focus on the principal biological or physical constituent elements (primary constituent elements such as roost sites, nesting grounds, seasonal wetlands, water quality, tide, soil type) that are essential to the conservation of the species. Primary constituent elements are those specific elements of the physical or biological features that provide for a species' life-history processes and are essential to the conservation of the species.
Under the second prong of the Act's definition of critical habitat, we can designate critical habitat in areas outside the geographic area occupied by the species at the time it is listed, upon a determination that such areas are essential for the conservation of the species. For example, an area currently occupied by the species but that was not occupied at the time of listing may be essential to the conservation of the species and may be included in the critical habitat designation. We designate critical habitat in areas outside the geographic area occupied by a species only when a designation limited to its range would be inadequate to ensure the conservation of the species.
Section 4 of the Act requires that we designate critical habitat on the basis of the best scientific data available. Further, our Policy on Information Standards under the Endangered Species Act (published in the
When we are determining which areas should be designated as critical habitat, our primary source of information is generally the information developed during the listing process for the species. Additional information sources may include the recovery plan for the species, articles in peer-reviewed journals, conservation plans developed by States and counties, scientific status surveys and studies, biological assessments, other unpublished materials, or experts' opinions or personal knowledge.
Habitat is dynamic, and species may move from one area to another over time. Climate change will be a particular challenge for biodiversity because the interaction of additional stressors associated with climate change and current stressors may push species beyond their ability to survive (Lovejoy 2005, pp. 325–326). The synergistic implications of climate change and habitat fragmentation are the most threatening facet of climate change for biodiversity (Hannah and Lovejoy 2005, p. 4). Current climate change predictions for terrestrial areas in the Northern Hemisphere indicate warmer air temperatures, more intense precipitation events, and increased summer continental drying (Field
We recognize that critical habitat designated at a particular point in time may not include all of the habitat areas that we may later determine are necessary for the recovery of the species. For these reasons, a critical habitat designation does not signal that habitat outside the designated area is unimportant or may not be needed for recovery of the species. Areas that are important to the conservation of a listed species, both inside and outside the critical habitat designation, will continue to be subject to: (1) Conservation actions implemented under section 7(a)(1) of the Act, (2) regulatory protections afforded by the requirement in section 7(a)(2) of the Act for Federal agencies to ensure their actions are not likely to jeopardize the continued existence of any endangered or threatened species, and (3) section 9 of the Act's prohibitions on taking any individual of the species, including taking caused by actions that affect habitat. Federally funded or permitted projects affecting listed species outside their designated critical habitat areas may still result in jeopardy findings in some cases. Similarly, critical habitat designations made on the basis of the best available information at the time of designation will not control the direction and substance of future recovery plans, habitat conservation plans (HCPs), or other species conservation planning efforts if new information available at the time of these planning efforts calls for a different outcome.
Section 4(a)(3) of the Act, as amended, and its implementing regulations (50 CFR 424.12) require that, to the maximum extent prudent and determinable, the Secretary designate critical habitat at the time the species is determined to be an endangered or threatened species. Our regulations (50 CFR 424.12(a)(1)) state that the designation of critical habitat is not prudent when one or both of the following situations exist:
(1) The species is threatened by taking or other human activity, and identification of critical habitat can be expected to increase the degree of threat to the species, or
(2) Such designation of critical habitat would not be beneficial to the species.
There is currently no imminent threat of take attributed to collection or vandalism (see the discussion under Factor B in the proposed listing rule, which is published elsewhere in today's
In the absence of a finding that the designation of critical habitat would increase threats to a species, if there are any benefits to a critical habitat designation, then we may find that such designation is prudent. Here, the potential benefits of designation include: (1)Triggering consultation under section 7 of the Act, in new areas for actions in which there may be a Federal nexus where it would not otherwise occur because, for example, it is or has become unoccupied or the occupancy is in question; (2) focusing conservation activities on the most essential features and areas; (3) providing educational benefits to State or county governments or private entities; and (4) preventing people from causing inadvertent harm to the species.
Therefore, because we have determined that the designation of critical habitat would not likely increase the degree of threat to the species and may provide some measure of benefit, we find that designation of critical habitat is prudent for
Having determined that designation is prudent, under section 4(a)(3) of the Act, we must find whether critical habitat for the three Caribbean plants is determinable. Our regulations at 50 CFR 424.12(a)(2) state that critical habitat is not determinable if information sufficient to perform required analyses of the impacts of the designation is lacking, or the biological needs of the species are not sufficiently well known to permit identification of an area as critical habitat.
We reviewed the available information pertaining to the biological needs of the species and habitat characteristics where the species are located. This and other information represent the best scientific data available and have led us to conclude that the designation of critical habitat is determinable for
In accordance with section 3(5)(A)(i) and 4(b)(1)(A) of the Act and regulations at 50 CFR 424.12, in determining which areas within the geographic area occupied by the species at the time of listing to designate as critical habitat, we consider the physical or biological features (PBFs) that are essential to the conservation of the species and which may require special management considerations or protection. These include, but are not limited to:
(1) Space for individual and population growth and for normal behavior;
(2) Food, water, air, light, minerals, or other nutritional or physiological requirements;
(3) Cover or shelter;
(4) Sites for breeding, reproduction, or rearing (or development) of offspring; and
(5) Habitats that are protected from disturbance or are representative of the historical, geographic, and ecological distributions of a species.
We derive the specific physical or biological features required for the three Caribbean plants from studies and observations of the three species' habitat, ecology, and life history as described below. Unfortunately, little is known of the specific habitat requirements for the three Caribbean plants. To identify the physical and biological needs of the species, we have relied on current conditions at locations where the three species exist and the limited information available for these species.
Dry forest structure is greatly influenced by wind, salt spray and the presence of fresh water. Some of the native tree species that are common in subtropical dry forest in the USVI are
Plant communities where
Therefore, based on the above information, we identify the vegetation composition areas (e.g., dry coastal cliffs and dry shrubland) as an essential physical or biological feature for this species.
The elfin forest is found on exposed peaks and ridges of Cerro La Santa, above 2,900 ft (880 m) in elevation from sea level, occupying approximately 24.9 acres (ac) (10.1 hectares (ha)) in the Carite Commonwealth Forest (Silander
The ausubo forest is only found along the Rio Grande de Patillas River basin and intermittent streams between 2,000 ft (620 m) and 2,300 ft (720 m) of elevation (DNR 1976, p. 169); occupying approximately 179.2 ac (72.5 ha) in the Charco Azul area within the Carite Commonwealth Forest (Silander
Therefore, based on the above information, we identify the vegetation composition found in the elfin and the ausubo forests as an essential physical or biological feature for this species.
The species has been recorded in forested hills with open to relatively dense scrub and shrub lands 6.5 to 9.8 ft (2 to 3 m) in height; in low forest with canopy from 8 to 15 ft (3 to 5 m) high; and at the edge of a dense, low, coastal shrubland and forest.
In the island of Anegada (British Virgin Islands),
Therefore, based on the above information, we identify remnants of scrubland and shrubland forest that occurs within the subtropical dry forest life zone overlying limestone substrate as an essential physical or biological feature for this species.
The island of St. Croix, USVI, is located in the Caribbean, where the warm sea stabilizes air temperatures and diurnal temperature changes approximate annual fluctuations. The mean annual temperature of the region at sea level is lower than 75 degrees Fahrenheit (°F) (24 degrees Celsius (°C)). This subtropical climate results from the location of St. Croix at the lower limit of the tropical region (Ewel and Whitmore 1973 p. 8; Mac
The island of St. Croix has easterly trade winds of 15 miles per hour (24 kilometers per hour) or more, which keep the humidity relatively low (Chakroff 2010, p. 7). This island is much drier than most of the Greater Antilles, averaging 40 inches (in) (102 centimeters (cm)) of rain in the west, and about 30 in (76 cm) in the east. Rain usually comes in the form of brief tropical showers. The wettest and hottest months are July to October. Hurricane season falls within these same months, with September being the most active for tropical storms. The USVI have been hit by four major hurricanes in recent years: Hugo (1989), Luis and Marilyn (1995), Lenny (1999), and Omar (2008) (Mac
Soils substrates supporting
Therefore, based on the information above, we identify the dry climate regime that regulates the dry forest structure and the well-drained soils of Cramer, Glynn, Hasselberg, Southgate, and Victory series to be physical or biological features for this species.
The variables used to delineate any given life zone are mean annual precipitation and mean annual temperature. The life zones and associations of which they are comprised only define the potential vegetation or range of vegetation types that might be found in an area (Ewel and Whitmore 1973, p. 5). The mean annual precipitation at the Carite Commonwealth Forest is 88.7 in (225.3 cm), with February to April the drier months (NOAA 2013,
The Carite Commonwealth Forest is underlain by volcanic-sedimentary rock (DNR 1976, p. 168). The forest topography is rough and highly dissected by intermittent streams, with steep slopes ranging from 20 to 60 percent. The forest's soil is primarily comprised by Los Guineos complex (Silander
Therefore, based on the information above, we identify mean annual precipitation of 88.7 in (225.3 cm), mean annual temperature of 72.3 °F (22.7 °C), and Los Guineos type of soil (i.e., very deep, acidic, clayey, well-drained soils on side slopes of mountains) to be physical or biological features for this species.
Like
The majority of the suitable habitat and known populations of
Therefore, based on the information above, we identify shallow and alkaline soils derived from limestone rock and an average rainfall of 34 in (86 cm) to be physical or biological features for this species.
Very little is known about habitat parameters specifically relating to cover or shelter for
This species has been recorded in forested hills with open to relatively dense shrublands ranging between 6.5 to 9.8 ft (2 to 3 m) in height; in low forest with canopy from 8 to 15 ft (3 to 5 m) high; and at the edge of a dense, low, coastal shrubland and forest. On the island of Anegada, the species is located on open limestone pavement and sand dunes. Despite the species' preference for gaps, it remains associated to remnants of native forest.
In a recent study at Anegada,
Therefore, based on the information above, we identify forested hills with open to relatively dense shrubland forest dominated by native species to be physical or biological features for this species.
The reproductive biology and ecology of
Material germinated in the Service greenhouse at Cabo Rojo National Wildlife Refuge flowered and produced fruits about 1 year after planted (O. Monsegur, Service, pers. obs. 2013). The rapid development of the species as reproductive individuals, and the finding of individuals along recently disturbed sites (i.e., new dirt roads) and natural forest gaps, may indicate that
Therefore, based on the information above, we identify open to relatively dense shrubland forest (scrub forest and deciduous forest or shrubland) dominated by native species to be a physical or biological feature for this species.
There are reports from Britton and Wilson (1923, p. 156) that
Since 2007,
Therefore, based on the information above, we identify the dry forest conditions in the eastern side of St. Croix to be part of the physical or biological features for this species.
The elfin and the ausubo forest where
The species has been historically recorded from the geographical area comprising the Guánica Commonwealth Forest in southwestern Puerto Rico, and the area of the Vieques National Wildlife Refuge (NWR) in the island of Vieques, eastern Puerto Rico. The Guánica Forest was designated as a Commonwealth forest in 1917, by Governor Arthur Yager, and has been protected and managed since 1930 (Lugo
On Vieques Island, about 54 percent of the land is a National Wildlife Refuge managed by the Service (Vieques NWR CCP & EIS 2007, p. 2). Some areas within the refuge harbor suitable habitat for
Therefore, based on the information above, we identify remnants of scrubland and shrubland forest that occurs within the subtropical dry forest life zone overlying limestone substrate to be physical or biological features for this species.
Under the Act and its implementing regulations, we are required to identify the physical or biological features essential to the conservation of the three Caribbean plants in areas occupied at the time of listing, focusing on the features' primary constituent elements. We consider primary constituent elements (PCEs) to be the elements of physical or biological features that provide for a species' life-history processes and are essential to the conservation of the species.
Based on our current knowledge of the physical or biological features and habitat characteristics required to sustain the species' life-history processes, we determine the primary constituent elements specific for each of the three plants below:
(1) Areas consisting of coastal cliffs and dry coastal shrublands.
(a) Coastal cliff habitat includes:
(i) Bare rock; and
(ii) Sparse vegetation.
(b) Dry coastal shrubland habitat includes:
(i) Dry forest structure; and
(ii) A plant community of predominately native vegetation.
(2) Well-drained soils from the series Cramer, Glynn, Hasselberg, Southgate, and Victory.
(3) Habitat of sufficient area to sustain viable populations in the coastal cliffs and dry coastal shrublands listed in PCEs (1) and (2), above.
(1) Elfin forest at elevations over 2,900 ft (880 m) in Cerro La Santa, Puerto Rico, which includes:
(a) Forest with single canopy layer with trees seldom exceeding 22 ft (7 m) in height.
(b) Associated native vegetation dominated by species such as
(2) Ausubo forest at elevations between 2,000 to 2,300 ft (620 to 720 m) in the Charco Azul, which includes:
(a) Forest with single canopy layer with trees exceeding 22 ft (7 m) in height.
(b) Plant association comprised by few species of native trees and associated native vegetation (e.g.,
(3) The type locations described in PCEs (1) and (2), above, for this species should have mean annual precipitation of 88.7 in (225.3 cm), mean annual temperature of 72.3 °F (22.7 °C), and Los Guineos type of soil (i.e., very deep, acidic, clayey, well-drained soils on side slopes of mountains).
(1) Remnants of native shrubland and scrubland forest on limestone substrate within the subtropical dry forest life zone. Dry shrubland and scrubland forest includes:
(a) Shrubland vegetation with canopy from 6.5 to 9.8 ft (2 to 3 m) high;
(b) Limestone pavement;
(c) Associated native vegetation; and
(d) A shrub layer dominated by
(2) Semi-deciduous dry forest on limestone substrate within the subtropical dry forest life zone. Dry limestone semi-deciduous forest includes:
(a) Low forest with canopy from 8 to 15 ft (3 to 5 m) high;
(b) Limestone pavement;
(c) Associated dry forest native vegetation; and
(d) A shrub layer dominated by
(3) The type locations described in PCEs (1) and (2), above, for this species should have shallow and alkaline soils derived from limestone rock and an average rainfall of 34 in (86 cm).
When designating critical habitat, we assess whether the specific areas within the geographic area occupied by the species at the time of listing contain features which are essential to the conservation of the species and which may require special management considerations or protection.
The primary threats to the PBFs that
Management activities that could ameliorate these threats include, but are not limited to, establishment of permanent conservation easements or land acquisition to protect the species and its habitat on private lands; establishment of conservation agreements on private, nongovernment, and government lands to protect the habitat; implementation of control of invasive, nonnative plant species to reduce competition and prevent habitat degradation; implementation of management practices to control fires; and creation or revision of management plans for the identification of the areas where current developments exist and to better guide the implementation of conservation measures for the species. For
The primary threats to the PBFs that
Management activities that could ameliorate these threats include, but are not limited to, implementation of conservation measures with DNER to reduce threats to the species in the Carite Commonwealth Forest; minimization of habitat disturbance, fragmentation, and destruction resulting from maintenance of telecommunication facilities; prevention of fires; and controlling invasive plant species.
The reduction of all these threats for
Special management considerations or protection for the features essential to the conservation of the species within each critical habitat area will depend on the threats to the essential features in that critical habitat area. Accordingly, the description of each critical habitat unit below will include a discussion of the threats and the special management actions needed to address them.
As required by section 4(b)(2) of the Act, we use the best scientific data available to designate critical habitat. Sources of data for the three Caribbean species and their habitat include multiple databases maintained by universities and by State and Federal agencies from Puerto Rico and USVI, reports on assessments and surveys throughout the species' range, and assessments of current conditions of the three Caribbean species and their
We are proposing to designate critical habitat in areas within the geographical area currently occupied by the three Caribbean plants (i.e., occupied at the time of proposed listing). All of these units are proposed for designation based on sufficient elements of physical and biological features being present to support known life-history processes of the species. We have defined occupied critical habitat as areas where the three Caribbean plants are currently found and that have the PCEs mentioned above at the time of listing. We used information from site visits to the species' habitats conducted by Service biologists, herbarium specimens, personal communications with researchers, and reports prepared by agencies and researchers to identify the specific locations occupied by the three species. We plotted all occurrence records of the three Caribbean plants on maps in geographic information system as points and polygons. Then, we used U.S. Geological Survey (USGS) topographic maps, aerial photographs, and U.S. Forest Service (USFS)—International Institute of Tropical Forestry (IITF) land cover layers to delineate the critical habitat units. Critical habitat units were then mapped using ArcMap version 10 (Environmental Systems Research Institute, Inc.), a Geographic Information Systems (GIS) program.
We are also proposing to designate specific areas outside the geographical area occupied by
Small populations and plant species with limited distributions, like those of
The habitat of these species must be conserved to fulfill their recovery. Furthermore, it is important to ensure there are enough individuals of the species to secure their survival into the future as well as to ensure the habitat (with all associated plant communities) is adequate for the species. At present, there are only approximately 300 known adult individuals of
We are proposing four areas that are currently occupied and two areas that are currently unoccupied, but on which the species have been historically reported as critical habitat, for
The proposed critical habitat designation focuses on occupied areas throughout the range of the three Caribbean species that have the necessary PCEs to allow for the maintenance and expansion of existing populations.
We identified seven populations of
We identified two units that harbor the only three populations known of
We identified five natural areas currently occupied by
For us to propose for designation areas not occupied by the three Caribbean species at the time of listing, we must demonstrate that these areas are essential to the conservation of the species. We are proposing to designate critical habitat outside of the geographic range at the time of listing for
The east end of St. Croix is within the historical range of
The easternmost area of St. Croix encompasses conservation areas managed by the USVI Government and The Nature Conservancy. In this area, we are proposing to designate two units (East End North and East End South). These areas may allow for important population expansion of
We propose the designation of two areas that are not currently occupied by the species. These two areas are known as Punta Negra and Cerro Playuela on the Island of Vieques and lie adjacent to an area currently occupied by the species (Puerto Ferro), forming a continuous habitat that provides an ecological niche for the species. They contain the dry coastal shrubland habitat PCEs and PBFs, including substrates, and associated native plants and forest structure. We consider these three contiguous peninsulas (Punta Negra, Cerro Playuela, and Puerto Ferro) as a single ecological unit, which are separated by two narrow water channels. The channels are not representative of a barrier for dispersion or expansion of the species. Furthermore, these forested areas provide shelter for potential pollinators and dispersers of
For
When determining proposed critical habitat boundaries, we made every effort to avoid including developed areas such as buildings and pavement, and other structures because such lands lack the physical or biological features for the three Caribbean species. The scale of the maps we prepared under the parameters for publication within the Code of Federal Regulations may not reflect the exclusion of such developed lands. Any such lands inadvertently left inside critical habitat boundaries shown on the maps of this proposed rule have been excluded by text in the proposed rule and are not proposed for designation as critical habitat. Therefore, if the critical habitat is finalized as proposed, a Federal action involving these lands would not trigger section 7 consultation with respect to critical habitat and the requirement of no adverse modification unless the specific action would affect the physical or biological features in the adjacent critical habitat.
The critical habitat designation is defined by the map or maps, as modified by any accompanying regulatory text, presented at the end of this document in the rule portion. We include more detailed information on the boundaries of the critical habitat designation in the preamble of this document. We will make the coordinates or plot points or both on which each map is based available to the public on
We are proposing to designate 50.6 ac (20.5 ha) in six units as critical habitat for
Below, we present brief descriptions of all units and reasons why these units meet the definition of critical habitat for
Unit 1 consists of 6.9 ac (2.8 ha) of privately owned lands located at Estate Cane Garden and Estate Peters Mindle, Christiansted, St. Croix, USVI. This unit is located in the south-central portion of the island, approximately 0.17 mi (0.27 km) south of Road 62 and approximately 0.2 mi (0.3 km) northeast of Vagthus Point, along the northeast coast of Canegarden Bay and south of a private trail. It is within the geographical area occupied at the time of listing. This unit contains all the PCEs. The PCEs in this unit may require special considerations to address threats of nonnative plant species, effects of hurricanes (i.e., storm surge and erosion), and habitat modification (e.g., trails expansion).
Unit 2 consists of 1.5 ac (0.61 ha) of privately owned lands located at Estate Granard, Christiansted, St. Croix, USVI. This unit is located in the south-central portion of the island, approximately 0.50 mi (0.82 km) south of Road 62 and approximately 0.02 mi (0.03 km) east of South Shore Road, along the northeast coast of Manchenil Bay. It is within the geographical area occupied at the time of listing. This unit contains all the PCEs. The PCEs in this unit may require special considerations to address threats of fires, nonnative plant species, effects of hurricanes (i.e., storm surge), and habitat modification.
Unit 3 consists of 0.8 ac (0.32 ha) of government-owned land located at Estate Great Pond, Christiansted, St. Croix, USVI. This unit is located in the south of the island, approximately 6.5 ft (2 m) south of Road 62 and east of the entrance of East End Marine Park offices. It is within the geographical area occupied at the time of listing. This unit contains all the PCEs. The PCEs in this unit may require special considerations to address threats of fire, nonnative plant species, and habitat modification (i.e., landscaping).
Unit 4 consists of 0.4 ac (0.16 ha) of government-owned lands that are leased to a private party and are located at Protestant Cay, St. Croix, USVI. The Cay is located approximately 0.33 km (0.20 mi) north of Christiansted town. The unit is located on the northeast side of the Cay. It is within the geographical area occupied at the time of listing. This unit contains all the PCEs. The PCEs in this unit may require special considerations to address threats of nonnative plant species, effects of hurricanes (i.e., storm surge and erosion), and habitat modification (i.e., hotel landscaping and maintenance).
The Protestant Cay unit is also currently designated as critical habitat for the St. Croix ground lizard (
Unit 5 consists of 19 ac (7.7 ha) of located at Estate Jack's Bay and Estate Isaac's Bay, Christiansted, St. Croix, USVI. This unit is located south of the eastern end portion of the island, approximately 0.93 mi (1.5 km) southwest of Point Udall, approximately 0.02 mi (0.04 km) east of Point Road, along the north coast of Jack's Bay, and south of a Jack's and Issac's Bay Preserve trail. It is owned by The Nature Conservancy and managed as conservation land. This unit is not occupied at the time of listing. However, it is part of the historical range of the species. This unit is essential for the conservation of the species because it contains the PCEs and because its designation would safeguard other established populations in case of any stochastic event that occurs within habitats currently occupied by the species.
Unit 6 consists of 22 ac (8.9 ha) of government-owned land located at Estate Cotton Garden, Christiansted, St. Croix, USVI. This unit is located north of the eastern end portion of the island, approximately 0.86 mi (1.4 km) northwest of Point Udall, north of Road 82 along the eastern coast of Cotton Garden Bay and western coast of Boiler Bay. This unit is not occupied at the time of listing. However, it is part of the historical range of the species. This unit is essential for the conservation of the species because it contains the PCEs and because its designation would safeguard other established populations in case of any stochastic event that occurs within habitats currently occupied by the species.
We are proposing to designate approximately198 ac (80.1 ha) in two units as critical habitat for the
Below, we present brief descriptions of all units and reasons why these units meet the definition of critical habitat for
Unit 1 consists of 18.8 ac (7.6 ha) of elfin forest located on exposed peaks and ridges of Cerro La Santa, above 2,890 ft (880 m) in elevation from sea level. This unit is located in the Sierra de Cayey on Road PR 184, Km 27.1 in Espino Ward, between the Municipalities of Cayey and San Lorenzo. This unit is within the geographical area occupied by the species at the time of listing. This unit contains all PCEs. The PCEs in this unit may require special considerations to address threats of habitat modification resulting from maintenance and potential expansion of existing telecommunication facilities, human-induced fires, invasive species, and degradation of forest quality.
Unit 2 consists of 179.2 ac (72.5 ha) of ausubo forest located along the Rio Grande de Patillas River basin between 2,030 ft (620 m) and 2,330 ft (720 m) in elevation from sea level. This unit is approximately 2.0 mi (3.2 km) southeast of Unit 1. This unit is within the geographical area occupied by the species at the time of listing. This unit contains all PCEs. The PCEs in this unit may require special considerations and protection to address threats of habitat modification resulting from human-induced fires, invasive species, and degradation of forest quality.
We are proposing to designate 6,547 ac (2,648 ha) in seven units as critical habitat for
Below, we present brief descriptions of all units and reasons why these units meet the definition of critical habitat for
Unit 1 consists of 992 ac (401 ha) of Commonwealth-owned lands located at Montalva Ward in the Municipality of Guánica, Puerto Rico. This unit is located just south of State Highway PR 324 and the Town of Guánica, and includes Cerro Montalva. It is within the geographical area occupied by the species at the time of listing. Due to the marginal agricultural value, these forests were minimally impacted by other land use practices (e.g., charcoal production and ranching). Therefore, the prime and essential habitat for the species has maintained its unique features, such as the dry coastal shrubland habitat's PCEs and PBFs, including suitable climate, substrates, and associated native plants and forest structure. Despite its conservation status the habitat has been affected by human-induced fires and maintenance of access roads and rights-of-way. The PCEs in this unit may require special considerations to address threats of nonnative plant species, human-induced fires, hurricanes, and habitat modification (e.g., urban development).
Unit 2 consists of 584 ac (236 ha) of Commonwealth-owned lands located within Carenero, Barina, and Boca Wards in the municipalities of Guánica, Yauco, and Guayanilla, Puerto Rico. This unit is located within the core of the east section of the Guánica Commonwealth Forest. The forested habitat in this unit was minimally impacted by other land use practices like charcoal production and ranching due to its marginal agricultural value; hence, it has maintained its unique features. It is within the geographical area occupied by the species at the time of listing and contains the dry coastal shrubland habitat's PCEs and PBFs, including suitable climate, substrates, and associated native plants and forest structure. Despite its conservation status, the habitat has been affected by human-induced fires and maintenance of access roads and rights-of-way. The PCEs in this unit may require special considerations to address threats of nonnative plant species, human-induced fires, hurricanes, and habitat
Unit 3 consists of 2,002 ac (810 ha) of privately owned lands primarily located along Indios Ward in the municipality of Guayanilla. A small section of this unit falls within the Cambalache Ward in Yauco, Puerto Rico. This unit is located just south of State Highway PR 2. The forested habitat in this unit was minimally impacted by other land use practices like charcoal production and ranching due to its marginal agricultural value; hence, it has maintained its unique features. The unit is within the geographical area occupied by the species at the time of listing and contains the dry coastal shrubland habitat's PCEs and PBFs, including suitable climate, substrates, and associated native plants and forest structure. The PCEs in this unit may require special considerations to address threats of nonnative plant species, human-induced fires, hurricanes, and habitat modification (e.g., urban development).
Unit 4 consists of 2,174 ac (880 ha) of privately owned lands located along Encarnación and Canas Wards in the municipalities of Peñuelas and Ponce, Puerto Rico. This unit is located just north of State Highway PR 2 in the area known as Punta Cucharas. The forested habitat in this unit was minimally impacted by other land use practices like charcoal production and ranching due to its marginal agricultural value; hence, it has maintained its unique features. It is within the geographical area occupied by the species at the time of listing and contains the dry coastal shrubland habitat's PCEs and PBFs, including suitable climate, substrates, and associated native plants and forest structure. The PCEs in this unit may require special considerations to address threats of nonnative plant species, human-induced fires, hurricanes, and habitat modification (e.g., urban development).
Unit 5 is a small peninsula that consists of 291 ac (117 ha) of Commonwealth-owned lands located within Puerto Ferro Ward on the island of Vieques, Puerto Rico. This unit is located about 1.5 mi (2.5 km) east of the town of Esperanza and west of Puerto Ferro, Vieques National Wildlife Refuge (NWR). This natural area is managed by the Puerto Rico DNER as part of the Puerto Mosquito Natural Reserve. The forested habitat in this unit was minimally impacted by other land use practices like charcoal production and ranching due to its marginal agricultural value; hence, it has maintained its unique features. It is adjacent to an area currently occupied by the species (Unit 6), forming a continuous habitat and contains the dry coastal shrubland habitat's PCEs and PBFs, including suitable climate, substrates, and associated native plants and forest structure. However, there is no specific record of the species within this unit. We consider Units 5, 6, and 7 to be a single ecological unit. The species is expected to occur within this area and ecological interactions and genetic flow between this area and Unit 6 may be essential for the recovery of the species. It was not included as a single unit with Units 6 and 7 because these peninsulas are united by a narrow mangrove forest that does not provide habitat for the species. The PCEs in this unit may require special considerations to address threats of nonnative plant species, human-induced fires, and hurricanes.
Unit 6 is a small peninsula that consists of 381 ac (154 ha) of federally owned lands managed by the Service as the Vieques NWR, and is located within the Puerto Ferro Ward on the island of Vieques, Puerto Rico. This unit is located about 4 km (2.5 mi) east of the town of Esperanza. It is located just between Unit 5 and Unit 7, forming a continuous habitat and contains the dry coastal shrubland habitat's PCEs and PBFs, and therefore we consider Units 5, 6, and 7 to be a single ecological unit. The forested habitat in this unit was minimally impacted by other land use practices like charcoal production and ranching due to its marginal agricultural value; hence, it has maintained its unique features. It is within the geographical area occupied by the species at the time of listing and contains the dry coastal shrubland's habitat PCEs and PBFs, including suitable climate, substrates, and associated native plants and forest structure. The species occurs within this area and ecological interactions and genetic flow between this area and the adjacent habitat (Unit 5 and Unit 7) may be essential for the recovery of the species. It was not included as a single unit with Units 5 and 7 because these peninsulas are united by a narrow mangrove forest that does not provide habitat for the species. The PCEs in this unit may require special considerations to address threats of nonnative plant species, human-induced fires, and hurricanes.
Unit 7 is a small peninsula that consists of 123 ac (50 ha) of federally owned lands managed by the Service as the Vieques NWR, and is located within Puerto Ferro Ward on the island of Vieques, Puerto Rico. This unit is located about 0.5 km (0.31 mi) south of the former airport of Campamento García (Vieques NWR). The forested habitat in this unit was minimally impacted by other land use practices like charcoal production and ranching due to its marginal agricultural value; hence, it has maintained its unique features. It is adjacent to an area currently occupied by the species (Unit 6), forming a continuous habitat, and contains the dry coastal shrubland habitat's PCEs and PBFs, including suitable climate, substrates, and associated native plants and forest structure. However, there is no specific record of the species within this unit. We consider Units 5, 6, and 7 to be a single ecological unit. The species is expected to occur within this area and ecological interactions and genetic flow between this area and Unit 6 may be essential for the recovery of the species. It was not included as a single unit with Units 5 and 6 because these peninsulas are united by a narrow mangrove forest that does not provide habitat for the species. The PCEs in this unit may require special considerations to address threats of nonnative plant species, human-induced fires, and hurricanes.
Section 7(a)(2) of the Act requires Federal agencies, including the Service, to ensure that any action they fund, authorize, or carry out is not likely to jeopardize the continued existence of any endangered species or threatened species or result in the destruction or adverse modification of designated critical habitat of such species. In addition, section 7(a)(4) of the Act requires Federal agencies to confer with the Service on any agency action which is likely to jeopardize the continued existence of any species proposed to be listed under the Act or result in the destruction or adverse modification of proposed critical habitat.
Decisions by the 5th and 9th Circuit Courts of Appeals have invalidated our regulatory definition of “destruction or adverse modification” (50 CFR 402.02) (see
If a Federal action may affect a listed species or its critical habitat, the responsible Federal agency (action agency) must enter into consultation with us. Examples of actions that are subject to the section 7 consultation process are actions on State, tribal, local, or private lands that require a Federal permit (such as a permit from the U.S. Army Corps of Engineers under section 404 of the Clean Water Act (33 U.S.C. 1251
As a result of section 7 consultation, we document compliance with the requirements of section 7(a)(2) through our issuance of:
(1) A concurrence letter for Federal actions that may affect, but are not likely to adversely affect, listed species or critical habitat; or
(2) A biological opinion for Federal actions that may affect and are likely to adversely affect listed species or critical habitat.
When we issue a biological opinion concluding that a project is likely to jeopardize the continued existence of a listed species and/or destroy or adversely modify critical habitat, we provide reasonable and prudent alternatives to the project, if any are identifiable, that would avoid the likelihood of jeopardy and/or destruction or adverse modification of critical habitat. We define “reasonable and prudent alternatives” (at 50 CFR 402.02) as alternative actions identified during consultation that:
(1) Can be implemented in a manner consistent with the intended purpose of the action,
(2) Can be implemented consistent with the scope of the Federal agency's legal authority and jurisdiction,
(3) Are economically and technologically feasible, and
(4) Would, in the Director's opinion, avoid the likelihood of jeopardizing the continued existence of the listed species and/or avoid the likelihood of destroying or adversely modifying critical habitat.
Reasonable and prudent alternatives can vary from slight project modifications to extensive redesign or relocation of the project. Costs associated with implementing a reasonable and prudent alternative are similarly variable.
Regulations at 50 CFR 402.16 require Federal agencies to reinitiate consultation on previously reviewed actions in instances where we have listed a new species or subsequently designated critical habitat that may be affected and the Federal agency has retained discretionary involvement or control over the action (or the agency's discretionary involvement or control is authorized by law). Consequently, Federal agencies sometimes may need to request reinitiation of consultation with us on actions for which formal consultation has been completed, if those actions with discretionary involvement or control may affect subsequently listed species or designated critical habitat.
The key factor related to the adverse modification determination is whether, with implementation of the proposed Federal action, the affected critical habitat would continue to serve its intended conservation role for the species. Activities that may destroy or adversely modify critical habitat are those that alter the physical or biological features to an extent that appreciably reduces the conservation value of critical habitat for
Section 4(b)(8) of the Act requires us to briefly evaluate and describe, in any proposed or final regulation that designates critical habitat, activities involving a Federal action that may destroy or adversely modify such habitat, or that may be affected by such designation.
Activities that may affect critical habitat, when carried out, funded, or authorized by a Federal agency, should result in consultation for
(1) Actions that would appreciably degrade or destroy the physical or biological features for the species. Such activities could include, but are not limited to, clearing or cutting native live trees and shrubs (e.g., bulldozing, vegetation pruning, construction, road building, maintenance of rights-of-way for powerlines, and herbicide application). These activities could pose a risk of take by fire to the survival of
(2) Actions that would introduce or encourage the spread of nonnative plant species that would significantly alter vegetation structure. Such activities may include, but are not limited to, residential and commercial development and road construction. These activities can affect the growth, reproduction, and survival of
(3) Actions that would significantly alter the structure and function of the elfin forest or the ausubo forest within the Carite Commonwealth Forest. Removal of vegetation could alter or eliminate the microclimate (e.g., change in temperature and humidity levels) and may allow invasion of competitor species and thereby negatively affect the habitat necessary for all life stages of the
The Sikes Act Improvement Act of 1997 (Sikes Act) (16 U.S.C. 670a) required each military installation that includes land and water suitable for the conservation and management of natural resources to complete an integrated natural resources management plan (INRMP) by November 17, 2001. An INRMP integrates implementation of the military mission of the installation with stewardship of the natural resources found on the base. Each INRMP includes:
(1) An assessment of the ecological needs on the installation, including the need to provide for the conservation of listed species;
(2) A statement of goals and priorities;
(3) A detailed description of management actions to be implemented to provide for these ecological needs; and
(4) A monitoring and adaptive management plan.
Among other things, each INRMP must, to the extent appropriate and applicable, provide for fish and wildlife management; fish and wildlife habitat enhancement or modification; wetland
The National Defense Authorization Act for Fiscal Year 2004 (Pub. L. 108–136) amended the Act to limit areas eligible for designation as critical habitat. Specifically, section 4(a)(3)(B)(i) of the Act (16 U.S.C. 1533(a)(3)(B)(i)) now provides: “The Secretary shall not designate as critical habitat any lands or other geographic areas owned or controlled by the Department of Defense, or designated for its use, that are subject to an integrated natural resources management plan prepared under section 101 of the Sikes Act (16 U.S.C. 670a), if the Secretary determines in writing that such plan provides a benefit to the species for which critical habitat is proposed for designation.”
There are no Department of Defense lands within the proposed critical habitat designation for
Section 4(b)(2) of the Act states that the Secretary shall designate and make revisions to critical habitat on the basis of the best available scientific data after taking into consideration the economic impact, national security impact, and any other relevant impact of specifying any particular area as critical habitat. The Secretary may exclude an area from critical habitat if he determines that the benefits of such exclusion outweigh the benefits of specifying such area as part of the critical habitat, unless he determines, based on the best scientific data available, that the failure to designate such area as critical habitat will result in the extinction of the species. In making that determination, the statute on its face, as well as the legislative history, are clear that the Secretary has broad discretion regarding which factor(s) to use and how much weight to give to any factor.
Under section 4(b)(2) of the Act, we may exclude an area from designated critical habitat based on economic impacts, impacts on national security, or any other relevant impacts. In considering whether to exclude a particular area from the designation, we identify the benefits of including the area in the designation, identify the benefits of excluding the area from the designation, and evaluate whether the benefits of exclusion outweigh the benefits of inclusion. If the analysis indicates that the benefits of exclusion outweigh the benefits of inclusion, the Secretary may exercise her discretion to exclude the area only if such exclusion would not result in the extinction of the species.
Under section 4(b)(2) of the Act, we consider the economic impacts of specifying any particular area as critical habitat. In order to consider economic impacts, we are preparing an analysis of the economic impacts of the proposed critical habitat designation and related factors.
We will announce the availability of the draft economic analysis as soon as it is completed, at which time we will seek public review and comment. At that time, copies of the draft economic analysis will be available for downloading from the Internet at the Federal eRulemaking Portal at
Under section 4(b)(2) of the Act, we consider whether there are lands where a national security impact might exist. As discussed above, we have determined that the lands within the proposed designation of critical habitat for
Under section 4(b)(2) of the Act, we consider any other relevant impacts, in addition to economic impacts and impacts on national security. We consider a number of factors, including whether the landowners have developed any HCPs or other management plans for the area, or whether there are conservation partnerships that would be encouraged by designation of, or exclusion from, critical habitat. In addition, we look at any tribal issues, and consider the government-to-government relationship of the United States with tribal entities. We also consider any social impacts that might occur because of the designation.
In preparing this proposal, we have determined that there are currently no HCPs or other management plans for
In accordance with our joint policy on peer review published in the
We will consider all comments and information we receive during this comment period on this proposed rule during our preparation of a final determination. Accordingly, the final determination may differ from this proposal.
Section 4(b)(5) of the Act provides for one or more public hearings on this proposal, if requested. Requests must be received within 45 days after the date of publication of this proposed rule in the
Executive Order 12866 provides that the Office of Information and Regulatory Affairs will review all significant rules. The Office of Information and Regulatory Affairs has determined that this rule is not significant.
Executive Order 13563 reaffirms the principles of Executive Order 12866
Under the Regulatory Flexibility Act (RFA; 5 U.S.C. 601
According to the Small Business Administration, small entities include small organizations such as independent nonprofit organizations; small governmental jurisdictions, including school boards and city and town governments that serve fewer than 50,000 residents; and small businesses (13 CFR 121.201). Small businesses include such businesses as manufacturing and mining concerns with fewer than 500 employees, wholesale trade entities with fewer than 100 employees, retail and service businesses with less than $5 million in annual sales, general and heavy construction businesses with less than $27.5 million in annual business, special trade contractors doing less than $11.5 million in annual business, and forestry and logging operations with fewer than 500 employees and annual business less than $7 million. To determine whether small entities may be affected, we will consider the types of activities that might trigger regulatory impacts under this designation as well as types of project modifications that may result. In general, the term “significant economic impact” is meant to apply to a typical small business firm's business operations.
Importantly, the incremental impacts of a rule must be both significant and substantial to prevent certification of the rule under the RFA and to require the preparation of an initial regulatory flexibility analysis. If a substantial number of small entities are affected by the proposed critical habitat designation, but the per-entity economic impact is not significant, the Service may certify. Likewise, if the per-entity economic impact is likely to be significant, but the number of affected entities is not substantial, the Service may also certify.
Under the RFA, as amended, and following recent court decisions, Federal agencies are only required to evaluate the potential incremental impacts of rulemaking on those entities directly regulated by the rulemaking itself, and not the potential impacts to indirectly affected entities. The regulatory mechanism through which critical habitat protections are realized is section 7 of the Act, which requires Federal agencies, in consultation with the Service, to ensure that any action authorized, funded, or carried by the agency is not likely to adversely modify critical habitat. Therefore, only Federal action agencies are directly subject to the specific regulatory requirement (avoiding destruction and adverse modification) imposed by critical habitat designation. Under these circumstances, it is our position that only Federal action agencies would be directly regulated by this designation. Therefore, because Federal agencies are not small entities, the Service certifies that the proposed critical habitat rule will not have a significant economic impact on a substantial number of small entities.
In conclusion, based on our interpretation of directly regulated entities under the RFA and relevant case law, this designation of critical habitat will only directly regulate Federal agencies, which are not by definition small business entities. As such, we certify that, if promulgated, this designation of critical habitat will not have a significant economic impact on a substantial number of small business entities. Therefore, an initial regulatory flexibility analysis is not required.
Executive Order 13211 (Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use) requires agencies to prepare Statements of Energy Effects when undertaking certain actions. Within one of the units, vegetation maintenance will occur along the edges of an existing road that remains accessible for power line maintenance. We do not anticipate any effects to critical habitat from this activity. Therefore, we do not expect the designation of this proposed critical habitat to significantly affect energy supplies, distribution, or use. Thus, this action is not a significant energy action, and no Statement of Energy Effects is required. However, we will further evaluate this issue as we conduct our economic analysis, and review and revise this assessment as warranted.
In accordance with the Unfunded Mandates Reform Act (2 U.S.C. 1501
(1) This proposed rule would not produce a Federal mandate. In general, a Federal mandate is a provision in legislation, statute, or regulation that would impose an enforceable duty upon State, local, or tribal governments, or the private sector, and includes both “Federal intergovernmental mandates” and “Federal private sector mandates.” These terms are defined in 2 U.S.C. 658(5)–(7). “Federal intergovernmental mandate” includes a regulation that “would impose an enforceable duty upon State, local, or tribal governments” with two exceptions. It excludes “a condition of Federal assistance.” It also excludes “a duty arising from participation in a voluntary Federal program,” unless the regulation “relates to a then-existing Federal program under which $500,000,000 or more is provided annually to State, local, and tribal governments under entitlement authority,” if the provision would “increase the stringency of conditions of assistance” or “place caps upon, or otherwise decrease, the Federal Government's responsibility to provide funding,” and the State, local, or tribal governments “lack authority” to adjust accordingly. At the time of enactment, these entitlement programs were: Medicaid; Aid to Families with Dependent Children work programs; Child Nutrition; Food Stamps; Social Services Block Grants; Vocational Rehabilitation State Grants; Foster Care, Adoption Assistance, and Independent
The designation of critical habitat does not impose a legally binding duty on non-Federal Government entities or private parties. Under the Act, the only regulatory effect is that Federal agencies must ensure that their actions do not destroy or adversely modify critical habitat under section 7. While non-Federal entities that receive Federal funding, assistance, or permits, or that otherwise require approval or authorization from a Federal agency for an action, may be indirectly impacted by the designation of critical habitat, the legally binding duty to avoid destruction or adverse modification of critical habitat rests squarely on the Federal agency. Furthermore, to the extent that non-Federal entities are indirectly impacted because they receive Federal assistance or participate in a voluntary Federal aid program, the Unfunded Mandates Reform Act would not apply, nor would critical habitat shift the costs of the large entitlement programs listed above onto State governments.
(2) We lack the available economic information to determine if a Small Government Agency Plan is required. Therefore, we defer this finding until completion of the draft economic analysis is prepared under section 4(b)(2) of the Act.
In accordance with Executive Order 12630 (Government Actions and Interference with Constitutionally Protected Private Property Rights), we will analyze the potential takings implications of designating critical habitat for
In accordance with Executive Order 13132 (Federalism), this proposed rule does not have significant Federalism effects. A federalism impact summary statement is not required. In keeping with Department of the Interior and Department of Commerce policy, we requested information from, and coordinated development of, this proposed critical habitat designation with appropriate State resource agencies in St. Croix, USVI, and Puerto Rico. The designation of critical habitat in areas currently occupied by the
Where State and local governments require approval or authorization from a Federal agency for actions that may affect critical habitat, consultation under section 7(a)(2) would be required. While non-Federal entities that receive Federal funding, assistance, or permits, or that otherwise require approval or authorization from a Federal agency for an action, may be indirectly impacted by the designation of critical habitat, the legally binding duty to avoid destruction or adverse modification of critical habitat rests squarely on the Federal agency.
In accordance with Executive Order 12988 (Civil Justice Reform), the Office of the Solicitor has determined that this rule does not unduly burden the judicial system and that it meets the requirements of sections 3(a) and 3(b)(2) of the Order. We are proposing to designate critical habitat in accordance with the provisions of the Act. To assist the public in understanding the habitat needs of the species, the rule identifies the elements of physical or biological features essential to the conservation of the species. The areas of proposed critical habitat are presented on maps, and the rule provides several options for the interested public to obtain more detailed location information, if desired.
This rule does not contain any new collections of information that require approval by OMB under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
It is our position that, outside the jurisdiction of the U.S. Court of Appeals for the Tenth Circuit, we do not need to prepare environmental analyses pursuant to the National Environmental Policy Act in connection with designating critical habitat under the Endangered Species Act. We published a notice outlining our reasons for this determination in the
In accordance with the President's memorandum of April 29, 1994 (Government-to-Government Relations with Native American Tribal Governments; 59 FR 22951), Executive Order 13175 (Consultation and Coordination with Indian Tribal Governments), and the Department of the Interior's manual at 512 DM 2, we readily acknowledge our responsibility to communicate meaningfully with recognized Federal Tribes on a government-to-government basis. In accordance with Secretarial Order 3206 of June 5, 1997 (American Indian Tribal Rights, Federal-Tribal Trust Responsibilities, and the Endangered Species Act), we readily acknowledge our responsibilities to work directly with tribes in developing programs for healthy ecosystems, to acknowledge that tribal lands are not subject to the same controls as Federal public lands, to remain sensitive to Indian culture, and to make information available to tribes.
As discussed above, there are no tribal lands in Puerto Rico or St. Croix, USVI.
We are required by Executive Orders 12866 and 12988 and by the Presidential Memorandum of June 1,
(1) Be logically organized;
(2) Use the active voice to address readers directly;
(3) Use clear language rather than jargon;
(4) Be divided into short sections and sentences; and
(5) Use lists and tables wherever possible.
If you feel that we have not met these requirements, send us comments by one of the methods listed in the
A complete list of references cited in this rulemaking is available on the Internet at
The primary authors of this proposed rule are the staff members of the Caribbean Ecological Services Field Office.
Endangered and threatened species, Exports, Imports, Reporting and recordkeeping requirements, Transportation.
Accordingly, we propose to amend part 17, subchapter B of chapter I, title 50 of the Code of Federal Regulations, as set forth below:
16 U.S.C. 1361–1407; 1531–1544; 4201–4245, unless otherwise noted.
The additions read as follows:
(a)
(1) Critical habitat units are depicted for St. Croix, USVI, on the maps in this entry.
(2) Within these areas, the primary constituent elements of the physical or biological features essential to the conservation of
(i) Areas consisting of coastal cliffs and dry coastal shrublands.
(A) Coastal cliff habitat includes:
(
(
(B) Dry coastal shrubland habitat includes:
(
(
(ii) Well-drained soils from the series Cramer, Glynn, Hasselberg, Southgate, and Victory.
(iii) Habitat of sufficient area to sustain viable populations in the coastal cliffs and dry coastal shrublands described in paragraphs (2)(i)(A) and (2)(i)(B) of this entry.
(3) Critical habitat does not include manmade structures (such as bridges, docks, aqueducts, and paved areas) and the land on which they are located existing within the legal boundaries on the effective date of this rule.
(4)
(5) Index map of critical habitat units for
(6) Unit 1: Cane Garden, Estate Canegarden and Estate Peters Mindle, Christiansted, St. Croix, USVI. Map of Unit 1 follows:
(7) Unit 2: Manchenil, Estate Granard, Christiansted, St. Croix, USVI. Map of Unit 2 follows:
(8) Unit 3: Great Pond, Estate Great Pond, Christiansted, St. Croix, USVI. Map of Unit 3 follows:
(9) Unit 4: Protestant Cay, Protestant Cay, St. Croix, USVI. Map of Unit 4 follows:
(10) Unit 5: East End South, Estate Jack's Bay and Estate Issac's Bay, Christiansted, St. Croix, USVI. Map of Units 5 and 6 follows:
(11) Unit 6: East End North, Estate Cotton Garden, Christiansted, St. Croix, USVI. Map of Unit 6 is provided at paragraph (10) of this entry.
(1) Critical habitat units are depicted for the municipalities of Guánica, Yauco, Guayanilla, Peñuelas, Ponce, and Vieques, Commonwealth of Puerto Rico, on the maps in this entry.
(2) Within these areas, the primary constituent elements of the physical or biological features essential to the conservation of
(i) Remnants of native shrubland and scrubland forest on limestone substrate within the subtropical dry forest life zone. Dry shrubland and scrubland forest includes:
(A) Shrubland vegetation with canopy from 6.5 to 9.8 ft (2 to 3 m) high;
(B) Limestone pavement;
(C) Associated native vegetation; and
(D) A shrub layer dominated by
(ii) Semi-deciduous dry forest on limestone substrate within the subtropical dry forest life zone. Dry limestone semi-deciduous forest includes:
(A) Low forest with canopy from 8 to 15 ft (3 to 5 m) high;
(B) Limestone pavement;
(C) Associated dry forest native vegetation; and
(D) A shrub layer dominated by
(iii) The type locations described paragraphs (2)(i) and (2)(ii) of this entry for this species should have shallow and alkaline soils derived from limestone rock and an average rainfall of 34 in (86 cm).
(3) Critical habitat does not include manmade structures (such as houses, bridges, aqueducts, and paved areas) and the land on which they are located existing within the legal boundaries on the effective date of this rule.
(4)
(5) Index map of critical habitat units for
(6) Unit 1: Montalva, municipality of Guánica, Puerto Rico. Map of Units 1, 2, 3, and 4 follows:
(7) Unit 2: Guánica Commonwealth Forest, municipalities of Guánica and Yauco, Puerto Rico. Map of Unit 2 is provided at paragraph (6) of this entry.
(8) Unit 3: Montes de Barina, municipalities of Yauco and Guayanilla, Puerto Rico. Map of Unit 3 is provided at paragraph (6) of this entry.
(9) Unit 4: Peñon de Ponce, municipalities of Peñuelas and Ponce, Puerto Rico. Map of Unit 4 is provided at paragraph (6) of this entry.
(10) Unit 5: Punta Negra, municipality of Vieques, Puerto Rico. Map of Units 5, 6, and 7 follows:
(11) Unit 6: Puerto Ferro, municipality of Vieques, Puerto Rico. Map of Unit 6 is provided at paragraph (10) of this entry.
(12) Unit 7: Cerro Playuela, municipality of Vieques, Puerto Rico. Map of Unit 7 is provided at paragraph (10) of this entry.
(1) Critical habitat units are depicted for the municipalities of Cayey, San Lorenzo, and Patillas, Commonwealth of Puerto Rico, on the maps in this entry.
(2) Within these areas, the primary constituent elements of the physical or biological features essential to the conservation of
(i) Elfin forest at elevations over 2,900 ft (880 m) in Cerro La Santa, Puerto Rico, which includes:
(A) Forest with single canopy layer with trees seldom exceeding 22 ft (7 m) in height.
(B) Associated native vegetation dominated by species such as
(ii) Ausubo forest at elevations between 2,000 to 2,300 ft (620 to 720 m) in the Charco Azul, which includes:
(A) Forest with single canopy layer with trees exceeding 22 ft (7 m) in height.
(B) Plant association comprised by few species of native trees and associated native vegetation (e.g.,
(iii) The type locations described in paragraphs (2)(i) and (2)(ii) of this entry for this species should have mean annual precipitation of 88.7 in (225.3 cm), mean annual temperature of 72.3 °F (22.7 °C), and Los Guineos type of soil (i.e., very deep, acidic, clayey, well-drained soils on side slopes of mountains).
(3) Critical habitat does not include manmade structures (such as bridges, docks, and aqueducts) and the land on which they are located existing within the legal boundaries on the effective date of this rule.
(4)
(5) Index map of critical habitat units for
(6) Unit 1: Cerro La Santa, Carite Commonwealth Forest, Puerto Rico. Map of Unit 1 follows:
(7) Unit 2: Charco Azul, Carite Commonwealth Forest, Puerto Rico. Map of Unit 2 follows:
Fish and Wildlife Service, Interior.
Proposed rule.
We, the U.S. Fish and Wildlife Service (Service), propose to list
We will accept comments received or postmarked on or before December 23, 2013. Comments submitted electronically using the Federal eRulemaking Portal (see
You may submit comments by one of the following methods:
(1)
(2)
We request that you send comments only by the methods described above. We will post all comments on
Marelisa Rivera, Deputy Field Supervisor, U.S. Fish and Wildlife Service, Caribbean Ecological Services Field Office, P.O. Box 491, Road 301 Km. 5.1, Boquerón, PR 00622; by telephone 787–851–7297; or by facsimile 787–851–7440. Persons who use a telecommunications device for the deaf (TDD) may call the Federal Information Relay Service (FIRS) at 800–877–8339.
We have determined that listing is warranted for these species, which are currently at risk throughout all of their respective ranges due to threats related to:
•
•
•
We intend that any final action resulting from this proposed rule will be based on the best scientific and commercial data available and be as accurate and as effective as possible. Therefore, we request comments or information from other concerned governmental agencies, Native American tribes, the scientific community, industry, or any other interested parties concerning this proposed rule. We particularly seek comments concerning:
(1) The biology, range, and population trends of
(a) Habitat requirements for feeding, reproducing, and sheltering;
(b) Genetics and taxonomy;
(c) Historical and current range, including distribution patterns;
(d) Historical and current population levels, and current and projected trends; and
(e) Past and ongoing conservation measures for these species, their habitat, or both.
(2) The factors that are the basis for making a listing determination for these
(a) The present or threatened destruction, modification, or curtailment of their habitat or range;
(b) Overutilization for commercial, recreational, scientific, or educational purposes;
(c) Disease or predation;
(d) The inadequacy of existing regulatory mechanisms; or
(e) Other natural or manmade factors affecting their continued existence.
(3) Biological, commercial trade, or other relevant data concerning any threats (or lack thereof) to these species and existing regulations that may be addressing those threats.
(4) Additional information concerning the historical and current status, range, distribution, and population size of these species, including the locations of any additional populations of these species.
(5) Any information on the biological or ecological requirements of the species and ongoing conservation measures for the species and their habitats.
Please include sufficient information with your submission (such as scientific journal articles or other publications) to allow us to verify any scientific or commercial information you include.
Please note that submissions merely stating support for or opposition to the action under consideration without providing supporting information, although noted, will not be considered in making a determination, as section 4(b)(1)(A) of the Act directs that determinations as to whether any species is an endangered or threatened species must be made “solely on the basis of the best scientific and commercial data available.”
You may submit your comments and materials concerning this proposed rule by one of the methods listed in the
If you submit information via
Comments and materials we receive, as well as supporting documentation we used in preparing this proposed rule, will be available for public inspection on
On December 15, 1980,
On November 21, 1996, we received a petition from the U.S. Virgin Islands Department of Planning and Natural Resources (DPNR) requesting that we list
On September 1, 2004, the Center for Biological Diversity (CBD) filed a lawsuit against the Department of the Interior and the Service alleging that the Service failed to publish a 12-month finding for
On October 25, 1999, we published in the
In the CNOR published on December 6, 2007 (72 FR 69034),
On May 11, 2004, we received a petition from the CBD (CBD 2004, pp.
Although
Flowers are bisexual, 5-merous (floral part in multiples of 5 in each whorl), regular, and uniformly vivid red. Flowers are borne solitary on auxillary brachyblast (short shoot), and are semipendent (hanging or suspended). Pedicel is terete (cylindrical and tapering), 0.35 to 0.43 in (0.89 to 1.1 cm) long, red, fringed with trichomes at the summit, bibracteolate (2 bracts subtending the flower within an inflorescence) near the base, and articulate with calyx. The corolla (the part of a flower that consists of the separate or fused petals and constitutes the inner whorl of the perianth) tube is carnose (of a fleshy consistence), campanulate (shape like a bell), and about 0.5 to 0.6 in (1.3 to 1.5 cm) in length and 0.2 to 0.3 in (0.5 cm to 0.8 cm) in diameter.
Fruit is a bright red berry with many seeds inside (Lioger 1995, p. 105). No additional information regarding fruit production is available.
The coastal cliffs where
The natural populations of
The mean temperature is 22.7 °C (72.3 °F), varying from 20 °C (68 °F) in January to 24 °C (73.4 °F) in July (Silander
Both the elfin and ausubo forests have similar climate conditions (Ewel and Whitmore 1973, p. 32). The elfin forest, also referred to as dwarf or cloud-forest, is found on exposed peaks and ridges of Cerro La Santa, above 2,890 ft (880 m) in elevation from sea level, occupying approximately 10.1 ha (24.9 ac) in the Carite Commonwealth Forest (Silander
The ausubo forest is only found along the Río Grande de Patillas River basin and intermittent streams between 2,034 ft (620 m) and 2,329.4 ft (720 m) of elevation (DNR 1976, p. 169), and occupying approximately 72.5 ha (179.2 ac) in the Charco Azul area (Silander
Based on the information currently available to us, there is no published information describing the ecology and genetics of
Studies on the distribution, abundance, and reproductive biology of
Historically,
Historically, land use intensity increased by colonial exploitation since the 15th century (Chakroff 2010, p. 6). Sugarcane was the main crop on the island and dominated the economy for nearly 200 years (Shaw 1933, p. 414). Apparently, the former land use of the areas used for sugar cane cultivation resulted in degradation of the species' habitat and nearly extirpated the species from the wild. Sugarcane is no longer cultivated commercially on the island, the majority of the areas formerly used for sugarcane plantations are currently grasslands, and early secondary forests are dominated by the nonnative tree
The current distribution of populations of
a. North coast—(1) Gallows Bay with an estimate of 2 individuals; and (2) Protestant Cay with an estimated 40 individuals.
b. South coast—(3) Manchenil Bay with an estimated 8 individuals; (4) West side of Vagthus point with a single individual; (5) Great Pond with approximately 65 individuals; (6) South Shore with an estimate of 182 individuals; and (7) Cane Garden Bay with 15 individuals.
Most of the sites have juvenile individuals except for Gallows Bay and Vagthus Point (Table 1).
In addition, there are introduced individuals located at Salt River National Park and Ecological Preserve (SARI) with an estimate of 90 individuals (mostly juveniles); Buck Island National Monument with an estimate of 11 individuals; and Ruth Island with 1 individual (O. Monsegur and M. Vargas, Service, pers. obs., 2010 and 2013; Dalmita-Smith, DPNR, pers. comm., 2010).
Currently,
In 1992, Dr. George R. Proctor conducted a status review of the species estimating its population at Cerro La Santa at around 35 individuals (Proctor 1992, p. 4). Later, Dr. Samuel Flores (professor from the Turabo University) visited the same area and estimated its population at around 172 individuals (S. Flores, pers. comm., 2009). In December 2006, Omar Monsegur (graduate student from the University of Puerto Rico, Mayagüez Campus) estimated approximately 25 individuals at Cerro La Santa and 4 individuals at Charco Azul (O. Monsegur, UPRM, unpubl. report, 2006, p. 1). In 2013, Service biologists, Carlos Pacheco and Omar Monsegur, visited the population at Cerro La Santa and estimated the
From the municipality of Peñuelas, Monsegur and Breckon (2007, p. 6) found a single individual in a ravine area on the west side of El Peñón site. This seems to be part of the same population identified by Breckon and Kolterman in 1995. In addition, the Service confirmed the presence of about eight clusters of the species in an area just north of the Ponce Holiday Inn in the municipality of Ponce (O. Monsegur, Service, and J. Sustache, DNER, unpubl. Data, 2013).
Another recorded site for
There is new information suggesting the existence of one population within the Tortuguero Lagoon in northern Puerto Rico (Beverly Yoshioka, Service, pers. comm., 2013). This will be the first record for the species in the northern coast of Puerto Rico. The finding of this new locality is supported by the existence of the species on a similar habitat in the Island of Anegada (British Virgin Islands).
Section 4 of the Act (16 U.S.C. 1533), and its implementing regulations at 50 CFR part 424, set forth the procedures for adding species to the Federal Lists of Endangered and Threatened Wildlife and Plants. Under section 4(a)(1) of the Act, we may list a species based on any of the following five factors: (A) The present or threatened destruction, modification, or curtailment of its habitat or range; (B) overutilization for commercial, recreational, scientific, or educational purposes; (C) disease or predation; (D) the inadequacy of existing regulatory mechanisms; and (E) other natural or manmade factors affecting its continued existence. Listing actions may be warranted based on any of the above threat factors, singly or in combination. Each of these factors is discussed below.
The
The population at Protestant Cay has been affected by construction and management activities associated with the current use of the area, i.e., the disposal of garden debris from a hotel in the species' known habitat (O. Monsegur and M. Vargas, Service, pers. obs., 2010). As
Another modification of habitat in the area was a sand ramp constructed in 2011, on the northeast side of the cay (T. Cummins and W. Coles, DPNR, pers comm., 2011; R. Platenberg and T. Cummins, DPNR, pers. comm., 2012; Zegarra, Service, pers. comm., 2012). It was documented that at least five individuals of
The individuals located at Gallows Bay are within a developed residential complex that has the potential for future expansion, and thus may affect
The area from Cane Garden Bay to Manchenil Bay on the south coast of St. Croix harbors four of the known natural populations of
The population of Great Pond is located between the entrance road of the East End Marine Park office and a private property currently advertised for sale. The population seems to be healthy based on the presence of different size plants and evidence of recent flowering events. However, the area near the population is mowed, and the access road limits the expansion of the population. Furthermore, the property adjacent to the population is privately owned and currently for sale (O. Monsegur and M. Vargas, Service, pers. obs., 2010 and 2013). The possible use of the area for additional residential or tourist development may affect the
Habitat destruction and modification have been identified by species expert as the main threat to
Land-use history of Cerro La Santa has shown that installation of telecommunication facilities for television, radio, and cellular communication, and for military and governmental purposes, has adversely impacted
For the above reasons, we determined that installation of additional communications towers or expansion of the existing one at Cerro La Santa is a threat to
Construction of a new access road and improvement of the existing access road to the existing communication facilities have been identified as a factor that could directly (destruction of individuals) or indirectly (slope instability and habitat degradation) reduce the number
Vegetation management around the existing telecommunication towers and associated facilities and along the existing power lines that energize these facilities is a threat to
Even though the population dynamics of the species are poorly known, we understand that the impacts discussed above could be detrimental to the species as a whole. Clearing of vegetation may result in direct impacts (cutting of individuals) or indirect impacts (by opening forest gaps that can serve as corridors for invasive species) to the species. Vegetation management and maintenance of communication towers and facilities are a threat to
The species' rarity and restricted distribution make it vulnerable to habitat destruction and modification. About 50 percent of known
In Peñuelas, the species is found in an area that is currently under urban development. Breckon and Kolterman (1996) reported a healthy population of
In Yauco, the species occurs within private properties that may be subject to urban development (
In the Guánica Commonwealth Forest and the Vieques Island National Wildlife Refuge (NWR),
Furthermore, despite being a National Wildlife Refuge, the Vieques site (Puerto Ferro) is considered as an active ammunition site due to the previous use of Vieques Island as a bombing range by the U.S. Navy (
About half of known populations and suitable habitat are within privately owned land, which is being modified or proposed to be modified for urban development. These activities are expected to continue.
Efforts to re-establish locally endangered plant species to the wild are occurring within properties managed by the National Park Service (NPS) (SARI and Buck Island Reef National Monument) on St. Croix. The intent of NPS is to increase production of the species' progeny around the island, which started in 2007, by planting seven individuals of
Other efforts include the evaluation of the status of the natural populations by Service staff. In 2010 and 2013, Service biologists visited St. Croix and found
The Service's Caribbean Ecological Service Field Office (CESFO) has evaluated federally funded projects or federally related projects requiring federal permits that lie within the species' range. As part of the evaluation, the Service recommends surveys to identify populations and recommends conservation measures to protect the species. However, residential projects without Federal nexuses are not submitted to the Service for evaluation.
The threats of possible construction and developments, and the current management of the habitat of the populations, may further limit the species. Direct consequences can be expected as impacting (harming) the individuals (e.g., cutting or mowing), while indirect consequences can be expected to create a habitat disturbance where nonnative plants can overpower
The species' rarity and restricted distribution makes it vulnerable to habitat destruction and modification. The scope of these factors is exacerbated because the most significant portion of the known population occurs adjacent to telecommunication facilities and at the edge of the existing access road. The activities related to these facilities are expected to continue into the future. Therefore, they are likely to have significant impact on
Degradation of habitat represents a threat to
Current evidence suggests that the wild and cultivated populations of
There is scientific interest in
At present, the Service is unaware of any conservation efforts to reduce overutilization for commercial, recreational, scientific, or educational purposes of
The Carite and Guánica Commonwealth Forests are managed for conservation by the Puerto Rico DNER, and collection of any plant in these lands is regulated by Commonwealth Law No. 133. Currently, there are permits to collect plants in the Carite and Guánica Commonwealth Forests. However, such permits are issued by DNER after determining that proposed actions will not negatively affect the species (José Sustache, DNER, pers. comm., 2013; see Factor D discussion, below). If this proposed rule is adopted, collection of
The genus
Although we do not have evidence on the agave snout weevil's presence on St. Croix, due to the low number of natural populations of
Service biologists documented that a small number of individuals of
On Mona Island, Puerto Rico, feral pigs are known to uproot juveniles and destroy the root system of
No insect pest or predation of individuals of
Due to the low number of individuals and populations of these species, disease and predation could certainly be threats. However, we have no further information indicating that disease or predation are a current threat to
Based on the information available, we have no evidence of conservation efforts to prevent or reduce adverse effects due to disease or predation. So far, the only species that could be potentially affected by an insect pest is
Predation (scaring) has been observed in some individuals of
We have no information indicating that disease or predation is a current threat to
Under this factor, we examine whether existing regulatory mechanisms are inadequate to address the threats to
Having evaluated the significance of the threat as mitigated by any such conservation efforts, we analyze under Factor D the extent to which existing regulatory mechanisms are inadequate to address the specific threats to the species. Regulatory mechanisms, if they exist, may reduce or eliminate the impacts from one or more identified threats. In this section, we review existing State and Federal regulatory mechanisms to determine whether they effectively reduce or remove threats to
The Territory of the U.S. Virgin Islands currently considers
Based on the above, although there is a regulatory mechanism that protects
One of the currently known populations of
In 1999, the Commonwealth of Puerto Rico approved the Law No. 241, also known as New Wildlife Law of Puerto Rico (“Nueva Ley de Vida Silvestre de Puerto Rico”). The purpose of this law is to protect, conserve, and enhance both native and migratory wildlife species, including plants; declare all wildlife species within its jurisdiction as property of Puerto Rico; and regulate permits, hunting activities, and nonnative species, among others. However, as we mentioned above under the Factor A discussion, some individuals of
In 1998, the Commonwealth of Puerto Rico approved the Commonwealth Law No. 150, known as Puerto Rico Natural Heritage Law (Ley del Programa de Patrimonio Natural de Puerto Rico). The purpose of the Law No. 150 is to create the DNER Natural Heritage Program. This program has the responsibility to identify and designate as critical elements some rare, threatened, or endangered species that should be considered for conservation, because of their contribution to biodiversity and because of their importance to the natural heritage (DNR 1988, p.1). Currently,
The Carite and Guánica Commonwealth Forests are protected by Law No. 133 (12 L.P.R.A. sec. 191), 1975, as amended, known as the Puerto Rico Forest Law (“Ley de Bosques de Puerto Rico”), as amended in 2000. Section 8(A) of Law No. 133 prohibits cutting, killing, destroying, uprooting, extracting, or in any way damaging any tree or vegetation within a Commonwealth forest without authorization of the Secretary of the DNER. Although management plans for Commonwealth forests include the protection and conservation of species classified under DNER regulations as critical element, endangered, or threatened, on occasions the location of such species in the forests makes enforcement of these regulations a difficult task. As previously mentioned,
In 2004, the Commonwealth of Puerto Rico adopted Regulation No. 6769, Regulation of Special Permits for the Use of Communications and Buildings Associated to Electronic Systems of Communication within Commonwealth Forests in Puerto Rico (“Reglamento de Permisos Especiales para Uso de Comunicaciones y Edificaciones Asosiadas a Sistemas Electrónicos de comunicación en los Bosques Estatales”), which provides guidance for the installation and maintenance of telecommunication facilities within Commonwealth forests and for the protection of natural resources. Article 7(d) of this regulation states that during installation, operation, and maintenance of telecommunication facilities, conservation measures should be taken to avoid or minimize impacts on species protected by DNER and Federal agencies (DNER 2004a, p. 13). However, individuals of
In 2004, DNER approved Regulation 6766 to regulate the management of threatened and endangered species in the Commonwealth of Puerto Rico (“Reglamento para Regir el Manejo de las Especies Vulnerables y en Peligro de Extinción en el Estado Libre Asociado de Puerto Rico”). Article 2.06 of Regulation 6766 prohibits collecting, cutting, and removing, among other activities, listed plants within the jurisdiction of Puerto Rico.
On the island of Anegada, there are various conservation and education efforts taking place for the protection of rare plant and animal species (Wenger
Invasive plant species can affect native ecosystems at three levels: the genetic level, where the number of individuals of native species can be reduced below the minimum necessary for persistence; the species diversity level, where the number of species present and their distribution can be reduced; and the ecosystem level, where the functioning of the ecosystem can be changed (Rippey
Although invasive plant species have not been documented as a current threat to
With respect to
Invasive, native plants, such as the ferns
These invasive ferns and grass are currently found occupying areas disturbed by fire, landslides, and road construction in Cerro La Santa, and have the potential to affect
Fire is not a natural event in subtropical dry or moist forests in Puerto Rico and the U. S. Virgin Islands. The vegetation in the Caribbean is not adapted to fires, because this disturbance does not naturally occur on these islands (Brandeis and Woodall 2008, p. 557; Santiago-García
Human-induced fires may lead to destruction of the native vegetation seed bank and may create conditions favorable for the establishment of nonnative plant species adapted to fires (e.g.,
On the island of St. Croix, human-induced fires are also frequently reported, and most of them appear to have been originated close to existing roads (Chakroff 2010, p. 41). Estate
Human-induced fire is also a current threat to
The islands of the Caribbean are frequently affected by hurricanes. The U.S. Virgin Islands have been hit by five major hurricanes in recent years: Hugo (1989), Luis and Marilyn (1995), Lenny (1999), and Omar (2008). Examples of the visible effects of hurricanes on the ecosystem include massive defoliation, snapped and wind-thrown trees, large debris accumulations, landslides, debris flows, altered stream channels, and transformed beaches (Lugo 2008, p. 368). Successional responses to hurricanes can influence the structure and composition of plant communities in the Caribbean islands (Van Bloem
The reduced number and small size of
Populations of
On the island of Anegada, climate-induced sea-level rise could lead to the extirpation of
The limited distribution and low number of populations (3) and individuals (172 historically reported) of this species may exacerbate its vulnerability to natural events such as hurricanes and landslides, and compromise its continued existence. Damage to higher elevation forested habitat is usually greater during hurricane events (Weaver 2008, p. 150).
The recovery of elfin forest vegetation after hurricanes is usually slow, and the
The habitat where
Small and isolated populations of rare plants often display reduced fitness as reduced reproductive output, seedling performance, or pollen viability (Holmes
In the case of
The staff from the Royal Botanical Garden (KEW) has developed a germination and cultivation protocol for
Based on the above information and due to the reduced number of populations and individuals, we believe that
The primary threats to
The limited distributions and small population sizes of
The rarity and specialized ecological requirements of
Based on our evaluation of the best available scientific and commercial information on the species, the significant threats affecting
Based on our evaluation of the best available scientific and commercial information on the species, the significant threats affecting
Current evidence indicates that the majority of suitable habitat and known populations of
We have carefully assessed the best scientific and commercial information available regarding the past, present, and future threats to
The Act defines an endangered species as any species that is “in danger of extinction throughout all or a significant portion of its range” and a threatened species as any species “that is likely to become endangered throughout all or a significant portion of its range within the foreseeable future.” A major part of the analysis of “significant portion of the range” requires considering whether the threats to the species are geographically concentrated in any way. If the threats are essentially uniform throughout the species' range, then no portion is likely to warrant further consideration.
Based on the threats to
Conservation measures provided to species listed as endangered or threatened under the Act include recognition, recovery actions, requirements for Federal protection, and prohibitions against certain practices. Recognition through listing the species, results in public awareness and conservation by Federal, State, Tribal, and local agencies; private organizations; and individuals. The Act encourages cooperation with the States and requires that recovery actions be carried out for all listed species. The protection required by Federal agencies and the prohibitions against certain activities are discussed, in part, below.
The primary purpose of the Act is the conservation of endangered and threatened species and the ecosystems upon which they depend. The ultimate goal of such conservation efforts is the recovery of these listed species, so that they no longer need the protective measures of the Act. Subsection 4(f) of the Act requires the Service to develop and implement recovery plans for the conservation of endangered and threatened species. The recovery planning process involves the identification of actions that are necessary to halt or reverse the species' decline by addressing the threats to its survival and recovery. The goal of this process is to restore listed species to a point where they are secure, self-sustaining, and functioning components of their ecosystems.
Recovery planning includes the development of a recovery outline shortly after a species is listed and preparation of a draft and final recovery plan. The recovery outline guides the immediate implementation of urgent recovery actions and describes the process to be used to develop a recovery plan. Revisions of the plan may be done to address continuing or new threats to the species, as new substantive information becomes available. The recovery plan identifies site-specific management actions that set a trigger for review of the five factors that control whether a species remains endangered or may be downlisted or delisted, and methods for monitoring recovery progress. Recovery plans also establish a framework for agencies to coordinate their recovery efforts and provide estimates of the cost of implementing recovery tasks. Recovery teams (composed of species experts, Federal and State agencies, nongovernmental organizations, and stakeholders) are often established to develop recovery plans. When completed, the recovery outline, draft recovery plan, and the final recovery plan will be available on our Web site (
Implementation of recovery actions generally requires the participation of a broad range of partners, including other Federal agencies, States, Tribes, nongovernmental organizations, businesses, and private landowners. Examples of recovery actions include habitat restoration (e.g., restoration of native vegetation), research, captive propagation and reintroduction, and outreach and education. The recovery of many listed species cannot be accomplished solely on Federal lands because their range may occur primarily or solely on non-Federal lands. To achieve recovery of these species requires cooperative conservation efforts on private and Commonwealth and Territory lands.
If these species are listed, funding for recovery actions will be available from a variety of sources, including Federal budgets, State programs, and cost share grants for non-Federal landowners, the academic community, and nongovernmental organizations. In addition, pursuant to section 6 of the Act, the Territory of the U.S. Virgin Islands and the Commonwealth of Puerto Rico would be eligible for Federal funds to implement management actions that promote the protection or recovery of
Although
Section 7(a) of the Act requires Federal agencies to evaluate their actions with respect to any species that is proposed or listed as an endangered or threatened species and with respect to its critical habitat, if any is designated. Regulations implementing this interagency cooperation provision of the Act are codified at 50 CFR part 402. Section 7(a)(4) of the Act requires Federal agencies to confer with the Service on any action that is likely to jeopardize the continued existence of a species proposed for listing or result in
Federal agency actions within the species' habitat that may require conference or consultation or both as described in the preceding paragraph include management and any other landscape-altering activities on Federal lands administered by the U.S. Fish and Wildlife Service (Vieques National Wildlife Refuge), and National Park Service (SARI and Buck Islands Monument); issuance of section 404 Clean Water Act (33 U.S.C. 1251
The Act and its implementing regulations set forth a series of general prohibitions and exceptions that apply to endangered and threatened plants. The prohibitions of section 9(a)(2) of the Act, codified at 50 CFR 17.61, apply to endangered plants. These prohibitions, in part, make it illegal for any person subject to the jurisdiction of the United States to import or export, transport in interstate or foreign commerce in the course of a commercial activity, sell or offer for sale in interstate or foreign commerce, or remove and reduce the species to possession from areas under Federal jurisdiction. In addition, for plants listed as endangered, the Act prohibits the malicious damage or destruction on areas under Federal jurisdiction and the removal, cutting, digging up, or damaging or destroying of such plants in knowing violation of any State law or regulation, including State criminal trespass law. It is also unlawful to violate any regulation pertaining to plant species listed as endangered or threatened (section 9(a)(2)(E) of the Act).
We may issue permits to carry out otherwise prohibited activities involving endangered and threatened species under certain circumstances. Regulations governing permits are codified at 50 CFR 17.62 for endangered plants, and at 17.72 for threatened plants. With regard to endangered plants, a permit must be issued for the following purposes: for scientific purposes or to enhance the propagation or survival of the species.
It is our policy, as published in the
(1) Unauthorized collecting, handling, possessing, selling, delivering, carrying, or transporting of
(2) Introduction of nonnative species that compete with or prey upon
(3) The unauthorized release of biological control agents that attack any life stage of
Questions regarding whether specific activities would constitute a violation of section 9 of the Act should be directed to the Caribbean Ecological Services Field Office (see
In accordance with our joint policy on peer review published in the
We will consider all comments and information we receive during the comment period on this proposed rule during our preparation of a final determination. Accordingly, the final decision may differ from this proposal.
Section 4(b)(5) of the Act provides for one or more public hearings on this proposal, if requested. Requests must be received within 45 days after the date of publication of this proposed rule in the
We are required by Executive Orders 12866 and 12988 and by the Presidential Memorandum of June 1, 1998, to write all rules in plain language. This means that each rule we publish must:
(1) Be logically organized;
(2) Use the active voice to address readers directly;
(3) Use clear language rather than jargon;
(4) Be divided into short sections and sentences; and
(5) Use lists and tables wherever possible.
If you feel that we have not met these requirements, send us comments by one of the methods listed in the
We have determined that environmental assessments and environmental impact statements, as defined under the authority of the National Environmental Policy Act (NEPA), need not be prepared in connection with listing a species as an endangered or threatened species under the Endangered Species Act. We published a notice outlining our reasons for this determination in the
A complete list of references cited in this rulemaking is available on the Internet at
The primary authors of this proposed rule are the staff members of the Caribbean Ecological Services Field Office.
Endangered and threatened species, Exports, Imports, Reporting and recordkeeping requirements, Transportation.
Accordingly, we propose to amend part 17, subchapter B of chapter I, title 50 of the Code of Federal Regulations, as set forth below:
16 U.S.C. 1361–1407; 1531–1544; 4201–4245, unless otherwise noted.
(h) * * *
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Proposed changes to management measures; request for comments.
NMFS proposes to establish funding responsibilities for an upgrade to the shrimp electronic logbook (ELB) program as described in a framework action to the Fishery Management Plan for the Shrimp Fishery of the Gulf of Mexico (FMP), as prepared by the Gulf of Mexico (Gulf) Fishery Management Council (Council). Newer and more efficient ELB units have been purchased by NMFS for the Gulf shrimp fleet and are available for installation on Gulf shrimp vessels. If the framework action is implemented, the proposed changes to the management measures would include establishing a cost-sharing program to fund the ELB program. The proposed changes would require NMFS to pay for the software development, data storage, effort estimation analysis, and archival activities for the new ELB units, and vessel permit holders in the Gulf shrimp fishery to pay for installation and maintenance of the new ELB units and for the data transmission from the ELB units to a NOAA server. The purpose of the proposed changes is to ensure that management of the shrimp fishery is based upon the best scientific information available and that bycatch is minimized to the extent practicable.
Written comments must be received on or before November 6, 2013.
You may submit comments on the proposed changes to the management measures, identified by “NOAA–NMFS–2013–0127” by any of the following methods:
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Electronic copies of the framework action, which includes a Regulatory Flexibility Act analysis and a regulatory impact review, may be obtained from the Southeast Regional Office Web site at
Comments regarding the burden-hour estimates or other aspects of the collection-of-information requirements contained in the proposed changes to the management measures may be submitted in writing to Anik Clemens, Southeast Regional Office, NMFS, 263 13th Avenue South, St. Petersburg, FL
Susan Gerhart, Southeast Regional Office, NMFS, telephone: 727–824–5305; email:
The shrimp fishery of the Gulf is managed under the FMP. The FMP was prepared by the Council and is implemented through regulations at 50 CFR part 622 under the authority of the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act).
The final rule implementing Amendment 13 to the FMP, which published on September 26, 2006 (71 FR 56039), established the requirement for an ELB program for the Gulf shrimp fishery. The program is administered by NMFS and is a cost-effective way to accurately determine the amount and location of effort occurring in the shrimp fishery in the Gulf exclusive economic zone (EEZ). Current regulations require vessels to participate in the ELB program, if selected by the NMFS Science and Research Director (SRD).
The ELB program provides data on Gulf shrimp fishing effort that are critical to both the Council and NMFS in performing annual assessments of the status of shrimp stocks. The ELB program is also a key component in the Council's red snapper rebuilding plan because accurate estimates of juvenile red snapper mortality attributable to the shrimp fishery are essential data for red snapper stock assessments. Accurate estimates of shrimp fishing effort from the ELB program are also used to generate mortality estimates on a number of other species captured as bycatch in the shrimp fishery. In particular, the effort information from the ELB program is used to estimate and monitor incidental sea turtle takes.
Currently, NMFS funds the deployment of ELB units on approximately 500 shrimp vessels, roughly one-third of the offshore fleet. The previous contract expired on March 31, 2013; a new contract with the Gulf States Marine Fisheries Commission extended the services and will expire December 31, 2013. The contract for the current ELB program will lapse because funding is not available at this time. NMFS recently purchased newer and more efficient ELB units and they are now available for installation. To continue the ELB program, additional funding is needed regardless of the equipment used. Therefore, the Council voted for a framework action to require vessel permit holders in the Gulf shrimp fishery to share in the cost of the ELB program. If additional funding becomes available, the current ELB units could be continued to be used for multiple years to allow a smoother transition to the new ELB units, and sharing the costs of the ELB program with the shrimp fishery may not be necessary.
NMFS purchased the new ELB units for each of the vessel permit holders in the Gulf shrimp fishery through the NMFS vessel monitoring system (VMS) program, an estimated one-time cost of $1,100,000 for 1,500 vessels. If the cost-sharing program is implemented, NMFS would pay for the software development, data storage, effort estimation analysis, and archival activities, which are estimated to cost approximately $313,791 annually. Vessel owners would pay for installation and maintenance of the new ELB units and the data transmission from the ELB units to a NOAA server. The initial installation cost would be approximately $200 per vessel, and the annual wireless provider contract (data transmission) cost is estimated to be $720 per vessel. This division of costs between NMFS and the shrimp fishery is similar to the Gulf reef fish VMS program, and other cost sharing data reporting programs within NMFS throughout the U.S.
NMFS initially sent a letter to each vessel permit holder in the Gulf shrimp fishery outlining the upgraded ELB program. This letter included the timeline and process for installation of the new ELB units.
If the cost-sharing program is implemented, NMFS will, in a subsequent letter, inform vessel owners that they have been selected to participate in this program, and that they have a total of 90 days to comply with the regulations to install and activate their new ELB units including 30 days to activate a wireless account and 60 days to install the new ELB unit after it has been shipped by NMFS and received by the vessel owner. These vessel owners must contact Verizon Wireless, the wireless provider, by email at
The framework action and the proposed changes would not require any changes to the current regulatory text within § 622.51(a), “Commercial vessel owners and operators,” regarding the requirements for the Gulf shrimp ELB program. This is because the current regulations specify that the SRD will select the vessel owners who will participate in the ELB program and how the ELB program is administered, and this would not change in this rulemaking. The proposed changes would revise the funding responsibilities for the ELB program, which are described in the FMP; however, the regulatory text would not change. The changes to the management measures are being proposed pursuant to section 304(b)(1)(A) of the Magnuson-Stevens Act.
Pursuant to section 304(b)(1)(A) of the Magnuson-Stevens Act, the NMFS Assistant Administrator has determined that the framework action is consistent with FMP, other provisions of the Magnuson-Stevens Act, and other applicable law, subject to further consideration after public comment.
The proposed changes to the management measures have been determined to be not significant for purposes of Executive Order 12866.
NMFS prepared an Initial Regulatory Flexibility Analysis (IRFA) for the proposed changes to the management measures, as required by section 603 of the Regulatory Flexibility Act, 5 U.S.C. 603. The IRFA describes the economic impact that the proposed changes, if implemented, would have on small entities. A description of the action, why it is being considered, and the objectives of and legal basis for this action are contained in the preamble. A copy of the full analysis is available from the NMFS (see
The Magnuson-Stevens Act provides the statutory basis for the proposed changes to the management measures. No duplicative, overlapping, or conflicting Federal rules have been identified.
The ELB program for the Gulf shrimp fishery, established through the final rule to implement Amendment 13 to the FMP in 2006, required selected vessels to carry ELB units. The proposed changes to the management measures would require selected vessels to carry new ELB units that are more modern and technologically advanced. From the standpoint of technical and professional skills needed, the new ELB units do not materially differ from the current ELB units. In fact, the new ELB units would no longer require a technician to meet vessels to pull and program the memory card. Data collected by ELB units would
NMFS expects the proposed changes to the management measures to directly affect commercial fishermen with valid or renewable Federal Gulf shrimp permits for harvesting penaied shrimp in the Gulf Exclusive Economic Zone (EEZ). The Small Business Administration has established small entity size criteria for all major industry sectors in the United States, including fish harvesters. A business involved in fish harvesting is classified as a small business if independently owned and operated, is not dominant in its field of operation (including its affiliates), and its combined annual receipts are not in excess of $19.0 million from finfish fishing (NAICS code 114111), or $5.0 million from shellfish fishing (NAICS code 114112), or $7 million from other marine fishing (NAICS code 114119) for all of its affiliated operations worldwide. For for-hire vessels, all qualifiers apply except that the annual receipts threshold is $7.0 million (NAICS code 713990, recreational industries).
The Federal Gulf shrimp permit has been placed under a moratorium since 2007. At the start of the moratorium, 1,915 vessels qualified and received Gulf shrimp permits. Over time, the number of permitted shrimp vessels declined, and in 2012 there were 1,582 such permitted vessels. According to the Southeast Regional Office Web site, the Constituency Services Branch (Permits) unofficially listed 1,431 holders of Gulf shrimp permits as of June 25, 2013.
During 2006 through 2010, an average of 4,582 vessels fished for shrimp in the Gulf EEZ and state waters, of which 20 percent held Gulf shrimp permits. Despite being fewer in number, vessels with Gulf shrimp permits accounted for an average of 67 percent of total shrimp landings and 77 percent of total ex-vessel revenues. Of all vessels with Gulf shrimp permits, 73 percent were active and 27 percent were inactive (
During 2006 through 2010, an average permitted shrimp vessel generated revenues from commercial fishing ranging from around $205,000 to $244,000. An average active permitted vessel had revenues from commercial fishing ranging from around $233,000 to $274,000. As may be expected, revenues from commercial fishing for an average inactive permitted vessel were practically none.
Based on the revenue figures above, all permitted shrimp vessels are expected to be directly affected by the proposed changes to the management measures and are determined for the purpose of this analysis to be small business entities.
Because all directly affected entities have been determined, for the purpose of this analysis, to be small entities, NMFS determined that the proposed action would affect a substantial number of small entities.
Because NMFS determined that all entities expected to be affected by the proposed changes to the management measures are small entities, the issue of disproportional effects on small versus large entities does not arise in the present case.
The vessel permit holders' share of the cost of the ELB program consists of a one-time cost of installing the ELB unit, an annual cost of transmitting data from the ELB unit to NMFS servers, and a periodic cost of repairing or replacing defective ELB units. On a per vessel basis, the installation cost is $200 and the annual data transmission cost is $720. In the event of equipment failure, the cost of repair could run from a small amount to $425, which is the cost of replacing an ELB unit.
During 2006 through 2010, an average permitted shrimp vessel had negative net operating revenues in all years, except 2009. Its net profits (
For active permitted shrimp vessels, net operating revenues were negative in all years during 2006 through 2010. In addition, profits in all years were negative, except in 2010. Again, the positive net profits in 2010 were due to revenues associated with the DWH oil spill. The situation is worse for inactive permitted shrimp vessels, with net revenues and profits (except for 2010) being more negative than those of active permitted shrimp vessels. The average inactive permitted shrimp vessel had higher net profit in 2010 than the average active permitted shrimp vessel.
The cost of the ELB program would impose a significant impact on the profits of an average permitted shrimp vessel. The effects would be even more significant for vessels that are not active in the fishery. It is noted that there are some vessels that are substantially more profitable than the average vessel, and thus would be able to absorb the per vessel cost of the ELB program. However, there are other vessels that are only slightly more profitable than the average vessel, and very likely the impacts on their profits would be significant.
The following discussion analyzes the alternatives that were not selected as preferred by the Council.
The proposed action would continue the ELB program. Being adjudged and proven to be very effective in collecting shrimp effort data in the Gulf EEZ, continuation of the ELB program has been deemed necessary so that NMFS could effectively carry out its mandate to base conservation and management measures on the best scientific information available and to minimize bycatch to the extent practicable. Therefore, no other alternative to collect shrimp effort data was considered.
However, three alternatives, including the preferred alternative, were considered for funding the ELB program. As noted above, the preferred alternative would provide for cost sharing between NMFS and the vessel permit holders in the Gulf shrimp fishery. The second alternative would require NMFS to bear the entire cost of the ELB program. NMFS has recognized the vital role the ELB program has played in estimating shrimp effort in the Gulf, but due to tight budget constraints, NMFS cannot fully fund the ELB program. The third alternative would require the vessel permit holders to fund the entire cost of the ELB program. For several years now, the Gulf shrimp industry has been in relatively dire financial condition, thus the Gulf shrimp fishery indicated that funding the entire cost of the ELB would not be possible.
Notwithstanding any other provision of law, no person is required to respond to, nor shall a person be subject to a penalty for failure to comply with, a collection-of-information subject to the requirements of the Paperwork
The proposed changes to the management measures contain collection-of-information requirements subject to the PRA. NMFS estimates the requirement for the Gulf shrimp fishery to share in the costs of the new ELB units, which includes installation ($200) and data transmission ($720), to average 1 hour and $920 per response for the first year. After the first year, NMFS estimates the requirement for vessel permit holders in the Gulf shrimp fishery to share in the costs of the new ELB units, which includes data transmission, to average 1 hour and $720 per response. These estimates of the public reporting burden include the time for reviewing instructions, gathering and maintaining the data needed, and completing and reviewing the collection-of-information.
These requirements have been submitted to OMB for approval. NMFS seeks public comment regarding: Whether this proposed collection-of-information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; the accuracy of the burden estimate; ways to enhance the quality, utility, and clarity of the information to be collected; and ways to minimize the burden of the collection-of-information, including through the use of automated collection techniques or other forms of information technology. Send comments regarding the burden estimate or any other aspect of the collection-of-information requirement, including suggestions for reducing the burden, to NMFS and to OMB (see
16 U.S.C. 1801
The Department of Agriculture has submitted the following information collection requirement(s) to Office of Management and Budget (OMB) for review and clearance under the Paperwork Reduction Act of 1995, Public Law 104–13. Comments regarding (a) whether the collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (b) the accuracy of the agency's estimate of burden including the validity of the methodology and assumptions used; (c) ways to enhance the quality, utility and clarity of the information to be collected; (d) ways to 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 should be addressed to: Desk Officer for Agriculture, Office of Information and Regulatory Affairs, Office of Management and Budget, New Executive Office Building, 725—17th Street NW., Washington, DC 20502. Commenters are encouraged to submit their comments to OMB via email to:
An agency may not conduct or sponsor a collection of information unless the collection of information displays a currently valid OMB control number and the agency informs potential persons who are to respond to the collection of information that such persons are not required to respond to the collection of information unless it displays a currently valid OMB control number.
On May 21, 2013, Lasko Products, Inc., submitted a notification of proposed production activity to the Foreign-Trade Zones (FTZ) Board for its facilities within FTZ 39—Sites 16, 17, and 18, in Fort Worth, Texas.
The notification was processed in accordance with the regulations of the FTZ Board (15 CFR part 400), including notice in the
Import Administration, International Trade Administration, Department of Commerce.
October 22, 2013.
Charles Riggle (Malaysia), Brandon
On June 12, 2013, the Department of Commerce (the “Department”) published a notice of initiation of antidumping duty investigations of welded stainless pressure pipe from Malaysia, Thailand, and the Socialist Republic of Vietnam.
On September 19, 2013, more than 25-days before the scheduled preliminary determination, Bristol Metals, Felker Brothers, and Outokumpu Stainless Pipe (“Petitioners”), pursuant to section 733(c)(1)(A) of the Act and 19 CFR 351.205(e), made a timely request for a 50-day postponement of the preliminary determinations in these investigations.
The Department has found no compelling reasons to deny the request and, therefore, in accordance with section 733(c)(1)(A) of the Act, the Department is postponing the deadline for the preliminary determinations to no later than 190 days after the date on which it initiated these investigations. Therefore, the new deadline for issuing these preliminary determinations is December 12, 2013.
This notice is issued and published pursuant to section 733(c)(2) of the Act and 19 CFR 351.205(f)(1).
Import Administration, International Trade Administration, Department of Commerce.
The Department of Commerce (the Department) is conducting an administrative review of the countervailing duty (CVD) order on certain lined paper products from India. The period of review (POR) is January 1, 2011, through December 31, 2011, and the review covers one producer/exporter of the subject merchandise, A.R. Printing & Packaging India Pvt. Ltd. (AR Printing). We have preliminarily determined that AR Printing received countervailable subsidies during the POR. Interested parties are invited to comment on these preliminary results.
Patricia M. Tran, AD/CVD Operations, Office 8, Import Administration, International Trade Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue NW., Washington, DC 20230; telephone (202) 482–1503.
The merchandise subject to the
The Preliminary Decision Memorandum is a public document and is on file electronically via Import Administration's Antidumping and Countervailing Duty Centralized Electronic Service System (IA ACCESS). IA ACCESS is available to registered users at
The Department has conducted this review in accordance with section 751(a)(1)(A) of the Tariff Act of 1930, as amended (the Act). For each of the subsidy programs found countervailable, we preliminarily determine that there is a subsidy,
The Department has preliminarily determined that the following net subsidy rates exist for the period January 1, 2011, through December 31, 2011:
The Department will disclose to parties to this proceeding the calculations performed in reaching the preliminary results within five days of the date of publication of these preliminary results.
Interested parties who wish to request a hearing, or to participate if one is requested, must submit a written request to the Assistant Secretary for Import Administration, U.S. Department of Commerce, within 30 days after the date of publication of this notice.
Parties are reminded that briefs and hearing requests are to be filed electronically using IA ACCESS and that electronically filed documents must be received successfully in their entirety by 5:00 p.m. Eastern Time on the due date.
Unless the deadline is extended pursuant to section 751(a)(3)(A) of the Act, the Department will issue the final results of this administrative review, including the results of our analysis of the issues raised by parties in their comments, within 120 days after issuance of these preliminary results.
Upon issuance of the final results, the Department shall determine, and U.S. Customs and Border Protection (CBP) shall assess, countervailing duties on all appropriate entries covered by this review. We intend to issue instructions to CBP 15 days after publication of the final results of this review.
The Department also intends to instruct CBP to collect cash deposits of estimated countervailing duties for the respondent in the amount of the net subsidy rate calculated for calendar year 2011 on all shipments of subject merchandise entered, or withdrawn from warehouse, for consumption on or after the date of publication of the final results of this review. For all non-reviewed firms, we will instruct CBP to collect cash deposits of estimated countervailing duties at the most recent company-specific or all-others rate applicable to the company. These cash deposit requirements, when imposed, shall remain in effect until further notice.
This administrative review and notice are in accordance with sections 751(a)(1) and 777(i)(1) of the Act and 19 CFR 351.213.
Notice of Application to amend the Export Trade Certificate of Review Issued to Outdoor Power Equipment Institute, Inc. (Application No. 89–5A018).
The Office of Competition and Economic Analysis (“OCEA”) of the International Trade Administration, Department of Commerce, has received an application to amend an Export Trade Certificate of Review (“Certificate”). This notice summarizes the proposed amendment and requests comments relevant to whether the amended Certificate should be issued.
Joseph Flynn, Director, Office of Competition and Economic Analysis, International Trade Administration, (202) 482–5131 (this is not a toll-free number) or email at
Title III of the Export Trading Company Act of 1982 (15 U.S.C. 4001–21) authorizes the Secretary of Commerce to issue Export Trade Certificates of Review. An Export Trade Certificate of Review protects the holder and the members identified in the Certificate from State and Federal government antitrust actions and from private treble damage antitrust actions for the export conduct specified in the Certificate and carried out in compliance with its terms and conditions. Section 302(b)(1) of the Export Trading Company Act of 1982 and 15 CFR 325.6(a) require the Secretary to publish a notice in the
Interested parties may submit written comments relevant to the determination whether an amended Certificate should be issued. If the comments include any privileged or confidential business information, it must be clearly marked and a nonconfidential version of the comments (identified as such) should be included. Any comments not marked as privileged or confidential business
An original and five (5) copies, plus two (2) copies of the nonconfidential version, should be submitted no later than 20 days after the date of this notice to: Export Trading Company Affairs, International Trade Administration, U.S. Department of Commerce, Room 7025–X, Washington, DC 20230.
Information submitted by any person is exempt from disclosure under the Freedom of Information Act (5 U.S.C. 552). However, nonconfidential versions of the comments will be made available to the applicant if necessary for determining whether or not to issue the Certificate. Comments should refer to this application as “Export Trade Certificate of Review, application number 89–5A018.”
The Outdoor Power Equipment Institute, Inc. original Certificate was issued on March 19, 1990 (55 FR 11041, March 26, 1990). A summary of the current application for an amendment follows.
1. Remove the following member companies from OPEI's Certificate: Dixon Industries, Inc., Garden Way, Inc., Hoffco, Inc., Howard Price Turf Equipment, Ingersoll Equipment Company, Kut-Kwick Corporation, Maxim Manufacturing Corporation, Ransomes, Inc., Simplicity Manufacturing, Inc., Solo Incorporated, Southland Mower Company, Yazoo Manufacturing Company, Inc.
2. Change the names of the following OPEI members: Deere & Company dba Worldwide Lawn & Grounds Care Division, Moline, IL to Deere & Company (Moline, IL), Honda Power Equipment Manufacturing, Inc. to American Honda Motor Company Power Equipment Division (Alpharetta, GA), and Textron, Inc., dba Bunton, a division of Jacobsen, a division of Textron, Inc., Louisville, KY to Textron, Inc.
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice of SEDAR 38 data webinar for Gulf of Mexico and South Atlantic King Mackerel.
The SEDAR assessment of the Gulf of Mexico and South Atlantic King Mackerel will consist of several workshops and a series of webinars. See
The SEDAR 38 data webinar will be held on Wednesday, November 6, 2013 from 10 a.m. until 1 p.m. eastern standard time (EST).
Julie A. Neer, SEDAR Coordinator; telephone: (843) 571–4366; email:
The Gulf of Mexico, South Atlantic, and Caribbean Fishery Management Councils, in conjunction with NOAA Fisheries and the Atlantic and Gulf States Marine Fisheries Commissions, have implemented the Southeast Data, Assessment and Review (SEDAR) process, a multi-step method for determining the status of fish stocks in the Southeast Region. SEDAR is a multi-step process including: (1) Data Workshop; (2) Assessment Workshop and a series of Assessment webinars; and (3) Review Workshop. The product of the Data Workshop is a report which compiles and evaluates potential datasets and recommends which datasets are appropriate for assessment analyses. The assessment workshop and webinars produce a report which describes the fisheries, evaluates the status of the stock, estimates biological benchmarks, projects future population conditions, and recommends research and monitoring needs. The assessment is independently peer reviewed at the Review Workshop. The product of the Review Workshop is a Consensus Summary documenting panel opinions regarding the strengths and weaknesses of the stock assessment and input data. Participants for SEDAR Workshops are appointed by the Gulf of Mexico, South Atlantic, and Caribbean Fishery Management Councils and NOAA Fisheries Southeast Regional Office, Highly Migratory Species Management Division, and Southeast Fisheries Science Center. Participants include: data collectors and database managers; stock assessment scientists, biologists, and researchers; constituency representatives including fishermen, environmentalists, and non-governmental organizations (NGOs); international experts; and staff of Councils, Commissions, and state and federal agencies.
The items of discussion during the data webinar are as follows:
1. Participants will present summary data and will discuss data needs and treatments.
Although non-emergency issues not contained in this agenda may come before this group for discussion, those issues may not be the subject of formal action during this meeting. Action will be restricted to those issues specifically identified in this notice and any issues arising after publication of this notice that require emergency action under section 305(c) of the Magnuson-Stevens Fishery Conservation and Management Act, provided the public has been notified of the intent to take final action to address the emergency.
This meeting is accessible to people with disabilities. Requests for auxiliary aids should be directed to the SEDAR office (see
The times and sequence specified in this agenda are subject to change.
16 U.S.C. 1801
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce
Notice of meeting of the South Atlantic Fishery Management Council's Habitat and Environmental Protection (Habitat) Advisory Panel (AP).
The South Atlantic Fishery Management Council (Council) will hold a meeting of its Habitat AP in St. Petersburg, FL. The meeting is open to the public.
The meeting will be held from 8:30 a.m. until 4:30 p.m. on Tuesday, November 5, 2013 and from 8:30 a.m. until 4:30 p.m. on Wednesday, November 6, 2013.
Kim Iverson, Public Information Officer, South Atlantic Fishery Management Council, 4055 Faber Place Drive, Suite 201, N. Charleston, SC 29405; telephone: (843) 571–4366 or toll free (866) SAFMC–10; fax: (843) 769–4520; email:
The Habitat AP will work on development of the Council's Essential Fish Habitat Policy Statements and receive training on the use of the Regional Habitat and Ecosystem Mapping Atlas and other online information systems. The AP will receive an update on regional habitat and ecosystem modelling efforts and discuss necessary updates to the Council's Fishery Ecosystem Plan for 2014. The AP will provide recommendations to the Council for consideration.
Although non-emergency issues not contained in this agenda may come before this group for discussion, those issues may not be the subject of formal action during this meeting. Action will be restricted to those issues specifically listed in this notice and any issues arising after publication of this notice that require emergency action under section 305(c) of the Magnuson-Stevens Fishery Conservation and Management Act, provided the public has been notified of the Council's intent to take final action to address the emergency.
These meetings are physically accessible to people with disabilities. Requests for auxiliary aids should be directed to the council office (see
The times and sequence specified in this agenda are subject to change.
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice; public meeting.
The New England Fishery Management Council (Council) will hold public meeting of its ABC Control Rule Working Group (ABC WG).
The meeting of the ABC Control Rule Working Group will be on Friday, November 8, 2013 and it will be held at the Doubletree by Hilton in Danvers, MA starting at 10 a.m. Additional meetings may be held between November 4, 2013 and January 31, 2014. Specific information about the dates, times and places for this meeting will be posted on the Council's Web site,
Thomas A. Nies, Executive Director, New England Fishery Management Council; telephone: (978) 465–0492.
The ABC Control Rule Working Group will continue to prepare a work plan regarding how the New England Fishery Management Council (Council) may proceed in developing ABC (acceptable biological catch) control rules that incorporate a risk policy. The goal of the work plan will be to enable the Council to consider/approve a process for developing the risk policy as a 2014 Council priority. The work plan will be considered during the Council's discussion of 2014 management priorities (November 2013 Council meeting).
This meeting is physically accessible to people with disabilities. Requests for sign language interpretation or other auxiliary aids should be directed to Thomas A. Nies, Executive Director, at 978–465–0492, at least 5 days prior to the meeting date.
16 U.S.C. 1801
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice of a public meeting of the Gulf of Mexico Fishery Management Council.
The Gulf of Mexico Fishery Management Council (Council) will hold a meeting of the Ad Hoc Red Snapper Individual Fishing Quota (IFQ) Advisory Panel.
The meeting will be held 9 a.m. until 5 p.m. on Tuesday, November 5 and 9 a.m. until 12 noon Wednesday, November 6, 2013.
Dr. Assane Diagne, Economist, Gulf of Mexico Fishery Management Council; telephone: (813) 348–1630; fax: (813) 348–1711; email:
The items of discussion on the meeting agenda are as follows:
For meeting materials see folder “Ad Hoc Red Snapper IFQ AP 11–2013” on the Gulf Council ftp server:
Although non-emergency issues not contained in this agenda may come before this group for discussion, those issues may not be the subject of formal action during this meeting. Action will be restricted to those issues specifically identified in this notice and any issues arising after publication of this notice that require emergency action under section 305(c) of the Magnuson-Stevens Fishery Conservation and Management Act, provided the public has been notified of the Council's intent to take final action to address the emergency.
These meetings are physically accessible to people with disabilities. Requests for sign language interpretation or other auxiliary aids should be directed to Kathy Pereira at the Council Office (see
The times and sequence specified in this agenda are subject to change.
16 U.S.C. 1801
Tuesday, October 22, 2013, 10 a.m.–12 p.m.
Hearing Room 420, Bethesda Towers, 4330 East-West Highway, Bethesda, Maryland.
Commission Meeting—Open to the Public
A live webcast of the Meeting can be viewed at
For a recorded message containing the latest agenda information, call (301) 504–7948.
Todd A. Stevenson, Office of the Secretary, U.S. Consumer Product Safety Commission, 4330 East West Highway, Bethesda, MD 20814, (301) 504–7923.
Defense Security Cooperation Agency, Department of Defense.
Notice.
The Department of Defense is publishing the unclassified text of a section 36(b)(1) arms sales notification. This is published to fulfill the requirements of section 155 of Public Law 104–164 dated July 21, 1996.
Ms. B. English, DSCA/DBO/CFM, (703) 601–3740.
The following is a copy of a letter to the Speaker of the House of Representatives, Transmittals 13–53 with attached transmittal and policy justification.
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The Government of Saudi Arabia has requested a possible sale of support services to its Ministry of Defense for
This proposed sale will contribute to the foreign policy and national security of the United States by helping to improve the security of a friendly country that has been and continues to be an important force for political stability in the Middle East.
This proposed sale will provide the continuation of USMTM services to Saudi Arabia. The proposed sale conveys the U.S.'s continued commitment to Saudi Arabia's security and strengthens our strategic partnership.
The proposed sale will not alter the basic military balance in the region.
There is no prime contractor associated with this proposed sale. There are no known offset agreements in connection with this potential sale.
Implementation of this proposed sale will not require the permanent assignment of any U.S. Government or contractor representatives to Saudi Arabia. Support teams will travel to the country on a temporary basis.
There will be no adverse impact on U.S. defense readiness as a result of this proposed sale.
Department of Defense, Defense Security Cooperation Agency.
Notice.
The Department of Defense is publishing the unclassified text of a section 36(b)(1) arms sales notification. This is published to fulfill the requirements of section 155 of Public Law 104–164 dated July 21, 1996.
Ms. B. English, DSCA/DBO/CFM, (703) 601–3740.
The following is a copy of a letter to the Speaker of the House of Representatives, Transmittal 13–43 with attached transmittal, policy justification, and Sensitivity of Technology.
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* As defined in Section 47(6) of the Arms Export Control Act.
The Government of Japan has requested a possible sale of an E–767 Airborne Warning and Control System (AWACS) Mission Computing Upgrade (MCU) that includes 4 Electronic Support Measure (ESM) Systems, 8 AN/UPX–40 Next Generation Identify Friend or Foe (NGIFF), 8 AN/APX–119 IFF Transponder, and 4 KIV–77 Cryptographic Computers. Also included are design and kit production, support and test equipment, provisioning, spare and repair parts, personnel training and training equipment, publications and technical documentation, U.S. Government and contractor engineering and technical support, installation and checkout, and other related elements of program support. The estimated cost is $950 million.
This proposed sale will contribute to the foreign policy and national security of the United States. Japan is one of the major political and economic powers in East Asia and the Western Pacific and a key ally of the United States in ensuring the peace and stability of this region. The U.S. Government shares bases and facilities in Japan. This proposed sale is consistent with U.S. objectives and the 1960 Treaty of Mutual Cooperation and Security.
The proposed sale will provide Japan with an upgraded AWACS command and control capability. This upgrade will allow Japan's AWACS fleet to be more compatible with the U.S. Air Force AWACS fleet baseline and provide for greater interoperability. Japan will use this enhanced capability to provide for its self-defense.
The proposed sale of this equipment and support will not alter the basic military balance in the region.
The principal contractor will be Boeing Integrated Defense Systems in Seattle, Washington. There are no known offset agreements proposed in connection with this potential sale.
Implementation of this proposed sale will require multiple trips to Japan involving U.S. Government and contractor representatives for modification kit installations, testing, technical reviews/support, and training over a period of eight years.
There will be no adverse impact on U.S. defense readiness as a result of this proposed sale.
(vii)
This sale will involve the release of sensitive technology to Japan.
1. The E–767 AWACS MCU is based on the US AWACS Block 40/45 upgrade. The new mission computing system, with Commercial Off-the-Shelf (COTS) equipment, significantly enhances the surveillance, identification, situational awareness and battle management capabilities of the AWACS. It will also provide on/off-board, multi-source integration that produces “one-target/one-track” automatic track initiation and combat ID, improved data link infrastructure and reduced operator workload.
2. The E–767 AWACS MCU will also add an Electronic Support Measure (ESM) capability using a derivative of the Boeing 737 AEW&C SE–200A System. JASDF will procure a classified emitter database, through a separate FMS case, to support this system. The emitter database is classified up to Secret.
3. The E–767 AWACS MCU will provide IFF Modes 4, 5 and Mode S capabilities with the AN/UPX–40 interrogator or a derivative. The AN/UPX–40 hardware and software will not be classified. Military article KIV–77 encryption device will be used with the AN/UPX–40. The key material will be classified Secret.
4. The E–767 AWACS MCU will improve identification by using a COTS Automatic Identification System (AIS), a VHF transceiver system to automatically track and identify marine vessels. AIS-produced tracks will be associated with the E–767 tracks; not used to update E–767 mission computer produced tracks.
5. The E–767 AWACS MCU will add a COTS Traffic Alert and Collision Avoidance System (TCAS) to the cockpit navigation system. TCAS alerts the pilot to the potential of loss of separation with other aircraft, using air traffic control radar beacon systems and the capabilities of Mode S transponders to coordinate with other TCAS equipped aircraft. In addition, the E–767 AWACS MCU will replace the current military IFF transponder with the AN/APX–119 digital transponder for IFF Modes 4/5/S. The KIV–77 encryption device will be used with the transponder. The key material will be classified Secret.
6. If a technologically advanced adversary were to obtain knowledge of the specific hardware and software elements, the information could be used to develop countermeasures that might reduce weapon system effectiveness or be used in the development of a system with similar or advanced capabilities.
Defense Security Cooperation Agency, Department of Defense.
Notice.
The Department of Defense is publishing the unclassified text of a section 36(b)(1) arms sales notification. This is published to fulfill the requirements of section 155 of Public Law 104–164 dated July 21, 1996.
Ms. B. English, DSCA/DBO/CFM, (703) 601–3740.
The following is a copy of a letter to the Speaker of the House of Representatives, Transmittals 13–51 with attached transmittal, policy justification, and Sensitivity of Technology.
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* As defined in Section 47(6) of the Arms Export Control Act.
The Government of Singapore has requested a possible sale of 6 AN/TPQ–53 (V) Counterfire Target Acquisition Radar Systems with 120 degree sector scan capability, software support, support equipment, simulator, generators, power units, publications and technical documentation, spare and repair parts, live fire exercise, communication support equipment, tool and test equipment, personnel training and training equipment, U.S. Government and contractor technical and logistic support services, repair and return, Quality Assurance Teams, and other related elements or program and logistics support. The estimated cost is $179 million.
This proposed sale will contribute to the foreign policy and national security of the United States by increasing the ability of the Republic of Singapore to contribute to regional security. Its contributions to counter-piracy and counterterrorism efforts continue to stabilize a critical chokepoint where much of the world's goods and services transit en route to and from the Asia Pacific region. The proposed sale will improve the security of a strategic partner which has been, and continues to be, an important force for political stability and economic progress in the Asia Pacific region.
The Government of Singapore intends to use these radar systems to modernize its armed forces. The purchase of these target acquisition radars will enhance the Singapore Army's foundational defense capability. The radars will reduce the vulnerability of forces to indirect fire attacks and provide them with the information necessary to respond to such attacks. The proposed sale provides the Government of Singapore with assets vital to protect and deter potential threats. Singapore will have no difficulty absorbing this equipment into its armed forces.
The proposed sale of this equipment and support will not alter the basic military balance in the region.
The principal contractor will be Lockheed Martin Corporation in Syracuse, New York. There are no known offset agreements proposed in connection with the potential sale.
Implementation of this proposed sale will require the U.S. Government and contractor representatives to travel to Singapore for a period of six (6) weeks for equipment deprocessing/fielding, systems checkout and new equipment training.
There will be no adverse impact on U.S. defense readiness as a result of this proposed sale.
(vii)
1. The AN/TPQ–53(V) Counterfire target acquisition radar is a new generation of counter fire sensor with the flexibility to adapt to targets and changing missions. The solid-state phased array AN/TPQ–53 radar system detects, classifies, tracks and determines the location of enemy indirect fire. This radar system is replacing the aging AN/TPQ–36 and AN/TPQ–37 medium-range radars. The radar is mounted on a 5-ton prime mover and is mobile, maneuverable, fully supportable and easily maintained. The AN/TPQ–53(V) Radar System is Unclassified. There is no sensitive or restricted information contained in the AN/TPQ–53(V) Radar System or software.
2. If a technologically advanced adversary were to obtain knowledge of the specific hardware and software elements, the information could be used to identify ways of countering the detection capabilities of the AN/TPQ–53(V) Radar System or improve the performance of their radar systems. The hardware used in the AN/TPQ–53(V) Radar System is considered mature and available in other industrial nation's comparable performance thresholds.
Defense Security Cooperation Agency, Department of Defense.
Notice.
The Department of Defense is publishing the unclassified text of a section 36(b)(1) arms sales notification. This is published to fulfill the requirements of section 155 of Public Law 104–164 dated July 21, 1996.
Ms. B. English, DSCA/DBO/CFM, (703) 601–3740.
The following is a copy of a letter to the Speaker of the House of Representatives, Transmittals 13–48 with attached transmittal, policy justification, and Sensitivity of Technology.
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* as defined in Section 47(6) of the Arms Export Control Act.
The Government of the United Arab Emirates has requested a possible sale of 5000 GBU–39/B Small Diameter Bombs (SDB) with BRU–61 carriage systems, 8 SDB Guided Test Vehicles for aircraft integration, 16 SDB Captive Flight and Load Build trainers, 1200 AGM–154C Joint Stand Off Weapon (JSOW), 10 JSOW CATMs, 300 AGM–84H Standoff Land Attack Missiles-Expanded Response (SLAM–ER), 40 CATM–84H Captive Air Training Missiles, 20 ATM–84H SLAM–ER Telemetry Missiles, 4 Dummy Air Training Missiles, 30 AWW–13 Data Link pods, containers, munitions storage security and training, mission planning, transportation, tools and test equipment, integration support and testing, weapon operational flight program software development, support equipment, spare and repair parts, publications and technical documentation, personnel training and training equipment, U.S. Government and contractor engineering and logistics support services, and other related elements of logistics support. The estimated cost is $4.0 billion.
This proposed sale will contribute to the foreign policy and national security of the United States by helping to improve the security of a friendly country that has been and continues to be an important force for political stability and economic progress in the Middle East. The UAE continues host-nation support of vital U.S. forces stationed at Al Dhafra Air Base and plays a vital role in supporting U.S. regional interests.
The sale of these munitions is in support of the UAE's fleet of F–16s. This proposed sale will improve the UAE's military readiness and capabilities to meet current and future regional threats, reduce the dependence on U.S. forces in the region, and enhance any coalition operations the U.S. may undertake. The UAE will have no difficulty absorbing these munitions into its armed forces.
The proposed sale of these weapon systems will not alter the basic military balance in the region.
The principal contractors will be The Boeing Company in St. Louis, Missouri; Raytheon in Indianapolis, Indiana; and Raytheon in Tucson, Arizona. There are no known offset agreements proposed in connection with this potential sale.
Implementation of this proposed sale may require the assignment of approximately 2–4 U.S. Government or contractor representatives to the UAE. The actual number and duration to support the program will be determined in joint negotiations as the program proceeds through the development, production and equipment installation phases. Additionally, the proposed sale will require multiple trips to UAE during the life of the program for program and technical reviews.
There will be no adverse impact on U.S. defense readiness as a result of this proposed sale.
(vii)
1. The AGM–84H Standoff Land Attack Missile-Expanded Response (SLAM–ER) is a non-nuclear tactical weapon system currently in service in the U.S. Navy and in two other foreign nations. It provides a day, night, and adverse weather, standoff air-to-surface capability. SLAM–ER is a follow on to the SLAM missile that is no longer in production. It is a variant of the Harpoon missile that uses the Maverick Imaging Infrared (IIR) seeker, Global Positioning System—Precise Positioning System (GPS/PPS) for improved navigation, proprietary automatic target acquisition, planar wings, and a new warhead. SLAM–ER is effective against a wide range of land-based targets and has a secondary anti-ship mission capability. The missile is classified Confidential.
2. The SLAM–ER incorporates components, software, and technical design information that are considered sensitive. The following SLAM–ER components being conveyed by the proposed sale that are considered sensitive and are classified Confidential include Imaging Infrared (IIR) seeker, the Global Positioning System/Inertial Navigation System (GPS/INS), Operational Flight Program (OFP) Software, Missile operational characteristics and performance data.
3. The AGM–154 Joint Standoff Weapon (JSOW) is used by Navy, Marine Corps, and Air Force, and allows aircraft to attack well-defended targets in day, night, and adverse weather conditions. AGM–154C carries a BROACH warhead. The BROACH warhead incorporates an advanced multi-stage warhead. JSOW uses the GPS Precise Positioning System (PPS), which provides for a more accurate capability than the commercial version of GPS.
4. The JSOW incorporates components, software, and technical design information that are considered sensitive. The following JSOW–C components being conveyed by the proposed sale that are considered sensitive and are classified Confidential include the GPS/INS, IIR seeker, OFP software and missile operational characteristics and performance data. These elements are essential to the ability of the JSOW–C missile to selectively engage hostile targets under a wide range of operational, tactical, and environmental conditions.
5. The GBU–39/B Small Diameter Bomb (SDB) I weapon is a 250-lb class, all-up round (AUR) that provides greater than 50nm standoff range. SDB I is a day or night, adverse weather, precision engagement capability against pre-planned fixed or stationary soft, non-hardened, and hardened targets. The warhead has a high-strength steel penetration design with a blast or fragmentation capability containing approximately 36 pounds of high explosives. SDB I is a Global Positioning System (GPS) guided weapon aided by Inertial Navigation System (INS).
6. The SDB I include an integrated height of burst (HoB) sensor that provides the weapon with an airburst capability.
7. A key component of the SDB system is the weapon planning module (WPM). The module is hosted on the Joint Mission Planning System (JMPS). The WPM provides unit-level planners and intelligence personnel a means of importing target location data, programming desired fuzing parameters, and computing release and impact conditions (or using defaults) for the employment of each weapon. This weapon planning data is saved to an aircraft data transfer device for download into the aircraft avionics and subsequently passed to the carriage and weapon upon initialization.
8. Logistics components consist of training equipment, technical data, sustainment spares, shipping and storage containers, and a test adapter unit for the Common Munitions BIT and Reprogramming Equipment (CMBRE) or CMBRE Plus. The GBU–39/B (SBD I) hardware and software is Unclassified.
9. The BRU–61/A carriage system consists of a four-place rack with a self-
10. If a technologically advanced adversary were to obtain knowledge of the specific hardware in the proposed sale, the information could be used to develop countermeasures which might reduce weapons system effectiveness or be used in the development of a system with similar or advanced capabilities. In order to mitigate this possibility, the USG, in conjunction with the UAE, has developed a robust protocol of handling and storage procedures that maximizes security of the munitions, minimizes the opportunity for unauthorized disclosure of sensitive information, with the net effect of preserving the capability and effectiveness of the munitions for the USG and our international partners.
Defense Security Cooperation Agency, Department of Defense.
Notice.
The Department of Defense is publishing the unclassified text of a section 36(b)(1) arms sales notification. This is published to fulfill the requirements of section 155 of Public Law 104–164 dated July 21, 1996.
Ms. B. English, DSCA/DBO/CFM, (703) 601–3740.
The following is a copy of a letter to the Speaker of the House of Representatives, Transmittals 13–49 with attached transmittal, policy justification, and Sensitivity of Technology.
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* As defined in Section 47(6) of the Arms Export Control Act.
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The Government of Saudi Arabia has requested a possible sale of 650 AGM–84H Standoff Land Attack Missiles—Expanded Response (SLAM–ER), 973 AGM–154C Joint Stand Off Weapons (JSOW), 400 AGM–84L Harpoon Block II missiles, 1000 GBU–39/B Small Diameter Bombs (SDB), 40 CATM–84H Captive Air Training Missiles (CATM), 20 ATM–84H SLAM–ER Telemetry Missiles, 4 Dummy Air Training Missiles, 60 AWW–13 Data Link pods, 10 JSOW CATMs, 40 Harpoon CATMs, 20 ATM–84L Harpoon Exercise Missiles, 36 SDB Captive Flight and Load Build trainers, containers, mission planning, integration support and testing, munitions storage security and training, weapon operational flight program software development, transportation, tools and test equipment, support equipment, spare and repair parts, publications and technical documentation, personnel training and training equipment, U.S. Government and contractor engineering and logistics support services, and other related elements of logistics support. The estimated total cost is $ 6.8 billion.
This proposed sale will contribute to the foreign policy and national security of the United States by helping to improve the security of a friendly country that has been and continues to be an important force for political stability in the Middle East.
This proposed sale will improve Saudi Arabia's capability to meet current and future regional threats. These munitions will strengthen the effectiveness and interoperability of the air force of a potential coalition partner, enhancing the coalition operation. In December 2011, Saudi Arabia signed a letter of offer and acceptance (LOA) to purchase 84 new and 70 refurbished F–15SA multi-role fighter aircraft and associated weapons. The armaments in this request are separate and distinct from those in the F–15SA LOA, but are intended for that platform. Saudi Arabia will have no difficulty absorbing these weapons into its armed forces.
The proposed sale of these weapon systems will not alter the basic military balance in the region.
The principal contractors will be The Boeing Company in St. Louis, Missouri; Raytheon in Indianapolis, Indiana; and Raytheon in Tucson, Arizona. There are no known offset agreements proposed in connection with this potential sale.
Implementation of this sale will require the assignment of approximately 2–4 additional U.S. Government or contractor representatives to Saudi Arabia. The actual number and duration will be determined in joint negotiations as the program proceeds through the development, production, and equipment installation phases.
There will be no adverse impact on U.S. defense readiness as a result of this proposed sale.
1. The AGM–84H Standoff Land Attack Missile-Expanded Response (SLAM–ER) is a non-nuclear tactical weapon system currently in service in the U.S. Navy and two other foreign nations. It provides a day, night, and adverse weather, standoff air-to-surface capability. SLAM–ER is a follow on to the SLAM missile that is no longer in production. It is a variant of the Harpoon missile that uses the Maverick Imaging Infrared (IIR) seeker, Global Positioning System-Precise Positioning System (GPS/PPS) for improved navigation, proprietary automatic target acquisition, planar wings, and a new warhead. SLAM–ER is effective against a wide range of land-based targets and has a secondary anti-ship mission capability. The missile is classified as Confidential.
2. The SLAM–ER incorporates components, software, and technical design information that are considered sensitive. The following SLAM–ER components being conveyed by the proposed sale that are considered sensitive and are classified Confidential include-Imaging Infrared (IIR) seeker, the Global Positioning System/Inertial Navigation System (GPS/INS), Operational Flight Program (OFP) Software, Missile operational characteristics and performance data.
3. The AGM–154 JSOW is used by Navy, Marine Corps, and Air Force, and allows aircraft to attack well-defended targets in day, night, and adverse weather conditions. The AGM–154C carries a BROACH warhead. The BROACH warhead incorporates an advanced multi stage warhead. The JSOW uses the GPS Precise Positioning System (PPS), which provides for a more accurate capability than the commercial version of GPS.
4. The JSOW incorporates components, software, and technical design information that are considered sensitive. The following JSOW–C components being conveyed by the proposed sale that are considered sensitive and are classified Confidential include the GPS/INS, IIR seeker, INS OFP software and missile operational characteristics and performance data. These elements are essential to the ability of the JSOW–C missile to selectively engage hostile targets under a wide range of operational, tactical, and environmental conditions.
5. The AGM–84L Harpoon missiles is a non-nuclear tactical weapon system currently in service in the U.S. Navy and in 28 other foreign nations. It provides a day, night, and adverse weather conditions, standoff air-to-surface capability. Harpoon Block II is a follow on to the Harpoon missile that is no longer in production. Harpoon Block II is an effective Anti-Surface Warfare missile. The version being proposed for Saudi Arabia includes Coastal Target Suppression (CTS). The missiles are classified as Confidential.
6. The AGM–84L incorporates components, software, and technical design information that are considered sensitive. The following Harpoon components being conveyed by the proposed sale that are considered sensitive and are classified Confidential include-the Radar seeker, GPS/INS, OFP Software, missile operational characteristics and performance data.
7. The GBU–39/B Small Diameter Bomb (SDB) I weapon is a 250-lb class, all-up round (AUR) that provides greater than 50nm standoff range. SDB I is a day or night, adverse weather, precision engagement capability against pre-planned fixed or stationary soft, non-hardened, and hardened targets. The warhead has a high-strength steel penetration design with a blast or fragmentation capability containing approximately 36 pounds of high explosives. SDB I is a Global Positioning System (GPS) guided weapon aided by Inertial Navigation System (INS).
8. The SDB I includes an integrated height of burst (HoB) sensor that provides the weapon with an airburst capability.
9. A key component of the SDB system is the weapon planning module (WPM). The module is hosted on the Joint Mission Planning System (JMPS). The WPM provides unit-level planners and intelligence personnel a means of importing target location data, programming desired fuzing parameters, and computing release and impact conditions (or using defaults) for the employment of each weapon. This weapon planning data is saved to the aircraft data transfer device (DTD) for download into the aircraft avionics and subsequently passed to the carriage and weapon upon initialization.
10. Logistics components consist of training equipment, technical data, sustainment spares, shipping and storage containers, and a test adapter unit for the Common Munitions BIT and Reprogramming Equipment (CMBRE) or CMBRE Plus. The GBU–39/B SDB I is Unclassified.
11. The BRU–61/A carriage system consists of a four-place rack with a self-contained pneumatic charging and accumulator section. Four ejector assemblies hold the individual weapons. Internal avionics and wire harnesses connect the carriage system to the aircraft and to the individual weapons. The carriage avionics assembly provides the interface between the individual stores and the aircraft for targeting, GPS keys, alignment, fuze settings, and weapon release sequence information. A MIL–STD–1760 umbilical, using a MIL–STD–1760 Class II primary interface signal set connects the carriage system to the aircraft. Each ejector station has a Joint Miniature Munitions Interface (JMMI) umbilical which provides the electrical and logical interface to the individual weapons.
12. If a technologically advanced adversary were to obtain knowledge of the specific hardware in the proposed sale, the information could be used to develop countermeasures which might reduce weapons system effectiveness or be used in the development of a system with similar or advanced capabilities. In order to mitigate this possibility, the USG, in conjunction with Saudi Arabia, has developed a robust protocol of handling and storage procedures that maximizes security of the munitions, minimizes the opportunity for unauthorized disclosure of sensitive information, with the net effect of preserving the capability and effectiveness of the munitions for the USG and our international partners.
Defense Security Cooperation Agency, Department of Defense.
Notice.
The Department of Defense is publishing the unclassified text of a section 36(b)(1) arms sales notification. This is published to fulfill the requirements of section 155 of Public Law 104–164 dated July 21, 1996.
Ms. B. English, DSCA/DBO/CFM, (703) 601–3740.
The following is a copy of a letter to the Speaker of the House of Representatives, Transmittal 13–47 with attached transmittal, policy justification, and Sensitivity of Technology.
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* as defined in Section 47(6) of the Arms Export Control Act.
The Government of Belgium has requested a possible sale of 40 AIM–9X–2 Sidewinder Block II All-Up-Round Missiles, 36 CATM–9X–2 Captive Air Training Missiles, 2 CATM–9X–2 Block II Missile Guidance Units, and 10 AIM–9X–2 Block II Tactical Guidance Units, 4 Dummy Air Training Missiles, containers, missile support and test equipment, provisioning, spare and repair parts, personnel training and training equipment, publications and technical data, U.S. Government and contractor technical assistance and other related logistics support, and other related elements of logistics and program support. The estimated cost is $68 million.
This proposed sale will contribute to the foreign policy and national security of the United States by helping to improve the security of a NATO ally which continues to be an important force for political stability and economic progress in Europe.
The Belgian Air Force (BAF) intends to obtain these AIM–9X missiles as part of an overall military modernization program to better support its own air defense needs and to improve its interoperability with the U.S. and other NATO allies. The BAF will have no difficulty absorbing the AIM–9X missiles into its armed forces.
The proposed sale of this weapon system will not alter the basic military balance in the region.
The principal contractor will be Raytheon Missile Systems Company in Tucson, Arizona. There are no known offset requirements in connection with this potential sale.
Implementation of this proposed sale will require travel of U.S. Government or contractor representatives to Belgium on a temporary basis for program technical support and management oversight.
There will be no adverse impact on U.S. defense readiness as a result of this proposed sale.
(vii)
1. The AIM–9X–2 Block II Sidewinder Missile represents a substantial increase in missile acquisition and kinematics performance over the AIM–9M and replaces the AIM–9X Block I Missile. The missile includes a high off-boresight seeker, enhanced countermeasure rejection capability, low drag/high angle of attack airframe and the ability to integrate the Helmet Mounted Cueing System. The software algorithms are the most sensitive portion of the AIM–9X–2 missile. The software continues to be modified via a pre-planned product improvement (P
2. The AIM–9X–2 will result in the transfer of sensitive technology and information. The equipment, hardware, and documentation are classified Confidential. The software and operational performance are classified Secret. The seeker/guidance control section and the target detector are Confidential and contain sensitive state-of-the-art technology. Manuals and technical documentation that are necessary or support operational use and organizational management are classified up to Secret. Performance and operating logic of the counter-countermeasures circuits are classified Secret. The hardware, software, and data identified are classified to protect vulnerabilities, design and performance parameters and similar critical information.
3. If a technologically advanced adversary were to obtain knowledge of the specific hardware and software elements, the information could be used to develop countermeasures that might reduce weapon system effectiveness or be used in the development of a system with similar advanced capabilities.
Uniformed Services University of the Health Sciences (USU), DoD.
Quarterly meeting notice; correction.
On Thursday, October 3, 2013 (78 FR 61344), the Department of Defense published in the
The meeting location has been moved to the Everett Alvarez Jr. Board of Regents Room (D3001), Uniformed Services University of the Health Sciences, 4301 Jones Bridge Road, Bethesda, Maryland 20814.
Members of the public wishing to attend the meeting should contact S. Leeann Ori, Designated Federal Officer, 4301 Jones Bridge Road, D3002, Bethesda, Maryland 20814; telephone 301–295–3066; email
Pursuant to Federal statute and regulations (5 U.S.C. 552b and 41 CFR 102–3.140 through 102–3.165) and the availability of space, the meeting is open to the public from 8:30 a.m. to 10:30 a.m. Seating is on a first-come basis.
Office of Postsecondary Education (OPE), Department of Education (ED).
Notice
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 3501
Interested persons are invited to submit comments on or before [insert the 30th day after publication of this notice].
Comments submitted in response to this notice should be submitted electronically through the Federal eRulemaking Portal at
For questions related to collection activities or burden, please call Kate Mullan, 202–401–0563 or electronically mail
The Department of Education (ED), in accordance with the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3506(c)(2)(A)), provides the general public and Federal agencies with an opportunity to comment on proposed, revised, and continuing collections of information. This helps the Department assess the impact of its information collection requirements and minimize the public's reporting burden. It also helps the public understand the Department's information collection requirements and provide the requested data in the desired format. ED is soliciting comments on the proposed information collection request (ICR) that is described below. The Department of Education is especially interested in public comment addressing the following issues: (1) Is this collection necessary to the proper functions of the Department; (2) will this information be processed and used in a timely manner; (3) is the estimate of burden accurate; (4) how might the Department enhance the quality, utility, and clarity of the information to be collected; and (5) how might the Department minimize the burden of this collection on the respondents, including through the use of information technology. Please note that written comments received in response to this notice will be considered public records.
Department of Education.
Correction Notice.
On October 3, 2013, the U.S. Department of Education published a 30-day comment period notice in the
The Acting Director, Information Collection Clearance Division, Privacy, Information and Records Management Services, Office of Management, hereby issues a correction notice as required by the Paperwork Reduction Act of 1995.
Federal Student Aid (FSA), Department of Education (ED).
Notice.
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 3501
Interested persons are invited to submit comments on or before November 21, 2013.
Comments submitted in response to this notice should be submitted electronically through the Federal eRulemaking Portal at
For questions related to collection activities or burden, please call Katrina Ingalls, 703–620–3655 or electronically mail
The Department of Education (ED), in accordance with the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3506(c)(2)(A)), provides the general public and Federal agencies with an opportunity to comment on proposed, revised, and continuing collections of information. This helps the Department assess the impact of its information collection requirements and minimize the public's reporting burden. It also helps the public understand the Department's information collection requirements and provide the requested data in the desired format. ED is soliciting comments on the proposed information collection request (ICR) that is described below. The Department of Education is especially interested in public comment addressing the
Section 483 of the Higher Education Act of 1965, as amended (HEA), mandates that the Secretary of Education “. . . shall produce, distribute, and process free of charge common financial reporting forms as described in this subsection to be used for application and reapplication to determine the need and eligibility of a student for financial assistance . . .”.
The determination of need and eligibility are for the following Title IV, HEA, federal student financial assistance programs: the Federal Pell Grant Program; the Campus-Based programs (Federal Supplemental Educational Opportunity Grant (FSEOG), Federal Work-Study (FWS), and the Federal Perkins Loan Program); the William D. Ford Federal Direct Loan Program; the Teacher Education Assistance for College and Higher Education (TEACH) Grant; and the Iraq and Afghanistan Service Grant.
Federal Student Aid, an office of the U.S. Department of Education (hereafter “the Department”), subsequently developed an application process to collect and process the data necessary to determine a student's eligibility to receive Title IV, HEA program assistance. The application process involves an applicant's submission of the Free Application for Federal Student Aid (FAFSA). After submission and processing of the FAFSA, an applicant receives a Student Aid Report (SAR), which is a summary of the processed data they submitted on the FAFSA. The applicant reviews the SAR, and, if necessary, will make corrections or updates to their submitted FAFSA data. Institutions of higher education listed by the applicant on the FAFSA also receive a summary of processed data submitted on the FAFSA which is called the Institutional Student Information Record (ISIR).
The Department seeks OMB approval of all application components as a single “collection of information”. The aggregate burden will be accounted for under OMB Control Number 1845–0001. The specific application components, descriptions and submission methods for each are listed in the following Table.
This information collection also documents an estimate of the annual public burden as it relates to the application process for federal student aid. The Applicant Burden Model (ABM), measures applicant burden through an assessment of the activities each applicant conducts in conjunction with other applicant characteristics and in terms of burden, the average applicant's experience. Key determinants of the ABM include:
The total number of applicants that will potentially apply for federal student aid;
How the applicant chooses to complete and submit the FAFSA (e.g., by paper or electronically via FOTW);
How the applicant chooses to submit any corrections and/or updates (e.g., the paper SAR or electronically via FOTW Corrections);
The type of SAR document the applicant receives (eSAR, SAR acknowledgment, or paper SAR);
The formula applied to determine the applicant's EFC (full need analysis formula, Simplified Needs Test or Automatic Zero); and
The average amount of time involved in preparing to complete the application.
The ABM is largely driven by the number of potential applicants for the application cycle. The total application projection for 2014–2015 is based upon two factors—estimates of the total enrollment in all degree-granting institutions and the percentage change in FAFSA submissions for the last completed or almost completed application cycle. The ABM is also based on the application options available to students and parents. The Department accounts for each application component based on Web trending tools, survey information, and other Department data sources.
For 2014–2015, the Department is reporting a net burden increase of 204,513 hours attributed to the increase in applicants.
In response to the 60-day comment period, the Department has made some changes to the application explained in the Summary of Enhancements (see
Office of Hearings & Appeals, Office of Management, Department of Education.
Notice of a new system of records.
In accordance with the Privacy Act of 1974, as amended (Privacy Act), the Department of Education (Department) publishes this notice of a new system of records entitled “The Office of Hearings & Appeals (OHA) Records System” (18–05–19).
Submit your comments on the system of records in this notice on or before November 21, 2013. The Department filed a report describing the new system of records covered by this notice with the Chair of the Senate Committee on Homeland Security and Governmental Affairs, the Chair of the House Committee on Oversight and Government Reform, and the Administrator of the Office of Information and Regulatory Affairs, Office of Management and Budget (OMB) on September 26, 2013. This system of records will become effective at the later date of—(1) the expiration of the 40 day period for OMB review on November 5, 2013, unless OMB waives 10 days of the 40-day review period for compelling reasons shown by the Department, or (2) November 21, 2013, unless the system of records needs to be changed as a result of public comment or OMB review. The Department will publish any changes to the system of records or routine uses that result from public comment or OMB review.
Address all comments about this new system of records notice to Frank Furey, Director, Office of Hearings & Appeals, Office of Management, U.S. Department of Education, 400 Maryland Avenue SW., Suite 2100A, Washington, DC 20202–4416. If you prefer to send your comments through the Internet, use the following address:
You must include the term “OHA system of records” in the subject line of your electronic message.
During and after the comment period, you may inspect all comments about this notice at the U.S. Department of Education in room 2100A, 400 Maryland Avenue SW., Washington, DC, between the hours of 8:00 a.m. and 4:30 p.m., Eastern Time, Monday through Friday of each week except Federal holidays.
On request we will supply an appropriate accommodation or auxiliary aid to an individual with a disability, such as a reader or print magnifier, who needs assistance to review the comments or other documents in the public rulemaking record for this notice. If you want to schedule an appointment for this type of accommodation or auxiliary aid, please contact the person listed under
Frank Furey, Director, Office of Hearings & Appeals, Office of Management, U.S. Department of Education, 400 Maryland Avenue SW., Suite 2100A, Washington, DC 20202–4416.
If you use a telecommunications device for the deaf (TDD) or text telephone (TTY), you may call the Federal Relay Service (FRS), toll free, at 1–800–877–8339.
The Privacy Act requires the Department to publish in the
The Privacy Act applies to any record about an individual that is maintained in a system of records from which individually identifying information is retrieved by a unique identifier associated with each individual, such as a name or Social Security number. The information about each individual is called a “record,” and the system, whether manual or computer-based, is called a “system of records.”
The Privacy Act requires each agency to publish a notice of a system of records in the
“The Office of Hearings & Appeals (OHA) Records System” reflects how the Office of Hearings and Appeals processes its records, including the development of a case tracking database and the use of electronic filing designed to streamline case management. This system of records also reflects the Office of Hearings and Appeals' jurisdiction over salary offset cases including waiver requests and hearing requests challenging the validity of salary overpayment debts involving current and former Department employees, and administrative wage garnishment cases under the cross servicing program of the Department and the U.S. Department of the Treasury.
This notice describes in detail the system of records, including among other items, its title, location, authority for maintenance of the system, routine uses of records maintained in the system, policies and practices for storing, retrieving, accessing, retaining, and disposing of records in the system (specifically the retention and disposal of system records), safeguards that protect the records in the system, and system manager's title and address.
You may also access documents of the Department published in the
For the reasons discussed in the preamble, the Principal Deputy Assistant Secretary for Management, U.S. Department of Education publishes a notice of a new system of records to read as follows:
The Office of Hearings & Appeals (OHA) Records System.
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OHA, Office of Management, U.S. Department of Education, 400 Maryland Avenue SW., Suite 2100A, 490 L'Enfant Plaza, Washington, DC 20202–4616.
This system of records contains records about current and former Department of Education (Department) employees against whom the Department has a claim for a salary overpayment debt who request a waiver or challenge the validity of a salary overpayment. It also contains records regarding recipients subject to administrative wage garnishments under the cross servicing program of the Department and the U.S. Department of the Treasury (Treasury). Administrative wage garnishment applies to collection of any financial obligation owed to the United States by an individual that arises under a program the Department administers with the exception of debts that arise from an individual's obligation to repay a loan or an overpayment of a grant received under a student financial assistance program authorized under title IV of the Higher Education Act of 1965, as amended.
This system of records notice covers salary overpayment case files that contain information that is pertinent to the particular claim (e.g., a request for a waiver of a salary overpayment filed by current or former Department employees or a salary pre-offset hearing request filed by a current or former Department employee), including but not limited to, documents that contain the employee's name, sex, date of birth, home address, telephone number, email address, as well as information that is pertinent to the particular claim being
This system of records also covers wage garnishment case files that contain information that is pertinent to the particular claim (e.g., a wage garnishment proceeding) including but not limited to, documents that contain the individual's name, sex, date of birth, home address, telephone number, email address, as well as information that is pertinent to the particular claim being asserted, including documents relating to the existence, amount, or current enforceability of the debt, financial hardship, and payroll documentation.
This system of records does not include records covered by other Departmental or governmental system of records notices, such as the Department's systems of records notices entitled “Education's Central Automated Processing System (EDCAPS)” (18–03–02) and the “Receivables Management System” (18–03–03) (which the Department soon expects to delete and include as part of the EDCAPS system of records notice).
5 U.S.C. 5584; 31 U.S.C. § 3711 et seq.;, 34 CFR part 32; 34 CFR part 34; Federal Claims Collection Standards (FCCS) 31 CFR chapter IX, parts 900–904; and the U.S. Department of Education, Administrative Communications System, Handbook for Processing Salary Overpayments (Handbook ACS–OM–04) (Jan. 19, 2012).
The information in this system of records is used: To adjudicate requests for waivers of salary overpayments and claims regarding the validity of salary overpayments made to current and former employees and to adjudicate administrative wage garnishments under the cross servicing program of the Department and Treasury. The Department also uses the OHA Records System to provide docket management, including scheduling of hearings, oral arguments, and determining compliance with parties' filing deadlines and to produce docket reports that may be distributed internally in the Department. The authorities identified in this notice require hearing officers to preside over and issue decisions regarding the aforementioned cases.
The Department may disclose information contained in a record in this system of records without the consent of the individual if the disclosure is compatible with the purposes for which the record was collected. The Department may make these disclosures on a case-by-case basis or, if the Department has complied with the computer matching requirements of the Computer Matching and Privacy Protection Act of 1988, as amended, under a computer matching agreement.
(1)
(2)
(3)
(4)
(5)
(a)
(i) The Department of Education, or any component of the Department;
(ii) Any Department employee in his or her official capacity;
(iii) Any Department employee in his or her individual capacity if the Department of Justice (DOJ) has been requested to or has agreed to provide or arrange for representation for the employee;
(iv) Any Department employee in his or her individual capacity where the agency has agreed to represent the employee; or
(v) The United States where the Department determines that the litigation is likely to affect the Department or any of its components.
(b)
(c)
(d)
(6)
(a)
(b)
(7)
(8)
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Not applicable to this system of records notice.
The Department maintains records in paper files in filing cabinets, and electronically on a computerized tracking system.
Records are indexed by docket number and can be retrieved by the name of the non-Government party.
Records are maintained electronically and in paper files.
All physical access to the Department's site where these paper and electronic records are maintained is controlled and monitored by security personnel who check each individual entering the building for his or her employee or visitor badge. Paper records are maintained in a secured space in locked cabinets.
In accordance with the Department's Administrative Communications System (ACS) Directive OM: 5–101 entitled “Contractor Employee Personnel Security Screenings,” all contract personnel who have facility access and system access are required to undergo a security clearance investigation. Individuals requiring access to Privacy Act data are required to hold, at a minimum, a moderate-risk security clearance level. These individuals are required to undergo periodic screening at five-year intervals.
In addition to holding security clearances, contract and Department personnel are required to complete security awareness training on an annual basis. This training is required to ensure that contract and Department users are trained appropriately in safeguarding Privacy Act data in accordance with OMB Circular No. A–130, Appendix III.
The computer system employed by the Department offers a high degree of resistance to tampering and circumvention. This security system limits data access to Department and contract staff on a need-to-know basis, and controls individual users' ability to access and alter records within the system. All users of this system of records are given a unique user identification.
The OHA electronic records system is a web-based J2EE application that is platform independent which captures all information relating to salary overpayment cases and administrative wage garnishment cases. Authorized log-on codes and passwords prevent unauthorized users from gaining access to data and system resources. All users have unique log-on codes and passwords. The password scheme requires that users must change passwords every 90 days and may not repeat the old password.
Any individual attempting to log on who fails is locked out of the system after three attempts. Access after that time requires intervention by the system manager.
The records are maintained in accordance with the Department of Education Records Disposition Schedules (ED/RDS) 241 and 243. Under ED/RDS 241, “Administrative Adjudication Files for the Office of Hearings and Appeals,” official docket files are cut off annually upon close of a case and transferred to a certified records center or to a certified records storage facility one year after cut off. Files will be destroyed or deleted six years after cutoff.
For attorney working files, these files will be cut off annually upon close of case and destroyed or deleted when no longer needed for administrative or reference purposes.
Duplicate copies maintained for reference purposes and that do not serve as the record copy will be destroyed or deleted when no longer needed for reference.
Under ED/RDS 243, “Decisions Made by Hearing Officials, Administrative Law Judges, the Secretary of Education and Members of the CRRA,” copies of the original decision are permanent and removed before official docket file is transferred to a certified records center. Original decisions are held on site and transferred to the National Archives and Records Administration in five-year blocks. Duplicate copies regardless of medium maintained for reference purposes do not serve as the record copy and will be destroyed/deleted when no longer needed for reference.
Director, Office of Hearings & Appeals, Office of Management, U.S. Department of Education, 400 Maryland Avenue SW., Suite 2100A, 490 L'Enfant Plaza, Washington, DC 20202–4616.
If you wish to determine whether a record exists regarding you in the system of records, contact the system manager. Your request must meet the requirements of the regulations at 34 CFR 5b.5, including proof of identity.
If you wish to gain access to a record regarding you in the system of records, contact the system manager. Your request must meet the requirements of the regulations at 34 CFR 5b.5, including proof of identity.
If you wish to contest the content of a record regarding you in the system of records, contact the system manager. Your request must meet the requirements of the regulations at 34 CFR 5b.7.
The information in the OHA Records System comes from a number of sources including: Employees, former employees, and grant recipients. Information may also be supplied by an individual's attorney or representative and by Department officials or other employees.
None.
U.S. Department of Energy.
Notice and Request for Comments.
The Department of Energy (DOE), pursuant to the Paperwork Reduction Act of 1995, intends to extend for three years, an information collection request (ICR) with the Office of Management and Budget (OMB) concerning the
Comments are invited on: (a) Whether the extended collection of information is necessary for the proper performance of the functions of the Agency, including whether the information shall have practical utility; (b) 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; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology.
Comments regarding this proposed information collection must be received on or before December 23, 2013. If you anticipate difficulty in submitting comments within that period, contact the person listed below as soon as possible.
Written comments may be sent to Dr. Judith D. Fouke, Office of Worker Safety and Health Policy (HS–11), U.S. Department of Energy, Office of Health, Safety and Security, 1000 Independence Ave. SW., Washington, DC 20585, telephone (301) 903–5865, by fax at (301) 903–3445, or by email at
Requests for additional information or copies of the information collection instrument and instructions should be directed to the person listed above in
This information collection request contains: (1)
Title 10, Code of Federal Regulations, Part 835, Subpart H.
Office of Science, Department of Energy.
Notice of Renewal.
Pursuant to Section 14(a)(2)(A) of the Federal Advisory Committee Act, (Pub. L. 92–463), and in
The Committee will provide advice and recommendations to the Director, Office of Science (DOE), and the Assistant Director, Directorate for Mathematical and Physical Sciences (NSF), on scientific priorities within the field of basic nuclear science research.
Additionally, the renewal of the DOE/NSF Nuclear Science Advisory Committee has been determined to be essential to conduct business of the Department of Energy and the National Science Foundation, and to be in the public interest in connection with the performance of duties imposed upon the Department of Energy and National Science Foundation, by law and agreement. The Committee will continue to operate in accordance with the provisions of the Federal Advisory Committee Act, adhering to the rules and regulations in implementation of that Act.
Dr. Timothy Hallman at (301) 903–3613.
Take notice that on October 3, 2013, North Baja Pipeline, LLC (North Baja), 717 Texas Street, Suite 2400, Houston, Texas 77002–2761, filed an application in Docket No. CP14–1–000 pursuant to section 7(b) of the Natural Gas Act (NGA) and Part 157 of the Commission's regulations, for authorization for a temporary act or operation to reduce the authorized horsepower associated with two 7,200 horsepower compressor units at its Ehrenberg Compressor Station located in Ehrenberg, Arizona. North Baja states that the subject compressor units will be removed and returned to the manufacturer. North Baja proposes that the temporary action last for 36 months. North Baja avers that, during the 36-month period, it will determine if market conditions support replacement of the units or whether it will seek authorization for permanent abandonment of the horsepower related to the two units, all as more fully set forth in the application which is on file with the Commission and open to public inspection. The filing is available for review at the Commission in the Public Reference Room or may be viewed on the Commission's Web site web at
Any questions concerning this application may be directed to Richard Parke, Manager, Certificates, North Baja Pipeline, LLC, 717 Texas Street, Suite 2400, Houston, Texas 77002–2761, by telephone at (832) 320–5516, or by email at
There are two ways to become involved in the Commission's review of this project. First, any person wishing to obtain legal status by becoming a party to the proceedings for this project should, on or before the comment date stated below, file with the Federal Energy Regulatory Commission, 888 First Street NE., Washington, DC 20426, a motion to intervene in accordance with the requirements of the Commission's Rules of Practice and Procedure (18 CFR 385.214 or 385.211) and the Regulations under the NGA (18 CFR 157.10). A person obtaining party status will be placed on the service list maintained by the Secretary of the Commission and will receive copies of all documents filed by the applicant and by all other parties. A party must submit an original and seven copies of filings made with the Commission and must mail a copy to the applicant and to every other party in the proceeding. Only parties to the proceeding can ask for court review of Commission orders in the proceeding.
However, a person does not have to intervene in order to have comments considered. The second way to participate is by filing with the Secretary of the Commission, as soon as possible, an original and two copies of comments in support of or in opposition to this project. The Commission will consider these comments in determining the appropriate action to be taken, but the filing of a comment alone will not serve to make the filer a party to the proceeding. The Commission's rules require that persons filing comments in opposition to the project provide copies of their protests only to the party or parties directly involved in the protest.
The Commission strongly encourages electronic filings of comments, protests and interventions in lieu of paper using the “eFiling” link at
Take notice that the Commission received the following electric corporate filings:
Take notice that the Commission received the following electric rate filings:
Take notice that the Commission received the following electric securities filings:
The filings are accessible in the Commission's eLibrary system by clicking on the links or querying the docket number.
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
Take notice that the Commission received the following electric corporate filings:
Take notice that the Commission received the following exempt wholesale generator filings:
Take notice that the Commission received the following electric rate filings:
Take notice that the Commission received the following electric securities filings:
The filings are accessible in the Commission's eLibrary system by clicking on the links or querying the docket number.
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
Take notice that the Commission has received the following Natural Gas Pipeline Rate and Refund Report filings:
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR § 385.211 and § 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
The filings are accessible in the Commission's eLibrary system by clicking on the links or querying the docket number.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
Take notice that the Commission has received the following Natural Gas Pipeline Rate and Refund Report filings:
The filings are accessible in the Commission's eLibrary system by clicking on the links or querying the docket number.
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR § 385.211 and § 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
Take notice that on October 15, 2013, Guttman Energy, Inc. and PBF Holding Company LLC (Complainants) submitted for filing with the Federal Energy Regulatory Commission (Commission) a complaint against Buckeye Pipe Line Company L.P. and Laurel Pipe Line Company L.P. (Respondents) challenging the rates charged by the Respondents for pipeline transportation of petroleum products from Chelsea Junction, Pennsylvania, to delivery points in Pennsylvania on the grounds that (1) the Respondents are unlawfully charging interstate tariff rates for intrastate transportation, (2) the pertinent interstate rates are excessive, unjust and unreasonable, (3) the pertinent market-based rates of Buckeye are no longer justified because, as a result of changed circumstances, Buckeye does not, in fact, lack significant market power, and (4) the Respondents' collection of interstate rates which are higher than intrastate rates for the same service is unduly and unreasonably preferential and discriminatory, all in violation of the Interstate Commerce Act.
The Complainants state that copies of the complaint were served on the Respondents.
Any person desiring to intervene or to protest this filing must file in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211, 385.214). Protests will be considered by the Commission in determining the appropriate action to be taken, but will not serve to make protestants parties to the proceeding. Any person wishing to become a party must file a notice of intervention or motion to intervene, as appropriate. The Respondent's answer and all interventions, or protests must be filed on or before the comment date. The Respondent's answer, motions to intervene, and protests must be served on the Complainants.
The Commission encourages electronic submission of protests and interventions in lieu of paper using the “eFiling” link at
This filing is accessible on-line at
Take notice that on October 11, 2013, pursuant to section 206 of the Federal Power Act (FPA), 16 U.S.C. 824e and Rule 206 of the Federal Energy Regulatory Commission's (Commission) Rules of Practice and Procedure, 18 CFR 385.206 (2013), CalWind Resources, Inc. (Complainant) filed a formal complaint against California Independent System Operator Corporation (CAISO or Respondent), requesting that the Commission direct CAISO to file an amendment to sections 25.1 and 25.1.2 of its open access transmission tariff or, in the alternative, direct CAISO to follow a tariff interpretation conforming to the Commission's policy, as more fully described in the complaint.
The Complainant certifies that copies of the complaint were served on the contacts for the Respondent as listed on the Commission's list of Corporate Officials.
Any person desiring to intervene or to protest this filing must file in
The Commission encourages electronic submission of protests and interventions in lieu of paper using the “eFiling” link at
This filing is accessible on-line at
This is a supplemental notice in the above-referenced proceeding of RE Rosamond Two LLC's application for market-based rate authority, with an accompanying rate tariff, noting that such application includes a request for blanket authorization, under 18 CFR part 34, of future issuances of securities and assumptions of liability.
Any person desiring to intervene or to protest should file with the Federal Energy Regulatory Commission, 888 First Street NE., Washington, DC 20426, in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211 and 385.214). Anyone filing a motion to intervene or protest must serve a copy of that document on the Applicant.
Notice is hereby given that the deadline for filing protests with regard to the applicant's request for blanket authorization, under 18 CFR part 34, of future issuances of securities and assumptions of liability, is November 5, 2013.
The Commission encourages electronic submission of protests and interventions in lieu of paper, using the FERC Online links at
Persons unable to file electronically should submit an original and 5 copies of the intervention or protest to the Federal Energy Regulatory Commission, 888 First Street NE., Washington, DC 20426.
The filings in the above-referenced proceeding are accessible in the Commission's eLibrary system by clicking on the appropriate link in the above list. They are also available for review in the Commission's Public Reference Room in Washington, DC. There is an eSubscription link on the Web site that enables subscribers to receive email notification when a document is added to a subscribed docket(s). For assistance with any FERC Online service, please email
This is a supplemental notice in the above-referenced proceeding of Healthy Planet Partners Energy Company, LLC's application for market-based rate authority, with an accompanying rate tariff, noting that such application includes a request for blanket authorization, under 18 CFR part 34, of future issuances of securities and assumptions of liability.
Any person desiring to intervene or to protest should file with the Federal Energy Regulatory Commission, 888 First Street NE., Washington, DC 20426, in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211 and 385.214). Anyone filing a motion to intervene or protest must serve a copy of that document on the Applicant.
Notice is hereby given that the deadline for filing protests with regard to the applicant's request for blanket authorization, under 18 CFR part 34, of future issuances of securities and assumptions of liability, is November 5, 2013.
The Commission encourages electronic submission of protests and interventions in lieu of paper, using the FERC Online links at
Persons unable to file electronically should submit an original and 5 copies of the intervention or protest to the Federal Energy Regulatory Commission, 888 First Street NE., Washington, DC 20426.
The filings in the above-referenced proceeding are accessible in the Commission's eLibrary system by clicking on the appropriate link in the above list. They are also available for review in the Commission's Public Reference Room in Washington, DC. There is an eSubscription link on the Web site that enables subscribers to receive email notification when a document is added to a subscribed
This is a supplemental notice in the above-referenced proceeding of RE Rosamond One LLC's application for market-based rate authority, with an accompanying rate tariff, noting that such application includes a request for blanket authorization, under 18 CFR Part 34, of future issuances of securities and assumptions of liability.
Any person desiring to intervene or to protest should file with the Federal Energy Regulatory Commission, 888 First Street NE., Washington, DC 20426, in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211 and 385.214). Anyone filing a motion to intervene or protest must serve a copy of that document on the Applicant.
Notice is hereby given that the deadline for filing protests with regard to the applicant's request for blanket authorization, under 18 CFR part 34, of future issuances of securities and assumptions of liability, is November 5, 2013.
The Commission encourages electronic submission of protests and interventions in lieu of paper, using the FERC Online links at
Persons unable to file electronically should submit an original and 5 copies of the intervention or protest to the Federal Energy Regulatory Commission, 888 First Street NE., Washington, DC 20426.
The filings in the above-referenced proceeding are accessible in the Commission's eLibrary system by clicking on the appropriate link in the above list. They are also available for review in the Commission's Public Reference Room in Washington, DC. There is an eSubscription link on the Web site that enables subscribers to receive email notification when a document is added to a subscribed docket(s). For assistance with any FERC Online service, please email
On October 15, 2013, the Commission issued an order that initiated a proceeding in Docket No. EL14–2–000, pursuant to section 206 of the Federal Power Act (FPA), 16 U.S.C. 824e (2006), to determine the justness and reasonableness of the rate decrease proposed by Duke Energy Progress, Inc.
The refund effective date in Docket No. EL14–2–000, established pursuant to section 206(b) of the FPA, will be the date of publication of this notice in the
1. By letter filed September 23, 2013, Salmon Creek Hydroelectric Company informed the Commission that they have changed its name to Salmon Creek Hydroelectric Company, LLC for the Salmon Creek Hydroelectric Project, FERC No. 3730, originally issued August 10, 1981.
2. Salmon Creek Hydroelectric Company, LLC is now the exemptee of the Salmon Creek Hydroelectric Project, FERC No. 3730. All correspondence should be forwarded to: Mr. Mark Henwood, Salmon Creek Hydroelectric Company, LLC, 7311 Greenhaven Drive, Suite 275, Sacramento, CA 95831.
Southwestern Power Administration, DOE.
Notice of Rate Order.
The U.S. Department of Energy Deputy Secretary has approved and placed into effect on an interim basis Rate Order No. SWPA–66, which increases the power rates for the Integrated System pursuant to the Integrated System Rate Schedules to supersede the existing rate schedules.
The effective period for the rate schedules specified in Rate Order No. SWPA–66 is October 1, 2013, through September 30, 2017.
Mr. James K. McDonald, Vice President for Corporate Operations/Chief Operating Office, Southwestern Power Administration, Department of Energy, Williams Center Tower I, One West Third Street, Tulsa, Oklahoma 74103, (918) 595–6690,
Rate Order No. SWPA–66, which has been approved and placed into effect on an interim basis, increases the power rates for the Integrated System pursuant to the following Integrated System Rate Schedules:
Rate Schedule P–13, Wholesale Rates for Hydro Peaking Power;
Rate Schedule NFTS–13, Wholesale Rates for Non-Federal Transmission/Interconnection Facilities Service;
Rate Schedule EE–13, Wholesale Rate for Excess Energy.
The rate schedules supersede the existing rate schedules shown below:
Rate Schedule P–11, Wholesale Rates for Hydro Peaking Power (superseded by P–13);
Rate Schedule NFTS–11, Wholesale Rates for Non-Federal Transmission/Interconnection Facilities Service (superseded by NFTS–13);
Rate Schedule EE–11, Wholesale Rate for Excess Energy (superseded by EE–13).
Southwestern Power Administration's (Southwestern) Administrator has determined based on the 2013 Integrated System Current Power Repayment Study, that existing rates will not satisfy cost recovery criteria specified in Department of Energy Order No. RA 6120.2 and Section 5 of the Flood Control Act of 1944. The finalized 2013 Integrated System Power Repayment Studies (PRSs) indicate that an increase in annual revenue of $8,706,702, or 4.7 percent, beginning October 1, 2013, will satisfy cost recovery criteria for the Integrated System projects. The proposed Integrated System rate schedules would increase annual revenues from $184,059,100 to $192,765,802 to recover increased investments and replacements in the hydroelectric generating and transmission facilities and increased operations and maintenance costs for both Southwestern and the U.S. Army's Corps of Engineers (Corps). Additionally, the PRS analyzes the Purchased Power Deferral Account which indicated a reduction was needed for the Purchased Power Adder which is used to recover average year purchased energy costs. This proposal also continues the Administrator's Discretionary Purchased Power Adder Adjustment (Adjustment). This Adjustment allows the Administrator to adjust the Purchased Power Adder twice annually, limited to ±$0.0059 per kilowatthour per year as necessary, at his/her discretion, with notification to the Federal Energy Regulatory Commission, to regulate the account at a level that will recover purchased power costs.
The Administrator has followed Title 10, Part 903 Subpart A, of the Code of Federal Regulations, “Procedures for Public Participation in Power and Transmission Rate Adjustments and Extensions” in connection with the proposed rate schedule. On July 1, 2013, Southwestern published notice in the
Information regarding this rate proposal, including studies and other supporting material, is available for public review and comment in the offices of Southwestern Power Administration, Williams Center Tower I, One West Third Street, Tulsa, Oklahoma 74103. Following review of Southwestern's proposal within the Department of Energy, I hereby approve Rate Order No. SWPA–66, which increases the existing Integrated System annual revenue requirement to $192,765,802 per year for the period October 1, 2013 through September 30, 2017. Rate Order No. SWPA–66 will be submitted to FERC for confirmation and approval on a final basis.
The Administrative Procedure Act requires that publication of a substantive rule be made not less than 30 days before its effective date, except, in relevant part, if the agency has good cause to waive the delay requirement (5 U.S.C. 553(d)). Southwestern finds good cause to waive the 30-day delay in effective date, placing the rates in effect on an interim basis starting October 1, 2013, because the current rate is insufficient to recover costs as required by statute; no change to the standard October 1 date of implementation is being made; and no comments were received and no revisions were made to the proposed rates.
Pursuant to Sections 302(a) and 301(b) of the Department of Energy Organization Act, Public Law 95–91, the functions of the Secretary of the Interior and the Federal Power Commission under Section 5 of the Flood Control Act of 1944, 16 U.S.C. 825s, relating to the Southwestern Power Administration (Southwestern) were transferred to and vested in the Secretary of Energy. By Delegation Order Nos. 00–037.00 and 00–001.00E, the Secretary of Energy delegated to the Administrator of Southwestern the authority to develop power and transmission rates, delegated to the Deputy Secretary of the Department of Energy the authority to confirm, approve, and place in effect such rates on an interim basis, and delegated to the Federal Energy Regulatory Commission (FERC) the authority to confirm and approve on a final basis or to disapprove rates developed by the Administrator under the delegation. Pursuant to delegated authority, the Deputy Secretary issued this interim rate order.
FERC confirmation and approval of the following Integrated System (System) rate schedules was provided in FERC Docket No. EF12–1–000 issued on March 5, 2012, (138 FERC ¶ 62,199) effective for the period from January 1, 2012, through September 30, 2015:
Rate Schedule P–11, Wholesale Rates for Hydro Peaking Power;
Rate Schedule NFTS–11, Wholesale Rates for Non-Federal Transmission/Interconnection Facilities Service;
Rate Schedule EE–11, Wholesale Rate for Excess Energy.
Southwestern prepared a 2013 Current Power Repayment Study (PRS) which indicated that the existing rates would not satisfy present financial criteria regarding repayment of investment within a 50-year period due to increased investments, replacements, and operations and maintenance expenses in the U.S. Army Corps of Engineers (Corps) hydroelectric generating facilities and Southwestern's transmission facilities. The Revised PRS indicated the need for a 4.7 percent revenue increase. These preliminary results, which presented the basis for the proposed revenue increase, were provided to the customers for their review prior to the formal process.
The final 2013 Revised PRS indicates that an increase in annual revenues of $8,706,702 (a 4.7 percent increase) is necessary beginning October 1, 2013, to accomplish repayment in the required number of years. Accordingly, Southwestern has prepared proposed rate schedules based on the additional revenue requirement and the 2013 Rate Design Study which allocates the revenue requirement to the various System rate schedules to ensure repayment.
Title 10, Part 903, Subpart A of the Code of Federal Regulations, “Procedures for Public Participation in Power and Transmission Rate Adjustments and Extensions,” has been followed in connection with the proposed rate adjustments. Specifically, opportunities for public review and comment on proposed System power rates during a 60-day period were announced by notice published in the
No comments were received during the public participation process on Southwestern's preliminary results. Following the conclusion of the comment period on August 30, 2013, the 2013 Power Repayment and Rate Design Studies were finalized. The Administrator made the decision to submit the rate proposal for interim approval and implementation.
The existing rate schedules as developed in the 2011 Integrated System PRS were the basis for the revenue determination in the System Current PRS. The Current PRS indicates that existing rates are insufficient to produce the annual revenues necessary to accomplish repayment of the capital investment as required by Section 5 of the Flood Control Act of 1944 and Department of Energy (DOE) Order No. RA 6120.2.
The Revised PRS indicates it is necessary to increase annual revenues by $8,706,702 or 4.7 percent, which satisfies the cost recovery criteria outlined in DOE Order No. RA 6120.2 and Section 5 of the Flood Control Act of 1944.
In Southwestern's 2013 Rate Design proposal, rates were designed to recover the additional revenue requirements. The monthly demand charge for the sale of Federal hydroelectric power has increased. The base energy and supplemental energy charges also reflect an increase over the current rate. In addition, transmission charges for non-Federal, firm service have increased. Those customers taking transformation service will also see an increase in that rate component. The increases to the transmission charges are due to including projected additions and replacements to Southwestern's aging transmission facilities since the last rate change and a transmission-specific cost related to participation in the Southwest Power Pool Regional Transmission Organization.
Consistent with FERC's Order No. 888, Southwestern will continue charging for the six ancillary services under Rate Schedule P–13 and Rate Schedule NFTS–13, and offering non-Federal transmission service under Rate Schedule NFTS–13. Southwestern's rate design has separated the ancillary services for all transmission service. Two ancillary services, Scheduling, System Control and Dispatch Service together with Reactive and Voltage Support Service, are required for every transmission transaction. These charges are also a part of the capacity rate for Federal power. This is consistent with Southwestern's long-standing practice of charging for the sale and delivery of Federal power in its Federal demand charge. The remaining ancillary services will be made available to any transmission user within Southwestern's balancing area, including Federal power customers. The rate schedules for Peaking Power and Non-Federal Transmission Service reflect these charges. Network transmission service is provided to those who have contracted for the service, but only for non-Federal deliveries. The rate for and application of this service are identified in the Non-Federal Transmission/Interconnection Facilities Service Rate Schedule, NFTS–13.
With respect to the Purchased Power Adder (PPA), Southwestern proposed, as in all previous proposals beginning with the 1983 implementation of the purchased power rate component, that the Adder is set equal to the current average long-term purchased power revenue requirement. As shown in the Rate Design Study, the amount is determined by dividing the estimated total average direct purchased power costs by Southwestern's total annual contractual 1200-hour peaking energy commitments to the customers (exclusive of contract support arrangements). In Southwestern's rate proposal, the resulting Adder decreases from the current $0.0062 per kWh of peaking energy to $0.0059 per kWh of peaking energy. The total revenue created through application of this Adder should enable Southwestern to cover its average annual purchased power costs.
Southwestern received no comments or questions during the public participation period.
Information regarding this rate proposal, including studies, comments and other supporting material, is available for public review and comment in the offices of Southwestern Power Administration, One West Third Street, Tulsa, OK 74103.
The July 2013 Revised PRS indicates that the increased power rates will repay all costs of the Integrated System including amortization of the power investment consistent with the provisions of Department of Energy Order No. RA 6120.2. In accordance with Delegation Order No. 00–037.00 (December 6, 2001) and Section 5 of the Flood Control Act of 1944, the Administrator has determined that the proposed System rates are consistent with applicable law and the lowest possible rates consistent with sound business principles.
The environmental impact of the proposed System rates was evaluated in consideration of DOE's guidelines for implementing the procedural provisions of the National Environmental Policy Act and was determined to fall within the class of actions that are categorically excluded (10 CFR 1021) from the requirements of preparing either an Environmental Impact Statement or an Environmental Assessment.
In view of the foregoing and pursuant to the authority delegated to me by the Secretary of Energy, I hereby confirm, approve and place in effect on an interim basis, effective October 1, 2013, the following Southwestern Integrated System Rate Schedules which shall remain in effect on an interim basis through September 30, 2017, or until the FERC confirms and approves the rates on a final basis.
During the period October 1, 2013, through September 30, 2017, in accordance with interim approval from Rate Order No. SWPA–66 issued by the Deputy Secretary of Energy on
In the marketing area of Southwestern Power Administration (Southwestern), described generally as the States of Arkansas, Kansas, Louisiana, Missouri, Oklahoma, and Texas.
To wholesale Customers which have contractual rights from Southwestern to purchase Hydro Peaking Power and associated energy (Peaking Energy and Supplemental Peaking Energy).
Three-phase, alternating current, delivered at approximately 60 Hertz, at the nominal voltage(s), at the point(s) of delivery, and in such quantities as are specified by contract.
The services necessary to support the transmission of capacity and energy from resources to loads while maintaining reliable operation of the System of Southwestern in accordance with good utility practice, which include the following:
1.1.1. Scheduling, System Control, and Dispatch Service is provided by Southwestern as Balancing Authority Area operator and is in regard to interchange and load-match scheduling and related system control and dispatch functions.
1.1.2. Reactive Supply and Voltage Control from Generation Sources Service is provided at transmission facilities in the System of Southwestern to produce or absorb reactive power and to maintain transmission voltages within specific limits.
1.1.3. Regulation and Frequency Response Service is the continuous balancing of generation and interchange resources accomplished by raising or lowering the output of on-line generation as necessary to follow the moment-by-moment changes in load and to maintain frequency within a Balancing Authority Area.
1.1.4. Spinning Operating Reserve Service maintains generating units on-line, but loaded at less than maximum output, which may be used to service load immediately
1.1.5. Supplemental Operating Reserve Service provides an additional amount of operating reserve sufficient to reduce Area Control Error to zero within 10 minutes following loss of generating capacity which would result from the most severe single contingency.
1.1.6. Energy Imbalance Service corrects for differences over a period of time between schedules and actual hourly deliveries of energy to a load. Energy delivered or received within the authorized bandwidth for this service is accounted for as an inadvertent flow and is returned to the providing party by the receiving party in accordance with standard utility practice or a contractual arrangement between the parties.
The entity which is utilizing and/or purchasing Federal Power and Federal Energy and services from Southwestern pursuant to this Rate Schedule.
The period of time used to determine maximum integrated rates of delivery for the purpose of power accounting which is the 60-minute period that begins with the change of hour.
The power and energy provided from the System of Southwestern.
The Federal Power that Southwestern sells and makes available to the Customers through their respective Power Sales Contracts in accordance with this Rate Schedule.
The quantity equal to the Peaking Contract Demand for any month unless otherwise provided by the Customer's Power Sales Contract.
The maximum rate in kilowatts at which Southwestern is obligated to deliver Federal Energy associated with Hydro Peaking Power as set forth in the Customer's Power Sales Contract.
The Federal Energy associated with Hydro Peaking Power that Southwestern sells and makes available to the Customer in accordance with the terms and conditions of the Customer's Power Sales Contract.
The Customer's contract with Southwestern for the sale of Federal Power and Federal Energy.
The Federal Energy associated with Hydro Peaking Power that Southwestern sells and makes available to the Customer if determined by Southwestern to be available and that is in addition to the quantity of Peaking Energy purchased by the Customer in accordance with the terms and conditions of the Customer's Power Sales Contract.
The transmission and related facilities owned by Southwestern, and/or the generation, transmission, and related facilities owned by others, the capacity of which, by contract, is available to and utilized by Southwestern to satisfy its contractual obligations to the Customer.
Any force which is not within the control of the party affected, including, but not limited to failure of water supply, failure of facilities, flood, earthquake, storm, lightning, fire, epidemic, riot, civil disturbance, labor disturbance, sabotage, war, act of war, terrorist acts or restraint by court of general jurisdiction, which by exercise of due diligence and foresight such party could not reasonably have been expected to avoid.
Unless otherwise specified, this Section 2 is applicable to all sales under the Customer's Power Sales Contract.
$4.50 per kilowatt of Peaking Billing Demand.
The capacity charge for Hydro Peaking Power includes such transmission services as are necessary to integrate Southwestern's resources in order to reliably deliver Hydro Peaking Power and associated energy to the Customer. This capacity charge also includes two Ancillary Services charges: Scheduling, System Control, and Dispatch Service; and Reactive Supply and Voltage Control from Generation Sources Service.
Customers may utilize the transmission capacity associated with Peaking Contract Demand for the transmission of non-Federal energy, on a non-firm, as-available basis, at no additional charge for such transmission service or associated Ancillary Services, under the following terms and conditions:
2.1.3.1. The sum of the capacity, for any hour, which is used for Peaking Energy, Supplemental Peaking Energy, and Secondary Transmission Service, may not exceed the Peaking Contract Demand;
2.1.3.2. The non-Federal energy transmitted under such secondary service is delivered to the Customer's point of delivery for Hydro Peaking Power;
2.1.3.3. The Customer commits to provide Real Power Losses associated with such deliveries of non-Federal energy; and
2.1.3.4. Sufficient transfer capability exists between the point of receipt into the System of Southwestern of such non-Federal energy and the Customer's point of delivery for Hydro Peaking Power for the time period that such secondary transmission service is requested.
If, during any month, the Peaking Contract Demand associated with a Power Sales Contract in which Southwestern has the obligation to provide 1,200 kilowatthours of Peaking Energy per kilowatt of Peaking Contract Demand is reduced by Southwestern for a period or periods of not less than two consecutive hours by reason of an outage caused by either an Uncontrollable Force or by the installation, maintenance, replacement or malfunction of generation, transmission and/or related facilities on the System of Southwestern, or insufficient pool levels, the Customer's capacity charges for such month will be reduced for each such reduction in service by an amount computed under the formula:
Such reduction in charges shall fulfill Southwestern's obligation to deliver Hydro Peaking Power and Peaking Energy.
$0.0094 per kilowatthour of Peaking Energy delivered plus the Purchased Power Adder as defined in Section 2.2.3 of this Rate Schedule.
$0.0094 per kilowatthour of Supplemental Peaking Energy delivered.
A purchased power adder of $0.0059 per kilowatthour of Peaking Energy delivered, as adjusted by the Administrator, Southwestern, in accordance with the procedure within this Rate Schedule.
The Purchased Power Adder shall apply to sales of Peaking Energy. The Purchased Power Adder shall not apply to sales of Supplemental Peaking Energy or sales to any Customer which, by contract, has assumed the obligation to supply energy to fulfill the minimum of 1,200 kilowatthours of Peaking
Not more than twice annually, the Purchased Power Adder of $0.0059 (5.9 mills) per kilowatthour of Peaking Energy, as noted in this Rate Schedule, may be adjusted by the Administrator, Southwestern, by an amount up to a total of ±$0.0059 (5.9 mills) per kilowatthour per year, as calculated by the following formula:
$0.46 per kilowatt will be assessed for capacity used to deliver energy at any point of delivery at which Southwestern provides transformation service for deliveries at voltages of 69 kilovolts or less from higher voltage facilities.
Unless otherwise specified by contract, for any particular month, a charge for transformation service will be assessed on the greater of (1) that month's highest metered demand, or (2) the highest metered demand recorded during the previous 11 months, at any point of delivery. For the purpose of this Rate Schedule, the highest metered demand will be based on all deliveries, of both Federal and non-Federal energy, from the System of Southwestern, at such point during such month.
Monthly rate of $0.07 per kilowatt of Peaking Billing Demand plus the Regulation Purchased Adder as defined in Section 2.4.5 of this Rate Schedule.
Monthly rate of $0.0146 per kilowatt of Peaking Billing Demand.
Daily rate of $0.00066 per kilowatt for non-Federal generation inside Southwestern's Balancing Authority Area.
Monthly rate of $0.0146 per kilowatt of Peaking Billing Demand.
Daily rate of $0.00066 per kilowatt for non-Federal generation inside Southwestern's Balancing Authority Area.
$0.0 per kilowatt for all reservation periods.
Regulation and Frequency Response Service and Energy Imbalance Service are available only for deliveries of power and energy to load within Southwestern's Balancing Authority Area. Spinning Operating Reserve Service and Supplemental Operating Reserve Service are available only for deliveries of non-Federal power and energy generated by resources located within Southwestern's Balancing Authority Area and for deliveries of all Hydro Peaking Power and associated energy from and within Southwestern's Balancing Authority Area. Where available, such Ancillary Services must be taken from Southwestern; unless, arrangements are made in accordance with Section 2.4.4 of this Rate Schedule.
For any month, the charges for Ancillary Services for deliveries of Hydro Peaking Power shall be based on the Peaking Billing Demand.
The daily charge for Spinning Operating Reserve Service and Supplemental Operating Reserve Service for non-Federal generation inside Southwestern's Balancing Authority Area shall be applied to the greater of Southwestern's previous day's estimate of the peak, or the actual peak, in kilowatts, of the internal non-Federal generation.
Customers for which Ancillary Services are made available as specified above, must inform Southwestern by written notice of the Ancillary Services which they do
Subject to Southwestern's approval of the ability of such resources or third parties to meet Southwestern's technical and operational requirements for provision of such Ancillary Services, the Customer may change the Ancillary Services which it takes from Southwestern and/or from other sources at the beginning of any month upon the greater of 60 days notice or upon completion of any necessary equipment modifications necessary to accommodate such change;
Southwestern has determined the amount of energy used from storage to provide Regulation and Frequency Response Service in order to meet Southwestern's Balancing Authority Area requirements. The replacement value of such energy used shall be recovered through the Regulation Purchased Adder. The Regulation Purchased Adder during the time period of January 1 through December 31 of the current calendar year is based on the average annual use of energy from storage
The Regulation Purchased Adder will be phased in over a period of four (4) years as follows:
The replacement value of the estimated annual use of energy from storage for Regulation and Frequency Response Service shall be recovered by Customers located within Southwestern's Balancing Authority
If the Regulation Purchased Adder is determined and applied under Southwestern's Rate Schedule NFTS–11, then it shall not be applied here.
Unless otherwise specified by contract, the Regulation Purchased Adder for an individual Customer shall be based on the following formula rate, calculated to include the replacement value of the estimated annual use of energy from storage by Southwestern for Regulation and Frequency Response Service.
with the factors defined as follows:
For Customers that have aggregated their load, resources, and scheduling into a single node by contract within Southwestern's Balancing Authority Area, the individual Customer's respective Regulation Purchased Adder shall be that Customer's ratio share of the Regulation Purchased Adder established for the node. Such ratio share shall be determined for the Customer on a non-coincident basis and shall be calculated for the Customer from their highest metered load plus generation behind the meter.
Energy Imbalance Service primarily applies to deliveries of power and energy which are required to satisfy a Customer's load. As Hydro Peaking Power and associated energy are limited by contract, the Energy Imbalance Service bandwidth specified for Non-Federal Transmission Service does not apply to deliveries of Hydro Peaking Power, and therefore Energy Imbalance Service is not charged on such deliveries. Customers who consume a capacity of Hydro Peaking Power greater than their Peaking Contract Demand may be subject to a Capacity Overrun Penalty.
Customers which have loads within Southwestern's Balancing Authority Area are obligated by contract to provide resources, over and above the Hydro Peaking Power and associated energy purchased from Southwestern, sufficient to meet their loads. A Capacity Overrun Penalty shall be applied only when the formulas provided in Customers' respective Power Sales Contracts indicate an overrun on Hydro Peaking Power,
$0.1034 per kilowatthour for each kilowatthour of overrun.
By contract, the Customer is subject to limitations on the maximum amounts of Peaking Energy which may be scheduled under the Customer's Power Sales Contract. When the Customer schedules an amount in excess of such maximum amounts, such Customer is subject to the Energy Overrun Penalty.
Any Customer served from facilities owned by or available by contract to Southwestern will be required to maintain a power factor of not less than 95 percent and will be subject to the following provisions.
The power factor will be determined for all Demand Periods and shall be calculated under the formula:
The Customer shall be assessed a penalty for all Demand Periods of a month where the power factor is less than 95 percent lagging. For any Demand Period during a particular month such penalty shall be in accordance with the following formula:
If C is negative, then C = zero (0).
The Power Factor Penalty is applicable to radial interconnections with the System of Southwestern. The total Power Factor Penalty for any month shall be the sum of all charges “C” for all Demand Periods of such month. No penalty is assessed for leading power factor. Southwestern, in its sole judgment and at its sole option, may determine whether power factor calculations should be applied to (i) a single physical point of delivery, (ii) a combination of physical points of delivery where a Customer has a single, electrically integrated load, (iii) or interconnections. The general criteria for such decision shall be that, given the configuration of the Customer's and Southwestern's systems, Southwestern will determine, in its sole judgment and at its sole option, whether the power factor calculation more accurately assesses the detrimental impact on Southwestern's system when the above formula is calculated for a single physical point of delivery, a combination of physical points of delivery, or for an
Southwestern, at its sole option, may reduce or waive Power Factor Penalties when, in Southwestern's sole judgment, low power factor conditions were not detrimental to the System of Southwestern due to particular loading and voltage conditions at the time the power factor dropped below 95 percent lagging.
Customers are required to self-provide all Real Power Losses for non-Federal energy transmitted by Southwestern on behalf of such Customers under the provisions detailed below.
Real Power Losses are computed as four (4) percent of the total amount of non-Federal energy transmitted by Southwestern. The Customer's monthly Real Power Losses are computed each month on a megawatthour basis as follows:
The Customer must schedule or cause to be scheduled to Southwestern, Real Power Losses for which it is responsible subject to the following conditions:
4.1.1. The Customer shall schedule and deliver Real Power Losses back to Southwestern during the second month after they were incurred by Southwestern in the transmission of the Customer's non-Federal power and energy over the System of Southwestern unless such Customer has accounted for Real Power Losses as part of a metering arrangement with Southwestern.
4.1.2. On or before the twentieth day of each month, Southwestern shall determine the amount of non-Federal loss energy it provided on behalf of the Customer during the previous month and provide a written schedule to the Customer setting forth hour-by-hour the quantities of non-Federal energy to be delivered to Southwestern as losses during the next month.
4.1.3. Real Power Losses not delivered to Southwestern by the Customer, according to the schedule provided, during the month in which such losses are due shall be billed by Southwestern to the Customer to adjust the end-of-month loss energy balance to zero (0) megawatthours and the Customer shall be obliged to purchase such energy at the following rates:
4.1.4. Real Power Losses delivered to Southwestern by the Customer in excess of the losses due during the month shall be purchased by Southwestern from the Customer at a rate per megawatthour equal to Southwestern's rate per megawatthour for Supplemental Peaking Energy, as set forth in Southwestern's then-effective Rate Schedule for Hydro Peaking Power to adjust such hourly end-of-month loss energy balance to zero (0) megawatthours.
The services necessary to support the transmission of capacity and energy from resources to loads while maintaining reliable operation of the System of Southwestern in accordance with good utility practice, which include the following:
1.1.1. Scheduling, System Control, and Dispatch Service is provided by Southwestern as Balancing Authority Area operator and is in regard to interchange and load-match scheduling and related system control and dispatch functions.
1.1.2. Reactive Supply and Voltage Control from Generation Sources Service is provided at transmission facilities in the System of Southwestern to produce or absorb reactive power and to maintain transmission voltages within specific limits.
1.1.3. Regulation and Frequency Response Service is the continuous balancing of generation and interchange resources accomplished by raising or lowering the output of on-line generation as necessary to follow the moment-by-moment changes in load and to maintain frequency within a Balancing Authority Area.
1.1.4. Spinning Operating Reserve Service maintains generating units on-line, but loaded at less than maximum output, which may be used to service load immediately when disturbance conditions are experienced due to a sudden loss of generation or load.
1.1.5. Supplemental Operating Reserve Service provides an additional amount of operating reserve sufficient to reduce Area Control Error to zero within 10 minutes following loss of generating capacity which would result from the most severe single contingency.
1.1.6. Energy Imbalance Service corrects for differences over a period of time between schedules and actual hourly deliveries of energy to a load. Energy delivered or received within the authorized bandwidth for this service is accounted for as an inadvertent flow and is returned to the providing party by the receiving party in accordance with standard utility practice or a contractual arrangement between the parties.
The entity which is utilizing and/or purchasing services from Southwestern pursuant to this Rate Schedule.
The period of time used to determine maximum integrated rates of delivery for the purpose of power accounting which is the 60-minute period that begins with the change of hour.
Transmission service reserved on a firm basis between specific points of receipt and delivery pursuant to either a Firm Transmission Service Agreement or to a Transmission Service Transaction.
A service that provides for the use of the System of Southwestern to deliver energy and/or provide system support at an interconnection.
Transmission service provided under Part III of Southwestern's Open Access Transmission Service Tariff which provides the Customer with firm transmission service for the delivery of capacity and energy from the Customer's resources to the Customer's load.
Transmission service reserved on a non-firm basis between specific points of receipt and delivery pursuant to a Transmission Service Transaction.
Either a single physical point to which electric power and energy are delivered from the System of Southwestern, or a specified set of delivery points which together form a single, electrically integrated load.
Service that is associated with Firm Point-to-Point Transmission Service and Network Integration Transmission Service. For Firm Point-to-Point Transmission Service, it consists of transmission service provided on an as-available, non-firm basis, scheduled within the limits of a particular capacity reservation for transmission service, and scheduled from points of receipt, or to points of delivery, other than those designated in a Long-Term Firm Transmission Service Agreement or a Transmission Service Transaction for Firm Point-to-Point Transmission Service. For Network Integration Transmission Service, Secondary Transmission Service consists of transmission service provided on an as-available, non-firm basis, from resources other than the network resources designated in a Network Transmission Service Agreement, to meet the Customer's network load. The charges for Secondary Transmission Service, other than Ancillary Services, are included in the applicable capacity charges for Firm Point-to-Point Transmission Service and Network Integration Transmission Service.
A contract executed between a Customer and Southwestern for the transmission of non-Federal power and energy over the System of Southwestern or for interconnections which include the following:
1.10.1. Firm Transmission Service Agreement provides for reserved transmission capacity on a firm basis, for a particular point-to-point delivery path.
1.10.2. Interconnection Agreement provides for the use of the System of Southwestern and recognizes the exchange of mutual benefits for such use or provides for application of a charge for Interconnection Facilities Service.
1.10.3. Network Transmission Service Agreement provides for the Customer to request firm transmission service for the delivery of capacity and energy from the Customer's network resources to the Customer's network load, for a period of one year or more.
1.10.4. Non-Firm Transmission Service Agreement provides for the Customer to request transmission service on a non-firm basis.
The request made under a Transmission Service Agreement through the Southwest Power Pool, Inc. (hereinafter “SPP”) Open Access Same-Time Information System (hereinafter “OASIS”) for reservation of transmission capacity over a particular point-to-point delivery path for a particular period. The Customer must submit hourly schedules for actual service in addition to the Service Request.
The transmission and related facilities owned by Southwestern, and/or the generation, transmission, and related facilities owned by others, the capacity of which, by contract, is available to and utilized by Southwestern to satisfy its contractual obligations to the Customer.
A Service Request that has been approved by SPP.
Any force which is not within the control of the party affected, including, but not limited to failure of water supply, failure of facilities, flood, earthquake, storm, lightning, fire, epidemic, riot, civil disturbance, labor disturbance, sabotage, war, act of war, terrorist acts or restraint by court of general jurisdiction, which by exercise of due diligence and foresight such party could not reasonably have been expected to avoid.
$1.48 per kilowatt of transmission capacity reserved in increments of one month of service or invoiced in accordance with a longer term agreement.
$0.370 per kilowatt of transmission capacity reserved in increments of one week of service.
$0.0673 per kilowatt of transmission capacity reserved in increments of one day of service.
The capacity charge for Firm Point-to-Point Transmission Service includes Secondary Transmission Service, but does not include charges for Ancillary Services associated with actual schedules.
Capacity charges for Firm Point-to-Point Transmission Service are applied to quantities reserved by contract under a Firm Transmission Service Agreement or in accordance with a Transmission Service Transaction.
A Customer, unless otherwise specified by contract, will be assessed capacity charges on the greatest of (1) the highest metered demand at any particular Point of Delivery during a particular month, rounded up to the nearest whole megawatt, or (2) the highest metered demand recorded at such Point of Delivery during any of the previous 11 months, rounded up to the nearest whole megawatt, or (3) the capacity reserved by contract; which amount shall be considered such Customer's reserved capacity. Secondary Transmission Service for such Customer shall be limited during any month to the most recent metered demand on which that Customer is billed or to the capacity reserved by contract, whichever is greater.
80 percent of the monthly capacity charge for Firm Point-to-Point Transmission Service reserved in increments of one month.
80 percent of the monthly capacity charge divided by 4 for Firm Point-to-Point Transmission Service reserved in increments of one week.
80 percent of the monthly capacity charge divided by 22 for Firm Point-to-Point Transmission Service reserved in increments of one day.
80 percent of the monthly capacity charge divided by 352 for Firm Point-to-Point Transmission Service reserved in increments of one hour.
Capacity charges for Non-Firm Point-to-Point Transmission Service are applied to quantities reserved under a Transmission Service Transaction, and do not include charges for Ancillary Services.
$15,533,800.
$1,294,483.
872,000 kilowatts.
$1.48 per kilowatt of Network Load (charge derived from $1,294,483 ÷ 872,000 kilowatts).
Network Integration Transmission Service is available only for deliveries of non-Federal power and energy, and is applied to the Customer utilizing such service exclusive of any deliveries of Federal power and energy. The capacity on which charges for any particular Customer utilizing this service is determined on the greatest of (1) the highest metered demand at any particular point of
For a Customer taking Network Integration Transmission Service who is also taking delivery of Federal Power and Energy, the highest metered demand shall be determined by subtracting the energy scheduled for delivery of Federal Power and Energy for any hour from the metered demand for such hour.
Secondary transmission Service for a Customer shall be limited during any month to the most recent highest metered demand on which such Customer is billed. Charges for Ancillary Services shall also be assessed.
$1.48 per kilowatt.
Any Customer that requests an interconnection from Southwestern which, in Southwestern's sole judgment and at its sole option, does not provide commensurate benefits or compensation to Southwestern for the use of its facilities shall be assessed a capacity charge for Interconnection Facilities Service. For any month, charges for Interconnection Facilities Service shall be assessed on the greater of (1) that month's actual highest metered demand, or (2) the highest metered demand recorded during the previous eleven months, as metered at the interconnection. The use of Interconnection Facilities Service will be subject to power factor provisions as specified in this Rate Schedule. The interconnection customer shall also schedule and deliver Real Power Losses pursuant to the provisions of this Rate Schedule based on metered flow through the interconnection where Interconnection Facilities Services is assessed.
$0.46 per kilowatt will be assessed for capacity used to deliver energy at any point of delivery at which Southwestern provides transformation service for deliveries at voltages of 69 kilovolts or less from higher voltage facilities.
Unless otherwise specified by contract, for any particular month, a charge for transformation service will be assessed on the greater of (1) that month's highest metered demand, or (2) the highest metered demand recorded during the previous 11 months, at any point of delivery. For the purpose of this Rate Schedule, the highest metered demand will be based on all deliveries, of both Federal and non-Federal energy, from the System of Southwestern, at such point during such month.
Monthly rate of $0.09 per kilowatt of transmission capacity reserved in increments of one month of service or invoiced in accordance with a Long-Term Firm Transmission Service Agreement or Network Transmission Service Agreement.
Weekly rate of $0.023 per kilowatt of transmission capacity reserved in increments of one week of service.
Daily rate of $0.0041 per kilowatt of transmission capacity reserved in increments of one day of service.
Hourly rate of $0.00026 per kilowatt of transmission energy delivered as non-firm transmission service.
Monthly rate of $0.04 per kilowatt of transmission capacity reserved in increments of one month of service or invoiced in accordance with a Long-Term Firm Transmission Service Agreement or Network Transmission Service Agreement.
Weekly rate of $0.010 per kilowatt of transmission capacity reserved in increments of one week of service.
Daily rate of $0.0018 per kilowatt of transmission capacity reserved in increments of one day of service.
Hourly rate of $0.00011 per kilowatt of transmission energy delivered as non-firm transmission service.
Monthly rate of $0.07 per kilowatt of transmission capacity reserved in increments of one month of service or invoiced in accordance with a Long-Term Firm Transmission Service Agreement or Network Transmission Service Agreement plus the Regulation Purchased Adder as defined in Section 2.6.5 of this Rate Schedule.
Weekly rate of $0.018 per kilowatt of transmission capacity reserved in increments of one week of service plus the Regulation Purchased Adder as defined in Section 2.6.5 of this Rate Schedule.
Daily rate of $0.0032 per kilowatt of transmission capacity reserved in increments of one day of service plus the Regulation Purchased Adder as defined in Section 2.6.5 of this Rate Schedule.
Hourly rate of $0.00020 per kilowatt of transmission energy delivered as non-firm transmission service plus the Regulation Purchased Adder as defined in Section 2.6.5 of this Rate Schedule.
Monthly rate of $0.0146 per kilowatt of transmission capacity reserved in increments of one month of service or invoiced in accordance with a Long-Term Firm Transmission Service Agreement or Network Transmission Service Agreement.
Weekly rate of $0.00365 per kilowatt of transmission capacity reserved in increments of one week of service.
Daily rate of $0.00066 per kilowatt of transmission capacity reserved in increments of one day of service.
Hourly rate of $0.00004 per kilowatt of transmission energy delivered as non-firm transmission service.
Monthly rate of $0.0146 per kilowatt of transmission capacity reserved in increments of one month of service or invoiced in accordance with a Long-Term Firm Transmission Service Agreement or Network Transmission Service Agreement.
Weekly rate of $0.00365 per kilowatt of transmission capacity reserved in increments of one week of service.
Daily rate of $0.00066 per kilowatt of transmission capacity reserved in increments of one day of service.
Hourly rate of $0.00004 per kilowatt of transmission energy delivered as non-firm transmission service.
$0.0 per kilowatt for all reservation periods.
Scheduling, System Control, and Dispatch Service and Reactive Supply and Voltage Control from Generation Sources Service are available for all transmission services in and from the System of Southwestern and shall be provided by Southwestern. Regulation and Frequency Response Service and Energy Imbalance Service are available only for deliveries of power and energy to load within Southwestern's Balancing Authority Area, and shall be provided by Southwestern, unless, subject to Southwestern's approval, they are provided by others. Spinning Operating Reserve Service and Supplemental Operating Reserve Service are available only for deliveries of power and energy generated by resources located within Southwestern's Balancing Authority Area and shall be provided by Southwestern, unless, subject to Southwestern's approval, they are provided by others.
Charges for all Ancillary Services are applied to the transmission capacity reserved or network transmission service taken by the Customer in accordance with the rates listed above when such services are provided by Southwestern.
The charges for Ancillary Services are considered to include Ancillary Services for any Secondary Transmission Service, except in cases where Ancillary Services identified in Sections 2.6.1.3 through 2.6.1.6 of this Rate Schedule are applicable to a Transmission Service Transaction of Secondary Transmission Service, but are not applicable to the transmission capacity reserved under which Secondary Transmission Service is provided. When charges for Ancillary Services are applicable to Secondary Transmission Service, the charge for the Ancillary Service shall be the hourly rate applied to all energy transmitted utilizing the Secondary Transmission Service.
Customers for which Ancillary Services identified in Sections 2.6.1.3 through 2.6.1.6 of this Rate Schedule are made available as specified above must inform Southwestern by written notice of the Ancillary Services which they do
Subject to Southwestern's approval of the ability of such resources or third parties to meet Southwestern's technical and operational requirements for provision of such Ancillary Services, the Customer may change the Ancillary Services which it takes from Southwestern and/or from other sources at the beginning of any month upon the greater of 60 days written notice or upon the completion of any necessary equipment modifications necessary to accommodate such change;
Southwestern has determined the amount of energy used from storage to provide Regulation and Frequency Response Service in order to meet Southwestern's Balancing Authority Area requirements. The replacement value of such energy used shall be recovered through the Regulation Purchased Adder. The Regulation Purchased Adder during the time period of January 1 through December 31 of the current calendar year is based on the average annual use of energy from storage
The Regulation Purchased Adder will be phased in over a period of four (4) years as follows:
The replacement value of the estimated annual use of energy from storage for Regulation and Frequency Response Service shall be recovered by Customers located within Southwestern's Balancing Authority Area on a non-coincident peak ratio share basis, divided into twelve equal monthly payments, in accordance with the formula in Section 2.4.5.2.
If the Regulation Purchased Adder is determined and applied under Southwestern's Rate Schedule NFTS–11, then it shall not be applied here.
Unless otherwise specified by contract, the Regulation Purchased Adder for an individual Customer shall be based on the following formula rate, calculated to include the replacement value of the estimated annual use of energy from storage by Southwestern for Regulation and Frequency Response Service.
For Customers that have aggregated their load, resources, and scheduling into a single node by contract within Southwestern's Balancing Authority Area, the individual Customer's respective Regulation Purchased Adder shall be that Customer's ratio share of the Regulation Purchased Adder established for the node. Such ratio share shall be determined for the Customer on a non-coincident basis and shall be calculated for the Customer from their highest metered load plus generation behind the meter.
Energy Imbalance Service primarily applies to deliveries of power and energy which are required to satisfy a Customer's load. As Hydro Peaking Power and associated energy are limited by contract, the Energy Imbalance Service bandwidth specified for Non-Federal Transmission Service does not apply to deliveries of Hydro Peaking Power, and therefore Energy Imbalance Service is not charged on such deliveries. Customers who consume a capacity of Hydro Peaking Power greater than their Peaking Contract Demand may be subject to a Capacity Overrun Penalty.
Energy delivered or received within the authorized bandwidth for this service is accounted for as an inadvertent flow and will be netted against flows in the future. The inadvertent flow in any given hour will only be offset with the flows in the corresponding hour of a day in the same category. Unless otherwise specified by contract, the two categories of days are weekdays and weekend days/North American Electric Reliability Corporation holidays, and this process will result in a separate inadvertent accumulation for each hour of the two categories of days. The hourly accumulations in the current month will be added to the hourly inadvertent balances from the previous month, resulting in a month-end balance for each hour.
The Customer is required to adjust the scheduling of resources in such a way as to reduce the accumulation towards zero. It is recognized that the inadvertent hourly flows
Customers who receive deliveries within Southwestern's Balancing Authority Area are obligated to provide resources sufficient to meet their loads. Such obligation is not related to the amount of transmission capacity that such Customers may-have reserved for transmission service to a particular load. In the event that a Customer underschedules its resources to serve its load, resulting in a difference between resources and actual metered load (adjusted for transformer losses as applicable) outside the authorized bandwidth for Energy Imbalance Service for any hour, then such Customer is subject to the Capacity Overrun Penalty.
In the event that a Customer schedules greater resources than are needed to serve its load, such that energy flows at rates beyond the authorized bandwidth for the use of Energy Imbalance Service, Southwestern retains such energy at no cost to Southwestern and with no obligation to return such energy.
Any Customer served from facilities owned by or available by contract to Southwestern will be required to maintain a power factor of not less than 95 percent and will be subject to the following provisions.
The power factor will be determined for all Demand Periods and shall be calculated under the formula:
The Customer shall be assessed a penalty for all Demand Periods of a month where the power factor is less than 95 percent lagging. For any Demand Period during a particular month such penalty shall be in accordance with the following formula:
If C is negative, then C = zero (0).
The Power Factor Penalty is applicable to radial interconnections with the System of Southwestern. The total Power Factor Penalty for any month shall be the sum of all charges “C” for all Demand Periods of such month. No penalty is assessed for leading power factor. Southwestern, in its sole judgment and at its sole option, may determine whether power factor calculations should be applied to (i) a single physical point of delivery, (ii) a combination of physical points of delivery where a Customer has a single, electrically integrated load, (iii) or interconnections. The general criteria for such decision shall be that, given the configuration of the Customer's and Southwestern's systems, Southwestern will determine, in its sole judgment and at its sole option, whether the power factor calculation more accurately assesses the detrimental impact on Southwestern's system when the above formula is calculated for a single physical point of delivery, a combination of physical points of delivery, or for an interconnection as specified by an Interconnection Agreement.
Southwestern, at its sole option, may reduce or waive Power Factor Penalties when, in Southwestern's sole judgment, low power factor conditions were not detrimental to the System of Southwestern due to particular loading and voltage conditions at the time the power factor dropped below 95 percent lagging.
Customers are required to self-provide all Real Power Losses for non-Federal energy transmitted by Southwestern on behalf of such Customers under the provisions detailed below.
Real Power Losses are computed as four (4) percent of the total amount of non-Federal energy transmitted by Southwestern. The Customer's monthly Real Power Losses are computed each month on a megawatthour basis as follows:
The Customer must schedule or cause to be scheduled to Southwestern, Real Power Losses for which it is responsible subject to the following conditions:
4.1.1. The Customer shall schedule and deliver Real Power Losses back to Southwestern during the second month after they were incurred by Southwestern in the transmission of the Customer's non-Federal power and energy over the System of Southwestern unless such Customer has accounted for Real Power Losses as part of a metering arrangement with Southwestern.
4.1.2. On or before the twentieth day of each month, Southwestern shall determine the amount of non-Federal loss energy it provided on behalf of the Customer during the previous month and provide a written schedule to the Customer setting forth hour-by-hour the quantities of non-Federal energy to be delivered to Southwestern as losses during the next month.
4.1.3. Real Power Losses not delivered to Southwestern by the Customer, according to the schedule provided, during the month in which such losses are due shall be billed by Southwestern to the Customer to adjust the end-of-month loss energy balance to zero (0) megawatthours and the Customer shall be obliged to purchase such energy at the following rates:
4.1.4. Real Power Losses delivered to Southwestern by the Customer in excess of the losses due during the month shall be purchased by Southwestern from the Customer at a rate per megawatthour equal to Southwestern's rate per megawatthour for Supplemental Peaking Energy, as set forth in Southwestern's then-effective Rate Schedule for Hydro Peaking Power to adjust such hourly end-of-month loss energy balance to zero (0) megawatthours.
Excess Energy will be furnished at such times and in such amounts as Southwestern determines to be available.
Transmission service for the delivery of Excess Energy shall be the sole responsibility of such customer purchasing Excess Energy.
$0.0094 per kilowatthour of Excess Energy delivered.
Southwestern Power Administration, DOE.
Notice of Rate Order.
The U.S. Department of Energy Deputy Secretary has approved and placed into effect on an interim basis Rate Order No. SWPA–67, which increases the power rate for the Sam Rayburn Dam (Rayburn) project pursuant to the Rayburn rate schedule (SRD–13) to supersede the existing rate schedule.
The effective period for the rate schedule specified in Rate Order No. SWPA–67 is October 1, 2013, through September 30, 2017.
Mr. James K. McDonald, Vice President for Corporate Operations/Chief Operating Officer, Southwestern Power Administration, U.S. Department of Energy, One West Third Street, Tulsa, Oklahoma 74103, (918) 595–6690 (office), (918) 595–6656 (fax),
Rate Order No. SWPA–67, which has been approved and placed into effect on an interim basis, increases the power rate for the Rayburn project pursuant to the following rate schedule:
Rate Schedule SRD–13, Wholesale Rates for Hydro Power and Energy Sold to Sam Rayburn Dam Electric Cooperative, Inc. (Contract No. DE–PM75–92SW00215)
Rate Schedule SRD–08, Wholesale Rates for Hydro Power and Energy Sold to Sam Rayburn Dam Electric Cooperative, Inc. (Contract No. DE–PM75–92SW00215) (superseded by SRD–13)
The Administrator has followed Title 10, part 903 subpart A, of the Code of Federal Regulations, “Procedures for Public Participation in Power and Transmission Rate Adjustments and Extensions” in connection with the proposed rate schedule. On August 6, 2013, Southwestern published notice in the
Information regarding this rate proposal, including studies and other supporting material, is available for public review and comment in the offices of Southwestern Power Administration, Williams Center Tower I, One West Third Street, Tulsa, Oklahoma 74103. Following review of Southwestern's proposal within the Department of Energy, I hereby approve Rate Order No. SWPA–67 which increases the existing Sam Rayburn Dam rate to $4,230,120 per year for the period October 1, 2013 through September 30, 2017. Rate Order No. SWPA–67 will be submitted to FERC for confirmation and approval on a final basis.
The Administrative Procedure Act requires that publication of a substantive rule be made not less than 30 days before its effective date, except, in relevant part, if the agency has good cause to waive the delay requirement (5 U.S.C. 553(d)). Southwestern finds good cause to waive the 30-day delay in effective date, placing the rates in effect on an interim basis starting October 1, 2013, because the current rate is insufficient to recover costs as required by statute; no change to the standard October 1 date of implementation is being made; and no comments were received and no revisions were made to the proposed rates.
Pursuant to Sections 302(a) and 301(b) of the Department of Energy Organization Act, Public Law 95–91, the functions of the Secretary of the Interior and the Federal Power Commission under Section 5 of the Flood Control Act of 1944, 16 U.S.C. 825s, relating to the Southwestern Power Administration (Southwestern) were transferred to and vested in the Secretary of Energy. By Delegation Order No. 00–037.00, the Secretary of Energy delegated to the Administrator of Southwestern the authority to develop power and transmission rates, delegated to the Deputy Secretary of the
The Sam Rayburn Dam (Rayburn) is located on the Angelina River in the State of Texas in the Neches River Basin. Since the beginning of its operation in 1965, it has been marketed as an isolated project, under contract with Sam Rayburn Dam Electric Cooperative, Inc. (SRDEC) (Contract No. DE–PM75–92SW00215).
FERC confirmation and approval of the current Rayburn rate schedule was provided in FERC Docket No. EF09–4021–000 issued on March 30, 2009, (126 FERC ¶ 62224) effective for the period January 1, 2009, through September 30, 2012. The rate was extended by the Deputy Secretary of Energy for the period October 1, 2012 through September 30, 2013 (77 FR 67813, November 14, 2012), and FERC was notified of the extension (Docket No. EF13–2–000).
Southwestern prepared a 2013 Current Power Repayment Study (PRS) which indicated that the existing rate would not satisfy present financial criteria regarding repayment of investment within a 50-year period due to increased U.S. Army Corps of Engineers (Corps) investments, replacements and operations and maintenance expenses in the hydroelectric generating facilities. The Revised PRS indicated the need for a 7.1 percent revenue increase. These preliminary results, which presented the basis for the proposed revenue increase, were provided to the customers for their review prior to the formal process.
The final 2013 Revised PRS indicates that an increase in annual revenues of $280,248 (7.1 percent) is necessary beginning October 1, 2013, to accomplish repayment in the required number of years. Accordingly, Southwestern has prepared a proposed rate schedule based on the additional revenue requirement to ensure repayment.
Southwestern conducted the rate adjustment proceeding in accordance with Title 10, part 903, subpart A of the Code of Federal Regulations, “Procedures for Public Participation in Power and Transmission Rate Adjustments and Extensions.” More specifically, opportunities for public review and comment during a 30-day period on the proposed Rayburn power rate were announced by a
Southwestern will continue to perform its Power Repayment Studies annually, and if the 2014 results should indicate the need for additional revenues, another rate filing will be conducted and updated revenue requirements implemented for FY 2014 and thereafter.
Following the conclusion of the comment period on September 5, 2013, Southwestern finalized the PRS and rate schedule for the proposed annual rate of $4,230,120 which is the lowest possible rate needed to satisfy repayment criteria. This rate represents an annual increase of 7.1 percent. The Administrator made the decision to submit the rate proposal for interim approval and implementation.
Southwestern received one comment during the public comment period. That comment expressed no objection to the final proposed rate on behalf of the Sam Rayburn Dam Electric Cooperative, Inc.
Information regarding this rate increase, including studies, comments and other supporting material, is available for public review and comment in the offices of Southwestern Power Administration, One West Third Street, Tulsa, OK 74103.
The 2013 Rayburn Revised PRS indicates that the increased power rate of $4,230,120 will repay all costs of the project including amortization of the power investment consistent with the provisions of Department of Energy Order No. RA 6120.2. In accordance with Delegation Order No. 00–037.00 (December 6, 2001), and Section 5 of the Flood Control Act of 1944, the Administrator has determined that the proposed Rayburn rate is consistent with applicable law and the lowest possible rate consistent with sound business principles.
The environmental impact of the rate increase proposal was evaluated in consideration of DOE's guidelines for implementing the procedural provisions of the National Environmental Policy Act and was determined to fall within the class of actions that are categorically excluded from the requirements of preparing either an Environmental Impact Statement or an Environmental Assessment.
In view of the foregoing and pursuant to the authority delegated to me by the Secretary of Energy, I hereby confirm, approve and place in effect on an interim basis, effective October 1, 2013, through September 30, 2017, the annual Sam Rayburn Dam rate of $4,230,120 for the sale of power and energy from the Sam Rayburn Dam project to the Sam Rayburn Dam Electric Cooperative Inc., under Contract No. DE–PM75–92SW00215. This rate shall remain in effect on an interim basis through September 30, 2017, or until the FERC confirms and approves the rate on a final basis, or until it is superseded by a subsequent rate.
During the period October 1, 2013, through September 30, 2017, in accordance with interim approval from Rate Order No. SWPA–67 issued by the Deputy Secretary of Energy on
To the power and energy purchased by Sam Rayburn Dam Electric Cooperative, Inc., (SRDEC) from the Southwestern Power Administration (Southwestern) under the terms and conditions of the Power Sales Contract dated October 7, 1992, for the sale of all Hydro Power and Energy generated at the Sam Rayburn Dam.
Three-phase, alternating current, delivered at approximately 60 Hertz, at the nominal voltage, at the point of delivery, and in such quantities as are specified by contract.
1.1. These rates shall be applicable regardless of the quantity of Hydro Power and Energy available or delivered to SRDEC;
1.2. The term “Uncontrollable Force,” as used herein, shall mean any force which is not within the control of the party affected, including, but not limited to, failure of water supply, failure of facilities, flood, earthquake, storm, lightning, fire, epidemic, riot, civil disturbance, labor disturbance, sabotage, war, acts of war, terrorist acts, or restraint by court of general jurisdiction, which by exercise of due diligence and foresight such party could not reasonably have been expected to avoid.
$352,510 per month ($4,230,120 per year) for Sam Rayburn Dam Hydro Power and
Environmental Protection Agency (EPA).
Notice.
The Environmental Protection Agency is planning to submit an information collection request (ICR), “Clean Water Act Section 404 State-Assumed Programs” (EPA ICR No. 0220.12, OMB Control No. 2040–0168) to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act (44 U.S.C. 3501
Comments must be submitted on or before December 23, 2013.
Submit your comments, referencing Docket ID No. EPA–HQ–OW–2005–0023, online using
EPA's policy is that all comments received will be included in the public docket without change including any personal information provided, unless the comment includes profanity, threats, information claimed to be Confidential Business Information (CBI) or other information whose disclosure is restricted by statute.
Kathy Hurld, Office of Wetlands, Oceans, and Watersheds, Wetlands Division (4502T), Environmental Protection Agency, 1200 Pennsylvania Ave. NW., Washington, DC 20460; telephone: 202–566–1348; fax number: 202–566–1349; email address:
Supporting documents which explain in detail the information that the EPA will be collecting are available in the public docket for this ICR. The docket can be viewed online at
Pursuant to section 3506(c)(2)(A) of the PRA, EPA is soliciting comments and information to enable it to: (i) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the Agency, including whether the information will have practical utility; (ii) 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; (iii) enhance the quality, utility, and clarity of the information to be collected; and (iv) 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 submission of responses. EPA will consider the comments received and amend the ICR as appropriate. The final ICR package will then be submitted to OMB for review and approval. At that time, EPA will issue another
Request to assume CWA section 404 permit program. States/Tribes must demonstrate that they meet the statutory and regulatory requirements (40 CFR 233) for an approvable program. Specified information and documents must be submitted by the State/Tribe to EPA to request assumption and must be sufficient to enable EPA to undertake a thorough analysis of the State/Tribal program. Once the required information and documents are submitted and EPA has a complete assumption request package, the statutory time clock for EPA's decision to either approve or disapprove the State/Tribe's assumption request starts. The information contained in the assumption request submission is provided to the other involved Federal agencies (Corps of Engineers, US Fish and Wildlife Service, and National Marine Fisheries Service) and to the general public for review and comment.
States/Tribes with assumed programs must be able to issue permits that assure compliance with all applicable statutory and regulatory requirements, including the 404(b)(1) Guidelines. Sufficient information must be provided in the application so that States/Tribes, and Federal agencies reviewing the permit, are able to evaluate, avoid, minimize and compensate for any anticipated impacts resulting from the proposed project. EPA's assumption regulations establish required and recommended elements that should be included in the State/Tribe's permit application, so that sufficient information is available to make a thorough analysis of anticipated impacts. (40 CFR 233.30). These minimum information requirements generally reflect the information that must be submitted when applying for a section 404 permit from the Corps of Engineers. (CWA section 404(h); CWA section 404(j); 40 CFR 230.10, 233.20, 233.21, 233.34, and 233.50; 33 CFR 325).
EPA has an oversight role for assumed 404 permitting programs to ensure that State/Tribal programs are in compliance with applicable requirements and that State/Tribal permit decisions adequately consider, avoid, minimize and compensate for anticipated impacts. States/Tribes must evaluate their programs annually and submit the results in a report to EPA. EPA's assumption regulations establish minimum requirements for the annual report (40 CFR 233.52).
The information included in the State/Tribe's assumption request and the information included in a permit application is made available for public review and comment. The information included in the annual report to EPA is made available to the public. EPA does not make any assurances of confidentiality for this information.
Environmental Protection Agency (EPA).
Notice.
The Environmental Protection Agency has submitted an information collection request (ICR), “NSPS for Magnetic Tape Coating Facilities (40 CFR part 60, subpart SSS) (Renewal)” (EPA ICR No. 1135.11, OMB Control No. 2060–0171), to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act (44 U.S.C. 3501
Additional comments may be submitted on or before November 21, 2013.
Submit your comments, referencing Docket ID Number EPA–HQ–OECA–2013–0318, to: (1) EPA online using
EPA's policy is that all comments received will be included in the public docket without change including any personal information provided, unless the comment includes profanity, threats, information claimed to be Confidential Business Information (CBI) or other information whose disclosure is restricted by statute.
Learia Williams, Monitoring, Assistance, and Media Programs Division, Office of Compliance, Mail Code 2227A, Environmental Protection Agency, 1200 Pennsylvania Ave. NW., Washington, DC 20460; telephone number: (202) 564–4113; fax number: (202) 564–0050; email address:
Supporting documents which explain in detail the information that the EPA will be collecting are available in the public docket for this ICR. The docket can be viewed online at
Environmental Protection Agency (EPA).
Notice of Settlement.
Under 122(h) of the Comprehensive Environmental
The Agency will consider public comments on the settlement until November 21, 2013. The Agency will consider all comments received and may modify or withdraw its consent to the settlement if comments received disclose facts or considerations which indicate that the settlement is inappropriate, improper, or inadequate.
Copies of the settlement are available from the Agency by contacting Ms. Paula V. Painter, Environmental Protection Specialist using the contact information provided in this notice. Comments may also be submitted by referencing the Site's name through one of the following methods:
•
•
•
Paula V. Painter at 404/562–8887
Federal Deposit Insurance Corporation (FDIC).
Notice and request for comment.
In accordance with requirements of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.), the FDIC may not conduct or sponsor, and the respondent is not required to respond to, an information collection unless it displays a currently valid Office of Management and Budget (OMB) control number. As part of its continuing effort to reduce paperwork and respondent burden, the FDIC invites the general public and other Federal agencies to take this opportunity to comment on revision of an existing information collection, as required by the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35). The FDIC is seeking public comment on proposed revisions to its “Forms Related to Processing Deposit Insurance Claims” information collection (OMB No. 3064–0143). At the end of the comment period, any comments and recommendations received will be analyzed to determine the extent to which the FDIC should modify the proposed revisions prior to submission to OMB for review and approval.
Comments must be submitted on or before December 23, 2013.
Interested parties are invited to submit written comments. All comments should refer to the name of the collection. Comments may be submitted by any of the following methods:
•
•
•
•
A copy of the comments may also be submitted to the FDIC Desk Officer, Office of Information and Regulatory Affairs, Office of Management and Budget, New Executive Office Building, Room 10235, Washington, DC 20503.
For further information about the revisions discussed in this notice, please contact Gary Kuiper, by telephone at 202.898.3877 or by mail at the address identified above. In addition, a link to copies of the revised and new forms is available directly beneath this notice on the FDIC's
The FDIC is proposing to revise three of the forms in the collection: Declaration for Combined Contribution Plan (7200/10), Declaration for Defined Benefit Plan (7200/12), and Declaration for Health and Welfare Plan (7200/14); make minor clarifying changes to 10 of the forms in the collection: Declaration for Government Deposit (7200/04), Declaration for Revocable Living Trust (7200/05), Declaration of Independent Activity (7200/06), Declaration of Independent Activity for Unincorporated Association (7200/07), Declaration of Joint Ownership Deposit (7200/08), Declaration of Testamentary Deposit (7200/09), Declaration of IRA Keogh Deposit (7200/11), Declaration of Custodian Deposit (7200/13), Declaration for Plan and Trust (7200/15), and Declaration for Irrevocable Trust (7200/18); and add two new forms to the collection: Claimant Verification Form (7200/24) and Depositor Interview Form (7200/26).
Declaration for Irrevocable Trust, Form 7200/18.
Comments are invited on: (a) Whether these collections of information are necessary for the proper performance of the FDIC's functions, including whether the information has practical utility; (b) the accuracy of the estimate of the burden of the information collection, including the validity of the methodology and assumptions used; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the information collection on respondents, including through the use of automated collection techniques or other forms of information technology. All comments will become a matter of public record.
Federal Deposit Insurance Corporation.
Federal Deposit Insurance Corporation (FDIC).
Notice and request for comment.
In accordance with the requirements of the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. chapter 35), the FDIC may not conduct or sponsor, and the respondent is not required to respond to, an information collection unless it displays a currently valid Office of Management and Budget (OMB) control number. The FDIC hereby gives notice that it is seeking comment on renewal of its information collection, entitled
Comments must be submitted on or before December 23, 2013.
Interested parties are invited to submit written comments to the FDIC by any of the following methods:
•
•
•
•
All comments should refer to the relevant OMB control number. A copy of the comments may also be submitted to the OMB desk officer for the FDIC: Office of Information and Regulatory Affairs, Office of Management and Budget, New Executive Office Building, Washington, DC 20503.
Leneta Gregorie, at the FDIC address above.
Proposal to renew the following currently approved collections of information:
Comments are invited on: (a) Whether the collection of information is necessary for the proper performance of the FDIC's functions, including whether the information has practical utility; (b) the accuracy of the estimates of the burden of the information collection, including the validity of the methodology and assumptions used; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the information collection on respondents, including through the use of automated collection techniques or other forms of information technology. All comments will become a matter of public record.
Federal Deposit Insurance Corporation (FDIC).
Notice of Designated Reserve Ratio for 2014.
Pursuant to the Federal Deposit Insurance Act, the Board of Directors of the Federal Deposit Insurance Corporation designates that the Designated Reserve Ratio (DRR) for the Deposit Insurance Fund shall remain at 2 percent for 2014.
Munsell St. Clair, Chief, Banking and Regulatory Policy Section, Division of Insurance and Research, (202) 898–8967; or, Christopher Bellotto, Counsel, Legal Division, (202) 898–3801.
By order of the Board of Directors.
This notice corrects a notice (FR Doc. 2013–24477) published on page 62333 of the issue for Thursday, October 17, 2013.
Under the Federal Reserve Bank of Minneapolis heading, the entry for Karen Neidhardt, Tampa, Florida, is revised to read as follows:
A Federal Reserve Bank of Minneapolis (Jacqueline G. King, Community Affairs Officer) 90 Hennepin Avenue, Minneapolis, Minnesota 55480–0291:
1.
In addition, Ann Lenore Musser Irrevocable Trust, Kenmare, North Dakota, Karen Neidhardt and Jane Neidhardt Farris, co-trustees, and Jane Ellen Neidhardt Irrevocable Trust, all of Kenmare, North Dakota, Karen Neidhardt and Ann N. Musser, co-trustees, to retain voting shares of Jorgenson Holding Company and thereby join the Jorgenson family group.
Comments on this application must be received by October 31. 2013.
The companies listed in this notice have applied to the Board for approval,
The applications listed below, as well as other related filings required by the Board, are available for immediate inspection at the Federal Reserve Bank indicated. The applications will also be available for inspection at the offices of the Board of Governors. Interested persons may express their views in writing on the standards enumerated in the BHC Act (12 U.S.C. 1842(c)). If the proposal also involves the acquisition of a nonbanking company, the review also includes whether the acquisition of the nonbanking company complies with the standards in section 4 of the BHC Act (12 U.S.C. 1843). Unless otherwise noted, nonbanking activities will be conducted throughout the United States.
Unless otherwise noted, comments regarding each of these applications must be received at the Reserve Bank indicated or the offices of the Board of Governors not later than November 15, 2013.
A. Federal Reserve Bank of San Francisco (Gerald C. Tsai, Director, Applications and Enforcement) 101 Market Street, San Francisco, California 94105–1579:
1.
The companies listed in this notice have applied to the Board for approval, pursuant to the Home Owners' Loan Act (12 U.S.C. 1461
The applications listed below, as well as other related filings required by the Board, are available for immediate inspection at the Federal Reserve Bank indicated. The application also will be available for inspection at the offices of the Board of Governors. Interested persons may express their views in writing on the standards enumerated in the HOLA (12 U.S.C. 1467a(e)). If the proposal also involves the acquisition of a nonbanking company, the review also includes whether the acquisition of the nonbanking company complies with the standards in section 10(c)(4)(B) of the HOLA (12 U.S.C. 1467a(c)(4)(B)). Unless otherwise noted, nonbanking activities will be conducted throughout the United States.
Unless otherwise noted, comments regarding each of these applications must be received at the Reserve Bank indicated or the offices of the Board of Governors not later than November 15, 2013.
A. Federal Reserve Bank of Dallas (E. Ann Worthy, Vice President) 2200 North Pearl Street, Dallas, Texas 75201–2272:
1.
Office of the Secretary, Department of Health and Human Services.
Notice.
As stipulated by the Federal Advisory Committee Act, the U.S. Department of Health and Human Services (HHS) is hereby giving notice that the National Biodefense Science Board (NBSB) will be holding a public meeting via teleconference. The meeting is open to the public.
The NBSB will hold a public meeting on October 31, 2013, tentatively, from 3:00 p.m. to 4:00 p.m. ET. The agenda is subject to change as priorities dictate.
Individuals who wish to participate should send an email to
The National Biodefense Science Board mailbox:
Pursuant to section 319M of the Public Health Service Act (
In accordance with section 10(a)(2) of the Federal Advisory Committee Act (Pub. L. 92–463), the Centers for Disease Control and Prevention (CDC) announces the following meeting for the aforementioned subcommittee:
In December 2000, the President delegated responsibility for funding, staffing, and operating the ABRWH to HHS, which subsequently delegated this authority to CDC. NIOSH implements this responsibility for CDC. The charter was issued on August 3, 2001, renewed at appropriate intervals, and will expire on August 3, 2015.
The agenda is subject to change as priorities dictate.
This meeting is open to the public, but without a public comment period. In the event an individual wishes to provide comments, written comments may be submitted. Any written comments received will be provided at the meeting and should be submitted to the contact person below in advance of the meeting.
The Director, Management Analysis and Services Office, has been delegated the authority to sign
In accordance with section 10(a)(2) of the Federal Advisory Committee Act (Pub. L. 92–463), the Centers for Disease Control and Prevention (CDC) announces the following meeting of the aforementioned subcommittee:
The agenda is subject to change as priorities dictate.
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The Director, Management Analysis and Services Office, has been delegated the authority to sign
In accordance with section 10(a)(2) of the Federal Advisory Committee Act (Pub. L. 92–463), the Centers for Disease Control and Prevention (CDC) announce the following meeting for the aforementioned committee:
Agenda items are subject to change as priorities dictate.
The Director, Management Analysis and Services Office, has been delegated the authority to sign
The meeting announced below concerns Cooperative Agreement on Occupational Health with the World Health Organization (WHO): Implementing World Health Assembly Resolution 60.26 Global Plan of Action for Workers Health 2008–2017; RFA OH14–002.
In accordance with Section 10(a)(2) of the Federal Advisory Committee Act (Pub. L. 92–463), the Centers for Disease Control and Prevention (CDC) announces the aforementioned meeting:
The Director, Management Analysis and Services Office, has been delegated the authority to sign
Notice.
The Centers for Medicare & Medicaid Services (CMS) is announcing an opportunity for the public to comment on CMS' intention to collect information from the public. Under the Paperwork Reduction Act of 1995 (PRA), federal agencies are required to publish notice in the
Comments on the collection(s) of information must be received by the OMB desk officer by
When commenting on the proposed information collections, please reference the document identifier or OMB control number. To be assured consideration, comments and recommendations must be received by the OMB desk officer via one of the following transmissions: OMB, Office of Information and Regulatory Affairs, Attention: CMS Desk Officer, Fax Number: (202) 395–6974 or Email:
To obtain copies of a supporting statement and any related forms for the proposed collection(s) summarized in this notice, you may make your request using one of following:
1. Access CMS' Web site address at
2. Email your request, including your address, phone number, OMB number, and CMS document identifier, to
3. Call the Reports Clearance Office at (410) 786–1326.
Reports Clearance Office at (410) 786–1326
Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501–3520), federal Agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. The term “collection of information” is defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3(c) and includes agency requests or requirements that members of the public submit reports, keep records, or provide information to a third party. Section 3506(c)(2)(A) of the PRA (44 U.S.C. 3506(c)(2)(A)) requires federal agencies to publish a 30-day notice in the
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The goals of the PREP Multi-Component Evaluation are to document how PREP programs are designed and implemented in the field, collect performance measure data for PREP programs, and assess the effectiveness of selected PREP-funded programs.
The PREP Multi-Component Evaluation contains three components: The “Design and Implementation Study,” the “Performance Analysis Study,” and the “Impact and In-Depth Implementation Study.” Previously approved data collection efforts for each of the three components can be found on
The goals of this portion of the study are to document how States and sub-awardees actually implemented their PREP programs, given their program designs. In order to meet this goal, both State PREP Administrators and a selection of sub-awardee program providers, across the nation, will be interviewed. The interviews will be used to understand important aspects of implementation, such as training, technical assistance and program fidelity monitoring.
In compliance with the requirements of Section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995, the Administration for Children and Families is soliciting public comment on the specific aspects of the information collection described above. Copies of the proposed collection of information can be obtained and comments may be forwarded by writing to the Administration for Children and Families, Office of Planning, Research and Evaluation, 370 L'Enfant Promenade SW., Washington, DC 20447, Attn: OPRE Reports Clearance Officer. Email address:
The Department specifically requests comments on (a) whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (b) the accuracy of the agency's estimate of the burden of the proposed collection of information; (c) the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted within 60 days of this publication.
1. To implement third-party verification of household data obtained during the LIHEAP intake process, in order to strengthen program integrity by reducing the risk of making LIHEAP benefit payments to ineligible households or in the wrong amount. These risks arise in large part when there are errors or fraud in the reporting of household members' identity and income during the LIHEAP intake process.
2. To collect and report new performance measures that ACF is proposing to require of all State LIHEAP grantees by Fiscal Year 2015.
This needs assessment represents a maturity model—a process for determining the existing capabilities of grantees. Through a web-based tool, respondents will be asked to indicate the level of maturity, or sophistication, of their program across multiple areas of evaluation. The data collected will be analyzed to identify strengths and weaknesses among grantees and determine opportunities for improvement. This needs assessment is designed to identify and organize the systems, processes and activities that are critical to each grantee's LIHEAP program.
The needs assessment is broken up into multiple sections. Each section is focused on a different part of the overall program, and as such may be best answered by an individual with expertise in that specific area of the program. Burden estimates shown below represent the total time to complete all sections by all relevant parties.
The data that will be obtained through this needs assessment is a one-time collection to inform ACF in its operational decision-making over how to distribute training and technical assistance, and other capacity building resources to its directly-funded LIHEAP grantees. The data will be for internal use by ACF and its contractors for this internal purpose only. Currently, there is very limited data available on a national scale to provide program administrators and stakeholders information on the impact of LIHEAP services and the effectiveness of how the program is administered. The data that will be collected through this needs assessment will inform ACF as to how to help LIHEAP grantees improve the timeliness and accuracy of their data collection and reporting which will in turn provide better feedback to ACF and national stakeholders about the program's performance.
Comments and questions about the information collection described above should be directed to the Office of Information and Regulatory Affairs, Attn: OMB Desk Officer for ACF, Office of Management and Budget, Paperwork Reduction Project, 725 17th Street NW., Washington, DC 20503; FAX: (202) 395–7285; email:
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. App.), notice is hereby given of the following meetings.
The meetings will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The contract proposals and the discussions could disclose
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. App.), notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. App.), notice is hereby given of the following meetings.
The meetings will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. App.), notice is hereby given of the following meetings.
The meetings will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. App.), notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. App.), notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. App.), notice is hereby given of the following meetings.
The meetings will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. App.), notice is hereby given of the following meetings.
The meetings will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Substance Abuse and Mental Health Services Administration, HHS.
Notice of intent to award a Single Source Grant to Link2Health Solutions, Inc.
This notice is to inform the public that the Substance Abuse and Mental Health Services Administration (SAMHSA) intends to award approximately $2,100,000 (total costs) for the HHS Programs for Disaster Relief Appropriations Act—Non Construction—SAMHSA Disaster Distress Helpline (DDH—Hurricane Sandy) for up to two years to Link2Health Solutions, Inc., the current grantee for the National Suicide Prevention Lifeline. This is not a formal request for applications. Assistance will be provided only to Link2Health Solutions, Inc. based on the receipt of a satisfactory application that is approved by an objective review group.
The Disaster Relief Appropriations Act of 2013 (Pub. L. 113–2).
Link2Health Solutions is in the unique position to carry out the activities of this grant announcement because it is the current recipient of SAMHSA's cooperative agreement to manage the National Suicide Prevention Lifeline. As such, Link2Health Solutions has been maintaining the network communications system and has an existing relationship with the networked crisis centers.
The purpose of this funding is for the implementation of the Disaster Distress Helpline—Hurricane Sandy, which provides access to trained crisis support professionals, 24 hours a day, 7 days a week (24/7), in response to urgent and emerging behavioral health needs for the areas in Connecticut, Delaware, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, Virginia, West Virginia, and the District of Columbia, that were directly affected by Hurricane Sandy. The DDH—Hurricane Sandy will utilize one contracted crisis center, from the Suicide Prevention Lifeline network, in the impacted region. Additionally, one back-up center will be funded to support the DDH—Hurricane Sandy.
Federal Emergency Management Agency, DHS.
Notice.
The Federal Emergency Management Agency (FEMA) is submitting a request for review and approval of a collection of information under the emergency processing procedures in Office of Management and Budget (OMB) regulation 5 CFR 1320.13. FEMA is requesting that this information collection be approved by November 12, 2013. The approval will authorize FEMA to use the collection through May 12, 2014. FEMA plans to follow this emergency request with a request for a 3-year renewal approval. The request will be processed under OMB's normal clearance procedures in accordance with the provisions of OMB regulation 5 CFR 1320.10. To help us with the timely processing of the emergency and normal clearance submissions to OMB, FEMA invites the general public to comment on the proposed collection of information.
Comments must be submitted to OMB on or before November 12, 2013. You may submit comments to FEMA on or before November 12, 2013.
Submit written comments on the proposed information collection to the Office of Information and Regulatory Affairs, Office of Management and Budget. Comments should be addressed to the Desk Officer for the Department of Homeland Security, Federal Emergency Management Agency (Proposed change to existing collection, FEMA Form 010–0–11),
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All submissions received must include the agency name and Docket ID. Regardless of the method used for submitting comments or material, all submissions will be posted, without change, to the Federal eRulemaking Portal at
Requests for additional information or copies of the information collection should be made to Director, Records Management Division, Office of the Chief Administrative Officer, Mission Support Bureau, Federal Emergency Management Agency, 1800 South Bell Street, Arlington, VA 20598–3005, facsimile number (202) 646–3347, or at email address
The Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. 5121–5207 (the Act) is the legal basis for FEMA to provide disaster related assistance and services to individuals who apply for disaster assistance benefits in the event of a federally declared disaster. The Individuals and Households Program (IHP) (the Act at 5174, Federal Assistance to Individuals and Households) provides financial assistance to eligible individuals and households who, as a direct result of a major disaster or emergency have necessary expenses and serious needs. The “Other Needs Assistance” (ONA) provision of IHP provides disaster assistance to address needs other than housing, such as personal property, transportation, etc.
The delivery of the ONA provision of IHP is contingent upon the State/Tribe choosing an administrator for the assistance. States/Tribes satisfy the selection of an administrator of ONA by completing the Administrative Option Agreement (FEMA Form 010–0–11), which establishes a plan for the delivery of ONA. This agreement establishes a partnership with FEMA and inscribes the plan for the delivery of disaster assistance. The agreement is used to identify the State/Tribe's proposed level of support and participation during disaster recovery. In response to Super Storm Sandy (October 2012), Congress added “child care” expenses as a category of ONA through the Sandy Recovery Improvement Act of 2013 (SRIA), Public Law 113–2. Section 1108 of the SRIA amends section 408(e)(1) of the Stafford Act (42 U.S.C. 5174(e)(1)), giving FEMA the specific authority to pay for “child care” expenses as disaster assistance under ONA.
In light of this legislation, FEMA needs to change FEMA Form 010–0–11 so that States/Tribes who want to administer ONA can choose “child care” expenses as one of the categories. Without having this option on the form, FEMA cannot meet statutory requirement to consult with the Governor of a State (or Tribal Executive) with respect to providing IHP ONA.
Written comments are solicited to (a) evaluate whether the proposed data collection is necessary for the proper performance of the agency, including whether the information shall have practical utility; (b) evaluate the accuracy of the agency's estimate of the burden of the proposed information collection, including the validity of the methodology and assumptions used; (c) enhance the quality, utility, and clarity of the information to be collected; and (d) minimize the burden of the collection of information on those who are to respond, including through the
Federal Emergency Management Agency, DHS.
Notice.
The Federal Emergency Management Agency (FEMA) is submitting a request for review and approval of a collection of information under the emergency processing procedures in Office of Management and Budget (OMB) regulation 5 CFR 1320.13. FEMA is requesting that this information collection be approved by November 12, 2013. The approval will authorize FEMA to use the collection through May 12, 2014. FEMA plans to follow this emergency request with a request for a 3-year renewal approval. The request will be processed under OMB's normal clearance procedures in accordance with the provisions of OMB regulation 5 CFR 1320.10. To help us with the timely processing of the emergency and normal clearance submissions to OMB, FEMA invites the general public to comment on the proposed collection of information.
Comments must be submitted to OMB on or before November 12, 2013. You may submit comments to FEMA on or before November 12, 2013.
Submit written comments on the proposed information collection to the Office of Information and Regulatory Affairs, Office of Management and Budget. Comments should be addressed to the Desk Officer for the Department of Homeland Security, Federal Emergency Management Agency (Proposed change to existing collection, FEMA FORMS 009–0–1, 009–0–2, 009–0–1Int, 009–0–2Int, 009–0–1S, 009–0–2S, 009–0–1T, and eligibility/verification correspondence).
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All submissions received must include the agency name and Docket ID. Regardless of the method used for submitting comments or material, all submissions will be posted, without change, to the Federal eRulemaking Portal at
Requests for additional information or copies of the information collection should be made to Director, Records Management Division, Office of the Chief Administrative Officer, Mission Support Bureau, Federal Emergency Management Agency, 1800 South Bell Street, Arlington, VA 20598–3005, facsimile number (202) 646–3347, or at email address
The Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. 5121–5207 (the Act) is the legal basis for FEMA to provide disaster related assistance and services to individuals who apply for disaster assistance benefits in the event of a federally declared disaster. The Individuals and Households Program (IHP) (the Act at 5174, Federal Assistance to Individuals and Households) provides financial assistance to eligible individuals and households who, as a direct result of a major disaster or emergency have necessary expenses and serious needs. Individuals and households that apply for this assistance must provide information detailing their losses and needs. In response to Super Storm Sandy (October 2012), Congress added “child care” expenses as a category of IHP assistance through the Sandy Recovery Improvement Act of 2013 (SRIA), Public Law 113–2. Section 1108 of the SRIA amends section 408(e)(1) of the Stafford Act (42 U.S.C. 5174(e)(1)), giving FEMA the specific authority to pay for “child care” expenses as disaster assistance under the Other Needs Assistance (ONA) provision of IHP in addition to funeral, medical and dental expenses.
FEMA's current registration application and script for IHP disaster assistance does not ask questions regarding a survivor/registrant's need for assistance with “child care” expenses. Thus, FEMA needs to change its application to include a question about whether the survivor/registrant needs financial assistance for child care expenses as a result of a disaster. FEMA also needs to collect necessary paperwork from the survivor/registrant to determine eligibility and verify the expenses associated with child care through correspondence with the survivor/registrant.
Written comments are solicited to (a) evaluate whether the proposed data collection is necessary for the proper performance of the agency, including whether the information shall have practical utility; (b) evaluate the accuracy of the agency's estimate of the burden of the proposed information collection, including the validity of the methodology and assumptions used; (c) enhance the quality, utility, and clarity of the information to be collected; and (d) 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 technology, e.g., permitting electronic submission of responses. Submit comments to OMB within November 12, 2013. To ensure that FEMA is fully aware of any comments or concerns that you share with OMB, please provide FEMA with a copy of your comments. Submit comments to the FEMA address listed in the
30-day notice.
The Department of Homeland Security (DHS), U.S. Citizenship and Immigration Services (USCIS) will be submitting the following information collection request to the Office of Management and Budget (OMB) for review and clearance in accordance with the Paperwork Reduction Act of 1995. The notice allowing for a 60-day public comment period for this information collection was previously published in the
The purpose of this notice is to allow an additional 30 days for public comments. Comments are encouraged and will be accepted until November 21, 2013. This process is conducted in accordance with 5 CFR 1320.10.
Written comments and/or suggestions regarding the item(s) contained in this notice, especially regarding the estimated public burden and associated response time, must be directed to the OMB USCIS Desk Officer via email at
Regardless of the method used for submitting comments or material, all submissions will be posted, without change, to the Federal eRulemaking Portal at
The address listed in this notice should only be used to submit comments concerning this information collection. Please do not submit requests for individual case status inquiries to this address. If you are seeking information about the status of your individual case, please check “My Case Status” online at:
Written comments and suggestions from the public and affected agencies should address one or more of the following four points:
(1) Evaluate whether the proposed collection of information is necessary for the proper performance of the 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 submission of responses.
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If you need a copy of the information collection instrument with supplementary documents, or need additional information, please visit
60-Day Notice.
The Department of Homeland Security (DHS), U.S. Citizenship and Immigration Services (USCIS) invites the general public and other Federal agencies to comment upon this proposed revision of a currently approved collection of information. In accordance with the Paperwork Reduction Act (PRA) of 1995, the information collection notice is published in the
Comments are encouraged and will be accepted for 60 days until December 23, 2013.
All submissions received must include the OMB Control Number 1615–0018 in the subject box, the agency name and Docket ID USCIS- 2008–0068. To avoid duplicate submissions, please use only one of the following methods to submit comments:
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Regardless of the method used for submitting comments or material, all submissions will be posted, without change, to the Federal eRulemaking Portal at
The address listed in this notice should only be used to submit comments concerning this information collection. Please do not submit requests for individual case status inquiries to this address. If you are seeking information about the status of your individual case, please check “My Case Status” online at:
Written comments and suggestions from the public and affected agencies should address one or more of the following four points:
(1) Evaluate whether the proposed collection of information is necessary for the proper performance of the 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 submission of responses.
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If you need a copy of the information collection instrument with instructions, or additional information, please visit the Federal eRulemaking Portal site at:
U.S. Customs and Border Protection, Department of Homeland Security.
Notice of accreditation and approval of Camin Cargo Control, Inc., as a commercial gauger and laboratory.
Notice is hereby given, pursuant to CBP regulations, that Camin Cargo Control, Inc., has been approved to gauge and accredited to test petroleum and petroleum products, organic chemicals and vegetable oils for customs purposes for the next three years as of February 21, 2013.
Approved Gauger and Accredited Laboratories Manager, Laboratories and Scientific Services, U.S. Customs and Border Protection, 1300 Pennsylvania
Notice is hereby given pursuant to 19 CFR 151.12 and 19 CFR 151.13, that Camin Cargo Control, Inc., 31 Fulton Street—Unit A, New Haven, CT 06513, has been approved to gauge and accredited to test petroleum and petroleum products, organic chemicals and vegetable oils for customs purposes, in accordance with the provisions of 19 CFR 151.12 and 19 CFR 151.13. Anyone wishing to employ this entity to conduct laboratory analyses and gauger services should request and receive written assurances from the entity that it is accredited or approved by the U.S. Customs and Border Protection to conduct the specific test or gauger service requested. Alternatively, inquiries regarding the specific test or gauger service this entity is accredited or approved to perform may be directed to the U.S. Customs and Border Protection by calling (202) 344–1060. The inquiry may also be sent to
Fish and Wildlife Service, Interior.
Notice of availability; request for comments.
We, the U.S. Fish and Wildlife Service (Service), received a permit application from the Garfield County Commission and are announcing the availability of a Draft Low-effect Habitat Conservation Plan (HCP) for the Utah prairie dog in Garfield County, Utah, for review and comment by the public and Federal, Tribal, State, and local governments. We request comment on the draft low-effect HCP.
Written comments must be submitted by November 21, 2013.
Send written comments by U.S. mail to Laura Romin, Deputy Field Supervisor, Utah Ecological Services Field Office, U.S. Fish and Wildlife Service, 2369 W. Orton Circle, Suite 50, West Valley City, UT 84119, or via email to
Laura Romin, 801–975–3330, ext. 142;
We announce availability for review and comment of the Draft Low-effect Habitat Conservation Plan for the Utah prairie dog in Garfield County, Utah. The Garfield County Commission has prepared a draft low-effect habitat conservation plan (HCP) for the translocation of Utah prairie dogs away from human developed areas or where construction is occurring in and adjacent to Panguitch, Utah, and that may result in incidental take of the federally threatened Utah prairie dog. The intent of this low-effect HCP is to serve as an interim mechanism to authorize incidental take in the short term while a more comprehensive long-term or range-wide habitat conservation plan is prepared for the species. We request public comment on the draft low-effect HCP.
Section 9 of the Endangered Species Act (ESA) (16 U.S.C. 1538) and its implementing regulations prohibit take of species listed as endangered or threatened. The definition of take under the ESA includes to “harass, harm, pursue, hunt, shoot, wound, kill, trap, capture, or collect listed species or to attempt to engage in such conduct” (16 U.S.C. 1532(19)). Section 10 of the ESA (16 U.S.C. 1539) establishes a program whereby persons seeking to pursue activities that are otherwise legal, but could result in take of federally protected species, may receive an incidental take permit (ITP). Applicants for ITPs must submit a HCP that meets the section 10 permit issuance criteria. “Low-effect” incidental take permits are those permits that, despite their authorization of some small level of incidental take, individually and cumulatively have a minor or negligible effect on the species covered in the HCP.
The USFWS and Iron County began work on a Rangewide HCP (to include Iron, Garfield, and Wayne Counties) in 2006; however, efforts to complete the Rangewide HCP have stalled, due largely to concerns regarding funding mechanisms. Garfield County has committed to proceed with completing a new long-term Garfield County HCP. However, it is likely that completion of a new HCP will require 2–3 years. Therefore, this low-effect HCP will provide a bridge, authorizing incidental take of the Utah prairie dog until a new long-term HCP can be completed.
As a bridge to cover additional take anticipated before a range-wide or long-term plan can be completed, Garfield County has submitted a draft low-effect HCP that would authorize the take of no more than 220 acres (89 hectares) of occupied Utah prairie dog habitat over a maximum 3-year period. Incidental take could occur as a result of (1) translocations of prairie dogs away from the town of Panguitch, Utah, to Federal or other protected lands in Garfield County or (2) ongoing and future residential and commercial development in occupied Utah prairie dog habitat in Panguitch, Utah. Minimization and mitigation measures will include the translocations of Utah prairie dogs to Federal or other protected habitat in Garfield County or the payment of a mitigation fee to a conservation fund for Utah prairie dogs. Under this low-effect HCP, developers would apply to the County for their individual take permits or letters of authorization.
We have made a preliminary determination that the HCP qualifies as a “low-effect” habitat conservation plan as defined by our Habitat Conservation Planning Handbook (November 1996).
We base our determination on the following information:
(1) The size and scope of the incidental take of Utah prairie dogs is relatively small, and limited to maximum of 220 ac (89 ha) of Utah prairie dog occupied habitats over three years;
(2) The total amount of take amounts to only 1.4 percent of the total mapped
(3) Most of the take is limited to already developed areas or those areas projected for development in the near future. These areas do not serve to support current or future metapopulations and objectives for recovery of the species in the wild.
Overall we conclude that implementation of the plan would result in overall minor or negligible effects on the Utah prairie dog and its habitats. We may revise this preliminary determination based on public comments submitted in response to this notice.
Before including your address, phone number, email address, or other personal identifying information in your comment, you should be aware that your entire comment—including your personal identifying information—may be made publicly available at any time. While you can ask us in your comment to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so.
Fish and Wildlife Service, Interior.
Notice of receipt of applications for permit.
We, the U.S. Fish and Wildlife Service, invite the public to comment on the following applications to conduct certain activities with endangered species. With some exceptions, the Endangered Species Act (ESA) prohibits activities with listed species unless Federal authorization is acquired that allows such activities.
We must receive comments or requests for documents on or before November 21, 2013.
Brenda Tapia, Division of Management Authority, U.S. Fish and Wildlife Service, 4401 North Fairfax Drive, Room 212, Arlington, VA 22203; fax (703) 358–2280; or email
Brenda Tapia, (703) 358–2104 (telephone); (703) 358–2280 (fax);
Send your request for copies of applications or comments and materials concerning any of the applications to the contact listed under
Please make your requests or comments as specific as possible. Please confine your comments to issues for which we seek comments in this notice, and explain the basis for your comments. Include sufficient information with your comments to allow us to authenticate any scientific or commercial data you include.
The comments and recommendations that will be most useful and likely to influence agency decisions are: (1) Those supported by quantitative information or studies; and (2) Those that include citations to, and analyses of, the applicable laws and regulations. We will not consider or include in our administrative record comments we receive after the close of the comment period (see
Comments, including names and street addresses of respondents, will be available for public review at the street address listed under
To help us carry out our conservation responsibilities for affected species, and in consideration of section 10(a)(1)(A) of the Endangered Species Act of 1973, as amended (16 U.S.C. 1531
The following applicants each request a permit to import the sport-hunted trophy of one male bontebok (
Fish and Wildlife Service, Interior.
Notice of intent; Comprehensive Conservation Plan and Environmental Assessment request for comments.
We, the Fish and Wildlife Service (Service), intend to prepare a comprehensive conservation plan (CCP) and associated National Environmental Policy Act (NEPA) documents for Cat Island National Wildlife Refuge (NWR). We provide this notice in compliance with our CCP policy to advise other Federal and State agencies, Native-American Tribes, and the public of our intentions, and to obtain suggestions and information on the scope of issues to consider in the planning process.
To ensure consideration, we must receive your written comments by November 21, 2013.
You may send comments, questions, and requests for information to: Robert Strader, Project Leader, USFWS, Lower Mississippi River Refuge Complex, P.O. Box 217, Sibley, MS, 39165.
Michelle Paduani, Project Planner, 662–323–5548,
With this notice, we initiate our process for developing a CCP for Cat Island NWR, West Feliciana Parish, Louisiana. This notice complies with our CCP policy to: (1) Advise other Federal and State agencies, Native-American tribes, and the public of our intention to conduct detailed planning on this refuge; and (2) obtain suggestions and information on the scope of issues to consider in the environmental document and during development of the CCP.
The National Wildlife Refuge System Administration Act of 1966 (16 U.S.C. 668dd-668ee) (Administration Act), as amended by the National Wildlife Refuge System Improvement Act of 1997, requires us to develop a CCP for each national wildlife refuge. The purpose for developing a CCP is to provide refuge managers with a 15-year plan for achieving refuge purposes and contributing toward the mission of the National Wildlife Refuge System, consistent with sound principles of fish and wildlife management, conservation, legal mandates, and our policies. In addition to outlining broad management direction on conserving wildlife and their habitats, CCPs identify wildlife-dependent recreational opportunities available to the public, including opportunities for hunting, fishing, wildlife observation, wildlife photography, and environmental education and interpretation. We will review and update the CCP at least every 15 years in accordance with the Administration Act.
Each unit of the National Wildlife Refuge System was established for specific purposes. We use these purposes as the foundation for developing and prioritizing the management goals and objectives for each refuge within the National Wildlife Refuge System mission, and to determine how the public can use each refuge. The planning process is a way for us and the public to evaluate management goals and objectives for the best possible conservation approach to this important wildlife habitat, while providing for wildlife-dependent recreation opportunities that are compatible with the refuge's establishing purposes and the mission of the National Wildlife Refuge System.
Our CCP process provides participation opportunities for Tribal, State, and local governments; agencies; organizations; and the public. We encourage input in the form of issues, concerns, ideas, and suggestions for the future management of Cat Island NWR.
We will conduct the environmental review of this project in accordance with the requirements of the National Environmental Policy Act of 1969, as amended (NEPA) (42 U.S.C. 4321 et seq.); NEPA regulations (40 CFR parts 1500–1508); other appropriate Federal laws and regulations; and our policies and procedures for compliance with those laws and regulations.
The Cat Island National Wildlife Refuge was established and shall be managed—(1) to conserve, restore, and manage habitats as necessary to contribute to the migratory bird population goals and habitat objective as established through the Lower Mississippi Valley Joint Venture; (2) to conserve, restore, and manage the significant aquatic resource values associated with the area's forested wetlands and to achieve the habitat objectives of the “Mississippi River Aquatic Resources Management Plan”; (3) to conserve, enhance, and restore the historic native bottomland community characteristics of the lower Mississippi alluvial valley and its associated fish, wildlife, and plant species; (4) to conserve, enhance, and restore habitat to maintain and assist in the recovery of endangered, and threatened plants and animals; and (5) to encourage the use of volunteers and facilitate partnerships among the United States Fish and Wildlife Service, local communities, conservation organizations, and other non-Federal entities to promote public awareness of the resources of the Refuge and the National Wildlife Refuge System and public participation in the conservation of those resources. 114 STAT. 1418. dated Oct. 27, 2000
Before including your address, phone number, email address, or other personal identifying information in your comment, you should be aware that your entire comment—including your personal identifying information—may be made publicly available at any time. While you can ask us in your comment to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so.
This notice is published under the authority of the National Wildlife Refuge System Improvement Act of 1997 (16 U.S.C. 668dd et seq.).
Fish and Wildlife Service, Interior.
Notice of issuance of permits.
We, the U.S. Fish and Wildlife Service (Service), have issued the following permits to conduct certain activities with endangered species, marine mammals, or both. We issue these permits under the Endangered Species Act (ESA) and Marine Mammal Protection Act (MMPA).
Brenda Tapia, Division of Management Authority, U.S. Fish and Wildlife Service, 4401 North Fairfax Drive, Room 212, Arlington, VA 22203; fax (703) 358–2280; or email
Brenda Tapia, (703) 358–2104 (telephone); (703) 358–2280 (fax);
On the dates below, as authorized by the provisions of the ESA (16 U.S.C. 1531
Documents and other information submitted with these applications are available for review, subject to the requirements of the Privacy Act and Freedom of Information Act, by any party who submits a written request for a copy of such documents to: Division of Management Authority, U.S. Fish and Wildlife Service, 4401 North Fairfax Drive, Room 212, Arlington, VA 22203; fax (703) 358–2280.
Bureau of Indian Affairs, Interior.
Notice of Tribal-State Class III Gaming Compact taking effect.
This notice publishes the Class III Gaming Compact between the North Fork Rancheria of Mono Indians and the State of California taking effect.
Paula L. Hart, Director, Office of Indian Gaming, Office of the Deputy Assistant Secretary—Policy and Economic Development, Washington, DC 20240, (202) 219–4066.
Under section 11 of the Indian Gaming Regulatory Act (IGRA), Public Law 100–497, 25 U.S.C. 2701
Bureau of Indian Affairs, Interior.
Notice of Approved Tribal-State Class III Gaming Compact.
This notice publishes the approval of an amendment to the Class III Tribal-State Gaming Compact (Amendment), between the Tunica-Biloxi Tribe of Louisiana (Tribe) and the State of Louisiana (State).
Paula L. Hart, Director, Office of Indian Gaming, Office of the Deputy Assistant Secretary—Policy and Economic Development, Washington, DC 20240, (202) 219–4066.
Under section 11 of the Indian Gaming Regulatory Act of 1988 (IGRA) Public Law 100–497, 25 U.S.C. 2701
Bureau of Indian Affairs, Interior.
Notice of extension of Tribal-State Class III Gaming Compact.
This publishes notice of the extension of the Class III gaming compact between the Rosebud Sioux Tribe and the State of South Dakota.
Paula L. Hart, Director, Office of Indian Gaming, Office of the Deputy Assistant Secretary—Policy and Economic Development, Washington, DC 20240, (202) 219–4066.
Pursuant to 25 CFR 293.5, an extension to an existing tribal-state Class III gaming compact does not require approval by the Secretary if the extension does not include any amendment to the terms of the compact. The Rosebud Sioux Tribe and the State of South Dakota have reached an agreement to extend the expiration of their existing Tribal-State Class III gaming compact to February 15, 2014. This publishes notice of the new expiration date of the compact.
Bureau of Indian Affairs, Interior.
Notice.
The Bureau of Indian Education (BIE) is seeking nominations for individuals to be considered as a member of the Advisory Board for Exceptional Children (Advisory Board). There are six positions available. BIE will consider nominations received in response to this request for nominations, as well nominations received from as other sources.
Nomination applications must be received on or before November 15, 2013.
Submit nomination applications to Sue Bement, Designated Federal Officer, Bureau of Indian Education, 1011 Indian School Road NW., Suite 332, Albuquerque, New Mexico 87104–1088, telephone (505) 563–5274 or fax (505) 563–5281.
Sue Bement, Designated Federal Officer, at the above-listed address and telephone number.
The Advisory Board was established in accordance with the Federal Advisory Committee Act, 5 U.S.C. App 2. The following provides information about the Committee, the membership and the nomination process.
(a) Members of the Advisory Board will provide guidance, advice, and recommendations with respect to special education and related services for children with disabilities in Bureau-funded schools in accordance with the requirements of the Individuals with Disabilities Education Act of 2004 (IDEA).
(b) The Advisory Board will:
(1) Provide advice and recommendations for the coordination of services within BIE and with other local, State, and Federal agencies;
(2) Provide advice and recommendations on a broad range of policy issues dealing with provision of educational services to American Indian children with disabilities;
(3) Serve as an advocate for American Indian students with special education needs by providing advice and recommendations regarding best practices, effective program coordination strategies, and recommendations for improved educational programming;
(4) Provide advice and recommendations for preparation of information required to be submitted to the Secretary of Education under 20 U.S.C. 1411(h)(2);
(5) Provide advice and recommend policies concerning effective inter- and intra-agency collaboration, including modifications to regulations, and elimination of barriers to inter- and intra-agency programs and activities; and
(6) Report and direct all correspondence to the Assistant Secretary-Indian Affairs through the Director, BIE with a courtesy copy to the Designated Federal Officer (DFO).
(a) Pursuant to 20 U.S.C. 1411(h)(6), the Advisory Board will be composed of up to 15 individuals involved in or concerned with the education and provision of services to Indian infants, toddlers, children, and youth with disabilities. The Advisory Board composition will reflect a broad range of viewpoints and will include at least one member representing each of the following interests: Indians with disabilities; teachers of children with disabilities; Indian parents or guardians of children with disabilities; service providers; state education officials; local education officials; state interagency coordinating councils (for states having Indian reservations); tribal representatives or tribal organization representatives; and other members representing the various divisions and entities of BIE.
(b) The Assistant Secretary—Indian Affairs may provide the Secretary of the Interior recommendations for the chairperson; however, the chairperson and other Advisory Board members will be appointed by the Secretary. Advisory Board members shall serve staggered terms of two years or three years from the date of their appointment.
(a) Members of the Advisory Board will not receive compensation, but may be reimbursed for travel, including subsistence, and other necessary expenses incurred in the performance of their duties in the same manner as persons employed intermittently in government service under 5 U.S.C. 5703.
(b) A member may not participate in matters that will directly affect, or
(c) The Advisory Board meets at least twice a year, budget permitting, but additional meetings may be held as deemed necessary by the Assistant Secretary—Indian Affairs or DFO.
(d) All Advisory Board meetings are open to the public in accordance with the Federal Advisory Committee Act.
(a) Nominations are requested from individuals, organizations, and federally recognized tribes, as well as from State directors of Special Education (within the 23 States in which Bureau-funded schools are located) concerned with the education of Indian children with disabilities as described above.
(b) Nominees should have expertise in and knowledge of the issues and needs of American Indian children with disabilities. Such knowledge and expertise are needed to provide advice and recommendations to BIE regarding the needs of American Indian children with disabilities.
(c) A summary of the candidate's qualifications (résumé or curriculum vitae) must be provided. Nominees must have the ability to attend Advisory Board meetings, carry out Advisory Board assignments, participate in conference calls, and work in groups.
If you wish to nominate someone for appointment to the Advisory Board, please do not make the nomination until the person has agreed to have his or her name submitted to BIE for this purpose.
(Please fill out this form completely and include a copy of the nominee's résumé or curriculum vitae.)
This collection of information is authorized by OMB Control Number 1076–0179, “Solicitation of Nominations for the Advisory Board for Exceptional Children.”
Bureau of Land Management, Interior.
Notice of Decision Approving Lands for Conveyance.
As required by 43 CFR 2650.7(d), notice is hereby given that an appealable decision will be issued by the Bureau of Land Management (BLM) to Aleknagik Natives Limited. The decision approves the surface estate in the lands described below for conveyance pursuant to the Alaska Native Claims Settlement Act (43 U.S.C. 1601,
Notice of the decision will also be published once a week for four consecutive weeks in the
Any party claiming a property interest in the lands affected by the decision may appeal the decision in accordance with the requirements of 43 CFR part 4 within the following time limits:
1. Unknown parties, parties unable to be located after reasonable efforts have been expended to locate, parties who fail or refuse to sign their return receipt, and parties who receive a copy of the decision by regular mail which is not certified, return receipt requested, shall have until November 21, 2013 to file an appeal.
2. Parties receiving service of the decision by certified mail shall have 30 days from the date of receipt to file an appeal.
Parties who do not file an appeal in accordance with the requirements of 43 CFR part 4 shall be deemed to have waived their rights. Notices of appeal transmitted by electronic means, such as facsimile or email, will not be accepted as timely filed.
A copy of the decision may be obtained from: Bureau of Land Management, Alaska State Office, 222 West Seventh Avenue, #13, Anchorage, AK 99513–7504.
The BLM by phone at 907–271–5960 or by email at
Bureau of Land Management, Interior.
Notice of public meeting.
In accordance with the Federal Land Policy and Management Act and the Federal Advisory Committee Act of 1972 (FACA), the U.S. Department of the Interior, Bureau of Land Management (BLM) Southwest Colorado Resource Advisory Council (RAC) is scheduled to meet as indicated below.
The Southwest Colorado RAC meeting will be held on November 15, 2013, in Dolores, Colorado.
The Southwest Colorado RAC meeting will be held November 15, 2013, at the Dolores Public Lands Center, 29211 Highway 184, Dolores, CO 81323. The meeting will begin at 9 a.m. and adjourn at approximately 4 p.m. A public comment period regarding matters on the agenda will be held at 11:30 a.m.
Lori Armstrong, BLM Southwest District Manager, 970–240–5300; or Shannon Borders, Public Affairs Specialist, 970–240–5300; 2505 S. Townsend Ave., Montrose, CO 81401. Persons who use a telecommunications device for the deaf (TDD) may call the Federal Information Relay Service (FIRS) at 1–800–877–8339 to contact the above individual during normal business hours. The FIRS is available 24 hours a day, seven days a week, to leave a message or question with the above individual. You will receive a reply during normal business hours.
The Southwest Colorado RAC advises the Secretary of the Interior, through the BLM, on a variety of public land issues in Colorado. Topics of discussion for all Southwest Colorado RAC meetings may include field manager and working group reports, recreation, fire management, land use planning, invasive species management, energy and minerals management, travel management, wilderness, land exchange proposals, cultural resource management and other issues as appropriate.
These meetings are open to the public. The public may present written comments to the RACs. Each formal RAC meeting will also have time, as identified above, allocated for hearing public comments. Depending on the number of persons wishing to comment and time available, the time for individual oral comments may be limited.
National Park Service, Interior.
Notice; request for comments.
We (National Park Service) will ask the Office of Management and Budget (OMB) to approve the information collection (IC) described below. As required by the Paperwork Reduction Act of 1995 and as part of our continuing efforts to reduce paperwork and respondent burden, we invite the general public and other Federal agencies to take this opportunity to comment on this IC. This IC is scheduled to expire on February 28, 2014. We may not conduct or sponsor and a person is not required to respond to a collection of information unless it displays a currently valid OMB control number.
To ensure that we are able to consider your comments on this IC, we must receive them by December 23, 2013.
Send your comments on the IC to Madonna L. Baucum, Information Collection Clearance Officer, National Park Service, 1849 C Street, NW. (2601), Washington, DC 20240 (mail); or
To request additional information about this IC, contact Brandon Flint by email
The Interagency Access Pass is a free, lifetime pass issued to citizens or persons who are domiciled in the United States, regardless of age, and who have a medical determination and documentation of permanent disability. You can obtain an Access Pass in person, with proper documentation, from a participating Federal recreation site or office. Access Passes may also be obtained via mail order. Mail-order applicants for the Access Pass must submit a completed application, proof of residency, and documentation of permanent disability, and pay the document processing fee of $10 to obtain a pass through the mail.
If a person arrives at a recreation site and claims eligibility for the Interagency Access Pass, but cannot produce any documentation, that person must read, sign, and date a Statement of Disability Form in the presence of the agency officer issuing the Interagency Access Pass. If the applicant cannot read and/or sign the form, someone else may read, date, and sign the statement on his/her behalf in the applicant's presence and in the presence of the agency officer issuing the Interagency Access Pass.
The Interagency Senior Pass is a lifetime pass issued to U.S. citizens or permanent residents who are 62 years or older. There is a $10 fee for the Senior Pass. You can buy a Senior Pass in person from a participating Federal recreation site or office or by mail order. There is an additional document processing fee of $10 to obtain a Senior Pass through the mail. Mail-order applicants must submit a completed application and proof of residency and age, and pay $20 for the pass fee and processing fee.
Agency Web sites provide information on the passes and acceptable documentation. All documentation submitted in person or through the mail is returned to the applicant.
We invite comments concerning this information collection on:
• Whether or not the collection of information is necessary, including whether or not the information will have practical utility;
• The accuracy of our estimate of the burden for this collection of information;
• Ways to enhance the quality, utility, and clarity of the information to be collected; and
• Ways to minimize the burden of the collection of information on respondents.
Comments that you submit in response to this notice are a matter of public record. We will include or summarize each comment in our request to OMB to approve this IC. Before including your address, phone number, email address, or other personal identifying information in your comment, you should be aware that your entire comment, including your personal identifying information, may be made publicly available at any time. While you can ask us in your comment to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so.
National Park Service, Interior.
Notice; request for comments.
We (National Park Service) will ask the Office of Management and Budget (OMB) to approve the information collection (IC) described below. As required by the Paperwork Reduction Act of 1995 and as part of our continuing efforts to reduce paperwork and respondent burden, we invite the general public and other Federal agencies to take this opportunity to comment on this IC. This IC is scheduled to expire on February 28, 2014. We may not conduct or sponsor and a person is not required to respond to a collection of information unless it displays a currently valid OMB control number.
To ensure that we are able to consider your comments on this IC, we must receive them by December 23, 2013.
Send your comments on the IC to Madonna L. Baucum, Information Collection Clearance Officer, National Park Service, 1849 C Street NW., (2601), Washington, DC 20240 (mail); or
To request additional information about this IC, contact Ben Erichsen at (202) 513–7156 (telephone) or at
I.
Our authority to collect information for the leasing program is derived from section 802 of the National Parks Omnibus Management Act of 1998 (P.L. 105–391), the National Historic Preservation Act (P.L. 89–665), and Title 36, Code of Federal Regulations, section 18 (36 CFR 18). For competitive leasing opportunities, the regulations require the submission of proposals or bids by parties interested in applying for a lease. The regulations also require that the Director approve lease amendments, construction or demolition of structures, and encumbrances on leasehold interests.
We collect Information from anyone who wishes to submit a bid or proposal to lease a property. The Director may issue a request for bids if the amount of rent is the only criterion for award of a lease. The Director issues a request for proposals when the award of a lease is based on selection criteria other than the rental rate. A request for proposals may be preceded by a request for qualifications to select a “short list” of potential offerors that meet minimum management, financial, and other qualifications necessary for submission of a proposal.
The Director may enter into negotiations for a lease with nonprofit organizations and units of government without soliciting proposals or bids. In those cases, the Director collects information from the other party regarding the planned use of the premises, potential modifications to the premises, and other information as necessary to support a decision on whether or not to enter into a lease.
We also collect Information from existing leaseholders who seek to:
• Sublet a leased property or assign the lease to a new lessee.
• Construct or demolish portions of a leased property.
• Amend a lease to change the type of activities permitted under the lease.
• Encumber (mortgage) the leased premises.
We invite comments concerning this information collection on:
• Whether or not the collection of information is necessary, including whether or not the information will have practical utility;
• The accuracy of our estimate of the burden for this collection of information;
• Ways to enhance the quality, utility, and clarity of the information to be collected; and
• Ways to minimize the burden of the collection of information on respondents.
Comments that you submit in response to this notice are a matter of public record. We will include or summarize each comment in our request to OMB to approve this IC. Before including your address, phone number,
Bureau of Ocean Energy Management (BOEM), Interior.
Notice of Availability (NOA) of a Final Environmental Impact Statement (EIS).
Consistent with the regulations implementing the National Environmental Policy Act, as amended (42 U.S.C. 4321
This Final EIS provides information on the baseline conditions and potential environmental effects of oil and natural gas leasing, exploration, development, and production in the EPA. The Final EIS incorporates by reference the analysis presented in the
1. You may obtain a copy of the Final EIS from the Bureau of Ocean Energy Management, Gulf of Mexico OCS Region, Public Information Office (GM 335A), 1201 Elmwood Park Boulevard, Room 250, New Orleans, Louisiana 70123–2394 (1–800–200–GULF).
2. You may download or view the Final EIS on BOEM's Internet Web site at
Several libraries along the Gulf Coast have been sent copies of the Final EIS. To find out which libraries have copies of the Final EIS for review, you may contact BOEM's Public Information Office or visit BOEM's Internet Web site at
For more information on the Final EIS, you may contact Mr. Gary D. Goeke, Chief, Environmental Assessment Section, Office of Environment (GM 623E), Bureau of Ocean Energy Management, Gulf of Mexico OCS Region, 1201 Elmwood Park Boulevard, New Orleans, Louisiana 70123–2394 or by email at
This NOA is published pursuant to the regulations (40 CFR 1503) implementing the provisions of NEPA, as amended (42 U.S.C. 4321
United States International Trade Commission.
Notice.
The Commission hereby gives notice of the institution of investigations and commencement of preliminary phase antidumping and countervailing duty investigations Nos. 701–TA–506–508 and 731–TA–1238–1243 (Preliminary) under sections 703(a) and 733(a) of the Tariff Act of 1930 (19 U.S.C. 1671b(a) and 1673b(a)) (the Act) to determine whether there is a reasonable indication that an industry in the United States is materially injured or threatened with material injury, or the establishment of an industry in the United States is materially retarded, by reason of imports from China, Germany, Japan, Korea, Sweden, and Taiwan of non-oriented electrical steel that are alleged to be sold in the United States at less than fair value and alleged to be subsidized by the Governments of China, Korea, and Taiwan. The products subject to the petitions are classifiable in subheadings 7225.19.00 and 7226.19.10, and 7226.19.90 of the Harmonized Tariff Schedule of the United States (HTS). Certain products
For further information concerning the conduct of these investigations and rules of general application, consult the Commission's Rules of Practice and Procedure, part 201, subparts A through E (19 CFR part 201), and part 207, subparts A and B (19 CFR part 207).
Edward Petronzio (202–205–3176), Office of Investigations, U.S. International Trade Commission, 500 E Street SW., Washington, DC 20436. Hearing-impaired persons can obtain information on this matter by contacting the Commission's TDD terminal on 202–205–1810. Persons with mobility impairments who will need special assistance in gaining access to the Commission should contact the Office of the Secretary at 202–205–2000. General information concerning the Commission may also be obtained by accessing its Internet server (
The public record for these investigations may be viewed on the Commission's electronic docket (EDIS) at
In accordance with sections 201.16(c) and 207.3 of the rules, each document filed by a party to the investigations must be served on all other parties to the investigations (as identified by either the public or BPI service list), and a certificate of service must be timely filed. The Secretary will not accept a document for filing without a certificate of service.
These investigations are being conducted under authority of title VII of the Tariff Act of 1930; this notice is published pursuant to section 207.12 of the Commission's rules.
By order of the Commission.
On September 30, 2013, the Department of Justice lodged a proposed Consent Decree (“Decree”) in the United States District Court for the District of South Carolina, Florence Division in the lawsuit entitled
This Decree represents a settlement of claims against the Defendants ConAgra Foods, Inc., and ConAgra Grocery Products, LLC (“Defendants” or “ConAgra”) for violations of the Clean Water Act, 33 U.S.C. 1321, and Spill Prevention, Control and Countermeasure (“SPCC”) and Facility Response Plan (“FRP”) regulations found at 40 CFR part 112. The Decree requires that the Defendants pay a civil penalty of $475,000. The Decree further requires that ConAgra implement a formal tank integrity testing program in accordance with the American Petroleum Institute's (“API”) formal standard 653. ConAgra will be required to submit a report annually to EPA summarizing the status of the tank testing and identifying which tanks were inspected during the previous calendar year and which will be inspected in the current year. The Decree provides for stipulated penalties in the event the Defendants fail to comply with the Decree's requirements.
The publication of this notice opens a period for public comment on the Consent Decree. Comments should be
During the public comment period, the Consent Decree may be examined and downloaded at this Justice Department Web site:
Please enclose a check or money order for $6.25 (25 cents per page reproduction cost) payable to the United States Treasury for the Consent Decree.
On November 17, 2011, the Deputy Assistant Administrator issued an Order to Show Cause to Ronald Lambert, D.D.S. (hereinafter, Respondent), of Longmont, Colorado. The Show Cause Order proposed the denial of Respondent's application for a DEA Certificate of Registration as a practitioner, on the ground that Respondent's “registration would be inconsistent with the public interest.” Show Cause Order at 1 (citing 21 U.S.C. 823(f)).
The Show Cause Order alleged that on January 1, 2011, Respondent had applied for a practitioner's registration with authority to dispense controlled substances in schedules III through V.
Next, the Show Cause Order alleged that on June 10, 2003, Respondent's dental license was suspended by the Colorado State Board of Dental Examiners (hereinafter, the Board), and that on November 5, 2003, the Board revoked his license.
On November 22, 2011, the Show Cause Order, which also notified Respondent of his right to request a hearing on the allegations, or to submit a written statement of position in lieu of a hearing, the procedure for electing either option, and the consequence for failing to elect either option, was served on Respondent by certified mail addressed to him at his proposed registered location.
On August 8, 2012, the Government submitted a Request for Final Agency Action, along with the Investigative Record it had compiled. Having considered the entire record, including Respondent's statement of position, I conclude that the evidence submitted by the Government makes out a
Respondent is a dentist licensed by Colorado State Board of Dental Examiners. GX 10. While on November 5, 2003, the Board revoked Respondent's dental license based on his having engaged in substance abuse and criminal activity, on March 13, 2008, the Board approved a Stipulation and Final Agency Order, pursuant to which it reinstated Respondent's dental license while placing him on probation for five years.
In the Stipulation and Final Agency Order, Respondent admitted that he “has a history of substance abuse with alcohol, marijuana, methamphetamine and cocaine.” GX 10, at 1. He also admitted to having a felony conviction for manufacture and possession of a schedule II controlled substance on November 11, 2003.
Respondent previously held a DEA practitioner's registration, which expired on March 31, 2004. GX 12. On January 11, 2011, Respondent applied for a new registration, seeking authority to dispense controlled substances in schedules III through V. GX 4. On his application, Respondent disclosed that on April 22, 2003, he pled guilty to manufacturing a controlled substance and that he was sentenced to two years in jail and four years of supervised probation, which he had successfully completed.
On June 29, 2011, two DEA Diversion Investigators interviewed Respondent.
Thereafter, Respondent was taken to a local hospital for a 72-hour mental health hold. GX 8, at 2. Upon his arrival, “Respondent was cursing, screaming and refus[ed] all treatment.”
The following day, Respondent admitted to methamphetamine use; he also admitted to daily use of marijuana in the preceding six months.
Upon being discharged from the hospital, family members took Respondent to the Talbot Recovery Center in Atlanta to undergo residential treatment. GX 7, at 6; GX 13, at 2. However, five days after entering treatment, Talbot discharged him alleging that he had brought a vial of methamphetamine with him. GX 13, at 2. Upon his return to Colorado, Respondent learned that he had criminal charges pending against him based on the April 21, 2003 incident.
Respondent admitted to DEA Investigators that on returning to Colorado, he purchased methamphetamine from street dealers.
As a condition of his bond, Respondent was required to undergo urine drug screening.
On November 11, 2003, Respondent met with several members of the Bandidos at a home in Denver.
Respondent drove to an address in Arvada, Colorado, where someone reported to the police that he/she had observed him cursing, screaming at two girls who were walking in a nearby park, and slamming the trunk of his car. GX 5, at 1. Two police officers were dispatched to the scene; upon their arrival they observed Respondent standing near the trunk of his car, which was open.
When the officers asked Respondent what he was doing, he was uncooperative and would not answer their questions.
The officers observed a bulge in Respondent's left front pants pocket and that Respondent's left hand was in the pocket.
Thereafter, the officers determined that Respondent was the owner of the car and conducted an inventory search, during which they found a variety items used to manufacture methamphetamine.
Respondent was then charged with manufacturing methamphetamine, possession of a schedule II controlled substance, and disorderly conduct. GX 13, at 3–4. Respondent was offered a plea bargain, pursuant to which he pled guilty to the manufacturing charge; the other charges, including those which were brought after the April 2003 incident, were dismissed.
In February 2006, Respondent returned to the Talbot Recovery Center, and in May 2006, he successfully completed the Center's in-patient treatment program.
Pursuant to the Board's Order, Respondent was placed on probation for five years. The terms of his probation included,
In his statement of position, Respondent states that he “has been very honest with the DEA and the [State Board] by admitting his past struggles with substance abuse as well as his past felony convictions, one of which was related to the manufacture and possession of a Schedule II controlled substance.” GX 2, at 2. However, Respondent denies that he “work[ed] directly with the Banditos to illegally manufacture methamphetamine,” stating that “[h]e helped a person illegally manufacture methamphetamine, and . . . later learned that this man was associated with the Banditos.”
Respondent acknowledges that he “has a history of substance abuse as well as a Major Depressive Disorder,” but states that he “has sought, and continues to seek, treatment for this disease.”
Finally, Respondent states that he “is not trying to ignore his past nor make excuses for his conduct.”
Section 303(f) of the Controlled Substances Act (CSA) provides that an application for a practitioner's registration may be denied upon a determination “that the issuance of such registration would be inconsistent with the public interest.” 21 U.S.C. 823(f). In making the public interest determination in the case of a practitioner, Congress directed that the following factors be considered:
(1) The recommendation of the appropriate State licensing board or professional disciplinary authority.
(2) The applicant's experience in dispensing . . . controlled substances.
(3) The applicant's conviction record under Federal or State laws relating to the manufacture, distribution, or dispensing of controlled substances.
(4) Compliance with applicable State, Federal, or local laws relating to controlled substances.
(5) Such other conduct which may threaten the public health and safety.
“[T]hese factors are considered in the disjunctive.”
The Government has the burden of proving, by a preponderance of the evidence, that the requirements for denial of an application pursuant to 21 U.S.C. 823(f) are met. 21 CFR 1301.44(d). However, “once the [G]overnment establishes a prima facie case showing a practitioner has committed acts which render his registration inconsistent with the public interest, the burden shifts to the practitioner to show why [granting his application for] registration would be consistent with the public interest. ”
Having considered all of the factors, I conclude that the Government's evidence with respect to factors three, four, and five establishes its
It is further noted that there is no evidence regarding factor two, Respondent's experience in dispensing controlled substances.
It is undisputed that in March 2004, Respondent pled guilty to, and was convicted of, the state law offense of manufacturing methamphetamine, a schedule II controlled substance. GX 6, at 3 (citing Colo. Rev. Stat. § 18–18–405(1)(a)(2)(a)(I)(A)). Respondent's conviction of this offense, which arose out of the November 2003 incident, supports an adverse finding under factor three, and by itself, satisfies the Government's
Buttressing the Government's case is the undisputed evidence that Respondent possessed and abused controlled substances including methamphetamine, cocaine and marijuana. For example, the evidence
Moreover, during the April 2003 hospitalization, Respondent admitted that he had used marijuana on a daily basis for the past six months. And finally, in the 2008 Board Order, he admitted to abusing cocaine. Thus, Respondent clearly possessed controlled substances in violation of federal law; his failure to comply with federal laws related to controlled substances likewise supports an adverse finding under factor four.
So too, DEA has long held that a practitioner's self-abuse of controlled substances constitutes “[s]uch other conduct which may threaten the public health and safety.”
This Agency has repeatedly held that a proceeding under section 303 “ ‘is a remedial measure, based upon the public interest and the necessity to protect the public from those individuals who have misused controlled substances or their DEA Certificate of Registration, and who have not presented sufficient mitigating evidence to assure the Administrator that they can be entrusted with the responsibility carried by such a registration.' ”
With respect to the first prerequisite for rebutting the Government's
Notwithstanding its concessions that Respondent has provided sufficient evidence as to both prongs necessary to rebut the Government's
It cannot be disputed that Respondent committed serious misconduct in possessing and abusing various controlled substances; his participation in the manufacturing of methamphetamine is especially egregious. Yet the record demonstrates that he was addicted to methamphetamine and started using methamphetamine because of his depression. Nor can it be disputed that at the time he committed the offense of manufacturing methamphetamine, he was in the throes of his addiction.
In
By contrast, the evidence here shows that Respondent was addicted to methamphetamine throughout the period in which he committed the various acts of misconduct involving that drug, a substance which this Agency has recognized is a highly addictive controlled substance.
As for the Government's contention that Respondent has a long-standing history of substance abuse, which could have placed his patients at risk, the argument is refuted by its acknowledgment that Respondent “has avoided illicit drugs for what appears to be eight years” and that his “professional practice has continued without blemish.”
Indeed, in
Accordingly, I will grant Respondent's application for a new registration. However, Respondent's registration shall be subject to the following conditions:
1. Respondent shall only be authorized to prescribe controlled substances in schedules III through V and may not administer or dispense directly any controlled substances to his patients. Respondent may not store any controlled substance at his registered location except for a controlled substance which has been prescribed to him by another practitioner, who is authorized to prescribe controlled substances, for the purpose of treating a legitimate medical condition. Respondent shall not accept any samples of controlled substances from any representative of a manufacturer, distributor or pharmacy.
2. Respondent shall maintain a log of all controlled substance prescriptions he issues, which shall list in chronological order, the date of the prescription, the patient name, the drug name and strength, dosage, and quantity. Respondent shall submit a copy of the log to the nearest DEA Field Office no later than ten (10) days following the last day of each quarter (March 31, June 30, September 30, and December 31).
3. Respondent shall consent to unannounced inspections of his registered location and agrees to waive his right to require that DEA personnel obtain an Administrative Inspection Warrant prior to conducting any inspection.
4. In the event Respondent's probation is continued by the State Board past its ending date, Respondent shall notify the DEA Field Office within five days of the Board's order and provide a copy of the order to the DEA Field Office.
Pursuant to the authority vested in me by 21 U.S.C. 823(f) and 28 CFR 0.100(b), I order that the application of Ronald F. Lambert, D.D.S., for a DEA Certificate of Registration as a practitioner, be, and it hereby is, granted subject to the conditions set forth above. This Order is effective immediately.
On December 14, 2010, the Deputy Assistant Administrator, Office of Diversion Control, Drug Enforcement Administration, issued an Order to Show Cause to Kenneth Harold Bull, M.D. (Respondent), of Albuquerque, New Mexico. ALJ Ex. 1. The Show Cause Order proposed the revocation of Respondent's DEA Certificate of Registration, which authorizes him to dispense controlled substances in schedules II through V as a practitioner, on the ground that because of actions taken by the New Mexico Medical Board, Respondent was without authority to handle controlled substances in New Mexico, the State in which he holds his DEA registration.
Respondent timely requested a hearing. ALJ Ex. 2. The matter was placed on the docket of the DEA Office of Administrative Law Judges (ALJ) and assigned to ALJ Wing, who, on January 19, 2011, issued an Order for Prehearing Statements. ALJ Ex. 3. The next day, the Government moved to stay the proceeding and for summary disposition; its motion was based on the New Mexico Medical Board's (hereinafter, Board) issuance, on October 1, 2010, of an order which summarily suspended Respondent's state medical license “[u]ntil further [o]rder of the Board.” ALJ Ex. 4 (Appendix A).
On January 25, 2011, Respondent opposed the motion, arguing that the Board's hearing was scheduled for February 11, 2011 and that the Government “will not be prejudiced by this short delay.” ALJ Ex. 5. On February 9, 2011, the ALJ issued his ruling on the motion, “conclud[ing] that further delay in ruling on the Government's motion for summary disposition is not warranted.” ALJ Ex. 6, at 4. Because Respondent did not dispute that he “is presently without state authority to handle controlled substances,” the ALJ granted the Government's motion and recommended that his registration be revoked.
On May 9, 2011, the State Board issued an order, which authorizes Respondent to “continue to practice medicine in psychiatry,” but prohibits him “from treating patients with chronic pain.” ALJ Ex. 8 (Appendix A, at 13). The State order also prohibits him from “prescrib[ing] narcotics, including but not limited to, all opioid analgesics, including buprenorphine and all synthetic opioid analgesics.”
Because the sole basis for the issuance of a final order was no longer in existence, on May 26, 2011, the Government filed with my Office an unopposed motion to remand. ALJ Ex. 8, at 2, 4. Therein, the Government stated that it “intends to seek to amend the current Order to Show Cause and will seek the revocation of the Respondent's DEA Certificate of Registration on the basis that the Respondent's registration is inconsistent with the public interest.”
Thereafter, additional prehearing procedures were conducted during which both parties submitted prehearing statements; the Government also submitted a supplemental prehearing statement. The Government did not, however, file an amended show cause order.
In its Prehearing Statement, the Government stated the issues as: (1) “[w]hether the DEA should revoke the registration of [Respondent], pursuant to 21 U.S.C. 824(a)(4) and 823(f), and deny any pending applications for renewal or modification of such registration, pursuant to 21 U.S.C. 823(f),” and (2) “[w]hether the DEA should revoke the registration of the Respondent pursuant to 21 U.S.C. 824(a)(3) and deny any pending applications for renewal or modification of the registration, pursuant to 21 U.S.C. 823(f), based on the Respondent's restricted/limited state authority to practice medicine or handle controlled substances in the State of New Mexico, the state in which the Respondent is registered with the DEA.” ALJ Ex. 11, at 2.
In its Prehearing Statement, the Government further discussed the proposed testimony of two witnesses, an Agency Investigator (hereinafter, DI) and Respondent.
With respect to the second issue, the Government stated that the DI would testify that the State Board “issued a Decision and Order dated May 9, 2011 which reinstated the Respondent's license to practice medicine and state authority to handle controlled substances for an indefinite term of probation which includes terms, conditions, and restrictions imposed by the Board.”
As for Respondent's proposed testimony, the Government stated that Respondent would testify “he is currently on an indefinite term of probation with the Board which included terms, conditions, and restrictions,” and “that he is not authorized by the State of New Mexico to handle all controlled substances in Schedules II through V.”
In its Supplemental Prehearing Statement, the Government provided notice that it also intended to elicit testimony from a former State Drug Inspector (hereinafter, SDI) for the New Mexico State Board of Pharmacy. ALJ Ex. 14, at 3. The Government stated that the SDI would testify regarding a complaint the Pharmacy Board received alleging that Respondent would take “returned medications from patients and re-dispens[e] these same medications to different patients,” and that on November 16, 2009, he accompanied DEA DIs on an inspection of Respondent's office.
Finally, in its Supplemental Prehearing Statement, the Government noted that the DI would testify that during the November 16, 2009 inspection, nine empty prescription vials were seized.
On November 15, 2011, the ALJ conducted a hearing in Tucson, Arizona, at which both parties elicited testimony and submitted documentary evidence. ALJ Recommended Decision (hereinafter R.D.), at 5. Thereafter, both parties filed briefs containing their proposed factual findings, legal conclusions and argument.
On January 6, 2012, the ALJ issued his R.D.
With respect to factors two and four—Respondent's experience in dispensing controlled substances and compliance with applicable laws related to controlled substances—the ALJ first addressed the Government's argument that Respondent “improperly act[ed] as a pharmacist without a DEA registration . . . by retrieving controlled substances from patients and re-distributing them to other patients.”
Next, the ALJ addressed whether Respondent violated federal and state record-keeping requirements.
Finally, the ALJ discussed whether Respondent's prescribing practices violated the CSA's requirement that a prescription be “issued for a legitimate medical purpose by an individual practitioner acting in the usual course of his professional practice.”
Finally, with respect to factor five—such other conduct which may threaten public health and safety—the ALJ found that “Respondent's acceptance of responsibility was somewhat mixed, but when considering the record as a whole, [he] has failed to demonstrate that he has accepted responsibility for [his] past misconduct and that he will not engage in future misconduct.”
The ALJ ultimately concluded that the Government had made out a
Respondent filed exceptions to the ALJ's R.D. Thereafter, the record was forwarded to this Office for Final Agency Action.
Having considered the record in its entirety, I adopt the ALJ's finding that Respondent violated federal law by failing to keep proper records of the controlled substances he received, as well as his finding that the Government failed to prove that he redistributed the controlled substances he received from his patients. However, I reject the ALJ's findings that Respondent violated the CSA's prescription requirement (21 CFR 1306.04(a)) with respect to the five patients listed in the State Board's order because the Government never provided notice that it intended to raise the issue of whether the Board's findings also establish a violation of federal law.
Respondent is a psychiatrist licensed by the New Mexico Board; as of the date of the hearing, he has practiced medicine for thirty-seven years, during which he has been the chief of psychiatry or medical director of psychiatric services at nearly every hospital in the Albuquerque area. Tr. 129–30. In addition, he has received a fellowship from the American Psychiatric Association and served as President of the New Mexico Psychiatric Association.
On August 9, 2010, the Board issued Respondent a Notice of Contemplated Action against his medical license, and on October 1, 2010, the Board filed an Amended Notice of Contemplated Action and also issued a Summary Suspension Order, which suspended his medical license pending a hearing which was held on some date not clear on the record.
On May 9, 2011, the Board issued its Decision and Order. GX 5, at 1. Therein, the Board found that Respondent committed “unprofessional or dishonorable conduct” by engaging in “injudicious prescribing, administering, or dispensing of a drug or medicine” with respect to five patients.
Respondent is also the holder of a DEA Certificate of Registration, which authorizes him to dispense controlled substances in schedules II through V, including narcotic controlled substances, as a practitioner. GX 1. In addition, Respondent is authorized to treat up to 100 patients for opiate addiction with Suboxone and Subutex under the Drug Addiction Treatment Act of 2000, Public Law 106–310, title XXXV, 114 Stat. 122 (codified at 21 U.S.C. 823(g)(2)).
On August 10, 2009, the New Mexico Board of Pharmacy received information from Presbyterian Health Plan Quality Management, a health insurer, that a consumer had alleged that Respondent “was accepting medications from patients that had already been dispensed to them” and that he was asking “patients to return medications to him so that he could . . . re-dispense them.” Tr. 26–27. The matter was assigned to one of the Board's SDIs, who contacted the local DEA Office and asked if the DIs wanted to accompany him on a visit to Respondent's office.
Upon their arrival, Respondent agreed to meet with the Investigators, and the SDI informed him of the reason for the visit and presented him with a Notice of Inspection and a Consent to Audit, which Respondent signed.
In response to Respondent's explanation of his conduct, the DI explained that “once a prescription is filled for an end-user it's outside of the cycle of distribution and [that he could not] obtain that from a patient.”
The Investigators then asked to see where Respondent kept the medications.
The Investigators were also taken to a different room which was like an office.
The Investigators then interviewed Respondent.
According to the SDI, during the interview, Respondent stated that he was “unaware” that Ambien, Lunesta, and Lyrica “were controlled substances.” Tr. 40. However, according to the DI, she only spoke to Respondent about the Lyrica samples, telling him that it was a schedule V controlled substance, which he was unaware of.
During cross-examination, the DI acknowledged that she had not interviewed any of Respondent's patients.
At the conclusion of the visit, the SDI seized all of the non-controlled drugs that had been returned by Respondent's patients, as well as the non-controlled drug samples that were past their expiration date; the DEA Investigators seized all of the controlled substances except for the drug samples.
Respondent testified on his own behalf. Respondent acknowledged that he accepted medications from his patients, stating he did so because it helped him “feel more secure about treating patients that were potentially dangerous to themselves.” Tr. 141. He also denied “ask[ing] patients to bring in their medications . . . so that [he] could redistribute those drugs to other patients.”
Regarding the manner in which the drugs were stored, Respondent denied that any controlled substances were stored in the cardboard boxes. Tr. 142–43. Respondent stated that he kept the controlled substances that his patients returned to him because he “felt bad about putting them down the toilet” and that he kept them “in a locked cabinet,”
Respondent admitted that he “did not keep” a log of the return medications and claimed that he “did not” know that he was required to do so under state or federal law.
Respondent testified, however, that he “always indicated” in the patient charts the medications and amounts that he had given his patients.
Regarding whether he knew that various drugs samples were controlled substances, Respondent testified that none of the drug company representatives “ever stated that these are controlled substances and that logs have to be kept.”
Respondent also testified that in response to the State Medical Board's order, he has “endeavored to do a better job” of charting.
On cross-examination, the Government asked Respondent why the Medical Board had suspended his license.
Regarding the two patients who overdosed, Respondent testified that one of the patients had allegedly attempted suicide, but later recounted his statement.
The Government
Finally, the Government asked Respondent if the Medical Board's prohibition on his being allowed to practice pain management was based on his “over prescribing [of] pain medication.”
Section 304(a) of the Controlled Substances Act (CSA) provides that a registration to “dispense a controlled substance . . . may be suspended or revoked by the Attorney General upon a finding that the registrant . . .
(1) The recommendation of the appropriate State licensing board or professional disciplinary authority.
(2) The applicant's experience in dispensing . . . controlled substances.
(3) The applicant's conviction record under Federal or State laws relating to the manufacture, distribution, or dispensing of controlled substances.
(4) Compliance with applicable State, Federal, or local laws relating to controlled substances.
(5) Such other conduct which may threaten the public health and safety.
“These factors are . . . considered in the disjunctive.”
The Government has the burden of proving, by a preponderance of the evidence, that the requirements for revocation or suspension pursuant to 21 U.S.C. 824(a) are met. 21 CFR 1301.44(e). However, “once the [G]overnment establishes a prima facie case showing a practitioner has committed acts which render his registration inconsistent with the public interest, the burden shifts to the practitioner to show why his continued registration would be consistent with the public interest.”
The evidence shows that the New Mexico Medical Board has not made a recommendation in this matter. However, because the Controlled Substances Act makes the possession of authority under state law to dispense controlled substances a requirement for both obtaining and maintaining a practitioner's registration,
Here, the evidence shows that on October 1, 2010, the New Mexico Board of Medicine summarily suspended Respondent's state medical license. GX 4. The evidence also shows that on May 9, 2011, the Board, following a hearing, found that Respondent committed “unprofessional or dishonorable conduct” in that he engaged in the “injudicious prescribing of drugs” and “fail[ed] to maintain timely, accurate, legible and complete medical records.” GX 5, at 13.
Notwithstanding these findings, the Board re-instated Respondent's medical license to allow him to practice psychiatry.
Under the CSA, a practitioner's registration grants authority to dispense a controlled substance, which by definition “means to deliver a controlled substance to an ultimate user . . . by, or
With respect to these factors, the ALJ rejected, as unsupported by substantial evidence, the Government's contentions that: (1) Respondent acted as a pharmacy without being registered to do so; and (2) he re-dispensed the controlled substances he obtained from his patients. ALJ at 18–19. The ALJ found, however, that Respondent violated various federal and state controlled substance recordkeeping requirements by failing to: (1) Take inventories of the drugs he had on hand and keep a record of such, (2) maintain records of the drugs he received, and (3) document his dispensings of controlled substances.
As noted above, in its Prehearing Statement, the Government alleged that Respondent “ask[ed] his patients to return their unused drugs, which included controlled substances, and that Respondent would re-distribute these drugs to his other patients as samples.” ALJ Ex. 11, at 3. Yet the SDI, who was a witness for the Government, testified that while Respondent acknowledged that he took back both controlled and non-controlled drugs from his patients, he denied that he ever re-dispensed any controlled substances to his patients. Tr. 46, 80. Respondent likewise denied having ever re-dispensed controlled substances to his patients.
The Government nonetheless argues that the empty prescription vials, three of which bore labels indicating they had
The Government further argues that Respondent illegally possessed the controlled substances that were “returned . . . from his patients.” Gov. Br. 21. On point here, the CSA provides that “[i]t shall be unlawful for any person knowingly or intentionally to possess a controlled substance unless such substance was obtained directly, or pursuant to a valid prescription or order, from a practitioner, while acting in the course of his professional practice, or except as otherwise authorized by this subchapter.” 21 U.S.C. 844(a). The CSA created a closed system of distribution which generally contemplates that a controlled substance can only be lawfully acquired from a registrant; in the case of a practitioner, the Act generally allows a registered practitioner to obtain a controlled substance only from a registrant who is authorized to distribute a controlled substance. Moreover, while an Agency regulation provides that “[a]ny person lawfully in possession of a controlled substance listed in any schedule may distribute (without being registered to distribute) that substance to the person from whom he/she obtained it[,]” 21 CFR 1307.12(a), this regulation does not authorize a practitioner to acquire a controlled substance which has been dispensed to his patient by another practitioner. Nor, by its plain language, does the regulation even allow a practitioner to acquire a controlled substance which the practitioner dispensed through his own prescription.
The record contains evidence of at least seven instances in which Respondent obtained possession of controlled substances which had been prescribed by another physician.
The evidence further shows that Respondent violated numerous recordkeeping requirements. Indeed, notwithstanding that he has been practicing medicine for nearly four decades and a DEA registrant for much (if not all) of this time,
Under the CSA, Respondent was required to take an initial inventory of the controlled substances he had on hand “as soon” as he “first engage[d]” in the dispensing of controlled substances, and “every second year thereafter, make a complete and accurate record of all stocks thereof on hand.” 21 U.S.C. 827(a)(1). Respondent was also required to “maintain, on a current basis, a complete and accurate record of each such substance . . . received, sold delivered, or otherwise disposed of by him.”
Respondent did not, however, have an inventory of the controlled substances he had on hand at the time of the November 2009 inspection. Nor did he maintain a record of the controlled substances he received from either his patients or from the manufacturers/distributors who provided him with samples. He also did not have a dispensing log for the controlled substance samples he dispensed to his patients.
Finally, Respondent was required to maintain a record of his prescribing of controlled substances “in the course of maintenance or detoxification treatment of an individual.”
As his basis for finding Respondent's testimony not credible, the ALJ cited testimony to the effect “that Respondent never provided the patient charts” to the Investigators and that he claimed that he documented the dispensing in the charts only after being informed “that he was in violation of the federal regulations.” R.D. at 21. The ALJ thus reasoned that “[t]he delayed timing of Respondent's uncorroborated revelation that all his record-keeping was located in patient charts is plainly incredible, particularly given other credible testimony of record that Respondent was unaware of any record-keeping requirements for controlled substances for over thirty-five years.”
Respondent's lack of awareness of controlled substance recordkeeping requirements aside, I reject the ALJ's finding because physicians routinely document the prescriptions they write in their patient charts. As for “[t]he delayed timing” of his response,
As for the ALJ's observation that Respondent “never provided the patient charts,”
Accordingly, I reject this allegation as unsupported by substantial evidence. However, as explained above, I do find that Respondent violated the CSA and DEA regulations by: (1) Failing to maintain the required inventories, (2) failing to retain records of the controlled substances he received from both patients and the drug samples he received from distributors/manufacturers, and (3) failing to document his dispensing of controlled substance samples.
As explained above, the State Board made extensive findings regarding Respondent's prescribing of controlled substances to five patients, and concluded that he had engaged in the “injudicious prescribing of drugs” and thus committed “unprofessional or dishonorable conduct.” GX 5, at 13 (citing N.M. Stat. Ann. § 61–6–15(D)(26)). Based on these findings, and notwithstanding his acknowledgment that this was “not a central issue of the Government's case,” the ALJ found that Respondent “issued prescriptions outside of the usual course of professional practice in violation of federal and state law.” R.D. at 24;
It is certainly true—if not an understatement—to say that Respondents' prescribing to the five patients was “not a central issue of the Government's case.” Indeed, the Government never properly put this conduct in issue at all. As explained above, following the remand, and notwithstanding its representation that it intended to file an amended show cause order, the Government did not do so. And while it is settled (and has been upheld by various federal courts of appeals) that Due Process is satisfied provided the Government, through its prehearing statements, provides adequate notice that it intends to litigate an issue, at no point in its pleadings did the Government state that it was alleging that Respondent violated 21 CFR 1306.04(a) and intended to use the State Board's order as proof. Rather, in its prehearing statements, the Government merely stated that it intended to put on evidence that the Board had restricted his state authority to handle controlled substances and that his DEA “registration is not a restricted registration and includes the authority to handle all controlled substances in Schedules II through V which is different from and inconsistent with the Respondent's limited/restricted state authority to handle controlled substances.” ALJ Ex. 11, at 6;
Moreover, even in its post-hearing brief, the Government never argued that Respondent's prescribing to the five patients identified in the Board's Order establishes that he violated 21 CFR 1306.04(a), which prohibits the issuance of prescriptions without a legitimate medical purpose and outside of the usual course of professional practice.
In its brief, the Government also notes Respondent's testimony, in which he referred to the State Board's suspension as his “sabbatical,” to argue that he “accepts no responsibility whatsoever for his bad medical practices because he believes that the state suspension of his medical license is a sabbatical as opposed to a mandatory suspension that was imposed . . . because of his bad medical practices.”
Subsequently, after the SDI testified in essence that he had no knowledge as to whether the Medical Board investigated Respondent because he had harmed patients or diverted medications, the Government moved into evidence various board orders, arguing that they were relevant because they address “the issue that counsel brought up with [the SDI], were any patients harmed, were any patients injured, was there any diversion,” and “[t]his specifically goes to [Respondent's] activities along those lines and has become relevant through [the] questioning” of the SDI. Tr. 92. Not only did Respondent's counsel object to the admission of most of these exhibits, I conclude that because her questioning of the SDI was limited to asking him about the basis for the Pharmacy Board's investigation and its findings, this did not make the Medical Board's findings relevant and does not excuse the Government from its obligation to provide notice. And I further conclude that the limited questioning undertaken by Respondent's counsel on these issues does not establish that Respondent consented to litigate the issue of whether the Medical Board's findings establish that he violated 21 CFR 1306.04(a).
Here, while the State Board found that Respondent had engaged in the “injudicious prescribing” of drugs and thus committed “unprofessional or dishonorable conduct” in violation of N.M. Stat. Ann. § 61–6–15(D)(26), notably, the Board did not find that Respondent had engaged in “the prescribing, administering or
While it may be that the State Board's findings establish reckless or negligent conduct in the handling of controlled substances, which is a basis to revoke a registration under Agency precedent,
As explained above, I find that Respondent unlawfully possessed controlled substances which he obtained from his patients. I also find that Respondent failed to maintain required records. I thus conclude that the Government has satisfied its
Where the Government has met its
Here, although the ALJ noted that “Respondent's acceptance of responsibility was somewhat mixed,” he nonetheless concluded that “when considering the record as a whole, [he] has failed to demonstrate that he will not engage in future misconduct.” R.D. at 25. I reject the ALJ's conclusion because contrary to his statement, he did not consider the record as a whole, but rather, ignored relevant evidence to the contrary. And he further erred when he required Respondent to accept responsibility for conduct which the Government never properly put at issue.
For example, with respect to the recordkeeping violations, the ALJ noted that Respondent admitted that he had failed to keep required records.
Moreover, the ALJ entirely ignored Respondent's testimony that following the November 2009 inspection he had stopped accepting drugs from his patients.
Next, although it is not clearly stated in his recommended decision, the ALJ apparently found that Respondent lacked candor, based on his finding not credible, Respondent's testimony that he documented the medications he was providing his patients in their charts. R.D. at 25. Because for reasons explained above, I reject the ALJ's credibility finding, I conclude that his testimony on this issue does not establish that he lacks candor.
The ALJ then noted that “Respondent also admitted that he was unaware that Ambien, Lunesta and Lyrica are controlled substances, but appeared to blame the pharmaceutical companies for failing to inform him.”
Finally, the ALJ cited Respondent's testimony regarding the Medical Board's findings, including his testimony to the effect that while he acknowledges his obligation to comply with the Board's order, “he does not agree with the Medical Board's findings pertaining to his prescribing practices.” R.D. at 26 (citing Tr. 166). However, because as explained above, the Government failed to raise the issue, Respondent was not obligated to address it in the proceeding.
As for what was properly at issue in the proceeding, Respondent has substantially complied with the requirement that he accept responsibility for his misconduct and demonstrate that he will not engage in future misconduct. However, even where a registrant satisfies this obligation, in fashioning an appropriate sanction, the Agency is still entitled to consider the egregiousness of the proven misconduct and its deterrence interests.
Given the unrefuted evidence that he acted out of a benign motivation, I place little weight on Respondent's unlawful conduct in obtaining possession of the controlled substances from his patients. Respondent's recordkeeping violations are, however, a different matter. Indeed, I find it remarkable—and inexcusable—that Respondent was unaware of both the CSA's and the State's recordkeeping requirements. “Recordkeeping is one of the CSA's central features” for maintaining accountability of the distribution and dispensing of controlled substances; “a registrant's accurate and diligent adherence to this obligation is absolutely essential to protect against the diversion of controlled substances.”
It should be obvious to anyone that the lawful handling of controlled substances is a highly regulated activity, and having voluntarily chosen to become a registrant, Respondent cannot reasonably claim ignorance of the legal requirements applicable to his controlled substance activities.
By themselves, recordkeeping violations can support the revocation of a registration.
Moreover, pursuant to the Medical Board's order, Respondent no longer holds authority under state law to prescribe “narcotics, including but not limited to, all opioid analgesics, including buprenorphine and all synthetic opioid analgesics.” GX 5, at 13. As explained in the discussion of factor one, under the CSA, the Board's revocation of his authority to prescribe these drugs likewise mandates that the same restriction be imposed on his DEA registration. Therefore, his registration will be restricted to bar him from prescribing the aforementioned drugs and his Identification Number as a DATA-Waiver physician must also be revoked.
Accordingly, I will order that Respondent's application to renew his new registration be granted subject to the following conditions:
(1) Effective on the date on which Respondent's registration is renewed, his registration shall be suspended for period of six months.
(2) Respondent's registration shall be restricted to authorize the dispensing of only non-narcotic controlled substances.
(3) Respondent's Identification Number as a DATA-Waiver physician shall be revoked.
Pursuant to the authority vested in me by 21 U.S.C. 823(f) and 824(a)(4), as well as 28 CFR 0.100(b), I order that the application of Kenneth Harold Bull, M.D., to renew his DEA Certificate of Registration as a practitioner be, and it hereby is, granted subject to the condition that he be authorized to dispense only non-narcotic controlled substances. I also order that the Identification Number as a DATA-Waiver physician issued to Kenneth Harold Bull, M.D., be, and it hereby is, revoked. I further order that upon the effective date of this Order, the DEA Certificate of Registration issued to Kenneth Harold Bull, M.D., be, and it hereby is, suspended for a period of six months. This Order is effective November 21, 2013.
On June 6, 2012, the Deputy Assistant Administrator, Office of Diversion Control, Drug Enforcement Administration, issued an Order to Show Cause to Anthony E. Wicks, M.D. (Applicant), of Tampa, Florida. Show Cause Order at 1. The Show Cause Order proposed the denial of Applicant's application for a DEA Certificate of Registration, because granting his application would be “inconsistent with the public interest.”
The Show Cause Order specifically alleged that in approximately December 2010, Applicant discontinued his practice in Visalia, California and began practicing in Winter Springs, Florida, and that he issued more than 2,290 controlled-substance prescriptions without being registered at this location, in violation of 21 U.S.C. 822(e) and 21 CFR 1301.12; and that he also failed to notify DEA of the change in his practice location pursuant to 21 CFR 1301.51. Show Cause Order at 1. The Show Cause Order also alleged that after Applicant's registration expired on May 31, 2011, he issued more than 270 controlled-substance prescriptions, in violation of 21 U.S.C. 841(a) and 843(a)(2).
The Show Cause Order further notified Applicant that within thirty days of the date of his receipt of the Order, he had the right to either request a hearing, or to file a waiver of his right to a hearing, together with a written statement of his position on the matters of fact and law asserted by the Government.
The Government served the Show Cause Order on Applicant by certified mail addressed to him at the address of his proposed registered location. GXs 1, 16, 17. As evidenced by the signed return receipt card, service was accomplished on June 9, 2012. GX 17.
On July 5, 2012, Applicant, through his counsel, filed a timely request for a hearing. GX 18. The matter was placed on the docket of the Office of Administrative Law Judges (ALJ) and assigned to an ALJ, who proceeded to conduct pre-hearing procedures. GX 22. However, on September 26, 2012, Applicant withdrew his request for a hearing. GX 21. The same day, the ALJ issued an Order granting Applicant's request and cancelled the hearing. GX 22.
On March 13, 2013, the Government submitted the Investigative Record and a Request for Final Agency Action to my Office. As an initial matter, I find that Applicant, by withdrawing his request for a hearing, has waived his right to a hearing on the allegations.
Applicant previously held DEA Certificate of Registration BW7987184, which authorized him to dispense controlled substances in Schedules II through V, as a practitioner, at the registered address of 400 West Mineral King Blvd., Department of Anesthesia, Visalia, California.
On July 19, 2011, Applicant applied for a new registration. GX 1. Applicant sought authority to dispense controlled substances in Schedules II—V at the registered address of 1105 Shipwatch Circle, Tampa, Florida.
A Diversion Investigator (DI) subsequently determined that beginning in December 2010, Applicant had begun practicing at a pain clinic located in Winter Springs, Florida. GX 15. However, Applicant neither obtained a registration for this location, nor sought to modify the address of his then-existing registration. Instead, during the ensuing period, which lasted through at least most of June 2011, Applicant issued 3,120 controlled-substance prescriptions,
The DI also found that Applicant had issued at least 341
Under the Controlled Substances Act (CSA), an application for a practitioner's registration may be denied if “the issuance of such registration . . . would be inconsistent with the public interest.” 21 U.S.C. 823(f). In making the public interest determination, Congress directed that the following factors be considered:
(1) The recommendation of the appropriate State licensing board or professional disciplinary authority;
(2) The applicant's experience in dispensing, or conducting research with respect to controlled substances;
(3) The applicant's conviction record under Federal or State laws relating to the manufacture, distribution, or dispensing of controlled substances;
(4) Compliance with applicable State, Federal, or local laws relating to controlled substances; and
(5) Such other conduct, which may threaten the public health and safety.
“[T]hese factors are considered in the disjunctive.”
The Government has “the burden of proving that the requirements for . . . registration . . . are not satisfied.” 21 CFR 1301.44(d). In this matter, I have considered all of the factors and conclude that the evidence with respect to factors two and four supports the conclusion that granting the application “would be inconsistent with the public interest.”
Under the CSA, “[e]very person who dispenses
In a rulemaking, DEA has explained that “DEA individual practitioner registrations are based on a [s]tate license to practice medicine and prescribe controlled substances.” DEA,
The evidence shows that Applicant issued thousands of controlled-substance prescriptions while practicing medicine at the Winter Springs, Florida pain clinic and did so over the course of a seven-month period. The evidence thus establishes that Applicant
The CSA further provides that “[e]very registrant . . . shall be required to report any change of professional or business address in such manner as the Attorney General shall by regulation require.” 21 U.S.C. 827(g). Under a DEA regulation, “[a]ny registrant may apply to modify his/her registration . . . to change his/her name or address, by submitting a letter of request to the Registration Unit, Drug Enforcement Administration.” 21 CFR 1301.51. Of consequence, this regulation further provides that “[t]he request for modification shall be handled in the same manner as an application for registration.”
Because section 827(g) clearly creates a substantive obligation on the part of a registrant to notify the Agency if he changes his professional address, the regulation's use of the words “may apply to modify” cannot alter (and cannot reasonably be read as altering) the binding nature of a registrant's obligation to notify the Agency.
Under the CSA, it is unlawful for a practitioner to “knowingly or intentionally . . . use in the course of the distribution[] or dispensing of a controlled substance, . . . a registration number which is . . . expired.” 21 U.S.C. 843(a)(2);
Here, the evidence shows that while Applicant's registration expired on May 31, 2011, he nonetheless proceeded to use the registration to issue several hundred controlled-substance prescriptions for drugs such as oxycodone 30mg. and Valium 10mg.
Here again, the extent of Applicant's misconduct in using an expired registration to issue prescriptions provides reason to deny his application.
Pursuant to the authority vested in me by 21 U.S.C. 823(f) and 28 CFR 0.100(b), I order that the application of Anthony E. Wicks, M.D., for a DEA Certificate of Registration as a practitioner be, and it hereby is, denied. This Order is effective immediately.
On July 9, 2013, Administrative Law Judge Gail A. Randall (hereinafter, ALJ) issued the attached Recommended Decision. Therein, the ALJ found that there was no dispute over the material fact that Respondent does not hold authority under the laws of the State of Alabama, the State in which he seeks registration with the Agency, to dispense controlled substances. R.D. at 12–13. Applying longstanding agency precedent, which holds that the possession of authority to dispense controlled substances under the laws of the State in which a practitioner engages in professional practice is a prerequisite for obtaining a registration under the Controlled Substances Act (CSA),
Having considered the entire record, I have decided to adopt the ALJ's factual findings, legal conclusions, and recommended order. However, I do not adopt the ALJ's reasoning that “[w]here the state has suspended or revoked a registrant's license to handle controlled substances, summary disposition of a registrant's case is only appropriate if the registrant is afforded some mechanism to challenge the state action.” R.D. at 11 (citing
Thus, when the Agency subsequently sought summary disposition on the ground that the practitioner no longer held state authority, the Administrator noted that granting the Government's motion “would effectively preclude [the practitioner] from ever being able to challenge the basis of the Immediate Suspension order and regain both her [f]ederal and [s]tate registrations were the allegations without merit.”
Here, by contrast, DEA previously provided Respondent with a hearing on the merits of the Agency's allegations that he committed various acts which rendered his registration inconsistent with the public interest.
Respondent nonetheless maintains that both DEA and the State “will continue to deny [him] access to prescribing medications based on the other's actions,” and that “[t]his is an unjust an [sic] inequitable situation as [he] fully complied with all the requirements set forth by the Medical Licensure Commission [MLC] after the charges were first brought against him.” Resp. to Govt's Mot. for Summ. Disp. at 4. However, as explained in the ALJ's decision (
As for whether this Agency has placed Respondent in an unjust position, Respondent ignores that in the previous DEA proceeding, he had a full and fair opportunity to contest the allegations, as well as to put on evidence (including his evidence that he had fully complied with the requirements of the MLC's order) to refute the Government's contention that his continued registration is inconsistent with the public interest.
And as for whether the MLC has placed him in an unjust position (or has acted arbitrarily or capriciously), because notwithstanding his compliance with its order, it proceeded to revoke his state authority based on the Administrator's order, this is a matter for the Alabama courts to decide.
After the Board has reached a determination, from consideration of all of the evidence on the question of guilt or innocence of the registrant with respect to the grounds specified in the complaint, and before the Board determines the appropriate penalty, if any, to be imposed, the Board may, but is not required to, receive and consider all prior actions of the Board with respect to the registrant's certificate of registration and any matters in mitigation or extenuation which the registrant desires to submit.
Ala. Admin. Code r.540–x–6–.02(2). It is further noted that under the Board's regulations, the Board had available to it a range of sanctions, including sanctions short of revocation or outright suspension, yet chose to revoke Respondent's state registration.
Respondent has not, however, identified how he has been adversely affected by the refusal to grant his request to withdraw his application, and under the rules of the Agency, Respondent can reapply for a new registration at any time. However, because under federal law, the possession of state authority is a prerequisite for obtaining a registration, Respondent is not entitled to be registered, or to challenge the Government's contention that his registration is inconsistent with the public interest, until he obtains state authority. 21 U.S.C. 823(f).
Pursuant to the authority vested in me by 21 U.S.C. 823(f), as well as 28 CFR 0.100(b) and 0.104, I order that the application of Morris W. Cochran, M.D., for a DEA Certificate of Registration as a practitioner be, and it hereby is, denied. This Order is effective immediately.
The Deputy Assistant Administrator, Drug Enforcement Administration (“DEA” or “Government”), issued an Order to Show Cause (“Order”) dated January 11, 2013,
The Order specifically alleged that, on February 12, 2012, Respondent's Schedule II and IIN state registration for controlled substances had been revoked by the Alabama Board of Medical Examiners and Respondent was prohibited from treating patients for pain management or drug addiction. [
On February 11, 2013, the Respondent, through counsel, filed a timely request for hearing in the above-captioned matter.
Later, on February 11, 2013, this Court issued an Order for Prehearing Statements in which the Government was directed to file its Prehearing Statement on or before February 25, 2013, and the Respondent was directed to file his Prehearing Statement on or before March 4, 2013.
On February 25, 2013, the Government filed its Motion for Summary Judgment and Motion to Stay the Proceedings (“Government's Motion”). Therein, the Government moved this Court to summarily dispose of the above-captioned matter and stay the proceedings while the Government's Motion was pending. [Gov't Mot. I, at 1].
Specifically, the Government argued that “summary judgment” is warranted in this case because the Respondent currently lacks authority to handle controlled substances in the state of Alabama and thus, the Respondent's application for a DEA COR should be denied. [
On March 4, 2013, Government counsel filed its Second Motion to Stay the Proceedings while Respondent's Request to Withdraw his Application is Pending (“Government's Second Motion”). Therein, Government requested that the Court stay the above-captioned matter because Dr. Cochran submitted a request to withdraw his pending application. [Gov't Mot. II, at 1;
On March 20, 2013, this Court ordered the parties to file a Joint Status Report on or before April 15, 2013, regarding Respondent's request to withdraw his application.
On April 12, 2013, the Respondent filed his Status Update (“Respondent's Status Report I”). Therein, he explained to this Court that he had not yet been “informed as to the DEA's decision on his request to withdraw the application.” [Resp't Status Report I, at 1]. Accordingly, the Respondent requested “that the ALJ continue to stay this action until the DEA reaches a decision on Dr. Cochran's request to withdraw his application.” [
On April 15, 2013, the Government filed its Status Report (“Government's Status Report I”). Therein, the Government informed this Court that the Government had sent the Respondent's request to withdraw his application to the Deputy Assistant Administrator, Office of Diversion Control, but had not yet received a decision from him. [Gov't Status Report I, at 1–2].
On April 16, 2013, this Court ordered the parties to file a second Joint Status Report on or before April 29, 2013.
On April 29, 2013, the Respondent filed his Status Update (“Respondent's
Later, on April 29, 2013, the Government filed its Status Report and Second Request to Stay Proceedings while Respondent's Request to Withdraw his Application is Pending with the Deputy Assistant Administrator's Office (“Government's Status Report II”). Therein, the Government confirmed that the “Deputy Assistant Administrator still has this matter and [Government counsel] has been informed that a decision will come shortly.” [Gov't Status Report II, at 1]. Accordingly, the Government requests “that the proceedings be stayed until the Deputy Assistant Administrator issues a decision.” [
On April 30, 2013, this Court ordered the parties to file a third Joint Status Report no later than May 13, 2013 regarding Respondent's request to withdraw his application for a DEA registration.
On May 6, 2013, Respondent filed a Status Update, wherein the Respondent indicated that he, once again, “has not been informed as to the DEA's decision on his request to withdraw the application.” [Resp't Status Report III, at 1]. Respondent requested that the ALJ continue this action until the DEA reaches a decision on Respondent's withdrawal request. [
On May 14, 2013, Government filed a Status Report, Third Request to Stay Proceedings While Respondent's Request to Withdraw His Application is Pending with the Deputy Assistant Administrator's Office, and Request to Accept this Status Report One Day Late. Government confirmed that the Deputy Assistant Administrator had not yet made a decision on Respondent's withdrawal request. [Gov't Status Report III, at 1]. Government's untimely filing was the result of waiting until late afternoon for a response from the Deputy Assistant Administrator's office about this matter. [
On May 17, 2013, this Court continued the stay on the above-captioned matter and ordered the parties to file a fourth Joint Status Report no later than June 13, 2013.
On June 11, 2013, Government filed a Status Report (“Government's Status Report IV”) indicating that on “May 17, 2012 (sic), the Deputy Assistant Administrator's office notified [Government Counsel] that DEA' (sic) Office of Diversion will let Dr. Cochran withdraw his application `only on the condition that [Dr.] Cochran not re-apply for a period of five years.'” [Gov't Status Report IV, at 2]. Government's Status Report IV did not, however, indicate whether Respondent had accepted the offer. [
On June 12, 2013, this Court ordered Respondent to respond to Government's Status Report IV, which contained the Deputy Assistant Administrator's offer for Respondent's withdrawal of his application. Specifically, I asked the Respondent to address the Deputy Assistant Administrator's withdrawal offer and the current status of his authority to handle controlled substances in the state of Alabama.
Later, on June 12, 2013, the Respondent, through counsel, filed a Response to Government's Status Report IV. [Resp't Resp., at 1]. Respondent noted that the Government's most recent filing “was the first time that the [Respondent had] been notified that the DEA Office of Diversion would only allow Dr. Cochran to withdraw his application for DEA registration if he waited five years before he applied again.” [
On June 14, 2013, I held a telephonic conference with the parties. The parties represented their positions on the issue of Respondent's request to withdraw his application, including whether I should order the disclosure of the email from the Deputy Assistant Administrator that contained the withdrawal offer.
On June 24, 2013, the Respondent, through counsel, filed a Response to Government's Motion for Summary Judgment. [Resp't Resp. II, at 1]. Respondent explained that on January 25, 2012, Respondent appeared before the Alabama Medical Licensure Commission (“AMLC”) concerning the same actions that resulted in the suspension of Respondent's former DEA COR on September 22, 2010. [
Respondent also contended that he has “been placed in an indefinite back and forth between the DEA and the Alabama Board of Medical Examiners.” [
Later, on June 24, 2013, I issued a Memorandum and Order (“MO”) addressing the statutory and regulatory basis for withdrawing an application for a DEA COR. [MO, at 4–6]. I also explained that it would not be appropriate in this case to permit Respondent to file an interlocutory appeal with the Administrator for review of the withdrawal offer terms. [
Respondent has failed to notify this Court of his decision as to how he plans to proceed with his case. I interpret Respondent's silence to indicate that he has waived his opportunity to accept the Deputy Assistant Administrator's withdrawal offer. I further interpret his silence to mean that he plans to pursue his case through the administrative process. As a result, I will now address Government's motion for summary disposition, which was contained in the February 25, 2013 motion and renewed
The Controlled Substances Act (“CSA”) and long-standing agency precedent provide that having state authority to handle controlled substances is a prerequisite to obtaining a DEA registration.
Therefore, the DEA does not have statutory authority under the CSA to grant the application of a practitioner, who lacks state authority to handle controlled substances.
Consequently, the Deputy Administrator has found that denial of an application for registration through summary disposition is appropriate where a respondent lacks state authority to handle controlled substances.
Here, the Respondent does not dispute that he currently lacks state authority to handle controlled substances. Respondent indicated that his state registration was revoked October 19, 2012.
With the central issue of state authority resolved, I turn to Respondent's additional argument that he has “been placed in an indefinite back and forth between the DEA and the Alabama Board of Medical Examiners.” [Resp't Resp. II, at 2]. Although not explicitly styled as a due process argument, I find that Respondent is impliedly arguing that his inability to obtain a state registration without a DEA registration, and vice versa, is a denial of his due process rights.
A respondent has a constitutionally protected property interest in his DEA registration.
Where the state has suspended or revoked a registrant's license to handle controlled substances, summary disposition of a registrant's case is only appropriate if the registrant is afforded some mechanism to challenge the state action.
The state of Alabama affords the Respondent due process through a hearing entitlement and opportunity for appellate review. Specifically, the Code of Alabama provides that “[b]efore denying, suspending, or revoking a registration . . . the certifying boards shall serve upon the applicant or registrant an order to show cause.” Ala. Code § 20–2–53(a) (2013). The statute indicates that the order to show cause “call[s] upon the applicant or registrant to appear before the certifying board.”
Here, Respondent had an opportunity to appear before the AMLC during a hearing about his state authority to handle controlled substances. [Resp't Resp. II, at 1; Gov't Mot. I, at 6–7]. Thus, I find that Respondent's due process rights are protected, even if I recommend denial of his application for DEA COR through summary disposition. With regards to Respondent's appeal of the AMLC decision that revoked his state registration, I find that it is within the discretion of the Alabama Court of Civil Appeals to decide whether Respondent's case will be heard or resolved through summary judgment. Finally, I acknowledge that Respondent's Alabama registration was
It is well-settled that when there is no material question of fact involved, or when the facts are agreed upon, there is no need for a plenary, administrative hearing.
Here, the parties do not dispute that the Respondent lacks state authority to handle controlled substances in Alabama. Thus, there is no material question of fact to be adjudicated.
DEA is bound by federal statute to deny applications for a DEA COR, where an applicant lacks state authority. 21 U.S.C. 823(f), 824(a)(3);
I also forward this case to the Deputy Administrator for final disposition. I recommend that the Deputy Administrator deny Respondent's pending application for a DEA COR.
Dated: July 9, 2013.
On October 17, 2012, Administrative Law Judge (ALJ) Gail A. Randall issued the attached Recommended Decision (hereinafter, cited as R.D.
Having reviewed the record in its entirety, I reject the Government's Exceptions and adopt the ALJ's findings of fact and conclusions of law except as discussed below. I also adopt in part, and reject in part, the ALJ's recommended order. A discussion of the Government's Exceptions follows.
The Government first takes exception to the ALJ's finding that it failed to prove that Respondent, while serving as the dental director of the Round Valley Indian Health Clinic (RVIHC), made an unauthorized purchase of two controlled substances (hydrocodone and codeine). Exceptions at 2. The contention is not well taken as either a factual or legal matter.
The evidence showed that on November 29, 2010, Respondent prepared a purchase order for various dental supplies, including one bottle of 500 tablets of hydrocodone/acetaminophen and one bottle of 500 tablets of codeine/acetaminophen. GX 10, at 1–3; Tr. 151. The purchase order comprised all of one page and listed a total of eleven items; the order was approved by Jan Scribner, the deputy director of the RVIHC.
In challenging this finding, the Government takes issue with the ALJ's credibility findings. Citing
In taking exception to the ALJ's findings regarding the purchase, the Government also takes issue with the ALJ's finding that Respondent “honestly and reasonably believed he possessed the necessary authority to store and dispense controlled substances in [the RVIHC] dental department.” Exceptions at 2. To the extent the Government has even properly put this finding at issue, I reject its contention, because, by itself, it does not establish a violation of the CSA or state law, or otherwise actionable misconduct under the public interest standard.
More specifically, the Government requests that I reject the ALJ's credibility findings regarding the testimony of both Respondent (whom she found credible on the issue of whether a dental clinic employee had told him that the executive director had approved the purchase order,
The Seventh Circuit held that the Commission could “discredit the weight of a witness's testimony without impinging on an ALJ's credibility determinations.”
The Commission must attribute significant weight to an ALJ's findings based on a witness's demeanor
The Government attempts to overcome this evidence, arguing that in an affidavit, the deputy director “unequivocally states that she was not aware [that] the purchase order, which contained a number of items, also contained an order for controlled substances.” Exceptions at 7. The Government then argues that “[a] review of the purchase order shows that . . . the controlled substances order is buried in the middle/end of the purchase order.”
The Government's argument is wholly unpersuasive. Notably, the purchase order was but a single page in length and listed all of eleven items. GX 10, at 1. Moreover, the purchase order clearly described the respective controlled substances as “1 bottle” of “Hydrocodone” and “1 bottle” of “APAP w/codeine.”
Even if the Government's contention was supported by substantial evidence, I would nonetheless reject the exception. Notably, while the Government argues—as an afterthought—that Respondent used the clinic's “DEA registration without authorization from RVIHC executive personnel,” it does not go so far as to maintain that this constitutes a violation of the Controlled Substances Act.
The ALJ found that Respondent took responsibility for his actions and “repeatedly demonstrated remorse for his conduct at the RVIHC.” R.D. at 29. The Government takes exception to this finding, arguing that while Respondent acknowledged the misconduct he committed prior to 2008, he “was not candid and not willing to accept
Respondent is, however, only required to accept responsibility for the misconduct which the Government has proven on the record.
The Government did not, however, take exception to these findings.
The record, however, does establish that Respondent failed to maintain accurate dispensing records, as well as a dispensing log, which was required under the terms of the Dental Board's order, which restored his dental license. While there is some evidence to support the Government's contention that Respondent did not accept responsibility for his failure to maintain accurate records, I conclude that the ALJ's finding is supported by the record as a whole.
At the hearing, Government counsel asked Respondent whether it was correct that he did not keep “a separate dispensing record when [he] started to use the Vicodin . . . that [he] had ordered.” Tr. 491. Respondent answered that this was “[a]bsolutely correct.”
Subsequently, the Government asked Respondent whether “hav[ing] shortages and . . . overages” is “a violation of DEA law?”
I don't know, but I do know that I violated [the State] order. I'm willing to stipulate that I violated that too. However you want to characterize it, they wouldn't have happened if I hadn't made my mistakes. There would be no three separate logs. So if you want to say that I violated a couple of steps, of course, I'm willing to stipulate that there was a tough time in my life. I'm sorry. I don't mean, if I get argumentative, I ask the Court's forgiveness.
Respondent also testified that he had abused the public trust in his handling of Vicodin while at the RVIHC. Tr. 539–40. While Respondent subsequently testified that there was a difference in degree between his previous violations and the violations he committed at RVIHC, he testified that “I abused the public trust here” and “I screwed up.”
Ignoring nearly all of the evidence which supports the ALJ's finding, the Government argues that “Respondent repeatedly minimized the significance of his dispensing-record violations.” Exceptions at 10. As support for this contention, it quotes Respondent's testimony that “we're talking about 40 tabs. . . . so I'm going to jeopardize my licenses for 40 Vicodin tabs . . . [f]or forty tabs?”
In any event, I have considered the entirety of Respondent's testimony in reviewing the ALJ's finding and conclude that much of the testimony cited by the Government is not probative of whether he has accepted responsibility for his failure to maintain accurate records. For example, the Government contends that “Respondent did not admit to wrongdoing when he was asked during cross-examination whether the audit shortages could be partially attributable to the hydrocodone he gave to the transient patient.” Exceptions at 9. A review of what appears to be the relevant portion of the transcript shows that the Government asked Respondent whether the forty dosage unit shortage “could be accounted for, if not in total, at least in part based on the amount of Vicodin that [he] dispensed to [the] transient that did not get charted.” Tr. 528. Respondent answered: “I suppose some of the Vicodin, some of those 40 tabs could have been it. I don't know. I'm confused. Do you want me to confess to something?”
The Government also points to a question it asked Respondent about an email to the RVIHC Executive Director, in which he wrote that he “desperately wanted to be liked by the natives so I prescribed Vicodin too liberally.” Exceptions at 9;
However, while I adopt the ALJ's finding that Respondent has accepted responsibility for his misconduct, I nonetheless conclude that the ALJ's proposed sanction does not adequately protect the public interest. As noted above, pursuant to the Dental Board's order which restored his dental license, Respondent was required to “maintain a record of all controlled substances prescribed, dispensed or administered by [him] during probation.” GX 7, at 7. This record was required to be maintained “in a separate file or ledger,” and to include, “in chronological order,” each patient's name and address, the date, the controlled substances and quantity, and “the pathology and purpose for which the controlled substance was furnished.”
Notwithstanding the egregiousness of his prior misconduct, Respondent did not appreciate the forbearance shown by the Board
Based on this misconduct, in September 2002, the Dental Board of California (DBC) filed an accusation against Respondent and he surrendered his state dental license. GX 5. On May 26, 2006, Respondent filed a petition to reinstate his dental license; on June 12, 2007, the DBC granted the petition. GX 7.
1. Upon the granting of Respondent's application, his registration will be suspended outright for a period of six months. Thereafter, Respondent's
2. Respondent is prohibited from administering or dispensing directly controlled substances. Respondent is authorized only to prescribe controlled substances.
3. Respondent is required to maintain a log, in chronological order, of all controlled-substance prescriptions he issues. The log must include the following information: (1) the date; (2) the patient's name and address; (3) the drug name, its strength, and quantity; and (4) the pathology and purpose of the prescription. Respondent shall maintain the log at his registered address. In addition, Respondent must provide a copy of the log to the nearest DEA field division office, on a quarterly basis, within seven calendar days of the last day of each quarter ending on March 31st, June 30th, September 30th, and December 31st.
4. Respondent shall not prescribe any controlled substance to himself or a family member.
5. Respondent is required to notify the nearest DEA field division office within 72 hours of any violation of this Order, any Dental Board Order, or any provision of federal or state law related to controlled substances.
Pursuant to the authority vested in me by 21 U.S.C. 823(f), as well as 28 CFR 0.100(b), I order that the application of Mark G. Medinnus, D.D.S., for a DEA Certificate of Registration as a practitioner, be, and it hereby is, granted, subject to the conditions set forth above. This Order is effective November 21, 2013.
Gail A. Randall, Administrative Law Judge. The Deputy Assistant Administrator, Office of Diversion Control, Drug Enforcement Administration (“DEA” or “Government”), issued an Order to Show Cause (“Order” or “OSC”) dated March 22, 2012, proposing to deny the application of Mark G. Medinnus, D.D.S. (“Respondent” or “Dr. Medinnus”) for a DEA Certificate of Registration pursuant to 21 U.S.C. 824(a)(2)–(4) and § 823(f)(2)–(5), because the registration of the Respondent would be inconsistent with the public interest, as that term is used in 21 U.S.C. 823(f). [Administrative Law Judge Exhibit (“ALJ Exh.”) 1 at 1].
The Order stated that Respondent had been previously registered with the DEA as a practitioner with authority to handle controlled substances in Schedules II–IV under DEA Certificate of Registration BM0207678. [
The Order further stated that on July 30, 2008, Respondent had been granted a DEA Certificate of Registration FM0982808 as a practitioner with authority to handle controlled substances in Schedules II–IV. [
The Order also stated that on December 18, 2002, Respondent entered into a Stipulated Surrender of License and Order with the Dental Board of California wherein Dr. Medinnus surrendered his rights and privileges as a dentist in the state of California. [
The Order also stated that on February 23, 2003, Respondent pled guilty to a felony violation of Cal. Health & Safety Code § 11173(a) (West 2012) for obtaining controlled substances by fraud. [
Lastly, the Order alleged that in December 2010, while Respondent was an employee of the Round Valley Indian Health Center (“RVIHC”), Dr. Medinnus made an unauthorized purchase of bottles of hydrocodone and codeine using RVIHC's DEA registration. [
On April 5, 2012, Respondent timely filed a request for a hearing in the above-captioned matter. [ALJ Exh. 2].
After authorized delays, the hearing was conducted on July 10–11, 2012, in Sacramento, California. [ALJ Exh. 5]. At the hearing, counsel for the DEA called four witnesses to testify and introduced documentary evidence. [Transcript (“Tr.”) Volume I–II]. The Respondent called two witnesses to testify, including himself, and introduced documentary evidence. [
After the hearing, the Government and the Respondent submitted Proposed Findings of Fact, Conclusions of Law and Argument (“Govt. Brief” and “Resp. Brief”).
The issue in this proceeding is whether or not the record as a whole establishes by a preponderance of the evidence that the Drug Enforcement Administration should deny the application for a DEA Certificate of Registration of Mark G. Medinnus, D.D.S. as a practitioner, pursuant to 21 U.S.C. 824(a)(2)–(4) (2006), and pursuant to 21 U.S.C. 823(f)(2)–(5), because the Respondent's registration would be inconsistent with the public interest, as that term is used in 21 U.S.C. 823(f). [ALJ Exh. 4; Tr. 7].
1. On September 19, 2011, Dr. Medinnus applied for registration with DEA as a practitioner in Schedules II through V at 9024 Sniktaw Lane, Fort Jones, CA 96032.
2. Dr. Medinnus was previously registered with DEA as a practitioner in Schedules II through IV under DEA Certificate of Registration BM0207678 at 1680 Westwood Drive, Suite C, San Jose, CA 95125. Dr. Medinnus voluntarily surrendered this registration on January 16, 2002.
3. On July 30, 2008, Dr. Medinnus was granted DEA Certificate of Registration FM0982808 as a
4. On September 3, 2002, the Dental Board of California, Department of Consumer Affairs, (hereinafter “Dental Board”) issued an “Accusation” which sought to revoke or suspend Dr. Medinnus' dental license. The “Accusation” alleged that Dr. Medinnus ordered controlled substances in order for his own and others illegal use and not in the course of his dental practice.
5. On September 20, 2002, Dr. Medinnus entered into a “Stipulated Surrender of License and Order” with the Dental Board as a result of the September 3, 2002, Dental Board “Accusation.” In the September 20, 2002, “Stipulated Surrender of License and Order,” Dr. Medinnus agreed to surrender his California dental license.
6. Effective December 18, 2002, the Dental Board adopted the September 20, 2002, “Stipulated Surrender of License and Order.”
7. On February 27, 2003, Dr. Medinnus pled guilty in Santa Clara County to one felony count of a violation of California Health & Safety Code 11173, obtaining controlled substances by fraud. Dr. Medinnus was sentenced to probation.
8. On April 27, 2006, Dr. Medinnus' felony conviction of California Health & Safety Code 11173 was reduced to a misdemeanor conviction under California Penal Code, Section 17, and then the conviction was dismissed under California Penal Code, Section 1203.4.
9. On or about May 26, 2006, Dr. Medinnus petitioned the Dental Board to re-instate his license. On March 15, 2007, a Dental Board Administrative Law Judge submitted a “Proposed Decision” to grant Dr. Medinnus' petition to re-instate his dental license subject to probation for five years. The “Proposed Decision” was adopted by the Dental Board in a “Decision” on May 10, 2007. The “Decision” became effective on June 12, 2007.
10. Hydrocodone, in combination dosage unit form, is a Schedule III narcotic controlled substance. Its brands,
11. Codeine with apap, in dosage unit form, is a Schedule III narcotic controlled substance.
12. Lorazepam and diazepam are both Schedule IV depressant controlled substances.
13. The Respondent stipulates that the Government can establish a
The Respondent was first licensed to practice dentistry in 1985. [Govt. Exh. 5]. On November 25, 1985, the Agency issued a Certificate of Registration Number BM0207678 to Respondent as a practitioner with authority to handle controlled substances in schedules II–IV. [Govt. Exh. 2; Tr. 323]. Respondent voluntarily surrendered this registration for cause on January 18, 2002. [Govt. Exh. 2; Tr. 323–24].
On July 23, 2008, Respondent applied for a new DEA Certificate of Registration. [Tr. 326]. This application was granted and the Agency issued Certificate of Registration Number FM0982808 to Respondent as a practitioner with authority to handle controlled substances in schedules II–IV. [Govt. Exh. 3; Resp. Exh. A74; Tr. 325–326]. This registration expired on January 31, 2011 and was retired from the DEA computer system on December 5, 2011. [Govt. Exh. 3].
On September 19, 2011, Respondent submitted a new application for registration under DEA control number W11065544C. [Govt. Exh. 1; Tr. 321]. This application is the subject of these proceedings. [
Respondent began experiencing headaches and tinnitus in approximately 1996 while he was working in a private family dentistry practice in San Jose, California. [Govt. Exh. 7 at 2]. To treat these conditions, Dr. Medinnus began to take Vicodin tablets from his office. [
On September 3, 2002, the Dental Board of California (“DBC” or “the Board”) filed an accusation against Respondent seeking to suspend or revoke his California dental license. [Govt. Exh. 4; Tr. 327]. Therein, the DBC alleged that Respondent had ordered significant quantities of controlled substances, including hydrocodone, lorazepam, and diazepam, from approximately January 2000 to November 2001, for his own personal use and to unlawfully distribute to others. [Govt. Exh. 4 at 3–5]. Respondent entered into a Stipulated Surrender of License and Order with the Board on September 20, 2002, wherein he admitted to the allegations contained in the DBC's accusation and surrendered his dental license to the Board. [Govt. Exh. 5; Tr. 328]. On November 18, 2002, the Board adopted the Stipulated Surrender of License and Order in a Decision and Order which became effective on December 18, 2002. [Govt. Exh. 6; Tr. 329].
On February 27, 2003, Dr. Medinnus pled guilty in Santa Clara County, California to one felony count of a violation of Cal. Health & Safety Code § 11173(a) (West 2012) for obtaining controlled substances by fraud. [Resp. Exh. 3]. Dr. Medinnus was sentenced to three years' probation. [Govt. Exh. 7 at 2]. Respondent successfully complied with all his probationary conditions and on April 27, 2006, Dr. Medinnus successfully petitioned to reduce his felony conviction to a misdemeanor pursuant to Cal. Penal Code § 17(b)(3) (West 2012) and then dismissed pursuant to Cal. Penal Code § 1203.4(a) (West 2012). [Resp. Exh. A–17; Tr. 350–351].
Pursuant to this felony conviction, the Department of Health and Human Services (“HHS”) excluded Dr. Medinnus from participating as a healthcare provider in Medicare for a period of five years. [Resp. Exh. A86]. In addition, on June 23, 2004, the Office of Personnel Management (“OPM”) debarred Respondent from participating in the Federal Employees Health Benefits Program. [Resp. Exh. A87]. On April 20, 2009, HHS reinstated Respondent's eligibility to participate as a Medicare provider and OPM terminated Respondent's debarment from the Federal Employees Health
Following Respondent's felony conviction, he began an intensive drug rehabilitation program. [Govt. Exh. 7 at 2–3]. This program included attending individual and group therapy sessions with a licensed therapist to address Respondent's mental health and substance abuse issues. [Resp. Exh. A5–8]. In addition, Respondent received psychiatric treatment, including medication, to treat his symptoms of depression. [Resp. Exh. A13–15]. Respondent also participated in frequent twelve-step program meetings and joined the board of a local transitional housing facility for recovering addicts. [Resp. Exh. A3–4; A9–11].
On May 26, 2006, Respondent filed a petition for reinstatement of his California dental license. [Govt. Exh. 7 at 2]. As part of his petition, Dr. Medinnus submitted letters of recommendations from fellow dentists regarding his clinical abilities. [Resp. Exh. A32–34]. Respondent also proffered evidence regarding his family life, involvement in his stepchildren's elementary school and athletics programs and his own volunteer activities. [Resp. Exh. A19, A21, A25, A26–27, A30–31, A91]. After an administrative hearing, a state administrative law judge recommended that the DBC reinstate Respondent's dental license and place the Respondent on probation for a period of five years. [Govt. Exh. 7 at 5; Tr. 292–293]. The ALJ made detailed factual findings regarding Dr. Medinnus' successful drug rehabilitation program. [Govt. Exh. 7 at 3–4]. These included maintaining his sobriety from March 7, 2003, receiving outpatient medical and psychotherapy treatment, attending NA and AA meetings, and completing continuing dental education courses. [
The ALJ recommended that Respondent's dental license be subject to several probationary conditions, including that he maintain a separate log of all controlled substances that he prescribed, dispensed or administered during his probationary period. [Govt. Exh. 7 at 7; 293–294]. Among other conditions, Dr. Medinnus was also required to pass a dental licensing examination, undergo a psychiatric evaluation, participate in a diversion program offered by the Board, and be subject to random drug screenings. [Govt. Exh. 7 at 5–9]. On May 10, 2007, the Board adopted the ALJ's Decision, which became effective on June 12, 2007. [Govt. Exh. 8; Tr. 330–331].
To regain his probationary dental license, Dr. Medinnus successfully completed the mandated dental licensing examination on July 14, 2007. [Resp. Exh. A61; A85]. Respondent also received a comprehensive psychiatric evaluation, which favorably reported his ongoing recovery. [Resp. Exh. A57]. In addition, on December 6, 2007, Respondent was released from the Board mandated diversion program. [Resp. Exh. A58; Resp. Exh. 6]. During this time, Dr. Medinnus took and passed numerous random drug screens as directed by the DBC. [Resp. Exh. A45–47; A49; A51; A53–54]. When his probationary dental license was issued, Dr. Medinnus performed volunteer dental consulting work at Milestones Health Center in Weaverville, California. [Resp. Exh. A68; A76].
After the reinstatement of his dental license, Respondent negotiated an employment contract to work as the dental director at the Round Valley Indian Health Center, (“RVIHC”) which is located in Covelo, California. [Govt. Exh. 9; Tr. 31]. One of the terms of the employment contract was that the Respondent agreed to “comply with all policies and procedures, rules and regulations of the RVIHC funding agencies and federal and state laws including all of the HIPPA requirements.” [Govt. Exh. 9 at 2].
James Russ, the executive director of RVIHC, testified at the hearing, and I find his testimony credible and consistent with the documentary evidence. Mr. Russ testified that prior to the negotiation of his contract, Dr. Medinnus voluntarily and freely disclosed his history of substance abuse and the surrender of his dental license and DEA registration in 2002 and its subsequent reinstatement. [Tr. 34–35].
As RVIHC's executive director, Mr. Russ administers the day-to-day operations of the clinic's various departments. [Tr. 23–24]. Mr. Russ outlined RVIHC's operation and the services it provided including operating a medical center, dental clinic, outpatient physical or psychological treatment, and a group home. [Tr. 24–25]. He testified that all controlled substances ordered by RVIHC were stored in a central dispensary, which contained a locked safe. [Tr. 25–26]. Mr. Russ further testified that RVIHC's usual suppliers of controlled substances were McKesson and Pharmadex, and did not include Henry Schein, a supplier from whom RVIHC only ordered dental supplies. [Tr. 40–41].
Linda Lohne, a registered nurse and clinic manager at RVIHC, also testified at the hearing. [Tr. 186]. I find her testimony credible and consistent with the documentary evidence. As part of her clinic manager duties, Ms. Lohne oversaw RVIHC's ordering and dispensing of controlled substances. [Tr. 187]. She likewise testified that all controlled substances ordered under RVIHC's DEA registration were stored in the clinic's central dispensary. [
Mr. Russ testified that Dr. Medinnus had discussed with him the possibility of storing hydrocodone in the dental department to obviate the need for Respondent or his dental staff to pick up the controlled substances at the dispensary and then return to the dental department to dispense them to the patients. [Tr. 51, 90; Resp. Exh. A134–135, A148]. Mr. Russ discussed his concerns about this request with Respondent, including his belief that the controlled substances would be more secure if they remained in the central dispensary. [Tr. 70–71].
Dr. Medinnus testified that he sought to order controlled substances to store in the dental department because the dispensary would occasionally run low or out entirely of controlled substances. [Tr. 464–466]. But, Ms. Lohne testified that RVIHC never completely ran out of hydrocodone during 2010, although she did testify that the dispensary had run low on controlled substances, including having as little as five or seven dosage units on hand. [Tr. 240–241]. Ms. Lohne, however, also testified that RVIHC's dispensary might have run out of controlled substances by the end of some days. [Tr. 242–243].
Kimberly Stillwell, a dental sterilization technician at RVIHC, also testified at the hearing. [Tr. 149]. I find her testimony only partially credible. Though called as a witness for Respondent, her testimony suggested that she bore Dr. Medinnus substantial animus from his employment at RVIHC. Her demeanor while testifying was consistent with this animus towards Respondent and was repeatedly demonstrated by her nonresponsive answers or unsolicited comments adverse to Respondent. Therefore, I decline to credit much of her testimony.
On November 29, 2010, Ms. Stillwell prepared a purchasing order to obtain supplies for RVIHC's dental department.
The purchase order was then ultimately approved by Jan Scribner, the deputy director of RVIHC, who possessed the ability to approve purchase orders in the absence of Mr. Russ. [Govt. Exh. 10; Govt. Exh. 21; Tr. 46]. Ms. Scribner did not realize that the order contained a request to purchase controlled substances. [Govt. Exh. 21]. Nor did Ms. Stillwell inform her that the order contained a request to purchase controlled substances for use in the dental department. [Tr. 164–165]. Ms. Stillwell received the controlled substances from the purchase order on December 7, 2010 [Govt. Exh. 10 at 4; Tr. 48–49, 150]. She stored the bottle of hydrocodone and the bottle of APAP with codeine in a locked cabinet in the dental department and informed Dr. Medinnus of their arrival. [Tr. 169–170, 173].
Dr. Medinnus testified that he began to dispense hydrocodone directly to dental patients beginning on January 18, 2011. [Tr. 418]. Respondent did not dispense any of the APAP with codeine during this period. [Tr. 432]. Respondent testified that he only intended to dispense the hydrocodone on an emergency basis. [Tr. 418; 475–476]. He further testified that he was experiencing serious marital and personal problems during this period of time and that he was under a great deal of personal and professional stress due to the absence of dental department employees and the hospitalization of his mother-in-law. [Tr. 436–437; Resp. Exh. A117, A123, A138]. Ms. Stillwell testified that she never saw Dr. Medinnus self-abuse any of the hydrocodone kept in the dental department. [Tr. 179–180].
Dr. Medinnus did acknowledge that he did not keep a separate dispensing log for hydrocodone that he dispensed during this period. [Tr. 491; Govt. Exhs. 18, 19]. Instead, he notated the dispensing of hydrocodone in each patient's dental chart. [Tr. 68; Govt. Exh. 13]. He testified that by not keeping a separate dispensing log, he violated the conditions of his DBC probation. [Tr. 509].
Respondent also testified that he dispensed hydrocodone to one patient, a transient named “JC”, without recording it in the patient's chart. [Tr. 519–525]. Again, due to concerns about the bias she displayed during her testimony and her lack of recall regarding this specific patient, I decline to credit Ms. Stillwell's account of the dispensing of hydrocodone to this patient. [Tr. 178, 180–184]. Dr. Medinnus credibly testified that he had examined the patient on January 20, 2011, and observed that he needed a surgical extraction on two of his teeth. [Tr. 421, 521–22]. When the patient returned to RVIHC on January 24, 2011, Dr. Medinnus could not perform the extraction because of his busy schedule. [
The Respondent accepted responsibility for his failure to document this dispensing to “JC”. [Tr. 523]. Further, the Respondent offered to stipulate to the audit numbers' discrepancy, concluding that “[r]egardless, of course, the fault for this confusion is mine alone.” [Resp. Brief at 7;
On December 14, 2010, independent pharmacy consultant, Tom Reidenbach, performed a quarterly drug utilization audit for RVIHC. [Tr. 53–54; Govt. Exh. 15]. In that report, he wrote that “I recommended to Dr. Medinnus that all controlled substances continue to be dispensed from the dispensary.” [Govt. Exh. 15 at 2].
On January 27, 2011, Mr. Reidenbach conducted a chart audit related to the dispensing of hydrocodone. In his report, Mr. Reidenbach noted that there “were several deficiencies in the dental clinic record keeping. There were 3 prescriptions that did not have chart orders evident. There were also 9 chart orders that were not dispensed from the dispensary. These were all after 1/20/11.”
After receiving Mr. Reidenbach's report, Mr. Russ attended a meeting on January 28, 2011, with RVIHC staff to discuss Mr. Reidenbach's findings. [Tr. 59–62, 82–84]. During this meeting, a RVIHC staff member observed that the dispensary had experienced a dramatic decline in orders for hydrocodone from the dental department. [Tr. 61–63]. Ms. Lohne, who was also at this meeting, had observed a similar gap in the patient orders for controlled substances from the dental department. [Tr. 193].
At the conclusion of this meeting, Mr. Russ went to Dr. Medinnus' office and asked him if he had any hydrocodone in his office. [Tr. 63]. Respondent acknowledged that he had a bottle of hydrocodone in the dental office and he informed Mr. Russ that RVIHC management had approved the purchase order containing the hydrocodone bottle. [
One or two days later, Mr. Russ asked Dr. Medinnus if he had kept a dispensing log to track the hydrocodone he had dispensed. [Tr. 66–67]. Respondent said that he had not kept a dispensing log, so Mr. Russ instructed him to consult the patient charts and recreate a dispensing log to account for the dosage units he had dispensed. [Tr. 68]. Ms. Lohne also directed Dr. Medinnus to prepare a dispensing log for the bottle of hydrocodone. [Tr. 196]. Dr. Medinnus prepared this dispensing log for the hydrocodone he dispensed directly to patients from the dental department, and he provided the log to Ms. Lohne on February 2, 2011. [Govt. Exh. 11; Resp. Exh. A161; Tr. 69, 198–199, 203].
Mr. Russ then directed Ms. Lohne to account for the apparent discrepancies from Respondent's dispensing log to the number of dosage units left in the bottle when Dr. Medinnus turned it in to the dispensary. [Tr. 69–70, 188–189]. Ms.
Her audit revealed that the dental department patient charts showed that Dr. Medinnus had dispensed three hundred and eighty-eight dosage units of hydrocodone, even though the Respondent's dispensing log showed he only dispensed three hundred and sixty dosage units of hydrocodone. [Govt. Exh. 12; Govt. Exh. 13; 208–211]. Ms. Lohne then crosschecked the patient charts and Respondent's dispensing log with the carbon copy duplicates of the prescription orders for hydrocodone associated with each patient file, which showed that Respondent had only dispensed three hundred and twenty dosage units of hydrocodone. [Govt. Exh. 12; Tr. 206–207]. When Ms. Lohne reviewed the patient charts, she noticed that in some files, Dr. Medinnus had altered the number of dosage units he had dispensed. [Govt. Exhs. 13, 19–20; Tr. 221–236].
Unwilling to credit the patient files altered by Respondent, Ms. Lohne concluded that RVIHC could not account for approximately forty dosage units of hydrocodone from the bottle that Dr. Medinnus had ordered. [Tr. 237–238]. Thus, on February 4, 2011, RVIHC filed a DEA Form 106, a Report of Theft or Loss of Controlled Substances, for forty hydrocodone tablets. [Govt. Exh. 14; Tr. 238]. Ms. Lohne testified that this figure came from her audit, which showed three hundred and twenty dosage units dispensed from the dental department according to duplicate prescription orders from each patient file and one hundred and forty dosage units remaining in the bottle when it was returned to the dispensary. [Tr. 238; Govt. Exh. 12].
Following this report, Dr. Medinnus offered to report himself to his probation monitor, Shirley Boldrini, at the DBC. [Tr. 109]. On February 9, 2011, Respondent called and sent an email to Ms. Boldrini reporting a violation of his DBC probation. [Govt. Exhs. 18, 19]. That same day, Mr. Russ placed Dr. Medinnus on a thirty-day suspension. [Tr. 109–110, 145; Resp. Exh. 4 at 24]. Respondent offered to perform a number of conditions during this suspension, including weekly drug testing, weekly therapy and AA meetings, and taking continuing dental education courses. [Tr. 97–99; Govt. Exh. 18]. Mr. Russ did not agree to these conditions. [Tr. 91]. However, during his suspension, Dr. Medinnus notified Ms. Boldrini that he was completing these self-imposed conditions. [Resp. Exh. A125 at 1, 2, 11, and 17].
The record also contains an email dated February 11, 2011, from the RVIHC psychologist, Dr. Mack, who had been treating the Respondent since the Fall of 2010. He concluded that “the recent documentation error [by the Respondent] was the result of acute stress and fatigue and not an attempt to be deceitful or abuse the medication.” [Resp. Exh. A123].
On March 10, 2011, Dr. Medinnus resigned from RVIHC. [Resp. Exh. A126; Govt. Exh. 17].
Geno Davis, a DBC investigator, also testified at the hearing. [Tr. 286]. I find his testimony credible and consistent with the documentary evidence. Mr. Davis serves as Respondent's current probation monitor for the Board. [Tr. 288]. When the Board was notified of a potential narcotic or drug discrepancy involving Dr. Medinnus while he was employed at RVIHC, Mr. Davis was assigned to be Respondent's probation monitor. [Tr. 289]. Mr. Davis interviewed Respondent at the Board's office in Sacramento, California in August 2011. [Tr. 294–295]. When asked about the discrepancies in Respondent's dispensing log for the hydrocodone, Dr. Medinnus told Mr. Davis that he had poured the hydrocodone tablets into a small envelope before giving it to each patient, which may have accounted for the discrepancies in the patient charts and his dispensing log because he may have inadvertently dispensed more tablets than he had intended. [Tr. 295–297].
Following this interview, Mr. Davis contacted the Respondent by phone and asked him if he had personally taken any of the hydrocodone. [Tr. 298]. Dr. Medinnus denied taking any of the hydrocodone. [
DEA Diversion Investigator Craig Tom also testified at the hearing. [Tr. 318—319]. I find his testimony credible and consistent with the documentary evidence. DI Tom was assigned to investigate Respondent's application for registration. [Tr. 320]. DI Tom coordinated his investigation with the DBC and also spoke with Mr. Russ regarding the Respondent's conduct at RVIHC. [Tr. 332–333]. DI Tom testified that Dr. Medinnus was truthful in the applications for registration that he submitted to the DEA. [Tr. 333]. DI Tom did not interview Dr. Medinnus. [
Dr. Medinnus currently possesses an active California dental license, subject to the probationary conditions imposed by the DBC's June 12, 2007 order. He is currently employed as a dentist at the ANAV Tribal Health Clinic in Fort Jones, California, where he has worked since April 21, 2011. [Resp. Exh. A129; Tr. 541]. Dr. Medinnus has not dispensed or prescribed any controlled substances while working at the ANAV Tribal Health Clinic. [Tr. 545]. Respondent credibly testified that obtaining a DEA registration may be necessary for him to continue at his present position and to be eligible to become the dental director. [Tr. 547–548]. In addition, Respondent proffered two letters of recommendation regarding his application for a DEA Registration from his supervisors at the ANAV Tribal Health Clinic. [Resp. Exh. A151–152]. The ANAV Tribal Health Clinic does not store or dispense any narcotic medications and only faxes the prescriptions to neighboring pharmacies. [
The Government asserts that the appropriate remedy in this matter is denial of the Respondent's application. [Govt. Brief at 25–26]. First, the Government argues that by procuring the order of the bottle of hydrocodone and then subsequently surreptitiously dispensing it to dental patients, Respondent violated federal law, the terms of his DBC probation and his RVIHC contract. [
The Government makes several arguments to justify the denial of Respondent's application. Primarily, the Government argues that Respondent violated federal law and his DBC probation by failing to maintain a contemporaneous dispensing log for the hydrocodone he dispensed to patients. [
In conclusion, the Government argues that Respondent's application for a DEA Certificate of Registration as practitioner is inconsistent with the public interest and that his application should be denied. [
Respondent asserts that the appropriate remedy in this matter is the conditional granting of his application. [Resp. Brief at 34–35]. First, Dr. Medinnus acknowledges his misconduct in not maintaining the required dispensing log at RVIHC pursuant to his DBC probation. [
Next, Respondent argues that the Government has failed to prove its allegations that he made an unauthorized purchase of hydrocodone or that he violated RVIHC's policies on storing and dispensing by directly dispensing to patients in the dental department. [
Lastly, Respondent argues that denying his application for registration would be a disproportionate penalty for his conduct at RVIHC. [
Pursuant to 21 U.S.C. 823(f) (2006),
(1) The recommendation of the appropriate State licensing board or professional disciplinary authority.
(2) The applicant's experience in dispensing, or conducting research with respect to controlled substances.
(3) The applicant's conviction record under Federal or State laws relating to the manufacture, distribution, or dispensing of controlled substances.
(4) Compliance with applicable State, Federal, or local laws relating to controlled substances.
(5) Such other conduct which may threaten the public health and safety.
These factors are to be considered in the disjunctive; the Deputy Administrator may rely on any one or a combination of factors and may give each factor the weight he deems appropriate in determining whether a registration should be revoked.
The Government bears the ultimate burden of proving that the requirements for registration are not satisfied. 21 CFR 1301.44(d) (2012). However, where the Government has made out a
Although the recommendation of the applicable state licensing board is probative to this factor, the Agency possesses “a separate oversight responsibility with respect to the handling of controlled substances” and therefore must make an “independent
In this case, the DBC has not made a specific recommendation concerning the granting of a DEA registration to the Respondent. The DBC has reinstated Respondent's dental license, subject to a series of probationary conditions. [Govt. Exh. 7, 8; Tr. 330–331]. Thus, Dr. Medinnus currently possesses an active dental license in the state of California. [
The record contains evidence that the Respondent has been convicted of an offense related to the manufacture, distribution or dispensing of controlled substances, namely his 2003 felony conviction for violating Cal. Health & Safety Code § 11173(a) (West 2012) for obtaining controlled substances by fraud. [Resp. Exh. 3]. Thus, I find that this factor weighs against the granting of Respondent's application for a DEA Certificate of Registration.
The Agency has long held that a practitioner's self-abuse of controlled substances constitutes “conduct which may threaten public health and safety.” 21 U.S.C. 823(f)(5) (2006); s
Yet, I find that the Respondent has successfully addressed his addiction problem and returned to the practice of dentistry by regaining his dental license in 2007. At the hearing, Dr. Medinnus proffered substantial and detailed evidence regarding his impressive recovery program, including numerous negative drug screens he has taken over the past nine years. [Resp. Brief at 2–7, 9–10]. As the Deputy Administrator has previously determined, “[t]he paramount issue is not how much time has elapsed since [the Respondent's] unlawful conduct, but rather, whether during that time [the] Respondent has learned from past mistakes and has demonstrated that he would handle controlled substances properly if entrusted with a DEA registration.”
Under the Controlled Substances Act (“CSA” or “the Act”) and Agency regulations, it is fundamental that a practitioner who directly dispenses controlled substances maintain an effective recordkeeping system. This includes maintaining inventories and other records pursuant to 21 U.S.C. 827(a) (2006). They are also required to hold a DEA registration at any location where they dispense controlled substances,
The Government brought three primary allegations to support the denial of Respondent's application, the unauthorized purchase order for the controlled substances, Respondent's failure to abide by RVIHC's storing and dispensing policies for controlled substances, and his failure to maintain the required dispensing log for the hydrocodone pursuant to his DBC probation. I decline to credit the Government's first two allegations although I find that the Government has met its burden of proof concerning Respondent's failure to maintain the required dispensing log pursuant to his DBC probation and Agency regulations.
First, with regards to the unauthorized purchase allegation, I find that the Government has not sustained its burden of proof. The testimony and evidence elicited at the hearing regarding this purchase order does not support the Government's claim that Respondent was unauthorized to place the order. Dr. Medinnus credibily maintained that Ms. Stillwell told him that Mr. Russ approved the order. [Tr. 158; Resp. Exh. A140; Resp. Brief at 28–31]. As explained above, I decline to credit much of Ms. Stillwell's testimony on her conversation with Mr. Russ regarding this order. Furthermore, I also note that Mr. Russ failed to recall many of the details surrounding this particular order including any conversation he had with Ms. Stillwell prior to the submission of the order to Ms. Scribner. Thus, the evidence in the record does not support a conclusion by a preponderance of the evidence that Dr. Medinnus was responsible for knowingly submitting an unauthorized purchase order for controlled substances. More tellingly, the submission of the purchase order on behalf of the dental department and its subsequent approval by Jan Scribner, a duly authorized RVIHC representative
And as the Respondent persuasively argues, if Dr. Medinnus reasonably believed the purchase order was duly approved, the Government's allegation that he failed to abide by RVIHC policies regarding the storage and dispensing of controlled substances, also fails. [Resp. Brief at 20–21]. While the Government has elicited substantial testimony and evidence regarding RVIHC's policies and procedures related to dispensing controlled substances, it has failed to link these policies to any deliberate or knowing attempt on behalf of the Respondent to violate them. [Govt. Brief at 21–22]. Indeed, when Mr. Russ confronted Dr. Medinnus regarding the bottle of hydrocdone, Respondent promptly admitted to ordering and storing the controlled substances and pointed to the approval of the purchase order as justification for his conduct. [Tr. 63]. Such a response supports Respondent's consistent position that he honestly and reasonably believed he possessed the necessary authority to store and dispense controlled substances in the dental department. Therefore, I decline to credit the Government's allegation that Respondent violated RVIHC's policies on the storage and dispensing of controlled substances.
Both parties however, do acknowledge that Dr. Medinnus failed to maintain the required dispensing log for these controlled substances. [Resp. Brief at 7–8; Govt. Brief at 20]. In addition, I find that Dr. Medinnus failed to properly chart each dispensing of hydrocodone he gave to a patient, most notably with regards to his dispensing to “JC”, which represents another serious violation of Agency recordkeeping regulations. Nor was Respondent's clumsy attempt to reconstruct a dispensing log and alteration of patient charts consistent with a registrant's duty to maintain complete and accurate records regarding controlled substances. Therefore, I find that Respondent committed several serious violations of the Act's recordkeeping requirement, Agency regulations, as well as the terms of his DBC probation. Thus, in light of Respondent's serious and undisputed violations of the CSA's recordkeeping requirements and his DBC probation, I conclude that the Government has presented a
After the Government “has proved that a registrant has committed acts inconsistent with the public interest, a registrant must `present sufficient mitigating evidence to assure the Administrator that [he] can be entrusted with the responsibility carried by such a registration.' ”
Here, I find that Respondent has both taken responsibility for his actions and shown remorse for his conduct. During his testimony, Dr. Medinnus repeatedly demonstrated remorse for his conduct at the RVIHC. He also testified credibly and candidly about the circumstances surrounding the misconduct, including the various personal and professional challenges he faced during his employment at RVIHC.
The Government argues that the Respondent attempted to “minimize” his misconduct by testifying that he could only not account for forty dosage units of the hydrocodone. [Govt. Brief at 22]. I disagree. Instead, I find that while this evidence, along with the evidence regarding the circumstances surrounding Respondent's employment at RVIHC does not excuse Respondent's conduct, it does provide appropriate mitigating factors for this Court and the Deputy Administrator to consider.
In light of the substantial evidence that Respondent proffered regarding his acceptance of responsibility for the misconduct, I find that the Government's proposed sanction, the denial of Respondent's application, is too severe. As this Agency has repeatedly held, a proceeding under the Act “ `is a remedial measure, based upon the public interest and the necessity to protect the public from those individuals who have misused . . . their DEA Certificate of Registration, and who have not presented sufficient mitigating evidence to assure the Administrator that they can be entrusted with the responsibility carried by such a registration.' ”
Therefore, I conclude that the DEA has met its burden of proof and has established that grounds exist for denying the Respondent's application for a DEA Certificate of Registration. I do not condone nor minimize the seriousness of the Respondent's misconduct. However, based on this record, I recommend that the Respondent be afforded an opportunity to demonstrate that he can again responsibly handle controlled substance prescriptions by the granting of a restricted registration.
Consistently, I suggest that the conditions in this case be tailored to ensure that the Respondent does not personally handle or dispense controlled substances. Thus, they should include: That the registration restricts his handling of controlled substances to merely prescribing and not storing, administering or dispensing
Dated: October 17, 2012.
On August 29, 2012, the Deputy Assistant Administrator, Office of Diversion Control, Drug Enforcement Administration, issued an Order to Show Cause to Hoi Y. Kam, M.D. (Respondent), of Fresh Meadows, New York. The Show Cause Order proposed the revocation of Respondent's DEA Certificate of Registration, which authorizes him to dispense controlled substances as a practitioner, as well as the denial of any pending applications to renew or modify his registration, on the grounds that he: (1) Materially falsified a renewal application, and (2) committed acts which render his registration inconsistent with the public interest. Show Cause Order at 1 (citing 21 U.S.C. 824(a)(1) & (4)).
More specifically, the Show Cause Order alleged that Respondent materially falsified his December 1, 2011 renewal application, by falsely answering the application question which asked if he had “ever surrendered for cause or had a state professional license or controlled substance registration revoked, suspended, denied, restricted, or placed on probation or is any such action pending?”
The Government further alleged that between July 21 and October 4, 2011, Respondent violated federal law and regulations by “issu[ing] at least six (6) prescriptions for controlled substances, despite lacking legal authority to do so.”
On August 31, 2012, a DEA Diversion Investigator (DI) “attempted to personally serve the Order to Show Cause on Respondent at his registered address.” GX 2, at 3. According to the DI, “[s]ince no one appeared to be at the registered location, I left a copy of the Order to Show Cause in Respondent's mailbox.”
Regarding the allegation that he had written six prescriptions between July 10 and October 27, 2011, Respondent denied writing them with the exception of “the prescription dated July 21, 2011,” which it was “possible” he “predated.”
As for the material falsification allegation, Respondent wrote that “I probably did not pay attention to the box. I marked on the wrong box. I apologize for the mistake.”
However, while the Show Cause Order notified Respondent that he had a right to request a hearing and the procedure for doing so, Respondent did not request a hearing. Consistent with 21 CFR 1301.43(c), I deem Respondent's September 10, 2012 letter to be a statement of his “position on the matters of fact and law” asserted by the Show Cause Order.
On September 23, 2012, Respondent submitted a further letter to DEA counsel, which he titled as his “response to” a “phone conversation” he had with the DI. GX 8, at 1. Therein, Respondent asserted that the DI “admitted there are false accusations of the prescriptions written.”
Regarding the prescription, Respondent explained that “pharmacist should call and verify each controlled substances [sic] prescription” but that “[n]o one called me.”
Based on Respondent's failure to request a hearing in either his September 10 or September 23 letter, I find that Respondent has waived his right to a hearing on the allegations of the Show Cause Order. 21 CFR 1301.43(c) & (d). Having reviewed the investigative record submitted by the Government, including Respondent's letters, I make the following findings of fact.
Respondent is the holder of a DEA Certificate of Registration, which authorizes him to dispense controlled substances in schedules II through V as a practitioner. GX 1. On December 1, 2011, Respondent submitted a renewal application, and on April 3, 2012, DEA issued Respondent a new registration, which does not expire until December 31, 2014.
Respondent is also the holder of a medical license issued by the New York Department of Health (hereinafter, the Department). On February 10, 2011, the Department's Bureau of Professional Medical Conduct (hereinafter, BPMC) issued a Statement of Charges to Respondent, which alleged that on or about November 10, 2006, the Department had, following a hearing, “sustained a decision to exclude Respondent from participation in the Medicaid program for five (5) years” based on his violation of several state regulations. GX 3, at 6 (citations omitted). The BPMC alleged that these violations “would constitute professional misconduct under the laws of New York State.”
On May 19, 2011, a committee of the BPMC held a hearing, after which it determined that Respondent's medical license should be revoked.
This is a case about Medicaid fraud for which the Respondent has been excluded from the Medicaid program. The five-year exclusion was sustained by a decision after a hearing in 2006. The panel weighed all the facts and circumstances in this case and recognized that this was primarily a case of greed and dishonesty.
The Exclusion found that the Respondent's records failed to reflect accurately the examinations the Respondent performed on the Investigators. Such conduct amounted to misconduct under [N.Y. Educ. Law] § 6530(32) as failure to maintain accurate records. The Exclusion also concluded that the Respondent billed Medicaid for services the Respondent never provided. Such conduct amounted to fraud in practice under the misconduct definition at [N.Y. Educ. Law] § 6530(2). The Exclusion also found that the Respondent violated Title 18 NYCRR § 515.2(b)(12) by failing to furnish medical care according to professional recognized standards. The failure, on repeated occasions, to practice according to accepted medical standards amounted to practicing medicine with negligence on more than one occasion, a violation under [N.Y. Educ. Law] § 6530(3).
GX 4, at 7–8.
It is also noted that among the probationary terms imposed by the ARB was that “Respondent shall maintain legible and complete medical records, which accurately reflect the evaluation and treatment of patients. The medical records shall contain all information required by State rules and regulations regarding controlled substances.”
On July 5, 2011, the Department served the Determination and Order on Respondent and his attorney in that proceeding, by certified mail.
Respondent sought review by the State's Administrative Review Board (ARB). On or about October 14, 2011, the ARB issued its Determination and Order. GX 2, at 2. Therein, the ARB vacated the revocation of Respondent's medical license, noting,
On October 27, 2011, the New York Diversion Program Manager sent a letter to Respondent by certified mail; the letter stated that the Government had been advised that his medical license had been revoked (even though it no longer was).
As found above, on December 1, 2011, Respondent submitted an application to renew his DEA registration. GX 2, at 3. In completing the application, Respondent was required to answer several questions, including question three, which asked: “Has the applicant ever surrendered for cause or had a state professional license or controlled substance registration revoked, suspended, denied, restricted, or placed on probation or is any such action pending?”
On or about April 12, 2012, a DI issued a subpoena to the N.Y. Department of Health, requesting a summary of all controlled substance prescriptions issued by Respondent between July 12 and October 27, 2011. GX 2, at 3. On April 16, 2012, the State provided the DI with a report which listed six prescriptions as having been issued by Respondent during the above period.
On September 14, 2012, the DI contacted the pharmacies which had filled the prescriptions listed on the report and obtained copies of the prescriptions.
As noted above, in his letter, Respondent denied writing the prescription after his state license was revoked. However, he did admit to pre-signing the prescription, and submitted an unsworn statement from N.I. which corroborates Respondent's story.
Under the Controlled Substances Act, “[a] registration pursuant to section 823 of this title to . . . dispense a controlled
(1) The recommendation of the appropriate State licensing board or professional disciplinary authority.
(2) The applicant's experience in dispensing . . . controlled substances.
(3) The applicant's conviction record under Federal or State laws relating to the manufacture, distribution, or dispensing of controlled substances.
(4) Compliance with applicable State, Federal, or local laws relating to controlled substances.
(5) Such other conduct which may threaten the public health and safety.
The public interest “factors are . . . considered in the disjunctive.”
Where the Government has met its
The Government contends that Respondent materially falsified his December 1, 2011 application to renew his registration when he answered “no” to the question of whether he had “ever surrendered (for cause) or had a state professional license or controlled substance registration revoked, suspended, denied, restricted, or placed on probation, or is any such action pending?” Respondent's answer was clearly false, because his State medical license had not only been revoked for approximately three months (even if the revocation was ultimately vacated), his license was then suspended by the ARB (albeit the suspension was stayed), and he was also placed on probation. However, that Respondent's answer was false does not end the inquiry, because his answer must also have been material.
“The most common formulation” of the concept of materiality is that “a concealment or misrepresentation is material if it `has a natural tendency to influence, or was capable of influencing, the decision of' the decisionmaking body to which it was addressed.”
As the above makes clear, the relevant decision for assessing whether a false statement is material is the Agency's decision as to whether an applicant is entitled to be registered (or in the case of a current registrant, remain registered). In this regard, the Government argues that “Respondent is not `entitled to be registered' based upon the revocation and subsequent suspension/probation of his medical license, as well as the fact that he issued a prescription for controlled substances during the period where he was not legally authorized to do so.” Req. for Final Agency Action, at 7–8.
Because possessing authority to dispense controlled substances under the laws of the State in which a physician practices medicine is a requirement for holding a DEA registration,
Here, however, the Government's contention ignores that the BPMC's revocation order had been vacated prior to Respondent's filing of the application. Moreover, while the ARB suspended Respondent's license, the suspension was stayed. Thus, Respondent was “authorized” to dispense controlled substances at the time he submitted the application. DEA therefore could not have revoked his registration and denied his application on the basis that Respondent lacked
In placing Respondent on probation, the ARB also noted the various findings of the order which had excluded him years earlier from the New York Medicaid program. However, because the exclusion order does not fall under the mandatory exclusion authority of 42 U.S.C. 1320a–7(a), but rather, the permissive exclusion authority of 42 U.S.C. 1320a–7(b), by itself, the exclusion does not fall within the Agency's authority to suspend or revoke a registration.
To be sure, the probationary terms imposed by the ARB included that Respondent maintain medical records that “contain all information required by State rules and regulations regarding controlled substances.” GX 4, at 15. The ARB's Order did not, however, discuss what evidence supported the imposition of this probationary term.
The Government also asserts that Respondent has committed acts which render his registration inconsistent with the public interest. More specifically, the Government argues that factors two (Respondent's experience in dispensing controlled substances) and four (Respondent's compliance with applicable laws related to controlled substances) support the revocation of his registration.
More specifically, the Government contends that “[i]n order to maintain a registration with DEA, a practitioner must be currently authorized to handle controlled substances in the jurisdiction in which he practices.”
While the Government is correct that a practitioner must be currently authorized under the laws of the State in which he practices in order to maintain a DEA registration, it cites no support for the suggestion that a registrant
On the other hand, where a registrant no longer possesses state authority, he cannot lawfully prescribe a controlled substance.
As found above, Respondent disputes the Government's contention that he violated the CSA by issuing a controlled substance prescription for 240 oxycodone 30mg. on July 28, 2011, after the revocation by the BPMC of his New York medical license. Rather, Respondent maintains that he actually wrote the prescription in June 2011, prior to the BPMC's issuance of its order. Respondent also submitted an unsworn hearsay statement from the patient who received the prescription, which supports his assertion.
However, even accepting Respondent's explanation that he pre-signed (and post-dated) the prescription, I conclude that he still violated the CSA. Under DEA's regulations, “[a]ll prescriptions for controlled substances shall be dated as of, and signed on, the
While my decision in
The Government argues that it has “establishe[d] by a preponderance of the evidence that Respondent's continued registration is inconsistent with the public interest” and that Respondent has put on “no evidence that could support a finding that [he] should be entrusted with a . . . registration.” Req. for Final Agency Action, at 9–10 (citing cases). The Government thus seeks the revocation of Respondent's registration.
Had the Government proved that Respondent materially falsified his application, I would grant the Government's request. The Government, however, has proved only that Respondent committed a single act of issuing a prescription in violation of DEA regulations (whether because he lacked state authority or pre-signed/post-dated the prescription). Moreover, the Government has produced no evidence that the prescription lacked a legitimate medical purpose.
As I have previously held, in determining the appropriate sanction, DEA considers the egregiousness and the scope of the misconduct which has been proved on the record, as well as the need to deter similar misconduct on the part of others.
In
Here, while the proven misconduct is limited to a single prescription, I conclude that a period of outright suspension is warranted. In contrast to
Pursuant to the authority vested in me by 21 U.S.C. 824(a)(4), as well as 28 CFR 0.100(b), I order that the DEA Certificate of Registration issued to Hoi Y. Kam, M.D., be, and it hereby is, suspended for a period of six months. This Order is effective November 21, 2013.
On November 15, 2012, I, the Administrator of the Drug Enforcement Administration, issued a Declaratory Order in the above-captioned matter.
In response, Lannett filed a new application, seeking to import 10,000 dosage units for each of the three dosage strengths for which it intends to file an ANDA.
On June 28, 2013, Lannett filed an amended application, explaining that it now needs 7,000 capsules of each dosage strength for which it intends to file an ANDA. Lannett Company, Inc.'s Response to the Administrator's Declaratory Order of June 11, 2013. Neither the Government, nor the firms which objected to Lannett's application, filed a response to the amended application. Having reviewed Lannett's amended application, I conclude that it should be granted.
Pursuant to the authority vested in me by 21 U.S.C. 958(a) and 28 CFR 0.100(b), I order that the application of Lannett Company, Incorporated, for a DEA Certificate of Registration authorizing it to import Tetrahydrocannibinols (Drug Code 7370) for the purpose of conducting research be, and it hereby is, granted. Pursuant to the authority vested in me by 21 U.S.C. 952(a)(2)(C), I further order that a rule be, and it hereby is, issued, authorizing Lannett Company, Incorporated, to import the amounts of Tetrahydrocannibinols set forth in its amended application.
Under the Controlled Substances Import Export Act (hereinafter, “CSIEA”), a person seeking to lawfully import a schedule I or II controlled substance into the United States must obtain from the Drug Enforcement Administration both a registration as an importer and permission to import the substance.
Relevant here are subparagraphs (2)(B) and (2)(C). The former provision authorizes an importation “[i]n any case in which the Attorney General finds that competition among domestic manufacturers is inadequate and will not be rendered adequate by the registration of additional manufacturers under [21 U.S.C. § ] 823.”
On October 10, 2006, Lannett Company, Inc., of Philadelphia, Pennsylvania (hereinafter, Lannett), applied for a DEA Certificate of Registration authorizing it to import tetrahydrocannabinols (THC), a schedule I controlled substance.
It is undisputed that the dronabinol, which is the subject of Lannett's application, is a schedule I controlled substance. 21 CFR 1308.11(d)(30). However, when synthetic dronabinol in sesame oil is encapsulated in a soft gel capsule, and is an FDA-approved drug, it is a schedule III controlled substance.
On September 19, 2007, the Deputy Assistant Administrator, Office of Diversion Control, published the Notice of Application. ALJ Ex. 1, at 1. Therein, the Deputy Assistant Administrator specifically noted that “[p]ursuant to 21 U.S.C. 958(i), the Attorney General shall, prior to issuing a registration under this Section to a bulk manufacturer of a controlled substance in schedule I or II and prior to issuing a registration[sic]
Thereafter, Rhodes Technologies timely requested a hearing on the application, noting that it is registered as a bulk manufacturer of THC and is therefore “among the category of firms entitled to a hearing on the proposed registration pursuant to 21 CFR 1301.34(a).” ALJ Ex. 2, at 1–2. Rhodes further explained that it sought “to be heard on the issue of whether . . . the proposed registration of [Applicant] as an importer of THC . . . is consistent with the applicable legal standards reflected in the DEA regulations at 21 CFR 1301.34(b) and the Controlled Substances Act at 21 U.S.C. §§ 952(a), 958(a), and 823(a).”
Mallinckrodt, Inc., another registered manufacturer of THC, also filed comments and objections to the application.
Thereafter, both Lannett and the Government moved to dismiss the proceeding on the ground that under 21 U.S.C. § 958(i), a third-party manufacturer such as Rhodes is entitled to request a hearing only where the applicant for an import registration is also a bulk manufacturer of the substance. Motion of Lannett to Dismiss and Terminate Proceedings, at 4. Lannett maintained that it is a “finished dosage form” manufacturer, and not a “bulk manufacturer” of controlled substances,
The Government supported Lannett's motion, arguing that “under the express terms of section § 958(i), the applicant also must be a bulk manufacturer” of the controlled substance in order to trigger the right of another bulk manufacturer to challenge the application for an import registration. Gov. Mot. to Dismiss The Hearing Requested By the Intervenors at 3–4. According to the Government, because Lannett “is not a bulk manufacturer of any of the controlled substances it seeks to import[,] . . . under the plain terms of Section 958(i) and the quoted language from the
On May 28, 2008, the ALJ issued her ruling on the motion to dismiss.
The ALJ further noted, however, that “[t]he rulemaking provision of § 958(i) provides manufacturers, who currently hold registrations as bulk manufactures of a Schedule I or II substances, the right to a hearing before the DEA issues a regulation under § 952(a) that authorizes the importation of a substance that those manufacturers are registered to bulk manufacture.”
The ALJ then addressed whether the Objectors had a right to a hearing under 21 CFR 1301.34(a).
While acknowledging that Lannett sought to use the substances to do various tests which are necessary to file an Abbreviated New Drug Application (ANDA) with the FDA, the ALJ relied on a DEA Policy Statement, which states that dosage form development activities do not constitute research for purposes of the CSA's registration provisions,
Thereafter, the ALJ conducted a hearing at which Lannett and Rhodes elicited the testimony of witnesses and introduced extensive exhibits into the record, and at which the Government also participated. Thereafter, the parties filed briefs containing their proposed findings of fact, conclusions of law, and argument.
On April 6, 2010, the ALJ issued her decision. Therein, the ALJ reiterated the conclusions of her May 2008 ruling that Rhodes was entitled to an on-the-record hearing. Moreover, noting that Lannett (and the Government) also maintained that the application should be considered under section 952(a)(2)(C), the ALJ turned to the question of whether Rhodes was entitled “to a hearing if § 952(a)(2)(B) does not apply.” ALJ at 49. The ALJ noted that in several instances, I directed the Office of Administrative Law Judges to dismiss requests for a hearing on the application of an entity to import a narcotic raw material on the ground that the entity which had requested the hearing was not registered as a bulk manufacturer of the same substance.
While the ALJ recognized that a finding that the proposed importation is permissible under either exception (2)(B) or (2)(C) is a prerequisite to obtaining a registration as an importer, ALJ at 54, she also made findings under each of the public interest factors. With respect to factor one, which directs the Agency to consider the maintenance of effective controls against diversion “by limiting the importation and bulk manufacture of such controlled substances to a number of establishments which can produce an adequate and uninterrupted supply . . . under adequately competitive conditions for legitimate medical, scientific, research and industrial purposes,” the ALJ found that “[t]here is no evidence that competition among [the] manufacturers” of dronabinol “or their products is inadequate.”
With respect to factor two—the applicant's compliance with applicable State and local law—the ALJ found “that there is not sufficient evidence in the record to make a finding.”
With respect to factor four—the applicant's conviction record of offenses related to the manufacture or distribution of controlled substances—the ALJ found that Lannett has never been convicted of such an offense and that this factor supported a finding that its registration “would be consistent with the public interest.”
Finally, with respect to the sixth factor—“other factors as may be relevant to and consistent with the public health and safety”—the ALJ noted the testimony of Lannett's CEO that granting the application, “would make more low cost generic drugs available to the public.”
Summarizing her findings, the ALJ concluded that “factor one weighs strongly against a finding that Lannett's registration would be in the public interest,” and that while factors four and five supported granting the application, they “are not dispositive.”
Thereafter, both Lannett and the Government filed exceptions to the ALJ's Decision. The ALJ then forwarded the record to me for final agency action.
Having considered the record as a whole, I agree with the ALJ's holding that Rhodes was entitled to a hearing under section 958(i) even though Lannett is not a bulk manufacturer of THC. While I disagree with the ALJ's conclusion that Lannett has not established that the proposed importation is permissible under section 952(a)(2)(C), I conclude that Lannett has established that it is necessary to import only a portion of the dronabinol.
With respect to the public interest factors, while I generally agree with the ALJ's findings with respect to each of the factors, for reasons explained below, I reject her conclusion that “factor one weighs strongly against a finding that Lannett's registration would be in the public interest.” I further conclude that Lannett is entitled to a registration provided that it can adequately justify the amount it seeks to import; however, such registration shall be limited to authorizing it to import a quantity sufficient to conduct the studies necessary for filing an Abbreviated New Drug Application and barring it from subsequent commercial distribution of those quantities imported under this authority.
It is undisputed that Lannett does not hold a manufacturer's registration for THC and has never engaged in the bulk manufacture of this substance. Tr. 74. Moreover, it is undisputed that the dronabinol which Lannett seeks permission to import will be in finished dosage form.
In their exceptions, both Lannett and the Government contend that Rhodes was not entitled to an on-the-record hearing to challenge Lannett's application. Lannett contends that because it is not a bulk manufacturer of THC, “[t]here is no basis for a hearing under [section] 958(i)” because this provision “ `gives the right to request a hearing . . . only in those [cases] in which the applicant for the import registration is a bulk manufacturer and only where the person seeking the hearing is a bulk manufacturer.' ” Lannett Exc., at 2 (quoting 72 FR at 3419). Lanett further contends that the ALJ erred in construing 21 CFR 1301.34(a) to provide a hearing as doing so “conflicts with the limitation in 21 U.S.C. § 958(i) of such hearings to cases where both the applicant and the party seeking a hearing are bulk manufacturers.”
Lannett thus contends that because the regulation “enacts 21 U.S.C. §§ 952 and 958[,] [it] cannot be read to permit what the statutes prohibit” and that the Agency's grant of a right to a hearing to third party bulk manufacturers is an
In its Exceptions, the Government states its agreement with the ALJ's holding that section 958(i) does not require an on-the-record hearing on either the issue of whether Lannett is entitled to be registered or whether it is entitled to a rule authorizing the importation. Gov. Exc. at 3. The Government also states that it agrees with the ALJ's holding that section 958(i) provides an
The Government, however, disagrees with the ALJ's construction of section 958(i) as requiring a hearing on an application for a rule under section 952(a)(2) even where the applicant is not registered as a bulk manufacturer.
However, the Government then acknowledges that its argument “may only highlight the ambiguity in the statute” and that “the ALJ's interpretation might be acceptable.”
The Government also takes issue with the ALJ's interpretation that 21 CFR 1301.34(a) does not require that an applicant be a bulk manufacturer to trigger the right of bulk manufacturers to a hearing on both the application for registration and the rule authorizing the import.
The resolution of this issue must, of course, begin with the language of the statute and the Agency's regulation.
Except in emergency situations as described in section 952(a)(2)(A) of this title, prior to issuing a registration under this section to a bulk manufacturer of a controlled substance in schedule I or II,
Shortly after the CSIEA's enactment, DEA promulgated the regulation which implements this provision and which is now codified at 21 CFR 1301.34(a).
In the case of an application for registration or reregistration to import a controlled substance listed in Schedule I or II, under the authority of . . . . 21 U.S.C. 952(a)(2)(B), the Administrator shall, upon the filing of such application, publish in the
Also relevant to understanding the scope of section 958(i) and 21 CFR 1301.34(a), are the registration provisions of the Controlled Substances Act (CSA).
Congress did, however, define the terms “manufacture” and “manufacturer.” Under the CSA, the term “manufacture” is broad in scope and includes “the production, preparation, propagation, compounding, or processing of a drug or other substance . . . and includes any packaging or repackaging of such substance or labeling or relabeling of its container.”
In section 958(i), Congress clearly instructed the Agency to provide “an opportunity for a hearing” on two separate issues: 1) whether to grant an application for an import registration, and 2) whether “to issu[e] a regulation under section 952(a) . . . authorizing the importation of such a substance.” 21 U.S.C. § 958(i). Moreover, in enacting the provision, which was enacted at the same time as the CSA, Congress was well aware that under the CSA, both manufacturers registered under section 823(a) and distributors registered under section 823(b) would have authority to engage in the commercial distribution of schedule I or II controlled substances and thus could presumably seek a registration to import a schedule I or II controlled substance.
In section 958(i), however, Congress made it clear enough that a current bulk manufacturer of a schedule I or II controlled substance is entitled to a hearing on another entity's application for registration to import a schedule I or II controlled substance, only if the applicant is itself “a bulk manufacturer of the substance.” 21 U.S.C. § 958(i) (“prior to issuing a registration under this section to
Indeed, had Congress intended to provide bulk manufacturers with the right to a hearing to challenge
As found above, Lannett is not a bulk manufacturer of THC. Moreover, as long as Lannett does not repackage or relabel the containers that the dronabinol has been packaged in by its manufacturer, Lannett does not need to hold a manufacturer's registration. Thus, it is clear that under the statute, Rhodes was not entitled to a hearing to challenge Lannett's application for a registration because the latter was not, and need not be, registered as a bulk manufacturer of THC to lawfully distribute the dronabinol for testing.
It is noted that on DEA's Application for Registration (Form 225), the Agency recognizes both “Manufacturer” and “Manufacturer BULK” as different categories of “Business Activity.” The Application further recognizes four different stages of manufacturing: 1) “Bulk synthesis/extraction,” 2) “Dosage Form manufacture,” 3) “Package/Repackage” and “Label/Relabel,” and 4) “Non-human consumption.” However, the Agency has not defined by regulation the term “Bulk Manufacturer” and the Government has provided no guidance in this case as to the Agency's view on what distinguishes a “Bulk Manufacturer” from a “Manufacturer” and which of the above stages it considers to be bulk manufacturing. In any event, because Lannett need not engage in any of the four stages to conduct its tests, it is clear that it does not need to be registered as either a bulk manufacturer or manufacturer.
By contrast, section 958(i) does not clearly provide that a bulk manufacturer's right to challenge the issuance of a regulation under section 952(a) is—as the Government and Lannett maintain—triggered only by the application of a bulk manufacturer (of the substance) to import. The relevant text of section 958(i), which immediately follows the “prior to issuing a registration . . . to a bulk manufacturer” clause, states: “and prior to issuing a regulation under section 952(a) of this title authorizing the importation of such a substance, the Attorney General shall give manufacturers holding registrations for the bulk manufacture of the substance an opportunity for a hearing.” 21 U.S.C. § 958(i). Construing this provision, the ALJ reasoned that “[b]y its plain language, this hearing right does not appear to be limited to situations in which the importer of the controlled substance is also a bulk manufacturer.” Memorandum to Counsel and Ruling on Request for Hearing, at 21.
The Government and Lannett disagree. As noted above, the Government maintains that the insertion of the word “and” between the two clauses manifests that the right to a hearing on the issuance of the regulation is also triggered only when the applicant for such a regulation is a bulk manufacturer. Contrary to the Government's contention, the clause is self-contained and seems clear enough. Absent other textual evidence of an intent to limit the hearing right to where the applicant is a bulk manufacturer, Congress's use of the word “and” (as opposed to “or”) to conjoin the two clauses is too thin a reed to conclude that Congress intended for the right to a hearing to challenge the issuance of a regulation under section 952 to be triggered only where an applicant is a bulk manufacturer.
Indeed, had Congress intended to limit the right to challenge the issuance of a regulation only to the instance in which the importer was a bulk manufacturer, it could have clarified that by inserting the same limitation in this clause. Moreover, the Government's proposed construction would exclude from the hearing right any application by a distributor to import a schedule I or II controlled substance. Yet, as the Government then recognizes in its brief, “it is important for DEA to scrutinize import applications” to ensure that the proposed import complies with Federal law. Gov. Exc., at 5. This is so whether the importer holds a manufacturer's registration or a distributor's registration.
As for Lannett, it cites the 2007
Lannett also argues that “there [was] no basis for a hearing under 21 CFR 1301.34(a),” because section 958(i) limits the hearing right “to cases where both the applicant and the party seeking a hearing are bulk manufacturers.' ” Lannett Exc., at 2. It further contends that “21 CFR 1301.34(a) enacts 21 U.S.C. §§ 952 and 958 and thus cannot be read to permit what the statutes prohibit.”
I conclude that it is not necessary to decide whether the ALJ correctly held that Rhodes was entitled to a full evidentiary hearing under 21 CFR 1301.34(a) even though Lannett is not a bulk manufacturer. As held above, section 958(i) obligates the Agency to provide “an opportunity for a hearing” to challenge whether Lannett's proposed importation complies with section 952(a). Moreover, while 21 CFR 1301.34(a) appears to limit the Agency's obligation to publish notice of the application and to grant bulk manufacturers a hearing to those instances in which a rule authorizing the importation is sought under 952(a)(2)(B) (
In 1984, Congress amended the statute to add subparagraph (2)(C).
As for Lannett's argument that the regulation is
In her various rulings, the ALJ concluded that section 958 does not require that the Agency provide an “on the record” hearing as part of the rulemaking process under section 952(a). ALJ Memorandum to Counsel, at 21; ALJ at 48. This holding is amply supported by Supreme Court precedent.
To the extent Lannett contends that the Agency did not have discretion to grant Rhodes a formal hearing on its application (in essence, an argument that the Agency has granted too much process), the Supreme Court has long recognized that “the formulation of procedures was basically left within the discretion of the agencies to which Congress had confided the responsibility for substantive judgments.”
Under section 952(a)(2), it is unlawful to import into the United States a schedule I or II controlled substance “except that . . . such amounts of any controlled substance in schedule I or II . . . that the Attorney General finds to be necessary to provide for the medical, scientific, or other legitimate needs of the United States” may be imported if one of three findings is made. 21 U.S.C. § 952(a)(2). These are:
(A) During an emergency in which domestic supplies of such substance or drug are found by the Attorney General to be inadequate,
(B) [i]n any case in which the Attorney General finds that competition among domestic manufacturers of the controlled substance is inadequate and will not be rendered adequate by the registration of additional manufacturers under section 823 of this title, or
(C) in any case in which the Attorney General finds that such controlled substance is in limited quantities exclusively for scientific, analytical, or research uses[.]
In its Post-Hearing Brief, Lannett contends that its proposed importation is permissible under both subparagraphs B and C.
In its Exceptions, Lannett further argues that because its application presents “no increased risk of diversion,” the Agency can grant its application “without regard to 21 U.S.C. § 952(a).” Lannett's Exc., at 3. In Lannett's view, because the overarching purpose of the CSA and the CSIEA is to prevent the diversion of controlled substances, and there is no evidence that granting its application will increase the risk of diversion, DEA can disregard section 952(a).
Lannett's argument fails, however, because both cases involved an application of the Agency's discretionary authority under the public interest standard used to determine whether to grant an application for registration, and not whether an importation was permissible under section 952(a)(2)(B).
By contrast, section 952(a)(2) sets forth the affirmative requirement that the Agency make one of three findings before issuing a regulation approving a proposed importation of a schedule I or II controlled substance. As section 952 makes plain, DEA does not have discretion under the statute to authorize an importation in the absence of a finding that one of the three conditions exists. Accordingly, I reject Lannett's argument that because there is no evidence that the importation will increase the risk of diversion, the Agency can grant its application without regard to whether its proposed importation is permissible under section 952.
As the ALJ recognized, to import pursuant to this provision, an applicant must show that competition among domestic manufacturers of the controlled substance is inadequate and will not be rendered adequate by the registration of additional manufacturers. ALJ at 52. In her decision, the ALJ found that Lannett had failed to establish that competition among domestic manufactures of dronabinol is inadequate. ALJ at 52–53. More specifically, she noted that Lannett's evidence was largely confined to the testimony of its CEO as to several
While the average wholesale and retail prices of dosage form dronabinol might provide some evidence that competition is inadequate among the domestic manufacturers of bulk dronabinol, Lannett did not put on any testimony, let alone that of an expert, to explain how this evidence shows that competition in the bulk dronabinol market is inadequate. Moreover, Lannett does not even cite this evidence in its brief.
DEA regulations further direct that “[i]n considering the scope of the domestic market, consideration shall be given to substitute products which are reasonably interchangeable in terms of price, quality and use,”
As for Lannett's evidence regarding its inability (circa 2002–03) to find a domestic manufacturer to supply it, the ALJ properly held that this evidence was too stale to support a finding of inadequate competition. Notably, the statutory text requires a finding that competition “
Lannett (supported by the Government) argues that the importation is nonetheless permissible under the exception for “ `limited quantities exclusively for scientific, analytical, or research uses.' ” Lannett's Exc., at 7 (quoting 21 U.S.C. § 952(a)(2)(C)). As found above, the evidence shows that Lannett seeks to import three batches of 100,000 dosage units each for the purpose of conducting testing to establish the stability of the drug and to show that the dronabinol is bioequivalent to Marinol, the FDA-approved legend drug; Lannett will then submit the data to the FDA as part of an ANDA. Lannett also established that the reason why the test batches are 100,000 dosage units is because the FDA generally requires that the test batch be the same size as the eventual production batch and that if Lannett's ANDA is approved, it does not want to limit the production batches “to less than 100,000 dosage units per batch.” LX 1, at 3–4; LX 4, at 6 (“OGD's Procedure and Policy Guide . . . 22–90 . . . requires that the test batch size be determined based on the proposed production batch.”);
Lannett's CEO also testified that as a general matter, to comply with FDA's standards, three batches must be produced to validate the manufacturing process, although the batches need not necessarily be made consecutively. Tr. 37–39. However, the FDA's
The ALJ concluded that the proposed importation is not permissible under subparagraph C. In so concluding, the ALJ relied on the testimony of a former agency official who was involved in drafting the provision and reasoned that the legislative history of the amendment indicates “that (1) the purpose of the broad prohibition on importing Schedule I and II bulk active pharmaceutical ingredients was to establish a strong system of domestic controls, support the domestic manufacturer who bears the cost of these controls, and discourage the expansion of foreign production under less stringent controls; and (2) the research exception from the prohibition was intended to allow importation of substances for comparative studies on compounds developed abroad.” ALJ at 53.
The ALJ also relied on a 1995 Policy Statement which was issued in response to the practice of some companies that were engaging in dosage-form development activities, including bulk manufacturing, without obtaining a manufacturer's registration; these firms claimed that their activities were coincident activities which could be lawfully performed under a researcher's registration.
[f]or purposes of 21 CFR part 1301, the following dosage form development activities are not considered research and must be conducted under a manufacturer registration: (a) Activities for the purpose of satisfying regulatory requirements such as FDA submission or good manufacturing practice; (b) activities associated with establishing the manufacturing processes and procedures, including, but not limited to, production of material used for pilot, scale-up and reformulation studies, as well as the studies themselves; and (c) all activities associated with such development including, but not limited to, bioavailability, formulation, stability, and validation. While these activities may be considered research under FDA requirements, 21 CFR part 1301 must be read within the context of the CSA and its attendant requirements concerning quotas, recordkeeping, security and reporting. DEA does not consider such dosage form development to be a coincident research activity as contemplated by 21 CFR 1301.22(b); the production of material for such activities is manufacturing.
60 FR at 55311.
The ALJ observed that “[a] major concern expressed in the
As originally enacted, subsection 952(a)(2) did not contain this provision.
Rhodes points to the legislative history of both the original CSIEA and the Amendment, as well as the testimony of the former DEA official who was involved in drafting the provision, and contends that subparagraph (2)(C) was only intended to address the statute's failure to provide a mechanism (as had a Treasury Department regulation enacted under the Narcotic Manufacturing Act of 1960) to allow researchers to import foreign-source materials to perform comparative studies on them when the domestic supply is inadequate because the foreign-source material is unique and/or to develop reference standards. Rhodes Post-Hearing Br. at 76; RX 31, at 20–23. Rhodes cites the written testimony of the former official, who, in turn, cites the Senate Report Committee Report, which states:
Under current 21 U.S.C. 952(a)(2), the importation of controlled substance in Schedules I and II . . . for medical, scientific, and other legitimate purposes is generally limited to those cases in which there is a finding that competition among domestic manufactures is inadequate. This requirement has created difficulties in situations which routinely arise when researchers need specific substances for comparative studies on foreign-developed compounds that are unique in their manufacture. Section 518 [this amendment] would accommodate the need to import such substances by adding a new provision to 21 U.S.C. 952(a)(2) that would allow importation of limited quantities of controlled substances for purposes exclusive of ultimate scientific, analytic, or research uses.
S. Rep. No. 98–225, at 269–70,
According to the former official:
The principal purpose of this statutory amendment was . . . to restore an important exception to the prohibition that had (perhaps inadvertently) been left out of the 1970 Act. The commercial purposes for which Lannett wishes to import these substances merely to satisfy FDA regulatory requirements, in my view, certainly do not relate to the purpose for which this amendment is intended. These are not unique substances or laboratory standards, and are not being sought for any such characteristics or purposes.
RX 31, at 21. Rhodes thus argues that because Lannett's purpose in importing the dronabinol is to establish that it is bioequivalent to the domestically-produced innovator drug and not to show that it is a unique substance, “its proposed importation does not fit within the purposes for which th[e] provision is intended.” Rhodes Post-Hearing Br. at 75.
Rhodes also argues that its position is supported by 21 CFR 1312.13(a)(3) & (4), which were promulgated to implement section 952(a)(2)(C).
The regulation, however, further provided that:
Applicants for import permits licensed under section 8 of the Narcotics Manufacturing Act of 1960, who as part of their manufacturing business maintain branch or subsidiary manufacturing establishments in foreign countries, or are themselves a branch or subsidiary of a foreign parent organization, may be issued import permits for occasional imports of samples of the products of these foreign branches, subsidiaries or parent organizations for the purpose of research or spot check analyses to establish or maintain proper chemical and therapeutical standards of their products. However, an applicant will not be granted import permits to make continuous or regular imports of samples of recurring batches or lots of the same product for routine factory controls.
It cannot be disputed that prior to the enactment of the CSIEA, longstanding Federal policy prohibited the importation of narcotics other than raw materials such as crude opium and coca leaves. The CSIEA, however, substantially modified this policy by allowing for the importation of additional controlled substances, including not only schedule I and II drugs, in accordance with the provisions of subsection 952(a)(2), but also nonnarcotic schedule III through V drugs, under the provisions of subsection 952(b).
Thus, even conceding Rhodes' contention that “[t]he principal purpose” of the provision was to restore the exception provided for under the Treasury Department regulation, that does not mean that this was Congress'
Moreover, under the former Treasury Department regulation, importation “for the purpose of research or spot check analyses to establish or maintain proper chemical and therapeutical standards of their products” was deemed to be “for scientific purposes.” 21 CFR 307.151 (1962). Other than the fact that Lannett seeks to do the stability and bioequivalence studies to support an ANDA (and eventually market a drug), there is little difference between the nature of these studies and those permitted under the former regulation. Indeed, as is made clear by the testimony of the former official, it is not the
However, performing stability and bioequivalence studies on a drug clearly constitutes a “scientific, analytical or research use[]” as required by the statute even if these activities are being done for the purpose of being able to obtain approval to commercially distribute a drug. While subsection (a)(2)(C) further requires that the importation be “exclusively” for these purposes, effectuating the statutory mandate can be accomplished by prohibiting the subsequent commercial distribution of any of the drugs imported under this provision.
Contrary to Rhodes' position, neither the Agency's regulation nor the 1995 Policy Statement preclude the Agency from construing 952(a)(2)(C) to permit the importation. Under the regulation, the Agency may authorize an importation upon a finding that “the controlled substance is for ballistics
The ALJ's reliance on the 1995 Policy Statement was also misplaced. Most significantly, the Policy Statement did not address the issue of what activities constitute “scientific, analytical, or research uses” under subsection 952(a)(2)(C), but rather the question of whether manufacturers could engage in “the production of material” in batch sizes for dosage-form development activities under a researcher's registration. 60 FR at 55311. The scale of the latter activity clearly raised a variety of concerns involving the security and recordkeeping of the bulk active pharmaceutical ingredients used in the manufacturing process, and DEA's regulations have long imposed far more extensive security and recordkeeping requirements on manufacturers than they have on researchers.
While these concerns remain valid, they are not implicated by Lannett's proposed importation. Notably, Lannett seeks to import controlled substances which are already in finished dosage form and packaged. The importation thus does not raise the same security and recordkeeping concerns as does the practice of manufacturing large batches of dosage form drugs from active pharmaceutical ingredients. Because the 1995 Policy Statement clearly did not consider this situation, I decline to give it any weight in the analysis.
Subsection (a)(2)(C) does, however, require that the importation be “in limited quantities.” Based on this requirement, the ALJ reasoned that “[w]hatever the limit may be on the quantity that qualifies for the research exception, 300,000 dosage units would likely exceed it.” ALJ at 54.
As noted above, in enacting this provision, Congress did not define the term “limited quantities.” I conclude that the best reading of this provision is that it does not impose an absolute numerical limit on the size of a permissible importation, but rather, requires an assessment of the quantity sought to be imported in light of the substance's intended use.
Accordingly, while the absolute size of a proposed importation does not necessarily render it impermissible, absent a clear justification to support the quantity, the importation does not comply with the “limited quantities” standard. An applicant must therefore justify the amount of the proposed importation based on the underlying purpose of the research.
Here, Lannett's evidence shows that FDA generally requires that the test batch be the same size as the eventual production batches and that these batches should be 100,000 dosage units. LX 1, at 3–4; LX 3, at 1–2. Moreover, according to the FDA Guidance, the samples which are used to conduct stability and bioequivalency tests should be selected from “packaged product” and should either “be systematically selected at intervals from the packaging line,” or selected by “a random sampling procedure.” LX 3, at 3–4. The same FDA Guidance Document includes a table for solid oral dosage form drugs indicating the number of bottles that should be selected based on the number of dosage units in a package.
It is further noted that under an FDA regulation, that Agency “strongly recommends that . . . any person planning to conduct a bioavailability or bioequivalence study submit the proposed protocol for the study to FDA for review prior to the initiation of the study” and that FDA “will offer advice with respect to whether” the design of the “study is appropriate” and whether “[t]he proposed chemical and statistical analytical methods are adequate.” 21 CFR 320.30. Lannett should therefore submit its protocol for review by the FDA and should obtain advice from FDA as to whether its study will be acceptable if the samples are selected prior to importation at the manufacturer (as the Guidance suggests) rather than selected after importation. Lannett should then submit its protocol and the FDA's review of the protocol to this Agency. If Lannett still seeks to import the remaining two batches, it must provide further evidence to support its contention that these batches need to be imported to validate the manufacturing process.
Accordingly, I conclude that conducting stability and bioequivalency testing constitutes “scientific, analytical, or research uses” and is a permissible basis for importing a schedule I or II controlled substance under section 952(a)(2)(C). However, before the Agency issues a regulation approving Lannett's proposed importation, Lannett must demonstrate that the quantity is “limited” in accordance with the above discussion.
While I hold that the importation of a schedule I or II controlled substance for the purpose of conducting stability and bioequivalency testing in support of an ANDA is permissible under section 952(a)(2)(C), the provision must be construed in a manner that also gives effect to the language of 952(a)(2)(B). Accordingly, any controlled substances which are imported under the authority of 952(a)(2)(C) cannot thereafter be commercially distributed. Moreover, where an importer succeeds in obtaining FDA approval to market a drug, subsequent importation of the drug for commercial distribution must comply with the applicable provision of section 952. Thus, where an FDA-approved drug has been placed in schedule II, or involves a narcotic drug in schedules III through V, an applicant will be granted permission to import only if it establishes “that competition among domestic manufacturers is inadequate and will not be rendered adequate by the registration of additional manufacturers under section 823.” 21 U.S.C. § 952(a)(2)(B).
As held above, section 958(i) does not provide a bulk manufacturer with the right to a hearing on the issue of whether Lannett was entitled to a registration. While the ALJ recognized as much, she nonetheless allowed the objectors to litigate the issue and made recommended findings.
Having concluded that the objectors were not entitled to a hearing on the issue of whether Lannett was entitled to be registered,
Pursuant to section 303(a) of the CSA, “[t]he Attorney General shall register an applicant to manufacture controlled substances in schedule I or II if he determines that such registration is consistent with the public interest and with the United States obligations under international treaties, conventions, or protocols in effect on May 1, 1971.” 21 U.S.C. § 823(a). “In determining the public interest,” section 303(a) directs the Attorney General to consider the following factors:
(1) Maintenance of effective controls against diversion of particular controlled substances and any controlled substances in schedule I or II compounded there from into other than legitimate medical, scientific, research, or industrial channels, by limiting the importation and bulk manufacture of such controlled substances to a number of establishments which can produce an adequate and uninterrupted supply of these substances under adequately competitive conditions for legitimate medical, scientific, research, and industrial purposes;
(2) compliance with applicable State and local law;
(3) promotion of technical advances in the art of manufacturing these substances and the development of new substances;
(4) prior conviction record of applicant under Federal and State laws relating to the manufacture, distribution, or dispensing of such substances;
(5) past experience in the manufacture of controlled substances, and the existence in the establishment of effective controls against diversion; and
(6) such other factors as may be relevant to and consistent with public health and safety.
While there is insufficient evidence to make findings with respect to factors two, three, and six, the record establishes that Lannett has experience in the manufacture and development of pharmaceutical products and that it maintains effective controls against diversion (factor five). The record also establishes that Lannett has not been convicted of an offense related to the manufacture or distribution of controlled substances (factor four). Both of these findings support the conclusion that granting Lannett's application for a registration would be consistent with the public interest.
The ALJ found that Lannett had not shown that competition among domestic manufactures of dronabinol is inadequate and that the current manufacturers were incapable of producing an adequate and uninterrupted supply of this substance (factor one). Relying on
I conclude, however, that
Accordingly, I conclude that factor one does not preclude the issuance of an import registration to Lannett, subject to the condition that its authority to import dronabinol as a schedule I drug be limited to the quantity which is necessary to support an ANDA.
Lannett is hereby directed to file with this Office its testing protocol and an itemization setting forth the various quantities it needs to import for bioequivalency and stability studies, as well as reserves. If FDA requires that it import the entire batch that will be used for bioequivalency and stability testing and will not permit it to select its test samples from the production batch and import only those quantities, Lannett should provide evidence supporting this. Finally, if Lannett intends to pursue importation of the additional batches, it must provide additional justification for doing so. Lannett must serve a copy of all filings on the objectors. Lannett's submission shall be due no later than 90 days from date of the issuance of this Order; Lannett shall timely inform this Office of any delays in obtaining a response from FDA.
Pursuant to the authority contained in Section 512 of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. 1142, the 169th 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 4–5, 2013.
The meeting will take place in C5521 Room 4, U.S. Department of Labor, 200 Constitution Avenue NW., Washington, DC 20210 on November 4, from 1 p.m. to approximately 5:00 p.m. On November 5, 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 5 will be in C5521 Room 1. The afternoon session on November 5 will take place in Room S–2508 at the same address. The purpose of the open meeting on November 4 and the morning of November 5 is for the Advisory Council members to finalize the recommendations they will present to the Secretary. At the November 5 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) Successful Retirement Plan Communications for Various Population Segments, (2) Locating Missing and Lost Participants, and (3) Private Sector Pension De-risking and Participant Protections. 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 October 28, 2013 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 October 28, 2013 at the address indicated.
Office of Management and Budget, Executive Office of the President.
Notice.
By virtue of the authority vested in the President by section 2(a) of Public Law 87–603 (76 Stat. 593; 42 U.S.C. 2652), and delegated to the Director of the Office of Management and Budget (OMB) by the President through Executive Order No. 11541 of July 1, 1970, the rates referenced below are hereby established. These rates are for use in connection with the recovery from tortiously liable third persons for the cost of outpatient medical, dental and cosmetic surgery services furnished by military treatment facilities through the Department of Defense (DoD). The rates were established in accordance with the requirements of OMB Circular A–25, requiring reimbursement of the full cost of all services provided.
Nuclear Regulatory Commission.
Environmental assessment and finding of no significant impact; issuance.
The U.S. Nuclear Regulatory Commission (NRC) is considering extending the latest construction completion date specified in Construction Permit No. CPPR–92 issued to Tennessee Valley Authority (permittee, TVA) for the Watts Bar Nuclear Plant (WBN), Unit 2.
Please refer to Docket ID NRC–2008–0369 when contacting the NRC about the availability of information regarding this document. You may access publicly-available information related to this action by the following methods:
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The NRC is considering extending the latest construction completion date specified in Construction Permit No. CPPR–92 issued to Tennessee Valley Authority (permittee, TVA) for the Watts Bar Nuclear Plant (WBN), Unit 2. The facility is located at the permittee's site on the west branch of the Tennessee River approximately 50 miles northeast of Chattanooga, Tennessee. Therefore, as required by section 51.21 of Title 10 of the
The proposed action would extend the latest construction completion date of Construction Permit No. CPPR–92 from March 31, 2013, to September 30, 2016. TVA submitted the construction permit request by letter dated May 17, 2012 (ADAMS Accession No. ML12143A346). TVA submitted the request to extend the construction permit at least 30 days before the expiration of the existing permit, therefore, in accordance with 10 CFR 2.109(a), the existing construction permit will remain in effect until the NRC staff has completed the review of the request.
The proposed extension will not allow any work to be performed that is not already allowed by the existing construction permit. The extension will merely grant the permittee more time to complete construction in accordance with the previously approved construction permit.
The proposed action is necessary to give the permittee adequate time to complete construction of WBN Unit 2 given their latest estimate to completion. The construction permit for WBN Unit 2 was originally issued on January 23, 1973. The permit listed the earliest date for completing WBN Unit 2 as November 1, 1976, and the latest date for completion as May 1, 1977. The completion date of the WBN Unit 2 construction permit has been extended numerous times since 1977, mainly for construction delays.
In a July 14, 2000, letter, TVA confirmed that WBN Unit 2 met the NRC's definition of a deferred plant, as described in Generic Letter (GL) 87–15, “Policy Statement on Deferred Plants.” By letter dated, August 3, 2007, and in accordance with the policy specified in GL 87–15, TVA informed the Commission of its intent to complete construction and licensing of WBN Unit 2 by April 1, 2012. TVA provided the information requested in GL 87–15, and also informed the Commission that it would resume construction activities no sooner than December 3, 2007. These activities were within the scope of the construction permit, which was set to expire December 31, 2010. By letter dated May 8, 2008, TVA requested the construction permit completion date be extended from December 31, 2010, to March 31, 2013. The NRC granted the extension of the permit completion date by order dated July 7, 2008.
In March of 2012, TVA completed a detailed review of the status of WBN 2 construction and developed a revised estimate of the time necessary to complete the project. The results of the review came up with a completion range of September 2015 to June 2016, with the most likely date being December 2015. TVA is requesting September 30, 2016, to ensure the entire completion range is covered, including a few extra months in case of additional delay.
The environmental impacts associated with the construction of the facility have been previously discussed and evaluated in TVA's Final Environmental Statement for construction (FES–CP) of WBN, Units 1 and 2, issued on November 9, 1972 (ADAMS Accession No. ML073470580). Since TVA is a corporate agency of the Federal government, the Atomic Energy Commission (AEC), the precursor agency to NRC, agreed that TVA was the lead agency for preparing and circulating detailed environmental statements for TVA nuclear plants. TVA consulted with the AEC in preparing the environmental statement and incorporated AEC's comments and recommendations in the final environmental statement.
The NRC staff evaluated the environmental impacts of construction and operation of this plant, issuing comments on TVA's FES–CP as part of its review. In December 1978, the NRC staff issued NUREG–0498, “Final Environmental Statement Related to Operation of Watts Bar Nuclear Plant Units 1 and 2,” (ADAMS Accession No. ML082540803) for the operating-license stage (FES–OL), which addressed environmental impacts of construction activities not addressed previously in TVA's FES–CP. The activities included: (1) Construction of the transmission route for the Watts Bar—Volunteer 500 kilovolt line, (2) construction of the settling pond for siltation control for construction runoff at a different location from that originally proposed in the FES–CP, and (3) the relocation of the blowdown diffuser from the originally proposed site indicated in the FES–CP. The staff addressed the terrestrial and aquatic environmental impacts in the FES–OL, as well as historic and archeological impacts, and concluded that the assessment presented in the FES–CP remains valid.
The NRC issued NUREG–0498, Supplement 1 (FES–95) in April 1995 (ADAMS Accession No. ML081430592) to re-evaluate the environmental issues before deciding to issue the operating license for WBN Unit 1. Environmental issues evaluated included changes to regional demography, natural resource use, meteorology, ecology, impacts to humans and the environment, severe accident mitigation design alternatives, and socioeconomic impacts, including environmental justice issues. The staff concluded that there were no significant changes to the environmental impacts discussed in the 1978 FES–OL due to changes in plant design or operation, or changes in the environment. Furthermore, the staff concluded that no additional impacts not previously discussed in the NRC's 1978 FES–OL related to construction of Unit 2 were expected.
On February 15, 2008, TVA submitted “Watts Bar Nuclear Plant (WBN)—Unit 2—Final Supplemental Environmental Impact Statement [FSEIS] For the Completion and Operation of Unit 2,” (ADAMS Accession No. ML080510469) to the NRC. This FSEIS was completed in June 2007, and was submitted in support of TVA's operating license application for WBN Unit 2. It also included TVA's evaluation of the environmental impacts of construction.
The NRC staff reviewed TVA's 2008 FEIS and in May 2013, the NRC issued NUREG–0498, Supplement 2 (FES–2013) (ADAMS Accession Nos. ML13144A092—Vol. 1 and ML13144A039—Vol. 2) to describe the environmental impacts associated with completing construction and subsequently operating, WBN Unit 2. Additionally, FES–2013 covers issues that have changed since the publication of 1978 FES–OL, or were introduced subsequent to the publication of FES–95. Issues that were either not included in the previous versions of NUREG–0498, or issues that needed updating, include groundwater quality, public services, noise, socioeconomic impacts, severe accident mitigation alternatives, cultural and historical resources, environmental justice, greenhouse gas emissions, and cumulative impacts.
FES–2013 reviews the impacts on the environment of operating WBN Unit 2 and since the majority of environmentally disruptive activities have been completed, the findings in FES–2013 will bound any further environmental impacts as a result of construction activities. In FES–2013, the NRC staff concluded that the impacts from operation of WBN Unit 2 associated with water use, aquatic ecology, terrestrial resources, design basis accidents, socioeconomics, the radiological exposure and nonradiological wastes and effluents, decommissioning, air quality and land use are generally consistent with the impacts disclosed in the FES–OL, and FES–95 documents. The NRC staff concluded that impacts associated with operation of WBN Unit 2 on groundwater quality, public services, noise, transportation infrastructure, cultural and historical resources, greenhouse gas emissions, and severe accidents would be small. The staff also concluded that operation of the WBN Unit 2 would not result in disproportionately high and adverse human health or environmental effect to any of the minority and low-income communities near the WBN site. The NRC staff also considered the cumulative impacts from past, present, and reasonably foreseeable future actions. The NRC staff concluded that the potential cumulative impacts from
The permittee has no plans to construct additional transmission lines or disturb any land not discussed in previous environmental reviews. Completed construction of WBN Unit 2 includes major structures such as the containment, turbine building, control building, and equipment such as the reactor pressure vessel, reactor coolant system piping, and steam generators. Installation of equipment shared with WBN Unit 1, such as diesel generators, was completed prior to issuance of the Unit 1 operating license in 1996. Therefore, most of the construction impacts discussed in the previous versions of environmental documents have already occurred. The remaining construction activities will take place within structures already completed. Therefore extending these types of construction activities an additional three and half years out from March 31, 2012, to September 31, 2016, as previously approved by order dated July 7, 2008, does not involve any different impacts or a significant change to those impacts described and analyzed in any of the previous environmental documents (FES–CP, FES–OL, FES–95, FES–2013).
Based on the foregoing, the NRC staff has concluded that the proposed action would have no significant environmental impact. Since this action would only extend the period of construction activities described in the FES, it does not involve any different impacts or a significant change to those impacts described and analyzed in any of the previous environmental documents (FES–CP, FES–OL, FES–95, FES–2013).
A possible alternative to the proposed action would be to deny the request, or the no-action alternative. This alternative would result in expiration of the construction permit for Watts Bar, Unit 2. This option would require submittal of another application for construction in order to allow the permittee to complete construction of the facility with no significant environmental benefit. The environmental impacts of the proposed action and alternative action are similar.
Since the permittee has no plans to construct additional transmission lines or disturb any land not discussed in previous environmental reviews, the construction of major structures such as the containment, turbine building, control building, intake pumping station, and equipment such as the reactor pressure vessel, reactor coolant system piping, and steam generators and diesel generators were already completed prior to issuance of the Unit 1 operating license in 1996, the remaining construction activities will take place within structures already completed. Spreading these activities across three and half more years does not involve the use of resources not previously considered in the environmental documents already discussed for Watts Bar, Units 1 and 2 (FES–CP, FES–OL, FES–95, FES–2013).
In accordance with its stated policy, on August 14, 2013, the staff consulted with officials from the State of Tennessee, including Anthony Hogan, Deputy Director of Radiological Health, Tennessee Department of Environment and Conservation, regarding the environmental impact of the proposed action. The State officials had no comments.
Based on the details provided in the environmental assessment, which is incorporated by reference, the NRC staff concludes that the proposed action of extending the latest construction completion date of Construction Permit No. CPPR–92 from March 31, 2013, to September 30, 2016, does not involve any different impacts or a significant change to those impacts described and analyzed in the original environmental impact statement or its supplements. Therefore, the NRC staff has determined that extending the construction completion date will not have a significant effect on the quality of the human environment because the major construction activities have already occurred, and the work being extended out for three and half more years is within previously disturbed areas at the site within the existing structures. Accordingly, the NRC has determined not to prepare an environmental impact statement for the proposed action.
This finding and documents related to this action such as the permittee's request for extension dated May 17, 2012 (ADAMS Accession No. ML12143A346) and related environmental documents (FES–CP, FES–OL, FES–95, and FES–2013 (ADAMS Accession Nos. ML073470580, ML082540803, ML081430592, and ML13144A092—Vol. 1/ML13144A039—Vol. 2, respectively)), are available electronically at the NRC Library at
For the Nuclear Regulatory Commission.
Weeks of October 21, 28, November 4, 11, 18, 25, 2013.
Commissioners' Conference Room, 11555 Rockville Pike, Rockville, Maryland.
Public and Closed.
There are no meetings scheduled for the week of October 21, 2013.
There are no meetings scheduled for the week of November 4, 2013.
There are no meetings scheduled for the week of November 11, 2013.
This meeting will be webcast live at the Web address—
There are no meetings scheduled for the week of November 25, 2013.
The Briefing on Flooding and Other Extreme Weather Events scheduled on October 16, 2013, was postponed. The Meeting with the Advisory Committee on the Medical Uses of Isotopes and the Briefing on Proposed Rulemaking Concerning the Medical Use of Byproduct Material scheduled on October 18, 2013, were postponed.
The schedule for Commission meetings is subject to change on short notice. To verify the status of meetings, call (recording)—301–415–1292. Contact person for more information: Rochelle Bavol, 301–415–1651.
The NRC Commission Meeting Schedule can be found on the Internet at:
The NRC provides reasonable accommodation to individuals with disabilities where appropriate. If you need a reasonable accommodation to participate in these public meetings, or need this meeting notice or the transcript or other information from the public meetings in another format (e.g. braille, large print), please notify Kimberly Meyer, NRC Disability Program Manager, at 301–287–0727, or by email at
Members of the public may request to receive this information electronically. If you would like to be added to the distribution, please contact the Office of the Secretary, Washington, DC 20555 (301–415–1969), or send an email to
Postal Regulatory Commission.
Notice.
The Commission is noticing a recent Postal Service filing seeking postal rate adjustments based on exigent circumstances. 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.
On September 26, 2013, the Postal Service filed an exigent rate request with the Commission pursuant to 39 U.S.C. 3622(d)(1)(E) and subpart E of 39 CFR 3010.60
In a related case (a Type 1–A filing), also filed September 26, 2013, the Postal Service proposes an increase, on average, of 1.6 percent for the same set of products and services based on the annual adjustment allowed under 39 U.S.C. 3622(d)(1) and 39 CFR part 3010 subpart B.
This Order provides public notice of the Exigent Request; establishes Docket No. R2013–11 for consideration of the Exigent Request; establishes an expedited procedural schedule consistent with the Commission's intention to issue a determination within 90 days of the Postal Service's filing; provides other information concerning the Exigent Request; and takes related administrative steps.
The Postal Service provides a procedural history leading to the filing of the Exigent Request. Exigent Request at 3–7. It indicates that the Exigent Request, which it characterizes “as a complete update to its original request,” is “premised on the recent recession as an exigent event.”
In Order No. 1059, the Commission stated:
If the Postal Service wishes to pursue its Exigent Request, it must complete the submission of its entire case to the Commission. A complete case would include all information, materials, and testimony on which the Postal Service would rely to demonstrate that its Exigent Request satisfies the causal nexus of “due to,” as interpreted by the Commission in Order No. 864, as well as the remaining requirements of section 3622(d)(1)(E).
The Postal Service represents that “[t]he instant filing is intended to constitute an `entire case,' as contemplated by Order No. 1059.” Exigent Request at 7.
Although the Postal Service captioned the Exigent Request as Docket No. R2010–4R, it indicates that its filing constitutes an entire case as contemplated by Order No. 1059. Because the filing is complete and to avoid any ambiguity about the record concerning the instant Request, the Commission establishes Docket No. R2013–11 for consideration of the Postal Service's Exigent Request. The Commission concludes that such an approach is appropriate, given the 90-day statutory deadline for its decision, and its need not only to manage this proceeding on an expedited basis, but also in harmony with its need to manage its entire administrative calendar and other responsibilities.
The proposed prices increase, on average, by 4.3 percent and are spread
The average increase by class and product appears in the table below. A full schedule of the proposed increases is provided in Attachment A to the Exigent Request.
In support of its Exigent Request, the Postal Service filed statements by Thomas E. Thress, Stephen J. Nickerson, and Altaf Taufique. The Postal Service states that the Thress statement is an update to his statement of November 2011, and estimates the effect of the recession on mail volumes.
The Exigent Request also includes thirteen supporting library references (of which ten are public and three are non-public); and two attachments.
Developments may warrant adoption of additional procedural dates and/or requirements. If so, the Commission will issue further procedural orders as it deems advisable or necessary to ensure timely completion of its review. All such rulings will be published on the Commission Web site: (
1. The Commission establishes Docket No. R2013–11 to consider matters raised in the Postal Service's September 26, 2013 Exigent Request.
2. The Commission adopts the procedural schedule in the Attachment to this order, subject to further developments.
3. The Commission will sit
4. Comments by interested persons are due no later than November 6, 2013.
5. Reply comments may be filed by the Postal Service and other interested persons are due no later than November 20, 2013.
6. Pursuant to 39 U.S.C. 505, the Commission appoints James Waclawski to represent the interests of the general public in this proceeding.
7. The Secretary shall arrange for publication of this order in the
By the Commission.
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 September 27, 2013, it filed with the Postal Regulatory Commission a
Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
On July 7, 1976, effective July 16, 1976 (
There is approximately 1 respondent per year that requires an aggregate total of 4 hours to comply with this rule. This respondent makes an estimated 1 annual response. Each response takes approximately 4 hours to complete. Thus, the total compliance burden per year is 4 burden hours. The approximate cost per hour is $20, resulting in a total cost of compliance for the respondent of approximately $80 (
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information under the PRA unless it displays a currently valid OMB control number.
The public may view background documentation for this information collection at the following Web site:
Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
Rule 17a–1 requires that every national securities exchange, national securities association, registered clearing agency, and the Municipal Securities Rulemaking Board keep on file for a period of not less than five years, the first two years in an easily accessible place, at least one copy of all documents, including all correspondence, memoranda, papers, books, notices, accounts, and other such records made or received by it in the course of its business as such and in the conduct of its self-regulatory activity, and that such documents be available for examination by the Commission.
There are 28 entities required to comply with the rule: 17 national securities exchanges, 1 national securities association, 9 registered clearing agencies, and the Municipal Securities Rulemaking Board. The Commission staff estimates that the average number of hours necessary for compliance with the requirements of Rule 17a–1 is 50 hours per year. In addition, 5 national securities exchanges notice-registered pursuant to Section 6(g) of the Act (15 U.S.C. 78f(g)) are required to preserve records of determinations made under Rule 3a55–1 under the Act (17 CFR 240.3a55–1), which the Commission staff estimates will take 1 hour per exchange, for a total of 5 hours. Accordingly, the Commission staff estimates that the total number of hours necessary to comply with the requirements of Rule 17a–1 is 1,405 hours. The average cost per hour is $63. Therefore, the total cost of compliance for the respondents is $88,515.
Compliance with Rule 17a–1 is mandatory. Rule 17a–1 does not assure confidentiality for the records maintained pursuant to the rule. The records required by Rule 17a–1 are available only for examination by the Commission staff, state securities authorities and the self-regulatory organizations. Subject to the provisions of the Freedom of Information Act, 5 U.S.C. 522, and the Commission's rules thereunder (17 CFR 200.80(b)(4)(iii)), the Commission does not generally publish or make available information contained in any reports, summaries, analyses, letters, or memoranda arising out of, in anticipation of, or in connection with an examination or inspection of the books and records of any person or any other investigation.
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number.
The public may view background documentation for this information collection at the following Web site,
Securities and Exchange Commission (“SEC” or “Commission”).
Notice of application for an order approving the substitution of certain securities pursuant to Section 26(c) of the Investment Company Act of 1940, as amended (the “1940 Act”).
Pacific Life Insurance Company (“Pacific Life”), Pacific Life's Separate Account A (“Separate Account A”), Pacific Life's Pacific Select Variable Annuity Separate Account (“Select VA Account” and, together with Separate Account A, the “Pacific Life Separate Accounts”), Pacific Life & Annuity Company (“PL&A”), and PL&A's Separate Account A (“PL&A Separate Account A”). Pacific Life, PL&A, and the Separate Accounts are referred to collectively as the “Applicants.” The Pacific Life Separate Accounts and PL&A Separate Account A are referred to individually as a “Separate Account” and collectively as the “Separate Accounts.” Pacific Life and PL&A are referred to herein individually as an “Insurer” and collectively as the “Insurers.”
Each Insurer, on behalf of itself and its Separate Account(s), seeks an order pursuant to Section 26(c) of the 1940 Act, approving the substitution of Service Shares of the Janus Aspen Balanced Portfolio, a series of Janus Aspen Series (the “Replacement Portfolio”), for Class B shares of the AllianceBernstein VPS Balanced Wealth Strategy Portfolio, a series of the AllianceBernstein Variable Product Series Fund, Inc. (the “Replaced Portfolio”) (hereinafter, the “Proposed Substitution”), under certain variable annuity contracts issued by the Insurers (collectively, the “Contracts”).
An order granting the application will be issued unless the Commission orders a hearing. Interested persons may request a hearing by writing to the Secretary of the Commission and serving the Applicants with a copy of the request, personally or by mail. Hearing requests should be received by the Commission by 5:30 p.m. on November 7, 2013, and should be accompanied by proof of service on the Applicants in the form of an affidavit or, for lawyers, a certificate of service. Hearing requests should state the nature of the requester's interest, the reason for the request, and the issues contested. Persons who wish to be notified of a hearing may request notification by writing to the Secretary of the Commission.
Secretary, SEC, 100 F Street NE., Washington, DC 20549–1090. Applicants: Pacific Life Insurance Company, Separate Account A of Pacific Life Insurance Company, Pacific Select Variable Annuity Separate Account of Pacific Life Insurance Company, Pacific Life & Annuity Company, and Pacific Life & Annuity Company Separate Account A, all located at 700 Newport Center Drive, Newport Beach, CA 92660.
Deborah D. Skeens, Senior Counsel, or Michael L. Kosoff, Branch Chief, Insured Investments Office, Division of Investment Management, at (202) 551–6795.
The following is a summary of the application. The complete 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
1. The Insurers, on their own behalf and on behalf of their respective Separate Accounts, propose to substitute Service Shares of the Replacement Portfolio for Class B shares of the Replaced Portfolio held by the Separate Account to fund the Contracts. Each Separate Account is divided into subaccounts (each a “Subaccount,” collectively, the “Subaccounts”). Each Subaccount invests in the securities of a single portfolio of an underlying mutual fund (“Portfolio”). Contract owners (each a “Contract Owner” and collectively, the “Contract Owners”) may allocate some or all of their Contract value to one or more Subaccounts that are available as investment options under the Contracts.
2. Pacific Life is the depositor and sponsor of the Pacific Life Separate Accounts. PL&A is the depositor and sponsor of PL&A Company Separate Account A.
3. Each of the Separate Accounts is a “separate account” as defined by Section 2(a)(37) of the 1940 Act and each is registered under the 1940 Act as a unit investment trust for the purpose of funding the Contracts. Security interests under the Contracts have been registered under the Securities Act of 1933. The application sets forth the registration statement file numbers for the Contracts and the Separate Accounts.
4. Each Insurer, on behalf of itself and its Separate Account(s), proposes to replace the Class B shares of the Replaced Portfolio that are held in Subaccounts of its Separate Account(s) with Service Shares of the Replacement Portfolio.
5. The Applicants state that the Proposed Substitution involves moving assets attributable to the Contracts from the Replaced Portfolio managed by AllianceBernstein L.P. (“AllianceBernstein”) to a Replacement Portfolio managed by Janus Capital Management LLC (“Janus Capital”) (each of Janus Capital and AllianceBernstein, an “Investment Adviser” and collectively, the “Investment Advisers”). Each Investment Adviser is responsible for the day-to-day management of the assets of the Replaced or Replacement Portfolio, as the case may be. Neither the Replaced nor Replacement Portfolio employs a sub-adviser and neither Portfolio operates under a manager-of-managers arrangement that, among other things, would permit the Investment Adviser to engage a new or additional sub-adviser without the approval of the Portfolio's shareholders. The Applicants state that the Investment Advisers are not affiliates of the Insurers.
6. Applicants state that under the Contracts, the Insurers reserve the right to substitute, for the shares of a Portfolio held in any Subaccount, the shares of another Portfolio, shares of another investment company or series of another investment company, or another investment vehicle. The prospectuses for the Contracts include appropriate disclosure of this reservation of right.
7. The Applicants represent that the investment objectives of the Replaced and Replacement Portfolio are similar. The investment objective of the Replaced Portfolio is to maximize total return consistent with its Investment Adviser's determination of reasonable risk, whereas that of the Replacement Portfolio is long-term capital growth, consistent with preservation of capital and balanced by current income. The investment objectives of both Portfolios include a growth component as well as an income component. Additionally, the Applicants state that the principal investment strategies of the Replaced and Replacement Portfolios are similar. The principal investment strategies of both Portfolios include investment in a combination of equity and debt securities. The Replaced Portfolio targets a weighting of 60% equity securities and 40% debt securities, whereas the Replacement Portfolio normally invests 35–65% of its assets in equity securities and the remaining assets in debt securities and cash equivalents, with normally 25% of its assets invested in fixed-income senior securities. In addition, both Portfolios may invest in securities of non-U.S. issuers. The principal investment strategies of the Replaced Portfolio also include investment in fixed-income securities with below investment grade ratings (also called “junk” bonds), which is not a principal investment strategy of the Replacement Portfolio though it may invest in such bonds. The principal investment strategies of the Replaced Portfolio include investments in real estate investment trusts or REITS, whereas the same is not true for the Replacement Portfolio though it may invest in REITs. The principal investment strategies of the Replaced Portfolio include entering into forward commitments, the making of short sales of securities or maintaining a short position, and investments in rights or warrants, none of which is a principal investment strategy of the Replacement Portfolio, though it may engage in short sales and invest in securities on a forward commitment basis, and invest in warrants. The principal investment strategies of the Replacement Portfolio include investments in mortgage-backed and mortgage-related securities, which are not a principal investment strategy of the Replaced Portfolio, though it may investment in mortgage-backed securities. A comparison of the investing strategies, risks, and performance of the Replaced and Replacement Portfolios is included in the application.
8. The following table compares the fees and expenses of the Replaced Portfolio (Class B shares) and the Replacement Portfolio (Service Shares) as of the year ended December 31, 2012. As described below, the management fees of the Replaced Portfolio are subject to breakpoints whereas the management fees of the Replacement Portfolio are not.
9. The Applicants state that the performance for the Replacement Portfolio is generally better than that of the Replaced Portfolio for all periods shown.
10. The Applicants state that the Proposed Substitution is part of an ongoing effort by the Insurers to make their Contracts more attractive to existing and prospective Contract Owners. The Applicants believe the Proposed Substitution will help to accomplish these goals for the following reasons: (1) The total annual operating expenses (no expense waivers or reimbursements) for the Replacement Portfolio are lower than those of the Replaced Portfolio; (2) the historical performance of the Replacement Portfolio is generally better than that of the Replaced Portfolio; and (3) the Proposed Substitution will facilitate the ability of Contract Owners to elect certain optional living benefit riders; and (4) the Proposed Substitution will simplify the Subaccount offerings under the Contracts by eliminating an overlapping Investment Option that largely duplicates another Investment Option with similar investment objectives, principal investment strategies, and principal risks.
11. The Applicants represent that the Proposed Substitution will be described in supplements to the applicable prospectuses for the Contracts filed with the Commission or in other supplemental disclosure documents, (collectively, “Supplements”) and delivered to all affected Contract Owners at least 30 days before the date the Proposed Substitution is effected (the “Substitution Date”). Each Supplement will give the relevant Contract Owners notice of the
12. The Proposed Substitution will take place at the applicable Replaced and Replacement Portfolios' relative per share net asset values determined on the Substitution Date in accordance with Section 22 of the 1940 Act and Rule 22c–1 thereunder. Accordingly, the Applicants submit that the Proposed Substitution will have no negative financial impact on any Contract Owner.
13. The Proposed Substitution will be effected by having the Replaced Portfolio Subaccount redeem its Replaced Portfolio shares in cash and/or in-kind (as determined by the Investment Adviser to the Replaced Portfolio) on the Substitution Date at net asset value per share and purchase shares of the Replacement Portfolio at net asset value per share calculated on the same date. In the event that the Investment Adviser of the Replacement Portfolio declines to accept, on behalf of the Replacement Portfolio, any securities redeemed in-kind by the Replaced Portfolio, the Replaced Portfolio shall instead provide cash equal to the value of the declined securities so that Contract Owners' Contract values will not be adversely impacted or diluted.
14. The Insurers or an affiliate thereof will pay all expenses and transaction costs reasonably related to the Proposed Substitution, including all legal, accounting, and brokerage expenses relating to the Proposed Substitution, the above described disclosure documents, and this application. No costs of the Proposed Substitution will be borne directly or indirectly by Contract Owners. Affected Contract Owners will not incur any fees or charges as a result of the Proposed Substitution, nor will their rights or the obligations of the Insurers under the Contracts be altered in any way. The Proposed Substitution will not cause the fees and charges under the Contracts currently being paid by Contract Owners to be greater after the Proposed Substitution than before the Proposed Substitution. In addition, no transfer charges will apply in connection with the Proposed Substitution.
15. The Applicants represent that will not receive, for three years from the date of the Proposed Substitution, any direct or indirect benefits from the Replacement Portfolio, its adviser or underwriter (or their affiliates), in connection with assets attributable to contracts affected by the Proposed Substitution, at a higher rate than it had received from the Replaced Portfolio, its adviser or underwriter (or their affiliates), including without limitation 12b-1 fees, revenue sharing, or other arrangements; and the Proposed Substitution and the selection of the Replacement Portfolio were not motivated by any financial consideration paid or to be paid to the Company or its affiliates by the Replacement Portfolio, its adviser or underwriter, or their affiliates.
1. The Applicants request that the Commission issue an order pursuant to Section 26(c) of the 1940 Act approving the Proposed Substitution. Section 26(c) of the 1940 Act makes it unlawful for any depositor or trustee of a registered unit investment trust holding the security of a single issuer to substitute another security for such security unless the Commission approves the substitution. Section 26(c) requires the Commission to issue an order approving a substitution if the evidence establishes that it is consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the 1940 Act.
2. Applicants assert that the terms and conditions of the Proposed Substitution are consistent with the principles and purposes of Section 26(c) and do not entail any of the abuses that Section 26(c) is designed to prevent. Applicants further submit that the Proposed Substitution will not result in the type of costly forced redemption that Section 26(c) was intended to guard against and, for the following reasons, are consistent with the protection of investors and the purposes fairly intended by the 1940 Act:
(1) The costs reasonably related to the Proposed Substitution will be borne by the applicable Insurer or an affiliate and will not be borne by Contract Owners. No charges will be assessed to the Contract Owners to effect the Proposed Substitution.
(2) The Proposed Substitution will be effected, in all cases, at the relative net asset values of the shares of the Replaced and Replacement Portfolios, without the imposition of any transfer or similar charge and with no change in the amount of any Contract Owner's Contract value.
(3) The Proposed Substitution will not cause the fees and charges under the Contracts currently being paid by Contract Owners to be greater after the Proposed Substitution than before the Proposed Substitution, and will result in Contract Owners' Contract values being allocated to Subaccounts that invest in the Replacement Portfolio, which has lower total expenses than the Replaced Portfolio. Any changes in the charges for optional living benefit riders would be independent of the Proposed Substitution.
(4) All affected Contract Owners will be given notice of the Proposed Substitution prior to the Substitution Date and will have an opportunity to reallocate their Contract value among other available Subaccounts, including Subaccounts investing in the Replacement Portfolio, without the imposition of any charge or limitation (unless such transfers are made in connection with market timing or other disruptive trading activity), thereby minimizing the likelihood of being
(5) The Proposed Substitution will in no way alter the insurance benefits to Contract Owners or the contractual obligations of the Insurers.
(6) The Proposed Substitution will in no way alter the tax treatment of Contract Owners in connection with their Contracts, and no tax liability will arise for Contract Owners as a result of the Proposed Substitution.
(7) The Proposed Substitution will not adversely affect existing Contract Owners who elected optional living benefit riders and allocated Contract value to Subaccounts investing in the Replaced Portfolio since the Replacement Portfolio is an allowable Investment Option for use with such riders.
For the reasons and upon the facts set forth above and in the application, the Applicants submit that the Proposed Substitution meets the standards of Section 26(c) of the 1940 Act and respectfully request that the Commission issue an order of approval pursuant to Section 26(c) of the 1940 Act and that such order be made effective as soon as possible.
For the Commission, by the Division of Investment Management, under delegated authority.
Notice is hereby given, pursuant to the provisions of the Government in the Sunshine Act, Public Law 94–409, that the Securities and Exchange Commission will hold a Closed Meeting on Thursday, October 24, 2013 at 11:00 a.m.
Commissioners, Counsel to the Commissioners, the Secretary to the Commission, and recording secretaries will attend the Closed Meeting. Certain staff members who have an interest in the matters also may be present.
The General Counsel of the Commission, or her designee, has certified that, in her opinion, one or more of the exemptions set forth in 5 U.S.C. 552b(c)(3), (5), (7), 9(B) and (10) and 17 CFR 200.402(a)(3), (5), (7), 9(ii) and (10), permit consideration of the scheduled matter at the Closed Meeting.
Commissioner Aguilar, as duty officer, voted to consider the items listed for the Closed Meeting in a closed session.
The subject matter of the Closed Meeting will be: Institution and settlement of injunctive actions; institution and settlement of administrative proceedings; adjudicatory matters; amicus consideration; and other matters relating to enforcement proceedings.
At times, changes in Commission priorities require alterations in the scheduling of meeting items.
For further information and to ascertain what, if any, matters have been added, deleted or postponed, please contact the Office of the Secretary at (202) 551–5400.
Notice is hereby given that, on September 12, 2013, The Options Clearing Corporation (“OCC”) filed an advance notice with the Securities and Exchange Commission (“Commission”) pursuant to Section 806(e) of Title VIII of the Dodd-Frank Wall Street Reform and Consumer Protection Act,
In connection with a change to its operations (the “Change”), OCC proposes to replace its credit facility with a new credit facility, which is designed to be used to meet obligations of OCC arising out of the default or suspension of a clearing member of OCC, in anticipation of a potential default by a clearing member or as a result of the insolvency of any bank or clearing organization doing business with OCC.
In its filing with the Commission, OCC included statements concerning the purpose of and basis for the proposed change and discussed any comments it received, if any, on the advance notice. The text of these statements may be examined at the places specified in Item IV below. OCC has prepared summaries, set forth in sections A and B below, of the most significant aspects of these statements.
The Change involves the replacement of a credit facility that OCC maintains for the purposes of meeting obligations arising out of the default or suspension of a clearing member or the failure of a bank or securities or commodities clearing organization to perform its obligations due to its bankruptcy, insolvency, receivership or suspension of operations. OCC's existing credit facility (the “Existing Facility”) was implemented on October 11, 2012 through the execution of a Credit Agreement among OCC, JPMorgan Chase Bank, N.A. (“JPMorgan”), as administrative agent, and the lenders that are parties to the agreement from time to time, which provides short-term secured borrowings in an aggregate principal amount of $2 billion and may be increased to $3 billion.
The Existing Facility is set to expire on October 10, 2013 and OCC is therefore currently negotiating the terms of a new credit facility (the “New
The terms and conditions applicable to the New Facility are set forth in the Commitment Letter and a Summary of Terms and Conditions attached as an exhibit to the Commitment Letter. The Commitment Letter, including the exhibit, is attached to this filing as Exhibit 3A. One of the conditions to the availability of the New Facility is the execution and delivery of a credit agreement and pledge agreement between OCC, JPMorgan, JPMorgan Securities, MLPF&S, BANA and the various lenders under the New Facility, which OCC anticipates will occur on or before October 9, 2013. Another condition is the successful syndication of the facility to a group of lenders who will in the aggregate provide commitments of $2 billion.
Under the New Facility, a syndicate of banks, financial institutions and other entities will make loans to OCC on request. The New Facility includes a tranche that may be drawn in dollars or euros and a dollar-only tranche. The aggregate amount of loans available under the facility, subject to the value of eligible collateral, is up to $2 billion. The dollar equivalent of the total loans denominated in euros under the euro/dollar tranche of the New Facility may not exceed $100 million. During the term of the New Facility, the amount of the New Facility may be increased to up to $3 billion if OCC so requests and if sufficient commitments from lenders are received and accepted.
The New Facility is available on a revolving basis for a 364-day term. OCC may request a loan under the New Facility on any business day by providing a notice to JPMorgan, as administrative agent, which will then notify the lenders, who will be required to fund their
The amount available under the New Facility at any given point in time is equal to the lesser of (i) $2 billion, or the increased size of the facility, if applicable, and (ii) the sum of (A) 90% of the value of OCC's clearing fund that is not subject to liens or encumbrances granted by OCC other than in connection with the New Facility and (B) 90% of the value of unencumbered margin deposits of suspended clearing members that are not subject to liens or encumbrances granted by OCC other than in connection with the New Facility. If the aggregate principal amount of loans under the New Facility exceeds the amount available under this formula, OCC must prepay loans, obtain the release of liens and/or require additional margin and/or clearing fund deposits to cure the deficiency. A condition to the making of any loan under the New Facility is that, after giving effect to the loan, the sum of 100% of the dollar-denominated loans and 105% of the euro-denominated loans under the New Facility may not exceed the “borrowing base.” The borrowing base is determined by adding the value of all collateral pledged in connection with all loans under the New Facility, after applying “haircuts” to U.S. and Canadian Government securities based on their remaining maturity. If the borrowing base is less than the sum of 100% of the dollar-denominated loans and 105% of the euro-denominated loans under the New Facility, OCC must prepay loans or pledge additional collateral to cure the deficiency. There are additional customary conditions to the making of any loan under the New Facility, including that OCC is not in default. Importantly, however, the absence of a material adverse change affecting OCC is not a condition to the making of a loan. Loans may be prepaid at any time without penalty.
Events of default by OCC under the New Facility include, but are not limited to, non-payment of principal, interest, fees or other amounts when due; non-compliance with a daily borrowing base when loans are outstanding; material inaccuracy of representations and warranties; bankruptcy events; fundamental changes; and failure to maintain a first priority perfected security interest in collateral. In the event of a default, the interest rate applicable to outstanding loans would increase by 2.00%. The New Facility also includes customary defaulting lender provisions, including provisions that restrict the defaulting lender's voting rights, permit set-offs of payments against the defaulting lender and suspend the defaulting lender's right to receive commitment fees.
The New Facility involves a variety of customary fees payable by OCC, including: (1) A one-time arrangement fee payable to JPMorgan Securities and MLPF&S; (2) a one-time administrative and collateral agent fee payable to JPMorgan if the New Facility closes; (3) a one-time euro administrative fee payable to JPMorgan if the New Facility closes; (4) upfront commitment fees payable to the lenders based on the amount of their commitments; and (5) an ongoing quarterly commitment fee based on the unused amount of the New Facility.
Overall, the New Facility reduces the risks to OCC, its clearing members and the options market in general because it will allow OCC to obtain short-term funds to address liquidity demands arising out of the default or suspension of a clearing member of OCC, in anticipation of a potential default of clearing members or the insolvency of a bank or another securities or commodities clearing organization. The existence of the New Facility could enable OCC to minimize losses in the event such a default, suspension or insolvency, by allowing it to obtain funds on extremely short notice to
Two new features of the New Facility have been added to enhance OCC liquidity and reduce risk. The inclusion of Canadian Government securities as eligible collateral will increase the amount of OCC collateral that can be pledged to support borrowings under the New Facility, resulting in increased availability of loans. The clarification that OCC may borrow under the New Facility in anticipation of a potential default by of a clearing member is subject to the condition that such provision will not become effective until an appropriate rule change is filed with and approved by the Commission.
While the New Facility will, in general, reduce the risks associated with OCC's clearing function, like any lending arrangement the New Facility involves risks. One of the primary risks to OCC and its clearing function associated with the New Facility is the risk that a lender fails to fund when OCC requests a loan, because of the lender's insolvency or otherwise. This risk is mitigated through the use of a syndicated facility, which does not depend on the creditworthiness of a small number of lenders. In addition, the New Facility has lender default provisions designed to discourage lenders from failing to fund loans. Moreover, OCC has the ability under the New Facility to replace a defaulting lender. Finally, in the event a particular lender fails to fund its portion of the requested loan, the New Facility includes provisions pursuant to which OCC may request “covering” loans from non-defaulting lenders to make up the shortfall, or OCC may simply make a second borrowing request for the shortfall amount that lenders are committed to make, subject to OCC's satisfying the borrowing conditions for the second loan, although in either case the total amount available for borrowing under the New Facility would be reduced by the unfunded commitment of the defaulting lender. The failure by one or more lenders to fund the first loan does not relieve the lenders of their commitment to fund the second loan.
A second risk associated with the New Facility is the risk that OCC is unable to repay a loan within 30 days, which would allow the lenders to seize the pledged collateral and liquidate it, potentially at depressed prices that would result in losses to OCC. OCC believes that this risk is at a manageable level, because 30 days should be an adequate period of time to allow OCC to generate funds to repay the loans under the New Facility, such as by liquidating clearing fund assets other than those pledged to secure the loans. As provided in Section 5(e) of Article VIII of its By-Laws, if the loans have not been repaid within 30 days, the amount of clearing fund assets used to secure the loans will be considered to be an actual loss to the clearing fund, which will be allocated in accordance with Section 5 of Article VIII, and the proceeds of such allocation can be used to repay the loans.
The New Facility will further the relevant objectives from Section 805(b) of the Payment, Clearing and Settlement Supervision Act of 2010 (“Clearing Supervision Act”)
Pursuant to Section 806(e)(1)(I) of Title VIII of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, OCC requests that the Commission notify OCC that it has no objection to the Change no later than October 3, 2013, which is one week prior to the October 10, 2013 effective date of the New Facility. OCC requests Commission action one week in advance of the effective date to ensure that there is no period of time that OCC operates without a credit facility, given the importance of the borrowing capacity in connection with OCC's risk management.
Written comments were not and are not intended to be solicited with respect to the proposed Change and none have been received.
The proposed change may be implemented if the Commission does not object to the proposed change within 60 days of the later of (i) the date that the proposed change was filed with the Commission or (ii) the date that any additional information requested by the Commission is received. The clearing agency shall not implement the proposed change if the Commission has any objection to the proposed change.
The Commission may extend the period for review by an additional 60 days if the proposed change raises novel or complex issues, subject to the Commission providing the clearing agency with prompt written notice of the extension. A proposed change may be implemented in less than 60 days from the date the advance notice is filed, or the date further information requested by the Commission is received, if the Commission notifies the clearing agency in writing that it does not object to the proposed change and authorizes the clearing agency to implement the proposed change on an earlier date, subject to any conditions imposed by the Commission.
The clearing agency shall post notice on its Web site of proposed changes that are implemented.
The proposal shall not take effect until all regulatory actions required with respect to the proposal are completed.
Interested persons are invited to submit written data, views and arguments concerning the foregoing. 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–OCC–2013–806 and should be submitted on or before November 12, 2013.
Section 806(e)(1)(G) of the Clearing Supervision Act provides that a designated financial market utility may implement a change if it has not received an objection from the Commission within 60 days of the later of (i) the date that the Commission receives notice of the proposed change or (ii) the date the Commission receives any further information it requests for consideration of the notice. A designated financial market utility may implement a proposed change in less than 60 days from the date of receipt of the notice of the change by the Commission, or the date the Commission receives any further information it requested, if the Commission notifies the designated financial market utility in writing that it does not object to the proposed change and authorizes the designated financial market utility to implement the proposed change on an earlier date, subject to any conditions imposed by the Commission.
In its filing with the Commission, OCC requested that the Commission notify OCC that it has no objection to the change no later than October 3, 2013, which is one week before the October 10, 2013 effective date of the New Facility. OCC requested Commission action by this date to ensure that there is no period of time that OCC operates without a credit facility, given the importance of the borrowing capacity in connection with OCC's risk-management framework.
The Commission does not object to the proposed change. Ensuring that OCC has uninterrupted access to a credit facility will promote the safety and soundness of the broader financial system by providing OCC with an additional source of liquidity to meet its clearance and settlement obligations in the event of the failure of a clearing member, bank, or clearing organization doing business with OCC. Having access to a credit facility will help OCC minimize losses in the event of such a failure by allowing it to access funds on extremely short notice, and without having to liquidate assets at a time when market prices could be falling precipitously.
Pursuant to Section 806(e)(1)(I) of the Clearing Supervision Act, the Commission does not object to the proposed change, and authorizes OCC to implement the change (SR–OCC–2013–806) as of the date of this Order.
By the Commission.
On June 28, 2013, Financial Industry Regulatory Authority, Inc. (“FINRA”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
On December 14, 2012, the Commission approved new rules established by OCC to clear and guarantee OTC options on the S&P 500 index.
FINRA Rule 2360 covers, among other things, the definitions, position limits, exercise limits, reporting, suitability, and disclosure requirements related to options and options trading.
Specifically, FINRA proposes to amend Rule 2360 to define an “OCC Cleared OTC Option” as “any put, call, straddle or other option or privilege that meets the definition of an `option' under Rule 2360(a)(21) and is cleared by The [OCC], is entered into other than on or through the facilities of a national securities exchange, and is entered into exclusively by persons who are `eligible contract participants' as defined in the Exchange Act.”
In addition, FINRA proposes to amend Rule 2360 to provide that the Characteristics and Risks of Standardized Options, also known as the Options Disclosure Document (“ODD”), and the Special Statement for Uncovered Option Writers (“Special Written Statement”), as further described below, will not be required to be delivered to customers effecting transactions in OCC Cleared OTC Options, which is consistent with the treatment of conventional options under Rule 2360.
Finally, FINRA proposes to make technical, non-substantive changes to FINRA Rule 2360 in order to renumber certain provisions to account for the proposed new rule text and to reflect FINRA Manual style convention.
FINRA Rule 2360(b)(3)(A) imposes position limits on the number of options contracts in each class on the same side of the market (
In general, conventional equity options are subject to the same position limits as the standardized equity options overlying the same security.
Conventional index options are not subject to position limits while standardized index options are subject to the position limit as specified on the exchange on which the option trades.
Position limits for standardized equity options contracts of the put class and call class on the same side of the market overlying the same security are not aggregated with the conventional equity options contracts or FLEX Equity Options contracts overlying the same security on the same side of the market.
FINRA proposes that OCC Cleared OTC Options be subject to the position limits applicable to conventional options.
Accordingly, pursuant to the proposal, OCC Cleared OTC Options on an equity security will be subject to the position limit of the greater of (i) 25,000 contracts or (ii) any standardized equity options position limit for which the underlying security qualifies, and OCC Cleared OTC Options will not be aggregated with any standardized option counterpart.
FINRA Rule 2360(b)(5)(A)(i)(a) generally requires all members to report to FINRA with respect to each account that has established an aggregate position of 200 or more conventional option contracts (whether long or short) of the put class and the call class on the same side of the market covering the same underlying security or index.
FINRA Rule 2360(b)(11)(A)(1) requires members to deliver the ODD to customers at or prior to the time the customer's account is approved for trading options issued by the OCC, and thereafter to deliver to customers applicable amendments to the ODD.
Pursuant to the proposal, and consistent with the treatment of transactions in conventional options, FINRA members will not be required to deliver the ODD or Special Written Statement to customers that engage in transactions in OCC Cleared OTC Options.
FINRA Rules 4210(f)(2) and 4210(g) set forth the strategy-based margin and portfolio margin requirements for transactions in options.
FINRA proposes to amend certain existing definitions under FINRA Rule 4210 in order to provide for the same margin treatment for OCC Cleared OTC Options as other cleared and guaranteed options. Specifically, FINRA proposes to amend the definition of “listed” in Rule 4210(f)(2)(A)(xxiv) to include OCC Cleared OTC Options and to amend the definition of “OTC” in Rule 4210(f)(2)(A)(xxvii) to specifically exclude OCC Cleared OTC Options.
As previously noted, the Commission received one comment letter on the proposal.
After careful review of the proposed rule change and the comment letter received, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder that are applicable to a national securities association.
The Commission finds the proposed treatment of OCC Cleared OTC Options under FINRA Rule 2360 is consistent with the Act. FINRA represents that, other than with respect to the requirements relating to position limits, reporting, and the delivery of disclosure documents, OCC Cleared OTC Options will be subject to the same options sale practice and other requirements (such as account opening procedures and standards for supervision and suitability) as apply to all categories of options.
As previously stated by the Commission, position limits are intended to prevent the establishment of options positions that can be used or might create incentives to manipulate or disrupt the underlying market so as to benefit the options position, are designed to minimize the potential for mini-manipulation and for corners or squeezes of the underlying market, and serve to reduce the possibility for disruption of the options market itself, especially in illiquid options classes.
With respect to the delivery of disclosure documents, the Commission finds that it is consistent with the Act to treat transactions in OCC Cleared OTC Options consistent with conventional options and to not require delivery of the ODD or Special Written Statement to customers transacting in OCC Cleared OTC Options. As noted by FINRA, OTC options are not addressed in the ODD. Furthermore, the counterparties to transactions in OCC Cleared OTC Options must be “eligible contract participants” as defined in the Act and, therefore, are more sophisticated investors likely to be aware of the risks of options trading.
Finally, the Commission finds the proposed margin treatment of OCC Cleared OTC Options under FINRA Rule 4120 is consistent with the Act. As noted by FINRA, the margin requirement for options listed on an exchange (and cleared and guaranteed by the OCC) generally is lower than the margin requirement for OTC options (not cleared or guaranteed by the OCC). As noted by FINRA, the reasons underlying the more favorable margin treatment for listed (and OCC cleared and guaranteed) options apply with equal force to OCC Cleared OTC Options because the clearing and guaranteeing functions performed by the OCC reduce the counterparty credit risk of these OTC options, likening them to the same level of risk as listed options.
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”)
NASDAQ is proposing to adopt new regulatory fees payable by certain listed companies and applicants.
The text of the proposed rule change is available on the Exchange's Web site at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for 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.
NASDAQ proposes to adopt new regulatory fees applicable to certain listed companies and applicants. Specifically, NASDAQ proposes to require that an acquisition company that completes a business combination pay a $15,000 substitution listing fee in connection with the acquisition transaction. In addition, NASDAQ proposes to require that an applicant that does not list within 12 months of submitting its application pay a $5,000 additional application fee each subsequent 12 month period that the application remains pending. NASDAQ also proposes to impose a $5,000 application fee on companies that transfer from the NASDAQ Global or Global Select Market to the NASDAQ Capital Market. Finally, NASDAQ proposes to impose a $5,000 review fee on companies that submit a plan to regain compliance with certain listing requirements.
NASDAQ Rule IM–5101–2 provides rules for the listing of a company whose business plan is to complete one or more acquisitions. These companies are required to maintain most of the proceeds of their initial public offering in a deposit account until the company completes one or more acquisitions representing at least 80% of the value of the deposit account. In connection with each acquisition made during this period, the acquisition company must notify NASDAQ about the acquisition and NASDAQ staff must determine whether the combined company will meet the requirements for initial listing. In conducting this review, NASDAQ staff considers the quantitative requirements for listing and also reviews for any public interest concerns the new officers, directors and shareholders that will become associated with the listed company as a result of the transaction.
When NASDAQ initially adopted rules concerning the listing of acquisition companies it determined not to charge an entry fee when the company completes a business combination.
Accordingly, NASDAQ now proposes to include a business combination described in IM–5101–2 in the definition of “Substitution Listing Events,” and thus subject these transactions to the $15,000 fee imposed on a Subsitution [sic] Listing Event in Rules 5910(f) and 5920(e). NASDAQ believes that this is appropriate, as the business combination by an acquisition company is similar to other Substitution Listing Events for which a fee is charged, such as a technical change whereby the shareholders of the original company receive a share-for-share interest in a new company.
NASDAQ will implement this fee immediately. However, NASDAQ will not charge this fee in connection with its review of any transaction that was publicly announced in a press release or Form 8–K prior to October 15, 2013.
NASDAQ Rules 5910(a) and 5920(a) impose application fees on companies listing on NASDAQ. These fees are designed to recoup a portion of the costs associated with NASDAQ's review of the company.
NASDAQ has observed that when a company lists a substantial period of time after it first submitted its applications, NASDAQ must complete additional reviews of the application prior to the listing. These additional reviews are substantially equivalent to the review for a newly applying company and include, for example, additional reviews of individuals associated with the company, staff monitoring of disclosures and public filings by the applicant while its application is pending, and often extensive discussions with the applicant. To offset the costs associated with the ongoing monitoring and additional reviews for companies whose application remains open for an extended period, NASDAQ proposes to
Like the current application fee, the proposed additional application fee would be credited towards the entry fee payable upon listing if the application remains open until such listing. Thus, for a company that ultimately lists on NASDAQ, there would be no change in the overall fee paid. If a company does not timely pay the additional application fee, its application will be closed and it will be required to submit a new application, and pay a new application fee, if it subsequently reapplies.
NASDAQ will implement this fee immediately, but will not charge any company until October 15, 2014. This will assure that any company with an application pending at the time of this filing will have at least one year to list before they are charged the fee.
NASDAQ does not impose an entry fee on a company that transfers from the NASDAQ Global Market to the NASDAQ Capital Market.
NASDAQ will implement this fee for transfer applications submitted after October 15, 2013. This period before implementation will allow companies with an application in progress to finalize and submit that application before the new fee is applicable.
NASDAQ will implement this fee for transfer applications submitted after October 15, 2013. This period before implementation will allow companies with an application in progress to finalize and submit that application before the new fee is applicable. [sic]
NASDAQ proposes to impose a $5,000 review fee on non-compliant companies that submit a plan to regain compliance with certain of the listing requirements. Rule 5810(c)(2) allows a listed company to submit a plan to regain compliance when it fails to meet certain listing requirements. NASDAQ dedicates considerable staff resources to reviewing these plans of compliance. At present, the cost of that time is allocated across all companies as part of the listing fee. In order to allocate this cost more equitably to the individual companies who directly benefit, NASDAQ proposes to adopt a $5,000 review fee for the review of certain compliance plans.
NASDAQ believes that the proposed compliance plan review fee is appropriate because companies often have the ability to foresee non-compliance with these listing requirements and take appropriate action before becoming non-compliant. In addition, companies have a period of time, generally either 45 or 60 days, before they must submit a plan to regain compliance
NASDAQ does not propose to impose the compliance plan review fee on plans to regain compliance with deficiencies from board of director and board committee requirements where the company is not eligible for a cure period, as described in Rule 5810(c)(2)(A)(iii) [sic]. NASDAQ's experience is that these types of deficiencies often arise unexpectedly from events outside the control of the company, such as the death or resignation of a director. Further, NASDAQ has observed that the plans to regain compliance with these deficiencies are typically straight forward and do not require significant staff analysis. For example, a typical plan might describe the hiring of a director search firm or providing the resume of a director candidate who is concluding his or her own due diligence on the company before agreeing to join the board. As such, NASDAQ does not believe it is necessary to impose a plan review fee in these situations.
NASDAQ will implement this fee for plans submitted in response to deficiency notifications sent after October 15, 2013.
NASDAQ believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,
NASDAQ believes that the proposed fees are reasonable because they will better reflect NASDAQ's costs in reviewing applications and compliance plans and help ensure adequate resources for NASDAQ's listing compliance program. In addition, NASDAQ believes that such fees are reasonable and that none of the proposed fees are unduly burdensome or would discourage any company from pursuing an application or submitting a plan of compliance, as applicable.
The proposed changes are equitable and not unfairly discriminatory because they would apply equally to all similarly situated companies. In addition, aligning NASDAQ's fees with the costs incurred for specific actions will help minimize the extent that companies that do not utilize the application process, or which are compliant with all listing standards, may subsidize the costs of review for other companies. NASDAQ believes that excluding companies that submit a plan for a board or committee deficiency
NASDAQ also believes that the proposed fees are consistent with the investor protection objectives of Section 6(b)(5) of the Act
NASDAQ does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. The market for listing services is extremely competitive and listed companies may freely choose alternative venues based on the aggregate fees assessed, and the value provided by each listing. This rule proposal does not burden competition with other listing venues, which are similarly free to align their fees on the costs incurred by the process they offer. For these reasons, NASDAQ does not believe that the proposed rule change will result in any burden on competition for listings.
No written comments were either solicited or received.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) 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.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1)
CHX proposes to amend Exchange Rules relating to the registration and qualification and continuing education of individuals associated with CHX Participant Firms, and the supervision of registered persons and firm activity. The text of this 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
The Exchange proposes to amend the rules in Article 6 regarding the qualification, registration, supervision and Continuing Education (“CE”) of CHX Participant Firms and their associated persons
Exchange Participants are considered “members” of the Exchange for purposes of the Exchange Act and are defined as Firms that hold a valid Trading Permit and any person associated with a Participant Firm who is registered with the Exchange under Articles 16 and 17 as a Market Maker Trader or Institutional Broker Representative, respectively.
Participants may also elect to register under a Participant subcategory such as the Institutional Broker category of Participants. “Institutional Broker” means a member of the Exchange who is registered as an Institutional Broker pursuant to the provisions of Article 17 and has satisfied all Exchange requirements to operate as an Institutional Broker on the Exchange.
The rule changes proposed herein will apply to all Participant Firms. Individual associated persons registered at Participant Firms, including Participant Firms registered as Institutional Brokers will be required to pass the appropriate examinations as defined in the proposed rules. The appropriate examinations for associated persons at all categories of Participant Firms will depend on the Firm's business, size, and other factors as described below. The only varying requirement regarding examinations between Participant Firms and Institutional Broker firms is that individuals registered as Institutional Broker Representatives at Institutional Broker firms are required to pass the Exchange's internal Institutional Broker Examination.
Exchange rules currently require that persons associated with CHX Participants meet the registration and qualification requirements in Article 6, Rules 2 and 3. According to Article 6, Rule 2, all Representatives of a Participant must be registered with the Exchange. A Representative is defined as a person, who is engaged or will be engaged in the securities business of a Participant.
Current Exchange rules recognize four qualification examinations for registration with the Exchange.
Current Exchange rules also require that members that are Joint Back Office
Through this filing, the Exchange proposes to require that all persons that function as Representatives of a Participant under Article 6, Rule 2(b) register, pass appropriate examinations and participate in CE requirements. In this regard, the Exchange proposes to make a number of amendments to its registration and qualification standards including (1) expanding its registration requirements to all Participant Firms rather than solely Firms for which CHX is the DEA, (2) recognizing the Proprietary Traders Qualification Examination (Series 56) as one of the applicable qualification examinations,
First, CHX proposes to amend Article 6, Rule 2 to require that all persons associated with a Participant who are engaged or will be engaged in the securities business of a Participant register as a [sic] Representative.
To strengthen the supervisory systems of Participant Firms and thereby enhance investor protection, the Exchange proposes to require each Participant Firm to have at least two officers or partners who are registered as Principals with respect to each aspect of the Participant's securities business.
Notably, the proposed rules allow the Exchange to waive the two-principal requirement and only require Participant Firms to have one Principal under certain enumerated circumstances. Such circumstances include when a Participant demonstrates conclusively, upon written application, that only one individual should be required to register. Also, a Participant that conducts a proprietary trading business only and has 25 or fewer Representatives shall only be required to have one officer or partner who is registered as a Principal. According to proposed Article 6 Rule 2(c)(vi), a Participant shall be considered to conduct only proprietary trading if the Participant has the following characteristics: (1) The Participant is not required by Section 15(b)(8) of the Exchange Act to become a FINRA member; (2) All funds used or proposed to be used by the Participant are the Participant's own capital, traded through the Participant's own accounts; (3) The Participant does not, and will not, have customers; and (4) All persons registered on behalf of the Participant acting or to be acting in the capacity of a trader must be owners of, employees of, or contractors to the Participant. According to proposed Article 6, Rule 3(a)(ii), a proprietary trader is a person who only enters or executes orders on behalf of the Participant and does not handle or execute transactions for customers. The Exchange notes that these provisions are similar to the registration requirements of other exchanges and believes that they are appropriate given the limited size and scope of activities of such firms.
The Exchange proposes that all CHX Participant Firms designate at least one individual as a FINOP who must maintain the appropriate registration status.
In accordance with other SROs, the Exchange proposes to require Participant Firms to designate a Chief Compliance Officer (“CCO”).
A Compliance Officer at such Participant Firm would qualify for the alternate exam if the firm, (1) engages solely in proprietary trading, (2) otherwise meets the registration requirements for Principals as defined in Article 6, Rule 2(c), and (3) meets the supervisory requirements in Rule 3(b). The Compliance Officer Exam is intended to ensure that the individuals who have compliance responsibilities for their respective firms or who supervise ten or more people engaged in compliance activities have the knowledge necessary to carry out their job responsibilities. Therefore, the Series 14 measures the knowledge and skills related to the position of a compliance official. Accordingly, compliance officials at Participant Firms that meet the above requirements would be permitted to take the compliance-focused Series 14 examination rather than the broader Series 24 examination. Notably, if the CCO passed the Series 24 examination, they [sic] would qualify as one of the two registered Principals as outlined in Article 6, Rule 2(v). A CCO that does not also pass the Series 24 would not qualify as a Principal for purposes of the two principal requirement in Article 6, Rule 2(c)(v). The Exchange believes that it is important that CCOs demonstrate heightened knowledge with respect to compliance responsibilities for their respective firms.
The Exchange proposes to enumerate in its rules the list of persons exempt from any registration requirements to include such persons not actively engaged in the securities business or, in some circumstances, individuals who are already registered at other exchanges.
The Exchange also proposes to clarify the circumstances under which a Participant is prohibited from seeking registration for an individual person. In addition to the existing limitations precluding a Participant from applying for registration for an associated person where there is no intent to employ the individual in the Participant's securities business, the amendments would preclude a Participant Firm from maintaining a registration with the Exchange of a person, (1) who is no longer active in the Participant's securities business; (2) who is no longer functioning in the registered capacity; or (3) where the sole purpose is to avoid an examination requirement. The Exchange believes that these provisions appropriately prohibit Participant Firms from “warehousing” registrations for persons who are not actively engaged in the securities business.
A Participant may, however, maintain or make application for registration of an individual who performs legal, compliance, internal audit, back-office operations, or similar responsibilities for the Participant. The rule will also allow application for registration for a person who performs administrative support functions for registered personnel, as well as a person engaged in the securities business of a foreign securities affiliate or subsidiary of the Participant. The Exchange believes that in allowing persons who perform legal, compliance, audit or similar functions to apply for registration, such persons will receive additional training and expertise to better perform their functions.
After an individual's registration lapses, the amended rules will require the individual to pass an appropriate qualification examination. A lapse in registration occurs when the registration has been revoked by the Exchange or when an individual's registration has been terminated for a period of two or more years. The Exchange believes that these provisions reasonably permit an individual to transfer his or her registrations when changing firms or looking for employment if the individual is also within the two-year time period. Such individual will still meet the requirement of active involvement in the securities industry.
The proposed amendments provide that the Exchange may, in exceptional cases and where good cause is shown, waive the applicable qualification examination and accept other standards as evidence of an applicant's qualification for registration. Advanced age or physical infirmity will not individually of themselves constitute sufficient grounds to waive a qualification examination. Experience in fields ancillary to the securities business may constitute sufficient grounds to waive a qualification examination.
Persons associated with a CHX Participant who meet the definition of a Representative must pass the Series 7 General Securities Representative Qualification Examination unless such individuals meet the definition of Proprietary Trader.
The Exchange also proposes to delete the references to the Series 7A examination in the new exam requirements of Rule 3. The Series 7A examination is obsolete with the retirement of the CHX trading “floor” and is therefore no longer appropriate for Participants.
As part of this proposal, the Exchange will require all supervisors at all Participant Firms to pass the Series 24 examination for General Securities Principals.
Proposed Article 6, Rule 3(e) provides that all Participants shall be in compliance with the examination qualification language by no later than four months after the Effective Date of these provisions for associated persons who only need to take one exam.
The Exchange further proposes to amend its existing supervision rule (Article 6, Rule 5) to include a basic declaration that CHX Participants are responsible for adherence with the federal securities laws and Exchange rules, and that they must reasonably supervise their operations and associated persons to prevent violations thereof. These obligations already exist under Section 15 of the Exchange Act and Article 8, Rule 1 of the CHX rules, but the Exchange believes that the inclusion of the proposed additions will provide direction to Participant Firms designing their supervisory systems and reinforce the importance of having adequate supervisory programs. Such reinforcement will be beneficial to Participants and the marketplace in general.
The Exchange believes that the imposition of the additional registration, examination, training and CE requirements implicit in Series 24 and 27 registrations will strengthen existing supervisory and compliance structures and help to assure that its Participants are conducting their businesses in compliance with all applicable rules and regulations.
The Exchange is also proposing to amend Article 6, Rule 11 (“Rule 11”) to specify the different CE requirements for registered persons based upon their registration with the Exchange. This change will authorize the Exchange to administer different CE programs to differently registered individuals while bringing clarity to Exchange Participants about what CE requirement they must fulfill. More specifically, the Exchange is proposing to: (1) enumerate the required Regulatory Element programs, (2) add language to Rule 11 that would outline which program Exchange registered persons engaging in proprietary trading must take, and (3) add language to Rule 11(b) specifying that registered persons with a Series 56 registration must complete the Firm Element of the CE requirement.
Currently, Exchange Rule 11 states that “[n]o member or member organization shall permit any registered person to continue to, and no registered person shall continue to, perform duties as a registered person, unless such person has complied with the continuing education requirements of Section (a) of this Rule.”
The Exchange is proposing to introduce a new CE Program for proprietary traders registered with the Exchange who have passed the Series 56 and who have no other registrations. As discussed above, proposed Article 6, Rule 3 outlines the registration and qualification requirements (including prerequisite examinations) for Participants conducting proprietary trading, market-making and/or effecting transactions on behalf of other broker dealers. According to proposed Article 6 Rule 3(a)(ii), if the activities of the registered person are confined to making trading decisions regarding, or otherwise engaging in, proprietary trading for the broker-dealer with which he or she is associated, however, he or she may register with the Exchange as a Proprietary Trader and shall pass the Series 56 Proprietary Trader exam before such registration may become effective. The Proprietary Trader Continuing Education Program (S501) is a computer-based education program developed by many of the SROs
The Proprietary Trader Continuing Education Program will logistically operate as the currently offered CE Programs do. Specifically, registered persons will be required, through CRD, to complete the Regulatory Element of the CE on the second anniversary of the base date and then every three years thereafter. While creating the S501, the Participating SROs
The Proprietary Trader Continuing Education Program (S501) is required for those registrants who registered as Proprietary Traders and do not maintain any other registration through CRD.
As part of the new Proprietary Trader CE, registered persons will also be required to complete the Firm Element outlined in Exchange Rule 9.3A(c). Though proprietary traders with a Series 56 registration do not interact with the public, the Exchange believes this requirement is appropriate as it ensures these registered persons continue to enhance their securities knowledge, skill and professionalism. As stated in Exchange Rule 11(b)(2)(ii), the program should be tailored to fit the business of the Participant. Thus, the Exchange believes it is appropriate that these individuals also complete the Firm Element.
The introduction of the Proprietary Trader Continuing Education Program allows the Exchange to tailor its CE requirements more closely to those registered individuals who are registered as Series 56. More specifically, the Exchange believes allowing individuals engaging in proprietary trading and registered under the Series 56 to complete a separate CE Program than those maintaining a Series 7 registration is appropriate as all individuals have the option of taking either test. In comparison to the Series 7, the Series 56 Examination is more closely tailored to the practice of proprietary trading while the Series 7 is more comprehensive. As such, the Exchange believes a Series 56 CE Program should be tailored as well. At the same time, if an individual would like to remain registered as a Series 7, the Exchange believes it is appropriate they [sic] continue to be required to complete the broader CE program. As stated above, though an individual maintaining a Series 7 registration may be engaging in the same capacity as one registered as a Proprietary Trader, because the Series 7 examination is a more comprehensive exam, the Exchange believes that such individual that continues to maintain a Series 7 registration should complete a CE that covers all aspects of his or her registration.
The Exchange proposes to amend Section J.5 of the Fee Schedule to include the registration fees for the Series 14 and Series 56 exams.
• $335 registration fee for the Series 14 Examination;
• $195 registration fee for the Series 56 Examination.
CHX also proposes to adopt a fee applicable to Proprietary Trader Regulatory Element. Currently, the applicable fee for the Regulatory Element (S101 and S201) is $100. CHX proposes to adopt a $60 fee for the S501. FINRA administers these programs on behalf of the exchanges and therefore the fees are payable directly to FINRA.
The Exchange has proposed the above rule changes for the purpose of requiring certain persons associated with CHX Participants to maintain appropriate licenses and registrations. These changes will help to assure competency of Representatives and provide for more effective supervision and oversight of the Participant's activities.
The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act
The Exchange believes that the proposed amendment requiring that all persons associated with a Participant and who are engaged or will be engaged in the securities business register as a Representative will continue to promote the development and maintenance of adequate training and supervisory programs by CHX Participants.
The Exchange also believes that adding the Proprietary Trader (Series 56) examination to its list of qualifying exams will allow individuals who solely conduct a business in proprietary trading to demonstrate their proficiency in that area. In offering an alternative to the Series 7 examination, CHX will permit proprietary traders who pass the Series 56 to trade on a proprietary basis. As stated above, Representatives will qualify for the Proprietary Trader category at CHX if the Representative is a person who does not handle or execute transactions for customers and only enters or executes orders on behalf of the Participant. Further, and as noted above, other SROs have similarly recognized the Proprietary Trader registration category and the Series 56 exam.
As the Exchange is continuing to strengthen the supervisory systems of Participant Firms and thereby contribute to greater investor protection through the proposed changes, the Exchange has proposed to require each Participant Firm to register as representatives with the Exchange at least two Principals in specified categories as described above. In addition to the requirement of two registered Principals, each Participant would also be required to register an additional associated person as a FINOP. Further, the Exchange proposes to require Participant Firms to designate a CCO.
In addition, the Exchange believes that the proposed amendments are consistent with Section 6(c) of the Exchange Act,
The Exchange also believes that the proposed changes are not unfairly discriminatory as CHX is not only conforming to the rules set forth by other SROs, but the proposed changes will be applied to all associated persons of all CHX Participants.
The proposed rule also introduces a new CE program for the Series 56 registered persons as described above. We believe the content of the 501 education is tailored to the job the proprietary trader performs. The Exchange believes the proposed changes are reasonable and set forth the appropriate CE requirements for an individual Participant or individual associated person who is required to
The Exchange believes that the proposed registration fees for the CE and Series 14 and Series 56 exams are consistent with Section 6(b) of the Act
Finally, the Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues. In such an environment, the Exchange must continually review, and consider adjusting, its rules to remain competitive with other exchanges. The Exchange notes that the rule change is reasonable in comparison to similar rule changes by certain other SROs. For the reasons described above, the Exchange believes that the proposed rule change reflects this competitive environment.
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. The rule change is designed to amend its current registration and qualification rules to require that persons associated with CHX Participants maintain appropriate licenses and registrations. These rule changes will help to assure competency and provide for more effective supervision and oversight of a CHX Participant's activities and will not impose any burden on competition.
The Exchange also does not believe the administrative changes being made nor the introduction of the Proprietary Trader Continuing Education Program (S501) will affect intermarket competition as the Exchange believes all Exchanges offering the same CE requirements will file similar rules addressing those CE Programs. In addition, the Exchange does not believe the proposed changes will affect intramarket competition because all similarly situated registered persons,
The Exchange believes that the fee changes proposed herein will not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. Specifically, the Exchange believes that the proposed change will result in the same Series 14 and Series 56 registration fees being charged to all FINRA and Non-FINRA firms.
In addition, the Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues. In such an environment, the Exchange must continually review, and consider adjusting, its rules to remain competitive with other exchanges. As noted above, many SROs have adopted similar rules relating to the registrations and qualifications of their members.
No written comments were solicited or received with respect to the proposed rule change.
Because the foregoing proposed rule does not affect a change that (A) significantly affects the protection of investors or the public interest; (B) impose any significant burden on competition; and (C) by its terms, becomes operative for 30 days after the date of the filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest; provided that the self-regulatory organization has given the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission, the proposed rule change will become effective pursuant to Section 19(b)(3)(A) of the Act
The Exchange has given the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange respectfully requests that the Commission waive the 30-day operative delay period after which a proposed rule change under Rule 19b–4(f)(6) becomes operative. The Commission believes that the proposed rule change described herein will strengthen existing supervisory and compliance structures and align CHX's registration, qualification, and CE rules with those of other SROs. Waiving the 30-day operative delay will enable CHX to implement the changes without delay. Therefore, the Commission designates the proposal operative upon filing.
At any time within 60 days of the filing of this proposed rule change, the Commission summarily may
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 submissions should refer to File Number SR–CHX–2013–14. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”)
The MSRB is filing with the Commission a proposed rule change consisting of amendments to MSRB Rule G–11, on primary offering practices (the “proposed rule change”). The MSRB requests an effective date for the proposed rule change of 60 days following the date of SEC approval.
The text of the proposed rule change is available on the MSRB's Web site at
In its filing with the Commission, the MSRB 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 MSRB has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements.
The proposed rule change would amend MSRB Rule G–11 to prohibit, with carefully defined exceptions, brokers, dealers and municipal securities dealers (“dealers”) from providing consents to changes in a bond authorizing document, such as trust indentures and bond resolutions (“authorizing document” or “bond authorizing document”). The proposed rule change would enhance protections for existing owners of bonds (“owners” or “bond owners”) from changes to authorizing documents consented to by a dealer in lieu of bond owners by prescriptively prohibiting such consents in certain circumstances.
Amendments to authorizing documents are often requested by municipal entity issuers (“issuers”) or bond owners to modernize outdated provisions or to address operational or other concerns that have arisen after the initial issuance of bonds. Such amendments are typically achieved by the vote of owners of a specified percentage of the aggregate principal amount of bonds, as determined by the authorizing document. The principal amount necessary usually will vary, depending upon the type of amendments sought.
The process of obtaining consents from bond owners and related costs can be significant. Since many municipal securities are issued in book-entry form and registered as a single “global” certificate in the name of a depository, the identity of beneficial owners of the bonds is frequently unknown to issuers and trustees. Identifying such owners and obtaining consents requires an extensive process of inquiry through layers of nominee ownership and often
To address some of these burdens, issuers frequently have requested underwriters, as temporary owners of bonds during the initial distribution period and representing the aggregate principal amount of bonds underwritten, to provide consents to changes to authorizing documents. This alternative allows issuers to avoid the potential cost and delay of obtaining consents from beneficial owners by direct solicitation.
Although this lessens the burdens on issuers, the MSRB is concerned about the practice of having a dealer, acting as an underwriter or in some cases a remarketing agent, consent to changes in authorizing documents that adversely affect the interests of existing bond owners. The MSRB believes that while existing bond owners may be considered as having agreed to provisions relating to amendments to the authorizing documents at the time of purchase, such owners are not likely to have contemplated that a dealer, acting as an underwriter or remarketing agent with no prior or future long-term economic interest in the bonds could provide such consent unless such ability had been specifically authorized in the authorizing documents and disclosed to bond owners.
The MSRB believes that the proposed rule change will protect investors and balance the concerns of issuers about the cost and efficiency of obtaining consents to their authorizing documents. The proposed rule change does not grant an affirmative right to dealers to provide consents, and does not alter the dealer's obligations applicable under other MSRB rules, including its fair dealing obligations under Rule G–17. Rather, the proposed rule change will limit the circumstances under which a dealer may provide consents at the request of an issuer to amendments to bond authorizing documents within the context of the dealer's fair dealing obligations.
The MSRB received 10 comment letters on the Draft G–17 Notice, discussed in more detail in Part 5 below. Commenters said, among other things, that restricting the use of underwriters to provide consents could result in potential cost and inefficiency to issuers when seeking to modernize outdated provisions in their authorizing documents. Commenters also said that identifying a “reduction in security” could be difficult and could result in varying interpretations, depending on the underwriter or the issuer, and also could lead to unintended consequences by prohibiting amendments that, while technically could be considered a reduction in security, were nevertheless seen by bond owners as being in their long-term best interest.
The MSRB acknowledged the issues raised by commenters in response to the Draft G–17 Notice but remained concerned about protecting the rights of existing bond owners that could be materially affected by amendments consented to by a party that had no prior or future long-term economic interest in the bonds. The MSRB also recognized the need for greater clarity in identifying the particular types of consents and circumstances under which dealers may not provide such consents. Moreover, because the formulation of Draft Rule G–17, as well as some comments suggested that the provisions of Draft G–17 Notice could be read to waive a dealer's fair dealing obligations under certain circumstances, the MSRB ultimately determined that such issues would be more effectively addressed as an amendment to MSRB Rule G–11. By including the proposed rule change as an amendment to Rule G–11, the MSRB intends to clarify that the proposed rule does not eliminate the obligation of a dealer under Rule G–17, when considering requests from an issuer to consent to changes to an authorizing document, and a dealer, in such circumstances, would also be required to consider whether such action is consistent with its duties of fair dealing.
The MSRB subsequently published two additional requests for comment proposing amendments to MSRB Rule G–11 (“G–11 Amendments”). The G–11 Amendments would limit the ability of dealers to provide consents to changes in authorizing documents except in specified circumstances. The first request for comment
The G–11 Amendments would prohibit a dealer from providing consent to any amendment to authorizing documents for municipal securities, either as an underwriter, a remarketing agent, an agent for owners, or in lieu of owners, except that this particular prohibition would not apply in the limited circumstances set forth in proposed section (l) of Rule G–11.
Proposed subparagraph (l)(i)(A) would except from the prohibition a dealer, acting as an underwriter, that provides bond owner consents to changes in authorizing documents if such documents expressly allowed an underwriter to provide such consents and the offering documents for the issuer's existing securities expressly disclosed that consents could be provided by underwriters of other
Proposed subparagraph (l)(i)(B) would except from the prohibition a dealer that owns the relevant securities other than in the capacity of an underwriter or a remarketing agent. This provision acknowledges the rights of dealers as owners of securities and avoids any unintended derogation of a dealer's rights as owner. Whether a dealer owns the securities for the purposes of the proposed rule change will depend on whether it purchased such securities without a view to distribution.
Proposed subparagraph (l)(i)(C) would except a dealer acting as a remarketing agent to whom the relevant securities had been tendered as a result of a mandatory tender, provided that all securities affected by the amendment (other than securities retained by an owner in lieu of a tender and for which such bond owner had delivered consent) had been tendered. If a bond owner elected to exercise its right to “hold” bonds subject to a mandatory tender in lieu of tendering, the remarketing agent would be prohibited from providing consents to any amendment to an authorizing document unless it also received the specific written consent of such bond owner to such change.
Proposed subparagraph (l)(i)(D) would except an underwriter that provides an “omnibus” consent to changes to authorizing documents solely as agent for and on behalf of bond owners that delivered separate written consents to such amendments. An underwriter providing an “omnibus” consent under this subparagraph would not be viewed as substituting its judgment for that of bond owners, but rather as an agent facilitating the collection and delivery of consents. This exception would benefit the issuer and the existing bond owners in that the underwriter, in tabulating consents to support its “omnibus” consent, would be required to authenticate ownership and requisite corporate authority of the purchaser of bonds to provide a consent, thereby reducing the burden on the issuer and its trustee of such duty.
Proposed subparagraph (l)(i)(E) would except an underwriter that provides consent on behalf of prospective purchasers to amendments to authorizing documents if the amendments would not become effective until all existing bond owners (other than the prospective purchasers for whom the underwriter had provided consent) had also consented.
Proposed paragraph (l)(ii) would define certain terms for purposes of proposed section (l), specifically the terms “authorizing document,” “bond owner,” and “bond owner consent.”
The G–11 Amendments would not affect other methods used by issuers to obtain consents from owners of newly issued bonds, such as consents received from bond owners upon initial purchase of the bonds. However, the G–11 Amendments would prohibit the dealer from providing any consent for or in lieu of bond owners except as provided by the proposed rule change.
Given the limited circumstances in the proposed rule change in which a dealer may provide consent to changes to authorizing documents, the MSRB does not consider it necessary at this time to provide guidance describing the application of Rule G–17 to particular instances. It may, upon evidence of potential violations of Rule G–17 in the context of the proposed rule change, consider more explicit guidance concerning the application of Rule G–17 to the proposed rule change.
The MSRB believes The MSRB believes [sic] that the proposed rule change is consistent with Section 15B(b)(2)(C) of the Act,
The MSRB believes that the proposed rule change is consistent with the Act. Protecting investors is a key component of the Act and its protections apply equally to existing bond owners and new purchasers of municipal securities. The proposed rule change will protect investors by prohibiting consents from a dealer that does not share a bond owner's prior or long-term economic interest in the bonds, except under carefully prescribed circumstances. As described above, the proposed rule change will protect the expectation of investors that amendments would be affected in compliance with the terms of the authorizing documents or, in certain instances, with the specific consent by owners having comparable long-term economic interests in the bonds.
The MSRB believes that the protections afforded investors by the proposed rule change will also aid in perfecting the mechanism of an open market by improving investor confidence in the process of amending authorizing documents and making such process more transparent.
The MSRB 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.
In the first request for comment on the G–11 Amendments, the MSRB solicited comments on, among other topics, the potential benefits and burdens of and alternatives to the proposed rule change. On these points, the MSRB asked:
• Would the Draft Rule G–11 Amendment help to protect investors, and are there other benefits that would be realized from adopting the Draft Rule G–11 Amendment?
• Would the Draft Rule G–11 Amendment have any negative effects on issuers, investors or other market participants?
• Are issuers able to obtain consents from beneficial holders of bonds effectively and efficiently through existing mechanisms?
• What would be the burdens on issuers or other market participants of adopting a rule that limits obtaining bond owner consents in the manner contemplated by the Draft Rule G–11 Amendment?
• Are there alternative methods the MSRB should consider to providing the protections sought under the Draft Rule G–11 Amendment that would be more effective and/or less burdensome, resulting in an appropriate balance between the need for a cost effective and efficient manner of obtaining consents and the duty of dealers under Rule G–17 to deal fairly with all persons?
In proposing the G–11 Amendments and the resulting proposed rule change, the MSRB recognized a potential burden on issuers if they were limited in their ability to request consents from underwriters and remarketing agents to changes they believed were necessary to modernize their authorizing documents. The MSRB recognized that issuers may incur additional costs when preparing authorization and disclosure provisions for the authorizing and offering documents, or if required to increase efforts to remarket bonds with amended features following a mandatory tender of bonds. Other costs may be associated with the provisions of the proposed rule change affecting an issuer's options when accumulating consents over time, requiring it or its trustee to maintain records of outstanding bond owners and related consents. However, since maintaining these records is currently required under an authorizing document, costs associated with this alternative, if chosen by an issuer, should not impose an additional burden.
The proposed rule change also may impose burdens on dealers by: (i) Requiring a remarketing agent to obtain written consents from bond owners that elect to “hold” in lieu of tendering their bonds in a mandatory tender and (ii) requiring an underwriter to obtain consents from new purchasers at the time of purchase. In both cases, the proposed rule change may require the remarketing agent or underwriter, as the case may be, to obtain consents from appropriately authorized representatives of the new purchasers which may require identifying persons other than those placing the purchase order with the underwriter or remarketing agent.
The MSRB 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. The MSRB believes that the proposed rule change protects existing bond owners while addressing the concerns raised by commenters by providing a range of potential options to allow issuers to obtain bond owner consents from dealers. The proposed rule change and any resulting burden, are appropriate in furtherance of the purposes of the Act.
As another alternative, the MSRB could retain the prohibition in the proposed rule change and reduce or eliminate entirely the exceptions. The MSRB does not consider this approach to be in the best interest of investors or issuers, since issuers will be precluded from adopting amendments necessary to modernize their authorizing documents except by direct solicitation of bond owners. Also, issuers whose authorizing documents already included provisions allowing underwriters to consent to amendments will not be able to rely on those provisions. Investors might also be precluded from realizing the benefits of modernized documents. The MSRB believes that the exceptions noted in the proposed rule change will provide dealers a range of potential options to provide the necessary consents while recognizing the concerns of both issuers and existing bond owners.
As noted above, the proposed rule change was informed by comments received from market participants to the Draft G–17 Notice and the G–11 Amendments. The MSRB received 10 comment letters to the Draft G–17 Notice,
It would not be a violation of Rule G–17 for an underwriter to consent to amendments to an authorizing document that would reduce the security for existing bondholders if the underwriter is giving consent as to newly issued bonds it is purchasing and the offering document for the new bonds (1) clearly describes the proposed amendments in the manner required by the authorizing document, and (2) conspicuously indicates that, by their purchase of the new bonds, the buyers are deemed to have given their consent to the amendments and to have directed and authorized the underwriter to execute, on their behalf, any written consent to the amendments that is required by the authorizing documents.
As noted above, the MSRB published two additional requests for comment on proposed amendments to MSRB Rule G–11 concerning a dealer's ability to provide consents to amendments to authorizing documents. The MSRB received 11 comment letters
The MSRB also recognizes that certain issuers' authorizing and offering documents expressly authorized and disclosed the ability of underwriters to provide bond owner consents, and that following the publication of the Draft G–17 Notice, some issuers amended their documents to provide such authorization and disclosure. As a result, the MSRB, in its second request for comment on the G–11 Amendments, added a subparagraph (now subparagraph (l)(i)(A)) to except consents provided by an underwriter where the authorizing documents and the offering documents include such authorization and disclosure. MEAG agreed with this approach in its comments.
Other comments received, while not in direct response to the questions posed, are included here.
Within 45 days of the date of publication of this notice in the
(A) By order approve or disapprove such 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.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1)
The Exchange proposes to amend NYSE Arca Equities Rules 7.31, 7.32, 7.37, and 7.38 in order to comprehensively update rules related to the Exchange's order types and modifiers. 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 NYSE Arca Equities Rules 7.31, 7.32, 7.37, and 7.38
The Exchange proposes to make specific rule changes as follows:
The Exchange proposes to amend Rule 7.31(a) to expressly provide that Market Orders will not trade through the NBBO and that Market Orders shall be rejected if there is no bid or offer. A Market Order is an order to buy or sell a stated amount of a security that is to be executed at the National Best Bid or Offer (“NBBO”). Therefore, Market Orders will not trade through the NBBO, and the Exchange believes expressly stating as such in its Rules will provide additional specificity to Users. Additionally, Market Orders will be rejected if there is no bid or offer because a Market Order cannot be executed pursuant to the Users expectations—at the NBBO. The Exchange believes it is appropriate to reject a Market Order when there is no bid or offer because it assures that an unexecutable order will not be entered into the Exchange's book.
The Exchange proposes to make the following changes with respect to the description of Time in Force Modifiers:
• The Exchange proposes to describe the functionality found in Rule 7.31(c) as “Modifiers,” and as such, revise the title of Rule 7.31(c) to read “Time in Force Modifiers.” Similarly, the Exchange proposes to revise the names and descriptions of the functionality described in Rule 7.31(c) to reflect the usage of the term “Modifiers” rather than “Orders.” The Exchange believes that these proposed rule changes more clearly describe the function of the time-in-force instructions,
• The Exchange proposes to amend Rule 7.31(c)(1) to clarify that the Day Modifier cannot be combined with any other Time in Force Modifier. As is the case today, an order type that is required to include a Day Modifier cannot also have a Good Till Cancelled (“GTC”), Good Till Date (“GTD”), Timed, Immediate-or-Cancel (“IOC”), or Fill-or-Kill (“FOK”) Time in Force Modifier.
• The Exchange proposes to move the description of the Timed Modifier from its current location in Rule 7.31(q) to become new Rule 7.31(c)(2)(C). The Timed Modifier is used in conjunction with the GTD Modifier in order to specify an exact time until which a limit order will remain in effect, after which such order or the portion thereof not executed is to be treated as cancelled. As such, the Exchange believes it is appropriate to relocate the Timed Modifier to Rule 7.31(c) as a Time in Force Modifier.
• The Exchange proposes to move the description of the IOC Modifier from its current location in Rule 7.31(e) to become new Rule 7.31(c)(3). The Exchange also proposes to expand the description of the IOC Modifier in Rule 7.31(c)(3) to provide that the IOC Modifier will override any posting or routing instructions of orders that include the IOC Modifier. This rule change makes clear to ETP Holders that Exchange systems give priority to the IOC Modifier and ignore any other posting and routing instructions submitted with the order. Additionally, the Exchange proposes to specify that orders designated with an IOC Modifier never route. Further, the Exchange proposes to delete the subparagraphs under old Rule 7.31(e) as redundant. The determination as to what away quotes will not be traded through is based on the order type and not the IOC designation. Therefore, the Exchange believes it is appropriate for Users to review the applicable order type descriptions to determine which away quotes will be respected.
• The Exchange proposes to move the description of the FOK Modifier from its current location in current Rule 7.31(ll) to become new Rule 7.31(c)(4). The Exchange believes that the FOK instructions on an order are a time-in-force condition, and therefore it is more intuitive to include this modifier with other time in force descriptions.
• Because the Exchange proposes to define the term “IOC,” the Exchange proposes to replace references to the term “immediate or cancel” with the term “IOC” in Rules 7.31 and 7.37.
The Exchange proposes to amend Rule 7.31(d) to specify that an Inside Limit Order may not be designated as a Discretionary Order and will not trade through either the NBBO or Protected Quotations.
An Inside Limit Order is a limit order routed to the market participant with the best displayed price, and any unfilled portion will not be routed to the next best price level until all quotes at the current best bid or offer are exhausted. Once each current best bid or offer is exhausted, Exchange systems reevaluate the next best displayed price and route to that single price point and continue such assessment at each new best displayed price level until the Inside Limit Order is filled or no longer marketable. An Inside Limit Order is marketable when priced to buy (sell) at or above (below) the NBBO for the security. Therefore, the Inside Limit Order's functionality relies on a single-price to determine when it is no longer marketable. A Discretionary Order, however, is an order with two prices: a specified, undisplayed price and a specified, displayed price. The Exchange believes that it could cause confusion if Discretionary Orders were combined with Inside Limit Orders because Users might not know whether it is the limit price or the discretionary price which determines when the Inside Limit Order is no longer marketable. Therefore, the Exchange believes it is appropriate to reject Discretionary Orders when combined with Inside Limit Orders to reduce confusion, thus prohibiting an order combination which could result in an execution at odds with the expectations of a User.
Additionally, the Exchange believes that it is appropriate to specify that Inside Limit Orders will not trade through either the NBBO or Protected Quotations. Inside Limit Orders are designed to execute against the best displayed price level, whether or not quotes at such level are automatic or manual. As such, Inside Limit Orders will respect the NBBO and Protected Quotations, routing to away markets as necessary.
The Exchange proposes to amend Rule 7.31(h)(2) to specify that Discretionary Orders designated IOC and sell short Discretionary Orders shall be rejected.
Similar to why a Discretionary Order and an Inside Limit Order cannot be combined, the Exchange believes it is appropriate to reject a Discretionary Order designated IOC in order to reduce confusion regarding whether the order's functionality is based on the limit price or the discretionary price. A limit order designated IOC will execute in whole or in part as soon as such order is received at prices better than its limit price; adding a discretionary price only serves to add confusion as to whether the IOC will execute at prices better than its limit price or at prices better than its discretionary price. As such, the Exchange believes it is appropriate to reject Discretionary Orders designated IOC, thus prohibiting an order combination which could result in an execution at odds with the expectations of a User.
Additionally, Exchange systems currently do not accept sell short
A previous rule change filed with the Commission inadvertently deleted portions of the definition of a Passive Discretionary Order.
The Exchange proposes to amend Rule 7.31(h)(2)(B) to insert language that was inadvertently deleted by a filing previously made with the Commission to provide that a Discretionary Order may be designated as a Discretion Limit Order.
The Exchange proposes to amend Rule 7.31(h)(3) to specify that Reserve Orders cannot be combined with an order type that could never be displayed on the Corporation and must be in round lots. A Reserve Order is a limit order with a portion of the size displayed and with a reserve portion of the size (“reserve size”) that is not displayed on the Corporation. Therefore, the description of a Reserve Order contemplates a displayed portion. If an order type is never displayed on the Corporation, then it will not have the displayed portion required by the Reserve Order description. As a result, such order types are incompatible with a Reserve Order, and their combination with a Reserve Order is rejected. Additionally, because of its original design, Exchange systems currently do not accept Reserve Orders not entered in round lots, and the Exchange believes that it will provide transparency in its rules to specify that Reserve Orders not entered in round lots would be rejected.
The Exchange proposes to amend Rule 7.31(h)(4) to specify that Passive Liquidity (“PL”) Orders must be designated as Inside Limit Orders. Exchange systems require that a PL Order must be designated as an Inside Limit Order or it will be rejected. A PL Order is entered by ETP Holders into Exchange systems by using two order tags, one for the order type and one for an execution instruction. The order type tag for PL Orders is the same as that for an Inside Limit Order. The execution instruction tag is one specifically for PL Orders. If the execution instruction tag specifically for PL Orders is not combined with an Inside Limit Order, then Exchange systems reject such an order. Thus, the combination is required to ensure proper entry of a PL Order, and the rule change is meant to add transparency to the order entry process. With the order entry for PL Orders designed in this manner, the combination of PL Orders with Inside Limit Orders permits PL Orders to respect not only protected quotations, but also manual quotations in its functionality.
Additionally, the Exchange proposes to amend Rule 7.31(h)(4) to specify that PL Orders designated IOC shall be rejected. The Exchange believes it is appropriate to reject a PL Order designated IOC because an IOC designation would be inconsistent with the nature of a PL Order. A PL Order is designed to permit passive interaction with incoming orders; however, an IOC designation is seeking immediately available liquidity and then cancelling. As a result, the combination is incompatible and the Exchange believes it is appropriate to reject a PL Order designated IOC.
The Exchange proposes to amend Rule 7.31(h)(5) to clarify that MPL Orders entered without a limit price shall be rejected. MPL Orders are limit orders and therefore must be entered with a limit price. If a User fails to include a limit price with its MPL Order, the MPL Order will be rejected.
Additionally, in order to use consistent language in its rules, the Exchange proposes to change language referring to a “No Midpoint Execution” designator in the MPL Order description to a “No Midpoint Execution” Modifier.
The Exchange proposes to delete Rules 7.31(i) and (j), as the Directed Order and Directed Fill are order types no longer available to Users on Exchange systems and thus should be removed from the rule. The Exchange also proposes to eliminate references in other rules to Directed Orders and Directed Fills.
The Exchange proposes to amend Rule 7.31(k)(4) to clarify that, in addition to being rejected when designated as an Intermarket Sweep Order, a Q Order will be rejected if it is marketable or is an odd lot. Both of these rejections reflect the fact that Q Orders are designed to be used by Market Makers to satisfy their obligation to maintain continuous, two-sided interest in securities in which they are registered to trade. As such, Q Orders are meant to act as a means to post quotes, and trades are to occur against them. Therefore, the Exchange believes it is appropriate to reject Q Orders that are marketable upon entry since such orders would be taking liquidity rather than providing liquidity. Additionally, a Market Maker's obligation to maintain continuous, two-sided interest requires that the interest “shall have a displayed size of at least one normal unit of trading (or a larger multiple thereof).”
For consistency, the Exchange proposes to describe the “Do Not Reduce” and “Do Not Increase” functionality as “Modifiers” rather than “orders.” The Exchange believes that the use of the term “Modifier” more accurately describes the functionality, since these modifiers can be added to any order type.
The Exchange proposes to delete Rules 7.31 (p) and (r), as the Fill-or-Return Order and Fill-or-Return Plus Order are order types not available to Users on Exchange systems and thus should be removed from the rule. The Exchange also proposes to eliminate references in other rules to the Fill-or-Return or Fill-or-Return Plus functionality.
The Exchange proposes to amend Rule 7.31(t) to specify that, in addition to being incompatible with a GTC designation, an Auction-Only order cannot be designated as a discretionary order. A Discretionary Order is an order with a specified, undisplayed price, in addition to a specified, displayed price. Thus, a Discretionary Order contains two different prices. The Exchange believes permitting a Discretionary Order to combine with an Auction-Only order may cause confusion regarding the price at which the order would participate in the auction process. Therefore, the Exchange believes it is appropriate to reject such a combination, thus prohibiting an order combination which could result in an execution at odds with the expectations of a User.
The Exchange also proposes to move the descriptions of a Market-on-Close Order (“MOC”) and a Limit-on-Close Order (“LOC”) from their current locations in Rules 7.31(dd) and (ee), respectively, to new subparagraphs (3) and (4), respectively, of Rule 7.31(t). The Exchange believes that because MOC and LOC Orders are a form of Auction-only Orders, it is more logical to include these order types with other Auction-only order types. The Exchange also proposes to amend the descriptions of MOC and LOC Orders to conform them to the descriptions of Limit-on-Open and Market-on-Open Orders.
The Exchange proposes to delete Rule 7.31(u), as Cleanup Orders are not available to Users on Exchange systems and thus should be removed from the rule.
The Exchange proposes to amend Rule 7.31(v) to specify that combining a NOW Order with another order type will override the posting or routing instructions of the order with which it is combined. This rule change makes clear to ETP Holders that Exchange systems give priority to the NOW Order and ignore any other posting and routing instructions submitted with the order.
In order to conform its rule set, the Exchange also proposes to amend the description of a NOW Order such that it is described as a “Limit Order” rather than a “Limited Price Order.”
The Exchange proposes to amend Rule 7.31(x) to specify that, in addition to being incompatible with a GTC designation, a PO Order cannot be designated as a Reserve Order. A Reserve Order is a limit order with a portion of the size displayed, and with a reserve portion of the size that is not displayed, on the Exchange. Therefore, the Reserve Order's functionality is dependent on being on the Exchange. A PO Order, however, is a market or limit order that is routed to the primary market and will never have a size displayed on the Exchange. As a result, the Exchange believes it is appropriate to specify that a PO Order may not be combined with a Reserve Order because the two orders are incompatible.
The Exchange proposes to delete Rule 7.31(z), as Midpoint Directed Fills are not available to Users on Exchange systems and thus should be removed from the rule.
The Exchange proposes to amend Rule 7.31(cc) to specify that Pegged Orders may be entered only during the Core Trading Session. Additionally, the Exchange is clarifying that Pegged Orders will be rejected where an NBBO does not exist at time of entry or where the Pegged Order is to sell short during a Short Sale Period.
The Exchange believes it is appropriate to reject a Pegged Order where an NBBO does not exist because Pegged Orders are limit orders to buy or sell at a displayed price set to track the current bid or ask of the NBBO. If no NBBO exists, then a Pegged Order cannot function properly. Further, because a Pegged Order is rejected where an NBBO does not exist, Exchange systems will reject a Pegged Order entered outside of the Core Trading Session. Additionally, Exchange systems reject a sell short Pegged Order during a Short Sale Period because of the complexity of offering such functionality, and the Exchange believes it will provide clarity to ETP Holders to specify that such orders are rejected.
The Exchange also proposes to add subparagraphs (1) and (2) to Rule 7.31(cc) to specifically describe the two variations of Pegged Orders available to Users: Market Pegged and Primary Pegged. A Market Pegged Order is a buy order that is pegged to the National Best Offer or a sell order that is pegged to the National Best Bid. Because a Market Pegged Order is tracking the contra-side NBB or NBO, an offset value is required to avoid locking the market. A Primary Pegged Order is a buy order that is pegged to the NBB or a sell order that is pegged to the NBO. An offset value is permitted, but not required, on a Primary Pegged Order. Additionally, the Exchange is proposing to amend Rule 7.31(cc) to clarify that the offset value for Pegged Orders may be specified up to two decimals. The Exchange notes that the Primary and Market Pegged Orders are not new or novel, and the proposed revisions to the Exchange rule are consistent with the operation of pegging functionality at other markets.
The Exchange proposes to delete Rule 7.31(gg), as the Don't Arb Me Modifier is not available to Users on Exchange systems and thus should be removed from the rule.
The Exchange proposes to amend Rule 7.31(hh) to clarify that the Proactive if Locked Modifier may be used in conjunction with order types other than Reserve Orders. Under current Rule 7.31(hh), the Proactive if Locked Modifier is described as a Proactive if Locked Reserve Order, and its description is tailored to the modifier's combination with a Reserve Order. The Exchange proposes to amend the description to make clear that the Proactive if Locked Modifier is not limited to use with only a Reserve Order, and may be combined with a limit order to cause the limit order to be routed to another market center in instances where the other market center has locked the order and the locking market has not resolved the locked market situation in a timely manner.
The Exchange proposes to amend Rule 7.31(jj) to clarify that an ISO is never routed to an away market and may trade through a Protected Quotation. Although the Exchange's reference to the requirements of Regulation NMS provides Users with sufficient information to understand the ISO functionality, the Exchange believes that the amended language will provide additional clarity to Users.
Additionally, the Exchange proposes to amend Rule 7.31(jj) to clarify that when designated ISO, an order will not be rejected or cancelled even though it would lock, cross, or be marketable against an away market. Several Exchange order types will be rejected or cancelled if they were to lock, cross, or be marketable against an away market; however, marking such orders as ISOs will cause the combination to be accepted by Exchange systems. The restriction against locking, crossing, or being marketable against away markets, and thus rejecting the order, generally relates to the fact that such orders would be violating the restrictions found in Regulation NMS as locking, crossing, or trading through Protected Quotations. Because the ISO designation signifies that the User is complying with SEC Rule 611 of Regulation NMS with respect to ISOs—routing ISOs to better-priced Protected Quotations for the full displayed size—the concerns are no longer applicable, and therefore, the Exchange will not cancel or reject such orders when designated ISO.
The Exchange proposes to amend Rule 7.31(kk) to update the description of PSOs. Currently, Rule 7.31(kk)(1) describes the process by which PSOs are routed to NYSE; however, such process is also applicable to PSOs routed to NYSE MKT. As such, the Exchange proposes to amend Rule 7.31(kk)(1) to include NYSE MKT.
The Exchange proposes to amend Rule 7.31(mm) to clarify that a PNPB Order is an PNP Order that is placed undisplayed on the NYSE Arca book at the price of the contra-quote of the PBBO if the order would lock or cross a protected quotation. The current rule text references the term “displayed,” however, that term is intended to modify the Protected Best Bid or Protected Best Offer. The Exchange proposes to amend the rule text to make clear that a PNPB order is undisplayed if it is priced at or through the PBBO. The proposed rule change does not change the functionality of the PNPB Order.
The Exchange proposes to further amend Rule 7.31(mm) to clarify that a PNPB Order combined with an Add Liquidity Only (“ALO”) Order will not be cancelled if it is marketable against the PBBO. Currently, Rule 7.31(nn)(1) states that an ALO Order will be rejected where, at time of entry, the ALO Order is marketable. This restriction is designed to prevent (1) the order from locking or crossing an away quote and (2) the order from taking liquidity rather than being a provider of liquidity. However, an ALO Order, when combined with a PNPB Order will not be rejected when it is marketable against the NBBO. An ALO Order that is combined with a PNPB Order may be marketable against the NBBO upon arrival. However, pursuant to the order instructions associated with a PNPB Order, if the PNPB ALO Order is marketable against the PBBO, it is placed undisplayed in the NYSE Arca book and therefore would not lock or cross an away quote. Additionally, because the order is undisplayed, it can rest in Exchange systems as a liquidity provider, despite being marketable against away quotes. A PNPB ALO Order would still be rejected if it would be marketable against liquidity resting in Exchange systems.
The Exchange proposes to amend Rule 7.31(nn) to clarify that an ALO Order must be designated as either a PNP or MPL Order. The Exchange notes that the reference to PNP Orders includes all types of PNP Orders, including PNPB Orders. An ALO Order is a limit order that is accepted and placed in the NYSE Arca book only where the order adds liquidity. ALO Orders do not route to away market centers. Such functionality is accomplished by designating the ALO Order as a PNP Order. As described in Rule 7.31(w), a PNP Order is a limit order to buy or sell that is to be executed in whole or part on the Corporation, without routing any portion of the order to another market center. An ALO Order can also be designated as an MPL Order, an order type combination whose functionality has previously been described by the Exchange.
The Exchange also proposes to amend Rule 7.31(nn)(3) to explicitly provide that an MPL–ALO Order may lock another MPL or MPL–ALO Order and not be rejected. Currently, Rule 7.31(nn)(3) states that “ALO Orders will ignore MPL Orders and proceed to be placed in the NYSE Arca Book . . . .” For clarity, the Exchange is amending this provision to state that an ALO Order, designated as MPL and therefore undisplayed, will be accepted even if it is at the same price level as a contra-side MPL or MPL–ALO Order.
The Exchange proposes to add Supplementary Material .01 to Rule 7.31 in order to provide guidance to Users as to the possible order type combinations available and how to interpret Rule 7.31 to aid in determining what order type combinations will be accepted. Specifically, Supplementary Material .01 will provide the general proposition that, unless the terms of a proposed combination are inconsistent, Users are generally able to combine order types and modifiers. Additionally, the explicit rules that the Exchange has developed to aid Users are meant to provide guidance, but not provide an exhaustive list, of the permissible and impermissible order type and modifier combinations.
Given the number of order types and modifiers, the number of potential order type and modifier combinations is too numerous to effectively describe every possible combination without producing an unwieldy rule. The revisions appearing in this proposed rule change are meant to provide additional clarity as to combinations NYSE Arca reasonably believes that Users, in practice, enter. In addition, Supplementary Material .01 is designed to provide Users with the general rule for deciding when order types and modifiers may be combined.
The Exchange proposes to add Supplementary Material .02 to Rule 7.31
The Exchange proposes to amend Rule 7.32 to specify that orders with a size greater than one million shares shall be rejected. Exchange systems currently do not accept orders with a size greater than one million shares, and the Exchange believes that it will provide transparency in its rules to specify that orders with a size greater than one million shares would be rejected.
The Exchange proposes to amend Rule 7.38(a)(2) to clarify that specific language in the descriptions of individual order types override the general rule that mixed lot orders may be any order type supported by the Exchange. Rule 7.38(a)(2) currently provides that mixed lot orders submitted by Users to the NYSE Arca Marketplace may be any order type supported by the NYSE Arca Marketplace. The Exchange believes explicitly stating that specific language in the individual order types is controlling will provide guidance to those Users who may be confused by the broad language in Rule 7.38(a)(2).
The Exchange proposes to make technical amendments to various provisions in Rules 7.31 and 7.37. Specifically, the Exchange proposes to conform its usage of abbreviations such that common abbreviations for order types and modifiers will be inserted throughout Rules 7.31 and 7.37 where appropriate.
The proposed rule change is consistent with Section 6(b)
The Exchange believes that the proposed rule change will foster cooperation and coordination with persons engaged in regulating transactions in securities because the specificity, transparency, and more intuitive descriptions and organization will assist regulators to understand how the affected order types and modifiers are being used by market participants. As such, the proposed rule change will help regulators in the identification of any potential misuse by market participants.
The Exchange believes that the proposed rule change will remove impediments to and perfect the mechanism of a free and open market and national market system because, by providing specificity and transparency, the proposed rule change will provide greater clarity with respect to the use and potential use of the functionality. With greater clarity regarding what a specific order type or modifier does and its proper use, greater competitive forces can be brought to bear on, and help to foster the proper functioning of, the market.
The Exchange believes that the proposed rule change will protect investors and the public interest. The increased transparency and specificity resulting from the proposed rule change will enable investors and the public to understand the tools available to the agents handling their orders as well as those available to professional market participants who may be competing with their orders.
Finally, the Exchange believes that the proposed rule change is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. By enhancing transparency, specificity, and clarity, the proposed rule change will reduce any potentially discriminatory or unfair use of Exchange functionality. By providing the functionality, making it available to the public, and providing clear explanations to help facilitate a complete understanding of the functionality, the proposed rule change will reduce any discriminatory or unfair use by a subset of the market.
The Exchange does not believe that the proposed rule change imposes any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. In fact, the Exchange believes that the proposed rule change will increase competition between market participants by providing greater transparency and specificity to market participants who may wish to take advantage of the functionality offered by the Exchange. The greater transparency and specificity will allow market participants to utilize the tools made available by the Exchange to accomplish their trading strategies and investment goals in an efficient manner. An increase in the knowledge of market participants regarding the functionality offered by the Exchange can only serve to improve the competition in the marketplace by creating a more transparent trading environment.
No written comments were solicited or received with respect to the proposed rule change.
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.
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 Exchange proposes to list and trade the shares of the following funds of the WisdomTree Trust (“Trust”) under NYSE Arca Equities Rule 8.600 (“Managed Fund Shares”): WisdomTree Bloomberg U.S. Dollar Bullish Fund (“DI Bull Fund”); the WisdomTree Bloomberg U.S. Dollar Bearish Fund (“DI Bear Fund,” and with the DI Bull Fund, “DI Funds”); and the WisdomTree Commodity Currency Bearish Fund (“CC Bear Fund,” and collectively with the DI Funds, “Funds”). The shares of the Funds are collectively referred to herein as the “Shares.” 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 list and trade the Shares of the Funds under NYSE Arca Equities Rule 8.600, which governs the listing and trading of Managed Fund Shares on the Exchange.
WisdomTree Asset Management, Inc. (“WisdomTree Asset Management”) will be the investment adviser (“Adviser”) to each of the Funds.
Commentary .06 to Rule 8.600 provides that, if the investment adviser to the investment company issuing Managed Fund Shares is affiliated with a broker-dealer, such investment adviser shall erect a “fire wall” between the investment adviser and the broker-dealer with respect to access to information concerning the composition and/or changes to such investment company portfolio.
The DI Bull Fund will be an actively managed fund that seeks to provide total returns, before expenses, that exceed the performance of the Bloomberg USD TR Index. The Bloomberg USD TR Index is based on the Bloomberg US Dollar Index (BDXY), which tracks changes in the value of the U.S. Dollar against a basket of developed and emerging market currencies which are deemed to have the highest liquidity in the currency markets and represent countries that make the largest contribution to trade flows with the United States.
The Index Sponsor selects for both Indexes the top ten currencies included in both the most recent BIS Survey and Federal Reserve Release, giving equal weighting to both liquidity and trade volume. The currencies selected are given weights in each Index based equally on relative trade volume and relative liquidity as compared with the other included currencies. The Indexes each exclude any currency that is tied directly to the U.S. Dollar (
As of December 31, 2012 (the date of the most recent rebalancing of the Indexes), the components of each index were the following: Euro (34.3%); Japanese Yen (16.2%); Canadian Dollar (12.0%); British Pound (9.9%); Mexican Peso (8.5%); Australian Dollar (5.5%); Swiss Franc (4.9%); Korean Won (3.6%); Chinese Yuan Renminbi (3.0%); and Singapore Dollar (2.2%).
To be considered for the Bloomberg US Dollar Index (and, accordingly, the Bloomberg USD TR Index and the Bloomberg Inverse USD TR Index), currencies must rank high in terms of their countries' or regions' contribution to overall trade in the U.S. or have high standing in terms of rank in foreign exchange trading volume, although they must have influence in both categories. The basket of currencies will be selected and weighted using the U.S. trade volume reported by the Federal Reserve
The Bloomberg USD TR Index's annual rebalance is done in December every year with a reference date of the third Friday of the month and a rebalance date after the close of the last U.S. trading date of the month.
The Bloomberg US Dollar Index value is published real time under the ticker BBDXY on Bloomberg. The Bloomberg USD TR Index (BBDXT) value is generated once a day.
The DI Bear Fund will be an actively managed fund that seeks to provide total returns, before expenses, that exceed the performance of the Bloomberg Inverse USD TR Index. The Bloomberg Inverse USD TR Index is based on the Bloomberg US Dollar Index (as described above), which tracks changes in the value of the U.S. Dollar against a basket of developed and emerging market currencies that have the highest liquidity in the currency markets and the biggest trade flows with the U.S. The Bloomberg Inverse USD TR Index additionally incorporates the impact of short-term interest rates in the global currencies. The Bloomberg Inverse USD TR Index is structured to potentially rise as global currencies appreciate relative to the U.S. Dollar.
The Bloomberg Inverse USD TR Index's annual rebalance is done in December every year with a reference date of the third Friday of the month and a rebalance date after the close of the last U.S. trading date of the month.
The Bloomberg Inverse USD TR Index (BBDXI) value is generated once a day.
The Indexes seek contrasting positions in the same currencies and the same weightings. The Bloomberg USD TR Index seeks to potentially benefit from a rise in the U.S. Dollar against a basket of currencies, while the Bloomberg Inverse USD TR Index seeks to potentially benefit from a fall in the U.S. Dollar against the same basket of currencies. The eligibility criteria for each of the Indexes and the method of weighting the Indexes are the same.
According to the Registration Statement, under normal circumstances,
The term “investment grade,” for purposes of money market securities only, is intended to mean securities rated A1 or A2 by one or more NRSROs. As used herein, the term “U.S.-issued money market securities” means money market securities issued or guaranteed by the U.S. government, repurchase agreements backed by the U.S. government securities, and U.S.-based money market mutual funds and deposits and other obligations of financial institutions organized or having their principal place of business in the U.S. “Non-U.S.-issued money market securities” means money market securities issued or guaranteed by a non-U.S. government, repurchase agreements backed by non-U.S. government securities, non-U.S.-based money market mutual funds, and deposits and other obligations of financial institutions organized or having their principal place of business outside the U.S.
Each of the exchange-listed currency options and exchange-listed futures contracts in which a Fund may invest will be listed on exchanges that are members of the Intermarket Surveillance Group (“ISG”) or on an exchange with which the Exchange has entered into a comprehensive surveillance sharing agreement.
The Adviser or Sub-Adviser will also attempt to mitigate each Fund's credit risk by transacting only with large, well-capitalized institutions using measures designed to determine the creditworthiness of the counterparty. The Adviser or Sub-Adviser will take various steps to limit counterparty credit risk which will be described in the Registration Statement. Each Fund will enter into forward contracts and swap agreements only with financial institutions that meet certain credit quality standards and monitoring policies. Each Fund may also use various techniques to minimize credit risk, including early termination or reset and payment, using different counterparties, and limiting the net amount due from any individual counterparty. The Funds generally will collateralize forward contracts and swap agreements with cash and/or certain securities. Such collateral will generally be held for the benefit of the counterparty in a segregated tri-party account at the custodian to protect the counterparty against non-payment by the Fund. In the event of a default by the counterparty, and a Fund is owed money in the forward contract or swap transaction, the applicable Fund will seek withdrawal of the collateral from the segregated account and may incur certain costs exercising its right with respect to the collateral.
Positioning for a stronger U.S. Dollar through a mixture of these securities and financial instruments is intended to provide a return reflective of the changes in the U.S. Dollar against the specified currencies, the U.S. cash rate, and the spread of U.S. interest rates against foreign interest rates.
The Fund may invest directly in foreign currencies in the form of bank and financial institution deposits, certificates of deposit, and bankers acceptances denominated in a specified non-U.S. currency, and may enter into foreign currency exchange transactions. As stated above, the Fund may also conduct its foreign currency exchange transactions on a spot (
In order to reduce interest rate risk, the Fund will generally maintain a weighted average portfolio maturity with respect to money market securities of 180 days or less on average (not to exceed 18 months) and will not purchase any money market securities with a remaining maturity of more than 397 calendar days. The “average portfolio maturity” of the Fund will be the average of all current maturities of the individual securities in the Fund's portfolio. The Fund's actual portfolio duration may be longer or shorter depending on market conditions.
The Exchange notes that the Fund's fixed income investment portfolio will meet the listing criteria for index-based, fixed income ETFs contained in NYSE Arca Equities Rule 5.2(j)(3), Commentary .02.
According to the Registration Statement, under normal circumstances,
Positioning for a weaker U.S. Dollar through a mixture of these securities and financial instruments is intended to provide a return reflective of the change in the basket of currencies relative to the U.S. Dollar, the rate of U.S.-issued money market securities, and the spread of foreign interest rates over the U.S. Dollar.
The Fund may invest directly in foreign currencies in the form of bank and financial institution deposits, certificates of deposit, and bankers acceptances denominated in a specified non-U.S. currency, and may enter into foreign currency exchange transactions. As stated above, the Fund may also conduct its foreign currency exchange transactions on a spot (
In order to reduce interest rate risk, the Fund will generally maintain a weighted average portfolio maturity with respect to money market securities of 180 days or less on average (not to exceed 18 months) and will not purchase any money market securities with a remaining maturity of more than 397 calendar days. The “average portfolio maturity” of the Fund will be the average of all current maturities of the individual securities in the Fund's portfolio. The Fund's actual portfolio duration may be longer or shorter depending on market conditions.
The Exchange notes that the Fund's investment portfolio in fixed income securities will meet the listing criteria for index-based, fixed income ETFs contained in NYSE Arca Equities Rule 5.2(j)(3), Commentary .02.
The CC Bear Fund will be an actively-managed fund that seeks to provide total returns reflective of changes in the value of the U.S. Dollar relative to the currencies of selected commodity exporters and the difference between the relative short-term interest rates in the United States and comparable interest rates available for the investments in the currencies of those selected commodity exporters. The CC Bear Fund will seek to potentially benefit from appreciation in the U.S. Dollar relative to the selected commodity currencies. As used herein, the term “commodity currency” generally means the currency of a country whose economic success is commonly identified with the production and export of commodities (such as precious metals, oil, agricultural products, or other raw materials) and whose value is closely linked to the value of such commodities. These countries currently include Australia, Brazil, Canada, Chile, Indonesia, Mexico, New Zealand, Norway, Russia, and South Africa.
According to the Registration Statement, under normal circumstances,
The Fund's investments in forward contracts, listed options contracts, listed futures contracts, and currency swap agreements will be backed by investments in U.S. issued money market securities, longer-term U.S. government securities, or other liquid assets (
In addition to seeking broad exposure to the movements in the U.S. Dollar relative to the commodity currencies, the Fund intends to seek exposure across currencies correlated to each of their key commodity groups: Industrial metals; precious metals; energy; agriculture; and livestock. The CC Bear Fund generally will invest only in currencies that “float” relative to other currencies.
The Fund may invest directly in foreign currencies in the form of bank and financial institution deposits, certificates of deposit, and bankers acceptances denominated in a specified non-U.S. currency, and may enter into foreign currency exchange transactions. As stated above, the Fund may also conduct its foreign currency exchange transactions on a spot (
Positioning for a stronger U.S. Dollar through a mixture of these securities and financial instruments is intended to provide a return reflective of the changes in the U.S. Dollar against the specified currencies, the U.S. cash rate, and the spread of foreign interest rates against U.S. interest rates.
In order to reduce interest rate risk, the Fund will generally maintain a weighted average portfolio maturity with respect to money market securities of 90 days or less. The “average portfolio maturity” of the Fund will be the average of all current maturities of the individual securities in the Fund's portfolio. The Fund's actual portfolio duration may be longer or shorter depending on market conditions.
The CC Bear Fund is actively-managed and is not tied to an index. The Exchange notes, however, that the Fund's investment portfolio in fixed income securities will meet the listing criteria for index-based, fixed income ETFs contained in NYSE Arca Equities Rule 5.2(j)(3).
Each Fund reserves the right to invest in fixed income securities and cash, without limitation, as determined by the
While each Fund, under normal circumstances, will invest at least 80% of its net assets in securities and other financial instruments as described above, each Fund may invest its remaining assets in other securities and financial instruments, as generally described below.
Each Fund may invest in the securities of other investment companies and exchange-traded products,” including other ETFs registered under the 1940 Act (“ETPs”).
Each Fund may hold up to an aggregate of 15% of its net assets in illiquid securities (calculated at the time of investment), including Rule 144A securities deemed illiquid by the Adviser or Sub-Adviser in accordance with Commission guidance.
According to the Registration Statement, with respect to each of the Funds, the Funds each intend to qualify each year as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended.
None of the Funds will concentrate 25% or more of the value of its respective total assets (taken at market value at the time of each investment) in any one industry, as that term is used in the 1940 Act (except that this restriction does not apply to obligations issued by the U.S. government or its agencies and instrumentalities).
None of the Funds will invest in any non-U.S. equity securities. Each Fund's investments will be consistent with the Fund's respective investment objective and will not be used to enhance leverage.
The Funds will issue and redeem Shares on a continuous basis at net asset value (“NAV”)
Together, the Deposit Securities and/or Deposit Cash and the Cash Component will constitute the “Fund Deposit,” which represents the minimum initial and subsequent investment amount for a Creation Unit of the applicable Fund. The “Cash Component” will be an amount equal to the difference between the NAV of the Shares (per Creation Unit) and the market value of the Deposit Securities (
According to the Registration Statement, to be eligible to place orders with respect to creations and redemptions of Creation Units, an entity must be (i) a “Participating Party,”
The Custodian, through the NSCC, will make available on each business day, immediately prior to the opening of business on the Exchange's Core Trading Session (currently 9:30 a.m. E.T.), the list of names and the required number of each Deposit Security and/or Deposit Cash, as applicable, to be included in the current Fund Deposit (based on information at the end of the previous business day) for the applicable Fund. Such Fund Deposit is subject to any applicable adjustments, in order to effect purchases of Creation Units of the Fund until such time as the next-announced composition of the Deposit Securities and/or Deposit Cash, as applicable, is made available.
Shares may be redeemed only in Creation Units at their NAV next determined after receipt of a redemption request in proper form by the applicable Fund through the Transfer Agent and only on a business day.
With respect to the Fund, the Custodian, through the NSCC, will make available immediately prior to the opening of business on the Exchange (9:30 a.m. E.T.) on each business day, the list of the names and quantities of the applicable Fund's portfolio securities (“Fund Securities”) that will be applicable (subject to possible amendment or correction) to redemption requests received in proper form on that day. Fund Securities on redemption may not be identical to Deposit Securities.
Redemption proceeds for a Creation Unit will be paid either in-kind or in cash or a combination thereof, as determined by the Trust. With respect to in-kind redemptions of the Fund, redemption proceeds will consist of Fund Securities as announced by the Custodian on the business day of the request for redemption received in proper form plus cash in an amount equal to the difference between the NAV of the Shares being redeemed, as next determined after receipt of a request in proper form, and the value of the Fund Securities (“Cash Redemption Amount”), less a fixed redemption transaction fee and any applicable variable charge as set forth in the Registration Statement. In the event the Fund Securities have a value greater than the NAV of the Shares, a compensating cash payment equal to the differential will be required to be made by or through an Authorized Participant by the redeeming shareholder. Notwithstanding the foregoing, at the Trust's discretion, an Authorized Participant may receive the corresponding cash value of the securities in lieu of the in-kind securities value representing one of more Fund Securities.
The creation/redemption order cut-off time for the Funds is expected to be 4:00 p.m. E.T. for purchases/redemptions of Shares. On days when the Exchange closes earlier than normal, the applicable Fund may require orders for Creation Units to be placed earlier in the day.
Additional information regarding the Shares and the Funds, including investment strategies, risks, creation and redemption procedures, fees, portfolio holdings disclosure policies, distributions, and taxes is included in the Registration Statement.
The NAV per Share for each of the Funds will be computed by dividing the value of the net assets of each Fund (
In calculating a Fund's NAV per Share, the Fund's investment will generally be valued using market valuations. A market valuation generally means a valuation (i) obtained from an exchange, a pricing service, or a major market maker (or dealer), (ii) based on a price quotation or other equivalent indication of value supplied by an exchange, a pricing service, or a major market maker or dealer, or (iii) based on amortized cost, for securities with remaining maturities of 60 days or less. The Adviser may use various pricing services or discontinue the use of any pricing service, as approved by the applicable Fund's board of trustees (“Board”) from time to time. A price obtained from a pricing service based on such pricing service's valuation matrix may be considered a market valuation. Any assets or liabilities denominated in currencies other than the U.S. dollar will be converted into U.S. dollars at the current market rates on the date of valuation as quoted by one or more sources.
In the event that current market valuations are not readily available or such valuations do not reflect current market value, the Trust's procedures require the Trust's Valuation Committee to determine a security's or other asset's fair value in accordance with the 1940 Act if a market price is not readily available.
The Funds' Web site (
In addition, for each Fund, an estimated value, defined in Rule 8.600 as the “Portfolio Indicative Value,” that reflects an estimated intraday value of the Fund's portfolio, will be widely disseminated.
The dissemination of the Portfolio Indicative Value, together with the Disclosed Portfolio, will allow investors to determine the value of the underlying portfolio of each Fund on a daily basis and to provide a close estimate of that value throughout the trading day.
Intra-day executable price quotations on money market securities and other Fund fixed income securities, currency forwards, currency options, currency futures, currency swaps, and foreign exchange are available from major broker-dealer firms. Price information for listed currency options, listed currency futures, and ETPs is available from the exchange on which they trade. Intra-day price information is available through subscription services, such as Bloomberg and Thomson Reuters, which can be accessed by Authorized Participants and other investors. Information regarding market price and volume of the Shares will be continually available on a real-time basis throughout the day on brokers' computer screens and other electronic services. The previous day's closing price and trading volume information will be published daily in the financial section of newspapers. Quotation and last-sale information for the Shares will be available via the CTA high-speed line.
The Shares will be subject to Rule 8.600, which sets forth the initial and continued listing criteria applicable to Managed Fund Shares. The Exchange represents that, for initial and/or continued listing, the Funds must be in compliance with Rule 10A–3 under the Act,
With respect to trading halts, the Exchange may consider all relevant factors in exercising its discretion to halt or suspend trading in the Shares of a Fund. Shares of each Fund will be halted if the “circuit breaker” parameters in NYSE Arca Equities Rule 7.12 are reached. These may include: (1) The extent to which trading is not occurring in the securities or the financial instruments comprising the Disclosed Portfolio of a Fund; or (2) whether other unusual conditions or circumstances detrimental to the maintenance of a fair and orderly market are present. Trading in the Shares will be subject to NYSE Arca Equities Rule 8.600(d)(2)(D), which sets forth circumstances under which Shares of a Fund may be halted.
The Exchange deems the Shares to be equity securities, thus rendering trading in the Shares subject to the Exchange's existing rules governing the trading of equity securities. Shares will trade on the NYSE Arca Marketplace from 4:00 a.m. to 8:00 p.m. E.T. in accordance with NYSE Arca Equities Rule 7.34 (Opening, Core, and Late Trading Sessions). The Exchange has appropriate rules to facilitate transactions in the Shares during all trading sessions. As provided in NYSE Arca Equities Rule 7.6, Commentary .03, the minimum price variation (“MPV”) for quoting and entry of orders in equity securities traded on the NYSE Arca Marketplace is $0.01, with the exception of securities that are priced less than $1.00 for which the MPV for order entry is $0.0001.
The Exchange represents that trading in the Shares will be subject to the existing trading surveillances, administered by the Financial Industry Regulatory Authority (“FINRA”) on behalf of the Exchange, which are designed to detect violations of Exchange rules and applicable federal securities laws.
The surveillances referred to above generally focus on detecting securities trading outside their normal patterns, which could be indicative of manipulative or other violative activity. When such situations are detected, surveillance analysis follows and investigations are opened, where appropriate, to review the behavior of all relevant parties for all relevant trading violations.
FINRA, on behalf of the Exchange, will communicate as needed regarding trading in the Shares, ETPs, futures contracts, and options contracts with other markets and other entities that are members of the ISG, and FINRA, on behalf of the Exchange, may obtain trading information regarding trading in the Shares, ETPs, futures contracts, and
In addition, the Exchange also has a general policy prohibiting the distribution of material, non-public information by its employees.
Prior to the commencement of trading of Shares in a Fund, the Exchange will inform its Equity Trading Permit Holders in an Information Bulletin (“Bulletin”) of the special characteristics and risks associated with trading the Shares. Specifically, the Bulletin will discuss the following: (1) The procedures for purchases and redemptions of Shares in Creation Unit aggregations (and that Shares are not individually redeemable); (2) NYSE Arca Equities Rule 9.2(a), which imposes a duty of due diligence on its Equity Trading Permit Holders to learn the essential facts relating to every customer prior to trading the Shares; (3) the risks involved in trading the Shares during the Opening and Late Trading Sessions when an updated Portfolio Indicative Value will not be calculated or publicly disseminated; (4) how information regarding the Portfolio Indicative Value is disseminated; (5) the requirement that Equity Trading Permit Holders deliver a prospectus to investors purchasing newly issued Shares prior to or concurrently with the confirmation of a transaction; and (6) trading information.
In addition, the Bulletin will reference that a Fund is subject to various fees and expenses described in the Registration Statement. The Bulletin will discuss any exemptive, no-action, and interpretive relief granted by the Commission from any rules under the Act. The Bulletin will also disclose that the NAV for the Shares will be calculated after 4:00 p.m. E.T. each trading day.
The basis under the Act for this proposed rule change is the requirement under Section 6(b)(5)
The Exchange believes that the propose rule change is designed to prevent fraudulent and manipulative acts and practices in that the Shares will be listed on the Exchange pursuant to the initial and continued listing criteria in NYSE Arca Equities Rule 8.600. The Exchange has in place surveillance procedures that are adequate to properly monitor trading in the Shares in all trading sessions and to deter and detect violations of Exchange rules and applicable federal securities laws. The Adviser is not registered as, or affiliated, with a broker-dealer. Mellon is not a broker-dealer, but it is affiliated with multiple broker-dealers and has implemented a “fire wall” with respect to such broker-dealers regarding access to information concerning the composition and/or changes to a Fund's portfolio. In the event (a) the Adviser or Sub-Adviser becomes registered as, or the Adviser becomes newly affiliated with, a broker-dealer, or (b) any new adviser or sub-adviser is registered as or is affiliated with a broker-dealer, they will implement a fire wall with respect to such broker-dealer regarding access to information concerning the composition and/or changes to the applicable Fund's portfolio, and will be subject to procedures designed to prevent the use and dissemination of material, non-public information regarding such portfolio. In addition, Sub-Adviser personnel who make decisions regarding each Fund's portfolio are subject to procedures designed to prevent the use and dissemination of material, non-public information regarding the Fund's portfolio. The Index Sponsor is not a broker-dealer but is affiliated with one or more broker-dealers. The Index Sponsor has implemented procedures designed to prevent the illicit use and dissemination of material, non-public information regarding the Indexes and has implemented a “fire wall” with respect to such broker-dealers regarding the Indexes. FINRA, on behalf of the Exchange, will communicate as needed regarding trading in the Shares, ETPs, futures contracts, and options contracts with other markets and other entities that are members of the ISG and FINRA, and on behalf of the Exchange, may obtain trading information regarding trading in the Shares, ETPs, futures contracts, and options contracts from such markets and other entities. In addition, the Exchange may obtain information regarding trading in the Shares, ETPs, futures contracts, and options contracts from markets and other entities that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. The ETPs, currency options, and currency futures held by the Funds all will be traded on registered exchanges that are ISG members or with which the Exchange has in place a comprehensive surveillance sharing agreement. The holdings of the Funds will be comprised primarily of money market securities and related investments in derivative instrument such as forward contracts, listed futures contracts, currency options, and swap agreements, as well as spot currencies. Each Fund's fixed income investment portfolio will meet the listing criteria for index-based, fixed income ETFs contained in NYSE Arca Equities Rule 5.2(j)(3), Commentary .02.
The proposed rule change is designed to promote just and equitable principles of trade and to protect investors and the public interest in that the Exchange will obtain a representation from the issuer of the Shares that the NAV per Share of each Fund will be calculated daily every day the NYSE is open, and that the applicable NAV and Disclosed Portfolio will be made available to all market participants at the same time. In addition, a large amount of publicly available information will be publicly available regarding the Funds and the Shares, thereby promoting market transparency.
The Exchange believes that the proposed rule change will facilitate the listing and trading of additional types of exchange-traded products that will enhance competition among market participants, to the benefit of investors and the marketplace. In addition, the listing and trading criteria set forth in Rule 8.600 are intended to protect investors and the public interest. Each Fund's portfolio holdings that will form the basis for the Fund's calculation of NAV will be disclosed on its Web site daily after the close of trading on the Exchange and prior to the opening of trading of Shares in the Core Trading Session on the Exchange the following day. In addition, the Portfolio Indicative Value, as defined in NYSE Arca Equities Rule 8.600(c)(3), will be disseminated by the CTA or by one or more major market data vendors at least every 15 seconds during the Core Trading Session. Information regarding market price and trading volume of the Shares will be continually available on a real-time basis throughout the day on brokers' computer screens and other electronic services, and quotation and last-sale information will be available via the CTA high speed line. In addition, the Exchange has in place surveillance procedures that are adequate to properly monitor trading in the Shares. The Web site for the Funds will include a form of the applicable prospectuses for the Funds and additional data relating to the NAV and other applicable quantitative information. Moreover, prior to the commencement of trading, the Exchange will inform its ETP holders in an Information Bulletin of the special characteristics and risks associated with trading the Shares. Trading in Shares of the Funds will be halted if the circuit breaker parameters in NYSE Arca Rule 7.12 have been reached in the applicable Fund or because of market condition or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable, and trading in the Shares will be subject to NYSE Arca Rule 8.600(d)(2)(D), which sets forth circumstances under which trading in Shares of the Funds may be halted. In addition, as noted above, investors will have ready access to information regarding the Funds' holdings, the Portfolio Indicative Values, the Disclosed Portfolios, and quotation and last-sale information for the Shares of the Funds.
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 purpose of the Act. The Exchange notes that the proposed rule change will facilitate the listing and trading of additional actively-managed exchange-traded products that will enhance competition among market participants, to the benefit of investors and the marketplace.
No written comments were solicited or received with respect to the proposed rule change.
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 paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090.
All submissions should refer to File Number SR–NYSEArca–2013–101. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (
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 Exchange proposes to delay implementation of the Dedicated OUCH Port Infrastructure service under Rule 7015(g). NASDAQ will begin offering the service in mid-first quarter of 2014, and will provide public notice thereof at least five days prior to the implementation date.
The text of the proposed rule change is available from NASDAQ's Web site 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.
On July 23, 2013, the Exchange filed a proposal with the Commission to adopt a new Dedicated OUCH Port Infrastructure connectivity option and related fee.
The Exchange believes that the proposed rule change is consistent with Section 6(b)(5) of the Act,
NASDAQ does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. NASDAQ believes that the delay will not impact competition whatsoever as it will maintain the status quo until such time that the OUCH port infrastructure is upgraded, at which time the new service and associated monthly fee will be implemented. In this regard, existing subscribers to shared OUCH port infrastructure will continue to receive the same service, unaffected by the delay in upgrading the OUCH port infrastructure. Once upgraded, both subscribers to the shared infrastructure and Dedicated OUCH Port Infrastructure subscribers will operate on the same type of underlying hardware.
Written comments were neither solicited nor received.
Because the foregoing 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, it has become effective pursuant to Section 19(b)(3)(A) of the Act
A proposed rule change filed under Rule 19b–4(f)(6)
The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest. If the 30-day operative delay were not to be waived, then the Dedicated OUCH Port Infrastructure service would go live and require payments of fees even though the underlying hardware to support such a system would not be operational. Without a waiver, fees would be collected from subscribers of the Dedicated OUCH Port Infrastructure service before the service would actually be useable. Thus, waiver of the operative delay provides benefits to NASDAQ and to member firms subscribing to the service. Therefore, the Commission hereby waives the 30-day operative delay and designates the proposal operative upon filing.
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. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule change should be approved or 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.
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 proposed rule change is to amend the ICC Clearing Rules (the “Rules”) in order to correct minor grammatical errors, remove obsolete references and comply with a Commission recommendation to provide for consistent language within the Rules and Section 19(d)(1) of the Act.
In its filing with the Commission, ICC 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. ICC has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of these statements.
The proposed revisions are intended to correct minor grammatical errors, remove obsolete references, and comply with a Commission recommendation to provide for consistent language within the Rules and Section 19(d)(1) of the Act. ICC believes such changes will facilitate the prompt and accurate clearance and settlement of securities transactions and derivative agreements, contracts, and transactions for which it is responsible. The proposed Rule revisions are described in detail as follows.
In Rule 402(b), the term “the Clearing House” was removed and replaced with “ICE Clear Credit” in order to remain consistent with the Rules. In Rules
In Rules 201(b)(i) and 206(a)(iii), references to the “U.K. Financial Services Authority” were removed and replaced with references to the “U.K. Prudential Regulatory Authority.” In Rule 201(b)(i), “the European Securities and Markets Authority” was added to the sample list of competent authorities for capital adequacy regulation listed in the membership qualification rules. Further, in Rule 206(a)(iii), “the European Securities and Markets Authority” was added to the list of regulatory agencies from which the receipt of specific notices requires Participant notification to ICC.
In Rule 503(a)(v) the specifically listed original nine Participant Appointees were removed from the Rules as the Participant Appointees are determined annually according to the procedure in Rule 503(a)(vi). Rule 503(a)(vi) was updated to change the word “anniversary” to the word “date” for clarification. Rule 503(a)(viii) was deleted and replaced with “Intentionally omitted.” because Rule 503(a)(viii) dealt with contingencies for an interim period that has since passed. Correspondingly, the definition of “DCO/SCA Conversion Date” was removed from Rule 102, as the term is no longer referred to in the Rules. In Rule 503(a)(x), language referring to an interim period that has since passed was removed. In Rules 801(b) and 802(b) obsolete references to deadlines for actions required of ICC that have since been completed were removed.
Per Commission recommendation, the word “promptly” was added to Rule 712(c) in order to provide for consistency of language within the Rules and Section 19(d)(1) of the Act.
The proposed rule changes do not require any changes to the ICC risk management framework including the ICC margin methodology, guaranty fund methodology, pricing parameters and pricing model.
Section 17A(b)(3)(F) of the Act
The correction of minor grammatical errors, removal of obsolete references and compliance with a Commission recommendation to provide for consistent language within the Rules and Section 19(d)(1) of the Act apply consistently across all market participants. Therefore, ICC 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. ICC will notify the Commission of any written comments received by ICC.
The foregoing 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–ICC–2013–06 and should be submitted on or before November 12, 2013.
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”),
Topaz is proposing to amend its Schedule of Fees to establish a surcharge fee for non-Priority Customer orders in options on 1/10 the value of the Nasdaq-100 Stock Index. The text of the proposed rule change is available on the Exchange's Internet Web site 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 self-regulatory organization has prepared summaries, set forth in Sections A, B and C below, of the most significant aspects of such statements.
On August 26, 2013 the Exchange filed a proposed rule change to adopt a surcharge fee for options on the full value of the Nasdaq-100 Stock Index (“NDX”),
The Exchange has entered into a license agreement with The NASDAQ OMX Group, Inc. in connection with the listing and trading of MNX options, and is proposing to adopt a surcharge fee applicable to non-Priority Customer orders in these options to defray the licensing costs. Absent this license agreement, market participants would be unable to trade MNX options on the Exchange. This surcharge fee reflects the pass-through charges associated with the licensing of this product, and the Exchange believes that charging the participants that trade these instruments is the most equitable means of recovering the costs of the license. The Exchange notes that the proposed surcharge fee does not apply to Priority Customer orders in this product.
The Exchange believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,
The proposed surcharge fee is reasonable because it is a direct result of the licensing fees charged to the Exchange by the index provider that owns the intellectual property associated with the index, and reflect the pass-through charges associated with obtaining the license to trade MNX options, which the Exchange believes is the most equitable means of recovering the costs of the license. The proposed fee is equitable and not unfairly discriminatory in that it applies uniformly to all similarly situated Exchange participants, and is assessed only on those non-Priority Customer participants who choose to transact in MNX options. The Exchange believes it is equitable and not unfairly discriminatory to assess this surcharge fee on all participants except Priority Customers because the Exchange seeks to encourage Priority Customer order flow and the liquidity such order flow brings to the marketplace, which in turn benefits all market participants.
In accordance with Section 6(b)(8) of the Act,
Finally, the Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive. In such an environment, the Exchange must continually review, and consider adjusting, its fees and credits to remain competitive with other exchanges. For the reasons described above, the Exchange believes that the proposed rule change reflects this competitive environment.
The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any unsolicited written comments from members or other interested parties.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act,
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. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or 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.
The Commission will post all comments on the Commission's Internet Web site (
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 Exchange proposes to amend BOX Rule 3130 (Exemptions from Position Limits) to simplify the position limit exemptions available to Options Participants. The text of the proposed rule change is available from the principal office of the Exchange, at the Commission's Public Reference Room and also on the Exchange's Internet 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 these statements may be examined at the places specified in Item IV below. The self-regulatory organization has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements.
The Exchange proposes to amend BOX Rule 3130 (Exemptions from Position Limits) to simplify the position limit exemptions available to Options Participants. This is a competitive filing based on the rules of BX and BATS.
Specifically, the Exchange proposes to remove sections (b) through (e) of BOX Rule 3130. Once removed, section (a), “Exemption Granted by Other Exchanges,” will be the sole position limit exemption remaining. The Exchange believes that this exemption, which allows Participants to rely on applicable position limit exemptions granted by other exchanges, will result in increased uniformity among the exchanges and cause less confusion among all market participants. Furthermore the proposed change will have no impact on the position limit exemptions currently used by Participants on BOX. The Exchange has reviewed the position limit exemptions available at the other option exchanges and believes these represent all position limit exemptions that the Exchange is seeking to remove. The Exchange notes that this proposed change mimics the position limit exemption language used by BX and BATS.
The Exchange believes that the proposal is consistent with the
In particular, the Exchange believes the proposed rule change will provide greater clarity to market participants regarding the Exchange's rules. In addition, the Exchange believes that the proposed rule change will help ensure that the Exchange's rules regarding Exemptions from Position Limits will always be in alignment with FINRA's rules. Accordingly, this proposal is designed to harmonize the exemptions from position limits rules across exchanges and will help protect investors.
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. In this regard and as indicated above, the Exchange notes that the rule change being proposed is substantially similar to BX's and BATS's rules regarding Exemptions from Position Limits.
The Exchange believes this proposed rule change is necessary to establish uniform rules regarding Exemptions from Position Limits. Specifically, the proposed rule change will bring clarity and consistency to Exchange Rules by harmonizing the exemptions from position limits rules across exchanges and will therefore help protect investors. The Exchange does not believe the proposed rule change will impose any burden on any intramarket competition as it applies to all Participants. In addition, the Exchange does not believe the proposed rule filing will bring any unnecessary burden on intermarket competition as it is consistent with the “Exemption from Position Limits” rules of BX and BATS.
The Exchange has neither solicited nor received comments on 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 for 30 days from the date on which it was filed, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) 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.
On June 21, 2013, NYSE MKT LLC (“NYSE MKT”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
NYSE MKT Rule 965NY(b) provides procedures for trading Nasdaq 100 Index (“NDX”) and Russell 2000 Index (“RUT”) combination orders.
NYSE MKT proposes to amend NYSE MKT Rule 965NY(b) to implement a one-year pilot program that would revise the procedures for trading NDX and RUT combination orders. NYSE MKT believes that the pilot program's revised trading procedures would make the trading of NDX and RUT combination orders more competitive with the trading of combinations in Nasdaq 100 Index futures and Russell 2000 Index futures on the Chicago Mercantile Exchange (“CME”) and the Intercontinental Exchange (“ICE”), respectively.
NYSE MKT notes that its rules currently preclude trading the legs of an NDX or RUT combination order outside of the prevailing market quotes in the individual component series legs.
To further level the field of competition between market participants trading on NYSE Amex Options and on the CME and ICE, NYSE MKT proposes to revise its NDX and RUT combination order trading procedures.
NYSE MKT states that the proposed procedure is generally modeled after CME Rule 542 and ICE Rule 27.11(a)(v), in that it would allow an NDX or RUT combination order to be executed out-of-range from the current market prices in the individual component option series legs, provided that the reported net price and related component series prices were in range within the preceding two hours.
Each component leg of an NDX or RUT combination order would continue to be reported to the trading floor and the Options Price Reporting Authority (“OPRA”) with a special indicator identifying the reported price as part of a combination order trade.
NYSE MKT states its belief that the proposed procedure would not lessen the obligation of ATP Holders to obtain best execution of options orders for their customers.
NYSE MKT characterizes the proposed pilot program as a narrowly tailored trading process that does not go as far as existing CME and ICE rules.
NYSE MKT believes that the proposed pilot program would facilitate the orderly execution of combination orders in NDX and RUT at all times, including during volatile markets, in a manner that is more competitive with the existing CME and ICE trading procedures.
If NYSE MKT were to propose to extend the pilot program or to make it permanent, NYSE MKT would provide the Commission with a pilot report analyzing the pilot program.
The Commission received two comments regarding the proposal,
Another commenter supports implementing the proposal on a pilot basis.
The commenter believes, further, that because NDX and RUT combination orders are difficult to complete, they require different rules from options transactions that can be executed almost immediately with the current quotes.
As discussed above, the commenter that opposes the proposal believes that market participants would be able, in some cases, to adjust the prices of the individual legs of a combination order to achieve the order's desired net price so that the order may be executed within the range of the current markets.
NYSE MKT believes that the proposal would provide for additional flexibility in achieving desired combinations and hedging strategies, and would create a transparent and more efficient process.
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, the Commission is providing notice of the grounds for disapproval under consideration. The sections of the Act and the rules thereunder that are applicable to the proposed rule change include Sections 3(a)(1), 6(b)(5), and
The Commission believes that NYSE MKT's proposal raises questions as to whether the proposed rule change is consistent with these standards. As discussed above, NYSE MKT's proposed pilot program would allow an ATP Holder to execute an NDX or RUT combination order outside the current derived net market so long as: (a) The best net debit or credit price would have been at or within the derived net market over the preceding two hours of trading that day; (b) no leg of the order would trade at a price outside the displayed bids or offers in the trading crowd or customer interest in the NDX or RUT Consolidated Book at a point in time over the preceding two-hour period; and (c) at least one leg of the order would trade at a price that is better than the corresponding customer bid or offer in the NDX or RUT Consolidated Book at the same point in time over the preceding two-hour period.
NYSE MKT states that practices similar to the trade-throughs that would be permitted under the proposal already exist in the equity markets.
In light of these issues and concerns, the Commission believes that questions arise regarding whether the proposal is consistent with the requirements of Sections 3(a)(1), 6(b)(5), and 11A(a) of the Act. As the Commission continues to evaluate the issues presented by the proposal, the Commission solicits comment on whether the proposal is consistent with the Act and whether the Exchange has met its burden in presenting a statutory analysis of how its proposal is consistent with the Act. In particular, the grounds for disapproval under consideration include whether the Exchange's proposal is consistent with Section 6(b)(5) of the Act, which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and to protect investors and the public interest. In addition, under the Commission's rules of procedure, a self-regulatory organization that proposes to amend its rules bears the burden of demonstrating that its proposal is consistent with the Act.
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 proposal. In particular, the Commission invites the written views of interested persons concerning whether the proposal is consistent with Sections 3(a)(1), 6(b)(5), 11A(a), or any other provision of the Act, or the rules and regulations thereunder. Although there do not appear to be any issues relevant to approval or disapproval which would be facilitated by an oral presentation of views, data, and arguments, the Commission will consider, pursuant to Rule 19b–4, any request for an opportunity to make an oral presentation.
Interested persons are invited to submit written data, views, and arguments regarding whether the proposal should be approved or disapproved by November 12, 2013. Any person who wishes to file a rebuttal to any other person's submission must file that rebuttal by November 26, 2013.
The Commission asks that commenters address the sufficiency and merit of the Exchange's statements in support of the proposal, in addition to any other comments they may wish to submit about the proposed rule change. In particular, the Commission seeks comment on the following:
1. What, if any, effect do commenters believe the proposal may have on the incentives of market participants to provide liquidity in the series comprising an NDX or RUT combination order? Do commenters believe that permitting NDX and RUT combination orders to trade through interest in the leg market potentially could discourage market participants from placing limit orders in the individual series on the NDX and RUT limit order books? Why or why not?
2. Do commenters believe that NYSE MKT has adequately analyzed the potential effects of the proposal on the markets for NDX and RUT options, including the potential impact on market participants providing liquidity in the series comprising the legs of an NDX or RUT combination order? Why or why not?
3. As noted above, one commenter expresses concern that the flexibility to trade outside of the current derived net market could result in harm to customers.
4. NYSE MKT believes that its current combination order rule “does not come close to leveling the field with the CME and ICE rules for spread and combination trading,” and that the rules of the CME and ICE require only that the reported price of each component futures contract be within the daily limit price.
5. Do commenters believe that there are characteristics associated with the trading of NDX and RUT options that potentially could help the Commission assess the concerns discussed above regarding the potential to impact the quality of executions or the incentives of liquidity providers in the individual series? If so, please explain. Do commenters believe that these characteristics, if any, are unique to NDX and RUT options, or are they also shared by other broad-based index options? If so, the Commission is interested in statistics or other data concerning the trading of NDX and RUT options that would help the Commission to assess these characteristics.
6. As discussed more fully above, one commenter believes that the proposal is unnecessary because market participants would be able to adjust the prices of the legs of an NDX or RUT combination order so that they are at or within the current market. Another commenter states that the proposal would remove an impediment to the trading of NDX and RUT combination orders by allowing the orders to trade through the current market, provided that the conditions in the rule are satisfied. Do commenters agree or disagree with these views and why?
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 Exchange proposes to amend interpretive material to Rule 5050 (Series of Options Contracts Open for Trading) and Rule 6090 (Terms of Index Options Contracts) to give the Exchange the ability to initiate strike prices in more granular intervals for Short Term Options (“STOs”) in the same manner as on other options exchanges. The text of the proposed rule change is available from the principal office of the Exchange, at the Commission's Public
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 these statements may be examined at the places specified in Item IV below. The self-regulatory organization has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements.
The Exchange proposes to amend IM–5050–6 to Rule 5050 (Series of Options Contracts Open for Trading) and IM–6090–2 to Rule 6090 (Terms of Index Options Contracts) to give the Exchange the ability to initiate strike prices in more granular intervals for Short Term Options (“STOs”). This is a competitive filing being proposed as a response to immediately effective fillings recently submitted by the Chicago Board Options Exchange, Inc. (“CBOE”), NASDAQ OMX PHLX, LLC (“Phlx”), NYSE Arca, Inc. (“Arca”), NYSE MKT LLC (“MKT”), MIAX Options Exchange (“MIAX”) and the International Securities Exchange, LLC (“ISE”).
The Commission recently approved filings submitted by ISE and Phlx that amended the strike price interval setting parameters for their Short Term Option Series (“STOS”) Programs, but the revisions to their respective rules differ.
The Exchange recently amended the strike price interval setting parameters for its STOS Program, however, the Exchange did not adopt a consolidated methodology and instead elected to adopt changes based on the Phlx filing.
The STOS Program is codified in the BOX Rules 5050 and 6090. These rules state that after an option class has been approved for listing and trading on the Exchange, the Exchange may open for trading on any Thursday or Friday that is a business day, series of options on no more than thirty option classes that expire on each of the next five consecutive Fridays that are business days. In addition to the thirty option class limitation, there is also a limitation that no more than twenty series for each expiration date in those classes may be opened for trading.
The Exchange notes that while it believes that there is substantial overlap between the two strike price interval setting parameters, the Exchange believes there are gaps that would enable one of the options exchanges listed above to initiate a series that the Exchange would not be able to initiate.
In support of this proposal, the Exchange states that the principal reason for the proposed expansion is in response to market and customer demand to list actively traded products in more granular strike price intervals and to provide Participants
With regard to the impact of this proposal on system capacity, the Exchange has analyzed its capacity and represents that it and the Options Price Reporting Authority (“OPRA”) have the necessary systems capacity to handle any potential additional traffic associated with this current amendment to the STOS Program. The Exchange believes that its Participants will not have a capacity issue as a result of this proposal. The Exchange represents that it will monitor the trading volume associated with the additional options series listed as a result of this proposal and the effect (if any) of these additional series on market fragmentation and on the capacity of the Exchange's automated systems.
The Exchange believes that the proposal is consistent with the requirements of Section 6(b) of the Securities Exchange Act of 1934 (the “Act”),
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. The Exchangebelieves that the proposed rule change will in fact relieve any burden on, or otherwise promote, competition. In this regard and as indicated above, the Exchange notes that the rule change is being proposed as a competitive response to immediately effective filings recently submitted by CBOE, PHLX, Arca, MKT, MIAX and ISE.
The Exchange has neither solicited nor received comments on the proposed rule change.
Because the foregoing proposed rule change does not significantly affect the protection of investors or the public interest, does not impose any significant burden on competition, and, by its terms, does not become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act
The Exchange has requested that the Commission waive the 30-day operative delay. The Commission believes that waiver of the 30-day operative delay will allow BOX to initiate strikes prices in more granular intervals for STOs in the same manner as other options exchanges. In sum, the proposed rule change presents no novel issues, and waiver will allow the Exchange to remain competitive with other exchanges. Therefore, the Commission designates the proposal operative upon filing.
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. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule
• 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 submissions should refer to File Number SR–BOX–2013–48. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (
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 Exchange proposes to amend the Table of Contents to its Pricing Schedule to refer to FLEX
The text of the proposed rule change is available on the Exchange's Web site 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 amend the Table of Contents to include a reference to FLEX transaction fees within the Pricing Schedule. The Exchange adopted new FLEX transaction fee pricing in Section IV, entitled “Other Transaction Fees,” Part B of the Pricing Schedule in a previous rule change and inadvertently did not amend the Table of Contents to reflect the addition of that pricing to Section IV.
The Table of Contents allows members to readily locate pricing within the Pricing Schedule. The Pricing Schedule is located on the Exchange's Web page.
The Exchange believes that its proposal is consistent with Section 6(b) of the Act
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 as the amendment is non-substantive and merely serves to add a reference to the Table of Contents which was inadvertently not amended in a prior rule change.
No written comments were either solicited or received.
Pursuant to Section 19(b)(3)(A) of 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. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or 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.
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 Appendix A in the CBOE Stock Exchange, LLC's (“CBSX”) Rules. The text of the proposed rule change is available on the Exchange's Web site (
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.
By way of background, CBSX (CBOE's facility for trading non-option securities) rules are generally contained within Chapters 50 through 54 of the CBOE rulebook. Trading of non-option securities on CBSX is also subject to the rules in Chapters 1 through 29 to the same extent such rules apply to the trading of the products to which those rules apply, in some cases supplemented by the rules in Chapters 50 through 54, except for rules that have been replaced by rules in Chapters 50 through 54 and except where the context otherwise requires. Appendix A to Chapters 50 through 54 lists the rules in Chapters 1 through 29 that are applicable to trading on CBSX. Where appropriate, Appendix A also indicates that a rule in Chapter 1 through 29 has been supplemented by a rule in Chapter 50 through 54.
In that regard, Appendix A of the CBSX rules currently references CBOE Rule 3.9, as supplemented by CBSX Rule 50.4. CBOE Rule 3.9(g) currently states, in relevant part, that any person applying pursuant to paragraph (a) of the rule to “have an authorized trading function is required to have completed the Exchange's Trading Permit Holder Orientation Program and to have passed an Exchange Trading Permit Holder Qualification Exam.” Because Appendix A of the CBSX rules contains a cross-reference to CBOE Rule 3.9 (as supplemented by CBSX Rule 50.4)
As such, the Exchange is proposing to add text to the CBSX Appendix A to make clear that CBOE Rule 3.9(g) is not applicable to CBSX TPH applicants that will not engage in options trading on the Exchange. Specifically, the Exchange is proposing to add text to CBSX Appendix A to explicitly state the applicable subparagraphs of 3.9(g) that are applicable to CBSX TPH applicants. The Exchange believes this proposal is appropriate as the orientation program and examination referenced in CBOE 3.9(g) is focused on options trading. Thus, the Exchange believes it is appropriate to continue to administer the orientation and examination to CBOE TPH applicants but not to CBSX TPH applicants.
The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 (the “Act”) and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.
In particular, the Exchange believes that the proposed rule filing will more specifically state the requirements for CBSX applicants along with codify existing Exchange practices. The Exchange believes the proposed change is consistent with the Act in that it continues to require the options focused TPH Qualification Examination and associated orientation program for CBOE applicants applying to engage in options trading but not for CBSX applicants applying to the Exchange to engage in trading of non-option securities. In addition, the proposed filing is not unfairly discriminating because it will be applied to all similarly situated TPH applicants who are solely trading on CBSX.
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. In particular, the Exchange does not believe that the proposed rule filing will place any burden on intramarket competition because it will be applied equally to similarly situated applicants that are applying to only engage in non-options trading on CBSX. The Exchange does not believe the proposed rule filing will place any burden on intermarket competition because it is merely codifying a current Exchange practice.
The Exchange neither solicited nor received comments on the proposed rule change.
Because the foregoing proposed rule 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
The Exchange has requested that the Commission waive the 30-day operative delay because the rule change would codify an existing Exchange practice and reduce confusion for associated persons of TPHs and regulators. The Commission designates the proposal operative upon filing because it will align CBSX's rules with its existing practice of not requiring CBSX TPH applicants to complete either the TPH orientation program or the TPH exam.
At any time within 60 days of the filing of this 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. If the
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 filed a proposal add language to Rule 14.1, entitled “Unlisted Trading Privileges,” that will make clear that the Exchange will not list equity securities without first ensuring that its rules comply with Rule 10C–1 under the Act (“Rule 10C–1”).
The text of the proposed rule change is available at the Exchange's Web site 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 parts of such statements.
The Exchange is proposing to add language to Rule 14.1, which will clarify the fact that the Exchange will not list equity securities without first ensuring that Exchange Rules comply with Rule 10C–1, as described below.
On March 30, 2011, to implement Section 10C of the Act,
The Exchange does not currently list any securities as a primary listing market. Consistent with this fact, Exchange Rule 14.1 currently states that
The Exchange believes that its proposal is consistent with the requirements of the Act and the rules and regulations thereunder that are applicable to a national securities exchange, and, in particular, with the requirements of Section 6(b) of the Act.
BYX believes the proposal is consistent with Section 6(b)(8) of the Act
The Exchange has neither solicited nor received written comments on the proposed rule change.
Because the foregoing 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, it has become effective pursuant to Section 19(b)(3)(A) of 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. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or 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.
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 its fees and rebates applicable to Members
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 these statements may be examined at the places specified in Item IV below. The self-regulatory organization has prepared summaries, set forth in sections A, B and C below, of the most significant aspects of such statements.
The Exchange proposes to amend its Fee Schedule to add orders yielding Flag AA to the calculation of the ADV threshold required to meet the MidPoint Match Volume Tier. Footnote 3 of the Fee Schedule currently provides that Members may qualify for the MidPoint Match Volume Tier and not be charged a fee for orders that yield Flag MM on EDGX if they add and/or remove an ADV of at least 2,500,000 shares on a daily basis, measured monthly, on EDGX, yielding flags MM (adds liquidity to MidPoint Match using the Midpoint Match order type
The Exchange proposes to implement these amendments to its Fee Schedule on October 2, 2013.
The Exchange believes that the proposed rule change is consistent with the objectives of Section 6 of the Act,
The Exchange believes that adding orders yielding Flag AA to the calculation of the ADV threshold required to meet the MidPoint Match Volume Tier represents an equitable allocation of reasonable dues, fees, and other charges because adding orders yielding Flag AA, like Flags MM and MT, are designed to encourage Members to add liquidity at the midpoint of the national best bid or offer (“NBBO”) to the EDGX Book
These proposed rule changes do not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange does not believe that any of these changes represent a significant departure from previous pricing offered by the Exchange or pricing offered by the Exchange's competitors. Additionally, Members may opt to disfavor EDGX's pricing if they believe that alternatives offer them better value. Accordingly, the Exchange does not believe that the proposed changes will impair the ability of Members or competing venues to maintain their competitive standing in the financial markets.
The Exchange believes that adding orders yielding Flag AA to the calculation of the ADV threshold required to meet the MidPoint Match Volume Tier would increase intermarket competition because it would lead to more competition for orders that seek liquidity at the midpoint of the NBBO. The Exchange believes that its proposal would neither increase nor decrease intramarket competition because the MidPoint Match Volume Tier would continue to apply uniformly to all Members and the ability of some Members to meet the tier would only benefit other Members by contributing to increased liquidity at the midpoint of the NBBO and better market quality at the Exchange.
The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) 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.
On July 3, 2013, the Municipal Securities Rulemaking Board (“MSRB”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”)
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 Exchange is filing with the Commission a proposal to clarify that Rule 1014 (Obligations and Restrictions
The text of the proposed rule change is available on the Exchange's Web site 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 this proposed rule change is to clarify that Rule 1014 quoting obligations remain in effect on a daily basis even though compliance with such obligations may be determined on a monthly basis.
Market makers on the Exchange include Registered Options Traders (“ROTs”),
Rule 1014 also discusses other market makers including Directed SQTs and Directed RSQTs, which receive Directed Orders as defined in Rule 1080(l)(i)(A). Specialists may likewise receive Directed Orders.
The daily market making obligations of market makers on the Exchange are set forth in Rule 1014. In particular, subsection (b)(ii)(D)(1) of Rule 1014 states that SQTs and RSQTs (when they do not function as Remote Specialists) shall be responsible to quote two-sided markets in not less than 60% of the series in which such SQTs or RSQTs are assigned; provided that, on any given day, a DRSQT or DSQT shall be responsible to quote two-sided markets in the lesser of 99% of the series listed on the Exchange or 100% of the series listed on the Exchange minus one call-put pair. The sub-section states also that whenever a DSQT or DRSQT enters a quotation in an option in which such DSQT or DRSQT is assigned, such DSQT or DRSQT must maintain until the close of that trading day quotations for the lesser of 99% of the series of the option listed on the Exchange or 100% of the series of the option listed on the Exchange minus one call-put pair. To satisfy the applicable requirements of this subparagraph (D)(1) with respect to quoting a series, an SQT, RSQT, DSQT, or DRSQT must 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 the Exchange may announce in advance. Subsection (b)(ii)(D)(2) of Rule 1014 states that a specialist (including the RSQT functioning as a Remote Specialist in particular options) shall be responsible to quote two-sided markets in the lesser of 99% of the series or 100% of the series minus one call-put pair in each option in which such specialist is assigned. To satisfy the requirement of subsection (b)(ii)(D)(2) with respect to quoting a series, the specialist must 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 the Exchange may announce in advance.
As discussed, subsections (b)(ii)(D)(1) and (b)(ii)(D)(2) of Rule 1014 currently state that compliance with quoting obligations may be determined on a monthly basis. To make it clear that daily quoting obligations remain, however, the Exchange is adding language to these subsections to state that determining compliance with the continuous quoting requirement on a monthly basis does not relieve market makers of their obligation to provide continuous two-sided quotes on a daily basis, nor will it prohibit the Exchange from taking disciplinary action against market makers for failing to meet the continuous quoting obligation each trading day. Compliance on a monthly basis allows the Exchange to review the market makers' daily compliance in the aggregate and determine the appropriate disciplinary action for single or multiple failures to comply with the continuous quoting requirement during the month period.
This proposal clarifies that daily quoting requirements for market makers per Rule 1014 as specified remain the same and are not changed.
The Exchange believes that its proposal is consistent with Section 6(b)
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. The Exchange does not believe that this proposal should have any competitive impact because the Exchange's rules as noted are similar to those of other options exchanges.
No written comments were either solicited or received.
The Exchange believes that the foregoing proposed rule change may take effect upon filing with the Commission pursuant to Section 19(b)(3)(A)
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: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or 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.
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 extend a pilot program related to Rule 11.19, entitled “Clearly Erroneous Executions.” The Exchange also proposes to remove certain references to individual stock trading pauses contained in Rule 11.19(c)(4) and to amend to Rule 11.19 to make technical and non-substantive changes in the rule text. The Exchange has designated this proposal as non-controversial and provided the Commission with the notice required by Rule 19b-4(f)(6)(iii) under the Act.
The text of the proposed rule change is available on the Exchange's Web site 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 parts of such statements.
The purpose of this filing is to extend the effectiveness of the Exchange's current rule applicable to Clearly Erroneous Executions and to remove references to individual stock trading pauses described in Rule 11.19(c)(4). Portions of Rule 11.19, explained in further detail below, are currently operating as a pilot program set to expire on September 30, 2013.
On September 10, 2010, the Commission approved, on a pilot basis, changes to NSX Rule 11.19 to provide for uniform treatment: (1) Of clearly erroneous execution reviews in multi-stock events involving twenty or more securities; and (2) in the event transactions occur that result in the issuance of an individual stock trading pause by the primary listing market and subsequent transactions that occur before the trading pause is in effect on the Exchange.
The Exchange also proposes to eliminate all references in Rule 11.19 to individual stock trading pauses issued by a primary listing market. Specifically, Rule 11.19(c)(4) provides specific rules to follow with respect to review of an execution as potentially clearly erroneous when there was an individual stock trading pause issued for that security and the security is included in the S&P 500® Index, the Russell 1000® Index, or a pilot list of Exchange Traded Products (“Circuit Breaker Securities”). The stock trading pauses described in Rule 11.19(c)(4) are being phased out as securities become subject to the Plan pursuant to a phased implementation schedule. The Plan is already operational with respect to all Circuit Breaker Securities and thus the Exchange believes that all references to individual stock trading pauses should be removed, including all cross-references to Rule 11.19(c)(4) contained in other portions of Rule 11.19.
Finally, the Exchange is proposing amendments to Rule 11.19 to make technical and non-substantive changes in the rule text. These changes include removing incorrect references in the first paragraph of the rule to paragraph (i) when the correct reference should be to paragraph (j), and correcting certain other language and punctuation issues.
The Exchange believes that its proposal is consistent with the requirements of the Act and the rules and regulations thereunder that are applicable to a national securities exchange and, in particular, with the requirements of Section 6(b) of the Act.
With respect to the technical, non-substantive changes to the text of Rule 11.19, the Exchange believes that these are consistent with Section 6(b)(5) of the Act in that they correct certain incorrect references to other section of the rule text and other language and punctuation items, thereby enhancing the clarity of Exchange rules, which is consistent with promoting just and equitable principles of trade and the protection of investors and the public interest.
The Exchange does not believe that the proposed rule change implicates any competitive issues. To the contrary, the
Written comments on the proposed rule change were neither solicited nor 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 if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act
The Exchange has asked the Commission to waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest, as it will allow the pilot program to continue uninterrupted, thereby avoiding investor confusion that could result from a temporary interruption in the pilot program. For this reason, the Commission designates the proposed rule change to be operative upon filing.
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.
All submissions should refer to File No. SR–NSX–2013–19. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Web site (
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
On August 15, 2013, Financial Industry Regulatory Authority, Inc. (“FINRA”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
Section 19(b)(2) of the Act
The Commission is hereby extending the 45-day period for Commission action on the proposed rule change. The Commission has determined that it is appropriate to designate a longer period within which to take action on the proposed rule change. In particular, the extension of time will ensure that the Commission has sufficient time to consider and take action on FINRA's proposal in light of, among other things, the comments received on the proposal.
Accordingly, pursuant to Section 19(b)(2)(A)(ii)(I) of the Act
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 changes to mitigate market maker risk by requiring market makers to enter values in the Exchange-provided risk parameters.
The text of the proposed rule change is available on the Exchange's Internet Web site 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 self-regulatory organization has prepared summaries, set forth in Sections A, B and C below, of the most significant aspects of such statements.
Pursuant to Topaz Rule 804, the Exchange currently provides functionality that will automatically remove a market maker's quotes in all series of an options class when certain parameter settings are triggered. Specifically, there are four parameters that can be set by market makers on a class-by-class basis. These parameters are available for market maker quotes in single options series. Market makers establish a time frame during which the system calculates: (1) the number of contracts executed by the market maker in an options class; (2) the percentage of the total size of the market maker's quotes in the class that has been executed; (3) the absolute value of the net between contracts bought and contracts sold in an options class; and (4) the absolute value of the net between (a) calls purchased plus puts sold, and (b) calls sold plus puts purchased. The market maker establishes limits for each of these four parameters, and when the limits are exceeded within the prescribed time frame, the market makers quotes are removed.
The purpose of this functionality is to allow market makers to provide liquidity across potentially hundreds of options series without being at risk of executing the full cumulative size of all such quotes before being given adequate opportunity to adjust their quotes. For example, if a market maker can enter quotes with a size of 20 contracts in 150 series of an options class, its total potential exposure is 3000 contracts in the options class. To mitigate the risk of executing all 3000 contracts without evaluating its positions, the market maker risk functionality will automatically remove its quotes in all series of the options class after it has executed a specified number of contracts (
To assure that all quotations are firm for their full size, the parameter calculations occur after an execution against a market maker's quote takes place. For example, if a market maker has set a parameter of 100 contracts during a 5 second interval for an options class, and has executed a total of 95 contracts in the options class within the previous 3 seconds, a quote in a series of that class with a size of 20 contracts continues to be firm for all 20 contracts. In this example, an incoming order could execute all 20 contracts of the quote, and following the execution, the total size parameter would add 20 contracts to the running total of 95. Since the total size executed within the 5 second time frame exceeds the 100 contracts established by the market maker for the options class, all of the market maker's quotes in the options class would be removed. The market maker would then enter new quotes in the class.
Use of these risk management tools is voluntary under the rules. Similarly, from a technical perspective, market makers currently do not need to enter
While entering values into the quotation risk parameters will be mandatory to prevent an inadvertent exposure to risk, the Exchange notes that market makers who prefer to use their own risk-management systems can enter values that assure the Exchange-provided parameters will not be triggered.
The Exchange believes that its proposal is consistent with Section 6(b) of the Securities Exchange Act of 1934 (the “Act”)
The Exchange believes that requiring market makers to enter values into the risk parameters provided by the Exchange will not be unreasonably burdensome, as all Topaz market makers currently utilize the functionality. Moreover, the Exchange is proposing this rule change at the request of its market makers to reduce their risk of inadvertently entering quotes without populating the risk parameters. As discussed above, the Exchange will be modifying the trading system to automatically reject quotations unless the parameters are populated with values, which will protect market makers from inadvertent exposure to excessive risk. Reducing such risk will enable market makers to enter quotations with larger size, which in turn will benefit investor through increased liquidity for the execution of their orders. Such increased liquidity benefits investors because they receive better prices and because it lowers volatility in the options market.
The proposed rule change does not impose any burden on competition. This proposal is based on a recently approved rule change by the International Securities Exchange, LLC (“ISE”) and is identical to the ISE proposal.
The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any unsolicited written comments from members or other interested parties.
The Exchange believes that the foregoing proposed rule change may take effect upon filing with the Commission pursuant to Section19(b)(3)(A)
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: (i) necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or 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.
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” or “Exchange Act”),
CME proposes to make an adjustment to one particular component of its current IRS margin model. The proposed change is reflected in an Advisory Notice issued to market participants (included below). Italicized text indicates additions; bracketed text indicates deletions.
•
•
In its filing with the Commission, CME included statements concerning the purpose 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 currently offers clearing for a variety of swaps products under the exclusive jurisdiction of the Commodity Futures Trading Commission (“CFTC”), including, specifically, clearing for over-the-counter (“OTC”) interest rate swaps (“IRS”). CME proposes to make certain changes to its current IRS margin model in relation to Singapore Dollar (“SGD”) IRS.
The current CME IRS margin model utilizes historical inputs. In August 2011, the Singapore Dollar Swap Offer Rate (“SOR”) turned negative due to inflows into the Singapore dollar. Inputs into the IRS margin model are undefined for negative rate environments. The proposed change will solve for the negative SOR inputs from the August 2011 timeframe. The changes are being communicated to market participants via advisory notices. The text of the most recent advisory notice, which announces the intended October 1, 2013 production date for the change, is the subject of this filing. Prior advisory notices also discussed this change in the context of providing market participants with notice of the change for the purpose of announcing a testing environment.
There are no CME rulebook changes associated with the changes. The changes do not materially affect the CME IRS margin model. The changes only affect CME's interest rate swap clearing offering and do not materially impact CME's security-based swap clearing business. CME also notes that it has also submitted the proposed rule changes that are the subject of this filing to its primary regulator, the CFTC, in a separate filing. The changes became effective with the CFTC as of September 23, 2013. The changes are effective on filing but will become operational on October 1, 2013.
CME believes the proposed rule changes are consistent with the requirements of the Exchange Act including Section 17A of the Exchange Act.
Furthermore, the proposed changes are limited in their effect to swaps products offered under CME's authority to act as a derivatives clearing organization. These products are under the exclusive jurisdiction of the CFTC. As such, the proposed CME changes are limited to CME's activities as a derivatives clearing organization clearing swaps that are not security-based swaps; CME notes that the policies of the CFTC with respect to administering the Commodity Exchange Act are comparable to a number of the policies underlying the Exchange Act, such as promoting market transparency for over-the-counter derivatives markets, promoting the prompt and accurate clearance of transactions and protecting investors and the public interest.
Because the proposed changes are limited in their effect to swaps products offered under CME's authority to act as a derivatives clearing organization, the proposed changes are properly classified as effecting a change in an existing service of CME that:
(a) primarily affects the clearing operations of CME with respect to products that are not securities, including futures that are not security futures, and swaps that are not security-based swaps or mixed swaps; and
(b) does not significantly affect any securities clearing operations of CME or any rights or obligations of CME with respect to securities clearing or persons using such securities-clearing service.
CME does not believe that the proposed rule change will have any impact, or impose any burden, on competition. The proposed rule changes simply involve enhancements to CME's current IRS margin methodology.
CME has not solicited comments regarding this proposed rule change. CME has not received any unsolicited written comments from interested parties.
The foregoing rule change has become effective upon filing pursuant to Section 19(b)(3)(A)(iii) 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.
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–2013–21 and should be submitted on or before November 12, 2013.
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”)
FINRA is proposing to amend FINRA Rule 7730 to: (1) Provide for Trade Reporting and Compliance Engine (“TRACE”) data fees for real-time and historic data sets of transactions in TRACE-Eligible Securities
The text of the proposed rule change is available on FINRA's Web site at
In its filing with the Commission, FINRA 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. FINRA has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
Recently, FINRA amended FINRA Rule 6750, FINRA Rule 7730 and TRACE dissemination protocols to provide greater transparency in Rule 144A transactions in TRACE-Eligible Securities.
In this proposed rule change, FINRA proposes to establish fees for the real-time disseminated Rule 144A transaction data and the Historic TRACE Data for Rule 144A transactions, clarify Level II Full Service Web Browser fee rates in light of the availability of additional data sets, and incorporate other technical amendments in FINRA Rule 7730.
In the Rule 144A Dissemination Rule Change, FINRA amended FINRA Rule 7730(c) to establish the Rule 144A transaction data set (“Rule 144A Data Set”), which is similar to the data sets established for corporate bonds (“Corporate Bond Data Set”), Agency Debt Securities (“Agency Data Set”) and Asset-Backed Securities (“ABS Data Set”).
In addition, in the Rule 144A Dissemination Rule Change, FINRA amended FINRA Rule 7730(d) to establish a historic data set for Rule 144A transactions (“Historic Rule 144A Data Set”), which is similar to the data sets established for corporate bonds (“Historic Corporate Bond Data Set”), Agency Debt Securities (“Historic Agency Data Set”) and Asset-Backed Securities (“Historic ABS Data Set”) referenced in the rule.
FINRA also proposes two clarifying amendments to other provisions of Rule 7730 as discussed below.
FINRA proposes to clarify in FINRA Rule 7730(a)(1) applicable fees when a firm uses a TRACE web browser that includes access to real-time TRACE transaction data. The subscription rate
The trade reporting fees for transactions in TRACE-Eligible Securities are set forth in FINRA Rule 7730(b)(1). For Agency Pass-Through Mortgage-Backed Securities, as defined in FINRA Rule 6710(v), traded to be announced (“TBA”), as defined in FINRA Rule 6710(u), the trade reporting fee is $1.50 per transaction. At the time the TBA reporting fee was established, FINRA had not defined TBA transactions to include those involving SBA-Backed ABS; however, FINRA intended the TBA reporting fee to apply to all TBA transactions. Accordingly, FINRA proposes to clarify that SBA-Backed ABS, as defined in FINRA Rule 6710(bb), traded TBA are subject to the $1.50 per transaction trade reporting fee.
FINRA has filed the proposed rule change for immediate effectiveness. The implementation date of the proposed rule change will be the same as the effective date of the Rule 144A Dissemination Rule Change.
FINRA believes that the proposed rule change is consistent with the provisions of Section 15A(b)(5) of the Exchange Act,
FINRA believes that the proposed fees for the Rule 144A Data Set and Historic Rule 144A Data Set that are an extension of the fee rates that are assessed currently for existing real-time and historic data sets are reasonable, equitably allocated and not unfairly discriminatory. FINRA believes that the proposed fees are reasonable in light of FINRA's regulatory and operational costs, including personnel, technology and storage costs to collect and provide real-time and historic Rule 144A transaction data and the increase in such costs incurred by FINRA over time. FINRA proposes fees at the rates that have been in effect for several years for similar data bases, and such fees are designed to defray a portion of such costs.
FINRA believes that the proposed rule change provides for the equitable allocation of the proposed fees among member firms and other market participants and data users, and is not unfairly discriminatory. The Rule 144A Data Set and Historic Rule 144A Data Set would be accessible by all member firms and other market participants and data users, subject to the same fee rates that are in effect for the real-time and historic Corporate Bond, Agency and ABS data sets. As with fees for other data sets (real-time and historic) provided by FINRA, the proposed fees would be charged only to those member firms and other market participants and data users that opt to receive a subscription to the applicable data set. FINRA proposes to charge qualifying Tax-Exempt Organizations
FINRA believes that the proposed amendments regarding the Level II Full Service Web Browser subscription fees are reasonable in light of FINRA's regulatory and operational costs, including personnel, technology and storage costs to collect and provide real-time transaction data and the increase in such costs incurred by FINRA over time. FINRA proposes amendments to allow members to access additional data bases at the same fee rate that has been in effect for several years, and such fees are designed to defray a portion of such costs. FINRA also believes that such amendments provide for the equitable allocation of fees among member firms in that the combined service/market data product, which allows members to report and review the member's transactions and to access market data, is available to all firms that wish to subscribe at the same rate. In addition, FINRA believes that the additional proposed fees for access to additional data sets as part of the Level II Full Service Web Browser are not unfairly discriminatory because the Level II Full Service Web Browser service is available to all members.
Finally, FINRA believes that applying the TBA reporting fee that currently applies to almost all TBA transactions to an additional small number of TBA transactions is a reasonable and fair fee assessment, and results in a fee that is equitably allocated among members engaged in similar transactions. Also, the proposed fee is not unfairly discriminatory in that all members engaged in such TBA transactions will be subject to the same fee.
FINRA does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Exchange Act.
Written comments were neither solicited nor received.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) 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 Exchange is proposing to list and trade shares of the iShares Liquidity Income Fund (“Fund”) of the iShares U.S. ETF Trust (“Trust”) under BATS Rule 14.11(i) (“Managed Fund Shares”). The shares of the Fund are collectively referred to herein as the “Shares.”
The text of the proposed rule addition is available at the Exchange's Web site 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 parts of such statements.
The Exchange proposes to list and trade the Shares under BATS Rule 14.11(i), which governs the listing and trading of Managed Fund Shares on the Exchange.
BlackRock Fund Advisors is the investment adviser (“BFA” or “Adviser”) to the Fund.
BATS Rule 14.11(i)(7) provides that, if the investment adviser to the investment company issuing Managed Fund Shares is affiliated with a broker-dealer, such investment adviser shall erect a “fire wall” between the investment adviser and the broker-dealer with respect to access to information concerning the composition and/or changes to such investment company portfolio.
According to the Registration Statement, the Fund will seek to provide current income consistent with preservation of capital. To achieve its objective, the Fund will invest, under normal circumstances,
The Fund will hold Fixed Income Securities of at least 13 non-affiliated issuers. The Fund will not purchase the securities of issuers conducting their principal business activity in the same industry if, immediately after the purchase and as a result thereof, the value of the Fund's investments in that industry would equal or exceed 25% of the current value of the Fund's total assets, provided that this restriction does not limit the Fund's: (i) Investments in securities of other investment companies; (ii) investments in securities issued or guaranteed by the U.S. government, its agencies or instrumentalities; or (iii) investments in repurchase agreements collateralized by U.S. government securities.
The Fund intends to qualify each year as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended.
The Fund intends to achieve its investment objective by investing, under normal circumstances, at least 80% of its net assets in a portfolio of U.S.
Fixed Income Securities will include fixed and floating rate debt securities, such as corporate
The Fund will invest in asset-backed and mortgage-backed Fixed Income Securities.
The Fund's investments will be consistent with the Fund's investment objective and will not be used to enhance leverage. Under normal circumstances, the dollar-weighted average life of the Fund's portfolio is expected to be one year or less, as calculated by the Adviser.
The Fund is an actively-managed fund that does not seek to replicate the performance of a specified index. The Exchange notes, however, that the Fund's portfolio will meet certain criteria for index-based, fixed income exchange-traded funds contained in Rule 14.11(c)(4)(B)(i).
The Fund may, to a limited extent (under normal circumstances, less than 20% of the Fund's net assets), engage in transactions in futures contracts, options, and swaps.
The Fund may hold up to an aggregate amount of 15% of its net assets in illiquid securities (calculated at the time of investment), including Rule 144A securities deemed illiquid by the Adviser
According to the Registration Statement, the net asset value (“NAV”) of the Fund's Shares generally will be calculated once daily Monday through Friday as of the close of regular trading on the New York Stock Exchange (“NYSE”), generally 4:00 p.m. Eastern Time (“NAV Calculation Time”) on each day that NYSE is open for trading, based on prices at the NAV Calculation Time. NAV per Share is calculated by dividing the Fund's net assets by the number of Fund Shares outstanding. The Fund's net assets are valued primarily on the basis of market quotations.
According to the Registration Statement, the Fund values Fixed Income Securities using prices provided directly from one or more broker-dealers, market makers, or independent third-party pricing services which may use matrix pricing and valuation models to derive values. Swap agreements and other derivatives are generally valued based upon quotations from market makers or by a pricing service in accordance with valuation procedures approved by the Fund's board of directors. Certain short-term debt securities may be valued on the basis of amortized cost. Intraday, executable price quotations on Fixed Income Securities and other assets are available from major broker-dealer firms and for exchange-traded assets, including investment companies, futures, and options, such intraday information is available directly from the applicable listing exchange.
According to the Registration Statement, generally, trading in certain Fixed Income Securities is substantially completed each day at various times prior to the close of business on NYSE. Generally, trading in certain derivatives is substantially completed each day at various times prior to the close of business on NYSE. The values of such securities and derivatives used in computing the NAV of the Fund are determined at such times.
According to the Registration Statement, when market quotations are not readily available or are believed by BFA to be unreliable, the Fund's investments are valued at fair value. Fair value determinations are made by BFA in accordance with policies and procedures approved by the Fund's board of directors and in accordance with the 1940 Act. BFA may conclude that a market quotation is not readily available or is unreliable if a security or other asset or liability is thinly traded, or where there is a significant event
According to the Registration Statement, fair value represents a good faith approximation of the value of an asset or liability. The fair value of an asset or liability held by the Fund is the amount the Fund might reasonably expect to receive from the current sale of that asset or the cost to extinguish that liability in an arm's-length transaction. Valuing the Fund's investments using fair value pricing will result in prices that may differ from current valuations and that may not be the prices at which those investments could have been sold during the period in which the particular fair values were used. The value of assets or liabilities denominated in non-U.S. currencies will be converted into U.S. dollars using exchange rates deemed appropriate by BFA in its role as Adviser.
For more information regarding the valuation of Fund investments in calculating the Fund's NAV, see the Registration Statement.
The Fund will issue and redeem Shares on a continuous basis at the NAV per Share only in large blocks of a specified number of Shares or multiples thereof (“Creation Units”) in transactions with authorized participants who have entered into agreements with the Distributor. The Fund currently anticipates that a Creation Unit will consist of 50,000 Shares, though this number may change from time to time, including prior to listing of the Fund. The exact number of Shares that will constitute a Creation Unit will be disclosed in the Registration Statement of the Fund. Once created, Shares of the Fund trade on the secondary market in amounts less than a Creation Unit.
The consideration for purchase of Creation Units of the Fund generally will consist of the in-kind deposit of a designated portfolio of securities (including any portion of such securities for which cash may be substituted) (
The portfolio of securities required for purchase of a Creation Unit may not be
The Cash Component will be an amount equal to the difference between the NAV of the Shares (per Creation Unit) and the “Deposit Amount,” which will be an amount equal to the market value of the Deposit Securities, and serve to compensate for any differences between the NAV per Creation Unit and the Deposit Amount. The Fund generally offers Creation Units partially for cash. BFA will make available through the National Securities Clearing Corporation (“NSCC”) on each business day, prior to the opening of business on the Exchange, the list of names and the required number or par value of each Deposit Security and the amount of the Cash Component to be included in the current Fund Deposit (based on information as of the end of the previous business day) for the Fund.
The identity and number or par value of the Deposit Securities may change pursuant to changes in the composition of the Fund's portfolio as rebalancing adjustments and corporate action events occur from time to time. The composition of the Deposit Securities may also change in response to adjustments to the weighting or composition of the holdings of the Fund.
The Fund reserves the right to permit or require the substitution of a “cash in lieu” amount to be added to the Cash Component to replace any Deposit Security that may not be available in sufficient quantity for delivery or that may not be eligible for transfer through the Depository Trust Company (“DTC”) or the clearing process through the NSCC.
Except as noted below, all creation orders must be placed for one or more Creation Units and must be received by the Distributor in proper form no later than 4:00 p.m. Eastern Time, in each case on the date such order is placed in order for creation of Creation Units to be effected based on the NAV of Shares of the Fund as next determined on such date after receipt of the order in proper form. Orders requesting substitution of a “cash in lieu” amount generally must be received by the Distributor no later than 2:00 p.m. Eastern Time on the Settlement Date. The “Settlement Date” is generally the third business day after the transmittal date. On days when the Exchange or the bond markets close earlier than normal, the Fund may require orders to create or to redeem Creation Units to be placed earlier in the day.
Fund Deposits must be delivered through the Federal Reserve System (for cash and government securities), through DTC (for corporate and municipal securities), or through a central depository account, such as with Euroclear or DTC, maintained by State Street or a sub-custodian (“Central Depository Account”) by an authorized participant. Any portion of a Fund Deposit that may not be delivered through the Federal Reserve System or DTC must be delivered through a Central Depository Account. The Fund Deposit transfer must be ordered by the authorized participant in a timely fashion so as to ensure the delivery of the requisite number of Deposit Securities to the account of the Fund by no later than 3:00 p.m. Eastern Time on the Settlement Date.
A standard creation transaction fee will be imposed to offset the transfer and other transaction costs associated with the issuance of Creation Units.
Shares of the Fund may be redeemed only in Creation Units at their NAV next determined after receipt of a redemption request in proper form by the Distributor and only on a business day. BFA will make available through the NSCC, prior to the opening of business on the Exchange on each business day, the designated portfolio of securities (including any portion of such securities for which cash may be substituted) that will be applicable (subject to possible amendment or correction) to redemption requests received in proper form on that day (“Fund Securities”). Fund Securities received on redemption may not be identical to Deposit Securities that are applicable to creations of Creation Units.
Unless cash redemptions are available or specified for the Fund, the redemption proceeds for a Creation Unit generally will consist of a specified amount of cash, Fund Securities, plus additional cash in an amount equal to the difference between the NAV of the Shares being redeemed, as next determined after the receipt of a request in proper form, and the value of the specified amount of cash and Fund Securities, less a redemption transaction fee. The Fund generally redeems Creation Units partially for cash.
A standard redemption transaction fee will be imposed to offset transfer and other transaction costs that may be incurred by the Fund.
Redemption requests for Creation Units of the Fund must be submitted to the Distributor by or through an authorized participant no later than 4:00 p.m. Eastern Time on any business day in order to receive that day's NAV. The authorized participant must transmit the request for redemption in the form required by the Fund to the Distributor in accordance with procedures set forth in the authorized participant agreement.
Additional information regarding the Shares and the Fund, including investment strategies, risks, creation and redemption procedures, fees and expenses, portfolio holdings disclosure policies, distributions, taxes, and reports to be distributed to beneficial owners of the Shares can be found in the Registration Statement or on the Web site for the Fund (
The Fund's Web site, which will be publicly available prior to the public offering of Shares, will include a form of the prospectus for the Fund that may be downloaded. The Web site will include additional quantitative information updated on a daily basis, including, for the Fund: (1) The prior business day's reported NAV, mid-point of the bid/ask spread at the time of calculation of such NAV (“Bid/Ask Price”),
In addition, for the Fund, an estimated value, defined in BATS Rule 14.11(i)(3)(C) as the “Intraday Indicative Value,” that reflects an estimated intraday value of the Fund's portfolio, will be disseminated. Moreover, the Intraday Indicative Value will be based upon the current value for the components of the Disclosed Portfolio and will be updated and widely disseminated by one or more major market data vendors at least every 15 seconds during the Exchange's Regular Trading Hours.
The dissemination of the Intraday Indicative Value, together with the Disclosed Portfolio, will allow investors to determine the value of the underlying portfolio of the Fund on a daily basis and provide a close estimate of that value throughout the trading day.
Intraday, executable price quotations on Fixed Income Securities and other assets are available from major broker-dealer firms and for exchange-traded assets, including investment companies, futures, and options, such intraday information is available directly from the applicable listing exchange. All such intraday price information is available through subscription services, such as Bloomberg, Thomson Reuters, and International Data Corporation, which can be accessed by authorized participants and other investors.
Information regarding market price and volume of the Shares will be continually available on a real-time basis throughout the day on brokers' computer screens and other electronic services. The previous day's closing price and trading volume information for the Shares will be published daily in the financial section of newspapers. Quotation and last-sale information for the Shares will be available on the facilities of the CTA.
The Shares will be subject to BATS Rule 14.11(i), which sets forth the initial and continued listing criteria applicable to Managed Fund Shares. The Exchange represents that, for initial and/or continued listing, the Fund must be in compliance with Rule 10A–3 under the Act.
With respect to trading halts, the Exchange may consider all relevant factors in exercising its discretion to halt or suspend trading in the Shares of the Fund. The Exchange will halt trading in the Shares under the conditions specified in BATS Rule 11.18. Trading may be halted because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable. These may include: (1) The extent to which trading is not occurring in the securities and/or the financial instruments composing the Disclosed Portfolio of the Fund; or (2) whether other unusual conditions or circumstances detrimental to the maintenance of a fair and orderly market are present. Trading in the Shares also will be subject to Rule 14.11(i)(4)(B)(iv), which sets forth circumstances under which Shares of the Fund may be halted.
The Exchange deems the Shares to be equity securities, thus rendering trading in the Shares subject to the Exchange's existing rules governing the trading of equity securities. BATS will allow trading in the Shares from 8:00 a.m. until 5:00 p.m. Eastern Time. The Exchange has appropriate rules to facilitate transactions in the Shares during all trading sessions. As provided in BATS Rule 11.11(a), the minimum price variation for quoting and entry of orders in Managed Fund Shares traded on the Exchange is $0.01, with the exception of securities that are priced less than $1.00, for which the minimum price variation for order entry is $0.0001.
The Exchange believes that its surveillance procedures are adequate to properly monitor the trading of the Shares on the Exchange during all trading sessions and to deter and detect violations of Exchange rules and the applicable federal securities laws. Trading of the Shares through the Exchange will be subject to the Exchange's surveillance procedures for derivative products, including Managed Fund Shares. The Exchange may obtain information regarding trading in the Shares and the underlying shares in investment companies, futures, and options via the Intermarket Surveillance Group (“ISG”), from other exchanges who are members or affiliates of the ISG, or with which the Exchange has entered into a comprehensive surveillance sharing agreement.
Prior to the commencement of trading, the Exchange will inform its members in an Information Circular of the special characteristics and risks associated with trading the Shares. Specifically, the Information Circular will discuss the following: (1) The procedures for purchases and redemptions of Shares in Creation Units (and that Shares are not individually redeemable); (2) BATS Rule 3.7, which imposes suitability obligations on Exchange members with respect to recommending transactions in the Shares to customers; (3) how information regarding the Intraday Indicative Value is disseminated; (4) the risks involved in trading the Shares during the Pre-Opening
In addition, the Information Circular will advise members, prior to the commencement of trading, of the prospectus delivery requirements applicable to the Fund. Members purchasing Shares from the Fund for resale to investors will deliver a prospectus to such investors. The Information Circular will also discuss any exemptive, no-action, and interpretive relief granted by the Commission from any rules under the Act.
In addition, the Information Circular will reference that the Fund is subject to various fees and expenses described in the Registration Statement. The Information Circular will also disclose the trading hours of the Shares of the Fund and the applicable NAV Calculation Time for the Shares. The Information Circular will disclose that information about the Shares of the Fund will be publicly available on the Fund's Web site. In addition, the Information Circular will reference that the Trust is subject to various fees and expenses described in the Fund's Registration Statement.
The Exchange believes that the proposal is consistent with Section 6(b) of the Act
The Exchange believes that the proposed rule change is designed to prevent fraudulent and manipulative acts and practices in that the Shares will be listed and traded on the Exchange pursuant to the initial and continued listing criteria in BATS Rule 14.11(i). The Exchange believes that its surveillance procedures are adequate to properly monitor the trading of the Shares on the Exchange during all trading sessions and to deter and detect violations of Exchange rules and the applicable federal securities laws. If the investment adviser to the investment company issuing Managed Fund Shares is affiliated with a broker-dealer, such investment adviser to the investment adviser shall erect a “fire wall” between the investment adviser and the broker-dealer with respect to access to information concerning the composition and/or changes to such investment company portfolio. The Adviser is not a registered broker-dealer, but is affiliated with multiple broker-dealers and has implemented “fire walls” with respect to such broker-dealers regarding access to information concerning the composition and/or changes to the Fund's portfolio. The Exchange may obtain information regarding trading in the Shares and the underlying shares in investment companies, futures, and options via the ISG, from other exchanges who are members or affiliates of the ISG, or with which the Exchange has entered into a comprehensive surveillance sharing agreement.
According to the Registration Statement, the Fund expects that it will have at least 80% of its assets invested in U.S. dollar-denominated investment grade Fixed Income Securities. The Fund's exposure to any single industry will generally be limited to 25% of the Fund's assets. The Fund's investments will be consistent with the Fund's investment objective and will not be used to enhance leverage. The Fund also may invest its net assets in money market instruments at the discretion of the Adviser. The Fund may invest up to 5% of its net assets in Fixed Income Securities and instruments of issuers that are domiciled in emerging market countries. While the Fund is permitted to invest without restriction in corporate bonds, the Adviser expects that, under normal circumstances, the Fund will generally seek to invest in corporate bond issuances that have at least $100 million par amount outstanding in developed countries and at least $200 million par amount outstanding in emerging market countries. The Fund will not invest in non-U.S. equity securities.
Additionally, the Fund may hold up to an aggregate amount of 15% of its net assets in illiquid securities (calculated at the time of investment), including Rule 144A securities. The Fund will monitor its portfolio liquidity on an ongoing basis to determine whether, in light of current circumstances, an adequate level of liquidity is being maintained, and will consider taking appropriate steps in order to maintain adequate liquidity if, through a change in values, net assets, or other circumstances, more than 15% of the Fund's net assets are held in illiquid securities. Illiquid securities include securities subject to contractual or other restrictions on resale and other instruments that lack readily available markets as determined in accordance with Commission staff guidance. The Fund may engage in derivatives transactions, including transactions in futures contracts, options, and swaps, to a limited extent.
The proposed rule change is designed to promote just and equitable principles of trade and to protect investors and the public interest in that the Exchange will obtain a representation from the issuer of the Shares that the NAV per Share will be calculated daily and that the NAV and the Disclosed Portfolio will be made available to all market participants at the same time. In addition, a large amount of information is publicly available regarding the Fund and the Shares, thereby promoting market transparency. Moreover, the Intraday Indicative Value will be disseminated by one or more major market data vendors at least every 15 seconds during Regular Trading Hours. On each business day, before commencement of trading in Shares during Regular Trading Hours, the Fund will disclose on its Web site the Disclosed Portfolio that will form the basis for the Fund's calculation of NAV at the end of the business day. Pricing information will be available on the Fund's Web site including: (1) The prior business day's reported NAV, the Bid/Ask Price of the Fund, and a calculation of the premium and discount of the Bid/Ask Price against the NAV; and (2) data in chart format displaying the frequency distribution of discounts and premiums of the daily Bid/Ask Price against the NAV, within appropriate ranges, for each of the four previous calendar quarters. Additionally, information regarding market price and trading of the Shares will be continually available on a real-time basis throughout the day on brokers' computer screens and other electronic services, and quotation and last-sale information for the Shares will be available on the facilities of the CTA. The Web site for the Fund will include a form of the prospectus for the Fund
Intraday, executable price quotations on Fixed Income Securities and other assets are available from major broker-dealer firms and for exchange-traded assets, including investment companies, futures, and options, such intraday information is available directly from the applicable listing exchange. Such intraday price information is available through subscription services, such as Bloomberg, Thomson Reuters, and International Data Corporation, which can be accessed by authorized participants and other investors.
The proposed rule change is designed to perfect the mechanism of a free and open market and, in general, to protect investors and the public interest in that it will facilitate the listing and trading of an additional type of actively-managed exchange-traded product that will enhance competition among market participants, to the benefit of investors and the marketplace. As noted above, the Exchange has in place surveillance procedures relating to trading in the Shares and may obtain information via ISG from other exchanges that are members of ISG or with which the Exchange has entered into a comprehensive surveillance sharing agreement. In addition, as noted above, investors will have ready access to information regarding the Fund's holdings, the Intraday Indicative Value, the Disclosed Portfolio, and quotation and last-sale information for the Shares.
For the above reasons, the Exchange believes that the proposed rule change is consistent with the requirements of Section 6(b)(5) of the Act.
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 purpose of the Act. The Exchange notes that the proposed rule change will facilitate the listing and trading of an additional actively-managed exchange-traded product that will enhance competition among market participants, to the benefit of investors and the marketplace.
The Exchange has neither solicited nor received written comments on the proposed rule change.
Within 45 days of the date of publication of this notice in the
A. By order approve or disapprove such 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.
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”),
Chicago Board Options Exchange, Incorporated (the “Exchange” or “CBOE”) proposes to amend the fee schedule of Market Data Express, LLC (“MDX”), an affiliate of CBOE, to establish fees for the Complex Order Book (“COB”) Data Feed for CBOE listed options (“COB Data Feed” or “Data”). The text of the proposed rule change is available on the Exchange's Web site (
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 COB Data Feed is a real-time feed that consists of data regarding the Exchange's Complex Order Book and related complex order information. The COB Data Feed includes “best bid and offer” or “BBO” quotes and identifying information for all CBOE-traded complex order strategies, as well as all executed CBOE complex order trades (and identifies whether the trade was a customer trade or whether a complex order in the COB is a customer order). The COB Data Feed is currently made available by MDX to all market participants free of charge.
The Exchange proposes to establish fees for the COB Data Feed. MDX would charge Customers of the COB Data Feed $3,000 per month (“Data Fee”). A COB Data Feed “Customer” is any entity that receives the COB Data Feed, either directly from MDX's system or through a connection to MDX provided by an approved redistributor (
In addition, MDX would charge a Customer “User Fees” of $25 per month per Device
The Exchange also proposes to make several formatting and clean up changes to the MDX fee schedule. The Exchange proposes to create three separate sections on the MDX fee schedule for the BBO Data Feed, COB Data Feed and FLEX Options Data Feed
The proposed fees would be effective on October 1, 2013.
The Exchange believes the proposed rule change is consistent with the requirements of Section 6(b) of the Securities Exchange Act of 1934 (“Act”)
The Exchange believes the proposed waiver of the Data Fee is equitable and not unfairly discriminatory because it would apply equally to all Customers of the COB Data Feed who are also Customers of the BBO Data Feed. Customers of the BBO Data Feed already pay MDX $5,000 for the right to use and redistribute the data in the BBO Data Feed. The BBO Data Feed includes the data in the COB Data Feed. The proposed waiver of the Data Fee would allow a Customer of the COB Data Feed who is also a Customer of the BBO Data Feed to redistribute the COB Data Feed for no additional charge, thereby incentivizing further redistribution of the data in the COB Data Feed. The Exchange notes other exchanges offer similar fee waivers.
The Exchange also believes the proposed fees are equitable because the COB Data Feed is purely optional. Only those Customers that deem the product to be of sufficient overall value and usefulness would purchase it.
The Exchange believes the proposed fees are reasonable because they compare favorably to fees that other markets charge for similar products. For example, the Exchange believes The International Securities Exchange (“ISE”) offers a “Spread Feed”, which like the COB Data Feed includes order and quote data for complex strategies. The Exchange believes ISE charges distributors of its Spread Feed $3,000 per month and a monthly controlled device fee of $25 per controlled device for Professionals.
The Exchange notes that the COB Data Feed also competes with products offered by NASDAQ OMX PHLX and NYSE. NASDAQ OMX PHLX offers a market data product entitled “TOPO Plus Orders”, which like the COB Data Feed includes order and last sale information for complex strategies and other market data. NYSE offers market data products entitled “NYSE ArcaBook for Amex Options” and “NYSE ArcaBook for Arca Options” that include top-of-book and last sale data for complex strategies similar to the data in the COB Data Feed.
The Exchange believes that the proposed cap on User Fees is reasonable because it may encourage more vendors to choose to offer the COB Data Feed, thereby expanding the distribution of this market data for the benefit of investors.
The proposed formatting and clean-up changes to the MDX fee schedule will benefit Customers and users by making the fee schedule clearer and easier to understand.
For the reasons cited above, the Exchange believes the proposed fees for the COB Data Feed are equitable, reasonable and not unfairly discriminatory. In addition, the Exchange believes that no substantial countervailing basis exists to support a finding that the proposed fees for the COB Data Feed fails to meet the requirements of the Act.
In accordance with Section 6(b)(8) of the Act,
In addition, in the case of products that are distributed through market data vendors, the market data vendors themselves provide additional price discipline for proprietary data products because they control the primary means of access to certain end users. These vendors impose price discipline based upon their business models. For example, vendors that assess a surcharge on data they sell are able to refuse to offer proprietary products that their end users do not or will not purchase in sufficient numbers. Internet portals, such as Google, impose price discipline by providing only data that they believe will enable them to attract “eyeballs” that contribute to their advertising revenue. Similarly, Customers will not offer the COB Data Feed unless this product will help them maintain current users or attract new ones. For example, a broker-dealer will not choose to offer the COB Data Feed to its retail customers unless the broker-dealer believes that the retail customers will use and value the data and the provision of such data will help the broker-dealer maintain the customer relationship, which allows the broker-dealer to generate profits for itself. Professional Users will not request the COB Data Feed from Customers unless they can use the data for profit-generating purposes in their businesses. All of these operate as constraints on pricing proprietary data products.
Analyzing the cost of market data product production and distribution in isolation from the cost of all of the inputs supporting the creation of market data and market data products will inevitably underestimate the cost of the data and data products. Thus, because it is impossible to obtain the data inputs to create market data products without a fast, technologically robust, and well-regulated execution system, system costs and regulatory costs affect the price of both obtaining the market data itself and creating and distributing market data products. It would be equally misleading, however, to attribute all of an exchange's costs to the market data portion of an exchange's joint products. Rather, all of an exchange's costs are incurred for the unified purposes of attracting order flow, executing and/or routing orders, and generating and selling data about market activity. The total return that an exchange earns reflects the revenues it receives from the joint products and the total costs of the joint products.
The level of competition and contestability in the market is evident in the numerous alternative venues that compete for order flow, including 12 options self-regulatory organization (“SRO”) markets, as well as internalizing broker-dealers (“BDs”) and various forms of alternative trading systems (“ATSs”), including dark pools and electronic communication networks (“ECNs”). Competition among trading platforms can be expected to constrain the aggregate return that each platform earns from the sale of its joint products, but different platforms may choose from a range of possible, and equally reasonable, pricing strategies as the means of recovering total costs. For example, some platforms may choose to pay rebates to attract orders, charge relatively low prices for market data products (or provide market data products free of charge), and charge relatively high prices for accessing posted liquidity. Other platforms may choose a strategy of paying lower rebates (or no rebates) to attract orders, setting relatively high prices for market data products, and setting relatively low prices for accessing posted liquidity. In this environment, there is no economic basis for regulating maximum prices for one of the joint products in an industry in which suppliers face competitive constraints with regard to the joint offering.
Further, data products are valuable to professional users only if they can be used for profit-generating purposes in their businesses and valuable to non-professional users only insofar as they provide information that such users expect will assist them in tracking prices and market trends and making trading decisions. The Exchange believes that the proposed waiver of the Data Fee and the cap on User Fees, which may permit wider distribution of the COB Data Feed at a lower cost to Customers with a large number of Professional and Non-professional Users, may encourage more users to demand and more Customers to choose to offer the COB Data Feed, thereby benefitting Professional and Non-professional Users, including public investors.
The existence of numerous alternatives to the Exchange's products, including proprietary data from other sources, ensures that the Exchange cannot set unreasonable fees, or fees that are unreasonably discriminatory, when vendors and subscribers can elect these alternatives or choose not to purchase a specific proprietary data product if its cost to purchase is not justified by the returns any particular vendor or subscriber would achieve through the purchase.
The COB Data Feed is voluntary on the part of the Exchange, which is not required to offer such services, and voluntary on the part of prospective Customers that are not required to use it. The Exchange believes the COB Data Feed offered by MDX will help attract new users and new order flow to the Exchange, thereby improving the Exchange's ability to compete in the market for options order flow and executions.
The Exchange neither solicited nor received comments on the proposed rule change.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) 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)
The Exchange proposes a temporary suspension of those aspects of Rules 36.20—Equities and 36.21—Equities that would not permit Floor brokers to use personal portable phone devices on the Trading Floor due to the unavailability of Exchange-provided cell phones beginning on October 10, 2013 until the earlier of when cell phone service is restored or October 11, 2013. 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 temporarily suspend those aspects of Rules 36.20—Equities and 36.21—Equities that would not permit Floor brokers to use personal portable phone devices on the Trading Floor.
On October 10, 2013, the third-party carrier that provides service for the Exchange-provided cell phones experienced an issue that affected Exchange authorized and provided portable phones for Floor brokers. This outage only impacted the service for Exchange authorized and provided portable phones. As a result, all Exchange authorized and provided cell phones were non-operational before the opening of trading on October 10, 2013. The Exchange is working closely with the third-party carrier to restore such cell phone service.
Rules 36.20—Equities and 36.21—Equities govern the type of telephone communications that are approved for Floor brokers. Pursuant to Rule 36.20—Equities, Floor brokers may maintain a telephone line on the Trading Floor and use Exchange authorized and provided portable phones while on the Trading Floor. The use of such Exchange authorized and provided portable phones is governed by Rule 36.21—Equities. Because of the issues with the third-party carrier, all Exchange authorized and provided portable phones are not functional and therefore Floor brokers cannot use the Exchange authorized and provided portable phones. However, the personal cell phones of Floor brokers are operational on the Trading Floor. The Exchange believes that because communications with customers is a vital part of a Floor broker's role as agent and therefore contributes to maintaining a fair and orderly market, during the period when Exchange-provided cell phones are non-operational, Floor brokers should be permitted to use personal portable phone devices in lieu of the non-operational Exchange authorized and provided portable phones.
The Exchange therefore proposes to temporarily suspend the limitations in Rules 36.20—Equities and 36.21—Equities that permit Floor brokers to use only Exchange authorized and provided portable phones so that Floor brokers may also use personal portable phones on the Trading Floor. The Exchange proposes that pursuant to this temporary suspension, Floor brokers must provide the Exchange with the names of all Floor-based personnel who used personal portable phones during this temporary suspension period, together with the phone number and applicable carrier for each number.
The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,
In particular, because of issues experienced by a third-party cell phone carrier, Exchange authorized and provided cell phones are not functional. The Exchange believes that the proposed temporary suspensions from those aspects of Rule 36—Equities that restrict Floor broker's use of personal portable phones on the Trading Floor removes impediments to and perfects the mechanism of a free and open market and national market system because the proposed relief will enable Floor brokers to conduct their regular business, notwithstanding the ongoing issues with telephone service. The Exchange further believes that without the requested relief, Floor brokers would be compromised in their ability to conduct their regular course of business on the Trading Floor. In particular, for Floor brokers, because they operate as agents for customers, their inability to communicate with customers could compromise their ability to represent public orders on the Trading Floor.
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. The Exchange does not believe that the proposed rule change will impose any burden on competition because the proposed change only impacts Floor brokers and has no change in operations for other market participants or other market centers. To the contrary, the Exchange believes that without the proposed relief, Floor brokers would be compromised in their ability to conduct their regular course of business on the Trading Floor, thereby placing a burden on the Floor brokers' ability to compete.
No written comments were solicited or received with respect to the proposed rule change.
The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act
A proposed rule change filed under Rule 19b–4(f)(6)
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. If the Commission takes such action, the Commission shall institute proceedings under Section 19(b)(2)(B) 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.
All submissions should refer to File Number SR–NYSEMKT–2013–82. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will
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 filed a proposal to amend the fee schedule applicable to Members
The text of the proposed rule change is available at the Exchange's Web site 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 parts of such statements.
The Exchange proposes to modify its fee schedule applicable to use of the Exchange effective October 1, 2013, in order to: (1) Increase the fee to remove liquidity from the Exchange's order book in all securities; (2) modify the tiered rebate structure applicable to adding liquidity to the Exchange's order book in securities priced $1.00 or above; (3) adopt an additional rebate incentive (subject to average daily volume requirements) for orders that join the national best bid or national best offer (the “NBBO”) when the Exchange is not already at the NBBO (“NBBO Joiner” orders); and (4) make various formatting changes to enhance and simplify the fee schedule.
The Exchange currently charges $0.0029 per share for all orders executed on the Exchange that remove liquidity from the Exchange in securities priced $1.00 per share or above. The Exchange proposes to increase this standard fee to remove liquidity from the Exchange to $0.0030 per share.
Consistent with the current fee to remove liquidity, the $0.0030 charge per share for executions that remove liquidity from the Exchange will not apply to executions that remove liquidity in securities priced under $1.00 per share. The Exchange proposes to increase the fee for such executions from 0.10% of the total dollar value of the execution to 0.30% of the total dollar value of the execution.
The Exchange currently operates a tiered pricing structure through which Members can realize higher rebates for adding displayed liquidity. Specifically, the Exchange provides a standard rebate of $0.0025 per share for orders that add displayed liquidity for Members that do not qualify for a higher rebate based on their volume. The Exchange then provides a rebate of $0.0027 per share for orders that add displayed liquidity to the Exchange's order book where the Member has an average daily volume (“ADV”), as defined below, equal to or greater than 0.5% but less than 1.0% of average of total consolidated volume (“TCV”), as also defined below. Finally, the Exchange provides a rebate of $0.0029 per share for orders that add displayed liquidity to the Exchange's order book for any Member that has an ADV equal to or greater than 1.0% of TCV. The Exchange proposes to expand the number of tiers available and to modify the rebates associated with such tiers, as well as the rebates provided to Members not qualifying for tiered pricing.
For purposes of the fee schedule, the definition of ADV is average daily volume calculated as the number of shares added or removed, combined, per day on a monthly basis (excluding routed volume).
In connection with the proposed changes described below, the Exchange proposes to add a definition of “ADAV” to the fee schedule, which term will mean average daily volume calculated as the number of shares added per day on a monthly basis (excluding routed volume). Accordingly, ADAV measures a Member's average daily added volume only, and Member's will be able to qualify for applicable tiers with a lower ADAV than ADV.
The Exchange proposes to replace the two existing tiers with six tiers, each of which, in turn, can be reached through either a Member's ADAV (added liquidity only) or a Member's ADV (added and removed volume combined). In part to fund such expansion, the Exchange proposes to reduce its standard rebate for Members that do not qualify for a tiered rebate from $0.0025 per share to $0.0020 per share. Further, the Exchange proposes to adopt the following tiers and rebates.
Accordingly, the Exchange proposes to offer the current standard rebate of $0.0025 per share to all Members that can achieve Tier 1, which is available to Members with ADAV of 0.10% or more of average TCV or ADV of 0.25% or more of average TCV. Members that do not currently qualify for any tiered rebates today may be able to qualify either under this tier, Tier 1, or if their ADAV (added liquidity only) qualifies for one of the Tiers. With respect to Members that qualify for tiered pricing today, with ADV of at least 0.5% of average TCV, all such Members will receive higher rebates than they do under the current pricing structure. For instance, Members qualifying for Tier 2 with between 0.5% and 0.75% of ADV and 0.75% and 1% of ADV will receive rebates of $0.0028 per share and $0.0029 per share (as compared to $0.0027 for Members with between 0.5% and 1.0% of ADV under the current rebate structure). Members will also be able to qualify for these two tiers at lower levels of ADAV, namely 0.2% and 0.3%, respectively. Further, the Exchange proposes to offer three tiers at which a higher rebate is available than is currently available for reaching the Exchange's current highest tier. Specifically, Members reaching Tier 4 will receive a rebate of $0.0030 per share, Members reaching Tier 5 will receive a rebate of $0.0031 per share and Members reaching the highest tier, Tier 6, will receive a rebate of $0.0032 per share.
Consistent with programs offered by the Exchange for orders that set the NBBO when received by the Exchange (“NBBO Setter” orders), the Exchange proposes to adopt a program to attract aggressively priced displayed liquidity by providing an additional rebate for orders that join the NBBO when the Exchange is not already at the NBBO. To the extent such an order is displayed and executed on the Exchange, a NBBO Joiner order will receive an additional rebate of $0.0001 per share. This rebate is in addition to the rebate a Member would otherwise receive under the tiered pricing structure, as described above. Consistent with the current NBBO Setter program, the Exchange proposes to limit the ability to qualify for NBBO Joiner rebates to Members that have ADV equal to or greater than 0.5% of TCV. Because the Exchange has expanded the tiered pricing structure such that Members can qualify for rebates at the same level as those with ADV equal to or greater than 0.5% of TCV if they achieve ADAV of 0.2% or higher, the Exchange proposes to use this tier level as the eligibility requirement. Accordingly, the Exchange proposes to provide NBBO Setter and NBBO Joiner rebates to all qualifying orders entered by Members qualifying for Tier 2 or higher.
In order to adopt the new tiered pricing structure, the Exchange has proposed to add much of the new pricing as part of a chart format. The Exchange proposes to convert other portions of its “Equities Pricing” section to charts, even though the substance of such fees will not change. In this connection, the Exchange has also further differentiated between the liquidity rebates for displayed liquidity, as described above, and those for non-displayed liquidity, which the Exchange does not propose to substantively modify. The Exchange notes that it intends to further convert the remainder of the fee schedule to a chart format in the near future. In order to reduce text later in the fee schedule, the Exchange also proposes to make clear up-front that all references on the fee schedule to “adding” and “removing” liquidity mean adding liquidity or removing liquidity from the Exchange's order book.
The Exchange believes that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder that are applicable to a national securities exchange, and, in particular, with the requirements of Section 6 of the Act.
The changes to Exchange execution fees and rebates proposed by this filing are intended to attract order flow to the Exchange by continuing to offer competitive pricing while also creating additional incentives to providing aggressively priced displayed liquidity. While Members that remove liquidity from the Exchange will be paying higher fees due to the proposal, the increased revenue received by the Exchange will be used to fund programs that the Exchange believes will attract additional liquidity and thus improve the depth of liquidity available on the Exchange. Accordingly, the Exchange believes that the higher access fees for both securities priced $1.00 and above and securities priced below $1.00 will benefit Members' results in trading on the Exchange to the extent the tiered rebate structure maintained by the Exchange for adding displayed liquidity, the continued offering of the NBBO Setter rebate, and the adoption of the NBBO Joiner rebate incentivize liquidity providers to provide more aggressively priced liquidity. Thus, the Exchange believes that the slight increases to the fees to remove liquidity from the Exchange are reasonable and equitably allocated. Further, the Exchange does not believe that the proposed increases to the fees to remove liquidity from the Exchange are unfairly discriminatory as they will be uniformly applied to all Members.
The Exchange believes that continuing to base its tiered rebate structure on overall TCV, rather than a static number irrespective of overall volume in the securities industry, is a fair and equitable approach to pricing. Volume-based tiers such as the expanded liquidity rebate tiers proposed in this filing have been widely adopted in the equities markets, and are equitable and not unreasonably discriminatory because they are open to all members on an equal basis and provide rebates that are reasonably related to the value to an exchange's market quality associated with higher levels of market activity, such as higher levels of liquidity provision and introduction of higher volumes of orders into the price and volume discovery process. Accordingly, the Exchange believes that the proposal is not unreasonably discriminatory because it is consistent with the overall goals of enhancing market quality.
The proposed modification to the Exchange's rebate structure will have variable affects on Members of the Exchange, dependent on the volume of transaction activity they conduct on the Exchange. The Exchange notes that Members currently qualifying for tiered rebates will receive higher rebates in all cases. The Exchange also notes that additional Members will be able to qualify for tiered rebates based on a lower threshold of ADV (i.e., Tier 1 at ADV of 0.25% of TCV) or based on the new classification of ADAV, which measures added volume only but allows Members to qualify at lower percentages of TCV (e.g., ADAV of 0.1%, 0.2%, or 0.3% of TCV, respectively, for Tiers 1, 2, and 3). Those Members qualifying for volume Tier 1 will not be impacted by any decrease in rebates, but will continue to receive the same rebates that they do today. Despite the decrease in rebate for all Members that do not qualify for the lowest tier, the Exchange believes that its proposed fee structure is fair and equitable for the reasons described above related to market quality. The Exchange reiterates that the volume tiers are open to all Members on an equal basis, and are therefore equitable and not unreasonably discriminatory.
The proposed addition of the definition of ADAV and, in turn, the ability to qualify for volume-based enhanced rebate based on ADAV is reasonable as it is another method of measuring a Member's contribution to the overall market quality on the Exchange. While all order flow contributing to the Exchange is important, the Exchange has consistently offered programs to incentivize the addition of aggressively priced displayed liquidity to the Exchange due to the value of such liquidity. Accordingly, the Exchange believes that its proposed policy to measure ADAV and permit tier qualification at lower levels than ADV is fair and equitable, and not unreasonably discriminatory.
Additionally, the Exchange believes that the proposed NBBO Joiner rebate, similar to rebates offered by the Exchange under the NBBO Setter program, will incentivize the entry on the Exchange of more aggressive orders that will maintain tight spreads, benefitting both Members and public investors. The Exchange further believes that conditioning a Member's ability to receive the NBBO Joiner rebate on reaching a volume tier of Tier 2 or higher is consistent with the Act for the reasons described above with respect to volume-based tiers generally. The Exchange notes that by proposing qualification at Tier 2 or higher it is maintaining the same volume requirement to qualify for the NBBO Setter rebate (i.e., ADV 0.5% or more of TCV) as it previously required, though Members may potentially also qualify based on ADAV of 0.2%, and thus, additional Members may qualify for NBBO Setter rebates or the new NBBO Joiner rebates.
Finally, the Exchange believes that the proposed changes to further simplify the fee schedule and to move towards a fee schedule that is in a chart format are fair and reasonable, and non-discriminatory in that they are designed to be more easily understood by Members.
The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. As noted above, the changes to Exchange execution fees and rebates proposed by this filing are intended to attract order flow to the Exchange by continuing to offer competitive pricing while also creating additional incentives to provide aggressively priced displayed liquidity. Thus, while the Exchange is slightly increasing the fees to remove liquidity from the Exchange, the Exchange is offsetting such increase with additional rebates designed to enhance the liquidity available on the Exchange. Similarly, while some Members will recognize a decrease rebate for liquidity added to the Exchange, the Exchange has offered a lower volume tier in order to maintain the current rebate level as well as additional ways to reach the various volume tiers (with lower volume levels) based on added liquidity only. The Exchange's proposed NBBO Joiner rebate will benefit competition by
The Exchange has neither solicited nor received written comments on the proposed rule change.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) 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”),
NASDAQ is proposing amend its schedule of fees and credits applicable to execution and routing of orders in securities priced at $1 or more per share under Rule 7018. NASDAQ will implement the proposed rule change on October 1, 2013.
The text of the proposed rule change is available on the Exchange's Web site at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for 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.
NASDAQ is proposing several changes to its schedule of fees and credits applicable to execution and routing of orders in securities priced at $1 or more per share under Rule 7018. First, NASDAQ currently offers a credit of $0.0020 per share executed for midpoint pegged and midpoint post-only orders (“midpoint orders”) that provide liquidity if a member provides an average daily volume of more than 5 million shares through midpoint orders during the month and the member's average daily volume of liquidity provided through midpoint orders during the month is at least 2 million shares more than in April 2013. NASDAQ is proposing to eliminate this pricing tier for midpoint orders, because no member has ever qualified for it. Accordingly, NASDAQ believes that the tier has been ineffective at encouraging
Second, NASDAQ is modifying certain routing fees applicable to orders routed to NASDAQ OMX PSX (“PSX”), so that the applicable fees for routing to that venue will be generally consistent with fees for routing to other venues. Specifically, NASDAQ currently charges $0.0028 per share executed for orders using the SOLV or SAVE routing strategies
Third, NASDAQ is reducing the credit paid with respect to QCST and QDRK orders
QCST is a routing option under which orders check NASDAQ for available shares and simultaneously route the remaining shares to destinations on the applicable routing table that are not posting Protected Quotations within the meaning of Regulation NMS and to certain, but not all, exchanges. If shares remain un-executed after routing, they are posted on the book. Once on the book, if the order is subsequently locked or crossed by another market center, NASDAQ will not route the order to the locking or crossing market center.
NASDAQ believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,
The change to eliminate the rebate tier applicable to midpoint orders is reasonable because the tier has never applied to any members since its inception and therefore the change will not result in a fee increase. Similarly, the change is consistent with an equitable allocation of fees and is not unfairly discriminatory because members that use midpoint orders will continue to be eligible for the tiers for which they currently qualify (either $0.0017 or $0.0014 per share executed, depending on their volume levels). Accordingly, the change will not affect the allocation of fees and rebates among members and will not have a discriminatory impact on any members.
The change with respect to fees for routing to PSX is reasonable because it will make the applicable fees for routing to PSX consistent with the fees for routing to other venues. Moreover, the change will result in a modest increase of only $0.0002 per share executed for SAVE, SOLV, and TFTY orders when they access liquidity on PSX. The change is consistent with an equitable allocation of fees and not unfairly discriminatory because it will eliminate an existing disparity between the fees charged for routing to PSX and routing to certain other destinations, thereby making the applicable fees more consistent. In addition, the change is equitable and not unfairly discriminatory because it affects only those members that opt to use NASDAQ's optional routing services, and will in any event have a minimal impact because few orders using the strategies execute at PSX.
The change with respect to QCST and QDRK orders routed to BX is reasonable because it will make the credit paid by NASDAQ more consistent with the credit received by NASDAQ from BX with respect to such orders. Moreover, the change will result in a modest decrease of only $0.0003 per share executed with respect to the applicable
NASDAQ does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended.
No written comments were either solicited or received.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) 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 Exchange is filing with the Commission a proposal to amend Rule 1012 (Series of Options Open for Trading) to expand the Short Term Option Program (“STO Program” or “Program”)
The text of the proposed rule change is available on the Exchange's Web site 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 this proposed rule change is to amend Rule 1012 to expand the STO Program for non-index options so that the Exchange may: Change the current thirty option class limitation to fifty option classes on which STOs may be opened; list or add STOs within fifty percent (50%) above or below the closing price of the underlying security from the preceding day if the price of the underlying security is greater than $20, or within one hundred percent (100%) above or below the closing price of the underlying security from the preceding day if the price of the underlying security is less than or equal to $20; open up to thirty STO series for each expiration date in an STO class; add an STO strike price interval of $2.50 or greater where the strike price is above $150; and in general harmonize the different parts of the Program.
The STO Program, which was initiated in 2010,
Subsection 3.(g)(i) of the OLPP indicates that an option series price has to be reasonably close to the price of the underlying security and must not exceed a maximum of 50% or 100%, depending on the price, from the underlying. The Exchange's proposal related to non-index options, while conforming to the current structure of the Exchange's STO rules, is similar in practical effect to the noted OLPP subsection.
In terms of the strike price intervals, the STO Program currently allows that the interval between strike prices on
First, the Exchange proposes to increase the number of STO classes that may be opened after an option class has been approved for listing and trading on the Exchange. Specifically, the Exchange proposes in Commentary .11(a) of Rule 1012 that the Exchange may select up to fifty currently listed option classes on which Short Term Option Series may be opened. The Exchange proposes also that for each option class eligible for participation in the STO Program, the Exchange may open up to thirty STO Series for each expiration date in that class.
Second, the Exchange proposes to indicate under what circumstances, subsequent to opening initial STO classes, additional STO strike prices may be added. Specifically, the Exchange proposes in Commentary .11(c) of Rule 1012 that any initial series listed by the Exchange shall be reasonably close to the price of the underlying equity security and within the following parameters: (i) If the price of the underlying security is less than or equal to $20, additional strike prices shall be not more than one hundred percent (100%) above or below the price of the underlying security; and (ii) if the price of the underlying security is greater than $20, additional strike prices shall be not more than fifty percent (50%) above or below the price of the underlying security. This proposal is in line with the process for adding new series of options found in subsection 3.(g)(i) of the OLPP, and harmonizes the Program internally. The Exchange believes that this proposal is a reasonable and desirable enhancement to the STO Program.
Third, the Exchange proposes changes to Commentary .11(d) of Rule 1012 to indicate that any additional strike prices listed by the Exchange shall be reasonably close to the price of the underlying equity security and within the following parameters: (i) If the price of the underlying security is less than or equal to $20, additional strike prices shall be not more than one hundred percent (100%) above or below the price of the underlying security; and (ii) if the price of the underlying security is greater than $20, additional strike prices shall be not more than fifty percent (50%) above or below the price of the underlying security. This is done so that the parameters for opening STOs and adding strike prices are in conformity. The Exchange proposes additional changes to Commentary .11(d) to indicate that if the Exchange has opened less than thirty (30) Short Term Option Series for a Short Term Option Expiration Date, the Exchange may also open additional strike prices of Short Term Option Series that are more than 50% above or below the current price of the underlying security (if the price is greater than $20); provided that demonstrated customer interest exists for such series, as expressed by institutional, corporate or individual customers or their brokers. Market Makers trading for their own account are not considered when determining customer interest.
Fourth, the Exchange also proposes to simplify the Delisting Language in Commentary .11(d) of Rule 1012, which currently contains a range methodology (at least 10% but not more than 30% above or below the current price of the underlying),
Fifth, the Exchange proposes to add $2.50 strike price intervals to the STO Program. Specifically, the Exchange proposes in Commentary .11(e) of Rule 1012 to indicate that the interval between strike prices on STOs may be $2.50 or greater where the strike price is above $150. This proposed change complements the current STO strike price intervals, which are $0.50 or greater where the strike price is less than $75, and $1 or greater where the strike price is between $75 and $150 for all classes that participate in the STO Program.
All options exchanges that have weeklies programs have similar rules regarding their own programs, and tend to emulate STO changes that are initiated by other options exchanges. The Exchange recognizes that while this may result in a potentially increased combined capacity footprint of exchanges with weeklies programs, the specific beneficial changes proposed in this filing greatly outweigh any such potential impact.
The principal reason for the proposed expansion is market demand for additional STO classes and series and a desire to make the STO Program more effective. There is continuing strong customer demand for having the ability to execute hedging and trading strategies via STOs, particularly in the current fast and volatile multi-faceted trading and investing environment that extends across numerous markets and platforms
In order that the Exchange not exceed the current thirty option class and twenty option series restriction, the Exchange has on occasion had to turn away STO customers (traders and investors) because it could not list, or had to delist, STOs or could not open adequate STO Series because of restrictions in the STO Program. This has negatively impacted investors and traders, particularly retail public customers, who have continued to request the Exchange not to remove STO classes or add STO classes, or have requested the Exchange to expand the STO Program so that additional STO classes and series could be opened that would allow the market participants to execute trading and hedging strategies.
The Exchange notes that the STO Program has been well-received by market participants, in particular by retail investors. The volume of STO trading has increased by 132% since the beginning of 2011
The proposed revisions to the STO Program will permit the Exchange to meet customer demand for better STO Program use and efficiency, harmonization of OLPP and STO Program rules, internal harmonization of the STO Program, and a reasonable expansion of strike price intervals in the Program.
By way of example, if an investor wants to gain exposure to a relatively higher priced security like AAPL, he may invest in AAPL stock and/or AAPL options. Currently, the investor must choose a strike price that might lack the precision he is looking for in order to gain or reduce exposure to AAPL. If the investor is looking to invest in a long position in AAPL, for example, he may choose to execute a covered call strategy by selling calls on AAPL. Assume AAPL is trading at $415. Under the current rules the nearest out of the money STO call would be the $420.00 strike, which would, with one week until expiration, trade at or about $2.15. If the $417.50 strike were available per this proposal, however, the investor could sell calls at approximately $3.15. This would allow the investor to still execute an out of the money covered call strategy, but would increase the potential return by $1, or approximately 46% ($1/$2.15), thus offering approximately 46% additional risk protection. To the investor writing covered calls on his AAPL equity position, this extra risk protection could be very significant on an annual basis, and costly if not available.
By way of a second example, if an investor wants to gain exposure to a lower priced security like Banc of America (BAC), he may invest in BAC stock and/or options. Assume BAC is trading at $14.60. The investor may have established a long position in a non-STO BAC option like, for example, the standard expiration BAC Aug 17th 1.00 calls. To offset some of the risk the investor possesses in the BAC Aug 17th 1.00 calls, the investor may wish to make a corresponding trade in the BAC Aug 10th (STO) 1.00 call. Currently, the investor does not have this risk reduction strategy available to him, as the current BAC STO does not have available strikes. The proposal would correct this shortcoming.
By way of further example, in a lower priced stock such as BAC there may be a need for tighter strike price intervals in case of a precipitous drop in price. Assume BAC is trading at $14.60. Assume BAC announces a large loss, and the stock price drops to $6. The Exchange believes that investors should have the ability to use calls or puts with a more targeted strike price to attain proper risk protection—one of the great advantages of options. Because current STO rules do not allow a strike price below $9.50 in the BAC STO, however, an investor looking to purchase out of the money put protection for a short period of time, and at a lower premium than a longer term option, is not able to do so. BAC $9.50 strike puts would trade at a premium of about $3.50 or more, and would require the investor to sell or exercise his puts by expiration if they remained in the money. An Aug 10th $5.00 out of the money STO option in BAC, on the other hand, would trade a much more affordable premium due to being out of the money, and would only require the investor to sell or exercise his put if the BAC stock price continued its precipitous drop. Clearly, the ability to make more targeted and efficient decisions regarding the protection of investments is of great importance to investments and market participants, and should be encouraged.
Following are illustrations of the STO listing process per the rules as proposed. Assume that the Alcoa Inc. (AA) STO closes at $7.92. Pursuant to the proposed rule, STOs may be added between $1 and $15.50 (half point strike
Following are illustrations of the STO delisting process per the rules as proposed. Series delisting would occur under the proposed rule if the stock price moves and there are no series at least 10% above/below the current price. Assume AA closed at $7.92 and strikes were listed between $1 and $15. If the AA price moved to $15, and there were no strikes at $16.50 or above (at least 10% above the current price), the delisting process would begin. For the delisting process, staff would simply need to check what, if any, strikes are higher than the highest strike with open interest, and lower than the lowest strike with open interest. Unlike the current delisting process, there would be no need to check whether strikes were within a listing band (e.g., 10% to 30%). Or, assume that MCD closed at $96.26 and strikes were listed between $82 and $110. If the MCD price moved to $104, and there were no strikes at $115 or above (at least 10% above the current price), the delisting process would begin. For the delisting process, staff would simply need to check what strikes are higher than the highest strike with open interest, and lower than the lowest strike with open interest.
With regard to the impact of this proposal on system capacity, the Exchange has analyzed its capacity and represents that it and the Options Price Reporting Authority (“OPRA”) have the necessary systems capacity to handle any potential additional traffic associated with this current amendment to the STO Program. The Exchange believes that its members will not have a capacity issue as a result of this proposal. The Exchange represents that it will monitor the trading volume associated with the additional options series listed as a result of this proposal and the effect (if any) of these additional series on market fragmentation and on the capacity of the Exchange's automated systems.
The Exchange believes that its proposal is consistent with Section 6(b) of the Act
The STO Program has been well-received by market participants, and in particular by retail investors, and has seen increasing trading volume. The Exchange believes that the current proposed revisions to the STO Program will permit the Exchange to meet customer demand for enhanced STO Program use and efficiency, harmonization of OLPP and STO Program rules, and a reasonable expansion of strike price intervals in the Program to the benefit of investors, market participants, and the marketplace.
With regard to the impact of this proposal on system capacity, the Exchange believes that it and OPRA have the necessary systems capacity to handle any potential additional traffic associated with this current amendment to the STO Program. The Exchange believes that its members will not have a capacity issue as a result of this proposal. All exchanges that have STO programs have largely similar STO rules and tend to emulate STO rule changes proposals initiated by other exchanges. While the Exchange recognizes that this proposal may be copied by other exchanges and impact their capacity, the Exchange believes that any such potential capacity impact will not outweigh (and does not outweigh for the Exchange) the significant benefits that this proposal will afford market participants and the market in general in terms of significantly greater flexibility and increases in efficient trading and hedging options.
The proposed revisions to the STO Program will permit the Exchange to meet customer demand for better STO Program use and efficiency, harmonization of OLPP and STO Program rules, internal harmonization of the STO Program, and a reasonable expansion of strike price intervals in the Program.
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. To the contrary, the Exchange believes that the proposal is decidedly pro-competitive. The Exchange believes that the proposed rule change will result in additional investment options and opportunities to achieve the investment objectives of market participants seeking efficient trading and hedging vehicles, to the benefit of investors, market participants, and the marketplace in general.
No written comments were either solicited or received.
Within 45 days of the date of publication of this notice in the
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.
On July 31, 2013, 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”)
After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange
In the Notice, the Exchange represents that it has the ability to conduct the surveillances and regulatory functions that it will assume. The Commission also notes that the Exchange represents that its expertise in its own market structure, along with its existing real-time monitoring of these activities, may enable the Exchange to better detect improper activities on its market. Moreover, these patterns, underlying rules, and analytical requirements are similar to patterns that NASDAQ regulatory personnel already operate for affiliated options markets. The Exchange represents that NASDAQ's MarketWatch group, which already handles other real-time surveillance of the NASDAQ market, should be able to adequately and effectively handle the surveillances related to the instant proposed rule change.
In the Notice, the Exchange further represents that it will continue to refer potentially violative conduct to FINRA for further review and that FINRA will continue to perform most of the surveillance activity for NASDAQ's equity markets. The Exchange also represents that FINRA will continue to perform examination and enforcement work, subject to NASDAQ's supervision and ultimate responsibility.
For the foregoing reasons, the Commission believes that the proposed rule change is consistent with the Act.
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”),
Topaz is proposing to amend its Schedule of Fees to increase Maker Rebates for Market Makers that achieve the Tier 4 ADV threshold, to permit Topaz to exclude from its ADV calculations any trading day on which the Exchange is closed for trading due to a market-wide trading halt, to adopt a definition of “affiliate” for the purpose of calculating affiliated Member ADV, and to make other related clarifying changes. The text of the proposed rule change is available on the Exchange's Internet Web site 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 self-regulatory organization has prepared summaries, set forth in Sections A, B and C below, of the most significant aspects of such statements.
The Exchange proposes to increase Maker Rebates for Market Makers
On September 3, 2013 the Exchange filed with the Commission an immediately effective rule filing (the “initial filing”)
The Exchange is further proposing to modify its Schedule of Fees to permit the Exchange to exclude from its ADV calculation, when determining applicable rebate tiers, any day that the market is not open for the entire trading day. This would allow the Exchange to exclude days where the Exchange declares a trading halt in all securities or honors a market-wide trading halt declared by another market.
If the Exchange did not have the ability to exclude aberrant low volume days when calculating ADV for the month, as a result of the decreased trading volume, the numerator for the calculation (
As stated in the initial filing, the Exchange will aggregate the trading activity of affiliated members in determining ADV.
The Exchange is also adopting clarifying text to its Schedule of Fees to reflect how Maker Rebates are currently provided on the Exchange. This clarifying text merely explains in the Schedule of Fees items already discussed in the initial filing, and does not make any substantive changes to the rebates being offered. In particular, the Exchange wants to clarify in the text of the Schedule of Fees that Total Affiliated Member ADV includes all volume in all symbols and order types, including both maker and taker volume, and that the highest tier threshold attained by a Member applies retroactively only in the given month. The Exchange is also changing a reference to “client categories” to instead refer to “market participants” as that term is used elsewhere in the Schedule of Fees and is therefore clearer. The Exchange believes that adopting this new text in the Schedule of Fees itself will decrease confusion among its Members.
The Exchange believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,
With respect to increasing the Tier 4 Maker Rebate for Market Makers, the Exchange believes that the price differentiation between Market Makers and other market participants is appropriate and not unfairly discriminatory because Market Makers have different requirements and obligations to the Exchange that other market participants do not (such as quoting requirements). The Exchange believes that increasing the Maker Rebate applicable to Market Makers that achieve Tier 4, which is the highest volume tier, will incentivize Market Makers to increase order flow to the Exchange.
The Exchange notes that it has determined to charge fees and provide rebates in Mini Options at a rate that is 1/10th the rate of fees and rebates the Exchange provides for trading in Standard Options. The Exchange believes it is reasonable and equitable and not unfairly discriminatory to assess lower fees and rebates to provide market participants an incentive to trade Mini Options on the Exchange. The Exchange believes the proposed rebates are reasonable and equitable in light of the fact that Mini Options have a smaller exercise and assignment value, specifically 1/10th that of a standard option contract, and, as such, is providing rebates that are 1/10th of those applicable to Standard Options.
The Exchange believes that it is equitable and reasonable to permit the Exchange to eliminate from the calculation days on which the market is not open the entire trading day because it preserves the Exchange's intent behind adopting volume-based pricing. The proposed change is non-discriminatory because it applies equally to all Members and to all volume tiers.
The language permitting aggregation of volume amongst corporate affiliates for purposes of the ADV calculation is intended to avoid disparate treatment of firms that have divided their various business activities between separate corporate entities as compared to firms that operate those business activities within a single corporate entity. By way of example, many firms that are Members of the Exchange operate several different business lines within the same corporate entity. In contrast, other firms may be part of a corporate structure that separates those business lines into different corporate affiliates, either for business, compliance or historical reasons. Those corporate affiliates, in turn, are required to maintain separate memberships with the Exchange in order to access the Exchange. The Exchange believes that corporate affiliates should continue to be aggregated and is adopting a definition of affiliate to clarify when Members will be considered affiliated. The Exchange notes that the proposed definition of “affiliate” to be used to aggregate affiliated Member ADV is consistent with definitions used by other options exchanges, including the Chicago Board Options Exchange, Inc. (“CBOE”) and the MIAX Options Exchange (“MIAX”).
The Exchange further believes that it is appropriate to add the clarifying text to the Schedule of Fees in order to make it more transparent to Members and investors.
In accordance with Section 6(b)(8) of the Act,
With respect to Tier 4 Maker Rebates for Market Makers, the Exchange believes that the fee change will not impose any unnecessary burden on intramarket competition because, while it only applies to Market Maker orders, Market Makers take on a number of obligations and responsibilities that other market participants are not required to undertake. The proposed increase to the Tier 4 Maker Rebate applicable to Market Makers is intended to attract increased order flow to the Exchange from Market Makers, which will provide increased volume and greater trading opportunities for all market participants. The Exchange believes the proposed fee change does not impose a burden on inter-market competition because it is consistent with fees charged by other exchanges.
With respect to ADV calculations for rebates, the Exchange notes that there are very few instances where the rule will actually be invoked, and when invoked, the Exchange believes the rule will have little or no impact on trading decisions or execution quality. To the contrary, the Exchange believes that the proposed modification to its ADV calculation is pro-competitive and will result in lower total costs to end users, a positive outcome of competitive
The Exchange also notes that other exchanges have substantially similar requirements for aggregating affiliated Member ADV in determining applicable tiered rebates. As provided in the initial filing, the Exchange currently aggregates affiliated Member ADV in calculating rebate tiers, and this proposed rule change merely explains the how affiliate status is determined for that purpose, which will have no competitive impact.
Furthermore, the Exchange believes that the clarifying text being added to the Schedule of Fees is non-substantive, and therefore does not impact the competition analysis.
The Exchange operates in a highly competitive market in which market participants can readily direct their order flow to competing venues. In such an environment, the Exchange must continually review, and consider adjusting, its fees and rebates to remain competitive with other exchanges. For the reasons described above, the Exchange believes that the proposed fee changes reflect this competitive environment.
The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any unsolicited written comments from members or other interested parties.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act,
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. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or 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.
The Commission will post all comments on the Commission's Internet Web site (
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(7) of the Securities Exchange Act of 1934 (“Act”),
CFE proposes to revise the notification and reporting provisions contained in CFE Rules 414 (Exchange of Contract for Related Position) (“ECRP”) and 415 (Block Trading).
The scope of this filing is limited solely to the application of the rule changes to security futures traded on CFE. The only security futures currently traded on CFE are traded under Chapter 16 of CFE's Rulebook which is applicable to Individual Stock Based and Exchange-Traded Fund Based Volatility Index (“Volatility Index”) security futures.
The text of the proposed rule change is attached as Exhibit 4 to the filing
In its filing with the Commission, CFE 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. CFE has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements.
CFE Rule 414 sets forth requirements relating to ECRP transactions, and CFE Rule 415 sets forth requirements relating to Block Trades. Each of these types of transactions occurs off-exchange, and CFE Rules 414(i) and 415(g) each set forth notification and reporting requirements, which are substantially the same. The current proposal seeks to amend these provisions. The impetus for these proposed changes is the planned expansion of extended trading hours for CBOE Volatility Index (VIX) futures, which is planned to occur in two phases with the first phase to begin in late September and the second phase to begin in the weeks that follow.
Because CFE's Help Desk will be staffed during longer periods of time than previously, the Exchange is proposing to amend the notification and reporting provisions contained in CFE Rules 414 (Exchange of Contract for Related Position) and 415 (Block Trades), which apply to all products traded on the Exchange.
For purposes of efficiency, the Exchange will describe below the current notification and reporting provisions and the proposed changes to those provisions, which would apply equally to both CFE Rule 414 and CFE Rule 415.
The current notification and reporting provisions require that each party to the transaction have an Authorized Reporter call or email the CFE Help Desk after the transaction is agreed upon to notify CFE of the terms of the transaction.
• If the transaction is agreed upon between the time that Trading Hours commence in the relevant Contract and 3:15 p.m., the notification to the CFE Help Desk must be made without delay and by no later than ten minutes after the transaction is agreed upon (in which event the CFE Help Desk will report the transaction to CFE's trading system and provide a written transaction summary on that day);
• if the transaction is agreed upon between 3:15 p.m. and 3:25 p.m., the notification to the CFE Help Desk must be made either
• on the day the transaction is agreed upon by no later than 3:25 p.m. (in which event the CFE Help Desk will report the transaction to CFE's trading system and provide a written transaction summary to the Authorized Reporters on that day) or
• on the following business day by no later than ten minutes from the time that Trading Hours commence in the relevant Contract (in which event the CFE Help Desk will report the transaction to CFE's trading system and provide and provide a written transaction summary to the Authorized Reporters on that business day); and
• if the transaction is agreed upon after 3:25 p.m. and prior to the time that Trading Hours commence in the relevant Contract on the following business day, the notification to the CFE Help Desk must be made on that following business day by no later than ten minutes from the time that Trading Hours commence in the relevant Contract (in which event the CFE Help Desk will report the transaction to CFE's trading system and provide a written transaction summary to the Authorized Reporters on that business day).
The current proposal would extend the time frames during which ECRP transactions and Block Trades may be reported. Also, the notification provisions would be described in terms of the time of notification to the Exchange (instead of when there is agreement to the transaction).
Specifically, based upon the time of notification to the CFE Help Desk of an ECRP or Block Trade, these Rules would be amended to include charts that specify the manner in which the notification of an ECRP or Block Trade must be provided to the CFE Help Desk, the Business Day for which the ECRP Contract leg or Block Trade will be submitted for clearing, and when the Help Desk will report the ECRP Contract leg or Block Trade to CFE's trading system. The CFE Help Desk will provide a written transaction summary to each Authorized Reporter on the Business Day for which the ECRP Contract leg or Block Trade is submitted for clearing. The Exchange notes that between 7:00 a.m. and 4:00 p.m. on each business day, notification may be made by phone or email. The Exchange proposes to limit the method of notification to email only during all other times. The proposed rule charts
CFE
The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,
The Exchange believes that the proposed rule change would benefit investors and market participants because it would enhance CFE's ECRP and Block Trade reporting provisions by extending the time frames during which ECRP transactions and Block Trades may be reported. The Exchange also believes that the proposed rule change is equitable and not unfairly discriminatory because amended CFE Rules 414 and 415 would apply to all TPHs and Authorized Reporters and do not discriminate between market participants.
CFE 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, in that the rule change makes enhancements to CFE's Block Trade and ECRP reporting process. In addition, the Exchange believes that the expansion of the ability to report Block Trades and ECRP transactions in security futures in conjunction with the expansion of trading hours in VIX futures will promote competition because it will provide for the reporting and dissemination of security futures Block Trades and ECRPs during additional time frames which will serve to promote additional transparency and thus potential further price competition.
No written comments were solicited or received with respect to the proposed rule change.
The proposed rule change will become operative on or after October 7, 2013.
At any time within 60 days of the date of effectiveness of the proposed rule change, the Commission, after consultation with the CFTC, may summarily abrogate the proposed rule change and require that the proposed rule change be refiled in accordance with the provisions of Section 19(b)(1) 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”),
NASDAQ is proposing to extend for three months the fee pilot pursuant to which NASDAQ distributes the NASDAQ Last Sale (“NLS”) market data products. NLS allows data distributors to have access to real-time market data for a capped fee, enabling those distributors to provide free access to the data to millions of individual investors via the internet and television. Specifically, NASDAQ offers the “NASDAQ Last Sale for NASDAQ” and “NASDAQ Last Sale for NYSE/NYSE MKT” data feeds containing last sale activity in U.S. equities within the NASDAQ Market Center and reported to the FINRA/NASDAQ Trade Reporting Facility (“FINRA/NASDAQ TRF”), which is jointly operated by NASDAQ and the Financial Industry Regulatory Authority (“FINRA”). The purpose of this proposal is to extend the existing pilot program for three months, from October 1, 2013 to December 31, 2013.
This pilot program supports the aspiration of Regulation NMS to increase the availability of proprietary data by allowing market forces to determine the amount of proprietary market data information that is made available to the public and at what price. During the pilot period, the program has vastly increased the availability of NASDAQ proprietary market data to individual investors. Based upon data from NLS distributors, NASDAQ believes that since its launch in July 2008, the NLS data has been viewed by millions of investors on Web sites operated by Google, Interactive Data, and Dow Jones, among others.
The text of the proposed rule change is below. Proposed new language is in italics; proposed deletions are in brackets.
(a) For a three month pilot period commencing on [July]
(1)–(2) No change.
(b)–(c) No change.
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.
Prior to the launch of NLS, public investors that wished to view market data to monitor their portfolios generally had two choices: (1) pay for real-time market data or (2) use free data that is 15 to 20 minutes delayed. To increase consumer choice, NASDAQ proposed a pilot to offer access to real-time market data to data distributors for a capped fee, enabling those distributors to disseminate the data at no cost to millions of internet users and television viewers. NASDAQ now proposes a three-month extension of that pilot program, subject to the same fee structure as is applicable today.
NLS consists of two separate “Level 1” products containing last sale activity within the NASDAQ market and reported to the jointly-operated FINRA/NASDAQ TRF. First, the “NASDAQ Last Sale for NASDAQ” data product is a real-time data feed that provides real-time last sale information including execution price, volume, and time for executions occurring within the NASDAQ system as well as those reported to the FINRA/NASDAQ TRF. Second, the “NASDAQ Last Sale for NYSE/NYSE MKT” data product provides real-time last sale information including execution price, volume, and time for NYSE- and NYSE MKT-securities executions occurring within the NASDAQ system as well as those reported to the FINRA/NASDAQ TRF. By contrast, the securities information processors (“SIPs”) that provide “core” data consolidate last sale information from all exchanges and trade reporting facilities (“TRFs”). Thus, NLS replicates a subset of the information provided by the SIPs.
NASDAQ established two different pricing models, one for clients that are able to maintain username/password
NASDAQ also established a cap on the monthly fee, currently set at $50,000 per month, for all NASDAQ Last Sale products. The fee cap enables NASDAQ to compete effectively against other exchanges that also offer last sale data for purchase or at no charge.
As with the distribution of other NASDAQ proprietary products, all distributors of the NASDAQ Last Sale for NASDAQ and/or NASDAQ Last Sale for NYSE/NYSE MKT products pay a single $1,500/month NASDAQ Last Sale Distributor Fee in addition to any applicable usage fees. The $1,500 monthly fee applies to all distributors and does not vary based on whether the distributor distributes the data internally or externally or distributes the data via both the internet and television.
NASDAQ believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,
NASDAQ believes that its NASDAQ Last Sale market data products are precisely the sort of market data product that the Commission envisioned when it adopted Regulation NMS. The Commission concluded that Regulation NMS—by lessening regulation of the market in proprietary data—would itself further the Act's goals of facilitating efficiency and competition:
[E]fficiency is promoted when broker-dealers who do not need the data beyond the prices, sizes, market center identifications of the NBBO and consolidated last sale information are not required to receive (and pay for) such data. The Commission also believes that efficiency is promoted when broker-dealers may choose to receive (and pay for) additional market data based on their own internal analysis of the need for such data.
By removing unnecessary regulatory restrictions on the ability of exchanges to sell their own data, Regulation NMS advanced the goals of the Act and the principles reflected in its legislative history. If the free market should determine whether proprietary data is sold to BDs at all, it follows that the price at which such data is sold should be set by the market as well.
The decision of the United States Court of Appeals for the District of Columbia Circuit in
The court in
NASDAQ does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. NASDAQ's ability to price its Last Sale Data Products is constrained by (1) competition between exchanges and other trading platforms that compete with each other in a variety of dimensions; (2) the existence of inexpensive real-time consolidated data and market-specific data and free delayed consolidated data; and (3) the inherent contestability of the market for proprietary last sale data.
The market for proprietary last sale data products is currently competitive and inherently contestable because there is fierce competition for the inputs necessary to the creation of proprietary data and strict pricing discipline for the proprietary products themselves. Numerous exchanges compete with each other for listings, trades, and market data itself, providing virtually
Transaction execution and proprietary data products are complementary in that market data is both an input and a byproduct of the execution service. In fact, market data and trade execution are a paradigmatic example of joint products with joint costs. The decision whether and on which platform to post an order will depend on the attributes of the platform where the order can be posted, including the execution fees, data quality and price, and distribution of its data products. Without trade executions, exchange data products cannot exist. Moreover, data products are valuable to many end users only insofar as they provide information that end users expect will assist them or their customers in making trading decisions.
The costs of producing market data include not only the costs of the data distribution infrastructure, but also the costs of designing, maintaining, and operating the exchange's transaction execution platform and the cost of regulating the exchange to ensure its fair operation and maintain investor confidence. The total return that a trading platform earns reflects the revenues it receives from both products and the joint costs it incurs. Moreover, the operation of the exchange is characterized by high fixed costs and low marginal costs. This cost structure is common in content and content distribution industries such as software, where developing new software typically requires a large initial investment (and continuing large investments to upgrade the software), but once the software is developed, the incremental cost of providing that software to an additional user is typically small, or even zero (
An exchange's BD customers view the costs of transaction executions and of data as a unified cost of doing business with the exchange. A BD will direct orders to a particular exchange only if the expected revenues from executing trades on the exchange exceed net transaction execution costs and the cost of data that the BD chooses to buy to support its trading decisions (or those of its customers). The choice of data products is, in turn, a product of the value of the products in making profitable trading decisions. If the cost of the product exceeds its expected value, the BD will choose not to buy it. Moreover, as a BD chooses to direct fewer orders to a particular exchange, the value of the product to that BD decreases, for two reasons. First, the product will contain less information, because executions of the BD's trading activity will not be reflected in it. Second, and perhaps more important, the product will be less valuable to that BD because it does not provide information about the venue to which it is directing its orders. Data from the competing venue to which the BD is directing orders will become correspondingly more valuable.
Similarly, in the case of products such as NLS that are distributed through market data vendors, the vendors provide price discipline for proprietary data products because they control the primary means of access to end users. Vendors impose price restraints based upon their business models. For example, vendors such as Bloomberg and Reuters that assess a surcharge on data they sell may refuse to offer proprietary products that end users will not purchase in sufficient numbers. Internet portals, such as Google, impose a discipline by providing only data that will enable them to attract “eyeballs” that contribute to their advertising revenue. Retail BDs, such as Schwab and Fidelity, offer their customers proprietary data only if it promotes trading and generates sufficient commission revenue. Although the business models may differ, these vendors' pricing discipline is the same: they can simply refuse to purchase any proprietary data product that fails to provide sufficient value. NASDAQ and other producers of proprietary data products must understand and respond to these varying business models and pricing disciplines in order to market proprietary data products successfully. Moreover, NASDAQ believes that products such as NLS can enhance order flow to NASDAQ by providing more widespread distribution of information about transactions in real time, thereby encouraging wider participation in the market by investors with access to the internet or television. Conversely, the value of such products to distributors and investors decreases if order flow falls, because the products contain less content.
Analyzing the cost of market data distribution in isolation from the cost of all of the inputs supporting the creation of market data will inevitably underestimate the cost of the data. Thus, because it is impossible to create data without a fast, technologically robust, and well-regulated execution system, system costs and regulatory costs affect the price of market data. It would be equally misleading, however, to attribute all of the exchange's costs to the market data portion of an exchange's joint product. Rather, all of the exchange's costs are incurred for the unified purposes of attracting order flow, executing and/or routing orders, and generating and selling data about market activity. The total return that an exchange earns reflects the revenues it receives from the joint products and the total costs of the joint products.
Competition among trading platforms can be expected to constrain the aggregate return each platform earns from the sale of its joint products, but different platforms may choose from a range of possible, and equally reasonable, pricing strategies as the means of recovering total costs. NASDAQ pays rebates to attract orders, charges relatively low prices for market information and charges relatively high prices for accessing posted liquidity. Other platforms may choose a strategy of paying lower liquidity rebates to attract orders, setting relatively low prices for accessing posted liquidity, and setting relatively high prices for market information. Still others may provide most data free of charge and rely exclusively on transaction fees to recover their costs. Finally, some platforms may incentivize use by providing opportunities for equity ownership, which may allow them to charge lower direct fees for executions and data.
In this environment, there is no economic basis for regulating maximum prices for one of the joint products in an industry in which suppliers face competitive constraints with regard to the joint offering. Such regulation is unnecessary because an “excessive” price for one of the joint products will ultimately have to be reflected in lower
The level of competition and contestability in the market is evident in the numerous alternative venues that compete for order flow, including thirteen SRO markets, as well as internalizing BDs and various forms of alternative trading systems (“ATSs”), including dark pools and electronic communication networks (“ECNs”). Each SRO market competes to produce transaction reports via trade executions, and two FINRA-regulated TRFs compete to attract internalized transaction reports. It is common for BDs to further and exploit this competition by sending their order flow and transaction reports to multiple markets, rather than providing them all to a single market. Competitive markets for order flow, executions, and transaction reports provide pricing discipline for the inputs of proprietary data products.
The large number of SROs, TRFs, BDs, and ATSs that currently produce proprietary data or are currently capable of producing it provides further pricing discipline for proprietary data products. Each SRO, TRF, ATS, and BD is currently permitted to produce proprietary data products, and many currently do or have announced plans to do so, including NASDAQ, NYSE, NYSE MKT, NYSE Arca, BATS, and Direct Edge.
Any ATS or BD can combine with any other ATS, BD, or multiple ATSs or BDs to produce joint proprietary data products. Additionally, order routers and market data vendors can facilitate single or multiple BDs' production of proprietary data products. The potential sources of proprietary products are virtually limitless.
The fact that proprietary data from ATSs, BDs, and vendors can by-pass SROs is significant in two respects. First, non-SROs can compete directly with SROs for the production and sale of proprietary data products, as BATS and Arca did before registering as exchanges by publishing proprietary book data on the internet. Second, because a single order or transaction report can appear in a core data product, an SRO proprietary product, and/or a non-SRO proprietary product, the data available in proprietary products is exponentially greater than the actual number of orders and transaction reports that exist in the marketplace. Indeed, in the case of NLS, the data provided through that product appears both in (i) real-time core data products offered by the SIPs for a fee, and (ii) free SIP data products with a 15-minute time delay, and finds a close substitute in last-sale products of competing venues.
In addition to the competition and price discipline described above, the market for proprietary data products is also highly contestable because market entry is rapid, inexpensive, and profitable. The history of electronic trading is replete with examples of entrants that swiftly grew into some of the largest electronic trading platforms and proprietary data producers: Archipelago, Bloomberg Tradebook, Island, RediBook, Attain, TracECN, BATS Trading and Direct Edge. A proliferation of dark pools and other ATSs operate profitably with fragmentary shares of consolidated market volume.
Regulation NMS, by deregulating the market for proprietary data, has increased the contestability of that market. While BDs have previously published their proprietary data individually, Regulation NMS encourages market data vendors and BDs to produce proprietary products cooperatively in a manner never before possible. Multiple market data vendors already have the capability to aggregate data and disseminate it on a profitable scale, including Bloomberg and Thomson Reuters.
Moreover, consolidated data provides two additional measures of pricing discipline for proprietary data products that are a subset of the consolidated data stream. First, the consolidated data is widely available in real-time at $1 per month for non-professional users. Second, consolidated data is also available
The competitive nature of the market for products such as NLS is borne out by the performance of the market. In May 2008, the internet portal Yahoo! began offering its Web site viewers real-time last sale data (as well as best quote data) provided by BATS. In response, in June 2008, NASDAQ launched NLS, which was initially subject to an “enterprise cap” of $100,000 for customers receiving only one of the NLS products, and $150,000 for customers receiving both products. The majority of NASDAQ's sales were at the capped level. In early 2009, BATS expanded its offering of free data to include depth-of-book data. Also in early 2009, NYSE Arca announced the launch of a competitive last sale product with an enterprise price of $30,000 per month. In response, NASDAQ combined the enterprise cap for the NLS products and reduced the cap to $50,000 (
In this environment, a super-competitive increase in the fees charged for either transactions or data has the potential to impair revenues from both products. “No one disputes that competition for order flow is `fierce'.”
In establishing the price for the NASDAQ Last Sale Products, NASDAQ considered the competitiveness of the market for last sale data and all of the implications of that competition. NASDAQ believes that it has considered all relevant factors and has not
Three comment letters were filed regarding the proposed rule change as originally published for comment. NASDAQ responded to these comments in a letter dated December 13, 2007. Both the comment letters and NASDAQ's response are available on the SEC Web site at
It appears to NASDAQ that SIFMA's contentions in this new proceeding are similar to the contentions in its numerous prior comment letters, which have repeatedly argued that market data fees are improper unless established through public utility-style rate-making proceedings that are nowhere contemplated by the Act. In making its arguments, SIFMA has sought to rely upon
The petitioners believe that the SEC's market-based approach is prohibited under the Exchange Act because the Congress intended “fair and reasonable” to be determined using a cost-based approach. The SEC counters that, because it has statutorily-granted flexibility in evaluating market data fees, its market-based approach is fully consistent with the Exchange Act. We agree with the SEC.
SIFMA further contended that prior filings lacked evidence supporting a conclusion that the market for NLS is competitive, asserting that arguments about competition for order flow and substitutability were rejected in
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) 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)
The Exchange proposes a temporary suspension of those aspects of Rules 36.20 and 36.21 that would not permit Floor brokers to use personal portable phone devices on the Trading Floor due to the unavailability of Exchange-provided cell phones beginning on October 10, 2013 until the earlier of when cell phone service is restored or October 11, 2013. 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 temporarily suspend those aspects of Rules 36.20 and 36.21 that would not permit Floor brokers to use personal portable phone devices on the Trading Floor.
On October 10, 2013, the third-party carrier that provides service for the Exchange-provided cell phones experienced an issue that affected Exchange authorized and provided
Rules 36.20 and 36.21 govern the type of telephone communications that are approved for Floor brokers. Pursuant to Rule 36.20, Floor brokers may maintain a telephone line on the Trading Floor and use Exchange authorized and provided portable phones while on the Trading Floor. The use of such Exchange authorized and provided portable phones is governed by Rule 36.21. Because of the issues with the third-party carrier, all Exchange authorized and provided portable phones are not functional and therefore Floor brokers cannot use the Exchange authorized and provided portable phones. However, the personal cell phones of Floor brokers are operational on the Trading Floor. The Exchange believes that because communications with customers is a vital part of a Floor broker's role as agent and therefore contributes to maintaining a fair and orderly market, during the period when Exchange-provided cell phones are non-operational, Floor brokers should be permitted to use personal portable phone devices in lieu of the non-operational Exchange authorized and provided portable phones.
The Exchange therefore proposes to temporarily suspend the limitations in Rules 36.20 and 36.21 that permit Floor brokers to use only Exchange authorized and provided portable phones so that Floor brokers may also use personal portable phones on the Trading Floor. The Exchange proposes that pursuant to this temporary suspension, Floor brokers must provide the Exchange with the names of all Floor-based personnel who used personal portable phones during this temporary suspension period, together with the phone number and applicable carrier for each number. Floor broker member organizations must maintain in their books and records all cell phone records that show both incoming and outgoing calls that were made during the period that a personal portable phone was used on the Trading Floor. To the extent the records are unavailable from the third-party carrier, the Floor brokers must maintain contemporaneous records of all calls made or received on a personal portable phone while on the Trading Floor. As with all member organization records, such cell phone records must be provided to Exchange regulatory staff, including without limitation staff of the Financial Industry Regulatory Authority (“FINRA”), on request.
The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,
In particular, because of issues experienced by a third-party cell phone carrier, Exchange authorized and provided cell phones are not functional. The Exchange believes that the proposed temporary suspensions from those aspects of Rule 36 that restrict Floor broker's use of personal portable phones on the Trading Floor removes impediments to and perfects the mechanism of a free and open market and national market system because the proposed relief will enable Floor brokers to conduct their regular business, notwithstanding the ongoing issues with telephone service. The Exchange further believes that without the requested relief, Floor brokers would be compromised in their ability to conduct their regular course of business on the Trading Floor. In particular, for Floor brokers, because they operate as agents for customers, their inability to communicate with customers could compromise their ability to represent public orders on the Trading Floor.
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. The Exchange does not believe that the proposed rule change will impose any burden on competition because the proposed change only impacts Floor brokers and has no change in operations for other market participants or other market centers. To the contrary, the Exchange believes that without the proposed relief, Floor brokers would be compromised in their ability to conduct their regular course of business on the Trading Floor, thereby placing a burden on the Floor brokers' ability to compete.
No written comments were solicited or received with respect to the proposed rule change.
The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act
A proposed rule change filed under Rule 19b–4(f)(6)
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. If the Commission takes such action, the Commission shall institute proceedings under Section 19(b)(2)(B) 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.
On August 22, 2013, The Depository Trust Company (“DTC”) filed with the Securities and Exchange Commission (“Commission”) proposed rule change SR–DTC–2013–10 (“Proposed Rule Change”) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
DTC filed the Proposed Rule Change to terminate its Sealed Envelope Service (“Service”), which is part of its Custody Service, as described below.
In 2002, DTC launched the Service as an addition to its Custody Service in response to requests from DTC participants (“Participants”) to assist in fully outsourcing their vaults to DTC. The Service is designed to provide physical custody to Participants for documents or instruments that are not securities, such as loan agreements, wills, deeds, mortgages, contracts, and option agreements.
DTC allows for the sealed envelopes containing instruments or documents that are not securities to be held in custody in one of DTC's vaults. DTC assigns each sealed envelope a user-CUSIP number for tracking and record keeping purposes. Participants balance their sealed envelopes daily with DTC in the same manner as for securities held in the Custody Service. The depositing Participant is required to list the contents of the envelope on the outside of the envelope, as DTC does not open any sealed envelopes or verify the contents therein other than an examination for dangerous contents.
DTC has determined to discontinue the Service for multiple reasons. First, the Service is not widely used, as only 15 Participants currently use the Service and one of those Participants represents approximately 85% of the total volume. Second, since DTC does not verify the content of the envelope submitted by a Participant under the Service, it cannot confirm that a sealed envelope contains instruments and document qualifying for the Service.
DTC has stated that all 15 Participants of the Service were notified of DTC's intention to discontinue the Service and none of the Participants objected. DTC will work with those Participants to develop a timeline to return sealed envelopes that it currently has in custody.
The Commission received one comment on the Proposed Rule Change.
Section 19(b)(2)(C) of the Act directs the Commission to approve a proposed rule change of a self-regulatory organization if it finds that such proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to such organization.
Here, as described above, DTC's proposed rule change to terminate the Service should help further safeguard the securities and settlement process as a whole, as required by Section 17A(b)(3)(F) of the Act,
On the basis of the foregoing, the Commission finds the Proposed Rule Change is consistent with the requirements of the Act, particularly with the requirements of Section 17A of the Act,
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 filed a proposal to amend Rule 12.6 to make it substantially the same as Financial Industry Regulatory Authority (“FINRA”) Rule 5320.
The text of the proposed rule change is available at the Exchange's Web site 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 parts of such statements.
The Exchange proposes to amend Rule 12.6, which limits trading ahead of customer orders by Members,
Current Rule 12.6, the customer order protection rule, generally prohibits Members from trading on a proprietary basis ahead of, or along with, customer orders that are executable at the same price as the proprietary order. The rule contains several exceptions that make it permissible for a Member to enter a proprietary order while representing a customer order that could be executed at the same price, including permitting transactions for the purposes of facilitating the execution, on a riskless principal basis, of one or more customer orders.
To harmonize its rules with FINRA, the Exchange proposes to delete the current text of Rule 12.6 and its supplementary material and adopt the text and supplementary material of FINRA Rule 5320, with certain technical changes, as Rule 12.6. FINRA Rule 5320 generally provides that a FINRA member that accepts and holds an order in an equity security from its own
Amended Rule 12.6 would include exceptions to the prohibition against trading ahead of customer orders. That is, a Member that meets the conditions of an exception would be permitted to trade a security on the same side of the market for its own account at a price that would satisfy a customer order in certain circumstances. The exceptions are set out below.
One exception would permit a Member to negotiate terms and conditions with respect to the acceptance of certain large-sized orders (orders of 10,000 shares or more unless such orders are less than $100,000 in value) or orders from institutional accounts. The term “institutional account” will be defined in accordance with FINRA Rule 4512(c). That is, an institutional account will be defined as the account of: (1) A bank savings and loan association, insurance company or registered investment company; (2) an investment adviser registered either with the SEC under Section 203 of the Investment Advisers Act or with a state securities commission (or any agency or office performing like functions); or (3) any other person (whether a natural person, corporation, partnership, trust or otherwise) with total assets of at least $50 million. This exception would require the Member to provide clear and comprehensive written disclosure to each customer at account opening and annually thereafter that: (a) states that the Member may trade proprietarily at prices that would satisfy the customer order, and (b) provides the customer with a meaningful opportunity to opt in to the Rule 12.6 protections with respect to all or any portion of its order. If a customer does not opt in to the protections with respect to all or any portion of its order, the Member may reasonably conclude that such customer has consented to the Member trading a security on the same side of the market for its own account at a price that would satisfy the customer's order.
In lieu of providing written disclosure to customers at account opening and annually thereafter, the proposed rule would permit Members to provide clear and comprehensive oral disclosure to, and obtain consent from, a customer on an order-by-order basis. The Member would be required to document who provided such consent and that such consent evidences the customer's understanding of the terms and conditions of the order. If a customer opted in to the Rule 12.6 protections, a Member could still obtain consent on an order-by-order basis to trade ahead of or along with an order from that customer, provided that the Member documented who provided such consent and that such consent evidenced the customer's understanding of the terms and conditions of the order.
The Exchange is also proposing to include in Interpretation and Policy .02 a “no-knowledge” exception to its customer order protection rule. The proposed exception would allow one trading unit of a Member to trade in a proprietary capacity and at prices that would satisfy customer orders held by another, separate trading unit of the Member. The No-Knowledge Exception would be applicable with respect to NMS stocks, as defined in Rule 600 of Regulation NMS under the Act.
To avail itself of the No-Knowledge Exception, a Member would be required to meet certain conditions. First, it would have to implement and utilize an effective system of internal controls (such as appropriate information barriers) that operate to prevent the proprietary trading unit from obtaining knowledge of the customer orders held by a separate trading unit. As proposed, Interpretation and Policy .02 will make clear that appropriate information barriers must, at a minimum, comply with the Exchange's existing requirements regarding the prevention of the misuse of material, non-public information, which are set forth in Exchange Rule 5.5. Second, the Member would have to provide, at account opening and annually thereafter, a written description of how it handles customer orders and the circumstances under which it may trade proprietarily, including in a market-making capacity, at prices that would satisfy the customer order. A Member must maintain records indicating which orders rely on the no-knowledge exception and produce these records to the Exchange upon request. The onus will be on the Member to produce sufficient documentation justifying reliance on the No-Knowledge exception for any given trade. To ensure clarity and transparency regarding this exception and others, the Exchange will be issuing a regulatory notice informing Members of these proposed rule changes. The Exchange will include in the regulatory notice the effective date for the rule as amended, which shall be at least 30 days after the approval of the amendments to Rule 12.6 in order to allow Members to make any necessary changes to their internal policies or processes.
Amended Rule 12.6 would not apply to a proprietary trade made by the Member to facilitate the execution, on a riskless principal basis, of another order from a customer (whether its own customer or the customer of another broker-dealer). To take advantage of this exception, the Member would have to: (a) Submit a report, contemporaneously with the execution of the facilitated order, identifying the trade as riskless principal to the Exchange, and (b) have written policies and procedures to ensure that riskless principal transactions relied upon for this exception comply with applicable Exchange rules. At a minimum, these policies and procedures would have to require: (1) Receipt of the customer order before execution of the offsetting principal transaction, and (2) execution of the offsetting principal transaction at the same price as the customer order, exclusive of any markup or markdown, commission equivalent, or other fee and allocation to a riskless principal or customer account in a consistent manner and within 60 seconds of execution.
Members would have to have supervisory systems in place that produce records that enable the Member and the Exchange to reconstruct accurately, readily, and in a time-sequenced manner all orders on which a Member relies in claiming this exception.
The proposed rule change would also exempt a Member from the obligation to execute a customer order in a manner consistent with Rule 12.6 with regard to trading for its own account when the Member routed an ISO in compliance with Rule 600(b)(30)(ii) of Regulation NMS if the customer order is received after the Member routed the ISO. If a Member routes an ISO to facilitate a customer order, and that customer has consented to not receiving the better
The Exchange proposes to except a Member's proprietary trade that: (1) Offsets a customer odd lot order (i.e., an order less than one round lot, which is typically 100 shares), or (2) corrects a bona fide error. With respect to bona fide errors, the Member would be required to demonstrate and document the basis upon which a transaction meets the bona fide error exception. For purposes of this proposed Rule, the Exchange will adopt the definition of “bona fide error” found in Regulation NMS's exemption for error correction transactions.
(i) The inaccurate conveyance or execution of any term of an order including, but not limited to, price, number of shares or other unit of trading; identification of the security; identification of the account for which securities are purchased or sold; lost or otherwise misplaced order tickets; short sales that were instead sold long or vice versa; or the execution of an order on the wrong side of a market; (ii) the unauthorized or unintended purchase sale or allocation of securities or the failure to follow specific client instructions; (iii) the incorrect entry of data into relevant systems, including reliance on incorrect cash positions, withdrawals, or securities positions reflected in an account; or (iv) a delay, outage, or failure of a communication system used to transmit market data prices or to facilitate the delivery or execution of an order.
The proposed rule change establishes the minimum amount of price improvement necessary for a Member to execute an order on a proprietary basis when holding an unexecuted limit order in that same security without being required to execute the held limit order.
In addition, if the minimum price improvement standards set forth in proposed Interpretation and Policy .06, paragraphs (a) through (g) would trigger the protection of a pending customer limit order, any better-priced customer limit order(s) must also be protected under this Rule, even if those better-priced limit orders would not be directly triggered under these minimum price improvement standards.
The proposed rule change provides that a Member must make every effort to execute a marketable customer order that it receives fully and promptly. A Member holding a marketable customer order that has not been immediately executed would have to make every effort to cross such order with any other order received by the Member on the other side of the market, up to the size of such order at a price that is no less than the best bid and no greater than the best offer at the time that the subsequent order is received by the Member and that is consistent with the terms of the orders. If a Member were holding multiple orders on both sides of the market that have not been executed, the Member would have to make every effort to cross or otherwise execute such orders in a manner reasonable and consistent with the objectives of the proposed Rule and with the terms of the orders. A Member could satisfy the crossing requirement by contemporaneously buying from the seller and selling to the buyer at the same price.
Under the proposed amendments to Rule 12.6, a Member generally could limit the life of a customer order to the period of normal market hours of 9:30 a.m. to 4:00 p.m. Eastern Time. However, if the customer and Member agreed to the processing of the customer's order outside normal market hours, the protections of amended Rule 12.6 would apply to that customer's order at all times the customer order is executable by the Member.
The Exchange believes that its proposal is consistent with Section 6(b) of the Act
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, the Exchange believes that the proposal enhances cooperation among markets and other trading venues to promote fair and orderly markets and to protect the interests of the public and of investors. Specifically, by aligning the Exchange's customer protection rules with those of FINRA and other exchanges,
The Exchange has neither solicited nor received written comments on the proposed rule change.
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.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
On June 21, 2013, the Financial Industry Regulatory Authority, Inc. (“FINRA”) filed with the Securities and Exchange Commission (“SEC” or “Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Exchange Act” or “Act”)
Institution of proceedings does not indicate that the Commission has reached any conclusions with respect to the proposed rule change, nor does it mean that the Commission will ultimately disapprove the proposed rule change. Rather, as discussed below, the Commission seeks additional input from interested parties on the changes to the proposed rule change, as set forth in Amendment No. 1.
As further described in the Notice of Filing, FINRA proposes to adopt consolidated FINRA broker-dealer supervision rules. As part of the process of developing a new consolidated rulebook (“Consolidated FINRA Rulebook”),
In general, the commenters to the Notice of Filing supported the proposal. Commenters, however, raised concerns regarding various aspects of the proposed rules, including, among others:
• References to MSRB rules;
• the scope of the definition of the term “covered accounts”;
• application of a risk-based approach;
• the conditions for establishing a one person office of supervisory jurisdiction (“OSJ”);
• the requirements and presumptions relating to a single principal supervising multiple OSJs;
• the documentation requirements relating to written and oral complaints;
• the lack of a cost benefit analysis.
FINRA addressed many of these comments by modifying the proposed rules in Amendment No. 1, as described below. Additionally, FINRA responded to these and other comments in its Response.
FINRA's proposed changes in response to comments, as set forth in Amendment No. 1 are summarized below.
First, FINRA is proposing to delete the references to MSRB rules in proposed FINRA Rules 3110(a), (b)(1), (b)(4), (b)(6), (b)(7), (c)(1), 3110.06, 3110.12, 3120(a)(1), 3150(c), and 3170(b)(3) in light of a member's separate obligation to comply with MSRB Rule G–27 (Supervision).
Second, FINRA is proposing to delete proposed FINRA Rule 3110.03 (One-Person OSJs), which expressly provided that the registered principal at a one-person OSJ (“on-site principal”) must be under the effective supervision and control of another appropriately registered principal (referred to as a “senior principal”) who would be responsible for conducting on-site supervision of the one-person OSJ on a regular periodic schedule to be determined by the member.
Third, FINRA is proposing to revise proposed FINRA Rule 3110.03 (Supervision of Multiple OSJs by a Single Principal) to use the term “on-site principal” consistently throughout the provision. As originally proposed, FINRA Rule 3110.03 used the terms “on-site supervisor” and “designated principal” interchangeably throughout the provision; however, FINRA clarified in the rule filing that the two terms referred to one person. Also, FINRA is proposing to revise proposed FINRA Rule 3110.03 to replace the presumption that assigning one principal to be the on-site principal at more than two OSJs is unreasonable with a general statement that assigning a principal to more than one OSJ will be subject to scrutiny.
Fourth, FINRA is proposing to amend proposed FINRA Rule 3110.05 (Risk-based Review of Member's Investment Banking and Securities Business) to clarify that a member is not required to conduct detailed reviews of each transaction required to be reviewed pursuant to proposed FINRA Rule 3110(b)(2) (Review of Member's Investment Banking and Securities Business) if a member is using a reasonably designed risk-based review system that provides a member with sufficient information that permits the member to focus on the areas that pose
Fifth, FINRA is proposing to replace the term “correspondence with the public” used in proposed FINRA Rules 3110(b)(4) (Review of Correspondence and Internal Communications), 3110.06 (Risk-based Review of Correspondence and Internal Communications), 3110.07 (Evidence of Review of Correspondence and Internal Communications), and 3110.08 (Delegation of Correspondence and Internal Communication Review Functions) with “correspondence” to be consistent with FINRA Rule 2210's (Communications with the Public) definition and use of the term “correspondence.”
Sixth, FINRA is proposing to revise proposed FINRA Rule 3110(b)(6)(D) to clarify that the provision does not create a strict liability obligation requiring identification and elimination of all conflicts of interest with respect to an associated person being supervised by a member's supervisory personnel. As revised, proposed FINRA Rule 3110(b)(6)(D) requires that a member have procedures reasonably designed to prevent the supervisory system required pursuant to proposed FINRA Rule 3110(a) from being compromised due to the conflicts of interest that may be present with respect to the associated person being supervised, including the position of such person, the revenue such person generates for the firm, or any compensation that a supervisor may derive from an associated person being supervised.
Seventh, FINRA is proposing to revise proposed FINRA Rule 3110(c)(2)(D) to require a member to: (1) Identify in its written supervisory procedures
Eighth, FINRA is proposing to revise proposed FINRA Rule 3110(c)(3)(A) to clarify that the provision does not create a strict liability obligation requiring identification and elimination of all conflicts of interest with respect to a location's inspections. As revised, proposed FINRA Rule 3110(c)(3)(A) requires that a member have procedures reasonably designed to prevent the effectiveness of the inspections required pursuant to proposed FINRA Rule 3110(c)(1) from being compromised due to the conflicts of interest that may be present with respect to the location being inspected, including but not limited to, economic, commercial, or financial interests in the associated persons and businesses being inspected.
Ninth, FINRA is proposing to revise proposed FINRA Rules 3110.10 (Supervision of Supervisory Personnel) and 3110.14 (Exception to Persons Prohibited from Conducting Inspections) to delete the term “only” in both supplementary materials, to further clarify that the provisions provide non-exclusive examples of situations where the exceptions generally would apply.
Tenth, FINRA is proposing to revise the definition of “covered account” in proposed FINRA Rule 3110(d) (Transaction Review and Investigation) to align the definition with existing NYSE guidance. Under the revised definition, “covered account” would include any account introduced or carried by the member that is held by: (1) The spouse of a person associated with the member; (2) a child of the person associated with the member or such person's spouse, provided that the child resides in the same household as or is financially dependent upon the person associated with the member; (3) any other related individual over whose account the person associated with the member has control; or (4) any other individual over whose account the associated person of the member has control and to whose financial support such person materially contributes. FINRA also is proposing to revise proposed FINRA Rule 3110(d) to include the phrase “reasonably designed” to acknowledge more clearly that firms with different business models may adopt different procedures and practices. As amended, the proposed rule requires each member to “include in its supervisory procedures a process for the review of securities transactions reasonably designed to identify trades that may violate the provisions of the Exchange Act, the rules thereunder, or FINRA rules prohibiting insider trading and manipulative and deceptive devices.”
Eleventh, proposed FINRA Rule 3120 (Supervisory Control System) requires a member to test and verify the member's supervisory procedures and prepare and submit to the member's senior management a report at least annually summarizing the test results and any necessary amendments to those procedures. The proposed rule also requires a member that reported $200 million or more in gross revenue on its FOCUS reports in the prior calendar year to include additional content in the report it submits to senior management. FINRA is proposing to revise proposed FINRA Rule 3120(b) to clarify that a member complying with the additional content requirement must include the additional content in its report only to the extent applicable to the member's business.
The Commission is instituting proceedings pursuant to Section 19(b)(2)(B) of the Act to determine whether the proposed rule change should be approved or disapproved.
Pursuant to Section 19(b)(2)(B) of the Exchange Act,
The Commission believes FINRA's proposed rule change, as amended, raises questions as to whether it is consistent with the requirements of Section 15A(b)(6) and 15A(b)(9) of the Exchange Act.
The Commission requests that interested persons provide written submissions of their views, data, and arguments with respect to the changes to the proposed rule change as set forth in Amendment No. 1, as well as any others they may have identified with the proposed rule change, as amended. In particular, the Commission invites the written views of interested persons concerning whether the proposed rule change, as modified by Amendment No. 1, is inconsistent with Section 15A(b)(6) or any other provision of the Exchange Act, or the rules and regulations thereunder.
Although there do not appear to be any issues relevant to approval or disapproval which would be facilitated by an oral presentation of views, data, and arguments, the Commission will consider, pursuant to Rule 19b–4, any request for an opportunity to make an oral presentation.
• 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 submissions should refer to File Number SR–FINRA–2013–025 and should be submitted on or before October 28, 2013. If comments are received, any rebuttal comments should be submitted by November 12, 2013.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
On August 16, 2013, The NASDAQ Stock Market LLC (“Exchange” or “Nasdaq”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act” or “Exchange Act”)
The Exchange proposes to list and trade Shares of the Fund pursuant to Nasdaq Rule 5735, which governs the listing and trading of Managed Fund Shares on the Exchange. The Shares will be offered by First Trust Exchange-Traded Fund VII (“Trust”), which is organized as a Massachusetts business trust and is registered with the Commission as an open-end investment company.
The Fund's investment objective will be to provide total return by providing investors with commodity exposure while seeking a relatively stable risk profile. The Fund will pursue its objective by seeking to invest through a wholly-owned subsidiary in a broadly diversified portfolio composed principally of commodity futures contracts.
The Fund will be an actively managed exchange-traded fund (“ETF”) that will seek to achieve attractive risk adjusted returns by investing in exchange-traded commodity futures contracts and exchange-traded commodity linked instruments
The Fund will not invest directly in Commodities. The Fund expects to gain exposure to these investments exclusively by investing in the First Trust Subsidiary.
The Fund will use the fixed-income securities as investments and to collateralize the First Trust Subsidiary's commodity exposure on a day-to-day basis. The Fund may also invest directly in ETFs
According to the Exchange, the Fund's investment in the First Trust Subsidiary will be designed to help the Fund achieve exposure to commodity returns in a manner consistent with the federal tax requirements applicable to the Fund and other regulated investment companies.
The First Trust Subsidiary will seek to make investments generally in Commodities while managing volatility, as measured by annualized standard deviation, to a more consistent range than statistically weighted commodity indices. The investment weightings of the underlying Commodities held by the First Trust Subsidiary will be rebalanced in an attempt to stabilize risk levels. According to the Exchange, the dynamic weighting process will result in a disciplined, systematic investment process which will be keyed off of the Adviser's volatility forecasting process.
The First Trust Subsidiary will be advised by the Adviser.
The First Trust Subsidiary may have both long and short positions in Commodities. However, for a given Commodity, the First Trust Subsidiary will have a net long exposure. The First Trust Subsidiary will initially consider investing in specific exchange-traded
As U.S. and London exchanges list additional contracts, as currently listed contracts on those exchanges gain sufficient liquidity, or as other exchanges list sufficiently liquid contracts, the Adviser will include those contracts in the list of possible investments of the First Trust Subsidiary. The list of commodities futures and commodities markets considered for investment can and will change over time.
According to the Exchange, the Commodity Futures Trading Commission (“CFTC”) has recently adopted substantial amendments to CFTC Rule 4.5 relating to the permissible exemptions and conditions for reliance on exemptions from registration as a commodity pool operator. As a result of the instruments that will be indirectly held by the Fund, the Adviser has registered as a commodity pool operator
The Fund may invest in certificates of deposit issued against funds deposited in a bank or savings and loan association. In addition, the Fund may invest in bankers' acceptances, which are short-term credit instruments used to finance commercial transactions.
The Fund may invest in bank time deposits, which are monies kept on deposit with banks or savings and loan associations for a stated period of time at a fixed rate of interest. In addition, the Fund may invest in commercial paper, which are short-term unsecured promissory notes, including master demand notes
The Fund may not invest more than 25% of the value of its total assets in securities of issuers in any one industry or group of industries. This restriction will not apply to obligations issued or guaranteed by the U.S. government or its agencies or instrumentalities or to securities of other investment companies.
The First Trust Subsidiary's shares will be offered only to the Fund, and the Fund will not sell shares of the First Trust Subsidiary to other investors. The Fund and the First Trust Subsidiary will not invest in any non-U.S. equity securities (other than shares of the First Trust Subsidiary). The Fund will not purchase securities of open-end or closed-end investment companies except in compliance with the 1940 Act.
Pursuant to the Exemptive Order, the Fund will not invest directly in options contracts, futures contracts, or swap agreements; however, this restriction will not apply to the First Trust Subsidiary.
The Fund may hold up to an aggregate amount of 15% of its net assets in illiquid securities (calculated at the time of investment), including Rule 144A securities deemed illiquid by the Adviser and master demand notes.
The Fund intends to qualify for and to elect to be treated as a separate regulated investment company under Subchapter M of the Internal Revenue Code.
Under the 1940 Act, the Fund's investment in investment companies will, subject to certain exceptions, be limited to: (i) 3% of the total outstanding voting stock of any one investment company, (ii) 5% of the Fund's total assets with respect to any one investment company, and (iii) 10% of the Fund's total assets with respect to investment companies in the aggregate.
The Fund's and the First Trust Subsidiary's investments will be consistent with the Fund's investment objective and will not be used to enhance leverage.
Additional information regarding the Fund and the Shares, including investment strategies, futures contracts and futures exchange information, risks, creation and redemption procedures, fees, Fund holdings disclosure policies, distributions, and taxes is included in the Notice and Registration Statement, as applicable.
After careful review, the Commission finds that the proposed rule change is consistent with the requirements of Section 6 of the Act
The Commission finds that the proposal to list and trade the Shares on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the Act,
The Commission further believes that the proposal to list and trade the Shares is reasonably designed to promote fair disclosure of information that may be necessary to price the Shares appropriately and to prevent trading when a reasonable degree of transparency cannot be assured. The Commission notes that the Exchange will obtain a representation from the issuer of the Shares that the NAV per Share will be calculated daily and that the NAV and the Disclosed Portfolio will be made available to all market participants at the same time.
The Exchange represents that the Shares are deemed to be equity securities, thus rendering trading in the Shares subject to the Exchange's existing rules governing the trading of equity securities. In support of this proposal, the Exchange has made representations, including:
(1) The Shares will be subject to Nasdaq Rule 5735, which sets forth the
(2) The Exchange has appropriate rules to facilitate transactions in the Shares during all trading sessions.
(3) The Exchange represents that trading in the Shares will be subject to the existing trading surveillances, administered by both Nasdaq and FINRA on behalf of the Exchange, which are designed to detect violations of Exchange rules and applicable federal securities laws and that these procedures are adequate to properly monitor Exchange trading of the Shares in all trading sessions and to deter and detect violations of Exchange rules and applicable federal securities laws.
(4) Prior to the commencement of trading, the Exchange will inform its members in an Information Circular of the special characteristics and risks associated with trading the Shares. Specifically, the Information Circular will discuss the following: (a) The procedures for purchases and redemptions of Shares in Creation Units (and that Shares are not individually redeemable); (b) Nasdaq Rule 2111A, which imposes suitability obligations on Nasdaq members with respect to recommending transactions in the Shares to customers; (c) how information regarding the Intraday Indicative Value is disseminated; (d) the risks involved in trading the Shares during the Pre-Market and Post-Market Sessions when an updated Intraday Indicative Value will not be calculated or publicly disseminated; (e) the requirement that members deliver a prospectus to investors purchasing newly issued Shares prior to or concurrently with the confirmation of a transaction; and (f) trading information.
(5) For initial and continued listing, the Fund and the First Trust Subsidiary must be in compliance with Rule 10A–3 under the Exchange Act.
(6) A minimum of 100,000 Shares will be outstanding at the commencement of trading on the Exchange.
(7) The Fund may hold up to an aggregate amount of 15% of its net assets in illiquid securities (calculated at the time of investment), including Rule 144A securities deemed illiquid by the Adviser and master demand notes.
(8) The equity securities (including shares of ETFs and closed-end funds) in which the Fund may invest will be limited to securities that trade in markets that are members of the ISG, which includes all U.S. national securities exchanges, or are parties to a comprehensive surveillance sharing agreement with the Exchange. The Fund and the First Trust Subsidiary will not invest in any non-U.S. equity securities (other than shares of the First Trust Subsidiary).
(9) The Fund will not invest directly in Commodities. The Fund expects to gain exposure to these investments exclusively by investing in the First Trust Subsidiary.
(10) The Fund's investment in the First Trust Subsidiary may not exceed 25% of the Fund's total assets.
(11) The Fund's and the First Trust Subsidiary's investments will be consistent with the Fund's investment objective and will not be used to enhance leverage. The Fund may invest in inverse ETFs, but it will not invest in leveraged or inverse leveraged ETFs.
(12) Pursuant to the Exemptive Order, the Fund will not invest directly in options contracts, futures contracts, or swap agreements. However, this restriction will not apply to the First Trust Subsidiary. With respect to the futures contracts held indirectly through the First Trust Subsidiary, not more than 10% of the weight of such futures contracts in the aggregate shall consist of instruments whose principal trading market is not a member of ISG or is a market with which the Exchange does not have a comprehensive surveillance sharing agreement.
For the foregoing reasons, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act
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”),
Topaz is proposing to amend its rules to correct date references related to two pilot programs being conducted on the Exchange: the PIM Pilot and Penny Pilot, each as defined below. The Exchange is also proposing to revise a provision describing how the Exchange notifies Members about which option classes are eligible to trade in the Penny Pilot. The text of the proposed rule change is available on the Exchange's Internet Web site 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
The Exchange is proposing to amend its rules to correct two incorrect date references related to the expiration of pilot programs currently being conducted on the Exchange. In particular, the Exchange proposes to amend the pilot periods specified for a pilot program related to the minimum size requirement for orders sent to the Exchange's Price Improvement Mechanism (“PIM Pilot”), and a pilot program permitting certain options classes to be quoted and traded in pennies (“Penny Pilot”). The Exchange's rules related to both of these pilot programs each mistakenly state a pilot period end date that was prior to Topaz's registration as a national securities exchange.
With respect to the PIM Pilot, Topaz rules provide that during the specified pilot period there will be no minimum size requirement for orders to be eligible for the PIM. Supplementary Material .03 to Rule 723 states that this pilot was scheduled to expire on July 18, 2013, which is a date prior to the Exchange's registration as a national securities exchange. The Exchange notes that Supplementary Material .05 to Rule 723 currently references the correct pilot end date of July 18, 2014, which is consistent with the pilot period on the International Securities Exchange, LLC (“ISE”).
With respect to the Penny Pilot, Topaz rules provide that during the specified pilot period certain participating options classes may be quoted and traded in increments as low as $0.01.
With this proposed rule change, the Exchange also proposes to revise the provision describing how the Exchange specifies which option classes trade in the Penny Pilot. Currently, the rule requires that the Exchange specify which options trade in the Penny Pilot and in what increments in a Regulatory Information Circular that has been filed with the Commission pursuant to Rule 19b–4 under the Exchange Act and distributed to its Members. The Exchange now proposes to revise that provision to indicate that information regarding the option classes trading in the Penny Pilot will be communicated to Members through a Market Information Circular. The Exchange will also post on its Web site the replacement option classes that are selected for the Penny Pilot.
The Exchange notes that when it filed its application to be registered as a national securities exchange it represented that it would provide certain data to the Commission in connection with the PIM and Penny Pilots.
For example, the Exchange currently conducts a pilot program that eliminates position and exercise limits for physically-settled options on the SPDR S&P ETF Trust (“SPY Pilot”). When the ISE adopted the SPY Pilot it agreed to provide data to the Commission in a “Pilot Report” to be submitted within thirty (30) days of the end of the twelve (12) month time period following the adoption of the pilot program.
The Exchange also notes that it currently conducts another pilot program adopted in connection with the Plan to Address Extraordinary Market Volatility that suspends Rule 720 (Obvious and Catastrophic Errors) with respect to transactions executed during a Limit State or Straddle State (“Obvious Error Pilot”).
The basis under the Securities Exchange Act of 1934 (the “Exchange Act”) for this proposed rule change is found in Section 6(b)(5), in that the proposed rule change is designed to promote just and equitable principles of trade, remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest. The Exchange believes that it is appropriate to correct the pilot dates referenced in its rules for the PIM and Penny Pilots so that Members and investors have a clear and accurate understanding of the Exchange's rules. The Exchange notes again that the pilot end dates being proposed here are consistent with other parts of the Exchange's rules, and with the rules of the ISE and other options exchanges.
In addition, the revision to how the Exchange will specify which options participate in the Penny Pilot promotes just and equitable principles of trade since it clarifies how Members and other market participants will be made aware of which option classes are trading in the Penny Pilot and eliminates a requirement that the Exchange specify which option classes are in the Penny Pilot through a Regulatory Information Circular that has been filed with the Commission pursuant to Rule 19b–4 under the Exchange Act. Eliminating the requirement to file the Regulatory Information Circular is appropriate because most other options exchanges do not require such a submission to the Commission.
The proposed rule changes are non-substantive corrections to the Exchange's rules and therefore do not implicate the competition analysis. The proposed rule change will serve to promote regulatory clarity and consistency, thereby reducing burdens on the marketplace and facilitating investor protection.
The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any unsolicited written comments from members or other interested parties.
The Exchange believes that the foregoing proposed rule change may take effect upon filing with the Commission pursuant to Section 19(b)(3)(A)
The Exchange has asked the Commission to waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The Commission believes that waiver of the operative delay is consistent with the protection of investors and the public interest because this rule change is not proposing any substantive changes. The proposed rule change is correcting certain inaccuracies in the Exchange's rules, conforming to how other exchanges provide notice of the options that trade in the Penny Pilot, and confirming that the Exchange will provide certain data to the Commission in connection with various pilot programs. These changes and clarifications should eliminate member confusion and provide clarity on how the rules apply. Therefore, the Commission designates the proposal operative upon filing.
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: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or 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 submissions should refer to File No. SR–Topaz–2013–05. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method.
The Commission will post all comments on the Commission's Internet Web site (
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 Exchange proposes to amend the fee schedule under Exchange Rule 7018(a) with respect to transactions in securities priced at $1 per share or greater. The Exchange will implement the proposed rule change on October 1, 2013.
The text of the proposed rule change is also available on the Exchange's Web site 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 Exchange is proposing to amend the credit it pays with respect to routable orders that access liquidity on the Exchange (either before or after routing to other venues). Currently, the Exchange pays a credit of $0.0013 or $0.0011 per share executed for orders that execute at BX if the member achieves certain volume tiers and a credit of $0.0007 per share executed if such tiers are not reached. However, the Exchange pays a credit of $0.0014 per share executed with respect to routable orders (specifically, orders using the Exchange's BSTG, BSCN, BMOP, BTFY, BCRT, BDRK, or BCST routing strategies) if such orders execute at the Exchange. The Exchange is reducing this credit to $0.0011 per share executed, as a means of reducing costs in a period of persistent low trading volumes. The Exchange notes, however, that it is still providing an incentive for members to use the Exchange's routing functionality by paying a credit available to all members, regardless of their trading volumes, that exceeds the base credit of $0.0007 per share executed otherwise available.
BX believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,
The proposed change is reasonable because it reflects a modest decrease of $0.0003 per share executed in the credit paid to members with routable orders that execute at the Exchange. The resulting credit is comparable to the credit that members receive if they provide an average daily volume of at least 25,000, but less than 1 million, shares of liquidity during the month, which is a higher rate than the base rate of $0.0007 per share executed. The change is consistent with an equitable allocation of fees and is not unfairly discriminatory because it makes the credits applicable to routable orders that execute at the Exchange more consistent with the credits paid with respect to other orders that execute at the Exchange. Although the credit exceeds the base rate of $0.0007, the difference is not unfairly discriminatory because the credit offered with respect to routable orders is still available to all members, regardless of volume levels, and is intended to provide an incentive for BX members to make use of the Exchange's optional routing functionality.
The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended.
No written comments were either solicited or received.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) 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.
Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission's Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. 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–BX–2013–054 and should be submitted on or before November 12, 2013.
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: (i) Amend Rule 3.22, Proxy Voting; (ii) amend Rule 13.3, Forwarding of Issuer Materials; and (iii) adopt new Rule 12.14, Front Running of Block Transactions, to conform with the rules of the Financial Industry Regulatory Authority, Inc. (“FINRA”) for purposes of an agreement between the Exchange and FINRA pursuant to Rule 17d–2 under the Act.
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 these statements may be examined at the places specified in Item IV below. The self-regulatory organization has
Pursuant to Rule 17d–2 under the Act,
The 17d–2 Agreement included a certification by the Exchange that states that the requirements contained in certain Exchange rules are identical to, or substantially similar to, certain FINRA rules that have been identified as comparable. To conform with comparable FINRA rules for purposes of the 17d–2 Agreement, the Exchange proposes to: (i) Amend Rule 3.22, Proxy Voting; (ii) amend Rule 13.3, Forwarding of Issuer Materials; and (iii) adopt new Rule 12.14, Front Running of Block Transactions.
The Exchange proposes to amend Rules 3.22 and 13.3 concerning proxy voting and forwarding of proxy materials to align these rules with FINRA Rule 2251.
Similarly, the Exchange proposes to add new paragraph (c) to Rule 3.22, based entirely on FINRA Rule 2251(d), to explicitly state that a Member may give a proxy to vote any stock registered in its name if such Member holds such stock as executor, administrator, guardian, trustee, or in a similar representative or fiduciary capacity with authority to vote. Proposed paragraph (c) would also state that a Member that has in its possession or within its control stock registered in the name of another Member and that desires to transmit signed proxies pursuant to the provisions of Rule 13.3, shall obtain the requisite number of signed proxies from such holder of record. Lastly, proposed paragraph (c) would also state that, notwithstanding the foregoing: (1) Any Member designated by a named Employee Retirement Income Security Act of 1974 (as amended) (“ERISA”) Plan fiduciary as the investment manager of stock held as assets of the ERISA Plan may vote the proxies in accordance with the ERISA Plan fiduciary responsibilities if the ERISA Plan expressly grants discretion to the investment manager to manage, acquire, or dispose of any plan asset and has not expressly reserved the proxy voting right for the named ERISA Plan fiduciary; and (2) any designated investment adviser may vote such proxies.
To promote consistency with FINRA Rule 2251, the Exchange proposes to add language to the existing text of Rule 13.3 to state that for beneficial owners, the proxy materials or other materials to be forwarded on behalf of an issuer can be sent to the beneficial owner's designated investment adviser, if applicable. In conjunction with this change, the Exchange proposes to adopt the definition of “designated investment adviser” set forth in FINRA Rule 2251(f) as Interpretation and Policy .01 to Rule 3.22.
The Exchange also proposes modifying the text of Rule 13.3, which currently would require forwarding of proxy material but which does not explicitly reference such material, to add such an explicit reference. The Exchange further proposes to modify the text of Rule 13.3 to reference “security holders,” rather than stockholders, in the initial sentence, to ensure that the coverage of the rule applies to all securities, including debt securities to the extent applicable, and not just equity securities. The Exchange also proposes to incorporate certain language from FINRA Rule 2251 that provides additional detail regarding the material that must be provided to beneficial owners in the event of a proxy solicitation. Specifically, Rule 13.3 as amended would state that in the event of a proxy solicitation, materials provided pursuant to the Rule shall include a signed proxy indicating the number of shares held for such beneficial owner and bearing a symbol identifying the proxy with proxy records maintained by the Member, and a letter informing the beneficial owner (or the beneficial owner's designated investment adviser) of the time limit and necessity for completing the proxy form and forwarding it to the person soliciting proxies prior to the expiration of the time limit in order for the shares to be represented at the meeting. The Rule would also require a Member to furnish a copy of the symbols to the person soliciting the proxies and shall also retain a copy thereof pursuant to the provisions of Exchange Act Rule 17a–4. Finally, the Exchange proposes
The Exchange believes that these changes will help to avoid confusion among Members of the Exchange that are also members of FINRA by further aligning the Exchange's rules with FINRA Rule 2251. The proposed changes to Rules 3.22 and 13.3 are designed to enable the Exchange to incorporate Rules 3.22 and 13.3 into the 17d–2 Agreement, further reducing duplicative regulation of Members that are also members of FINRA.
The Exchange proposes to adopt new Rule 12.14, Front Running of Block Transactions, which would require that Members and persons associated with a Member shall comply with FINRA Rule 5270 as if such Rule were part of the Exchange's Rules. The proposed rule text is substantially the same as IM–2110–3 of the Nasdaq Stock Market LLC (“Nasdaq”), which has been approved by the Commission.
FINRA Rule 5270 includes exceptions to the general prohibitions of the rule where a member can demonstrate that a transaction is unrelated to the material, non-public market information received in connection with the customer order. The Supplementary Material to FINRA Rule 5270 includes an illustrative list of potentially permitted transactions as examples of transactions that, depending upon the circumstances, may be unrelated to the customer block order. These types of transactions may include: where the member has information barriers established to prevent internal disclosure of such information; actions in the same security related to a prior customer order in that security; transactions to correct bona fide errors; or transactions to offset odd-lot orders.
In addition, Rule 5270 does not preclude transactions undertaken for the purpose of fulfilling, or facilitating the execution of, the customer block order. However, when engaging in trading activity that could affect the market for the security that is the subject of the customer block order, the member must minimize any potential disadvantage or harm in the execution of the customer's order, must not place the member's financial interests ahead of those of its customer, and must obtain the customer's consent to such trading activity. A member may obtain its customers' consent through affirmative written consent or through the use of a negative consent letter. The negative consent letter must clearly disclose to the customer the terms and conditions for handling the customer's orders; if the customer does not object, then the member may reasonably conclude that the customer has consented and the member may rely on such letter for all or a portion of the customer's orders. In addition, a member may provide clear and comprehensive oral disclosure to and obtain consent from the customer on an order-by-order basis, provided that the member documents who provided such consent and such consent evidences the customer's understanding of the terms and conditions for handling the customer's order.
The Exchange also proposes to state in new Rule 12.14 that although the prohibitions in Rule 5270 are limited to imminent block transactions, the front running of other types of orders that place the financial interests of the Member or persons associated with a Member ahead of those of its customer or the misuse of knowledge of an imminent customer order may violate other Exchange rules, including Rule 3.1 and Rule 12.6, or provisions of the federal securities laws.
The Exchange believes that proposed rule change is consistent with Section 6(b)(5) of the Act,
The Exchange believes that proposed amendments to Rules 3.22 and 13.3 are consistent with Section 6(b)(5) of the Act,
The Exchange believes that new Rule 12.14 is consistent with Section 6(b)(5) of the Act
The Exchange does not believe that the proposed rule change would impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The proposed rule change is not designed to address any competitive issues but rather is designed to provide greater harmonization among Exchange and FINRA rules of similar purpose, resulting in less burdensome and more efficient regulatory compliance for common members and facilitating FINRA's performance of its regulatory functions under the 17d–2 Agreement.
The Exchange has neither solicited nor received written comments on the proposed rule change.
Because the foregoing proposed rule change does not: (1) Significantly affect the protection of investors or the public interest; (2) impose any significant burden on competition; and (3) by its terms does not become operative for 30 days after the date of this filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act
A proposed rule change filed under Rule 19b–4(f)(6) normally does not become operative for 30 days after the date of filing. However, Rule 19b–4(f)(6)(iii) permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest because it will help foster consistency between the rulebooks of the self-regulatory organizations.
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 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.
On March 21, 2013, National Securities Clearing Corporation (“NSCC”) filed with the Securities and Exchange Commission (“Commission”) proposed rule change SR–NSCC–2013–02 (“Proposed Rule Change”) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Exchange Act”)
Pursuant to Section 19(b)(1) of the Exchange Act
The Proposed Rule Change, as modified by Amendments No. 1, No. 2, and No. 3, is a proposal by NSCC to amend its Rules & Procedures (the “NSCC Rules”) to provide for supplemental liquidity deposits to its Clearing Fund (the “NSCC Clearing Fund”) to ensure that NSCC has adequate liquidity resources to meet its liquidity needs (the “SLD Proposal” or sometimes the “Proposal”), as described below. NSCC filed Amendment No. 3 (this “Amendment”) to the Proposed Rule Change, as previously modified by Amendment No. 1 and No. 2, in order to delete the provisions in the proposed Rule relating to Regular Activity Liquidity Obligations (as defined), to respond to concerns raised by Members. As a result the Proposal, as revised, would impose supplemental liquidity obligations on affected Members only with respect to activity relating to monthly options expiry periods (defined in the proposed Rule as “Special Activity Liquidity Obligations”).
In its filing with the Commission, NSCC included statements concerning the purpose of and basis for the Proposed Rule Change, as modified by Amendment No. 3, 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. NSCC has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
As noted in the original proposal contained in the Proposed Rule Change, as modified by Amendments No. 1 and No. 2 (the “Rule Filing”), the SLD Proposal would modify the NSCC Rules to add a new Rule 4(A), to establish a supplemental liquidity funding obligation designed to cover the liquidity exposure attributable to those Members and families of affiliated Members (“Affiliated Families”) that regularly incur the largest gross settlement debits over a settlement cycle during both times of normal trading activity (“Regular Activity Periods”) and times of increased trading and settlement activity that arise around monthly options expiration dates (“Options Expiration Activity Periods”).
Under the existing Proposal, the Liquidity Obligation of a Member or Affiliated Family with respect to a
The cash deposit in respect of a Special Activity Liquidity Obligation (a “Special Activity Supplemental Deposit”) is structured in the existing SLD Proposal to address any additional liquidity shortfalls (over and above NSCC's other available liquidity resources) that arise during the heightened activity period around monthly options expiration. As such, these additional Special Activity Supplemental Deposits would be required to be maintained on deposit with NSCC only through the completion of the related settlement cycle and for a few days thereafter.
The key concerns raised by commenters with respect to the existing SLD Proposal were as follows:
First, commenters claimed that Members were not sufficiently consulted or involved during the development of the Proposal (even though NSCC management conducted significant Member outreach), so that the Proposal lacked input that could have potentially resulted in a less burdensome approach.
Second, commenters claimed that the Proposal was anticompetitive or discriminatory because the obligation to provide supplemental liquidity was imposed on only the 30 largest Unaffiliated Members or Affiliated Families (even though those Members collectively represent approximately 85% of NSCC's total membership by peak liquidity needs), rather than all Members of NSCC. This concern was raised in the context of Regular Activity Supplemental Deposits.
Third, commenters claimed that the existing Proposal was anticompetitive or discriminatory because, with respect to Regular Activity Supplemental Deposits, it gave a dollar for dollar credit for commitments made by Regular Activity Liquidity Providers or their Designated Lenders under the Credit Facility—supposedly favoring Regular Activity Liquidity Providers with affiliated banks.
NSCC believes that the proposed amendments and items described below address or mitigate all of these concerns.
NSCC is proposing to amend the existing SLD Proposal by removing those provisions that, collectively, deal with the imposition of Regular Activity Liquidity Obligations, while maintaining the provisions relating to Special Activity Liquidity Obligations. The proposed Rule, as so revised, would thus impose only Special Activity Liquidity Obligations with respect to the heightened activity of Options Expiration Activity Periods (that is, the four days beginning with the Friday that precedes the monthly expiration date for stock options, and ending on the third settlement day following). Under the revised Proposal, as under the existing Proposal as it relates to Special Activity Liquidity Obligations, only those Unaffiliated Members or Affiliated Families among the top 30 whose activity during monthly Options Expiration Activity Periods generate liquidity needs in excess of NSCC's then available liquidity resources will be obligated to fund such additional amounts. That is, the allocation formula ratably applies the additional amount needed during the relevant Options Expiration Activity Period based upon the affected Member's Special Activity Peak Liquidity Exposure. To the extent that a Member's Special Activity Peak Liquidity Exposure is less than or equal to NSCC's then available liquidity resources, its share of the Special Activity Peak Liquidity Need will be zero.
In addition, under the revised SLD Proposal, as under the existing Proposal as it relates to Special Activity Liquidity Obligations, Unaffiliated Members and Affiliated Families, will be able to manage their exposures by making Special Activities Prefund Deposits where they project their own activity will increase their liquidity exposure. For example, if a Special Activity Liquidity Provider anticipates that its Special Activity Peak Liquidity Exposure at any time during a particular Options Expiration Activity Period will be greater than the amount calculated by NSCC, it can make an additional cash deposit to the Clearing Fund (in excess of its Required Deposit) that it designates as a “Special Activity Prefund Deposit.” However, to the extent that a Member fails to adequately prefund its activity, it may be subject to a Special Activity Liquidity Call in the same manner as provided in the existing Proposal.
With these changes, NSCC is removing those provisions of the existing SLD Proposal that generated most concern from commenters, while retaining those provisions that enable NSCC to collect additional liquidity resources to cover the heightened liquidity needs that arise during monthly Options Expiration Activity Periods. Every Unaffiliated Member and Affiliated Family among the top 30 whose activity causes a liquidity need in excess of NSCC's available liquidity resources will contribute ratably to such shortfall, so the Proposal fairly and equitably apportions the obligation among those Unaffiliated Members and Affiliated Families whose activity cause the need. The removal of those provisions relating to how commitments under the Credit Facility would be credited against the cash deposit obligations of Regular Activity Liquidity Providers render concerns about such allocation moot.
As indicated in NSCC's August 20, 2013 letter to the Commission, DTCC is separately establishing a standing member-based advisory group, the Clearing Agency Liquidity Council (“CALC”), as a forum for the discussion of liquidity and liquidity-related financing needs and trends. The CALC will initially focus on liquidity initiatives currently being considered by NSCC to address liquidity funding during periods of normal activity, including issues raised by commenters on the existing SLD Proposal. In response to commenters' more general concerns regarding NSCC's reliance on
Finally, the amendment makes certain technical corrections and clarifies the time period for when Special Activity Liquidity Calls must be satisfied.
The revised SLD Proposal contributes to NSCC's goal of ensuring that NSCC has adequate liquidity resources to meet its settlement obligations notwithstanding the default of an Unaffiliated Member or Affiliated Family that poses the largest aggregate liquidity exposure over the relevant settlement cycle, by providing a mechanism for satisfying the peak liquidity needs that occur during monthly Options Expiration Activity Periods. As such, the Proposal is consistent with the requirements of the Exchange Act, and the rules and regulations thereunder applicable to NSCC, as well as with PFMI Principle 7 as described in the Rule Filing.
NSCC believes that the revised SLD Proposal will not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Exchange Act. The Special Activity Liquidity Obligations imposed on Special Activity Liquidity Providers will ensure that all Unaffiliated Members and Affiliated Families whose activity present liquidity exposure to NSCC during periods of heightened activity during Options Expiration Activity Periods fairly and equitably contribute to NSCC's liquidity resources for settlement. NSCC believes the changes that have been made to the existing Proposal fully address the concerns raised by commenters, and eliminate any impact that the SLD Proposal might have on competition. To the extent there remains any perceived burden on competition caused by the Proposal, NSCC believes that such burden is not unreasonable or inappropriate to prevent systemic risk given that the Proposal contributes to the goal of financial stability in the event of Member default.
Written comments on the Proposed Rule Change, including NSCC's formal response to the written comments, have been filed with the Commission and are available on the Commission's Web site.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the Proposed Rule Change, as modified by Amendment No. 3, is consistent with the Section 17A
• 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 No. SR–NSCC–2013–02 and should be submitted on or before November 5, 2013.
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”),
C2 Options Exchange, Incorporated (the “Exchange” or “C2”) proposes to amend the fee schedule of Market Data Express, LLC (“MDX”), an affiliate of C2, to establish fees for the Complex Order Book (“COB”) Data Feed for C2 listed options (“COB Data Feed” or “Data”). The text of the proposed rule change is available on the Exchange's Web site (
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 COB Data Feed is a real-time feed that consists of data regarding the Exchange's Complex Order Book and related complex order information. The COB Data Feed includes “best bid and offer” or “BBO” quotes and identifying information for all C2-traded complex order strategies, as well as all executed C2 complex order trades (and identifies whether the trade was a customer trade or whether a complex order in the COB is a customer order). The COB Data Feed is currently made available by MDX to all market participants free of charge.
The Exchange proposes to establish fees for the COB Data Feed. MDX would charge Customers of the COB Data Feed $500 per month (“Data Fee”). A COB Data Feed “Customer” is any entity that receives the COB Data Feed, either directly from MDX's system or through a connection to MDX provided by an approved redistributor (
In addition, MDX would charge a Customer “User Fees” of $25 per month per Device
The Exchange also proposes to make several formatting and clean up changes to the MDX fee schedule. The Exchange proposes to create two separate sections on the MDX fee schedule for the C2 BBO Data Feed and the COB Data Feed and include the definitions applicable to each data feed within its respective section. The Exchange proposes to renumber the section on Systems Fees and move the definition of Port Fee within that section. Finally, the Exchange proposes to delete the Definitions section of the MDX fee schedule, including the provisions on invoicing and late payments which are included within MDX's written agreement for the data.
The proposed fees would be effective on October 1, 2013.
The Exchange believes the proposed rule change is consistent with the requirements of Section 6(b) of the Securities Exchange Act of 1934 (“Act”)
The Exchange believes the proposed waiver of the Data Fee is equitable and not unfairly discriminatory because it would apply equally to all Customers of the COB Data Feed who are also Customers of the C2 BBO Data Feed. Customers of the C2 BBO Data Feed already pay MDX $1,000 for the right to use and redistribute the data in the C2 BBO Data Feed. The C2 BBO Data Feed includes the data in the COB Data Feed. The proposed waiver of the Data Fee would allow a Customer of the COB Data Feed who is also a Customer of the C2 BBO Data Feed to redistribute the COB Data Feed for no additional charge, thereby incentivizing further redistribution of the data in the COB Data Feed. The Exchange notes other exchanges offer similar fee waivers.
The Exchange also believes the proposed fees are equitable because the COB Data Feed is purely optional. Only those Customers that deem the product to be of sufficient overall value and usefulness would purchase it.
The Exchange believes the proposed fees are reasonable because they compare favorably to fees that other markets charge for similar products. For example, the Exchange believes The International Securities Exchange (“ISE”) offers a “Spread Feed”, which like the COB Data Feed includes order and quote data for complex strategies. The Exchange believes ISE charges distributors of its Spread Feed $3,000 per month and a monthly controlled device fee of $25 per controlled device for Professionals.
The Exchange notes that the COB Data Feed also competes with products offered by NASDAQ OMX PHLX and NYSE. NASDAQ OMX PHLX offers a market data product entitled “TOPO Plus Orders”, which like the COB Data Feed includes order and last sale information for complex strategies and other market data. NYSE offers market data products entitled “NYSE ArcaBook for Amex Options” and “NYSE ArcaBook for Arca Options” that include top-of-book and last sale data for complex strategies similar to the data in the COB Data Feed.
The Exchange believes that the proposed cap on User Fees is reasonable because it may encourage more vendors to choose to offer the COB Data Feed, thereby expanding the distribution of this market data for the benefit of investors.
The proposed formatting and clean-up changes to the MDX fee schedule will benefit Customers and users by making the fee schedule clearer and easier to understand.
For the reasons cited above, the Exchange believes the proposed fees for the COB Data Feed are equitable, reasonable and not unfairly discriminatory. In addition, the Exchange believes that no substantial countervailing basis exists to support a finding that the proposed fees for the COB Data Feed fails to meet the requirements of the Act.
In accordance with Section 6(b)(8) of the Act,
In addition, in the case of products that are distributed through market data vendors, the market data vendors themselves provide additional price discipline for proprietary data products because they control the primary means of access to certain end users. These vendors impose price discipline based upon their business models. For example, vendors that assess a surcharge on data they sell are able to refuse to offer proprietary products that their end users do not or will not purchase in sufficient numbers. Internet portals, such as Google, impose price discipline by providing only data that they believe will enable them to attract “eyeballs” that contribute to their advertising revenue. Similarly, Customers will not offer the COB Data Feed unless this product will help them maintain current users or attract new ones. For example, a broker-dealer will not choose to offer the COB Data Feed to its retail customers unless the broker-dealer believes that the retail customers will use and value the data and the provision of such data will help the broker-dealer maintain the customer relationship, which allows the broker-dealer to generate profits for itself. Professional Users will not request the COB Data Feed from Customers unless they can use the data for profit-generating purposes in their businesses. All of these operate as constraints on pricing proprietary data products.
Analyzing the cost of market data product production and distribution in isolation from the cost of all of the inputs supporting the creation of market data and market data products will inevitably underestimate the cost of the data and data products. Thus, because it is impossible to obtain the data inputs to create market data products without a fast, technologically robust, and well-regulated execution system, system costs and regulatory costs affect the price of both obtaining the market data itself and creating and distributing market data products. It would be equally misleading, however, to attribute all of an exchange's costs to the market data portion of an exchange's joint products. Rather, all of an exchange's costs are incurred for the unified purposes of attracting order flow, executing and/or routing orders, and generating and selling data about market activity. The total return that an exchange earns reflects the revenues it receives from the joint products and the total costs of the joint products.
The level of competition and contestability in the market is evident in the numerous alternative venues that compete for order flow, including 12 options self-regulatory organization (“SRO”) markets, as well as internalizing broker-dealers (“BDs”) and various forms of alternative trading systems (“ATSs”), including dark pools and electronic communication networks (“ECNs”). Competition among trading platforms can be expected to constrain the aggregate return that each platform earns from the sale of its joint products, but different platforms may choose from a range of possible, and equally reasonable, pricing strategies as the means of recovering total costs. For example, some platforms may choose to pay rebates to attract orders, charge relatively low prices for market data products (or provide market data products free of charge), and charge relatively high prices for accessing posted liquidity. Other platforms may choose a strategy of paying lower rebates (or no rebates) to attract orders, setting relatively high prices for market data products, and setting relatively low prices for accessing posted liquidity. In this environment, there is no economic basis for regulating maximum prices for one of the joint products in an industry in which suppliers face competitive constraints with regard to the joint offering.
Further, data products are valuable to professional users only if they can be used for profit-generating purposes in their businesses and valuable to non-professional users only insofar as they provide information that such users expect will assist them in tracking prices and market trends and making trading decisions. The Exchange believes that the proposed waiver of the Data Fee and the cap on User Fees, which may permit wider distribution of the COB Data Feed at a lower cost to Customers with a large number of Professional and Non-professional Users, may encourage more users to demand and more Customers to choose to offer the COB Data Feed, thereby benefitting Professional and Non-professional Users, including public investors.
The existence of numerous alternatives to the Exchange's products, including proprietary data from other sources, ensures that the Exchange cannot set unreasonable fees, or fees that are unreasonably discriminatory, when vendors and subscribers can elect these alternatives or choose not to purchase a specific proprietary data product if its cost to purchase is not justified by the returns any particular vendor or subscriber would achieve through the purchase.
The COB Data Feed is voluntary on the part of the Exchange, which is not required to offer such services, and voluntary on the part of prospective Customers that are not required to use it. The Exchange believes the COB Data Feed offered by MDX will help attract new users and new order flow to the Exchange, thereby improving the Exchange's ability to compete in the market for options order flow and executions.
The Exchange neither solicited nor received comments on the proposed rule change.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) 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.
All submissions should refer to File Number SR–C2–2013–035. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (
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 Exchange proposes to delay the implementation of its new Options Floor Broker Management System.
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 proposal is to delay the implementation of the Exchange's enhancements to the Options Floor Broker Management System (“FBMS”). The Exchange received approval to implement the enhancements as of June 1, 2013,
Accordingly, the Exchange seeks to be able to implement the changes by the end of December 2013; the Exchange will announce the specific date in advance through an Options Trader Alert.
Today, FBMS enables Floor Brokers and/or their employees to enter, route, and report transactions stemming from options orders received on the Exchange. FBMS also establishes an electronic audit trail for options orders represented by Floor Brokers on the Exchange. Floor Brokers can use FBMS to submit orders to Phlx XL, rather than executing the orders in the trading crowd.
With the new FBMS, all options transactions on the Exchange involving at least one Floor Broker would be required to be executed through FBMS. In connection with order execution, the Exchange will allow FBMS to execute two-sided orders entered by Floor Brokers, including multi-leg orders up to 15 legs, after the Floor Broker has represented the orders in the trading crowd. FBMS will also provide Floor Brokers with an enhanced functionality called the complex calculator that will calculate and display a suggested price of each individual component of a multi-leg order, up to 15 legs, submitted on a net debit or credit basis.
The Exchange still intends to implement these enhancements with a trial period of two to four weeks, to be determined by the Exchange, during which the new FBMS enhancements and related rules would operate along with the existing FBMS and rules. The Exchange will announce the beginning and end of the trial period in advance.
The Exchange believes that its proposal is consistent with Section 6(b)
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. The Exchange continues to believe, as it stated when proposing these enhancements, that these enhancements to FBMS should result in the Exchange's trading floor operating in a more efficient way, which should help it compete with other floor-based exchanges and help the Exchange's Floor Brokers compete with floor brokers on other options exchanges.
No written comments were either solicited or received.
Because the foregoing 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, it has become effective pursuant to Section 19(b)(3)(A) of the Act
A proposed rule change filed under Rule 19b–4(f)(6) normally does not become operative for 30 days after the date of filing.
The Commission believes that the waiver of the 30-day operative delay is consistent with the protection of investors and the public interest as it will clarify that the delayed implementation of the FBMS will be effective and operative immediately. In addition, because the proposal only delays the implementation date of the FBMS and does not make any additional changes to the FBMS itself, it does not raise any novel regulatory issues. Therefore, the Commission designates the proposal operative upon filing.
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: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) 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 its fees and rebates applicable to Members
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 these statements may be examined at the places specified in Item IV below. The self-regulatory organization has prepared summaries, set forth in sections A, B and C below, of the most significant aspects of such statements.
The Exchange proposes to amend its Fee Schedule to decrease the rebate for orders yielding Flag RZ. In securities priced at or above $1.00, the Exchange currently provides a rebate of $0.0025 per share for Members' orders that yield Flag RZ, which routes to the BATS Exchange Inc. (“BATS”) and adds liquidity. The Exchange proposes to amend its Fee Schedule to decrease this rebate to $0.0020 per share for Members' orders that yield Flag RZ. The proposed change represents a pass through of the rate that Direct Edge ECN LLC (d/b/a DE Route) (“DE Route”), the Exchange's affiliated routing broker-dealer, is rebated for routing orders to BATS when it does not qualify for a volume tiered rebate. When DE Route routes to BATS, it is rebated a standard rate of $0.0020 per share.
The Exchange proposes to implement these amendments to its Fee Schedule on October 1, 2013.
The Exchange believes that the proposed rule change is consistent with the objectives of Section 6 of the Act,
The Exchange believes that its proposal to decrease the pass through rebate for Members' orders that yield Flag RZ from $0.0025 to $0.0020 per share represents an equitable allocation of reasonable dues, fees, and other charges among Members and other persons using its facilities because the Exchange does not levy additional fees or offer additional rebates for orders that it routes to BATS through DE Route. Prior to BATS's October 2013 fee change, BATS provided DE Route a rebate of $0.0025 per share for orders yielding Flag RZ, which DE Route passed through to the Exchange and the Exchange passed through to its Members. In October 2013, BATS decreased the standard rebate it provides its customers, such as DE Route, from a rebate of $0.0025 per share to a rebate of $0.0020 per share for orders that are routed to BATS.
These proposed rule changes do not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange does not believe that any of these changes represent a significant departure from previous pricing offered by the Exchange or pricing offered by the Exchange's competitors. Additionally, Members may opt to disfavor EDGA's pricing if they believe that alternatives offer them better value. Accordingly, the Exchange does not believe that the proposed changes will impair the ability of Members or competing venues to maintain their competitive standing in the financial markets.
The Exchange believes that its proposal to pass through a rebate of $0.0020 per share for Members' orders that yield Flag RZ would increase intermarket competition because it offers customers an alternative means to route to BATS for the same price as entering orders on BATS directly. The Exchange believes that its proposal would not burden intramarket
The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any unsolicited written comments from Members or other interested parties.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) 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: (i) Amend Rule 3.22, Proxy Voting; (ii) amend Rule 13.3, Forwarding of Issuer Materials; and (iii) adopt new Rule 12.14, Front Running of Block Transactions, to conform with the rules of the Financial Industry Regulatory Authority, Inc. (“FINRA”) for purposes of an agreement between the Exchange and FINRA pursuant to Rule 17d-2 under the Act.
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 these statements may be examined at the places specified in Item IV below. The self-regulatory organization has prepared summaries, set forth in sections A, B and C below, of the most significant aspects of such statements.
Pursuant to Rule 17d–2 under the Act,
The 17d–2 Agreement included a certification by the Exchange that states that the requirements contained in certain Exchange rules are identical to, or substantially similar to, certain FINRA rules that have been identified as comparable. To conform with comparable FINRA rules for purposes of the 17d–2 Agreement, the Exchange proposes to: (i) Amend Rule 3.22, Proxy Voting; (ii) amend Rule 13.3, Forwarding of Issuer Materials; and (iii) adopt new Rule 12.14, Front Running of Block Transactions.
The Exchange proposes to amend Rules 3.22 and 13.3 concerning proxy voting and forwarding of proxy materials to align these rules with FINRA Rule 2251.
Similarly, the Exchange proposes to add new paragraph (c) to Rule 3.22, based entirely on FINRA Rule 2251(d), to explicitly state that a Member may give a proxy to vote any stock registered in its name if such Member holds such stock as executor, administrator, guardian, trustee, or in a similar representative or fiduciary capacity with authority to vote. Proposed paragraph (c) would also state that a Member that has in its possession or within its control stock registered in the name of another Member and that desires to transmit signed proxies pursuant to the provisions of Rule 13.3, shall obtain the requisite number of signed proxies from such holder of record. Lastly, proposed paragraph (c) would also state that, notwithstanding the foregoing: (1) any Member designated by a named Employee Retirement Income Security Act of 1974 (as amended) (“ERISA”) Plan fiduciary as the investment manager of stock held as assets of the ERISA Plan may vote the proxies in accordance with the ERISA Plan fiduciary responsibilities if the ERISA Plan expressly grants discretion to the investment manager to manage, acquire, or dispose of any plan asset and has not expressly reserved the proxy voting right for the named ERISA Plan fiduciary; and (2) any designated investment adviser may vote such proxies.
To promote consistency with FINRA Rule 2251, the Exchange proposes to add language to the existing text of Rule 13.3 to state that for beneficial owners, the proxy materials or other materials to be forwarded on behalf of an issuer can be sent to the beneficial owner's designated investment adviser, if applicable. In conjunction with this change, the Exchange proposes to adopt the definition of “designated investment adviser” set forth in FINRA Rule 2251(f) as Interpretation and Policy .01 to Rule 3.22.
The Exchange also proposes modifying the text of Rule 13.3, which currently would require forwarding of proxy material but which does not explicitly reference such material, to add such an explicit reference. The Exchange further proposes to modify the text of Rule 13.3 to reference “security holders,” rather than stockholders, in the initial sentence, to ensure that the coverage of the rule applies to all securities, including debt securities to the extent applicable, and not just equity securities. The Exchange also proposes to incorporate certain language from FINRA Rule 2251 that provides additional detail regarding the material that must be provided to beneficial owners in the event of a proxy solicitation. Specifically, Rule 13.3 as amended would state that in the event of a proxy solicitation, materials provided pursuant to the Rule shall include a signed proxy indicating the number of shares held for such beneficial owner and bearing a symbol identifying the proxy with proxy records maintained by the Member, and a letter informing the beneficial owner (or the beneficial owner's designated investment adviser) of the time limit and necessity for completing the proxy form and forwarding it to the person soliciting proxies prior to the expiration of the time limit in order for the shares to be represented at the meeting. The Rule would also require a Member to furnish a copy of the symbols to the person soliciting the proxies and shall also retain a copy thereof pursuant to the provisions of Exchange Act Rule 17a–4. Finally, the Exchange proposes to modify the title of Rule 13.3 to include a reference to proxy voting.
The Exchange believes that these changes will help to avoid confusion among Members of the Exchange that are also members of FINRA by further aligning the Exchange's rules with FINRA Rule 2251. The proposed changes to Rules 3.22 and 13.3 are designed to enable the Exchange to incorporate Rules 3.22 and 13.3 into the 17d–2 Agreement, further reducing duplicative regulation of Members that are also members of FINRA.
The Exchange proposes to adopt new Rule 12.14, Front Running of Block Transactions, which would require that Members and persons associated with a Member shall comply with FINRA Rule 5270 as if such Rule were part of the Exchange's Rules. The proposed rule text is substantially the same as IM–2110–3 of the Nasdaq Stock Market LLC (“Nasdaq”), which has been approved by the Commission.
FINRA Rule 5270 includes exceptions to the general prohibitions of the rule where a member can demonstrate that a transaction is unrelated to the material, non-public market information received in connection with the customer order. The Supplementary Material to FINRA Rule 5270 includes an illustrative list of potentially permitted transactions as examples of transactions that, depending upon the circumstances, may be unrelated to the customer block order. These types of transactions may include: where the member has information barriers established to prevent internal disclosure of such information; actions in the same security related to a prior customer order in that security; transactions to correct bona fide errors; or transactions to offset odd-lot orders.
In addition, Rule 5270 does not preclude transactions undertaken for the purpose of fulfilling, or facilitating the execution of, the customer block order. However, when engaging in trading activity that could affect the market for the security that is the subject of the customer block order, the member must minimize any potential disadvantage or harm in the execution of the customer's order, must not place the member's financial interests ahead of those of its customer, and must obtain the customer's consent to such trading activity. A member may obtain its customers' consent through affirmative written consent or through the use of a negative consent letter. The negative consent letter must clearly disclose to the customer the terms and conditions for handling the customer's orders; if the customer does not object, then the member may reasonably conclude that the customer has consented and the member may rely on such letter for all or a portion of the customer's orders. In addition, a member may provide clear and comprehensive oral disclosure to and obtain consent from the customer on an order-by-order basis, provided that the member documents who provided such consent and such consent evidences the customer's understanding of the terms and conditions for handling the customer's order.
The Exchange also proposes to state in new Rule 12.14 that although the prohibitions in Rule 5270 are limited to imminent block transactions, the front running of other types of orders that place the financial interests of the Member or persons associated with a Member ahead of those of its customer or the misuse of knowledge of an imminent customer order may violate other Exchange rules, including Rule 3.1 and Rule 12.6, or provisions of the federal securities laws.
The Exchange believes that proposed rule change is consistent with Section 6(b)(5) of the Act,
The Exchange believes that proposed amendments to Rules 3.22 and 13.3 are consistent with Section 6(b)(5) of the Act,
The Exchange believes that new Rule 12.14 is consistent with Section 6(b)(5) of the Act
The Exchange does not believe that the proposed rule change would impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The proposed rule change is not designed to address any competitive issues but rather is designed to provide greater harmonization among Exchange and FINRA rules of similar purpose, resulting in less burdensome and more efficient regulatory compliance for common members and facilitating FINRA's performance of its regulatory functions under the 17d-2 Agreement.
The Exchange has neither solicited nor received written comments on the proposed rule change.
Because the foregoing proposed rule change does not: (1) Significantly affect the protection of investors or the public interest; (2) impose any significant burden on competition; and (3) by its terms does not become operative for 30 days after the date of this filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act
A proposed rule change filed under Rule 19b–4(f)(6) normally does not become operative for 30 days after the date of filing. However, Rule 19b–4(f)(6)(iii) permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest because it will help foster consistency between the rulebooks of the self-regulatory organizations.
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.
The Exchange is proposing to amend Exchange Rules 5.5(d) and 24.9(a)(2)(A) to allow the Exchange to list five Short Term Option Series at one time and to specify that new series of Short Term Option Series may be listed up to, and including on, the expiration date. The text of the proposed rule change is available on the Exchange's Web site (
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 Exchange is proposing to amend Exchange Rules 5.5(d) and 24.9(a)(2)(A). Currently the Exchange's Rules allow for the Exchange to list options in the Short Term Option Series Program (“Weeklys Program” or “Weekly option”) “on each of the next five consecutive Fridays that are business days.”
As proposed, the Exchange will have the ability to list a total of five Weeklys and that count of five would not include monthly or quarterly option expirations. The Exchange notes that this proposal would restrict the five listed Weeklys to those closest to the Short Term Option Opening Date. For example, if a class of options has five Weeklys listed with expiration dates in July, the other two listed expiration dates may not be in December. The Exchange believes that allowing otherwise would undermine the purpose of the Short Term Option Program.
As examples of how this would work in practice, consider a situation in which a quarterly option expires week 1 and a monthly option expire week 3 from now, the proposal would allow the following expirations: week 1 quarterly option, week 2 Weekly option, week 3 monthly option, week 4 Weekly option, week 5 Weekly option, week 6 Weekly option, and week 7 Weekly option.
Next, the Exchange is proposing to add language to Rules 5.5(d) and 24.9(a)(2)(A) to state that additional series of Weekly options may be added up to, and including on, the expiration date of the series.
The Exchange notes that the Weeklys Program has been very well-received by market participants, in particular by retail investors. The Exchange believes that the current proposed revision to the Weeklys Program will permit the Exchange to meet increased customer demand and provide market participants with the ability to hedge in a greater number of option classes and series. In addition, the proposed changes will codify an existing practice in the Exchange's rules.
The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 (the “Act”) and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.
In particular, the Exchange believes that expanding the Weeklys Program will result in a continuing benefit to investors by giving them more flexibility to closely tailor their investment decisions and hedging decisions in a greater number of securities. The Exchange also believes that expanding the Weeklys Program will provide the investing public and other market participants with additional opportunities to hedge their investment thus allowing these investors to better manage their risk exposure.
With regard to the impact of this proposal on system capacity, the Exchange has analyzed its capacity and represents that it and the Options Price Reporting Authority (“OPRA”) have the necessary systems capacity to handle any potential additional traffic associated with this current amendment to the Weeklys Program. The Exchange believes that its TPHs will not have a capacity issue as a result of this proposal. The Exchange also represents that it does not believe this expansion will cause fragmentation to liquidity.
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. The Exchange believes this proposed rule change will benefit investors by providing additional methods to trade options on the liquid securities, and providing greater ability to mitigate risk in managing large portfolios. Specifically, the Exchange believes that investors would benefit from the introduction and availability of additional series by more series available as an investing tool. The Exchange also believes the proposed changes will provide investors with an additional tool for hedging risk in highly liquid securities. For all the reasons stated, 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, and believes the proposed change will enhance competition.
The Exchange neither solicited nor received comments on the proposed rule change.
Within 45 days of the date of publication of this notice in the
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 submissions should refer to File Number SR–CBOE–2013–096. This file number should be included on the subject line if email is used.
To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (
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 Exchange proposes to amend BOX Rule 8040 (Obligations of Market Makers) to widen [sic] pre-opening
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 these statements may be examined at the places specified in Item IV below. The self-regulatory organization has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements.
The Exchange proposes to amend BOX Rule 8040(a)(7) (Obligations of Market Makers) to widen the pre-opening phase spread differential requirement imposed on Market Makers.
The Exchange recently eliminated the pre-opening quoting obligations imposed on BOX Market Makers.
The Exchange further believes that applying the standard bid-ask differential to all phases of trading is appropriate because it will more closely align the Exchange's rules with the rules of other option exchanges that do not have pre-opening quoting requirements, specifically Nasdaq Stock Exchange Options Market (“NOM”).
In addition, the Exchange proposes to remove an exception to the standard bid-ask differential requirement in Rule 8040(a)(7)(ii). Rule 8040(a)(7)(ii) is no longer necessary as the bids and asks for all indices are now disseminated to the Exchange by outside service providers.
The Exchange believes that its proposal is consistent with Section 6(b) of the Act
Further, the proposed change conforms BOX's Market Maker obligations to the requirements of a competing exchange,
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, but rather eliminates any investor confusion and could increase competition by attracting liquidity. In this regard and as indicated above, the Exchange notes that the rule change is being proposed as a competitive response to a recent filing submitted by NOM.
The Exchange has neither solicited nor received comments on 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 for 30 days from the date on which it was filed, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) 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.
• 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”)
FINRA is proposing to (i) adopt FINRA Rule 4552 to require each alternative trading system (“ATS”) to report to FINRA weekly volume information and number of trades regarding securities transactions within the ATS; and (ii) amend FINRA Rules 6160, 6170, 6480, and 6720 to require each ATS to acquire and use a single, unique market participant identifier (“MPID”) when reporting information to FINRA. FINRA will make the reported volume and trade count information for equity securities publicly available on its Web site.
The text of the proposed rule change is available on FINRA's Web site at
In its filing with the Commission, FINRA 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. FINRA has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
FINRA is proposing a rule change to adopt new FINRA Rule 4552, which requires each ATS
Regulation ATS requires an ATS to provide to a national securities exchange or association for display the prices and sizes of orders at the ATS's highest buy price and lowest sell price for any NMS stock, displayed to more than one person in the ATS, with respect to which the ATS has had an average daily trading volume of 5% or more of the aggregate average daily share volume for such NMS stock during at least four of the preceding six
Regulation ATS requires each ATS to report to the SEC on a quarterly basis, via Form ATS–R, its total unit volume of transactions and total dollar volume of transactions, not for each particular security issue, but only for each category of securities covered by the rule.
Current trade reporting data also does not provide a definitive way to assess whether an ATS has reached the volume thresholds in Regulation ATS. Although each over-the-counter securities transaction in which an ATS is involved must be reported under FINRA rules, a broker-dealer that operates an ATS may report trades executed within a particular ATS using the same MPID it uses for transactions it executes in other areas of its business (including other ATSs it operates). Current trade reporting data, therefore, is not dispositive in determining which trades were executed within an ATS as opposed to other areas of a broker-dealer's business, and FINRA is unable to rely solely on existing trade reporting data to surveil for compliance with the display obligations and the fair access requirements in Regulation ATS.
The proposed rule change creates a reporting obligation requiring each ATS that has filed a Form ATS with the SEC to report to FINRA its aggregate weekly volume information and number of trades, by security, in securities subject to FINRA trade reporting requirements. The reporting requirement would thus apply to any NMS stock,
The proposed rule change also specifies how ATSs should calculate their volumes to ensure consistency and to avoid potential over-counting of volume. Proposed Rule 4552 provides that, “[w]hen calculating and reporting the volume of securities traded and the number of trades, an alternative trading system shall include only those trades executed within the alternative trading system. If two orders are crossed by the alternative trading system, the volume shall include only the number of shares or par value of bonds crossed as a single trade (e.g., crossing a buy order of 1,000 shares with a sell order of 1,000 shares would be calculated as a single trade of 1,000 shares of volume).” Thus, for example, an ATS would only report trades executed within the ATS (not orders routed out of the ATS) and would only report the volume of each executed trade once (not separate or double counting for the buy and sell side of the trade).
In addition to benefitting FINRA's regulatory and surveillance efforts for compliance with Regulation ATS, the proposed rule change would also enhance the transparency of trading activity in the over-the-counter market.
Address Extraordinary Market Volatility
The reporting obligations in the proposed rule change apply to transactions in NMS stocks, OTC Equity Securities, and TRACE-Eligible Securities. Although ATSs that trade TRACE-Eligible Securities would be subject to the self-reporting obligations, FINRA does not intend to begin publishing self-reported data for TRACE-Eligible Securities until it has had the opportunity to evaluate the data received from such ATSs and the differences between the existing trade reporting regimes applicable to equity and debt securities. Following implementation of Rule 4552, FINRA intends periodically to assess the reporting and publication of information to consider whether modifications to the scope of securities covered, the delay between the activity and publication, or the frequency of publication of the information are appropriate.
FINRA discussed the proposed rule change with several of its industry committees and a number of ATS operators. The consulted firms generally supported the proposed reporting requirements and publication of the transaction information. As noted above, following discussions with firms, FINRA is proposing a two-week delay before publishing the reported data on Tier 1 NMS stocks on FINRA's Web site and a four-week delay for all other NMS stocks and OTC Equity Securities. The firms also generally supported FINRA's decision to initially publish only data on equity securities.
Some consulted firms also indicated support for expanding the scope of the proposed rule change to include other, non-ATS over-the-counter trading information of broker-dealers. The proposed rule change does not currently contemplate applying the proposed rule change beyond ATSs, but FINRA requests comment on the benefits and burdens of future expansion of the proposal to require trading information for other over-the-counter executions of FINRA broker-dealers separate from ATS trade information, and making this information public in the same manner as is proposed for ATS trade information. This other over-the-counter execution information could include broker-dealer internalized executions, trades executed in the over-the-counter market by wholesale market makers trading with order entry brokers, and executions on broker crossing systems that have not filed a Form ATS with the Commission.
In addition to the reporting requirements described above, the proposed rule change also requires that a member operating an ATS obtain for each such ATS a single, unique MPID that is designated for exclusive use for reporting each ATS's transactions. Members that operate multiple ATSs or engage in other lines of business requiring the use of MPIDs would therefore be required to obtain and use multiple MPIDs. FINRA currently has three rules permitting the use of multiple MPIDs on FINRA facilities: Rule 6160 (Multiple MPIDs for Trade Reporting Facility Participants), Rule 6170 (Primary and Additional MPIDs for Alternative Display Facility Participants), and Rule 6480 (Multiple MPIDs for Quoting and Trading in OTC Equity Securities). All three rules are permissive, and none of the rules currently requires the use of multiple MPIDs.
Rule 6160 provides that any Trade Reporting Facility Participant that wishes to use more than one MPID for purposes of reporting trades to a FINRA Trade Reporting Facility (“TRF”) must submit a written request, in the form required by FINRA, to, and obtain approval from, FINRA Market Operations for such additional MPIDs. In addition, Supplementary Material to the rule states that FINRA considers the issuance of, and trade reporting with, multiple MPIDs to be a privilege and not a right. A Trade Reporting Facility Participant must identify the purpose(s) and system(s) for which the multiple MPIDs will be used. If FINRA determines that the use of multiple MPIDs is detrimental to the marketplace, or that a Trade Reporting Facility Participant is using one or more additional MPIDs improperly or for other than the purpose(s) identified by the Participant, FINRA staff retains full discretion to limit or withdraw its grant of the additional MPID(s) to such Trade Reporting Facility Participant for purposes of reporting trades to a TRF.
Like Rule 6160, Rule 6480 provides that any member that wishes to use more than one MPID for purposes of quoting an OTC Equity Security or reporting trades to the OTC Reporting Facility (“ORF”) must submit a written request, in the form required by FINRA, to, and obtain approval from, FINRA Market Operations for such additional MPIDs. The rule also states that a member that posts a quotation in an OTC Equity Security and reports to a FINRA system a trade resulting from such posted quotation must utilize the same MPID for reporting purposes. In addition, Supplementary Material to the rule states that FINRA considers the issuance of, and trade reporting with, multiple MPIDs to be a privilege and not a right. When requesting an additional MPID(s), a member must identify the purpose(s) and system(s) for which the multiple MPIDs will be used. If FINRA determines that the use of multiple MPIDs is detrimental to the marketplace, or that a member is using one or more additional MPIDs improperly or for purposes other than the purpose(s) identified by the member, FINRA staff retains full discretion to limit or withdraw its grant of the additional MPID(s) to such member.
Rule 6170 governs the use of MPIDs on FINRA's Alternative Display Facility (“ADF”) and provides that a Registered Reporting ADF ECN may request additional MPIDs for displaying quotes and orders and reporting trades through the ADF for any ADF-Eligible Security. Among other things, Registered Reporting ADF ECNs are prohibited from using an additional MPID to accomplish indirectly what they are prohibited from doing directly through their Primary MPID. In addition, FINRA staff retains full discretion to determine whether a bona fide regulatory or business need exists for being granted an additional MPID privilege and to limit or withdraw the additional MPID display privilege at any time. The procedures for requesting, and the restrictions surrounding the use of,
In 2010, FINRA also adopted amendments to Rule 6160 establishing a voluntary program to allow members operating an ATS dark pool to have their daily aggregate trading data published by the TRFs.
As noted above, the proposed rule change requires that a member that operates an ATS obtain for each such ATS a single, unique MPID that is designated for exclusive use for reporting each ATS's transactions. A firm would not be permitted to use multiple MPIDs for a single ATS, and if a firm operates multiple ATSs, each ATS would be required to have its own MPID. Firms are also required to notify FINRA before changing the usage of the MPID in any way (e.g., repurposing an MPID from reflecting ATS activity to other trading activity at the firm). After an ATS is provided its MPID, any reporting by the ATS (either reporting trades to a FINRA TRF, the ADF, the ORF, TRACE, or reporting orders to the Order Audit Trail System (“OATS”)) would need to include the MPID assigned to the particular ATS, and the member must use such separate MPID to report all transactions executed within the ATS to the appropriate reporting facility.
The proposed rules prohibit a member from using a separate MPID assigned to an ATS to report any transaction that is not executed within the ATS and require members to have policies and procedures in place to ensure that trades reported with a separate MPID obtained under the rules are restricted to trades executed within the ATS. ATSs are already required “to have in place safeguards and procedures to . . . separate alternative trading system functions from other broker-dealer functions, including proprietary and customer trading.”
The proposed rule change, once implemented, would enable FINRA to rely on trade reports to determine whether an ATS has reached any of the volume thresholds in Regulation ATS by requiring each ATS to acquire and use a unique MPID for reporting to FINRA.
FINRA discussed the proposed requirement for ATSs to use single, unique MPIDs with several of its industry committees and a number of ATS operators. The consulted firms generally supported the proposed MPID requirement; however, several firms noted that requiring unique MPIDs could impose costs on some firms resulting from systems changes needed to incorporate multiple MPIDs. Other firms indicated that they already use a separate MPID for their ATS reporting and, therefore, such a requirement would not be burdensome. Finally, some firms suggested that FINRA consider alternative methods for identifying trading activity occurring on ATSs through, for example, the use of a trade report modifier or ATS “flag.”
Although FINRA recognizes that some firms may incur costs associated with acquiring and using multiple MPIDs, FINRA believes that using a separate MPID for each ATS is feasible on an ongoing basis, and that the primary costs result from initial changeover costs. In fact, many members already voluntarily use separate MPIDs to report ATS transactions. However, given the potential systems changes required by the MPID requirement, FINRA will provide additional time for firms to implement the MPID requirement.
FINRA has also considered whether alternative methods exist that could achieve the benefits of unique MPIDs. After consideration, FINRA believes that alternative methods of identifying ATS transactions on an automated basis (e.g., using an ATS “flag” or other modifier on trade reports) will not provide FINRA with the same degree of comprehensive, reliable information as requiring unique MPIDs because MPIDs can be used consistently across multiple trade reporting systems as well as OATS and can immediately reflect the particular ATS associated with the order event or trade. Consequently, the proposed rule change continues to require that each ATS obtain and use a single, unique MPID for reporting to FINRA.
FINRA will announce the effective date of the proposed rule change in a
FINRA believes that the proposed rule change is consistent with the provisions of Section 15A(b)(6) of the Act,
FINRA does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.
As noted above, although the proposed rule change imposes a new weekly reporting obligation on ATSs, they are already required to maintain this information pursuant to Regulation ATS. Because of the existing recordkeeping obligations in Regulation ATS, FINRA does not believe that the weekly reporting requirements in the proposed rule change will impose significant costs on firms or will require firms to expend significant resources.
By standardizing the calculation of transaction volumes on ATSs, and mandating public reporting, the proposal will help ensure that ATSs are publishing standardized transaction statistics. This will support competition among ATSs by replacing the incomplete, inconsistent, or inaccurate ATS statistics currently made available with more reliable and standard statistics of market share in a security.
Although some members may incur costs associated with systems changes needed to incorporate a separate MPID for their ATS activity, following discussions with multiple firms and FINRA committees, FINRA believes that other members will incur relatively low costs in implementing the proposed rule change. In fact, many members already use unique MPIDs to report ATS transactions separately. FINRA also believes that, as noted above, alternative methods of identifying ATS transactions on an automated basis (e.g., using an ATS “flag” or other modifier on trade reports) will not provide FINRA with the same degree of comprehensive, reliable information as requiring unique MPIDs since MPIDs are used across FINRA trade reporting facilities and are used to report order information to OATS.
FINRA also believes that the proposal increases competition on a fair basis by enabling FINRA itself, in time, to calculate and disseminate trading statistics for ATSs on a standard, reliable basis. It also enables FINRA to monitor more closely order entry and execution on ATSs, which will promote consistent compliance with Regulation ATS and trading requirements by ATSs and their participants.
Some firms consulted said that the information reporting requirements could place ATSs at a competitive disadvantage to broker crossing systems that are not registered as ATSs. While FINRA asks for comment above regarding whether FINRA should require similar trading information to be provided by FINRA broker-dealers' securities trades in the over-the-counter market, FINRA does not view any potential disadvantage to ATSs from the proposed disclosures as sufficient to outweigh the value of presently making available for public information and regulatory analysis the trading information of regulated ATSs.
Written comments were neither solicited nor received.
Within 45 days of the date of publication of this notice in the
(A) By order approve or disapprove such 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.
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 MSRB is filing with the Commission a proposed rule change consisting of proposed MSRB Rule G–47, on time of trade disclosure obligations, proposed revisions to MSRB Rule G–19, on suitability of recommendations and transactions,
The text of the proposed rule change is available on the MSRB's Web site at
In its filing with the Commission, the MSRB 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 MSRB has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements.
The MSRB has examined its interpretive guidance related to time of trade disclosures, suitability, and SMMPs and is proposing to consolidate this guidance and codify it into several rules: a new time of trade disclosure rule (proposed Rule G–47), a revised suitability rule (Rule G–19), and two new SMMP rules (proposed Rules D–15 and G–48). Additionally, the proposed revisions to Rule G–19 would harmonize the MSRB's suitability rule with Financial Industry Regulatory Authority's (“FINRA's”) suitability rule as recommended by the SEC in its 2012 Report on the Municipal Securities Market.
MSRB Rule G–17 provides that, in the conduct of its municipal securities or municipal advisory activities, each broker, dealer, municipal securities dealer (“dealer”), and municipal advisor must deal fairly with all persons and may not engage in any deceptive, dishonest or unfair practice. The MSRB has interpreted Rule G–17 to require a dealer, in connection with a municipal securities transaction, to disclose to its customer, at or prior to the time of trade, all material information about the transaction known by the dealer, as well as material information about the security that is reasonably accessible to the market.
The structure of proposed Rule G–47 (rule language followed by supplementary material) is the same structure used by FINRA and other self-regulatory organizations (“SROs”). The MSRB intends generally to transition to this structure for all of its rules going forward in order to streamline the rules, harmonize the format with that of other SROs, and make the rules easier for dealers and municipal advisors to understand and follow.
A summary of proposed Rule G–47 is as follows:
Proposed Rule G–47(a) sets forth the general time of trade disclosure obligation as currently set forth in the MSRB's interpretive guidance. The rule states that dealers cannot sell municipal securities to a customer, or purchase municipal securities from a customer, without disclosing to the customer, at or prior to the time of trade, all material information known about the transaction and material information about the security that is reasonably accessible to the market. The rule applies regardless of whether the transaction is unsolicited or recommended, occurs in a primary offering or the secondary market, and is a principal or agency transaction. The rule provides that the disclosure can be made orally or in writing.
Proposed Rule G–47(b) states that information is considered to be “material information” if there is a substantial likelihood that the information would be considered important or significant by a reasonable investor in making an investment decision. The rule defines “reasonably accessible to the market” as information that is made available publicly through “established industry sources.” Finally, the rule defines “established industry sources” as including the MSRB's Electronic Municipal Market Access (“EMMA”®)
In addition to stating the general disclosure obligation, proposed Rule G–47 includes supplementary material describing the disclosure obligation in more detail.
Supplementary material .01 provides general information regarding the manner and scope of required disclosures. Specifically, the supplementary material provides that dealers have a duty to give customers a complete description of the security which includes a description of the features that would likely be considered significant by a reasonable investor, and facts that are material to assessing potential risks of the investment. This section of the supplementary material further provides that the public availability of material information through EMMA, or other established industry sources, does not relieve dealers of their disclosure obligations. Section .01 of the supplementary material also provides that dealers may not satisfy the disclosure obligation by directing customers to established industry sources or through disclosure in general advertising materials. Finally, section .01 of the supplementary material states that whether the customer is purchasing or selling the municipal securities may be a consideration in determining what information is material.
Supplementary material .02 provides that dealers operating electronic trading or brokerage systems have the same time of trade disclosure obligations as other dealers.
Supplementary material .03 provides a list of examples describing information that may be material in specific scenarios and require disclosures to a customer. The guidance provides that the list is not exhaustive and other information may be material to a customer in these and other scenarios. This section describes the following scenarios: variable rate demand obligations; auction rate securities; credit risks and ratings; credit or liquidity enhanced securities; insured securities; original issue discount bonds; securities sold below the minimum denomination; securities with non-standard features; bonds that prepay principal; callable securities; put option and tender option bonds; stripped coupon securities; the investment of bond proceeds; issuer's intent to prerefund; and failure to make continuing disclosure filings.
Finally, supplementary material .04 provides that dealers must implement processes and procedures reasonably designed to ensure that material information regarding municipal securities is disseminated to registered representatives who are engaged in sales to and purchases from a customer.
The MSRB has identified two interpretive notices that were previously filed with the Commission and would be superseded in their entirety by the proposed time of trade disclosure rule and the MSRB proposes deleting these two notices.
The MSRB has conducted a review of Rule G–19, on suitability of recommendations and transactions, as well as the MSRB's interpretive guidance addressing suitability. As a result of this review, the MSRB is proposing the amendments described below to more closely harmonize Rule G–19 with FINRA's suitability rule,
A summary of the proposed revisions to Rule G–19 is as follows:
Current MSRB Rule G–19(a) requires dealers to obtain certain customer information prior to completing a transaction in municipal securities for that customer account. The required customer information consists of, by cross-reference, the customer information required under MSRB Rule G–8(a)(xi), on books and records. A provision equivalent to current Rule G–19(a) is not included in proposed Rule G–19 since MSRB Rule G–8 already independently requires dealers to make and keep a record of this information for each customer. Additionally, deleting this provision streamlines the rule and more closely aligns it with FINRA's suitability rule, which does not have this specific requirement.
The current MSRB suitability rule contains a list of customer information that dealers must obtain prior to recommending a transaction to a non-institutional account.
The current MSRB suitability rule also requires dealers to consider information available from the issuer of the security or otherwise in making suitability determinations.
The current MSRB suitability rule includes a provision on discretionary accounts which provides that dealers cannot effect transactions in municipal securities with or for a discretionary account unless permitted by the customer's prior written authorization which has been accepted in writing by a municipal securities principal.
The current MSRB suitability rule also includes a provision stating that a dealer cannot effect a transaction in municipal securities with or for a discretionary account unless the dealer first determines that the transaction is suitable for the customer or the transaction is specifically directed by the customer and was not recommended by the dealer.
The proposed revisions to Rule G–19 retain the substance of the existing MSRB prohibition on churning,
The proposed amendments to Rule G–19 incorporate the application of suitability to “investment strategies.” Specifically, proposed supplementary material .03 defines the phrase “investment strategy involving a municipal security or municipal securities” by stating that it is “to be interpreted broadly and would include, among other things, an explicit
Provisions in guidance to MSRB Rule G–17 and proposed MSRB Rules D–15 and G–48 (discussed below) exempt dealers from the duty to perform a customer-specific suitability determination for recommendations to SMMPs.
MSRB Rule G–8(a)(xi)(F) includes references to MSRB Rule G–19(c)(ii) and G–19(b). These referenced provisions are not codified as such in the proposed revisions to MSRB Rule G–19, but the concepts would remain in the proposed rule. Therefore, the MSRB proposes revising MSRB Rule G–8(a)(xi)(F) simply to include a reference to the entire MSRB Rule G–19.
Over the years, the MSRB has issued guidance on suitability in connection with other issues under MSRB Rule G–17. This guidance provides that a dealer must take into account all material information that is known to the dealer or that is available through established industry sources in meeting its suitability obligations.
The MSRB also has issued interpretive guidance under Rule G–19 that has been previously filed with the Commission and addresses online communications, investment seminars, and customers contacting a dealer in response to an advertisement.
Proposed Rules D–15 and G–48 on SMMPs (the “proposed SMMP rules”) would streamline and codify the existing MSRB Rule G–17 guidance regarding the application of MSRB rules to transactions with SMMPs. The proposed SMMP rules would consist of a new definitional rule, D–15, defining an SMMP and a new general rule, G–48, on the regulatory obligations of dealers to SMMPs.
On May 25, 2012, the SEC approved an interpretive notice to Rule G–17 revising prior guidance on the application of MSRB rules to transactions with SMMPs.
A summary of proposed Rules D–15 and G–48 is as follows:
Proposed Rule D–15 defines the term “sophisticated municipal market professional” or “SMMP” as a customer of a dealer that is a bank, savings and loan association, insurance company, or registered investment company; or an investment adviser registered with the Commission under Section 203 of the Investment Advisers Act of 1940 or with a state securities commission (or any agency or office performing like functions); or any other entity with total assets of at least $50 million. Additionally, the dealer must have a reasonable basis to believe that the customer is capable of evaluating investment risks and market value independently, both in general and with regard to particular transactions and investment strategies in municipal securities, and affirmatively indicates that it is exercising independent judgment in evaluating the recommendations of the dealer.
The supplementary material to proposed Rule D–15 addresses the reasonable basis analysis and the customer affirmation. Section .01 states that as part of the reasonable basis analysis, the dealer should consider the amount and type of municipal securities owned or under management by the customer. Section .02 states that a customer may affirm that it is exercising independent judgment either orally or in writing, and such affirmation may be given on a trade-by-trade basis, on a type-of-municipal-security basis, or on an account-wide basis.
Proposed Rule G–48 describes the application of certain obligations to SMMPs. More specifically, the proposed rule provides that a dealer's obligations to a customer that it reasonably concludes is an SMMP are modified as follows: (1) With respect to the time of trade disclosure obligation in proposed Rule G–47, the dealer does not have any obligation to disclose material information that is reasonably accessible to the market; (2) with respect to transaction pricing obligations under Rule G–18, the dealer does not have any obligation to take action to ensure that transactions meeting certain conditions set forth in the proposed rule are effected at fair and reasonable prices; (3) with respect to the suitability obligation in Rule G–19, the proposed rule provides that the dealer does not have any obligation to perform a customer-specific suitability analysis; and (4) with respect to the obligation regarding bona fide quotations in Rule G–13, the dealer disseminating an SMMP's quotation which is labeled as such shall apply the same standards described in Rule G–13(b) for quotations made by another dealer.
There are two interpretive notices that were previously filed with the Commission that would be superseded in their entirety by the SMMP rule
The MSRB believes that the proposed rule change is consistent with Section 15B(b)(2)(C) of the Act,
The proposed rule change is consistent with Section 15B(b)(2)(C) of the Act. The disclosure of material information about a transaction to investors and the performance of a meaningful suitability analysis is central to the role of a dealer in facilitating municipal securities transactions. Proposed Rule G–47, on time of trade disclosures, codifies current interpretive guidance and protects investors by requiring dealers to make disclosures to customers in connection with purchases and sales of municipal securities. These required disclosures are designed to prevent fraudulent and manipulative acts and practices by dealers, and promote just and equitable principles of trade, by requiring dealers to disclose information about a security and transaction that would be considered significant or important to a reasonable investor in making an investment decision. Similarly, the proposed revisions to Rule G–19, on suitability, furthers these purposes by requiring dealers and their associated persons to make only suitable recommendations to customers and fosters cooperation and coordination by harmonizing the rule with FINRA's suitability rule. Finally, the proposed SMMP rules codify current interpretive guidance that was approved by the SEC in 2012
The MSRB does not believe that the proposed rule change would result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. As discussed above, the proposed time of trade disclosure rule and proposed SMMP rules codify current interpretive guidance, therefore, they do not add any burden on competition. The proposed revisions to the suitability rule codify current interpretive guidance and add new requirements that are largely harmonized with FINRA's suitability rule in response to a recommendation by the Commission to harmonize MSRB Rule G–19 with FINRA Rule 2111.
On February 11, 2013, the MSRB requested comment on a draft of Rule G–47, on time of trade disclosures.
The comment letters are summarized by topic as follows:
COMMENTS: All of the commenters generally support the MSRB's initiative to clarify and codify the time of trade disclosure requirements. BDA states that the incorporation of interpretive notices into rules should help provide much desired clarity to market participants. Lumesis indicates that the proposed rule would provide greater clarity to market participants and support enhanced transparency and disclosure for the retail investor. Lumesis further states that the proposed rule is a significant step in clarifying the requirements for time of trade disclosures to retail investors. Schwab states that, generally speaking, it supports the MSRB's effort to consolidate years of interpretive guidance related to time of trade disclosure obligations into a rule. SIFMA comments that it generally supports the concept behind the MSRB's initial effort to provide clarity to regulated entities by reorganizing or eliminating certain interpretive guidance associated with MSRB Rule G–17 into new or revised rules highlighting core principles. TMC states that it supports the MSRB's efforts to more clearly define Rule G–17. Finally, WFA commends the MSRB's efforts to simplify dealer compliance with time of trade disclosure guidance and to harmonize the MSRB's rule structure with FINRA's rule structure.
MSRB RESPONSE: The MSRB believes these comments support the MSRB's statement on the burden on competition.
COMMENT: SIFMA suggests that the MSRB should consolidate the existing time of trade disclosure guidance into a user friendly format similar to the format used when the MSRB reorganized guidance on Rule G–37, on political contributions and prohibitions on municipal securities business. SIFMA proposes preserving the text of the time of trade disclosure guidance, but consolidating it in one place since the guidance contains nuances that are easily lost in a short bullet point format.
MSRB RESPONSE: The MSRB believes the supplementary material incorporates the necessary information from the interpretive guidance and that it is not necessary to preserve the text of the current guidance or create a set of questions and answers similar to Rule G–37 at the present time. Moreover, to codify the existing interpretative guidance into a rule but preserve the text of the guidance would not advance the MSRB's goal to streamline its rulebook.
COMMENT: SIFMA states that, since the current SMMP guidance primarily relates to time of trade disclosures, Rule G–47 should affirm such guidance. Similarly, BDA states that the Rule G–17 SMMP guidance should apply to Rule G–47 and a reference to the exception should be added to the proposed rule or, at a minimum, the SMMP guidance should be revised to reference Rule G–47.
MSRB RESPONSE: The SMMP guidance does not primarily relate to time of trade disclosures as it addresses four separate areas: time of trade disclosures, transaction pricing, suitability, and bona fide quotations. The MSRB has proposed a draft SMMP rule that references proposed Rule G–47 and does not believe it is necessary or appropriate to reference this new SMMP rule in proposed Rule G–47 (and the other rules to which the SMMP guidance applies). Because the proposed SMMP rule references proposed Rule G–47, the MSRB has effectively addressed the comment that the SMMP guidance should, at a minimum, reference proposed Rule G–47.
COMMENT: Schwab and SIFMA are concerned about the proposed deletion of the Interpretive Notice dated March 18, 2002 entitled “Interpretive Notice Regarding Rule G–17, on Disclosure of Material Facts” (the “March 18, 2002 Notice”). Specifically, Schwab and SIFMA are concerned about deleting the following sentence:
The MSRB believes that the provision of electronic access to material information to customers who elect to transact in municipal securities on an electronic platform is generally consistent with a dealer's obligation to disclose such information, but that whether such access is effective disclosure ultimately depends upon the particular facts and circumstances present.
MSRB RESPONSE: The sentence quoted above was intentionally excluded from the proposed rule because the ability to use electronic disclosure is now so widely accepted and the qualifying phrase “whether such access is effective disclosure ultimately depends upon the particular facts and circumstances present” renders the guidance less definitive. Moreover, based on the comments received, some industry members appear to have misinterpreted this sentence to mean that “access” equals disclosure for online trading. This apparent misunderstanding of the guidance supports deletion of the sentence and highlights the importance of clarifying the time of trade disclosure guidance by codifying it into a short and easy to understand rule.
COMMENT: BDA encourages the MSRB to establish a separate section of the proposed rule addressing disclosure obligations in connection with online trading to provide more clarity.
MSRB RESPONSE: The codification of interpretive guidance in this rulemaking initiative is not intended to substantively change the time of trade disclosure obligation. The MSRB can consider adding provisions addressing online trading if the Board undertakes to amend the rule substantively in the future.
COMMENT: TMC suggests that the proposed rule exempt institutional market professionals from the disclosure requirement.
MSRB RESPONSE: The proposed rule, in conjunction with the SMMP guidance and proposed SMMP rule, should address TMC's concerns by exempting dealers from the requirement to disclose to SMMPs material information that is reasonably accessible to the market. Therefore, the MSRB is not proposing any changes to the proposed rule based on these comments.
COMMENT: SIFMA believes that the Interpretive Notice dated January 30, 2002 entitled “Notice of Interpretation of Rule G–17 Concerning Minimum Denominations” should not be deleted because it is the only guidance concerning the disclosure obligation for securities sold below minimum denominations. SIFMA states that its members believe the background information in this notice is important.
MSRB RESPONSE: The proposed rule addresses disclosure obligations related to minimum denominations as described in the current Rule G–17 guidance. The MSRB does not believe that it is necessary to include the background information included in the guidance; however, in response to this comment, the MSRB has proposed a revision to Rule G–47, supplementary material .03(g), clarifying that the disclosure obligation relates to minimum denominations authorized by bond documents.
COMMENT: SIFMA argues that the rule should make a distinction between a dealer's disclosure obligation for sales to customers, as opposed to purchases from customers, and that the rule's failure to do so is inconsistent with current guidance. SIFMA states that existing guidance primarily focuses on disclosure obligations when a dealer is selling a bond to a customer and very limited guidance has been issued covering situations when a dealer is purchasing. SIFMA states that this proposed extension of the disclosure obligation is not warranted, as arguably the selling customer knows the features of the security that it owns and the potentially purchasing dealer is about to assume the risks of those features. SIFMA acknowledges, however, that knowledge professionally available to dealers, such as a ratings change that has not yet been noticed to EMMA, or a call at par announced minutes ago via a recognized information vendor, is material and should be disclosed. However, SIFMA argues that this new requirement could be harmful to customers and would also be unnecessarily burdensome for dealers.
MSRB RESPONSE: Although recent time of trade disclosure guidance focuses on sales of municipal securities to customers, certain earlier guidance requires dealers to make disclosures in connection with both sales to and purchases from customers, and that guidance remains in effect. The MSRB believes, from a fair dealing perspective, that it is difficult to categorically exclude purchases from customers. Significantly, both SIFMA and BDA have pointed out instances where disclosure to a customer selling a bond would be appropriate. Therefore, the MSRB proposes to retain the disclosure requirement for purchases from customers. However, in response to this comment, the MSRB proposes to add the following sentence to the rule to clarify that whether the customer is purchasing or selling is a factor that can be considered in making the materiality determination: “Whether the customer is purchasing or selling the municipal securities may be a consideration in determining what information is material.”
COMMENT: SIFMA and BDA propose that the MSRB modify the definition of “material” to exclude material non-public information.
MSRB RESPONSE: As discussed above, the MSRB is not proposing substantively to revise the current time of trade disclosure obligations but simply to codify them. While the MSRB understands the issue raised by the commenters, the MSRB can consider this comment if the Board undertakes to amend the rule substantively in the future.
COMMENT: SIFMA states that the proposed rule seems to eviscerate recent MSRB access equals delivery initiatives. SIFMA states that, in connection with marketing new issues of municipal securities to customers, dealers have relied on MSRB guidance that providing a preliminary official statement (“POS”) to a customer “can serve as a primary vehicle for providing the required time-of-trade disclosures under Rule G–17, depending upon the accuracy and completeness of the POS as of the time of trade.” SIFMA believes that providing access to a POS, whether on EMMA or some other electronic platform, should continue to satisfy a dealer's time of trade obligation for new issues of municipal securities. SIFMA states that proposed Rule G–47, supplementary material .01(b) and (c), seem to prohibit activity recently championed by the MSRB and that the proposed new obligation could create a risk of having dealers misinterpret or inadequately summarize information in a POS.
MSRB RESPONSE: This comment does not sufficiently differentiate between Rule G–32, on disclosures in connection with primary offerings, and Rule G–17, which are two separate and distinct obligations. The guidance cited by SIFMA states that a POS can serve as a primary vehicle for
COMMENT: SIFMA requests further clarification of the types of “disclosure of general advertising materials” as referenced in proposed Rule G–47, supplementary material .01(c).
MSRB RESPONSE: The MSRB does not propose to provide further clarification on general advertising materials at this time since the Rule G–17 interpretive notices do not elaborate on this concept. The MSRB can consider providing additional guidance if the Board undertakes to amend proposed Rule G–47 substantively in the future.
COMMENT: Lumesis suggests that requiring market participants to disclose “material information about the security that is reasonably accessible to the market” should contemplate more than “established industry sources” as currently defined. Lumesis states that this would make the definition broad enough to encompass current or future technology and/or dissemination systems. Lumesis suggests that the MSRB remove the term “established industry sources” from the proposed rule or provide clarity to ensure that market participants focus on disclosing material information about the security that is reasonably accessible to the market. Similarly, TMC suggests that the proposed rule clarify what information is considered “reasonably accessible to the market.”
MSRB RESPONSE: The proposed rule provides that dealers must disclose “all material information known about the transaction, as well as material information about the security that is reasonably accessible to the market.” The proposed rule further provides that “`[r]easonably accessible to the market' shall mean that the information is made available publicly through established industry sources” and “`[e]stablished industry sources' shall
COMMENT: WFA states that the rule should acknowledge the role of information vendors in helping a dealer monitor established industry sources. WFA cites the Interpretive Notice dated November 30, 2011,
[T]he MSRB has noted that information vendors and other organizations may provide industry professionals with access to information that is generally used by dealers to effect transactions in municipal securities. The MSRB expects that, as technology evolves and municipal securities information becomes more readily available, new `established industry sources' are likely to emerge.
More specifically, WFA requests that the final rule clarify that dealers may rely on vendors to help aggregate material information from established industry sources and monitor for “emerging” sources. Additionally, WFA states that the rule and guidance should recognize that established industry sources remain reliant on the quality of continuing and material event notifications provided by issuers.
MSRB RESPONSE: The MSRB believes the role that information aggregators may play in assisting dealers in compliance with the rule is widely known and recognized and that specifically addressing the use of aggregators in the proposed rule may imply that use of such services is encouraged or required.
COMMENT: SIFMA requests that the MSRB clarify “rating agency reports” within the definition of “established industry sources” in the proposed rule. SIFMA states that the use of the term “reports” implies that dealers must distribute credit event-driven reports and that disclosure of the rating action alone is insufficient. SIFMA requests that the MSRB clarify that firms are under no obligation to distribute such reports.
Lumesis suggests that the definition of “established industry sources” should not include “rating agency reports.” Lumesis states that inclusion of the reference may be inconsistent with a focus on material information that is timely since these reports may be issued months or more before the trade triggering disclosure. Additionally, Lumesis states that the inclusion of reports may be construed as an implicit endorsement of a private, for-profit enterprise's offering as fulfilling the requirement. Lumesis also states that the inclusion of rating agency reports seems inconsistent with the Dodd-Frank Act which indicates that market participants using ratings or rating reports should not rely on them alone.
MSRB RESPONSE: As discussed previously, the MSRB is simply codifying the existing guidance in this rulemaking initiative. The current guidance does not address the meaning of the reference to “rating agency reports” for purposes of time of trade disclosure and, as discussed above, the definition of established industry sources is not limited to the particular sources listed. Therefore, the MSRB does not propose adding any additional interpretation to the meaning of “rating agency reports” or deleting this reference. However, the MSRB can consider revisions in this area if the Board undertakes to amend proposed Rule G–47 substantively in the future.
COMMENT: TMC suggests that the requirement for dealers to disclose reasonably accessible information to a client placing an unsolicited order is unnecessary regulation given the ease of access to the internet.
MSRB RESPONSE: Current guidance provides that the time of trade disclosure obligation is the same whether the order is unsolicited or solicited. The goal of this rulemaking initiative is to codify current guidance in the new proposed Rule G–47.
COMMENT: TMC suggests that it might be beneficial to codify the time of trade disclosure rule as a subsection of Rule G–17 as opposed to creating a new rule so that participants would only have to view a single rule for fair dealing, as opposed to having to cross-reference similar rules and their corresponding comments.
MSRB RESPONSE: The MSRB does not propose to codify the provisions as suggested because, as a result of this rulemaking initiative, there will no longer be any time of trade disclosure guidance in Rule G–17.
COMMENT: SIFMA states that it would be helpful for the MSRB to explicitly address the concept that an event disclosed by an issuer or obligated person pursuant to an SEC Rule 15c2–12 continuing disclosure agreement does not necessarily constitute
MSRB RESPONSE: There is nothing in the proposed rule indicating that events disclosed by an issuer or obligated person pursuant to Rule 15c2–12 are automatically material at the time of trade. The proposed rule states the well established definition that “[i]nformation is considered to be material if there is a substantial likelihood that the information would be considered important or significant by a reasonable investor in making an investment decision.” Therefore, the MSRB does not believe that any revisions are necessary or appropriate in response to this comment. In addition, there is no safe-harbor look back period under the existing guidance and thus a look back period is not included in the proposed rule, the purpose of which is only to codify existing obligations.
COMMENT: SIFMA states that the list of scenarios in the proposed rule that may be material under certain circumstances and require disclosure is too prescriptive for a principles-based rule and will become a de facto enforcement checklist for regulators. SIFMA also states that dealers may rely on the four corners of the notice and not consider other factors that may become material in the future. SIFMA suggests that the existing interpretive notices be reorganized by specific scenarios, as many of the listed specific scenarios are the subject of more than one interpretive notice.
MSRB RESPONSE: The proposed rule provides that the examples describe information that may be material in specific scenarios and that the list is not exhaustive. The MSRB does not propose to reorganize the existing interpretive guidance by specific scenarios since the MSRB plans to delete the Rule G–17 time of trade disclosure guidance.
COMMENT: Similarly, WFA states that a final rule should provide dealers with more clarity about the specific scenarios that trigger time of trade disclosure obligations for the types of information identified in the supplementary material.
MSRB RESPONSE: The MSRB believes that the supplementary material in the proposed rule provides dealers with sufficient clarity regarding time of trade disclosure obligations by providing a non-exhaustive list of examples describing information that may be material.
COMMENT: SIFMA states that unlike many of the other specific scenarios addressed in the proposed rule, credit ratings are potentially more fluid. Therefore, SIFMA argues that it would be helpful to define a material look-back period for credit ratings changes.
MSRB RESPONSE: The MSRB does not propose making these changes since they are not in the current guidance but the MSRB can consider them if the Board undertakes to amend the proposed rule substantively in the future.
COMMENT: SIFMA states that the prior uses of the term “non-standard features” have been related to situations where the bonds pay interest annually, rather than semi-annually, a fact that affects yield calculations. SIFMA argues that this new usage seems to have no bounds, and adds the traditional interpretation as an afterthought. SIFMA states that it would be helpful to know what the MSRB considers to be standard features.
MSRB RESPONSE: The MSRB does not propose making any revisions to the proposed rule in response to this comment. The requirement in the proposed rule is drawn from current interpretive guidance on time of trade disclosure obligations, and while the discussion of non-standard features arose in the context of price/yield calculations, the basic principle, when limited by a materiality threshold, is appropriate for the proposed rule change.
COMMENT: SIFMA states that, unless an issuer's intent to prerefund has been publicly announced, it will not be known to established industry sources and would likely be material non-public information. (See the discussion above regarding the disclosure of material non-public information.)
MSRB RESPONSE: This requirement is drawn from the current interpretive guidance and the MSRB does not propose any changes in response to this comment.
COMMENT: WFA suggests that the proposed rule should provide guidance about how to interpret the potential materiality of issuer event reporting deficiencies. WFA believes that the rule should make clear that an issuer's failure to make continuing disclosure filings is a factor but is not determinative of the materiality of the issuer's disclosure deficiency. WFA also believes the MSRB should make clear that a dealer may consider subsequent disclosures and the curing of late filings as relevant in determining the significance of a prior or less severe disclosure deficiency. Finally, WFA believes the supplementary material should specify a window of time in which an issuer's late continuing disclosure filing would be regarded as a clerical or ministerial issue and thus not a material deficiency.
MSRB RESPONSE: Proposed Rule G–47, supplementary material .03(o) provides that discovery that an issuer has failed to make filings required under its continuing disclosure agreements may be material in specific scenarios and require time of trade disclosures to a customer. Therefore, this does not indicate that such a failure is always material requiring disclosure. The proposed rule, as noted, states the well established definition that “[i]nformation is considered to be material if there is a substantial likelihood that the information would be considered important or significant by a reasonable investor in making an investment decision.” Additionally, the MSRB does not propose to add the information requested by WFA relating to curing of late filings and a time window where it would be considered clerical. As discussed previously, the MSRB is simply codifying the existing guidance in this rulemaking initiative and the existing guidance does not provide for such a bright-line look back.
COMMENT: SIFMA states that the rule should make it clear that for secondary market trades the “discovery” by a dealer that an issuer has failed to make filings required by its continuing disclosure agreements is limited to a dealer's review of “failure to file” notices on EMMA pursuant to Rule 15c2–12.
MSRB RESPONSE: The interpretive guidance states that, “if a firm discovers through its Rule 15c2–12 procedures
COMMENT: SIFMA argues that proposed Rule G–47, supplementary material .04 is an expansion of current regulatory requirements, is too narrow, and omits critical guidance as set forth in the Interpretive Notice dated November 30, 2011,
Brokers, dealers, and municipal securities dealers must implement processes and procedures reasonably designed to ensure that material information regarding municipal securities is disseminated to registered representatives who are engaged in sales to and purchases from a customer.
The proposed rule does not include the following sentence contained in the guidance:
It would be insufficient for a dealer to possess such material information, if there were no means by which a registered representative could access it and provide such information to customers.
SIFMA argues that a dealer that provides its registered representatives access to such information satisfies current MSRB guidance under Rule G–17 and should similarly be sufficient under the proposed rule. SIFMA also argues that incorporating this guidance into the proposed rule is an expansion of existing regulatory obligations as currently approved by the SEC and is not merely a codification of existing regulations. Therefore, SIFMA states that any enforcement against dealers for failing to disseminate or provide access to their registered representatives of material information regarding municipal securities should be applied solely prospectively.
MSRB RESPONSE: SIFMA appears to interpret the sentence in the guidance to mean that merely providing access is sufficient. The sentence states that dealer possession of information is insufficient if registered representatives lack access to it. This does not mean that the converse is true—that mere access to the information is sufficient. Beyond providing access, dealers must implement processes and procedures reasonably designed to ensure that material information is disseminated to registered representatives. The potential for misinterpretation of this sentence supports the MSRB's determination that it should not be included in the proposed rule. Additionally, proposed Rule G–47, supplementary material .04 is not an expansion of current regulatory requirements since this obligation is fairly and reasonably implied by current MSRB rules, as enunciated by the MSRB since November 30, 2011.
COMMENT: WFA suggests that the proposed rule should make clear that a dealer with a reasonably designed system for the detection and disclosure of material information will be presumed to have complied with its time of trade disclosure obligations.
MSRB RESPONSE: The current guidance does not provide that a dealer will be presumed to have complied with its time of trade disclosure obligations by having a reasonably designed system. To do so in the proposed rule would significantly narrow dealers' current obligations.
COMMENT: BDA states that the proposed rule, like the interpretive guidance, is unnecessarily ambiguous. BDA believes that there should be at least a safe harbor or some additional clarity that allows dealers to comply with concrete rules rather than broad-based principles.
MSRB RESPONSE: The MSRB believes the new rule will be clear and easier for dealers to follow. As discussed above, the MSRB is simply codifying the guidance and can consider revisions to the proposed rule in the future.
COMMENT: BDA suggests that the MSRB should reconcile how the new proposed rule will be harmonized with FINRA Regulatory Notice 10–41 and exactly how the market should read the two in conjunction with one another.
MSRB RESPONSE: The MSRB's rules and guidance should be followed for all municipal securities transactions as FINRA's notice is simply its interpretation of MSRB rules and guidance.
COMMENT: Lumesis comments that providing dealers that have made good faith efforts to comply with proposed Rule G–47 with ample notice and sufficient direction to take corrective actions would support the spirit and intent of the rule.
MSRB RESPONSE: The MSRB appreciates this comment; however, the approach to enforcement is beyond the scope of the proposal.
COMMENT: Lumesis suggests that as the MSRB contemplates refinements and changes to the proposed rule in the future the subject of “form of disclosure” be more fully addressed as many market participants struggle with what actions satisfy the time of trade disclosure obligation.
MSRB RESPONSE: The MSRB can consider this suggestion if the Board undertakes to revise the proposed rule in the future.
On March 11, 2013, the MSRB requested comment on proposed revisions to Rule G–19.
The comment letters are summarized by topic as follows:
COMMENTS: All of the commenters generally support the MSRB's initiative to harmonize MSRB Rule G–19 with FINRA Rule 2111. BDA states that it is encouraged by many of the changes in proposed Rule G–19. FSI states that it supports the harmonization of MSRB
MSRB RESPONSE: These comments support the MSRB's statement on burden on competition.
COMMENTS: SIFMA comments that its members would prefer the MSRB to explicitly include the SMMP exemption in the proposed rule as with the institutional account exemption in FINRA Rule 2111(b) even though the MSRB is proposing separate rules codifying SMMP guidance. SIFMA states that the suitability rule should, at a minimum, cross reference the SMMP rules.
Similarly, WFA requests that the MSRB reconsider its plan to handle the SMMP exemption separately from the proposed rule. WFA requests that the MSRB adopt a structure parallel to FINRA's suitability rule to make clear that, under certain circumstances, a dealer has limited suitability obligations to institutional customers.
Additionally, WFA is concerned that the SMMP exemption continues to impose additional suitability requirements on dealers transacting with institutional clients beyond those required under FINRA's suitability rule. WFA states that dealers considering whether an institutional account is an SMMP must assess the factors required under Rule 2111(b) as well as additional criteria such as the institutional customer's ability to independently evaluate the “market value” of municipal securities and the “amount and type of municipal securities owned [by] or under management” of the institutional customer. WFA states that since some institutional clients may satisfy FINRA's exemptive criteria but not MSRB's, dealers will likely need to invest in costly technology enhancements and will likely be required to maintain separate policies and procedures. WFA is also concerned that the difference in rule structure will lead to regulatory confusion for clients and regulators.
BDA believes that omitting any reference to the SMMP exemption in the proposed rule undermines the goal of harmonizing it with FINRA's suitability rule. BDA is concerned that FINRA examiners will not be able to consistently apply the FINRA suitability rule as contrasted with the MSRB suitability rule, potentially causing confusion for application of the rules by FINRA examiners.
BDA states that, if the MSRB includes an exemption for SMMPs in the proposed rule, the supplementary material should be updated to make certain corresponding changes.
MSRB RESPONSE: The MSRB does not believe that it is appropriate or necessary to reference the SMMP exemption in Rule G–19. The SMMP exemption addresses four separate areas: time of trade disclosures, transaction pricing, suitability, and bona fide quotations and the exemption is not referenced in any of these separate rules. In connection with the proposed suitability rule, the MSRB has not proposed any revisions to the SMMP exemption and addresses WFA's comments in this area separately in response to the request for comment on the proposed SMMP rules set out below.
COMMENTS: SIFMA states that the proposed rule omits important exclusions from recommended strategies that are present in FINRA's suitability rule including with respect to: Descriptive information about an employee benefit plan; asset allocation models such as investment analysis tools; and other interactive investment materials. SIFMA states that these omissions solely with respect to municipal securities will result in confusion. SIFMA believes that materials and output of this nature provide investors with valuable information when considering investment decisions and should be recognized by the MSRB as exclusions from Rule G–19. SIFMA notes that the SEC, in its 2012 Report on the Municipal Securities Market, expressly discusses amending Rule G–19 to be consistent with FINRA's Rule 2111 “including with respect to the scope of the term strategy.”
SIFMA also recommends listing 529 plan education savings calculators and tools as a type of excluded “general investment information.”
MSRB RESPONSE: The proposed rule does not include the following general financial and investment information from FINRA's suitability rule: (1) Dollar cost averaging; (2) compounded return; (3) tax deferred investment; (4) descriptive information about an employer-sponsored retirement or benefit plan, participation in the plan, the benefits of plan participation, and the investment options available under the plan; (5) asset allocation models that are (i) based on generally accepted investment theory, (ii) accompanied by disclosures of all material facts and assumptions that may affect a reasonable investor's assessment of the asset allocation model or any report generated by such model, and (iii) in compliance with Rule 2214 (Requirements for the Use of Investment Analysis Tools) if the asset allocation model is an “investment analysis tool” covered by Rule 2214; and (6) interactive investment materials that incorporate the above. These items are not included in the proposed rule because the MSRB chose to include the concepts that are most pertinent to the municipal securities market. With respect to the suggestion to add 529 calculators and tools to the list, the MSRB may create a separate rule or guidance to specifically address suitability obligations for 529 plans in the future and the MSRB can consider this comment at that time.
COMMENTS: ICI states that it is not clear whether the proposed rule is intended to apply to MSRB registrants selling 529 plans. However, ICI states that, from talking to MSRB staff, they understand that the proposed rule is intended to apply to such registrants' recommendations. ICI recommends that the MSRB revise the current proposal to add supplementary material to Rule G–19 that sets forth all additional suitability obligations imposed on registrants' recommendations of 529 plan securities. ICI also recommends that the MSRB rescind all suitability requirements and guidance that have been issued under other MSRB rules relating to recommendations involving 529 plan securities. If the MSRB follows this recommendation, ICI recommends that the MSRB publish a revised request for comment that includes any provisions designed to address 529 plans.
SIFMA states that the request for comment creates confusion about the
MSRB RESPONSE: The proposed rule is intended to apply to 529 plans. All MSRB rules and guidance apply to 529 plans unless specifically excluded, and the proposed rule does not exclude 529 plans. Additionally, the current guidance addressing suitability requirements for 529 plans continues to apply. The MSRB may decide to create a separate rule addressing 529 plans in the future; however, the proposed suitability rule and related guidance will apply to 529 plans until any such separate 529 plan rule is created.
COMMENT: ICI recommends that the MSRB confirm in the notice adopting the proposed revisions to Rule G–19 the MSRB's intent to interpret its rule in a manner that is consistent with FINRA's interpretation.
MSRB RESPONSE: The MSRB will interpret proposed Rule G–19 in a manner consistent with FINRA's interpretations of Rule 2111 except to the extent that the MSRB affirmatively states that specific provisions of FINRA's interpretations do not apply.
COMMENTS: WFA comments that the MSRB should provide guidance similar to FINRA's guidance that suitability obligations concerning hold recommendations cover only explicit hold recommendations.
BDA is concerned that there is a potential for confusion with respect to explicit versus passive hold recommendations. Specifically, proposed Rule G–19, supplementary material .03, Recommended Strategies, would apply the suitability obligation to investment strategies that include an explicit recommendation to hold a municipal security or municipal securities. BDA is concerned that this might lead to unnecessary and burdensome compliance documentation in certain instances. BDA encourages the MSRB to provide further guidance as to what constitutes an explicit hold recommendation for purposes of the rule and believes that the MSRB should have guidance, as FINRA does in Regulatory Notice 12–55, that “implicit” hold recommendations are not within the scope of the suitability rule.
MSRB RESPONSE: As noted, the MSRB will interpret Rule G–19 in a manner that is consistent with FINRA's interpretation of its suitability rule except to the extent that the MSRB affirmatively states that specific provisions of FINRA's interpretations do not apply.
COMMENTS: SIFMA appreciates that the MSRB intends to file the time of trade disclosure, suitability, and SMMP proposals with the SEC at the same time.
SIFMA further requests that these three rules be implemented simultaneously with the same effective date.
SIFMA states that FINRA Rule 2111 was the result of a multi-year process, including an implementation period of approximately 19 months and that any regulatory scheme takes time to implement properly. SIFMA further states that municipal securities dealers that are not FINRA members, as well as FINRA members that only buy and sell municipal securities, will need a reasonable time to allow for a sufficient implementation period to develop, test, and implement supervisory policies and procedures, systems and controls, as well as training.
SIFMA also states that municipal securities dealers that are FINRA members will also need time, albeit less than non-FINRA members, to implement the proposed changes. SIFMA recommends an implementation period of no less than one year from approval by the SEC before the proposal becomes effective.
MSRB RESPONSE: The MSRB contemplated implementing the time of trade disclosure, suitability, and SMMP rules simultaneously with the same effective date. However, the MSRB believes that an implementation period of one year is unnecessary. The time of trade disclosure and SMMP rules simply codify existing guidance and the suitability rule is largely consistent with FINRA's suitability rule. Therefore, the MSRB proposes an effective date for the proposed rule change of 60 days following the date of SEC approval.
COMMENTS: BDA suggests striking the word “retirement” from supplementary material .03, Recommended Strategies, item (iv). BDA suggests that the section should be rewritten to read “estimates of future income needs” as this would better align to FINRA's “liquidity needs” criteria to recognize that when purchasing a position, one might be looking for a period to help bridge income needs until they reach retirement and not solely for “retirement income needs.”
MSRB RESPONSE: The language in the proposed rule regarding estimates of future retirement income needs is identical to the parallel language in FINRA's suitability rule relating to general financial and investment information. The MSRB does not propose to delete the word “retirement” since there is no unique aspect of the municipal securities market that would support adopting different language from FINRA's rule. Moreover, the MSRB does not believe that the phrase should be aligned to the non-parallel “liquidity needs” criterion in FINRA's rule relating to a customer's investment profile.
On May 1, 2013, the MSRB requested comment on proposed Rules D–15 and G–48 on SMMPs.
The comment letters are summarized by topic as follows:
COMMENTS: All of the commenters generally support the MSRB's initiative to codify the SMMP guidance into Rules D–15 and G–48. BDA states that, while it is supportive of the proposed rules, it seeks clarity on some items. SIFMA comments that it continues to support the efforts by the MSRB to provide clarity to regulated entities by reorganizing or eliminating certain interpretive guidance associated with Rule G–17 into new or revised rules. WFA states that it supports the MSRB's continued commitment to “streamline” its rules and guidance and its ongoing effort to align its rule format with that of other regulators.
MSRB RESPONSE: The MSRB believes these comments support the MSRB's statement on the burden on competition.
COMMENTS: SIFMA comments that there is one group of customers that may be experienced municipal market participants yet does not fall within the current SMMP definition: Hedge funds with assets under management of less than $50 million. SIFMA states that the
Last year the MSRB harmonized (with slight distinctions) the SMMP definition and the process by which dealers confirm a customer's SMMP status with FINRA's suitability rule and institutional account definition. SIFMA suggests that hedge funds managing less assets than required by the MSRB and FINRA are nevertheless sophisticated and, therefore, should be covered by the MSRB and FINRA rules. By contrast, BDA indicated in its comment letter that it is comfortable with the $50 million threshold.
MSRB RESPONSE: As discussed in the SMMP notice, the codification of the interpretive guidance on SMMPs that is currently in Rule G–17 is intended to preserve the substance of the guidance approved by the Board. No substantive changes are intended. It would be beyond the scope of this initiative to determine whether small hedge funds are sufficiently sophisticated to warrant the relief to dealers in proposed Rule G–48.
COMMENTS: SIFMA and WFA comment that the rules under which a dealer's obligations to SMMPs are modified (proposed Rule G–47, and Rules G–19, G–13, and G–18)
MSRB RESPONSE: One of the benefits of adopting stand-alone rules is to make them more prominent and easier for dealers and other market participants to locate. The MSRB believes that a stand-alone SMMP definition and a stand-alone rule describing the relief available to dealers who do business with SMMPs will provide ample clarity to dealers regarding their obligations. Cross-references, therefore, are unnecessary. Moreover, if cross-references were used for rules impacting SMMPs, a consistent practice of including cross-references in other rules would tend to make the rulebook unmanageable. This comment was also made in response to the requests for comment on proposed Rule G–47 and the proposed revisions to Rule G–19. In response to the previous comments, the MSRB indicated that it does not believe it is necessary to reference the new SMMP rules in each of the rules to which the SMMP guidance applies.
COMMENT: SIFMA requests that the proposed revisions to Rule G–19, and proposed Rules G–47, G–48, and D–15 be implemented simultaneously with the same effective date.
MSRB RESPONSE: The MSRB agrees that it is appropriate to file these proposed rules simultaneously and for them to become effective together on the same date.
COMMENT: With regard to proposed Rule D–15, supplementary material .02, Customer Affirmation, BDA requests that the MSRB consider permitting alternate methods of affirming SMMP status in lieu of specifically obtaining customer affirmations under the proposed rule.
MSRB RESPONSE: As BDA points out, the rule already provides flexibility with regard to the affirmation process, which is substantially similar to (and can be combined with) FINRA's process. It can be done orally or in writing, on a trade by trade, type of municipal security or account-wide basis. BDA's request to use the credit review process in lieu of an affirmation would be a substantial change in the process. The customer affirmation requirement in proposed Rule D–15, supplementary material .02 is taken directly from the 2012 SMMP Interpretation.
COMMENTS: BDA expresses concern regarding the more stringent requirement in proposed Rule D–15, supplementary material .01, Reasonable Basis Analysis, which goes beyond FINRA's rules to state that a “. . . dealer should consider the amount and type of municipal securities owned or under management by the customer.” BDA states that FINRA does not require a consideration of the type of securities held by the customer for qualification under FINRA's institutional investor exemption. BDA also states that it is unaware of any feature unique to the municipal securities market that would justify the more burdensome requirement to consider both the amount and type of municipal securities owned or under management by the customer. BDA further states that this requirement might confuse examiners and allow for an uneven application of the proposed rule. BDA believes a determination by the dealer that the customer has total assets of at least $50 million and that the dealer has a reasonable basis to believe the customer is capable of evaluating investment risk and market value independently should be given deference.
MSRB RESPONSE: The MSRB believes this additional requirement that a dealer consider the amount and type of municipal securities owned or under management by the customer is appropriate since it provides some assurance that the dealer considered the investor's experience as a municipal securities investor in forming a reasonable basis for believing that the customer is capable of evaluating investment risks and market value independently. The MSRB believes the concern about misapplication in the regulatory examination process is misplaced, since the dealer need only evidence that it considered the municipal securities holdings of the customer in its analysis. The customer affirmation requirement in proposed Rule D–15, supplementary material .01 is taken directly from the 2012 SMMP Interpretation.
COMMENTS: BDA requests further clarification as to how the MSRB defines “agency transactions” for purposes of Rule G–48(b)(1). Additionally, BDA states that, with respect to transaction pricing, the 2012 SMMP Interpretation included guidance that was particularly relevant to dealers operating alternative trading systems. BDA requests the MSRB to consider the application of this provision in the context of alternative trading systems and whether it would be appropriate to expand this exemption for transaction pricing under the proposed rule to include an alternative trading system “which functions on a riskless principal basis disclosing all commissions in the same manner as it would if it were acting as agent.”
MSRB RESPONSE: The agency concept is taken directly from the current Rule G–17 guidance and relates to agency transactions as described in Rule G–18. The restated SMMP guidance in 2012 did not change this concept from the original notice in 2002. It has always been the case that fair pricing relief was limited to non-recommended secondary market agency trades. BDA suggests that the MSRB expand the relief to riskless principal transactions executed by alternative trading systems. While some such systems effect trades with their institutional customers on an agency basis, the MSRB understands that some are executed on a riskless principal basis and include a markup or markdown. The MSRB views BDA's requested change as substantive and worthy of consideration at a later date. As for the request for clarification of the definition of an agency transaction, we believe the concept is well-settled and understood by the market. Finally, the reference in the 2012 notice to commissions charged by ATSs was meant to remind dealers operating ATSs that their obligation to charge a fair and reasonable commission under Rule G–30(b) is independent of the fair and reasonable price obligation under Rule G–18 (and corresponding SMMP relief).
COMMENTS: BDA states that proposed Rule G–48(d), on bona fide quotations, provides that a “. . . dealer disseminating an SMMP's ‘quotation' as defined in Rule G–13, which is labeled as such, shall apply the same standards. . . .” BDA states that it is unclear whether the MSRB intends that a quotation from an SMMP needs to be labeled as an “SMMP quotation” or if the MSRB is simply referring to a quotation that meets the requirements set forth under MSRB Rule G–13. BDA states that under the 2012 SMMP Interpretation it was clear that, if an SMMP makes a “quotation” and it is labeled as such, then it is presumed not to be a quotation made by the disseminating dealer. BDA states that, if proposed Rule G–48(d) is intended to codify the language from the 2012 SMMP Interpretation, they request that the MSRB consider modifying the language in the proposed rule to clarify that the clause “which is labeled as such” does not require the quotation to be specifically labeled as an SMMP quotation.
MSRB RESPONSE: BDA suggests that the proposed rule changes the standard for identifying quotes from SMMPs. Such is not the case. Since the original interpretation in 2002, dealers have been required to identify the quote as from an SMMP to take advantage of the relief in the guidance. To read the rule any other way would not make sense. BDA suggests it would be sufficient to simply label the SMMP quote as a quote, rather than an SMMP quote. This would not alert the disseminating dealer that the quote was from an SMMP. The MSRB does not propose to make any revisions in response to this comment. The language in the proposed rule tracks the language in the current Rule G–17 guidance
COMMENTS: WFA expresses concern that dealers considering whether an institutional account is an SMMP must assess not only the factors required under FINRA Rule 2111(b), but also additional criteria such as the institutional customer's ability to independently evaluate the “market value” of municipal securities and the “amount and type of municipal securities owned [by] or under management” of the institutional customer. WFA states that the differences in duties owed under the SMMP rules and FINRA Rule 2111(b) may confuse clients and regulators. WFA believes that proposed Rule D–15 should not include these additional criteria.
MSRB RESPONSE: The second additional criterion regarding the amount and type of municipal securities was discussed previously. As for the first additional criterion, the MSRB believes that the phrase “market value” should be retained, since the relief goes beyond FINRA's suitability relief and extends to fair pricing. Although the SMMP definition does impose some obligations beyond those required by FINRA's suitability rule, proposed Rule D–15 simply codifies the current Rule G–17 SMMP guidance. The MSRB does not propose making any substantive changes to the proposed rules in response to this comment.
Within 45 days of the date of publication of this notice in the
(A) By order approve or disapprove such 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.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1)
The Exchange proposes to amend Rule 341A to specify applicable continuing education (“CE”) requirements, (ii) [sic] amend the NYSE Amex Options Fee Schedule (“Fee Schedule”) to specify corresponding CE fees, and (iii) amend the Fee Schedule to specify fees for the Series 56 examination. 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 (i) amend Rule 341A to specify applicable CE requirements, (ii) amend the Fee Schedule to specify corresponding CE fees, and (iii) amend the Fee Schedule to specify fees for the Series 56 examination.
Rule 341A(a) states that no member or member organization may permit any registered person to continue to, and no registered person may continue to, perform duties as a registered person unless such person has complied with the CE requirements of the rule. Rule 341A specifies the CE requirements for registered persons subsequent to their initial qualification and registration. The requirements consist of a Regulatory Element and a Firm Element.
There are currently three existing Regulatory Element programs: (1) The S201 (“S201 CE Program”) for registered principals (e.g., General Securities Principals and Limited Principals) and supervisors; (2) the S106 (“S106 CE Program”) for persons registered only as Investment Company Products/Variable Contracts Limited Representatives; and (3) the S101 (“S101 CE Program”) for all other registered persons (e.g., General Securities Representatives). The Exchange proposes to enumerate these existing programs in subsection (1) of Rule 341A(a).
The Exchange also proposes to specify the new S501 (“S501 CE Program,” and together with the S201, S106 and S101 CE Programs, “CE Programs”) for persons registered only as Proprietary Traders.
Persons accepting orders from non-member customers (unless such customer is a broker-dealer registered with the Securities and Exchange Commission (“Commission”)) must successfully complete the Series 7 Examination.
If a person initially qualified as a Proprietary Trader by taking the Series 7 Examination or otherwise previously maintained both Series 7 and Series 56 qualifications, but was only maintaining a Proprietary Trader registration when the CE requirement became due, then completion of the S501 CE Program by such person would satisfy his or her then-applicable CE requirement. However, upon re-registering thereafter as a General Securities Representative, such individual would be required to complete the S101 CE Program the next time he or she became subject to CE.
The S501 CE Program is a computer-based education program developed by many of the self-regulatory organizations (“Participating SROs”)
As proposed, registered Proprietary Traders would also be required to complete the Firm Element outlined in Rule 341A(b). Although registered Proprietary Traders, including those who have passed the Series 56 Examination, do not interact with the public, the Exchange believes that this requirement is appropriate because it ensures that these registered Proprietary Traders continue to enhance their securities knowledge, skill, and professionalism. As stated in Rule 341A(b)(2)(ii), the program should be tailored to fit the business of the member or member organization. Thus, the Exchange believes that it is appropriate that registered Proprietary Traders also complete the Firm Element.
The introduction of the S501 CE Program would allow the Exchange to tailor its CE requirements more closely to those individuals who are registered only as Proprietary Traders. More specifically, the Exchange believes that the proposed rule change would allow persons registered only as Proprietary Traders to complete a CE Program separate from persons maintaining other registrations. For example, in comparison to the Series 7 Examination, the Series 56 Examination is more closely tailored to the practice of proprietary trading while the Series 7 Examination is more comprehensive. As such, the Exchange believes that the S501 CE Program should also be closely tailored to proprietary trading. If an individual remains registered in another capacity, such as a General Securities Representative, the Exchange believes that it is appropriate that such individual continue to be required to complete the more comprehensive CE Program (
The Exchange proposes to amend the Fee Schedule to specify the CRD session fees for the CE Programs described above, including the existing CE Programs and the proposed new S501 CE Program. Specifically, the Exchange proposes to specify the existing $100 session fee associated with the existing CE Programs (
The Exchange has determined that the $60 session fee is necessary to administer the S501 CE Program. Specifically, the $60 session fee will be used to fund the S501 CE Program administered to persons registered only as Proprietary Traders who are required to complete the S501 CE Program. The $60 session fee is less than the existing $100 session fee currently charged by FINRA through CRD for the existing CE Programs, including the S101 CE Program, because the fees associated with the existing CE Programs are utilized for both development and administration, whereas the $60 session fee for the S501 CE Program would only be used for the administration of the program. The costs associated with the development of the S501 CE Program are included in the Series 56 Examination fee. The Exchange anticipates that the other Participating SROs will adopt, or have adopted, the same $60 session fee applicable to completion of the S501 CE Program.
The Exchange previously amended its rules to prescribe the Series 56 Examination as the qualifying examination for registered Proprietary Traders.
The Fee Schedule does not currently set forth the examination fees for other qualification examinations required or accepted by the Exchange because these programs are within FINRA's jurisdiction. The Series 56 Examination, however, is a limited registration category that is not recognized by FINRA under its registration rules. However, as with existing non-FINRA examinations, FINRA administers the Series 56 Examination and collects the $195 fee through CRD on behalf of the SROs that developed and maintain the exam. Additionally, only one $195 fee would be charged through CRD for a registered person completing the Series 56 Examination, even if such registered person's firm was a member of multiple exchanges. The Exchange anticipates that the other Participating SROs will adopt, or have adopted, the same $195 fee applicable to completion of the Series 56 Examination.
The proposed change is not otherwise intended to address any other issues relating to CE or related fees and the Exchange is not aware of any problems that ATP Holders or their registered persons would have in complying with the proposed change.
The proposed rule change is consistent with Section 6(c) of the Act,
The Exchange also believes that the proposed rule change is consistent with Section 6(b) of the Act,
The Exchange believes that it is reasonable to include the Series 56 Examination fee within the Fee Schedule to make the cost of this examination clear to ATP Holders. The proposed fee is reasonably designed to allow FINRA to cover its cost of administering the Series 56 Examination on behalf of the Exchange. The Exchange believes that the proposed $195 Series 56 Examination fee is also reasonable because it is designed to reflect the costs of maintaining and developing the Series 56 Examination, as well as the development of the S501 CE Program, and to ensure that the examination's content is, and continues to be, adequate for testing the competence and knowledge generally applicable to proprietary trading. The Exchange also believes that the fee is reasonable because the Exchange anticipates that the other Participating SROs will adopt, or have adopted, the same $195 fee applicable to completion of the Series 56 Examination.
For these reasons, the Exchange believes that the proposal is consistent with the Act.
In accordance with Section 6(b)(8) of the Act,
No written comments were solicited or received with respect to the proposed rule change.
Because the foregoing 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, it has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act
The Exchange has requested that the Commission waive the 30-day operative delay. Waiver of the operative delay would allow the Exchange to modify its rules and implement the proposed rule change at once, enabling its Members to comply with their continuing education requirements in a timely manner, and thus is consistent with the protection of investors and the public interest. Therefore, the Commission designates the proposal operative upon filing.
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: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission will institute proceedings to determine whether the proposed rule change should be approved or 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.
Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission's Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. 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–NYSEMkt–2013–77 and should be submitted on or before November 12, 2013.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
On July 31, 2013, NASDAQ OMX BX, Inc. (“BX” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange
In the Notice, the Exchange represents that it has the ability to conduct the surveillances and regulatory functions that it will assume. The Commission also notes that the Exchange represents that its expertise in its own market structure, along with its existing real-time monitoring of these activities, may enable the Exchange to better detect improper activities on its market. Moreover, these patterns, underlying rules, and analytical requirements are similar to patterns that BX regulatory personnel already monitor for affiliated options markets. The Exchange represents that NASDAQ's MarketWatch group, which already handles other real-time surveillance of the BX market, should be able to adequately and effectively handle the surveillances related to the instant proposed rule change.
In the Notice, the Exchange further represents that it will continue to refer potentially violative conduct to FINRA for further review and that FINRA will continue to perform most of the surveillance activity for BX's equity market. The Exchange also represents that FINRA will continue to perform examination and enforcement work, subject to BX's supervision and ultimate responsibility.
For the foregoing reasons, the Commission believes that the proposed rule change is consistent with the Act.
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 its Fees Schedule. The text of the proposed rule change is available on the Exchange's Web site (
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 Exchange proposes to amend its Fees Schedule. First, the Exchange proposes to remove the following language from Section 3 of its Fees Schedule:
Because C2 intends to cease listing of SPXPM following the closing of trading on Friday, February 15, 2013, for any Market-Maker Permit used in February 2013 solely to act as a Market-Maker in SPXPM, C2 will credit back to the Market-Maker a pro-rated amount (corresponding to the portion of the month during which SPXPM is not listed on C2) of the Market-Maker Permit cost. This language is obsolete and no longer relevant, as the month of February 2013 has ended and SPXPM is no longer traded on the Exchange.
The Exchange also proposes to make another amendment to Section 3 of its Fees Schedule. Currently, Section 3 states that “Trading Permits will be renewed automatically for the next month unless the Trading Permit Holder submits written notification to the Registration Services Department by the 25th day of the prior month (or the preceding business day if the 25th is not a business day) to cancel the Trading Permit effective at or prior to the end of the applicable month.” The Exchange proposes to amend this statement to give Trading Permit Holders (“TPHs”) until 4 p.m. on the second-to-last business day of the prior month to cancel a Trading Permit. This will give TPHs more time to cancel Trading Permits before such permits renew.
Third, the Exchange proposes to adopt a one-time “Responsible Person” fee of $500 to the list of Application-Related Fees. A “Responsible Person” is an individual designated by an organization that is the holder of a Trading Permit to represent the organization with respect to that Trading Permit in all matters relating to the Exchange. The Responsible Person must be a United States-based officer, director or management-level employee of the Permit Holder, who is responsible for the direct supervision and control of
Effective April 1, 2012, the Exchange added a clause to the Fees Schedule that waived Renewal fees for six months.
The Exchange also proposes to add the language “after three months, all fees as assessed by the Exchange are considered final by the Exchange” to the end of the Fees Schedule. This will serve to encourage Permit Holders to promptly review their Exchange invoices so that any disputed charges can be addressed in a timely manner while the information and data underlying those charges is still easily and readily available. Other exchanges include this language in their Fees Schedules.
The Exchange believes the proposed rule change is consistent with the Act and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.
The Exchange believes that the proposed changes to remove obsolete language from the Fees Schedule will alleviate any potential investor confusion, thereby removing impediments to and perfecting the mechanism of a free and open market and a national market system, and, in general, protecting investors and the public interest.
The Exchange believes that the proposal to amend Section 3 of the Fees Schedule to give TPHs until 4 p.m. on the second-to-last business day of the prior month to cancel a Trading Permit is reasonable because it will give TPHs more time to determine whether to cancel a Trading Permit. The Exchange believes that the proposed change is equitable and not unfairly discriminatory because it will apply to all TPHs.
The Exchange believes the addition of the Responsible Person fee is reasonable because the amount of the fee is intended to cover the costs of the review and examination of Responsible Persons. The Exchange believes that this is equitable and not unfairly discriminatory because the fee will apply to all Responsible Person applicants (with the exception of those that are also Associated Person applicants.) The Exchange believes that it is equitable and not unfairly discriminatory to exempt Associated Person applicants with the same Permit Holder from the Responsible Person fee because the same investigation and review is conducted for each Associated Person as is conducted for each Responsible Person. Since the investigation and review will not be conducted twice for a Responsible Person who is also an Associated Person, the Exchange does not believe it would be equitable to assess both fees in such a circumstance.
The Exchange believes that the proposed addition of the language “after three months, all fees as assessed by the Exchange are considered final by the Exchange” to the end of the Fees Schedule is reasonable because this will serve to encourage Permit Holders to promptly review their Exchange invoices so that any disputed charges can be addressed in a timely manner while the information and data underlying those charges is still easily and readily available. The Exchange believes that this is equitable and not unfairly discriminatory because it will apply to all market participants. Further, other exchanges include this language in their Fees Schedules.
C2 does not believe that the proposed rule change will impose any burden on intramarket competition that is not necessary or appropriate in furtherance of the purposes of the Act because the proposed changes apply to all qualifying market participants equally. C2 does not believe that the proposed rule change will impose any burden on intermarket competition that is not necessary or appropriate in furtherance of the purposes of the Act because the proposed changes are all specific to C2 operations, fees and the C2 Fees Schedule. To the extent that such changes may make C2 a more attractive market to market participants at other exchanges, such market participants may elect to become C2 market participants.
The Exchange neither solicited nor received comments on the proposed rule change.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) 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 Rule 6.42. The text of the proposed rule change is available on the Exchange's Web site (
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 Exchange proposes to amend its Rule 6.42—Minimum Increments for Bids and The Exchange proposes to amend its Rule 6.42—Minimum Increments for Bids and Offers—regarding minimum increments of bids and offers for complex orders. Currently, Rule 6.42(4) states that bids and offers on complex orders may be expressed in any increment regardless of the minimum increments otherwise appropriate to the individual legs of the order. This language allows for complex order bids and offers to be expressed in any increment whatsoever. The Exchange believes that setting a minimum increment for bids and offers on complex orders of $0.01 will ensure that there is a lowest minimum increment for bids and offers that makes it simple to monitor and participate for all market participants (for example, many of the web-based services that public customers use to enter options orders do not permit the entry of orders in sub-penny increments, while other types of market participants may not face that limitation). Further, this $0.01 minimum increment will put the electronic and manual entry of complex orders on even footing (as the Exchange's Complex Order Book (“COB”) and Complex Order Auction
As such, in order to limit the potential to express orders in any increment, the Exchange hereby proposes to state that bids and offers on complex orders, as defined in Interpretation and Policy .01 below, may be expressed in any net price increment (that may not be less than $0.01) that may be determined by the Exchange on a class-by-class basis and announced to the Trading Permit Holders (“TPHs”) via Regulatory Circular, regardless of the minimum increments otherwise appropriate to the individual legs of the order.
The Exchange proposes adding the parenthetical language which allows the Exchange to set minimum increments for bids and offers on complex orders on a class-by-class basis and announce such minimum increments to TPHs via Regulatory Circular in order to ensure uniformity of minimum bid and offer increments within a class (as the Exchange may already do for bids and offers on complex orders in options on the S&P 500 Index (“SPX”), p.m.-settled S&P 500 Index (“SPXPM”) or on the S&P 100 Index (“OEX” and “XEO”)). The proposed parenthetical language would allow the Exchange to set and vary minimum increments for bids and offers on complex orders for different classes in response to different market conditions in those classes and in order to encourage more trading in such classes.
This proposed change will ensure that there is a lowest minimum increment for bids and offers on complex orders that makes it simple to monitor and participate for all market participants and places market participants entering orders manually and electronically on an equal footing. This is simpler and more restrictive than the current rule, which permits the expression of bids and offers on complex orders in any increment (though only complex orders entered manually can be in sub-penny increments), which would allow more sophisticated market participants entering orders electronically [sic]
The Exchange believes the proposed rule change is consistent with the Act and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.
BOE 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. The Exchange believes that the proposed change will not impose an unnecessary burden on intramarket competition because it applies to minimum increments for bids and offers on complex orders from all market participants. The Exchange believes that the proposed change will not impose an unnecessary burden on intermarket competition because it applies only to CBOE. To the extent that setting the lowest possible minimum increment for bids and offers in complex orders at $0.01 (and the other changes proposed herein) may be attractive to market participants at other options exchange, such market participants are always welcome to become CBOE market participants.
The Exchange neither solicited nor received comments on the proposed rule change.
Within 45 days of the date of publication of this notice in the
A. by order approve or disapprove such 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.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1)
The Exchange proposes to amend Section 907.00 of the Listed Company Manual to expand the suite of complimentary products and services that are offered to certain current and newly listed companies. 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 proposed to amend Section 907.00 of the Manual to expand the suite of complimentary products and services that it offers to certain listed companies. All listed issuers receive some complimentary products and services through NYSE Market Access Center. Presently, the Exchange offers products and services in the following general categories to certain current and newly listed companies: Market surveillance, web-hosting, market analytics and news distribution. The available products and services have approximate commercial values ranging from $10,000 to $45,000 annually
With respect to currently listed companies, the Exchange offers complimentary products and services based on the number of shares such company has issued and outstanding. Companies that have more than 270 million shares issued and outstanding (each a “Tier One Company”) are offered (i) a choice of market surveillance or market analytics products and services, and (ii) web-hosting products and services on a complimentary basis. Companies that have between 160 million and 269.9 million shares issued and outstanding (each a “Tier Two Company”) are offered a choice of market analytics or web-hosting products and services.
For newly listed companies, the Exchange offers different product and service options for an initial period of two years based on such company's global market value. A company with a global market value of $400 million or more (each a “Tier A Company”) is offered (i) a choice of market surveillance products and services for a period of twelve months or market analytics products and services for a period of 24 months, and (ii) web-hosting and news distribution products and services for a period of 24 months. Newly-listed companies with a global market value of less than $400 million (each a “Tier B Company”) are offered web-hosting and news distribution products and services for a period of 24 months.
The Exchange proposes to amend Section 907.00 of the Manual to add three additional categories of complimentary products and services that will be offered to certain current and newly listed companies. Specifically, the Exchange proposes to include corporate governance tools and advisory services with a commercial value of approximately $45,000 annually (the “Enhanced Package”), corporate governance tools with a commercial value of approximately $20,000 annually (the “Basic Package”) and data room services and virtual investor relation tools
In an increasingly complex and constantly evolving regulatory environment, the management and boards of directors of listed companies are eager to understand corporate governance best practices and to adopt high quality corporate governance policies. To that end, the Exchange has seen a growing demand among listed companies for pragmatic tools that will enable them to develop comprehensive corporate governance policies. Due to this demand, the Exchange believes it is attractive and helpful to listed companies to add corporate governance tools to the suite of products and services that it offers to certain current and newly listed companies. The Exchange proposes to offer these tools through an affiliated service provider and may engage additional third-party providers in the future.
As discussed above, the Exchange proposes to offer two tiers of corporate governance products. The Basic Package, offered to Tier Two and Tier A Companies, will consist of a combination of governance, risk, compliance and board tools for company directors and executives. The Exchange expects that these tools will provide generic, easily implemented corporate governance advice and/or educational tools that are applicable to a wide range of listed companies.
The Enhanced Package, offered to Tier One Companies, will be an expanded version of the Basic Package. It will offer the same tools as the Basic Package but will also include access to advisory services. Such advisory services may include ongoing, periodic review of a company's corporate governance policies as well as benchmarking such polices against a company's peer group. The advisory services will offer companies a more individualized assessment of their corporate governance practices particular to the specific nature of their industry and organization.
The Exchange believes it is appropriate to offer the Enhanced Package to Tier One Companies. It is the Exchange's experience that Tier One Companies tend to be larger, more complex organizations. In many cases they have more divisions and product lines and operate across multiple jurisdictions thereby increasing their need for comprehensive corporate governance and compliance policies. Tier One Companies tend to be very large and complex organizations and the Exchange believes that such companies would benefit most from the individualized attention offered by the advisory services element of the Enhanced Package. By comparison, Tier Two and Tier A Companies tend to be mid-sized companies and therefore are smaller, less complex organizations than Tier One companies that can benefit from the general tools offered by the Basic Package. Given that most Tier B Companies are smaller and, less complex organizations than Tier Two and Tier A Companies, the Exchange believes they are unlikely to require the tools offered by the Basic Package.
The specific tools and services offered by these products will be developed by the Exchange or by third-party vendors. Companies that are offered these products are under no obligation to accept them and a company's listing on the Exchange is not conditioned upon acceptance of any product or service. The Exchange notes that, from time to time, companies elect to purchase products and services from other vendors at their own expense rather than accepting comparable products and services offered by the Exchange.
The proposed expansion of additional complimentary products and services will not benefit any category of listed companies over another one. The additional corporate governance packages discussed above will not increase the overall value of complimentary products and services offered to companies by the Exchange. The commercial value of the two corporate governance packages is approximately equal to the commercial value of other products already being offered to listed companies in each tier and are simply being offered as an additional alternative choice. Additionally, the data room services and virtual investor relation tools are being offered to all listed companies.
The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,
The Exchange believes that it is reasonable to offer complimentary products and services to attract new listings, retain currently listed issuers, and respond to competitive pressures. The Exchange faces competition in the market for listing services, and it competes in part by improving the quality of the services that it offers to
With respect to the addition of the two corporate governance packages, the Exchange believes that it is reasonable, equitable and not unfairly discriminatory to allow companies to choose whether they receive corporate governance products or one of the other complimentary products offered by the Exchange. With respect to the addition of the data room services and virtual investor relation tools, the Exchange believes it is reasonable, equitable and not unfairly discriminatory to offer an additional product to all listed companies. The Exchange further notes that the proposed rule change is equitable and not unfairly discriminatory because the criteria for satisfying the tiers are the same for all similarly situated companies. Companies are not forced or required to utilize the complimentary products and services as a condition of listing. All companies will continue to receive some level of free services.
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. The proposed change simply expands the universe of products and services offered to certain listed companies. While the value of complimentary products and services offered by the Exchange will increase marginally, such increased value will be offered to all listed companies without regard to size or status. Accordingly, the Exchange does not believe that the proposed change will impose any burden on competition.
No written comments were solicited or received with respect to the proposed rule change.
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.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
On August 16, 2013, NASDAQ OMX PHLX LLC (the “Exchange” or “Phlx”) filed with the Securities and Exchange Commission (“Commission”) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
Phlx Rule 1080(n) provides a price improvement mechanism in which a member (an “Initiating Member”) may electronically submit for execution an order it represents as agent on behalf of
However, Phlx rules currently provide different treatment if the PIXL Order is for fewer than 50 contracts. Specifically, if the PIXL Order is a
Phlx rules also provide that if the PIXL Order is for a
The Exchange is proposing to discontinue the differentiation between PIXL Orders for less than 50 contracts and PIXL Orders for 50 contracts or greater.
All public customers will continue to have priority at each price level in accordance with Phlx Rule 1080(n)(ii)(E).
After carefully considering the proposal, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange
Under this proposal, a PIXL Order submitted to the PIXL Auction, regardless of its size, will be guaranteed an execution price of at least the NBBO and, moreover, will be given an opportunity to receive an execution at a price better than the NBBO. Public customer orders of fewer than 50 contracts will not, however, be guaranteed price improvement over the NBBO.
In the Notice, the Exchange explained that, when it first implemented PIXL, the differentiation provision “was a means to ensure some level of price improvement for smaller orders.”
In further support of its proposal, Phlx noted that other exchanges, including the International Securities Exchange and the BOX Options Exchange, do not guarantee price improvement over the NBBO today, and that Phlx is at a competitive disadvantage in continuing the differentiation provision.
While Phlx's proposal will eliminate the current guarantee of price improvement it provides to public customer orders of fewer than 50 contracts, the Commission notes that some other exchanges do not provide such benefit in their price improvement mechanisms.
The Commission notes that Phlx is not proposing to change any other provision of PIXL in this proposal. For example, orders entered into PIXL will continue to be exposed to all Phlx members before the initiating member can execute against the PIXL order. Further, Phlx is not proposing any changes to the fact that public customer orders are afforded priority at each price point in a PIXL Auction. Further, once an order is entered into PIXL, it may not be cancelled by the initiating member and thus is exposed for possible price improvement. In addition, the PIXL Order will still be guaranteed an execution price of at least the NBBO.
The Commission also notes that the proposal does not have any impact on the pilot program established in Phlx Rule 1080(n)(vii) regarding no required minimum size for orders to be eligible for the PIXL. Thus, the Commission and the Exchange will continue to have access to data that will help assess competition within the PIXL.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
On March 21, 2013, National Securities Clearing Corporation (“NSCC”) filed with the Securities and Exchange Commission (“Commission”) advance notice SR–NSCC–2013–802 (“Advance Notice”) pursuant to Section 806(e)(1) of the Payment, Clearing, and Settlement Supervision Act of 2010 (“Clearing Supervision Act”)
Pursuant to Section 806(e)(1) of the Clearing Supervision Act
The Advance Notice, as modified by Amendments No. 1, No. 2, and No. 3, is a proposal by NSCC to amend its Rules & Procedures (the “NSCC Rules”) to provide for supplemental liquidity deposits to its Clearing Fund (the “NSCC Clearing Fund”) to ensure that NSCC has adequate liquidity resources to meet its liquidity needs (the “SLD Proposal” or sometimes the “Proposal”), as described below. NSCC filed Amendment No. 3 (this “Amendment”) to the Advance Notice, as previously modified by Amendment No. 1 and No. 2, in order to delete the provisions in the proposed Rule relating to Regular Activity Liquidity Obligations (as defined), to respond to concerns raised by Members. As a result the Proposal, as revised, would impose supplemental liquidity obligations on affected Members only with respect to activity relating to monthly options expiry periods (defined in the proposed Rule as “Special Activity Liquidity Obligations”).
In its filing with the Commission, NSCC included statements concerning the purpose of and basis for the Advance Notice, as modified by Amendment No. 3, and discussed any comments it received on the Advance Notice. The text of these statements may be examined at the places specified in Item IV below. NSCC has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
As noted in the original proposal contained in the Advance Notice, as modified by Amendments No. 1 and No. 2, the SLD Proposal would modify the NSCC Rules to add a new Rule 4(A), to establish a supplemental liquidity funding obligation designed to cover the liquidity exposure attributable to those Members and families of affiliated Members (“Affiliated Families”) that regularly incur the largest gross settlement debits over a settlement cycle during both times of normal trading activity (“Regular Activity Periods”) and times of increased trading and settlement activity that arise around monthly options expiration dates (“Options Expiration Activity Periods”).
Under the existing Proposal, the Liquidity Obligation of a Member or Affiliated Family with respect to a Regular Activity Period (a “Regular Activity Liquidity Obligation”) or an Options Expiration Activity Period (a “Special Activity Liquidity Obligation”) would be imposed on the 30 Members or Affiliated Families who generate the largest aggregate liquidity needs over a settlement cycle that would apply in the event of a closeout (that is, over a period from date of default through the following three settlement days), based upon an historical look-back period. The calculations for both the Regular Activity Liquidity Obligation and the Special Activity Liquidity Obligation were designed so that NSCC has adequate liquidity resources to enable it to settle transactions, notwithstanding the default of one of these 30 largest Members or Affiliated Families during Regular Activity Periods, as well as during Options Expiration Activity Periods. The liquidity obligations imposed on Members of Affiliated Families would be apportioned among the Members in that Affiliated Family in proportion to the liquidity risk (or peak exposure) they present to NSCC. The Regular Activity Liquidity Obligation of an Unaffiliated Member or Affiliated Family that has a Regular Activity Liquidity Obligation (a Regular Activity Liquidity Provider) is satisfied by such Regular Activity Liquidity Provider making a Regular Activity Supplemental Deposit to the Clearing Fund in the amount of its Regular Activity Liquidity Obligation, offset by (i) the total amount (if any) if its commitment and the commitment of its “Designated Lender” under NSCC's committed line of credit (the “Credit Facility”) and (ii) a share of the unallocated commitments of other lenders under the Credit Facility.
The cash deposit in respect of a Special Activity Liquidity Obligation (a “Special Activity Supplemental Deposit”) is structured in the existing SLD Proposal to address any additional liquidity shortfalls (over and above NSCC's other available liquidity resources) that arise during the heightened activity period around monthly options expiration. As such, these additional Special Activity Supplemental Deposits would be required to be maintained on deposit with NSCC only through the completion of the related settlement cycle and for a few days thereafter.
The key concerns raised by commenters with respect to the existing SLD Proposal were as follows:
First, commenters claimed that Members were not sufficiently consulted or involved during the development of the Proposal (even though NSCC management conducted significant Member outreach), so that the Proposal lacked input that could have potentially resulted in a less burdensome approach.
Second, commenters claimed that the Proposal was anticompetitive or discriminatory because the obligation to provide supplemental liquidity was imposed on only the 30 largest Unaffiliated Members or Affiliated Families (even though those Members collectively represent approximately 85% of NSCC's total membership by peak liquidity needs), rather than all Members of NSCC. This concern was raised in the context of Regular Activity Supplemental Deposits.
Third, commenters claimed that the existing Proposal was anticompetitive or discriminatory because, with respect to Regular Activity Supplemental Deposits, it gave a dollar for dollar credit for commitments made by Regular Activity Liquidity Providers or their Designated Lenders under the Credit Facility—supposedly favoring Regular Activity Liquidity Providers with affiliated banks.
NSCC believes that the proposed amendments and items described below address or mitigate all of these concerns.
NSCC is proposing to amend the existing SLD Proposal by removing those provisions that, collectively, deal with the imposition of Regular Activity Liquidity Obligations, while
In addition, under the revised SLD Proposal, as under the existing Proposal as it relates to Special Activity Liquidity Obligations, Unaffiliated Members and Affiliated Families, will be able to manage their exposures by making Special Activities Prefund Deposits where they project their own activity will increase their liquidity exposure. For example, if a Special Activity Liquidity Provider anticipates that its Special Activity Peak Liquidity Exposure at any time during a particular Options Expiration Activity Period will be greater than the amount calculated by NSCC, it can make an additional cash deposit to the Clearing Fund (in excess of its Required Deposit) that it designates as a “Special Activity Prefund Deposit.” However, to the extent that a Member fails to adequately prefund its activity, it may be subject to a Special Activity Liquidity Call in the same manner as provided in the existing Proposal.
With these changes, NSCC is removing those provisions of the existing SLD Proposal that generated most concern from commenters, while retaining those provisions that enable NSCC to collect additional liquidity resources to cover the heightened liquidity needs that arise during monthly Options Expiration Activity Periods. Every Unaffiliated Member and Affiliated Family among the top 30 whose activity causes a liquidity need in excess of NSCC's available liquidity resources will contribute ratably to such shortfall, so the Proposal fairly and equitably apportions the obligation among those Unaffiliated Members and Affiliated Families whose activity cause the need. The removal of those provisions relating to how commitments under the Credit Facility would be credited against the cash deposit obligations of Regular Activity Liquidity Providers render concerns about such allocation moot.
As indicated in NSCC's August 20, 2013 letter to the Commission, DTCC is separately establishing a standing member-based advisory group, the Clearing Agency Liquidity Council (“CALC”), as a forum for the discussion of liquidity and liquidity-related financing needs and trends. The CALC will initially focus on liquidity initiatives currently being considered by NSCC to address liquidity funding during periods of normal activity, including issues raised by commenters on the existing SLD Proposal. In response to commenters' more general concerns regarding NSCC's reliance on the Credit Facility and related refinancing risk, NSCC will review with the CALC the financing options available to NSCC to supplement the Clearing Fund as a liquidity resource, and the related costs of those options. Any new initiatives proposed as a result of the CALC review that require regulatory approval will be addressed in a separate filing.
Finally, the amendment makes certain technical corrections and clarifies the time period for when Special Activity Liquidity Calls must be satisfied.
As described in above, NSCC is proposing to amend the Advance Notice to address concerns raised by commenters, by removing provisions relating to Regular Activity Liquidity Obligations, while maintaining provisions relating to Special Activity Liquidity Obligations. NSCC believes that the SLD Proposal, as amended hereby, has been designed to mitigate any unintended impact on competition that may have been perceived by the existing SLD Proposal, while ameliorating liquidity risk by providing NSCC with a mechanism to cover peak liquidity needs relating to options expiry periods.
NSCC believes that the revised SLD Proposal will not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Securities and Exchange Act of 1934, as amended (“Exchange Act”). The Special Activity Liquidity Obligations imposed on Special Activity Liquidity Providers will ensure that all Unaffiliated Members and Affiliated Families whose activity present liquidity exposure to NSCC during periods of heightened activity during Options Expiration Activity Periods fairly and equitably contribute to NSCC's liquidity resources for settlement. NSCC believes the changes that have been made to the existing Proposal fully address the concerns raised by commenters, and eliminate any impact that the SLD Proposal might have on competition. To the extent there remains any perceived burden on competition caused by the Proposal, NSCC believes that such burden is not unreasonable or inappropriate to prevent systemic risk given that the Proposal contributes to the goal of financial stability in the event of Member default.
Written comments on the Advance Notice, including NSCC's formal response to the written comments, have
The clearing agency may implement the proposed change pursuant to Section 806(e)(1)(G) of the Clearing Supervision Act
The Commission may extend the period for review by an additional 60 days if the proposed change raises novel or complex issues, subject to the Commission providing the clearing agency with prompt written notice of the extension. A proposed change may be implemented in less than 60 days from the date of receipt of the advance notice, or the date the Commission receives any further information it requested, if the Commission notifies the clearing agency in writing that it does not object to the proposed change and authorizes the clearing agency to implement the proposed change on an earlier date, subject to any conditions imposed by the Commission. The clearing agency shall post notice on its Web site of proposed changes that are implemented.
The proposal shall not take effect until all regulatory actions required with respect to the proposal are completed.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the Advance Notice, as modified by Amendment No. 3, is consistent with the Clearing Supervision 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.
By the Commission.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”),
The Exchange filed a proposal to amend Rule 12.6 to make it substantially the same as Financial Industry Regulatory Authority (“FINRA”) Rule 5320.
The text of the proposed rule change is available at the Exchange's Web site 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 parts of such statements.
The Exchange proposes to amend Rule 12.6, which limits trading ahead of customer orders by Members,
Current Rule 12.6, the customer order protection rule, generally prohibits Members from trading on a proprietary basis ahead of, or along with, customer orders that are executable at the same price as the proprietary order. The rule contains several exceptions that make it permissible for a Member to enter a proprietary order while representing a customer order that could be executed at the same price, including permitting transactions for the purposes of facilitating the execution, on a riskless principal basis, of one or more customer orders.
To harmonize its rules with FINRA, the Exchange proposes to delete the current text of Rule 12.6 and its supplementary material and adopt the text and supplementary material of FINRA Rule 5320, with certain technical changes, as Rule 12.6. FINRA Rule 5320 generally provides that a FINRA member that accepts and holds an order in an equity security from its own customer, or a customer of another broker-dealer, without immediately executing the order is prohibited from trading that security on the same side of the market for its own account at a price that would satisfy the customer order, unless it immediately thereafter executes the customer order up to the size and at the same or better price at which it traded for its own account.
Amended Rule 12.6 would include exceptions to the prohibition against trading ahead of customer orders. That is, a Member that meets the conditions of an exception would be permitted to trade a security on the same side of the market for its own account at a price that would satisfy a customer order in certain circumstances. The exceptions are set out below.
One exception would permit a Member to negotiate terms and conditions with respect to the acceptance of certain large-sized orders (orders of 10,000 shares or more unless such orders are less than $100,000 in value) or orders from institutional accounts. The term “institutional account” will be defined in accordance with FINRA Rule 4512(c). That is, an institutional account will be defined as the account of: (1) A bank savings and loan association, insurance company or registered investment company; (2) an investment adviser registered either with the SEC under Section 203 of the Investment Advisers Act or with a state securities commission (or any agency or office performing like functions); or (3) any other person (whether a natural person, corporation, partnership, trust or otherwise) with total assets of at least $50 million. This exception would require the Member to provide clear and comprehensive written disclosure to each customer at account opening and annually thereafter that: (a) States that the Member may trade proprietarily at prices that would satisfy the customer order, and (b) provides the customer with a meaningful opportunity to opt in to the Rule 12.6 protections with respect to all or any portion of its order. If a customer does not opt in to the protections with respect to all or any portion of its order, the Member may reasonably conclude that such customer has consented to the Member trading a security on the same side of the market for its own account at a price that would satisfy the customer's order.
In lieu of providing written disclosure to customers at account opening and annually thereafter, the proposed rule would permit Members to provide clear and comprehensive oral disclosure to, and obtain consent from, a customer on an order-by-order basis. The Member would be required to document who provided such consent and that such consent evidences the customer's understanding of the terms and conditions of the order. If a customer opted in to the Rule 12.6 protections, a Member could still obtain consent on an order-by-order basis to trade ahead of or along with an order from that customer, provided that the Member documented who provided such consent and that such consent evidenced the customer's understanding of the terms and conditions of the order.
The Exchange is also proposing to include in Interpretation and Policy .02 a “no-knowledge” exception to its customer order protection rule. The proposed exception would allow one trading unit of a Member to trade in a proprietary capacity and at prices that would satisfy customer orders held by another, separate trading unit of the Member. The No-Knowledge Exception would be applicable with respect to NMS stocks, as defined in Rule 600 of Regulation NMS under the Act.
To avail itself of the No-Knowledge Exception, a Member would be required to meet certain conditions. First, it would have to implement and utilize an effective system of internal controls (such as appropriate information barriers) that operate to prevent the proprietary trading unit from obtaining knowledge of the customer orders held by a separate trading unit. As proposed, Interpretation and Policy .02 will make clear that appropriate information barriers must, at a minimum, comply with the Exchange's existing requirements regarding the prevention of the misuse of material, non-public information, which are set forth in Exchange Rule 5.5. Second, the Member would have to provide, at account opening and annually thereafter, a written description of how it handles customer orders and the circumstances under which it may trade proprietarily, including in a market-making capacity, at prices that would satisfy the customer order. A Member must maintain records indicating which orders rely on the no-knowledge exception and produce these records to the Exchange upon request. The onus will be on the Member to produce sufficient documentation justifying reliance on the No-Knowledge Exception for any given trade. To ensure
Amended Rule 12.6 would not apply to a proprietary trade made by the Member to facilitate the execution, on a riskless principal basis, of another order from a customer (whether its own customer or the customer of another broker-dealer). To take advantage of this exception, the Member would have to: (a) Submit a report, contemporaneously with the execution of the facilitated order, identifying the trade as riskless principal to the Exchange, and (b) have written policies and procedures to ensure that riskless principal transactions relied upon for this exception comply with applicable Exchange rules. At a minimum, these policies and procedures would have to require: (1) Receipt of the customer order before execution of the offsetting principal transaction, and (2) execution of the offsetting principal transaction at the same price as the customer order, exclusive of any markup or markdown, commission equivalent, or other fee and allocation to a riskless principal or customer account in a consistent manner and within 60 seconds of execution.
Members would have to have supervisory systems in place that produce records that enable the Member and the Exchange to reconstruct accurately, readily, and in a time-sequenced manner all orders on which a Member relies in claiming this exception.
The proposed rule change would also exempt a Member from the obligation to execute a customer order in a manner consistent with Rule 12.6 with regard to trading for its own account when the Member routed an ISO in compliance with Rule 600(b)(30)(ii) of Regulation NMS if the customer order is received after the Member routed the ISO. If a Member routes an ISO to facilitate a customer order, and that customer has consented to not receiving the better prices obtained by the ISO, the Member would also be exempt with respect to any trading for its own account that is the result of the ISO with respect to the consenting customer's order.
The Exchange proposes to except a Member's proprietary trade that: (1) Offsets a customer odd lot order (i.e., an order less than one round lot, which is typically 100 shares), or (2) corrects a bona fide error. With respect to bona fide errors, the Member would be required to demonstrate and document the basis upon which a transaction meets the bona fide error exception. For purposes of this proposed Rule, the Exchange will adopt the definition of “bona fide error” found in Regulation NMS's exemption for error correction transactions.
(i) The inaccurate conveyance or execution of any term of an order including, but not limited to, price, number of shares or other unit of trading; identification of the security; identification of the account for which securities are purchased or sold; lost or otherwise misplaced order tickets; short sales that were instead sold long or vice versa; or the execution of an order on the wrong side of a market; (ii) the unauthorized or unintended purchase sale or allocation of securities or the failure to follow specific client instructions; (iii) the incorrect entry of data into relevant systems, including reliance on incorrect cash positions, withdrawals, or securities positions reflected in an account; or (iv) a delay, outage, or failure of a communication system used to transmit market data prices or to facilitate the delivery or execution of an order.
The proposed rule change establishes the minimum amount of price improvement necessary for a Member to execute an order on a proprietary basis when holding an unexecuted limit order in that same security without being required to execute the held limit order.
In addition, if the minimum price improvement standards set forth in proposed Interpretation and Policy .06, paragraphs (a) through (g) would trigger the protection of a pending customer limit order, any better-priced customer limit order(s) must also be protected under this Rule, even if those better-priced limit orders would not be directly triggered under these minimum price improvement standards.
The proposed rule change provides that a Member must make every effort to execute a marketable customer order that it receives fully and promptly. A Member holding a marketable customer order that has not been immediately executed would have to make every effort to cross such order with any other order received by the Member on the other side of the market, up to the size of such order at a price that is no less than the best bid and no greater than the best offer at the time that the subsequent order is received by the Member and that is consistent with the terms of the orders. If a Member were holding multiple orders on both sides of the market that have not been executed, the Member would have to make every effort to cross or otherwise execute such orders in a manner reasonable and consistent with the objectives of the proposed Rule and with the terms of the orders. A Member could satisfy the crossing requirement by contemporaneously buying from the seller and selling to the buyer at the same price.
Under the proposed amendments to Rule 12.6, a Member generally could limit the life of a customer order to the period of normal market hours of 9:30 a.m. to 4:00 p.m. Eastern Time. However, if the customer and Member agreed to the processing of the customer's order outside normal market hours, the protections of amended Rule 12.6 would apply to that customer's order at all times the customer order is executable by the Member.
The Exchange believes that its proposal is consistent with Section 6(b) of the Act
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, the Exchange believes that the proposal enhances cooperation among markets and other trading venues to promote fair and orderly markets and to protect the interests of the public and of investors. Specifically, by aligning the Exchange's customer protection rules with those of FINRA and other exchanges,
The Exchange has neither solicited nor received written comments on the proposed rule change.
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.
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 ISE proposes to amend its Schedule of Fees to permit ISE to exclude from its average daily volume calculations any trading day on which the Exchange is closed for trading due to early closing or a market-wide trading halt, and to correct a reference to ISE rules in the “Flash Order” definition. The text of the proposed rule change is available on the Exchange's Web site (
In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change
The Exchange is proposing to permit ISE to exclude from its average daily volume (“ADV”) calculations any trading day on which the Exchange is closed for trading due to a market-wide trading halt, and to correct a reference to ISE rules in the “Flash Order” definition.
The Exchange currently provides volume-based tiered rebates for Priority Customer complex orders when these orders trade with non-Priority Customer orders in the complex order book,
The Exchange is proposing to modify its Schedule of Fees to permit the Exchange to exclude from its ADV calculation, when determining applicable rebate tiers, any day that the market is not open for the entire trading day. This would allow the Exchange to exclude days where the Exchange declares a trading halt in all securities or honors a market-wide trading halt declared by another market.
If the Exchange did not have the ability to exclude aberrant low volume days when calculating ADV for the month, as a result of the decreased trading volume, the numerator for the calculation (
The Exchange is also proposing to amend its Schedule of Fees to correct a reference to ISE rules. The preface to the Schedule of Fees currently defines a “Flash Order” as an order that is exposed at the National Best Bid or Offer by the Exchange to all members for execution, as provided under Supplementary Material .02 to ISE Rule 803. The Exchange recently modified its linkage rules referenced above, and in the process moved the relevant rule text from Supplementary Material .02 to ISE Rule 803 to Supplementary Material .02 to ISE Rule 1901.
The Exchange believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,
The Exchange believes that it is equitable and reasonable to permit the Exchange to eliminate from the calculation days on which the market is not open the entire trading day because it preserves the Exchange's intent behind adopting volume-based pricing. The proposed change is non-discriminatory because it applies equally to all Members and to all volume tiers.
The Exchange further believes that it is appropriate to correct the outdated reference to ISE rules in the “Flash Order” definition so that Exchange members and investors have a clear and accurate understanding of the meaning of the Exchange's rules, which will reduce investor confusion.
In accordance with Section 6(b)(8) of the Act,
The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any unsolicited written comments from members or other interested parties.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act
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. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or 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.
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 ISE proposes to amend its Schedule of Fees. The text of the proposed rule change is available on the Exchange's Web site (
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 these statements may be examined at the places specified in Item IV below. The self-regulatory organization has prepared summaries, set forth in sections A, B and C below, of the most significant aspects of such statements.
The Exchange is proposing to amend its Schedule of Fees to: (1) decrease the discount applicable to Market Makers
On January 29, 2013, the Commission approved
The Exchange is also proposing to amend its Schedule of Fees to increase the fees for Priority Customer orders in FX options. Currently, Priority Customers pay a fee in non-Early Adopter FX Option Symbols of $0.18 per contract for non-Crossing Orders and Crossing Orders, and $0.20 per contract for Responses to Crossing Orders. In Early Adopter FX Option Symbols, this fee is $0.40 per contract for non-Crossing Orders, Crossing Orders, and Responses to Crossing Orders. The Exchange is now proposing to increase the fee for Priority Customer orders for non-Early Adopter FX Option Symbols to $0.40 per contract to be in line with the fees currently charged for Priority Customer orders in Early Adopter FX Option Symbols.
The Exchange is further proposing to amend its Schedule of Fees to increase the route-out fee applicable to Priority Customers orders. The Exchange currently charges a fee of $0.38 per contract for executions of Priority Customer orders in Standard Options in all symbols that are routed to one or more exchanges in connection with the Options Order Protection and Locked/Crossed Market Plan. For Mini Options, this fee is currently $0.038 per contract. In order to offset costs associated with routing orders to other exchanges, the Exchange now proposes to increase the route-out fee for Priority Customer orders to $0.40 per contract for Standard Options and $0.040 per contract for Mini Options. The route-out fee offsets costs incurred by the Exchange in connection with using unaffiliated broker-dealers to access other exchanges for linkage executions, and is therefore appropriate.
The Exchange believes that its proposal to amend its Schedule of Fees is consistent with Section 6(b) of the Securities and Exchange Act of 1934 (the “Act”)
The Exchange believes that reducing the current discount applicable to Market Makers when they trade against Priority Customer complex orders that are preferenced to them from $0.05 to $0.02 per contact is reasonable, equitable, and not unfairly discriminatory because reducing the discount for preferenced orders will narrow the fee differential between Market Makers that receive preferenced orders and those that do not. The Exchange believes that it is reasonable, equitable and not unfairly discriminatory to continue to assess lower fees to preferenced Market Makers that add or remove liquidity from the complex order book by trading against Priority Customer orders that are preferenced to them because preferenced Market Makers are subject to heightened and burdensome quoting obligations that do not apply to non-preferenced Market Makers or to other market participants.
The Exchange believes that its proposal to increase the fee for Priority Customer orders in non-Early Adopter FX Option Symbols to $0.40 per contract is reasonable and equitably allocated because the proposed fee is identical to the fee currently charged by the Exchange for Early Adopter FX Option Symbols. With this proposed rule change, Priority Customers will be charged the same fee regardless of whether they place orders in Early Adopter or non-Early Adopter FX Option Symbols.
The Exchange believes the proposed route-out fee is reasonable and equitable as it provides the Exchange the ability to recover costs associated with using unaffiliated broker-dealers to route Priority Customer orders to other exchanges for linkage executions. The Exchange also believes that the proposed fees are not unfairly discriminatory because these fees would be uniformly applied to all Priority Customer orders routed to other exchanges. As fees to access liquidity for Priority Customer orders have risen at other exchanges, it has become necessary for the Exchange to raise routing fees in order to recoup the higher costs. The Exchange notes that a number of other exchanges currently charge a variety of routing related fees associated with customer and non-customer orders that are subject to linkage handling. The Exchange also notes that the fees proposed herein are within the range of fees charged by some of the Exchange's competitors.
The Exchange has determined to charge fees for regular orders in Mini Options at a rate that is 1/10th the rate of fees the Exchange currently provides for trading in Standard Options. The Exchange believes it is reasonable, equitable and not unfairly discriminatory to assess lower fees to provide market participants an incentive to trade Mini Options on the Exchange. The Exchange believes the proposed fees are reasonable and equitable in light of the fact that Mini Options have a smaller exercise and assignment value, specifically 1/10th that of a Standard Option contract, and, as such, is levying fees that are 1/10th of what market participants pay to trade Standard Options.
The Exchange does not believe that the proposed rule will impose any
The Exchange is proposing to decrease the fee differential between Market Makers that receive preferenced orders and those that do not receive preferenced orders. The Exchange believes that decreasing this fee differential does not create an undue burden on competition. The differential is similar to the differential currently in place at the PHLX and furthermore reduces intra-market competition by reducing the differential between preferenced and non-preferenced market makers.
The Exchange believes the proposed fee for Priority Customer orders in non-Early Adopter FX Option Symbols does not impose a burden on competition because it will apply a uniform fee to Priority Customer orders in all FX Option symbols traded on the Exchange. Even though these options are solely listed on ISE, the Exchange operates in a highly competitive market, comprised of twelve exchanges, any of which can determine to trade similar products.
With respect to increasing the Priority Customer route-out fee, the Exchange believes the proposed fee change does not impose a burden on competition because the proposed fee is consistent with fees charged by other exchanges and will uniformly apply to all Priority Customer orders in Standard Options and Mini Options that are routed out to other exchanges for linkage executions. The Exchange notes that Members can and do route these orders to other markets or specify that ISE not route orders away on their behalf.
The Exchange notes that it operates in a highly competitive market in which market participants can readily direct their order flow to competing venues. In such an environment, the Exchange must continually review, and consider adjusting, its fees and rebates to remain competitive with other exchanges. For the reasons described above, the Exchange believes that the proposed fee changes reflects this competitive environment.
The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any unsolicited written comments from members or other interested parties.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act
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. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or 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.
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 its fees and rebates applicable to Members
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 these statements may be examined at the places specified in Item IV below. The self-regulatory organization has prepared summaries, set forth in sections A, B and C below, of the most significant aspects of such statements.
The Exchange proposes to amend its Fee Schedule to: (i) Increase the discounted fee to remove and/or route under the Mega Tier 1 from $0.0015 per share to $0.0029 per share; (ii) add a discounted fee of $0.00295 per share to remove liquidity to the Mega Tier 3; (iii) add a new Market Depth Tier 2; (iv) rename the current Market Depth Tier as “Market Depth Tier 1”; and (v) increase the rebate provided by the Tape B Step Up Tier from $0.0025 per share to $0.0027 per share; (vi) lower the ADV threshold required to meet the MidPoint Match Volume Tier; and (vii) decrease the rebate for orders yielding Flag RZ.
The Exchange proposes to increase the fee to remove and or route under the Mega Tier 1 from $0.0015 per share to $0.0029 per share. To be eligible for the fees and rebates offered under the Mega Tier 1, Members must: (1) Add or route at least 4,000,000 shares of ADV prior to 9:30 a.m. or after 4:00 p.m.; (2) add a minimum of 35,000,000 shares of ADV on EDGX in total, including during both market hours and pre and post-trading hours; and (3) have an “added liquidity” to “added plus removed liquidity” ratio of at least 85%. The Exchange notes that the criteria necessary to achieve the tier would remain unchanged.
The Exchange proposes to add a discounted fee to remove liquidity to Mega Tier 3 of $0.00295 per share. To be eligible for the fees and rebates offered under the Mega Tier 3, Members must: (1) Add or route at least 1,500,000 shares of ADV prior to 9:30 a.m. or after 4:00 p.m.; and (2) add a minimum of 0.75% of the TCV on a daily basis measured monthly, including during both market hours and pre and post-trading hours. Mega Tier 3 does not currently provide a discounted fee to remove liquidity to Members that qualify for the tier. Instead, Members are charged the standard removal rate of $0.0030 per share for securities priced at or above $1.00 and 0.30% of the dollar value for securities priced below $1.00. The Exchange now proposes to provide Members that qualify for the Mega Tier 3 with a discounted removal fee of $0.00295 per share for securities priced at or above $1.00.
The Exchange proposes to add a new tier to Footnote 1 to its Fee Schedule named the Market Depth Tier 2. The Market Depth Tier 2 would provide a rebate of $0.0029 per share to Members that: (1) Add 10,000,000 shares in average daily volume (“ADV”) on a daily basis, measured monthly; and (2) add at least 1,000,000 shares as non-displayed orders that yield Flag HA (non-displayed orders that add liquidity (not including MidPoint Match orders
Due to the proposed addition of the Market Depth Tier 2, discussed above, the Exchange proposes to rename the current Market Depth Tier as “Market Depth Tier 1.” The Exchange notes that the criteria necessary to achieve the tier and the rebates offered by the tier would remain unchanged.
The Exchange proposes to increase the rebate provided under the Tape B Step Up Tier orders yielding flags B and 4 (adds liquidity to EDGX in Tape B securities) from $0.0025 per share to $0.0027 per share. To be eligible for the rebate offered under the Tape B Step Up Tier, Members must add 600,000 shares in ADV in Tape B securities more than the Member's August 2013 ADV in Tape B securities added to EDGX. The Exchange notes that the criteria necessary to achieve the tier would remain unchanged.
Footnote 3 of the Fee Schedule currently provides that Members may qualify for the MidPoint Match Volume Tier and not be charged a fee for orders that yield Flag MM on EDGX if they add and/or remove an ADV of at least 3,000,000 shares on a daily basis, measured monthly, on EDGX, yielding flags MM (adds liquidity to MPM using the Midpoint Match order type
In securities priced at or above $1.00, the Exchange currently provides a rebate of $0.0025 per share for Members' orders that yield Flag RZ, which routes to the BATS Exchange Inc. (“BATS”) and adds liquidity. The Exchange proposes to amend its Fee Schedule to decrease this rebate to $0.0020 per share for Members' orders that yield Flag RZ. The proposed change represents a pass through of the rate that Direct Edge ECN
The Exchange proposes to implement these amendments to its Fee Schedule on October 1, 2013.
The Exchange believes that the proposed rule change is consistent with the objectives of Section 6 of the Act,
The Exchange believes that the proposal to increase the discounted fee to remove and/or route under the Mega Tier 1 from $0.0015 per share to $0.0029 per share represents an equitable allocation of reasonable dues, fees, and other charges among Members and other persons using its facilities because it will enable the Exchange to retain additional funds to offset increased administrative, regulatory, and other infrastructure costs associated with operating an exchange. The Exchange believes that it is reasonable to increase the discounted removal and/or routing fees using liquidity provision patterns. A discounted removal rate that is designed to incent fee sensitive liquidity takers to the Exchange, provided they are able to meet certain volume requirements. The proposed removal and/or routing rate is also similar to that provided by the Mega Tier 2 in Footnote 1 of the Fee Schedule.
The Exchange believes that its proposal to add a discounted fee to remove liquidity to Mega Tier 3 of $0.00295 per share represents an equitable allocation of reasonable dues, fees, and other charges among Members and other persons using its facilities because the tier would further encourage Members to add liquidity to EDGX during pre- and post-trading hours. Fewer Members generally trade during pre- and post-trading hours because of the limited time parameters associated with these trading sessions, which generally results in less liquidity. In addition, liquidity received during pre- and post-trading hours is an important contributor to price discovery and acts as an important indication of price for the market as a whole considering the relative illiquidity of the pre- and post-trading hour sessions. The Exchange believes that offering a discounted removal fee would incentivize Members to provide liquidity during these trading sessions.
The Exchange also believes that discounted fee provided by the Mega Tier 3 is reasonable and equitably allocated because the increased liquidity that may result from Members attempting to achieve the tier would benefit all investors by deepening EDGX's liquidity pool and improving investor protection. Volume-based discounted fees such as the one proposed herein are widely utilized in the cash equities markets, and are equitable because they are open to all Members on an equal basis and provide incentives that are reasonably related to the value to an exchange's market quality associated with higher levels of market activity, such as higher levels of liquidity provision and opportunities for price improvement.
Lastly, the Exchange believes that the proposed amendment to the Mega Tier 3 is non-discriminatory because it applies uniformly to all Members.
The Exchange believes that its proposal to add the Market Depth Tier 2 to its Fee Schedule represents an equitable allocation of reasonable dues, fees, and other charges among Members and other persons using its facilities because the tier would encourage Members to add liquidity to EDGX to qualify for a higher rebate. This tier would also recognize the contribution that non-displayed liquidity provides to the marketplace, including: (i) Adding needed depth to the EDGX market; (ii) providing price support/depth of liquidity; and (iii) increasing diversity of liquidity to EDGX. The increased liquidity would benefit all investors by deepening EDGX's liquidity pool, offering additional flexibility for all investors to enjoy cost savings, supporting the quality of price discovery, promoting market transparency and improving investor protection.
Furthermore, the Exchange believes that the criteria for the Market Depth Tier 2 represents an equitable allocation of reasonable dues, fees, and other charges because higher rebates are directly correlated with more stringent criteria. For example, for a Member to qualify for the current Market Depth Tier, and receive a rebate of $0.0033 per share for displayed liquidity, a Member must post at least 0.50% of the TCV in ADV on EDGX in total, where at least 1.8 million shares are non-displayed orders that add liquidity to EDGX yielding Flag HA. Based on a TCV of six (6) billion shares, this would amount to 30,000,000 shares for the Market Depth Tier while the Market Depth Tier 2 would require an ADV of 10,000,000 shares. Members seeking to achieve the Market Depth Tier would also be required to post at least 1.8 million shares of non-displayed orders that add liquidity to EDGX yielding Flag HA, whereas the Market Depth Tier 2 would require that Members post 1,000,000 shares of non-displayed orders that add liquidity to EDGX yielding Flag HA. The lower volume requirement necessary to achieve the Market Depth Tier 2 justifies its lower rebate. Lastly, the Exchange believes that the proposed addition of the Market Depth Tier is non-discriminatory because it applies uniformly to all Members.
The Exchange believes that changing the “Market Depth Tier” to the “Market Depth Tier 1” is reasonable because it conforms to the numbering of the proposed Market Depth Tier 2. The Exchange notes that the criteria necessary to achieve the tier and the rate offered by the tier would remain unchanged.
The Exchange believes that increasing the rebate offered by the Tape B Step-
The Exchange believes that lowering the ADV requirement in Flags MM and/or MT for the MidPoint Match Volume Tier represents an equitable allocation of reasonable dues, fees, and other charges because slightly lowering the threshold to achieve the tier encourages Members to add liquidity at the midpoint of the national best bid or offer (“NBBO”) to the EDGX Book
The Exchange believes that its proposal to decrease the pass through rebate for Members' orders that yield Flag RZ from $0.0025 to $0.0020 per share represents an equitable allocation of reasonable dues, fees, and other charges among Members and other persons using its facilities because the Exchange does not levy additional fees or offer additional rebates for orders that it routes to BATS through DE Route. Prior to BATS's October 2013 fee change, BATS provided DE Route a rebate of $0.0025 per share for orders yielding Flag RZ, which DE Route passed through to the Exchange and the Exchange passed through to its Members. In October 2013, BATS decreased the standard rebate it provides its customers, such as DE Route, from a rebate of $0.0025 per share to a rebate of $0.0020 per share for orders that are routed to BATS.
These proposed rule changes do not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange does not believe that any of these changes represent a significant departure from previous pricing offered by the Exchange or pricing offered by the Exchange's competitors. Additionally, Members may opt to disfavor EDGX's pricing if they believe that alternatives offer them better value. Accordingly, the Exchange does not believe that the proposed changes will impair the ability of Members or competing venues to maintain their competitive standing in the financial markets.
The Exchange believes that increasing the removal fee under the Mega Tier 1 would not impact intermarket competition because it is similar to removal rates offered by the Exchange's Mega Tier 2 in Footnote 1 of its Fee Schedule
The Exchange believes that the proposed discounted removal rate for Mega Tier 3 would increase intermarket competition because it would encourage market participants to send additional liquidity to EDGX in exchange for a discounted removal rate. The Exchange believes that the proposed discounted removal rate would neither increase nor decrease intramarket competition because the discounted removal rate offered by the tier would apply uniformly to all Members that meet the requirements necessary to achieve the tier.
The Exchange believes that the proposed addition of the Market Depth Tier 2 would increase intermarket competition because it would encourage market participants to send additional liquidity to EDGX in exchange for an increased rebate. The Exchange believes that the proposed tier would neither
The Exchange believes that the proposed non-substantive change to the Market Depth Tier would neither affect intermarket nor intramarket competition because the change does not alter the criteria necessary to achieve the tier nor does it alter the rate offered by the tier.
The Exchange believes that the proposed increased rebate under the Tape B Step-Up Tier would increase intermarket competition because it would encourage market participants to send additional liquidity in Tape B securities to EDGX in exchange for a higher rebate. The Exchange believes that the proposed increased rebate would neither increase nor decrease intramarket competition because the increased rebate offered by the tier would apply uniformly to all Members that meet the requirements necessary to achieve the tier.
The Exchange believes that its proposal to decrease the ADV requirement in Flags MM and/or MT in the MidPoint Match Volume Tier would increase intermarket competition because the lower ADV requirement would incentivize Members that could not previously meet the tier to send higher volume to the Exchange. The Exchange believes that its proposal would neither increase nor decrease intramarket competition because the MidPoint Match Volume Tier would continue to apply uniformly to all Members and the ability of some Members to meet the tier would only benefit other Members by contributing to increased liquidity at the midpoint of the NBBO and better market quality at the Exchange.
The Exchange believes that its proposal to pass through a rebate of $0.0020 per share for Members' orders that yield Flag RZ would increase intermarket competition because it offers customers an alternative means to route to BATS for the same price as entering orders on BATS directly. The Exchange believes that its proposal would not burden intramarket competition because the proposed rate would apply uniformly to all Members.
The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any unsolicited written comments from Members or other interested parties.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) 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 the fee schedule applicable to Members
The text of the proposed rule change is available at the Exchange's Web site 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 parts of such statements.
Exchange proposes to modify its fee schedule effective September 30, 2013, in order to amend the way that the Exchange calculates rebates for removing liquidity from and fees for adding liquidity to the Exchange. Specifically, the Exchange is proposing to amend the methodology by which it determines the rebate that it will provide and fee it will charge to Members based on the Exchange's tiered pricing structure by excluding from the calculation of both ADV
The Exchange currently offers a tiered structure for determining the rebates that Members receive for executions that remove liquidity from the Exchange and the fees that Members are charged for executions that add liquidity to the Exchange. Under the tiered pricing structure, the Exchange provides different rebates and charges different fees to Members based on a Member's ADV as a percentage of average daily TCV. The Exchange notes that it is not proposing to modify any of the existing rebates or fees or the percentage thresholds at which a Member may qualify for certain rebates and fees pursuant to the tiered pricing structure. Rather, as mentioned above, the Exchange is proposing to modify its fee schedule in order to exclude trading activity occurring on any day that the Exchange experiences an Exchange Outage, defined as an outage lasting for more than sixty (60) minutes, from the calculation of ADV and average daily TCV. The Exchange believes that including trading activity on days when trading on the Exchange is unavailable for a significant portion of the day can unfairly skew the calculation of ADV and TCV. Thus, the Exchange believes that the most accurate and fair implementation of its tiered pricing structure is to exclude from the calculation of ADV and TCV all days where the Exchange experiences an Exchange Outage.
The Exchange believes that eliminating days where the Exchange experiences an Exchange Outage from the definition of ADV and TCV, and thereby eliminating that day from the calculation as it relates to rebates and fees based on trading activity on the Exchange, will help to eliminate significant uncertainty faced by Members as to their monthly ADV as a percentage of average daily TCV and the rebates and fees that this percentage will qualify for, providing Members with an increased certainty as to their monthly cost for trades executed on the Exchange.
The Exchange notes that it recently adopted changes to exclude the last Friday of June from the calculation of ADV and average daily TCV.
The Exchange believes that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder that are applicable to a national securities exchange, and, in particular, with the requirements of Section 6 of the Act.
With respect to the proposed changes to the tiered pricing structure for removing liquidity from the Exchange and adding liquidity to the Exchange, the Exchange believes that its proposal is reasonable because, as explained above, it will help provide Members with a greater level of certainty as to their level of rebates and costs for trading in any month where the Exchange experiences an Exchange Outage on one or more trading days. The Exchange also believes that its proposal is reasonable because it is not changing the thresholds to become eligible or the dollar value associated with the tiered rebates or fees and, moreover, by eliminating the inclusion of a trading day that would almost certainly lower a Member's ADV as a percentage of average daily TCV, it will make the majority of Members more likely to meet the minimum or higher tier thresholds, which will provide additional incentive to Members to increase their participation on the Exchange in order to meet the next tier. In addition, the Exchange believes that
Volume-based tiers such as the liquidity removing and adding tiers maintained by the Exchange have been widely adopted in the equities markets, and are equitable and not unfairly discriminatory because they are open to all members on an equal basis and provide higher rebates or lower fees that are reasonably related to the value to an exchange's market quality associated with higher levels of market activity, such as higher levels of liquidity provision and introduction of higher volumes of orders into the price and volume discovery process. Accordingly, the Exchange believes that the proposal is equitably allocated and not unfairly discriminatory because it is consistent with the overall goals of enhancing market quality. Further, the Exchange believes that a tiered pricing model not significantly altered by a day of atypical trading behavior which allows Members to predictably calculate what their costs associated with trading activity on the Exchange will be is reasonable, fair and equitable and not unreasonably discriminatory as it is uniform in application amongst Members and should enable such participants to operate their business without concern of unpredictable and potentially significant changes in expenses.
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. The proposed changes will benefit intermarket competition in that they will help the Exchange to continue to incentivize higher levels of liquidity at a tighter spread while providing more stable and predictable costs to its Members. Further, the proposed changes will help to promote intramarket competition by avoiding a penalty to Members for days when trading on the Exchange is unavailable for a significant portion of the day. As stated above, the Exchange notes that it operates in a highly competitive market in which market participants can readily direct order flow to competing venues if the deem fee structures to be unreasonable or excessive.
No written comments were solicited or received.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) 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 correct an administrative error in Rule 9.3A(c)(1) and add a reference to CBOE Rule 9.3A to the CBOE Stock Exchange, LLC (“CBSX”) Appendix A. The text of the proposed rule change is available on the Exchange's Web site (
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 Exchange proposes to make an administrative change to correct an inadvertent error in Exchange Rule 9.3A(c)(1). The Exchange proposes to make the proposed change so the text properly reflects the intention and practice of Rule 9.3A(c)(1). The Exchange also proposes to add a reference to CBOE Rule 9.3A to CBSX Appendix A. The Exchange believes that adding the reference to CBOE Rule 9.3A to CBSX Appendix A will more clearly put CBSX Trading Permit Holders (“TPHs”) on notice of their continuing education requirements.
In 2003, the Exchange filed a rule change, SR–CBOE–2003–01 to, among other things, amend CBOE's continuing education rule.
The intention of CBOE Rule 9.3A is to discuss the register [sic] persons subject to the Firm Element of the continuing education program. This intention is spelled out in the title of the paragraph which is, “Persons Subject to the Firm Element.” This intention is more explicitly spelled out in SR–CBOE–2003–01. More specifically, the filing states that the Firm Element requires, “member and member organizations to provide to their registered employees having direct contact with customers ongoing training that is specifically tailored to their business.”
Finally, the Exchange is proposing to add a reference to Rule 9.3A to CBSX Appendix A. CBSX Appendix A to Chapters 50 through 54 lists the rules in Chapters 1 through 29 that are applicable to trading on CBSX.
The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 (the “Act”) and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.
Specifically, the proposed rule change is consistent with these provisions as it will more accurately describe the practice of the Exchange in the Exchange Rulebook. The same registered persons will be subject to the Firm Element of the continuing education requirements, and, thus, the current practices of the Exchange will remain the same. The Exchange believes the proposed rule change is necessary to accurately describe to the continuing education requirements for Exchange Trading Permit Holders. In addition, the Exchange believes that adding a reference to Rule 9.3A to CBSX Appendix A will more sufficiently put participants on CBSX of their continuing education requirements.
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. The Exchange does not believe the proposed rule change imposes any burden on intramarket competition because it applies to all Trading Permit Holders. Additionally, the Exchange does not believe the proposed rule change will impose any burden on intermarket competition as it merely attempting to correct a typographical error and add an additional cross reference. There will be
The Exchange neither solicited nor received comments on the proposed rule change.
Because the foregoing 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
The Exchange has requested that the Commission waive the 30-day operative delay. The Commission notes that the rule change raises no novel issues. It corrects an inaccurate cross reference in Rule 9.3A and would more clearly set forth the continuing education requirements for associated persons of CBSX Trading Permit Holders. Waiver of the operative delay would be beneficial to associated persons of member firms by making the existing requirements clearer. Therefore, the Commission designates the proposal operative upon filing.
At any time within 60 days of the filing of this 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. If the Commission takes such action, the Commission will institute proceedings to determine whether the proposed rule change should be approved or 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.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1)
The Exchange proposes to amend Rule 2.23 to specify applicable continuing education (“CE”) requirements, (ii) [sic] amend the NYSE Arca Options Fee Schedule (“Fee Schedule”) to specify corresponding CE fees, and (iii) amend the Fee Schedule to specify fees for the Series 56 examination. 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 (i) amend Rule 2.23 to specify applicable CE requirements, (ii) amend the Fee Schedule to specify corresponding CE fees, and (iii) amend the Fee Schedule to specify fees for the Series 56 examination.
Rule 2.23(d) states that no OTP Firm or OTP Holder may permit any registered person to continue to, and no registered person may continue to, perform duties as a registered person unless such person has complied with the CE requirements of the rule. Rule 2.23(d) specifies the CE requirements for registered persons subsequent to their initial qualification and registration. The requirements consist of a Regulatory Element and a Firm Element.
There are currently three existing Regulatory Element programs: (1) The S201 (“S201 CE Program”) for registered principals (e.g., General Securities Principals and Limited Principals) and supervisors; (2) the S106 (“S106 CE Program”) for persons registered only as Investment Company Products/Variable Contracts Limited Representatives; and (3) the S101 (“S101 CE Program”) for all other registered persons (e.g., General Securities Representatives). The Exchange proposes to enumerate these existing programs in subsection (A) of Rule 2.23(d)(1).
The Exchange also proposes to specify the new S501 (“S501 CE Program,” and together with the S201, S106 and S101 CE Programs, “CE Programs”) for persons registered only as Proprietary Traders.
All traders of OTP Holders and OTP Firms must successfully complete the Series 7 Examination, except as provided in Rule 2.23(b)(2).
If a person initially qualified as a Proprietary Trader by taking the Series 7 Examination or otherwise previously maintained both Series 7 and Series 56 qualifications, but was only maintaining a Proprietary Trader registration when the CE requirement became due, then completion of the S501 CE Program by such person would satisfy his or her then-applicable CE requirement. However, upon re-registering thereafter as a General Securities Representative, such individual would be required to complete the S101 CE Program the next time he or she became subject to CE.
The S501 CE Program is a computer-based education program developed by many of the self-regulatory organizations (“Participating SROs”)
As proposed, registered Proprietary Traders would also be required to complete the Firm Element outlined in Rule 2.23(d)(2). Although registered Proprietary Traders, including those who have passed the Series 56 Examination, do not interact with the public, the Exchange believes that this
The introduction of the S501 CE Program would allow the Exchange to tailor its CE requirements more closely to those individuals who are registered only as Proprietary Traders. More specifically, the Exchange believes that the proposed rule change would allow persons registered only as Proprietary Traders to complete a CE Program separate from persons maintaining other registrations. For example, in comparison to the Series 7 Examination, the Series 56 Examination is more closely tailored to the practice of proprietary trading while the Series 7 Examination is more comprehensive. As such, the Exchange believes that the S501 CE Program should also be closely tailored to proprietary trading. If an individual remains registered in another capacity, such as a General Securities Representative, the Exchange believes that it is appropriate that such individual continue to be required to complete the more comprehensive CE Program (
The Exchange proposes to amend the Fee Schedule to specify the CRD session fees for the CE Programs described above, including the existing CE Programs and the proposed new S501 CE Program. Specifically, the Exchange proposes to specify the existing $100 session fee associated with the existing CE Programs (
The Exchange has determined that the $60 session fee is necessary to administer the S501 CE Program. Specifically, the $60 session fee will be used to fund the S501 CE Program administered to persons registered only as Proprietary Traders who are required to complete the S501 CE Program. The $60 session fee is less than the existing $100 session fee currently charged by FINRA through CRD for the existing CE Programs, including the S101 CE Program, because the fees associated with the existing CE Programs are utilized for both development and administration, whereas the $60 session fee for the S501 CE Program would only be used for the administration of the program. The costs associated with the development of the S501 CE Program are included in the Series 56 Examination fee. The Exchange anticipates that the other Participating SROs will adopt, or have adopted, the same $60 session fee applicable to completion of the S501 CE Program.
The Exchange previously amended its rules to prescribe the Series 56 Examination as the qualifying examination for registered Proprietary Traders.
The Fee Schedule does not currently set forth the examination fees for other qualification examinations required or accepted by the Exchange because these programs are within FINRA's jurisdiction. The Series 56 Examination, however, is a limited registration category that is not recognized by FINRA under its registration rules. However, as with existing non-FINRA examinations, FINRA administers the Series 56 Examination and collects the $195 fee through CRD on behalf of the SROs that developed and maintain the exam. Additionally, only one $195 fee would be charged through CRD for a registered person completing the Series 56 Examination, even if such registered person's firm was a member of multiple exchanges. The Exchange anticipates that the other Participating SROs will adopt, or have adopted, the same $195 fee applicable to completion of the Series 56 Examination.
The proposed change is not otherwise intended to address any other issues relating to CE or related fees and the Exchange is not aware of any problems that OTP Holders, OTP Firms or their registered persons would have in complying with the proposed change.
The proposed rule change is consistent with Section 6(c) of the Act,
The Exchange also believes that the proposed rule change is consistent with Section 6(b) of the Act,
The Exchange believes that it is reasonable to include the Series 56 Examination fee within the Fee Schedule to make the cost of this examination clear to OTP Holders and OTP Firms. The proposed fee is reasonably designed to allow FINRA to cover its cost of administering the Series 56 Examination on behalf of the Exchange. The Exchange believes that the proposed $195 Series 56 Examination fee is also reasonable because it is designed to reflect the costs of maintaining and developing the Series 56 Examination, as well as the development of the S501 CE Program, and to ensure that the examination's content is, and continues to be, adequate for testing the competence and knowledge generally applicable to proprietary trading. The Exchange also believes that the fee is reasonable because the Exchange anticipates that the other Participating SROs will adopt, or have adopted, the same $195 fee applicable to completion of the Series 56 Examination.
For these reasons, the Exchange believes that the proposal is consistent with the Act.
In accordance with Section 6(b)(8) of the Act,
No written comments were solicited or received with respect to the proposed rule change.
Because the foregoing 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, it has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act
The Exchange has requested that the Commission waive the 30-day operative delay. Waiver of the operative delay would allow the Exchange to modify its rules and implement the proposed rule change at once, enabling its Members to comply with their continuing education requirements in a timely manner, and thus is consistent with the protection of investors and the public interest. Therefore, the Commission designates the proposal operative upon filing.
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: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission will institute proceedings to determine whether the proposed rule change should be approved or 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.
Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission's Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. 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–NYSEArca–2013–96 and should be submitted on or before November 12, 2013.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1)
The Exchange proposes to amend Rule 2 to specify that the definition of an approved person does not include a governmental entity and amend Rule 304 to provide that if a governmental entity directly or indirectly owns a member organization, then the member organization must identify such governmental entity to the Exchange. 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 Rule 2 to specify that the definition of an approved person does not include a governmental entity and amend Rule 304 to provide that if a governmental entity directly or indirectly owns a member organization, then the member organization must identify such governmental entity to the Exchange.
Under Rule 2(b)(i), a “member organization” is defined as a registered broker-dealer that has been approved for membership on NYSE. To qualify as a member organization, a broker-dealer must be a member of either (i) the Financial Industry Regulatory Authority, Inc. (“FINRA”) or (ii) a registered securities exchange other than NYSE. Under Rule 2(c), an approved person of a member organization is defined as a person, other than a member, principal executive or employee of a member organization, who controls a member organization, is engaged in a securities or kindred business that is controlled by a member or member organization, or is a U.S.-registered broker-dealer under common control with a member organization. Under Rule 2(d), “control” means the power to direct or cause the direction of the management or policies of a person whether through ownership of securities, by contract or otherwise. A person is presumed to control another person if such person, directly or indirectly, (i) has the right to vote 25 percent or more of the voting securities, (ii) is entitled to receive 25 percent or more of the net profits, or (iii) is a director, general partner or principal executive (or person occupying a similar status or performing similar functions) of the other person.
Rule 304 provides that a member organization must identify each approved person to the Exchange. Each approved person must execute a written consent to the jurisdiction of the Exchange and agree to (1) supply the Exchange with information relating to
The Exchange recently received a membership application for a broker-dealer that is an approved FINRA member; this broker-dealer has an owner that is a governmental entity that indirectly controls the broker-dealer and thus falls within the definition of approved person under the Exchange's rules. This is the first time that the Exchange has received a membership application presenting this ownership structure. The Exchange notes that a governmental entity could be either a direct or an indirect owner of a member organization, and by virtue of its control, fall within the Exchange's definition of approved person, although this result was not contemplated at the time the definition was created. The Exchange does not believe that the Exchange could, under conflict of laws, have jurisdiction over a governmental entity and therefore requiring a governmental entity that falls under the Exchange's definition of approved person to consent to jurisdiction, as required by Rule 304, would not be possible. In light of these conflicts and in the interest of providing better notice to member organizations, the Exchange proposes to amend Rule 2(c) to specifically exclude a governmental entity from the definition of approved person. The proposed rule text would define governmental entity as a sovereign nation, state, territory, or other political subdivision, agency, or instrumentality thereof. While it is unnecessary for a governmental entity to be deemed an approved person under the Exchange's rules, the Exchange nonetheless wishes to have all direct and indirect owners that control member organizations identified to the Exchange. Therefore, the Exchange proposes to add new Supplementary Material .20 to Rule 304 to specify that a member organization that is directly or indirectly controlled by a governmental entity as defined in Rule 2(c) is required to identify such governmental entity to the Exchange.
The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,
In accordance with Section 6(b)(8) of the Act,
No written comments were solicited or received with respect to the proposed rule change.
The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act
A proposed rule change filed under Rule 19b–4(f)(6)
At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if
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)
The Exchange proposes to add a new rule to adopt price protection filters for Electronic Complex Orders. 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 is proposing to amend Rule 980NY-Electronic Complex Order Trading by establishing new Commentary .05 governing price protections filters applicable to electronically entered Complex Orders.
As defined in Exchange Rule 980NY, which governs Electronic Complex Order trading, an “Electronic Complex Order” is a Complex Order that has been entered into the NYSE Amex Options System (“System”), which is routed to the Complex Matching Engine (“CME”) for possible execution. As set forth in Rule 980NY, the CME is the mechanism in which Electronic Complex Orders are executed against each other or against individual quotes and orders in the Consolidated Book. Electronic Complex Orders that are not immediately executed by the CME are routed to the Consolidated Book.
Electronic Complex Orders are entered into the System at a net debit/credit price for the entire strategy. Electronic Complex Orders do not include specified prices for any single series component (“leg”) of the Electronic Complex Order. Bids and offers on Electronic Complex Orders may be expressed in any decimal price, and the legs(s) of an Electronic Complex Order may be executed in one cent increments regardless of the minimum price variation (“MPV”)
The Exchange believes that while it is appropriate to exempt individual leg prices of Electronic Complex Orders from NBBO trade through liability, there is still need for some level of price protection for Complex Orders that are entered at a net debit/credit price that is greater (less) than the contra-side NBBO market for the Electronic Complex Order as a whole. The Exchange now proposes to enhance Complex Order processing by introducing a Price Protection Filter for Complex Orders (“Filter”) that will automatically reject an incoming Electronic Complex Order if the net debit/credit limit price of the order is greater (less) than the derived net debit/credit NBBO
The Specified Amount is applicable to the net debit/credit price of the Electronic Complex Order and is not applicable to any single leg of the order. The Exchange proposes to specify the following amounts as the price protection settings for the Filter.
.10 for orders where the smallest MPV of any leg of the Electronic Complex Order is .01;
.15 for orders where the smallest MPV of any leg of the Electronic Complex Order is .05;
and .30 for orders where the smallest MPV of any leg of the Electronic Complex Order is .10.
For Electronic Complex Orders that are entered on a 1×1 ratio, the Filter will be applied by the Specified Amounts above (.10, .15, or .30).
For Electronic Complex Orders that are entered on an uneven ratio (2×3 for example) where the MPV on all legs is the same, the Filter will be applied by the Specified Amount multiplied by the smallest contract size leg of the ratio (.20, .30, or .60 on the 2×3 example).
For Electronic Complex Orders that are entered on an uneven ratio (2×3 for example) where the MPV of the legs are not the same (.10 and .05 for example), the Filter will be applied by taking the lesser of; the Specified Amount applicable to the smallest leg of the Electronic Complex Order and multiplied by the contract size of that leg (.60 in this example), or the Specified Amount of the largest leg of the Complex Order multiplied by the contract size of that leg (.45 in this example).
The price protection filter will work as described below.
Upon receipt by the Exchange of an Electronic Complex Order, the Filter will check the net debit/credit price of the order against the derived contra-side NBBO for the same strategy at the time of order entry to determine whether the order's limit price is within the specified price. The contra-side NBBO will be derived from the net debit/credit market for the same strategy by using the NBBO prices for the individual leg markets as disseminated by OPRA, that when aggregated create a derived NBBO for that same strategy.
By rejecting the aggressively priced Electronic Complex Order, the Filter prevents a possible execution from occurring at a price significantly worse than the derived NBBO.
This example shows how the Filter is applied to an Electronic Complex Order priced at a net debit with leg markets having the same MPV. Assume the following:
The Exchange receives an incoming Electronic Complex Order to buy Jan 20 calls and sell Jan 25 calls on a 1×1 ratio, priced at a 1.25 debit. This would imply that the buyer would be willing to pay 1.25 for the strategy as a whole without regard to the prices of the individual leg markets. Upon receipt, this order would be sent to the CME for processing. Pursuant to this proposal, before routing the order to the CME the Filter will first check the derived NBBO net debit/credit market for the contra-side of the same strategy. In this case the contra-side NBBO market is offered at 1.05 (this price is established by selling one Jan 20 for 2.10 and buying one Jan 25 for 1.05). The Filter will then look at the NBBO price of smallest-priced leg of the Complex Order and apply the appropriate price protection amount as described above. Which for this example would be .15. Because the derived contra-side NBBO price of 1.05 is better than the limit price of the Complex Order by .20, which exceeds the Filter setting of .15, the System will not route the order to the CME for processing but will automatically reject the order back to the entering ATP Holder with a reject code explaining the reason for the rejection.
This example shows how the Filter is applied to an Electronic Complex Order priced at a net debit with leg markets having different MPVs. Assume the following:
The Exchange receives an incoming Electronic Complex Order to buy Jan 20 calls and sell Jan 25 calls on a 1x1 ratio, priced at a 3.60 debit. (This would imply that the buyer would be willing to pay 3.60 for the strategy as a whole without regard to the prices of the
This example shows how the Filter is applied to an Electronic Complex Order priced at a net credit with leg markets having the same MPV. Assume the following:
The Exchange receives an incoming Electronic Complex Order to sell Jan 20 calls and buy Jan 25 calls on a 1x1 ratio, priced at a .90 credit. (This would imply that the seller would be willing to receive .90 for the strategy as a whole without regard to the individual leg markets). Upon receipt, this order would be sent to the CME for processing.
Pursuant to this proposal however, before routing the Electronic Complex Order to the CME the Filter will first check the derived NBBO net debit/credit market for the contra-side of the same strategy. In this case the contra-side NBBO market is priced at 1.02 (this price is established by buying one Jan 20 for 2.03 and selling one Jan 25 for 1.01). The Filter will then look at the NBBO price of smallest priced leg of the Electronic Complex Order and apply the appropriate price protection amount as described above. Which for this example would be .10. Because the derived contra-side NBBO price of 1.02 is better than the limit price of the Electronic Complex Order by .12, which exceeds the Filter setting of .10, the System would automatically reject the order back to the entering ATP Holder with a reject code explaining the reason for the rejection.
This example shows how the Filter is applied to an Electronic Complex Order priced at a net credit on an uneven ratio with leg markets having the same MPV. Assume the following:
The Exchange receives an incoming Electronic Complex Order to sell Jan 20 calls and buy Jan 25 calls, on a 2x3 ratio, priced at a .75 credit. This would imply that the seller would be willing to receive .75 for the strategy as a whole without regard to the prices of the individual leg markets.
As proposed, before routing the Electronic Complex Order to the CME the Filter will first check the derived NBBO net debit/credit market for the contra-side of the same strategy. In this case the contra-side NBBO market is priced at 1.00 (this price is established by buying two Jan 20s for 2.03 each and selling three Jan 25s for 1.02 each (4.06−3.06 = 1.00)). The Filter will then look at the NBBO price of smallest-priced leg of the Electronic Complex Order and apply the appropriate price protection amount as described above, which for this example would be .10. However, because this order was entered on a ratio where the smallest contract sized leg is greater than one contract, the Filter is applied to the aggregate of the small sized leg of the ratio, which in this case is .20 (.10 × 2 contracts). Because the derived contra-side NBBO price of 1.00 is better than the limit price of the Electronic Complex Order by .25, which exceeds the Filter setting of .20, the Filter will automatically reject the order back to the entering ATP Holder with a reject code explaining the reason for the rejection.
This example shows how the Filter is applied to an Electronic Complex Order priced at a net credit on an uneven ratio with leg markets having a different MPV. Assume the following:
The Exchange receives an incoming Electronic Complex Order to sell Jan 20 calls and buy Jan 25 calls, on a 2 × 3 ratio, priced at a 1.50 credit. (This would imply that the seller would be willing to receive 1.50 for the strategy as a whole without regard to the prices of the individual leg markets).
As proposed, before routing the Electronic Complex Order to the CME, the Filter will first check the derived NBBO net debit/credit market for the contra side of same strategy. In this case the contra-side NBBO market is priced at 2.20 (this price is established by buying two Jan 20s for 4.10 each and selling three Jan 25s for 2.00 each (8.20−6.00 = 2.20)). The Filter will then look at two scenarios to determine what price protection level would apply. First, the Filter will look at the contra-side NBBO price of the leg of the Electronic Complex Order with the smallest contract size (Jan 20 leg) and determine the appropriate price protection amount. Which in this example would be .30. However, because the minimum contract size on the leg is greater than one, the price protection amount is applied to the aggregate contract size (2 contracts), which in this case would establish a Filter setting of .60 (.30 × 2 contracts). Next, the Filter will look at the contra-side NBBO price of the leg of the order with the largest contract size (Jan 25 leg) and determine the appropriate price protection amount, which in this case would be .15. However, because the minimum contract size on the leg is greater than one, the price protection amount is applied to the aggregate contract size of the leg (3 contracts), which in this case would establish a Filter setting of .45 (.15 × 3). The Filter will always apply the more conservative setting, which in this case is .45. Because the derived contra-side NBBO price of 2.20 is better than the limit price of the Electronic Complex Order by .70, which exceeds the Filter setting of .45, the Filter would automatically reject the order back to the entering ATP Holder.
The Filter is not intended to offer price protection to bids and offers at away markets, or to offer NBBO guaranteed pricing to Electronic Complex Orders submitted to NYSE Amex Options. Rather the proposed Filter would provide a level of protection to incoming Electronic Complex Orders that are entered at a price so far away from the prevailing contra-side NBBO market for the same strategy, that the execution of such order could cause price dislocation in the market. Accordingly, the Exchange does not propose to reject all orders with a limit price greater (less) than the contra-side NBBO, just those that are greater (less) by an amount as prescribed by the Exchange. The Exchange believes that rejecting such aggressively priced Electronic Complex Orders will help to ensure that market participants do not receive an execution at a price significantly inferior to the contra-side NBBO.
The Exchange recognizes that under certain market conditions the specified amounts prescribed by the Exchange, and applicable to the Filter, may be overly restrictive at times and there could be situations where the Exchange may need to temporarily widen the Filter settings to accommodate market conditions in a given class. This could happen because of, but not limited to, instances of extreme volatility, the dissemination of non-firm markets by competing exchanges, or some other condition that would lead the Exchange to believe that it would not be reasonable to expect that a market participant could receive an execution of an Electronic Complex Order at, or close to, the prevailing contra-side NBBO market for a given strategy. Therefore, the Exchange proposes that in the interest of a fair and orderly market, the Filter settings may be temporarily modified by a Trading Official to an amount greater than prescribed, on a class-by-class basis. Trading Officials are presently authorized to make similar determinations regarding such matters as position limits,
The statutory basis for the proposed rule change is Section 6(b)(5) of the Securities Exchange Act of 1934 (the “Act”), in general, and furthers the objectives of Section 6(b)(5)
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. The Exchange is proposing a market enhancement that provides greater protections from potentially erroneous executions and the attendant risks of such executions to market participants. Therefore, the Exchange believes that the proposal should provide an incentive for market participants to enter executable interest in the CME that can help foster price discovery and transparency thereby benefiting all market participants. The proposal is structured to offer the same enhancement to all market participants, regardless of account type, and will not impose a competitive burden on any participant. The Exchange does not believe that the proposed mechanism will impose a burden on competing options exchanges. Rather, the availability of this mechanism may foster more competition. Specifically, the Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues. When an exchange offers enhanced functionality that distinguishes it from the competition and participants find it useful, it has been the Exchange's experience that competing exchanges will move to adopt similar functionality. Thus, the Exchange believes that this type of competition amongst exchanges is beneficial to the market place as a whole as it can result in enhanced processes, functionality, and technologies.
No written comments were solicited or received with respect to the proposed rule change.
Because the foregoing 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, it has become effective 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. If the Commission takes such action, the Commission shall institute proceedings under Section 19(b)(2)(B)
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 filed a proposal to amend the fee schedule applicable to Members
The text of the proposed rule change is available at the Exchange's Web site 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 parts of such statements.
The Exchange recently filed a proposal to establish a revenue sharing program with Interactive Data Corporation, acting by and through its division, Interactive Desktop Solutions, and its subsidiary, Interactive Data Online Properties, Inc. (collectively, “IDC”), whereby the Exchange will make available, through IDC, private labeled versions of IDC's Market-Q and LiveCharts products.
Pursuant to a revenue sharing agreement between IDC and the Exchange, the private labeled products will be marketed by the Exchange by featuring and advertising them on the Exchange's Web site. Market–Q will be marketed under the private label name “BATS Investor Pro” and LiveCharts will be marketed under the private label name “BATS Investor RT” (BATS Investor Pro and BATS Investor RT, collectively, the “Private Labeled Products”).
Under the agreement, IDC determines the price schedule for the Private Labeled Products, and has the right to change the price schedule at any time in its sole discretion upon prior notice to BATS; provided, however, that such changes to the price schedule will not become effective unless and until the applicable fees set forth in the price schedule have been filed with and/or approved by the Commission through a proposed rule change submitted by the Exchange in accordance with the Act.
The current price schedule charges subscribers a $125 monthly fee for BATS Investor Pro and a $24.95 monthly fee for BATS Investor RT. Subscribers of BATS Investor Pro and BATS Investor RT may, for an additional fee, supplement their subscriptions to include market data in addition to Exchange data. This fee is not included as part of the Exchange's revenue sharing program with IDC. As
Under the agreement, the Exchange will receive 25% of the total monthly subscription fees received by IDC from parties who have registered to use the Private Labeled Products and who first subscribe as a result of the Exchange's marketing activities under the agreement, less certain fees and taxes. IDC will operate and maintain the Private Labeled Products and will provide first line technical support, accounting and contract administration services for the Private Labeled Products. The Exchange will not bill or contract with any subscriber directly.
The Exchange is not proposing any other changes to its market data fees at this time.
The Exchange believes that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder that are applicable to a national securities exchange, and, in particular, with the requirements of Section 6 of the Act.
In particular, the Exchange will make the Private Labeled Products uniformly available pursuant to a standard non-discriminatory price schedule offered by IDC. The Exchange also believes that the proposed fees for the Private Labeled Products described herein are reasonable in light of the benefits to data recipients.
Further, the Exchange notes that these products are completely optional in that no consumer is required to purchase any of them and only those consumers that deem such products to be of sufficient overall value and usefulness will purchase them. To the extent consumers do purchase the Private Labeled Products, the revenue generated will offset the Exchange's fixed costs of operating and regulating its trading platforms, including the continued operation of data feeds that will supply data to be used in the Private Labeled Products. It will also help the Exchange cover its costs in developing and running that platform, as well as ongoing infrastructure costs.
The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. To the contrary, the Exchange believes that this proposal will promote competition through the offering of optional, additional market data products to similar market data products being offered by IDC containing data from other exchanges and market centers. In addition, the Exchange believes that the fees for these products (and, in turn, the Exchange's revenue share) are constrained by such competitive market data products offered by IDC, as well as other market data vendors.
Lastly, the revenue sharing program is not exclusive as between the Exchange and IDC. Any recipient of BATS data feeds is permitted to redistribute such data, whether through a revenue sharing arrangement with BATS or otherwise, or provide products and services similar to those being offered by IDC, provided that such recipient (including IDC) has entered into the required contractual arrangements with the Exchange.
The Exchange has neither solicited nor received written comments on the proposed rule change.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposal 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)
The Exchange proposes to add a new rule to adopt price protection filters for Electronic Complex Orders. 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 is proposing to amend Rule 6.91-Electronic Complex Order Trading by establishing new Commentary .04 [sic] governing price protections filters applicable to electronically entered Complex Orders.
As defined in NYSE Arca Rule 6.91, which governs Electronic Complex Order trading, an “Electronic Complex Order” is a Complex Order entered into the NYSE Arca System (“System”), which is routed to the Complex Matching Engine (“CME”) for possible execution. As set forth in Rule 6.91, the CME is the mechanism in which Electronic Complex Orders are executed against each other or against individual quotes and orders in the Consolidated Book. Electronic Complex Orders that are not immediately executed by the CME are routed to the Consolidated Book.
Electronic Complex Orders are entered into the System at a net debit/credit price for the entire strategy. Complex Orders do not include specified prices for any single series component (“leg”) of the Electronic Complex Order. Bids and offers on Electronic Complex Orders may be expressed in any decimal price, and the legs(s) of an Electronic Complex Order may be executed in one cent increments regardless of the minimum price variation (“MPV”)
The Exchange believes that while it is appropriate to exempt individual leg prices of Electronic Complex Orders from NBBO trade through liability, there is still need for some level of price protection for Electronic Complex Orders that are entered at a net debit/credit price that is greater (less) than the NBBO market for the Electronic Complex Order as a whole. The Exchange now proposes to enhance the processing of Electronic Complex Order by introducing a Price Protection Filter for Electronic Complex Orders (“Filter”) that will automatically reject an incoming Electronic Complex Order if the net debit/credit limit price of the order is greater (less) than the derived net debit/credit NBBO
The Specified Amount is applicable to the net debit/credit price of the Electronic Complex Order and is not applicable to any single leg of the order. The Exchange proposes to specify the following amounts as the price protection settings for the Filter.
.10 for orders where the smallest MPV of any leg of the Electronic Complex Order is .01;
.15 for orders where the smallest MPV of any leg of the Electronic Complex Order is .05;
and .30 for orders where the smallest MPV of any leg of the Electronic Complex Order is .10.
For Electronic Complex Orders that are entered on a 1x1 ratio, the Filter will be applied by the Specified Amounts above (.10, .15, or .30).
For Electronic Complex Orders that are entered on an uneven ratio (2x3 for example) where the MPV on all legs is the same, the Filter will be applied by the Specified Amount multiplied by the smallest contract
For Electronic Complex Orders that are entered on an uneven ratio (2x3 for example) where the MPV of the legs are not the same (.10 and .05 for example), the Filter will be applied by taking the lesser of; the Specified Amount applicable to the smallest leg of the Electronic Complex Order and multiplied by the contract size of that leg (.60 in this example), or the Specified Amount of the largest leg of the Electronic Complex Order multiplied by the contract size of that leg (.45 in this example).
The price protection filter will work as described below.
Upon receipt by the Exchange of an Electronic Complex Order, the Filter will check the net debit/credit price of the order against the contra-side derived NBBO for the same strategy at the time of order entry to determine whether the order's limit is within the specified price. The contra-side NBBO will be derived from the net debit/credit market for the same strategy by using the NBBO prices for the individual leg markets as disseminated by OPRA that when aggregated create a derived NBBO for that same strategy.
By rejecting the aggressively priced Electronic Complex Order, the Filter prevents a possible execution from occurring at a price significantly worse than the derived contra-side NBBO.
This example shows how the Filter is applied to an Electronic Complex Order priced at a net debit with leg markets having the same MPV. Assume the following:
The Exchange receives an incoming Electronic Complex Order to buy Jan 20 calls and sell Jan 25 calls, on a 1:1 ratio, priced at a 1.25 debit. This would imply that the buyer would be willing to pay 1.25 for the strategy as a whole without regard to the prices of the individual leg markets. Upon receipt, this order would be routed to the CME for processing.
Pursuant to this proposal, before routing the order to the CME the Filter will first check the derived contra-side NBBO net debit/credit market for the same strategy. In this case the NBBO market for the contra side of the same strategy is offered at 1.05 (this price is established by selling one Jan 20 for 2.10 and buying one Jan 25 for 1.05). The Filter will then look at the NBBO price of smallest-priced leg of the Electronic Complex Order and apply the appropriate price protection amount as described above. Which for this example .15. Because the derived contra-side NBBO price of 1.05 is better than the limit price of the Electronic Complex Order by .20, which exceeds the Filter setting of .15, the System will not route the order to the CME for processing but will automatically reject the order back to the entering OTP Holder with a reject code explaining the reason for the rejection.
This example shows how the Filter is applied to an Electronic Complex Order priced at a net debit with leg markets having different MPVs.
Assume the following:
The Exchange receives an incoming Electronic Complex Order to buy Jan 20 calls and sell Jan 25 calls, on a 1:1 ratio, priced at a 3.60 debit. (This would imply that the buyer would be willing to pay 3.60 for the strategy as a whole without regard to the prices of the individual leg markets). Upon receipt, this order would be routed to the CME for processing.
As proposed, before routing the Electronic Complex Order to the CME, the Filter will first check the derived NBBO net debit/credit market for the contra side of the same strategy. In this case, the contra-side NBBO for the same strategy is offered at 3.20 (this price is established by selling one Jan 20 for 5.30 and buying one Jan 25 for 2.10). The Filter will then look at the NBBO price of smallest priced leg of the Electronic Complex Order and apply the appropriate price protection amount as described above. Which for this example would be .15. Because the derived contra-side NBBO debit price of 3.20 is better than the limit price of the Electronic Complex Order by .40, which exceeds the Filter setting of .15, the System would automatically reject the order back to the entering OTP Holder with a reject code explaining the reason for the rejection.
This example shows how the Filter is applied to an Electronic Complex Order priced at a net credit with leg markets having the same MPV. Assume the following:
The Exchange receives an incoming Electronic Complex Order to sell Jan 20 call and buy Jan 25 call, priced at a .90 credit. (This would imply that the seller would be willing to receive .90 for the strategy as a whole without regard to the individual leg markets). Upon receipt, this order would be sent to the CME for processing.
Pursuant to this proposal however, before routing the Electronic Complex Order to the CME the Filter will first check the derived NBBO net debit/credit market for the contra side of the same strategy. In this case the contra-side NBBO market is priced at 1.02 (this price is established by buying one Jan 20 for 2.03 and selling one Jan 25 for 1.01). The Filter will then look at the NBBO price of smallest priced leg of the Electronic Complex Order and apply the appropriate price protection amount as described above. Which for this example would be .10. Because the derived contra-side NBBO price of 1.02 is better than the limit price of the Electronic Complex Order by .12, which exceeds the Filter setting of .10, the System would automatically reject the order back to the entering OTP Holder with a reject code explaining the reason for the rejection.
This example shows how the Filter is applied to an Electronic Complex Order priced at a net credit on an uneven ratio with leg markets having the same MPV. Assume the following:
The Exchange receives an incoming Electronic Complex Order to sell Jan 20 calls and buy Jan 25 calls, on a 2:3 ratio,
As proposed, before routing the Electronic Complex Order to the CME the Filter will first check the derived NBBO net debit/credit market for contra side of the same strategy. In this case the contra-side NBBO market is priced at 1.00 (this price is established by buying two Jan 20s for 2.03 each and selling three Jan 25s for 1.02 each (4.06 − 3.06 = 1.00)). The Filter will then look at the NBBO price of smallest-priced leg of the Electronic Complex Order and apply the appropriate price protection amount as described above. Which for this example would be .10. However, because this order was entered on a ratio where the smallest contract sized leg is greater than one contract, the Filter is applied to the aggregate of the small sized leg of the ratio, which in this case is .20 (.10 × 2 contracts). Because the derived contra-side NBBO price of 1.00 is better than the limit price of the Electronic Complex Order by .25, which exceeds the Filter setting of .20, the Filter will automatically reject the order back to the entering OTP Holder with a reject code explaining the reason for the rejection.
This example shows how the Filter is applied to an Electronic Complex Order priced at a net credit on an uneven ratio with leg markets having a different MPV. Assume the following:
The Exchange receives an incoming Electronic Complex Order to sell Jan 20 calls and buy Jan 25 calls, on a 2:3 ratio, priced at a 1.50 credit. (This would imply that the seller would be willing to receive 1.50 for the strategy as a whole without regard to the prices of the individual leg markets).
As proposed, before routing the Electronic Complex Order to the CME, the Filter will first check the derived NBBO net debit/credit market for the contra side of same strategy. In this case the contra-side NBBO market is priced at 2.20 (this price is established by buying two Jan 20s for 4.10 each and selling three Jan 25s for 2.00 each (8.20 − 6.00 = 2.20)). The Filter will then look at two scenarios to determine what price protection level would apply. First, the Filter will look at the NBBO price of the leg of the Electronic Complex Order with the smallest contract size (Jan 20 leg) and determine the appropriate price protection amount. Which in this example would be .30. However, because the minimum contract size on the leg is greater than one, the price protection amount is applied to the aggregate contract size (2 contracts), which in this case would establish a Filter setting of .60 (.30 × 2 contracts). Next, the Filter will look at the NBBO price of the leg of the order with the largest contract size (Jan 25 leg) and determine the appropriate price protection amount, which in this case would be .15. However, because the minimum contract size on the leg is greater than one, the price protection amount is applied to the aggregate contract size of the leg (3 contracts), which in this case would establish a Filter setting of .45 (.15 × 3). The Filter will always apply the more conservative setting, which in this case would be .45. Because the derived contra-side NBBO price of 2.20 is better than the limit price of the Electronic Complex Order by .70, which exceeds the Filter setting of .45, the Filter would automatically reject the order back to the entering OTP Holder or OTP Firm.
The Filter is not intended to either offer price protection to bids and offers at away markets, or to offer NBBO guaranteed pricing to Electronic Complex Orders submitted to NYSE Arca. Rather the proposed Filter would offer a level of protection to incoming Electronic Complex Orders that are entered at a price so far away from the prevailing contra-side NBBO market for the same strategy, that the execution of such order could cause price dislocation in the market. Accordingly, the Exchange does not propose to reject all orders with a limit price greater (less) than the contra-side NBBO, just those that are greater (less) by an amount as prescribed by the Exchange. The Exchange believes that rejecting such aggressively priced Electronic Complex Orders will help to ensure that market participants do not receive an execution at a price significantly inferior to the prevailing NBBO.
The Exchange recognizes that under certain market conditions the specified amounts prescribed by the Exchange, and applicable to the Filter, may be overly restrictive at times and there could be situations where the Exchange may need to temporarily widen the Filter settings to accommodate market conditions in a given class. This could happen because of, but not limited to, instances of extreme volatility, the dissemination of non-firm markets by competing exchanges, or some other condition that would lead the Exchange to believe that it would not be reasonable to expect that a market participant could receive an execution of an Electronic Complex Order at, or close to, the prevailing contra-side NBBO market for a given strategy. Therefore, the Exchange proposes that in the interest of a fair and orderly market, the Filter settings may be temporarily modified by a Trading Official to an amount greater than prescribed, on a class-by-class basis. Trading Officials are presently authorized to make similar determinations regarding such matters as position limits
The statutory basis for the proposed rule change is Section 6(b)(5) of the Securities Exchange Act of 1934 (the “Act”), in general, and furthers the objectives of Section 6(b)(5)
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. The Exchange is proposing a market enhancement that provides greater protections from potentially erroneous executions and the attendant risks of such executions to market participants. Therefore, the Exchange believes that the proposal should provide an incentive for market participants to enter executable interest in the CME that can help foster price discovery and transparency thereby benefiting all market participants. The proposal is structured to offer the same enhancement to all market participants, regardless of account type, and will not impose a competitive burden on any participant. The Exchange does not believe that the proposed mechanism will impose a burden on competing options exchanges. Rather, the availability of this mechanism may foster more competition. Specifically, the Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues. When an exchange offers enhanced functionality that distinguishes it from the competition and participants find it useful, it has been the Exchange's experience that competing exchanges will move to adopt similar functionality. Thus, the Exchange believes that this type of competition amongst exchanges is beneficial to the market place as a whole as it can result in enhanced processes, functionality, and technologies.
No written comments were solicited or received with respect to the proposed rule change.
Because the foregoing 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, it has become effective 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. If the Commission takes such action, the Commission shall institute proceedings under Section 19(b)(2)(B)
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 the fee schedule applicable to Members
The text of the proposed rule change is available at the Exchange's Web site 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 parts of such statements.
The Exchange proposes to modify its fee schedule applicable to the use of the Exchange effective October 1, 2013, in order to modify pricing related to executions that occur on BATS Exchange, Inc. (“BZX”) through the Exchange's Destination Specific Order routing strategy.
The [sic] Exchange believes that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder that are applicable to a national securities exchange, and, in particular, with the requirements of Section 6 of the Act.
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, as amended. Because the market for order execution is extremely competitive, Members may readily opt to disfavor the Exchange's routing services if they believe that alternatives offer them better value. For orders routed through the Exchange and executed at BZX through the Destination Specific Order strategy, the proposed fee change is designed to equal the fee that a Member would have received if such routed orders would have been executed directly by a Member at BZX.
No written comments were solicited or received.
The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) 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)
The Exchange proposes to amend Rule 2—Equities to specify that the definition of an approved person does not include a governmental entity and amend Rule 304—Equities to provide that if a governmental entity directly or indirectly owns a member organization, then the member organization must identify such governmental entity to the Exchange. 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 Rule 2—Equities to specify that the definition of an approved person does not include a governmental entity and amend Rule 304 to provide that if a governmental entity directly or indirectly owns a member organization, then the member organization must identify such governmental entity to the Exchange.
Under Rule 2(b)(i)—Equities, a “member organization” is defined as a registered broker-dealer that has been approved for membership on the Exchange. To qualify as a member organization, a broker-dealer must be a member of either (i) the Financial Industry Regulatory Authority, Inc. (“FINRA”) or (ii) a registered securities exchange other than the Exchange. Under Rule 2(c)—Equities, an approved person of a member organization is defined as a person, other than a member, principal executive or employee of a member organization, who controls a member organization, is engaged in a securities or kindred business that is controlled by a member or member organization, or is a U.S.-registered broker-dealer under common control with a member organization. Under Rule 2(d)—Equities, “control” means the power to direct or cause the direction of the management or policies of a person whether through ownership of securities, by contract or otherwise. A person is presumed to control another person if such person, directly or indirectly, (i) has the right to vote 25 percent or more of the voting securities, (ii) is entitled to receive 25 percent or more of the net profits, or (iii) is a director, general partner or principal executive (or person occupying a similar status or performing similar functions) of the other person.
Rule 304—Equities provides that a member organization must identify each approved person to the Exchange. Each approved person must execute a written consent to the jurisdiction of the Exchange and agree to (1) supply the Exchange with information relating to the existence of any statutory disqualification to which the approved person or any person associated with the approved person may be subject, as defined in the Act; (2) abide by such provisions of the rules of the Exchange relating to approved persons as shall from time to time be in effect; and (3) permit examination by the Exchange, or any person designated by it, at any time or from time to time, of its books and records to verify the accuracy of the information required to be supplied herein and by the rules of the Exchange. Supplementary Material .10 to Rule 304—Equities sets forth certain additional requirements for approved persons domiciled outside the United States.
The Exchange recently received a membership application for a broker-dealer that is an approved FINRA member; this broker-dealer has an owner that is a governmental entity that indirectly controls the broker-dealer and thus falls within the definition of approved person under the Exchange's rules. This is the first time that the Exchange has received a membership application presenting this ownership structure. The Exchange notes that a governmental entity could be either a direct or an indirect owner of a member organization, and by virtue of its control, fall within the Exchange's definition of approved person, although this result was not contemplated at the time the definition was created. The
The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,
In accordance with Section 6(b)(8) of the Act,
No written comments were solicited or received with respect to the proposed rule change.
The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act
A proposed rule change filed under Rule 19b–4(f)(6)
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. If the Commission takes such action, the Commission shall institute proceedings under Section 19(b)(2)(B)
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,
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
On July 30, 2013, the Securities and Exchange Commission (“Commission”) voted to adopt amendments to the broker-dealer net capital rule (Rule 15c3–1),
Industry representatives have indicated through physical and telephonic meetings with Commission staff that, as broker-dealers have worked to meet the October 21, 2013 effective date, some have determined that they will be unable to complete by that date the significant operational and systems changes necessary to comply with certain of the final rule amendments. For example, broker-dealers that maintain custody of customer securities and cash (a “carrying broker-dealer”) have said they are unable to comply with the requirements of paragraph (e)(5) of Rule 15c3–3 by the current effective date. This provision places restrictions on a carrying broker-dealer's ability to use cash bank deposits to meet customer or PAB reserve deposit requirements by excluding cash deposits held at an affiliated bank and limiting cash held at non-affiliated banks to an amount no greater than 15% of the bank's equity capital, as reported by the bank in its most recent Call Report.
Further, broker-dealers have indicated that 60 days is insufficient for implementing the system changes necessary for the customer account opening documentation and processes, as well as account notices and disclosures, required in connection with new requirements under paragraph (j)(2) to Rule 15c3–3 regarding the treatment of customers' free credit balances. Additionally, broker-dealer representatives have indicated that some broker-dealers may need additional time to completely and accurately document their market, credit, and liquidity risk management controls under new paragraph (a)(23) to Rule 17a–3.
Therefore, the Commission has determined to provide a temporary exemption to broker-dealers from the requirements of the following new amendments to the broker-dealer financial responsibility rules adopted in Exchange Act Release No. 70072: (1) Rule 15c3–3, except paragraph (j)(1);
The Commission is not granting a temporary exemption from the remaining new requirements adopted in Exchange Act Release No. 70072: (1) The requirement in paragraph (j)(1) of Rule 15c3–3; (2) the new requirements in Rule 15c3–1 (other than the requirement in paragraph (c)(2)(iv)(E)(
The effective date is quickly approaching, and granting a limited exemption until March 3, 2014 to broker-dealers from certain new requirements will help to facilitate an orderly implementation of the final rule amendments.
For the foregoing reasons, the Commission finds that this temporary exemption is necessary and appropriate in the public interest, and is consistent with the protection of investors.
Accordingly, pursuant to Section 36 of the Exchange Act,
By the Commission.
It appears to the Securities and Exchange Commission that there is a lack of current and accurate information concerning the securities of China Ritar Power Corp. because China Ritar Power Corp. has not filed any periodic reports for any reporting period subsequent to the period ended September 30, 2010.
The Commission is of the opinion that the public interest and the protection of investors require a suspension of trading in securities of China Ritar Power Corp.
Therefore, it is ordered, pursuant to Section 12(k) of the Securities Exchange Act of 1934, that trading in the securities of China Ritar Power Corp. is suspended for the period from 9:30 a.m. EDT, October 4, 2013, through 11:59 p.m. EDT, on October 17, 2013.
By the Commission.
This document was received by the Office of the Federal Register on October 17, 2013.
It appears to the Securities and Exchange Commission that there is a lack of current and accurate information concerning the securities of Pacific Clean Water Technologies, Inc. (“PCWT”) because of questions regarding the adequacy and accuracy of publicly disseminated information concerning, among other things, the company's business operations. PCWT is a Delaware corporation based in Irvine, California. It is quoted on OTC Link under the symbol PCWT.
The Commission is of the opinion that the public interest and the protection of investors require a suspension of trading in the securities of the above-listed company.
Therefore, it is ordered, pursuant to Section 12(k) of the Securities Exchange Act of 1934, that trading in the securities of the above-listed company is suspended for the period from 5:30 p.m. EDT on October 11, 2013 through 11:59 p.m. EDT, on October 24, 2013.
By the Commission.
Notice is hereby given that Emergence Capital Partners SBIC, L.P., 160 Bovet Road, Suite 300, San Mateo, CA 94402, a Federal Licensee under the Small Business Investment Act of 1958, as amended (“the Act”), in connection with the financing of a small concern, has sought an exemption under Section 312 of the Act and Section 107.730, Financings which Constitute Conflicts of Interest of the Small Business Administration (“SBA”) Rules and Regulations (13 CFR 107.730). Emergence Capital Partners SBIC, L.P. proposes to provide equity security financing to Bill.com, Inc., 3250 Ash Street, Palo Alto, CA 94306.
The financing is brought within the purview of § 107.730(a)(1) of the Regulations because the financing of Bill.com, Inc. by Emergence Capital Partners, Inc. will not occur at the same time, and on the same terms and conditions of the financing by Emergence Capital Partners, L.P. and Emergence Capital Associates, L.P., both Associates of Emergence Capital Partners SBIC, L.P., and therefore this transaction is considered a financing of an Associate requiring prior SBA approval.
Notice is hereby given that any interested person may submit written comments on the transaction, within fifteen days of the date of this publication, to the Associate Administrator for Investment, U.S. Small Business Administration, 409 Third Street SW., Washington, DC 20416.
The Small Business Administration publishes an interest rate called the optional “peg” rate (13 CFR 120.214) on a quarterly basis. This rate is a weighted average cost of money to the government for maturities similar to the average SBA direct loan. This rate may be used as a base rate for guaranteed fluctuating interest rate SBA loans. This rate will be 3.125 (3
Pursuant to 13 CFR 120.921(b), the maximum legal interest rate for any third party lender's commercial loan which funds any portion of the cost of a 504 project (see 13 CFR 120.801) shall be 6% over the New York Prime rate or, if that exceeds the maximum interest rate permitted by the constitution or laws of a given State, the maximum interest rate will be the rate permitted by the constitution or laws of the given State.
The Social Security Administration (SSA) publishes a list of information collection packages requiring clearance by the Office of Management and Budget (OMB) in compliance with Public Law 104–13, the Paperwork Reduction Act of 1995, effective October 1, 1995. This notice includes revisions and extensions of OMB-approved information collections.
SSA is soliciting comments on the accuracy of the agency's burden estimate; the need for the information; its practical utility; ways to enhance its quality, utility, and clarity; and ways to minimize burden on respondents, including the use of automated collection techniques or other forms of information technology. Mail, email, or fax your comments and recommendations on the information collection(s) to the OMB Desk Officer and SSA Reports Clearance Officer at the following addresses or fax numbers.
I. The information collections below are pending at SSA. SSA will submit them to OMB within 60 days from the date of this notice. To be sure we consider your comments, we must receive them no later than December 23, 2013. Individuals can obtain copies of the collection instruments by writing to the above email address.
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II. SSA submitted the information collections below to OMB for clearance. Your comments regarding the information collections would be most useful if OMB and SSA receive them 30 days from the date of this publication. To be sure we consider your comments, we must receive them no later than November 21, 2013. Individuals can obtain copies of the OMB clearance packages by writing to
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Notice is hereby given of the following determinations: Pursuant to the authority vested in me by the Act of October 19, 1965 (79 Stat. 985; 22 U.S.C. 2459), Executive Order 12047 of March 27, 1978, the Foreign Affairs Reform and Restructuring Act of 1998 (112 Stat. 2681,
For further information, including a description of the exhibit object, contact Paul W. Manning, Attorney-Adviser, Office of the Legal Adviser, U.S. Department of State (telephone: 202–632–6469). The mailing address is U.S. Department of State, SA–5, L/PD, Fifth Floor (Suite 5H03), Washington, DC 20522–0505.
Federal Motor Carrier Safety Administration (FMCSA), DOT.
Notice of applications for exemptions; request for comments.
FMCSA announces receipt of applications from 26 individuals for exemption from the vision requirement in the Federal Motor Carrier Safety Regulations. They are unable to meet the vision requirement in one eye for various reasons. The exemptions will enable these individuals to operate commercial motor vehicles (CMVs) in interstate commerce without meeting the prescribed vision requirement in one eye. If granted, the exemptions would enable these individuals to qualify as drivers of commercial motor vehicles (CMVs) in interstate commerce.
Comments must be received on or before November 21, 2013.
You may submit comments bearing the Federal Docket Management System (FDMS) Docket No. FMCSA–2013–0166 using any of the following methods:
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Elaine M. Papp, Chief, Medical Programs Division, (202) 366–4001,
Under 49 U.S.C. 31136(e) and 31315, FMCSA may grant an exemption from the Federal Motor Carrier Safety Regulations for a 2-year period if it finds “such exemption would likely achieve a level of safety that is equivalent to or greater than the level that would be achieved absent such exemption.” FMCSA can renew exemptions at the end of each 2-year period. The 26 individuals listed in this notice have each requested such an exemption from the vision requirement in 49 CFR 391.41(b)(10), which applies to drivers of CMVs in interstate commerce. Accordingly, the Agency will evaluate the qualifications of each applicant to determine whether granting an exemption will achieve the required level of safety mandated by statute.
Mr. Benner, age 44, has had amblyopia in his left eye since birth. The visual acuity in his right eye is 20/25, and in his left eye, 20/400. Following an examination in 2013, his optometrist noted, “Most recently Mr. Benner presented with a list of criteria for him to keep his medical card needed to continue driving hazardous materials . . . It is my opinion that because Mr.
Mr. Chavarria, 31, has had amblyopia in his left eye since childhood. The visual acuity in his right eye is 20/20, and in his left eye, 20/60. Following an examination in 2013, his optometrist noted, “In my medical opinion, I feel that Mr. Chavarria has sufficient vision to perform the driving tasks required to operate a commercial vehicle.” Mr. Chavarria reported that he has driven tractor-trailer combinations for 3 years, accumulating 1,500 miles. He holds a Class A CDL from New Mexico. His driving record for the last 3 years shows no crashes and no convictions for moving violations in a CMV.
Mr. DiVella, 71, has had macular degeneration in his left eye since 2007. The visual acuity in his right eye is 20/20, and in his left eye, 20/50. Following an examination in 2013, his ophthalmologist noted, “No change has occurred in Mr. DiVella's vision in over 7 years. No driving restrictions are necessary for this patient to safely operate a commercial motor vehicle.” Mr. DiVella reported that he has driven buses for 8 years, accumulating 320,000 miles. He holds a Class B CDL from Nevada. His driving record for the last 3 years shows no crashes and no convictions for moving violations in a CMV.
Mr. Elliot, 58, has had amblyopia in his right eye since childhood. The visual acuity in his right eye is 20/80, and in his left eye, 20/20. Following an examination in 2013, his ophthalmologist noted, “In my medical opinion he has sufficient vision to operate a commercial vehicle.” Mr. Elliot reported that he has driven straight trucks for 12 years, accumulating 240,000 miles. He holds Class A CDL from Tennessee. His driving record for the last 3 years shows one crash, to which he contributed by improper backing and careless or erratic driving, and no convictions for moving violations in a CMV.
Mr. Gillette, 45, has had a retinal detachment in his right eye since 1989. The visual acuity in his right eye is hand motion, and in his left eye, 20/25. Following an examination in 2013, his optometrist noted, “In my medical opinion he does have sufficient vision to perform the driving tasks required to operate a commercial vehicle under the current driving regulations.” Mr. Gillette reported that he has driven straight trucks for 40 years, accumulating 1.4 million miles, and tractor-trailer combinations for 38 years, accumulating 399,000. He holds a Class A CDL from Pennsylvania. His driving record for the last 3 years shows no crashes and no convictions for moving violations in a CMV.
Mr. Grega, 30, has had amblyopia in his right eye since birth. The visual acuity in his right eye is counting fingers, and in his left eye, 20/20. Following an examination in 2012, his optometrist noted, “In my medical opinion, he has sufficient vision to perform the driving tasks required to operate a commercial vehicle.” Mr. Grega reported that he has driven straight trucks for 4 years, accumulating 4,000 miles, and tractor-trailer combinations for 4 years, accumulating 400 miles. He holds an operator's license from Pennsylvania. His driving record for the last 3 years shows no crashes and no convictions for moving violations in a CMV.
Mr. Hoover, 37, has a prosthetic right eye due to a traumatic incident in 1985. The visual acuity in his right eye is no light perception, and in his left eye, 20/15. Following an examination in 2013, his optometrist noted, “Has vision capable of driving a commercial vehicle.” Mr. Hoover reported that he has driven straight trucks for 20 years, accumulating 10,000 miles, and tractor-trailer combinations for 6 years, accumulating 90,000 miles. He holds a Class A CDL from Illinois. His driving record for the last 3 years shows no crashes and no convictions for moving violations in a CMV.
Mr. Johnson, 45, has a retinal detachment in his right eye due to a traumatic incident in 1976. The visual acuity in his right eye is no light perception, and in his left eye, 20/20. Following an examination in 2012, his optometrist noted, “It is my professional opinion that since Mr. Johnson has apparently had a flawless driving record over the past 3 years doing this work that he has sufficient vision to perform his required tasks. It should be noted that I have had many professional truck drivers over the past 40 years who had amblyopia, trauma et. al. to one of their eyes and there was never a problem of driving safety. Most had been driving for many, many years with flawless records.” Mr. Johnson reported that he has driven straight trucks for 6 years, accumulating 90,000 miles. He holds an operator's license from South Carolina. His driving record for the last 3 years shows no crashes and no convictions for moving violations in a CMV.
Mr. Johnson, 48, has a retinal detachment in his right eye due to a traumatic incident in 1998. The visual acuity in his right eye is 20/70, and in his left eye, 20/20. Following an examination in 2013, his optometrist noted, “Bilateral vision is sufficient to operate commercial vehicle.” Mr. Johnson reported that he has driven straight trucks for 28 years, accumulating 420,000 miles. He holds an operator's license from Pennsylvania. His driving record for the last 3 years shows no crashes and no convictions for moving violations in a CMV.
Ms. Kelly, 51, has had amblyopia in her left eye since birth. The visual acuity in her right eye is 20/20, and in her left eye, 20/200. Following an examination in 2013, her optometrist noted, “In my opinion she has sufficient vision to perform the driving tasks required to operate a commercial vehicle.” Ms. Kelly reported that she has driven straight trucks for 4 years, accumulating 223,200 miles, tractor-trailer combinations for 1 year, accumulating 24,000, and buses for 16 years, accumulating 2.95 million miles. She holds a Class B CDL from Indiana. Her driving record for the last 3 years shows no crashes and no convictions for moving violations in a CMV.
Mr. Knott, 38, has had a retinal detachment in his right eye since 1998. The visual acuity in his right eye is 20/200, and in his left eye, 20/20. Following an examination in 2013, his optometrist noted, “In my medical opinion, Jeremy has sufficient vision to operate commercial motor vehicles.” Mr. Knott reported that he has driven
Mr. Larson, 42, has had amblyopia in his left eye since birth. The visual acuity in his right eye is 20/25, and in his left eye, 20/80. Following an examination in 2013, his optometrist noted, “In my professional opinion Mr. Larson has the vision sufficient to operate a commercial vehicle.” Mr. Larson reported that he has driven straight trucks for 2 years, accumulating 115,000 miles, and tractor-trailer combinations for 1.5 years, accumulating 116,250 miles. He holds a Class A CDL from Washington. His driving record for the last 3 years shows no crashes and no convictions for moving violations in a CMV.
Mr. Loper, 58, has had amblyopia in his left eye since birth. The visual acuity in his right eye is 20/20, and in his left eye, 20/100. Following an examination in 2013, his optometrist noted, “Mr. Loper has been a commercial truck driver for many years and I believe his visual function is adequate to continue driving a commercial vehicle.” Mr. Loper reported that he has driven straight trucks for 37 years, accumulating 1.1 million miles, and tractor-trailer combinations for 37 years, accumulating 1.1 million miles. He holds an operator's license from Louisiana. His driving record for the last 3 years shows no crashes and no convictions for moving violations in a CMV.
Mr. McCleary, 39, has had amblyopia in his right eye since childhood. The visual acuity in his right eye is 20/400, and in his left eye, 20/25. Following an examination in 2012, his optometrist noted, “For Federal Vision Exemption, he has sufficient vision if above conditions meets requirements and approval of the vision program to operate a commercial vehicle.” Mr. McCleary reported that he has driven straight trucks for 2 years, accumulating 40,000 miles, and tractor-trailer combinations for 4 years, accumulating 100,000 miles. He holds a Class A CDL from Ohio. His driving record for the last 3 years shows one crash, to which he did not contribute and for which he was not cited, and no convictions for moving violations in a CMV.
Mr. Miles, 67, has had a retinal detachment in his right eye since 1988. The visual acuity in his right eye is counting fingers, and in his left eye, 20/20. Following an examination in 2013, his optometrist noted, “With my findings, Mr. Miles has sufficient vision to perform the driving tasks required to operate a commercial vehicle.” Mr. Miles reported that he has driven straight trucks for 40 years, accumulating 1.2 million miles. He holds a Class AM CDL from Illinois. His driving record for the last 3 years shows no crashes and no convictions for moving violations in a CMV.
Mr. Miller, 38, has had amblyopia in his right eye since childhood. The visual acuity in his right eye is 20/60, and in his left eye, 20/20. Following an examination in 2013, his optometrist noted, “He has sufficient vision to operate a commercial vehicle.” Mr. Miller reported that he has driven tractor-trailer combinations for 12.5 years, accumulating 937,500 miles. He holds a Class A CDL from Oregon. His driving record for the last 3 years shows no crashes and no convictions for moving violations in a CMV.
Mr. Newlin, 65, has had amblyopia in his left eye since birth. The visual acuity in his right eye is 20/20, and in his left eye, counting fingers. Following an examination in 2013, his optometrist noted, “In my opinion, as his eye doctor of 8 years, Ronald Newlin has sufficient vision to perform the driving tasks required to operate a commercial vehicle.” Mr. Newlin reported that he has driven straight trucks for 48 years, accumulating 48,000 miles. He holds a Class B CDL from Illinois. His driving record for the last 3 years shows no crashes and no convictions for moving violations in a CMV.
Mr. Osollo, 44, has had amblyopia in his left eye since birth. The visual acuity in his right eye is 20/20, and in his left eye, counting fingers. Following an examination in 2013, his optometrist noted, “He has the sufficient vision necessary to perform the driving tasks required to operate a commercial vehicle.” Mr. Osollo reported that he has driven straight trucks for 8 years, accumulating 240,000 miles, and tractor-trailer combinations for 8 years, accumulating 272,000 miles. He holds a Class A CDL from New Mexico. His driving record for the last 3 years shows no crashes and no convictions for moving violations in a CMV.
Mr. Scesnewicz, 50, has had amblyopia in his right eye since childhood. The visual acuity in his right eye is 20/125, and in his left eye, 20/20. Following an examination in 2013, his optometrist noted, “In my clinical opinion the patient has sufficient vision to perform the tasks required to operate a commercial driving vehicle.” Mr. Scensnewicz reported that he has driven straight trucks for 20 years, accumulating 160,000 miles. He holds a Class A CDL from Illinois. His driving record for the last 3 years shows no crashes and no convictions for moving violations in a CMV.
Mr. Smith, 51, has had a prosthetic left eye since childhood. The visual acuity in his right eye is 20/20, and in his left eye, no light perception. Following an examination in 2012, his optometrist noted, “Mr. Smith, despite having a prosthetic left eye, has fully functional vision in his right eye. Because of this, and because of the fact that he has had a functional CDL with no problems for years, I feel that driving abilities are not compromised by his monocular vision.” Mr. Smith reported that he has driven straight trucks for 17 years, accumulating 1.36 million miles. He holds a Class B CDL from North Carolina. His driving record for the last 3 years shows no crashes and no convictions for moving violations in a CMV.
Mr. Stockert, 50, has a retinal detachment in his left eye due to a traumatic incident in 1987. The visual acuity in his right eye is 20/20, and in his left eye, light perception. Following an examination in 2013, his optometrist noted, “In my opinion, Mr. Stockert sees well enough binocularly to perform the driving tasks required to operate a commercial vehicle.” Mr. Stockert reported that he has driven straight trucks for 30 years, accumulating 900,000 miles. He holds an operator's license from Minnesota. His driving record for the last 3 years shows no crashes and no convictions for moving violations in a CMV.
Mr. Strickland, 35, has had amblyopia in his right eye since birth. The visual acuity in his right eye is 20/60, and in his left eye, 20/15. Following an examination in 2013, his optometrist noted, “In my opinion, Mr. Strickland's
Mr. Taniguchi, 54, has had Harada's disease in his left eye since 1984. The visual acuity in his right eye is 20/15, and in his left eye, no light perception. Following an examination in 2012, his ophthalmologist noted, “It is my medical opinion that Mr. Taniguchi has sufficient vision to operate any vehicle or equipment.” Mr. Taniguchi reported that he has driven straight trucks for 5 years, accumulating 50,000 mile, and tractor-trailer combinations for 23 years, accumulating 230,000. He holds an operator's license from Hawaii. His driving record for the last 3 years shows no crashes and no convictions for moving violations in a CMV.
Mr. Vermilya, 59, has had amblyopia in his left eye since childhood. The visual acuity in his right eye is 20/20, and in his left eye, 20/100. Following an examination in 2013, his optometrist noted, “In my opinion, the patient has sufficient vision to continue performing the drive [sic] tasks required to operate a commercial vehicle.” Mr. Vermilya reported that he has driven straight trucks for 40 years, accumulating 1.2 million miles, and tractor-trailer combinations for 40 years, accumulating 1.2 million miles. He holds a Class AM CDL from Pennsylvania. His driving record for the last 3 years shows no crashes and one conviction for a moving violation in a CMV; he disregarded a traffic lane signal.
Mr. Villa, 44, has had central scotoma in his left eye since 2009. The visual acuity in his right eye is 20/20, and in his left eye, counting fingers. Following an examination in 2013, his ophthalmologist noted, “The patient presents with CNV to the left eye and presents stable and has sufficient vision to operate a commercial vehicle.” Mr. Villa reported that he has driven straight trucks for 8 years, accumulating 440,000 miles, tractor-trailer combinations for 8 years, accumulating 520,000, and buses for 4 months, accumulating 6000 miles. He holds an operator's license from New Mexico. His driving record for the last 3 years shows no crashes and no convictions for moving violations in a CMV.
Mr. White, 58, has had strabismus in his right eye since childhood. The visual acuity in his right eye is 20/400, and in his left eye, 20/20. Following an examination in 2013, his optometrist noted, “Mr. White's central peripheral vision is adequate to perform the driving tasks required to operate a commercial vehicle.” Mr. White reported that he has driven straight trucks for 41 years, accumulating 1.64 million miles, and tractor-trailer combinations for 35 years, accumulating 875,000. He holds a Class A CDL from Pennsylvania. His driving record for the last 3 years shows no crashes and no convictions for moving violations in a CMV.
In accordance with 49 U.S.C. 31136(e) and 31315, FMCSA requests public comment from all interested persons on the exemption petitions described in this notice. The Agency will consider all comments received before the close of business November 21, 2013. Comments will be available for examination in the docket at the location listed under the
In addition to late comments, FMCSA will also continue to file, in the public docket, relevant information that becomes available after the comment closing date. Interested persons should monitor the public docket for new material.
You may submit your comments and material online or by fax, mail, or hand delivery, but please use only one of these means. FMCSA recommends that you include your name and a mailing address, an email address, or a phone number in the body of your document so that FMCSA can contact you if there are questions regarding your submission.
To submit your comment online, go to
We will consider all comments and material received during the comment period and may change this proposed rule based on your comments. FMCSA may issue a final rule at any time after the close of the comment period.
To view comments, as well as any documents mentioned in this preamble, To submit your comment online, go to
Federal Motor Carrier Safety Administration (FMCSA), DOT.
Notice of renewal of exemptions; request for comments.
FMCSA announces its decision to renew the exemptions from the vision requirement in the Federal Motor Carrier Safety Regulations for 10 individuals. FMCSA has statutory authority to exempt individuals from the vision requirement if the exemptions granted will not compromise safety. The Agency has concluded that granting these exemption renewals will provide a level of safety that is equivalent to or greater than the level of safety maintained without the exemptions for these commercial motor vehicle (CMV) drivers.
This decision is effective October 31, 2013. Comments must be received on or before November 21, 2013.
You may submit comments bearing the Federal Docket Management System (FDMS) numbers: Docket No. [Docket No. FMCSA–2011–0189], using any of the following methods:
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Elaine M. Papp, Chief, Medical Programs Division, 202–366–4001,
Under 49 U.S.C. 31136(e) and 31315, FMCSA may renew an exemption from the vision requirements in 49 CFR 391.41(b)(10), which applies to drivers of CMVs in interstate commerce, for a two-year period if it finds “such exemption would likely achieve a level of safety that is equivalent to or greater than the level that would be achieved absent such exemption.” The procedures for requesting an exemption (including renewals) are set out in 49 CFR part 381.
This notice addresses 10 individuals who have requested renewal of their exemptions in accordance with FMCSA procedures. FMCSA has evaluated these 10 applications for renewal on their merits and decided to extend each exemption for a renewable two-year period. They are:
The exemptions are extended subject to the following conditions: (1) That each individual has a physical examination every year (a) by an ophthalmologist or optometrist who attests that the vision in the better eye continues to meet the requirements in 49 CFR 391.41(b)(10), and (b) by a medical examiner who attests that the individual is otherwise physically qualified under 49 CFR 391.41; (2) that each individual provides a copy of the ophthalmologist's or optometrist's report to the medical examiner at the time of the annual medical examination; and (3) that each individual provide a copy of the annual medical certification to the employer for retention in the driver's qualification file and retains a copy of the certification on his/her person while driving for presentation to a duly authorized Federal, State, or local enforcement official. Each exemption will be valid for two years unless rescinded earlier by FMCSA. The exemption will be rescinded if: (1) the person fails to comply with the terms and conditions of the exemption; (2) the exemption has resulted in a lower level of safety than was maintained before it was granted; or (3) continuation of the exemption would not be consistent with the goals and objectives of 49 U.S.C. 31136(e) and 31315.
Under 49 U.S.C. 31315(b)(1), an exemption may be granted for no longer than two years from its approval date and may be renewed upon application for additional two year periods. In accordance with 49 U.S.C. 31136(e) and 31315, each of the 10 applicants has satisfied the entry conditions for obtaining an exemption from the vision requirements (76 FR 55465). Each of these 10 applicants has requested renewal of the exemption and has submitted evidence showing that the vision in the better eye continues to meet the requirement specified at 49 CFR 391.41(b)(10) and that the vision impairment is stable. In addition, a review of each record of safety while driving with the respective vision deficiencies over the past two years indicates each applicant continues to meet the vision exemption requirements.
These factors provide an adequate basis for predicting each driver's ability to continue to drive safely in interstate commerce. Therefore, FMCSA concludes that extending the exemption for each renewal applicant for a period of two years is likely to achieve a level of safety equal to that existing without the exemption.
FMCSA will review comments received at any time concerning a particular driver's safety record and determine if the continuation of the exemption is consistent with the requirements at 49 U.S.C. 31136(e) and 31315. However, FMCSA requests that interested parties with specific data concerning the safety records of these drivers submit comments by November 21, 2013.
FMCSA believes that the requirements for a renewal of an exemption under 49 U.S.C. 31136(e) and 31315 can be satisfied by initially granting the renewal and then requesting and evaluating, if needed, subsequent comments submitted by interested parties. As indicated above, the Agency previously published notices of final disposition announcing its decision to exempt these 10 individuals from the vision requirement in 49 CFR 391.41(b)(10). The final decision to grant an exemption to each of these individuals was made on the merits of each case and made only after careful consideration of the comments received to its notices of applications.
Interested parties or organizations possessing information that would otherwise show that any, or all, of these drivers are not currently achieving the statutory level of safety should immediately notify FMCSA. The Agency will evaluate any adverse evidence submitted and, if safety is being compromised or if continuation of the exemption would not be consistent with the goals and objectives of 49 U.S.C. 31136(e) and 31315, FMCSA will take immediate steps to revoke the exemption of a driver.
You may submit your comments and material online or by fax, mail, or hand delivery, but please use only one of these means. FMCSA recommends that you include your name and a mailing address, an email address, or a phone number in the body of your document so that FMCSA can contact you if there are questions regarding your submission.
To submit your comment online, go to
We will consider all comments and material received during the comment period and may change this proposed rule based on your comments. FMCSA may issue a final rule at any time after the close of the comment period.
To view comments, as well as any documents mentioned in this preamble, To submit your comment online, go to
Surface Transportation Board, DOT.
Notice of decision.
On October 17, 2013, the Board served a decision announcing the 2012 revenue adequacy determinations for the Nation's Class I railroads. Two carriers, Norfolk Southern Combined Railroad Subsidiaries and Union Pacific Railroad Company, were found to be revenue adequate.
Paul Aguiar, (202) 245–0323. Assistance for the hearing impaired is available through Federal Information Relay Service (FIRS) at (800) 877–8339.
The Board is required to make an annual determination of railroad revenue adequacy. A railroad is considered revenue adequate under 49 U.S.C. 10704(a) if it achieves a rate of return on net investment (ROI) equal to at least the current cost of capital for the railroad industry for 2012, determined to be 11.12% in
The decision in this proceeding is posted on the Board's Web site at
This action will not significantly affect either the quality of the human environment or the conservation of energy resources.
By the Board, Chairman Elliott, Vice Chairman Begeman, and Commissioner Mulvey.
The Department of the Treasury will submit the following information collection requests to the Office of Management and Budget (OMB) for review and clearance in accordance with the Paperwork Reduction Act of 1995, Public Law 104–13, on or after the date of publication of this notice.
Comments should be received on or before November 21, 2013 to be assured of consideration.
Send comments regarding the burden estimate, or any other aspect of the information collection, including suggestions for reducing the burden, to (1) Office of Information and Regulatory Affairs, Office of Management and Budget, Attention: Desk Officer for Treasury, New Executive Office Building, Room 10235, Washington, DC 20503, or email at
Copies of the submission(s) may be obtained by calling (202) 622–1295, email at
The Department of the Treasury will submit the following information collection request to the Office of Management and Budget (OMB) for review and clearance in accordance with the Paperwork Reduction Act of 1995, Public Law 104–13, on or after the date of publication of this notice.
Comments should be received on or before November 21, 2013 to be assured of consideration.
Send comments regarding the burden estimate, or any other aspect of the information collection, including suggestion for reducing the burden, to (1) Office of Information and Regulatory Affairs, Office of Management and Budget, Attention: Desk Officer for Treasury, New Executive Office Building, Room 10235, Washington, DC 20503, or email at
Copies of the submission(s) may be obtained by calling (202) 927–5331, email at
Notice is hereby given, pursuant to 5 U.S.C. App. 2, § 10(a)(2), that a meeting will be held at the Hay-Adams Hotel, 16th Street and Pennsylvania Avenue, NW.,Washington, DC, on November 5, 2013 at 11:30 a.m. of the following debt management advisory committee:
Treasury Borrowing Advisory Committee of The Securities Industry and Financial Markets Association.
The agenda for the meeting provides for a charge by the Secretary of the Treasury or his designate that the Committee discuss particular issues and conduct a working session. Following the working session, the Committee will present a written report of its recommendations. The meeting will be closed to the public, pursuant to 5 U.S.C. App. 2, 10(d) and Public Law 103–202, § 202(c)(1)(B)(31 U.S.C. 3121 note).
This notice shall constitute my determination, pursuant to the authority placed in heads of agencies by 5 U.S.C. App. 2, 10(d) and vested in me by Treasury Department Order No. 101–05, that the meeting will consist of discussions and debates of the issues presented to the Committee by the Secretary of the Treasury and the making of recommendations of the
Although the Treasury's final announcement of financing plans may not reflect the recommendations provided in reports of the Committee, premature disclosure of the Committee's deliberations and reports would be likely to lead to significant financial speculation in the securities market. Thus, this meeting falls within the exemption covered by 5 U.S.C. 552b(c)(9)(A).
Treasury staff will provide a technical briefing to the press on the day before the Committee meeting, following the release of a statement of economic conditions and financing estimates. This briefing will give the press an opportunity to ask questions about financing projections. The day after the Committee meeting, Treasury will release the minutes of the meeting, any charts that were discussed at the meeting, and the Committee's report to the Secretary.
The Office of Debt Management is responsible for maintaining records of debt management advisory committee meetings and for providing annual reports setting forth a summary of Committee activities and such other matters as may be informative to the public consistent with the policy of 5 U.S.C. 552(b). The Designated Federal Officer or other responsible agency official who may be contacted for additional information is Fred Pietrangeli, Director for Office of Debt Management (202) 622–1876.
Office of the Comptroller of the Currency, Treasury (OCC).
Notice.
The OCC, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to comment on this continuing information collection, as required by the Paperwork Reduction Act of 1995. Under the Paperwork Reduction Act, Federal agencies are required to publish notice in the
The OCC is soliciting comment on a proposed new regulatory reporting requirement for national banks and Federal savings associations titled, “Company-Run Annual Stress Test Reporting Template and Documentation for Covered Institutions with Total Consolidated Assets of $10 Billion to $50 Billion under the Dodd-Frank Wall Street Reform and Consumer Protection Act.” The proposal describes the scope of reporting and the proposed reporting requirements.
Comments must be received by November 21, 2013.
Because paper mail in the Washington, DC area and at the OCC is subject to delay, commenters are encouraged to submit comments by email if possible. Comments may be sent to: Legislative and Regulatory Activities Division, Office of the Comptroller of the Currency, Attention: 1557–0311, 400 7th Street SW., Suite 3E–218, Mail Stop 9W–11, Washington, DC 20219. In addition, comments may be sent by fax to (571) 465–4326 or by electronic mail to
Additionally, please send a copy of your comments by mail to: OCC Desk Officer, 1557–0237, U.S. Office of Management and Budget, 725 17th Street NW., #10235, Washington, DC 20503, or by fax to (202) 395–6974.
You can request additional information from or a copy of the collection from Johnny Vilela or Mary H. Gottlieb, Clearance Officers, (202) 649–5490, Legislative and Regulatory Activities Division, Office of the Comptroller of the Currency, 400 7th Street SW., Suite 3E–218, Mail Stop 9W–11, Washington, DC 20219. In addition, copies of the templates referenced in this notice can be found on the OCC's Web site under Tools and Forms (
In compliance with 44 U.S.C. 3507, the OCC has submitted the following proposed collection of information to OMB for review and clearance.
Section 165(i)(2) of the Dodd-Frank Wall Street Reform and Consumer Protection Act
The OCC intends to use the data collected through this proposal to assess the reasonableness of the stress test results of covered institutions and to provide forward-looking information to the OCC regarding a covered institution's capital adequacy. The OCC also may use the results of the stress tests to determine whether additional analytical techniques and exercises could be appropriate to identify, measure, and monitor risks at the covered institution. The stress test results are expected to support ongoing improvement in a covered institution's stress testing practices with respect to its internal assessments of capital adequacy and overall capital planning.
The Dodd-Frank Act stress testing (DFAST) requirements apply to all covered institutions, but the OCC recognizes that many covered institutions with consolidated total assets of $50 billion or more have been subject to existing stress testing requirements under the Board's Comprehensive Capital Analysis and Review (CCAR). The OCC also recognizes that these institutions' stress tests will be applied to more complex portfolios and therefore warrant a broader set of reports to adequately capture the results of the company-run stress tests. These reports necessarily will require more detail than would be appropriate for smaller, less complex institutions. Therefore, the OCC has decided to specify separate reporting templates for covered institutions with total consolidated assets between $10 and $50 billion and for covered institutions with total consolidated assets of $50 billion or more.
While the general reporting categories are the same (income statement, balance sheet and capital), the level of granularity for individual reporting items is less for $10 to $50 billion institutions. For example, accounting for provisions by category is not required, and less detail is required for commercial and industrial lending. Because smaller banks with assets of $10 to $50 billion generally have less complex balance sheets, the OCC believes that highly detailed reporting is not warranted, and so the OCC is not requiring supplemental schedules on such areas as retail balances, securities and trading, operational risk, and pre-provision net revenue (PPNR).
The OCC has worked closely with the Board and the Federal Deposit Insurance Corporation (FDIC) to make the agencies' respective rules implementing the annual stress testing requirements under the Dodd-Frank Act consistent and comparable by requiring similar standards for scope of application, scenarios, data collection and reporting forms. The OCC also has worked to minimize any potential duplication of effort related to the annual stress test requirements. Additionally, the agencies have coordinated to allow for a unified results submission process.
The proposed OCC DFAST 10–50 reporting templates for institutions with assets of $10 to $50 billion are described below.
The “Dodd-Frank Annual Stress Test Reporting Results Template for Covered Institutions with Total Consolidated Assets Between $10 and $50 Billion” ($10–$50 results template) includes data collection worksheets necessary for the OCC to assess the company-run stress test results for baseline, adverse and severely adverse scenarios as well as any other scenario specified in accordance with regulations issued by the OCC. The $10-$50B results template includes worksheets that collect information on the following areas:
Each $10 to $50 billion covered institution reporting to the OCC using this form will be required to submit results for each scenario provided to covered institutions in accordance with regulations implementing Section 165(i)(2) as specified by the OCC.
The income statement worksheet collects data for the quarter preceding the planning horizon and for each quarter of the planning horizon for the stress test on projected losses and revenues in the following categories:
Memoranda items:
This worksheet provides information used to assess losses and revenues that covered institutions can sustain in baseline, adverse and severely adverse stress scenarios.
The balance sheet worksheet collects data for the quarter preceding the planning horizon and for each quarter of the planning horizon for the stress test on projected equity capital, as well as on assets and liabilities in the following categories:
The OCC intends to use this worksheet to assess the projected changes in assets and liabilities that a covered institution can sustain in baseline, adverse and severely adverse stress scenarios. This worksheet will also be used to assess the revenue and loss projections identified in the income statement worksheet.
The capital worksheet, which is appended to the balance sheet worksheet, collects data for the quarter preceding the planning horizon and for each quarter of the planning horizon for the stress test on the following areas:
Additionally, the Summary Schedule captures projections for regulatory capital ratios over the planning horizon by scenario.
The OCC intends to use these worksheets to assess the impact on capital of the projected losses and projected changes in assets that the covered institution can sustain in a stressed scenario. In addition to reviewing the worksheet in the context of the balance sheet and income statement projections, the OCC also intends to use this worksheet in assessing capital planning processes for each covered institution.
To conduct the stress test required under this rule, a covered institution may need to project additional economic and financial variables to estimate losses or revenues for some or all of its portfolios. In such a case, the covered institution is required to complete the DFAST Scenario Variables template for each scenario where such additional variables are used to conduct the stress test. Each scenario worksheet collects the variable name (matching that reported on the Scenario Variable Definitions worksheet), the actual value of the variable during the third quarter of the reporting year, and the projected value of the variable for nine future quarters.
Covered institutions must submit clear documentation in support of the projections included in the worksheets to support efficient and timely review of annual stress test results by the OCC. The supporting documentation should be submitted electronically and is not expected to be reported in the workbooks used for required data reporting. This supporting documentation must describe the types of risks included in the stress test; describe clearly the methodology used to produce the stress test projections; describe the methods used to translate the macroeconomic factors into a covered institution's projections; and also include an explanation of the most significant causes for the changes in regulatory capital ratios. The supporting documentation also should address the impact of anticipated corporate events, including mergers, acquisitions or divestitures of business lines or entities, and changes in strategic direction, and should describe how such changes are reflected in stress test results, including the impact on estimates of losses, expenses and revenues, net interest margins, non-interest income items, and balance sheet amounts.
Where company-specific assumptions are made that differ from the broad macroeconomic assumptions incorporated in stress scenarios provided by the OCC, the documentation also must describe such assumptions and how those assumptions relate to reported projections. Where historical relationships are relied upon, the covered institutions must describe the historical data and provide the basis for the expectation that these relationships would be maintained in each scenario, particularly under adverse and severely adverse conditions.
In the
Some commenters expressed concern about having to submit stress testing results in a Call Report-type format, noting that their existing stress testing software was not developed with such a format in mind and asking for less detailed reporting forms. These commenters requested that the agencies consider further delaying implementation of the reporting requirements and/or limiting the report submissions to the OCC DFAST 10–50 summary schedule. The OCC has determined that using reporting templates modeled on the Call Report is the best solution because of familiarity with this format by the OCC, covered institutions and the public, particularly when mandatory public disclosure of summary results under the severely adverse scenario becomes effective in 2015. The OCC DFAST 10–50 results template, aligned to the Call Report, provides a format that is well understood and utilized by the industry. Therefore, the OCC believes that the reporting requirements will not place undue burden on institutions' ability to report stress test results. Using the Call Report format would also ensure a high level of consistency and facilitate assessment of the results. The OCC has already delayed the application of the stress testing rules for the $10–$50 billion covered institutions, in part so that they would have time to create the necessary infrastructure to submit the appropriate stress testing results.
Two commenters expressed concern about the differences among stress testing templates used to respond to different stress testing requirements and about the burden some banking organizations (companies with $50 billion or more in assets that control subsidiaries with $10–50 billion in assets) might face in having to prepare multiple sets of templates. The OCC notes that the final OCC DFA stress testing rule allows such subsidiaries to file the same template as filed by its parent. Per the final OCC DFA stress testing rule, “any $10 to $50 billion covered institution that elects to apply the requirements of an over $50 billion covered institution shall remain subject to the requirements applicable to an over $50 billion covered institution until otherwise approved by the OCC.”
One commenter suggested the application of generalized, bank-developed loss assumptions for immaterial portfolios. The commenter also noted that an immaterial portfolio exception is allowed for firms with $50 billion or more assets in stress testing submissions. The OCC has considered the burden of calculating losses for immaterial portfolios for companies with $10–$50 billion in assets and determined that providing a safe harbor that defines immaterial portfolios, where no or little consideration of the risk of these portfolios is undertaken, would be contrary to the purpose of a company-run stress test and could unintentionally mask or cause
One commenter asked for clarification regarding the calculation and reporting of regulatory capital and risk-weighted assets (RWAs), noting the expectation that capital and RWA calculations and definitions would change over the planning horizon as new rules are implemented (specifically noting new definitions when the Basel III final rule is adopted). In addition, this commenter also requested clarification on the calculation of tier 1 non-common capital elements.
OCC staff acknowledges that tier 1 common equity and non-common capital elements for institutions with total assets of less than $50 billion were not defined by regulation or rule prior to the final rule recently adopted to implement Basel III.
Accordingly, the OCC removed tier 1 common and non-common capital line items, and the associated equity ratios, from the DFAST 10–50 results template for the 2013 stress test cycle. The final template requires covered institutions to report capital and RWAs for the entire planning horizon using the regulatory capital rules and definitions that are applicable on the “as of” date of each report for this initial reporting submission. For the 2013 stress testing cycle institutions should use the OCC's applicable risk-based capital rules as they are effective as of September 30, 2013.
Two commenters argued that the level of detail demanded by the templates was excessive. These commenters stated that separating 1–4 family construction loans from all other construction loans would require more detailed reporting for the OCC DFAST 10–50 results template than what is required for firms subject to CCAR, and firms with $50 billion or more in assets that report the DFAST 14–A form. While the templates for firms with $50 billion or more in assets do not segment 1–4 family construction loans, that specific data item is required for these firms on both the FR Y–14Q and M input data reports. More importantly, the OCC believes this data item is particularly relevant to these smaller organizations which reported material concentrations in this product type and given that a significant amount of the industry's losses during the most recent economic downturn emanated from this product. These data would provide necessary information for the institutions to effectively manage risk and appropriately assess and plan for their capital needs.
One commenter also argued that requiring separate line items for retail and wholesale funding would add unnecessary complexity and burden. The OCC, however, believes it is necessary to maintain these separate items. The breakdown of deposits between retail and wholesale is easily facilitated through Call Report data and the proposed OCC DFAST 10–50 instructions indicate that institutions should use the Call Report segmentation definitions to project these line items. In addition, retail and wholesale funding have historically reacted differently under stressed economic conditions and projecting the retail and wholesale deposit structure throughout the planning horizon as proposed would provide useful information to the institutions and regulators with respect to how an institution internally assesses capital adequacy, plans for their capital needs, and manages risk.
One commenter stated that gathering available-for-sale (AFS) and held-to-maturity (HTM) balances for U.S. government obligations and obligations of government-sponsored entities (GSE) would require more detailed reporting for the OCC DFAST 10–50 templates than what is required for the DFAST 14A. Another commenter suggested separating GSE obligations from other government obligations on the OCC DFAST 10–50 balance sheet consistent with the treatment on the Call Report income statement. While the DFAST 14A collects only total AFS and HTM balances on the balance sheet worksheet, this reporting series requires more granular data than the OCC DFAST 10–50 on government securities through other schedules within the DFAST 14A report. The reporting requirements for the Call Report balance sheet require more detailed information on AFS and HTM GSE obligations relative to the reporting requirements for the OCC DFAST 10–50. Gathering AFS and HTM balances for U.S. government obligations and obligations of GSEs would provide relevant and required data to project net income and regulatory capital over the planning horizon.
Commenters also favored the elimination of several line items. Several commenters stated that the level of detail required by the balance sheet memoranda items were not informative or necessary to the loss estimation process, or entailed more detail than what was required by the DFAST 14A. Specific memoranda items cited by commenters included troubled debt restructurings and loans secured by 1–4 family in foreclosure. Based on this comment, the OCC also evaluated the utility of another balance sheet memoranda item: Loans and leases guaranteed by either U.S. government or GSE guarantees (i.e., non-FDIC loss sharing agreements). The OCC agrees that these memoranda data items are already captured within the OCC
Commenters also requested that common stock, retained earnings, surplus, and other equity components be reported as a single line item. The OCC agrees with this comment and has combined the aforementioned capital components into one line item to be reported as “equity capital.”
One commenter noted that separately modeling average rates for each type of deposit would also involve a significant amount of work and potentially affect other company-run models. The OCC agrees that the average rate information is not a necessary data input needed for an institution to project losses, pre-provision net revenue, or capital. Further, the additional burden placed on institutions to calculate the projected average rates could unnecessarily distract institutions from the primary goal of the annual company-run stress test—to effectively estimate the possible impact of an economic downturn on a firm's capital position in order to plan for capital needs and identify and manage risk. Therefore, the OCC has removed all average rate memoranda items on the balance sheet. This change is consistent with the OCC's goal of making the DFAST 10–50 report similar to the Call Report and of reducing new burden on covered institutions.
Two commenters favored the elimination of the income statement item for Gains and Losses on Other Real Estate Owned (OREO). One commenter noted that this element could effectively be combined with forecasting of other OREO expenses. The other commenter stated that the level of detail for this element is more granular than what is required for the DFAST 14A template. The OCC notes that gains or losses on OREO are captured in the pre-provision net revenue metrics worksheet of the DFAST 14A template; therefore, this requirement would not be more burdensome for the $10–$50 billion firms. Nevertheless, the OCC has eliminated this item since gains and losses on OREO would already be captured within the non-interest income statement memoranda item “itemize and describe amounts greater than 15% of non-interest income” or in the “itemize and describe amounts greater than 15% of non-interest expense” when the amount meets the 15% threshold required by the proposed OCC DFAST 10–50 results template.
In response to a few technical comments received, the OCC has adjusted the templates and instructions accordingly. These changes include correction of formulaic errors; correction of Micro Data Reference Manual (MDRM) errors; clarified reporting instructions for income statement memoranda items; and more detailed technical reporting instructions, including the elimination of the contact information schedule as this information would be collected through the results template cover sheet and related data collection application.
The burden for each $10 to $50 billion covered institution that completes the DFAST 10–50 results template is estimated to be 440 hours for a total of 14,520 hours. This burden includes 20 hours to input these data and 420 hours for work related to modeling efforts. The estimated burden for each $10 to $50 billion covered institution that completes the annual DFAST scenarios variables template is estimated to be 24 hours for a total of 792 hours. Start up costs for new respondents are estimated to be 93,600 hours and ongoing revisions for existing firms, 4,160 hours.
Comments continue to be invited on:
(a) Whether the collection of information is necessary for the proper performance of the functions of the OCC, including whether the information has practical utility;
(b) The accuracy of the OCC's estimate of the burden of the collection of information;
(c) Ways to enhance the quality, utility, and clarity of the information to be collected;
(d) Ways to minimize the burden of the collection on respondents, including through the use of automated collection techniques or other forms of information technology; and,
(e) Estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide information.
Office of Foreign Assets Control, Treasury.
Notice.
The U.S. Department of the Treasury 's Office of Foreign Assets Control (“OFAC”) is publishing the names of two individuals and one entity whose property and interests in property have been blocked pursuant to the Foreign Narcotics Kingpin Designation Act (“Kingpin Act”) (21 U.S.C. 1901–1908, 8 U.S.C. 1182).
The designation by the Director of OFAC of the two individuals and one entity identified in this notice pursuant to section 805(b) of the Kingpin Act is effective on September 30, 2013.
Assistant Director, Sanctions Compliance & Evaluation, Office of Foreign Assets Control, U.S. Department of the Treasury, Washington, DC 20220, Tel: (202) 622–2490.
This document and additional information concerning OFAC are available on OFAC's Web site at
The Kingpin Act became law on December 3, 1999. The Kingpin Act establishes a program targeting the activities of significant foreign narcotics traffickers and their organizations on a worldwide basis. It provides a statutory framework for the imposition of sanctions against significant foreign narcotics traffickers and their organizations on a worldwide basis, with the objective of denying their businesses and agents access to the U.S. financial system and the benefits of trade and transactions involving U.S. companies and individuals.
The Kingpin Act blocks all property and interests in property, subject to U.S. jurisdiction, owned or controlled by significant foreign narcotics traffickers as identified by the President. In addition, the Secretary of the Treasury, in consultation with the Attorney General, the Director of the Central Intelligence Agency, the Director of the Federal Bureau of Investigation, the Administrator of the Drug Enforcement Administration, the Secretary of
On September 30, 2013, the Director of OFAC designated the following two individuals and one entity whose property and interests in property are blocked pursuant to section 805(b) of the Kingpin Act.
Office of Foreign Assets Control, Treasury.
Notice.
The Department of the Treasury's Office of Foreign Assets Control (“OFAC”) is publishing the names of three individuals and three entities whose property and interests in property have been unblocked pursuant to the Foreign Narcotics Kingpin Designation Act (“Kingpin Act”) (21 U.S.C. 1901–1908, 8 U.S.C. 1182).
The unblocking and removal from the list of Specially Designated Nationals and Blocked Persons (“SDN List”) of three individuals and three entities identified in this notice whose property and interests in property were blocked pursuant to the Kingpin Act, is effective on September 26, 2013.
Assistant Director, Sanctions Compliance & Evaluation, Department of the Treasury, Office of Foreign Assets Control, Washington, DC 20220, Tel: (202) 622–2420.
This document and additional information concerning OFAC are available from OFAC's Web site at
On December 3, 1999, the Kingpin Act was signed into law by the President of the United States. The Kingpin Act provides a statutory framework for the President to impose sanctions against significant foreign narcotics traffickers and their organizations on a worldwide basis, with the objective of denying their businesses and agents access to the U.S. financial system and to the benefits of trade and transactions involving U.S. persons and entities.
The Kingpin Act blocks all property and interests in property, subject to U.S. jurisdiction, owned or controlled by significant foreign narcotics traffickers as identified by the President. In addition, the Secretary of the Treasury consults with the Attorney General, the Director of the Central Intelligence Agency, the Director of the Federal Bureau of Investigation, the Administrator of the Drug Enforcement Administration, the Secretary of Defense, the Secretary of State, and the Secretary of Homeland Security when designating and blocking the property or interests in property, subject to U.S. jurisdiction, of persons or entities found to be: (1) materially assisting in, or providing financial or technological support for or to, or providing goods or services in support of, the international narcotics trafficking activities of a person designated pursuant to the Kingpin Act; (2) owned, controlled, or directed by, or acting for or on behalf of, a person designated pursuant to the Kingpin Act; and/or (3) playing a significant role in international narcotics trafficking.
On September 26, 2013, the Director of OFAC removed from the SDN List the three individuals and three entities listed below, whose property and interests in property were blocked pursuant to the Kingpin Act:
Individuals:
Entities:
Office of Foreign Assets Control, Treasury.
Notice.
The Department of the Treasury's Office of Foreign Assets Control (“OFAC”) is publishing the names of seven individuals and three entities whose property and interests in property have been unblocked pursuant to Executive Order 12978 of October 21, 1995, “Blocking Assets and Prohibiting Transactions With Significant Narcotics Traffickers”.
The unblocking and removal from the list of Specially Designated Nationals and Blocked Persons (“SDN List”) of seven individuals and three entities identified in this notice whose property and interests in property were blocked pursuant to Executive Order 12978 of October 21, 1995, is effective on September 26, 2013.
Assistant Director, Sanctions Compliance & Evaluation, Department of the Treasury, Office of Foreign Assets Control, Washington, DC 20220, Tel: (202) 622–2490.
This document and additional information concerning OFAC are available from OFAC's Web site (
On October 21, 1995, the President, invoking the authority,
Section 1 of the Order blocks, with certain exceptions, all property and interests in property that are in the United States, or that hereafter come within the United States or that are or hereafter come within the possession or control of United States persons, of: (1) the foreign persons listed in an Annex to the Order; (2) any foreign person determined by the Secretary of Treasury, in consultation with the Attorney General and the Secretary of State: (a) to play a significant role in international narcotics trafficking centered in Colombia; or (b) to materially assist in, or provide financial or technological support for or goods or services in support of, the narcotics trafficking activities of persons designated in or pursuant to the Order; and (3) persons determined by the Secretary of the Treasury, in consultation with the Attorney General and the Secretary of State, to be owned or controlled by, or to act for or on behalf of, persons designated pursuant to the Order.
On September 26, 2013, the Director of OFAC removed from the SDN List seven individuals and three entities listed below, whose property and interests in property were blocked pursuant to the Order:
Individuals:
Internal Revenue Service (IRS), Treasury.
Notice and request for comments.
The Department of the Treasury, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this
Written comments should be received on or before December 23, 2013 to be assured of consideration.
Direct all written comments to Yvette Lawrence, Internal Revenue Service, Room 6129, 1111 Constitution Avenue NW., Washington, DC 20224.
Requests for additional information or copies of regulation the form and instructions should be directed to Kerry Dennis at Internal Revenue Service, Room 6129, 1111 Constitution Avenue NW., Washington DC 20224, or through the Internet, at
The following paragraph applies to all of the collections of information covered by this notice:
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.