Vol. 80 Thursday, No. 242 December 17, 2015
Pages 78649–78956
OFFICE OF THE FEDERAL REGISTER
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Contents Federal Register Vol. 80, No. 242
Thursday, December 17, 2015
Agricultural Marketing Service National Center for Natural Products Research, 78766– PROPOSED RULES 78767 Tart Cherries Grown in the States of Michigan, et al.: Manufacturers of Controlled Substances; Registrations: Free and Restricted Percentages for the 2015–16 Crop Austin Pharma, LLC, 78765 Year for Tart Cherries, 78677–78681 Economic Development Administration Agriculture Department NOTICES See Agricultural Marketing Service Trade Adjustment Assistance Eligibility; Petitions, 78708
Army Department Employment and Training Administration NOTICES NOTICES Agency Information Collection Activities; Proposals, Agency Information Collection Activities; Proposals, Submissions, and Approvals, 78721–78722 Submissions, and Approvals, 78768–78769 Agency Information Collection Activities; Proposals, Centers for Disease Control and Prevention Submissions, and Approvals: NOTICES Equal Employment Opportunity in Apprenticeship Agency Information Collection Activities; Proposals, Programs, 78772–78773 Submissions, and Approvals, 78736–78740 Occupational Code Assignment, 78769–78770 Guam Military Base Realignment Contractor Recruitment Commerce Department Standards, 78770–78772 See Economic Development Administration Energy Department See Foreign-Trade Zones Board See Federal Energy Regulatory Commission See Industry and Security Bureau NOTICES See International Trade Administration Charter Renewals: See National Oceanic and Atmospheric Administration Biological and Environmental Research Advisory Committee, 78723 Commodity Futures Trading Commission Nuclear Energy Advisory Committee, 78722–78723 PROPOSED RULES Meetings: Regulation Automated Trading, 78824–78948 Environmental Management Site-Specific Advisory NOTICES Board, Portsmouth, 78723–78724 Meetings; Sunshine Act, 78721 Fusion Energy Sciences Advisory Committee, 78723 Comptroller of the Currency State Energy Advisory Board; Open Teleconference, 78724 PROPOSED RULES Proposed Guidelines: Environmental Protection Agency Standards for Recovery Planning by Certain Large Insured PROPOSED RULES National Banks, Insured Federal Savings Protection of Stratospheric Ozone; Update to the Refrigerant Associations, and Insured Federal Branches, 78681– Management Requirements Under the Clean Air Act: 78689 Extension of Comment Period, 78705 NOTICES Consumer Product Safety Commission Pesticide Product Registrations: RULES Application for a New Active Ingredient, 78730 Toys: Applications for New Uses, 78729–78730 Determination Regarding Heavy Elements Limits for Protection of Water Quality from Forest Road Discharges, Unfinished and Untreated Wood, 78651–78657 78728–78729 Defense Department Farm Credit Administration See Army Department RULES NOTICES Federal Agricultural Mortgage Corporation Funding and Meetings: Fiscal Affairs; CFR Correction, 78650 Defense Acquisition University Board of Visitors, 78722 Privacy Act Regulations; CFR Correction, 78649–78650 Drug Enforcement Administration Federal Aviation Administration RULES RULES Schedules of Controlled Substances: Changes to Production Certificates and Approvals; Placement of Eluxadoline into Schedule IV; Correction, Correction, 78650–78651 78657 PROPOSED RULES NOTICES Airworthiness Directives: Importers of Controlled Substances; Applications: Saab AB, Saab Aeronautics (formerly known as Saab AB, Fisher Clinical Services, Inc., 78766 Saab Aerosystems), 78702–78704 Manufacturers of Controlled Substances; Applications: Saab AB, Saab Aeronautics (formerly known as Saab AB, Johnson Matthey, Inc., 78765–78766 Saab Aerosystems) Airplanes, 78699–78701
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NOTICES Meetings: Petitions for Exemptions; Summaries: Sport Fishing and Boating Partnership Council; AeroCine, LLC, 78815–78816 Teleconference, 78752–78753 Release of Airport Property: Orlando Executive Airport, Orlando, FL, 78816 Food and Drug Administration NOTICES Federal Communications Commission Agency Information Collection Activities; Proposals, NOTICES Submissions, and Approvals: Meetings: Guidance for Industry on Oversight of Clinical Open Commission Meeting, 78730–78732 Investigations, A Risk-Based Approach to Monitoring, 78745–78746 Federal Deposit Insurance Corporation Guidance for Industry on Safety Labeling Changes, NOTICES 78740–78741 Meetings; Sunshine Act, 78732 Determination That Drug Products, Were Not Withdrawn From Sale for Reasons of Safety or Effectiveness: Federal Energy Regulatory Commission Vancomycin Hydrochloride Injection, 78747–78748 NOTICES Guidance for Industry: Applications: Safety Assessment for Investigational New Drug Paulsboro Natural Gas Pipeline Co., LLC, 78726 Application Safety Reporting; Availability, 78743– Combined Filings, 78724–78726 78745 Environmental Reviews: Medical Device Single Audit Program Operational Phase; Dominion Carolina Gas Transmission; Columbia to Announcements: Eastover Project, 78727–78728 Medical Device ISO 13485:2003 Voluntary Audit Report License Terminations: Pilot Program; Termination of Pilot Program, 78741– David O. Harde, 78726–78727 78742 Meetings: Federal Highway Administration Twentieth Food and Drug Administration International NOTICES Separation Science Society Symposium on the Environmental Impact Statements; Availability, etc.: Interface of Regulatory and Analytical Sciences for Pennington County, SD; Pennington County, ME, 78816– Biotechnology Health Products, 78742–78743 78817 Foreign-Trade Zones Board Federal Housing Finance Agency NOTICES PROPOSED RULES Reorganizations under Alternative Site Framework: Acquired Member Assets, 78689–78699 Foreign-Trade Zone 147, Berks County, PA, 78708–78709
Federal Housing Finance Board Geological Survey PROPOSED RULES NOTICES Acquired Member Assets, 78689–78699 Agency Information Collection Activities; Proposals, Submissions, and Approvals, 78753–78754 Federal Maritime Commission NOTICES Health and Human Services Department Agreements Filed, 78732–78733 See Centers for Disease Control and Prevention See Food and Drug Administration Federal Reserve System See Health Resources and Services Administration NOTICES Formations of, Acquisitions by, and Mergers of Bank Health Resources and Services Administration Holding Companies, 78733 NOTICES Agency Information Collection Activities; Proposals, Federal Trade Commission Submissions, and Approvals, 78748–78749 NOTICES Requests for Early Terminations of the Waiting Period Housing and Urban Development Department under the Premerger Notification Rules, 78733–78736 NOTICES Statutorily Mandated Designations of Difficult Development Financial Crimes Enforcement Network Areas and Qualified Census Tracts: NOTICES Revision of Effective Date for 2015 Designations, 78749– Requests for Nominations: 78751 Bank Secrecy Act Advisory Group, 78819–78820 Industry and Security Bureau Fish and Wildlife Service RULES PROPOSED RULES Definitions of Terms; CFR Correction, 78651 Migratory Bird Subsistence Harvest in Alaska; Harvest Recordkeeping; CFR Correction, 78651 Regulations for Migratory Birds in Alaska during the 2016 Season, 78950–78956 Interior Department NOTICES See Fish and Wildlife Service Endangered and Threatened Wildlife and Plants: See Geological Survey Initiation of 5-Year Status Reviews of One Listed Animal See Ocean Energy Management Bureau and Five Listed Plant Species, 78751–78752 See Reclamation Bureau
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See Surface Mining Reclamation and Enforcement Office Fisheries of the Exclusive Economic Zone Off Alaska: NOTICES Other Hook-and-Line Fishery by Catcher Vessels in the Senior Executive Service Performance Review Board Gulf of Alaska, 78675–78676 Appointments, 78754–78755 PROPOSED RULES Fisheries of the Exclusive Economic Zone Off Alaska: Internal Revenue Service Observer Coverage Requirements for Small Catcher/ NOTICES Processor in the Gulf of Alaska and Bering Sea and Agency Information Collection Activities; Proposals, Aleutian Islands Groundfish Fisheries, 78705–78707 Submissions, and Approvals, 78820 NOTICES Endangered and Threatened Species: International Trade Administration Recovery Plans, 78719–78721 NOTICES Indirect Cost Rates for the Damage Assessment, Antidumping or Countervailing Duty Investigations, Orders, Remediation, and Restoration Program for Fiscal Year or Reviews: 2014, 78718–78719 Certain Pasta from Italy, 78710 Meetings: Drawn Stainless Steel Sinks from the People’s Republic Fisheries of the Gulf of Mexico; Southeast Data, of China: Partial Rescission of Antidumping Duty Assessment, and Review, 78718 Administrative Review; 2014–2015, 78709–78710 Pacific Fishery Management Council, 78717–78718 Permits: International Trade Commission Taking of Threatened or Endangered Marine Mammals NOTICES Incidental to Commercial Fishing Operations, 78711– Investigations; Determinations, Modifications, and Rulings, 78717 etc.: Nuclear Regulatory Commission Certain Computer Cables, Chargers, Adapters, Peripheral Devices and Packaging Containing the Same, 78763– NOTICES 78764 Exemptions: Probable Economic Effects of Certain Modifications to the Entergy Nuclear Operations, Inc., Vermont Yankee CAFTA–DR Rules of Origin, 78764–78765 Nuclear Power Station, 78776–78788 Occupational Safety and Health Administration Justice Department NOTICES See Drug Enforcement Administration Agency Information Collection Activities; Proposals, NOTICES Submissions, and Approvals: Agency Information Collection Activities; Proposals, Hexavalent Chromium Standards, 78775–78776 Submissions, and Approvals: Standard on 4, 4′- Methylenedianiline (MDA) in Body Worn Camera Supplement to the Law Enforcement Construction, 78773–78775 Management and Administrative Statistics Survey, 78767–78768 Ocean Energy Management Bureau Voluntary Magazine Questionnaire For Agencies/Entities NOTICES Who Store Explosive Materials, 78767 Agency Information Collection Activities; Proposals, Submissions, and Approvals: Labor Department Renewable Energy and Alternate Uses of Existing See Employment and Training Administration Facilities on the Outer Continental Shelf, 78756– See Occupational Safety and Health Administration 78763
National Credit Union Administration Postal Regulatory Commission RULES NOTICES Administrative Actions, Adjudicative Hearings, Rules of New Postal Products, 78788–78790 Practice and Procedure, and Investigations; CFR Correction, 78650 Postal Service NOTICES NOTICES Meetings; Sunshine Act, 78776 Product Changes: First-Class Package Service Negotiated Service National Highway Traffic Safety Administration Agreement, 78790 RULES Federal Motor Vehicle Safety Standard; Lamps, Reflective Reclamation Bureau Devices, and Associated Equipment, 78664–78670 NOTICES NOTICES Change in Discount Rate for Water Resources Planning, Petitions for Temporary Exemption: 78763 Columbia Body Manufacturing Co., 78817–78819 Securities and Exchange Commission National Oceanic and Atmospheric Administration NOTICES RULES Agency Information Collection Activities; Proposals, Fisheries of the Caribbean, Gulf of Mexico, and South Submissions, and Approvals, 78802–78803, 78810– Atlantic: 78811 Coastal Migratory Pelagic Resources in the Gulf of Self-Regulatory Organizations; Proposed Rule Changes: Mexico and Atlantic Region; Framework Amendment BATS Exchange, Inc., 78800–78802 3, 78670–78675 BATS Y-Exchange, Inc., 78804–78806
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C2 Options Exchange, Inc., 78793–78794 RULES Chicago Board Options Exchange, Inc., 78794–78797, Uniform Administrative Requirements, Cost Principles, and 78799–78800, 78803–78804 Audit Requirements for Federal Awards, 78649 NASDAQ OMX PHLX, LLC, 78797–78799 NYSE Arca, Inc., 78791–78793, 78806–78810 Treasury Department See Comptroller of the Currency Social Security Administration See Financial Crimes Enforcement Network NOTICES See Internal Revenue Service Agency Information Collection Activities; Proposals, Submissions, and Approvals, 78811–78812 Veterans Affairs Department NOTICES State Department Agency Information Collection Activities; Proposals, PROPOSED RULES Submissions, and Approvals: Privacy Act; Exemptions, 78704–78705 Application for VA Education Benefits, Application for NOTICES Family Member to Use Transferred Benefits, etc., Privacy Act; Systems of Records, 78812–78814 78820–78821
Surface Mining Reclamation and Enforcement Office RULES Separate Parts In This Issue Regulatory Program: Missouri, 78657–78664 Part II Commodity Futures Trading Commission, 78824–78948 Surface Transportation Board NOTICES Part III Temporary Trackage Rights Exemptions: Interior Department, Fish and Wildlife Service, 78950– BNSF Railway Co.; Union Pacific Railroad Co., 78819 78956
Susquehanna River Basin Commission NOTICES Reader Aids Projects Approved for Consumptive Uses of Water, 78814– Consult the Reader Aids section at the end of this issue for 78815 phone numbers, online resources, finding aids, and notice of recently enacted public laws. Transportation Department To subscribe to the Federal Register Table of Contents See Federal Aviation Administration LISTSERV electronic mailing list, go to http:// See Federal Highway Administration listserv.access.gpo.gov and select Online mailing list See National Highway Traffic Safety Administration archives, FEDREGTOC-L, Join or leave the list (or change See Surface Transportation Board settings); then follow the instructions.
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CFR PARTS AFFECTED IN THIS ISSUE
A cumulative list of the parts affected this month can be found in the Reader Aids section at the end of this issue.
2 CFR 1201...... 78649 7 CFR Proposed Rules: 930...... 78677 12 CFR 603...... 78649 652...... 78650 747...... 78650 Proposed Rules: 30...... 78681 995...... 78689 1201...... 78689 1268...... 78689 14 CFR 21...... 78650 45...... 78650 Proposed Rules: 39 (2 documents) ...... 78699, 78702 15 CFR 762...... 78651 772...... 78651 16 CFR 1251...... 78651 17 CFR Proposed Rules: 1...... 78824 38...... 78824 40...... 78824 170...... 78824 21 CFR 1308...... 78657 22 CFR Proposed Rules: 171...... 78704 30 CFR 925...... 78657 40 CFR Proposed Rules: 82...... 78705 49 CFR 18...... 78649 19...... 78649 571...... 78664 50 CFR 622...... 78670 679...... 78675 Proposed Rules: 92...... 78950 679...... 78705
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Rules and Regulations Federal Register Vol. 80, No. 242
Thursday, December 17, 2015
This section of the FEDERAL REGISTER SUPPLEMENTARY INFORMATION: The Office Transportation (MoDOT). The FHWA contains regulatory documents having general of Management and Budget (OMB) implementation guidance had stated applicability and legal effect, most of which published guidance titled ‘‘Uniform that 2 CFR 200.309 was ‘‘a significant are keyed to and codified in the Code of Administrative Requirements, Cost change to the Federal-aid highway Federal Regulations, which is published under Principles, and Audit Requirements for program because it will impose a period 50 titles pursuant to 44 U.S.C. 1510. Federal Awards’’ in 2 CFR part 200 on when project costs can be incurred, The Code of Federal Regulations is sold by December 26, 2013 (78 FR 78589), to which includes a project agreement start the Superintendent of Documents. Prices of improve the efficiency and effectiveness and end date. . . . The new provision new books are listed in the first FEDERAL of Federal financial assistance. That will require an end date to be included REGISTER issue of each week. guidance followed an advance notice of in the agreement after which no proposed guidance (77 FR 11778) and a additional costs may be incurred and notice of proposed guidance (78 FR are not eligible for reimbursement.’’ The DEPARTMENT OF TRANSPORTATION 7282). The guidance required that MoDOT commented that the Federal agencies promulgate a ‘‘requirement to monitor and track Office of the Secretary regulation implementing its policies and project end dates duplicates the efforts procedures. On December 19, 2014, the being performed to monitor and track 2 CFR Part 1201 Department and other agencies inactive projects.’’ The FHWA does not published a joint interim final rule to view the requirement in 2 CFR 49 CFR Parts 18 and 19 implement the guidance (79 FR 75871). 200.210(a)(5) and 200.309 that Federal [Docket No. OMB–2014–0006] In the joint interim final rule, the awards have end dates as duplicative of Department implemented the guidance other requirements on MoDOT. Instead, RIN 2105–AE33 through regulations at 2 CFR part 1201 the requirement is an additional internal and removed its previous regulations on control that complements existing Department of Transportation Federal awards at 49 CFR parts 18 and stewardship and oversight Regulatory Implementation of Office of 19. The OMB and the Department responsibilities held by State Management and Budget’s Uniform received comments in response to the departments of transportation. The Administrative Requirements, Cost joint interim final rule, but none of FHWA anticipates issuing additional Principles, and Audit Requirements for those comments were about the final guidance about using project agreement Federal Awards rule itself, 2 CFR part 1201, or 49 CFR end dates to improve funds part 18 or 19. Thus, the Department management. AGENCY: Office of the Secretary (OST), confirms that the changes to 2 CFR part Regulatory analyses and notices for U.S. Department of Transportation 1201 and 49 CFR parts 18 and 19 that (DOT). this final rule were published with the it published in the joint interim final joint interim final rule. ACTION: Final rule. rule are final. Although the Department did not For the reasons stated in the SUMMARY: On December 19, 2014, the receive any comments regarding the preamble, the Department of U.S. Department of Transportation, with substance of the joint interim final rule, Transportation adopts without change other Federal agencies, published a joint there were two comments submitted the addition of 2 CFR part 1201 and the interim final rule implementing the related to implementation guidance that removal and reservation of 49 CFR parts guidance titled ‘‘Uniform the Federal Highway Administration 18 and 19 that were published in the Administrative Requirements, Cost (FHWA) issued on December 4, 2014. joint interim final rule at 79 FR 75871 Principles, and Audit Requirements for First, we received a comment from the on December 19, 2014. Federal Awards’’ that the Office of Maryland State Highway Issued in Washington, DC, on November Management and Budget (OMB) Administration (SHA) seeking 30, 2015. published on December 26, 2013. While clarification of how FHWA expected Anthony R. Foxx, the Department received two comments State departments of transportation, as Secretary of Transportation. on related implementation guidance, to ‘‘pass-through entities,’’ to monitor and which we respond, the Department did [FR Doc. 2015–31076 Filed 12–16–15; 8:45 am] negotiate subrecipients’ indirect costs. BILLING CODE 4910–9X–P not receive any comments on the final Section D.1.b of Appendix VII to part rule implementing the OMB guidance. 200 states that ‘‘[w]here a non-Federal Therefore, this rule confirms that the entity only receives funds as a changes that the Department published subrecipient, the pass-through entity FARM CREDIT ADMINISTRATION in the interim final rule on December will be responsible for negotiating and/ 19, 2014, are final. or monitoring the subrecipient’s indirect 12 CFR Part 603 DATES: Effective December 17, 2015. costs.’’ The FHWA’s implementation FOR FURTHER INFORMATION CONTACT: guidance supports this requirement and Privacy Act Regulations Michael A. Smith, Office of the General does not add any additional oversight CFR Correction Counsel (C–10), U.S. Department of responsibilities for the SHA in Transportation, 1200 New Jersey negotiating or monitoring the In Title 12 of the Code of Federal Avenue SE., Washington, DC 20590, subrecipient’s indirect costs. Regulations, Parts 600 to 899, revised as (202) 366–2917, michael.a.smith@ Second, we received a comment from of January 1, 2015, on page 17, in dot.gov. the Missouri Department of § 603.350, remove the term ‘‘Section
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552a (l)(3)’’ and add ‘‘Section 552a an earlier implementation of the rule’s production certificate for the purpose of (i)(3)’’ in its place. provisions that allow production manufacturing and installing interface [FR Doc. 2015–31731 Filed 12–16–15; 8:45 am] approval holders to issue authorized components. The term ‘‘interface BILLING CODE 1505–01–D release documents for aircraft engines, component’’ is also specifically defined propellers, and articles. It also permits in § 21.1(a)(5). an earlier implementation date for Additionally, the final rule amends FARM CREDIT ADMINISTRATION production certificate holders to part 45 to exclude fixed-pitch wooden manufacture and install interface propellers from the requirement that a 12 CFR Part 652 components, and provides earlier relief propeller, propeller blade, or propeller from the current requirement that fixed- hub be marked using an approved Federal Agricultural Mortgage pitch wooden propellers be marked fireproof method. This exclusion allows Corporation Funding and Fiscal Affairs using an approved fireproof method. manufacturers to mark their products in CFR Correction DATES: The final rule published October a practical manner that takes into 1, 2015 (80 FR 59021), is effective account the inherent nature of wooden In Title 12 of the Code of Federal March 29, 2016, except for §§ 21.1(b)(1), propellers. Regulations, Parts 600 to 899, revised as 21.1(b)(5) through (9), 21.137(o), 21.142, Finally, the rule revises the definition of January 1, 2015, on page 344, in 21.147, and 45.11(c), which are effective of ‘‘airworthiness approval,’’ in appendix A to subpart B to part 652, in January 4, 2016. § 21.1(b)(1), by expanding it to account the table of contents, add ‘‘1.0 FOR FURTHER INFORMATION CONTACT: For for the issuance of an airworthiness Introduction.’’. technical questions concerning this approval in instances where an aircraft, [FR Doc. 2015–31730 Filed 12–16–15; 8:45 am] action, contact Priscilla Steward or aircraft engine, propeller, or article does BILLING CODE 1505–01–D Robert Cook, Aircraft Certification not conform to its approved design or Service, Production Certification may not be in a condition for safe Section, AIR–112, Federal Aviation operation at the time the airworthiness NATIONAL CREDIT UNION Administration, 800 Independence approval is generated and that ADMINISTRATION Avenue SW., Washington, DC 20591; nonconformity or condition is specified telephone (202) 267–1656; email: on the airworthiness approval 12 CFR Part 747 [email protected] or telephone: document. The FAA issued the final rule with an (202) 267–1590; email: robert.cook@ Administrative Actions, Adjudicative effective date of 180 days after its faa.gov. Hearings, Rules of Practice and publication in the Federal Register to Procedure, and Investigations SUPPLEMENTARY INFORMATION: allow sufficient time for industry Background compliance with new requirements CFR Correction contained in the rule. This effective In Title 12 of the Code of Federal On October 1, 2015, the final rule, date, however, also delayed the Regulations, Parts 600 to 899, revised as ‘‘Changes to Production Certificates and implementation date of certain of January 1, 2015, on page 918, in Approvals,’’ 80 FR 59021, was provisions that removed regulatory § 747.616, remove the term ‘‘Office of published in the Federal Register. In burdens that were no longer necessary the Controller’’ and add the term ‘‘Office that final rule the FAA revised the or appropriate in the current global of Chief Financial Officer’’ in its place. regulations pertaining to certification manufacturing environment. requirements for products and articles Accordingly, the FAA is amending the [FR Doc. 2015–31732 Filed 12–16–15; 8:45 am] in part 21 of title 14 of the Code of BILLING CODE 1505–01–P effective date of the final rule to January Federal Regulations (14 CFR) and 4, 2016 for the following sections: removed certain marking requirements • § 21.1(b)(1) which revises the in 14 CFR part 45 applicable to fixed- definition of airworthiness approval DEPARTMENT OF TRANSPORTATION pitch wooden propellers. The final rule • § 21.1(b)(5), which defines interface afforded production approval holders Federal Aviation Administration component (PAHs) a number of privileges not • § 21.137(o), which establishes currently permitted under current 14 CFR Parts 21 and 45 provisions for the issuance of regulations. authorized release documents by PAHs [Docket No. FAA–2013–0933; Amdt. Nos. To provide PAHs privileges similar to • § 21.142, which codifies provisions 21–98A, 45–29A] those afforded European and Canadian for the inclusion of interface approved manufacturers, § 21.137(o) of RIN 2120–AK20 components in a production limitation the final rule permits a PAH to issue record • Changes to Production Certificates authorized release documents for new § 21.147, which specifies the and Approvals; Correction aircraft engines, propellers, and articles requirements that must be met to amend that it produces, and also for used a production certificate to include AGENCY: Federal Aviation aircraft engines, propellers, and articles interface components Administration, DOT. it rebuilds or alters in accordance with • § 45.11(c), which excludes fixed- ACTION: Final rule; correction. § 43.3(j), provided it establishes an pitch wooden propellers from the FAA-approved process in its quality requirement that they be marked using SUMMARY: The Federal Aviation system for issuing those documents. an approved fireproof method. Administration (FAA) is correcting a Authorized release documents would The FAA also notes that Change 5 to final rule published on October 1, 2015. typically be issued using FAA Form the Maintenance Annex Guidance In that rule, the FAA amended its 8130–3, Airworthiness Release (MAG), which implements certain certification procedures and marking Certificate, Airworthiness Approval Tag. provisions of the Aviation Safety requirements for aeronautical products The final rule also allows a PAH that Agreement between the United States and articles. This action corrects the meets the requirements of § 21.147(c) to and the European Union requires that effective date of the final rule to permit apply for an amendment to its FAA Form 8130–3 be issued by a U.S.
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PAH for new parts that will be installed 658, in § 762.1, in paragraph (b), remove A. Background in articles for which a dual ‘‘§ 762.7’’ and add ‘‘§ 762.2’’ in its place, 1. Third Party Testing and Burden airworthiness release is to be issued. In and remove ‘‘§ 762.6’’ and add ‘‘§ 762.7’’ Reduction order to serve European customers in its place. many U.S. repair stations will be [FR Doc. 2015–31733 Filed 12–16–15; 8:45 am] Section 14(a) of the Consumer Product Safety Act, (‘‘CPSA’’), as required to possess parts documentation BILLING CODE 1505–01–D that U.S. PAHs cannot currently issue amended by the Consumer Product and which can only be obtained from Safety Improvement Act of 2008 the FAA or its designees. DEPARTMENT OF COMMERCE (‘‘CPSIA’’), requires that manufacturers Although the FAA and EASA have of products subject to a consumer agreed to delay the implementation of Bureau of Industry and Security product safety rule or similar rule, ban, Change 5 to the MAG until March 29, standard or regulation enforced by the 2016, correcting the effective date of 15 CFR Part 772 CPSC, must certify that the product § 21.137(o) will provide PAHs with the complies with all applicable CPSC- ability to establish a system for the Definitions of Terms enforced requirements. 15 U.S.C. issuance of authorized release 2063(a). For children’s products, documents to meet EASA requirements CFR Correction certification must be based on testing without increasing staff in the form of conducted by a CPSC-accepted third In Title 15 of the Code of Federal Organization Designation Authority party conformity assessment body. Id. Regulations, Parts 300 to 799, revised as (ODA) unit members or Designated Public Law 112–28 (August 12, 2011) of January 1, 2015, on pages 723, 727, Manufacturing Inspection directed the CPSC to seek comment on and 733, in § 772.1, remove the Representatives (DMIRs), or incurring ‘‘opportunities to reduce the cost of definitions of ‘‘fault tolerance’’, ‘‘laser the cost of hiring additional Designated third party testing requirements duration’’ and ‘‘positioning accuracy’’. Airworthiness Representatives (DARs). consistent with assuring compliance Additionally, correcting the effective [FR Doc. 2015–31737 Filed 12–16–15; 8:45 am] with any applicable consumer product date of §§ 21.142, 21.147, and 45.11(c) BILLING CODE 1505–01–D safety rule, ban, standard, or will alleviate the current need for PAHs regulation.’’ Public Law 112–28 also to request new exemptions or renew authorized the Commission to issue new current exemptions to manufacture and or revised third party testing regulations install interface components and CONSUMER PRODUCT SAFETY if the Commission determines ‘‘that appropriately mark wooden propellers. COMMISSION such regulations will reduce third party The remaining sections of the final testing costs consistent with assuring rule become effective on March 29, 16 CFR Part 1251 compliance with the applicable 2016, its originally published effective consumer product safety rules, bans, date. [Docket No. CPSC–2011–0081] standards, and regulations.’’ Id. 2063(d)(3)(B). Correction Toys: Determination Regarding Heavy 2. CPSC’s Toy Standard In FR Doc. 2015–24950, beginning on Elements Limits for Unfinished and page 59021 in the Federal Register of Untreated Wood Section 106 of the CPSIA states that October 1, 2015, in the second column, the provisions of ASTM International correct the DATES section to read as AGENCY: U.S. Consumer Product Safety (‘‘ASTM’’), Consumer Safety follows: Commission. Specifications for Toy Safety (‘‘ASTM DATES: This final rule is effective F963,’’ or ‘‘toy standard’’), ‘‘shall be ACTION: Final rule. March 29, 2016, except for §§ 21.1(b)(1), considered to be consumer product 21.1(b)(5) through (9), 21.137(o), 21.142, safety standards issued by the SUMMARY: The Consumer Product Safety 21.147 and 45.11(c), which are effective Commission under section 9 of the Commission (‘‘Commission,’’ or 1 on January 4, 2016. CPSA (15 U.S.C. 2058).’’ Thus, toys ‘‘CPSC’’) is issuing a final rule subject to ASTM F963–11, the current Issued under authority provided by 49 determining that unfinished and mandatory version of the standard, must U.S.C. 106(f), 44701(a), and 44703 in untreated trunk wood does not contain Washington, DC, on December 11, 2015. be tested by a CPSC-accepted third party heavy elements that would exceed the conformity assessment body and Lirio Liu, limits specified in the Commission’s toy demonstrate compliance with all Director, Office of Rulemaking. standard, ASTM F963–11. Based on this applicable CPSC requirements for the [FR Doc. 2015–31639 Filed 12–16–15; 8:45 am] determination, unfinished and manufacturer to issue a Children’s BILLING CODE P untreated trunk wood in toys does not Product Certificate (‘‘CPC’’) before the require third party testing for the heavy toys can be entered into commerce. element limits in ASTM F963. The toy standard has numerous DEPARTMENT OF COMMERCE DATES: The rule is effective on January requirements. Among them, section 19, 2016. 4.3.5 requires that surface coating Bureau of Industry and Security materials and accessible substrates of FOR FURTHER INFORMATION CONTACT: John toys 2 that can be sucked, mouthed, or 15 CFR Part 762 W. Boja, Lead Compliance Officer, Office of Compliance, U.S. Consumer 1 ASTM F963–11 is a consumer product safety Recordkeeping Product Safety Commission, 4330 East standard, except for section 4.2 and Annex 4, or any West Hwy., Room 610M, Bethesda, MD provision that restates or incorporates an existing CFR Correction mandatory standard or ban promulgated by the 20814; 301–504–7300: email: jboja@ Commission or by statute. In Title 15 of the Code of Federal cpsc.gov. 2 ASTM F963–11 contains the following note Regulations, Parts 300 to 799, revised as regarding the scope of the solubility requirement: of January 1, 2015, on pages 657 and SUPPLEMENTARY INFORMATION: Continued
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ingested, comply with the solubility section 4.3.5 of ASTM F963–11 is materials for research because they met limits on eight heavy elements. (We assured without requiring third party two criteria: refer to these elements as the ‘‘ASTM testing because the material is • Materials the Commission heavy elements.’’) One of the eight intrinsically compliant. previously determined not to contain ASTM heavy elements is lead. The The third party testing burden could lead in concentrations above 100 ppm; Commission previously determined that only be reduced if all heavy elements and certain materials do not exceed the lead listed in section 4.3.5 have • Materials more likely to be used in content limit, and therefore, those concentrations below their solubility toys subject to the ASTM F963–11 materials do not require third party limits. Because third party conformity solubility limits. testing when used in children’s assessment bodies typically run one test The contractor’s report is available on products (including toys). 16 CFR for all of the ASTM heavy elements, no the Commission’s Web site at: http:// 1500.91. Thus, CPSC staff focused its testing burden reduction would be www.cpsc.gov//Global/Research-and- work on the remaining seven ASTM achieved if any one of the heavy Statistics/Technical-Reports/Toys/ heavy elements. The eight ASTM heavy elements requires testing. TERAReportASTMElements.pdf. CPSC elements and their solubility limits are As discussed further in this preamble, staff reviewed the contractor’s report shown below. if the Commission determines that, due and prepared a briefing package to the nature of a particular material, providing recommendations to the TABLE 1—MAXIMUM SOLUBLE MI- children’s products made of that Commission. The staff’s briefing GRATED ELEMENT IN PARTS-PER- material will comply with CPSC’s package is also available on the MILLION FOR SURFACE COATINGS requirements with a high degree of Commission’s Web site: http:// AND SUBSTRATES INCLUDED AS assurance, manufacturers do not need to www.cpsc.gov//Global/Newsroom/ PART OF A TOY have those materials tested by a third FOIA/CommissionBriefingPackages/ party conformity assessment body. 2015/DFRandNPRDeterminationsonthe ASTMElementsUnfinishedWoods%20 Solubility limit, 4. Direct Final Rule and Notice of parts per June302015.pdf. Element million, Proposed Rulemaking 3 In conducting this research, the (‘‘ppm’’) On July 17, 2015, the Commission contractor considered the following Antimony, (‘‘Sb’’) ...... 60 published a direct final rule (‘‘DFR’’) factors: Arsenic, (‘‘As’’) ...... 25 and a companion notice of proposed • The concentrations of the seven Barium, (‘‘Ba’’) ...... 1000 rulemaking (‘‘NPR’’) for the ASTM heavy elements in the material under Cadmium, (‘‘Cd’’) ...... 75 wood determination that is the subject study; Chromium, (‘‘Cr’’) ...... 60 of this final rule in the same issue of the • The presence and concentrations of Lead, (‘‘Pb’’) ...... 90 Federal Register. (DFR, 80 FR 42376; the elements in the environmental Mercury, (‘‘Hg’’) ...... 60 NPR, 80 FR 42438). Because the media (e.g., soil, water, air), and in the Selenium, (‘‘Se’’) ...... 500 Commission received significant base materials for the textiles and paper; adverse comment to the DFR, the • Whether processing has the 3. Possible Determinations Regarding Commission withdrew the DFR and is potential to introduce any of the seven the ASTM Heavy Elements proceeding with the rulemaking under heavy elements into the material under For some materials, the the NPR that was published study; and concentrations of all the listed heavy simultaneously with the DFR. 80 FR • The potential for contamination elements might always be below their 54417 (Sept. 10, 2015). The comments after production, such as through respective solubility limits due to to the DFR/NPR are addressed in section packaging. biological, manufacturing, or other C of this preamble. The contractor examined secondary constraints. For example, one of the sources and reviewed articles to identify B. Contractor’s Research specified elements may be sequestered the available data regarding the in a portion of a plant, such as the roots, 1. Overview elements’ concentrations in the that is not used in subsequent materials listed above. The contractor manufacturing. Additionally, a CPSC hired a contractor to conduct a literature search to assess whether the summarized the relevant data on manufacturing process step may remove bioavailability and presence/ a specified element, if the element is Commission potentially could determine that wood and other natural concentrations in environmental media present, from the material being (i.e., soil, air, and water) from the most processed. For these materials, materials do not contain any of the seven specified heavy elements in recent Agency for Toxic Substances and compliance with the limits stated in 4 concentrations above the ASTM F963– Disease Registry (‘‘ATSDR’’) 11 maximum solubility limits toxicological profile, supplemented NOTE 3—For the purposes of this requirement, with more recent authoritative reviews. the following criteria are considered reasonably (excluding the eighth element, lead appropriate for the classification of toys or parts which is already subject to a The contractor conducted a literature likely to be sucked, mouthed or ingested: (1) All toy determination). The contractor search for data on concentrations of the parts intended to be mouthed or contact food or researched the following materials: chemical elements in each of the drink, components of toys which are cosmetics, and specific materials. Potentially relevant components of writing instruments categorized as • Unfinished and untreated wood toys; (2) Toys intended for children less than 6 (ash, beech, birch, cherry, maple, oak, papers for information on years of age, that is, all accessible parts and pine, poplar, and walnut); concentrations of chemical elements in components where there is a probability that those • Bamboo; each product were identified and parts and components may come into contact with reviewed. The contractor used the the mouth. • Beeswax; 3 The method to assess the solubility of a listed • Undyed and untreated fibers and references from reviewed articles to element is detailed in section 8.3.2, Method to textiles (cotton, wool, linen, and silk); 4 Dissolve Soluble Matter for Surface Coatings, of and The congressionally mandated Agency for Toxic ASTM F963–11. Modeling clays included as part of • Substances and Disease Registry produces a toy have different solubility limits for several of Uncoated or coated paper (wood or toxicological profiles for hazardous substances the elements. other cellulosic fiber). Staff chose these found at National Priorities List sites.
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identify other articles to examine and measurements of tree trunks showed uptake in the roots, shoots, leaves, bark, used the references in those articles to that the trunks were nearly free of trunks, limbs, fruits, branches, stems, find other sources recursively, to antimony. and nuts of trees. The studies included uncover relevant cited references.5 The Arsenic. For arsenic, trunks, roots both experimental tests and trees literature screening was to examine shoots, leaves, stems, bark, and sampled from natural areas. Only an whether there is a potential for an branches of trees were characterized. An experimental study with seedlings ASTM heavy element to be present in experimental study showed roots with grown in pots, to which either mercuric the natural material at levels above its more than 25 ppm arsenic. A study at nitrate, methyl mercury chloride, or solubility limit. When the contractor a contaminated mining site showed both, had been added, showed mercury determined there was sufficient roots, branches, leaves/needles, and in concentrations above the ASTM information to indicate the potential for shoots with arsenic concentrations solubility limit in shoots and leaves of an ASTM heavy element to be present, above the ASTM solubility limit. sycamore seedlings. The other studies the contractor stopped that particular However, no tree trunk measurement did not show mercury levels above the line of inquiry and reported the results. showed arsenic in concentrations above ASTM solubility limit of 60 ppm in As discussed in the staff’s briefing 25 ppm. In the two tested cases, tree samples, even at contaminated sites. package, the contractor’s report does not trunks contained only trace levels of Selenium. For selenium, one study support a Commission determination for arsenic (levels well below the solubility showed measured concentrations of 1.4 any material other than unfinished and limit). ppm selenium in tree rings growing in untreated trunk wood. The literature One study measured levels of arsenic contaminated soil. Other studies reviewed by the contractor did not in sawdust sampled from 15 sawmill showed selenium at concentrations of provide sufficient information to locations in the Sapele metropolis (a 10 ppm or less, well below the ASTM determine that any of the reviewed port city in Nigeria). The highest arsenic solubility limit of 500 ppm. Only an materials, other than unfinished and concentration measured was 93.0 ppm. experimental study with tree cuttings untreated trunk wood, do not contain The study’s authors did not specify grown hydroponically in either sodium the heavy elements in concentrations what types of trees or wood were selenate or sodium selenite for 6 days, above the limits stated in the toy processed at the sawmills. However, the showed root concentrations above the standard. authors noted that a major industry in ASTM solubility limit. All other parts of the study area is Africa Timber Plywood 2. Findings Regarding Wood the cuttings had selenium levels below Industry and mentioned that arsenic the ASTM solubility limit. Of the materials reviewed, the and chromium are used as wood Conclusions. The contractor’s report contractor identified the most studies preservatives. Plywood is a provides sufficient information for the for wood. Although the contractor could manufactured wood and could contain Commission to determine that not examine every study concerning materials not found in natural wood. unfinished and untreated wood from wood, the contractor reported that the The authors did not report what woods tree trunks does not contain the ASTM studies examined constitute a these sawmills were processing. heavy elements in concentrations above representative sample of the population Therefore, we cannot draw any their respective solubility limits, and studies. The contractor studied conclusions from this study. are, therefore, not required to be third measurements taken from trees in Barium. For barium, measurements of party tested to assure compliance with natural settings, samples from trees leaves, leaf litter, wood, and sawdust all the ASTM F963–11 solubility grown on contaminated soils, showed barium concentrations below requirements. The studies examined hydroponically grown 6 seedlings, the ASTM solubility limit of 1,000 ppm. multiple species of trees grown on experimental studies with seedlings Cadmium. For cadmium, the studies several continents. No study examined grown in pots in which the soil had examined showed cadmium in tree core by the contractor found any of the some of the elements intentionally samples and wood at levels below the ASTM heavy elements in tree trunks at added, and seedlings soaked in ASTM solubility limit of 75 ppm. concentrations beyond the element’s solutions containing one or more of the Studies that measured cadmium in solubility limit. ASTM heavy elements. hydroponic samples showed cadmium The contractor’s report indicates that The contractor examined levels in root, stem bark, stem wood, heavy elements could be present in measurements on roots, shoots, bark, and leaf parts above 75 ppm. In a wood from other portions of the tree: trunks, branches, and leaves (or needles, similar manner, shoots grown in pots The roots, bark, leaves, or fruit. The for evergreens). Not every study containing varying amounts of cadmium studies examined by the contractor conducted measurements on each part added, showed cadmium concentrations showed high levels of one or more of the of the tree. Many studies showed above the ASTM solubility limit in ASTM heavy elements in portions of concentrations of the ASTM heavy leaves, stems, and roots. elements at levels below their solubility Chromium. For chromium, one study trees other than trunks. However, limits. at a chromate-contaminated site found commercial timber harvesting involves Antimony. For antimony, the studies chromium concentrations above the the process of ‘‘delimbing’’ the tree to examined showed that roots, shoots, create logs that can be transported and ASTM solubility limit of 60 ppm in 7 branches, and leaves contained roots, but measurements were below the cut at a sawmill or lumberyard. Often, antimony in concentrations greater than detection limit for leaves, wood, and the sawmill creates uniform-length the ASTM solubility limit of 60 ppm. bark. Hydroponic studies by the same planks from the delivered logs. These No tree trunks showed antimony researcher showed that tree roots can 7 concentrations above the ASTM concentrate chromium, but A succinct description of timber logging can be solubility limit. One study’s found at http://en.wikipedia.org/w/index.php? translocation (the movement of a title=Logging&redirect=no. A more comprehensive material from one place to another) of review of timber harvesting can be found at 5 ‘This method is often referred to as ‘‘tree chromium from the roots to other parts http://www.amazon.com/Tree-Harvesting- searching.’’ Techniques-Forestry-Sciences/dp/9048182824/ 6 Hydroponics is a subset of hydroculture and is of the tree, is very low. ref=sr_1_1?s=books& a method of growing plants using mineral nutrient Mercury. For mercury, the contractor ie=UTF8&qid=1433193105&sr=1-1&keywords=tree+ solutions, in water, without soil. reviewed studies that measured mercury harvesting+techniques%2C+wiksten.
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planks are sold to wood wholesalers or children’s products for unfinished and such as for accessible edges and small retailers, and are bought by wooden toy untreated wood toys or wood parts, could be performed at any third and other manufacturers. Because component parts of toys. party laboratory, not just laboratories commercial practice creates logs from A surface coating, such as a clear accredited by the CPSC. only the trunks of harvested trees, the sealant applied to unfinished wood, is Response 3: The rule affects only the wood available for use in toys and other subject to the requirements of 16 CFR testing requirement for compliance to wooden objects is sourced from these part 1303 and the toy standard’s the ASTM F963 chemical solubility logs, or trunks of trees, and not the other chemical solubility requirement. The limits. If a toy is subject to other ASTM parts of trees that could contain the manufacturer would need to third party F963 requirements, such as the ASTM elements above the limits in the test the finished product or could use mechanical requirements, compliance toy standard.8 component part testing to test only the with those requirements still must be surface coating pursuant to 16 CFR part demonstrated through testing by a C. Discussion of Comments to the DFR/ 1109. CPSC-accepted conformity assessment NPR Comment 2: A commenter asserts that body for the manufacturer to issue a The CPSC received six comments in testing still should be required for children’s product certificate. response to the DFR and NPR published untreated wood because ‘‘so many toys Comment 4: A commenter asserts that in the Federal Register on July 17, 2015 are filled with other chemicals which the testing requirements are (80 FR 42376). Summaries of each will be inserted into the mouths of ‘‘overwhelming,’’ and are a factor in comment and our responses are millions of children.’’ The commenter reducing the number of specialty provided below. asserts that much of the wood from ‘‘single store, independent ‘mom and Three comments express support for outside the United States could be pop’ stores.’’ the proposed determination that contaminated by heavy metals during The commenter urges passing a law unfinished and untreated wood from processing or before shipping. This that would establish that federal tree trunks does not require testing for commenter also states that the required requirements would preempt state the ASTM elements. Two comments testing is a simple step to ensure the requirements that add to the burden for raise questions and requested safety of toys. small companies, and further asserts clarification about the rule. One Response 2: The commenter does not that only the largest companies are able comment expresses opposition to provide any data or specific information to meet the requirements. exempting wood toys from testing. about toys ‘‘filled with other chemicals’’ Response 4: The comment is beyond Comment 1: One commenter asks that would support a testing the scope of the current rulemaking. The what safety measures would be requirement for unfinished and proposed rule does not address state implemented to prevent manufactures untreated wood subject to the ASTM requirements or testing issues other than from using treated wood instead of elements restrictions. Nor does the the determination for unfinished and untreated wood in toys, and asks what commenter dispute the data and untreated wood. would be classified as untreated wood. information relied upon by the Comment 5: One commenter, For example, the commenter asks if a Commission. The determination for representing several consumer clear sealant could be used to protect unfinished and untreated wood is based organizations, expresses support for the the wood from water and saliva and still on data and information about the CPSC’s detailed research and study on be considered untreated wood. chemical content of wood from all over this issue and agrees that unfinished The commenter also asks what the world that demonstrated that and untreated trunk wood can be penalties would be incurred if treated unfinished and untreated wood does not exempted from compliance testing for wood was used in children’s toys. contain the chemical elements that are the heavy elements of the toy standard Response 1: The proposed rule does restricted in toys under the toy without any impact on safety. This not prohibit the use of wood finishes or standard. We note that the only commenter also expresses support for treatments in children’s products. There chemicals specifically prohibited in toys the Commission’s decision not to is no penalty for using treated woods in by ASTM F963 are lead and the seven include in the proposed rule bamboo, children’s toys as long as the treatment other ASTM elements; in addition, the beeswax, cotton, wool, linen, and silk, does not violate an applicable children’s CPSIA prohibited specified phthalates. and states that not enough evidence has product safety rule. The purpose of the Although the commenter refers to the been presented for a determination on rule is for the Commission to determine ‘‘simple step’’ of testing, mandatory these materials. that unfinished and untreated wood third party testing can be costly, Response 5: The rule is based on data does not contain the chemical elements especially for small or low-volume and information on the presence of the that are restricted in toys under the suppliers. The determination responds ASTM elements in unfinished and mandatory toy standard, and thus to the statutory requirement to consider untreated wood and other natural unfinished and untreated wood does not new or revised third party testing materials. The information on bamboo, require third party testing to ensure requirements that will reduce third beeswax, linen, and silk was insufficient compliance to the toy standard’s party testing costs consistent with to make a Commission determination on chemical solubility requirement. The assuring compliance with the applicable these materials. effect of the rule would be to relieve consumer product safety rules, bans, Comment 6: A commenter states that manufacturers and importers of the standards, and regulations. the rule would provide limited relief to Comment 3: A commenter states that third party testing requirement for toy manufacturers because very few toy his or her understanding of the manufacturers are making products 8 Often, the sawmill creates uniform-length proposed rule is that ‘‘any untreated using wood, and wood toys constitute planks from the delivered logs. These planks are wooden toy [could] be tested at any 3rd only a small percentage of the toys in sold to wood wholesalers or retailers, and are party lab, not [only those] accredited by the marketplace. bought by wooden toy and other manufacturers. the CPSC.’’ Based on this commenter’s The commenter urges the Commission Two references to the woods used in toys are: to continue to find ways to provide http://www.ehow.com/list_6896897_kinds-wood- understanding of the rule, the toys-made-from_.html, and http:// commenter asks whether other required meaningful third party testing burden www.woodtoyz.com/WTCat/LearnMaterials.html. ASTM F963 tests on natural wood toys, reduction for companies and for
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products most impacted by the testing children’s product safety rule. 15 U.S.C. 2. Potential for Third Party Testing requirements. The commenter suggests 2063(a)(2). Toys must comply with the Burden Reduction that one way for the Commission to do toy standard, including the specified CPSC staff assessed the burden this is by reconsidering the parameters limits on heavy elements. 15 U.S.C. reduction that could result from a used to exclude materials from testing. 2056b. In response to statutory determination that unfinished and The commenter states that the direction, the Commission has untreated trunk wood does not require Commission’s current standard for investigated approaches that would third party testing for compliance with finding materials that could be exempt reduce the burden of third party testing the limits on heavy elements in the toy from testing is ‘‘unreasonably high.’’ In while also assuring compliance with standards. Testing the soluble addition, the commenter claims CPSC requirements. As part of that concentration of the ASTM heavy Congress’s intent was not for the CPSC endeavor, the Commission has elements requires placing the toy (or to apply a ‘‘near zero-risk-tolerance considered whether certain materials component part of the toy) in a solution approach.’’ The commenter references used in toys would not require third of hydrochloric acid for 2 hours. After other Commission actions that ‘‘allow party testing. 2 hours, the solids are separated from for some level of risk tolerance,’’ such the solution, and the solution is as the component part testing rule at 16 To issue a determination that a analyzed for the presence of any of the CFR 1109.5(b), which the commenter material does not require third party ASTM F963–11 heavy elements using claims addresses the exercise of due testing, the Commission must have atomic spectroscopy. The cost of this care, and does not require certainty. sufficient evidence to conclude that the testing can vary by factors such as Additionally, the commenter mentions material would consistently comply geography and the volume of testing the lead determination rule at 16 CFR with the CPSC requirement that the that a manufacturer obtains from a 1500.91(b), pointing to text indicating material is subject to so that third party conformity assessment body. Based on that the rule is based on a finding that testing is unnecessary to provide a high published invoices and price lists, the the material or product ‘‘does not degree of assurance of compliance. 16 cost of a third party test for the ASTM exceed’’ the lead limits, not on a more CFR part 1107. Section 1107.2, defines heavy elements ranges from around $60 onerous standard of ‘‘will never ‘‘a high degree of assurance’’ as ‘‘an in China, up to around $190 in the exceed.’’ evidence-based demonstration of United States. The commenter also points to the test consistent performance of a product Staff cannot estimate with any procedures of the toy standard (i.e., regarding compliance based on certainty what the total potential burden testing is not conducted if only a small knowledge of a product and its reduction would be from a amount of material is present on the manufacture.’’ determination that unfinished and product), and urges the Commission to untreated wood will not contain consider this de minimus approach, and For a material determination, a high concentrations of antimony, arsenic, approaches like it, to provide degree of assurance of compliance barium, cadmium, mercury, and meaningful third party testing burden means that the material will comply selenium in excess of the limits in relief. with the specified chemical limits due ASTM F963–11. Most of the Response 6: Public Law 112–28 to the nature of the material, or due to approximately 80,000 kinds of toys on requires that actions to reduce the costs a processing technique (e.g., harvesting, the market 9 probably do not contain associated with third party testing must smelting, cleaning, filtering, sorting) any wood components. If we assume be consistent with assuring compliance that reduces the chemical concentration that 10 percent of the approximately with any applicable consumer product below its limit. For materials 80,000 different kinds of toys on the safety rule, ban, standard, or regulation. determined to comply with a chemical market have at least one wood This requirement establishes the limit, the material must continue to component that requires third party standard for Commission decisions for comply with that limit if it is used in testing, and we also assume that the implementing any actions to reduce the a children’s product subject to that average cost of a third party test is about cost associated with third party testing. requirement. A material on which a $125 (representing the approximate The rule on determinations for the determination has been made cannot be midpoint of the range for the test’s cost), ASTM elements in wood for products altered or adulterated to render it then the potential total burden subject to the toy safety standard noncompliant and then used in a reduction from a determination for represents only one of several children’s product. unfinished and untreated wood from completed and ongoing Commission tree trunks would be about $1 million activities to implement, research, and Based on the information discussed in annually. This estimate assumes that pursue opportunities to reduce the cost section B of this preamble, the only one type of wood was used in a of third party testing requirements. Commission determines that unfinished product so that the manufacturer would The commenter’s recommendation to and untreated trunk wood complies not have to test each individual consider de minimus and other with the solubility requirements for the unfinished and untreated wood approaches to reduce third party testing heavy elements in section 4.3.5 of component part in a product, as allowed costs are beyond the scope of this ASTM F963–11 with a high degree of by the component part testing rule (16 rulemaking. assurance. This determination means CFR part 1109). The estimated benefits D. Determination for Unfinished and that third party testing for compliance to Untreated Wood for ASTM F963 Limits the solubility requirements is not 9 The estimate that there are 80,000 different required for certification purposes for kinds of toys is based on the number of toys listed for Heavy Elements on the Amazon.com Web site on June 2, 2015, for unfinished and untreated trunk wood. which Amazon.com was listed as the seller and 1. Legal Requirements for a The Commission makes this recommended for children 13 years old or younger. Determination determination to reduce the third party Examples of toys that might include wood testing burden on children’s product components include building blocks, various wood As noted above, section 14(a)(2) of the pull toys, some toy cars and trucks, train sets, some CPSA requires third party testing for certifiers while continuing to ensure games and puzzles, some toy figures, and some toys children’s products that are subject to a compliance. for toddlers and infants.
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could be lower if some manufacturers 4. Description of the Rule information that would require a change certify that their wood components This rule creates a new Part 1251 for or revision to the Commission’s comply with the ASTM F963–11 heavy ‘‘Toys: Determination Regarding Heavy previous analysis of the impact of the elements requirements, based on third Elements Limits for Unfinished and rule on small entities. Therefore, the party tests of their raw materials instead Untreated Wood.’’ Section 1251.1 of the certification of no significant impact on of the finished product, as allowed by rule explains the statutorily-created a substantial number of small entities is the component part testing rule. requirements for toys under ASTM F963 still appropriate. Moreover, the assumption that 10 and the third party testing requirements percent of the toys have wood G. Environmental Considerations for children’s products. components is intended only to Section 1251.2(a) of the rule The Commission’s regulations illustrate the potential benefits; the establishes the Commission’s provide a categorical exclusion for assumption is not based on any formal determination that unfinished and Commission rules from any requirement study of the toy market. untreated trunk wood does not exceed to prepare an environmental assessment 3. Statutory Authority the limits for the heavy elements or an environmental impact statement Section 3 of the CPSIA grants the established in section 4.3.5 of the toy because they ‘‘have little or no potential Commission general rulemaking standard with a high degree of for affecting the human environment.’’ authority to issue regulations, as assurance as that term is defined in 16 16 CFR 1021.5(c)(2). This rule falls necessary, to implement the CPSIA. CFR part 1107. The determination only within the categorical exclusion, so no Public Law 110–314, sec. 3, Aug. 14, applies if the material has not been environmental assessment or 2008. As noted previously, section 14 of treated or adulterated with the addition environmental impact statement is the CPSA, which was amended by the of any materials that could result in the required. The Commission’s regulations CPSIA, requires third party testing for addition of any of the heavy elements state that safety standards for products children’s products that are subject to a listed in the toy standard at levels above normally have little or no potential for children’s product safety rule. 15 U.S.C. their respective solubility limits. In affecting the human environment. 16 2063(a)(2). Section 14(d)(3)(B) of the § 1251.2(b) of the rule, unfinished and CFR 1021.5(c)(1). Nothing in this rule CPSA, as amended by Public Law 112– untreated trunk wood means wood alters that expectation. 28, gives the Commission the authority harvested from trees with no added List of Subjects in 16 CFR Part 1251 to ‘‘prescribe new or revised third party surface coatings (e.g., varnish, paint, testing regulations if it determines that shellac, polyurethane) and no materials Business and industry, Consumer such regulations will reduce third party added to the wood substrate (e.g., stains, protection, Imports, Infants and testing costs consistent with assuring dyes, preservatives, antifungals, children, Product testing and compliance with the applicable insecticides). Because commercial certification, Toys. consumer product safety rules, bans, practice creates wood from only the Accordingly, 16 CFR part 1251 is standards, and regulations.’’ Id. trunks of harvested trees, unfinished added to read as follows: 2063(d)(3)(B). These statutory and untreated wood as used in the rule provisions authorize the Commission to means wood that is generally PART 1251—TOYS: DETERMINATIONS issue this rule determining that commercially available. Unfinished and REGARDING HEAVY ELEMENTS unfinished and untreated trunk wood untreated wood does not include LIMITS FOR CERTAIN MATERIALS will not exceed the limits for heavy manufactured or engineered woods such as pressed wood, plywood, particle elements stated in the toy standard, and Sec. therefore, unfinished and untreated board, or fiberboard. 1251.1 The toy standard and testing trunk wood does not require third party E. Effective Date requirements. conformity assessment body testing to 1251.2 Wood. assure compliance with the heavy The APA generally requires that a elements limits stated in the toy substantive rule must be published not Authority: Sec. 3, Pub. L. 110–314, 122 standard. less than 30 days before its effective Stat. 3016; 15 U.S.C. 2063(d)(3)(B). This determination relieves date. 5 U.S.C. 553(d)(1). Because the § 1251.1 The toy standard and testing unfinished and untreated trunk wood final rule provides relief from existing requirements. from the third party testing requirement testing requirements under the CPSIA, of section 14 of the CPSA for purposes the effective date is January 19, 2016. The Consumer Product Safety of supporting the required certification. Improvement Act of 2008 (‘‘CPSIA’’) F. Regulatory Flexibility Act However, if the unfinished and made provisions of ASTM F963, untreated wood is altered so that the The Regulatory Flexibility Act Consumer Product Safety Specifications material could exceed the heavy (‘‘RFA’’) generally requires that agencies for Toy Safety (‘‘toy standard’’), a elements limits of ASTM F963, the review proposed and final rules for the mandatory consumer product safety determination is not applicable to that rules’ potential economic impact on standard. 15 U.S.C. 2056b. The toy material. The changed or altered small entities, including small standard requires that surface coating material or product must then be tested businesses, and prepare regulatory materials and accessible substrates of and meet the heavy element flexibility analyses. 5 U.S.C. 603 and toys that can be sucked, mouthed, or requirements of ASTM F963. 604. The Commission certified that this ingested, must comply with solubility The determination only lifts the rule will not have a significant impact limits that the toy standard establishes obligation to have unfinished and on a substantial number of small entities for eight heavy elements. Materials used untreated trunk wood tested by a third pursuant to section 605(b) of the RFA, in toys subject to the heavy elements party conformity assessment body. The 5 U.S.C. 605(b) in the DFR. 80 FR 42376, limits in the toy standard must comply underlying requirement that products 42380. The Commission did not receive with the third party testing subject to the toy standard must comply any comments that questioned or requirements of section 14(a)(2) of the with the toy standard’s limits on heavy challenged this certification, nor has Consumer Product Safety Act (‘‘CPSA’’), elements remains in place. CPSC staff received any other unless listed in § 1251.2.
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§ 1251.2 Wood. document corrects the final rule by Office of Surface Mining Reclamation (a) Unfinished and untreated wood removing this paragraph. and Enforcement, 501 Belle Street, Suite does not exceed the limits for the heavy DATES: Effective December 17, 2015. 216, Alton, IL 62002, Telephone: (618) elements established in the toy standard FOR FURTHER INFORMATION CONTACT: John 463–6460, Email: [email protected]. with a high degree of assurance as that R. Scherbenske, Office of Diversion SUPPLEMENTARY INFORMATION: term is defined in 16 CFR part 1107, Control, Drug Enforcement I. Background on the Missouri Program provided that the material has been Administration; Mailing Address: 8701 II. Submission of the Amendment neither treated nor adulterated with Morrissette Drive, Springfield, Virginia III. OSMRE’s Findings materials that could result in the 22152, Telephone: (202) 598–6812. IV. Summary and Disposition of Comments V. OSMRE’s Decision addition of any of the heavy elements SUPPLEMENTARY INFORMATION: In FR Doc. VI. Procedural Determinations listed in the toy standard at levels above 2015–28718 appearing on page 69864 in their respective solubility limits. the Federal Register of Thursday, I. Background on the Missouri Program (b) For purposes of this section, November 12, 2015, the following Section 503(a) of the Act permits a unfinished and untreated wood means correction is made: State to assume primacy for the wood harvested from the trunks of trees regulation of surface coal mining and with no added surface coatings (such as, Administrative Procedure Act [Corrected] reclamation operations on non-Federal varnish, paint, shellac, or polyurethane) and non-Indian lands within its borders and no materials added to the wood 1. On page 69864, in the preamble, at by demonstrating that its State program substrate (such as, stains, dyes, the bottom of the first and top of the includes, among other things, ‘‘a State preservatives, antifungals, or second columns, the section titled law which provides for the regulation of insecticides). Unfinished and untreated Administrative Procedure Act is surface coal mining and reclamation wood does not include manufactured or removed entirely. operations in accordance with the engineered woods (such as pressed Dated: December 11, 2015. requirements of this Act . . .; and rules wood, plywood, particle board, or Chuck Rosenberg, and regulations consistent with fiberboard). Acting Administrator. regulations issued by the Secretary Dated: December 9, 2015. [FR Doc. 2015–31843 Filed 12–16–15; 8:45 am] pursuant to this Act.’’ See 30 U.S.C. Todd A. Stevenson, BILLING CODE 4410–09–P 1253(a)(1) and (7). On the basis of these Secretary, Consumer Product Safety criteria, the Secretary of the Interior Commission. conditionally approved the Missouri [FR Doc. 2015–31723 Filed 12–16–15; 8:45 am] DEPARTMENT OF THE INTERIOR program on November 21, 1980. You BILLING CODE 6355–01–P can find background information on the Office of Surface Mining Reclamation Missouri program, including the and Enforcement Secretary’s findings, the disposition of comments, and conditions of approval, DEPARTMENT OF JUSTICE 30 CFR Part 925 in the November 21, 1980, Federal Register (45 FR 77017). You can find Drug Enforcement Administration [SATS No. MO–041–FOR; Docket ID: OSM– later actions concerning the Missouri 2013–0008; S1D1S SS08011000 SX064A000 program and program amendments at 30 21 CFR Part 1308 167S180110; S2D2S SS08011000 SX064A000 16XS501520] CFR 925.10, 925.12, 925.15, and 925.16. [Docket No. DEA–419F] II. Submission of the Amendment Missouri Regulatory Program Schedules of Controlled Substances: By letter dated August 12, 2013 AGENCY: Office of Surface Mining (Administrative Record No. MO–678), Placement of Eluxadoline Into Reclamation and Enforcement, Interior. Schedule IV; Correction Missouri sent us an amendment to its ACTION: Final rule; approval of Program under SMCRA (30 U.S.C. 1201 AGENCY: Drug Enforcement amendment. et seq.). Missouri sent the amendment in Administration, Department of Justice. response to a January 31, 2008, letter SUMMARY: We, the Office of Surface ACTION: Final rule; correction. (Administrative Record No. MO–669) Mining Reclamation and Enforcement we sent to Missouri in accordance with (OSMRE), are approving an amendment SUMMARY: The Drug Enforcement 30 CFR 732.17(c) concerning changes to Administration (DEA) is correcting a to the Missouri regulatory program valid existing rights requirements. final rule that appeared in the Federal (Missouri program) under the Surface Missouri also made changes to eliminate Register of November 12, 2015 (80 FR Mining Control and Reclamation Act of required program amendments recorded 69861). The document issued an action 1977 (SMCRA or the Act). Missouri at 30 CFR 925.16(p)(4), (p)(20) and (v); placing the substance 5-[[[(2S)-2-amino- proposed revisions to its regulations and program disapprovals at 30 CFR 3-[4-aminocarbonyl)-2,6- concerning several topics regarding: 925.12(d). Missouri revised other dimethylphenyl]-1-oxopropyl][(1S)-1-(4- Valid Existing Rights; Protection of sections of its regulations at its own phenyl-1H-imidazol-2- Hydrologic Balance; Post-mining Land initiative. Missouri proposed revisions yl)ethyl]amino]methyl]-2- Use; Permit Applications; and Air to title 10 of its Code of State methoxybenzoic acid (eluxadoline), Resource Protection. Missouri intends to Regulations (CSR) under Division 40 including its salts, isomers, and salts of revise its program to be no less effective Land Reclamation Commission. The isomers, into schedule IV of the than the Federal regulations, to clarify specific sections of 10 CSR 40 in Controlled Substances Act. This ambiguities, and to improve operational Missouri’s amendment are discussed in document inadvertently included a efficiency. Part III OSMRE’s Findings. Missouri paragraph in the regulatory text that was DATES: Effective Date: December 17, intends to revise its program to be no not intended for publication, and was 2015. less effective than the Federal unable to be removed before being FOR FURTHER INFORMATION CONTACT: Len regulations, to clarify ambiguities, and placed on public inspection. This Meier, Director Alton Field Division, improve operational efficiency.
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We announced receipt of the period ended November 24, 2013. We not specifically discuss below proposed amendment in the October 25, did not receive any public comments. concerning non-substantive wording or 2013, Federal Register (78 FR 63909). In editorial changes can be found in the III. OSMRE’s Findings the same document, we opened the full text of the program amendment public comment period and provided an We are approving the amendment as available at www.regulations.gov. opportunity for a public hearing or described below. The following are the 1. Missouri proposed to revise the meeting on the adequacy of the findings we made concerning Missouri’s sections listed below to make numerous amendment. We did not hold a public amendment under SMCRA and the non-substantive edits for clarity and hearing or meeting because no one Federal regulations at 30 CFR 732.15 update its rules to current editions of requested one. The public comment and 732.17. Any revisions that we do the Missouri Statutes:
MINOR REFERENCE CHANGE TABLE
10 CSR Title
40–3.040 ...... Requirements for Protection of the Hydrologic Balance. 40–3.060 ...... Requirements for the Disposal of Excess Spoil. 40–3.170 ...... Signs and Markers for Underground Operations. 40–3.180 ...... Casing and Sealing of Exposed Underground Openings. 40–3.200 ...... Requirements for the Protection of the Hydrologic Balance for Underground Operations. 40–3.210 ...... Requirements for the Use of Explosives for Underground Operations. 40–3.220 ...... Disposal of Underground Development Waste and Excess Spoil. 40–3.230 ...... Requirements for the Disposal of Coal Processing Waste for Underground Operations. 40–3.240 ...... Air Resource Protection. 40–3.260 ...... Requirements for Backfilling and Grading for Underground Operations. 40–3.300 ...... Postmining Land Use Requirements for Underground Operations. 40–5.010 ...... Prohibitions and Limitations on Mining in Certain Areas. 40–5.020 ...... State Designation of Areas as Unsuitable for Mining. 40–6.020 ...... General Requirement for Coal Exploration, Permits. 40–6.030 ...... Surface Mining Permit Applications—Minimum Requirements for Legal, Financial, Compliance, and Re- lated Information. 40–6.040 ...... Surface Mining Permit Applications—Minimum Requirements for Information on Environmental Resources. 40–6.050 ...... Surface Mining Permit Applications—Minimum Requirements for Reclamation and Operations Plan. 40–6.060 ...... Requirements for Permits for Special Categories of Surface Coal Mining and Reclamation Operations. 40–6.070 ...... Review, Public Participation and Approval of Permit Applications and Permit Terms and Conditions. 40–6.100 ...... Underground Mining Permit Applications—Minimum Requirements for Legal, Financial, Compliance, and Related Information. 40–6.110 ...... Underground Mining Permit Applications—Minimum Requirements for Information on Environmental Re- sources. 40–6.120 ...... Underground Mining Permit Applications—Minimum Requirements for Reclamation and Operations Plan. 40–7.050 ...... Requirements, Conditions and Terms of Liability Insurance. 40–8.010 ...... Definitions. 40–8.020 ...... Exemption for Coal Extraction Incident to Government-Financed Highway or Other Construction. 40–8.070 ...... Applicability and General Requirements.
We find that Missouri’s proposed (10)(B)5. and 10 CSR 40–3.200 make its regulations no less effective revisions will make its regulations no Requirements for Protection of the than the Federal regulations. Therefore, less effective than the Federal Hydrologic Balance for Underground we are approving Missouri’s revision. regulations. Therefore, we are approving Operations (6)(T) and (10)(B)5. 4. 10 CSR 40–3.040 Requirements for Missouri’s revisions. Permanent and Temporary Protection of the Hydrologic Balance 2. 10 CSR 40–3.040 Requirements for Impoundments (10)(O)3.C. and 10 CSR 40–3.200 Protection of the Hydrologic Balance Missouri proposed to revise these Requirements for Protection of the (6)(A)1., (6)(R), and (6)(U) Siltation sections to clarify that requirements for Hydrologic Balance for Underground Structures and 10 CSR 40–3.200 impoundments that meet the size or Operations (10)(O)3.C. Permanent Underground Mining (6)(A)1., (6)(R), other criteria of the MSHA, 30 CFR and Temporary Impoundments and and (6)(U) Siltation Structures 77.216(a) are contained in United States Spillways Missouri proposed to replace the Soil Conservation Service Technical word ‘‘pond’’ with ‘‘structure’’ at 10 Release No. 60, Earth Dams and Missouri removes these design CSR 40–3.040 (6)(A)1., (6)(R), and (6)(U) Reservoirs, July 2005, incorporated by requirements in response to the Siltation Structures and at 10 CSR 40– reference. Requirements for disapproval recorded at 30 CFR 3.200 (6)(A)1., (6)(R), and (6)(U) impoundments that do not meet the size 925.12(d) in order to be no less effective Siltation Structures. The corresponding or other criteria contained in 30 CFR than the counterpart Federal regulations Federal Regulations at 30 CFR 816.46 77.216(a) are contained in United States for surface mining at 30 CFR 780.25(c) and 817.46 uses the same term. We find Natural Resources Conservation Service, and for underground mining at 30 CFR that Missouri’s proposed revision will Conservation Practice Standard, POND, 784.16(c). Therefore, we are approving make its regulations no less effective No. CODE 378, January 2004, by Missouri’s revision and removing the than the Federal regulations. Therefore, reference. The corresponding Federal disapproval at 30 CFR 925.12(d). we are approving Missouri’s revision. Regulation at 30 CFR 780.25(a)(2)(i) 5. 10 CSR 40–3.060 Requirements for 3. 10 CSR 40–3.040 Requirements for provides similar requirements. We find the Disposal of Excess Spoil (1)(K)2. Protection of the Hydrologic Balance that Missouri’s proposed revision will Fill Inspection and 10 CSR 40–3.220
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Disposal of Underground Missouri proposed to revise this 12. 10 CSR 40–3.240 Air Resource Development Waste and Excess Spoil section to correct the references for the Protection (1) (1)(L) Certified Report marking of stream buffer zones that are On May 8, 1984, OSMRE notified Missouri proposed to revise these not to be disturbed to meet the Missouri in the Federal Register (49 FR sections to require a registered regulatory requirements at 10 CSR 40– 19476 as amended at 64 FR 57981) and professional engineer or other qualified 3.170(6). The corresponding Federal recorded at 30 CFR 925.16(p)(4) that this professional specialist under the Regulation at 30 CFR 817.11 provides requirement must be revised to provide direction of a registered professional similar requirements. We find that performance standards that address air engineer to provide the director with a Missouri’s proposed revision will make quality in a manner no less effective certified report stating that the fill has its regulations no less effective than the than the Federal regulations at 30 CFR been constructed as specified in the Federal regulations. Therefore, we are 817.95(a). Missouri proposed to revise design approved in the permit and plan. approving Missouri’s revision. this section to require that all exposed The corresponding Federal Regulation 9. 10 CSR 40–3.220 Disposal of surface areas be protected and stabilized at 30 CFR 816.71(i)(2) contains a similar Underground Development Waste and to effectively control erosion and air requirement. We find that Missouri’s Excess Spoil (1)(K) and (L) General pollution attendant to erosion according proposed revision will make its Requirements to 10 CSR 40–3.200(5)(A). The regulations no less effective than the corresponding Federal Regulation at 30 Federal regulations. Therefore, we are Missouri proposed to revise these CFR 817.95(a) provides similar approving Missouri’s revision. sections to clarify at (K) that fill be requirements. We find that Missouri’s inspected by or under the direction of 6. 10 CSR 40–3.180 Casing and Sealing proposed revision will make its a professional engineer and at (L) only of Exposed Underground Openings (3) regulations no less effective than the the registered engineer shall provide the Permanent Casing and Sealing of Federal regulations. Therefore, we are certified report by removing the ‘‘. . . or Underground Openings approving Missouri’s revision and other qualified professional specialist removing the required program Missouri proposed to revise this . . .’’ verbiage from their rule. The amendment at 30 CFR 925.16(p)(4). section to correct various regulatory corresponding Federal Regulation at 30 13. 10 CSR 40–3.260 Requirements for citations and to include a reference to CFR 817.71(h)(2) provides similar the Wellhead Protection Section, Backfilling and Grading for requirements. We find that Missouri’s Underground Operations (4) Division of Geology and Land Survey at proposed revision will make its 10 CSR 23 Chapter 6 for approval of Regrading or Stabilizing Rills and regulations no less effective than the Gullies water well transfers. We find that Federal regulations. Therefore, we are Missouri’s proposed revision will make approving Missouri’s revision. Missouri proposed to revise this its regulations no less effective than the section to replace the existing 10. 10 CSR 40–3.230 Requirements for Federal regulations. requirements with more specific the Disposal of Coal Processing Waste However, OSMRE received a letter guidelines, including time frames, for for Underground Operations (1)(A) from the Mining Safety and Health regrading or stabilizing rills and gullies. General Requirements Administration (MSHA) on October 25, Missouri proposed to add a section on 2013 (Missouri Administrative Record Missouri proposed to revise this regrading or stabilizing rills and gullies No. 678.09), which noted that the section to state that all coal processing on areas that have been previously MSHA citation referenced (30 CFR waste disposed of in an area other than mined. The corresponding Federal 75.1771) was incorrect. The correct the mine workings or excavations shall Regulation at 30 CFR 816.95(b) provides MSHA regulation is 30 CFR 75.1711. We be hauled or conveyed and placed for similar, but less specific requirements. are approving the amendment with the final placement in new or existing We find that Missouri’s proposed condition that Missouri correct this disposal areas approved in the permit revision will make its regulations no typographical error through their State and plan for this purpose. The less effective than the Federal administrative process. corresponding Federal Regulation at 30 regulations. Therefore, we are approving 7. 10 CSR 40–3.200 Requirements for CFR 817.81(a) provides similar Missouri’s revision. Protection of the Hydrologic Balance requirements. We find that Missouri’s 14. 10 CSR 40–3.300 Postmining Land for Underground Operations proposed revision will make its Use Requirements for Underground (12)(A)1.(A) Groundwater Monitoring regulations no less effective than the Operations Federal regulations. Therefore, we are Missouri proposed to revise this approving Missouri’s revision. Missouri proposed to revise section to correct the references for subsection (3) of this section to correct remedial measures taken by the operator 11. 10 CSR 40–3.230 Requirements for the references to regulatory when analysis of any groundwater the Disposal of Coal Processing Waste requirements at this section to require sample indicates noncompliance with for Underground Operations (3)(D) that prior to the release of lands from the permit conditions to 10 CSR 40– Water Control Measures the permit area in accordance with 10 6.070(14) and 10 CSR 40–6.120(5). The Missouri proposed to revise this CSR 40–7.021(2)(C), the permit area corresponding Federal Regulation at 30 section to correct the references to shall be restored, in a timely manner, CFR 816.41 provides similar regulatory requirements that discharges either to conditions capable of requirements. We find that Missouri’s of all water from a coal processing waste supporting the uses they were capable proposed revision will make its bank shall comply with 10 CSR 40– of supporting before any mining or to regulations no less effective than the 3.200(15). The corresponding Federal conditions capable of supporting Federal regulations. Therefore, we are Regulation at 30 CFR 817.41(h) provides approved alternative land uses. approving Missouri’s revision. similar requirements. We find that Although there is no Federal Equivalent 8. 10 CSR 40–3.200 Requirements for Missouri’s proposed revision will make under the requirements for postmining Protection of the Hydrologic Balance its regulations no less effective than the land use, the corresponding Federal for Underground Operations (17)(B) Federal regulations. Therefore, we are regulation for bond release at 30 CFR Stream Buffer Zones approving Missouri’s revision. 800.40(c) provides similar requirements
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to the Missouri citation. We find that Federal regulations. Therefore, we are requirements. We find that Missouri’s Missouri’s proposed revision will make approving Missouri’s revision. proposed revision will make its its regulations no less effective than the 18. 10 CSR 40–5.010 Prohibitions and regulations no less effective than the Federal regulations. Therefore, we are Limitations on Mining in Certain Federal regulations. Therefore, we are approving Missouri’s revision. Areas (4) Procedures for Compatibility approving Missouri’s revision. 15. 10 CSR 40–5.010 Prohibitions and Findings for Surface Coal Mining 20. 10 CSR 40–5.010 Prohibitions and Limitations on Mining in Certain Operations on Federal Lands in Limitations on Mining in Certain Areas (1)(A) Definition of Valid National Forests Areas (6) Procedures for Waiving the Existing Rights Missouri proposed to revise this Prohibition on Surface Coal Mining Missouri proposed to revise this section at (4)(A) to correct references to Operations within the Buffer Zone of section to replace the definition of Valid the Federal regulations at 30 CFR 761.13 an Occupied Dwelling Existing Rights with language that is concerning Federal lands in a national Missouri proposed to revise this consistent with the corresponding forest. Missouri added language at (4)(B) section to identify three situations Federal regulation at 30 CFR 761.5. We that the applicant may submit a request where this section does not apply, and find that Missouri’s proposed revision to the regional director of OSMRE for a to require waivers to clarify who has a will make its regulations substantively determination before preparing and legal right to deny mining and the same as the Federal regulations. submitting an application for a permit knowingly waived that right. The Therefore, we are approving Missouri’s or boundary revision. Additionally, the waiver will act as consent for the revision. applicant must explain how the mining. Missouri adds language similar to the requirements in the 16. 10 CSR 40–5.010 Prohibitions and proposed operation would not damage corresponding Federal regulation at 30 Limitations on Mining in Certain the values listed in the definition of CFR 761.15. We find that Missouri’s Areas (2) Areas Where Mining is ‘‘significant recreational, timber, proposed revision will make its Prohibited or Limited economic, or other values incompatible with surface coal mining operations’’ in regulations no less effective than the Missouri proposed to revise this subsection (1)(B) and must include a Federal regulations. Therefore, we are section to require that surface coal map and sufficient information about approving Missouri’s revision. mining operations may not be the nature of the proposed operation for 21. 10 CSR 40–5.010 Prohibitions and conducted on the following lands, the Secretary of the Interior to make Limitations on Mining in Certain unless the permit applicant either has adequately documented findings. Areas (7) Submission and Processing valid existing rights as determined Missouri proposed to revise section of Requests for Valid Existing Rights under section (7) or qualifies for the (4)(C) to require that when a proposed Determinations exception for existing operations under surface coal mining operation or section (3). Missouri also revises this Missouri proposed to revise this proposed boundary revision for an section at 10 CSR 40–5.010 (2)(E)2. to section to require that an applicant must existing surface coal mining operation state that concerning the prohibition request a valid existing rights includes Federal lands within a national within 300 feet measured horizontally determination from OSMRE for Federal forest, the commission or director may from an occupied dwelling, the lands and for those features on Federal not issue the permit or approve the prohibition does not apply when the lands protected under subsections (2)(C) boundary revision before the Secretary part of the operation to be located closer through (G). An applicant must request of the Interior makes the findings than 300 feet to the dwelling is an a valid existing rights determination for required by subsection (2)(B). non-Federal lands and for those features access or haul road that connects with The corresponding Federal regulation an existing public road on the side of on non-Federal lands protected under at 30 CFR 761.13, provides similar subsections (2)(C) through (G) from the the public road opposite the dwelling. requirements. We find that Missouri’s The corresponding Federal regulation regulatory authority. The regulatory proposed revision will make its at 30 CFR 761.11 provides similar authority must use the Federal regulations no less effective than the requirements. We find that Missouri’s definition of valid existing rights at 30 Federal regulations. Therefore, we are proposed revision will make its CFR 761.5 when making a approving Missouri’s revision. regulations no less effective than the determination for non-Federal lands and Federal regulations. Therefore, we are 19. 10 CSR 40–5.010 Prohibitions and the definition of valid existing rights at approving Missouri’s revision. Limitations on Mining in Certain subsection (1)(A) when making a Areas (5) Procedures for Relocating or determination for those features 17. 10 CSR 40–5.010 Prohibitions and Closing a Public Road or Waiving the protected under subsections (2)(C) Limitations on Mining in Certain Prohibition on Surface Coal Mining through (G). Areas (3) Exception for Existing Operations Within the Buffer Zone of At (7)(B), Missouri requires that an Operations a Public Road applicant must request a valid existing Missouri proposed to revise this Missouri proposed to revise this rights determination from the section to require that the prohibitions section at (5)(A) to emphasize that the appropriate agency under subsection and limitations of section (2) do not requirements of this section do not (7)(A) if the applicant intends to apply to surface coal mining operations apply to lands for which a person has conduct surface coal mining operations for which a valid permit, issued under valid existing rights, that are within the on the basis of valid existing rights 10 CSR 40–6, exists when the land scope of existing operations as defined under section (2) or wishes to confirm within the permit area comes under the in Section (3), or roads that join an the right to do so. The applicant may protection of section 444.890.4, Revised existing public road. submit this request before preparing and Statute of Missouri (RSMo), or this rule. Missouri proposed to revise the submitting an application for a permit The corresponding Federal regulation at section at (5)(B)(3) to provide a public or boundary revision for the land. If 30 CFR 761.12 provides similar comment period if a mining operation OSMRE is the appropriate agency, the requirements. We find that Missouri’s may affect a right-of-way or public road. applicant must request the proposed revision will make its The corresponding Federal regulation determination in accordance with the regulations no less effective than the at 30 CFR 761.14 provides similar requirements of the Federal regulations
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at 30 CFR 761.16. If the regulatory regulations no less effective than the Missouri proposed to add paragraph authority is the appropriate agency, the Federal regulations. Therefore, we are 2.D. to this section requiring minimal applicant must request the approving Missouri’s revision. interference, to the extent possible, with determination in accordance with the 23. 10 CSR 40–5.020 State Designation the values for which those lands were requirements of 10 CSR 40–5.010. of Areas as Unsuitable for Mining (3) designated as unsuitable for surface coal The corresponding Federal regulation Applicability to Lands Designated as mining with exploration activities. This at 30 CFR 761.16, provides similar Unsuitable by Congress; and (4) section also requires reasonable requirements. We find that Missouri’s Exploration on Land Designated as opportunity for comment by the owner proposed revision will make its Unsuitable for Surface Coal Mining or agency with primary jurisdiction over regulations no less effective than the Operations the feature causing the land to come Federal regulations. Therefore, we are under the protection of 10 CSR 40– approving Missouri’s revision. Missouri proposed new language at 5.010(2) on whether the finding by the section (3) Applicability to Lands 22. 10 CSR 40–5.010 Prohibitions and commission under (3)(D)1 and 2 is Designated as Unsuitable by Congress; Limitations on Mining in Certain appropriate. pursuant to appropriate petitions, lands Areas (8) Regulatory Authority The corresponding Federal regulation listed under 10 CSR 40–5.010(2) are Obligations at Time of Permit at 30 CFR 772.12(d)(2)(iv), provides subject to designation as unsuitable for Application Review similar requirements. We find that all or certain types of surface coal Missouri proposed to revise this Missouri’s proposed revision will make mining operations under this rule. its regulations no less effective than the section at (8)(A) to require that the Missouri’s proposed new language is commission or director review the Federal regulations. Therefore, we are consistent with the corresponding approving Missouri’s revision. application to determine whether the Federal regulation at 30 CFR 762.14. proposed surface coal mining operation Therefore, we find that Missouri’s new 26. 10 CSR 40–6.030 Surface Mining would be located on any lands protected language is no less effective than the Permit Applications—Minimum under section 444.890.4, RSMo., or Federal regulation. Therefore, we are Requirements for Legal, Financial, Missouri regulations. approving Missouri’s new language. Compliance, and Related Information At (8)(B), Missouri requires that the Additionally, Missouri proposed to (4)(C) Relationship to Areas commission or director reject any revise section (4) by adding a new title: Designated Unsuitable for Mining portion of the application that would Exploration on Land Designated as Missouri proposed to revise this locate surface coal mining operations on Unsuitable for Surface Coal Mining subsection to require that if an applicant land protected under section 444.890.4, Operations and added the word proposed to conduct surface mining RSMo., or Missouri regulation, unless: ‘‘unsuitable’’ in this section. Missouri’s activities within one hundred feet (100′) the site qualifies for the exception for proposed revisions are consistent with of the outside right-of-way of a public existing operations under section (3); a corresponding Federal regulation at 30 road or within three hundred feet (300′) person has valid existing rights; the CFR 762.15. We find that Missouri’s of an occupied dwelling, the application applicant obtains a waiver or exception revisions are no less effective than the shall meet the requirements of 10 CSR from the prohibitions of section corresponding the Federal regulation. 40–5.010(5) or (6), respectively. The 444.890.4, RSMo., or Missouri Therefore, we are approving Missouri’s corresponding Federal regulation at 30 regulation; and for lands protected by revisions. CFR 778.16(c), provides similar subsection (2)(C), both the commission 24. 10 CSR 40–6.020 General requirements. We find that Missouri’s or director and the agency with Requirements for Coal Exploration proposed revision will make its jurisdiction over the park or place Permits (3)(B)14. Permit requirements regulations no less effective than the jointly approve the proposed operation for explorations removing more than Federal regulations. Therefore, we are in accordance with subsection (8)(D). two hundred fifty tons of coal or approving Missouri’s revision. At (8)(C), Missouri added language to where explorations will substantially 27. 10 CSR 40–6.050 Surface Mining this section that if the commission or disturb the natural land surface Permit Applications—Minimum director has difficulty determining Requirements for Reclamation and whether an application includes land Missouri proposed to revise this section to require that for any lands Operations Plan (14)(B) Protection of within an area specified in subsection Public Parks and Historic Places (2)(A), the commission or director shall listed in 10 CSR 40–5.010(2), a Missouri proposed to revise this request that the Federal, state, or local demonstration that the proposed section to correct the references to governmental agency verify the location. exploration activities have been At (8)(D), if the commission or designed to minimize interference with regulatory requirements to make it director determines that the proposed the values for which those lands were similar to the provisions of the surface coal mining operation will designated as unsuitable for surface coal corresponding Federal regulation at 30 adversely affect any publicly-owned mining operations. The corresponding CFR 780.31(a). We find that Missouri’s park or any place included in the Federal regulation at 30 CFR proposed revision will make its National Register of Historic Places, the 772.12(b)(14) provides similar regulations no less effective than the director shall request that the Federal, requirements. We find that Missouri’s Federal regulations. Therefore, we are state, or local agency with jurisdiction proposed revision will make its approving Missouri’s revision. over the park or place either approve or regulations no less effective than the 28. 10 CSR 40–6.050 Surface Mining object to the proposed operation. The Federal regulations. Therefore, we are Permit Applications—Minimum regulations contain requirements on approving Missouri’s revision. Requirements for Reclamation and how this request will be submitted and 25. 10 CSR 40–6.020 General Operations Plan (15) Relocation or processed. Requirements for Coal Exploration Use of Public Roads The corresponding Federal regulation Permits (3)(D) Decisions on Missouri proposed to revise this at 30 CFR 761.17 provides similar Applications for Exploration section to correct the references to requirements. We find that Missouri’s Removing More Than Two Hundred regulatory requirements to make it proposed revision will make its Fifty Tons of Coal similar to the provisions of the
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corresponding Federal regulation at 30 and 778.12 provide similar ‘‘Replacement of water supply.’’ We CFR 780.33. We find that Missouri’s requirements. We find that Missouri’s find that Missouri’s proposed revisions proposed revision will make its proposed revision will make its will make its regulations substantively regulations no less effective than the regulations no less effective than the the same as the corresponding Federal Federal regulations. Therefore, we are Federal regulations. Therefore, we are regulations. approving Missouri’s revision. approving Missouri’s revision. However, we noted in the definition 29. 10 CSR 40–6.060 Requirements for 32. 10 CSR 40–6.120 Underground at 89 Significant, imminent Permits for Special Categories of Mining Permit Applications— environmental harm to land, air or Surface Coal Mining and Reclamation Minimum Requirements for water resources, the reference needs to Operations Reclamation and Operations Plan be changed from 444.855.2, RSMo to the Missouri proposed to revise this (5)(C) Reclamation Plan—Protection valid reference 444.885.2, RSMo. section to correct the address of the of Hydrologic Balance Missouri needs to correct this citation in Land Reclamation Program at (4)(C)1.A. Missouri proposed to revise a future program amendment. We are and references to regulatory subparagraph (C) to clarify that the approving the amendment with the requirements to make it similar to the supplemental information required by condition that Missouri prepare a provisions of the corresponding Federal this section shall include the plans required program amendment at 30 CFR regulation at 30 CFR 785.17(e)(2). We listed at (C)1. through (C)3. The 925.16 to correct the regulation citation. corresponding Federal regulation at 30 find that Missouri’s proposed revision 36. 10 CSR 40–8.020 Exemption for CFR 784.14(g), provides similar will make its regulations no less Coal Extraction Incident to requirements. We find that Missouri’s effective than the Federal regulations. Government-Financed Highway or proposed revision will make its Therefore, we are approving Missouri’s Other Construction (2)(C) Definitions revision. regulations no less effective than the Federal regulations. Therefore, we are Missouri proposed to revise this 30. 10 CSR 40–6.070 Review, Public approving Missouri’s revision. definition to be substantively the same Participation and Approval of Permit as the corresponding Federal regulation Applications and Permit Terms and 33. 10 CSR 40–6.120 Underground Mining Permit Applications— at 30 CFR 707.5. Therefore, we are Conditions (2)(A)5. Public Notices of approving Missouri’s revision. Filing of Permit Applications Minimum Requirements for Reclamation and Operations Plan Missouri proposed to revise this 37. 10 CSR 40–8.070 Applicability and (7)(A)1.A. Reclamation Plan-Ponds, General Requirements (2)(C)1.A.(II) subsection to require that if an applicant Impoundments, Banks, Dams, and seeks a permit to mine within one Embankments Missouri proposed to correct the hundred feet (100′) of the outside right- reporting dates at (a) and (b) of this of-way of a public road or to relocate a Missouri proposed to revise this subparagraph. These dates were public road, a concise statement section to clarify that the general plan corrected to clearly require separate describing the mine-related activities shall be prepared by or under the cumulative coal production and revenue must be submitted. The corresponding direction of and certified by only a data from mining prior to October 1, Federal regulation at 30 CFR qualified registered professional 1992, and after October 1, 1992. This 773.6(a)(1)(v) provides similar engineer by removing the ‘‘ . . . or by action corrects the disapproval of the requirements. We find that Missouri’s a professional geologist. . .’’ verbiage Missouri regulations recorded at 30 CFR proposed revision will make its from their rule. The corresponding 925.12(f). The corresponding Federal regulations no less effective than the Federal regulation at 30 CFR 784.16(a) regulation at 30 CFR 702.5(a)(2) Federal regulations. Therefore, we are provides similar requirements. We find provides a similar requirement. We find approving Missouri’s revision. that Missouri’s proposed revision will that Missouri’s proposed revision will Additionally, Missouri proposed to make its regulations no less effective make its regulations no less effective revise this section to add ‘‘mine-related than the Federal regulations. Therefore, than the Federal regulations. Therefore, activities’’ to the concise statement we are approving Missouri’s revision. we are approving Missouri’s revision requirement if an applicant seeks a 34. 10 CSR 40–6.120 Underground and removing the disapproval at 30 CFR permit under this section of the rule. Mining Permit Applications— 925.12(f) and the required program The corresponding Federal regulation at Minimum Requirements for amendment at 30 CFR 925.16(p)(20). 30 CFR 773.15(c)(2), provides similar Reclamation and Operations Plan (9)(A) Relocation or Use of Public 38. 10 CSR 40–8.070 Applicability and requirements. We find that Missouri’s General Requirements (2)(C)8.B proposed revision will make its Roads regulations no less effective than the Missouri proposed to revise this Missouri removes this subparagraph Federal regulations. Therefore, we are section to change from ‘‘underground as redundant to the previously approved approving Missouri’s revision. mining activities’’ to ‘‘surface coal subparagraph at (2)(C)8.A. Since this 31. 10 CSR 40–6.100 Underground mining operations.’’ The corresponding action merely removes redundant Mining Permit Applications— Federal regulation at 30 CFR 784.18(a) language from a previously approved Minimum Requirements for Legal, provides similar requirements. We find requirement, we find that Missouri’s Financial, Compliance, and Related that Missouri’s proposed revision will proposed revision will make its Information (1)(C) and (D) make its regulations no less effective regulations no less effective than the Identification of Interests than the Federal regulations. Therefore, Federal regulations. Therefore, we are approving Missouri’s revision. Missouri proposed to revise this we are approving Missouri’s revision. section to clarify that required 35. 10 CSR 40–8.010 Definitions IV. Summary and Disposition of information concerning an applicant’s Missouri proposed to revise the Comments ownership or control as defined in 10 definition of several terms to provide Public Comments CSR 40–6.010(2)(C) must be contained similar definitions to the corresponding in each application. The corresponding Federal regulation at 30 CFR 701.5, We asked for public comments on the Federal regulations at 30 CFR 778.11 including adding a definition for amendment, but did not receive any.
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Federal Agency Comments VI. Procedural Determinations determined that the rule does not have substantial direct effects on one or more Executive Order 12630—Takings On August 23, 2013, under 30 CFR Indian tribes, on the relationship 732.17(h)(11)(i) and section 503(b) of This rule does not have takings between the Federal Government and SMCRA, we requested comments on the implications. This determination is Indian tribes, or on the distribution of amendment from various Federal based on the analysis performed for the power and responsibilities between the agencies with an actual or potential counterpart Federal regulation. Federal Government and Indian tribes. interest in the Missouri program This determination was reached because (Administrative Record Nos. MO– Executive Order 12866—Regulatory Planning and Review the Missouri program does not regulate 678.03 through MO–678.08). We coal exploration and surface coal received one comment from MSHA This rule is exempted from review by mining or reclamation operations on (Administrative Record No. MO– the Office of Management and Budget Indian lands. Therefore, the Missouri 678.09). MSHA pointed out that at 10 (OMB) under Executive Order 12866. program has no effect on federally CSR 40–3.180(3), Missouri had recognized Indian tribes. incorrectly cited the MSHA regulation Executive Order 12988—Civil Justice as 30 CFR 75.1771, when the correct Reform Executive Order 13211—Regulations MSHA regulation is 30 CFR 75.1711. The Department of the Interior has That Significantly Affect the Supply, Missouri was notified of this conducted the reviews required by Distribution, or Use of Energy typographical error and will make this Section 3 of Executive Order 12988 and On May 18, 200,1 the President issued correction through its State has determined that this rule meets the Executive Order 13211, which requires administrative process. applicable standards of subsections (a) agencies to prepare a Statement of and (b) of that section. Because each Energy Effects for a rule that is, (1) Environmental Protection Agency (EPA) program is drafted and promulgated by Concurrence and Comments considered significant under Executive a specific State, not by OSMRE, these Order 12866 and (2) likely to have a Under 30 CFR 732.17(h)(11)(ii), we standards are not applicable to the significant adverse effect on the supply, are required to get a written concurrence actual language of State regulatory distribution or use of energy. A from EPA for those provisions of the programs and program amendments. Statement of Energy Effects is not program amendment that relate to air or Under sections 503 and 505 of SMCRA required because this rule is exempt water quality standards issued under (30 U.S.C. 1253 and 1255) and the from review under Executive Order the authority of the Clean Water Act (33 Federal regulations at 30 CFR 730.11, 12866 and is not expected to have a U.S.C. 1251 et seq.) or the Clean Air Act 732.15 and 732.17(h)(10), decisions on significant adverse effect on the supply, (42 U.S.C. 7401 et seq.). None of the proposed State regulatory programs and distribution or use of energy. revisions that Missouri proposed to program amendments submitted by the National Environmental Policy Act make in this amendment pertain to air States must be based solely on a or water quality standards. Therefore, determination of whether the submittal This rule does not require an we did not ask EPA to concur on the is consistent with SMCRA and its environmental impact statement amendment. However, on August 23, implementing Federal regulations and because Section 702(d) of SMCRA (30 2013, under 30 CFR 732.17(h)(11)(i), we whether the other requirements of 30 U.S.C. 1292(d)) states that agency requested comments on the amendment CFR parts 730, 731 and 732 have been decisions on proposed State regulatory from EPA (Administrative Record No. met. program provisions do not constitute MO–678.04). The EPA did not respond Executive Order 13132—Federalism major Federal actions within the to our request. meaning of Section 102(2)(C) of the This rule does not have Federalism National Environmental Policy Act (42 State Historic Preservation Officer implications. SMCRA delineates the U.S.C. 4332(2)(C)). (SHPO) and the Advisory Council on roles of the Federal and State Historic Preservation (ACHP) governments with regard to the Paperwork Reduction Act regulation of surface coal mining and This rule does not contain Under 30 CFR 732.17(h)(4), we are reclamation operations. One of the information collection requirements that required to request comments from the purposes of SMCRA is to ‘‘establish a require approval by OMB under the SHPO and ACHP on amendments that nationwide program to protect society Paperwork Reduction Act (44 U.S.C. may have an effect on historic and the environment from the adverse 3507 et seq.). properties. On August 23, 2013, we effects of surface coal mining requested comments on Missouri’s Regulatory Flexibility Act operations.’’ Section 503(a)(1) of amendment (Administrative Record No. SMCRA requires State laws regulating The Department of the Interior MO–678.06 and MO–678.07), but surface coal mining and reclamation certifies that this rule will not have a neither the SHPO nor ACHP responded operations be’’ in accordance with’’ the significant economic impact on a to our request. requirements of SMCRA. Section substantial number of small entities V. OSMRE’s Decision 503(a)(7) requires that State programs under the Regulatory Flexibility Act (5 contain rules and regulations U.S.C. 601 et seq.). The State submittal, Based on the above findings, we ‘‘consistent with’’ regulations issued by which is the subject of this rule, is based approve the amendment Missouri sent the Secretary pursuant to SMCRA. upon counterpart Federal regulations for us on August 12, 2013. which an economic analysis was To implement this decision, we are Executive Order 13175—Consultation prepared and certification made that amending the Federal regulations at 30 and Coordination With Indian Tribal such regulations would not have a CFR part 925, which codify decisions Governments significant economic effect upon a concerning the Missouri program to In accordance with Executive Order substantial number of small entities. In include the original amendment 13175, we have evaluated the potential making the determination as to whether submission date and the date of final effects of this rule on federally this rule would have a significant publication for this rulemaking. recognized Indian tribes. We have economic impact, the Department relied
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upon the data and assumptions for the determination made that the Federal Dated: July 16, 2015. counterpart Federal regulations. regulation was not considered a major Len Meier, Small Business Regulatory Enforcement rule. Acting Regional Director, Mid-Continent Region. Fairness Act Unfunded Mandates This rule is not a major rule under 5 Editorial Note: This document was U.S.C. 804(2), the Small Business This rule will not impose an received for publication by the Office of the Regulatory Enforcement Fairness Act. unfunded mandate on State, local, tribal Federal Register on December 11, 2015. This rule (a) does not have an annual governments or the private sector of For the reasons set out in the effect on the economy of $100 million; $100 million or more in any given year. preamble, 30 CFR part 925 is amended (b) will not cause a major increase in This determination is based upon the as set forth below: costs or prices for consumers, fact that the State submittal, which is individual industries, Federal, State, or the subject of this rule, is based upon PART 925—MISSOURI local government agencies, or counterpart Federal regulations, for ■ geographic regions; and (c) does not which an analysis was prepared, and a 1. The authority citation for part 925 have significant adverse effects on determination made that the Federal continues to read as follows: competition, employment, investment, regulation did not impose an unfunded Authority: 30 U.S.C. 1201 et seq. productivity, innovation or the ability of mandate. ■ 2. Section 925.15 is amended in the U.S.-based enterprises to compete with table by adding an entry in List of Subjects in 30 CFR Part 925 foreign-based enterprises. This chronological order by ‘‘Date of final determination is founded upon the State Intergovernmental relations, Surface publication’’ to read as follows: submittal, which is the subject of this rule. The State submittal is based upon mining, Underground mining. § 925.15 Approval of Missouri regulatory counterpart Federal regulations, for program amendments. which an analysis was prepared, and a * * * * *
Original amendment Date of final submission date publication Citation/description
******* August 12, 2013 ...... December 17, 2015 ...... 10 CSR 40–3.040(6)(A)1., (6)(R), (6)(U), (10)(B)5., and (10)(O)3.C.; 10 CSR 40– 3.060(1)(K)2.; 10 CSR 40–3.180(3); 10 CSR 40–3.200(6)(A)1., (6)(R), (6)(U), (6)(T), (10)(B)5., (10)(O)3.C., (12)(A)1.(A), and (17)(B); 10 CSR 40–3.220(1)(K) and (L);10 CSR 40–3.230(1)(A) and (3)(D); 10 CSR 40–3.240(1); 10 CSR 40– 3.260(4); 10 CSR 40–3.300; 10 CSR 40–5.010(1)(A), (2), (3), (4), (5), (6), (7), and (8); 10 CSR 40–5.020(3) and (4); 10 CSR 40–6.020(3)(B)14., and (3)(D); 10 CSR 40–6.030(4)(C); 10 CSR 40–6.050(14)(B) and (15); 10 CSR 40–6.060; 10 CSR 40–6.070(2)(A)5.; 10 CSR 40–6.100(1)(C) and (D); 10 CSR 40– 6.120(5)(C), (7)(A)1.A., and (9)(A); 10 CSR 40–8.010; 10 CSR 40 8.020(2)(C); 10 CSR 40–8.070(2)(C)1.A.(II) and (2)(C)8.B.
§ 925.16 [Amended] SUMMARY: This final rule amends the rule must be received not later than ■ 3. Section 925.16 is amended by rear license plate holder requirements February 1, 2016. removing and reserving paragraphs contained in Federal Motor Vehicle ADDRESSES: Petitions for reconsideration (p)(4) and (20) and removing paragraph Safety Standard (FMVSS) No. 108; of this final rule must refer to the docket (v). ‘‘Lamps, reflective devices, and and notice number set forth above and [FR Doc. 2015–31674 Filed 12–16–15; 8:45 am] associated equipment.’’ The final rule be submitted to the Administrator, expands upon the proposal in the BILLING CODE 4310–05–P National Highway Traffic Safety NPRM and allows license plates on all Administration, 1200 New Jersey motor vehicles to be mounted on a Avenue SE., Washington, DC 20590. DEPARTMENT OF TRANSPORTATION plane up to 30 degrees upward from vertical if the upper edge of the license FOR FURTHER INFORMATION CONTACT: For technical issues: Mr. David Beck, Office National Highway Traffic Safety plate is not more than 1.2 meters (47.25 of Crash Avoidance Standards, Administration inches) from the ground. Previously, the maximum allowable upward mounting Telephone: 202–366–6813, Facsimile: 202–366–7002. 49 CFR PART 571 angle was 15 degrees beyond vertical. This final rule increases harmonization For legal issues: Mr. John Piazza, [Docket No. NHTSA–2015–0057] with existing requirements in European Office of the Chief Counsel, Telephone: RIN 2127–AL41 regulations. Additionally, this final rule 202–366–2992, Facsimile: 202–366– increases a manufacturer’s design 3820. Federal Motor Vehicle Safety Standard flexibility while providing opportunity The mailing address for these officials Lamps, Reflective Devices, and to decrease cost without compromising is: National Highway Traffic Safety Associated Equipment safety. Administration, 1200 New Jersey Avenue SE., Washington, DC 20590. AGENCY: National Highway Traffic DATES: Effective June 14, 2016, with Safety Administration (NHTSA), optional early compliance as discussed SUPPLEMENTARY INFORMATION: Department of Transportation (DOT). below. Petitions for Reconsideration: Table of Contents ACTION: Final rule. Petitions for reconsideration of this final I. Background
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II. Summary of the Notice of Proposed 2007 final rule explicitly stated the SAE II. Summary of the Notice of Proposed Rulemaking (NPRM) J587 requirements for the first time, Rulemaking (NPRM) III. Summary of Public Comments and these requirements were not new, since NHTSA’s Response On September 3, 2013, the agency IV. Final Rule FMVSS No. 108 had previously published an NPRM proposing to V. Effective Date incorporated them by reference. amend FMVSS No. 108 to allow VI. Regulatory Analyses and Notices In response to the December 2007 manufacturers greater flexibility in the final rule, the agency received petitions I. Background design of the license plate mounting for reconsideration from Harley- surface on motorcycles.11 The proposal The agency reorganized FMVSS No. Davidson Motor Company 4 (Harley- stated that the maximum downward 108, ‘‘Lamps, reflective devices, and Davidson) and Ford Motor Company angle at which a motorcycle license associated equipment,’’ in a 2007 final (Ford).5 Ford requested that the agency plate could be mounted (i.e., the plate rule by streamlining the regulatory text delete S6.6.3 because, Ford concluded, faces below the horizon) would remain and clarifying the standard’s NHTSA had stated that not all 15 degrees, as would the maximum requirements.1 The final rule, among requirements of referenced SAE upward angle for license plates on other things, incorporated important standards were intended to be motorcycles on which the upper edge of agency interpretations and reduced incorporated into FMVSS No. 108. the license plate is more than 1.2 m reliance on third-party documents Harley-Davidson petitioned NHTSA to (47.25 inches) from the ground. If the incorporated by reference. Regulated either withdraw or amend the license upper edge of the license plate is not parties provided feedback to the agency plate mounting angle requirements more than 1.2 m (47.25 inches) above that documents, incorporated by because, Harley-Davidson stated, the ground, however, NHTSA proposed reference before the 2007 FMVSS No. 108 regulated license plate to amend the motorcycle license plate reorganization, made it difficult to lamps, not holders. After the 2007 final mounting angle requirements to allow determine all of the applicable rule was published, the Motorcycle mounting angles of up to 30 degrees requirements. For example, the standard Industry Council (MIC) submitted a upward from the vertical (i.e., the plate incorporated some older versions of petition for reconsideration requesting faces above the horizon). SAE standards, not the most current that the agency amend the license plate NHTSA anticipated that this change versions; not only were the older SAE angle mounting requirement for would reduce costs for manufacturers standards sometimes difficult to obtain, motorcycles.6 Because the petition for by allowing them to use the same but some regulated parties may have reconsideration was received on March mounting hardware for the license plate mistakenly believed that FMVSS No. 19, 2009, well after the allowed time for in both the U.S. and Europe. The agency 108 incorporated the most recent SAE such petitions, NHTSA treated it as a also stated that it did not believe that standards. The reorganization was petition for rulemaking.7 the proposal would compromise safety because the proposed changes to the intended to fix these problems. The In two separate notices, both issued license plate mounting angle agency stated in the final rule that the on April 26, 2011, NHTSA granted requirement would not affect the ability reorganization of FMVSS No. 108 was MIC’s petition for rulemaking 8 and of law enforcement personnel or the administrative and not intended to denied, in part, the petitions for general public to view the license plate. change the standard’s substantive reconsideration of the 2007 final rule on The NPRM also requested comment on requirements. the same issue.9 Because of confusion SAE 2 International Recommended the following issues: Amending the among regulated entities over whether Practice, SAE J587 OCT81, License Plate license plate mounting angle the license plate mounting angle Lamps (Rear Registration Plate Lamps) requirements to allow the license plate requirements in SAE J587 OCT81 were was one of the third-party documents to be mounted at an angle of 30 degrees incorporated into FMVSS No. 108, the whose requirements were transferred to upward of vertical on all vehicles, or, agency announced that it would not the regulatory text of the standard. alternatively, on vehicles with a gross enforce the 15 degree mounting angle Among other requirements derived from vehicle weight rating of 10,000 pounds requirement while it is completing the SAE J587 OCT81, S6.6.3 of the final rule and less; adopting the maximum height rulemaking that was the subject of the required that the rear license plate requirement of 1.5 m specified in the petition.10 That enforcement policy will holder be mounted within an angle ± 15 analogous European Economic end as of the effective date of this final degrees of a plane perpendicular to that Community (EEC) regulations; and rule. on which the vehicle stands. This whether the proposed amendments requirement was not expressly stated in would negatively affect the ability of the text of the standard previously. Passenger Vehicles, Trucks, Buses and Trailers of license plate recognition technology to Less than 80 Inches in Overall Width). read license plate characters.12 Instead, FMVSS No. 108 contained two 4 Docket No. NHTSA 2011–0052. tables indicating the lighting 5 Docket No. NHTSA 2007–28322. III. Summary of Public Comments and requirements for different types of 6 MIC had also submitted a petition for NHTSA’s Response vehicles, and these tables indicated that rulemaking before the 2007 final rule (on March 14, ‘‘SAE J587, October 1981’’ was an 2005) requesting that the agency modify the license In response to the NPRM, the agency mounting angle requirement to allow license plates ‘‘Applicable SAE standard’’ for a received comments from trade to be mounted between 30 degrees upward and 15 associations, a non-profit association, ‘‘license plate lamp.’’ 3 Even though the degrees downward of a plane perpendicular to that on which the vehicle stands. NHTSA did not grant manufacturers, and an individual. The 1 72 FR 68234, Dec. 4, 2007. this request before or during the administrative re- trade associations that submitted 2 Previously named Society of Automotive write of FMVSS No. 108 because the agency’s intent comments were the Alliance of Engineers. was to streamline and clarify the standard, not to Automobile Manufacturers (the make substantive changes. 3 See 49 CFR 571.108, Table I (Required Motor Alliance) and MIC. The voluntary non- 7 See 49 CFR 553.35. Vehicle Lighting Equipment Other Than profit association of state and provincial Headlamps, Multipurpose Passenger Vehicles, 8 See 76 FR 23254, Apr. 26, 2011 (granting Trucks, Trailers, and Buses, of 80 or More Inches petition for rulemaking). motor vehicle administrations—the in Overall Width) (2006); see also Table III 9 See 76 FR 23255, Apr. 26, 2011 (denying, in (Required Motor Vehicle Lighting Equipment, part, petitions for reconsideration). 11 78 FR 54210, Sept. 3, 2013. Passenger Cars and Motorcycles, and Multipurpose 10 See id. at 23256. 12 Id.
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American Association of Motor Vehicle more sensitive to downward than viewing angle for a license plate Administrators (AAMVA)—submitted a upward angles. A former law mounted at the maximum height and at comment. Volkswagen Group of enforcement officer stated that license the maximum angle, when viewed by America (Volkswagen) and Harley- plates mounted at an angle are often the average driver’s eye height (worst- Davidson Motor Company (Harley- more difficult to read in low light. He case situation) will be no greater than Davidson) also submitted comments. stated that the proposed rule would 30° from perpendicular to the plate. The agency also received a comment interfere with the ability of witnesses, Considering all these factors, the agency from an individual commenter. police officers, and the public to concludes that the legibility of a license Comments are summarized below by identify vehicles. plate in low light situations for drivers topic, along with the agency’s will not be negatively impacted by Agency Response responses. today’s final rule. In response to the commenter that For automated license plate readers, Harmonization and Cost Saving Benefits expressed concern that the proposed the agency estimates that they are often of the Proposal rule would decrease the legibility of the mounted similar to, or higher than a Comments license plate in low light conditions, the driver’s eye height. As such, the agency MIC and Harley-Davidson supported agency considered the potential impact believes that the geometric and the proposal to increase the maximum of increasing the allowable mounting photometric factors outlined above mounting angle to 30 degrees beyond plate angle in the context of the totality apply similarly to machine license plate vertical if the upper edge of the license of factors that influence the legibility of readers as they do to human viewers. As plate is not more than 1.2 m (47.25 the plate in low light conditions. such, the agency agrees with MIC that inches) above the ground. (MIC and FMVSS No. 108 contains various today’s final rule will not have a Harley-Davidson also suggested, as photometric and geometric negative impact on automated plate discussed below, adopting the EEC requirements aimed at assuring readers. legibility of the license plate. While this height requirement.) Each commented License Plate Height that the proposal would align FMVSS final rule expands the allowable license No. 108 more closely with the EEC plate mounting plane angle, other lamp Comments mounting angle requirements.13 Each photometric requirements and Harley-Davidson and MIC commented also stated that this change would geometric requirements remain that the agency should adopt the EEC increase manufacturer design flexibility unchanged. The plate illumination maximum height allowance of 1.5 m and decrease manufacturers’ costs restriction continues to require that the above the ground, as measured from the without decreasing safety. test station targets be illuminated at a upper edge of the license plate when the value of no less than 8 lux by the license Agency Response vehicle is unladen. Harley-Davidson plate lamp. Additionally, the highest to stated that this more liberal height The agency agrees with MIC’s and lowest illumination ratio requirements, requirement would provide greater Harley-Davidson’s comments which protect against shadowing across design flexibility and potential supporting the agency’s proposal. the plate, remain unchanged. Also harmonization-related cost savings. MIC Regarding MIC’s comment that the unchanged is a requirement that the stated that, in addition to benefits from proposal would align FMVSS No. 108 incident light from the license plate harmonization, the 1.2 m and 1.5 m more closely with the EEC license plate lamp never be less than 8 degrees. These values are arbitrary and there is no mounting angle requirement, the agency factors all influence the legibility of the material advantage or disadvantage to verified that today’s final rule is license plate in low light conditions either. generally consistent with the inclination more than the mounting angle within provisions of EEC Council Directive the range of allowable angles and Agency Response 2009/62/EC.14 heights of this final rule. The agency has decided not to adopt Finally, the final rule’s adoption of Legibility the EEC maximum height allowance. the proposed maximum plate height for Neither MIC nor Harley-Davidson Comments which this expanded angle range submitted data or specific information applies of 1.2 m (measured from the top MIC agreed with the agency’s to support their comments. The agency of the plate) limits the range of likely tentative conclusion that the proposed disagrees with MIC that the 1.2 m vertical viewing angles. Considering the maximum mounting angle would not maximum plate height for which the sales-weighted average driver’s eye adversely affect the ability of license expanded angle applies is arbitrary. As height for a car is 1.1 m and 1.42 m for plate recognition technology to read outlined above, this restriction limits light trucks and vans, the agency license plates. MIC also stated that the vertical visual angle for which a anticipates that occurrences of an optics and software could be readily driver is likely to view a license plate. observer reading plate at large vertical While a 1.2 m maximum plate height, modified, and that the technology is 15 visual angles will remain rare. A for which the plate may be angled at 30° 13 See EEC Council Directive 2009/62/EC, 1990 driver, whose eye height is at the sales- upward, produces a maximum vertical O.J. (L 198/20). weighted average height in a sedan, will viewing angle of 30° beyond 14 3. INCLINATION view the center of a license plate perpendicular, a value of 1.5 m will not 3.1. The rear registration plate: (approximately 1.15 m to 1.125 m from provide such an assurance. If the agency 3.1.1. must be at right angles to the median the ground), if mounted at the chose the value of 1.5 m as suggested by longitudinal plane of the vehicle; maximum height of 1.2 m (at the top of 3.1.2. may be inclined from the vertical by not MIC and Harley-Davidson, and as more than 30°, with the vehicle unladen, when the the plate), nearly parallel to the horizon. allowed in the EEC regulation, a viewer backing plate for the registration number faces This means that the maximum vertical located at the average, sales-weighted upwards; eye height would need to look up 3.1.3. may be inclined by not more than 15° from 15 UMTRI–2002–8, ‘‘The Location of Headlamps the vertical, with the vehicle unladen, when the and Driver Eye Positions In Vehicles Sold in The beyond horizontal for a plate mounted backing plate for the registration number faces U.S.A.’’ (2002) Schoettle, B., Sivak, M., and Nakata, at the upper height limit. Such an downwards. Y. arrangement would cause the vertical
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viewing angle to increase beyond 30° the NPRM, the agency considered ground. The agency believes that these depending on the viewing distance. As applying the relaxed requirement to changes to the license plate mounting such, we have chosen to adapt the vehicles that are rated at 10,000 pound angle requirements will reduce costs for proposed limit of 1.2 m as the maximum or less vehicles. After considering the manufacturers by allowing them to use mounting height for a plate mounted on Alliance’s comment, the agency agrees the same mounting hardware for the a plane more than 15 degrees (but less that there is no logical connection license plate in both the United States than 30 degrees) upward from vertical. between the weight rating of the vehicle and Europe without compromising The agency has chosen, however, not to and the legibility of the plate based on safety because, as described above, we adopt the ECE maximum height of 1.5 the mounting angle considering the size do not believe that plate legibility will m because we are concerned that higher of the plate and other photometric and be compromised. mounting locations could create a geometric requirement are the same for As of the effective date of the final situation where the legibility of the heavy and light vehicles. Applying this rule we are terminating the policy, in plate becomes compromised. final rule to all motor vehicles will effect since our denial of the petitions Vehicles to Which the Proposed allow manufacturers of these additional for reconsideration of the 2007 final Changes Should Apply vehicle types the flexibility to use an rule, of not enforcing the license plate expanded mounting angle without holder mounting requirement. Comments compromising safety. V. Effective Date In the NPRM, the agency solicited Orientation of the License Plate as In the NPRM we proposed an effective comment on amending the mounting Either Vertical or Horizontal angle requirement not just for date of 60 days after publication of the motorcycles but for other types of Comments final rule. Under the Safety Act, a FMVSS typically is not effective before vehicles as well. We stated that after The AAMVA commented that the the 180th day after the standard is receiving public comment the agency proposed rule would continue to allow published.17 We did not receive any may decide to allow license plates to be license plates to be mounted vertically comments concerning the proposed mounted at an angle of up to 30 degrees (i.e., displayed so that the characters on effective date. In keeping with typical upward of vertical on all vehicles, or on the plate are read from top to bottom practice, this final rule will be effective all vehicles with a gross vehicle weight rather than left to right). AAMVA stated June 14, 2016, with optional early rating of 10,000 pounds and less. that vertically-mounted plates are compliance. We believe that specifying The agency received two comments difficult to read and that it ‘‘supports a later effective date for this final rule regarding the issue of what vehicles to the horizontal display of a front and rear will not have any adverse effects or which the proposed rule should apply. plate and the uniform manufacture and Both Volkswagen and the Alliance prejudice any regulated parties. This design of plates, to increase the effective stated that the proposed change in final rule expands the range of and efficient identification of license mounting angle should apply not just to compliance options available to plates. The use of common motorcycles but to all classes of manufacturers; it does not enact any characteristics and predictable designs vehicles. Volkswagen and the Alliance new duties or restrictions. Moreover, on license plates will enhance stated that making the rule generally providing for optional early compliance readability, usability, and a connection applicable would harmonize the FMVSS will allow manufacturers to to vehicle registration records.’’ No. 108 provision with the comparable immediately benefit from the flexibility ECE regulations and, (as Volkswagen Agency Response afforded by the expanded mounting stated) with SAEJ587, both of which While the agency appreciates angle requirements the same as if the apply the maximum 30 degree upward AAMVA’s comment, this rulemaking is effective date were earlier. mounting angle to all classes of limited to the mounting angle of the vehicles.16 The Alliance also indicated VI. Regulatory Notices and Analyses plate and does not address whether the that the permissible upward mounting license plate is horizontally or vertically A. Executive Order (E.O.) 12866 angle should not depend on vehicle displayed. Accordingly, the AAMVA’s (Regulatory Planning and Review), E.O. weight because license plate visibility proposed requirement is outside the 13563, and DOT Regulatory Policies and and legibility do not depend on vehicle scope of this rulemaking. Procedures weight. NHTSA has considered the impact of IV. Final Rule Agency Response this rulemaking action under Executive The agency anticipates that this final The agency is amending FMVSS No. Order 12866, Executive Order 13563, rule can yield design and manufacturing 108 to allow license plate mounting and the Department of Transportation’s benefits to all motor vehicles, not just angles of up to 30 degrees upward from regulatory policies and procedures. This motorcycles, without compromising vertical (an installed plate will face final rule does not result in any safety. As such, the agency has applied above the horizon) if the upper edge of increased costs or significant benefits. this final rule to all motor vehicles the license plate is not more than 1.2 m Therefore, it is not considered to be regardless of vehicle type or weight. In (47.25 inches) from the ground. The significant under E.O. 12866 or the agency is also expanding the application Department’s regulatory policies and 16 SAE J587 SEP2003, 6.5.2. ‘‘The design shall be of this change beyond that proposed in procedures. The Office of Management such that, when the plate is mounted on a vehicle the NPRM (motorcycles) to include all and Budget has designated this rule as as intended and the upper edge of the license plate motor vehicles. The maximum non-significant. is more than 1.2 m from the ground, the angle downward angle (an installed plate will between the plane of the license plate and a vertical face below the horizon) at which a B. Executive Order 13609: Promoting plane perpendicular to the plane of the ground on International Regulatory Cooperation which the vehicle stands shall be ±15 degrees. If the license plate can be mounted remains upper edge of the license plate is not more than 1.2 15 degrees, as does the maximum The policy statement in section 1 of m from the ground, the plate surface bearing the license numbers shall face between 30 degrees upward angle on vehicles for which the Executive Order 13609 provides, in part: upward and 15 degrees downward from the vertical upper edge of the license plate is more plane.’’ than 1.2 m (47.25 inches) above the 17 See 49 U.S.C. 30111(d).
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The regulatory approaches taken by foreign NHTSA has considered the effects of recognized the possibility, in some governments may differ from those taken by this rule under the Regulatory instances, of implied preemption of U.S. regulatory agencies to address similar Flexibility Act. I certify that this rule such State common law tort causes of issues. In some cases, the differences will not have a significant economic action by virtue of NHTSA’s rules, even between the regulatory approaches of U.S. impact on a substantial number of small agencies and those of their foreign if not expressly preempted. This second counterparts might not be necessary and entities. This rule expands the range of way that NHTSA rules can preempt is might impair the ability of American permissible mounting angles for license dependent upon there being an actual businesses to export and compete plates on motor vehicles. We do not conflict between an FMVSS and the internationally. In meeting shared challenges anticipate that there will be any higher standard that would effectively involving health, safety, labor, security, increased costs as a result of this be imposed on motor vehicle environmental, and other issues, rulemaking action. Accordingly, we do international regulatory cooperation can manufacturers if someone obtained a not anticipate that this rule will have a State common law tort judgment against identify approaches that are at least as significant economic impact on a the manufacturer, notwithstanding the protective as those that are or would be substantial number of small entities. adopted in the absence of such cooperation. manufacturer’s compliance with the International regulatory cooperation can also E. Executive Order 13132 (Federalism) NHTSA standard. Because most NHTSA reduce, eliminate, or prevent unnecessary NHTSA has examined today’s final standards established by an FMVSS are differences in regulatory requirements. rule pursuant to Executive Order minimum standards, a State common This rule more closely aligns the U.S. 13132 19 and concluded that no law tort cause of action that seeks to regulatory requirements for mounting additional consultation with States, impose a higher standard on motor motor vehicle license plates with those local governments or their vehicle manufacturers will generally not of European countries. Permitting an representatives is mandated beyond the be preempted. However, if and when upward mounting angle of up to 30 rulemaking process. The agency has such a conflict does exist—for example, degrees for all vehicles harmonizes with concluded that the rule will not have when the standard at issue is both a the ECE Council Directive 2009/62/EC, sufficient federalism implications to minimum and a maximum standard— 1990 O.J. (L 198/20). These changes will warrant consultation with State and the State common law tort cause of increase manufacturer design flexibility local officials or the preparation of a action is impliedly preempted.22 without decreasing safety. The agency federalism summary impact statement. Pursuant to Executive Order 13132, has chosen, however, not to adopt the The rule will not have ‘‘substantial NHTSA has considered whether this ECE maximum height of 1.5 m because direct effects on the States, on the rule could or should preempt State we are concerned that the higher relationship between the national common law causes of action. The mounting locations could create a government and the States, or on the situation where the legibility of the distribution of power and agency’s ability to announce its plate becomes compromised. responsibilities among the various conclusion regarding the preemptive effect of one of its rules reduces the C. National Environmental Policy Act levels of government.’’ NHTSA rules can preempt in two likelihood that preemption will be an We have reviewed this final rule for ways. First, the National Traffic and issue in any subsequent tort litigation. the purposes of the National Motor Vehicle Safety Act contains an To this end, the agency has examined Environmental Policy Act and express preemption provision: When a the nature (e.g., the language and determined that it would not have a motor vehicle safety standard is in effect structure of the regulatory text) and significant impact on the quality of the under this chapter, a State or a political objectives of today’s rule and finds that human environment. subdivision of a State may prescribe or the rule, like many NHTSA rules, would D. Regulatory Flexibility Act continue in effect a standard applicable prescribe only a minimum safety to the same aspect of performance of a standard. As such, NHTSA does not Pursuant to the Regulatory Flexibility motor vehicle or motor vehicle intend that this final rule would Act (5 U.S.C. 601 et seq., as amended by equipment only if the standard is preempt state tort law that would the Small Business Regulatory identical to the standard prescribed effectively impose a higher standard on Enforcement Fairness Act (SBREFA) of 20 under this chapter. It is this statutory motor vehicle manufacturers than that 1996), whenever an agency is required command by Congress that preempts to publish a notice of rulemaking for established by today’s proposed rule. any non-identical State legislative and Establishment of a higher standard by any proposed or final rule, it must administrative law addressing the same prepare and make available for public means of State tort law would not aspect of performance. conflict with the minimum standard comment a regulatory flexibility The express preemption provision established here. Without any conflict, analysis that describes the effect of the described above is subject to a savings there could not be any implied rule on small entities (i.e., small clause under which ‘‘[c]ompliance with preemption of a State common law tort businesses, small organizations, and a motor vehicle safety standard cause of action. small governmental jurisdictions). The prescribed under this chapter does not Small Business Administration’s exempt a person from liability at F. Executive Order 12988 (Civil Justice regulations at 13 CFR part 121 define a common law.’’ 21 Pursuant to this Reform) small business, in part, as a business provision, State common law tort causes entity ‘‘which operates primarily within of action against motor vehicle Pursuant to Executive Order 12988, the United States.’’ 18 No regulatory manufacturers that might otherwise be ‘‘Civil Justice Reform,’’ 23 NHTSA has flexibility analysis is required if the preempted by the express preemption considered whether this rule would head of an agency certifies the rule will provision are generally preserved. have any retroactive effect. This rule not have a significant economic impact However, the Supreme Court has does not have any retroactive effect. on a substantial number of small entities. 19 64 FR 43255, Aug. 10, 1999. 22 See Geier v. American Honda Motor Co., 529 20 49 U.S.C. 30103(b)(1). U.S. 861 (2000). 18 13 CFR 121.105(a). 21 49 U.S.C. 30103(e). 23 61 FR 4729, Feb. 7, 1996.
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G. Unfunded Mandates Reform Act a disproportionate effect on children. If agency considered incorporating SAE Section 202 of the Unfunded the regulatory action meets both criteria, J587 SEP 2003 in its entirety, we Mandates Reform Act of 1995 (UMRA) we must evaluate the environmental concluded that the deletion of the test requires Federal agencies to prepare a health or safety effects of the proposed requirement to maintain an 8 degree written assessment of the costs, benefits, rule on children, and explain why the relationship between the lamp and the and other effects of a proposed or final proposed regulation is preferable to license plate holder might negatively rule that includes a Federal mandate other potentially effective and impact the direction toward which the likely to result in the expenditure by reasonably feasible alternatives plate reflects the light provided by the State, local, or tribal governments, in the considered by us. license plate lamp. For this reason the aggregate, or by the private sector, of Today’s rule does not pose such a risk agency has decided not to use a more than $100 million in any one year for children. The primary effect of this voluntary consensus standard in its (adjusted for inflation with a base year rule is to amend the license plate entirety in this regulatory activity. mounting angle for motor vehicles. of 1995). K. Executive Order 13211 Before promulgating a rule for which J. National Technology Transfer and 26 a written statement is needed, section Advancement Act Executive Order 13211 applies to 205 of the UMRA generally requires any rule that: (1) Is determined to be Section 12(d) of the National NHTSA to identify and consider a economically significant as defined Technology Transfer and Advancement reasonable number of regulatory under E.O. 12866, and is likely to have Act (NTTAA) requires NHTSA to alternatives and adopts the least costly, a significant adverse effect on the evaluate and use existing voluntary most cost-effective, or least burdensome supply, distribution, or use of energy; or consensus standards in its regulatory alternative that achieves the objectives (2) that is designated by the activities unless doing so would be of the rule. The provisions of section Administrator of the Office of inconsistent with applicable law (e.g., 205 do not apply when they are Information and Regulatory Affairs as a the statutory provisions regarding inconsistent with applicable law. significant energy action. If the NHTSA’s vehicle safety authority) or Moreover, section 205 allows NHTSA to regulatory action meets either criterion, otherwise impractical. we must evaluate the adverse energy adopt an alternative other than the least Voluntary consensus standards are effects of the rule and explain why it is costly, most cost-effective, or least technical standards developed or preferable to other potentially effective burdensome alternative if the agency adopted by voluntary consensus and reasonably feasible alternatives publishes with the final rule an standards bodies. Technical standards considered by NHTSA. explanation why that alternative was are defined by the NTTAA as This rule amends the license plate not adopted. ‘‘performance-based or design-specific This rule, by harmonizing this mounting angle for motor vehicles. technical specification and related provision of FMVSS No. 108 with the Therefore, this rule will not have any management systems practices.’’ They comparable EEC standard will likely adverse energy effects. Accordingly, this pertain to ‘‘products and processes, reduce the manufacturing and design rulemaking action is not designated as such as size, strength, or technical costs of manufacturers by allowing a a significant energy action. greater degree of commonality between performance of a product, process or vehicles manufactured for sale in the material.’’ L. Regulation Identifier Number (RIN) Examples of organizations generally United States and for sale in Europe, The Department of Transportation regarded as voluntary consensus and possibly other markets. The rule is assigns a regulation identifier number standards bodies include the American not anticipated to result in the (RIN) to each regulatory action listed in Society for Testing and Materials expenditure by state, local, or tribal the Unified Agenda of Federal (ASTM), the Society of Automotive governments, in the aggregate, or by the Regulations. The Regulatory Information Engineers (SAE), and the American private sector in excess, of $100 million Service Center publishes the Unified National Standards Institute (ANSI). If annually. Therefore, the agency has not Agenda in April and October of each NHTSA does not use available and prepared an economic assessment year. You may use the RIN contained in potentially applicable voluntary pursuant to the Unfunded Mandate the heading at the beginning of this consensus standards, we are required by Reform Act. document to find this action in the the Act to provide Congress, through Unified Agenda. H. Paperwork Reduction Act OMB, an explanation of the reasons for Under the procedures established by not using such standards. Regulatory Text While SAE J587 SEP 2003, License the Paperwork Reduction Act of 1995 List of Subjects in 49 CFR Part 571 (PRA), a person is not required to Plate Lamps (Rear Registration Plate respond to a collection of information Lamps) contains a mounting angle Motor vehicle safety, Reporting and by a Federal agency unless the requirement for motor vehicles similar recordkeeping requirements. collection displays a valid OMB control to the agency’s proposal, the agency did In consideration of the foregoing, number. This rule does not contain any not believe that it would be appropriate NHTSA is amending 49 CFR part 571 as collection of information requirements to adopt J587 SEP 2003 in its entirety. set forth below. requiring review under the PRA. FMVSS No. 108 currently requires that when a single lamp is used to illuminate PART 571—FEDERAL MOTOR I. Executive Order 13045 the plate, the lamp and license plate VEHICLE SAFETY STANDARDS Executive Order 13045 24 applies to holder must bear such relation to each any rule that: (1) Is determined to be other that at no point on the plate must ■ 1. The authority citation for Part 571 economically significant as defined the incident light make an angle of less of Title 49 continues to read as follows: under E.O. 12866, and (2) concerns an than 8 degrees to the plane of the Authority: 49 U.S.C. 322, 30111, 30115, environmental, health or safety risk that plate.25 SAE J587 SEP 2003 does not 30117, 30166; delegation of authority at 49 NHTSA has reason to believe may have contain this requirement. While the CFR 1.95.
24 62 FR 19885, Apr. 23, 1997. 25 FMVSS 108, S7.7.15.4. 26 66 FR 28355, May 18, 2001.
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■ 2. Amend § 571.108 by revising Mexico and Atlantic Region (Framework only in the Florida west coast southern paragraph S6.6.3 to read as follows: Amendment 3), as prepared and subzone of the Gulf. This subzone submitted by the Gulf of Mexico Fishery includes the Federal waters off Collier § 571.108 Standard No. 108; Lamps, Management Council (Council). This County, Florida, year-round, and off reflective devices, and associated equipment. final rule modifies the trip limit, Monroe County, Florida, from accountability measures (AMs), dealer November 1 to March 30. To use gillnets * * * * * reporting requirements, and gillnet to commercially harvest king mackerel, S6.6.3 License plate holder. Each permit requirements for commercial vessels must have on board a Federal rear license plate holder must be king mackerel landed by run-around commercial king mackerel permit and a designed and constructed to provide a gillnet fishing gear in the Gulf of Mexico Federal king mackerel gillnet permit. A substantial plane surface on which to (Gulf). The purpose of this final rule is vessel with a gillnet permit is prohibited mount the plate. to increase the efficiency, stability, and from fishing for king mackerel with S6.6.3.1 For motor vehicles on accountability, and to reduce the hook-and-line gear. This rule modifies which the license plate is designed to be potential for regulatory discards of king management of the king mackerel gillnet mounted on the vehicle such that the mackerel in the commercial gillnet component of the commercial sector of upper edge of the license plate is 1.2 m component of the CMP fishery in the the CMP fishery by increasing the or less from the ground, the plane of the Gulf. commercial trip limit, revising AMs, license plate mounting surface and the modifying dealer reporting plane on which the vehicle stands must DATES: This final rule is effective requirements, and requiring a be perpendicular within 30° upward (an January 19, 2016. documented landing history for a king installed plate will face above the ADDRESSES: Electronic copies of mackerel gillnet permit to be renewed. horizon) and 15° downward (an Framework Amendment 3, which installed plate will face below the includes an environmental assessment, Management Measures Contained in horizon). a Regulatory Flexibility Act analysis, This Final Rule S6.6.3.2 For motor vehicles on and a regulatory impact review, may be which the license plate is designed to be obtained from the Southeast Regional Commercial Trip Limit mounted on the vehicle such that the Office Web site at http:// This final rule increases the upper edge of the license plate is more sero.nmfs.noaa.gov/sustainable_ commercial trip limit for vessels than 1.2m from the ground, the plane of fisheries/gulf_sa/cmp/2015/framework_ harvesting king mackerel by gillnets the license plate mounting surface and am3/index.html. from 25,000 lb (11,340 kg) to 45,000 lb the plane on which the vehicle stands Comments regarding the burden-hour (20,411 kg). The size of a school of king must be perpendicular within ± 15°. estimates, clarity of the instructions, or mackerel can be difficult to estimate other aspects of the collection-of- * * * * * precisely and king mackerel landed in information requirements contained in gillnets experience very high discard Issued on: December 8, 2015. this final rule (see the Classification mortality, which makes releasing fish in Mark R. Rosekind, section of the preamble) may be excess of the trip limit wasteful and Administrator. submitted in writing to Adam Bailey, impractical. Fishermen can cut the net [FR Doc. 2015–31353 Filed 12–16–15; 8:45 am] Southeast Regional Office, NMFS, 263 and leave the section with fish in excess BILLING CODE 4910–59–P 13th Avenue South, St. Petersburg, FL of the trip limit in the water and another 33701; or the Office of Management and vessel may be able to retrieve the partial Budget (OMB), by email at net, but this process damages gear, DEPARTMENT OF COMMERCE [email protected], or by which takes time and money to repair. fax to 202–395–5806. Fishermen have indicated that more National Oceanic and Atmospheric FOR FURTHER INFORMATION CONTACT: than 90 percent of successful gillnet Administration Susan Gerhart, NMFS Southeast gear deployments yield less than 45,000 Regional Office, telephone: 727–824– lb (20,411 kg) of fish. Therefore, 50 CFR Part 622 5305, or email: [email protected]. increasing the current trip limit should [Docket No. 150603502–5999–02] SUPPLEMENTARY INFORMATION: The CMP reduce the number of trips that result in fishery in the Gulf and Atlantic is king mackerel landings in excess of the RIN 0648–BF14 managed under the FMP. The FMP was commercial trip limit and the associated prepared by the Gulf and South Atlantic discard mortality. Fisheries of the Caribbean, Gulf of Fishery Management Councils and Mexico, and South Atlantic; Coastal Accountability Measures implemented through regulations at 50 Migratory Pelagic Resources in the CFR part 622 under the authority of the The commercial AM for the king Gulf of Mexico and Atlantic Region; Magnuson-Stevens Fishery mackerel gillnet component of the Framework Amendment 3 Conservation and Management Act fishery is an in-season closure when the AGENCY: National Marine Fisheries (Magnuson-Stevens Act). annual catch limit for the commercial Service (NMFS), National Oceanic and On October 7, 2015, NMFS published sector’s gillnet component (gillnet ACL), Atmospheric Administration (NOAA), a proposed rule for Framework which is equivalent to the commercial Commerce. Amendment 3 and requested public gillnet quota, is reached or is projected ACTION: Final rule. comment (80 FR 60605). The proposed to be reached. This final rule adds a rule and Framework Amendment 3 provision by which any gillnet ACL SUMMARY: In this final rule, NMFS outline the rationale for the actions overage in one fishing year will be implements management measures contained in this final rule. A summary deducted from the gillnet ACL in the described in Framework Amendment 3 of the actions implemented by this final following fishing year. If the gillnet ACL to the Fishery Management Plan (FMP) rule is provided below. is not exceeded in that following fishing for the Coastal Migratory Pelagic Current Federal regulations allow for year, then in the subsequent fishing year Resources (CMP) in the exclusive run-around gillnets to be used to the gillnet ACL will return to the economic zone (EEZ) of the Gulf of commercially harvest king mackerel original gillnet ACL level as specified in
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§ 622.388(a)(1)(ii). However, if the Renewal Requirements for King NMFS National Appeals Office will adjusted gillnet ACL is exceeded in the Mackerel Gillnet Permits process any appeals, which will be following fishing year, then the adjusted This final rule changes the renewal governed by the regulations and policy gillnet ACL will be reduced again in the requirements for a king mackerel gillnet of the National Appeals Office at 15 CFR subsequent fishing year by the amount permit. A king mackerel gillnet permit part 906. Appeals must be submitted to of the most recent gillnet ACL overage. is renewable only if the vessel the National Appeals Office no later Because the trip limit increase in this associated with the permit landed than 90 days after the date the initial final rule could increase the chance of greater than 1 lb (0.45 kg) of king determination by NMFS is issued. exceeding the gillnet ACL, a payback mackerel during any one year between Determinations of appeals will be based provision will help ensure that any ACL 2006 and 2015. Currently, there are 21 on NMFS’ logbook records, submitted overage is mitigated in the following vessels with valid or renewable Federal on or before February 16, 2015. If year. gillnet permits; 4 of these vessels have NMFS’ logbooks are not available, state landings records that were submitted in Dealer Reporting Requirements had no landings since 2001 and the permits associated with those vessels compliance with applicable Federal and This final rule modifies the reporting will no longer be renewable. Some state regulations on or before February requirements for federally permitted active gillnet fishermen are concerned 16, 2016 may be used. dealers purchasing commercial king that permit holders who have not been Other Changes to the Codified Text fishing may begin participating in the mackerel harvested by gillnets. In addition to the measures described gillnet component of the fishery, which Previously, such dealers were required for Framework Amendment 3, this final could result in increased effort in a to submit an electronic form daily to rule corrects an error in the recreational component of the commercial sector NMFS by 6 a.m. during the gillnet regulations for king mackerel, Spanish that already has a limited season. For fishing season for purposes of mackerel, and cobia. The regulatory text example, the 2014/2015 gillnet season, monitoring the gillnet ACL. However, in § 622.388(a)(2), (c)(1), and (e)(1)(i) which closed on February 20, 2015, was because some vessels land their catch included the statement that ‘‘the bag 32 days long and included 5 days of after midnight and may have long and possession limit would also apply active fishing. Requiring a landings offloading times, some gillnet landings in the Gulf on board a vessel for which history of king mackerel in any one of were not reported until the following a valid Federal charter vessel/headboat the last 10 years to renew a gillnet day. Further, the electronic monitoring permit for coastal migratory pelagic fish permit will help ensure the continued system involves processing and quality has been issued, without regard to participation of only those permit control time before the data can be where such species were harvested, i.e., holders who actively fish or have done passed to NMFS fishery managers. This in state or Federal waters.’’ This was resulted in some landings information so in the more recent past. NMFS will notify each king mackerel included in the final rule for not reaching NMFS until nearly 2 days Amendment 18 to the FMP (76 FR after the fish were harvested. gillnet permittee to advise them whether their gillnet permit is eligible for 82058, December 29, 2011), but the This final rule changes the daily renewal based upon NMFS’ initial Council did not approve this provision electronic reporting requirement to determination of eligibility. The for CMP species. This final rule removes daily reporting by some other means proposed rule provided NMFS 7 days that text. determined by NMFS, such as using after the date of publication of the final Comments and Responses port agent reports or some more direct rule to notify permitees, and provided No comments were received on either method of reporting to NMFS fishery permittees who do not receive a notice managers (e.g., by telephone or Framework Amendment 3 or the the concurrent time period to contact proposed rule. internet). NMFS will work with dealers NMFS to clarify their gillnet permit to establish a landings reporting system renewal status. However, this could Classification that minimizes the burden to the dealers create an undue burden on permittees The Regional Administrator, as well as the time for landings to reach who might not know if they need to Southeast Region, NMFS has NMFS fishery managers. NMFS will contact NMFS for clarification until the determined that this final rule is provide written notice to the king end of the NMFS time period, or the consistent with Framework Amendment mackerel gillnet dealers of the seventh day after the date of publication 3, the FMP, the Magnuson-Stevens Act, requirements of the reporting system, of the final rule. Therefore, this final and other applicable laws. and will also post this information on rule includes a change to the regulatory This final rule has been determined to the NMFS Southeast Regional Office text of the proposed rule clarifying that be not significant for purposes of Web site. Prior to the beginning of each permittees have 14 days after the date of Executive Order 12866. subsequent commercial king mackerel publication of the final rule to contact The Magnuson-Stevens Act provides gillnet season, NMFS will provide NMFS. The change ensures that the statutory basis for this final rule. No written notice to king mackerel gillnet permittees will have 7 days beyond the duplicative, overlapping, or conflicting dealers if the reporting methods and NMFS deadline to seek clarification of Federal rules have been identified. deadline change from the previous year, their gillnet permit renewal status. This The description of the action, why it and will also post this information on clarifying change will not result in any is being considered, and the legal basis the NMFS Southeast Regional Office impact on regulated parties. If NMFS for the rule are contained in the Web site. Dealers must also report advises a permittee that the permit is Framework Amendment and in the gillnet-caught king mackerel in their not renewable and they do not agree, a preamble of this final rule. regular weekly electronic report of all permittee may appeal that initial In compliance with section 604 of the species purchased to ensure king determination. RFA, NMFS prepared a Final Regulatory mackerel landings are included in the NMFS has an appeals process to Flexibility Analysis (FRFA) for this final Commercial Landings Monitoring provide a procedure for resolving rule. The FRFA incorporates the Initial database maintained by the Southeast disputes regarding eligibility to renew Regulatory Flexibility Analysis (IRFA), a Fisheries Science Center. the king mackerel gillnet permit. The summary of the significant economic
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issues raised by public comment, seafood dealers/wholesalers, the other Based on the revenue figures above NMFS’ responses to those comments, qualifiers apply and the employment and for the purpose of this analysis, all and a summary of the analyses threshold is 100 employees. The federally permitted vessels and dealers completed to support the action. The revenue threshold for seafood dealers/ expected to be directly affected by this FRFA follows. wholesalers/processors is $7.5 million. final rule are assumed to be small No public comments specific to the The Federal commercial king business entities. IRFA were received, and therefore, no mackerel permit is a limited access Because all entities expected to be public comments are addressed in this permit, which can be transferred or affected by this rule are assumed to be FRFA. No changes in the final rule were sold, subject to certain conditions. From small entities, NMFS has determined made in response to public comments. 2008 through 2014, the number of that this final rule will affect a In general, this final rule is not commercial king mackerel permits substantial number of small entities. expected to change current reporting, decreased from 1,619 in 2008 to 1,478 However, the issue of disproportionate recordkeeping, and other compliance in 2014, with an average of 1,534 during effects on small versus large entities requirements on vessel owners. this period. As of April 30, 2015, there does not arise in the present case. However, this final rule will replace the were 1,342 valid or renewable Increasing the commercial trip limit is dealer daily electronic reporting commercial king mackerel permits. The expected to result in greater king requirement with daily reporting by king mackerel gillnet permit, which acts mackerel harvests per vessel per trip. some other means as determined by as an endorsement to a commercial king This will directly translate into NMFS. This will involve reporting to a mackerel permit, is also a limited access increased ex-vessel revenues from king port agent, as used in the past, or some permit. Its transferability is more mackerel per trip and possibly profits, more direct method of reporting to restrictive than that for the commercial assuming relatively stable operating managers (e.g., by telephone or king mackerel permit. Specifically, it costs per trip. However, trip limit internet). NMFS will work with dealers may be transferred only to another increases will be expected to decrease to establish a system that will minimize vessel owned by the same entity or to the already limited number of fishing days currently needed to harvest the the burden to the dealers as well as the an immediate family member. From time for landings to reach the managers. gillnet ACL. Relative to status quo, 2008 through 2014, there were an Dealers will still have to report king fewer fishing days will concentrate the average of 23 king mackerel gillnet mackerel gillnet landings through the same amount of king mackerel over a permits. As of November 6, 2015, there electronic monitoring system weekly, smaller time interval, possibly were 21 valid or renewable king when they report all species purchased. depressing the ex-vessel price for king mackerel gillnet permits. Beginning in The weekly reporting will ensure any mackerel and canceling out some of the 2014, a Federal dealer permit has been king mackerel landings are included in revenue increases expected to result required to purchase king mackerel the Commercial Landings Monitoring from higher trip limits. Whether the (among other species) harvested in the database maintained by the Southeast reduction in revenues due to price Gulf or South Atlantic. This dealer Fisheries Science Center. depression will offset revenue increases This final rule is expected to directly permit is an open access permit, and as from a higher trip limit cannot be affect commercial fishermen with valid of May 4, 2015, there were 325 such determined with available information. or renewable Federal Gulf king mackerel dealer permits. In the last nine fishing years (2006/ gillnet permits and dealers purchasing Of the 21 vessels with king mackerel 2007–2014/2015), the king mackerel king mackerel from vessels with king gillnet permits, 11 to 15 vessels landed gillnet ACL was exceeded four times mackerel gillnet permits. The Small king mackerel each year from 2006– although this has not occurred in the Business Administration established 2014, or an average of 13 vessels landed last three fishing years. Under the new size criteria for all major industry king mackerel. These vessels generated commercial trip limit, however, there is sectors in the U.S. including a combined average of $544,981 in total some possibility that the commercial commercial finfish harvesters (NAICS ex-vessel revenues. These vessels, gillnet ACL will be exceeded, and thus code 114111), seafood dealers/ together with those that did not catch the overage provision (payback) will wholesalers (NAICS code 424460), and king mackerel, generated average apply with the following year’s gillnet seafood processors (NAICS code revenues of $427,258 from other species ACL being reduced by the full amount 311710). A business primarily involved during 2006–2014. Averaging total of the overage. The amount of the gillnet in finfish harvesting is classified as a revenues across all 21 vessels, the ACL overage will partly depend on how small business if it is independently average total revenue per vessel was effectively the landings could be owned and operated, is not dominant in $46,297 annually. monitored. Regardless of the amount of its field of operation (including its From 2008 through 2015, the number overage and reduction in the following affiliates), and has combined annual of dealers that purchased king mackerel year’s commercial gillnet ACL, the net receipts not in excess of $20.5 million from gillnet fishermen ranged from 4 to economic effects of the overage for all its affiliated operations 6, with an average of 5. On average provision could be negative, neutral, or worldwide. A business involved in (2008–2015), these dealers purchased positive, at least over a 2-year period. seafood purchasing and processing is approximately $570,105 (2014 dollars) Revenues and profits could be relatively classified as a small business based on worth of king mackerel from gillnet higher in the year an ACL overage either employment standards or revenue fishermen, or an average of $114,021 per occurred but the following year’s thresholds. A business primarily dealer. These dealers also purchased revenues and profits could be lower involved in seafood processing is other species from Gulf and South with a reduced gillnet ACL. It cannot be classified as a small business if it is Atlantic commercial fishermen, but the ascertained which of the three net independently owned and operated, is total amount cannot be estimated due to economic effects will occur. not dominant in its field of operation the absence of adequate information. Replacing the requirement for daily (including its affiliates), and has The estimated average annual revenue electronic reporting by dealers combined annual employment not in from seafood purchases for dealers with purchasing gillnet-caught king mackerel excess of 500 employees for all its a Gulf and South Atlantic Federal dealer with an alternative form of daily affiliated operations worldwide. For permit is approximately $546,000. reporting will not impose an additional
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reporting burden on dealers. The alternative, would retain the 25,000 lb higher revenues than the preferred replacement reporting requirement will (11,340 kg) trip limit. This alternative alternative, because any unused gillnet be similar to what had been done in would maintain the same economic quota would generate additional previous years or it will be more benefits per trip but at levels lower than revenues in the following year. The efficient in monitoring the amount of those afforded by the preferred absence of a gillnet ACL overage landings without changing the burden alternative. The second alternative, provision, however, could have adverse compared with the daily electronic which would increase the trip limit to consequences on the status of the king reporting requirement. NMFS will work 35,000 lb (15,876 kg), would yield lower mackerel stock and eventually on vessel with the dealers in developing such a economic benefits per trip than the revenues and profits. The third reporting system to ensure timely preferred alternative. The third alternative, with two options, would reporting of landings at no greater alternative would remove the trip limit, establish a payback provision. The first burden to the dealers. and thus would be expected to yield option is the preferred alternative, Establishing new renewal higher economic benefits per trip than which would establish a payback requirements for commercial king the preferred alternative. However, it provision regardless of the stock status, mackerel gillnet permits based on a cannot be determined whether the while the second option would establish landings threshold of 1 lb (0.45 kg) is benefits per trip would translate into a payback provision only if the Gulf not expected to result in economic total benefits because prices, and thus migratory group king mackerel stock is effects other than the potential loss of revenues, would tend to be affected by overfished. Because the Gulf migratory opportunities to excluded permit the amount of landings over a certain group king mackerel stock is not holders, should they want to re-enter time period. This price effect would overfished, the second option would the gillnet component of the fishery to tend to offset any revenue effects from yield the same economic results as the harvest king mackerel in the future. Of trip limit changes. That is, larger no action alternative but possibly lower the 21 vessels with valid or renewable landings over a shorter period, as in the adverse economic impacts than the gillnet permits, 4 vessels will not meet preferred or no trip limit alternatives, preferred alternative in the short term the renewal requirement. These 4 would tend to be associated with lower should an overage occur. However, the vessels have not landed any king prices, just as smaller landings over a second option would provide less mackerel using gillnets from 2001 longer period, as in the no action protection to the king mackerel stock through 2015, and thus have not alternative, would tend to be associated before the stock becomes overfished. generated any revenues from such with higher prices. The net economic Three alternatives, including the activity. Not allowing these 4 vessels to effects of all these alternatives for preferred alternative, were considered renew their gillnet permits will have no increasing the trip limit cannot be for modifying the electronic reporting short-term effects on their revenues and determined. requirements for dealers first receiving profits. It may also be expected that the king mackerel harvested by gillnets. The remaining vessels in the gillnet Three alternatives, including the first alternative, the no action component of the fishery will not preferred alternative, were considered alternative, would retain the daily experience revenue increases as a result for modifying the AM for the gillnet electronic reporting requirements. This of eliminating 4 vessels. Despite not component of the king mackerel fishery. alternative would not provide timely having used gillnets to harvest king The first alternative, the no action reporting of landings because some mackerel, those 4 permit owners have alternative, would retain the in-season landings reports could not be processed continued to renew their gillnet permits. AM, which would close king mackerel until the next day. The second To an extent, their decision not to gillnet fishing in the Florida west coast alternative would remove the daily exercise their option to re-enter the southern subzone when the gillnet ACL electronic reporting requirement but gillnet component of the fishery in the is met or is projected to be met. This would require a weekly electronic last 15 years may indicate that they have alternative would not alter the level of reporting instead. While this would be not undertaken substantial investments, economic benefits from the harvest of less burdensome to dealers, it would not e.g., in boats and gear, in preparation for king mackerel by commercial gillnet allow timely reporting of landings, harvesting king mackerel. The gillnet fishermen. The second alternative which is necessary to monitor a season permit cost they have spent, which is would establish an annual catch target that generally lasts for only a few days. currently $10 annually per gillnet (ACT), which would be a quota set at a Five alternatives, including the permit, is relatively small. There is a level below the commercial ACL, with preferred alternative, were considered good possibility that if they are not able various options. The first three options for renewal requirements for Federal to renew their permits to re-enter the would establish a gillnet ACT equal to king mackerel gillnet permits. The first king mackerel gillnet component of the 95 percent, 90 percent, or 80 percent of alternative, the no action alternative, CMP fishery they will not lose any the gillnet ACL; the fourth option would would maintain all current significant investments. They still will set the ACT according to the Gulf requirements for renewing king stand to forgo future revenues from Council’s ACL/ACT control rule mackerel gillnet permits. This using gillnets in fishing for king (currently equal to 95 percent of the alternative would allow all 21 gillnet mackerel. Those remaining in the ACL); and the fifth option, which permit holders to renew their gillnet fishery will not face the possibility of applies only if an ACT is established, permits. The second alternative, with additional competition from those would allow the amount of landings three options, would allow renewal of ineligible vessels. under the gillnet quota to be added to king mackerel gillnet permits if average The following discussion describes the following year’s quota but the total landings during 2006–2015 exceed 1 lb the alternatives that were not selected as gillnet quota could not exceed the (0.45 kg), 10,000 lb (4,536 kg), or 25,000 preferred by the Council. gillnet ACL. The first four options lb (11,340 kg). The third alternative, Four alternatives, including the would result in lower short-term with three options, would allow preferred alternative, were considered revenues and profits than the preferred renewal of king mackerel gillnet permits for modifying the commercial trip limit alternative by restricting the amount of if landings for a single year during for gillnet-caught king mackerel. The harvest to less than the gillnet ACL. The 2006–2015 exceed 1 lb (0.45 kg), 10,000 first alternative, the no action fifth option has the potential to yield lb (4,536 kg), or 25,000 lb (11,340 kg).
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This alternative with a landings guides. As part of the rulemaking component prior to the beginning of threshold of greater than 1 lb (0.45 kg) process, NMFS prepared a fishery each fishing year if the reporting for a single year is the preferred bulletin, which also serves as a small methods or deadline change from the alternative. The fourth alternative, with entity compliance guide. The fishery previous year. three options, would allow renewal of bulletin will be sent to all interested * * * * * king mackerel gillnet permits if average parties. ■ 3. In § 622.371, revise paragraph (a) to landings during 2011–2015 exceed 1 lb read as follows: (0.45 kg), 10,000 lb (4,536 kg), or 25,000 List of Subjects in 50 CFR Part 622 lb (11,340 kg). The fifth alternative, with Accountability measure, Annual catch § 622.371 Limited access system for three options, would allow renewal of limit, Fisheries, Fishing, Gulf of Mexico, commercial vessel permits for king king mackerel gillnet permits if landings King mackerel, Permits, Run-around mackerel. for a single year during 2011–2015 gillnet. (a) No applications for additional commercial vessel permits for king exceed 1 lb (0.45 kg), 10,000 lb (4,536 Dated: December 10, 2015. mackerel will be accepted. Existing kg), or 25,000 lb (11,340 kg). All these Samuel D. Rauch III, other alternatives, except the no action vessel permits may be renewed, are alternative, would eliminate the same or Deputy Assistant Administrator for subject to the restrictions on transfer or Regulatory Programs, National Marine change in paragraph (b) of this section, greater number of vessels than the Fisheries Service. and are subject to the requirement for preferred alternative. For the reasons set out in the This final rule contains collection-of- timely renewal in paragraph (c) of this preamble, 50 CFR part 622 is amended information requirements subject to the section. as follows: Paperwork Reduction Act (PRA), which * * * * * have been approved by OMB under PART 622—FISHERIES OF THE ■ 4. In § 622.372, add paragraph (d) to control number 0648–0013. NMFS CARIBBEAN, GULF OF MEXICO, AND read as follows: estimates that no change to the overall SOUTH ATLANTIC reporting burden will result from § 622.372 Limited access system for king modifying the previously required daily ■ 1. The authority citation for part 622 mackerel gillnet permits applicable in the southern Florida west coast subzone. reporting method for dealers that continues to read as follows: purchase king mackerel caught by * * * * * Authority: 16 U.S.C. 1801 et seq. gillnets during the fishing season. (d) Renewal criteria for a king Instead of submitting an electronic form ■ 2. In § 622.5, revise paragraph (c)(1)(i) mackerel gillnet permit. A king daily, NMFS will require daily reporting to read as follows: mackerel gillnet permit may be renewed by some other means as developed by only if NMFS determines at least 1 year § 622.5 Recordkeeping and reporting— of landings from 2006 to 2015 NMFS. Other means could involve general. reporting to the NMFS port agents or associated with that permit was greater some other more direct method of * * * * * than 1 lb (0.45 kg), round or gutted reporting to managers, such as by email (c) * * * weight. or phone. Dealers will report any (1) * * * (1) Initial determination. On or about purchase of king mackerel landed by the (i) A person issued a Gulf and South December 24, 2015, the RA will mail gillnet component of the fishery with Atlantic dealer permit must submit a each king mackerel gillnet permittee a the current and approved requirement detailed electronic report of all fish first letter via certified mail, return receipt for dealers to report fish purchases on received for a commercial purpose requested, to the permittee’s address of a weekly basis, as specified in 50 CFR within the time period specified in this record as listed in NMFS’ permit files, 622.5(c). NMFS estimates that this paragraph via the dealer electronic trip advising the permittee whether the requirement will not change the ticket reporting system. These electronic permit is eligible for renewal. A reporting burden of 10 minutes per reports must be submitted at weekly permittee who does not receive a letter response for dealers purchasing king intervals via the dealer electronic trip from the RA, must contact the RA no mackerel caught by gillnets. This ticket reporting system by 11:59 p.m., later than December 31, 2015, to clarify estimate of the public reporting burden local time, the Tuesday following a the renewal status of the permit. A includes the time for reviewing reporting week. If no fish were received permittee who is advised that the permit instructions, gathering and maintaining during a reporting week, an electronic is not renewable based on the RA’s the data needed, and completing and report so stating must be submitted for determination of eligibility and who reviewing the collection-of-information. that reporting week. In addition, during disagrees with that determination may Notwithstanding any other provision the open season, dealers must submit appeal that determination. of law, no person is required to respond daily reports for Gulf migratory group (2) Procedure for appealing landings to, nor shall a person be subject to a king mackerel harvested by the run- information. The only item subject to penalty for failure to comply with, a around gillnet component in the Florida appeal is the landings used to determine collection-of-information subject to the west coast southern subzone via the port whether the permit is eligible for requirements of the PRA, unless that agents, telephone, internet, or other renewal. Appeals based on hardship collection-of-information displays a similar means determined by NMFS. factors will not be considered. Any currently valid OMB control number. From the beginning of the open season appeal under this regulation will be Section 212 of the Small Business until the commercial ACL (commercial processed by the NMFS National Regulatory Enforcement Fairness Act of quota) for the run-around gillnet sector Appeals Office. Appeals will be 1996 states that, for each rule or group for Gulf migratory group king mackerel governed by the regulations and policy of related rules for which an agency is is reached, dealers must submit a daily of the National Appeals Office at 15 CFR required to prepare a FRFA, the agency report if no king mackerel were received part 906. Appeals must be submitted to shall publish one or more guides to during the previous day. NMFS will the National Appeals Office no later assist small entities in complying with provide written notice to dealers that than 90 days after the date the initial the rule, and shall designate such first receive Gulf king mackerel determination in issued. Determinations publications as small entity compliance harvested by the run-around gillnet of appeals regarding landings data for
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2006 to 2015 will be based on NMFS’ (c) * * * DATES: Effective 1200 hours, Alaska logbook records, submitted on or before (1) If the sum of the commercial and local time (A.l.t.), December 15, 2015, February 16, 2016. If NMFS’ logbooks recreational landings, as estimated by until 2400 hours A.l.t., December 31, are not available, state landings records the SRD, reaches or is projected to reach 2015. or data for 2006 to 2015 that were the stock ACL, as specified in paragraph FOR FURTHER INFORMATION CONTACT: Josh submitted in compliance with (c)(3) of this section, the AA will file a Keaton, 907–586–7228. applicable Federal and state regulations notification with the Office of the SUPPLEMENTARY INFORMATION: NMFS on or before February 16, 2015, may be Federal Register to close the commercial manages the groundfish fishery in the used. and recreational sectors for the GOA exclusive economic zone ■ remainder of the fishing year. On and 5. In § 622.385, revise paragraph according to the Fishery Management after the effective date of such a (a)(2)(ii)(A)(1) to read as follows: Plan for Groundfish of the Gulf of notification, all sale and purchase of Alaska (FMP) prepared by the North § 622.385 Commercial trip limits. Gulf migratory group Spanish mackerel Pacific Fishery Management Council * * * * * is prohibited and the harvest and (Council) under authority of the (a) * * * possession limit of this species in or Magnuson-Stevens Fishery (2) * * * from the Gulf EEZ is zero. Conservation and Management Act. (ii) * * * * * * * * Regulations governing fishing by U.S. (A) * * * (e) * * * vessels in accordance with the FMP (1) In the Florida west coast southern (1) * * * appear at subpart H of 50 CFR part 600 subzone, king mackerel in or from the (i) If the sum of all cobia landings, as and 50 CFR part 679. EEZ may be possessed on board or estimated by the SRD, reaches or is The Pacific halibut bycatch allowance landed from a vessel for which a projected to reach the stock quota (stock specified for the other hook-and-line commercial vessel permit for king ACT), specified in § 622.384(d)(1), the fishery by C/Vs in the GOA is 145 mackerel and a king mackerel gillnet AA will file a notification with the metric tons as established by the final permit have been issued, as required Office of the Federal Register to prohibit 2015 and 2016 harvest specifications for under § 622.370(a)(2), in amounts not the harvest of Gulf migratory group groundfish of the GOA (80 FR 10250, exceeding 45,000 lb (20,411 kg) per day, cobia in the Gulf zone for the remainder February 25, 2015). provided the gillnet component for Gulf of the fishing year. On and after the In accordance with § 679.21(d)(6)(ii), migratory group king mackerel is not effective date of such a notification, all the Administrator, Alaska Region, closed under § 622.378(a) or § 622.8(b). sale and purchase of Gulf migratory NMFS, has determined that the Pacific * * * * * group cobia in the Gulf zone is halibut bycatch allowance specified for ■ 6. In § 622.388: prohibited and the possession limit of the other hook-and-line fishery by C/Vs ■ a. Add paragraph (a)(1)(iii); and this species in or from the Gulf EEZ is in the GOA has been reached. ■ b. Revise paragraphs (a)(2), (c)(1), and zero. Consequently, NMFS is prohibiting (e)(1)(i) to read as follows: * * * * * directed fishing for groundfish, other [FR Doc. 2015–31708 Filed 12–16–15; 8:45 am] than demersal shelf rockfish, by C/Vs § 622.388 Annual catch limits (ACLs), BILLING CODE 3510–22–P using hook-and-line gear in the GOA. annual catch targets (ACTs), and accountability measures (AMs). After the effective date of this closure the maximum retainable amounts at * * * * * DEPARTMENT OF COMMERCE § 679.20(e) and (f) apply at any time (a) * * * during a trip. (1) * * * National Oceanic and Atmospheric (iii) If commercial landings for Gulf Administration Classification migratory group king mackerel caught This action responds to the best by run-around gillnet in the Florida 50 CFR Part 679 available information recently obtained west coast southern subzone, as [Docket No. 140918791–4999–02] from the fishery. The Assistant estimated by the SRD, exceed the Administrator for Fisheries, NOAA commercial ACL, the AA will file a RIN 0648–XE358 (AA), finds good cause to waive the notification with the Office of the requirement to provide prior notice and Federal Register to reduce the Fisheries of the Exclusive Economic Zone Off Alaska; Other Hook-and-Line opportunity for public comment commercial ACL for king mackerel pursuant to the authority set forth at 5 harvested by run-around gillnet in the Fishery by Catcher Vessels in the Gulf of Alaska U.S.C. 553(b)(B) as such requirement is Florida west coast southern subzone in impracticable and contrary to the public the following fishing year by the amount AGENCY: National Marine Fisheries interest. This requirement is of the commercial ACL overage in the Service (NMFS), National Oceanic and impracticable and contrary to the public prior fishing year. Atmospheric Administration (NOAA), interest as it would prevent NMFS from (2) Recreational sector. If recreational Commerce. responding to the most recent fisheries landings, as estimated by the SRD, reach ACTION: Temporary rule; closure. data in a timely fashion and would or are projected to reach the recreational delay closure of other hook-and-line ACL of 8.092 million lb (3.670 million SUMMARY: NMFS is prohibiting directed fishery by C/Vs in the GOA. NMFS was kg), the AA will file a notification with fishing for groundfish, other than unable to publish a notice providing the Office of the Federal Register to demersal shelf rockfish, by catcher time for public comment because the implement a bag and possession limit vessels (C/Vs) using hook-and-line gear most recent, relevant data only became for Gulf migratory group king mackerel in the Gulf of Alaska (GOA). This action available as of December 11, 2015. of zero, unless the best scientific is necessary because the Pacific halibut The AA also finds good cause to information available determines that a bycatch allowance specified for the waive the 30-day delay in the effective bag limit reduction is unnecessary. other hook-and-line fishery by C/Vs in date of this action under 5 U.S.C. * * * * * the GOA has been reached. 553(d)(3). This finding is based upon
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the reasons provided above for waiver of This action is required by § 679.20 Dated: December 14, 2015. prior notice and opportunity for public and § 679.21 and is exempt from review Galen R. Tromble, comment. under Executive Order 12866. Acting Director, Office of Sustainable Fisheries, National Marine Fisheries Service. Authority: 16 U.S.C. 1801 et seq. [FR Doc. 2015–31759 Filed 12–14–15; 4:15 pm] BILLING CODE 3510–22–P
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Proposed Rules Federal Register Vol. 80, No. 242
Thursday, December 17, 2015
This section of the FEDERAL REGISTER document number and the date and The Act provides that administrative contains notices to the public of the proposed page number of this issue of the Federal proceedings must be exhausted before issuance of rules and regulations. The Register and will be made available for parties may file suit in court. Under purpose of these notices is to give interested public inspection in the Office of the section 608c(15)(A) of the Act, any persons an opportunity to participate in the Docket Clerk during regular business handler subject to an order may file rule making prior to the adoption of the final rules. hours, or can be viewed at: http:// with USDA a petition stating that the www.regulations.gov. All comments order, any provision of the order, or any submitted in response to this proposal obligation imposed in connection with DEPARTMENT OF AGRICULTURE will be included in the record and will the order is not in accordance with law be made available to the public. Please and request a modification of the order Agricultural Marketing Service be advised that the identity of the or to be exempted therefrom. A handler individuals or entities submitting the is afforded the opportunity for a hearing 7 CFR Part 930 comments will be made public on the on the petition. After the hearing, USDA [Doc. No. AMS–FV–15–0063; FV16–930–1 internet at the address provided above. would rule on the petition. The Act PR] FOR FURTHER INFORMATION CONTACT: provides that the district court of the Jennie M. Varela, Marketing Specialist, United States in any district in which Tart Cherries Grown in the States of or Christian D. Nissen, Regional the handler is an inhabitant, or has his Michigan, et al.; Free and Restricted Director, Southeast Marketing Field or her principal place of business, has Percentages for the 2015–16 Crop Year Office, Marketing Order and Agreement jurisdiction to review USDA’s ruling on for Tart Cherries Division, Specialty Crops Program, the petition, provided an action is filed AMS, USDA; Telephone: (863) 324– not later than 20 days after the date of AGENCY: Agricultural Marketing Service, 3375, Fax: (863) 291–8614, or Email: the entry of the ruling. USDA. [email protected] or This proposed rule invites comments ACTION: Proposed rule. [email protected]. on the establishment of free and Small businesses may request restricted percentages for the 2015–16 SUMMARY: This proposed rule would information on complying with this crop year. This proposal would implement a recommendation from the regulation by contacting Jeffrey Smutny, establish the proportion of tart cherries Cherry Industry Administrative Board Marketing Order and Agreement from the 2015 crop which may be (Board) to establish free and restricted Division, Specialty Crops Program, handled in commercial outlets at 80 percentages for the 2015–16 crop year AMS, USDA, 1400 Independence percent free and 20 percent restricted. In under the marketing order for tart Avenue SW., STOP 0237, Washington, addition, this proposal would increase cherries grown in the states of Michigan, DC 20250–0237; Telephone: (202) 720– the carry-out volume of fruit to 55 New York, Pennsylvania, Oregon, Utah, 2491, Fax: (202) 720–8938, or Email: million pounds for calculation purposes Washington, and Wisconsin (order). The [email protected]. for this season. This proposal should Board locally administers the marketing SUPPLEMENTARY INFORMATION: This stabilize marketing conditions by order and is comprised of producers and proposal is issued under Marketing adjusting supply to meet market handlers of tart cherries operating Agreement and Order No. 930, both as demand and help improve grower within the production area. This action amended (7 CFR part 930), regulating returns. The proposed carry-out and the would establish the proportion of tart the handling of tart cherries produced in final percentages were recommended by cherries from the 2015 crop which may the States of Michigan, New York, the Board at a meeting on September 10, be handled in commercial outlets at 80 Pennsylvania, Oregon, Utah, 2015. percent free and 20 percent restricted. In Washington and Wisconsin, hereinafter Section 930.51(a) of the order addition, this proposal would increase referred to as the ‘‘order.’’ The order is provides authority to regulate volume the carry-out volume of fruit to 55 effective under the Agricultural by designating free and restricted million pounds for this season. These Marketing Agreement Act of 1937, as percentages for any tart cherries percentages should stabilize marketing amended (7 U.S.C. 601–674), hereinafter acquired by handlers in a given crop conditions by adjusting supply to meet referred to as the ‘‘Act.’’ year. Section 930.50 prescribes market demand and help improve The Department of Agriculture procedures for computing an optimum grower returns. (USDA) is issuing this proposed rule in supply based on sales history and for DATES: Comments must be received by conformance with Executive Orders calculating these free and restricted January 19, 2016. 12866, 13563, and 13175. percentages. Free percentage volume ADDRESSES: Interested persons are This proposal has been reviewed may be shipped to any market, while invited to submit written comments under Executive Order 12988, Civil restricted percentage volume must be concerning this proposal. Comments Justice Reform. Under the order held by handlers in a primary or must be sent to the Docket Clerk, provisions now in effect, free and secondary reserve, or be diverted or Marketing Order and Agreement restricted percentages may be used for exempt purposes as prescribed Division, Specialty Crops Program, established for tart cherries handled in §§ 930.159 and 930.162 of the AMS, USDA, 1400 Independence during the crop year. This proposed rule regulations. Exempt purposes include, Avenue SW., STOP 0237, Washington, would establish free and restricted in part, the development of new DC 20250–0237; Fax: (202) 720–8938; or percentages for tart cherries for the products, sales into new markets, the Internet: http://www.regulations.gov. All 2015–16 crop year, beginning July 1, development of export markets, and comments should reference the 2015, through June 30, 2016. charitable contributions. For cherries
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held in reserve, handlers would be to be carried into the succeeding crop In discussing the calculations, responsible for storage and would retain year to meet market demand until the industry participants commented that a title of the tart cherries. new crop is available. Desirable carry- carry-out of 20 million pounds would Under § 930.52, only those districts out is set by the Board after considering not meet their needs at the end of the with an annual average production of at market circumstances and needs. season before the new crop is available. least six million pounds are subject to Section 930.50(a) specifies that To address that concern, the Board regulation and any district producing a desirable carry-out can range from zero recommended increasing the desirable crop which is less than 50 percent of its to a maximum of 20 million pounds, but carry-out to 55 million pounds for the annual average is exempt. The regulated also authorizes the Board to establish an 2015–2016 season. This change districts for the 2015–2016 crop year alternative carry-out figure with the increased the optimum supply to 243 would be: District 1—Northern approval of the Secretary. million pounds, reducing the surplus to Michigan; District 2—Central Michigan; In addition, USDA’s ‘‘Guidelines for 94 million pounds. District 3—Southern Michigan; District Fruit, Vegetable, and Specialty Crop The Board also discussed whether the 4—New York; District 7—Utah; District Marketing Orders’’ (http:// substantial reduction of supply in 2012 8—Washington; and District 9— www.ams.usda.gov/publications/ due to weather was still a factor that Wisconsin. Districts 5 and 6 (Oregon content/1982-guidelines-fruit-vegetable- needed to be considered in determining and Pennsylvania, respectively) would marketing-orders) specify that 110 optimum supply. Because of the crop not be regulated for the 2015–16 season. percent of recent years’ sales should be loss, sales in 2012–13 reached only 123 Demand for tart cherries and tart made available to primary markets each million pounds, nearly 100 million cherry products tend to be relatively season before recommendations for pounds less than 2013–14 sales. In the stable from year to year. Conversely, volume regulation are approved. This previous two seasons when considering annual tart cherry production can vary requirement is codified in § 930.50(g) of volume regulation, the Board greatly. In addition, tart cherries are the order, which specifies that in years recommended economic adjustments to processed and can be stored and carried when restricted percentages are account for the substantial decline in over from crop year to crop year, further established, the Board shall make 2012. The Board again determined that impacting supply. As a result, supply available tonnage equivalent to an the market required additional tonnage and demand for tart cherries are rarely additional 10 percent of the average to continue recovering sales and voted in balance. sales of the prior three years for market to make an economic adjustment of 43 Because demand for tart cherries is expansion (market growth factor). million pounds to increase the available inelastic, total sales volume is not very After the Board determines optimum supply of tart cherries. The Board also responsive to changes in price. supply, desirable carry-out, and market complied with the market growth factor However, prices are very sensitive to growth factor, it must examine the requirement by adding 19 million changes in supply. As such, an current year’s available volume to pounds (188 million times 10 percent, oversupply of cherries would have a determine whether there is an rounded) to the free supply. sharp negative effect on prices, driving oversupply situation. Available volume The economic adjustment and market down grower returns. The Board, aware includes carry-in inventory (any growth factor further reduced the of this economic relationship, focuses inventory available at the beginning of preliminary surplus to 32 million on using the volume control provisions the season) along with that season’s pounds. After these adjustments, the in the order to balance supply and production. If production is greater than preliminary restricted percentage was demand to stabilize industry returns. the optimum supply minus carry-in, the recalculated as 14 percent (32 million Pursuant to § 930.50 of the order, the difference is considered surplus. This pounds divided by 228 million pounds). Board meets on or about July 1 to review surplus tonnage is divided by the sum The Board met again on September sales data, inventory data, current crop of production in the regulated districts 10, 2015, to consider establishing final forecasts and market conditions for the to reach a restricted percentage. This volume regulation percentages for the upcoming season and, if necessary, to percentage must be held in reserve or 2015–16 season. The final percentages recommend preliminary free and used for approved diversion activities, are based on the Board’s reported restricted percentages if anticipated such as exports. production figures and the supply and supply would exceed demand. After The Board met on June 25, 2015, and demand information available in harvest is complete, but no later than computed an optimum supply of 208 September. The total production for the September 15, the Board meets again to million pounds for the 2015–16 crop 2015–16 season was 249 million update their calculations using actual year using the average of free sales for pounds, 25 million pounds above the production data, consider any necessary the three previous seasons and a Board’s June estimate. In addition, adjustments to the preliminary desirable carry-out of 20 million growers diverted 1 million pounds in percentages, and determine if final free pounds. The Board then subtracted the the orchard, leaving 248 million pounds and restricted percentages should be estimated carry-in of 104 million available to market. Using the actual recommended to the Secretary. pounds from the optimum supply to production numbers, and accounting for The Board uses sales history, calculate the production needed from the recommended increase in desirable inventory, and production data to the 2015–16 crop to meet optimum carry-out and economic adjustment, as determine whether there is a surplus, supply. This number, 104 million well as the market growth factor, the and if so, how much volume should be pounds, was subtracted from the restricted percentage was recalculated. restricted to maintain optimum supply. Board’s estimated 2015–16 production The Board subtracted the carry-in The optimum supply represents the of 233 million pounds to calculate a figure used in June of 104 million desirable volume of tart cherries that surplus of 129 million pounds of tart pounds from the optimum supply of 243 should be available for sale in the cherries. The surplus minus the market million pounds to determine 139 coming crop year. Optimum supply is growth factor was then divided by the million pounds of 2015–16 production defined as the average free sales of the expected production in the regulated would be necessary to reach optimum prior three years plus desirable carry- districts (228 million pounds) to reach supply. The Board subtracted the 139 out inventory. Desirable carry-out is the a preliminary restricted percentage of 48 million pounds from the actual amount of fruit needed by the industry percent for the 2015–16 crop year. production of 248 million pounds,
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resulting in a surplus of 109 million 19 million pounds, resulting in an to calculate a restricted percentage of 20 pounds of tart cherries. The surplus was adjusted surplus of 47 million pounds. percent with a corresponding free then reduced by subtracting the The Board then divided this final percentage of 80 percent for the 2015– economic adjustment of 43 million surplus by the actual production in the 16 crop year, as outlined in the pounds and the market growth factor of regulated districts (240 million pounds) following table:
Millions of pounds
Final Calculations: (1) Average sales of the prior three years ...... 188 (2) Plus desirable carry-out ...... 55 (3) Optimum supply calculated by the Board ...... 243 (4) Carry-in as of July 1, 2015 ...... 104 (5) Adjusted optimum supply (item 3 minus item 4) ...... 139 (6) Board reported production ...... 248 (7) Surplus (item 6 minus item 5) ...... 109 (8) Total economic adjustments ...... 43 (9) Market growth factor ...... 19 (10) Adjusted Surplus (item 7 minus items 8 and 9) ...... 47 (11) Production from regulated districts ...... 240
Final Percentages: Percent
Restricted (item 10 divided by item 11 × 100) ...... 20 Free (100 minus restricted percentage) ...... 80
The primary purpose of setting One member noted setting the Marketing orders issued pursuant to the restricted percentages is an attempt to restriction at 20 percent would aid in Act, and rules issued thereunder, are bring supply and demand into balance. maintaining price stability, with another unique in that they are brought about If the primary market is oversupplied member reminding the Board of the through group action of essentially with cherries, grower prices decline importance of the order and volume small entities acting on their own substantially. Restricted percentages control in avoiding oversupplying the behalf. have benefited grower returns and market with tart cherries. One other There are approximately 600 helped stabilize the market as compared member said it was also important to producers of tart cherries in the to those seasons prior to the maintain a reserve in case of another regulated area and approximately 40 implementation of the order. The Board crop disaster. Other members stated the handlers of tart cherries who are subject believes the available information demand adjustment and the to regulation under the order. Small indicates that a restricted percentage recommended increased carry-out agricultural producers are defined by should be established for the 2015–16 would put sufficient fruit on the market the Small Business Administration crop year to avoid oversupplying the in the coming year. (SBA) as those having annual receipts of market with tart cherries. Consequently, After reviewing the available data, less than $750,000 and small based on its discussion of this issue and and considering the concerns expressed, agricultural service firms have been the result of the above calculations, the the Board determined that a 20 percent defined as those whose annual receipts Board recommended final percentages restriction with a carry-out volume of 55 are less than $7,000,000 (13 CFR of 80 percent free and 20 percent million pounds would meet sales needs 121.201). restricted by a vote of 16 in favor and and establish some reserves without According to the National 1 against. oversupplying the market. Thus, the Agricultural Statistics Service (NASS) During the discussion of the proposed Board recommended establishing final and Board data, the average annual restriction, some members expressed percentages of 80 percent free and 20 grower price for tart cherries during the concern regarding competition from percent restricted. The Board could 2014–15 season was $0.35 per pound, imported tart cherry juice concentrate. meet and recommend the release of and total utilization was around 300 In particular, some were concerned that additional volume during the crop year million pounds. Therefore, average the additional volume from imports is if conditions so warranted. receipts for tart cherry producers were around $175,800, well below the SBA not accounted for in the Optimum Initial Regulatory Flexibility Analysis Supply Formula, thus not capturing threshold for small producers. In 2014, overall supply and demand. An Pursuant to requirements set forth in The Food Institute estimated an f.o.b. economist from Michigan State the Regulatory Flexibility Act (RFA) (5 price of $0.96 per pound for frozen tart University is working with the Board to U.S.C. 601–612), the Agricultural cherries, which make up the majority of assemble information on tart cherry Marketing Service (AMS) has processed tart cherries. Using this data, imports. The Board also voted to considered the economic impact of this average annual handler receipts were establish an import committee to review proposed rule on small entities. about $6.9 million, which is also below the data on imports once it is available. Accordingly, AMS has prepared this the SBA threshold for small agricultural Another member asserted that any initial regulatory flexibility analysis. service firms. Assuming a normal restriction would adversely impact The purpose of the RFA is to fit distribution, the majority of producers growers’ ability to sell all of their fruit. regulatory actions to the scale of and handlers of tart cherries may be One member also said that a 20 percent businesses subject to such actions in classified as small entities. restriction seemed high given the order that small businesses will not be The tart cherry industry in the United moderate production in 2015. unduly or disproportionately burdened. States is characterized by wide annual
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fluctuations in production. According to quantity that would be available under districts, nearly 9 million pounds from NASS, tart cherry production in 2012 this proposal is greater than 110 percent the unrestricted districts (Oregon and was 85 million pounds, 294 million of the average quantity shipped in the Pennsylvania), and the 104 million pounds in 2013, and in 2014, prior three years. pound carry-in inventory would make a production was 304 million pounds. In addition, there are secondary uses total of 305 million pounds available as Because of these fluctuations, the available for restricted fruit, including free tonnage for the primary markets. supply and demand for tart cherries are the development of new products, sales This is similar to the 300 million rarely equal. into new markets, the development of pounds of total utilization in 2014–2015 Demand for tart cherries is inelastic, export markets, and being placed in and less restrictive than the 12 percent meaning changes in price have a reserve. While these alternatives may restriction in 2011–2012 which made minimal effect on total sales volume. provide different levels of return than just under 262 million pounds available. However, prices are very sensitive to the sales to primary markets, they play Further, the Board could meet and changes in supply, and grower prices an important role for the industry. The recommend the release of additional vary widely in response to the large areas of new products, new markets, volume during the crop year if swings in annual supply, with prices and the development of export markets conditions so warranted. ranging from a low of 7.3 cents per utilize restricted fruit to develop and Prior to the implementation of the pound in 1987 to a high of 59.4 cents expand the markets for tart cherries. In order, grower prices often did not come per pound in 2012. 2014–15, these activities accounted for close to covering the cost of production. Because of this relationship between 21 million pounds in sales, nearly 14 The most recent costs of production supply and price, oversupplying the million of which were exports. determined by representatives of market with tart cherries would have a Placing tart cherries into reserves is Michigan State University are an sharp negative effect on prices, driving also a key part of balancing supply and estimated $0.33 per pound. To assess down grower returns. The Board, aware demand. Although the industry must the impact that volume control has on of this economic relationship, focuses bear the handling and storage costs for the prices growers receive for their on using the volume control authority in fruit in reserve, reserves stored in large product, an econometric model has been the order in an effort to balance supply crop years are used to supplement developed. Based on the model, the use and demand in order to stabilize supplies in short crop years. The of volume control would have a positive industry returns. This authority allows reserves allow the industry to mitigate impact on grower returns for this crop the industry to set free and restricted the impact of oversupply in large crop year. With volume control, grower percentages as a way to bring supply years, while allowing the industry to prices are estimated to be approximately and demand into balance. Free maintain and supply markets in years $0.03 per pound higher than without percentage cherries can be marketed by where production falls below demand. restrictions. handlers to any outlet, while restricted Further, storage and handling costs are In addition, absent volume control, percentage volume must be held by more than offset by the increase in price the industry could start to build large handlers in reserve, diverted or used for when moving from a large crop to a amounts of unwanted inventories. exempted purposes. short crop year. These inventories would have a This proposal would establish free In addition, the Board recommended depressing effect on grower prices. The and restricted percentages using an an increased carry-out of 55 million econometric model shows for every 1 increased carry-out volume of 55 pounds and made a demand adjustment million-pound increase in carry-in million pounds for the 2015–16 crop of 43 million pounds in order to make inventories, a decrease in grower prices year under the order for tart cherries. the regulation less restrictive. Even with of $0.0042 per pound occurs. This proposal would control the supply the recommended restriction, over 300 Retail demand is assumed to be of tart cherries by establishing million pounds of fruit would be highly inelastic, which indicates that percentages of 80 percent free and 20 available to the domestic market. changes in price do not result in percent restricted for the 2015–16 crop Consequently, it is not anticipated that significant changes in the quantity year. These percentages should stabilize this proposal would unduly burden demanded. Consumer prices largely do marketing conditions by adjusting growers or handlers. not reflect fluctuations in cherry supply to meet market demand and help While this proposal could result in supplies. Therefore, this proposal improve grower returns. The proposal some additional costs to the industry, should have little or no effect on would regulate tart cherries handled in these costs are more than outweighed by consumer prices and should not result Michigan, New York, Utah, Washington, the benefits. The purpose of setting in a reduction in retail sales. and Wisconsin. The authority for this restricted percentages is to attempt to The free and restricted percentages action is provided for in §§ 930.51(a) bring supply and demand into balance. established by this proposal would and 930.52 of the order. The Board If the primary market (domestic) is provide the market with optimum recommended this action at a meeting oversupplied with cherries, grower supply and apply uniformly to all on September 10, 2015. prices decline substantially. Without regulated handlers in the industry, This proposal would result in some volume control, the primary market regardless of size. As the restriction fruit being diverted from the primary would likely be oversupplied, resulting represents a percentage of a handler’s domestic markets. However, as in lower grower prices. volume, the costs, when applicable, are mentioned earlier, the USDA’s The three districts in Michigan, along proportionate and should not place an ‘‘Guidelines for Fruit, Vegetable, and with the districts in New York, Utah, extra burden on small entities as Specialty Crop Marketing Orders’’ Washington, and Wisconsin are the compared to large entities. (http://www.ams.usda.gov/publications/ restricted areas for this crop year with The stabilizing effects of this proposal content/1982-guidelines-fruit-vegetable- a combined total production of 240 would benefit all handlers by helping marketing-orders) specify that 110 million pounds. A 20 percent restriction them maintain and expand markets, percent of recent years’ sales should be means 192 million pounds would be despite seasonal supply fluctuations. made available to primary markets each available to be shipped to primary Likewise, price stability positively season before recommendations for markets from these five states. The 192 impacts all growers and handlers by volume regulation are approved. The million pounds from the restricted allowing them to better anticipate the
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revenues their tart cherries would tart cherry handlers. As with all Federal Authority: 7 U.S.C. 601–674. generate. Growers and handlers, marketing order programs, reports and ■ 2. Revise § 930.151 to read as follows: regardless of size, would benefit from forms are periodically reviewed to the stabilizing effects of this restriction. reduce information requirements and § 930.151 Desirable carry-out inventory. In addition, the increased carry-out duplication by industry and public For the crop year beginning on July 1, should provide processors enough sector agencies. 2015, the desirable carry-out inventory, supply to meet market needs going into AMS is committed to complying with for the purposes of determining an the next season. the E-Government Act, to promote the optimum supply volume, will be 55 The Board considered some use of the Internet and other million pounds. alternatives in its preliminary restriction information technologies to provide ■ 3. Revise § 930.256 to read as follows: discussions that affected this increased opportunities for citizen recommended action. The first access to Government information and § 930.256 Free and restricted percentages alternative concerned the average sales services, and for other purposes. for the 2015–16 crop year. in estimating demand for the coming USDA has not identified any relevant The percentages for tart cherries season, and the second alternative Federal rules that duplicate, overlap or handled by handlers during the crop regarded the recommended carry-out conflict with this proposed rule. year beginning on July 1, 2015, which figure. In addition, the Board’s meeting was shall be free and restricted, respectively, Regarding demand, the Board began widely publicized throughout the tart are designated as follows: Free with the actual sales average of 188 cherry industry and all interested percentage, 80 percent and restricted million pounds. There was concern, persons were invited to attend the percentage, 20 percent. however that this value, which meeting and participate in Board Dated: December 14, 2015. incorporated the weather-related crop deliberations on all issues. Like all Rex A. Barnes, failure of 2012, would result in an over- Board meetings, the June 25, 2015, and restrictive calculation. After considering Associate Administrator, Agricultural September 10, 2015, meetings were Marketing Service. options in the range of 40 to 62 million public meetings and all entities, both pounds, the Board determined that an large and small, were able to express [FR Doc. 2015–31777 Filed 12–16–15; 8:45 am] adjustment of 43 million pounds, would views on this issue. Finally, interested BILLING CODE 3410–02–P best meet the industry’s sales needs. persons are invited to submit comments Thus the other alternatives were on this proposed rule, including the rejected and the Board recommended regulatory and informational impacts of DEPARTMENT OF THE TREASURY the 43 million pound economic this proposal on small businesses. adjustment. A small business guide on complying Office of the Comptroller of the Regarding the carry-out value, the with fruit, vegetable, and specialty crop Currency Board previously considered a one-year marketing agreements and orders may increase above the 20 million pounds be viewed at: http://www.ams.usda.gov/ 12 CFR Part 30 specified in the order to 50 million rules-regulations/moa/small-businesses. [Docket ID OCC–2015–0017] pounds. However, this season, Board Any questions about the compliance members indicated the carry-out should guide should be sent to Jeffrey Smutny RIN 1557–AD96 be even higher to facilitate processing at at the previously mentioned address in the end of the crop year. Board members the FOR FURTHER INFORMATION CONTACT Guidelines Establishing Standards for suggested a series of options from 35 section. Recovery Planning by Certain Large million to 60 million pounds of carry- A 30-day comment period is provided Insured National Banks, Insured out. Some feel the additional fruit is to allow interested persons to respond Federal Savings Associations, and necessary while others were more to this proposal. Thirty days is deemed Insured Federal Branches cautious about having additional fruit appropriate because this proposed rule on the market at the time of harvest, AGENCY: Office of the Comptroller of the would need to be in place as soon as Currency, Treasury. which may put downward pressure on possible since handlers are already prices. In conjunction with the demand shipping tart cherries from the 2015–16 ACTION: Proposed guidelines. adjustment, the Board reached a crop. All written comments timely SUMMARY: The Office of the Comptroller consensus and recommended the received will be considered before a Secretary increase the maximum carry- of the Currency (OCC) is requesting final determination is made on this comment on proposed enforceable out to 55 million pounds for the 2015– matter. 2016 season. guidelines establishing standards for In accordance with the Paperwork List of Subjects in 7 CFR Part 930 recovery planning by insured national banks, insured Federal savings Reduction Act of 1995 (44 U.S.C. Marketing agreements, Reporting and associations, and insured Federal Chapter 35), the order’s information recordkeeping requirements, Tart branches of foreign banks with average collection requirements have been cherries. total consolidated assets of $50 billion previously approved by the Office of For the reasons set forth in the Management and Budget (OMB) and or more (Guidelines). The OCC would preamble, 7 CFR part 930 is proposed to issue the Guidelines as an appendix to assigned OMB No. 0581–0177, Tart be amended as follows: Cherries Grown in the States of MI, NY, its safety and soundness standards PA, OR, UT, WA, and WI. No changes PART 930—TART CHERRIES GROWN regulations, and the Guidelines would in those requirements as a result of this IN THE STATES OF MICHIGAN, NEW be enforceable by the terms of the action are necessary. Should any YORK, PENNSYLVANIA, OREGON, Federal statute that authorizes the OCC changes become necessary, they would UTAH, WASHINGTON, AND to prescribe operational and managerial be submitted to OMB for approval. WISCONSIN standards for national banks and This proposal would not impose any Federal savings associations. additional reporting or recordkeeping ■ 1. The authority citation for 7 CFR DATES: Comments must be submitted by requirements on either small or large part 930 continues to read as follows: February 16, 2016.
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ADDRESSES: Because paper mail in the information on using Regulations.gov, of large or complex banks.1 These Washington, DC area and at the OCC is including instructions for viewing guidelines establish minimum standards subject to delay, commenters are public comments, viewing other for the design and implementation of a encouraged to submit comments supporting and related materials, and corporate governance framework and for through the Federal eRulemaking Portal viewing the docket after the close of the a bank’s board of directors in overseeing or email, if possible. Please use the title comment period. the framework’s design and ‘‘Guidelines Establishing Standards for • Viewing Comments Personally: You implementation. The OCC believes that Recovery Planning by Certain Large may personally inspect and photocopy these heightened standards further the Insured National Banks, Insured Federal comments at the OCC, 400 7th Street goals of the Dodd-Frank Act by Savings Associations, and Insured SW., Washington, DC. For security clarifying the OCC’s expectation that Federal Branches’’ to facilitate the reasons, the OCC requires that visitors banks have robust practices in areas organization and distribution of the make an appointment to inspect where the crisis revealed substantial comments. You may submit comments comments. You may do so by calling weaknesses. by any of the following methods: (202) 649–6700 or, for persons who are Another important component of an • Federal eRulemaking Portal— deaf or hard of hearing, TTY, (202) 649– institution’s risk management and ‘‘Regulations.gov’’: Go to http:// 5597. Upon arrival, visitors will be corporate governance practices is how www.regulations.gov. Enter ‘‘Docket ID required to present valid government- an institution plans to respond to severe OCC–2015–0017’’ in the Search Box and issued photo identification and to stress in a manner that preserves its click ‘‘Search’’. Results can be filtered submit to a security screening in order financial and operational strength and using the filtering tools on the left side to inspect and photocopy comments. viability. In the aftermath of the crisis, it became clear that many financial of the screen. Click on ‘‘Comment Now’’ • Docket: You may also view or institutions had insufficient plans for to submit public comments. request available background • identifying and responding rapidly to Click on the ‘‘Help’’ tab on the documents and project summaries using significant stress events. As a result, Regulations.gov home page to get the methods described above. information on using Regulations.gov, many institutions were forced to take including instructions for submitting FOR FURTHER INFORMATION CONTACT: For significant actions quickly without the public comments. questions concerning the Guidelines, benefit of a well-developed plan. In • Email: regs.comments@ contact Lori Bittner, Large Bank addition, recent large-scale operational occ.treas.gov. Supervision—Resolution and Recovery, events, such as destructive cyber • Mail: Legislative and Regulatory (202) 649–6093; Stuart Feldstein, attacks, demonstrate the need for Activities Division, Office of the Director, Andra Shuster, Senior institutions to plan how to respond to Comptroller of the Currency, 400 7th Counsel, or Karen McSweeney, Counsel, such occurrences. Street SW., Suite 3E–218, Mail Stop Legislative & Regulatory Activities The OCC believes that large, complex 9W–11, Washington, DC 20219. Division, (202) 649–5490 or, for persons institutions should have a recovery plan • Hand Delivery/Courier: 400 7th who are deaf or hard of hearing, TTY, that describes options for responding to Street SW., Suite 3E–218, Mail Stop (202) 649–5597; or Valerie Song, stress events. Accordingly, the OCC is 9W–11, Washington, DC 20219. Assistant Director, Bank Activities and proposing to establish standards for • Fax: (571) 465–4326. Structure Division, (202) 649–5500, 400 recovery planning that would apply to Instructions: You must include 7th Street SW., Washington, DC 20219. insured national banks, insured Federal ‘‘OCC’’ as the agency name and ‘‘Docket SUPPLEMENTARY INFORMATION: savings associations, and insured ID OCC–2015–0017’’ in your comment. Federal branches of foreign banks In general, the OCC will enter all Background (together, banks and each, a bank) with comments received into the docket and The recent financial crisis average total consolidated assets of $50 publish them on the Regulations.gov demonstrated the destabilizing effect billion or more (together, covered banks Web site without change, including any 2 that severe stress at large, complex, and each, a covered bank). An business or personal information that interconnected financial companies can institution’s recovery planning should you provide such as name and address, have on the national economy, capital be a dynamic, ongoing process. This email addresses, or phone numbers. markets, and the overall financial process should complement the Comments received, including stability of the banking system. institution’s risk management and attachments and other supporting Following the crisis, Congress passed corporate governance functions and materials, are part of the public record the Dodd-Frank Wall Street Reform and support its safe and sound operation. and subject to public disclosure. Do not Consumer Protection Act (Dodd-Frank The process of developing and enclose any information in your Act); among other purposes, the Dodd- maintaining a recovery plan also should comment or supporting materials that Frank Act was intended to strengthen cause covered banks’ management and you consider confidential or the framework for the supervision and boards of directors to enhance their inappropriate for public disclosure. regulation of large U.S. financial focus on risk management and corporate You may review comments and other companies in order to address the governance with a view toward related materials that pertain to this significant impact that these institutions lessening the financial or operational rulemaking action by any of the can have on capital markets and the impact of future unforeseen events. following methods: The OCC recognizes that many • economy. Viewing Comments Electronically: covered banks already engage in Go to http://www.regulations.gov. Enter One lesson learned from the crisis is the importance—especially in large or ‘‘Docket ID OCC–2015–0017’’ in the 1 79 FR 54518 (Sept. 11, 2014) (OCC Guidelines Search box and click ‘‘Search’’. complex financial institutions—of Establishing Heightened Standards for Certain Large Comments can be filtered by agency strong risk management and corporate Insured National Banks, Insured Federal Savings name using the filtering tools on the left governance practices. In 2014, the OCC Associations, and Insured Federal Branches; Integration of Regulations). side of the screen. adopted heightened standards • 2 While the Dodd-Frank Act addresses resolution Click on the ‘‘Help’’ tab on the guidelines that address the risk planning, it does not specifically address recovery Regulations.gov home page to get management and corporate governance planning.
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significant planning to respond to that relate to internal controls, receiving a Notice of Deficiency from events such as cyber attacks, business information systems, internal audit the OCC, the national bank or Federal interruptions, and leadership vacancies. systems, loan documentation, credit savings association must submit a They undertake strategic, operational, underwriting, interest rate exposure, compliance plan to the OCC for contingency, capital (including stress asset growth, asset quality, earnings, approval within 30 days. testing), liquidity, and resolution compensation, fees, and benefits. If a national bank or Federal savings planning. We do not intend for the Appendix B contains standards on association fails to submit an acceptable recovery planning required by these information security, and Appendix C compliance plan or fails in any material Guidelines to duplicate these efforts, contains standards that address respect to implement a compliance plan and we encourage covered banks to residential mortgage lending practices. approved by the OCC, the OCC may leverage their existing planning. Rather, Appendix D contains standards for the issue a Notice of Intent to Issue an Order the purpose of the Guidelines is to design and implementation of a risk pursuant to section 39 (Notice of Intent). provide a comprehensive framework for governance framework. The bank or savings association then evaluating how severe stress may affect Section 39 prescribes different has 14 days to respond to the Notice of the covered bank as a whole and the consequences depending on whether Intent. After considering the bank’s or options that will allow it to remain the standards are issued by regulation or savings association’s response, the OCC viable even under severe stress. guidelines. Pursuant to section 39, if a may issue the order, decide not to issue As described below, a covered bank national bank or Federal savings the order, or seek additional information should develop and maintain a recovery association 4 fails to meet a standard from the bank or savings association plan that identifies triggers based on prescribed by regulation, the OCC must before making a final decision. severe stress scenarios. These scenarios require it to submit a plan specifying the Alternatively, the OCC may issue an should range from those that cause steps it will take to comply with the order without providing the bank or significant financial and operational standard. If a national bank or Federal savings association with a Notice of hardship to those that bring the covered savings association fails to meet a Intent. In such a case, the bank or bank close to default, but no further; standard prescribed by a guideline, the savings association may appeal after- scenarios should not go so far as to push OCC has the discretion to decide the-fact to the OCC, and the OCC has 60 the covered bank into resolution. The whether to require the submission of a days to consider the appeal. Upon the plan should identify the credible plan.5 Issuing these standards as issuance of an order, a bank or savings options a covered bank could take to guidelines rather than as a regulation association is deemed to be in restore financial and operational provides the OCC with the flexibility to noncompliance with part 30. Orders are strength and viability in a timely pursue the course of action that is most formal, public documents, and they may manner, while maintaining market appropriate given the specific be enforced by the OCC in district court. confidence. Neither the plan nor the circumstances of a covered bank’s The OCC may also assess a civil money options may assume or rely on any noncompliance with one or more penalty, pursuant to 12 U.S.C. 1818, extraordinary government support. standards and the covered bank’s self- against any bank or savings association As part of the OCC’s regular corrective and remedial responses. that violates or otherwise fails to supervisory activities, OCC examiners The procedural rules implementing comply with any final order and against will assess the appropriateness and the supervisory and enforcement any institution-affiliated party who adequacy of the covered bank’s recovery remedies prescribed by section 39 are participates in such violation or planning process and the integration of contained in part 30 of the OCC’s rules. noncompliance. that process into the covered bank’s Under these provisions, the OCC may overall risk management and corporate Description of the OCC’s Guidelines for initiate a supervisory or enforcement Recovery Planning governance functions. Examiners will process when it determines, by also assess the quality and examination or otherwise, that a The proposed Guidelines consist of reasonableness of a covered bank’s national bank or Federal savings three sections. Section I provides an recovery plan, including its triggers and association has failed to meet the introduction to the Guidelines, explains the stress scenarios upon which the standards set forth in the Guidelines.6 the scope of the Guidelines, and defines triggers are based, recovery options, Upon making that determination, the key terms. Section II sets forth the impact assessments, and execution OCC may request, in writing, that the standards for the design and execution strategies, as well as the covered bank’s national bank or Federal savings of a covered bank’s recovery plan. management and board responsibilities. association submit a compliance plan to Section III provides the standards for Enforcement of the Guidelines the OCC detailing the steps the management’s and the board of institution will take to correct the directors’ responsibilities in connection The OCC is proposing these deficiencies and the time within which with the recovery plan. Guidelines pursuant to section 39 of the it will take those steps. This request is Federal Deposit Insurance Act (FDIA).3 Section I: Introduction termed a Notice of Deficiency. Upon Section 39 authorizes the OCC to Scope. The Guidelines would apply to prescribe safety and soundness 4 Section 39 of the FDIA applies to ‘‘insured a bank with average total consolidated standards in the form of a regulation or depository institutions,’’ which includes insured assets equal to or greater than $50 guidelines. The OCC currently has four Federal branches of foreign banks. While we do not billion as of the effective date of the sets of these guidelines, issued as specifically refer to these entities in this discussion, Guidelines (calculated by averaging the appendices to part 30 of the OCC’s it should be read to include them. However, section 39 does not apply to uninsured depository covered bank’s total consolidated assets, regulations. Appendix A contains institutions. as reported on the bank’s Consolidated operational and managerial standards 5 See 12 U.S.C. 1831p–1(e)(1)(A)(i) and (ii). Reports of Condition and Income (Call 6 The procedures governing the determination Reports), for the four most recent 3 12 U.S.C. 1831p–1. Section 39 was enacted as and notification of failure to satisfy a standard consecutive quarters). This threshold is part of the Federal Deposit Insurance Corporation prescribed pursuant to section 39, the filing and Improvement Act of 1991, Public Law 102–242, review of compliance plans, and the issuance, if consistent with the scope of the section 132(a), 105 Stat. 2236, 2267–70 (Dec. 19, necessary, of orders currently are set forth in the regulations of the Federal Deposit 1991). OCC’s regulations at 12 CFR 30.3, 30.4, and 30.5. Insurance Corporation (FDIC) and Board
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of Governors of the Federal Reserve objections. At the conclusion of the 30 structure, including its material entities, System (Board) that require certain days, the OCC would issue a written critical operations, core business lines, entities to prepare resolution plans.7 For notice of its final determination. and core management information those banks that have average total As discussed above, the Guidelines systems. The description should explain consolidated assets less than $50 billion would be enforceable pursuant to interconnections and as of the effective date of the Guidelines, section 39 of the FDIA and part 30 of the interdependencies 11 (i) across business but subsequently have average total OCC’s rules. Section I of the Guidelines lines within the covered bank, (ii) with consolidated assets of $50 billion or provides that nothing in section 39 or affiliates in a bank holding company greater, the date on which the the Guidelines in any way limits the structure, (iii) between a covered bank Guidelines would apply is the as-of date authority of the OCC to address unsafe and its foreign subsidiaries, and (iv) of the most recent Call Report used in or unsound practices or conditions or with critical third parties. The the calculation of the average.8 Once a other violations of law.9 description should address whether a bank becomes subject to the Guidelines Definitions. Paragraph D of Section I disruption of these interconnections or because its average total consolidated defines certain terms used throughout interdependencies would materially assets reach or exceed the $50 billion the Guidelines, including ‘‘average total affect the funding or operations of the threshold, it would be required to consolidated assets,’’ ‘‘bank,’’ ‘‘covered covered bank and, if so, how. Examples continue to comply with the Guidelines, bank,’’ ‘‘recovery,’’ ‘‘recovery plan,’’ and include relationships with respect to unless the OCC specifically determines ‘‘trigger.’’ The term ‘‘recovery’’ means credit exposures, investments, or that compliance is not required. timely and appropriate action that a funding commitments; guarantees In order to maintain supervisory covered bank takes to remain a going including an acceptance, endorsement, flexibility, the proposed Guidelines concern when it is experiencing or is or letter of credit issued for the benefit would reserve the OCC’s authority to likely to experience considerable of an affiliate during normal periods, as apply the Guidelines to a bank whose financial or operational distress. A opposed to during a crisis; and payment average total consolidated assets are less covered bank in recovery has not yet services, treasury operations, collateral than $50 billion if the OCC determines deteriorated to the point where management, information technology such entity’s operations are highly liquidation or resolution is imminent. A (IT), human resources (HR), or other complex or otherwise present a ‘‘recovery plan’’ is a plan that identifies operational functions. This overview is heightened risk that warrants triggers and options for responding to a an essential part of the recovery plan. application of the Guidelines. The OCC wide range of severe internal and 2. Triggers. As defined above, a trigger expects to use this authority external stress scenarios and for is a quantitative or qualitative indicator infrequently; it does not intend to apply restoring a covered bank to financial of the risk or existence of severe stress the Guidelines to community banks. and operational strength and viability in that should always be escalated to In determining whether a bank’s a timely manner, while maintaining the management or the board of directors, as operations are highly complex or confidence of market participants. appropriate, for purposes of initiating a present a heightened risk, the OCC will Neither the plan nor the options may response. In order to identify triggers consider the bank’s risk profile, size, assume or rely on any extraordinary that appropriately reflect the particular activities, and complexity, including the government support. ‘‘Trigger’’ means a vulnerabilities of each covered bank, the complexity of its organizational and quantitative or qualitative indicator of bank should begin by designing severe legal entity structure. Additionally, as the risk or existence of severe stress that stress scenarios that would threaten the noted above, the OCC may determine should always be escalated to covered bank’s critical operations or that a covered bank is no longer management or the board of directors, as cause it to fail if one or more recovery required to comply with the Guidelines. appropriate, for purposes of initiating a options were not implemented in a The OCC would generally make this response. The breach of any trigger timely manner. Because a recovery plan determination if a covered bank’s should result in timely notice should demonstrate the ability of the operations are no longer highly complex accompanied by sufficient information covered bank to restore its financial and or no longer present a heightened risk. to enable management of the covered operational strength and viability, these When exercising any of these bank to take corrective action. scenarios should range from those that cause significant financial and reservations of authority, the OCC Section II: Recovery Plan would apply notice and response operational hardship to those that bring procedures consistent with those set out Each covered bank should develop the covered bank close to default, but 12 in 12 CFR 3.404. In accordance with and maintain a recovery plan not into resolution. these procedures, the OCC would appropriate for its individual risk The covered bank should consider a provide a bank or covered bank, as profile, size, activities, and complexity, range of bank-specific and market-wide appropriate, with written notice of its including the complexity of its stress scenarios, individually and in the proposed determination under this organizational and legal entity structure. aggregate, that are immediate and paragraph of the Guidelines, and the Section II sets forth the elements that prolonged. The stress scenarios should bank or covered bank would have 30 the covered bank should include in a be designed to result in capital 10 shortfalls, liquidity pressures, or other days to respond in writing. The OCC recovery plan. significant financial losses. Examples of would consider failure to respond 1. Overview of covered bank. It is within this time frame a waiver of any important that a recovery plan provide a detailed description of the covered 11 We are using the terms ‘‘interconnections’’ and bank’s overall organizational and legal ‘‘interdependencies’’ in a manner consistent with 7 See 12 CFR 381.2(f) and 243.2(f), respectively. FDIC and Board resolution plan regulations. See See also 12 CFR 360.10. supra note 7. 8 While the Guidelines would apply as of the date 9 Section 39 preserves all authority otherwise 12 Separate from these Guidelines, covered banks of the most recent Call Report used in the available to the OCC, stating, ‘‘The authority are required to conduct supervisory stress tests. calculation of the average total consolidated assets granted by this section is in addition to any other While the scenarios used to conduct those tests may of the covered bank, we understand that a newly authority of the Federal banking agencies.’’ See 12 be appropriate for purposes of identifying triggers covered bank will need time to formulate a recovery U.S.C. 1831p–1(g). under these Guidelines, a covered bank should plan and expect the bank to work with its OCC 10 A covered bank can use information included evaluate the appropriateness of those scenarios on examiners during this period. in its resolution plan to prepare its recovery plan. a case-by-case basis.
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bank-specific stress scenarios include option set forth in the plan or taking consequences that may be associated fraud; portfolio shocks; a significant other corrective action. It should be with the breach of a particular trigger. cyber attack 13 or other wide-scale noted, however, that the breach of a 3. Options for recovery. The recovery operational event; accounting and tax particular trigger does not necessarily plan should identify a wide range of issues; events that cause a reputational correspond to a single recovery option; credible options that a covered bank crisis that degrades customer or market instead, more than one option may be could undertake to restore financial and confidence; and other key stresses that appropriate when a particular trigger is operational strength and viability, management identifies. Examples of breached. thereby allowing the bank to continue to market-wide stress scenarios include the A recovery plan should include both operate as a going concern and to avoid disruption of domestic or global quantitative and qualitative triggers. liquidation or resolution. A covered financial markets; the failure or Quantitative triggers include changes in bank should be able to execute the impairment of systemically important covered bank-specific indicators that identified options within time frames financial industry participants, critical reflect the covered bank’s capital or that allow those options to be effective financial market infrastructure firms, liquidity position. While capital or during periods of stress. Neither the and critical third-party relationships; liquidity triggers may be the most plan nor the options may assume or rely significant changes in debt or equity critical, a covered bank should also on any extraordinary government valuations, currency rates, or interest consider other quantitative triggers that support. rates; the widespread interruption of may have an impact on its condition, A recovery plan should explain how critical infrastructure that may degrade such as a rating downgrade; access to the covered bank would carry out each operational capability; 14 and general credit and borrowing lines; equity option. It should include a description economic conditions. ratios; profitability; asset quality; or of the decision-making process for As provided in the definition of other macroeconomic indicators. Of implementing each option, including ‘‘trigger,’’ the breach of a trigger should course, a covered bank should be the steps to be followed and any timing always be escalated to management or prepared to act to preserve the financial considerations. It should also identify the board of directors, as appropriate, and operational strength and viability of the critical parties needed to carry out for its consideration of an appropriate the bank if it is at risk, regardless of each option. Options may include the response. The breach of any trigger whether a trigger has been breached or conservation or restoration of liquidity should result in timely notice the recovery plan includes options to and capital; the sale, transfer, or accompanied by sufficient information specifically address the problems the disposal of significant assets, portfolios, to enable management of the covered bank faces. or business lines; the reduction of risk bank to take corrective action. A Qualitative triggers include the profile; the restructuring of liabilities; covered bank should select triggers that unexpected departure of senior the activation of emergency protocols; address a continuum of increasingly leadership; the erosion of reputation or and succession planning. Options may severe stress, ranging from those that market standing; the impact of an also include organizational provide a warning of the likely adverse legal ruling; and a material restructuring, including divesting legal occurrence of severe stress to those that operational event that affects the entities in order to simplify the covered indicate the actual existence of severe covered bank’s ability to access critical bank’s structure. The recovery plan stress. The number and nature of services or to deliver products or should also identify obstacles that could triggers should be appropriate for the services to its customers for a material impede the execution of an option and covered bank’s business and risk profile. period of time. It is important to note set out mitigation strategies for The nature of the trigger informs the that the covered bank should review addressing these obstacles. The recovery nature of the response. For example, in and update both qualitative and plan should specifically identify some situations, the appropriate quantitative triggers, as necessary, to recovery options that require regulatory response to the breach of a trigger may take into account changes in laws and or legal approval. be enhanced monitoring; in other regulations and other material events. In Set forth below are examples of how situations, the breach of a trigger should addition, a covered bank should stress scenarios, triggers, and options result in activating a specific recovery consider the regulatory or legal relate to each other:
Possible options in Example of a severe stress scenario Possible triggers response to triggers
Idiosyncratic stress: Trading losses caused by • Tier 1 capital falls below 6% ...... • Issue new capital. a rogue trader. • Liquidity falls below internal bank policy re- • Sell nonstrategic assets or businesses. quirements. • Reduce loan originations or commitments. Systemic stress: Significant decline in U.S. • Short-term credit rating falls below A–3 ...... • Sell strategic assets or businesses. gross domestic product, coupled with an in- • Nonperforming loans rise above a specified • Reduce expenses (e.g., business contrac- crease in the U.S. unemployment rate and a percentage. tions). deterioration in U.S. residential housing mar- • Market capitalization falls below a specific • Access the Board’s Discount Window. ket. limit for a certain period of time.
4. Impact assessments. For each would affect the covered bank. This covered bank would use to maintain the recovery option, a covered bank should impact assessment and description financial and operational strength and assess and describe how the option should specify the procedures the viability of its material entities, critical
13 An example of a significant cyber attack one of its third-party providers and that undermines 14 An example of this type of interruption includes an event that has an impact on a bank’s the covered bank’s data or processes. includes a disruption to a payment, clearing, or computer network(s) or the computer network(s) of settlement system that affects the covered bank’s ability to access that system.
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operations, and core business lines for notify persons within the organization management and the board of directors each recovery option. This assessment and other external parties of its actions with respect to the recovery plan. should include an analysis of both its under the recovery plan. These elements Management of the covered bank internal operations (e.g., IT systems, will ensure that all stakeholders are should review the recovery plan at least suppliers, HR operations) and its access informed in a timely manner of how the annually and in response to a material to market infrastructure (e.g., clearing covered bank responds to a breach of a event. It should revise the plan as and settlement facilities, payment trigger. In addition, the recovery plan necessary to reflect material changes in systems, additional collateral should specifically identify how the the covered bank’s risk profile, requirements). A recovery plan should covered bank will obtain required complexity, size, and activities, as well also specify actions a firm can take to regulatory or legal approvals in order to as changes in external threats. During sell entities, assets, or business lines to ensure that the covered bank receives this review, management should restore the financial condition of the such approval in a timely manner. consider the ongoing relevance and covered bank. For each recovery option, 8. Other information. A recovery plan applicability of the stress scenarios and a covered bank should identify any should include any other information triggers and revise the recovery plan as impediments or regulatory requirements that the OCC communicates in writing needed. This review should evaluate the that must be addressed to execute the directly to the covered bank regarding covered bank’s organizational structure option, including how to overcome the covered bank’s recovery plan. A and its effectiveness in facilitating a those impediments or satisfy those well-developed recovery plan should recovery. The assessment should requirements. Each recovery option also also consider relevant information consider the legal structures, number of should address potential consequences, included in other written OCC or entities, geographical footprint, booking including the benefits and risks of that Federal Financial Institutions practices (e.g., guarantees, exposures), particular option. The assessment Examination Council material. and servicing arrangements necessary to should address the impact on the C. Relationship to other processes; enable flexible operations. The board covered bank’s capital, liquidity, coordination with other plans. The and management should provide funding and profitability; and the effect covered bank should integrate its justification for the covered bank’s on the covered bank’s material entities, recovery plan into its corporate organizational and legal structures and critical operations, and core business governance and risk management outline changes that would enhance the lines, including reputational impact. functions. The covered bank also should board’s and management’s ability to 5. Escalation procedures. A recovery coordinate its recovery plan with its oversee the covered bank in times of plan should clearly outline the process strategic; operational (including stress. A more rational legal structure for escalating decision-making to senior business continuity); contingency; can provide a clearer path to recovery management or the board of directors, as capital (including stress testing); and the operational flexibility to appropriate, in response to the breach of liquidity; and resolution planning. In implement the recovery plan. a trigger. The recovery plan should also The board is responsible for identify the departments and persons many cases, these plans may be interconnected and would require the overseeing the covered bank’s recovery responsible for making and executing planning process. As part of the board’s these decisions, including the process covered bank to coordinate among them. In addition, to the extent possible, a oversight of a covered bank’s safe and for informing necessary stakeholders sound operations, the board also should (e.g., shareholders, counsel, covered bank should align its recovery plan with any recovery and resolution work closely with the bank’s senior accountants, regulators) to effect the management in developing and action. At a minimum, the escalation planning efforts by the covered bank’s executing the recovery plan. procedures should result in the covered holding company so that the plans are Accordingly, the Guidelines provide bank taking action before remedial consistent with and do not contradict that a covered bank’s board of directors, supervisory action is necessary. each other. We recognize that some 6. Management reports. A recovery inconsistency may be unavoidable or an appropriate committee of the plan should require reports that provide because recovery planning and board, should review and approve the management or the board of directors resolution planning differ in that recovery plan at least annually and as with sufficient data and information to recovery planning addresses a bank’s needed to address any changes made by make timely decisions regarding the ongoing financial and operational management. appropriate actions necessary to strength and viability while resolution Request for Comments respond to the breach of a trigger. A planning starts from the point of non- The OCC requests comment on all recovery plan should identify the types viability. aspects of the proposed Guidelines. of reports that the covered bank will The OCC notes that covered banks are provide to allow management or the an integral part of bank holding Regulatory Analysis company recovery and resolution plans. board to monitor progress with respect Paperwork Reduction Act to the actions taken under the recovery As a result, a covered bank may be able plan. to leverage certain elements in these The OCC has determined that this 7. Communication procedures. A other plans. For example, resolution proposal involves collections of recovery plan should provide that the plans typically require a bank to map its information pursuant to the provisions covered bank notify the OCC of any critical operations. A covered bank may of the Paperwork Reduction Act of 1995 significant breach of a trigger and any find this resolution planning mapping (PRA) (44 U.S.C. 3501 et seq.). The OCC action taken or to be taken in response exercise to be useful in describing its may not conduct or sponsor, and an to such breach and should explain the interconnections and interdependencies organization is not required to respond process for deciding when a breach of as set out in its recovery plan overview. to, these information collection requirements unless the information a trigger is significant. A covered bank Section III: Management’s and Board of collection displays a currently valid should work closely with the OCC when Directors’ Responsibilities executing a recovery plan. Office of Management and Budget A recovery plan also should address Section III of the proposed Guidelines (OMB) control number. The OCC is when and how the covered bank will addresses the responsibilities of both seeking a control number for this
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collection from OMB and has submitted certification and a short, explanatory ■ 2. Add Appendix E to part 30 to read this collection to OMB. statement in the Federal Register along as follows: The collections of information that are with its proposal. subject to the PRA in this proposal are The proposed Guidelines would have Appendix E to Part 30—OCC found in 12 CFR part 30, appendix E, no impact on any small entities. The Guidelines Establishing Standards for sections II.B., II.C., and III. Section II.B. proposed Guidelines would apply only Recovery Planning by Certain Large specifies the elements of the recovery to insured national banks, insured Insured National Banks, Insured plan, including an overview of the Federal savings associations, and Federal Savings Associations, and covered bank; triggers; options for insured Federal branches of foreign Insured Federal Branches recovery; impact assessments; escalation banks with $50 billion or more in Table of Contents procedures; management reports; and average total consolidated assets. The I. Introduction communication procedures. Section proposed Guidelines reserve the OCC’s A. Scope II.C. addresses the relationship of the authority to apply them to an insured B. Reservation of Authority plan to other covered bank processes national bank, insured Federal savings C. Preservation of Existing Authority and plans, as well as those of its bank association, or insured Federal branch D. Definitions holding company. Section III outlines of a foreign bank with less than $50 II. Recovery Plan A. Recovery Plan management’s and board of directors’ billion in average total consolidated B. Elements of Recovery Plan responsibilities. assets if the OCC determines such 1. Overview of Covered Bank Title: OCC Guidelines Establishing entity’s operations are highly complex 2. Triggers Standards for Recovery Planning by or otherwise present a heightened risk. 3. Options for Recovery Certain Large Insured National Banks, We do not expect any small entities will 4. Impact Assessments Insured Federal Savings Associations, be determined to have highly complex 5. Escalation Procedures and Insured Federal Branches. operations or present heightened risk by 6. Management Reports OMB Control No.: To be assigned by the OCC. Therefore, the OCC certifies 7. Communication Procedures OMB. that the proposed Guidelines would not, 8. Other Information C. Relationship to Other Processes; Frequency of Response: On occasion. if issued, have a significant economic Affected Public: Businesses or other Coordination With Other Plans impact on a substantial number of small III. Management’s and Board of Directors’ for-profit organizations. entities. Responsibilities Burden Estimates: Unfunded Mandates Reform Act A. Management Total Number of Respondents: 23. B. Board of Directors Total Burden per Respondent: 7,543 Analysis hours. Section 202 of the Unfunded I. Introduction Total Burden for Collection: 173,489 Mandates Reform Act of 1995 (2 U.S.C. A. Scope. This appendix applies to a hours. 1532), requires the OCC to prepare a covered bank, as defined in paragraph Comments should be submitted as budgetary impact statement before I.D.3. provided in the ADDRESSES section and promulgating a rule that includes a B. Reservation of authority. are invited on: (1) Whether the proposed Federal mandate that may result in the 1. The OCC reserves the authority: collection of information is necessary expenditure by State, local, and tribal a. To apply this appendix, in whole for the proper performance of the OCC’s governments, in the aggregate, or by the or in part, to a bank that has average functions; including whether the private sector, of $100 million or more total consolidated assets of less than $50 information has practical utility; (2) the in any one year (adjusted annually for billion, if the OCC determines such accuracy of the OCC’s estimate of the inflation). The OCC has determined that bank is highly complex or otherwise burden of the proposed information this proposal will not result in presents a heightened risk that warrants collection, including the cost of expenditures by State, local, and tribal the application of this appendix; or compliance; (3) ways to enhance the governments, or the private sector, of b. To determine that compliance with quality, utility, and clarity of the $100 million or more in any one year. this appendix should not be required for information to be collected; and (4) Accordingly, the OCC has not prepared a covered bank. The OCC will generally ways to minimize the burden of a budgetary impact statement. make the determination under this information collection on respondents, paragraph I.B.1.b. if a covered bank’s including through the use of automated List of Subjects in 12 CFR Part 30 operations are no longer highly complex collection techniques or other forms of Banks, Banking, Consumer protection, or no longer present a heightened risk. IT. National banks, Privacy, Safety and 2. In determining whether a covered bank is highly complex or presents a Regulatory Flexibility Analysis soundness, Reporting and recordkeeping requirements. heightened risk, the OCC will consider Pursuant to section 605(b) of the For the reasons set forth in the the bank’s risk profile, size, activities, Regulatory Flexibility Act, 5 U.S.C. preamble, and under the authority of 12 and complexity, including the 605(b) (RFA), the regulatory flexibility U.S.C. 93a, chapter I of title 12 of the complexity of its organizational and analysis otherwise required under Code of Federal Regulations is proposed legal entity structure. Before exercising section 603 of the RFA is not required to be amended as follows: the authority reserved by this paragraph if the agency certifies that the proposal I.B, the OCC will apply notice and will not, if promulgated, have a PART 30—SAFETY AND SOUNDNESS response procedures in the same significant economic impact on a STANDARDS manner and to the same extent as the substantial number of small entities notice and response procedures in 12 (defined for purposes of the RFA to ■ 1. The authority citation for part 30 CFR 3.404. include commercial banks and savings continues to read as follows: C. Preservation of existing authority. institutions with assets less than or Authority: 12 U.S.C. 1, 93a, 371, 1462a, Neither section 39 of the Federal equal to $550 million and trust 1463, 1464, 1467a, 1818, 1828, 1831p–1, Deposit Insurance Act (12 U.S.C. companies with assets less than or equal 1881–1884. 3102(b) and 5412(b)(2)(B); 15 1831p–1) nor this appendix in any way to $38.5 million) and publishes its U.S.C. 1681s, 1681w, 6801, and 6805(b)(1). limits the authority of the OCC to
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address unsafe or unsound practices or B. Elements of recovery plan. A responsible for making and executing conditions or other violations of law. recovery plan under paragraph II.A. these decisions. The OCC may take action under section should include the following elements: 6. Management reports. A recovery 39 and this appendix independently of, 1. Overview of covered bank. A plan should require reports that provide in conjunction with, or in addition to recovery plan should describe the management or the board of directors any other enforcement action available covered bank’s overall organizational with sufficient data and information to to the OCC. and legal structure, including its make timely decisions regarding the D. Definitions. material entities, critical operations, appropriate actions necessary to 1. Average total consolidated assets core business lines, and core respond to the breach of a trigger. means the average total consolidated management informational systems. The 7. Communication procedures. A assets of the bank or the covered bank, plan should describe interconnections recovery plan should provide that the as reported on the bank’s or covered and interdependencies (i) across covered bank notify the OCC of any bank’s Call Reports for the four most business lines within the covered bank, significant breach of a trigger and any recent consecutive quarters. (ii) with affiliates in a bank holding action taken or to be taken in response 2. Bank means any insured national company structure, (iii) between a to such breach and should explain the bank, insured Federal savings covered bank and its foreign process for deciding when a breach of association, or insured Federal branch subsidiaries, and (iv) with critical third a trigger is significant. A recovery plan of a foreign bank. parties. also should address when and how the 3. Covered bank means any bank— 2. Triggers. A recovery plan should covered bank will notify persons within (a) With average total consolidated identify triggers that appropriately the organization and other external assets equal to or greater than $50 reflect the covered bank’s particular parties of its action under the recovery billion; or vulnerabilities. plan. The recovery plan should (b) With average total consolidated 3. Options for recovery. A recovery specifically identify how the covered assets less than $50 billion, if the OCC plan should identify a wide range of bank will obtain required regulatory or determines that such bank is highly credible options that a covered bank legal approvals. complex or otherwise presents a 8. Other information. A recovery plan could undertake to restore financial and heightened risk as to warrant the should include any other information operational strength and viability, application of this appendix pursuant to that the OCC communicates in writing thereby allowing the bank to continue to paragraph I.B.1.a. directly to the covered bank regarding operate as a going concern and to avoid 4. Recovery means timely and the covered bank’s recovery plan. liquidation or resolution. A recovery appropriate action that a covered bank C. Relationship to other processes; plan should explain how the covered takes to remain a going concern when it coordination with other plans. The bank would carry out each option and is experiencing or is likely to experience covered bank should integrate its describe the timing required for carrying considerable financial or operational recovery plan into its risk management out each option. The recovery plan distress. A covered bank in recovery has and corporate governance functions. should specifically identify the recovery not yet deteriorated to the point where The covered bank also should options that require regulatory or legal liquidation or resolution is imminent. coordinate its recovery plan with its approval. 5. Recovery plan means a plan that strategic; operational (including identifies triggers and options for 4. Impact assessments. For each business continuity); contingency; responding to a wide range of severe recovery option, a covered bank should capital (including stress testing); internal and external stress scenarios assess and describe how the option liquidity; and resolution planning. To and to restore a covered bank that is in would affect the covered bank. This the extent possible, the covered bank recovery to financial and operational impact assessment and description also should align its recovery plan with strength and viability in a timely should specify the procedures the any recovery and resolution planning manner. The options should maintain covered bank would use to maintain the efforts by the covered bank’s holding the confidence of market participants, financial and operational strength and company, so that the plans are and neither the plan nor the options viability of its material entities, critical consistent with and do not contradict may assume or rely on any operations, and core business lines for each other. extraordinary government support. each recovery option. For each option, 6. Trigger means a quantitative or the recovery plan should address the III. Management’s and Board of qualitative indicator of the risk or following: Directors’ Responsibilities existence of severe stress that should a. The effect on the covered bank’s The recovery plan should address the always be escalated to management or capital, liquidity, funding and following management and board the board of directors, as appropriate, profitability; responsibilities: for purposes of initiating a response. b. The effect on the covered bank’s A. Management. Management should The breach of any trigger should result material entities, critical operations and review the recovery plan at least in timely notice accompanied by core business lines, including annually and in response to a material sufficient information to enable reputational impact; and event. It should revise the plan as management of the covered bank to take c. Any legal or market impediment or necessary to reflect material changes in corrective action. regulatory requirement that must be the covered bank’s risk profile, addressed or satisfied in order to complexity, size, and activities, as well II. Recovery Plan implement the option. as changes in external threats. This A. Recovery plan. Each covered bank 5. Escalation procedures. A recovery review should evaluate the should develop and maintain a recovery plan should clearly outline the process organizational structure and its plan that is appropriate for its for escalating decision-making to senior effectiveness in facilitating a recovery. individual risk profile, size, activities, management or the board of directors, as B. Board of directors. The board is and complexity, including the appropriate, in response to the breach of responsible for overseeing the covered complexity of its organizational and a trigger. The recovery plan should also bank’s recovery planning process. The legal entity structure. identify the departments and persons board of directors or an appropriate
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committee of the board of directors of a include Comments/RIN 2590–AA69 in the supervisory and oversight covered bank should review and the subject line of the message. responsibilities of the Office of Federal approve the recovery plan at least • Courier/Hand Delivery: The hand Housing Enterprise Oversight (OFHEO) annually and as needed to address any delivery address is: Alfred M. Pollard, over the Federal National Mortgage changes made by management. General Counsel, Attention: Comments/ Association (Fannie Mae), the Federal Dated: December 10, 2015. RIN 2590–AA69, Federal Housing Home Loan Mortgage Corporation Finance Agency, 400 Seventh Street Thomas J. Curry, (Freddie Mac) (collectively, SW., Eighth Floor, Washington, DC Enterprises), and of the Finance Board Comptroller of the Currency. 20219. Deliver the package to the over the Banks and the Bank System’s [FR Doc. 2015–31658 Filed 12–16–15; 8:45 am] Seventh Street entrance Guard Desk, Office of Finance. Under the legislation, BILLING CODE 4810–33–P First Floor, on business days between 9 the Enterprises, the Banks, and the a.m. and 5 p.m. Office of Finance continue to operate • U.S. Mail, United Parcel Service, under regulations promulgated by FEDERAL HOUSING FINANCE BOARD Federal Express or Other Mail Service: OFHEO and the Finance Board until The mailing address for comments is: such regulations are superseded by 12 CFR Part 955 Alfred M. Pollard, General Counsel, regulations issued by FHFA.2 Attention: Comments/RIN 2590–AA69, FEDERAL HOUSING FINANCE Federal Housing Finance Agency, 400 B. Dodd-Frank Act Provisions AGENCY Seventh Street SW., Eighth Floor, Section 939A of the Dodd-Frank Act Washington, DC 20219. requires federal agencies to: (i) Review 12 CFR Parts 1201 and 1268 FOR FURTHER INFORMATION CONTACT: regulations that require the use of an RIN 2590–AA69 Christina Muradian, Principal Financial assessment of the creditworthiness of a Analyst, [email protected], security or money market instrument; Acquired Member Assets 202–649–3323, Division of Bank and (ii) to the extent those regulations Regulation; or Thomas E. Joseph, contain any references to, or AGENCY: Federal Housing Finance Associate General Counsel, requirements regarding credit ratings, Board; Federal Housing Finance [email protected], 202–649– remove such references or Agency. 3076 (these are not toll-free numbers), requirements.3 In place of such credit- ACTION: Notice of proposed rulemaking; Office of General Counsel, Federal rating based requirements, the Dodd- request for comment. Housing Finance Agency, 400 Seventh Frank Act instructs agencies to Street SW., Washington, DC 20219. The substitute appropriate standards for SUMMARY: The Federal Housing Finance telephone number for the determining creditworthiness. The new Agency (FHFA) is proposing Telecommunications Device for the law further provides that, to the extent amendments to the existing Acquired Hearing Impaired is 800–877–8339. feasible, an agency should adopt a Member Assets (AMA) regulation, SUPPLEMENTARY INFORMATION: uniform standard of creditworthiness which applies to the Federal Home Loan for use in its regulations, taking into Banks (Banks). In particular, FHFA I. Comments account the entities regulated by it and proposes to remove from the regulation FHFA invites comments on all aspects the purposes for which such regulated requirements based on ratings issued by of the proposed regulation. After entities would rely on the a Nationally Recognized Statistical considering all comments, FHFA will creditworthiness standard. Ratings Organization (NRSRO), as develop a final regulation. FHFA will On November 8, 2013, FHFA required by the Dodd-Frank Wall Street post without change copies of all promulgated a final rule removing Reform and Consumer Protection Act comments received on the FHFA Web references to credit ratings in certain (Dodd-Frank Act). Additionally, FHFA site at http://www.fhfa.gov, and will regulations governing the Banks; this proposes to transfer the AMA regulation include any personal information you rule became effective on May 7, 2014.4 from the former Federal Housing provide, such as your name, address, That rulemaking removed references to Finance Board (Finance Board) email address, and telephone number. credit ratings in FHFA regulations regulations to FHFA’s regulations. FHFA will make copies of all comments related to Bank investments, standby FHFA also proposes to reorganize the timely received available for letters of credit, and liabilities.5 When current regulation and to modify and examination by the public on business those rule amendments were proposed, clarify a number of provisions in the days between the hours of 10 a.m. and FHFA stated that it would undertake regulation. 3 p.m., at the Federal Housing Finance separate rulemakings to remove NRSRO DATES: FHFA must receive written Agency, 400 Seventh Street SW., Eighth references and requirements contained comments on or before April 15, 2016. Floor, Washington, DC 20219. To make in the Banks’ capital regulations and in ADDRESSES: You may submit your an appointment to inspect comments, the regulations governing the Banks’ 6 comments, identified by Regulatory please call the Office of General Counsel AMA programs. In this rulemaking, Information Number (RIN) 2590–AA69, at 202–649–3804. FHFA is proposing to remove the references to NRSRO credit ratings in by any of the following methods: II. Background • Agency Web site: www.fhfa.gov/ 2 open-for-comment-or-input. A. Creation of the Federal Housing See 12 U.S.C. 4511, note. • Finance Agency 3 See 15 U.S.C. 78o–7 note. Federal eRulemaking Portal: http:// 4 See Final Rule, Removal of References to Credit www.regulations.gov. Follow the Effective July 30, 2008, the Housing Ratings in Certain Regulations Governing the instructions for submitting comments. If and Economic Recovery Act of 2008 Federal Home Loan Banks, 78 FR 67004 (Nov. 8, you submit your comment to the (HERA) 1 created FHFA as a new 2013). Federal eRulemaking Portal, please also independent agency of the federal 5 See 12 CFR parts 1267, 1269, and 1270. 6 See Proposed Rule, Removal of References to send it by email to FHFA at government. HERA transferred to FHFA Credit Ratings in Certain Regulations Governing the [email protected] to ensure Federal Home Loan Banks, 78 FR 30784, 30786 timely receipt by the agency. Please 1 Public Law 110–289, 122 Stat. 2654 (May 23, 2013).
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the current AMA regulation. FHFA will housing finance mission, and prescribes secondary mortgage markets but do not separately address removal of credit the parameters within which the Banks result in a Bank holding the mortgages ratings from the capital regulation in a may do so. In adopting the rule, the on its balance sheet. Non-AMA products future rulemaking. Finance Board noted that AMA was currently offered by some Banks are functionally equivalent to the business MPF Xtra and MPF Direct. C. The Bank System of making advances. It allowed members The eleven Banks are wholesale and housing associates to use eligible III. The Proposed Rule financial institutions organized under assets to access liquidity for further A. Highlights of the Proposed Rule the Federal Home Loan Bank Act (Bank mission-related lending, while the The proposed rule would re-organize Act).7 The Banks are cooperatives; only member or housing associate current 12 CFR part 955 and re-adopt it members of a Bank may purchase the maintained its exposure to all or a as part 1268 of FHFA’s regulations. capital stock of a Bank, and only material portion of the credit risk More significantly, as required by the members or certain eligible housing associated with the AMA loans sold to Dodd-Frank Act, it would remove and associates (such as state housing finance a Bank.12 The members or housing replace references to, or requirements agencies) may obtain access to secured associates of a Bank, or members or based on, ratings issued by an NRSRO. loans, known as advances, or other housing associates of another Bank products provided by a Bank.8 Each (pursuant to an arrangement between It would provide Banks greater Bank is managed by its own board of the Bank acquiring the AMA and the flexibility in choosing the models they directors and serves the public interest Bank in which the participating can use to estimate the credit by enhancing the availability of financial institution is a member), that enhancement required for AMA loans. residential credit through its member are authorized to sell mortgage loans to Additionally, the proposed rule would institutions.9 Any eligible institution the Bank through its AMA program add a provision allowing a Bank to (generally a federally insured depository generally are referred to as participating authorize the transfer of mortgage institution or state-regulated insurance financial institutions. servicing rights to any institution, company) may become a member of a The core of the current AMA rule, including a non-member of the Bank Bank if it satisfies certain criteria and which remains unchanged in the System. The proposal would remove purchases a specified amount of the proposed rule, establishes a three-part provisions allowing the use of private Bank’s capital stock.10 As government- test for a loan to qualify as AMA. First, supplemental mortgage insurance (SMI) sponsored enterprises, federal law the asset requirement establishes that in the required member credit grants the Banks certain privileges. In assets must be conforming whole enhancement structure. Finally, the light of those privileges, the Banks mortgage loans, certain interests in such proposal would delete some obsolete typically can borrow funds at spreads loans, whole loans secured by provisions from the current rule, and over the rates on U.S. Treasury manufactured housing, certain state or clarify certain other provisions. securities of comparable maturity that federal housing finance agency (HFA) B. Proposed Changes are narrower than those available to bonds, and certain other assets most other entities. The Banks pass enumerated in the rule. Second, assets As already noted, Section 939A of the along a portion of their funding must meet a member-nexus requirement Dodd-Frank Act requires federal advantage to their members and housing whereby a Bank must acquire the AMA agencies to review regulations that associates—and ultimately to assets from a participating financial require an NRSRO assessment of the consumers—by providing advances and institution or another Bank. In either creditworthiness of a security or money other financial services at rates that case, the assets acquired by a Bank must market instrument, or that includes any would not otherwise be available to be originated or held for a valid references to or requirements related to their members. Among those financial business purpose by a participating credit ratings issued by NRSROs. The services are the Banks’ AMA programs, financial institution (or an affiliate Dodd-Frank Act further requires the under which the Banks provide thereof). Finally, to meet the credit risk- removal of such references or financing for members’ housing sharing requirement, a Bank must requirements. The AMA rule currently activities by purchasing mortgage loans structure its AMA products such that a establishes a number of requirements that meet the requirements of the AMA substantial portion of the associated based on NRSRO ratings, which the regulation. credit risk is borne by a participating proposed rule would remove or amend financial institution. Specifically, consistent with the Dodd-Frank Act D. Acquired Member Assets participating financial institutions must mandate. In addition to the proposed On July 17, 2000, the Finance Board provide sufficient credit enhancement changes related to credit ratings, FHFA adopted a final AMA regulation, which on the assets sold so that the AMA is proposing other changes that would remains in effect.11 Neither the Finance purchased by a Bank is equivalent to an re-organize, modify, and clarify certain Board nor FHFA has amended the asset rated at least investment grade by provisions of the current regulation. regulation since its adoption. The an NRSRO or such higher rating as 1. Definitions Section Proposed § 1268.1 current rule authorizes the Banks to required by the Bank. acquire certain loans (principally Banks currently offer two AMA In the definitions section (current conforming residential mortgage loans) programs—Mortgage Partnership § 955.1 and proposed § 1268.1), FHFA from their members and housing Finance (MPF) and Mortgage Purchase proposes to modify the definition of associates as a means of advancing their Program (MPP). FHFA has authorized ‘‘expected losses’’ to remove a reference other mortgage products outside of the to NRSROs. As discussed more fully 7 See 12 U.S.C. 1423, 1432(a). AMA rule that are not subject to the below, FHFA would also make other 8 See 12 U.S.C. 1426(a)(4), 1430(a), 1430b. requirements of the rule. These changes to the definition of ‘‘expected 9 See 12 U.S.C. 1427. products, as structured by the Bank, losses’’ to account for the fact that a 10 See 12 U.S.C. 1424; 12 CFR part 1263. generally are conduit programs that Bank would have more modelling 11 See Final Rule, Federal Home Loan Bank Acquired Member Assets, Core Mission Activities, allow eligible members to access the options under the proposed rule for Investment and Advances, 65 FR 43969 (July 17, calculating the required credit 2000) (hereinafter ‘‘Final AMA Rule’’). 12 Id. at 43974. enhancement. Also, as discussed more
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fully below, FHFA would add to the did not meet the current AMA rule.14 from community financial institution rule a definition for ‘‘investment While the proposed grandfather (CFI) members or their affiliates, small quality’’ to implement changes needed provision would not authorize business loans, small farm loans, small to remove references in the current rule continued purchase of AMA that do not agri-business loans, or community to specific NRSRO credit ratings. comply with the proposed rule, FHFA development loans, in each case fully FHFA proposes to add to new believes that all currently active AMA secured by collateral other than real § 1268.1 definitions for the terms ‘‘AMA products would meet the requirements estate, or securities representing a whole product,’’ ‘‘AMA program,’’ in proposed part 1268. interest in such secured loans, provided ‘‘participating financial institution,’’ FHFA proposes to move the loan type, that such collateral has a readily and ‘‘pool.’’ FHFA intends for these member nexus, and credit enhancement ascertainable value, can be reliably requirements found in current 12 CFR newly defined terms to help simplify discounted to account for liquidation 955.2 to §§ 1268.3, 1268.4, and 1268.5. and clarify other provisions in the rule and other risks, and can be liquidated in As discussed below, FHFA is also and avoid use of repetitive, descriptive due course. proposing to make other changes to language in those provisions. It also c. Restrictions on Certain Loans these provisions. proposes to amend slightly the FHFA is proposing to adopt as definition of ‘‘AMA’’ in § 1201.1 to 3. Asset Requirement Section Proposed § 1268.3(a)(1) the current regulation mean ‘‘assets acquired in accordance § 1268.3 provision that excludes from AMA with, and satisfying the applicable a. Renaming Section those single-family mortgages where the requirements of, part 1268 of this loan amount exceeds the conforming chapter [XII], or any successor thereto.’’ FHFA is proposing to rename this section from the current ‘‘loan type loan limits established pursuant to 12 2. Authorization for Acquired Member requirement’’ to ‘‘asset requirement’’ U.S.C. 1717(b)(2). This limit is Assets Section Proposed § 1268.2 because not all of the interests this consistent with the limits imposed on section authorizes for purchase are the Enterprises. As noted when the FHFA is proposing to amend the technically loans. Specifically, HFA Finance Board first adopted the AMA language in the current authorization bonds and certificates representing rule, it intended this provision to provision (current 12 CFR 955.2) and to interests in whole loans, which the prohibit purchase of jumbo loans and to reorganize it into separate sections as current rule authorizes, are better create a level playing field with the proposed §§ 1268.2 through 1268.5. classified as securities. Enterprises concerning the types of Under the proposed rule, § 1268.2 loans that a Bank can purchase.15 generally would authorize a Bank to b. Asset Types As a point of clarification, FHFA invest in AMA subject to the Current 12 CFR 955.2(a) sets forth the confirms that under the amended rule, requirements of parts 1268 and 1272 of types of assets that are permissible as loans on properties located in FHFA’s regulations. FHFA is also AMA. Proposed § 1268.3(a)(1) and (2) designated ‘‘high-cost areas,’’ where the proposing to include in this new are substantively unchanged from the conforming loan limit is adjusted in authorization section a ‘‘grandfather’’ existing rule and set forth the asset accordance with the criteria established provision that would allow a Bank to types that are eligible for purchase as in 12 U.S.C. 1717(b)(2), would remain continue to hold any AMA loans that AMA. The proposed rule, as does the eligible for purchase as AMA as long as the Finance Board or FHFA previously current regulation, allows the the loan value is within the adjusted authorized for purchase, even if the loan acquisition of whole loans that are conforming loan limit. The criteria in 12 would not meet the requirements of the eligible to secure advances to members U.S.C. 1717(b)(2), as currently enacted, proposed rule. This proposed provision, under FHFA’s advances regulation (part allows that the conforming loan limits: set forth at § 1268.2(b), would cover 1266). These assets include: (1) Fully may be increased by not to exceed 50 per loans that were authorized for purchase disbursed, whole first mortgage loans on centum with respect to properties located in by rule, order, or other agency action improved residential real property not Alaska, Guam, Hawaii, and the Virgin such as waiver of particular more than 90 days delinquent; (2) Islands. Such foregoing limitations shall also requirements so a Bank to purchase the mortgages or other loans, regardless of be increased, with respect to properties of a particular size located in any area for which 13 delinquency status, to the extent that loan. It would assure that a Bank 115 percent of the median house price for could continue to hold any legacy loans, the mortgage or loan is insured or such size residence exceeds the foregoing including those that no longer meet the guaranteed by the United States or any limitation for such size residence, to the credit enhancement or other agency thereof, or otherwise is backed lesser of 150 percent of such limitation for requirements in the proposed rule. It by the full faith and credit of the United such size residence or the amount that is would replace the current provision that States, and such insurance, guarantee, equal to 115 percent of the median house allows a Bank to continue to purchase or other backing is for the direct benefit price in such area for such size residence. and hold loans that had been authorized of the holder of the mortgage or loan; (3) FHFA specifically requests comments under the Finance Board’s and FHFA’s other real estate-related collateral as to any issues regarding a Bank’s former Financial Management Policy provided that such collateral has a purchase of loans as AMA in designated even if the credit enhancement structure readily ascertainable value, can be high-cost areas as well as any issues reliably discounted to account for related to whether the rule should 13 For example, on August 5, 2011, FHFA waived liquidation and other risks, can be continue to limit AMA loans to those the ratings requirement for SMI providers in the liquidated in due course, and that the that meet the conforming loan limits current regulation to allow Banks to continue to buy Bank can perfect a security interest in loans that used SMI as part of the credit more generally. enhancement structure, even though no SMI such collateral; and (4) when acquired FHFA is proposing to add language to provider met the ratings requirement. This § 1268.3(a)(3) and (b) to restrict a Bank grandfather provision would allow the Banks that 14 FHFA terminated the Financial Management from purchasing as AMA any home bought loans pursuant to that waiver to continue to Policy on June 20, 2012, when its revised hold those loans even if FHFA changes the credit investment rule (12 CFR part 1267) took effect. See mortgage loans made to any directors, enhancement provision to no longer allow SMI, as Final Rule: Federal Home Loan Bank Investments, it proposed to do in this rulemaking. 76 FR 29147, 29151 (May 20, 2011). 15 See Final AMA Rule, 65 FR at 43974.
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officers, employees, attorneys, or agents definition of ‘‘mortgage’’ in the Bank the certificates have been created as a of a Bank or of the selling institution housing goals regulations so chattel security initially available to investors unless the board of directors of the Bank loans on manufactured housing also do generally, they will not be considered to has specifically approved such purchase not qualify for credit under Bank qualify as AMA under § 1268.3(d).24 by resolution.16 This restriction is housing goals.21 In its proposed statutory with regard to home mortgages Enterprise duty to serve regulations, 4. Member or Housing Associate Nexus used as collateral for advances.17 The FHFA similarly proposed that it would Requirement Section Proposed § 1268.4 proposed change would extend the consider only manufactured housing FHFA is proposing to reorganize as restriction to AMA purchases. Loans loans titled as real property toward the § 1268.4(a) and (b) the member nexus made to such persons pose the same or Enterprises’ duty to serve underserved requirements currently found at 12 CFR markets.22 greater risk when purchased by a Bank 955.2(b). The proposed rule would FHFA is also concerned that chattel as when taken as collateral for advances. continue to impose the requirement that The restriction would be implemented loans display a higher level of default risk, and present greater credit and for a loan to be eligible for purchase as by citing to 12 CFR 1266.7(f) of the AMA, the participating financial FHFA regulations, which is the operational risks, than other mortgage loans authorized for purchase under the institution would have either to provision that implements the statutory originate or issue the assets or have held 18 AMA regulation. Given these concerns restriction with regard to advances. them for a valid business purpose. The FHFA does not propose to apply the and the differences in how some current FHFA regulations treat chattel loans, ‘‘valid business purpose requirement’’ restriction to HFA bonds, given that in the current regulation accounts for FHFA does not apply the restriction to FHFA specifically requests comment as the fact that a member may acquire securities allowed as collateral for to whether it should continue to loans from a non-member during the advances under part 1266 of this authorize the purchase of manufactured normal course of business and then sell chapter. housing loans as AMA if relevant state law considers the loans as chattel loans. those loans to the Bank. It excludes any d. Manufactured Housing Loans loans that merely pass from a non- e. Certificates Representing Interests in member through a member to a Bank, The current AMA regulation allows Whole Loans with the intent of extending the benefits the purchase of manufactured housing Proposed § 1268.3(d) is a new of membership to the non-member.25 loans regardless of whether such provision. It would bring into the rule The reference in the proposed rule to housing constitutes real property under text the authority for Banks to acquire state law, and FHFA is not proposing assets issued ‘‘through, or on behalf of as AMA certain certificates representing the participating financial institution’’ changes to this provision (proposed as interests in whole loans. When the § 1268.3(b)). FHFA recognizes that the also carries over from the current Finance Board adopted the current regulation. As under the current Enterprises also may purchase AMA rule, it noted, in response to manufactured housing loans that are regulation, the provision would allow comments, that the rule allowed the HFA bonds issued by an underwriter for chattel loans under the Federal National Banks to buy structured products as Mortgage Association Charter Act and the participating financial institution to AMA, provided the products met qualify as AMA.26 the Federal Home Loan Mortgage certain identified conditions. The Corporation Act. In addition, under its proposed language would adopt in the Proposed § 1268.4(b) would adopt advances regulation, FHFA considers rule text the conditions that were set without substantive change current chattel loans on manufactured housing forth in this discussion. Currently, this special requirements in 12 CFR to be residential housing finance assets authority is set forth in a discussion in 955.2(b)(2)(ii) that apply when a Bank for purposes of the long-term advances the SUPPLEMENTARY INFORMATION of the purchases HFA bonds as AMA from a proxy test, and allows Banks to extend Federal Register release adopting the housing associate of another Bank. long-term advances to members for the current regulation.23 The Finance Board Under this provision, a Bank may purchase or funding of such loans.19 approved one AMA product under this acquire initial-offering taxable HFA Other FHFA regulations, however, authority (in December 2002), which is bonds from out-of-district associates, treat chattel loans on manufactured now inactive. By moving the preamble provided the Bank in whose district the housing differently from loans on real language to the rule text, FHFA would HFA is located (local Bank) has a right property. For example, in 2010, FHFA clarify that such programs are possible of first refusal to purchase, or negotiate adopted a change to the definition of under the amended regulation and bring the terms of, a particular bond issue. If ‘‘mortgage’’ as used in the Enterprise all relevant authority into the rule text. the local Bank refuses, or does not housing goals regulations with the result FHFA continues to believe that under respond within three days, the HFA that purchases of chattel loans on the circumstances in proposed may then offer the bonds to an out-of- manufactured housing would not § 1268.3(d), the use of a third party to district Bank. The Finance Board qualify for credit under the housing securitize the whole loans would merely adopted this approach to preserve the goals.20 FHFA adopted the same represent a vehicle to invest in certain integrity of the Bank Districts, while at types of AMA under more favorable the same time preventing any one Bank 16 This restriction would also apply with regard terms and should, therefore, be from denying an HFA in its District to an interest in whole loans under proposed permitted under the rule. However, if from financing that another Bank is § 1263.3(d), given that such interest must be in 27 loans that otherwise meet the requirements of willing to provide. proposed § 1263.3(a) or (b) for the interest to qualify housing goals rule. See 12 CFR 1282.1 (definition as AMA. of ‘‘mortgage’’). 24 Id. 17 12 U.S.C. 1430(b). 21 See Final Rule: Federal Home Loan Bank 25 See Proposed Rule: Federal Home Loan Bank 18 12 CFR 1266.7(f) Housing Goals, 75 FR 81096, 81100 (Dec. 27, 2010). Acquired Member Assets, Core Mission Activities, 19 See 12 CFR 1266.1 and 1266.3. 22 See Proposed Rule: Enterprise Duty to Serve Investments and Advances, 65 FR 25676, 25681 20 See Final Rule: Enterprise Housing Goals; Underserved Markets, 75 FR 32099, 32101–105 (May 3, 2000) (hereinafter 2000 Proposed AMA Enterprise Book-entry Procedures, 75 FR 55892, (June 7, 2010). FHFA has not yet adopted this Rule). 55896–895 (Sept. 14, 2010). FHFA continued this proposed rule as a final rule. 26 Id. exclusion in its most recently adopted Enterprise 23 Final AMA Rule, 65 FR at 43974, 43977. 27 See Final AMA Rule, 65 FR at 43975.
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5. Credit Risk-Sharing Requirement participating financial institution to it currently uses, it would not Section Proposed § 1268.5 have ‘‘skin in the game,’’ the rule necessarily need to alter the credit a. General Requirement provides them an incentive to sell high- enhancement levels it currently quality loans to the Banks and the requires, unless FHFA directs it to do so FHFA is proposing to reorganize as opportunity to benefit financially from or its estimated enhancement levels § 1268.5 the credit risk-sharing good underwriting practices. otherwise would not comply with the requirements currently found at 12 CFR To ensure that participating financial rule. For example, a Bank would need 955.2(c) and 955.3. FHFA proposes to institutions bear a material portion of re-adopt several of the credit risk- to increase credit enhancement levels if the credit risk, existing § 955.3(a) it determined that the credit sharing provisions without substantive currently requires a participating changes, including the requirement that enhancement currently estimated by its financial institution that sells AMA NRSRO model was not sufficient for an all AMA loans carry a credit loans to a Bank to enhance the pool to asset or pool of assets to be ‘‘investment enhancement. Proposed § 1268.5(c) also be equivalent to an asset rated at least quality’’ under the proposed definition generally would maintain the design the fourth highest credit grade rating of that term. requirement for the credit enhancement from an NRSRO (i.e., to be at least structure that helps ensure that the investment grade) or to a higher rating In addition, the proposed rule carries participating financial institution required by the Bank. The provision over requirements in the current retains an economic incentive to reduce also requires the Bank to make a regulation that a Bank’s authority to actual losses that is both material in determination of the amount of the hold AMA assets is specifically amount and early enough in the 28 required credit enhancement using a contingent on the Bank complying with structure to be meaningful. Thus, the methodology that is confirmed in FHFA’s New business activity (NBA) proposed rule would continue to writing by an NRSRO to be equivalent regulation (12 CFR part 1272).30 If the prohibit any AMA product that removes to one used by the NRSRO in rating a terms and conditions for a Bank’s new the participating financial institution’s comparable pool of assets. AMA product or a modification to an incentive to reduce actual credit losses. Proposed § 1268.5(a)(1) would amend As discussed below, the proposed existing AMA product triggered the the current provision to remove the rule also would change some of the requirements of the NBA rule, the Bank requirement that AMA loans be credit risk-sharing provisions to remove would need to file an NBA notice. enhanced to a specific rating that is references to NRSRO ratings, as required FHFA would expect the Bank to provide equivalent to one issued by an NRSRO. by the Dodd-Frank Act. Proposed a clear explanation in the notice of how Under the proposed amendment, a § 1268.5(e) would set forth the the new or modified product’s credit participating financial institution must requirements for the Bank’s use of a risk-sharing structure meets the AMA credit enhance AMA loans to at least methodology and model for calculating credit enhancement requirements, and ‘‘investment quality.’’ how the Bank would calculate that the credit enhancement obligation that FHFA proposes to define the term obligation. is not necessarily tied to one used by an ‘‘investment quality’’ in the AMA NRSRO. Additionally, FHFA is not regulation by reference to the definition As now is the case under the current proposing to re-adopt current provisions of that term adopted by FHFA in the regulation, proposed § 1268.5(c), at least that allow the use of private SMI or pool Bank investment regulation (12 CFR with respect to loans that would not be insurance as part of the credit part 1267). That definition reads: insured or guaranteed by the U.S. enhancement structure. Consequently, government, would continue to require FHFA is proposing to remove provisions Investment quality means a determination made by the Bank with respect to a security the participating financial institution from the current regulation requiring providing the credit enhancement to eligible SMI providers to maintain or obligation that, based on documented analysis, including consideration of the bear the direct economic consequences specific NRSRO ratings. sources for repayment on the security or of actual credit losses on the assets from b. Determining Credit Enhancements on obligation: (1) There is adequate financial the first dollar of loss up to expected AMA Pools backing so that full and timely payment of losses or immediately following principal and interest on such security or The proposed rule would modify 12 obligation is expected; and (2) There is expected losses but in an amount equal 31 CFR 955.3(a) of the current regulation, minimal risk that the timely payment of to or exceeding expected losses. and re-adopt it as proposed principal or interest would not occur because Consistent with previous Finance Board § 1268.5(b)(1). FHFA’s proposed of adverse changes in economic and financial statements, the participating financial modification to this provision would conditions during the projected life of the institution itself would be required to 29 remove current requirements based on security or obligation. bear the economic responsibility of the NRSRO ratings and methodologies in Under proposed § 1268.5(b)(1), the expected credit losses, as required by accordance with the Dodd-Frank Act. Bank could specify as part of the terms proposed § 1268.5(c), to ensure Otherwise, FHFA continues to believe and conditions for a particular AMA participating financial institution the credit risk-sharing approach in the product that a participating financial involvement and to ensure that the current regulation is valid. The institution provide a credit participating financial institution bears principles underlying the AMA enhancement greater than that needed the consequences of the credit quality of regulation establish that risks are borne to enhance the loan or pool to the asset or pool. The participating by those entities best suited to manage investment quality. The enhancement financial institution could not transfer them. Therefore, the credit risk-sharing would need to be defined in relation to requirements provide that participating a model and methodology of the Bank’s 30 See Proposed § 1268.2. financial institutions selling mortgages choosing, subject to conditions 31 As is discussed below, FHFA is proposing to must retain a substantial portion of the established in § 1268.5(e) of the change requirements in the current regulation for credit risk, given their expertise in proposed rule. If a Bank chooses to government insured or guaranteed loans so that members or housing associates would no longer underwriting mortgages. In requiring the continue to use the same NRSRO model have to bear responsibility for unreimbursed servicing expenses up to the amount of expected 28 Id. at 43967- 98. 29 12 CFR 1267.1 (defining ‘‘investment quality’’). losses for the loan to qualify as AMA.
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this responsibility to an affiliate or non- credit enhance the pool to the level credit enhancement in the terms of a member entity.32 consistent with the terms and particular AMA product, or by While the current regulation defines conditions of the specific AMA providing specific approval for the ‘‘expected losses’’ as the base loss product.33 transfer. The proposed change is scenario in the methodology of an The proposed rule would also consistent with how the AMA NRSRO applicable to a particular AMA continue to require that the credit regulations are currently applied, and asset, the proposed definition would enhancement must be for the life of the with current Bank practice with regard refer to the loss given the expected asset or pool. This requirement would to AMA product structures and future economic and market conditions exclude, for example, structures that permissible transfers of the credit in the model or methodology used by would comply with the credit rating enhancement obligations. the Bank to calculate the credit requirement in the first year, but would enhancement for an AMA product then scale back the amount of the d. Credit Quality of Mortgage Insurers— under proposed § 1268.5. This change member’s credit enhancement in future Supplementary Mortgage Insurance accounts for the fact that the proposed years so the pool is no longer credit Current 12 CFR 955.3(b) of the AMA rule would no longer require a Bank to enhanced to the level consistent with regulation allows a member to meet part use an NRSRO model and would the terms and conditions of the AMA of its credit enhancement obligation accommodate the potential for a Bank to product.34 through the purchase of SMI, provided adopt a model that applies a The current regulation at 12 CFR that the insurer is rated not lower than methodology that differs from that used 955.3(b) and (c) set forth specific the second highest credit rating in the Banks’ current models. requirements for a Bank to obtain the category. The proposed rule would Otherwise, FHFA believes that this NRSRO verifications with regard to the remove the option to use SMI as part of proposed change would not alter what adequacy of the credit enhancement the credit enhancement structure. While is currently required by the AMA rule; structure and Bank’s use of the NRSRO the current AMA regulation addresses nor is this change intended to alter how model for estimating the required use of SMI as part of the credit a Bank would calculate ‘‘expected enhancement in each AMA product. enhancement structure and minimum losses’’ if it continued to use its current Given that under the proposed rule criteria for providers of such insurance, model. Therefore, as under the current FHFA would no longer require a Bank it does not address borrower-funded regulation, the proposed rule would to use NRSRO models, these primary mortgage insurance (PMI) or set require a member to provide a credit requirements would become obsolete, minimum criteria for providers of PMI. enhancement against losses for all non- and FHFA is proposing to remove them. Instead, the rule allows a Bank to set the government insured or guaranteed loans In their place, FHFA is proposing minimum criteria for PMI providers. at least equal to the expected losses § 1268.5(b)(2), which would require a Nothing in the proposed rule alters this calculated by the credit enhancement Bank to document the basis for its approach with respect to PMI. FHFA model used by the Bank whether this conclusion that the contractual credit will continue to review the Banks’ enhancement is positioned in the first enhancement required for a particular assessments of PMI providers through loss position or immediately following pool is sufficient to meet the required the annual examination process. the first loss. credit enhancement obligation for a The main reason for proposing to The proposed rule at § 1268.5(c)(1)(ii) particular AMA product, given the remove the option to use SMI in the would also continue to require the Bank’s chosen model’s relevant stress credit enhancement structure is the fact participating financial institution to scenarios. This information will help that during the recent financial crisis, secure fully its credit enhancement FHFA monitor the Banks’ use of their no private insurance company obligation in parallel with the models and the adequacy of the specific maintained the second highest credit requirement for advances to members credit enhancement structures used in rating as required by the current AMA under part 1266 of this chapter. This each AMA product. regulation. FHFA had to waive the rule provision addresses the concern that a requirement for the products that relied c. Transfer of Credit Enhancement Bank might be exposed to credit risk if on SMI for existing business and Obligation the member were not able to comply required the Banks with only products with its contractual credit enhancement The proposed rule would modify that relied on SMI to develop alternate obligation. current 12 CFR 955.3(b)(1) and re-adopt structures for new business in their The proposed rule would not change it as § 1268.5(c)(2). This section would programs. Given that the Banks have the requirement that a Bank determine establish the acceptable forms a member alternate AMA structures and products the necessary credit enhancement on a may use to provide the credit that do not rely on SMI and that private pool at the earlier of 270 days from the enhancement for AMA loans, subject to mono-line insurers could face similar date of the Bank’s acquisition of the first certain limitations. The proposed rule problems if another financial crisis were loan in a pool or the date at which the would clarify that a participating to arise, FHFA is proposing to remove pool reaches $100 million in assets. financial institution, ‘‘with the approval these provisions. FHFA also believes This provision continues to be relevant of the Bank,’’ may choose to transfer its that eliminating the use of SMI from in that it addresses safety and credit enhancement obligation to its authorized credit enhancement soundness concerns that could arise if a insurance affiliate (but only where the structures remains consistent with the Bank did not timely perform the credit insurance is positioned after the intent of the AMA regulation to require enhancement determination on large participating financial institution bears participating financial institutions to pools formed over extended periods. losses in an amount at least equal to bear the direct economic consequences This provision ensures the Bank uses its expected losses) or to another of the credit risk associated with AMA model early enough in the process to participating financial institution. The loans and not transfer such risk to third determine that the contracted amount of Bank could give this permission either parties. the credit enhancement is sufficient to by establishing the required form of For similar reasons, FHFA also proposes to eliminate the provision in 32 See 2000 Proposed AMA Rule, 65 FR at 25683; 33 See Final AMA Rule, 65 FR at 43975. 12 CFR 955.3(b) that authorizes the use see also, Final AMA Rule, 65 FR 43976. 34 See id. at 43976. of pool level insurance as part of the
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credit enhancement structure where Board explained, in order for a These members, in particular, might such insurance covers that portion of participating financial institution to wish to sell their AMA government the credit enhancement obligation meet this structure requirement with loans into AMA government products related to geographic concentration or respect to government insured or but may lack the ability to perform the pool size. As discussed in more detail guaranteed loans, given that losses servicing obligations now required by below, however, the proposed rule eventually would be covered by the the AMA regulation. In addition, given would still allow a participating government insurance or guarantee, the changes in the mortgage industry, Banks financial institution to use U.S. participating financial institution would may find it increasingly difficult to find government insurance or guarantees to have to bear the economic responsibility member institutions to meet the meet credit enhancement requirements. of all unreimbursed servicing expenses, servicing obligations for AMA FHFA specifically requests comments up to the amount of expected losses.37 government loans. Banks may need the regarding the use and importance of As a result, the member’s credit flexibility to transfer such obligations to SMI or private pool insurance as part of enhancement obligation for AMA non-member institutions in order to an allowable credit enhancement government loans is tied closely to its continue to offer the product to a wide structure. In particular, FHFA solicits servicing obligations. This link limits a cross section of its members. The comments on what type of requirement participating financial institution’s current regulation does not allow such could replace the specific credit rating ability to transfer mortgage-servicing flexibility with respect to government requirement for private insurance rights for the AMA government loans to insured or guaranteed loans. providers if it were to retain these non-participating financial institutions. insurance options as part of the credit In addition, FHFA does not believe f. Model and Methodology Validation enhancement structure. Additionally, that requiring a member to retain an Proposed § 1268.5(e) would set forth FHFA requests comments on how a obligation to cover unreimbursed the specific requirements applicable to Bank might evaluate the claims-paying servicing rights for AMA government a Bank’s use of a model and ability of an insurer in the absence of a loans provides an additional incentive methodology for estimating the required specific credit rating requirement. to improve underwriting in order to member credit enhancements for AMA Finally, FHFA requests comment on achieve better than expected loan loans that a participating financial whether, if it were to adopt in the AMA performance. To qualify for government institution sells to a Bank. Specifically, regulation specific minimum insurance or guarantee, members will it would require a Bank to: (1) Validate requirements for providers of SMI and already be underwriting loans to its model and methodology at least pool insurance, such requirements also standards imposed by the relevant annually and make the results available should apply to PMI providers. government agency or department. upon request by FHFA (proposed Further, government insurance and § 1268.5(e)(1)); (2) institute and e. U.S. Government Insurance or maintain a process for monitoring Guarantee guarantee will usually cover any losses experienced on the loan. Therefore, this model performance that would include The proposed rule would modify requirement does not necessarily tracking, back-testing, benchmarking, current 12 CFR 955.3(b)(1)(ii)(A) and (B) provide additional protection to the and stress testing a model and its results with regard to the use of U.S. Bank beyond that provided by the (proposed § 1268.5(e)(2)) and be government insurance or guarantees as government insurance or guarantee. otherwise consistent with applicable part of the credit enhancement and re- Thus, FHFA is proposing in FHFA model guidance; (3) inform FHFA adopt the provision as § 1268.5(d). The § 1268.5(d) to remove the requirement prior to making any material changes to proposed provision would clarify that a that U.S. government insured or the model and methodology (proposed participating financial institution may guaranteed loans meet the specific § 1268.5(e)(3)); and (4) promptly change provide all or a portion of the required structure requirement now set forth in its model and methodology as directed credit enhancement by having the loan proposed § 1268.5(c). Proposed by FHFA (proposed § 1268.5(e)(4)). insured or guaranteed by an agency or § 1268.5(d) would continue to require The requirements of proposed department of the U.S. government. the credit enhancement provided by § 1268.5(e) are generally consistent with Unlike the current regulation, however, government insurance or guarantee be the requirements governing the Bank’s the new, proposed language would not maintained for the entire period a Bank market risk capital models (12 CFR require government insured or owns the AMA government loan. The 932.5(c)) and have been added here for guaranteed loans to meet the specific proposed rule would not necessarily safety and soundness reasons. FHFA credit enhancement structure require that a Bank member maintain also expects a Bank to have policies and requirements (wherein the member the insurance or guarantee. Instead, the procedures commensurate with the bears the first dollar of losses for a loan Bank would have to ensure that the complexity of the model and or pool up to the amount of expected participating financial institution or methodology, including, but not limited losses or bears losses immediately another entity maintains the insurance to, a governance structure, oversight by following expected losses in an amount or guarantee for as long as the Bank its board of directors, as well as formal that equals or exceeds expected owns the loan. For example, a Bank controls. Effective model risk losses).35 might require any entity that acquires management should entail a As already noted, the purpose of the the mortgage servicing rights to a loan comprehensive approach in identifying credit enhancement structure to maintain the insurance. FHFA risk throughout the model lifecycle and requirement was to ensure that believes increasing the flexibility should be consistent with any participating financial institutions, allowed in transferring mortgage- applicable FHFA guidance. As proposed, the rule would allow a ‘‘when responsible for such losses, [had] servicing rights under this proposed Bank to institute changes in its model incentive to seek ways to achieve better change would prove beneficial for many immediately upon notifying FHFA. than expected performance [for the smaller or medium sized members. loans sold as AMA].’’ 36 As the Finance FHFA, however, would review a Bank’s 37 Id. (explaining how government insured loans model and methodology for estimating 35 See 12 CFR 955.3(b)(1)(ii) and (b)(2). meet the credit enhancement requirements of the credit enhancements as part of the 36 Final AMA Rule, 65 FR at 43977. AMA rule). annual examination process, as well as
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through its on-going off-site monitoring changes proposed in § 1268.5(d) would, 8. Other Sections—§§ 1268.7 and 1268.8 program. If FHFA found that the model if adopted, allow the Banks to transfer Proposed §§ 1268.7 and 1268.8 would or the Bank’s use of the model were servicing of government insured or adopt without substantive change 12 inadequate or did not result in a credit guaranteed AMA loans to non-member CFR 955.4 and 955.5 of the current enhancement that would reasonably institutions, an action that is not regulation. These provisions address, protect a Bank against risk of loss as necessarily allowed under current respectively, reporting requirements for required under the proposed rule, FHFA regulations. AMA and administrative transactions would use authority in the proposed Proposed § 1268.6 also would require and agreements between Banks rule to direct the Bank to make changes the approval of the Banks that have any involving AMA. to the model. FHFA could also use other ownership interest in the loans prior to authorities, such as its authority to issue IV. Consideration of Differences the transfer of the servicing obligation. cease-and-desist orders, to require the Between the Banks and the Enterprises Finally, the proposed provision would Bank to make necessary changes to its When promulgating regulations model, or AMA products, to address any provide that the Banks have in place policies and procedures that ensure the relating to the Banks, section 1313(f) of violations of the regulation or unsafe or the Federal Housing Enterprises unsound practices. FHFA believes that transfer of servicing would not negatively affect the credit enhancement Financial Safety and Soundness Act of this proposed approach would allow a 1992 (Safety and Soundness Act) on the loans in question or substantially Bank sufficient flexibility to make requires the Director of FHFA (Director) increase the Bank’s exposure to risk. timely changes to its credit to consider the differences between the FHFA would expect such policies and enhancement model in response to Banks and the Enterprises with respect procedures specifically to address technological or market developments to the Banks’ cooperative ownership transfers to non-Bank System member while still allowing FHFA adequate structure, mission of providing liquidity oversight of the Bank’s use of its credit servicers given that in the case of to members, affordable housing and enhancement model. default on an obligation to the Bank, a community development mission, While the proposed new provisions Bank may enjoy more rights against a capital structure, and joint and several would no longer require a Bank to use member than it would against a non- liability.41 The Director also may an NRSRO model for estimating the member. For example, the Bank Act consider any other differences that required credit enhancement, nothing in provides enhanced status with regard to FHFA deems appropriate. The changes the proposed rule would prohibit a a Bank’s lien on member assets, and the proposed in this rulemaking apply only Bank from continuing to use its existing Bank’s membership agreement may to the Banks. Many of the proposed NRSRO model. However, use of all allow the Bank to take certain actions amendments are necessary to models, including a currently used against a member in the case of a breach implement requirements under the model, would be subject to the of an obligation that would not be Dodd-Frank Act; a number of others are 39 requirements of proposed § 1268.5(e). available against a non-member. In technical or conforming in nature. addition, FHFA would expect policies 6. Servicing Section Proposed § 1268.6 FHFA, in preparing this proposed rule, and procedures to include contingency considered the differences between the FHFA proposes to add new § 1268.6 plans to address a case in which a large Banks and the Enterprises as they relate to address the servicing of AMA loans. servicer fails or is otherwise unable to to the above factors and requests This provision incorporates current continue to service a Bank’s AMA comments from the public about FHFA positions, as set forth in a recent portfolio. whether these differences should result regulatory interpretation, on the rights in any revisions to the proposed rule. of the Banks to allow for transfer of 7. Risk-Based Capital Requirements V. Paperwork Reduction Act mortgage servicing rights from the The current regulation at 12 CFR participating financial institution that 955.6 established the risk-based capital The information collection, entitled originally sold the AMA loans at requirements for AMA, based on ‘‘Federal Home Loan Bank Acquired 38 issue. Thus, proposed § 1268.6 would NRSRO ratings. These risk-based capital Member Assets, Core Mission Activities, clarify that a Bank can allow for a requirements, however, applied only so Investments and Advances’’ contained transfer of servicing rights to any long as a Bank had not converted to the in current 12 CFR part 955 of the institution, including a non-Bank Gramm-Leach-Bliley Act capital regulations that would be transferred to System member. However, any transfer structure and was not yet subject to the 12 CFR part 1268 by this proposed rule of mortgage servicing rights may only risk-based capital requirements in 12 has been assigned control number 2590– occur as long as it does not result in the CFR part 932.40 Given that all Banks 0008 by the Office of Management and AMA loan failing to meet any have converted their capital structures Budget (OMB). The proposed rule if requirements of the rule, including the and are now subject to the AMA credit adopted as a final rule would not credit enhancement requirement. In and market risk charges established by substantively or materially modify the particular, because proposed § 1268.5(c) 12 CFR part 932 of the current capital current, approved information would require that the credit regulations, this section has no collection. enhancement on an AMA loan not continuing applicability, and FHFA VI. Regulatory Flexibility Act insured or guaranteed by the U.S. proposes to remove it. government continue to be held by a The Regulatory Flexibility Act (5 participating financial institution for the U.S.C. 601 et seq.) requires that a 39 See, e.g., 12 U.S.C. 1430(c) and (e). regulation that has a significant life of the loan, the transfer of servicing 40 In adopting the current AMA regulations, the cannot result in the transfer of any Finance Board noted that the AMA capital economic impact on a substantial portion of the credit enhancement requirements in § 955.6 were ‘‘interim risk based number of small entities, small obligation to a non-Bank System capital requirements’’ and when the Finance businesses, or small organizations must Board’s new Gramm-Leach-Bliley Act capital include an initial regulatory flexibility member. However, as already discussed, requirements became effective with respect to a Bank, the Bank would need to hold capital for AMA analysis describing the regulation’s 38 See Regulatory Interpretation, 2015–RI–01 based on those new requirements. Final AMA Rule, (June 23, 2015). 65 FR at 43979 (July 17, 2000). 41 See 12 U.S.C. 4513.
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impact on small entities. FHFA need not § 1201.1 Definitions. Residential real property has the undertake such an analysis if the agency * * * * * meaning set forth in § 1266.1 of this has certified the regulation will not have Acquired member assets or AMA chapter. a significant economic impact on a means assets acquired in accordance substantial number of small entities. 5 § 1268.2 Authorization for acquired with, and satisfying the applicable member assets. U.S.C. 605(b). FHFA has considered the requirements of, part 1268 of this (a) General. Each Bank is authorized impact of the proposed rule under the chapter, or any successor thereto. to invest in assets that qualify as AMA, Regulatory Flexibility Act. * * * * * FHFA certifies that the proposed rule, subject to the requirements of this part if adopted as a final rule, is not likely Subchapter D—Federal Home Loan Banks and part 1272 of this chapter. to have a significant economic impact ■ 4. Part 1268 is added to subchapter D (b) Grandfathered transactions. on a substantial number of small entities to read as follows: Notwithstanding paragraph (a) of this because the regulation is applicable section, a Bank may continue to hold as only to the Banks, which are not small PART 1268—ACQUIRED MEMBER AMA assets that were previously entities for purposes of the Regulatory ASSETS authorized by the Federal Housing Flexibility Act. Finance Board or FHFA for purchase as Sec. AMA, provided that the assets were List of Subjects 1268.1 Definitions. purchased, and continue to be held, in 1268.2 Authorization for acquired member compliance with that authorization. 12 CFR Part 955 assets. Community development, Credit, 1268.3 Asset requirement. § 1268.3 Asset requirement. 1268.4 Member or housing associate nexus Federal home loan banks, Housing, requirement. Assets that qualify as AMA shall be Reporting and recordkeeping 1268.5 Credit risk-sharing requirement. limited to the following: requirements. 1268.6 Servicing. (a) Whole loans that are eligible to secure advances under § 1266.7(a)(1)(i), 12 CFR Part 1201 1268.7 Reporting requirements for acquired member assets. (a)(2)(ii), (a)(4), or (b)(1) of this chapter, Administrative practice and 1268.8 Administrative transactions and excluding: procedure, Federal home loan banks, agreements between Banks. (1) Single-family mortgage loans Government-sponsored enterprises, Authority: 12 U.S.C. 1430, 1430b, 1431, where the loan amount exceeds the Office of Finance, Regulated entities. 4511, 4513, 4526. limits established pursuant to 12 U.S.C. 1717(b)(2); 12 CFR Part 1268 § 1268.1 Definitions. (2) Loans made to an entity, or Acquired member assets, Credit, As used in this part: secured by property, not located in a Federal home loan bank, Housing, Affiliate means any business entity state; and Nationally recognized statistical rating that controls, is controlled by, or is (3) Loans that would not be eligible to agency. under common control with, a member. serve as collateral for an advance under Authority and Issuance AMA product means an AMA § 1266.7(f) of this chapter; structure defined by a specific set of (b) Whole loans secured by For reasons stated in the terms and conditions that comply with manufactured housing, regardless of SUPPLEMENTARY INFORMATION, and under this part. whether such housing qualifies as the authority of 12 U.S.C. 1430, 1430b, AMA program means a Bank- residential real property, unless such 1431, 4511, 4513, 4526, FHFA proposes loan would not be eligible to serve as to amend subchapter G of chapter IX established program to buy mortgage loans that meet the requirements of this collateral for an advance under and subchapters A and D of chapter XII § 1266.7(f) of this chapter; of title 12 of the Code of Federal part, which may comprise multiple AMA products. (c) State and local housing finance Regulations as follows: agency bonds; or Expected losses means the loss given (d) Certificates representing interests CHAPTER IX—FEDERAL HOUSING the expected future economic and in whole loans if: FINANCE BOARD market conditions in the model or (1) The loans qualify as AMA under Subchapter G—[Removed and Reserved] methodology used by the Bank under paragraphs (a) or (b) of this section and § 1268.5 and applicable to an AMA ■ 1. Subchapter G, consisting of part meet the nexus requirements of product. 955 is removed and reserved. § 1268.4; and Investment quality has the meaning (2) The certificates: CHAPTER XII—FEDERAL HOUSING set forth in § 1267.1 of this chapter. FINANCE AGENCY (i) Meet the credit enhancement Participating financial institution requirements of § 1268.5; Subchapter A—Organization and means a member or housing associate of (ii) Are issued pursuant to an Operations a Bank that is authorized to sell agreement between the Bank and a mortgage loans to its own Bank through PART 1201—GENERAL DEFINITIONS participating financial institution to an AMA program, or a member or share risks consistent with the APPYING TO ALL FEDERAL HOUSING housing associate of another Bank that FINANCE AGENCY REGULATIONS requirements of this part; and has been authorized to sell mortgage (iii) Are acquired substantially by the ■ 2. The authority citation for part 1201 loans to the Bank pursuant to an initiating Bank or Banks. continues to read: agreement between the Bank acquiring the AMA product and the Bank of § 1268.4 Member or housing associate Authority: 12 U.S.C. 4511(b), 4513(a), which the selling institution is a nexus requirement. 4513(b). member or housing associate. (a) General provision. To qualify as ■ 3. Amend § 1201.1 by revising the Pool means a group of assets acquired AMA, any assets described in § 1268.3 definition of ‘‘Acquired member assets under a given master commitment or must be acquired in a purchase or or AMA’’ to read as follows: similar agreement. funding transaction only from:
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(1) A participating financial to at least investment quality and to be (d) U.S. government insured or institution, provided that the asset was: consistent with the terms and guaranteed loans. Instead of the (i) Originated or issued by, through, or conditions of a specific AMA product. structure set forth in paragraph (c) of on behalf of the participating financial The enhancement shall be for the life of this section, a participating financial institution, or an affiliate thereof; or the asset or pool. The Bank shall make institution also may provide the (ii) Held for a valid business purpose this determination for each AMA required credit enhancement by by the participating financial product using a model and methodology purchasing loan-level insurance that is institution, or an affiliate thereof, prior that the Bank deems appropriate, issued by an agency or department of to acquisition by the Bank; or provided, however, that the Bank’s use the U.S. government or is a guarantee (2) Another Bank, provided that the of the model and methodology complies from an agency or department of the asset was originally acquired by the with to the requirements and conditions U.S. government, provided that the selling Bank consistent with this of paragraph (e) of this section. government insurance or guarantee section. (2) A Bank shall document its basis remains in place for as long as the Bank (b) Special provision for housing for concluding that the contractual owns the loan. finance agency bonds. In the case of credit enhancement required from each (e) Appropriate methodology for housing finance agency bonds acquired participating financial institution with calculating credit enhancement. A Bank by a Bank from a housing associate regard to a particular asset or pool will shall use a model and methodology for located in the district of another Bank equal or exceed the credit enhancement estimating the amount of credit (local Bank), the arrangement required level specified in the terms and enhancement for a pool of AMA subject by the definition of ‘‘participating conditions of the AMA product and to the following requirements and financial institution’’ in § 1268.1 determined in accordance with conditions: between the acquiring Bank and the paragraph (b)(1) of this section. (1) The Bank shall validate its model local Bank may be reached in (c) Credit risk-sharing structure. and methodology for calculating the accordance with the following process: Under any credit risk-sharing structure, credit enhancement for AMA pools at (1) The housing finance agency shall the credit enhancement provided by the least annually, or more often if first offer the local Bank right of first participating financial institution shall necessary, and make the results of such refusal to purchase, or negotiate the meet the following requirements: validation available to FHFA upon terms of, its proposed bond offering; (1) The participating financial request; (2) If the local Bank indicates, within institution that is providing the credit (2) The Bank shall institute and a three-day period, it will negotiate in enhancement required under this this maintain a process to monitor the good faith to purchase the bonds, the paragraph (c) shall in all cases: performance of its model to include housing finance agency may not offer to (i) Bear the direct economic tracking, back-testing, bench-marking, sell or negotiate the terms of a purchase consequences of actual credit losses on and stress testing the model and the with another Bank; and the asset or pool: results it produces, and the Bank shall (3) If the local Bank declines the offer, (A) From the first dollar of loss up to make information gathered from or has failed to respond within the the amount of expected losses; or monitoring the model available to FHFA three-day period, the acquiring Bank (B) Immediately following expected upon request; will be considered to have an losses, but in an amount equal to or arrangement with the local Bank for (3) The Bank shall inform FHFA prior exceeding the amount of expected purposes of this section and may offer to making any material changes to an losses; and to buy or negotiate the terms of a bond approved model and methodology, (ii) Fully secure its credit sale with the housing finance agency. providing a description of the changes enhancement obligation subject to that the Bank intends to make and its § 1268.5 Credit risk-sharing requirement. § 1266.7 of this chapter; and reasons for doing so; and (a) General credit risk-sharing (2) The participating financial (4) The Bank promptly shall make any requirement. For each AMA product, institution also may provide all or a FHFA-directed changes to its model and the Bank shall implement and have in portion of the credit enhancement, with methodology. place at all times, a credit risk-sharing the approval of the Bank, by: § 1268.6 Servicing. structure that: (i) Contracting with an insurance (1) Requires a participating financial affiliate of that participating financial (a) Servicing of AMA loans may be institution to provide the credit institution to provide an enhancement, transferred to and performed by any enhancement necessary to enhance an but only where such insurance is institution, including an institution that eligible asset or pool to the credit positioned in the credit risk-sharing is not a member of the Bank System, quality specified by the terms and structure so as to cover only losses provided that the loans, after such conditions of the AMA product, remaining after the participating transfer, continue to meet all provided, however, that such credit financial institution has borne losses as requirements to qualify as AMA under enhancement results in the eligible asset required under paragraph (c)(1)(i) of this §§ 1268.3, 1268.4 and 1268.5. or pool being at least investment section; (b) The transfer of mortgage servicing quality, as defined in § 1268.1; and (ii) Contracting with another rights and responsibilities must be (2) Meets the requirements of this participating financial institution in the approved by the Bank or Banks that own section. Bank’s district to provide a credit the loan or a participation interest in the (b) Determination of necessary credit enhancement consistent with this loan. enhancement. (1) At the earlier of 270 section, in return for compensation; or (c) A Bank shall have in place policies days from the date of the Bank’s (iii) Contracting with a participating and procedures to ensure that the acquisition of the first loan in a pool, or financial institution in another Bank’s transfer of mortgage servicing rights the date at which the pool reaches $100 district, pursuant to an arrangement does not negatively affect the credit million in assets, the Bank shall between the two Banks, to provide a enhancement on the loans in question determine the total credit enhancement credit enhancement consistent with this or substantially increase the Bank’s necessary to enhance the asset or pool section, in return for compensation. exposure to risk.
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§ 1268.7 Reporting requirements for replacing the stall warning computer street address for the Docket Operations acquired member assets. (SWC) with a new SWC, which provides office (telephone 800–647–5527) is in Each Bank shall report information an artificial stall warning in icing the ADDRESSES section. Comments will related to AMA in accordance with the conditions, and modifying the airplane be available in the AD docket shortly instructions provided in the Data for the replacement of the SWC. Since after receipt. Reporting Manual issued by FHFA, as we issued AD 2012–24–06, a FOR FURTHER INFORMATION CONTACT: amended from time to time. determination was made that airplanes Shahram Daneshmandi, Aerospace with certain modifications were Engineer, International Branch, ANM– § 1268.8 Administrative transactions and excluded from the AD applicability and agreements between Banks. 116, Transport Airplane Directorate, are affected by the identified unsafe (a) Delegation of administrative FAA, 1601 Lind Avenue SW., Renton, condition and the SWC required by AD WA 98057–3356; telephone 425–227– duties. A Bank may delegate the 2012–24–06 contained erroneous logic. administration of an AMA program to 1112; fax 425–227–1149. This proposed AD would add airplanes SUPPLEMENTARY INFORMATION: another Bank whose administrative to the applicability, and would add office has been examined and approved requirements to replace the existing Comments Invited by FHFA, or previously examined and SWCs with new, improved SWCs and approved by the Federal Housing We invite you to send any written modify the airplane for the new relevant data, views, or arguments about Finance Board, to process AMA replacement of the SWC. We are transactions. The existence of such a this proposed AD. Send your comments proposing this AD to prevent natural to an address listed under the delegation, or the possibility that such stall events during operation in icing a delegation may be made, must be ADDRESSES section. Include ‘‘Docket No. conditions, which could result in loss of FAA–2015–6544; Directorate Identifier disclosed to any potential participating control of the airplane. financial institution as part of any 2014–NM–198–AD’’ at the beginning of DATES: We must receive comments on AMA-related agreements signed with your comments. We specifically invite this proposed AD by February 1, 2016. that participating financial institution. comments on the overall regulatory, (b) Termination of Agreements. Any ADDRESSES: You may send comments by economic, environmental, and energy agreement made between two or more any of the following methods: aspects of this proposed AD. We will • Banks in connection with any AMA Federal eRulemaking Portal: Go to consider all comments received by the program may be terminated by any party http://www.regulations.gov. Follow the closing date and may amend this after a reasonable notice period. instructions for submitting comments. proposed AD based on those comments. • (c) Delegation of Pricing Authority. A Fax: 202–493–2251. We will post all comments we • Bank that has delegated its AMA pricing Mail: U.S. Department of receive, without change, to http:// function to another Bank shall retain a Transportation, Docket Operations, M– www.regulations.gov, including any right to refuse to acquire AMA at prices 30, West Building Ground Floor, Room personal information you provide. We it does not consider appropriate. W12–140, 1200 New Jersey Avenue SE., will also post a report summarizing each Washington, DC 20590. substantive verbal contact we receive Dated: December 10, 2015. • Hand Delivery: U.S. Department of about this proposed AD. Melvin L. Watt, Transportation, Docket Operations, M– Discussion Director, Federal Housing Finance Agency. 30, West Building Ground Floor, Room [FR Doc. 2015–31660 Filed 12–16–15; 8:45 am] W12–140, 1200 New Jersey Avenue SE., On November 21, 2012, we issued AD BILLING CODE 8070–01–P Washington, DC, between 9 a.m. and 5 2012–24–06, Amendment 39–17276 (77 p.m., Monday through Friday, except FR 73279, December 10, 2012). AD Federal holidays. 2012–24–06 applies to certain Saab AB, DEPARTMENT OF TRANSPORTATION For service information identified in Saab Aerosystems Model 340A (SAAB/ this proposed rule, contact Saab AB, SF340A) and SAAB 340B airplanes. AD Federal Aviation Administration Saab Aeronautics, SE–581 88, 2012–24–06 was prompted by reports of Linko¨ping, Sweden; telephone +46 13 stall events during icing conditions 14 CFR Part 39 18 5591; fax +46 13 18 4874; email where the natural stall warning (buffet) [Docket No. FAA–2015–6544; Directorate [email protected]; was not identified. AD 2012–24–06 Identifier 2014–NM–198–AD] Internet http://www.saabgroup.com. requires replacing the stall warning You may view this referenced service computer (SWC) with a new SWC, RIN 2120–AA64 information at the FAA, Transport which provides an artificial stall warning in icing conditions, and Airworthiness Directives; Saab AB, Airplane Directorate, 1601 Lind Avenue modifying the airplane for the Saab Aeronautics (Formerly Known as SW., Renton, WA. For information on replacement of the SWC. We issued AD Saab AB, Saab Aerosystems) the availability of this material at the 2012–24–06 to prevent natural stall Airplanes FAA, call 425–227–1221. events during operation in icing Examining the AD Docket AGENCY: Federal Aviation conditions, which, if not corrected, Administration (FAA), DOT. You may examine the AD docket on could result in loss of control of the ACTION: Notice of proposed rulemaking the Internet at http:// airplane. (NPRM). www.regulations.gov by searching for Airplanes with certain modifications and locating Docket No. FAA–2015– were excluded from the applicability of SUMMARY: We propose to supersede 6544; or in person at the Docket AD 2012–24–06, Amendment 39–17276 Airworthiness Directive (AD) 2012–24– Management Facility between 9 a.m. (77 FR 73279, December 10, 2012). 06 for certain Saab AB, Saab and 5 p.m., Monday through Friday, Since we issued AD 2012–24–06, we Aeronautics (formerly known as Saab except Federal holidays. The AD docket have determined that those AB, Saab Aerosystems) Model 340A contains this proposed AD, the modifications for airplanes identified in (SAAB/SF340A) and SAAB 340B regulatory evaluation, any comments the applicability of AD 2012–24–06 are airplanes. AD 2012–24–06 requires received, and other information. The now subject to the identified unsafe
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condition. In addition, a new, improved and installation instructions valid for pre- modified by Saab AB mod No. 2650 or SWC has been designed to replace the and post-SB 340–27–097, 340–27–098, SB mod No. 2859; however, this proposed existing SWC, as well as the SWC 340–27–099 and SB 340–27–116 aeroplanes. AD does not exclude those airplanes required by AD 2012–24–06. The For aeroplanes modified in accordance with because this proposed AD requires SAAB AB mod. No. 2650 and/or mod. No. installation of the new SWC includes 2859 which are no longer registered in corrective actions for U.S. N-registered modifying the airplane. Canada, SAAB AB issued SAAB AB SB 340– airplanes that have either modification The European Aviation Safety Agency 27–109 to provide modification and installed. (EASA), which is the Technical Agent installation instructions to remove the ice Paragraph (2) of the MCAI requires for the Member States of the European speed curve function. replacement of the existing SWCs Union, has issued EASA Airworthiness For the reasons described above, this within 18 months after the effective date Directive 2014–0218, dated September [EASA] AD retains the requirements of EASA of the MCAI. However, due to the 29, 2014 (referred to after this as the AD 2013–0254, which is superseded, and urgency of the identified unsafe Mandatory Continuing Airworthiness requires modification of the Stall Warning condition, we have determined that this Information, or ‘‘the MCAI’’), to correct and Identification System and replacement of replacement must be done within 12 the SWC with an improved unit. an unsafe condition for certain Saab AB, months after the effective date of this Saab Aeronautics Model 340A (SAAB/ You may examine the MCAI in the AD, as specified in paragraph (h) of this SF340A) and SAAB 340B airplanes. The AD docket on the Internet at http:// proposed AD. MCAI states: www.regulations.gov by searching for These differences have been and locating Docket No. FAA–2015– A few natural stall events, specifically coordinated with the EASA and Saab when operating in icing conditions, have 6544. AB, Saab Aeronautics. been experienced on SAAB 340 series Related Service Information Under 1 Costs of Compliance aeroplanes, without receiving a prior stall CFR Part 51 warning. We estimate that this proposed AD This condition, if not corrected, could Saab AB, Saab Aeronautics has issued will affect 105 airplanes of U.S. registry. result in loss of control of the aeroplane. the following service information: We also estimate that it would take To address this potential unsafe condition, • Saab Service Bulletin 340–27–109, about 78 work-hours per product to SAAB developed a modified stall warning dated April 14, 2014. comply with the actions required by this system, incorporating improved stall warning • Saab Service Bulletin 340–27–116, proposed AD. The average labor rate is logic, and issued Service Bulletin (SB) 340– dated October 18, 2013. $85 per work-hour. Required parts 27–098 and SB 340–27–099, providing • instructions to replace the Stall Warning Saab Service Bulletin 340–27–120, would cost about $33,000 per product. Computer (SWC) with a new SWC, and dated July 11, 2014. Based on these figures, we estimate the instructions to activate the new SWC. The • Saab Service Bulletin 340–27–121, cost of this proposed AD on U.S. new system included stall warning curves dated July 11, 2014. operators to be $4,161,150, or $39,630 optimized for operation in icing conditions, • Saab Service Bulletin 340–27–122, per product. which are activated by selection of Engine dated July 11, 2014. Anti-Ice. The service information describes Authority for This Rulemaking Consequently, EASA issued AD 2011–0219 procedures for deactivating the stall Title 49 of the United States Code [http://ad.easa.europa.eu/ad/2011-0219, warning speed curves in the SWCs for specifies the FAA’s authority to issue which corresponds to FAA AD 2012–24–06, Amendment 39–17276 (77 FR 73279, certain airplanes; replacing the existing rules on aviation safety. Subtitle I, December 10, 2012)] to require installation of SWCs with new, improved SWCs, and section 106, describes the authority of the improved SWC. modifying the airplane for the new the FAA Administrator. ‘‘Subtitle VII: After that [EASA] AD was issued, in- replacement of the SWC. This service Aviation Programs,’’ describes in more service experience with the improved stall information is reasonably available detail the scope of the Agency’s warning system revealed cases of premature because the interested parties have authority. stall warning activation during the take-off access to it through their normal course We are issuing this rulemaking under phase. In numerous recorded cases, the onset of business or by the means identified the authority described in ‘‘Subtitle VII, of stall warning occurred without the 6 minute delay after weight off wheels. in the ADDRESSES section. Part A, Subpart III, Section 44701: This condition, if not corrected, could lead General requirements.’’ Under that FAA’s Determination and Requirements section, Congress charges the FAA with to premature stick shaker activation and of This Proposed AD consequent increase in pilot workload during promoting safe flight of civil aircraft in the take-off phase, possibly resulting in This product has been approved by air commerce by prescribing regulations reduced control of the aeroplane. the aviation authority of another for practices, methods, and procedures To correct this unsafe condition, EASA country, and is approved for operation the Administrator finds necessary for issued AD 2013–0254 [http:// in the United States. Pursuant to our safety in air commerce. This regulation ad.easa.europa.eu/ad/2013-0254] retaining bilateral agreement with the State of is within the scope of that authority the requirements of EASA AD 2011–0219, which was superseded, to require Design Authority, we have been notified because it addresses an unsafe condition deactivation of the ice speed curves in the of the unsafe condition described in the that is likely to exist or develop on improved SWC on SAAB 340 aeroplanes, in MCAI and service information products identified in this rulemaking accordance with SAAB SB 340–27–116. referenced above. We are proposing this action. Since EASA AD 2013–0254 was issued, AD because we evaluated all pertinent Regulatory Findings SAAB developed a technical solution to information and determined an unsafe eliminate the premature activation of the stall condition exists and is likely to exist or We determined that this proposed AD warning ice curves and issued SB 340–27– develop on other products of these same would not have federalism implications 120 (modification of the existing Stall under Executive Order 13132. This Warning System installation), SB 340–27– type designs. 121 (activation of improved SWC for proposed AD would not have a Differences Between This Proposed AD substantial direct effect on the States, on aeroplanes with a basic wing tip) and SB and the MCAI or Service Information 340–27–122 (activation of improved SWC for the relationship between the national aeroplanes with an extended wing tip). The applicability in the MCAI Government and the States, or on the SAAB SB 340–27–120 provides modification excludes airplanes which have been distribution of power and
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responsibilities among the various (e) Reason (j) Parts Installation Prohibitions levels of government. This AD was prompted by a determination After doing the replacement required by For the reasons discussed above, I that airplanes with certain modifications paragraph (h) of this AD, no person may certify this proposed regulation: were excluded from AD 2012–24–06, install any SWC having P/N 0020AK, 1. Is not a ‘‘significant regulatory Amendment 39–17276 (77 FR 73279, 0020AK1, 0020AK2, 0020AK4, 0020AK6, December 10, 2012), and are affected by the 0020AK7, or 0020AK3 MOD 1, on any action’’ under Executive Order 12866; identified unsafe condition and the stall airplane. 2. Is not a ‘‘significant rule’’ under the warning computer (SWC) required by AD DOT Regulatory Policies and Procedures 2012–24–06 contained erroneous logic. We (k) Other FAA AD Provisions (44 FR 11034, February 26, 1979); are issuing this AD to prevent natural stall The following provisions also apply to this 3. Will not affect intrastate aviation in events during operation in icing conditions, AD: Alaska; and which could result in loss of control of the (1) Alternative Methods of Compliance airplane. (AMOCs): The Manager, ANM–116, 4. Will not have a significant International Branch, Transport Airplane (f) Compliance economic impact, positive or negative, Directorate, FAA, has the authority to on a substantial number of small entities Comply with this AD within the approve AMOCs for this AD, if requested under the criteria of the Regulatory compliance times specified, unless already using the procedures found in 14 CFR 39.19. Flexibility Act. done. In accordance with 14 CFR 39.19, send your (g) Deactivation of Stall Speed Curves request to your principal inspector or local List of Subjects in 14 CFR Part 39 Flight Standards District Office, as For airplanes identified in paragraphs Air transportation, Aircraft, Aviation appropriate. If sending information directly (g)(1) and (g)(2) of this AD: Within 30 days to the International Branch, send it to ATTN: safety, Incorporation by reference, after the effective date of this AD, do the Shahram Daneshmandi, Aerospace Engineer, Safety. deactivation specified in paragraph (g)(1) or International Branch, ANM–116, Transport (g)(2) of this AD, as applicable to airplane Airplane Directorate, FAA, 1601 Lind The Proposed Amendment configuration, in accordance with the Avenue SW., Renton, WA 98057–3356; Accomplishment Instructions of Saab Service Accordingly, under the authority telephone 425–227–1112; fax 425–227–1149. Bulletin 340–27–116, dated October 18, 2013. Information may be emailed to: 9-ANM-116- delegated to me by the Administrator, (1) For airplanes with a basic wing tip that the FAA proposes to amend 14 CFR part has been modified in accordance with Saab [email protected]. Before using 39 as follows: Service Bulletin 340–27–098: Deactivate the any approved AMOC, notify your appropriate stall speed curves in the SWC having part principal inspector, or lacking a principal PART 39—AIRWORTHINESS number (P/N) 0020AK6. inspector, the manager of the local flight DIRECTIVES (2) For airplanes with an extended wing tip standards district office/certificate holding that has been modified in accordance with district office. The AMOC approval letter ■ 1. The authority citation for part 39 Saab Service Bulletin 340–27–099: Deactivate must specifically reference this AD. (2) Contacting the Manufacturer: For any continues to read as follows: the stall speed curves in the SWC having part number (P/N) 0020AK7. requirement in this AD to obtain corrective Authority: 49 U.S.C. 106(g), 40113, 44701. actions from a manufacturer, the action must (h) Replacement of SWCs be accomplished using a method approved § 39.13 [Amended] Within 12 months after the effective date by the Manager, International Branch, ANM– ■ 2. The FAA amends § 39.13 by of this AD: Do the replacement specified in 116, Transport Airplane Directorate, FAA; or removing Airworthiness (AD) 2012–24– paragraph (h)(1) or (h)(2) of this AD, as the European Aviation Safety Agency 06, Amendment 39–17276 (77 FR applicable. (EASA); or Saab AB, Saab Aeronautics’ EASA Design Organization Approval (DOA). If 73279, December 10, 2012), and adding (1) For airplanes with basic wing tips: Replace all SWCs with new, improved SWCs approved by the DOA, the approval must the following new AD: having P/N 0020AK6–1, in accordance with include the DOA-authorized signature. the Accomplishment Instructions of Saab Saab AB, Saab Aeronautics: Docket No. Related Information FAA–2015–6544; Directorate Identifier Service Bulletin 340–27–121, dated July 11, 2014–NM–198–AD. 2014. (1) Refer to Mandatory Continuing (2) For airplanes with extended wing tips: Airworthiness Information (MCAI) EASA (a) Comments Due Date Replace all SWCs with new, improved SWCs Airworthiness Directive 2014–0218, dated We must receive comments by February 1, having P/N 0020AK7–1, in accordance with September 29, 2014, for related information. 2016. the Accomplishment Instructions of Saab This MCAI may be found in the AD docket Service Bulletin 340–27–122, dated July 11, on the Internet at http://www.regulations.gov (b) Affected ADs 2014. by searching for and locating Docket No. This AD replaces AD 2012–24–06, FAA–2015–6544. Amendment 39–17276 (77 FR 73279, (i) Concurrent Modification (2) For service information identified in December 10, 2012). Before or concurrently with the this AD, contact Saab AB, Saab Aeronautics, accomplishment of the applicable SE–581 88, Linko¨ping, Sweden; telephone (c) Applicability requirements of paragraph (h) of this AD, do +46 13 18 5591; fax +46 13 18 4874; email This AD applies to Saab AB, Saab the actions specified in paragraph (i)(1) or [email protected]; Aeronautics (formerly known as Saab AB, (i)(2) of this AD, as applicable to airplane Internet http://www.saabgroup.com. You Saab Aerosystems) Model 340A (SAAB/ configuration. may view this service information at the SF340A) and SAAB 340B airplanes, (1) For airplanes on which either Saab AB FAA, Transport Airplane Directorate, 1601 certificated in any category, as identified in mod No. 2650 or mod No. 2859 is not Lind Avenue SW., Renton, WA. For paragraphs (c)(1) and (c)(2) of this AD. installed: Modify the stall warning and information on the availability of this (1) Model 340A (SAAB/SF340A) airplanes, identification system, in accordance with the material at the FAA, call 425–227–1221. serial numbers 004 through 159 inclusive. Accomplishment Instructions of Saab Service (2) Model SAAB 340B airplanes, serial Bulletin 340–27–120, dated July 11, 2014. Issued in Renton, Washington, on numbers 160 through 459 inclusive, except (2) For airplanes on which either Saab AB November 23, 2015. serial numbers 170, 342, 362, 363, 367, 372, mod No. 2650 or mod No. 2859 is installed, Jeffrey E. Duven, 379, 385, 395, 405, 409, 431, 441, and 455. or on which both mods are installed: Modify Manager, Transport Airplane Directorate, the stall warning and identification system, Aircraft Certification Service. (d) Subject in accordance with the Accomplishment Air Transport Association (ATA) of Instructions of Saab Service Bulletin 340–27– [FR Doc. 2015–30560 Filed 12–16–15; 8:45 am] America Code 27: Flight Controls. 109, dated April 14, 2014. BILLING CODE 4910–13–P
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DEPARTMENT OF TRANSPORTATION You may view this referenced service unsafe condition and allow reactivation information at the FAA, Transport of the potable water system. Federal Aviation Administration Airplane Directorate, 1601 Lind Avenue The European Aviation Safety Agency SW., Renton, WA. For information on (EASA), which is the Technical Agent 14 CFR Part 39 the availability of this material at the for the Member States of the European [Docket No. FAA–2015–7524; Directorate FAA, call 425–227–1221. Union, has issued EASA Airworthiness Identifier 2014–NM–231–AD] Examining the AD Docket Directive 2014–0255, dated November RIN 2120–AA64 25, 2014 (referred to after this as the You may examine the AD docket on Mandatory Continuing Airworthiness Airworthiness Directives; Saab AB, the Internet at http:// Information, or ‘‘the MCAI’’), to correct Saab Aeronautics (Formerly Known as www.regulations.gov by searching for an unsafe condition on certain Saab AB, Saab AB, Saab Aerosystems) and locating Docket No. FAA–2015– Saab Aeronautics Model SAAB 2000 7524; or in person at the Docket airplanes. The MCAI states: AGENCY: Federal Aviation Management Facility between 9 a.m. Administration (FAA), DOT. and 5 p.m., Monday through Friday, One occurrence of rudder pedal restriction was reported on a SAAB 2000 aeroplane. ACTION: Notice of proposed rulemaking except Federal holidays. The AD docket contains this proposed AD, the Subsequent investigation showed that this (NPRM). was the result of water leakage at the inlet regulatory evaluation, any comments SUMMARY: We propose to supersede tubing for the in-line heater (25HY) in the received, and other information. The lower part of the forward fuselage (Zone 116). Airworthiness Directive (AD) 2014–15– street address for the Docket Operations 04 for certain Saab AB, Saab The in-line heater attachment was found office (telephone 800–647–5527) is in ruptured, which resulted in water spraying in Aeronautics Model SAAB 2000 the ADDRESSES section. Comments will the area. Frozen water on the rudder control airplanes. AD 2014–15–04 currently be available in the AD docket shortly mechanism in Zone 116 then led to the requires deactivating the potable water after receipt. rudder pedal restriction. system, or alternatively filling and FOR FURTHER INFORMATION CONTACT: Analysis after the reported event indicated activating the potable water system. Shahram Daneshmandi, Aerospace that the pitch control mechanism (including Since we issued AD 2014–15–04, the pitch disconnect/spring unit) may also be manufacturer developed a modification Engineer, International Branch, ANM– frozen as a result of water spray, which that would address the unsafe 116, Transport Airplane Directorate, would prevent disconnection and normal condition. This proposed AD would FAA, 1601 Lind Avenue SW., Renton, pitch control. also require inspecting the in-line heater WA 98057–3356; telephone 425–227– This condition, if not corrected, could for correct brazing and corrective action 1112; fax 425–227–1149. result in further occurrences of reduced if needed, and installing a shrinkable SUPPLEMENTARY INFORMATION: control of an aeroplane. To address this tube on the water line and a spray potential unsafe condition, SAAB issued Comments Invited Service Bulletin (SB) 2000–38–10 to provide shield on the in-line heater. We are instructions to deactivate the Potable Water proposing this AD to prevent rudder We invite you to send any written relevant data, views, or arguments about System. Consequently, EASA issued [EASA] pedal restriction due to the pitch control [an] Emergency AD * * * to require that mechanism becoming frozen as the this proposed AD. Send your comments action. That [EASA] Emergency AD was result of water spray, which could to an address listed under the revised and republished as EASA AD 2013– prevent disconnection and normal pitch ADDRESSES section. Include ‘‘Docket No. 0172R1 [(http://ad.easa.europa.eu/ad/2013- control, and consequently result in FAA–2015–7524; Directorate Identifier 0172R1), which corresponds to FAA AD reduced controllability of the airplane. 2014–NM–231–AD’’ at the beginning of 2014–15–041, Amendment 39–17906 (79 FR DATES: We must receive comments on your comments. We specifically invite 45337, August 5, 2014)], introducing a this proposed AD by February 1, 2016. comments on the overall regulatory, temporary alternative procedure for filling, which would allow reactivation and ADDRESSES: You may send comments by economic, environmental, and energy aspects of this proposed AD. We will operation of the Potable Water System. any of the following methods: Since that [EASA] AD was issued, SAAB • Federal eRulemaking Portal: Go to consider all comments received by the closing date and may amend this developed an in-line heater spray shield and http://www.regulations.gov. Follow the a water line shrink tube to eliminate the instructions for submitting comments. proposed AD based on those comments. consequences of a water spray leak in case • Fax: 202–493–2251. We will post all comments we of rupture of the in-line heater. SAAB also • Mail: U.S. Department of receive, without change, to http:// issued a SB 2000–38–011, providing Transportation, Docket Operations, M– www.regulations.gov, including any instructions for inspection of the in-line 30, West Building Ground Floor, Room personal information you provide. We heater and installation of a shrink tube and W12–140, 1200 New Jersey Avenue SE., will also post a report summarizing each a spray shield. Washington, DC 20590. substantive verbal contact we receive For reasons described above, this [EASA] • Hand Delivery: U.S. Department of about this proposed AD. AD retains the requirements of EASA AD Transportation, Docket Operations, M– 2013–0172R1, which is superseded, and Discussion 30, West Building Ground Floor, Room requires inspection [for correct brazing] of On July 13, 2014, we issued AD 2014– the in-line heater [and corrective action if W12–140, 1200 New Jersey Avenue SE., needed] and installation of shrink tube [on Washington, DC, between 9 a.m. and 5 15–04, Amendment 39–17906 (79 FR water line] and spray shield [on in-line p.m., Monday through Friday, except 45337, August 5, 2014). AD 2014–15–04 heater]. Federal holidays. requires actions intended to address an For service information identified in unsafe condition on Saab AB, Saab Corrective actions include repairing this proposed AD, contact Saab AB, Aeronautics Model SAAB 2000 or replacing the in-line heater. You may Saab Aeronautics, SE–581 88, airplanes. examine the MCAI in the AD docket on Linko¨ping, Sweden; telephone +46 13 Since we issued AD 2014–15–04, the Internet at http:// 18 5591; fax +46 13 18 4874; email Amendment 39–17906 (79 FR 45337, www.regulations.gov by searching for [email protected]; August 5, 2014), a modification has and locating Docket No. FAA–2015– Internet http://www.saabgroup.com. been developed that would address the 7524.
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Related Service Information Under 1 General requirements.’’ Under that (a) Comments Due Date CFR Part 51 section, Congress charges the FAA with We must receive comments by February 1, Saab issued Service Bulletin 2000– promoting safe flight of civil aircraft in 2016. air commerce by prescribing regulations 38–011, dated October 22, 2014. The (b) Affected ADs for practices, methods, and procedures service information describes This AD replaces AD 2014–15–04, procedures for inspecting for correct the Administrator finds necessary for safety in air commerce. This regulation Amendment 39–17906 (79 FR 45337, August brazing of the in-line heater, repairing or 5, 2014). replacing the in-line heater, and is within the scope of that authority installing a shrinkable tube on the water because it addresses an unsafe condition (c) Applicability line and a spray shield on the in-line that is likely to exist or develop on This AD applies to Saab AB, Saab heater. This service information is products identified in this rulemaking Aeronautics (formerly known as Saab AB, reasonably available because the action. Saab Aerosystems) Model SAAB 2000 interested parties have access to it airplanes, certificated in any category, serial Regulatory Findings numbers 004 through 016 inclusive, 018, 022, through their normal course of business We determined that this proposed AD 023, 024, 026, 029, 031, 032, 033, 035 or by the means identified in the through 039 inclusive, 041 through 044 ADDRESSES section of this NPRM. would not have federalism implications inclusive, 046, 047, 048, 051, and 053 under Executive Order 13132. This through 063 inclusive. FAA’s Determination and Requirements proposed AD would not have a of This Proposed AD substantial direct effect on the States, on (d) Subject This product has been approved by the relationship between the national Air Transport Association (ATA) of the aviation authority of another Government and the States, or on the America Code 38, Water/Waste. country, and is approved for operation distribution of power and (e) Reason in the United States. Pursuant to our responsibilities among the various bilateral agreement with the State of This AD was prompted by a report of levels of government. rudder pedal restriction which was the result Design Authority, we have been notified For the reasons discussed above, I of water leakage at the inlet tubing of an in- of the unsafe condition described in the certify this proposed regulation: line heater in the lower part of the forward MCAI and service information 1. Is not a ‘‘significant regulatory fuselage. This AD was also prompted by the referenced above. We are proposing this action’’ under Executive Order 12866; development of a modification that would AD because we evaluated all pertinent address the unsafe condition. We are issuing information and determined an unsafe 2. Is not a ‘‘significant rule’’ under the this AD to prevent rudder pedal restriction condition exists and is likely to exist or DOT Regulatory Policies and Procedures due to the pitch control mechanism develop on other products of the same (44 FR 11034, February 26, 1979); becoming frozen as the result of water spray, type design. 3. Will not affect intrastate aviation in which could prevent disconnection and Alaska; and normal pitch control, and consequently Costs of Compliance result in reduced controllability of the 4. Will not have a significant airplane. We estimate that this proposed AD economic impact, positive or negative, affects 1 airplane of U.S. registry. on a substantial number of small entities (f) Compliance The actions required by AD 2014–15– under the criteria of the Regulatory Comply with this AD within the 04, Amendment 39–17906 (79 FR Flexibility Act. compliance times specified, unless already 45337, August 5, 2014), and retained in done. this proposed AD take about 1 work- List of Subjects in 14 CFR Part 39 (g) Retained Deactivation of Potable Water hour per product, at an average labor Air transportation, Aircraft, Aviation System With New Exception rate of $85 per work-hour. Required safety, Incorporation by reference, parts cost $0 per product. Based on This paragraph restates the requirements of Safety. paragraph (g) of AD 2014–15–04, these figures, the estimated cost of the Amendment 39–17906 (79 FR 45337, August actions that are required by AD 2014– The Proposed Amendment 5, 2014), with a new exception. Except as 15–04 is $85 per product. Accordingly, under the authority provided by paragraph (l) of this AD, within We also estimate that it would take 30 days after September 9, 2014 (the effective about 6 work-hours per product to delegated to me by the Administrator, date of AD 2014–15–04), deactivate the comply with the basic requirements of the FAA proposes to amend 14 CFR part potable water system, in accordance with the this proposed AD. The average labor 39 as follows: Accomplishment Instructions of Saab Service Bulletin 2000–38–010, dated July 12, 2013, rate is $85 per work-hour. Required PART 39—AIRWORTHINESS parts would cost about $3,650 per which is incorporated by reference in AD DIRECTIVES 2014–15–04. product. Based on these figures, we estimate the cost of this proposed AD on ■ (h) Retained Alternative To Deactivation of 1. The authority citation for part 39 Potable Water System With No Changes U.S. operators to be $4,160. continues to read as follows: Authority for This Rulemaking This paragraph restates the requirements of Authority: 49 U.S.C. 106(g), 40113, 44701. paragraph (h) of AD 2014–15–04, Title 49 of the United States Code Amendment 39–17906 (79 FR 45337, August § 39.13 [Amended] specifies the FAA’s authority to issue 5, 2014), with no changes. As an alternative, rules on aviation safety. Subtitle I, ■ 2. The FAA amends § 39.13 by or subsequent, to the action required by section 106, describes the authority of removing Airworthiness Directive (AD) paragraph (g) of this AD, during each filling the FAA Administrator. ‘‘Subtitle VII: 2014–15–04, Amendment 39–17906 (79 of the potable water system after September FR 45337, August 5, 2014), and adding 9, 2014, (the effective date of AD 2014–15– Aviation Programs,’’ describes in more 04), accomplish the temporary filling detail the scope of the Agency’s the following new AD: procedure, in accordance with the authority. Saab AB, Saab Aeronautics (Formerly instructions in Saab Service Newsletter SN We are issuing this rulemaking under Known as Saab AB, Saab Aerosystems): 2000–1304, Revision 01, dated September 10, the authority described in ‘‘Subtitle VII, Docket No. FAA–2015–7524; Directorate 2013, including Attachment 1 Engineering Part A, Subpart III, Section 44701: Identifier 2014–NM–231–AD. Statement to Operator 2000PBS034334, Issue
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A, dated September 9, 2013, which is certificate holding district office. The AMOC exempt portions of the system of records incorporated by reference in AD 2014–15–04. approval letter must specifically reference from one or more provisions of the this AD. Privacy Act of 1974. (i) New Inspection and Installation (ii) AMOCs approved previously in At the applicable compliance times accordance with AD 2014–15–04, DATES: Comments on this proposed rule specified in paragraphs (j)(1) and (j)(2) of this Amendment 39–17906 (79 FR 45337, August are due by January 26, 2016. AD, concurrently accomplish the actions 5, 2014), are approved as AMOCs for the specified in paragraphs (i)(1) and (i)(2) of this corresponding provisions of paragraphs (g) FOR FURTHER INFORMATION CONTACT: John AD, in accordance with the Accomplishment and (h) of this AD. Hackett, Director; Office of Information Instructions of Saab Service Bulletin 2000– (2) Contacting the Manufacturer: As of the Programs and Services, A/GIS/IPS; 38–011, dated October 22, 2014. effective date of this AD, for any requirement Department of State, SA–2; 515 22nd (1) Do a detailed inspection for correct in this AD to obtain corrective actions from brazing of the in-line heater, and if any a manufacturer, the action must be Street NW., Washington, DC 20522– discrepancy is found, before further flight, accomplished using a method approved by 8001, or at [email protected]. and before accomplishment of the the Manager, International Branch, ANM– SUPPLEMENTARY INFORMATION: The modification required by paragraph (i)(2) of 116, Transport Airplane Directorate, FAA; or this AD, accomplish all applicable corrective the European Aviation Safety Agency Department of State maintains the actions. (EASA); or Saab AB, Saab Aeronautics’ EASA Office of Foreign Missions Records (2) Install a shrink tube on the water line Design Organization Approval (DOA). If system of records. The primary purpose and a spray shield on the in-line heater. approved by the DOA, the approval must of this system of records relates to the (j) Compliance Times for Inspection and include the DOA-authorized signature. implementation of the Foreign Missions Installation (m) Related Information Act, the operation of foreign missions, Do the actions specified in paragraph (i) of (1) Refer to Mandatory Continuing and the United States’ extension of this AD at the applicable times specified in Airworthiness Information (MCAI) European privileges, exemptions, immunities, paragraphs (j)(1) and (j)(2) of this AD. Aviation Safety Agency Airworthiness benefits, and courtesies to foreign (1) For airplanes having had the potable Directive 2014–0255, dated November 25, government officials, members/ water system reactivated and operated using 2014, for related information. This MCAI employees and officers of foreign the alternative filling procedure specified in may be found in the AD docket on the Saab Service Newsletter SN 2000–1304, missions and certain international Internet at http://www.regulations.gov by organizations in the United States, their Revision 01, dated September 10, 2013, searching for and locating Docket No. FAA– including Attachment 1 Engineering 2015–7524. immediate family members, and Statement to Operator 2000PBS034334, Issue (2) For service information identified in domestic workers who are in the United A, dated September 9, 2013, which is this AD, contact Saab AB, Saab Aeronautics, States in nonimmigrant A–3 or G–5 visa incorporated by reference in AD 2014–15–04, SE–581 88, Linko¨ping, Sweden; telephone status. within 6 months after the effective date of +46 13 18 5591; fax +46 13 18 4874; email this AD. The Department of State is issuing [email protected]; (2) For airplanes having the potable water Internet http://www.saabgroup.com. You this document as a notice to amend 22 system deactivated using procedures may view this service information at the CFR part 171 to exempt portions of the specified in the Accomplishment FAA, Transport Airplane Directorate, 1601 Office of Foreign Missions Records Instructions of Saab Service Bulletin 2000– Lind Avenue SW., Renton, WA. For 38–010, dated July 12, 2013: Before further system of records from the Privacy Act information on the availability of this flight after the reactivation of the potable subsections (c)(3); (d); (e)(1); (e)(4)(G), material at the FAA, call 425–227–1221. water system. (H), and (I); and (f) of the Privacy Act Issued in Renton, Washington, on pursuant to 5 U.S.C. 552a(k)(2). STATE– (k) Terminating Actions for the Deactivation December 8, 2015. of the Potable Water System 81 is exempted under (k)(2) to the extent Michael Kaszycki, that records within that system are Accomplishing the actions required by paragraph (i) of this AD terminates the Acting Manager, Transport Airplane comprised of investigatory material requirements of paragraphs (g) and (h) of this Directorate, Aircraft Certification Service. compiled for law enforcement purposes, AD. [FR Doc. 2015–31537 Filed 12–16–15; 8:45 am] subject to the limitations set forth in (l) Other FAA AD Provisions BILLING CODE 4910–13–P that section. The following provisions also apply to this List of Subjects in 22 CFR Part 171 AD: (1) Alternative Methods of Compliance DEPARTMENT OF STATE Administrative practice and (AMOCs): The Manager, ANM–116, procedure; Classified information; 22 CFR Part 171 International Branch, Transport Airplane Confidential business information; Directorate, FAA, has the authority to [Public Notice: 9379] Freedom of information; Privacy. approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. RIN 1400–AD88 For the reasons stated in the In accordance with 14 CFR 39.19, send your preamble, 22 CFR part 171 is proposed Privacy Act; STATE–81, Office of request to your principal inspector or local to be amended as follows: Flight Standards District Office, as Foreign Missions Records appropriate. If sending information directly PART 171—[AMENDED] to the International Branch, send it to ATTN: AGENCY: Department of State. Shahram Daneshmandi, Aerospace Engineer, ACTION: Proposed rule. International Branch, ANM–116, Transport ■ 1. The authority citation continues to Airplane Directorate, FAA, 1601 Lind SUMMARY: The Department of State is read as follows: Avenue SW., Renton, WA 98057–3356; giving concurrent notice of a newly Authority: 5 U.S.C. 552, 552a; 22 U.S.C. telephone 425–227–1112; fax 425–227–1149. established system of records pursuant Information may be emailed to: 9-ANM-116- 2651a; Pub. L. 95–521, 92 Stat. 1824, as [email protected]. to the Privacy Act of 1974 for the Office amended; E.O. 13526, 75 FR 707; E.O. 12600, (i) Before using any approved AMOC, of Foreign Missions Records, State–81 52 FR 23781, 3 CFR, 1987 Comp., p. 235. notify your appropriate principal inspector, system of records and this proposed or lacking a principal inspector, the manager rulemaking. In this proposed ■ 2. Amend § 171.36 by adding an entry, of the local flight standards district office/ rulemaking, the Department proposes to in alphabetical order, for ‘‘The Office of
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Foreign Missions Records, State-81’’ to Refrigerant Management Requirements Halibut Observer Program (Observer the lists in paragraph (b)(2) under the Clean Air Act.’’ EPA received Program). Under Amendments 112 and requests from members of the public to 102, the GOA and BSAI FMPs would Joyce A. Barr, extend the comment period. EPA is each be amended to allow certain Assistant Secretary for Administration, U.S. hereby extending the comment period, catcher/processors with relatively small Department of State. which was previously set to end on levels of groundfish production to be [FR Doc. 2015–31551 Filed 12–16–15; 8:45 am] January 8, 2016, to January 25, 2016. placed in the partial observer coverage BILLING CODE 4710–43–P Accordingly, any comments on this category. Amendments 112 and 102 are proposed rule must be received on or intended to promote the goals of the before January 25, 2016. BSAI and GOA FMPs and to promote ENVIRONMENTAL PROTECTION To submit comments, or access the the goals and objectives of the AGENCY public docket, please follow the detailed Magnuson-Stevens Fishery instructions as provided under Conservation and Management Act 40 CFR Part 82 ADDRESSES in the November 9, 2015, (Magnuson-Stevens Act) and other [EPA–HQ–OAR–2015–0453; FRL–9940–31– Federal Register document. If you have applicable laws. OAR] questions, consult the person listed DATES: Submit comments on or before RIN 2060–AS51 under FOR FURTHER INFORMATION February 16, 2016. CONTACT. ADDRESSES: You may submit comments Protection of Stratospheric Ozone: List of Subjects in 40 CFR Part 82 on this document, identified by NOAA– Update to the Refrigerant Management NMFS–2015–0114, by any of the Requirements Under the Clean Air Act; Environmental protection, Air following methods: Extension of Comment Period pollution control, Chemicals, • Electronic Submission: Submit all Incorporation by reference, Reporting electronic public comments via the AGENCY: Environmental Protection and recordkeeping requirements. Federal eRulemaking Portal. Go to Agency (EPA). Dated: December 10, 2015. www.regulations.gov/ ACTION: Proposed rule; extension of Sarah Dunham, #!docketDetail;D=NOAA-NMFS-2015- comment period. Director, Office of Atmospheric Programs. 0114, click the ‘‘Comment Now!’’ icon, complete the required fields, and enter SUMMARY: [FR Doc. 2015–31661 Filed 12–16–15; 8:45 am] EPA issued a proposed rule in or attach your comments. the Federal Register on November 9, BILLING CODE 6560–50–P • Mail: Submit written comments to 2015, proposing to update service Glenn Merrill, Assistant Regional practices that reduce emissions of Administrator, Sustainable Fisheries ozone-depleting refrigerants as well as DEPARTMENT OF COMMERCE Division, Alaska Region NMFS, Attn: extend them, as appropriate, to non- Ellen Sebastian. Mail comments to P.O. National Oceanic and Atmospheric ozone-depleting substitute refrigerants. Box 21668, Juneau, AK 99802–1668. The November 9, 2015, proposal Administration Instructions: Comments sent by any provided for a 60-day public comment other method, to any other address or period ending January 8, 2016. EPA 50 CFR Part 679 individual, or received after the end of received requests from the public to RIN 0648–BF36 the comment period, may not be extend this comment period. This considered by NMFS. All comments document extends the comment period Fisheries of the Exclusive Economic received are a part of the public record for 17 days, from January 8, 2016, to Zone Off Alaska; Observer Coverage and will generally be posted for public January 25, 2016. Requirements for Small Catcher/ viewing on www.regulations.gov DATES: Comments, identified by docket Processor in the Gulf of Alaska and without change. All personal identifying identification (ID) number EPA–HQ– Bering Sea and Aleutian Islands information (e.g., name, address), OAR–2015–0453, must be received on Groundfish Fisheries confidential business information, or or before January 25, 2016. otherwise sensitive information AGENCY: National Marine Fisheries ADDRESSES: submitted voluntarily by the sender will Follow the detailed Service (NMFS), National Oceanic and be publicly accessible. NMFS will instructions as provided under Atmospheric Administration (NOAA), ADDRESSES accept anonymous comments (enter in the Federal Register Commerce. document of November 9, 2015. ‘‘N/A’’ in the required fields if you wish ACTION: Notice of availability of fishery FOR FURTHER INFORMATION CONTACT: to remain anonymous). management plan amendments; request Electronic copies of Amendment 112 Luke Hall-Jordan, Stratospheric for comments. Protection Division, Office of to the BSAI FMP and Amendment 102 to the GOA FMP and the Regulatory Atmospheric Programs, Mail Code SUMMARY: The North Pacific Fishery 6205T, 1200 Pennsylvania Avenue NW., Management Council (Council) has Impact Review/Initial Regulatory Washington, DC 20460; telephone submitted Amendment 112 to the Flexibility Analysis (RIR/IRFA) number (202) 343–9591; email address Fishery Management Plan for prepared for this action (collectively the [email protected]. Groundfish of the Bering Sea and ‘‘Analysis’’) are available from http:// www.regulations.gov or from the NMFS SUPPLEMENTARY INFORMATION: This Aleutian Islands Management Area document extends the public comment (BSAI FMP) and Amendment 102 to the Alaska Region Web site at http:// period established in the proposed rule Fishery Management Plan for alaskafisheries.noaa.gov. published in the Federal Register on Groundfish of the Gulf of Alaska (GOA FOR FURTHER INFORMATION CONTACT: November 9, 2015 (80 FR 69457) (FRL– FMP). If approved, Amendments 112 Anne Marie Eich, 907–586–7228. 9933–48–OAR). In that document, EPA and 102 would modify the criteria for SUPPLEMENTARY INFORMATION: NMFS solicited comments and information on NMFS to place small catcher/processors manages the groundfish fisheries of the its proposed rule titled ‘‘Protection of in the partial observer coverage category GOA under the GOA FMP. NMFS Stratospheric Ozone: Update to the under the North Pacific Groundfish and manages the groundfish fisheries of
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Bering Sea and Aleutian Islands under observer coverage requirements for all the potential for introducing error into the BSAI FMP. The Council prepared trawl catcher/processors and catcher/ NMFS’ catch accounting system (as the GOA FMP pursuant to the processors in a catch share program. described in the proposed rule: 77 FR Magnuson-Stevens Act (16 U.S.C. 1801, 23326, April 18, 2012). Background on the Observer Program et seq.). Regulations implementing the The restructured Observer Program GOA FMP appear at 50 CFR 679. Regulations implementing the provided for three limited exceptions The Magnuson-Stevens Act in section Observer Program allow NMFS-certified for catcher/processors to be placed in 304(a) requires that each regional observers (observers) to obtain the partial observer coverage category in fishery management council submit an information necessary for the recognition that the cost of full observer amendment to a fishery management conservation and management of the coverage would be disproportionate to plan for review and approval, BSAI and GOA groundfish and halibut total revenues for some small catcher/ disapproval, or partial approval by the fisheries. The Observer Program was processors. First, the restructured Secretary of Commerce (Secretary). The implemented in 1990 (55 FR 4839, Observer Program provided an Magnuson-Stevens Act in section 304(a) February 12, 1990). In 2012, NMFS exception (specified at the current also requires that the Secretary, upon restructured the funding and § 679.51(a)(2)(v)) that applies to receiving an amendment to a fishery deployment systems of the Observer ‘‘hybrid’’ vessels less than 60 feet length management plan, immediately publish Program (77 FR 70062, November 21, overall (LOA) that acted as both a a notice in the Federal Register 2012). Since implementation of the catcher vessel and a catcher/processor announcing that the amendment is restructured Observer Program in 2013, in the same year in any year from 2003 available for public review and vessels, shoreside processors and through 2009. Second, the restructured comment. The Council has submitted stationary floating processors Observer Program provided an Amendment 112 to the BSAI FMP and participating in the groundfish and exception from full coverage (specified Amendment 102 to the GOA FMP to the halibut fisheries off Alaska are placed in at the current § 679.5(a)(2)(v)) if a Secretary for review. This notice one of two observer coverage categories: catcher/processor had an average daily announces that proposed Amendment (1) Partial observer coverage category or production of less than 5,000 lb (2.3 mt) 112 to the BSAI FMP and Amendment (2) full observer coverage category. round weight equivalent in its most 102 to the GOA FMP are available for In the full observer coverage category, recent full calendar year of operation public review and comment. vessel operators obtain observers by from 2003 through 2009. Third, the Amendments 112 and 102 to the contracting directly with observer restructured Observer Program provided FMPs were adopted by the Council in providers. Operators of vessels in the an exception from full coverage June 2015. If approved by the Secretary, full observer coverage category pay the (specified at § 679.5(a)(2)(iv)(B)) if a Amendments 112 and 102 would amend observer provider for each day the catcher/processor did not process more Section 3.2.4.1 of the BSAI and GOA observer is on board the vessel, than one metric ton round weight of FMPs to state that catcher/processors including days that the vessel is groundfish on any day in the would be subject to full observer travelling to or from the fishing grounds immediately preceding year. coverage requirement with some but not fishing. The first two exceptions are based on exceptions specified in regulations. To NMFS deploys observers on vessels in a vessel’s activity between 2003 and be consistent with current terminology, the partial observer coverage category 2009. A vessel that started processing Amendments 112 and 102 would according to a statistical sample design after 2009 could never qualify to be replace references to ‘‘less than 100 based on an annual deployment plan placed in the partial observer coverage percent’’ and ‘‘greater than or equal to developed in consultation with the category under either of these 100 percent’’ with ‘‘partial’’ and ‘‘full,’’ Council. Vessels in the partial observer exceptions. The first two exceptions respectively, in Section 3.2.4.1 of both coverage category are required to carry permanently placed a vessel in the the GOA and BSAI FMPs. Additionally, observers only on fishing trips selected partial observer coverage category. the Amendments would make minor at random pursuant to the statistical These exceptions have no provision to technical edits and modifications in sample design. Instead of paying for review the production of a catcher/ terminology in Section 3.2.4.1 of the each day an observer is on board, NMFS processor placed in the partial observer GOA and BSAI FMPs to conform to assesses a fee equal to 1.25 percent of coverage category on an ongoing basis current NMFS style guidelines. These the ex-vessel value of the retained and remove them from the partial minor technical edits and modifications groundfish and halibut landed by observer coverage category if their in terminology are not substantive. vessels in the partial observer coverage production increases. Out of Amendments 112 and 102 would also category. NMFS uses these fees to approximately seventy catcher/ amend Appendix A to the GOA and establish a Federal contract with an processors in the Observer Program, BSAI FMPs to list the date that the observer service provider to deploy three catcher/processors have qualified Amendments are implemented, if observers in the partial observer for, and elected to be assigned approved, in chronological order. coverage category. Under this structure, permanently to the partial observer The objectives of Amendments 112 observer coverage funding is based on coverage category under these two and 102 are to (1) refine the balance the number of days a vessel operates exceptions (Section 2.1.1 and Table 2 of between observer data quality from the (full observer coverage category) or on the Analysis). fishery and the cost of observer coverage the ex-vessel value of a vessel’s retained The third exception, the one metric to catcher/processors with limited catch regardless of the amount of time ton exception, is theoretically open to groundfish production relative to the the vessel is covered by an observer any catcher/processor that began rest of the catcher/processor fleet by (partial observer coverage category). production after 2009. However, in allowing those catcher/processors with Under the restructured Observer reviewing production data from 2008 limited production to be placed in the Program, almost all catcher/processors through 2014 for this action, NMFS partial observer coverage category based were assigned to the full observer found no active catcher/processor (i.e., on contemporary groundfish production coverage category to obtain independent a catcher/processor which did any amounts; and (2) implement this estimates of catch, at-sea discards, and processing in a year) that processed one exception without altering the full prohibited species catch (PSC) to reduce metric ton or less on every day during
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a year (Section 2.1.1 of the Analysis). Council and NMFS reviewed and to the FMPs through the end of the One catcher/processor qualified for developed a series of analyses that comment period (see DATES). A placement in the partial observer resulted in this proposed action. The proposed rule that would implement coverage category in 2015 under the one history of this action is described in Amendment 112 to the BSAI FMP and metric ton exception, but that catcher/ detail in Section 1.2 of the Analysis. Amendment 102 to the GOA FMP is processor processed nothing in 2014 Data on past production identified a intended to be published in the Federal and therefore processed one metric ton small number of catcher/processors that Register for public comment, following or less on every day in 2014 (Section processed a small amount of groundfish NMFS’ evaluation of the proposed rule 2.1.1 of the Analysis). relative to the rest of the fleet. The pursuant to the Magnuson-Stevens Act. Council and NMFS concluded that these Public comments on the proposed rule Need for Amendments 112 and 102 to vessels were paying, or would pay, a must be received by the end of the the BSAI and GOA FMPs disproportionate amount for full comment period on Amendments 112 Beginning with comments on the observer coverage relative to the amount and 102 to the BSAI and GOA FMP in proposed rule for the restructured these vessels had processed, or would order to be considered in the approval/ Observer Program, industry participants be likely to process. The Council and disapproval decision on the asked that the final rule for the NMFS concluded that the cost of full amendment. NMFS will consider all restructured Observer Program allow observer coverage might be discouraging comments on the Amendments received NMFS to place catcher/processors with beneficial activity, such as processing by the end of the comment period, limited production in the partial sablefish in remote fishing grounds in whether specifically directed to the observer coverage category. In response the Aleutian Islands or processing by FMP amendments or the proposed rule, to these comments, NMFS stated in the small jig gear vessels. in the approval/disapproval decision. final rule for the restructured Observer As noted earlier, Amendments 112 Comments received after the end of Program (77 FR 70062, November 21, and 102 would amend Section 3.2.4.1 of the comment period may not be 2012) that neither the Council nor the BSAI and GOA FMPs to state that considered in the approval/disapproval NMFS had analyzed the situation of catcher/processors would be subject to decision on Amendments 112 and 102. small catcher/processors that began full observer coverage requirements To be certain of consideration, production after 2009. NMFS explained with some exceptions, as specified in comments must be received, not just that if these industry participants regulations. The proposed rule describes postmarked or otherwise transmitted, by wished to be considered for placement the regulations that would assign the last day of the comment period. in the partial observer coverage catcher/processors to either the full or Authority: 16 U.S.C. 1801 et seq. category, the Council and NMFS would partial coverage categories. Those need to make these changes through a regulatory provisions are not repeated Dated: December 14, 2015. separate rulemaking process. here. Galen R. Tromble, Industry participants subsequently Acting Director, Office of Sustainable sought to change in the rules for Public Comments Fisheries, National Marine Fisheries Service. placement of catcher/processors in the NMFS is soliciting public comments [FR Doc. 2015–31761 Filed 12–15–15; 8:45 am] partial observer coverage category. The on proposed Amendments 112 and 102 BILLING CODE 3510–22–P
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Notices Federal Register Vol. 80, No. 242
Thursday, December 17, 2015
This section of the FEDERAL REGISTER ACTION: Notice and opportunity for contains documents other than rules or public comment. proposed rules that are applicable to the public. Notices of hearings and investigations, committee meetings, agency decisions and Pursuant to Section 251 of the Trade rulings, delegations of authority, filing of Act 1974, as amended (19 U.S.C. 2341 petitions and applications and agency et seq.), the Economic Development statements of organization and functions are Administration (EDA) has received examples of documents appearing in this petitions for certification of eligibility to section. apply for Trade Adjustment Assistance from the firms listed below. Accordingly, EDA has initiated DEPARTMENT OF COMMERCE investigations to determine whether Economic Development Administration increased imports into the United States of articles like or directly competitive Notice of Petitions by Firms for with those produced by each of these Determination of Eligibility To Apply firms contributed importantly to the for Trade Adjustment Assistance total or partial separation of the firm’s workers, or threat thereof, and to a AGENCY: Economic Development Administration, Department of decrease in sales or production of each Commerce. petitioning firm.
LIST OF PETITIONS RECEIVED BY EDA FOR CERTIFICATION ELIGIBILITY TO APPLY FOR TRADE ADJUSTMENT ASSISTANCE [12/1/2015 through 12/10/2015]
Date accepted Firm name Firm address for Product(s) investigation
Badgett Corporation ...... 1150 Pagni Drive, Chickasha, OK 12/10/2015 The firm maufacturers fabricated and machine 73023. equipment, products, and tools for industries. Implast Interior Technologies, LLC d/ 332 Industrial Park Drive, Imlay City, 12/10/2015 The firm maufacturers sewn articles of cloth, b/a Trims Unlimited. MI 48444. vinyl and leather for furniture, automotive inte- riors and medical equipment. Meramec Instrument Transformer Co 1 Andrews Way, Cuba, MO 64553 .. 12/10/2015 The firm maufacturers various types of current transformers including board mounted, encap- sulated, internally mounted and outdoor mounted. Poulsen Cascade Tackle, LLC...... 15875 SE 114th Avenue #N, 12/10/2015 The firm maufacturers fishing tackle and acces- Clackamas, OR 97015. sories. Southern Machine Works, Inc ...... 907 E. Bois D’Arc Avenue, Duncan, 12/10/2015 The firm maufacturers precision machines, mill- OK 73534. ing, tubing, and welding services.
Any party having a substantial Dated: December 10, 2015. amended (19 U.S.C. 81a–81u), the Foreign- interest in these proceedings may Miriam Kearse, Trade Zones Board (the Board) adopts the request a public hearing on the matter. Lead Program Analyst. following Order: A written request for a hearing must be [FR Doc. 2015–31729 Filed 12–16–15; 8:45 am] Whereas, the Board adopted the submitted to the Trade Adjustment BILLING CODE 3510–WH–P Assistance for Firms Division, Room alternative site framework (ASF) (15 71030, Economic Development CFR 400.2(c)) as an option for the Administration, U.S. Department of DEPARTMENT OF COMMERCE establishment or reorganization of Commerce, Washington, DC 20230, no zones; later than ten (10) calendar days Foreign-Trade Zones Board Whereas, the FTZ Corporation of following publication of this notice. Southern Pennsylvania, grantee of [Order No. 1992] Please follow the requirements set Foreign-Trade Zone 147, submitted an forth in EDA’s regulations at 13 CFR Reorganization of Foreign-Trade Zone application to the Board (FTZ Docket B– 315.9 for procedures to request a public 147, (Expansion of Service Area) Under 46–2015, docketed July 20, 2015) for hearing. The Catalog of Federal Alternative Site Framework, Berks authority to expand the service area of Domestic Assistance official number County, Pennsylvania the zone to include Adams, Fulton, and title for the program under which Juniata, Lebanon and Perry Counties, these petitions are submitted is 11.313, Pursuant to its authority under the Foreign- Pennsylvania, as described in the Trade Adjustment Assistance for Firms. Trade Zones Act of June 18, 1934, as application, adjacent to the Harrisburg
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Customs and Border Protection port of Background Department is rescinding this review, in entry; part, with respect to these companies, in On April 1, 2015, the Department 4 Whereas, notice inviting public published in the Federal Register a accordance with 19 CFR 353.213(d)(1). The instant review will continue with comment was given in the Federal notice of ‘‘Opportunity to Request respect to the following companies: B&R Register (80 FR 44326, July 27, 2015) Administrative Review’’ of the Industries Limited; Feidong Import and and the application has been processed antidumping duty order on drawn Export Co., Ltd.; Foshan Shunde pursuant to the FTZ Act and the Board’s stainless steel sinks from the PRC for the Minghao Kitchen Utensils Co., Ltd.; regulations; and, POR (AD order).1 Franke Asia Sourcing Ltd.; Grand Hill Whereas, the Board adopts the In April 2015, the Department findings and recommendations of the Work Company; Guangdong Dongyuan received multiple timely requests to Kitchenware Industrial Co., Ltd.; examiner’s report, and finds that the conduct an administrative review of the requirements of the FTZ Act and the Hangzhou Heng’s Industries Co., Ltd.; antidumping duty order on drawn J&C Industries Enterprise Limited; Board’s regulations are satisfied; stainless steel sinks from the PRC. Now, therefore, the Board hereby Jiangmen Hongmao Trading Co., Ltd.; On May 26, 2015, in accordance with Jiangxi Zoje Kitchen Utensils Co., Ltd.; orders: section 751(a) of the Tariff Act of 1930, The application to reorganize FTZ 147 Ningbo Oulin Kitchen Utensils Co., Ltd.; as amended (the Act), the Department Shenzhen Kehuaxing Industrial Ltd.; to expand the service area under the published in the Federal Register a ASF is approved, subject to the FTZ Act Shunde Foodstuffs Import & Export notice of initiation of an administrative Company Limited of Guangdong; Yuyao and the Board’s regulations, including 2 review of the AD order. The Afa Kitchenware Co., Ltd.; Zhongshan Section 400.13, and to the Board’s administrative review was initiated with Newecan Enterprise Development standard 2,000-acre activation limit for respect to 26 companies, and covers the Corporation Limited; and Zhongshan the zone. period April 1, 2014, through March 31, Superte Kitchenware Co., Ltd./ Signed at Washington, DC, this 10 day of 2015. Subsequent to the initiation of the Zhongshan Superte Kitchenware Co., December 2015. administrative review, the requesting Ltd. invoiced as Foshan Zhaoshun Paul Piquado, parties timely withdrew their review Trade Co., Ltd. Assistant Secretary of Commerce for requests for 10 of these companies, as Enforcement and Compliance, Alternate discussed below. Assessment Chairman, Foreign-Trade Zones Board. Partial Rescission of Review The Department will instruct U.S. Attest: Customs and Border Protection (CBP) to Andrew McGilvray, Pursuant to 19 CFR 351.213(d)(1), the assess antidumping duties on all Executive Secretary. Department will rescind an appropriate entries. For the companies administrative review, in whole or in [FR Doc. 2015–31755 Filed 12–16–15; 8:45 am] for which this review is rescinded, part, if a party that requested a review antidumping duties shall be assessed at BILLING CODE 3510–DS–P withdraws its request within 90 days of rates equal to the cash deposit of the date of publication of notice of estimated antidumping duties required DEPARTMENT OF COMMERCE initiation of the requested review. All at the time of entry, or withdrawal from requesting parties withdrew their warehouse, for consumption, in International Trade Administration respective requests for an administrative accordance with 19 CFR review of the following companies 351.212(c)(1)(i). The Department within 90 days of the date of publication [A–570–983] intends to issue appropriate assessment of the Initiation Notice: 3 Elkay (China) instructions directly to CBP 15 days Drawn Stainless Steel Sinks From the Kitchen Solutions, Co., Ltd.; Guangdong after the date of publication of this People’s Republic of China: Partial G-Top Import & Export Co., Ltd.; notice in the Federal Register. Guangdong New Shichu Import & Rescission of Antidumping Duty Notification to Importers Administrative Review; 2014–2015 Export Co., Ltd.; Guangdong Yingao Kitchen Utensils Co., Ltd.; Jiangmen This notice serves as the only AGENCY: Enforcement and Compliance, New Star Hi-Tech Enterprise Ltd.; reminder to importers whose entries International Trade Administration, Jiangmen Pioneer Import & Export Co., will be liquidated as a result of this Commerce. Ltd.; Primy Cooperation Limited; rescission notice, of their responsibility SUMMARY: The Department of Commerce Tianjin ZNJ Industries Co., Ltd.; Xinhe under 19 CFR 351.402(f)(2) to file a (the Department) is partially rescinding Stainless Steel Products Co., Ltd.; and certificate regarding the reimbursement its administrative review of the Zhuhai Kohler Kitchen & Bathroom of antidumping duties and/or antidumping duty order on drawn Products Co., Ltd. Accordingly, the countervailing duties prior to stainless steel sinks from the People’s liquidation of the relevant entries Republic of China (PRC) for the period 1 See Antidumping or Countervailing Duty Order, during this review period. Failure to Finding, or Suspended Investigation; Opportunity comply with this requirement may of review (POR) April 1, 2014, through to Request Administrative Review, 80 FR 17392 March 31, 2015. result in the presumption that (April 1, 2015). reimbursement of antidumping duties DATES: Effective December 17, 2015. 2 See Initiation of Antidumping and Countervailing Duty Administrative Reviews, 80 FR and/or countervailing duties occurred FOR FURTHER INFORMATION CONTACT: 30041 (May 26, 2015) (Initiation Notice). Brian Smith or Ross Belliveau, 3 See Letter from Tianjin ZNJ Industries Co., Ltd. 4 As stated in Change in Practice in NME Reviews, Enforcement and Compliance, to the Department, dated June 26, 2015; Letter from the Department will no longer consider the non- International Trade Administration, Hajoca Corporation to the Department, dated July market entity as an exporter conditionally subject 31, 2015; Letters from Elkay Manufacturing to administrative reviews. See Antidumping U.S. Department of Commerce, 1401 Company (the Petitioner) to the Department dated Proceedings; Announcement of Change in Constitution Avenue NW., Washington, July 14, August 7, and August 24, 2015; Letter from Department Practice for Respondent Selection in DC 20230; telephone: (202) 482–1766 or Guangdong Yingao Kitchen Utensils Co., Ltd. to the Antidumping Duty Proceedings and Conditional (202) 482–4952, respectively. Department, dated August 11, 2015; and Letter from Review of the Nonmarket Economy Entity in NME Guangdong New Shichu Import & Export Co., Ltd. Antidumping Duty Proceedings, 78 FR 65963 SUPPLEMENTARY INFORMATION: to the Department, dated August 24, 2015. (November 3, 2013).
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and the subsequent assessment of 31, 2014.1 On July 29, 2015, Ritrovo, part, if the party or parties that double antidumping duties. LLC (Ritrovo) requested that the requested a review withdraws the Department conduct an administrative Notification Regarding Administrative request within 90 days of the review of La Romagna S.r.l., I Sapori Protective Order publication date of the notice of dell’Arca S.r.l., Vero Lucano S.r.I., initiation of the requested review. As This notice serves as the only Azienda Agricola Casina Rossa di De noted above, all requests for review reminder to parties subject to Laurentiis Nicola, Pastificio Bolognese were withdrawn, and all parties administrative protective order (APO) of of Angelo R. Dicuonzo, and withdrew their requests within 90 days their responsibility concerning the Ser.com.snc. On the same date, La of the publication date of the notice of disposition of proprietary information Fabbrica della Pasta do Gragnano S.a.s. initiation. No other parties requested an disclosed under APO in accordance di Antonino Moccia (La Fabbrica) administrative review of the order. with 19 CFR 351.305(a)(3). Timely requested an administrative review of Therefore, in accordance with 19 CFR written notification of return/ its POR sales and of its affiliated 351.213(d)(1), we are rescinding this destruction of APO materials or producer, Pastificio C.A.M.S. srl. On the conversion to judicial protective order is same date, La Molisana, SpA (La review in its entirety. hereby requested. Failure to comply Molisana) requested an administrative Assessment with the regulations and the terms of an review of itself for this POR.2 On July APO is a sanctionable violation. 30, 2015, Gruppo PTGC Oleificio USA The Department will instruct U.S. This notice is published in Corp. (Gruppo Fooding) requested an Customs and Border Protection (CBP) to accordance with section 751 of the Act administrative review of Poiatti, S.p.A.3 assess CVDs on all appropriate entries of and 19 CFR 351.213(d)(4). Pursuant to the requests and in certain pasta from Italy. CYDs shall be Dated: December 11, 2015. accordance with 19 CFR 351.213(b), the assessed at rates equal to the cash Christian Marsh, Department published a notice initiating deposit of estimated CYDs required at an administrative review of Azienda Deputy Assistant Secretary for Antidumping the time of entry, or withdrawal from and Countervailing Duty Operations. Agricola Casina Rossa di De Laurentiis warehouse, for consumption in Nicola, I Sapori dell’Arca S.r.l., La [FR Doc. 2015–31775 Filed 12–16–15; 8:45 am] accordance with 19 CFR Fabbrica, La Molisana, La Romagna BILLING CODE 3510–DS–P 351.212(c)(1)(i). The Department S.r.l., Pastificio Bolognese of Angelo R. intends to issue appropriate assessment Dicuonzo, Ser.com.snc, Vero Lucano S. instructions to CBP 15 days after the DEPARTMENT OF COMMERCE r. I., Pastificio C.A.M.S. srl, and Poiatti, date of publication of this notice of 4 S.p.A. On November 30, 2015, La rescission of administrative review. International Trade Administration Molisana and Gruppo Fooding timely withdrew their requests for Notifications [C–475–819] administrative review.5 On December 1, 2015, La Fabbrica and Ritrovo timely This notice also serves as a final Certain Pasta From Italy: Rescission of withdrew their requests for an reminder to parties subject to Countervailing Duty Administrative administrative review.6 administrative protective order (APO) of Review; 2014 their responsibility concerning the Rescission of Review AGENCY: Enforcement and Compliance, return or destruction of proprietary International Trade Administration, Pursuant to 19 CFR 351.213(d)(1), the information disclosed under an APO in Department of Commerce. Department will rescind an accordance with .19 CFR 351.305(a)(3). administrative review, in whole or in SUMMARY: The Department of Commerce Timely written notification of the return (the Department) is rescinding the or destruction of APO materials, or 1 See Antidumping or Countervailing Duty Order, conversion to judicial protective order, administrative review of the Finding, or Suspended Investigation; Opportunity countervailing duty (CVD) order on to Request Administrative Review, 80 FR 37583 is hereby requested. Failure to comply pasta from Italy for the period of review (July 1, 2015). with the regulations and terms of an (POR) January 1, 2014, through 2 See Letter from Ritrovo, ‘‘Request for APO is a sanctionable violation. Administrative Review Certain Pasta from Italy,’’ December 31, 2014, based on the timely dated July 29, 2015; Letter from La Molisana, This notice is issued and published in withdrawal of requests for review. ‘‘Certain Pasta From Italy: Request for Review by La accordance with sections 751(a)(1) and DATES: Effective date: December 17, Molisana, S.p.A.,’’ dated July 29, 2015; Letter from 777(i)(1) of the Tariff Act of 1930, as La Fabbrica, ‘‘Certain Pasta From Italy: Request for 2015. Review by La Fabbrica della Pasta do Gragnano amended, and 19 CFR 351.213(d)(4). FOR FURTHER INFORMATION CONTACT: S.a.s. di Antonino Moccia and Pastificio C.A.M.S. Dated: December 11, 2015. srl,’’ dated July 29, 2015. Mark Kennedy, AD/CVD Operations, 3 See Letter from Gruppo Fooding, ‘‘Certain Pasta Christian Marsh, Office I, Enforcement and Compliance, From Italy: Request for Administrative Review by Deputy Assistant Secretary for Antidumping International Trade Administration, Gruppo PTGC Oleificio USA Corp., Importer of and Countervailing Duty Operations. U.S. Department of Commerce, 14th Pasta Produced by Poiatti, S.p.A.,’’ dated July 30, [FR Doc. 2015–31799 Filed 12–16–15; 8:45 am] Street and Constitution Avenue NW., 2015. 4 See Initiation of Antidumping and BILLING CODE 3510–DS–P Washington, DC 20230; telephone: (202) Countervailing Duty Administrative Reviews, 80 FR 482–7883. 53106 (September 2, 2015). SUPPLEMENTARY INFORMATION: 5 See Letter from La Molisana, ‘‘Certain Pasta From Italy: Withdraw Request for Review,’’ dated Background November 30, 2015; Letter from Gruppo Fooding, ‘‘Certain Pasta From Italy: Withdraw Request for On July 1, 2015, the Department Review,’’ dated November 30, 2015. published the notice of opportunity to 6 See Letter from La Fabbrica, ‘‘Certain Pasta request an administrative review of the From Italy: Withdraw Request for Review,’’ dated December 1, 2015; Letter from Ritrovo, CVD order on pasta from Italy for the ‘‘Withdrawal of Request for Administrative Review POR January 1, 2014, through December Certain Pasta from Italy,’’ dated December 1, 2015.
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DEPARTMENT OF COMMERCE Mail: Submit written comments to Jon ESA listing of the species is currently Kurland, Assistant Regional not in effect. National Oceanic and Atmospheric Administrator for Protected Resources, Pursuant to section 101(a)(5)(E) of the Administration Alaska Region NMFS, Attn: Ellen MMPA, 16 U.S.C. 1361 et seq., NMFS RIN 0648–XD283 Sebastian, P.O. Box 21668, Juneau, AK shall for a period of up to three 99802–1668. consecutive years allow the incidental, Taking of Threatened or Endangered Instructions: Comments sent by any but not the intentional, taking of marine Marine Mammals Incidental to other method, to any other address or mammal species listed under the ESA, Commercial Fishing Operations; individual, or received after the end of 16 U.S.C. 1531 et seq., by persons using Proposed Permit the comment period, may not be vessels of the United States and those considered by NMFS. All comments vessels which have valid fishing permits AGENCY: National Marine Fisheries received are a part of the public record issued by the Secretary in accordance Service (NMFS), National Oceanic and and will generally be posted for public with section 204(b) of the Magnuson- Atmospheric Administration (NOAA), viewing on www.regulations.gov Stevens Fishery Conservation and Commerce. without change. All personal identifying Management Act, 16 U.S.C. 1824(b), ACTION: Notice; request for comments. information (e.g., name, address, etc.), while engaging in commercial fishing operations, if NMFS makes certain SUMMARY: NMFS proposes to issue a confidential business information, or determinations. NMFS must determine, permit for a period of three years to otherwise sensitive information after notice and opportunity for public authorize the incidental, but not submitted voluntarily by the sender will comment, that: (1) Incidental mortality intentional, taking of individuals from be publicly accessible. NMFS will and serious injury will have a negligible five marine mammal stocks listed under accept anonymous comments (enter impact on the affected species or stocks; the Endangered Species Act (ESA) by ‘‘N/A’’ in the required fields if you wish (2) a recovery plan has been developed the Bering Sea and Aleutian Islands to remain anonymous). Attachments to or is being developed for such species (BSAI) flatfish trawl, the BSAI pollock electronic comments will be accepted in or stock under the ESA; and (3) where trawl, and the BSAI Pacific cod longline Microsoft Word, Excel, or Adobe PDF required under section 118 of the fisheries. In accordance with the file formats only. MMPA, a monitoring program has been MMPA, NMFS must issue this permit Electronic copies of the draft NID for established, vessels engaged in such provided it can make the determinations the affected stocks and copies of the fisheries are registered in accordance that: The incidental take will have a recovery plans for humpback whales with section 118 of the MMPA, and a negligible impact on the affected stocks; and Steller sea lions are available at take reduction plan has been developed a recovery plan for all affected stocks of http://www.alaskafisheries.noaa.gov/ or is being developed for such species threatened or endangered marine cm/analyses/default.aspx and http:// or stock. mammals has been developed or is www.nmfs.noaa.gov/pr/recovery/ plans.htm#mammals. NMFS proposes to issue a permit being developed; and a take reduction under MMPA section 101(a)(5)(E) to plan and monitoring program have been FOR FURTHER INFORMATION CONTACT: vessels registered in the BSAI pollock implemented, and vessels in these Kristin R. Mabry, NMFS Alaska Region, trawl, BSAI flatfish trawl, and BSAI fisheries are registered. NMFS has made 907–586–7490, [email protected]; Pacific cod longline fisheries to a preliminary determination that or Shannon Betridge, NMFS Office of incidentally take individuals from the incidental taking from commercial Protected Resources, 301–427–8402, WNP and CNP stocks of humpback fishing will have a negligible impact on [email protected]. whales, the Western U.S. stock of Steller the endangered Western North Pacific SUPPLEMENTARY INFORMATION: sea lions, and Alaska stocks of ringed (WNP) stock of humpback whales, Background and bearded seals. Because other stocks endangered Central North Pacific (CNP) of threatened or endangered marine stock of humpback whales, endangered NMFS proposes to issue a three-year mammals are not taken in Category I or Western U.S. stock of Steller sea lions, permit under MMPA section Category II groundfish fisheries (as threatened Alaska stock of ringed seals, 101(a)(5)(E) to participants registered in listed in the 2016 List of Fisheries and Alaska stock of bearded seals. the Alaska BSAI flatfish trawl and BSAI (LOF)), effects to no other species or Accordingly, NMFS solicits public pollock trawl fisheries to incidentally stocks are evaluated for this proposed comments on the draft negligible impact take individuals from the following permit. The data for considering these determination (NID) and on the marine mammal stocks listed under the authorizations were reviewed proposal to issue a permit to vessels that ESA: The endangered WNP and CNP coincident with the preparation of the operate in these fisheries for the taking stocks of humpback whales, endangered 2016 MMPA List of Fisheries (80 FR of affected endangered or threatened Western U.S. stock of Steller sea lions, 58427, September 29, 2015), the 2014 stocks of marine mammals. threatened Alaska stock ringed seals; marine mammal stock assessment DATES: Comments must be received by and the Alaska stock of bearded seals; reports (SARs), and recovery plans for January 19, 2016. and to participants registered in the humpback whales and Steller sea lions. ADDRESSES: You may submit comments, BSAI Pacific cod longline fishery to Based on observer data and marine identified by FDMS docket Number incidentally take individuals from the mammal reporting forms, the BSAI NOAA–NMFS–2014–0057, by either of Alaska stock of ringed seals. The pollock trawl, BSAI flatfish trawl, and the following methods: bearded seal does not currently have BSAI Pacific cod longline fisheries are Electronic Submissions: Submit all status under the ESA because its ESA Category II fisheries that operate in the electronic public comments via the listing was vacated by the U.S. District ranges of affected stocks. A description Federal e-Rulemaking Portal. Go to Court for the District of Alaska on July of these fisheries can be found in the www.regulations.gov/ 25, 2014. NMFS is appealing that draft NID (see ADDRESSES). These #!docketDetail;D=NOAA-NMFS-2014- decision. In the interim, NMFS will federally-managed fisheries take place 0057, click the ‘‘Comment Now!’’ icon, continue to consider the effects of inside both state waters (from the complete the required fields, and enter fisheries on bearded seals under MMPA coastline out to three nautical miles) or attach your comments. section 101(a)(5)(E), even though the and federal waters (three to two
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hundred nautical miles from shore). The defined in 50 CFR 216.103, and through PBR, and the population is stable or federally-managed fisheries inside scientific analysis, peer review, and increasing. Fisheries may then be Alaska state waters are often referred to public notice developed a quantitative permitted subject to individual review as state ‘‘parallel’’ fisheries and are approach. As it applies here, the and certainty of data. Criterion 4 included in this authorization. All other definition of ‘‘negligible impact’’ is ‘‘an stipulates that if the population Category II fisheries that interact with impact resulting from the specified abundance of a stock is declining, the these marine mammal stocks observed activity that cannot be reasonably threshold level of 10% of PBR will off the coasts of Alaska are state- expected to, and is not reasonably likely continue to be used. Criterion 5 states managed fisheries (as opposed to state to adversely affect the species or stock that if total fisheries-related M/SI are parallel fisheries). Participants in through effects on annual rates of greater than PBR, permits may not be Category III fisheries are not required to recruitment or survival.’’ The issued for that species or stock. obtain incidental take permits under development of the approach is outlined For its analysis NMFS used the 2014 MMPA section 101(a)(5)(E) but are in detail in the draft NID made available SARs, which estimate mean or required to report injuries or mortality through this notice and was described minimum annual mortality from of marine mammals incidental to their in previous notices for other permits to observed commercial fisheries. For the operations. take threatened or endangered marine ice seals, NMFS also reviewed previous In accordance with the MMPA, NMFS mammals incidental to commercial incidental take statements (ITS) has determined that incidental taking fishing (e.g., 72 FR 60814, October 26, associated with ESA section 7 from the BSAI pollock and flatfish trawl 2007; 78 FR 54553, September 4, 2013). consultations as indicators of the levels and BSAI Pacific cod longline fisheries The negligible impact criteria are of M/SI to these species from groundfish will have a negligible impact on WNP described below and use the Potential fisheries. ITS included in biological and CNP stocks of humpback whales, Biological Removal (PBR) in their opinions on federal fisheries actions the Western U.S. stock of Steller sea application. The MMPA defines PBR as estimate take over a three-year period. lions, and Alaska stocks of ringed and ‘‘the maximum number of animals, not In the case of ringed and bearded seals, bearded seals. This proposed including natural mortalities that may NMFS used the maximum observed authorization is based on a be removed from a marine mammal mortality in a given year as the starting determination that the incidental take of stock while allowing that stock to reach point in generating the three-year these fisheries will have a negligible or maintain its optimum sustainable average, as opposed to the annual impact on the affected marine mammal population and was developed to assess average mortality. Since PBRs for the stocks; recovery plans have been the level of incidental take in two ice seals are not currently available, completed for humpback whales and commercial fisheries.’’ The PBR level is NMFS considered both sources of data Steller sea lions, and NMFS is the product of the minimum population in the NID analysis for making a developing recovery plans for ringed estimate of the stock, one-half the negligible impact determination of the and bearded seals; a monitoring maximum theoretical or estimated net effects of M/SI from groundfish fisheries program is established, vessels in the productivity rate of the stock at a small on those species. The specific ITS fisheries are registered, and the population size, and a recovery factor of comparison analysis is available for necessary take reduction plan (TRP) has between .1 and 1.0. review in the draft NID that been developed or is being developed. accompanies this notice. A previous three-year MMPA permit Criteria for Determining Negligible The time frame for the data used in was issued on December 13, 2010, for Impact this analysis includes the most recent BSAI flatfish trawl, BSAI pollock trawl, In 1999, NMFS proposed criteria to five-year period for which data are BSAI Pacific cod longline, and BSAI determine whether M/SI incidental to available and have been analyzed sablefish pot, all Category II fisheries commercial fisheries will have a (2008–2012). The NMFS Guidelines for that were determined to have negligible negligible impact on a listed marine Assessing Marine Mammal Stocks impacts on ESA-listed marine mammal mammal stock for MMPA 101(a)(5)(E) (GAMMS) and the subsequent GAMMS stocks, including: Humpback whale permits (64 FR 28800, May 27, 1999). In II provide guidance that, when (WNP and CNP stocks), Steller sea lion applying the 1999 criteria, Criterion 1 is available, the most recent five-year time (Western and Eastern U.S. stocks), fin whether total known, assumed, or frame of commercial fishery incidental whale (northeastern Pacific stock), and extrapolated human-caused M/SI is less serious injury and mortality data is an sperm whale (North Pacific stock) (75 than 10% of the potential biological appropriate measure of effects of fishing FR 32689, December 29, 2010). Because removal level (PBR) for the stock. If total operations on marine mammals (Wade that permit has expired, NMFS proposes known, assumed, or extrapolated and Angliss 1997). A five-year time to issue this new three-year permit. human-caused M/SI is less than 10% of frame provides enough data to PBR, the analysis would be concluded, adequately capture year-to-year Basis for Determining Negligible Impact and the impact would be determined to variations in take levels, while reflecting Prior to issuing a permit to take ESA- be negligible. If Criterion 1 is not current environmental and fishing listed marine mammals incidental to satisfied, NMFS may use one of the conditions as they may change over commercial fishing, NMFS must other criteria as appropriate. Criterion 2 time. In cases where available observer determine if mortality and serious is satisfied if the total known, assumed, data are only available outside that time injury (M/SI) incidental to commercial or extrapolated human-caused M/SI is frame, as is the case for state-managed fisheries will have a negligible impact greater than PBR, but fisheries-related fisheries, the most recent observer data on the affected species or stocks of M/SI is less than 10% of PBR. If are used. Where entanglement data from marine mammals. NMFS satisfied this Criterion 2 is satisfied, vessels operating the NMFS Marine Mammal Health and requirement through completion of a in individual fisheries may be permitted Stranding Network are considered, the draft NID (see ADDRESSES). if management measures are being taken five-year time frame from 2008–2012 is Although the MMPA does not define to address non-fisheries-related used. The draft NID made available ‘‘negligible impact,’’ NMFS has issued mortality and serious injury. Criterion 3 through this notice provides a complete regulations providing a qualitative is satisfied if total fisheries-related M/SI analysis of the criteria for determining definition of ‘‘negligible impact’’ as is greater than 10% of PBR and less than whether commercial fisheries off Alaska
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are having a negligible impact on the whales, Western U.S. stock of Steller sea Convention Line of 1867. Management WNP and CNP stocks of humpback lions, and the Alaska stocks of bearded measures for the BSAI groundfish whales, Western U.S. stock of Steller sea and ringed seals. fisheries constrain fishing both lions, and Alaska stocks of ringed and temporally and spatially. The BSAI Pollock Trawl Fishery bearded seals. A summary of the authorized gear, fishing season, criteria analysis and subsequent determination In 2013, 121 vessels targeted pollock for determining fishing seasons, and follows. in the Bering Sea and Aleutian Islands area restrictions by gear type are defined management area. The pattern of the in the regulations implementing the Description of the Fisheries recent pollock fishery in the BSAI is to BSAI fishery management plan (50 CFR A brief description follows of three focus on a winter, spawning-aggregation part 679). Category II federally-managed fisheries fishery. The A season fishery is January The SARs have recorded incidental in the 2016 List of Fisheries (80 FR 20 through June 10. Fishing in this takes of marine mammals in this fishery 58427, September 29, 2015) with season lasts about 8–10 weeks since 1988. Observer coverage ranged documented M/SI of ESA-listed species depending on the catch rates. The B 51–64% from 2008–2012. Species taken during 2008–2012 and considered in season is June 10 through November 1. include Dall’s porpoise (Alaska stock), this NID analysis. Fishing in the B season is typically July killer whale (GOA, AI, and BS Transient through October and has been BSAI Flatfish Trawl Fishery stocks), northern fur seal (Eastern conducted to a greater extent west of Pacific stock), and ringed seal (Alaska In 2008, Amendment 80 to the 170/W longitude compared to the A stock). Table 7 in the draft NID reports Fishery Management Plan for season fishing location in the southern the observed and mean annual mortality Groundfish of the Bering Sea and Bering Sea. Directed fishing is closed for of the Alaska stock ringed seals. Aleutian Islands allocated most of the pollock in all areas from November 1 to BSAI flathead sole, rock sole, and January 20. Fishing is also closed Negligible Impact Determinations yellowfin sole to the trawl catcher around designated rookeries and The draft NID made available through processor sectors using bottom trawl haulouts out to 20 nm and closed within this notice provides a complete analysis gear. American Fisheries Act catcher Steller sea lion foraging areas in the of the criteria for determining whether processors and trawl catcher vessels Bering Sea and Aleutian Islands. The commercial fisheries off Alaska are target yellowfin sole allocated to the BSAI pollock total allowable catch having a negligible impact on WNP and BSAI trawl limited access sector. Other (TAC) is allocated 40% to the A season CNP stocks of humpback whales, vessel categories and gear types catch and 60% to the B season. No more than Western U.S. stock of Steller sea lions, some flatfish incidentally in other 28% of the annual directed fishing and the Alaska stocks of bearded and directed fisheries. In 2013, 32 vessels allowance for pollock can be taken ringed seals. A summary of the analysis targeted flatfish in the BSAI. Rock sole inside the Sea Lion Conservation Area and subsequent determination follows. is generally targeted during the roe in the southern Bering Sea before April Humpback Whale, WNP Stock season, January to March. Then these 1. vessels shift to several different targets; The SARs have recorded incidental Criterion 1 was not satisfied because notably Atka mackerel, arrowtooth takes of marine mammals in this fishery the total human-related mortalities and flounder, flathead sole, yellowfin sole, since 1988. Observer coverage ranged serious injuries are not less than 10% Pacific cod, and Pacific ocean perch. from 85–98% during 2008–2012. PBR. The PBR calculated for this stock Vessels also can fish in the Gulf of Species taken include Dall’s porpoise is 3.0 animals (Allen and Angliss 2015). Alaska to fish for arrowtooth, Pacific (Alaska stock), harbor seal, humpback The annual average M/SI to the WNP cod, flathead sole, rex sole, and whale (CNP stock), humpback whale stock of humpback whales from all rockfish. In the BSAI, most of the (WNP stock), fin whale (Northeast human-caused sources is 2.16 animals, flathead sole, rock sole, and yellowfin Pacific stock), killer whale (GOA, which is 71.87% of this stock’s PBR sole fisheries occur on the continental Aleutian Islands, and Bering Sea (above the 10% PBR (0.3 animals) shelf in the eastern Bering Sea in water Transient stocks), minke whale (Alaska threshold). As a result, NMFS cannot shallower than 200 meters. Some effort stock), ribbon seal (Alaska stock), make a negligible impact determination follows the contour of the shelf to the spotted seal (Alaska stock), ringed seal based on Criterion 1 and the other northwest and extends as far north as (Alaska stock), bearded seal (Alaska criteria must be examined. Zhemchug Canyon. Very few flathead stock), northern fur seal (Eastern Pacific Criterion 2 was also not satisfied, sole, rock sole, and yellowfin sole are stock), Steller sea lion (Western U.S. because fisheries-related mortality alone taken in the Aleutian Islands due to the stock). Tables 3–7 in the draft NID exceeds 10% of PBR. The estimate of limited shallow water areas. report the observed and mean annual fisheries-related mortality is 0.9, which The SARs have documented mortality of WNP and CNP stocks of is 30% of the PBR. incidental takes of marine mammals in humpback whales, Western U.S. stock NMFS used NID Criterion 3 to this fishery since 1988. Observer of Steller sea lions, and the threatened evaluate impacts of commercial coverage during 2008–2012 was 100%. Alaska stocks of bearded and ringed fisheries on the WNP stock of humpback Species taken include bearded seal, seals. whales because the total fisheries harbor porpoise and harbor seal (Bering related M/SI is greater than 10% of the Sea), killer whale (Alaska resident), BSAI Pacific Cod Longline Fishery stock’s PBR but less than PBR, and the killer whale (GOA, AI, and BS This fishery targets Pacific cod with stock is stable or increasing. The total of transient), northern fur seal (Eastern hook and line gear in the Bering Sea 0.9 fisheries-related M/SI per year is Pacific stock), spotted seal (Alaska with 45 permits issued or fished. above 10% of PBR (0.3), and it is below stock), ringed seal (Alaska stock), ribbon Fishing effort in this fishery occurs the stock’s PBR of 3.0 animals. The 2014 seal (Alaska stock), Steller sea lion within the U.S. EEZ of the Eastern SAR reports a 6.7% annual rate of (Western U.S. stock), and Pacific walrus. Bering Sea and the portion of the North increase over the 1991–1993 estimate Tables 3–7 in the draft NID report the Pacific Ocean adjacent to the Aleutian using the best available information, but observed and mean annual mortality of Islands, which is west of 170 ° W. acknowledges that number is biased WNP and CNP stocks of humpback longitude up to the U.S.-Russian high to an unknown degree with no
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confidence limits. Further, there are available information, M/SI incidental estimates that total human-caused M/SI only minor fluctuations in expected to commercial fishing will have a is likely greater than 10% PBR based on fisheries-related M/SI. Using Criterion 3 negligible impact on the stock. the best available information on and the best available information on minimum stock abundance and total Steller Sea Lion, Western U.S. Stock the population growth of the WNP stock human-caused M/SI. Although NMFS of humpback whales and on fisheries- Criterion 1 was not satisfied for cannot calculate PBR for this stock with related M/SI as reported in the 2014 Steller sea lion, Western U.S. stock, the available information, NMFS SAR, NMFS determines that M/SI because the total human-related examined whether total human-caused incidental to commercial fishing will mortalities and serious injuries are not M/SI for this stock is less than a proxy have a negligible impact on the stock. less than 10% PBR. The PBR calculated for PBR based on the formula for this stock is 292 animals. The annual established in the MMPA for calculating Humpback Whale, CNP Stock average M/SI to the Western U.S. stock PBR. Section 3(20) of the MMPA defines Criterion 1 was not satisfied because of Steller sea lion from all human- PBR as ‘‘the product of the following the total human-related mortalities and caused sources is 244.9 animals, which factors: (A) The minimum population serious injuries are not less than 10% is 83.87% of this stock’s PBR (above the estimate of the stock (NMIN); (B) one-half PBR. The PBR calculated for this stock 10% PBR (29.2 animals) threshold). As the maximum theoretical or estimated is 82.8 animals. The annual average M/ a result, NMFS cannot make a negligible net productivity rate of the stock at a SI to the CNP stock of humpback whales impact determination based on Criterion small population size (0.5RMAX); and (C) from all human-caused sources is 15.89 1 and the other criteria must be a recovery factor of between 0.1 and 1.0 animals, which is 19.19% of this stock’s examined. (FR)’’ (16 U.S.C. 1362(20)). PBR = NMIN PBR (above the 10% PBR (8.28 animals) Criterion 2 was also not satisfied. The × 0.5RMAX × FR. threshold). As a result, NMFS cannot total fishery-related M/SI per year is NMFS evaluated the current human- make a negligible impact determination 32.7 animals per year and is 11.2% of caused M/SI under the assumption that based on Criterion 1 and the other the stock’s PBR of 292 animals. Total it represents a percentage of the stock’s criteria must be examined. human-caused M/SI is 83.87% of the unknown PBR. When considering CNP humpback whales do not stock’s PBR of 292 animals. Because Criterion 1, NMFS rearranged the PBR precisely fit the criteria as written for total human-caused M/SI are not greater equation to estimate whether total Criterion 2 or 3. Criterion 2 is satisfied than PBR, and fisheries-related human-caused M/SI for this stock is if the total known, assumed, or mortality is not less than 10% PBR, likely less than 10% of a proxy PBR for extrapolated human-caused M/SI is NMFS cannot make a negligible impact the stock, NMIN = PBR/(0.5RMAX × FR). greater than PBR, but fisheries-related determination based on Criterion 2. The total human-caused M/SI is M/SI is less than 10% of PBR. Criterion NMFS used NID Criterion 3 to 6,790.22 animals. If this total human 2 was not satisfied because total human- evaluate impacts of commercial related M/SI of 6,790.22 animals were caused mortality (15.89) does not fisheries on the Steller sea lion, Western equal to 10% of the stock’s PBR, NMIN exceed PBR (82.8). U.S. stock because the total fisheries would need to be 2,263,406 bearded Criterion 3 is satisfied if total fishery- related M/SI is greater than 10% of the seals (given a FR of 0.5 and a related M/SI is greater than 10% PBR, stock’s PBR but less than PBR and the recommended pinniped RMAX of 12%). less than PBR, and the population is stock is stable or increasing. The total An NMIN of 2,263,406 is far greater than stable or increasing. The fisheries- M/SI from commercial fisheries of 32.7 the crude estimate of 155,000 animals related M/SI (3.95) for this stock is animals per year is 11.2% of PBR (above based on regional surveys throughout 4.77% of PBR. The fisheries-related M/ 10% PBR), and is below the stock’s PBR the seal’s Alaska range provided in the SI is less than 10% of PBR and therefore of 292; there are only minor fluctuations 2010 Status Review and even greater less than PBR. in expected fisheries-related M/SI. The than the more recent core area estimate Although CNP humpback whales do level of total human-caused M/SI is of 61,800. Because this population level not precisely meet the criteria for estimated to be below PBR and is is highly unlikely, NMFS determines Criterion 1, 2, or 3, data support a expected to remain below PBR for the that the annual average total human- negligible impact determination for this foreseeable future. Survey data collected caused M/SI of 6,790.22 animals is stock. The stock’s population growth since 2000 indicate that Steller sea lion likely greater than 10% of PBR for this rate is increasing, increases in fisheries- decline continues in the central and stock. Therefore, NMFS cannot make a related M/SI are limited, and human- western Aleutian Islands but regional negligible impact determination for this caused M/SI is below PBR. The 2014 populations east of Samalga Pass have stock based on Criterion 1, and the other SAR reports a range of annual rates of increased or are stable. Overall, the criteria must be examined. population increase from 4.9–10%, stock is increasing at an annual rate of NMFS used the equation in a similar depending on the study and specific 1.67 (non-pups) and 1.45 (pups). Using manner to the process above in Criterion area. These data suggest that the stock the best available information on this 1 to evaluate whether Criterion 2 was is increasing. The level of total human- stock of Steller sea lions and on the satisfied (i.e., if total human-caused M/ caused M/SI (15.89 animals) is 19.19% fisheries-related M/SI, NMFS SI is greater than PBR, but fisheries- of the PBR and is expected to remain determines that M/SI incidental to related M/SI is less than 10% of PBR). below PBR for the foreseeable future. commercial fishing will have a NMFS first evaluated whether the total Thus, the expected total human-caused negligible impact on this stock based on human-caused mortality estimate of M/SI is well below the Criterion 2 M/ Criterion 3. 6,790.22 animals is likely greater than SI threshold supporting a negligible the stock’s proxy PBR. Based on the PBR impact determination. Further, there are Bearded Seal, Alaska Stock equation, if the total human-caused M/ only minor fluctuations in fisheries- The best available information on SI of 6,790.22 were equal to PBR, the related M/SI. The expected total total fisheries-related M/SI for the NMIN for this stock would need to be fisheries-related M/SI is well below the bearded seal stock is not consistent with 226,340.7. However, core area estimate Criterion 3 M/SI threshold supporting a thresholds required for NMFS to make for the central and eastern Bering Sea of negligible impact determination. NMFS a negligible impact determination for 61,800 bearded seals and the 2010 determines that, based on the best this stock based on Criterion 1. NMFS Status Review estimate of 155,000 are
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both considerably less than 226,340.7. If U.S.C. 1371(b)). Bearded seals, ringed available estimate of 170,000 ringed NMIN is less than 226,340.7 animals, seals, and other ice seal species are co- seals in the U.S. EEZ of the Bering Sea solving for the proxy PBR level based on managed by the Ice Seal Committee and in late April (Conn et al. 2013), NMFS the PBR equation would result in a NMFS by monitoring subsistence determines that the annual average M/ proxy PBR level smaller than 6,790.22 harvest and cooperating on needed SI to the Alaska stock of ringed seal animals. Therefore, NMFS estimates research and education programs from all human-caused sources of that total human-caused mortality is pertaining to ice seals. Currently, the mortality (9,571.32) is likely greater greater than a proxy PBR. subsistence harvest of ice seals by than 10% of a proxy PBR for this stock. NMFS then rearranged the PBR Alaska Natives appears to be sustainable Therefore, NMFS cannot make a equation to evaluate whether fisheries- and does not pose a threat to the negligible impact determination for this related M/SI for this stock is likely equal populations. stock based on Criterion 1, and the other to 10% of the stock’s proxy PBR, NMIN Based on NID Criterion 2 and the best criteria must be examined. = PBR/(0.5RMAX × FR). The annual available information on bearded seal NMFS used the equation in a similar average fisheries-related M/SI is 2.22 population, fisheries-related M/SI, and manner to the process above in Criterion animals. If the annual average fisheries- total human-caused M/SI, NMFS 1 to evaluate whether Criterion 2 was related M/SI of 2.22 were equal to 10% determines that M/SI incidental to satisfied (i.e., if total human-caused M/ of the stock’s proxy PBR, the proxy PBR commercial fishing will have a SI is greater than PBR, but fisheries- level would be 22.2 animals. Based on negligible impact on the stock. This related M/SI is less than 10% of PBR). the rearranged PBR equation above, an determination is supported by review of NMFS first evaluated whether the total NMIN of 740 animals would be required M/SI incidental to U.S. commercial human-caused mortality estimate of to calculate the proxy PBR level of 22.2 fishing, revealing total commercial animals is likely greater than the stock’s animals. fishery M/SI is low, and the fisheries proxy PBR. Based on the PBR equation, As indicted above, NMFS reviewed where bycatch does occur are monitored if the total human-caused M/SI of other analyses in which M/SI to bearded extensively. If bycatch rates change, 9,571.32 were equal to a proxy PBR, the seals from groundfish fisheries has been NMFS would have that information NMIN for this stock would need to be evaluated. NMFS issued an ITS relatively quickly and could reevaluate 319,044. However, the best available authorizing take of bearded seals in the the NID as necessary. Also, the non- population estimate of 170,000 ringed 2014 ESA section 7 consultation on the fishery M/SI due to subsistence hunting seals is considerably less than 319,044 North Pacific groundfish fisheries. is monitored and although the current animals. If NMIN is less than 319,044, NMFS estimated that 18.0 seals would subsistence harvest is substantial in solving for a proxy PBR based on the be taken in a three-year period. Using an some areas, there is little to no evidence PBR equation would result in a proxy annual average of 6.0 seals as a second that subsistence harvests have or are PBR smaller than 9,571.32 animals. estimate for annual fisheries-related M/ likely to pose serious risks to the Alaska Therefore, NMFS estimates that total SI, if 6.0 bearded seals were equal to stock of bearded seals. human-caused M/SI is greater than a 10% of the stock’s proxy PBR, the proxy proxy PBR. PBR level would be 60 animals. Based Ringed Seal, Alaska Stock NMFS then rearranged the PBR on the rearranged PBR equation above, The best available information on equation to examine whether fisheries- an NMIN of 2,000 animals would be total fisheries-related M/SI for the related M/SI for this stock is likely equal required to calculate the proxy PBR ringed seal stock is not consistent with to 10% of the stock’s proxy PBR, NMIN level of 60 animals. thresholds required for NMFS to make = PBR/(0.5RMAX × FR). The annual Using the best information currently a NID for this stock based on Criterion average fisheries-related M/SI is 4.12 available, the core area population 1. NMFS estimates that total human- animals. If the annual average fisheries- estimate for the central and eastern caused M/SI is likely greater than PBR related M/SI of 4.12 were equal to 10% Bering Sea of approximately 61,800 based on the best available information of the stock’s proxy PBR, the proxy PBR bearded seals and the 2010 Status on minimum stock abundance and total level would be 41.2 animals. Based on Review estimate of 155,000 are both human-caused M/SI. Although NMFS the rearranged PBR equation above, an orders of magnitude greater than an cannot calculate PBR for this stock with NMIN of 1,373 animals would be NMIN of 740 or 2,000 animals. Because the available information, NMFS required to calculate the proxy PBR these very low population levels are examined whether total human-caused level of 41.2 animals. highly unlikely, NMFS determines that M/SI for this stock is less than a proxy As with the bearded seals, NMFS also fisheries-related M/SI is less than 10% for PBR based on the formula reviewed other analyses in which M/SI of a proxy PBR. established in the MMPA for calculating to ringed seals from groundfish fisheries NMFS used NID Criterion 2 to PBR. As described in the Criterion 1 has been evaluated. NMFS issued an evaluate impacts of commercial analysis for the bearded seal, NMFS incidental take statement authorizing fisheries on the bearded seal because the rearranged the PBR equation to estimate take of ringed seals in the 2014 ESA total human-caused M/SI are likely whether total human-caused M/SI for section 7 consultation on the North greater than the stock’s PBR, the total this stock is likely less than 10% of the Pacific groundfish fisheries. NMFS fisheries-related M/SI are likely less stock’s PBR. estimated that 36.0 seals would be taken than 10% of the PBR, and management NMFS estimates that total human- in a three-year period. Using an annual measures are being taken to address caused M/SI for ringed seals is 9,571.32 average of 12.0 seals as a second non-fisheries-related M/SI. Non- animals. If the total human related M/ estimate for annual fisheries-related M/ fisheries-related M/SI as reported in the SI of 9,571.32 animals were equal to SI, if 12.0 seals were equal to 10% of the SARs include subsistence and research. 10% of the stock’s proxy PBR, the proxy stock’s proxy PBR, the proxy PBR level The ESA provides take exemption for PBR would have to be 95,713.2 and would be 120 animals. Based on the subsistence harvest of listed species by NMIN for this population would need to PBR equation above, an NMIN of 4,000 Alaska Natives (16 U.S.C. 1539(e)). be 3,190,440 ringed seals (given a FR of animals would be required to calculate Likewise, the MMPA provides take 0.5 and a recommended pinniped RMAX the proxy PBR level of 120 animals. exemption for subsistence harvest of of 12%). Because an NMIN of 3,190,440 Preliminary analysis of the U.S. marine mammals by Alaska Natives (16 ringed seals is far greater than the best surveys, which included only a small
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subset of the 2012 data, produced an stocks of humpback whales, Western participants in the BSAI trawl and estimate of 170,000 ringed seals in the U.S. stock of Steller sea lions, and longline fisheries has been integrated U.S. EEZ of the Bering Sea in late April. Alaska stocks of bearded and ringed with the Federal groundfish limited This estimate is orders of magnitude seals. Additionally, NMFS has entry permit process of the Federal greater than an NMIN of 1,373 animals or determined that for a period of up to Vessel Monitoring System. 4,000 animals. Because these very low three years, M/SI incidental to the BSAI Monitoring Program population levels are highly unlikely, Pacific cod longline fishery will have a NMFS determined that fisheries-related negligible impact on the Alaska stock of BSAI trawl and longline fisheries M/SI is less than 10% of PBR. ringed seals. considered for authorization under this Criterion 2 states that if the total The impacts on the human permit are monitored by NMFS-certified human-caused M/SI are greater than environment of continuing and observers in the North Pacific PBR and fisheries related mortality is modifying the Bering sea trawl fisheries, Groundfish Observer Program. The rate less than 10% of PBR, ‘‘individual including the taking of threatened and of observer coverage is high (ranging fisheries may be permitted if endangered species of marine mammals, from 50–100%) and is recorded by management measures are being taken were analyzed in the Biological Opinion fishery and by year in the draft NID to address non-fisheries-related M/SI.’’ for Authorization of Groundfish analysis. Accordingly, as required by Non-fisheries-related M/SI as reported Fisheries under the Fishery MMPA section 118, a monitoring in the SARs include subsistence and Management Plan for Groundfish of the program is in place for the BSAI Pollock gunshots. The ESA provides take Bering Sea and Aleutian Island trawl, flatfish trawl, and Pacific cod exemption for subsistence harvest of Management Area; in the Alaska longline fisheries. listed species by Alaska Natives (16 Groundfish Harvest Specifications Take Reduction Plans U.S.C. 1539(e)). Likewise, the MMPA Supplemental Information Report; the provides take exemption for subsistence ESA section 7 Biological Opinion that MMPA section 118 requires the harvest of marine mammals by Alaska considered effects from the groundfish development and implementation of a Natives (16 U.S.C. 1371(b)). Bearded fisheries on bearded seals; in the ESA Take Reduction Plan (TRP) in cases seals, ringed seals, and other ice seal section 7 Biological Opinion on Oil and where a strategic stock interacts with a species are co-managed by the Ice Seal Gas Leasing and Exploration Activities Category I or II fishery. With the Committee and NMFS by monitoring in the U.S. Beaufort and Chukchi Seas; exception of the bearded seal, the stocks subsistence harvest and cooperating on and in the Biological Opinion on the considered for this permit are needed research and education Authorization of the Alaska Groundfish designated as strategic stocks under the programs pertaining to ice seals. Fisheries Under the Proposed Revised MMPA because they are listed as Currently, the subsistence harvest of ice Steller Sea Lion Protection Measures. threatened or endangered under the seals by Alaska Natives appears to be Because this permit would not modify ESA (MMPA section 3(19)(C)). The three sustainable and does not pose a threat any fishery operation and the effects of fisheries considered for this permit are to the populations. the fishery operations have been Category II fisheries. Therefore, the four Based on NID Criterion 2 and the best evaluated fully in accordance with listed stocks and three fisheries meet the available information on ringed seal NEPA, no additional NEPA analysis is triggers for convening a take reduction population, fisheries-related M/SI, and required for this permit. Issuing the team (TRT) and developing a TRP. total human-caused M/SI, NMFS proposed permit would have no The obligations to develop and determines that M/SI incidental to additional impact to the human implement a TRP are further subject to commercial fishing will have a environment or effects on threatened or the availability of funding. MMPA negligible impact on the stock. This endangered species beyond those section 118(f)(3) contains specific determination is supported by review of analyzed in these documents. priorities for developing TRPs. At this M/SI incidental to U.S. commercial time, NMFS has insufficient funding fishing, revealing total commercial Recovery Plans available to simultaneously develop and fishery M/SI is low, and the fisheries Section 4(f) of the ESA requires that implement TRPs for all strategic stocks where bycatch does occur are monitored NMFS develop recovery plans for ESA- that interact with Category I or Category extensively. If bycatch rates change, listed species, unless such a plan will II fisheries. As provided in MMPA NMFS would have that information not promote the conservation of the sections 118(f)(6)(A) and (f)(7), NMFS relatively quickly and could reevaluate species. Recovery Plans for humpback used the most recent SARs and LOF as the NID as necessary. Also, the non- whales and Steller sea lions have been the basis to determine its priorities for fishery M/SI due to subsistence hunting completed (see ADDRESSES). NMFS is establishing TRTs and developing TRPs. is monitored and although the current developing recovery plans for the Through this process, NMFS evaluated subsistence harvest is substantial in Alaska stocks of both bearded and the WNP and CNP stocks of humpback some areas, there is little to no evidence ringed seals. whale, the Western U.S. stock of Steller that subsistence harvests have or are sea lions, the Alaska stock of bearded Vessel Registration likely to pose serious risks to the Alaska seals, and the Alaska stock of ringed stock of ringed seals. MMPA section 118(c) requires that seals as lower priorities compared to vessels participating in Category I and II other marine mammal stocks and Conclusions for Proposed Permit fisheries register to obtain an fisheries for establishing TRTs, based on In conclusion, based on the negligible authorization to take marine mammals M/SI levels incidental to those fisheries impact criteria outlined in 1999 (64 FR incidental to fishing activities. Further, and population levels and trends. 28800), the 2014 Alaska SARs, the best section 118(c)(5)(A) provides that Accordingly, given these factors and scientific information and data registration of vessels in fisheries NMFS’ priorities, developing TRPs for available, NMFS has determined that for should, after appropriate consultations, these five stocks in these three fisheries a period of up to three years, M/SI be integrated and coordinated to the will be deferred under section 118 as incidental to the BSAI pollock trawl and maximum extent feasible with existing other stocks/fisheries are a higher BSAI flatfish trawl fisheries will have a fisher licenses, registrations, and related priority for any available funding for negligible impact on WNP and CNP programs. MMPA registration for establishing new TRTs.
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Solicitation for Public Comments permit to participants in the BSAI participants in the BSAI Pacific cod pollock and flatfish trawl Category II longline Category II fisheries for the NMFS solicits public comments on fisheries for the taking of individuals taking of individuals from the Alaska the proposed permit and the from the WNP and CNP stocks of stock of ringed seals incidental to the preliminary determinations supporting humpback whales, Western U.S. stock fisheries’ operations (Table 1). As noted the permit. As noted in the summary of Steller sea lions, Alaska stock of under MMPA section 101(a)(5)(E)(ii), no above, all of the requirements to issue bearded seals, and the Alaska stock of permit is required for vessels in a permit to the following Federally- ringed seals (the that occurs within the Category III fisheries. For incidental authorized fisheries have been satisfied: U.S. Exclusive Economic Zone (EEZ) of taking of marine mammals to be BSAI pollock trawl, BSAI flatfish trawl, the Beaufort, Chukchi, and Bering Seas) authorized in Category III fisheries, any and BSAI Pacific cod longline. incidental to the fisheries’ operations, mortality or serious injury must be Accordingly, NMFS proposes to issue a and proposes to issue a permit to reported to NMFS.
TABLE 1—LIST OF FISHERIES AUTHORIZED TO TAKE SPECIFIC THREATENED AND ENDANGERED MARINE MAMMALS INCIDENTAL TO COMMERCIAL FISHING OPERATIONS
Fishery Category Marine mammal stock
HI deep-set (tuna target) longline ...... I False killer whale, MHI IFKW stock Humpback whale, CNP stock Sperm whale, Hawaii stock CA thresher shark/swordfish drift gillnet (>14 in mesh) ...... I Humpback whale, CA/OR/WA stock Sperm whale, CA/OR/WA stock HI shallow-set (swordfish target) longline/set line ...... II Humpback whale, CNP stock AK Bering Sea/Aleutian Islands flatfish trawl ...... II Humpback whale, CNP stock Humpback whale, WNP stock Steller sea lion, Western U.S. stock Bearded seal, Alaska stock Ringed seal, Alaska stock AK Bering Sea/Aleutian Island pollock trawl ...... II Humpback whale, CNP stock Humpback whale, WNP stock Steller sea lion, Western U.S. stock Bearded seal, Alaska stock Ringed seal, Alaska stock AK Bering Sea/Aleutian Islands Pacific cod longline ...... II Ringed seal, Alaska stock WA/OR/CA sablefish pot ...... II Humpback whale, CA/OR/WA stock
Dated: December 11, 2015. 1. Join the meeting by visiting this • Thursday, January 14: Biological Donna S. Wieting, link: http://www.gotomeeting.com/ indicators Director, Office of Protected Resources, online/webinar/join-webinar. • Tuesday, January 26: Human National Marine Fisheries Service. 2. Enter the Webinar ID: 121–225– dimensions indicators • [FR Doc. 2015–31693 Filed 12–16–15; 8:45 am] 731. Thursday, January 28: Habitat BILLING CODE 3510–22–P 3. Please enter your name and email indicators address (required). • Tuesday, February 2: Risk Once you have joined the webinar, assessments and application of DEPARTMENT OF COMMERCE choose either your computer’s audio or indicators to decision making select ‘‘Use Telephone.’’ If you do not Each webinar will begin with a short National Oceanic and Atmospheric select ‘‘Use Telephone’’ you will be presentation by members of NOAA’s Administration connected to audio using your California Current Integrated Ecosystem computer’s microphone and speakers Assessment Team, followed by a RIN 0648–XE309 (VolP). discussion facilitated by the EWG. This If you do not have a headset and webinar series is part of the Coordinated Pacific Fishery Management Council; speakers, you may use your telephone Ecosystem Indicator Review Initiative Public Meeting for the audio portion of the meeting by intended to address goals and objectives dialing this TOLL number 1-(702) 489– from the Council’s Fishery Ecosystem AGENCY: National Marine Fisheries 0007 (not a toll-free number), then enter Plan. Through these webinars, the EWG Service (NMFS), National Oceanic and your phone audio access code 471–159– seeks input from Council advisory Atmospheric Administration (NOAA), 571, then enter your audio phone pin bodies and the public on the indicators Commerce. (shown after joining the webinar). presented in the Annual Report and ACTION: Notice; public meeting. A public listening station will also be how they can effectively support the provided at the Council office. Council’s goal of integrating ecosystem SUMMARY: The Pacific Fishery Council address: Pacific Council, considerations into fishery management Management Council’s (Council) 7700 NE Ambassador Place, Suite 101, decisions. Ecosystem Workgroup (EWG) will host Portland, OR 97220–1384. Although non-emergency issues not a series of five webinars in January and FOR FURTHER INFORMATION CONTACT: Dr. contained in the meeting agenda may be February 2016, which are open to the Kit Dahl, Pacific Council; phone: (503) discussed, those issues may not be the public. Each webinar will begin at 1:30 820–2422. subject of formal action during these p.m. SUPPLEMENTARY INFORMATION: The meetings. Action will be restricted to DATES: The webinars will be held webinars will cover the following those issues specifically listed in this January 12, January 14, January 26, topics: document and any issues arising after January 28, and February 2, 2016. • Tuesday, January 12: Contents of publication of this document that ADDRESSES: The following login the Annual California Current require emergency action under section instructions will work for any of the Ecosystem Status Report; physical 305(c) of the Magnuson-Stevens Fishery webinars in this series. oceanography indicators Conservation and Management Act,
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provided the public has been notified of have implemented the Southeast Data, (see ADDRESSES) at least 10 business the intent to take final action to address Assessment and Review (SEDAR) days prior to each workshop. the emergency. process, a multi-step method for Note: The times and sequence specified in determining the status of fish stocks in Special Accommodations this agenda are subject to change. the Southeast Region. SEDAR is a multi- The meetings are physically step process including: (1) Data/ Authority: 16 U.S.C. 1801 et seq. accessible to people with disabilities. Assessment Workshop, and (2) a series Dated: December 14, 2015. Requests for sign language of webinars. The product of the Data/ Tracey L. Thompson, interpretation or other auxiliary aids Assessment Workshop is a report which Acting Deputy Director, Office of Sustainable should be directed to Mr. Kris compiles and evaluates potential Fisheries, National Marine Fisheries Service. Kleinschmidt at (503) 820–2425 at least datasets and recommends which [FR Doc. 2015–31736 Filed 12–16–15; 8:45 am] 5 days prior to the meeting date. datasets are appropriate for assessment BILLING CODE 3510–22–P Dated: December 14, 2015. analyses, and describes the fisheries, Tracey L. Thompson, evaluates the status of the stock, estimates biological benchmarks, Acting Deputy Director, Office of Sustainable DEPARTMENT OF COMMERCE Fisheries, National Marine Fisheries Service. projects future population conditions, and recommends research and National Oceanic and Atmospheric [FR Doc. 2015–31735 Filed 12–16–15; 8:45 am] monitoring needs. Participants for Administration BILLING CODE 3510–22–P SEDAR Workshops are appointed by the Gulf of Mexico, South Atlantic, and Indirect Cost Rates for the Damage Assessment, Remediation, and DEPARTMENT OF COMMERCE Caribbean Fishery Management Councils and NOAA Fisheries Southeast Restoration Program for Fiscal Year National Oceanic and Atmospheric Regional Office, HMS Management 2014 Division, and Southeast Fisheries Administration AGENCY: National Oceanic and Science Center. Participants include RIN 0648–XE350 Atmospheric Administration (NOAA), data collectors and database managers; Commerce. stock assessment scientists, biologists, Fisheries of the Gulf of Mexico; ACTION: and researchers; constituency Notice. Southeast Data, Assessment, and representatives including fishermen, Review (SEDAR); Public Meeting SUMMARY: The National Oceanic and environmentalists, and NGO’s; Atmospheric Administration’s AGENCY: National Marine Fisheries International experts; and staff of (NOAA’s) Damage Assessment, Service (NMFS), National Oceanic and Councils, Commissions, and state and Remediation, and Restoration Program Atmospheric Administration (NOAA), federal agencies. (DARRP) is announcing new indirect Commerce. The items of discussion in the cost rates on the recovery of indirect ACTION: Notice of the second SEDAR 45 Assessment Process webinars are as costs for its component organizations post-workshop webinar for Gulf of follows: involved in natural resource damage Mexico Vermilion Snapper. 1. Using datasets and initial assessment and restoration activities for assessment analysis recommended from fiscal year (FY) 2014. The indirect cost SUMMARY: The SEDAR 45 assessment of the In-person Workshop, panelists will rates for this fiscal year and date of the Gulf of Mexico Vermilion Snapper employ assessment models to evaluate implementation are provided in this will consist of one in-person workshop stock status, estimate population notice. More information on these rates and a series of webinars. See benchmarks and management criteria, and the DARRP policy can be found at SUPPLEMENTARY INFORMATION. and project future conditions. the DARRP Web site at DATES: The second SEDAR 45 post- 2. Participants will recommend the www.darrp.noaa.gov. most appropriate methods and workshop webinar will be held from 1 FOR FURTHER INFORMATION CONTACT: For p.m. to 3 p.m. January 12, 2016. configurations for determining stock status and estimating population further information, contact LaTonya ADDRESSES: Meeting address: The parameters. Burgess at 301–713–4248, ext. 211, by meeting will be held via webinar. The Although non-emergency issues not fax at 301–713–4389, or email at webinar is open to members of the contained in this agenda may come [email protected]. public. Those interested in participating before this group for discussion, those SUPPLEMENTARY INFORMATION: The should contact Julie A. Neer at SEDAR issues may not be the subject of formal mission of the DARRP is to restore (see FOR FURTHER INFORMATION CONTACT) action during this meeting. Action will natural resource injuries caused by to request an invitation providing be restricted to those issues specifically releases of hazardous substances or oil webinar access information. Please identified in this notice and any issues under the Comprehensive request webinar invitations at least 24 arising after publication of this notice Environmental Response, hours in advance of each webinar. that require emergency action under Compensation, and Liability Act SEDAR address: 4055 Faber Place section 305(c) of the Magnuson-Stevens (CERCLA) (42 U.S.C. 9601 et seq.) and Drive, Suite 201, North Charleston, SC Fishery Conservation and Management the Oil Pollution Act of 1990 (OPA) (33 29405. Act, provided the public has been U.S.C. 2701 et seq.), and to support FOR FURTHER INFORMATION CONTACT: Julie notified of the intent to take final action restoration of physical injuries to A. Neer, SEDAR Coordinator; (843) 571– to address the emergency. National Marine Sanctuary resources 4366; email: [email protected]. under the National Marine Sanctuaries SUPPLEMENTARY INFORMATION: The Gulf Special Accommodations Act (NMSA) (16 U.S.C. 1431 et seq.). of Mexico, South Atlantic, and These meetings are physically The DARRP consists of three component Caribbean Fishery Management accessible to people with disabilities. organizations: the Office of Response Councils, in conjunction with NOAA Requests for sign language and Restoration (ORR) within the Fisheries and the Atlantic and Gulf interpretation or other auxiliary aids National Ocean Service; the Restoration States Marine Fisheries Commissions should be directed to the Council office Center within the National Marine
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Fisheries Service; and the Office of the dollars, plus the application of NOAA’s The FY 2014 rates will be applied to General Counsel Natural Resources leave surcharge and benefits rates to all damage assessment and restoration Section (GCNRS). The DARRP conducts direct labor. Direct labor costs for case costs incurred between October 1, Natural Resource Damage Assessments contractors from ERT, Inc. (ERT), 2013 and September 30, 2014. DARRP (NRDAs) as a basis for recovering Freestone Environmental Services, Inc. will use the FY 2014 indirect cost rates damages from responsible parties, and (Freestone), and Genwest Systems, Inc. for future fiscal years, beginning with uses the funds recovered to restore (Genwest) were included in the direct FY 2015, until subsequent year-specific injured natural resources. labor base because Cotton determined rates can be developed. Consistent with federal accounting that these costs have the same For cases that have settled and for requirements, the DARRP is required to relationship to the indirect cost pool as cost claims paid prior to the effective account for and report the full costs of NOAA direct labor costs. ERT, date of the fiscal year in question, the its programs and activities. Further, the Freestone, and Genwest provided on- DARRP will not re-open any resolved DARRP is authorized by law to recover site support to the DARRP in the areas matters for the purpose of applying the reasonable costs of damage assessment of injury assessment, natural resource revised rates in this policy for these and restoration activities under economics, restoration planning and fiscal years. For cases not settled and CERCLA, OPA, and the NMSA. Within implementation, and policy analysis. cost claims not paid prior to the the constraints of these legal provisions Subsequent federal notices have been effective date of the fiscal year in and their regulatory applications, the published in the Federal Register as question, costs will be recalculated DARRP has the discretion to develop follows: using the revised rates in this policy for indirect cost rates for its component • FY 2002, published on October 6, these fiscal years. Where a responsible organizations and formulate policies on 2003 (68 FR 57672) party has agreed to pay costs using the recovery of indirect cost rates • FY 2003, published on May 20, 2005 previous year’s indirect rates, but has subject to its requirements. (70 FR 29280) not yet made the payment because the The DARRP’s Indirect Cost Effort • FY 2004, published on March 16, settlement documents are not finalized, the costs will not be recalculated. In December 1998, the DARRP hired 2006 (71 Fed Reg. 13356) • the public accounting firm Rubino & FY 2005, published on February 9, David Westerholm, McGeehin, Chartered (R&M) to: Evaluate 2007 (72 FR 6221) Director, Office of Response and Restoration. • FY 2006, published on June 3, 2008 the DARRP cost accounting system and [FR Doc. 2015–31728 Filed 12–16–15; 8:45 am] (73 FR 31679) allocation practices; recommend the BILLING CODE 3510–JE–P appropriate indirect cost allocation • FY 2007 and FY 2008, published on methodology; and determine the November 16, 2009 (74 FR 58948) • indirect cost rates for the three FY 2009 and FY 2010, published on DEPARTMENT OF COMMERCE organizations that comprise the DARRP. October 20, 2011 (76 FR 65182) A Federal Register notice on R&M’s • FY 2011, published on September 17, National Oceanic and Atmospheric effort, their assessment of the DARRP’s 2012 (77 FR 57074) Administration cost accounting system and practice, • FY 2012, published on August 29, RIN 0648–XE232 and their determination regarding the 2013 (78 FR 53425) • most appropriate indirect cost FY 2013, published on October 14, Endangered and Threatened Species; methodology and rates for FYs 1993 2014 (79 FR 61617) Recovery Plans through 1999 was published on Cotton’s recent reports on these indirect December 7, 2000 (65 FR 76611). rates can be found on the DARRP Web AGENCY: National Marine Fisheries R&M continued its assessment of site at www.darrp.noaa.gov. Service (NMFS), National Oceanic and DARRP’s indirect cost rate system and Cotton reaffirmed that the Direct Atmospheric Administration, structure for FYs 2000 and 2001. A Labor Cost Base is the most appropriate Commerce. second federal notice specifying the indirect allocation method for the ACTION: Notice of availability; extension DARRP indirect rates for FYs 2000 and development of the FY 2014 indirect of public comment period. 2001 was published on December 2, cost rates. 2002 (67 FR 71537). SUMMARY: We, NMFS, announce the In October 2002, DARRP hired the The DARRP’s Indirect Cost Rates and extension of the comment period for the accounting firm of Cotton and Company Policies Proposed Endangered Species Act (ESA) LLP (Cotton) to review and certify The DARRP will apply the indirect Recovery Plan for Snake River Fall DARRP costs incurred on cases for cost rates for FY 2014 as recommended Chinook Salmon (Proposed Plan) purposes of cost recovery and to by Cotton for each of the DARRP published on November 2, 2015. The develop indirect rates for FY 2002 and component organizations as provided in Proposed Plan addresses the Snake subsequent years. As in the prior years, the following table: River Fall Chinook Salmon Cotton concluded that the cost (Oncorhynchus tshawytscha) accounting system and allocation FY 2014 evolutionarily significant unit (ESU), practices of the DARRP component DARRP indirect which is listed as threatened under the organizations are consistent with federal component organization rate ESA. The geographic area covered by accounting requirements. Consistent (%) the Proposed Plan is the lower and with R&M’s previous analyses, Cotton Office of Response and Restora- middle mainstem Snake River and also determined that the most tion (ORR) ...... 113.54 tributaries as well as the mainstem appropriate indirect allocation method Restoration Center (RC) ...... 67.50 Columbia River below its confluence continues to be the Direct Labor Cost General Counsel Natural Re- with the Snake River. As required under Base for all three DARRP component sources Section (GCNRS) ...... 29.37 the ESA, the Proposed Plan contains organizations. The Direct Labor Cost objective, measurable delisting criteria, Base is computed by allocating total These rates are based on the Direct site-specific management actions indirect cost over the sum of direct labor Labor Cost Base allocation methodology. necessary to achieve the Proposed
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Plan’s goals, and estimates of the time on the Proposed Endangered Species when each component population and costs required to implement Act Recovery Plan for Snake River Fall within an ESU or distinct population recovery actions. We are soliciting Chinook Salmon. The public comment segment (DPS) should be considered review and comment from the public period for this action is set to end on viable (i.e., when they are have a low and all interested parties on the January 4, 2016. The comment period is risk of extinction over a 100-year Proposed Plan. The close of the being extended through February 5, period) and when ESUs or DPSs have a comment period is being extended— 2016, to provide additional opportunity risk of extinction consistent with no from January 4, 2016, to February 5, for public comment. longer needing the protections of the ESA. All Technical Recovery Teams 2016—to provide additional Background opportunity for public comment. used the same biological principles for We are responsible for developing and DATES: The deadline for receipt of developing their recommendations; comments on the Proposed Recovery implementing recovery plans for Pacific these principles are described in the Plan published on November 2, 2015 salmon and steelhead listed under the NOAA technical memorandum Viable ESA of 1973, as amended (16 U.S.C. (80 FR 67386), is extended to close of Salmonid Populations and the Recovery 1531 et seq.). The ESA requires the business on February 5, 2016. of Evolutionarily Significant Units development of recovery plans for each (McElhany et al., 2000). Viable ADDRESSES: You may submit comments listed species unless such a plan would salmonid populations (VSP) are defined on the Proposed Recovery Plan by the not promote its recovery. in terms of four parameters: abundance, following methods: • We believe it is essential to have local productivity or growth rate, spatial Electronic Submissions: Submit all support of recovery plans by those electronic public comments via: structure, and diversity. whose activities directly affect the listed We also collaborated with state, tribal, nmfs.wcr.snakeriverfallchinookplan@ species and whose continued and federal biologists and resource noaa.gov. Please include ‘‘Comments on commitment and leadership will be managers to provide technical Snake River Fall Chinook Salmon needed to implement the necessary information used to develop the Recovery Plan’’ in the subject line of the recovery actions. We therefore support Proposed Plan. In addition, NMFS email. and participate in collaborative efforts established a multi-state (Idaho, Oregon, • Facsimile: (503) 230–5441. to develop recovery plans that involve and Washington), tribal, and federal • Mail: Patricia Dornbusch, National state, tribal, and federal entities, local partners’ regional forum called the Marine Fisheries Service, 1201 NE. communities, and other stakeholders. Snake River Coordination Group that Lloyd Boulevard, Suite 1100, Portland, For this Proposed Plan for threatened addresses the four ESA-listed Snake OR 97232. Snake River Fall Chinook Salmon, we River salmon and steelhead species. Instructions: Comments must be worked collaboratively with state, tribal, They met twice a year to be briefed and submitted by one of the above methods and federal partners to produce a provide technical and policy to ensure that they are received, recovery plan that satisfies the ESA information to NMFS. We presented documented, and considered by NMFS. requirements. We have determined that regular updates on the status of this Comments sent by any other method, to this Proposed ESA Recovery Plan for Proposed Plan to the Snake River any other address or individual, or Snake River Fall Chinook Salmon meets Coordination Group and posted draft received after the end of the comment the statutory requirements for a recovery chapters on NMFS’ West Coast Region period, may not be considered. plan and we are proposing to adopt it Snake River recovery planning Web Attachments to electronic comments as the ESA recovery plan for this page. We also made full drafts of the will be accepted in Microsoft Word, threatened species. Section 4(f) of the Proposed Plan available for review to Excel, or Adobe PDF file formats only. ESA, as amended in 1988, requires that the state, tribal, and Federal entities Electronic copies of the Proposed Plan public notice and an opportunity for with which we collaborated to develop are available at http:// public review and comment be provided the plan. www.westcoast.fisheries.noaa.gov/ prior to final approval of a recovery In addition to the Proposed Plan, we protected_species/salmon_steelhead/ _ _ _ plan. This notice solicits comments on developed and incorporated the Module recovery planning and this Proposed Plan. for the Ocean Environment (Fresh et al. implementation/snake_river/current_ _ _ _ _ 2014) as Appendix D to address Snake snake river recovery plan Development of the Proposed Plan River Fall Chinook Salmon recovery documents.html. For the purpose of recovery planning needs in the Columbia River estuary, Persons wishing to obtain an for the ESA-listed species of Pacific plume, and Pacific Ocean. To address electronic copy on CD ROM of the salmon and steelhead in Idaho, Oregon, recovery needs related to the Columbia Proposed Plan may do so by calling and Washington, NMFS designated five River Hydropower System, we Bonnie Hossack at (503) 736–4741 or by geographically based ‘‘recovery developed and incorporated the emailing a request to bonnie.hossack@ domains.’’ The Snake River Fall Supplemental Recovery Plan Module for noaa.gov with the subject line ‘‘CD ROM Chinook Salmon ESU spawning range is Snake River Salmon and Steelhead Request for Snake River Fall Chinook in the Interior Columbia domain. For Mainstem Columbia River Hydropower Salmon Recovery Plan.’’ each domain, NMFS appointed a team Projects (NMFS 2014b) as Appendix E FOR FURTHER INFORMATION CONTACT: of scientists, nominated for their of this Proposed Plan. To address Patricia Dornbusch, NMFS Snake River geographic and species expertise, to recovery needs related to the Lower Fall Chinook Salmon Recovery provide a solid scientific foundation for Columbia River mainstem and estuary, Coordinator, at (503) 230–5430, or recovery plans. The Interior Columbia we incorporated the Columbia River [email protected]. Technical Recovery Team included Estuary ESA Recovery Plan Module for SUPPLEMENTARY INFORMATION: biologists from NMFS, other federal Salmon and Steelhead (NMFS 2011a) as agencies, states, tribes, and academic Appendix F. To address recovery needs Extension of Comment Period institutions. for fishery harvest management in the On November 2, 2015 (80 FR 67386) A primary task for the Interior mainstem Snake and Columbia Rivers, we (NMFS) published in the Federal Columbia Technical Recovery Team was Columbia River estuary, and ocean, we Register a request for public comment to recommend criteria for determining developed and incorporated the Snake
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River Harvest Module (NMFS 2014a) as action, life stage affected, estimated will now be held at 9:30 a.m. on Friday, Appendix G. costs, timing, and potential December 18, 2015. implementing entities. It also describes The Public Draft Recovery Plan CONTACT PERSON FOR MORE INFORMATION: how implementation, prioritization of Christopher Kirkpatrick, 202–418–5964. The Proposed Plan contains biological actions, and adaptive management will background and contextual information proceed. The Proposed Plan also Natise Allen, that includes description of the ESU, the summarizes time and costs (Chapter 9) Executive Assistant. planning area, and the context of the required to implement recovery actions. [FR Doc. 2015–31877 Filed 12–15–15; 4:15 pm] plan’s development. It presents relevant In some cases, costs of implementing BILLING CODE 6351–01–P information on ESU structure, actions could not be determined at this guidelines for assessing salmonid time and NMFS is interested in population and ESU status, and a brief additional information regarding scale, DEPARTMENT OF DEFENSE summary of Interior Columbia scope, and costs of these actions. We are Technical Recovery Team products on also particularly interested in comments Department of the Army population structure and species status. on establishing appropriate forums to [Docket ID USA–2015–HQ–0049] It also presents NMFS’ proposed coordinate implementation of the biological viability criteria and threats recovery plan. Proposed Collection; Comment criteria for delisting. Request As described in Chapter 2 of the Public Comments Solicited Proposed Plan, the historical Snake We are soliciting written comments AGENCY: Office of the Administrative River fall Chinook salmon ESU on the Proposed Plan. All substantive Assistant to the Secretary of the Army, consisted of two populations. The comments received by the date specified (OAA–AAHS), DoD. population above the Hells Canyon Dam above will be considered and ACTION: Notice. Complex is extirpated, leaving only one incorporated, as appropriate, prior to extant population—the Lower Mainstem our decision whether to approve the SUMMARY: In compliance with the Snake River population. An ESU with a plan. While we invite comments on all Paperwork Reduction Act of 1995, the single population would be at greater aspects of the Proposed Plan, we are Office of the Administrative Assistant to extinction risk than an ESU with particularly interested in comments on the Secretary of the Army announces a multiple populations. This is a key developing specific scenarios to address proposed public information collection consideration in the proposed Snake the placeholder recovery scenario, and seeks public comment on the River fall Chinook salmon biological comments on the cost of recovery provisions thereof. Comments are viability criteria, since there is more actions for which we have not yet invited on: (a) Whether the proposed than one possible scenario for achieving determined implementation costs, and collection of information is necessary the criteria. The proposed viability comments on establishing an for the proper performance of the criteria include two possible scenarios appropriate implementation forum for functions of the agency, including and a placeholder for developing the plan. We will issue a news release whether the information shall have additional scenarios that would be announcing the adoption and practical utility; (b) the accuracy of the consistent with delisting. Scenario A availability of the final plan. We will agency’s estimate of the burden of the focuses on achieving ESA delisting with post on the NMFS West Coast Region proposed information collection; (c) two populations (i.e., the extant Lower Web site (www.wcr.noaa.gov) a ways to enhance the quality, utility, and Mainstem Snake River population and a summary of, and responses to, the clarity of the information to be recovered Middle Snake population comments received, along with collected; and (d) ways to minimize the above the Hells Canyon Complex). burden of the information collection on Scenario B illustrates a single- electronic copies of the final plan and its appendices. respondents, including through the use population pathway to delisting. The of automated collection techniques or placeholder scenario describes a Authority: 16 U.S.C. 1531 et seq. other forms of information technology. framework under which additional Dated: December 14, 2015. DATES: Consideration will be given to all single-population scenarios could be Angela Somma, comments received by February 16, developed that would involve Chief, Endangered Species Division, Office 2016. developing natural production emphasis of Protected Resources, National Marine areas that would have a low percentage Fisheries Service. ADDRESSES: You may submit comments, of hatchery-origin spawners. NMFS is [FR Doc. 2015–31748 Filed 12–16–15; 8:45 am] identified by docket number and title, interested in comments on how such by any of the following methods: BILLING CODE 3510–22–P additional scenarios might be • Federal eRulemaking Portal: http:// developed, potentially for inclusion in www.regulations.gov. Follow the the final recovery plan. instructions for submitting comments. The Proposed Plan also describes COMMODITY FUTURES TRADING • Mail: Department of Defense, Office specific information on the following: COMMISSION of the Deputy Chief Management current status of Snake River Fall Officer, Directorate of Oversight and Chinook Salmon; limiting factors and Sunshine Act Meetings Compliance, Regulatory and Audit threats throughout the life cycle that Matters Office, 9010 Defense Pentagon, have contributed to the species decline; FEDERAL REGISTER CITATION OF PREVIOUS Washington, DC 20301–9010. recovery strategies and actions ANNOUNCEMENT: 80 FR 76948, Dec. 11, Instructions: All submissions received addressing these limiting factors and 2015. must include the agency name, docket threats; and a proposed research, PREVIOUSLY ANNOUNCED TIME AND DATE OF number and title for this Federal monitoring, and evaluation program for THE MEETING: 10:00 a.m., Friday, Register document. The general policy adaptive management. For recovery December 18, 2015. for comments and other submissions actions, the Proposed Plan includes a CHANGES IN THE MEETING: The time of from members of the public is to make table summarizing each proposed the meeting has changed. This meeting these submissions available for public
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viewing on the Internet at http:// Dated: December 14, 2015. will be made on a first-come, first www.regulations.gov as they are Aaron Siegel, served basis. Persons desiring to attend received without change, including any Alternate OSD Federal Register, Liaison the meeting should call Ms. Caren personal identifiers or contact Officer, Department of Defense. Hergenroeder at 703–805–5134. Written information. Any associated form(s) for [FR Doc. 2015–31699 Filed 12–16–15; 8:45 am] Statements: Pursuant to 41 CFR 102– this collection may be located within BILLING CODE 5001–06–P 3.140, and section 10(a)(3) of the this same electronic docket and Federal Advisory Committee Act of downloaded for review/testing. Follow 1972, the public or interested the instructions at http:// DEPARTMENT OF DEFENSE organizations may submit written www.regulations.gov for submitting statements to the Defense Acquisition comments. Please submit comments on Office of the Secretary University Board of Visitors about its any given form identified by docket mission and functions. Written number, form number, and title. Defense Acquisition University Board statements may be submitted at any of Visitors; Notice of Federal Advisory time or in response to the stated agenda FOR FURTHER INFORMATION CONTACT: To Committee Meeting request more information on this of a planned meeting of the Defense proposed information collection or to AGENCY: Defense Acquisition Acquisition University Board of obtain a copy of the proposal and University, DoD. Visitors. All written statements shall be associated collection instruments, ACTION: Meeting notice. please write to the Department of the submitted to the Designated Federal Army, U.S. Army Corps of Engineers, SUMMARY: The Department of Defense is Officer for the Defense Acquisition Institute for Water Resources, Corps of publishing this notice to announce a University Board of Visitors, and this individual will ensure that the written Engineers Waterborne Commerce Federal Advisory Committee meeting of statements are provided to the Statistics Center, 7400 Leake Avenue, the Defense Acquisition University membership for their consideration. New Orleans, LA 70118, ATTN: Board of Visitors. This meeting will be Statements being submitted in CEIWR–NDC–C (Mickey LaMaca), or open to the public. response to the agenda mentioned in call Department of the Army Reports DATES: Wednesday, January 20, 2016, this notice must be received by the Clearance Officer at (703) 428–6440. from 9:00 a.m. to 4:30 p.m. Designated Federal Officer at least five SUPPLEMENTARY INFORMATION: ADDRESSES: DAU West, Bldg 82, calendar days prior to the meeting Title; Associated Form; and OMB Classroom 1, 32444 Echo Lane, San which is the subject of this notice. Number: Description of Vessels, Diego, CA 92147. Written statements received after this Description of Operations; ENG Forms FOR FURTHER INFORMATION CONTACT: date may not be provided to or 3931 and 3932; OMB Control Number Caren Hergenroeder, Protocol Director, considered by the Defense Acquisition 0710–0009. DAU. Phone: 703–805–5134. Fax: 703– University Board of Visitors until its Needs and Uses: The Corps of 805–5940. Email: caren.hergenroeder@ next meeting. Committee’s Designated Engineers uses ENG Forms 3931 and dau.mil. Federal Officer or Point of Contact: Ms. 3932 as the basic instruments to collect SUPPLEMENTARY INFORMATION: This Christen Goulding, 703–805–5412, vessel and operating descriptions for meeting is being held under the [email protected]. use in waterborne commerce statistics. provisions of the Federal Advisory These data constitute the sole source for Dated: December 14, 2015. Committee Act of 1972 (5 U.S.C., domestic vessel characteristics and Aaron Siegel, Appendix, as amended), the operating descriptions for domestic Alternate OSD Federal Register Liaison Government in the Sunshine Act of vessels operating on U.S. navigable Officer, Department of Defense. 1976 (5 U.S.C. 552b, as amended), and waterways. These data are also critical [FR Doc. 2015–31711 Filed 12–16–15; 8:45 am] 41 CFR 102–3.150. BILLING CODE 5001–06–P to the enforcement of the ‘‘Harbor Purpose of the Meeting: The purpose Maintenance Tax’’ authorized under of this meeting is to report back to the section 1402 of Public Law 99–662. Board of Visitors on continuing items of Affected Public: Business or other for DEPARTMENT OF ENERGY interest. profit. Annual Burden Hours: 2,039. Agenda Nuclear Energy Advisory Committee Number of Respondents: 3,058. 9:00 a.m. Welcome and AGENCY: Office of Nuclear Energy, Responses per Respondent: 1. Announcements Department of Energy. Annual Responses: 3,058. 9:10 a.m. DAU Update ACTION: Notice of Renewal. Average Burden per Response: 40 9:30 a.m. West Region Overview minutes. 10:00 a.m. Discussion with West SUMMARY: Pursuant to Section Frequency: Annually. Region Customers 14(a)(2)(A) of the Federal Advisory The information collection is the 12:00 p.m. Lunch—Discussion of Committee Act, (Pub. L. 92–463), and in basic data from which the Corps of ‘‘Becoming a Chaosmeister’’ accordance with Title 41 of the Code of Engineers compiles and publishes 1:30 p.m. ACQ 315 Understanding Federal Regulations, Section 102– waterborne commerce statistics. The Industry 3.65(a), and following consultation with data is used not only to report to 3:00 p.m. Faculty Performance the Committee Management Secretariat, Congress, but also to perform cost Development Program General Services Administration, notice benefit studies for new projects, 4:30 p.m. Adjourn is hereby given that the Nuclear Energy rehabilitation projects, and O&M of Public’s Accessibility to the Meeting: Advisory Committee (NEAC) will be existing projects. It is also used by other Pursuant to 5 U.S.C. 552b and 41 CFR renewed for a two-year period beginning federal agencies involved in 102–3.140 through 102–3.165, and the on December 11, 2015. transportation and security. This data availability of space, this meeting is The Committee will provide advice to collection program is the sole source for open to the public. However, because of the Department of Energy’s Office of domestic navigation statistics. space limitations, allocation of seating Nuclear Energy on complex science and
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technical issues that arise in the Issued in Washington, DC, on December Public Participation: The meeting is planning, managing, and 11, 2015. open to the public. If you would like to implementation of DOE’s nuclear energy Amy Bodette, file a written statement with the program. Committee Management Officer. Committee, you may do so either before Additionally, the renewal of the [FR Doc. 2015–31783 Filed 12–16–15; 8:45 am] or after the meeting. If you would like NEAC has been determined to be BILLING CODE 6450–01–P to make an oral statement regarding any essential to conduct business of the of the items on the agenda, you should Department of Energy and to be the in contact Dr. Ed Synakowski at (301) 903– the public interest in connection with DEPARTMENT OF ENERGY 8584 (fax) or ed.synakowski@ the performance of duties imposed upon science.doe.gov (email). Reasonable the Department of Energy, by law and Fusion Energy Sciences Advisory provision will be made to include the agreement. The Committee will Committee scheduled oral statements during the continue to operate in accordance with Public Comments time on the agenda. AGENCY: Office of Science, Department the provisions of the Federal Advisory The Chairperson of the Committee will of Energy. Committee Act, adhering to the rules conduct the meeting to facilitate the and regulations in implementation of ACTION: Notice of Open Meeting. orderly conduct of business. Public that Act. comment will follow the 10-minute SUMMARY: This notice announces a FOR FURTHER INFORMATION CONTACT: meeting of the Fusion Energy Sciences rule. Robert Rova, Designated Federal Officer Advisory Committee (FESAC). The Minutes: The minutes of the meeting at (301) 903–9096. Federal Advisory Committee Act (Pub. will be available for public review and Issued at Washington, DC, on December 11, L. 92–463, 86 Stat. 770) requires that copying within 30 days at the Freedom 2015. public notice of these meetings be of Information Public Reading Room; Amy Bodette, announced in the Federal Register. 1G–033, Forrestal Building; 1000 Committee Management Officer. Independence Avenue SW., DATES: January 13, 2016, 8:30 a.m. to Washington, DC 20585; between 9:00 [FR Doc. 2015–31785 Filed 12–16–15; 8:45 am] 6:00 p.m., January 14, 2016, 8:30 a.m. to BILLING CODE 6450–01–P a.m. and 4:00 p.m., Monday through 12:00 noon. Friday, except holidays; and on the ADDRESSES: Bethesda North Marriott Fusion Energy Sciences Advisory DEPARTMENT OF ENERGY Hotel & Conference Center, 5701 Committee Web site at http:// Marinelli Road, North Bethesda, MD science.energy.gov/fes/fesac/. Biological and Environmental 20852. Issued at Washington, DC, on December 11, Research Advisory Committee FOR FURTHER INFORMATION CONTACT: 2015. AGENCY: Office of Science, Department Edmund J. Synakowski, Designated LaTanya R. Butler, of Energy. Federal Officer, Office of Fusion Energy Deputy Committee Management Officer. ACTION: Notice of Renewal. Sciences; U.S. Department of Energy; [FR Doc. 2015–31792 Filed 12–16–15; 8:45 am] 1000 Independence Avenue SW., BILLING CODE 6450–01–P SUMMARY: Pursuant to section Washington, DC 20585–1290; 14(a)(2)(A) of the Federal Advisory Telephone: (301) 903–4941. Committee Act, (Pub. L. 92–463) and in SUPPLEMENTARY INFORMATION: DEPARTMENT OF ENERGY accordance with title 41 of the Code of Purpose of the Meeting: To discuss the Federal Regulations, section 102–3.65, series of technical workshops held in Environmental Management Site- and following consultation with the 2015. These workshops were initiated Specific Advisory Board, Portsmouth Committee Management Secretariat, by the Office of Fusion Energy Sciences AGENCY: Department of Energy (DOE). General Services Administration, notice (FES) to seek community engagement is hereby given that the Biological and and input for future program planning ACTION: Notice of Open Meeting. Environmental Research Advisory activities. Committee’s (BERAC) charter will be SUMMARY: This notice announces a renewed for a two-year period. Tentative Agenda Items meeting of the Environmental The Committee provides advice and • Discussion of the workshops on Management Site-Specific Advisory recommendations to the Director, Office Integrated Simulations for Magnetic Board (EM SSAB), Portsmouth. The of Science on the biological and Fusion Energy Sciences, Plasma Federal Advisory Committee Act (Pub. environmental research programs. Transients, Plasma-Materials L. 92–463, 86 Stat. 770) requires that Additionally, the renewal of the Interactions, and Plasma Science public notice of this meeting be BERAC has been determined to be Frontiers. announced in the Federal Register. essential to conduct business of the • Perspective on Science and Energy DATES: Thursday, January 7, 2016 6:00 Department of Energy’s mission and to at DOE. p.m. be in the public interest in connection • Current Status and Future Plans for ADDRESSES: Ohio State University, with the performance of duties imposed ITER. Endeavor Center, 1862 Shyville Road, upon the Department of Energy by law • FES Perspective. Piketon, Ohio 45661. and agreement. The Committee will • Public Comment. FOR FURTHER INFORMATION CONTACT: Greg operate in accordance with the • Adjourn. provisions of the Federal Advisory Simonton, Alternate Deputy Designated Committee Act, and rules and Note: Remote attendance of the FESAC Federal Officer, Department of Energy regulations issued in implementation of meeting will be possible via Zoom. Portsmouth/Paducah Project Office, Post Instructions can be found on FESAC Web site that Act. Office Box 700, Piketon, Ohio 45661, at http://science.energy.gov/fes/fesac/ (740) 897–3737, Greg.Simonton@ FOR FURTHER INFORMATION CONTACT: Dr. meetings/ or by contacting Dr. Samuel J. lex.doe.gov. Sharlene C. Weatherwax at (301) 903– Barish by email at sam.barish@ 3251. science.doe.gov or by phone (301) 903–2917. SUPPLEMENTARY INFORMATION:
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Purpose of the Board: The purpose of DEPARTMENT OF ENERGY fashion that will facilitate the orderly the Board is to make recommendations conduct of business. to DOE–EM and site management in the State Energy Advisory Board (STEAB) Minutes: The minutes of the meeting will be available for public review and areas of environmental restoration, AGENCY: Office of Energy Efficiency and waste management and related Renewable Energy, Department of copying within 60 days on the STEAB activities. Energy. Web site at: http://www.energy.gov/eere/ steab/state-energy-advisory-board. Tentative Agenda ACTION: Notice of Open Teleconference. Issued at Washington, DC, on December 11, • Call to Order, Introductions, Review SUMMARY: This notice announces an 2015. of Agenda open teleconference of the State Energy LaTanya R. Butler, Advisory Board (STEAB). The Federal • Approval of November Minutes Deputy Committee Management Officer. Advisory Committee Act (Pub. L. 92– [FR Doc. 2015–31791 Filed 12–16–15; 8:45 am] • Deputy Designated Federal Officer’s 463; 86 Stat.770) requires that public BILLING CODE 6450–01–P Comments notice of these meetings be announced • Federal Coordinator’s Comments in the Federal Register. • DATES: Thursday, January 21, 2016 from DEPARTMENT OF ENERGY Liaison’s Comments 3:30 p.m. to 4:00 p.m. (EDT). To receive • Presentation the call-in number and passcode, please Federal Energy Regulatory • Administrative Issues contact the Board’s Designated Federal Commission Officer at the address or phone number • Subcommittee Updates listed below. Combined Notice of Filings #2 • Public Comments FOR FURTHER INFORMATION CONTACT: Take notice that the Commission • Final Comments From the Board Michael Li, Policy Advisor, Office of received the following electric corporate • Adjourn Energy Efficiency and Renewable filings: Energy, US Department of Energy, 1000 Public Participation: The meeting is Independence Ave. SW., Washington, Docket Numbers: EC16–50–000. open to the public. The EM SSAB, DC 20585. Phone number 202–287– Applicants: The Narragansett Electric Portsmouth, welcomes the attendance of 5718, and email: [email protected]. Company. Description: Application for the public at its advisory committee SUPPLEMENTARY INFORMATION: meetings and will make every effort to Purpose of the Board: To make Authorization Pursuant to Section 203 accommodate persons with physical recommendations to the Assistant of the Federal Power Act to Acquire disabilities or special needs. If you Secretary for the Office of Energy Interconnection Facilities, Requests for require special accommodations due to Efficiency and Renewable Energy Confidential Treatment and Certain a disability, please contact Greg regarding goals and objectives, Waivers of The Narragansett Electric Simonton at least seven days in advance programmatic and administrative Company. of the meeting at the phone number policies, and to otherwise carry out the Filed Date: 12/11/15. Accession Number: 20151211–5179. listed above. Written statements may be Board’s responsibilities as designated in Comments Due: 5 p.m. ET 1/4/16. filed with the Board either before or the State Energy Efficiency Programs after the meeting. Individuals who wish Improvement Act of 1990 (Pub. L. 101– Take notice that the Commission to make oral statements pertaining to 440). received the following electric rate agenda items should contact Greg Tentative Agenda: Receive STEAB filings: Simonton at the address or telephone Task Force updates on action items and Docket Numbers: ER15–1524–001. number listed above. Requests must be revised objectives for FY 2016; discuss Applicants: PacifiCorp. received five days prior to the meeting follow-up opportunities and Description: Compliance filing: OATT and reasonable provision will be made engagement with EERE and other DOE Formula Rate Schedule 10 Loss Factor to include the presentation in the staff as needed to keep Task Force work Compliance Filing to be effective 12/1/ agenda. The Deputy Designated Federal moving forward; continue engagement 2015. Officer is empowered to conduct the with DOE, EERE and EPSA staff Filed Date: 12/11/15. meeting in a fashion that will facilitate regarding energy efficiency and Accession Number: 20151211–5151. the orderly conduct of business. renewable energy projects and Comments Due: 5 p.m. ET 1/4/16. Individuals wishing to make public initiatives; and receive updates on member activities within their states. Docket Numbers: ER16–182–001. comments will be provided a maximum Discuss plans for next live STEAB Applicants: Cameron Ridge II, LLC. of five minutes to present their meeting. Description: Tariff Amendment: comments. Public Participation: The meeting is Amendment to 1 to be effective 12/31/ Minutes: Minutes will be available by open to the public. Written statements 2015. writing or calling Greg Simonton at the may be filed with the Board either Filed Date: 12/11/15. address and phone number listed above. before or after the meeting. Members of Accession Number: 20151211–5150. Minutes will also be available at the the public who wish to make oral Comments Due: 5 p.m. ET 1/4/16. following Web site: http://www.ports- statements pertaining to agenda items Docket Numbers: ER16–507–000. ssab.energy.gov/. should contact Michael Li at the address Applicants: PacifiCorp. or telephone number listed above. Description: Section 205(d) Rate Issued at Washington, DC, on December 9, Filing: Idaho Power JOOA Concurrence 2015. Requests to make oral comments must be received five days prior to the to be effective 10/30/2015. LaTanya R. Butler, meeting; reasonable provision will be Filed Date: 12/11/15. Deputy Committee Management Officer. made to include requested topic(s) on Accession Number: 20151211–5152. [FR Doc. 2015–31784 Filed 12–16–15; 8:45 am] the agenda. The Chair of the Board is Comments Due: 5 p.m. ET 1/4/16. BILLING CODE 6450–01–P empowered to conduct the meeting in a Docket Numbers: ER16–508–000.
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Applicants: California Independent DEPARTMENT OF ENERGY Accession Number: 20151211–5113. System Operator Corporation. Comments Due: 5 p.m. ET 1/4/16. Federal Energy Regulatory Description: Tariff Cancellation: Take notice that the Commission Commission Termination of IID APSA to be effective received the following electric securities 2/22/2016. Combined Notice of Filings #1 filings: Filed Date: 12/11/15. Docket Numbers: ES16–10–000. Accession Number: 20151211–5156. Take notice that the Commission Applicants: Rochester Gas & Electric Comments Due: 5 p.m. ET 1/4/16. received the following electric corporate Corporation. filings: Docket Numbers: ER16–509–000. Description: Application for Docket Numbers: EC16–49–000. Authorization to Issue Short Term Debt Applicants: NSTAR Electric Applicants: TerraForm Private LLC, Company. of Rochester Gas and Electric Meadow Creek Project Company LLC, Corporation. Description: Initial rate filing: Exelon Goshen Phase II LLC, Wolverine Creek Filed Date: 12/10/15. West Medway Design and Engineering Goshen Interconnection LLC, Canadian Accession Number: 20151210–5185. Agreement to be effective 12/11/2015. Hills Wind, LLC, Rockland Wind Farm Comments Due: 5 p.m. ET 12/31/15. Filed Date: 12/11/15. LLC, Burley Butte Wind Park, LLC, Docket Numbers: ES16–11–000. Accession Number: 20151211–5157. Golden Valley Wind Park, LLC, Milner Applicants: Westar Energy, Inc. Comments Due: 5 p.m. ET 1/4/16. Dam Wind Park, LLC, Oregon Trail Description: Application for Wind Park, LLC, Pilgrim Stage Station Docket Numbers: ER16–510–000. Authority To Issue and Pledge Wind Park, LLC, Thousand Springs Securities of Westar Energy, Inc. Applicants: NSTAR Electric Wind Park, LLC, Tuana Gulch Wind Company. Filed Date: 12/11/15. Park, LLC, Camp Reed Wind Park, LLC, Accession Number: 20151211–5063. Description: Initial rate filing: NRG Payne’s Ferry Wind Park, LLC, Salmon Comments Due: 5 p.m. ET 1/4/16. Canal Design and Engineering Falls Wind Park, LLC, Yahoo Creek Agreement to be effective 12/11/2015. Docket Numbers: ES16–12–000. Wind Park, LLC. Applicants: Kansas Gas and Electric Filed Date: 12/11/15. Description: Application for Company. Accession Number: 20151211–5160. Authorization Under Section 203 of the Description: Application under Comments Due: 5 p.m. ET 1/4/16. Federal Power Act, Requests for Section 204 of Kansas Gas and Electric Expedited Action, Waivers of Filing Docket Numbers: ER16–511–000. Company. Requirements and Confidential Filed Date: 12/11/15. Applicants: Southwestern Public Treatment of Transaction Document of Service Company. Accession Number: 20151211–5073. TerraForm Private LLC, et al. Comments Due: 5 p.m. ET 1/4/16. Description: Section 205(d) Rate Filed Date: 12/10/15. Docket Numbers: ES16–13–000. Filing: 2015–12–11_SPS–CapRkSlr– Accession Number: 20151210–5189. Applicants: Kansas Gas and Electric E&P–686–0.0.0—Filing to be effective Comments Due: 5 p.m. ET 12/31/15. 12/12/2015. Company. Take notice that the Commission Description: Application under Filed Date: 12/11/15. received the following electric rate Section 204 of Kansas Gas and Electric Accession Number: 20151211–5197. filings: Company. Comments Due: 5 p.m. ET 1/4/16. Docket Numbers: ER16–86–001. Filed Date: 12/11/15. The filings are accessible in the Applicants: Arizona Public Service Accession Number: 20151211–5074. Commission’s eLibrary system by Company. Comments Due: 5 p.m. ET 1/4/16. clicking on the links or querying the Description: Compliance filing: Rate Docket Numbers: ES16–14–000. docket number. Schedule No. 217 Exhibit D, Weed Applicants: Prairie Wind Any person desiring to intervene or Control to be effective 12/15/2015. Transmission, LLC. protest in any of the above proceedings Filed Date: 12/10/15. Description: Application of Prairie must file in accordance with Rules 211 Accession Number: 20151210–5158. Wind Transmission, LLC for and 214 of the Commission’s Comments Due: 5 p.m. ET 12/31/15. Authorization under Section 204 of the Regulations (18 CFR 385.211 and Docket Numbers: ER16–505–000. Federal Power Act. Filed Date: 12/11/15. 385.214) on or before 5:00 p.m. Eastern Applicants: South Central MCN LLC. Accession Number: 20151211–5093. time on the specified comment date. Description: Baseline eTariff Filing: Comments Due: 5 p.m. ET 1/4/16. Protests may be considered, but South Central MCN LLC Wholesale intervention is necessary to become a Distribuition Agreements to be effective The filings are accessible in the party to the proceeding. 1/1/2016. Commission’s eLibrary system by eFiling is encouraged. More detailed Filed Date: 12/10/15. clicking on the links or querying the information relating to filing Accession Number: 20151210–5179. docket number. requirements, interventions, protests, Comments Due: 5 p.m. ET 12/31/15. Any person desiring to intervene or service, and qualifying facilities filings Docket Numbers: ER16–506–000. protest in any of the above proceedings can be found at: http://www.ferc.gov/ Applicants: PJM Interconnection, must file in accordance with Rules 211 docs-filing/efiling/filing-req.pdf. For L.L.C., West Penn Power Company, The and 214 of the Commission’s other information, call (866) 208–3676 Potomac Edison Company, Trans- Regulations (18 CFR 385.211 and (toll free). For TTY, call (202) 502–8659. Allegheny Interstate Line Company, 385.214) on or before 5:00 p.m. Eastern Monongahela Power Company. time on the specified comment date. Dated: December 11, 2015. Description: Section 205(d) Rate Protests may be considered, but Nathaniel J. Davis, Sr., Filing: West Penn et al submit two IA intervention is necessary to become a Deputy Secretary. Nos. 4160 & 4313 and ECSA No. 4314 party to the proceeding. [FR Doc. 2015–31719 Filed 12–16–15; 8:45 am] to be effective 2/12/2016. eFiling is encouraged. More detailed BILLING CODE 6717–01–P Filed Date: 12/11/15. information relating to filing
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requirements, interventions, protests, issue a Notice of Schedule for environmental mailing list, will receive service, and qualifying facilities filings Environmental Review. If a Notice of copies of the environmental documents, can be found at: http://www.ferc.gov/ Schedule for Environmental Review is and will be notified of meetings docs-filing/efiling/filing-req.pdf. For issued, it will indicate, among other associated with the Commission’s other information, call (866) 208–3676 milestones, the anticipated date for the environmental review process. (toll free). For TTY, call (202) 502–8659. Commission staff’s issuance of the final Environmental commentors will not be Dated: December 11, 2015. environmental impact statement (FEIS) required to serve copies of filed or EA for this proposal. The filing of the Nathaniel J. Davis, Sr., documents on all other parties. EA in the Commission’s public record However, the non-party commentors Deputy Secretary. for this proceeding or the issuance of a will not receive copies of all documents [FR Doc. 2015–31718 Filed 12–16–15; 8:45 am] Notice of Schedule for Environmental filed by other parties or issued by the BILLING CODE 6717–01–P Review will serve to notify federal and Commission (except for the mailing of state agencies of the timing for the environmental documents issued by the completion of all necessary reviews, and Commission) and will not have the right DEPARTMENT OF ENERGY the subsequent need to complete all to seek court review of the Federal Energy Regulatory federal authorizations within 90 days of Commission’s final order. the date of issuance of the Commission Commission The Commission strongly encourages staff’s FEIS or EA. electronic filings of comments, protests [Docket No. CP16–27–000] There are two ways to become and interventions in lieu of paper using involved in the Commission’s review of the ‘‘eFiling’’ link at http:// Paulsboro Natural Gas Pipeline this project. First, any person wishing to www.ferc.gov. Persons unable to file Company, LLC; Notice of Application obtain legal status by becoming a party electronically should submit an original to the proceedings for this project Take notice that on December 1, 2015, and 5 copies of the protest or should, on or before the comment date Paulsboro Natural Gas Pipeline intervention to the Federal Energy stated below, file with the Federal Company, LLC (PNGPC), 800 Regulatory Commission, 888 First Street Energy Regulatory Commission, 888 Billingsport Road, Paulsboro, New NE., Washington, DC 20426. First Street NE., Washington, DC 20426, Jersey 08066, filed an application in This filing is accessible on-line at a motion to intervene in accordance Docket No. CP16–27–000 under sections http://www.ferc.gov, using the with the requirements of the ‘‘eLibrary’’ link and is available for 7(b) and 7(c) of the Natural Gas Act Commission’s Rules of Practice and (NGA), and part 157 of the review in the Commission’s Public Procedure (18 CFR 385.214 or 385.211) Reference Room in Washington, DC. Commission’s regulations requesting and the Regulations under the NGA (18 authorization to relocate, replace, There is an ‘‘eSubscription’’ link on the CFR 157.10). A person obtaining party Web site that enables subscribers to remove, in part, and abandon in place, status will be placed on the service list in part, an approximately 2.4-mile, 6- receive email notification when a maintained by the Secretary of the document is added to a subscribed and 8-inch diameter existing natural gas Commission and will receive copies of pipeline between Delaware County, docket(s). For assistance with any FERC all documents filed by the applicant and Online service, please email Pennsylvania, and Gloucester County, by all other parties. A party must submit New Jersey. PNGPC also requests a [email protected], or call 5 copies of filings made with the (866) 208–3676 (toll free). For TTY, call blanket certificate pursuant to part 157, Commission and must mail a copy to (202) 502–8659. subpart F, of the Commission’s the applicant and to every other party in Comment Date: 5:00 p.m. Eastern regulations, authorizing PNGPC to the proceeding. Only parties to the Time on January 4, 2016. engage in certain self-implementing proceeding can ask for court review of routine construction, operation and Commission orders in the proceeding. Dated: December 11, 2015. abandonment activities, as well as However, a person does not have to Nathaniel J. Davis, Sr., waivers of certain regulatory intervene in order to have comments Deputy Secretary. requirements, including the considered. The second way to [FR Doc. 2015–31721 Filed 12–16–15; 8:45 am] Commission’s interstate pipeline open participate is by filing with the BILLING CODE 6717–01–P access, tariff, accounting, posting, and Secretary of the Commission, as soon as reporting requirements, all as more fully possible, an original and two copies of set forth in the application which is on comments in support of or in opposition DEPARTMENT OF ENERGY file with the Commission and open to to this project. The Commission will public inspection. consider these comments in Federal Energy Regulatory Any questions regarding this determining the appropriate action to be Commission application should be directed to Mark taken, but the filing of a comment alone [Project No. 8722–018] Wilgus, Senior Community Relations will not serve to make the filer a party Specialist, Paulsboro Natural Gas to the proceeding. The Commission’s David O. Harde; Notice of Termination Pipeline Company LLC, 800 Billingsport rules require that persons filing of License (Minor Project) by Implied Road, Paulsboro, New Jersey 08066, or comments in opposition to the project Surrender and Soliciting Comments, by calling (856) 224–4354 (telephone) or provide copies of their protests only to Protests and Motions To Intervene by email at mark.wilgus@ the party or parties directly involved in pbfenergy.com. the protest. Take notice that the following Pursuant to section 157.9 of the Persons who wish to comment only hydroelectric proceeding has been Commission’s rules, 18 CFR 157.9, on the environmental review of this initiated by the Commission: within 90 days of this Notice the project should submit an original and a. Type of Proceeding: Termination of Commission staff will either: complete two copies of their comments to the License by Implied Surrender. its environmental assessment (EA) and Secretary of the Commission. b. Project No.: 8722–018. place it into the Commission’s public Environmental commentors will be c. Date Initiated: December 11, 2015. record (eLibrary) for this proceeding; or placed on the Commission’s d. Licensee: David O. Harde.
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e. Name and Location of Project: correspondence regarding transferring project number of the application to Landis-Harde Hydroelectric Project the license to a third party and resuming which the filing responds; (3) furnish located on Perry Creek, in El Dorado project operation, the licensee has the name, address, and telephone County, California. become non-responsive. Most recently, number of the person protesting or f. Filed Pursuant to: Standard Article by letter dated September 1, 2015, the intervening; and (4) otherwise comply 16. licensee informed the Commission of its with the requirements of 18 CFR g. Licensee Contact Information: Mr. intent to file a license transfer 385.2001 through 385.2005. All David O. Harde, 6540 Perry Creek Road, application shortly thereafter. The comments, motions to intervene, or Somerset, California 95684, Phone: licensee did not file a transfer protests must set forth their evidentiary (530) 620–5629. application. By letter dated September basis and otherwise comply with the h. FERC Contact: Mr. Ashish Desai, 4, 2015, Commission staff requested the requirements of 18 CFR 4.34(b). All (202) 502–8370, [email protected]. licensee file documentation regarding comments, motions to intervene, or i. Deadline for filing comments, the non-operational status of the project protests should relate to project works motions to intervene and protests, is 30 within 30 days. The licensee did not file which are the subject of the license days from the issuance date of this the requested information. By letter surrender. Agencies may obtain copies notice. The Commission strongly dated October 27, 2015, the Commission of the application directly from the encourages electronic filing. Please file ordered the licensee to file a plan and applicant. A copy of any protest or motions to intervene, protests, schedule to resume project operations or motion to intervene must be served comments, and recommendations, using a transfer application within 30 days, upon each representative of the the Commission’s eFiling system at and failure to do so would result in applicant specified in the particular http://www.ferc.gov/docs-filing/ termination of the project license by application. If an intervener files efiling.asp. Commenters can submit implied surrender. The licensee has not comments or documents with the brief comments up to 6,000 characters, filed a response. Commission relating to the merits of an without prior registration, using the l. This notice is available for review issue that may affect the responsibilities eComment system at http:// and reproduction at the Commission in of a particular resource agency, they www.ferc.gov/docs-filing/ the Public Reference Room, Room 2A, must also serve a copy of the document ecomment.asp. You must include your 888 First Street NE., Washington, DC on that resource agency. A copy of all name and contact information at the end 20426. The filing may also be viewed on other filings in reference to this of your comments. For assistance, the Commission’s Web site at http:// application must be accompanied by please contact FERC Online Support at www.ferc.gov/docs-filing/elibrary.asp. proof of service on all persons listed in [email protected], (866) Enter the Docket number (P–8722–018) the service list prepared by the 208–3676 (toll free), or (202) 502–8659 excluding the last three digits in the Commission in this proceeding, in (TTY). In lieu of electronic filing, please docket number field to access the accordance with 18 CFR 4.34(b) and send a paper copy to: Secretary, Federal notice. You may also register online at 385.2010. Energy Regulatory Commission, 888 http://www.ferc.gov/docs-filing/ First Street NE., Washington, DC 20426. esubscription.asp to be notified via Dated: December 11, 2015. The first page of any filing should email of new filings and issuances Nathaniel J. Davis, Sr., include docket number P–8722–018. related to this or other pending projects. Deputy Secretary. j. Description of Project Facilities: (1) For assistance, call toll-free 1–866–208– [FR Doc. 2015–31722 Filed 12–16–15; 8:45 am] A 4-foot-high, 42-foot-long reinforced 3676 or email FERCOnlineSupport@ BILLING CODE 6717–01–P concrete dam; (2) a 24-inch-diameter, ferc.gov. For TTY, call (202) 502–8659. 1,000-foot-long penstock; (3) a m. Individuals desiring to be included powerhouse containing a single on the Commission’s mailing list should DEPARTMENT OF ENERGY generating unit with a rated capacity of so indicate by writing to the Secretary 100 kW; and (4) a 500-foot-long tap of the Commission. Federal Energy Regulatory connecting the project with an existing n. Comments, Protests, or Motions to Commission Intervene: Anyone may submit Pacific Gas and Electric Company 21-kv [Docket No. CP15–504–000] transmission line west of the comments, a protest, or a motion to powerhouse. intervene in accordance with the Dominion Carolina Gas Transmission; k. Description of Proceeding: The requirements of Rules of Practice and Notice of Schedule for Environmental licensee is in violation of standard Procedure, 18 CFR 385.210, .211, .214. Review of the Columbia to Eastover Article 16 of its license, issued on April In determining the appropriate action to Project 27, 1990 (51 FERC ¶ 61,088). Article 16 take, the Commission will consider all states in part: If the Licensee shall protests or other comments filed, but On May 29, 2015, Dominion Carolina abandon or discontinue good faith only those who file a motion to Gas Transmission (Dominion) filed an operation of the project or refuse or intervene in accordance with the application in Docket No. CP15–504– neglect to comply with the terms of the Commission’s Rules may become a 000 requesting a Certificate of Public license and the lawful orders of the party to the proceeding. Any comments, Convenience and Necessity pursuant to Commission mailed to the record protests, or motions to intervene must Section 7(c) of the Natural Gas Act to address of the Licensee or its agent, the be received on or before the specified construct and operate certain natural gas Commission will deem it to be the comment date for the particular pipeline facilities. The proposed project intent of the Licensee to surrender the application. is known as the Columbia to Eastover license. o. Filing and Service of Responsive Project (Project), and would provide Commission records indicate that the Documents: Any filing must (1) bear in 18,000 dekatherms per day of firm project has not been operational since all capital letters the title transportation service to the existing 2006 when the licensee determined, that ‘‘COMMENTS’’, ‘‘PROTEST’’, or International Paper Plant in Eastover, the project was no longer financially ‘‘MOTION TO INTERVENE’’ as South Carolina. viable due to low water flows and high applicable; (2) set forth in the heading On June 12, 2015, the Federal Energy insurance rates. After several years of the name of the applicant and the Regulatory Commission (Commission or
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FERC) issued its Notice of Application Additional Information ADDRESSES: Submit your comments, for the Project. The notice informed In order to receive notification of the identified by Docket ID No. EPA–HQ– agencies issuing federal authorizations issuance of the EA and to keep track of OW–2015–0668, to the Federal of the requirement under EPAct 2005 all formal issuances and submittals in eRulemaking Portal: http:// section 313 to complete all necessary specific dockets, the Commission offers www.regulations.gov. Follow the online reviews and to reach a final decision on a free service called eSubscription. This instructions for submitting comments. a request for a federal authorization can reduce the amount of time you Once submitted, comments cannot be within 90 days of the date of issuance spend researching proceedings by edited or removed from Regulations.gov. of the Commission staff’s Environmental automatically providing you with EPA may publish any comment received Assessment (EA) for the Project. This notification of these filings, document to its public docket. Do not submit Notice of Schedule identifies the summaries, and direct links to the electronically any information you Commission staff’s planned schedule for documents. Go to www.ferc.gov/docs- consider to be Confidential Business the completion of the EA for the Project. filing/esubscription.asp. Information (CBI) or other information Additional information about the whose disclosure is restricted by statute. Schedule for Environmental Review Project is available from the Multimedia submissions (audio, video, etc.) must be accompanied by a written Issuance of EA—February 19, 2016 Commission’s Office of External Affairs at (866) 208–FERC or on the FERC Web comment. The written comment is 90-day Federal Authorization Decision site (www.ferc.gov). Using the considered the official comment and Deadline—May 19, 2016 ‘‘eLibrary’’ link, select ‘‘General Search’’ should include discussion of all points If a schedule change becomes from the eLibrary menu, enter the you wish to make. EPA will generally necessary, additional notice will be selected date range and ‘‘Docket not consider comments or comment provided so that the relevant agencies Number’’ excluding the last three digits contents located outside of the primary are kept informed of the Project’s (i.e., CP15–504), and follow the submission (i.e., on the web, cloud, or progress. instructions. For assistance with access other file sharing system). For to eLibrary, the helpline can be reached additional submission methods, the full Project Description at (866) 208–3676, TTY (202) 502–8659, EPA public comment policy, or at [email protected]. The information about CBI or multimedia For the Columbia to Eastover Project, eLibrary link on the FERC Web site also submissions, and general guidance on Dominion would construct and operate provides access to the texts of formal making effective comments, please visit approximately 28 miles of new 8-inch- documents issued by the Commission, http://www2.epa.gov/dockets/ diameter natural gas pipeline and new such as orders, notices, and rule commenting-epa-dockets. appurtenant facilities in Calhoun and makings. FOR FURTHER INFORMATION CONTACT: Richland Counties, South Carolina. Dated: December 11, 2015. Prasad Chumble, EPA Headquarters, Background Nathaniel J. Davis, Sr., Office of Water, Office of Wastewater Deputy Secretary. Management via email at On July 16, 2015, the Commission [email protected] or telephone [FR Doc. 2015–31720 Filed 12–16–15; 8:45 am] issued a Notice of Intent to Prepare an at 202–564–0021. BILLING CODE 6717–01–P Environmental Assessment for the SUPPLEMENTARY INFORMATION: On Proposed Columbia to Eastover Project November 10, 2015 EPA published in and Request for Comments on the Federal Register (80 FR 69653) a Environmental Issues (NOI). The NOI ENVIRONMENTAL PROTECTION AGENCY request for information and comments was sent to affected landowners; federal, on existing public and private sector state, and local government agencies; [EPA–HQ–OW–2015–0668; 9940–23–OW] programs that address stormwater elected officials; environmental and discharges from forest roads. This public interest groups; Native American Notice of an Extension To Provide information will assist EPA in tribes; other interested parties; and local Information on Existing Programs That responding to the remand in libraries and newspapers. The Protect Water Quality From Forest Environmental Defense Center, Inc. v. Commission received comments from Road Discharges U.S. EPA, 344 F.2d 832 (9th Cir. 2003) the U.S. Fish and Wildlife Service, AGENCY: Environmental Protection that requires EPA to consider whether South Carolina Department of Natural Agency (EPA). the Clean Water Act requires the Agency Resources, Friends of the Congaree ACTION: Notice; extension of comment to regulate stormwater discharges from Swamp, McEntire Joint National Guard period. forest roads. EPA is considering the Base, Richland County Conservation implementation, effectiveness, and Commission, Congaree Riverkeeper, and SUMMARY: The Environmental Protection scope of existing programs in addressing several landowners including Beckham Agency (EPA) is extending the comment water quality impacts attributable to Swamp LLC, Belle Grove LLC, and St. period for the notice, ‘‘Opportunity to stormwater discharges from forest roads Matthews Church. In addition to general Provide Information on Existing to assist in responding to the court’s opposition to the Project, we received Programs that Protect Water Quality question. The Agency plans to assess a requests for minor and major reroutes of from Forest Road Discharges.’’ In variety of existing programs, including the pipeline to utilize more existing response to stakeholder requests, EPA is federal, state, local, tribal, third party utility rights-of-way and a reduction in extending the comment period for an certifications, and combinations of these number and length of access roads. The additional 32 days, from January 11, approaches, including voluntary best primary environmental issues raised by 2016, to February 12, 2016. management practices (BMP)-based the commentors are potential impacts DATES: The comment period for the approaches. In preparing its response to on the following resources: sensitive notice, that was published on November the remand, EPA is coordinating with fish species, the Cowasee Basin, specific 10, 2015 (80 FR 69653), is extended. other federal agencies, and will assess archaeological sites, local tree farms, Comments must be received on or whether any additional stormwater and recreation areas. before February 12, 2016. controls are called for, consistent with
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federal law, including the 2014 dockets generally, is available at http:// notice of receipt and opportunity to amendments to the Clean Water Act. As www.epa.gov/dockets. comment on these applications. Notice initially published in the Federal FOR FURTHER INFORMATION CONTACT: of receipt of these applications does not Register, written comments were to be Susan Lewis, Director, Registration imply a decision by the Agency on these submitted to EPA on or before January Division (7505P), Office of Pesticide applications. 11, 2016 (a 60-day public comment Programs, Environmental Protection 1. EPA Registration Numbers: 264– period). Since publication, EPA has Agency, 1200 Pennsylvania Ave. NW., 776 and 264–1093. Docket ID number: received several requests for additional Washington, DC 20460–0001; main EPA–HQ–OPP–2015–0745. Applicant: time to submit comments. EPA is telephone number: (703) 305–7090; Bayer CropScience LP, 2 TW Alexander extending the public comment period email address: [email protected]. Drive, P.O. Box 12014, Research Triangle Park, NC 27709. Active for 32 days until February 12, 2016. SUPPLEMENTARY INFORMATION: ingredient: Trifloxystrobin. Product Dated: December 8, 2015. I. General Information type: Fungicide. Proposed use: Cotton. Joel Beauvais, Contact: RD. Acting Deputy Assistant Administrator, Office A. Does this action apply to me? 2. EPA Registration Numbers: 264– of Water. You may be potentially affected by 824; 264–825. Docket ID number: EPA– [FR Doc. 2015–31664 Filed 12–16–15; 8:45 am] this action if you are an agricultural HQ–OPP–2015–0722. Applicant: Bayer BILLING CODE 6560–50–P producer, food manufacturer, or CropScience LP, 2 T.W. Alexander pesticide manufacturer. The following Drive, P.O. Box 12014, RTP, NC 27709. list of North American Industrial Active ingredient: Prothioconazole. ENVIRONMENTAL PROTECTION Classification System (NAICS) codes is Product type: Fungicide. Proposed use: AGENCY not intended to be exhaustive, but rather Cotton. Contact: RD. provides a guide to help readers 3. EPA Registration Numbers: 279– [EPA–HQ–OPP–2015–0022; FRL–9939–19] determine whether this document 3460, 279–3052, 279–3158. Docket ID number: EPA–HQ–OPP–2015–0763. Pesticide Product Registration; applies to them. Potentially affected Applicant: FMC, 1735 Market Street, Receipt of Applications for New Uses entities may include: • Crop production (NAICS code 111). Philadelphia, PA 19103. Active AGENCY: Environmental Protection • Animal production (NAICS code ingredient: Clomazone. Product type: Agency (EPA). 112). Herbicide. Proposed uses: Asparagus • ACTION: Notice. Food manufacturing (NAICS code and edamame. Contact: RD. 311). 4. EPA Registration Number: 432– SUMMARY: EPA has received applications • Pesticide manufacturing (NAICS RLGL; 432–RLGA; 432–RLGT; 432– to register new uses for pesticide code 32532). RLGI; and 432–RLUG. Docket ID products containing currently registered number: EPA–HQ–OPP–2015–0707. B. What should I consider as I prepare Applicant: Bayer Environmental active ingredients. Pursuant to the my comments for EPA? Federal Insecticide, Fungicide, and Science LLC, P.O. Box 12014, 2 T.W. Rodenticide Act (FIFRA), EPA is hereby 1. Submitting CBI. Do not submit this Alexander Drive, Research Triangle providing notice of receipt and information to EPA through Park, NC 27709. Active ingredient: opportunity to comment on these regulations.gov or email. Clearly mark Fluopyram. Product type: Fungicide. applications. the part or all of the information that Proposed uses: Turf and Ornamentals. you claim to be CBI. For CBI Contact: RD. DATES: Comments must be received on information in a disk or CD–ROM that 5. EPA Registration Number or File or before January 19, 2016. you mail to EPA, mark the outside of the Symbol: 11678–73; 66222–243; 66222– ADDRESSES: Submit your comments, disk or CD–ROM as CBI and then EAE. Docket ID number: EPA–HQ–OPP– identified by docket identification (ID) identify electronically within the disk or 2015–0478. Applicant: Makhteshim number EPA–HQ–OPP–2015–0022 and CD–ROM the specific information that Agan of North America, 3120 the File Symbol of interest as shown in is claimed as CBI. In addition to one Highwoods Blvd., Suite 100, Raleigh, the body of this document, by one of the complete version of the comment that NC 27604. Active ingredient: following methods: includes information claimed as CBI, a Fluensulfone. Product type: Insecticide. • Federal eRulemaking Portal: http:// copy of the comment that does not Proposed uses: Root vegetables (crop www.regulations.gov. Follow the online contain the information claimed as CBI subgroup 1B except sugar beet), leaves instructions for submitting comments. must be submitted for inclusion in the of root and tuber vegetables (crop group Do not submit electronically any public docket. Information so marked 2); leafy vegetables (crop group 4 except information you consider to be will not be disclosed except in brassica vegetables), head and stem Confidential Business Information (CBI) accordance with procedures set forth in brassica (crop subgroup 5A), brassica or other information whose disclosure is 40 CFR part 2. leafy vegetables (crop subgroup 5B), low restricted by statute. 2. Tips for preparing your comments. growing berry (crop subgroup 13–07G), • Mail: OPP Docket, Environmental When preparing and submitting your and tobacco. Contact: RD. Protection Agency Docket Center (EPA/ comments, see the commenting tips at 6. File Symbol: 71512–1 and 71512– DC), (28221T), 1200 Pennsylvania Ave. http://www.epa.gov/dockets/ 8. Docket ID number: EPA–HQ–OPP– NW., Washington, DC 20460–0001. comments.html. 2015–0703. Applicant: ISK Biosciences • Hand Delivery: To make special Corporation, 7470 Auburn Road, Suite arrangements for hand delivery or II. Registration Applications A, Concord, OH, 44077. Active delivery of boxed information, please EPA has received applications to ingredient: Fluazinam. Product type: follow the instructions at http:// register new uses for pesticide products Fungicide. Proposed uses: Mayhaw, www.epa.gov/dockets/contacts.html. containing currently registered active cabbage, squash/cucumber subgroup 9B, Additional instructions on ingredients. Pursuant to the provisions brassica leafy group 5 (except cabbage), commenting or visiting the docket, of FIFRA section 3(c)(4) (7 U.S.C. and tuberous and corm subgroup 1C. along with more information about 136a(c)(4)), EPA is hereby providing Contact: RD.
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Authority: 7 U.S.C. 136 et seq. Additional instructions on commenting will not be disclosed except in Dated: December 10, 2015. or visiting the docket, along with more accordance with procedures set forth in Susan Lewis, information about dockets generally, is 40 CFR part 2. Director, Registration Division, Office of available at http://www.epa.gov/ 2. Tips for preparing your comments. Pesticide Programs. dockets. When preparing and submitting your [FR Doc. 2015–31757 Filed 12–16–15; 8:45 am] FOR FURTHER INFORMATION CONTACT: comments, see the commenting tips at http://www.epa.gov/dockets/ BILLING CODE 6560–50–P Robert McNally, Biopesticides and Pollution Prevention Division (7511P), comments.html. Office of Pesticide Programs, II. Registration Application ENVIRONMENTAL PROTECTION Environmental Protection Agency, 1200 AGENCY Pennsylvania Ave. NW., Washington, EPA has received an application to register a pesticide product containing [EPA–HQ–OPP–2015–0021; FRL–9939–25] DC 20460–0001; main telephone number: (703) 305–7090; email address: an active ingredient not included in any currently registered pesticide products. Pesticide Product Registration; [email protected]. Pursuant to the provisions of FIFRA Receipt of Application for a New Active SUPPLEMENTARY INFORMATION: section 3(c)(4) (7 U.S.C. 136a(c)(4)), EPA Ingredient I. General Information is hereby providing notice of receipt and AGENCY: Environmental Protection A. Does this action apply to me? opportunity to comment on this Agency (EPA). application. Notice of receipt of this You may be potentially affected by ACTION: Notice. application does not imply a decision this action if you are an agricultural by the Agency on this application. SUMMARY: EPA has received an producer, food manufacturer, or File Symbol: 70051–REN. Docket ID application to register a pesticide pesticide manufacturer. The following number: EPA–HQ–OPP–2015–0748. product containing an active ingredient list of North American Industrial Applicant: Certis USA, LLC, 9145 not included in any currently registered Classification System (NAICS) codes is Guilford Rd., Suite 175, Columbia, MD pesticide products. Pursuant to the not intended to be exhaustive, but rather 21046. Product name: Trident Biological Federal Insecticide, Fungicide, and provides a guide to help readers Insecticide. Active ingredient: Rodenticide Act (FIFRA), EPA is hereby determine whether this document Insecticide—Bacillus thuringiensis providing notice of receipt and applies to them. Potentially affected variety tenebrionis strain SA–10 at opportunity to comment on this entities may include: • 14.32%. Proposed uses: Agricultural application. Crop production (NAICS code 111). and residential. Contact: BPPD. • Animal production (NAICS code DATES: Comments must be received on 112). Authority: 7 U.S.C. 136 et seq. or before January 19, 2016. • Food manufacturing (NAICS code Dated: December 7, 2015. ADDRESSES: Submit your comments, 311). R. McNally, identified by the docket identification • Pesticide manufacturing (NAICS Director, Biopesticides and Pollution (ID) number and the File Symbol of code 32532). Prevention Division, Office of Pesticide interest as shown in the body of this B. What should I consider as I prepare Programs. document, by one of the following [FR Doc. 2015–31758 Filed 12–16–15; 8:45 am] methods: my comments for EPA? BILLING CODE 6560–50–P • Federal eRulemaking Portal: http:// 1. Submitting CBI. Do not submit this www.regulations.gov. Follow the online information to EPA through instructions for submitting comments. regulations.gov or email. Clearly mark Do not submit electronically any the part or all of the information that FEDERAL COMMUNICATIONS information you consider to be you claim to be CBI. For CBI COMMISSION Confidential Business Information (CBI) information in a disk or CD–ROM that or other information whose disclosure is you mail to EPA, mark the outside of the FCC To Hold Open Commission restricted by statute. disk or CD–ROM as CBI and then Meeting, Thursday, December 17, 2015 • Mail: OPP Docket, Environmental identify electronically within the disk or Protection Agency Docket Center (EPA/ CD–ROM the specific information that December 10, 2015. DC), (28221T), 1200 Pennsylvania Ave. is claimed as CBI. In addition to one The Federal Communications NW., Washington, DC 20460–0001. complete version of the comment that Commission will hold an Open Meeting • Hand Delivery: To make special includes information claimed as CBI, a on the subjects listed below on arrangements for hand delivery or copy of the comment that does not Thursday, December 17, 2015, which is delivery of boxed information, please contain the information claimed as CBI scheduled to commence at 10:30 a.m. in follow the instructions at http:// must be submitted for inclusion in the Room TW–C305, at 445 12th Street SW., www.epa.gov/dockets/contacts.html. public docket. Information so marked Washington, DC.
Item No. Bureau Subject
1 ...... WIRELINE COMPETITION TITLE: Petition of US Telecom for Forbearance Pursuant to 47 U.S.C. 160 (c) from Enforcement of Obsolete ILEC Legacy Regulations That Inhibit Deployment of Next-Generation Networks. (WC Docket No. 14–192); Lifeline and Link Up Reform and Modernization (WC Docket No. 11– 42); Connect America Fund (WC Docket No. 10–90) SUMMARY: The Commission will consider a Memorandum Opinion and Order and Report and Order addressing a petition from US Telecom that seeks forbearance from various categories of statutory and Commission requirements applicable to incumbent local exchange carriers.
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Item No. Bureau Subject
2 ...... MEDIA ...... TITLE: Amendment of Parts 73 and 74 of the Commission’s Rules to Establish Rules for Digital Low Power Television and Television Translator Stations (MB Docket No. 03–185); Expanding the Economic and Innovation Opportunities of Spectrum Through Incentive Auctions (GN Dock- et No. 12–268); Amendment of Part 15 of the Commission’s Rules to Eliminate the Analog Tur- ner Requirement (ET Docket No. 14–175) SUMMARY: The Commission will consider a Third Report and Order that extends the deadline for LPTV and TV Translator Stations to Transition to Digital and adopts measures to mitigate the impact of incentive auction displacement. The Fourth Notice of Proposed Rulemaking seeks comment on channel sharing issues between certain stations. 3 ...... INTERNATIONAL ...... TITLE: Comprehensive Review of Licensing and Operating Rules for Satellite Services (IB Docket No. 12–267) SUMMARY: The Commission will consider a Second Report and Order that streamlines, elimi- nates or updates numerous provisions of Part 25 of the Commission’s rules governing licensing and operation of space stations and earth stations for the provision of satellite communication services. 4 ...... INTERNATIONAL ...... SUMMARY: The Commission will hear a presentation on the outcomes of the International Tele- communication Union’s World Radio Conference that took place in November 2015.
* * * * * Consent Agenda consent agenda and these items will not The Commission will consider the be presented individually: following subjects listed below as a
1 ...... MEDIA ...... TITLE: Application of Hampton Roads Educational Telecommunications Association for a New Noncommercial Educational FM Station at Gloucester Point SUMMARY: The Commission will consider a Memorandum Opinion and Order concerning a joint Application for Review challenging the grant of an application filed by Hampton Roads Edu- cational Telecommunications Association for a new NCE FM station. 2 ...... MEDIA ...... TITLE: Public Media of New England, Inc. Application for a New LPFM Station at Haverhill, Mas- sachusetts SUMMARY: The Commission will consider a Memorandum Opinion and Order concerning an Ap- plication for Review filed by Boston Radio Association seeking review of the grant of a con- struction permit for a new LPFM station to Public Media of New England, Inc. 3 ...... MEDIA ...... TITLE: Cocoa Minority Educational Media Association, Application for a New LPFM Station at Cocoa, Florida SUMMARY: The Commission will consider a Memorandum Opinion and Order concerning an Ap- plication for Review filed by Cocoa Minority Educational Media Association seeking review of CMEMA’s dismissed application for a new LPFM station. 4 ...... MEDIA ...... TITLE: California Association for Research and Education, Inc., Application for a New Non- commercial Educational FM Broadcast Station at Upton, KY, and Bethel Fellowship, Inc., Appli- cation for a New Noncommercial Educational FM Broadcast Station at Cecilia, Kentucky SUMMARY: The Commission will consider an Order on Reconsideration in which Bethel seeks reconsideration of a denial of its Application for Review seeking denial of CARE’s noncommer- cial educational FM application. 5 ...... MEDIA ...... TITLE: Calvary Chapel of Honolulu, Inc., Application to Construct New Noncommercial Edu- cational FM Stations at Honolulu, Hawaii, and Maka’ainana Broadcasting Company, Ltd., Appli- cation to Construct New Noncommercial Educational FM Stations at Kaneohe, Hawaii SUMMARY: The Commission will consider a Memorandum Opinion and Order concerning Appli- cations for Review filed by Maka’ainana Broadcasting Company, Ltd. regarding mutually exclu- sive applications to construct new noncommercial educational FM stations in Hawaii. 6 ...... MEDIA ...... TITLE: John Edward Ostlund, Application for a Permit to Construct a new AM Station at Easton, California, and Hilo Broadcasting, LLC, Application for a Permit to Construct a New AM Station at Captain Cook, Hawaii SUMMARY: The Commission will consider a Memorandum Opinion and Order concerning an Ap- plication for Review filed by Hilo Broadcasting, LLC regarding mutually exclusive AM station ap- plications.
The meeting site is fully accessible to will be accepted, but may be impossible over the Internet from the FCC Live Web people using wheelchairs or other to fill. Send an email to: [email protected] page at www.fcc.gov/live. mobility aids. Sign language or call the Consumer & Governmental For a fee this meeting can be viewed interpreters, open captioning, and Affairs Bureau at 202–418–0530 (voice), live over George Mason University’s assistive listening devices will be 202–418–0432 (TTY). Capitol Connection. The Capitol provided on site. Other reasonable Additional information concerning Connection also will carry the meeting accommodations for people with this meeting may be obtained from the live via the Internet. To purchase these disabilities are available upon request. Office of Media Relations, (202) 418– services, call (703) 993–3100 or go to In your request, include a description of 0500; TTY 1–888–835–5322. Audio/ www.capitolconnection.gmu.edu. the accommodation you will need and Video coverage of the meeting will be a way we can contact you if we need more information. Last minute requests broadcast live with open captioning
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FCC Memorandum and resolution re: that the public interest did not require The meeting site is fully accessible to Fourth Joint Federal Register Notice consideration of the matters in a people using wheelchairs or other Addressing FDIC Regulations in meeting open to public observation; and mobility aids. Sign language Accordance with the Economic Growth that the matters could be considered in interpreters, open captioning, and and Regulatory Paperwork Reduction a closed meeting by authority of Act (‘‘EGRPRA’’). assistive listening devices will be subsections (c)(2), (c)(4), (c)(6), (c)(8), Summary reports, status reports, and provided on site. Other reasonable (c)(9)(A)(ii), (c)(9)(B), and (c)(10) of the reports of actions taken pursuant to ‘‘Government in the Sunshine Act’’ (5 accommodations for people with authority delegated by the Board of disabilities are available upon request. U.S.C. 552b(c)(2), (c)(4), (c)(6), (c)(8), Directors. (c)(9)(A)(ii), (c)(9)(B), and (c)(10). In your request, include a description of Discussion Agenda: the accommodation you will need and Memorandum and resolution re: Dated: December 15, 2015. a way we can contact you if we need Proposed 2016 FDIC Operating Budget. Federal Deposit Insurance Corporation. more information. Last minute requests In calling the meeting, the Board Robert E. Feldman, will be accepted, but may be impossible determined, on motion of Vice Executive Secretary. to fill. Send an email to: [email protected] Chairman Thomas M. Hoenig, seconded [FR Doc. 2015–31854 Filed 12–15–15; 4:15 pm] or call the Consumer & Governmental by Director Thomas J. Curry BILLING CODE P Affairs Bureau at 202–418–0530 (voice), (Comptroller of the Currency), 202–418–0432 (TTY). concurred in by Director Richard Additional information concerning Cordray (Director, Consumer Financial FEDERAL MARITIME COMMISSION this meeting may be obtained from the Protection Bureau), and Chairman Office of Media Relations, (202) 418– Martin J. Gruenberg, that Corporation Notice of Agreements Filed 0500; TTY 1–888–835–5322. Audio/ business required its consideration of Video coverage of the meeting will be the matters on less than seven days’ The Commission hereby gives notice broadcast live with open captioning notice to the public; and that no earlier of the filing of the following agreements over the Internet from the FCC Live Web notice of the meeting than that under the Shipping Act of 1984. page at www.fcc.gov/live. previously provided on December 9, Interested parties may submit comments For a fee this meeting can be viewed 2015, was practicable. on the agreements to the Secretary, live over George Mason University’s The meeting was held in the Board Federal Maritime Commission, Capitol Connection. The Capitol Room located on the sixth floor of the Washington, DC 20573, within twelve Connection also will carry the meeting FDIC Building located at 550 17th Street days of the date this notice appears in live via the Internet. To purchase these NW., Washington, DC. the Federal Register. Copies of the agreements are available through the services, call (703) 993–3100 or go to Dated: December 15, 2015. www.capitolconnection.gmu.edu. Commission’s Web site (www.fmc.gov) Federal Deposit Insurance Corporation. or by contacting the Office of Federal Communications Commission. Robert E. Feldman, Agreements at (202)–523–5793 or Gloria Miles, Executive Secretary. [email protected]. Information Specialist. [FR Doc. 2015–31853 Filed 12–15–15; 4:15 pm] Agreement No.: 201143–013. [FR Doc. 2015–31671 Filed 12–16–15; 8:45 am] BILLING CODE P Title: West Coast MTO Agreement. BILLING CODE 6712–01–P Parties: APM Terminals Pacific, Ltd.; California United Terminals, Inc.; Eagle FEDERAL DEPOSIT INSURANCE Marine Services, Ltd.; Everport CORPORATION Terminal Services, Inc; International FEDERAL DEPOSIT INSURANCE Transportation Service, Inc.; Long Beach CORPORATION Sunshine Act Meeting Container Terminal, Inc.; Trapac, Inc.; Sunshine Act Meeting Pursuant to the provisions of the Total Terminals LLC; West Basin ‘‘Government in the Sunshine Act’’ (5 Container Terminal LLC; Yusen Pursuant to the provisions of the U.S.C. 552b), notice is hereby given that Terminals, Inc.; Pacific Maritime ‘‘Government in the Sunshine Act’’ (5 at 10:23 a.m. on Tuesday, December 15, Services, L.L.C.; SSA Terminals, LLC; U.S.C. 552b), notice is hereby given that 2015, the Board of Directors of the and SSA Terminal (Long Beach), LLC. the Federal Deposit Insurance Federal Deposit Insurance Corporation Filing Party: Wayne R. Rohde, Esq.; Corporation’s Board of Directors met in met in closed session to consider Cozen O’Connor; 1200 19th Street NW.; open session at 10:06 a.m. on Tuesday, matters related to the Corporation’s Washington, DC 20036. December 15, 2015, to consider the supervision, corporate, and resolution Synopsis: The amendment deletes following matters: activities. Seaside Transportation Service LLC as a Summary Agenda: In calling the meeting, the Board party to the Agreement. Disposition of minutes of previous determined, on motion of Vice Agreement No.: 201202–008. Board of Directors’ Meetings. Chairman Thomas M. Hoenig, seconded Title: Oakland MTO Agreement. Memorandum and resolution: Review by Director Thomas J. Curry Parties: Everport Terminal Services, of Regulations Transferred from the (Comptroller of the Currency), Inc.; Ports America Outer Harbor Former Office of Thrift Supervision: concurred in by Director Richard Terminal, LLC; SSA Terminals, LLC; Part 390, Subpart V—Management Cordray (Director, Consumer Financial SSA Terminals (Oakland), LLC; and Official Interlocks. Protection Bureau), and Chairman Trapac, Inc. Memorandum and resolution re: Martin J. Gruenberg, that Corporation Filing Party: Wayne R. Rohde, Esq.; Notice of Proposed Rulemaking business required its consideration of Cozen O’Connor; 1200 19th Street NW.; Regarding Proposed Revisions to Part the matters which were to be the subject Washington, DC 20036. 341 of the FDIC’s Rules and Regulations of this meeting on less than seven days’ Synopsis: The amendment deletes Requiring the Registration of Securities notice to the public; that no earlier Seaside Transportation Service, LLC as Transfer Agents. notice of the meeting was practicable; a party to the Agreement.
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By Order of the Federal Maritime the BHC Act (12 U.S.C. 1842(c)). If the FEDERAL TRADE COMMISSION Commission. proposal also involves the acquisition of Dated: December 11, 2015. a nonbanking company, the review also Granting of Request for Early Rachel E. Dickon, includes whether the acquisition of the Termination of the Waiting Period Assistant Secretary. nonbanking company complies with the Under the Premerger Notification [FR Doc. 2015–31651 Filed 12–16–15; 8:45 am] standards in section 4 of the BHC Act Rules BILLING CODE 6731–AA–P (12 U.S.C. 1843). Unless otherwise Section 7A of the Clayton Act, 15 noted, nonbanking activities will be U.S.C. 18a, as added by Title II of the conducted throughout the United States. Hart-Scott- Rodino Antitrust FEDERAL RESERVE SYSTEM Unless otherwise noted, comments Improvements Act of 1976, requires persons contemplating certain mergers Formations of, Acquisitions by, and regarding each of these applications or acquisitions to give the Federal Trade Mergers of Bank Holding Companies must be received at the Reserve Bank indicated or the offices of the Board of Commission and the Assistant Attorney The companies listed in this notice Governors not later than January 11, General advance notice and to wait have applied to the Board for approval, 2016. designated periods before pursuant to the Bank Holding Company consummation of such plans. Section A. Federal Reserve Bank of Chicago Act of 1956 (12 U.S.C. 1841 et seq.) 7A(b)(2) of the Act permits the agencies, (BHC Act), Regulation Y (12 CFR part (Colette A. Fried, Assistant Vice in individual cases, to terminate this 225), and all other applicable statutes President) 230 South LaSalle Street, waiting period prior to its expiration and regulations to become a bank Chicago, Illinois 60690–1414: and requires that notice of this action be holding company and/or to acquire the 1. First Farmers Financial published in the Federal Register. assets or the ownership of, control of, or Corporation, Converse, Indiana; to The following transactions were the power to vote shares of a bank or merge with Century Bank Corp., granted early termination—on the dates bank holding company and all of the Fairmount, Indiana, and thereby indicated—of the waiting period banks and nonbanking companies indirectly acquire The Citizens provided by law and the premerger owned by the bank holding company, Exchange Bank, Fairmount, Indiana. notification rules. The listing for each including the companies listed below. transaction includes the transaction The applications listed below, as well Board of Governors of the Federal Reserve number and the parties to the as other related filings required by the System, December 14, 2015. transaction. The grants were made by Board, are available for immediate Michael J. Lewandowski, the Federal Trade Commission and the inspection at the Federal Reserve Bank Associate Secretary of the Board. Assistant Attorney General for the indicated. The applications will also be [FR Doc. 2015–31763 Filed 12–16–15; 8:45 am] Antitrust Division of the Department of available for inspection at the offices of BILLING CODE 6210–01–P Justice. Neither agency intends to take the Board of Governors. Interested any action with respect to these persons may express their views in proposed acquisitions during the writing on the standards enumerated in applicable waiting period.
EARLY TERMINATIONS GRANTED NOVEMBER 1, 2015 THRU NOVEMBER 30, 2015
11/02/2015
20160056 ...... G Suncor Energy Inc.; Canadian Oil Sands Limited; Suncor Energy Inc. 20160094 ...... G Leeds Equity Partners V, L.P.; Higher One Holdings, Inc.; Leeds Equity Partners V, L.P. 20160114 ...... G Allergan plc; Mimetogen Pharmaceuticals Inc.; Allergan plc.
11/03/2015
20150863 ...... G Mylan N.V.; Perrigo Company plc; Mylan N.V. 20160070 ...... G Carl C. Icahn; American International Group, Inc.; Carl C. Icahn. 20160124 ...... G DSV A/S; UTi Worldwide Inc.; DSV A/S. 20160132 ...... G Calpine Corporation; Granite Ridge Holdings LLC; Calpine Corporation.
11/04/2015
20160019 ...... G SS&C Technologies, Inc.; Carlyle U.S. Growth Fund III, L.P.; SS&C Technologies, Inc. 20160027 ...... G Mr. Patrick Drahi; Cablevision Systems Corporation; Mr. Patrick Drahi. 20160029 ...... G Mr. Patrick Drahi; Comcast Corporation; Mr. Patrick Drahi. 20160080 ...... G H&F EFS AIV I, L.P.; Lee Equity Partners Fund Summer AIV LP; H&F EFS AIV I, L.P. 20160123 ...... G Benchmark Electronics, Inc.; Vance Street Capital LLC; Benchmark Electronics, Inc. 20160127 ...... G Brentwood Associates Private Equity V, L.P.; Sea Island Clothiers Holdings, LLC; Brentwood Associates Private Equity V, L.P. 20160129 ...... G ServiceMaster Global Holdings, LLC; David Royce; ServiceMaster Global Holdings, LLC.
11/05/2015
20160035 ...... G AqGen Island Holdings, Inc.; C.G. JCF, L.P.; AqGen Island Holdings, Inc.
11/06/2015
20160028 ...... G Tyler Technologies, Inc.; Larry D. Leinweber; Tyler Technologies, Inc. 20160135 ...... G Estate of Vincent Camuto; Estate of Vincent Camuto; Estate of Vincent Camuto. 20160137 ...... G AEA Investors Small Business Fund II LP; Quad-C Partners VII, L.P.; AEA Investors Small Business Fund II LP.
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EARLY TERMINATIONS GRANTED NOVEMBER 1, 2015 THRU NOVEMBER 30, 2015—Continued 20160141 ...... G CCMP Capital Investors III (AV–9), L.P.; PQ Group Holdings Inc.; CCMP Capital Investors III (AV–9), L.P. 20160143 ...... G PQ Group Holdings Inc.; Eco Services Group Holdings LLC; PQ Group Holdings Inc. 20160145 ...... G CCMP Capital Investors III (AV–7), L.P.; PQ Group Holdings Inc.; CCMP Capital Investors III (AV–7), L.P. 20160156 ...... G Thales Group; Vormetric, Inc.; Thales Group 20160157 ...... G Lake Michigan Credit Union; United Federal Credit Union; Lake Michigan Credit Union. 20160160 ...... G Saudi Arabian Oil Company; LANXESS AG; Saudi Arabian Oil Company. 20160163 ...... G nexAir Holding, Inc.; Praxair, Inc.; nexAir Holding, Inc. 20160170 ...... G Carlyle Global Financial Services Partners II, LP; Edgewood Partners Holdings, LLC; Carlyle Global Financial Services Partners II, LP. 20160177 ...... G Intercontinental Exchange, Inc.; Interactive Data Holdings Corporation; Intercontinental Exchange, Inc.
11/09/2015
20160118 ...... G Singapore Post Limited; Genossenschaft Constanter; Singapore Post Limited 20160149 ...... G Capita plc; Xchanging plc; Capita plc 20160155 ...... G PBF Energy Inc.; Exxon Mobil Corporation; PBF Energy Inc. 20160159 G TransCanada Corp.; Talen Energy Corporation; TransCanada Corp. 20160164 G Green Plains Inc.; Murphy USA Inc.; Green Plains Inc. 20160172 ...... G Participacoes Industriais do Nordeste, S.A.; Ball Corporation ; Participacoes Industriais do Nordeste, S.A.
11/10/2015
20160061 ...... G TRC Companies, Inc.; Willbros Group, Inc.; TRC Companies, Inc. 20160101 ...... G Blue Mountain Credit Alternatives Fund Ltd.; Angiotech Pharmaceuticals, Inc.; Blue Mountain Credit Alternatives Fund Ltd. 20160111 ...... G Mason Capital, Ltd.; Edgewell Personal Care Company; Mason Capital, Ltd. 20160152 ...... G Bristol-Myers Squibb Company; Five Prime Therapeutics, Inc.; Bristol-Myers Squibb Company.
11/12/2015
20160088 ...... G Dialog Semiconductor Plc; Atmel Corporation; Dialog Semiconductor Plc. 20160174 ...... G Project Aurora Parent, Inc.; SolarWinds, Inc.; Project Aurora Parent, Inc.
11/13/2015
20160175 ...... G EQUATE Petrochemical Company; Kuwait Petroleum Corporation ; EQUATE Petrochemical Company. 20160178 ...... G EQUATE Petrochemical Company; The Dow Chemical Company; EQUATE Petrochemical Company.
11/16/2015
20160119 ...... G WEX Inc.; Benaissance, LLC; WEX Inc. 20160131 ...... G Cologix Holdings, Inc.; NAC Holdings LLC; Cologix Holdings, Inc. 20160139 ...... G Svenska Cellulosa Aktiebolaget SCA ; Wausau Paper Corp.; Svenska Cellulosa Aktiebolaget SCA. 20160151 ...... G NorthStar Asset Management Group Inc.; GTCR Fund X/B LP; NorthStar Asset Management Group Inc. 20160179 ...... G Securitas AB ; Diebold, Incorporated; Securitas AB. 20160184 ...... G Shaobo Li ; Nipro Corporation ; Shaobo Li. 20160185 ...... G Blackstone Capital Partners IV L.P.; Arlington Capital Partners III, L.P.; Blackstone Capital Partners IV L.P. 20160187 ...... G Trend Micro, Inc.; Hewlett Packard Enterprise Company; Trend Micro, Inc. 20160192 ...... G Navitas Midstream Partners, LLC; Apache Corporation ; Navitas Midstream Partners, LLC. 20160197 ...... G Envision Healthcare Holdings, Inc.; QRx Medical Management, LLC; Envision Healthcare Holdings, Inc. 20160202 ...... G Trilantic Capital Partners IV L.P.; Antero Resources Investment LLC; Trilantic Capital Partners IV L.P.
11/17/2015
20151733 ...... G Schlumberger N.V.; Cameron International Corporation ; Schlumberger N.V. 20160203 ...... G TCP Antero I–1 Holdco, LLC; Antero Resources Investment LLC; TCP Antero I–1 Holdco, LLC. 20160205 ...... G Paul M. Rady; Antero Resources Investment LLC; Paul M. Rady. 20160213 ...... G Warburg Pincus Private Equity X O&G, L.P.; Antero Resources Investment LLC; Warburg Pincus Private Equity X O&G, L.P. 20160214 ...... G Warburg Pincus Private Equity VIII, L.P.; Antero Resources Investment LLC; Warburg Pincus Private Equity VIII, L.P. 20160215 ...... G Warburg Pincus Private Equity X L.P.; Antero Resources Investment LLC; Warburg Pincus Private Equity X L.P. 20160216 ...... G BIF III Holtwood Holding (Delaware) LLC; Talen Energy Corporation ; BIF III Holtwood Holding (Delaware) LLC 20160217 ...... G Glen C. Warren, Jr.; Antero Resources Investment LLC; Glen C. Warren, Jr. 20160220 ...... G Invesco Perpetual UK Investment Series Investment Company; Biofem LLC; Invesco Perpetual UK Investment Series In- vestment Company. 20160221 ...... G Invesco Perpetual UK 2 Investment Series Investment Company; Biofem LLC; Invesco Perpetual UK 2 Investment Series Investment Company. 20160224 ...... G Gryphon Partners 3.5, L.P.; Robert W. Fisher ; Gryphon Partners 3.5, L.P. 20160229 ...... G Endologix, Inc.; TriVascular Technologies, Inc.; Endologix, Inc. 20160231 ...... G Brooks Automation, Inc.; BioStorage Technologies, Inc.; Brooks Automation, Inc. 20160236 ...... G Genstar Capital Partners VII, L.P.; Lee Equity Partners Fund PDR AIV, L.P.; Genstar Capital Partners VII, L.P.
11/18/2015
20160222 ...... G CF Woodford Investment Fund; Biofem LLC; CF Woodford Investment Fund.
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EARLY TERMINATIONS GRANTED NOVEMBER 1, 2015 THRU NOVEMBER 30, 2015—Continued 11/19/2015
20160136 ...... G CDC Holdings, L.P.; Windstream Holdings, Inc.; CDC Holdings, L.P. 20160167 ...... G Genstar Capital Partners VII, L.P.; PSG MB Holding Company I, L.P.; Genstar Capital Partners VII, L.P. 20160180 ...... G TPG-Axon Partners, LP; GNC Holdings, Inc.; TPG-Axon Partners, LP. 20160181 ...... G TPG-Axon Partners (Offshore), Ltd.; GNC Holdings, Inc.; TPG-Axon Partners (Offshore), Ltd.
11/20/2015
20160209 ...... G Blue Cross Blue Shield of Michigan Mutual Insurance Company; DDDS Holdings, LLC; Blue Cross Blue Shield of Michi- gan Mutual Insurance Company. 20160232 ...... G Kinder Morgan Inc.; BP plc; Kinder Morgan Inc. 20160235 ...... G Expedia, Inc.; HomeAway, Inc.; Expedia, Inc. 20160248 ...... G The Lyme Forest Fund IV LP; Hawthorne Timber Company, LLC; The Lyme Forest Fund IV LP. 20160250 ...... G GIP II CPV Holdings Partnership, L.P.; CPV Shore Holdings, LLC; GIP II CPV Holdings Partnership, L.P. 20160251 ...... G Yorktown Energy Partners VIII, L.P.; Antero Resources Investment LLC; Yorktown Energy Partners VIII, L.P. 20160252 ...... G American Capital Equity III, LP; Riverside Micro-Cap, Fund II, L.P.; American Capital Equity III, LP. 20160253 ...... G Yorktown Energy Partners VII, L.P.; Antero Resources Investment LLC; Yorktown Energy Partners VII, L.P. 20160254 ...... G Toshiba Corporation ; Chicago Bridge & Iron Company N.V.; Toshiba Corporation. 20160256 ...... G NeuStar, Inc.; MarketShare Partners, LLC; NeuStar, Inc. 20160258 ...... G ABRY Partners VIII, L.P.; Directravel Holdings, LLC; ABRY Partners VIII, L.P. 20160259 ...... G TPG Growth III (A), L.P.; Palladium Equity Partners III, L.P.; TPG Growth III (A), L.P. 20160263 ...... G Brenntag AG ; Ridgemont Equity Partners I–B, L.P.; Brenntag AG. 20160264 ...... G Cisco Systems, Inc.; Lancope, Inc.; Cisco Systems, Inc. 20160265 ...... G Alphabet Inc.; Diane Greene ; Alphabet Inc. 20160266 ...... G FMI Associates, L.L.C.; Maurice J. Wagener ; FMI Associates, L.L.C. 20160275 ...... G Agnaten SE ; Douglas Zell and Emily Mange ; Agnaten SE. 20160279 ...... G Sammer and Rawa Anabi Family Trust ; Rebel Oil Company, Inc.; Sammer and Rawa Anabi Family Trust. 20160285 ...... G TA XI L.P.; Dan Randolph ; TA XI L.P. 20160308 ...... G Nexstar Broadcasting Group, Inc.; West Virginia Media Partners, LP; Nexstar Broadcasting Group, Inc.
11/23/2015
20160158 ...... G Sola Ltd, Charitable Trust ; Loral Space & Communications Inc.; Sola Ltd, Charitable Trust. 20160191 ...... G Fairholme Funds, Inc.; Sears Holdings Corporation ; Fairholme Funds, Inc. 20160200 ...... G Carl C. Icahn ; Chesapeake Energy Corporation ; Carl C. Icahn. 20160274 ...... G FedEx Corporation ; TNT Express N.V.; FedEx Corporation. 20160276 ...... G Dan T. Montgomery; A. James Clark Revocable Trust ; Dan T. Montgomery. 20160278 ...... G Boston Scientific Corporation ; Dr. James R. Leininger ; Boston Scientific Corporation. 20160280 ...... G Gryphon Partners IV, L.P.; The Huron Fund III, L.P.; Gryphon Partners IV, L.P. 20160284 ...... G New Flyer Industries Inc.; Motor Coach Holdings, LP; New Flyer Industries Inc. 20160288 ...... G Chiyoda Corporation ; Ezra Holdings Limited; Chiyoda Corporation. 20160289 ...... G Caterpillar Inc.; Roy D. Sturgeon ; Caterpillar Inc. 20160291 ...... G Bridgestone Corporation ; The Pep Boys—Manny, Moe & Jack ; Bridgestone Corporation.
11/24/2015
20160148 ...... G FEI Company; DCG Systems, Inc.; FEI Company 20160165 ...... G NeoGenomics, Inc.; General Electric Company; NeoGenomics, Inc. 20160166 ...... G General Electric Company; NeoGenomics, Inc.; General Electric Company 20160168 ...... G Elliott Associates, L.P.; Cabela’s Incorporated; Elliott Associates, L.P. 20160169 ...... G Elliott International Limited; Cabela’s Incorporated; Elliott International Limited. 20160226 ...... G LSF9 Cypress LP; Gypsum Supply Co. Employee Stock Ownership Plan Trust ; LSF9 Cypress LP. 20160260 ...... G LetterOne Holdings S.A.; The Huron Fund III, L.P.; LetterOne Holdings S.A. 20160281 ...... G AstraZeneca PLC; ZS Pharma, Inc.; AstraZeneca PLC.
11/25/2015
20150944 ...... S NXP Semiconductors N.V.; Freescale Semiconductor, Ltd.; NXP Semiconductors N.V. 20160153 ...... G Blucora, Inc.; HDV Holdings LLC; Blucora, Inc. 20160233 ...... G Pamlico Capital III, L.P.; Chicago Growth Partners II, LP; Pamlico Capital III, L.P. 20160268 ...... G Johnson & Johnson ; Novira Therapeutics, Inc.; Johnson & Johnson. 20160273 ...... G Cathay Financial Holding Co., Ltd.; CCMP Capital Octagon Holdings, LLC; Cathay Financial Holding Co., Ltd. 20160295 ...... G AutoNation, Inc.; MWM Real Estate, LLC; AutoNation, Inc. 20160298 ...... G AutoNation, Inc.; Allen Samuels Enterprises, Inc.; AutoNation, Inc.
11/27/2015
20160277 ...... G Endurance International Group, Inc.; Constant Contact, Inc.; Endurance International Group, Inc. 11/30/2015
20160206 ...... G Sachem Head Offshore Ltd.; Autodesk, Inc.; Sachem Head Offshore Ltd.
20160207 ...... G Sachem Head LP; Autodesk, Inc.; Sachem Head LP. 20160208 ...... G Scott D. Ferguson ; Autodesk, Inc.; Scott D. Ferguson.
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EARLY TERMINATIONS GRANTED NOVEMBER 1, 2015 THRU NOVEMBER 30, 2015—Continued 20160283 ...... G Johnson & Johnson ; Hanmi Pharmaceutical Co., Ltd.; Johnson & Johnson. 20160297 ...... G Kinross Gold Corporation ; Barrick Gold Corporation ; Kinross Gold Corporation. 20160309 ...... G AAA Mid-Atlantic Inc.; AAA Allied Group, Inc.; AAA Mid-Atlantic Inc. 20160325 ...... G Constellation Brands, Inc.; Jack White, Jr.; Constellation Brands, Inc. 20160328 ...... G Targa Resources Corp.; Targa Resources Partners LP; Targa Resources Corp. 20160330 ...... G AP VIII DSB Holdings, L.P.; Warburg Pincus Private Equity X, L.P.; AP VIII DSB Holdings, L.P. 20160334 ...... G Arbor Investments III, L.P.; Ornua Co-operative Limited; Arbor Investments III, L.P. 20160341 ...... G Riverstone Global Energy and Power Fund; Bonanza Creek Energy, Inc.; Riverstone Global Energy and Power Fund. 20160347 ...... G Fossil Group, Inc.; Misfit, Inc.; Fossil Group, Inc.
FOR FURTHER INFORMATION CONTACT: Prevention, 1600 Clifton Road NE., MS– collected; (d) ways to minimize the Theresa Kingsberry Program Support D74, Atlanta, Georgia 30329. burden of the collection of information Specialist, Federal Trade Commission Instructions: All submissions received on respondents, including through the Premerger Notification Office Bureau of must include the agency name and use of automated collection techniques Competition, Room CC–5301, Docket Number. All relevant comments or other forms of information Washington, DC 20024 (202) 326–3100. received will be posted without change technology; and (e) estimates of capital By direction of the Commission. to Regulations.gov, including any or start-up costs and costs of operation, personal information provided. For Donald S. Clark, maintenance, and purchase of services access to the docket to read background to provide information. Burden means Secretary. documents or comments received, go to the total time, effort, or financial [FR Doc. 2015–31670 Filed 12–16–15; 8:45 am] Regulations.gov. resources expended by persons to BILLING CODE 6750–01–P Please note: All public comment generate, maintain, retain, disclose or should be submitted through the provide information to or for a Federal Federal eRulemaking portal agency. This includes the time needed DEPARTMENT OF HEALTH AND (Regulations.gov) or by U.S. mail to the to review instructions; to develop, HUMAN SERVICES address listed above. acquire, install and utilize technology FOR FURTHER INFORMATION CONTACT: To and systems for the purpose of Centers for Disease Control and request more information on the collecting, validating and verifying Prevention proposed project or to obtain a copy of information, processing and [60Day–16–16GX; Docket No. CDC–2015– the information collection plan and maintaining information, and disclosing 0113] instruments, contact the Information and providing information; to train Collection Review Office, Centers for personnel and to be able to respond to Proposed Data Collection Submitted Disease Control and Prevention, 1600 a collection of information, to search for Public Comment and Clifton Road NE., MS–D74, Atlanta, data sources, to complete and review Recommendations Georgia 30329; phone: 404–639–7570; the collection of information; and to Email: [email protected]. transmit or otherwise disclose the AGENCY: Centers for Disease Control and SUPPLEMENTARY INFORMATION: Under the information. Prevention (CDC), Department of Health Paperwork Reduction Act of 1995 (PRA) Proposed Project and Human Services (HHS). (44 U.S.C. 3501–3520), Federal agencies ACTION: Notice with comment period. must obtain approval from the Office of Mining Industry Surveillance Management and Budget (OMB) for each System—New—National Institute for SUMMARY: The Centers for Disease collection of information they conduct Occupational Safety and Health Control and Prevention (CDC), as part of or sponsor. In addition, the PRA also (NIOSH), Centers for Disease Control its continuing efforts to reduce public requires Federal agencies to provide a and Prevention (CDC). burden and maximize the utility of 60-day notice in the Federal Register government information, invites the Background and Brief Description concerning each proposed collection of general public and other Federal information, including each new The mission of the National Institute agencies to take this opportunity to proposed collection, each proposed for Occupational Safety and Health comment on proposed and/or extension of existing collection of (NIOSH) is to promote safety & health at continuing information collections, as information, and each reinstatement of work for all people through research required by the Paperwork Reduction previously approved information and prevention. The Federal Mine Act of 1995. This notice invites collection before submitting the Safety & Health Act of 1977, section comment on a proposed new collection to OMB for approval. To 501, enables NIOSH to carry out information collection request entitled comply with this requirement, we are research relevant to the health and ‘‘Mining Industry Surveillance System’’. publishing this notice of a proposed safety of workers in the mining DATES: Written comments must be data collection as described below. industry. Surveillance of occupational received on or before February 16, 2016. Comments are invited on: (a) Whether injuries, illnesses, and exposures has ADDRESSES: You may submit comments, the proposed collection of information been an integral part of the work of the identified by Docket No. CDC–2015– is necessary for the proper performance NIOSH since its creation by the 0113 by any of the following methods: of the functions of the agency, including Occupational Safety and Health Act in Federal eRulemaking Portal: whether the information shall have 1970. Surveillance activities at the Regulation.gov. Follow the instructions practical utility; (b) the accuracy of the Office of Mine Safety and Health for submitting comments. agency’s estimate of the burden of the Research (OMSHR), a Division of Mail: Leroy A. Richardson, proposed collection of information; (c) NIOSH, are focused on the nation’s Information Collection Review Office, ways to enhance the quality, utility, and mining workforce. OMSHR is planning Centers for Disease Control and clarity of the information to be to develop the Mining Industry
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Surveillance System, a unique source of association. In Phase 1 of the project, Based on the stratification and sample longitudinal information on U.S. mines the MIWS will be conducted in the size allocation plan developed for this and their employees. Its purpose will be stone/sand and gravel mining sector in project, 34% of all sampled mines have to: (1) Track changes and emerging year 1, the metal/nonmetal mining fewer than 10 employees. Mines with 10 trends over time; (2) provide current sector in year 2, and the coal mining or fewer employees will not have to do data to guide research and training sector in year 3. Data from this survey any sampling as they will be asked to activities; (3) provide updated will provide denominator data so that provide data for all of their employees. demographic and occupational data for accident, injury, and illness reports can Small mines will require up to 45 the mining workforce; and (4) provide be evaluated in relation to the minutes to complete the survey. Mines denominator data to help understand population at risk. with 11 or more employees will need up the risk of work-related injuries, disease, Additionally, NIOSH cannot to 1.5 hours given their need to generate and fatalities in specific demographic separately determine the number of an employee roster and sample 10 of and occupational subgroups. The goal of contractor employees working in metal, their employees. Thus, NIOSH is nonmetal, stone, or sand and gravel the proposed project is to improve its estimating that the average annual mines. The survey will collect mine- surveillance capability related to the burden to complete the survey will be level data on contractor employees to occupational risks in mining. NIOSH is 1 hour. Non-responding mines will be requesting a three-year approval for this allow NIOSH to determine the quantity asked to complete the Nonresponse data collection. of contract labor that mine operators use NIOSH is planning to use the Mining and the type of work these employees Survey which consists of only seven Industry and Workforce Survey (MIWS) perform. NIOSH will also use the MIWS questions. NIOSH estimates that the to collect data for the Mining Industry to collect mine-level data that will burden for this brief survey will be 10 Surveillance System. Data will be provide a valuable picture of the current minutes or less. collected through surveys conducted on working environment (work schedules The total estimated burden hours are a rotating basis in mining sectors and shift work practices) used in the 1,397. There is no cost to the aligned with national mining U.S. mining industry. respondents other than their time.
ESTIMATED ANNUALIZED BURDEN HOURS
Number of Avg. burden Type of respondents Form name Number of responses per per response Total burden respondents respondent (in hrs.) (in hrs.)
Responding Stone/Sand & Gravel Mining Industry & Workforce Survey 526 1 1 526 Mines (Year 1). Nonresponding Stone/Sand & Gravel Nonresponse Survey ...... 350 1 10/60 58 Mines (Year 1). Responding Metal/Nonmetal Mines Mining Industry & Workforce Survey 369 1 1 369 (Year 2). Nonresponding Metal/Nonmetal Nonresponse Survey ...... 246 1 10/60 41 Mines (Year 2). Responding Coal Mines (Year 3) ..... Mining Industry & Workforce Survey 363 1 1 363 Nonresponding Coal Mines (Year 3) Nonresponse Survey ...... 242 1 10/60 40
Total ...... 1,397
Leroy A. Richardson, accordance with the Paperwork who are to respond, including through Chief, Information Collection Review Office, Reduction Act of 1995. The notice for the use of appropriate automated, Office of Scientific Integrity, Office of the the proposed information collection is electronic, mechanical, or other Associate Director for Science, Office of the published to obtain comments from the technological collection techniques or Director, Centers for Disease Control and public and affected agencies. other forms of information technology, Prevention. e.g., permitting electronic submission of [FR Doc. 2015–31741 Filed 12–16–15; 8:45 am] Written comments and suggestions from the public and affected agencies responses; and (e) Assess information BILLING CODE 4163–18–P concerning the proposed collection of collection costs. information are encouraged. Your To request additional information on DEPARTMENT OF HEALTH AND comments should address any of the the proposed project or to obtain a copy HUMAN SERVICES following: (a) Evaluate whether the of the information collection plan and proposed collection of information is instruments, call (404) 639–7570 or Centers for Disease Control and necessary for the proper performance of send an email to [email protected]. Written the functions of the agency, including Prevention comments and/or suggestions regarding whether the information will have the items contained in this notice [30Day–16–0009] practical utility; (b) Evaluate the should be directed to the Attention: accuracy of the agencies estimate of the Agency Forms Undergoing Paperwork CDC Desk Officer, Office of Management Reduction Act Review burden of the proposed collection of information, including the validity of and Budget, Washington, DC 20503 or The Centers for Disease Control and the methodology and assumptions used; by fax to (202) 395–5806. Written Prevention (CDC) has submitted the (c) Enhance the quality, utility, and comments should be received within 30 following information collection request clarity of the information to be days of this notice. to the Office of Management and Budget collected; (d) Minimize the burden of (OMB) for review and approval in the collection of information on those
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Proposed Project Trichinosis, Legionellosis, Tularemia, evaluate nationwide surveillance National Disease Surveillance Lyme Disease (LD), Typhoid Fever, systems. State epidemiologists are Program–I—Case Reports—Revision— Malaria, Viral Hepatitis, and Plague. responsible for the collection, National Center for Emerging and Due to change requests and surveillance interpretation, and transmission of Zoonotic Infectious Disease (NCEZID), systems moving to and receiving medical and epidemiological Centers for Disease Control and information collection approval under information to CDC. OMB Control number 0920–0728 Prevention (CDC) The original purpose for reporting (National Notifiable Diseases Background and Brief Description Surveillance System (NNDSS)) during communicable diseases was to determine the prevalence of diseases Surveillance of the incidence and the last three years, the following dangerous to public health. However, distribution of disease has been an diseases/conditions are now included in important function of the US Public this program: Creutzfeldt-Jakob Disease collecting data also provided the basis Health Service (PHS) since an 1878 Act (CJD), Reye Syndrome, Kawasaki for planning and evaluating effective of Congress, which authorized the PHS syndrome, and Acute Flaccid Myelitis. programs for prevention and control of to collect morbidity reports. After the CDC needs to continue this surveillance infectious diseases. Current information Malaria Control in War Areas Program package for another three years to on disease incidence is needed to study had fulfilled its original 1942 objective maintain continuity in these present and emerging disease problems. of reducing malaria transmission, its surveillance systems. The data CDC coordination of nationwide basic tenets were carried forward and throughout the years are used to reporting maintains uniformity so that broadened by the formation of the monitor the occurrence of non-notifiable comparisons can be made from state to Communicable Disease Center (CDC) in conditions and to plan and conduct state and year to year. 1946. CDC was conceived of as a well- prevention and control programs at the In addition to development of equipped, broadly staffed agency used state, territorial, local and national prevention and control programs, to translate facts about analysis of levels. surveillance data serves as statistical morbidity and mortality statistics on CDC currently collects data for certain material for those engaged in research or communicable diseases and through diseases in summary form under OMB medical practice, aid to health field investigations. Control number 0920–0004, (National The surveillance emphasis has shifted Disease Surveillance Program II— education officials and students, and as certain diseases have declined in Disease Summaries). These disease data for manufacturers of incidence, national emergencies have summaries are for important, yet pharmaceutical products. Annual prompted involvement in new areas, different types of infections from those surveillance data are published in the and other diseases have taken on new covered in this disease case reports MMWR Surveillance Summary. The aspects. Surveillance for the following request. Maintaining separate OMB total burden requested is 190 hours, a diseases was approved three years ago: Control number approvals for these two decrease in 11,257 hours since the last Creutzfeldt-Jakob Disease (CJD), types of data collections assists CDC in submission. This is due to the other Cyclosporiasis cayetanensis, Q Fever, managing the two surveillance diseases reporting moving to the Dengue, Reye Syndrome, Hantavirus activities. Notifiable Diseases Surveillance System pulmonary syndrome (HPS), Tick-borne CDC works with state health (0920–0728). There is no cost to Rickettsial Disease, Kawasaki syndrome, departments to propose, coordinate, and respondents other than their time.
ESTIMATED ANNUALIZED BURDEN HOURS
Average Number of Number of burden per Type of respondents Form name respondents responses per response respondent (in hrs.)
Epidemiologist ...... CJD ...... 20 2 20/60 Epidemiologist ...... Kawasaki Syndrome ...... 55 8 15/60 Epidemiologist ...... Reye Syndrome ...... 50 1 20/60 Epidemiologist ...... Acute Flaccid Myelitis ...... 100 1 30/60
Total ......
Leroy Richardson, DEPARTMENT OF HEALTH AND ACTION: Notice with comment period. Chief, Information Collection Review Office, HUMAN SERVICES Office of Scientific Integrity, Office of the SUMMARY: The Centers for Disease Associate Director for Science, Office of the Centers for Disease Control and Control and Prevention (CDC), as part of Director, Centers for Disease Control and Prevention its continuing efforts to reduce public Prevention. burden and maximize the utility of [60Day–16–0821; Docket No. CDC–2015– government information, invites the [FR Doc. 2015–31706 Filed 12–16–15; 8:45 am] 0114] BILLING CODE 4163–18–P general public and other Federal Proposed Data Collection Submitted agencies to take this opportunity to for Public Comment and comment on proposed and/or Recommendations continuing information collections, as required by the Paperwork Reduction AGENCY: Centers for Disease Control and Act of 1995. This notice invites Prevention (CDC), Department of Health comment on a proposed revision of an and Human Services (HHS). information collection request entitled
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‘‘Quarantine Station Illness Response of the functions of the agency, including in an additional 15 hours of burden per Forms: Airline, Maritime, and Land/ whether the information shall have year. Border Crossing’’ which will enable practical utility; (b) the accuracy of the • CDC is requesting fewer CDC to collect information concerning agency’s estimate of the burden of the respondents to the Maritime cases of illness or death that occur proposed collection of information; (c) Conveyance Illness or Death during or after travel to the United ways to enhance the quality, utility, and Investigation Form, from 1873 to 750 States in order to determine if further clarity of the information to be reports. This results in a decrease of 94 public health follow-up is required. collected; (d) ways to minimize the hours. • DATES: Written comments must be burden of the collection of information CDC is requesting a decrease in the received on or before February 16, 2016. on respondents, including through the number of respondents to the Land Travel Illness or Death Investigation ADDRESSES: You may submit comments, use of automated collection techniques form, from 259 respondents to 100. This identified by Docket No. CDC–2015– or other forms of information results in a decrease of 13 hours. 0114 by any of the following methods: technology; and (e) estimates of capital • or start-up costs and costs of operation, Also included are adjustments to the Federal eRulemaking Portal: number of respondents and estimated Regulation.gov. Follow the instructions maintenance, and purchase of services to provide information. Burden means burden to the public for the use of the for submitting comments. United States Traveler Health • Mail: Leroy A. Richardson, the total time, effort, or financial resources expended by persons to Declaration and Ebola Risk Assessment Information Collection Review Office, forms at U.S. ports of entry. These forms Centers for Disease Control and generate, maintain, retain, disclose or provide information to or for a Federal are currently used to collect contact Prevention, 1600 Clifton Road NE., MS– information and assess travelers’ risk for D74, Atlanta, Georgia 30329. agency. This includes the time needed to review instructions; to develop, Ebola if they are coming to the United Instructions: All submissions received States from Sierra Leone and Guinea. must include the agency name and acquire, install and utilize technology and systems for the purpose of The adjustments are as follows: Docket Number. All relevant comments • collecting, validating and verifying CDC is requesting 40,238 fewer received will be posted without change respondents to the United States to Regulations.gov, including any information, processing and maintaining information, and disclosing Traveler Health Declaration (English: personal information provided. For Hard Copy, fillable PDF, electronic access to the docket to read background and providing information; to train personnel and to be able to respond to portal), resulting in a decrease of 10,060 documents or comments received, go to burden hours. Regulations.gov. a collection of information, to search • data sources, to complete and review CDC is requesting an additional Please note: All public comment should be the collection of information; and to 6,814 respondents to the United States submitted through the Federal eRulemaking transmit or otherwise disclose the Traveler Health Declaration (French portal (Regulations.gov) or by U.S. mail to the information. translation guide), with an increase of address listed above. 1,703 burden hours. Proposed Project • FOR FURTHER INFORMATION CONTACT: To CDC is requesting 76 fewer request more information on the Quarantine Station Illness Response respondents for the United States proposed project or to obtain a copy of Forms: Airline, Maritime, and Land/ Traveler Health Declaration (Arabic the information collection plan and Border Crossing (0920–0821, expires 04/ translation guide), with a decrease of 19 instruments, contact the Information 30/2016). Revision. Division of Global burden hours. • CDC is requesting 2,637 fewer Collection Review Office, Centers for Migration and Quarantine, National respondents to the Ebola Risk Disease Control and Prevention, 1600 Center for Emerging Zoonotic and Assessment Form (English hard copy), Clifton Road NE., MS–D74, Atlanta, Infectious Diseases, Centers for Disease and an associated decrease of 659 Georgia 30329; phone: 404–639–7570; Control and Prevention (CDC). burden hours. Email: [email protected]. Background and Brief Description • CDC is requesting an increase of SUPPLEMENTARY INFORMATION: Under the 141 respondents to the Ebola Risk CDC is requesting approval for a Paperwork Reduction Act of 1995 (PRA) Assessment (French translation guide) revision to this existing information (44 U.S.C. 3501–3520), Federal agencies and an increase of 35 burden hours. must obtain approval from the Office of collection with the intent of ensuring • CDC is requesting eight fewer Management and Budget (OMB) for each that CDC can continue and improve the respondents to the Ebola Risk collection of information they conduct collection of pertinent information Assessment (Arabic translation guide) or sponsor. In addition, the PRA also related to communicable disease or and two fewer burden hours. requires Federal agencies to provide a deaths that occur aboard conveyances CDC is also requesting an adjustment 60-day notice in the Federal Register during travel within the United States to the number of respondents and concerning each proposed collection of and into the United States from a burden hours for the use of the information, including each new foreign country, as authorized under 42 Interactive Voice Response (IVR) system proposed collection, each proposed Code of Federal Regulations part 70 and surveys. extension of existing collection of 71, respectively. • CDC is requesting 40,238 fewer information, and each reinstatement of Concerning routine operations, CDC is respondents to the IVR Active previously approved information adjusting its estimates of respondents Monitoring Survey (English: Recorded), collection before submitting the and burden associated with the use of with 56,333 fewer burden hours. collection to OMB for approval. To the Air Travel, Maritime Conveyance, • CDC is requesting an increase of comply with this requirement, we are and Land Travel Illness or Death 6,814 respondents to the IVR Active publishing this notice of a proposed Investigation forms. Monitoring Survey (French: Recorded) data collection as described below. • CDC is requesting an increase in the and an additional 9,540 burden hours. Comments are invited on: (a) Whether number of respondents to the Air Travel • CDC is requesting 76 fewer the proposed collection of information Illness or Death Investigation form, from respondents to the IVR Active is necessary for the proper performance 1626 respondents to 1800. This results Monitoring: Arabic translation
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assistance (no script), with a decrease of CDC requested a total of 38,817 ship medical personnel. There is no cost 106 burden hours. respondents and 29,388 burden hours to respondents other than the time These adjustments result in a decrease annually. The respondents to these required to provide the information of 55,994 burden hours. information collections are travelers and requested.
ESTIMATED ANNUALIZED BURDEN HOURS
Average Number of Number of burden per Total burden Respondent Form respondents responses per response hours respondent (in minutes)
Traveler ...... Airline Travel Illness or Death Inves- 1,800 1 5/60 150 tigation Form. Ship Medical Personnel...... Maritime Conveyance Illness or 750 1 5/60 63 Death Investigation Form. Traveler ...... Land Travel Illness or Death Inves- 100 1 5/60 8 tigation Form. Traveler ...... Ebola Risk Assessment Form (Ill 100 1 15/60 25 traveler interview: English, French, Arabic, or other as need- ed). Traveler ...... United States Traveler Health Dec- 9,000 1 15/60 2250 laration (English: Hard Copy, fillable PDF, electronic portal). Traveler ...... United States Traveler Health Dec- 8,400 1 15/60 2100 laration (French translation guide). Traveler ...... United States Traveler Health Dec- 100 1 15/60 25 laration (Arabic translation guide). Traveler ...... Ebola Risk Assessment Form 810 1 15/60 203 (English hard copy). Traveler ...... Ebola Risk Assessment French 252 1 15/60 63 translation guide. Traveler ...... Ebola Risk Assessment Arabic 5 1 15/60 1 translation guide. Traveler ...... IVR Active Monitoring Survey 9,000 21 4/60 12,600 (English: Recorded). Traveler ...... IVR Active Monitoring Survey 8,400 21 4/60 11,760 (French: Recorded). Traveler ...... IVR Active Monitoring: Arabic trans- 100 21 4/60 140 lation assistance (no script).
Total ...... 38,817 ...... 29,388
Leroy A. Richardson, ACTION: Notice. and Drug Administration, 8455 Chief, Information Collection Review Office, Colesville Rd., COLE–14526, Silver Office of Scientific Integrity, Office of the SUMMARY: The Food and Drug Spring, MD 20993–0002, PRAStaff@ Associate Director for Science, Office of the Administration (FDA) is announcing fda.hhs.gov. Director, Centers for Disease Control and that a proposed collection of Prevention. information has been submitted to the SUPPLEMENTARY INFORMATION: In [FR Doc. 2015–31742 Filed 12–16–15; 8:45 am] Office of Management and Budget compliance with 44 U.S.C. 3507, FDA has submitted the following proposed BILLING CODE 4163–18–P (OMB) for review and clearance under the Paperwork Reduction Act of 1995. collection of information to OMB for DATES: Fax written comments on the review and clearance. DEPARTMENT OF HEALTH AND collection of information by January 19, Guidance for Industry on Safety HUMAN SERVICES 2016. Labeling Changes—Implementation of ADDRESSES: To ensure that comments on Section 505(o)(4) of the Federal Food, Food and Drug Administration the information collection are received, Drug, and Cosmetic Act, OMB Control OMB recommends that written Number 0910–0734—Extension [Docket No. FDA–2011–D–0164] comments be faxed to the Office of Section 505(o)(4) of the Federal Food, Information and Regulatory Affairs, Agency Information Collection Drug, and Cosmetic Act (the FD&C Act) OMB, Attn: FDA Desk Officer, FAX: (21 U.S.C. 355(o)(4)) authorizes FDA to Activities; Submission for Office of _ 202–395–7285, or emailed to oira require, and if necessary, order labeling Management and Budget Review; [email protected]. All Comment Request; Guidance for changes if FDA becomes aware of new comments should be identified with the safety information that FDA believes Industry on Safety Labeling Changes— OMB control number 0910–0734. Also Implementation of Section 505(o)(4) of should be included in the labeling of include the FDA docket number found certain prescription drug and biological the Federal Food, Drug, and Cosmetic in brackets in the heading of this Act products approved under section 505 of document. the FD&C Act or section 351 of the PHS AGENCY: Food and Drug Administration, FOR FURTHER INFORMATION CONTACT: FDA Act (42 U.S.C. 262). Section 505(o)(4) of HHS. PRA Staff, Office of Operations, Food the FD&C Act applies to prescription
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drug products with an approved new constitutes new safety information, the each year and that each rebuttal drug application (NDA) under section procedures involved in requiring safety statement will take approximately 6 505(b) of the FD&C Act, biological labeling changes, and enforcement of hours to prepare. products with an approved biologics the requirements for safety labeling In addition, in the guidance, FDA license application under section 351 of changes. states that new labeling prepared in the PHS Act, or prescription drug FDA requires safety labeling changes response to a safety labeling change products with an approved abbreviated by sending a notification letter to the notification should be available on the new drug application under section application holder. Under section application holder’s Web site within 10 505(j) of the FD&C Act if the reference 505(o)(4)(B), the application holder calendar days of approval. FDA must respond to FDA’s notification by listed drug with an approved NDA is estimates that approximately 407 submitting a labeling supplement or not currently marketed. Section application holders will post new notifying FDA that the applicant does 505(o)(4) imposes timeframes for labeling one time each year in response not believe the labeling change is to a safety labeling change notification application holders to submit and FDA warranted and submitting a statement staff to review such changes, and gives and that the posting of the labeling will detailing the reasons why the take approximately 4 hours to prepare. FDA new enforcement tools to bring application holder does not believe a about timely and appropriate labeling change is warranted (a rebuttal In the Federal Register of September changes. The guidance provides statement). 2, 2015 (80 FR 53161), FDA published information on the implementation of Based on FDA’s experience to date a 60-day notice requesting public the new provisions, including a with safety labeling changes comment on the proposed collection of description of the types of safety requirements under section 505(o)(4), information. No comments were labeling changes that ordinarily might we estimate that approximately 42 received. be required under the new legislation, application holders will elect to submit FDA estimates the burden of this how FDA plans to determine what approximately one rebuttal statement collection of information as follows:
TABLE 1—ESTIMATED ANNUAL REPORTING BURDEN 1
Number of Average Number of responses per Total annual burden per Total hours respondents respondent responses response
Rebuttal statement ...... 42 1 42 6 252 1 There are no capital costs or operating and maintenance costs associated with this collection of information.
TABLE 2—ESTIMATED ANNUAL THIRD-PARTY DISCLOSURE BURDEN 1
Number of Number of disclosures Total annual Average Type of submission respondents per disclosures burden per Total hours respondent disclosure
Posting approved labeling on application holder’s Web site 407 1 407 4 1,628 1 There are no capital costs or operating and maintenance costs associated with this collect of information.
Dated: December 10, 2015. SUMMARY: The Food and Drug Administration, 10903 New Hampshire Leslie Kux, Administration (FDA) is announcing the Ave., Bldg. 66, Rm. 3615, Silver Spring, Associate Commissioner for Policy. termination of the Medical Device ISO MD 20993–0002, 301–796–6556. [FR Doc. 2015–31696 Filed 12–16–15; 8:45 am] Voluntary Audit Report Pilot Program. SUPPLEMENTARY INFORMATION: BILLING CODE 4164–01–P This program allowed the submission of ISO audit reports performed by third I. Background parties, along with audit reports from In the Federal Register of March 19, DEPARTMENT OF HEALTH AND the preceding 2 years, to determine if 2012 (77 FR 16036), FDA announced the HUMAN SERVICES the owner or operator of the medical availability of a final guidance entitled device establishment could be removed ‘‘Guidance for Industry, Third Parties Food and Drug Administration from FDA’s routine inspection work and Food and Drug Administration plan for 1 year. FDA is also announcing Staff: Medical Device ISO 13485:2003 [Docket No. FDA–2010–D–0226] its participation in the operational Voluntary Audit Report Submission phase of the Medical Device Single Pilot Program’’ (Ref. 1). This guidance Medical Device ISO 13485:2003 Audit Program (MDSAP), which will document was effective on June 5, 2012, Voluntary Audit Report Pilot Program; allow third parties recognized by the and as stated in the guidance was an Termination of Pilot Program; MDSAP consortium to submit audit interim measure while developing a Announcement of the Medical Device reports that FDA will utilize for routine single audit program, to implement Single Audit Program Operational inspections. section 228 of the Food and Drug Phase Administration Amendments Act of DATES: This notice is effective March 31, 2007 (Pub. L. 110–85), which amended 2016. AGENCY: Food and Drug Administration, section 704(g)(7) of the Federal Food, HHS. FOR FURTHER INFORMATION CONTACT: Drug, and Cosmetic Act (21 U.S.C. Robert Ruff, Center for Devices and 374(g)(7)). The pilot allowed the owner ACTION: Notice. Radiological Health, Food and Drug or operator of the medical device
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establishment to be removed from II. References Analytical Sciences for Biotechnology FDA’s routine inspection work plan for The following references are on Health Products—WCBP 2016.’’ The 1 year from the last day of the ISO display in the Division of Dockets purpose of the meeting is to discuss 13485:2003 audit. The voluntary Management (HFA–305), Food and Drug development of biotechnology-derived submitted ISO 13485:2003 audit report Administration, 5630 Fishers Lane, Rm. drug products and analytic provides FDA some information on the 1061, Rockville, MD 20852 and are methodologies for the development of conformance of the manufacturer with available for viewing by interested biotechnology-derived drug products. basic and fundamental quality persons between 9 a.m. and 4 p.m., DATES: The meeting will be held January management system requirements for Monday through Friday; they are also 26, 2016, from 8 a.m., until January 28, medical devices. available electronically at http:// 2016, at 5 p.m. In 2012, FDA started working on the www.regulations.gov. FDA has verified ADDRESSES: The meeting will be held at MDSAP with other global regulators the Web site addresses, as of the date The Mayflower Hotel, 1127 Connecticut within the International Medical Device this document publishes in the Federal Ave. NW., Washington, DC Regulators Forum (IMDRF) for purposes Register, but Web sites are subject to FOR FURTHER INFORMATION CONTACT: of leveraging work performed for other change over time. Linda Mansouria, CASSS, 5900 Hollis medical device regulators to meet its 1. FDA Guidance, Guidance for Industry, St., Suite R3, Emeryville, CA 94608, inspection obligations. On November Third Parties and Food and Drug 510–428–0740, FAX: 510–428–0741, 15, 2013 (78 FR 68853), FDA announced Administration Staff: Medical Device ISO [email protected]. its participation within the MDSAP 13485:2003 Voluntary Audit Report Pilot SUPPLEMENTARY INFORMATION: Program, available at http://www.fda.gov/ consortium’s pilot program, which is downloads/MedicalDevices/ I. Background effective January 1, 2014, through DeviceRegulationandGuidance/ CASSS is a scientific society December 31, 2016. GuidanceDocuments/UCM212798.pdf. 2. Medical Device Single Audit Program providing forums for the dissemination After review of the MDSAP Mid-Pilot of information and discussions among Report, which published in August 2015 (MDSAP) Mid-Pilot Status Report, January 2014–December 2016, available http:// industry, academic and regulatory (Ref. 2), FDA announced that it will www.fda.gov/downloads/MedicalDevices/ professionals founded on the participate with the other MDSAP InternationalPrograms/MDSAPPilot/ development and applications of Consortium regulators from Australia, UCM461661.pdf. separation science. This cosponsored Brazil, Canada, and Japan in the 3. Medical Device Single Audit Program meeting provides state-of-the-art implementation of the operational phase (MDSAP) Pilot, available at http:// presentations on the technologies used www.fda.gov/MedicalDevices/ of the program starting January 1, 2017. to produce and assess product quality of The MDSAP program provides FDA InternationalPrograms/MDSAPPilot/. 4. Health Canada’s transition strategy from biotechnology-derived drug products. better assurances than the ISO CMDCAS to MDSAP, available at http:// II. Registration and Accommodations 13485:2003 Voluntary Audit Report www.hc-sc.gc.ca/dhp-mps/md-im/activit/int/ Submission Pilot because FDA’s index-eng.php. A. Registration requirements under 21 CFR 820 or other Dated: December 8, 2015. There is a registration fee to attend FDA regulations typically covered Leslie Kux, this meeting. The registration fee is during FDA inspections are Associate Commissioner for Policy. charged to help defray the costs of encompassed within the MDSAP audit programming and facilities. Seats are model. [FR Doc. 2015–31692 Filed 12–16–15; 8:45 am] BILLING CODE 4164–01–P limited, and registration will be on a On January 1, 2017, MDSAP will first-come, first-served basis. become fully operational to include To register, please complete opening applications for additional DEPARTMENT OF HEALTH AND registration online at http:// auditing organizations beyond the HUMAN SERVICES www.casss.org/?WCBP1600. (FDA has limited eligible auditing organizations verified the Web address, but FDA is not within the pilot phase. Each regulator Food and Drug Administration responsible for subsequent changes to the Web site after this document within the consortium has committed to [Docket No.FDA–2015–N–0001] continuing to utilize the MDSAP audits publishes in the Federal Register.) The during the pilot as well as during the The Twentieth Food and Drug costs of registration for the different operational phase as described in the Administration International categories of attendees are as follows: MDSAP public announcements posted Separation Science Society on FDA’s Web page (Ref. 3). Symposium on the Interface of Category Cost Also, Health Canada in a recent Regulatory and Analytical Sciences for Industry Rep- $1995 (early bird); announcement laid out the timeframe Biotechnology Health Products— resentatives. $2395 (onsite). for which they will terminate their WCBP 2016 Academic ...... $795 (early bird); $895 (onsite). Canadian Medical Device Conformity AGENCY: Food and Drug Administration, Government ...... $795 (early bird); Assessment System (CMDCAS) program HHS. and utilize MDSAP as the means by $895 (onsite). ACTION: Notice of meeting. which manufacturers will obtain a medical device license for distribution SUMMARY: The Food and Drug B. Accommodations of medical devices in Canada (Ref. 4). Administration’s (FDA) Center for Drug Attendees are responsible for their As a result of the implementation of the Evaluation and Research, in own hotel accommodations. Attendees MDSAP program, FDA will no longer cosponsorship with the International making reservations at the Mayflower accept ISO 13485:2003 Voluntary Audit Separation Science Society (CASSS), is Hotel in Washington DC are eligible for Report Submissions after March 31, announcing a meeting entitled ‘‘The a reduced rate of $295 USD, not 2016, to assist transitioning Twentieth FDA CASSS Symposium on including applicable taxes. To receive manufacturers over to MDSAP. the Interface of Regulatory and the reduced rate, contact the Mayflower
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Hotel (1–877–212–5752) and identify 10.115(g)(5)), to ensure that the Agency submitted as ‘‘Confidential yourself as an attendee of ‘‘CASSS— considers your comment on this draft Submissions,’’ publicly viewable at WCBP 2016.’’ If you need special guidance before it begins work on the http://www.regulations.gov or at the accommodations due to a disability, final version of the guidance, submit Division of Dockets Management please contact Linda Mansouria (see FOR either electronic or written comments between 9 a.m. and 4 p.m., Monday FURTHER INFORMATION CONTACT) at least 7 on the draft guidance by February 16, through Friday. days in advance. 2016. Submit comments on the • Confidential Submissions—To information collection issues under the submit a comment with confidential III. Transcripts Paperwork Reduction Act of 1995 by information that you do not wish to be We expect that transcripts will be February 16, 2016. made publicly available, submit your available approximately 30 days after ADDRESSES: You may submit comments comments only as a written/paper the meeting. A transcript will be as follows: submission. You should submit two available in either hard copy or on CD– copies total. One copy will include the ROM, after submission of a Freedom of Electronic Submissions information you claim to be confidential Information request. Send written Submit electronic comments in the with a heading or cover note that states requests to the Division of Freedom of following way: ‘‘THIS DOCUMENT CONTAINS Information (ELEM–1029), Food and • Federal eRulemaking Portal: http:// CONFIDENTIAL INFORMATION.’’ The Drug Administration, 12420 Parklawn www.regulations.gov. Follow the Agency will review this copy, including Dr., Element Bldg., Rockville, MD instructions for submitting comments. the claimed confidential information, in 20857. Send faxed requests to 301–827– Comments submitted electronically, its consideration of comments. The 9267. including attachments, to http:// second copy, which will have the www.regulations.gov will be posted to claimed confidential information Dated: December 11, 2015. the docket unchanged. Because your redacted/blacked out, will be available Leslie Kux, comment will be made public, you are for public viewing and posted on http:// Associate Commissioner for Policy. solely responsible for ensuring that your www.regulations.gov. Submit both [FR Doc. 2015–31691 Filed 12–16–15; 8:45 am] comment does not include any copies to the Division of Dockets BILLING CODE 4164–01–P confidential information that you or a Management. If you do not wish your third party may not wish to be posted, name and contact information to be such as medical information, your or made publicly available, you can DEPARTMENT OF HEALTH AND anyone else’s Social Security number, or provide this information on the cover HUMAN SERVICES confidential business information, such sheet and not in the body of your as a manufacturing process. Please note comments and you must identify this Food and Drug Administration that if you include your name, contact information as ‘‘confidential.’’ Any [Docket No. FDA–2015–D–4562] information, or other information that information marked as ‘‘confidential’’ identifies you in the body of your will not be disclosed except in Safety Assessment for Investigational comments, that information will be accordance with 21 CFR 10.20 and other New Drug Application Safety posted on http://www.regulations.gov. applicable disclosure law. For more Reporting; Draft Guidance for Industry; • If you want to submit a comment information about FDA’s posting of Availability with confidential information that you comments to public dockets, see 80 FR do not wish to be made available to the 56469, September 18, 2015, or access AGENCY: Food and Drug Administration, the information at: http://www.fda.gov/ HHS. public, submit the comment as a written/paper submission and in the regulatoryinformation/dockets/ ACTION: Notice of availability. manner detailed (see ‘‘Written/Paper default.htm. Docket: For access to the docket to SUMMARY: Submissions’’ and ‘‘Instructions’’). The Food and Drug read background documents or the Administration (FDA, we, or Agency) is Written/Paper Submissions electronic and written/paper comments announcing the availability of a draft Submit written/paper submissions as received, go to http:// guidance for industry entitled ‘‘Safety follows: www.regulations.gov and insert the Assessment for IND Safety Reporting.’’ • Mail/Hand delivery/Courier (for docket number, found in brackets in the The draft guidance provides written/paper submissions): Division of heading of this document, into the recommendations to sponsors on Dockets Management (HFA–305), Food ‘‘Search’’ box and follow the prompts developing a systematic approach to and Drug Administration, 5630 Fishers and/or go to the Division of Dockets investigational new drug application Lane, Rm. 1061, Rockville, MD 20852. Management, 5630 Fishers Lane, Rm. (IND) safety reporting for human drugs • For written/paper comments 1061, Rockville, MD 20852. and biological products developed submitted to the Division of Dockets Submit comments on information under an IND. This draft guidance is a Management, FDA will post your collection issues to the Office of follow-on to the guidance for industry comment, as well as any attachments, Management and Budget in the and investigators entitled ‘‘Safety except for information submitted, following ways: Reporting Requirements for INDs and marked and identified, as confidential, • Fax to the Office of Information and BA/BE Studies’’ that provides if submitted as detailed in Regulatory Affairs, OMB, Attn: FDA recommendations for how sponsors of ‘‘Instructions.’’ Desk Officer, FAX: 202–395–7285, or INDs can identify and evaluate Instructions: All submissions received email to [email protected]. important safety information that must must include the Docket No. FDA– All comments should be identified with be submitted to FDA and all 2015–D–4562 for ‘‘Safety Assessment the title ‘‘Safety Assessment for IND participating investigators, including a for Investigational New Drug Safety Reporting.’’ recommendation that sponsors develop Application Safety Reporting; Draft Submit written requests for single a safety assessment committee. Guidance for Industry; Availability.’’ copies of the draft guidance to the DATES: Although you can comment on Received comments will be placed in Division of Drug Information, Center for any guidance at any time (see 21 CFR the docket and, except for those Drug Evaluation and Research, Food
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and Drug Administration, 10001 New for INDs and BA/BE Studies’’ describes II. Paperwork Reduction Act of 1995 Hampshire Ave., Hillingdale Bldg., 4th and provides recommendations for Floor, Silver Spring, MD 20993–0002; or complying with these requirements. Under the Paperwork Reduction Act the Office of Communication, Outreach During the evaluation of comments to of 1995 (the PRA) (44 U.S.C. 3501– and Development, Center for Biologics the draft guidance for industry and 3520), Federal Agencies must obtain Evaluation and Research, Food and investigators entitled ‘‘Safety Reporting approval from the Office of Management Drug Administration, 10903 New Requirements for INDs and BA/BE and Budget (OMB) for each collection of Hampshire Ave., Bldg. 71, Rm. 3128, Studies’’ (Docket No. FDA–2010–D– information that they conduct or Silver Spring, MD 20993–0002. Send 0482) and at meetings with sponsor. ‘‘Collection of information’’ is one self-addressed adhesive label to stakeholders, FDA identified the need defined in 44 U.S.C. 3502(3) and 5 CFR assist that office in processing your for additional guidance on IND safety 1320.3(c) and includes Agency requests requests. See the SUPPLEMENTARY reporting topics for IND studies. or requirements that members of the INFORMATION section for electronic It is critical for sponsors to detect and public submit reports, keep records, or access to the draft guidance document. report, as early as possible, serious and provide information to a third party. FOR FURTHER INFORMATION CONTACT: unexpected suspected adverse reactions Section 3506(c)(2)(A) of the PRA (44 Dianne Paraoan, Center for Drug and clinically important increased rates U.S.C. 3506(c)(2)(A)) requires Federal Evaluation and Research, Food and of previously recognized serious adverse Agencies to provide a 60-day notice in Drug Administration, 10903 New reactions (§ 312.32(c)(1)(i) and (iv)). the Federal Register for each proposed Hampshire Ave., Bldg. 51, Rm. 3326, Early detection of such occurrences will collection of information before Silver Spring, MD 20993–0002, 301– enable sponsors to carry out their submitting the collection to OMB for 796–2500; or Stephen Ripley, Center for obligation to monitor the progress of the approval. To comply with this Biologics Evaluation and Research, investigation (21 CFR 312.56(a)) and, requirement, FDA is publishing this Food and Drug Administration, 10903 when necessary, to take steps to protect notice of the proposed collection of subjects to allow an investigational drug New Hampshire Ave., Bldg. 71, Rm. information set forth in this document. 7301, Silver Spring, MD 20993–0002, to be safely developed despite potential With respect to the collection of 240–402–7911. risks. Early detection also allows sponsors to report meaningful safety information associated with this draft SUPPLEMENTARY INFORMATION: information to FDA and all participating guidance, FDA invites comments on the I. Background investigators in an IND safety report as following topics: (1) Whether the FDA is announcing the availability of soon as possible. proposed information collected is a draft guidance for industry entitled Timely reporting of meaningful safety necessary for the proper performance of ‘‘Safety Assessment for IND Safety information allows FDA to consider FDA’s functions, including whether the Reporting.’’ The draft guidance provides whether any changes in study conduct information will have practical utility; recommendations to sponsors on should be made beyond those initiated (2) the accuracy of FDA’s estimated developing a systematic approach to by the sponsor and allows investigators burden of the proposed information IND safety reporting for human drugs to make any needed changes to protect collected, including the validity of the and biological products developed subjects. For these reasons, the draft methodology and assumptions used; (3) under an IND. The draft guidance is a guidance provides recommendations ways to enhance the quality, utility, and intended to help sponsors meet their follow-on to the guidance for industry clarity of the information collected; and obligations under § 312.32. We and investigators entitled ‘‘Safety (4) ways to minimize the burden of recommend that sponsors develop a Reporting Requirements for INDs and information collected on the safety assessment committee and a BA/BE Studies.’’ 1 It provides respondents, including through the use safety surveillance plan as key elements recommendations for how sponsors of of automated collection techniques, of a systematic approach to safety INDs can identify and evaluate when appropriate, and other forms of surveillance. A safety assessment important safety information that must information technology. committee would be a group of be submitted to FDA and all individuals chosen by the sponsor to Title: Safety Assessment for IND participating investigators under the review safety information in a Safety Reporting. IND safety reporting regulations at development program and tasked with § 312.32 (21 CFR 312.32). The draft Description of Respondents: The making a recommendation to the respondents to this collection of guidance provides recommendations on sponsor regarding whether the safety the following: (1) The composition and information are sponsors that conduct information must be reported in an IND IND studies. role of a safety assessment committee, safety report. A safety surveillance plan (2) aggregate analyses for comparison of should describe processes and Burden Estimate: The draft guidance adverse event rates across treatment procedures for assessing serious adverse provides recommendations to sponsors groups, (3) planned unblinding of safety events and other important safety on developing a systematic approach to data, (4) reporting thresholds for IND information. IND safety reporting for human drugs safety reporting, and (5) the This draft guidance is being issued and biological products developed development of a safety surveillance consistent with FDA’s good guidance under an IND. The draft guidance also plan. practices regulation (21 CFR 10.115). provides recommendations on the The IND safety reporting requirements The draft guidance, when finalized, will following: (1) The composition and role for human drugs and biological represent the current thinking of FDA of a safety assessment committee, (2) products are found at § 312.32, and the on safety assessment for IND safety aggregate analyses for comparison of guidance for industry and investigators reporting. It does not establish any adverse event rates across treatment entitled ‘‘Safety Reporting Requirements rights for any person and is not binding groups, (3) planned unblinding of safety on FDA or the public. You can use an data, (4) reporting thresholds for IND 1 The guidance is available on the Internet at safety reporting, and (5) the http://www.fda.gov/Drugs/ alternative approach if it satisfies the GuidanceComplianceRegulatoryInformation/ requirements of the applicable statutes development of a safety surveillance Guidances/default.htm (under Guidances [Drugs]). and regulations. plan.
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A. Proposed Reporting Burden Specifically, the sponsor should submit plans in accordance with the draft Estimates for Developing and the list of anticipated serious adverse guidance and that the burden for each Submitting a Safety Surveillance Plan events and previously recognized plan will be approximately 120 to 240 serious adverse reactions and guiding hours. This burden estimate includes This draft guidance proposes the principles for periodic aggregate safety the time sponsors will need to prepare following new collections of reviews. information for reporting: safety surveillance plan amendments Based on information available to when appropriate. The average burden Developing and Submitting a Safety FDA, including burden estimates for per response is estimated as a range to Surveillance Plan: The draft guidance collections of information approved account for respondents that will make recommends that a sponsor develop a under OMB control numbers 0910–0014 changes to a pre-existing premarket safety surveillance plan that describes [covers § 312.23 (21 CFR 312.23) (IND safety system and those that will processes and procedures for assessing content), portions of § 312.32 (IND develop a new premarket safety system. serious adverse events and other safety safety reports), and § 312.66 (21 CFR information. The draft guidance 312.66) (investigator reporting to The average of this range (180 hours) describes seven elements that should be institutional review board)] and 0910– was used to calculate the total hours included in a safety surveillance plan 0733 (development of a comprehensive estimated in table 1 of this document (a and recommends that the sponsor monitoring plan), we estimate that total of 19,980 hours). submit a portion of the safety approximately 88 sponsors will develop FDA estimates the burden of this surveillance plan to the IND. approximately 111 safety surveillance collection of information as follows:
TABLE 1—ESTIMATED ANNUAL REPORTING BURDEN 1
Number of Average Safety assessment for IND safety reporting Number of responses per Total annual burden per Total hours respondents respondent responses response
Develop and submit a safety surveillance plan ...... 88 1.26 111 180 19,980 1 There are no capital costs or operating and maintenance costs associated with this collection of information.
B. Proposed Recordkeeping Burden The draft guidance recommends that records in accordance with the draft Estimates for Maintaining a Safety a sponsor maintain the safety guidance and that the average burden Surveillance Plan surveillance plan. per recordkeeping is 6 hours (a total of This draft guidance proposes the Based on information available to 1,584 hours). following new collections of FDA, we estimate that approximately 88 FDA estimates the burden of this information for recordkeeping: sponsors will maintain approximately 3 collection of information as follows:
TABLE 2—ESTIMATED ANNUAL RECORDKEEPING BURDEN 1
Number of Average Safety assessment for IND safety reporting Number of records per Total annual burden per Total hours recordkeepers recordkeeper records recordkeeping
Maintain a safety surveillance plan ...... 88 3 264 6 1,584 1 There are no capital costs or operating and maintenance costs associated with this collection of information.
The draft guidance also refers to under OMB control number 0910–0014 Dated: December 11, 2015. previously approved collections of (for example, reporting to FDA in an Leslie Kux, information found in FDA regulations IND safety report any clinically Associate Commissioner for Policy. that have been approved under the OMB important increase in the rate of [FR Doc. 2015–31690 Filed 12–16–15; 8:45 am] control numbers that follow. occurrence of serious suspected adverse • BILLING CODE 4164–01–P OMB control number 0910–0014 reactions over that listed in the protocol covers § 312.23 (IND content), portions or the investigator brochure). of § 312.32 (IND safety reports), and DEPARTMENT OF HEALTH AND § 312.66 (investigator reporting to III. Electronic Access HUMAN SERVICES institutional review board). • OMB control number 0910–0116 Persons with access to the Internet Food and Drug Administration covers 21 CFR 606.170(b) (adverse may obtain the document at http:// www.fda.gov/Drugs/ reaction file). [Docket No. FDA–2011–D–0597] • OMB control number 0910–0230 GuidanceCompliance covers 21 CFR 310.305 and 314.80 RegulatoryInformation/Guidances/ Agency Information Collection (postmarketing reporting of adverse default.htm, http://www.fda.gov/ Activities; Submission for Office of drug experiences). BiologicsBloodVaccines/ Management and Budget Review; • OMB control number 0910–0308 GuidanceCompliance Guidance for Industry on Oversight of covers 21 CFR 600.80 (postmarketing RegulatoryInformation/Guidances/ Clinical Investigations: A Risk-Based reporting of adverse experiences). default.htm, or http://www. Approach to Monitoring • OMB control number 0910–0672 regulations.gov. covers more recent provisions of AGENCY: Food and Drug Administration, § 312.32 that are not already approved HHS.
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ACTION: Notice. and combinations thereof. The guidance monitoring plan that describes the describes strategies for monitoring monitoring methods, responsibilities, SUMMARY: The Food and Drug activities performed by sponsors, or by and requirements for each clinical trial. Administration (FDA) is announcing contract research organizations (CROs), The plan should provide adequate that a proposed collection of that focus on the conduct, oversight, information to those involved with information has been submitted to the and reporting of findings of an monitoring to effectively carry out their Office of Management and Budget investigation by clinical investigators. duties. All sponsor and CRO personnel (OMB) for review and clearance under The guidance also recommends who may be involved with monitoring the Paperwork Reduction Act of 1995. strategies that reflect a risk-based (including those who review DATES: Fax written comments on the approach to monitoring that focuses on appropriate action, determine collection of information by January 19, critical study parameters and relies on appropriate action, or both) regarding 2016. a combination of monitoring activities potential issues identified through ADDRESSES: To ensure that comments on to oversee a study effectively. The monitoring, should review the the information collection are received, guidance specifically encourages greater monitoring plan. The components of a OMB recommends that written reliance on centralized monitoring monitoring plan are described in the comments be faxed to the Office of methods where appropriate. guidance, including monitoring plan Information and Regulatory Affairs, Under parts 312 and 812 (21 CFR amendments (i.e., the review and OMB, Attn: FDA Desk Officer, FAX: parts 312 and 812), sponsors are revision of monitoring plans and _ 202–395–7285, or emailed to oira required to provide appropriate processes for timely updates). [email protected]. All oversight of their clinical investigations comments should be identified with the FDA understands that sponsors to ensure adequate protection of the currently develop monitoring plans; OMB control number 0910–0733. Also rights, welfare, and safety of human include the FDA docket number found however, not all monitoring plans subjects and to ensure the quality and contain all the elements described in the in brackets in the heading of this integrity of the resulting data submitted document. guidance. Therefore, the burden to FDA. As part of this oversight, estimate provides the additional time FOR FURTHER INFORMATION CONTACT: FDA sponsors of clinical investigations are that a sponsor would expend in PRA Staff, Office of Operations, Food required to monitor the conduct and developing a comprehensive monitoring and Drug Administration, 8455 progress of their clinical investigations. plan based on the recommendations in Colesville Rd., COLE–14526, Silver The regulations do not specify how the guidance. FDA estimates that Spring, MD 20993–0002, PRAStaff@ sponsors are to conduct monitoring of approximately 88 sponsors will develop fda.hhs.gov. clinical investigations and, therefore, approximately 132 comprehensive SUPPLEMENTARY INFORMATION: In are compatible with a range of monitoring plans in accordance with the compliance with 44 U.S.C. 3507, FDA approaches to monitoring. FDA guidance, and that the added burden for has submitted the following proposed currently has OMB approval for the each plan will be approximately 4 hours collection of information to OMB for information collection required under to develop, including the time needed to review and clearance. part 812 (OMB control number 0910– prepare monitoring plan amendments 0078) and part 312, including certain when appropriate (a total of 528 hours). Guidance for Industry: Oversight of provisions under subpart D (OMB Clinical Investigations: A Risk-Based control number 0910–0014). In the Federal Register of July 14, Approach to Monitoring, OMB Control The collection of information 2015 (80 FR 41044), FDA published a Number 0910–0733 associated with this guidance that is 60-day notice requesting public The guidance is intended to assist approved under OMB control number comment on the proposed collection of sponsors of clinical investigations in 0910–0733 is as follows: information. FDA received one developing strategies for risk-based Development of Comprehensive comment; however, it did not pertain to monitoring and plans for clinical Monitoring Plan: Section IV.D of the the information collection. investigations of human drug and guidance recommends that sponsors FDA estimates the burden of this biological products, medical devices, develop a prospective, detailed collection of information as follows:
TABLE 1—ESTIMATED ANNUAL REPORTING BURDEN 1
Number of Average Activity Number of responses per Total annual burden per Total hours respondents respondent responses response
Development of Comprehensive Monitoring Plan ...... 88 1.5 132 4 528 1 There are no capital costs or operating and maintenance costs associated with this collection of information.
Dated: December 10, 2015. Leslie Kux, Associate Commissioner for Policy. [FR Doc. 2015–31695 Filed 12–16–15; 8:45 am] BILLING CODE 4164–01–P
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DEPARTMENT OF HEALTH AND 355(j)(7)), which requires FDA to petition did not address the 500 mg/vial HUMAN SERVICES publish a list of all approved drugs. and 1 g/vial strengths, these strengths FDA publishes this list as part of the have also been discontinued. On our Food and Drug Administration ‘‘Approved Drug Products With own initiative, we have also determined Therapeutic Equivalence Evaluations,’’ whether these strengths were [Docket No. FDA–2015–N–4667] which is known generally as the withdrawn for safety or effectiveness Determination That Vancomycin ‘‘Orange Book.’’ Under FDA regulations, reasons. Hospira submitted a citizen Hydrochloride Injection Drug Products, drugs are removed from the list if the petition dated October 5, 2015 (Docket Were Not Withdrawn From Sale for Agency withdraws or suspends No. FDA–2015–P–3621), under § 10.30, Reasons of Safety or Effectiveness approval of the drug’s NDA or ANDA requesting that the Agency determine for reasons of safety or effectiveness or whether VANCOLED (vancomycin HCl) AGENCY: Food and Drug Administration, if FDA determines that the listed drug injection, 10 g bulk packaging, was HHS. was withdrawn from sale for reasons of withdrawn from sale for reasons of ACTION: Notice. safety or effectiveness (21 CFR 314.162). safety or effectiveness. Although the A person may petition the Agency to citizen petition did not address the 500 SUMMARY: The Food and Drug determine, or the Agency may mg/vial, 1 g/vial, 2 g/vial, and 5 g/vial Administration (FDA or Agency) has determine on its own initiative, whether strengths, these strengths have also been determined that VANCOCIN a listed drug was withdrawn from sale discontinued. On our own initiative, we (vancomycin hydrochloride (HCl)) for reasons of safety or effectiveness. have also determined whether these injection, 500 milligrams (mg)/vial, 1 This determination may be made at any strengths were withdrawn from sale for gram (g)/vial, 10 g/vial (‘‘the time after the drug has been withdrawn reasons of safety or effectiveness. In VANCOCIN drug products’’); from sale, but must be made prior to addition, the VANCOCIN HCl VANCOLED (vancomycin HCl) approving an ANDA that refers to the (Vancomycin HCl), injection, 500 mg/ injection, 500 mg/vial, 1 g/vial, 2 g/vial, listed drug (§ 314.161 (21 CFR 314.161)). vial, and 1 g/vial drug products have 5 g/vial, and 10 g/vial (‘‘the VANCOLED FDA may not approve an ANDA that been discontinued from sale and FDA drug products’’); and VANCOCIN does not refer to a listed drug. has determined whether these drug HYDROCHLORIDE (vancomycin HCl) The VANCOCIN drug products are the products were withdrawn from the injection, 500 mg/vial and 1 g/vial (‘‘the subject of ANDA 62–812 held by ANI market for safety or effectiveness VANCOCIN HCl drug products’’) Pharmaceuticals, Inc., and were initially reasons. (hereinafter collectively ‘‘these approved on November 17, 1987. The After considering the citizen petitions Vancomycin HCl drug products’’), were VANCOLED drug products are the and reviewing Agency records and not withdrawn from sale for reasons of subject of ANDA 62–682 held by based on the information we have at this safety or effectiveness. This Eurohealth International Sa`rl and were time, FDA has determined under determination will allow FDA to initially approved on July 22, 1986. The § 314.161 that these Vancomycin HCl approve abbreviated new drug VANCOCIN HCl drug products are the drug products were not withdrawn for applications (ANDAs) for these subject of ANDA 60–180 held by ANI reasons of safety or effectiveness. The Vancomycin HCl drug products if all Pharmaceuticals, Inc., and were initially petitioners have identified no data or other legal and regulatory requirements approved on November 6, 1964. These other information suggesting that these are met. Vancomycin HCl drug products are Vancomycin HCl drug products were indicated for the treatment of serious or withdrawn for reasons of safety or FOR FURTHER INFORMATION CONTACT: severe infections caused by susceptible effectiveness. We have carefully Robin Fastenau, Center for Drug strains of methicillin-resistant (beta- reviewed our files for records Evaluation and Research, Food and lactam-resistant) staphylococci. They concerning the withdrawal of these Drug Administration, 10903 New are indicated for penicillin-allergic Vancomycin HCl drug products from Hampshire Ave., Bldg. 51, Rm. 6236, patients; for patients who cannot receive sale. We have also independently Silver Spring, MD 20993–0002, 240– or who have failed to respond to other evaluated relevant literature and data 402–4510, [email protected]. drugs, including the penicillins or for possible postmarketing adverse SUPPLEMENTARY INFORMATION: In 1984, cephalosporins; and for infections events. We have reviewed the available Congress enacted the Drug Price caused by vancomycin-susceptible evidence and determined that these Competition and Patent Term organisms that are resistant to other drug products were not withdrawn from Restoration Act of 1984 (Pub. L. 98–417) antimicrobial drugs. They are indicated sale for reasons of safety or (the 1984 amendments), which for initial therapy when methicillin- effectiveness. authorized the approval of duplicate resistant staphylococci are suspected, Accordingly, the Agency will versions of drug products under an but after susceptibility data are continue to list these Vancomycin HCl ANDA procedure. ANDA applicants available, therapy should be adjusted drug products in the ‘‘Discontinued must, with certain exceptions, show that accordingly. Drug Product List’’ section of the Orange the drug for which they are seeking These Vancomycin HCl drug products Book. The ‘‘Discontinued Drug Product approval contains the same active are currently listed in the ‘‘Discontinued List’’ delineates, among other items, ingredient in the same strength and Drug Product List’’ section of the Orange drug products that have been dosage form as the ‘‘listed drug,’’ which Book. discontinued from marketing for reasons is a version of the drug that was Strides Arcolab Limited submitted a other than safety or effectiveness. previously approved. ANDA applicants citizen petition dated May 18, 2009 ANDAs that refer to these Vancomycin do not have to repeat the extensive (Docket No. FDA–2009–P–0242), under HCl drug products may be approved by clinical testing otherwise necessary to § 10.30 (21 CFR 10.30), requesting that the Agency as long as they meet all gain approval of a new drug application the Agency determine whether other legal and regulatory requirements (NDA). VANCOCIN (Vancomycin HCl) for the approval of ANDAs. If FDA The 1984 amendments include what injection, 10 g/vial, was withdrawn determines that labeling for these drug is now section 505(j)(7) of the Federal from sale for reasons of safety or products should be revised to meet Food, Drug, and Cosmetic Act (21 U.S.C. effectiveness. Although the citizen current standards, the Agency will
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advise ANDA applicants to submit such instruments, email [email protected] proposed data collection is to analyze labeling. or call the HRSA Information Collection and report grantee training activities Dated: December 11, 2015. Clearance Officer at (301) 443–1984. and education, identify intended Leslie Kux, SUPPLEMENTARY INFORMATION: When practice locations and report outcomes of funded initiatives. Data collected Associate Commissioner for Policy. submitting comments or requesting from these grant programs will also [FR Doc. 2015–31689 Filed 12–16–15; 8:45 am] information, please include the information request collection title for provide a description of the program BILLING CODE 4164–01–P reference. activities of approximately 1,700 reporting grantees to better inform Information Collection Request Title: policymakers on the barriers, DEPARTMENT OF HEALTH AND Bureau of Health Workforce opportunities, and outcomes involved HUMAN SERVICES Performance Data Collection OMB No. in health care workforce development. 0915–0061—Revision Health Resources and Services The proposed measures focus on five Administration Abstract: Over 40 Bureau of Health key outcomes: (1) Increasing the Workforce (BHW) programs award workforce supply of diverse well- Agency Information Collection grants to health professions schools and educated practitioners, (2) increasing Activities: Proposed Collection: Public training programs across the United the number of practitioners that practice Comment Request States to develop, expand, and enhance in underserved and rural areas, (3) training, and to strengthen the enhancing the quality of education, (4) AGENCY: Health Resources and Services distribution of the health workforce. increasing the recruitment, training, and Administration, HHS. These programs are authorized by the placement of under-represented groups ACTION: Notice. Public Health Service Act (42 U.S.C. 201 in the health workforce, and (5) et seq.), specifically Titles III, VII, and supporting educational infrastructure to SUMMARY: In compliance with the VIII. Performance information regarding increase the capacity to train more requirement for opportunity for public these programs is collected in the HRSA health professionals. comment on proposed data collection Performance Report for Grants and Likely Respondents: Respondents are projects (Section 3506(c)(2)(A) of the Cooperative Agreements (PRGCA). Data awardees of BHW health professions Paperwork Reduction Act of 1995), the collection activities consisting of an grant programs. Health Resources and Services annual progress and annual Burden Statement: Burden in this Administration (HRSA) announces performance report satisfy statutory and context means the time expended by plans to submit an Information programmatic requirements for persons to generate, maintain, retain, Collection Request (ICR), described performance measurement and disclose or provide the information below, to the Office of Management and evaluation (including specific Title III, requested. This includes the time Budget (OMB). Prior to submitting the VII and VIII requirements), as well as needed to review instructions; to ICR to OMB, HRSA seeks comments Government Performance and Results develop, acquire, install and utilize from the public regarding the burden Act (GPRA) requirements. The technology and systems for the purpose estimate, below, or any other aspect of performance measures were last revised of collecting, validating and verifying the ICR. in 2013 to ensure they addressed information, processing and DATES: Comments on this Information programmatic changes, met evolving maintaining information, and disclosing Collection Request must be received no program management needs, and and providing information; to train later than February 16, 2016. responded to emerging workforce personnel and to be able to respond to ADDRESSES: Submit your comments to concerns—especially as a result of the a collection of information; to search [email protected] or mail the HRSA changes in the Affordable Care Act (Pub. data sources; to complete and review Information Collection Clearance L. 111–148). As these revisions were the collection of information; and to Officer, Room 10–105, Parklawn successful, BHW will continue with its transmit or otherwise disclose the Building, 5600 Fishers Lane, Rockville, current performance management information. The total annual burden MD 20857. strategy and measures and require hours estimated for this Information FOR FURTHER INFORMATION CONTACT: To annual progress and performance Collection Request are summarized in request more information on the reporting. the table below. proposed project or to obtain a copy of Need and Proposed Use of the Total Estimated Annualized burden the data collection plans and draft Information: The purpose of the hours:
Average Number of Number of Total burden per Total burden Form name respondents responses per responses response hours respondent (in hours)
Program Aggregate Data Collection* ...... 600 1 600 6 3,600 Individual-level Data Collection ...... 1,100 1 1,100 2 2,200
Total ...... 1,700 ...... 1,700 ...... 5,800 * Program aggregate data collection will only be required for programs that do not provide direct financial support to all trainees.
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HRSA specifically requests comments 4137, fax number (202) 317–6731. For building is placed in service after on (1) the necessity and utility of the questions about the ‘‘HUB Zone’’ December 31, 2014. proposed information collection for the program, contact Mariana Pardo, If an area is not on a subsequent list proper performance of the agency’s Director, HUBZone Program, Office of of DDAs, the 2015 lists are effective for functions, (2) the accuracy of the Government Contracting and Business the area if: estimated burden, (3) ways to enhance Development, U.S. Small Business (1) The allocation of credit to an the quality, utility, and clarity of the Administration, 409 Third Street SW., applicant is made no later than the end information to be collected, and (4) the Suite 8800, Washington, DC 20416; of the 730-day period after the applicant use of automated collection techniques telephone number (202) 205–2985, fax submits a complete application to the or other forms of information number (202) 481–6443, or send an LIHTC-allocating agency, and the technology to minimize the information email to [email protected]. A text submission is made before the effective collection burden. telephone is available for persons with date of the subsequent lists; or (2) for purposes of IRC Section Jackie Painter, hearing or speech impairments at 800– 877–8339. (These are not toll-free 42(h)(4), if: Director, Division of the Executive Secretariat. telephone numbers.) Additional copies (a) The bonds are issued or the [FR Doc. 2015–31641 Filed 12–16–15; 8:45 am] of this notice are available through HUD building is placed in service no later BILLING CODE 4165–15–P User at 800–245–2691 for a small fee to than the end of the 730-day period after cover duplication and mailing costs. the applicant submits a complete Copies Available Electronically: This application to the bond-issuing agency, DEPARTMENT OF HOUSING AND notice and additional information about and (b) the submission is made before the URBAN DEVELOPMENT DDAs and QCTs are available effective date of the subsequent lists, electronically on the Internet at http:// [Docket No. FR–5815–N–02] provided that both the issuance of the www.huduser.org/datasets/qct.html. bonds and the placement in service of Statutorily Mandated Designation of SUPPLEMENTARY INFORMATION: Difficult Development Areas and the building occur after the application Qualified Census Tracts: Revision of This Document is submitted. Effective Date for 2015 Designations An application is deemed to be This notice extends from 365 days to submitted on the date it is filed if the AGENCY: Office of the Assistant 730 days the period for which the 2015 application is determined to be Secretary for Policy Development and lists of QCTs and DDAs are effective for complete by the credit-allocating or Research, HUD. projects located in areas not on the 2016 bond-issuing agency. A ‘‘complete ACTION: Notice. list of DDAs or QCTs, published application’’ means that no more than November 24, 2015, at 80 FR 73201, but de minimis clarification of the SUMMARY: This document revises the having submitted applications while the application is required for the agency to effective date for designations of area was a 2015 QCT or DDA for each make a decision about the allocation of ‘‘Difficult Development Areas’’ (DDAs) of the 50 states, the District of Columbia, tax credits or issuance of bonds and ‘‘Qualified Census Tracts’’ (QCTs) Puerto Rico, American Samoa, Guam, requested in the application. for purposes of the Low-Income the Northern Mariana Islands, and the In the case of a ‘‘multiphase project,’’ Housing Tax Credit (LIHTC) under U.S. Virgin Islands. The actual the DDA or QCT status of the site of the Internal Revenue Code (IRC) Section 42 designations of 2015 QCTs and DDAs project that applies for all phases of the (26 U.S.C. 42) published on October 3, are not affected by this notice. HUD is project is that which applied when the 2014 (79 FR 59855). This Notice extends revising the effective date of the 2015 project received its first allocation of from 365 days to 730 days the period for QCTs and DDAs at this time to aid the LIHTC. For purposes of IRC Section which the 2015 lists of QCTs and DDAs transition to Small Difficult 42(h)(4), the DDA or QCT status of the are effective for projects located in areas Development Areas as announced in a site of the project that applies for all not on the 2016 list of DDAs or QCTs, notice designating 2016 QCTs and DDAs phases of the project is that which published November 24, 2015, at 80 FR published at 80 FR 73201 and otherwise applied when the first of the following 73201, but having submitted ensure that LIHTC and bond-financed occurred: (a) The building(s) in the first applications while the area was a 2015 projects relying on 2015 QCT or DDA phase were placed in service, or (b) the QCT or DDA. designations and not in areas designated bonds were issued. FOR FURTHER INFORMATION CONTACT: For as 2016 QCTs and DDAs, but unable to For purposes of this notice, a questions on how areas are designated meet the 365-day requirement of the ‘‘multiphase project’’ is defined as a set and on geographic definitions, contact original effective date of the 2015 QCT of buildings to be constructed or Michael K. Hollar, Senior Economist, and DDA designations, may still be rehabilitated under the rules of the Economic Development and Public completed within 730 days. LIHTC and meeting the following Finance Division, Office of Policy The sections entitled ‘‘Effective Date’’ criteria: Development and Research, Department and ‘‘Interpretive Examples of Effective (1) The multiphase composition of the of Housing and Urban Development, Date’’ of the 2015 DDA and QCT project (i.e., total number of buildings 451 Seventh Street SW., Room 8234, designations as published October 3, and phases in project, with a Washington, DC 20410–6000; telephone 2014 at 79 FR 59855 are hereby revised description of how many buildings are number (202) 402–5878, or send an to read as follows: to be built in each phase and when each email to [email protected]. For phase is to be completed, and any other Effective Date specific legal questions pertaining to information required by the agency) is Section 42, contact Branch 5, Office of The 2015 lists of QCTs and DDAs are made known by the applicant in the the Associate Chief Counsel, effective: first application of credit for any Passthroughs and Special Industries, (1) For allocations of credit after building in the project, and that Internal Revenue Service, 1111 December 31, 2014; or applicant identifies the buildings in the Constitution Avenue NW., Washington, (2) for purposes of IRC Section project for which credit is (or will be) DC 20224; telephone number (202) 317– 42(h)(4), if the bonds are issued and the sought;
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(2) The aggregate amount of LIHTC (Case B) Project B is located in a 2015 Credits are allocated to the second applied for on behalf of, or that would DDA that is NOT a designated DDA in phase of Project E on October 30, 2016. eventually be allocated to, the buildings 2016, 2017, or 2018. A complete The aggregate amount of credits on the site exceeds the one-year application for tax credits for Project B allocated to the two phases of Project E limitation on credits per applicant, as is filed with the allocating agency on exceeds the amount of credits that may defined in the Qualified Allocation Plan December 1, 2015. Credits are allocated be allocated to an applicant in one year (QAP) of the LIHTC-allocating agency, to Project B on March 30, 2018. Project under the allocating agency’s QAP and or the annual per-capita credit authority B is NOT eligible for the increase in is the reason that applications were of the LIHTC allocating agency, and is basis accorded a project in a 2015 DDA made in multiple phases. The second the reason the applicant must request because, although the application for an phase of Project E is, therefore, eligible multiple allocations over 2 or more allocation of tax credits was filed for the increase in basis accorded a years; and BEFORE January 1, 2016 (the effective project in a 2015 DDA, because it meets (3) All applications for LIHTC for date of the 2016 DDA lists), the tax all of the conditions to be a part of a buildings on the site are made in credits were allocated later than the end multiphase project. immediately consecutive years. of the 730-day period after the filing of (Case F) Project F is a multiphase Members of the public are hereby the complete application. project located in a 2015 DDA that is reminded that the Secretary of Housing (Case C) Project C is located in a 2015 NOT a designated DDA in 2016. The and Urban Development, or the DDA that was not a DDA in 2014. first phase of Project F received an Secretary’s designee, has legal authority Project C was placed in service on allocation of credits in 2015, pursuant to to designate DDAs and QCTs, by November 15, 2014. A complete an application filed March 15, 2015, publishing lists of geographic entities as application for tax-exempt bond which does not describe the multiphase defined by, in the case of DDAs, the financing for Project C is filed with the composition of the project. An bond-issuing agency on January 15, Census Bureau, the several states and application for tax credits for the second 2015. The bonds that will support the the governments of the insular areas of phase of Project F is filed with the permanent financing of Project C are the United States and, in the case of allocating agency by the same entity on issued on September 30, 2015. Project C QCTs, by the Census Bureau; and to March 15, 2017. Credits are allocated to is NOT eligible for the increase in basis establish the effective dates of such lists. the second phase of Project F on otherwise accorded a project in a 2015 The Secretary of the Treasury, through October 30, 2017. The aggregate amount DDA, because the project was placed in the IRS thereof, has sole legal authority of credits allocated to the two phases of service BEFORE January 1, 2015. Project F exceeds the amount of credits to interpret, and to determine and (Case D) Project D is located in an area enforce compliance with the IRC and that may be allocated to an applicant in that is a DDA in 2015, but is NOT a DDA one year under the allocating agency’s associated regulations, including in 2016, 2017, or 2018. A complete Federal Register notices published by QAP. The second phase of Project F is, application for tax-exempt bond therefore, NOT eligible for the increase HUD for purposes of designating DDAs financing for Project D is filed with the and QCTs. Representations made by any in basis accorded a project in a 2015 bond-issuing agency on October 30, DDA, since it does not meet all of the other entity as to the content of HUD 2015. Bonds are issued for Project D on conditions for a multiphase project, as notices designating DDAs and QCTs that April 30, 2017, but Project D is not defined in this notice. The original do not precisely match the language placed in service until January 30, 2018. application for credits for the first phase published by HUD should not be relied Project D is eligible for the increase in did not describe the multiphase upon by taxpayers in determining what basis available to projects located in composition of the project. Also, the actions are necessary to comply with 2015 DDAs because: (1) One of the two application for credits for the second HUD notices. events necessary for triggering the phase of Project F was not made in the effective date for buildings described in Interpretive Examples of Effective Date year immediately following the first Section 42(h)(4)(B) of the IRC (the two phase application year. For the convenience of readers of this events being bonds issued and buildings notice, interpretive examples are placed in service) took place on April Findings and Certifications provided below to illustrate the 30, 2017, within the 730-day period consequences of the effective date in after a complete application for tax- Environmental Impact areas that gain or lose DDA status. The exempt bond financing was filed, (2) the This notice involves the examples covering DDAs are equally application was filed during a time establishment of fiscal requirements or applicable to QCT designations. when the location of Project D was in a procedures that are related to rate and (Case A) Project A is located in a 2015 DDA, and (3) both the issuance of the cost determinations and do not DDA that is NOT a designated DDA in bonds and placement in service of constitute a development decision 2016 or 2017. A complete application Project D occurred after the application affecting the physical condition of for tax credits for Project A is filed with was submitted. specific project areas or building sites. the allocating agency on November 15, (Case E) Project E is a multiphase Accordingly, under 40 CFR 1508.4 of 2015. Credits are allocated to Project A project located in a 2015 DDA that is the regulations of the Council on on October 30, 2017. Project A is NOT a designated DDA in 2016. The Environmental Quality and 24 CFR eligible for the increase in basis first phase of Project E received an 50.19(c)(6) of HUD’s regulations, this accorded a project in a 2015 DDA allocation of credits in 2015, pursuant to notice is categorically excluded from because the application was filed an application filed March 15, 2015, environmental review under the BEFORE January 1, 2016 (the effective which describes the multiphase National Environmental Policy Act of date for the 2016 DDA lists), and composition of the project. An 1969 (42 U.S.C. 4321). because tax credits were allocated no application for tax credits for the second later than the end of the 730-day period phase Project E is filed with the Federalism Impact after the filing of the complete allocating agency by the same entity on Executive Order 13132 (entitled application for an allocation of tax March 15, 2016. The second phase of ‘‘Federalism’’) prohibits an agency from credits. Project E is located on a contiguous site. publishing any policy document that
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has federalism implications if the are requesting submission of any such species under active review. For document either imposes substantial information that has become available additional information about 5-year direct compliance costs on state and since the last review for the species. reviews, go to http://www.fws.gov/ local governments and is not required DATES: To ensure consideration, please endangered/what-we-do/recovery- by statute, or the document preempts send your written information by overview.html, scroll down to ‘‘Learn state law, unless the agency meets the February 16, 2016. However, we will More about 5-Year Reviews,’’ and click consultation and funding requirements continue to accept new information on our factsheet. of section 6 of the executive order. This about any listed species at any time. What information do we consider in notice merely designates DDAs as ADDRESSES: For how to send comments our review? required under IRC Section 42, as or information for each species, see the amended, for the use by political table in the SUPPLEMENTARY INFORMATION A 5-year review considers all new subdivisions of the states in allocating section. information available at the time of the the LIHTC. This notice also details the FOR FURTHER INFORMATION CONTACT: To review. In conducting these reviews, we technical method used in making such request information, contact the consider the best scientific and designations. As a result, this notice is appropriate person in the table in the commercial data that have become not subject to review under the order. SUPPLEMENTARY INFORMATION section. available since the listing determination Dated: December 10, 2015. Individuals who are hearing impaired or or most recent status review, such as: Katherine M. O’Regan, speech impaired may call the Federal (A) Species biology, including but not Assistant Secretary for Policy Development Relay Service at 800–877–8339 for TTY limited to population trends, and Research. assistance. distribution, abundance, demographics, [FR Doc. 2015–31766 Filed 12–16–15; 8:45 am] SUPPLEMENTARY INFORMATION: We are and genetics; BILLING CODE 4210–67–P initiating 5-year status reviews under (B) Habitat conditions, including but the Endangered Species Act of 1973, as not limited to amount, distribution, and amended (Act), for one animal and five suitability; DEPARTMENT OF THE INTERIOR plant species: Illinois cave amphipod (C) Conservation measures that have (Gammarus acherondytes), Michigan been implemented that benefit the Fish and Wildlife Service monkey flower (Mimulus species; michiganensis), Running buffalo clover (D) Threat status and trends in [FWS–R3–ES–2015–N201; (Trifolium stoloniferum), Minnesota FX3ES11130300000–167–FF03E00000] relation to the five listing factors (as dwarf trout lily (Erythronium defined in section 4(a)(1) of the Act); Endangered and Threatened Wildlife propullans), Western prairie fringed and orchid (Platanthera praeclara), and and Plants; Initiation of 5-Year Status (E) Other new information, data, or Reviews of One Listed Animal and Five Prairie bush clover (Lespedeza leptostachya). corrections, including but not limited to Listed Plant Species taxonomic or nomenclatural changes, Why do we conduct 5-year reviews? identification of erroneous information AGENCY: Fish and Wildlife Service, Interior. Under the Act (16 U.S.C. 1531 et seq.), contained in the List, and improved analytical methods. ACTION: Notice of initiation of reviews; we maintain Lists of Endangered and request for information. Threatened Wildlife and Plants (which Any new information will be we collectively refer to as the List) in considered during the 5-year review and SUMMARY: We, the U.S. Fish and the Code of Federal Regulations (CFR) at will also be useful in evaluating the Wildlife Service, are initiating 5-year 50 CFR 17.11 (for animals) and 17.12 ongoing recovery programs for the status reviews under the Endangered (for plants). Section 4(c)(2)(A) of the Act species. Species Act of 1973, as amended (Act), requires us to review each listed What species are under review? for one animal and five plant species. A species’ status at least once every 5 5-year status review is based on the best years. Our regulations at 50 CFR 424.21 This notice announces our active 5- scientific and commercial data available require that we publish a notice in the year status reviews of the species in the at the time of the review; therefore, we Federal Register announcing those following table.
Animals Final listing rule Listing (Federal Register Contact person, Contact person’s Common name Scientific name status Where listed citation and phone, email U.S. mail address publication date)
Illinois cave Gammarus E ...... Illinois ...... 63 FR 46900; Sep- Kristin Lundh; Kristin_ USFWS; 1511 47th amphipod. acherondytes. tember 3, 1988. [email protected]; Avenue; Moline, IL 309–757–5800, 61265. x215.
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Plants Final listing rule (Fed- Scientific name Common name Listing Where listed eral Register citation Contact person, Contact person’s U.S. status and publication date) phone, email mail address
Mimulus Michigan monkey E ...... Michigan ...... 55 FR 25596; June Barb Hosler; Bar- USFWS; 2651 Coo- michiganensis. flower. 21, 1990. bara_Hosler@ lidge Road, Suite fws.gov; 517–351– 101; East Lansing, 6326. MI 48823. Trifolium Running buffalo E ...... Arkansas, Indiana, 52 FR 21481; June 5, Jennifer Finfera; 614– USFWS; 4625 Morse stoloniferum. clover. Kentucky, Missouri, 1987. 416–8993, x13; Road, Suite 104; Ohio, West Virginia. Jennifer_Finfera@ Columbus, OH fws.gov. 43230. Erythronium Minnesota dwarf E ...... Minnesota ...... 73 FR 21643; March Phil Delphey; Phil_ USFWS; 4101 Amer- propullans. trout lily. 26, 1986. [email protected]; ican Boulevard 612–725–3548, East; Bloomington, x2206. MN 55425. Platanthera Western prairie T ...... Iowa, Kansas, Min- 54 FR 39875; Sep- Phil Delphey; Phil_ USFWS; 4101 Amer- praeclara. fringed orchid. nesota, Missouri, tember 28, 1989. [email protected]; ican Boulevard Nebraska, North 612–725–3548, East; Bloomington, Dakota, Oklahoma, x2206. MN 55425. South Dakota. Lespedeza Prairie bush clo- T ...... Iowa, Illinois, Min- 52 FR 781; June 9, Phil Delphey; Phil_ USFWS; 4101 Amer- leptostachya. * ver. nesota, Wisconsin. 1987. [email protected]; ican Boulevard 612–725–3548, East; Bloomington, x2206. MN 55425. * Species’ 5-year review was previously initiated, but that review was never completed. We are reinitiating here to ensure that we have the most up-to-date information to complete the review.
Request for Information cannot guarantee that we will be able to ACTION: Notice of teleconference. do so. To ensure that a 5-year review is Comments and materials received will SUMMARY: We, the U.S. Fish and complete and based on the best be available for public inspection, by Wildlife Service (Service), announce a available scientific and commercial appointment, during normal business public teleconference of the Sport information, we request new hours at the offices where the comments Fishing and Boating Partnership information from all sources. See ‘‘What are submitted. Council (Council). A Federal advisory Information Do We Consider in Our committee, the Council was created in Review?’’ for specific topics. If you Completed and Active Reviews part to foster partnerships to enhance submit information, please support it A list of all completed 5-year reviews public awareness of the importance of with documentation such as maps, addressing species for which the aquatic resources and the social and bibliographic references, methods used Midwest Region of the Service has lead economic benefits of recreational fishing to gather and analyze the data, and/or responsibility is available at http://www. and boating in the United States. This copies of any pertinent publications, fws.gov/midwest/endangered/recovery/ teleconference is open to the public, and reports, or letters by knowledgeable 5yr_rev/completed5yrs.hml. interested persons may make oral sources. statements to the Council or may file Authority How do I ask questions or provide written statements for consideration. We publish this notice under the information? DATES: Teleconference: Friday, January authority of the Endangered Species Act 8, 2016, 1:30 p.m. to 3:00 p.m. (Eastern of 1973, as amended (16 U.S.C. 1531 et If you wish to provide information for daylight time). For deadlines and seq.). any species listed above, please submit directions on registering to listen to the your comments and materials to the Dated: November 23, 2015. teleconference, submitting written appropriate contact in the table above. Lynn M. Lewis, material, and giving an oral You may also direct questions to those Assistant Regional Director, Ecological presentation, please see ‘‘Public Input’’ contacts. Individuals who are hearing Services, Midwest Region. under SUPPLEMENTARY INFORMATION. impaired or speech impaired may call [FR Doc. 2015–31725 Filed 12–16–15; 8:45 am] the Federal Relay Service at 800–877– FOR FURTHER INFORMATION CONTACT: BILLING CODE 4333–15–P 8339 for TTY assistance. Brian Bohnsack, Council Coordinator, via U.S. mail at U.S. Fish and Wildlife Public Availability of Submissions Service, 5275 Leesburg Pike, Mailstop DEPARTMENT OF THE INTERIOR Before including your address, phone FAC, Falls Church, VA 22041; via Fish and Wildlife Service telephone at (703) 358–2435; via fax at number, email address, or other _ personal identifying information in your (703) 358–2487; or via email at brian comment, you should be aware that [FWS–HQ–FAC–2015–N233; FF09F42300– [email protected]. FVWF97920900000–XXX] your entire comment—including your SUPPLEMENTARY INFORMATION: In personal identifying information—may Sport Fishing and Boating Partnership accordance with the requirements of the be made publicly available at any time. Council Federal Advisory Committee Act, 5 While you can ask us in your comment U.S.C. App., we announce that the Sport to withhold your personal identifying AGENCY: Fish and Wildlife Service, Fishing and Boating Partnership information from public review, we Interior. Council will hold a teleconference.
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Background the Association of Fish and Wildlife Meeting Agenda The Council was formed in January Agencies, who both serve in ex officio The Council will hold a 1993 to advise the Secretary of the capacities. Other Council members are teleconference to: Interior, through the Director of the directors from State agencies • Consider and approve the Council’s Service, on nationally significant responsible for managing recreational Boating Infrastructure Grant Program recreational fishing, boating, and fish and wildlife resources and Review Committee’s funding aquatic resource conservation issues. individuals who represent the interests recommendations for fiscal year 2015 The Council represents the interests of of saltwater and freshwater recreational proposal; the public and private sectors of the fishing, recreational boating, the • Discuss a proposed pilot project sport fishing, boating, and conservation recreational fishing and boating associated with permitting recreational communities and is organized to industries, recreational fisheries projects; enhance partnerships among industry, resource conservation, Native American • Schedule an upcoming spring constituency groups, and government. tribes, aquatic resource outreach and meeting; and The 18-member Council, appointed by education, and tourism. Background • Consider other Council business. the Secretary of the Interior, includes information on the Council is available The final agenda will be posted on the the Service Director and the president of at http://www.fws.gov/sfbpc. Internet at http://www.fws.gov/sfbpc.
PUBLIC INPUT
You must contact the Council Coordinator (see FOR FURTHER IN- If you wish to: FORMATION CONTACT) no later than:
Listen to the teleconference ...... Monday, January 4, 2016. Submit written information or questions before the teleconference for Monday, January 4, 2016. the council to consider during the teleconference. Give an oral presentation during the teleconference ...... Monday, January 4, 2016.
Submitting Written Information or submit written statements to the Paperwork Reduction Act of 1995 (PRA) Questions Council Coordinator up to 30 days and as part of our continuing efforts to subsequent to the teleconference. reduce paperwork and respondent Interested members of the public may burden, we invite the general public and submit relevant information or Meeting Minutes other Federal agencies to take this questions for the Council to consider Summary minutes of the opportunity to comment on this ICR. during the teleconference. Written teleconference will be maintained by DATES: To ensure that your comments statements must be received by the date the Council Coordinator (see FOR listed in ‘‘Public Input’’ under on this ICR are considered, OMB must FURTHER INFORMATION CONTACT) and will receive them on or before January 19, SUPPLEMENTARY INFORMATION, so that the be available for public inspection within 2016. information may be made available to 90 days of the meeting and will be the Council for their consideration prior posted on the Council’s Web site at ADDRESSES: Please submit written to this teleconference. Written http://www.fws.gov/sfbpc. comments on this information statements must be supplied to the collection directly to the Office of Council Coordinator in one of the Stephen Guertin, Management and Budget (OMB), Office following formats: One hard copy with Acting Director. of Information and Regulatory Affairs, original signature, and one electronic [FR Doc. 2015–31724 Filed 12–16–15; 8:45 am] Attention: Desk Officer for the copy via email (acceptable file formats BILLING CODE 4333–15–P Department of the Interior, via email: are Adobe Acrobat PDF, MS Word, MS ([email protected]); or PowerPoint, or rich text file). by fax (202) 395–5806; and identify your DEPARTMENT OF THE INTERIOR submission with ‘OMB Control Number Giving an Oral Presentation 1028—NEW Doug D. Nebert NSDI Geological Survey Individuals or groups requesting to Champion of the Year Award’. Please make an oral presentation during the [GX16EE000101000] also forward a copy of your comments teleconference will be limited to 2 and suggestions on this information minutes per speaker, with no more than Agency Information Collection collection to the Information Collection a total of 15 minutes for all speakers. Activities: Request for Comments on Clearance Officer, U.S. Geological Interested parties should contact the the Doug D. Nebert NSDI Champion of Survey, 12201 Sunrise Valley Drive MS Council Coordinator, in writing the Year Award 807, Reston, VA 20192 (mail); (703) _ (preferably via email; see FOR FURTHER AGENCY: U.S. Geological Survey (USGS), 648–7195 (fax); or gs-info collections@ INFORMATION CONTACT), to be placed on Interior. usgs.gov (email). Please reference ‘OMB Information Collection 1028—NEW: the public speaker list for this ACTION: Notice of a new information Doug D. Nebert NSDI Champion of the teleconference. To ensure an collection, Doug D. Nebert NSDI Year Award in all correspondence. opportunity to speak during the public Champion of the Year Award. comment period of the teleconference, FOR FURTHER INFORMATION CONTACT: members of the public must register SUMMARY: We (the U.S. Geological Brigitta Urban-Mathieux, Federal with the Council Coordinator. Survey) are notifying the public that we Geographic Data Committee Office of Registered speakers who wish to expand have submitted to the Office of the Secretariat, U.S. Geological Survey, upon their oral statements, or those who Management and Budget (OMB) the 12201 Sunrise Valley Drive, Mail Stop had wished to speak but could not be information collection request (ICR) 590, Reston, VA 20192 (mail); 703–648– accommodated on the agenda, may described below. To comply with the 5175 (phone); or [email protected]
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(email). You may also find information Estimated Time per Response: We DEPARTMENT OF THE INTERIOR about this ICR at www.reginfo.gov. estimate that it will take 10 hour(s) per SUPPLEMENTARY INFORMATION: nomination to complete the award Office of the Secretary nomination process. I. Abstract [167D0102DM/DS64600000/ Estimated Annual Burden Hours: 100 DLSN00000.000000/DX.64601] Nominations for Doug D. Nebert NSDI hours. Champion of the Year Award are Notice of Senior Executive Service Estimated Reporting and accepted from the public and private Performance Review Board Recordkeeping ‘‘Non-Hour Cost’’ sector individuals, teams, organizations, Appointments and professional societies that are from Burden: There are no ‘‘non-hour cost’’ the United States of America. burdens associated with this collection AGENCY: Office of the Secretary, Interior. Nomination packages include three of information. ACTION: Notice. sections: (A) Cover Sheet, (B) Summary Public Disclosure Statement: The PRA SUMMARY: Statement, and (C) Supplemental (44 U.S.C. 3501, et seq.) provides that an This notice provides the Materials. The cover sheet includes agency may not conduct or sponsor and names of individuals who have been professional contact information. The you are not required to respond to a appointed to serve as members of the Summary Statement is limited to two collection of information unless it Department of the Interior Senior pages and describes the nominee’s displays a currently valid OMB control Executive Service (SES) Performance achievements in the development of an number. Review Board. outstanding, innovative, and operational Comments: On September 9, 2015, we DATES: These appointments are effective tool, application, or service capability published a Federal Register notice (80 upon publication in the Federal that directly supports the spatial data FR 54309) announcing that we would Register. infrastructures. Nominations may submit this ICR to OMB for approval FOR FURTHER INFORMATION CONTACT: include up to 10 pages of supplemental and soliciting comments. The comment Raymond Limon, Director, Office of information such as resume, period closed on November 9, 2015. We Human Resources, Office of the publications list, and/or letters of did receive one comment from the Secretary, Department of the Interior, endorsement. The award consists of a public; however, the comment was not 1849 C Street NW., Washington, DC citation and plaque, which are directly related to this project but rather 20240, Telephone Number: (202) 208– presented to the recipient at an a rejection of all government data 5310. appropriate public forum by the FGDC collection. SUPPLEMENTARY INFORMATION: The Chair. The name of the recipient is also members of the Department of the inscribed on a permanent plaque, which III. Request for Comments Interior SES Performance Review Board are displayed by the FGDC. We again invite comments concerning The Doug D. Nebert NSDI Champion are as follows: this ICR as to: (a) Whether the proposed ANDERSON, ALLYSON K. of the Year Award honors a respected collection of information is necessary colleague, technical visionary, and ANDREW, JONATHAN M. for the agency to perform its duties, ANDROFF, BLAKE J. recognized U.S. national leader in the including whether the information is establishment of spatial data APPLEGATE, JAMES D. R. useful; (b) the accuracy of the agency’s ARAGON, JOSE RAMON infrastructures that significantly estimate of the burden of the proposed enhance the understanding of our ARROYO, BRYAN collection of information; (c) how to AUSTIN, STANLEY J. physical and cultural world. The award enhance the quality, usefulness, and is sponsored by the Federal Geographic BAIL, KRISTIN MARA clarity of the information to be BALES, JERAD D. Data Committee (FGDC) and its purpose collected; and (d) how to minimize the is to recognize an individual or a team BARCHENGER, ERVIN J. burden on the respondents, including BATHRICK, MARK L. representing Federal, State, Tribal, the use of automated collection regional, and (or) local government, BEALL, JAMES W. techniques or other forms of information BEAN, MICHAEL J. academia, or non-profit and professional technology. organization that has developed an BEARPAW, GEORGE WATIE BEAUDREAU, TOMMY P. outstanding, innovative, and operational Please note that comments submitted BECK, RICHARD T. tool, application, or service capability in response to this notice are a matter BELIN, ALLETTA D. used by multiple organizations that of public record. Before including your BERRIGAN, MICHAEL J. furthers the vision of the National personal mailing address, phone BERRY, DAVID A. Spatial Data Infrastructure (NSDI). number, email address, or other personally identifiable information in BIRDSONG, BRET CREECH II. Data your comment, you should be aware BLACK, MICHAEL S. OMB Control Number: 1028—NEW. that your entire comment, including BLAIR, JOHN WATSON Title: Doug D. Nebert NSDI Champion your personally identifiable BLANCHARD, MARY JOSIE of the Year Award. information, may be made publicly BLEDSOE DOWNES, ANN MARIE Type of Request: Approval of new available at any time. While you can ask BOLING, EDWARD A. information collection. us and the OMB in your comment to BOLTON, HANNIBAL Respondent Obligation: Required to withhold your personal identifying BOWKER, BRYAN L. obtain benefit. information from public review, we BRANUM, LISA A. Frequency of Collection: This is an cannot guarantee that it will be done. BROWN, LAURA B. annual offer. BROWN, WILLIAM Y Description of Respondents: State, Ivan DeLoatch, BRZEZINSKI, MARK F. local, and tribal governments; academia, Executive Director, Federal Geographic Data BUFFA, NICOLE and non-profit organizations. Committee, Core Science Systems. BURCH, MELVIN E. Estimated Total Number of Annual [FR Doc. 2015–31746 Filed 12–16–15; 8:45 am] BURCKMAN, JAMES N. Responses: 10. BILLING CODE 4338–11–P BURDEN, JOHN W.
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BURKETT, VIRGINIA KEABLE, EDWARD T. REYNOLDS, THOMAS G. BURNS, SYLVIA W. KELLY, FRANCIS P. RHEES, BRENT B. CALDWELL, MICHAEL A. KELLY, KATHERINE P. RICHARDSON, LIZETTE CARDINALE, RICHARD T. KENDALL JR., JAMES J. RIDEOUT JR., STERLING J. CARL, LEON M. KIMBALL, SUZETTE M. RIGGS, HELEN CARTER-PFISTERER, CAROLE KINSINGER, ANNE E. ROBERSON, EDWIN L. CASH, CASSIUS M. KLEIN, ELIZABETH A. ROBERTS, LAWRENCE SCOTT CLARK, HORACE G. KNOX, VICTOR W. ROESSEL, CHARLES M. CLEMENT, JOEL P. KROPF, RAMSEY LAURSOO ROSEN, DIANE K. COLANDER, BRANDI ADELE KURTH, JAMES W. ROSS, JOHN W. CONNELL, JAMIE E. LA COUNTE II, DARRYL D. RUGEN, CATHERINE E. CORDOVA-HARRISON, ELIZABETH LAIRD, JOSHUA RADBILL RUHS, JOHN F. CRAFF, ROBERT C. LANCE, LINDA L. RYAN, DENISE E. CRIBLEY, BUD C. LAPOINTE, TIMOTHY L. RYAN, MICHAEL J. CRUICKSHANK, WALTER D. LAROCHE, DARRELL WILLIAM SALERNO, BRIAN M. CRUZAN, DARREN A. LAURO, SALVATORE R. SALOTTI, CHRISTOPHER P. CUMMINGS, JODY ALLEN LEE, LORRI J. SARRI, KRISTEN JOAN DARNELL, JOSEPH D. LEHNERTZ, CHRISTINE S. SAUVAJOT, RAYMOND MARC DAVIS, MARK H. LEITER, AMANDA C. SCHNEIDER, MARGARET N. DEARMAN, TONY L. LIMON, RAYMOND A. SCHOCK, JAMES H. DEERINWATER, DANIEL J. LODGE, CYNTHIA LOUISE SHEEHAN, DENISE E. DOHNER, CYNTHIA LOFTIN, MELINDA J. SHEPARD, ERIC N. DOUGLAS, JAMES C. LOHOEFENER, RENNE R. SHOLLY, CAMERON H. DREHER, ROBERT GEOFFREY LORDS, DOUGLAS A. SHOPE, THOMAS D. DUMONTIER, DEBRA L. LOUDERMILK, WELDON B. SIMMONS, SHAYLA F. DUNTON, RONALD L. LUEBKE, THOMAS A. SINGER, MICHELE F. DUTSCHKE, AMY L. LUEDERS, AMY L. SLACK, JAMES J. EDSALL, DONNA LYNN LYONS, JAMES R. SMILEY, KARLA J. ELLIS, STEVEN A MABRY, SCOTT L. SMITH, MICHAEL R. ESTENOZ, SHANNON A. MARTINEZ, CYNTHIA T. SOGGE, MARK K. ETHRIDGE, MAX M. MASICA, SUE E. SONDERMAN, DEBRA E. FAETH, LORRAINE V. MAYTUBBY, BRUCE W. SOUZA, PAUL FARBER, MICHAEL D. MCCAFFERY, JAMES G. SPEAKS, STANLEY M. FERRERO, RICHARD C. MCDOWALL, LENA E. FERRITER, OLIVIA B. MCKEOWN, MATTHEW J. STEWARD, JAMES D. FLANAGAN, DENISE A. MEHLHOFF, JOHN J. STREATER, EDDIE R. FORD, JEROME E. MELIUS, THOMAS O. SUAZO, RAYMOND FORREST, VICKI L. MILAKOFSKY, BENJAMIN E. TABER, TERESA RENEE FRAZER, GARY D. MONACO, JENNIFER ROMERO TAYLOR, WILLIE R. FREEMAN, SHAREE M. MORRIS, DOUGLAS W. TEITZ, ALEXANDRA ELIZABETH FREIHAGE, JASON E. MOSS, ADRIANNE L. THOMPSON, DIONNE E. FROST, HERBERT C. MULLER JR., BRUCE C . THOMPSON, THOMAS D. FULP, TERRANCE J. MURILLO, DAVID G. THORNHILL, ALAN D. GALLAGHER, KEVIN T. MURPHY, TIMOTHY M. THORSON, ROBYN GIDNER, JEROLD L. MUSSENDEN, PAUL A. TOOTHMAN, STEPHANIE S. GIMBEL, JENNIFER L. NEDD, MICHAEL D. TUGGLE, BENJAMIN N. GLENN, DOUGLAS A. NEIMEYER, SARAH C. UBERUAGA, DAVID V. GLOMB, STEPHEN J. NEUBACHER, DONALD L. VELA, RAYMOND DAVID GOKLANY, INDUR M. OBERNESSER, RICHARD VELASCO, JANINE M. GONZALES-SCHREINER, ROSEANN O’DELL, MARGARET G. VIETZKE, GAY E. GOULD, GREGORY J. OLSEN, MEGAN C. VOGEL, ROBERT A. GREENBERGER, SARAH D. ONEILL, KEITH JAMES WAINMAN, BARBARA W. GUERTIN, STEPHEN D. ORR, L. RENEE WALKER, WILLIAM T. HAMLEY, JEFFREY L. ORTIZ, HANKIE P. WALSH, NOREEN E. HANNA, JEANETTE D. OWENS, GLENDA HUDSON WASHBURN, ELIZABETH R HART, PAULA L. PALUMBO, DAVID M. WASHBURN, JULIA L. HARTLEY, DEBORAH J. PAYNE, GRAYFORD F. WAYSON, THOMAS C. HAUGRUD, KEVIN JACK PEREZ, JEROME E WEAVER, JESS D. HAWBECKER, KAREN S. PETERSON, PENNY LYNN WEBER, WENDI HERBST, LARS T. PFEIFFER, TAMARAH WELCH, RUTH L. HILDEBRANDT, BETSY J. PIERRE-LOUIS, ALESIA J. WENK, DANIEL N. HOPPER, ABIGAIL ROSS PINTO, SHARON ANN WERKHEISER, WILLIAM H. HOSKINS, DAVID WILLIAM PLETCHER, MARY F. WHITE, JOHN ETHAN HUMBERT, HARRY L. PULA, NIKOLAO IULI Authority: 5 CFR 430.311(a)(4). HYUN, KAREN H. QUINLAN, MARTIN J. ISEMAN, THOMAS M. QUINT, ROBERT J. Raymond Limon, JAMES JR., JAMES D. RAMOS, PEDRO M. Director, Office of Human Resources. JOHNSTON, MICHAEL J. RAUCH, PAUL A. [FR Doc. 2015–31676 Filed 12–16–15; 8:45 am] JOSEPHSON, CLEMENTINE REYNOLDS, MICHAEL T. BILLING CODE 4334–12–P
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DEPARTMENT OF THE INTERIOR Forms: BOEM–0002, BOEM–0003, to document the financial responsibility BOEM–0004, BOEM–0005, BOEM– of lessees and grantees. Forms BOEM– Bureau of Ocean Energy Management 0006. 0002, BOEM–0003, BOEM–0004, and [OMB Control Number 1010–0176] Abstract: The Outer Continental Shelf BOEM–0006 are used by renewable (OCS) Lands Act, as amended (43 U.S.C. energy entities on the OCS to assign a Information Collection: Renewable 1331 et seq. and 43 U.S.C. 1801 et seq.), lease interest, designate an operator, and Energy and Alternate Uses of Existing authorizes the Secretary of the Interior to assign or relinquish a lease or grant. Facilities on the Outer Continental to issue leases, easements, or rights-of- Form BOEM–0005 was designed to way on the OCS for activities that Shelf; Proposed Collection for OMB guarantee the performance of sureties produce or support production, Review; Comment Request with respect to bonds issued on behalf transportation, or transmission of energy ACTION: 60-day notice. from sources other than oil and gas of OCS renewable energy lessees, (renewable energy). Specifically, grantees, and operators. The BOEM SUMMARY: To comply with the subsection 8(p) of the OCS Lands Act, maintains the submitted forms as Paperwork Reduction Act of 1995 as amended (43 U.S.C. 1337(p)), directs official lease and grant records (PRA), the Bureau of Ocean Energy the Secretary of the Interior to issue any pertaining to operating responsibilities, Management (BOEM) is inviting necessary regulations to carry out the ownership, and financial responsibility. comments on a collection of information OCS renewable energy program. The that we will submit to the Office of We will protect information Secretary delegated this authority to the Management and Budget (OMB) for considered proprietary under the Bureau of Ocean Energy Management review and approval. The information Freedom of Information Act (5 U.S.C. (BOEM). The BOEM has issued collection request (ICR) concerns the 552) and its implementing regulations regulations for OCS renewable energy paperwork requirements in the (43 CFR part 2) and under regulations at activities at 30 CFR part 585; this notice regulations under ‘‘Renewable Energy 30 CFR 585.113, addressing disclosure concerns the reporting and and Alternate Uses of Existing Facilities of data and information to be made recordkeeping elements required by on the Outer Continental Shelf.’’ available to the public and others. No these regulations. items of a sensitive nature are collected. DATES: Submit written comments by Respondents operate commercial and Responses are mandatory or required to February 16, 2016. noncommercial technology projects that obtain a benefit. ADDRESSES: Please send your comments include installation, construction, on this ICR to the BOEM Information operation and maintenance, and Frequency: On occasion or annually. Collection Clearance Officer, Kye decommissioning of offshore facilities, Description of Respondents: Mason, Bureau of Ocean Energy as well as possible onshore support Companies interested in renewable Management, 45600 Woodland Road, facilities. The BOEM must ensure that energy-related uses on the OCS and Sterling, VA 20166 (mail); or these activities and operations on the holders of leases and grants under 30 [email protected] (email); or (703) OCS are performed in a safe and CFR part 585. 787–1209 (fax). Please reference ICR pollution-free manner, do not interfere 1010–0176 in your comment and with the rights of other users on the Estimated Reporting and include your name and return address. OCS, and balance the protection and Recordkeeping Hour Burden: We FOR FURTHER INFORMATION CONTACT: Kye development of OCS resources. estimate the burden for this information Mason, Office of Policy, Regulations, Therefore, BOEM needs information collection to be 25,688 hours. The and Analysis at (703) 787–1025 to concerning the proposed activities, following table details the individual request additional information about facilities, safety equipment, inspections components and estimated hour this ICR or copies of the referenced and tests, and natural and manmade burdens. In calculating the burdens, we forms. hazards near the site, as well as assumed that respondents perform SUPPLEMENTARY INFORMATION: assurance of fiscal responsibility. certain requirements in the normal OMB Control Number: 1010–0176. The BOEM uses forms to collect some course of their activities. We consider Title: 30 CFR 585, Renewable Energy information to ensure proper and these to be usual and customary and and Alternate Uses of Existing Facilities efficient administration of OCS took that into account in estimating the on the Outer Continental Shelf. renewable energy leases and grants and burden. BURDEN TABLE
Non-hour cost burdens 1 Section(s) in 30 CFR 585 Reporting and recordkeeping requirement Hour burden Average number of Annual burden annual responses hours
Subpart A—General Provisions
102; 105; 110 ...... These sections contain general references to submitting comments, requests, applications, plans, notices, re- 0 ports, and/or supplemental information for BOEM approval—burdens covered under specific requirements
102(e) ...... State and local governments enter into task force or joint planning or 1 ...... 2 agreements ...... 2 coordination agreement with BOEM. 103; 904; ...... Request general departures not specifically covered elsewhere in part 2 ...... 6 requests ...... 12 585. 105(c) ...... Make oral requests or notifications and submit written follow up within 1 ...... 5 requests ...... 5 3 business days not specifically covered elsewhere in part 585. 106; 107; 213(e); 230(f); 302(a); Submit evidence of qualifications to hold a lease or grant; submit re- 2 ...... 20 submissions .... 40 408(b)(7); 409(c); 1005(d); quired supporting information (electronically if required). 1007(c); 1013(b)(7).
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BURDEN TABLE—Continued
Non-hour cost burdens 1 Section(s) in 30 CFR 585 Reporting and recordkeeping requirement Hour burden Average number of Annual burden annual responses hours
106(b)(1) ...... Request exception from exclusion or disqualification from participating 1 ...... 1 exception ...... 1 in transactions covered by Federal non-procurement debarment and suspension system.
106(b)(2), 118(c), 225(b); 436; 437; Request reconsideration and/or hearing ...... Requirement not considered IC 0 527(c); 705(c)(2); 1016. under 5 CFR 1320.3(h)(9).
108; 530(b) ...... Notify BOEM within 3 business days after learning of any action filed 1 ...... 1 notice ...... 1 alleging respondent is insolvent or bankrupt.
109 ...... Notify BOEM in writing of merger, name change, or change of busi- Requirement not considered IC 0 ness form no later than 120 days after earliest of either the effective under 5 CFR 1320.3(h)(1). date or filing date.
111 ...... Within 30 days of receiving bill, submit processing fee payments for .5 ...... 4 submissions ...... 2 BOEM document or study preparation to process applications and other requests.
4 payments × $4,000 = $16,000
111(b)(2), (3) ...... Submit comments on proposed processing fee or request approval to 2 ...... 4 requests ...... 8 perform or directly pay contractor for all or part of any document, study, or other activity, to reduce BOEM processing costs. 111(b)(3) ...... Perform, conduct, develop, etc., all or part of any document, study, or 19,000 ...... 1 submission ...... 19,000 other activity; and provide results to BOEM to reduce BOEM proc- essing fee.
111(b)(3) ...... Pay contractor for all or part of any document, study, or other activity, 3 contractor payments × $950,000 = $2,850,000 and provide results to BOEM to reduce BOEM processing costs.
111(b)(7); 118(a); 436(c) ...... Appeal BOEM estimated processing costs, decisions, or orders pursu- Exempt under 5 CFR 1320.4(a)(2), 0 ant to 30 CFR 590. (c).
113(b) ...... Respond to the Freedom of Information Act release schedule ...... 4 ...... 1 agreement ...... 4 115(c) ...... Request approval to use later edition of a document incorporated by 1 ...... 1 request ...... 1 reference or alternative compliance. 116 ...... The Director may occasionally request information to administer and 4 ...... 25 submissions .... 100 carry out the offshore renewable energy program via Federal Reg- ister Notices.
118(c); 225(b) ...... Within 15 days of bid rejection, request reconsideration of bid decision Requirement not considered IC 0 or rejection. under 5 CFR 1320.3(h)(9).
Subtotal ...... 71 responses ...... 19,176
$2,866,000 non-hour costs
Subpart B—Issuance of OCS Renewable Energy Leases
200; 224; 231; 235; 236; 238 ...... These sections contain references to information submissions, approvals, requests, applications, plans, pay- 0 ments, etc., the burdens for which are covered elsewhere in part 585
210; 211(a–c); 212 thru 216 ...... Submit nominations and general comments in response to Federal Not considered IC as defined in 5 0 Register notices on Request for Interest in OCS Leasing, Call for CFR 1320.3(h)(4) Information and Nominations (Call), Area Identification, and Notices of Sale. Includes industry, State & local governments.
210; 211(a–c); 212 thru 216 ...... Submit comments and required information in response to Federal 4 ...... 30 comments ...... 120 Register notices on Request for Interest in OCS Leasing, Call for Information and Nominations (Call), Area Identification, and Notices of Sale. Includes industry, State & local governments. 211(d); 216; 220 thru 223; 231(c)(2) Submit bid, payments, and required information in response to Fed- 5 ...... 12 bids ...... 60 eral Register Final Sale Notice. 224 ...... Within 10 business days, execute 3 copies of lease form and return to 1 ...... 2 lease executions 2 BOEM with required payments, including evidence that agent is au- thorized to act for bidder; if applicable, submit information to support delay in execution—competitive leases. 230; 231(a) ...... Submit unsolicited request and acquisition fee for a commercial or lim- 5 ...... 2 requests ...... 10 ited lease. 231(b) ...... Submit comments in response to Federal Register notice re interest 4 ...... 4 comments ...... 16 of unsolicited request for a lease. 231(g) ...... Within 10 business days of receiving lease documents, execute lease; 2 ...... 2 leases ...... 4 file financial assurance and supporting documentation—noncompeti- tive leases.
231(g) ...... Within 45 days of receiving lease copies, submit rent and rent informa- Burdens covered by information col- 0 tion. lections approved for ONRR 30 CFR Chapter XII.
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BURDEN TABLE—Continued
Non-hour cost burdens 1 Section(s) in 30 CFR 585 Reporting and recordkeeping requirement Hour burden Average number of Annual burden annual responses hours
235(b); 236(b) ...... Request additional time to extend preliminary or site assessment term 1 ...... 3 requests ...... 3 of commercial or limited lease, including revised schedule for SAP, COP, or GAP submission. 237(b) ...... Request lease be dated and effective 1st day of month in which 1 ...... 1 request ...... 1 signed.
238 ...... Submit other renewable energy research activities ...... Burden covered under SAPs & 0 GAPs § 585.600(a), (c).
Subtotal ...... 56 responses ...... 216
Subpart C—ROW Grants and RUE Grants for Renewable Energy Activities
306; 309; 315; 316 ...... These sections contain references to information submissions, approvals, requests, applications, plans, pay- 0 ments, etc., the burdens for which are covered elsewhere in part 585
302(a); 305; 306 ...... Submit copies of a request for a new or modified ROW or RUE and 5 ...... 1 request ...... 5 required information, including qualifications to hold a grant, in for- mat specified.
307; 308(a)(1) ...... Submit information in response to Federal Register notice of pro- 4 ...... 2 comments ...... 8 posed ROW or RUE grant area or comments on notice of grant auc- tion. 308(a)(2), (b); 315; 316 ...... Submit bid and payments in response to Federal Register notice of 5 ...... 1 bid ...... 5 auction for a ROW or RUE grant. 309 ...... Submit decision to accept or reject terms and conditions of non- 2 ...... 1 submission ...... 2 competitive ROW or RUE grant.
Subtotal ...... 5 responses ...... 20
Subpart D—Lease and Grant Administration
400; 401; 402; 405; 409; 416, 433 .. These sections contain references to information submissions, approvals, requests, applications, plans, pay- 0 ments, etc., the burdens for which are covered elsewhere in part 585
401(b) ...... Take measures directed by BOEM in cessation order and submit re- 100 ...... 1 report ...... 100 ports in order to resume activities.
405(d) ...... Submit written notice of change of address ...... Requirement not considered IC 0 under 5 CFR 1320.3(h)(1)
405(e); Form BOEM–0006 ...... If designated operator (DO) changes, notify BOEM and identify new 1 ...... 1 notice ...... 1 DO for BOEM approval. 408 thru 411; Forms BOEM–0002 Within 90 days after last party executes a transfer agreement, submit 1 (30 minutes 2 requests/submis- 2 and BOEM–0003. copies of a lease or grant assignment application, including originals per form × 2 sions. of each instrument creating or transferring ownership of record title, forms = 1 eligibility and other qualifications; and evidence that agent is author- hour). ized to execute assignment, in format specified. 415(a)(1); 416; 420(a), (b); 428(b) .. Submit request for suspension and required information/payment no 10 ...... 1 request ...... 10 later than 90 days prior to lease or grant expiration. 417(b) ...... Conduct, and if required pay for, site-specific study to evaluate cause 100 ...... 1 study/submission 100 of harm or damage; and submit copies of study and results, in for- mat specified.
1 study × $950,000 = $950,000
425 thru 428; 652(a); 235(a), (b) .... Request lease or grant renewal no later than 180 days before termi- 6 ...... 1 requests ...... 6 nation date of your limited lease or grant, or no later than 2 years before termination date of operations term of commercial lease. Submit required information. 435; 658(c)(2); Form BOEM–0004 .. Submit copies of application to relinquish lease or grant, in format 1 ...... 1 submission ...... 1 specified.
436; 437 ...... Provide information for reconsideration of BOEM decision to contract Requirement not considered IC 0 or cancel lease or grant area. under 5 CFR 1320.3(h)(9).
Subtotal ...... 8 responses ...... 220
$950,000 non-hour costs
Subpart E—Payments and Financial Assurance Requirements
An * indicates the primary cites for providing bonds or other financial assurance, and the burdens include any previous or subsequent references 0 throughout part 585 to furnish, replace, or provide additional bonds, securities, or financial assurance (including riders, cancellations, replace- ments). This subpart contains references to other information submissions, approvals, requests, applications, plans, etc., the burdens for which are covered elsewhere in part 585. In the future BOEM may require electronic filings of certain submissions.
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BURDEN TABLE—Continued
Non-hour cost burdens 1 Section(s) in 30 CFR 585 Reporting and recordkeeping requirement Hour burden Average number of Annual burden annual responses hours
500 thru 509; 1011 ...... Submit payor information, payments and payment information, and Burdens covered by information col- 0 maintain auditable records according to ONRR regulations or guid- lections approved for ONRR 30 ance. CFR Chapter XII.
506(c)(4) ...... Submit documentation of the gross annual generation of electricity 15 min ...... 2 submissions ...... 5 produced by the generating facility on the lease—use same form as authorized by the EIA. (Burden covered under DOE/EIA OMB Con- trol Number 1905–0129 to gather info and fill out form. BOEM’s bur- den is for submitting a copy). 510; 506(c)(3) ...... Submit application and required information for waiver or reduction of 1 ...... 1 submission ...... 1 rental or other payment. * 515; 516; 525(a) thru (f) ...... Execute and provide $100,000 minimum lease-specific bond or other 1 ...... 2 bonds ...... 2 approved security; or increase bond level if required. * 516(a)(2), (3), (b), (c); 517; 525(a) Execute and provide commercial lease supplemental bonds in 1 ...... 2 bonds ...... 2 thru (f). amounts determined by BOEM. 516(a)(4); 521(c) ...... Execute and provide decommissioning bond or other financial assur- 1 ...... 1 bond ...... 1 ance; schedule for providing the appropriate amount. 517(c)(1) ...... Submit comments on proposed adjustment to bond amounts ...... 1 ...... 1 submission ...... 1 517(c)(2) ...... Request bond reduction and submit evidence to justify ...... 5 ...... 1 request ...... 5 * 520; 521; 525(a) thru (f); Form Execute and provide $300,000 minimum limited lease or grant-specific 1 ...... 1 bond ...... 1 BOEM–0005. bond or increase financial assurance and required information. 525(g) ...... Surety notice to lessee or ROW/RUE grant holder and BOEM within 5 1 ...... 1 surety notice ...... 1 business days after initiating surety insolvency or bankruptcy pro- ceeding, or Treasury decertifies surety. * 526 Form BOEM–0005 ...... In lieu of surety bond, pledge other types of securities, including au- 2 ...... 1 pledge ...... 2 thority for BOEM to sell and use proceeds and submit required infor- mation (1 hour for form). 526(c) ...... Provide annual certified statements describing the nature and market 1 ...... 1 statement ...... 1 value, including brokerage firm statements/reports. * 527; 531 ...... Demonstrate financial worth/ability to carry out present and future fi- 10 ...... 1 demonstration ... 10 nancial obligations, annual updates, and related or subsequent ac- tions/records/reports, etc. 528 ...... Provide third-party indemnity; financial information/statements; addi- 10 ...... 1 submission ...... 10 tional bond info; executed guarantor agreement and supporting in- formation/documentation/agreements. 528(c)(6); 532(b) ...... Guarantor/Surety requests BOEM terminate period of liability and noti- 1 ...... 1 request ...... 1 fies lessee or ROW/RUE grant holder, etc. * 529 ...... In lieu of surety bond, request authorization to establish decommis- 2 ...... 1 request ...... 2 sioning account, including written authorizations and approvals as- sociated with account. 530 ...... Notify BOEM promptly of lapse in bond or other security/action filed al- 1 ...... 1 notice ...... 1 leging lessee, surety or guarantor et al is insolvent or bankrupt. 533(a)(2) (ii), (iii) ...... Provide agreement from surety issuing new bond to assume all or por- 3 ...... 1 submission ...... 3 tion of outstanding liabilities. 536(b) ...... Within 10 business days following BOEM notice, lessee, grant holder, 16 ...... 1 demonstration 8 or surety agrees to and demonstrates to BOEM that lease will be every 2 years. brought into compliance.
Subtotal ...... 21 responses ...... 52.5
Subpart F—Plans and Information Requirements
Two ** indicate the primary cites for Site Assessment Plans (SAPs), Construction and Operations Plans (COPs), and General Activities Plans 0 (GAPs); and the burdens include any previous or subsequent references throughout part 585 to submission and approval. This subpart contains references to other information submissions, approvals, requests, applications, plans, etc., the burdens for which are covered elsewhere in part 585
** 600(a); 601(a), (b); 605 thru 614; Within time specified after issuance of a competitive lease or grant, or 240 ...... 2 SAPs ...... 480 238; 810. within time specified after determination of no competitive interest, submit copies of SAP, including required information to assist BOEM to comply with NEPA/CZMA such as hazard info, air quality, SEMS, and all required information, certifications, requests, etc., in format specified. ** 600(b); 601(c), (d)(1); 606(b); If requesting an operations term for commercial lease, within time 1,000 ...... 2 COPs ...... 2,000 618; 620 thru 629; 632; 633; 810. specified before the end of site assessment term, submit copies of COP, or FERC license application, including required information to assist BOEM to comply with NEPA/CZMA such as hazard info, air quality, SEMS, and all required information, surveys and/or their re- sults, reports, certifications, project easements, supporting data and information, requests, etc., in format specified. ** 600(c); 601(a), (b); 640 thru 648; Within time specified after issuance of a competitive lease or grant, or 240 ...... 2 GAP ...... 480 651; 238; 810. within time specified after determination of no competitive interest, submit copies of GAP, including required information to assist BOEM to comply with NEPA/CZMA such as hazard info, air quality, SEMS, and all required information, surveys and reports, certifi- cations, project easements, requests, etc., in format specified. ** 601(d) (2); 622; 628(f); 632; 634; Submit revised or modified COPs, including project easements, and all 50 ...... 1 revised or modi- 50 658(c)(3); 907. required additional information. fied COP.
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BURDEN TABLE—Continued
Non-hour cost burdens 1 Section(s) in 30 CFR 585 Reporting and recordkeeping requirement Hour burden Average number of Annual burden annual responses hours
602 2 ...... Until BOEM releases financial assurance, respondents must maintain, 2 ...... 9 records/submis- 18 and provide to BOEM if requested, all data and information related sions. to compliance with required terms and conditions of SAP, COP, or GAP. ** 613(a), (d), (e); 617 ...... Submit revised or modified SAPs and required additional information .. 50 ...... 1 revised or modi- 50 fied SAP. 612; 647 ...... Submit copy of SAP or GAP consistency certification and supporting 1 ...... 2 leases ...... 2 documentation, including noncompetitive leases. 615(a) ...... Notify BOEM in writing within 30 days of completion of construction 1 ...... 2 notices ...... 2 and installation activities under SAP. 615(b) ...... Submit annual report summarizing findings from site assessment ac- 30 ...... 4 reports ...... 120 tivities. 615(c) ...... Submit annual, or at other time periods as BOEM determines, SAP 40 ...... 4 certifications ...... 160 compliance certification, effectiveness statement, recommendations, reports, supporting documentation, etc. 617(a) ...... Notify BOEM in writing before conducting any activities not approved, 10 ...... 1 notice ...... 10 or provided for, in SAP; provide additional information if requested.
627(c) ...... Submit oil spill response plan as required by BSEE 30 CFR part 254 .. Burden covered under BSEE 1014– 0 0007.
631 ...... Request deviation from approved COP schedule ...... 2 ...... 1 request ...... 2 633(b) ...... Submit annual, or at other time periods as BOEM determines, COP 50 ...... 9 certifications ...... 450 compliance certification, effectiveness statement, recommendations, reports, supporting documentation, etc. 634(a) ...... Notify BOEM in writing before conducting any activities not approved 10 ...... 1 notice ...... 10 or provided for in COP, and provide additional information if re- quested. 635 ...... Notify BOEM any time commercial operations cease without an ap- 1 ...... 1 notice ...... 1 proved suspension. 636(a) ...... Notify BOEM in writing no later than 30 days after commencing activi- 1 ...... 2 notices ...... 2 ties associated with placement of facilities on lease area. 636(b) ...... Notify BOEM in writing no later than 30 days after completion of con- 1 ...... 2 notices ...... 2 struction and installation activities. 636(c) ...... Notify BOEM in writing at least 7 days before commencing commercial 1 ...... 1 notices ...... 1 operations. ** 642(b); 648; 655; 658(c)(3) ...... Submit revised or modified GAPs and required additional information .. 50 ...... 1 revised or modi- 50 fied GAP. 651 ...... Before beginning construction of OCS facility described in GAP, com- 30 ...... 2 surveys/reports .. 60 plete survey activities identified in GAP and submit initial findings. [This only includes the time involved in submitting the findings; it does not include the survey time as these surveys would be con- ducted as good business practice.]. 653(a) ...... Notify BOEM in writing within 30 days of completing installation activi- 1 ...... 2 notices ...... 2 ties under the GAP. 653(b) ...... Submit annual report summarizing findings from activities conducted 30 ...... 4 reports ...... 120 under approved GAP. 653(c) ...... Submit annual, or at other time periods as BOEM determines, GAP 40 ...... 4 certifications ...... 160 compliance certification, recommendations, reports, etc. 655(a) ...... Notify BOEM in writing before conducting any activities not approved 10 ...... 1 notice ...... 10 or provided for in GAP, and provide additional information if re- quested. 656 ...... Notify BOEM any time approved GAP activities cease without an ap- 1 ...... 1 notice ...... 1 proved suspension. 658(c)(1) ...... If after construction, cable or pipeline deviate from approved COP or 3 ...... 1 notice/evidence 3 GAP, notify affected lease operators and ROW/RUE grant holders of deviation and provide BOEM evidence of such notices. 659 ...... Determine appropriate air quality modeling protocol, conduct air quality 70 ...... 5 reports/informa- 350 modeling, and submit 3 copies of air quality modeling report and 3 tion. sets of digital files as supporting information to plans.
Subtotal ...... 68 responses ...... 4,596
Subpart G—Facility Design, Fabrication, and Installation
Three *** indicate the primary cites for the reports discussed in this subpart, and the burdens include any previous or subsequent references 0 throughout part 585 to submitting and obtaining approval. This subpart contains references to other information submissions, approvals, requests, applications, plans, etc., the burdens for which are covered elsewhere in part 585.
*** 700(a)(1), (b), (c); 701 ...... Submit Facility Design Report, including copies of the cover letter, cer- 200 ...... 1 report ...... 200 tification statement, and all required information (1–3 paper or elec- tronic copies as specified). *** 700(a)(2); (b), (c); 702 ...... Submit copies of a Fabrication and Installation Report, certification 160 ...... 1 report ...... 160 statement and all required information, in format specified. 705(a)(3); 707; 712 ...... Certified Verification Agent (CVA) conducts independent assessment 100 ...... 1 interim report ..... 100 of the facility design and submits copies of all reports/certifications to lessee or grant holder and BOEM—interim reports if required, in format specified. 100 ...... 1 final report ...... 100
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BURDEN TABLE—Continued
Non-hour cost burdens 1 Section(s) in 30 CFR 585 Reporting and recordkeeping requirement Hour burden Average number of Annual burden annual responses hours
705(a)(3); 708; 709; 710; 712 ...... CVA conducts independent assessments/inspections on the fabrication 100 ...... 1 interim report ..... 100 and installation activities, informs lessee or grant holder if proce- dures are changed or design specifications are modified; and sub- mits copies of all reports/certifications to lessee or grant holder and BOEM—interim reports if required, in format specified. 100 ...... 1 final report ...... 100 *** 703; 705(a)(3); 712; 815 ...... CVA/project engineer monitors major project modifications and repairs 20 ...... 1 interim report ..... 20 and submits copies of all reports/certifications to lessee or grant holder and BOEM—interim reports if required, in format specified. 15 ...... 1 final report ...... 15 705(c) ...... Request waiver of CVA requirement in writing; lessee must dem- 40 ...... 1 waiver ...... 40 onstrate standard design and best practices. 706 ...... Submit for approval with SAP, COP, or GAP, initial nominations for a 16 ...... 2 nominations ...... 32 CVA or new replacement CVA nomination, and required information. 708(b)(2) ...... Lessee or grant holder notify BOEM if modifications identified by CVA/ 1 ...... 1 notice ...... 1 project engineer are accepted. 709(a) (14); 710(a)(2), (e) 2 ...... Make fabrication quality control, installation towing, and other records 1 ...... 3 records retention 3 available to CVA/project engineer for review (retention required by § 585.714). 713 ...... Notify BOEM within 10 business days after commencing commercial 1 ...... 1 notice ...... 1 operations. 714 2 ...... Until BOEM releases financial assurance, compile, retain, and make 100 ...... 1 lessee ...... 100 available to BOEM and/or CVA the as-built drawings, design as- sumptions/analyses, summary of fabrication and installation exam- ination records, inspection results, and records of repairs not cov- ered in inspection report. Record original and relevant material test results of all primary structural materials; retain records during all stages of construction.
Subtotal ...... 17 responses ...... 972
Subpart H—Environmental and Safety Management, Inspections, and Facility Assessments for Activities Conducted Under SAPs, COPs, and GAPs
801(c), (d) ...... Notify BOEM if endangered or threatened species, or their designated 1 ...... 2 notices ...... 2 critical habitat, may be in the vicinity of the lease or grant or may be affected by lease or grant activities. 801(e), (f) ...... Submit information to ensure proposed activities will be conducted in 6 ...... 2 submissions ...... 12 compliance with the Endangered Species Act (ESA) and Marine Mammal Protection Act (MMPA); including agreements and miti- gating measures designed to avoid or minimize adverse effects and incidental take of endangered species or critical habitat. 802; 902(e) ...... Notify BOEM of archaeological resource within 72 hours of discovery .. 3 ...... 1 notice ...... 3 802(b), (c) ...... If requested, conduct further archaeological investigations and submit 10 ...... 1 report ...... 10 report/information. 802(d) ...... If applicable, submit payment for BOEM costs in carrying out National .5 ...... 1 payment ...... 5 Historic Preservation Act responsibilities. 803 ...... If required, conduct additional surveys to define boundaries and avoid- 15 ...... 2 survey/report ..... 30 ance distances and submit report. *** 810; 614; 627; 632(b); 651 ...... Submit safety management system description with the SAP, COP, or 35 ...... 2 submissions ...... 70 GAP. 813(b)(1) ...... Report within 24 hours when any required equipment taken out of .5 ...... 2 reports ...... 1 service for more than 12 hours; provide written confirmation if re- ported orally. 1 ...... 1 written confirma- 1 tion. 813(b)(3) ...... Notify BOEM when equipment returned to service; provide written con- .5 ...... 2 notices ...... 1 firmation if reported orally. 815(c) ...... When required, analyze cable, P/L, or facility damage or failures to de- 2 ...... 1 report ...... 2 termine cause and as soon as available submit comprehensive writ- ten report. 816 ...... Submit plan of corrective action report on observed detrimental effects 2 ...... 1 plan/report ...... 2 on cable, P/L, or facility within 30 days of discovery; take remedial action and submit report of remedial action within 30 days after completion. 822(a)(2)(iii), (b) ...... Maintain records of design, construction, operation, maintenance, re- 1 ...... 4 records retention 4 pairs, and investigation on or related to lease or ROW/RUE area; make available to BOEM for inspection. 823 ...... Request reimbursement within 90 days for food, quarters, and trans- 2 ...... 1 request ...... 2 portation provided to BOEM reps during inspection. 824(a) 2 ...... Develop annual self-inspection plan covering all facilities; retain with 24 ...... 2 plans ...... 48 records, and make available to BOEM upon request. 824(b) ...... Conduct annual self-inspection and submit report by November 1 ...... 36 ...... 2 reports ...... 72 825 ...... Based on API RP 2A–WSD, perform assessment of structures, initiate 60 ...... 2 assessments/ac- 120 mitigation actions for structures that do not pass assessment proc- tions. ess, retain information, and make available to BOEM upon request. 830(a), (c); 831 thru 833 ...... Immediately report incidents to BOEM via oral communications, submit Oral .5 ...... 2 incidents ...... 1 written follow-up report within 15 business days after the incident, and submit any required additional information.
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BURDEN TABLE—Continued
Non-hour cost burdens 1 Section(s) in 30 CFR 585 Reporting and recordkeeping requirement Hour burden Average number of Annual burden annual responses hours
Written 4 ...... 1 incident ...... 4
830(d) ...... Report oil spills as required by BSEE 30 CFR 254 ...... Burden covered under BSEE 1014– 0 0007
Subtotal ...... 32 responses ...... 385.5
Subpart I—Decommissioning
Four **** indicate the primary cites for the reports discussed in this subpart, and the burdens include any previous or subsequent references throughout part 585 to submitting and obtaining approval. This subpart contains references to other information submissions, approvals, requests, applications, plans, etc., the burdens for which are covered elsewhere in part 585.
**** 902; 905, 906; 907; 908(c); 909 Submit for approval, in format specified, copies of the SAP, COP, or 20 ...... 1 application ...... 20 GAP decommissioning application and site clearance plan at least 2 years before decommissioning activities begin, 90 days after com- pletion of activities, or 90 days after cancellation, relinquishment, or other termination of lease or grant. Include documentation of coordi- nation efforts w/States/CZMA agencies, local or tribal governments, requests that certain facilities remain in place for other activities, be converted to an artificial reef, or be toppled in place. Submit addi- tional information/evidence requested or modify and resubmit appli- cation. 902(d); 908; ...... Notify BOEM at least 60 days before commencing decommissioning 1 ...... 1 notice ...... 1 activities. 910 ...... Within 60 days after removing a facility, verify to BOEM that site is 1 ...... 1 verification ...... 1 cleared. 912 ...... Within 60 days after removing a facility, cable, or pipeline, submit a 8 ...... 1 report ...... 8 written report.
BOEM does not anticipate decommissioning activities for at least 5 years so the requirements have been given a minimal burden.
Subtotal ...... 4 responses ...... 30
Subpart J—RUEs for Energy- and Marine-Related Activities Using Existing OCS Facilities
1004, 1005, 1006 ...... Contact owner of existing facility and/or lessee of the area to reach 1 ...... 1 request ...... 1 preliminary agreement to use facility and obtain concurring signa- tures; submit request to BOEM for an alternative use RUE, including all required information/modifications. 1007(a), (b), (c) ...... Submit indication of competitive interest in response to Federal Reg- 4 ...... 1 submission ...... 4 ister notice. 1007(c) ...... Submit description of proposed activities and required information in 5 ...... 1 submission ...... 5 response to Federal Register notice of competitive offering. 1007(f) ...... Lessee or owner of facility submits decision to accept or reject pro- 1 ...... 1 submission ...... 1 posals deemed acceptable by BOEM. 1010(c) ...... Request renewal of Alternate Use RUE ...... 6 ...... 1 request ...... 6 1012; 1016(b) ...... Provide financial assurance as BOEM determines in approving RUE 1 ...... 1 submission ...... 1 for an existing facility, including additional security if required. 1013 ...... Submit request for assignment of an alternative use RUE for an exist- 1 ...... 1 request ...... 1 ing facility, including all required information. 1015 ...... Request relinquishment of RUE for an existing facility ...... 1 ...... 1 request ...... 1
Subtotal ...... 8 responses ...... 20
Total Burden ...... 290 responses ...... 25,688
$3,816,000 Non-Hour Cost Burdens 1 In the future, BOEM may require electronic filing of certain submissions. 2 Retention of these records is usual and customary business practice; the burden is primarily to make them available to BOEM and CVAs.
Estimated Reporting and Public Disclosure Statement: The PRA whether or not the information will Recordkeeping Non-Hour Cost Burden: (44 U.S.C. 3501, et seq.) provides that an have practical utility; We have identified three non-hour cost agency may not conduct or sponsor a • The accuracy of our burden burdens for this collection totaling collection of information unless it estimates; $3,816,000 (refer to the table above). displays a currently valid OMB control • Ways to enhance the quality, utility, These non-hour cost burdens consist of number. Until OMB approves a and clarity of the information to be service fees for BOEM document/study collection of information, you are not collected; and • preparation, costs for paying a obligated to respond. Ways to minimize the burden on contractor instead of BOEM, and costs Comments: We invite comments respondents. for a site-specific study and report to concerning this information collection If you have costs to generate, on: maintain, and disclose this information, evaluate the cause of harm to natural • resources. Whether or not the collection of you should comment and provide your information is necessary, including total capital and startup costs or annual
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operation, maintenance, and purchase Discounting is to be used to convert SUMMARY: Notice is hereby given that a of service costs. You should describe the future monetary values to present complaint was filed with the U.S. methods you use to estimate major cost values. International Trade Commission on factors, including system and DATES: This discount rate is to be used November 12, 2015, under section 337 technology acquisition, expected useful for the period October 1, 2015, through of the Tariff Act of 1930, as amended, life of capital equipment, discount and including September 30, 2016. 19 U.S.C. 1337, on behalf of Belkin rate(s), and the period over which you International, Inc. of Playa Vista, incur costs. Capital and startup costs FOR FURTHER INFORMATION CONTACT: Max California. The complaint alleges include, among other items, computers Millstein, Bureau of Reclamation, violations of section 337 based upon the and software you purchase to prepare Reclamation Law Administration importation into the United States, the for collecting information, monitoring, Division, Denver, Colorado 80225; sale for importation, and the sale within and record storage facilities. You should telephone: 303–445–2853. the United States after importation of not include estimates for equipment or SUPPLEMENTARY INFORMATION: Notice is certain computer cables, chargers, services purchased: (a) Before October 1, hereby given that the interest rate to be adapters, peripheral devices and 1995; (b) to comply with requirements used by Federal agencies in the packaging containing the same by not associated with the information formulation and evaluation of plans for reason of infringement of U.S. collection; (c) for reasons other than to water and related land resources is Trademark Registration No. 2,339,459 provide information or keep records for 3.125 percent for fiscal year 2016. (‘‘the ’459 mark’’); U.S. Trademark the Government; or (d) as part of This rate has been computed in Registration No. 2,339,460 (‘‘the ’460 customary and usual business or private accordance with Section 80(a), Public mark’’); U.S. Trademark Registration No. practices. Law 93–251 (88 Stat. 34), and 18 CFR 4,168,379 (‘‘the ’379 mark’’); and U.S. We will summarize written responses 704.39, which: (1) Specify that the rate Trademark Registration No. 4,538,212 to this notice and address them in our will be based upon the average yield (‘‘the ’212 mark’’). The complaint submission for OMB approval. As a during the preceding fiscal year on further alleges that an industry in the result of your comments, we will make interest-bearing marketable securities of United States exists as required by any necessary adjustments to the burden the United States which, at the time the subsection (a)(2) of section 337. in our submission to OMB. computation is made, have terms of 15 The complainant requests that the Public Availability of Comments: years or more remaining to maturity Commission institute an investigation Before including your address, phone (average yield is rounded to nearest one- and, after the investigation, issue a number, email address, or other eighth percent); and (2) provide that the general exclusion order and cease and personal identifying information in your rate will not be raised or lowered more desist orders. comment, you should be aware that than one-quarter of 1 percent for any ADDRESSES: The complaint, except for your entire comment—including your year. The U.S. Department of the any confidential information contained personal identifying information—may Treasury calculated the specified therein, is available for inspection be made publicly available at any time. average to be 2.6511 percent. This rate, during official business hours (8:45 a.m. While you can ask us in your comment rounded to the nearest one-eighth to 5:15 p.m.) in the Office of the to withhold your personal identifying percent, is 2.625 percent, which is a Secretary, U.S. International Trade information from public review, we change of more than the allowable one- Commission, 500 E Street SW., Room cannot guarantee that we will be able to quarter of 1 percent. Therefore, the 112, Washington, DC 20436, telephone do so. fiscal year 2016 rate is 3.125 percent. (202) 205–2000. Hearing impaired The rate of 3.125 percent will be used Dated: December 10, 2015. individuals are advised that information by all Federal agencies in the Deanna Meyer-Pietruszka, on this matter can be obtained by formulation and evaluation of water and Chief, Office of Policy, Regulations, and contacting the Commission’s TDD related land resources plans for the Analysis. terminal on (202) 205–1810. Persons purpose of discounting future benefits [FR Doc. 2015–31707 Filed 12–16–15; 8:45 am] with mobility impairments who will and computing costs or otherwise BILLING CODE 4310–MR–P need special assistance in gaining access converting benefits and costs to a to the Commission should contact the common-time basis. Office of the Secretary at (202) 205– DEPARTMENT OF THE INTERIOR Dated: October 16, 2015. 2000. General information concerning Roseann Gonzales, the Commission may also be obtained Bureau of Reclamation Director, Policy and Administration. by accessing its internet server at [RR83550000, 167R5065C6, [FR Doc. 2015–31717 Filed 12–16–15; 8:45 am] http://www.usitc.gov. The public record RX.59389832.1009676] BILLING CODE 4332–90–P–P for this investigation may be viewed on the Commission’s electronic docket Change in Discount Rate for Water (EDIS) at http://edis.usitc.gov. Resources Planning INTERNATIONAL TRADE FOR FURTHER INFORMATION CONTACT: The AGENCY: Bureau of Reclamation, COMMISSION Office of Unfair Import Investigations, Interior. U.S. International Trade Commission, [Investigation No. 337–TA–975] ACTION: Notice of change. telephone (202) 205–2560. SUMMARY: The Water Resources Certain Computer Cables, Chargers, Authority: The authority for institution of Planning Act of 1965 and the Water Adapters, Peripheral Devices and this investigation is contained in section 337 of the Tariff Act of 1930, as amended, and Resources Development Act of 1974 Packaging Containing the Same; Institution of Investigation in section 210.10 of the Commission’s Rules require an annual determination of a of Practice and Procedure, 19 CFR 210.10 discount rate for Federal water AGENCY: U.S. International Trade (2015). resources planning. The discount rate Commission. for Federal water resources planning for Scope of Investigation: Having ACTION: Notice. fiscal year 2016 is 3.125 percent. considered the complaint, the U.S.
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International Trade Commission, on notice, and to authorize the deputy project leader Brian Allen (202– December 11, 2015, ordered that— administrative law judge and the 205–3034 or [email protected]) for (1) Pursuant to subsection (b) of Commission, without further notice to information specific to this section 337 of the Tariff Act of 1930, as the respondent, to find the facts to be as investigation. For information on the amended, an investigation be instituted alleged in the complaint and this notice legal aspects of this investigation, to determine whether there is a and to enter an initial determination contact William Gearhart of the violation of subsection (a)(1)(C) of and a final determination containing Commission’s Office of the General section 337 in the importation into the such findings, and may result in the Counsel (202–205–3091 or United States, the sale for importation, issuance of an exclusion order or a cease [email protected]). The media or the sale within the United States after and desist order or both directed against should contact Margaret O’Laughlin, importation of certain computer cables, the respondent. Office of External Relations (202–205– chargers, adapters, peripheral devices By order of the Commission. 1819 or [email protected]). and packaging containing the same by Hearing-impaired individuals may reason of infringement of one or more of Issued: December 14, 2015. Lisa R. Barton, obtain information on this matter by the ’459 mark; the ’460 mark; the ’379 contacting the Commission’s TDD mark; and the ’212 mark, and whether Secretary to the Commission. terminal at 202–205–1810. General an industry in the United States exists [FR Doc. 2015–31727 Filed 12–16–15; 8:45 am] information concerning the Commission as required by subsection (a)(2) of BILLING CODE 7020–02–P may also be obtained by accessing its section 337; (2) For the purpose of the Internet server (http://www.usitc.gov). investigation so instituted, the following INTERNATIONAL TRADE Persons with mobility impairments who are hereby named as parties upon which COMMISSION will need special assistance in gaining access to the Commission should this notice of investigation shall be [Investigation No. CAFTA–DR–103–028] served: contact the Office of the Secretary at (a) The complainant is: Belkin Probable Economic Effects of Certain 202–205–2000. International, Inc., 12045 E. Waterfront Modifications to the CAFTA–DR Rules Background: In his request letter Drive, Playa Vista, CA 90094. of Origin (received November 24, 2015), the (b) The respondents are the following USTR stated that U.S. negotiators have entities alleged to be in violation of AGENCY: United States International recently reached agreement in principle section 337, and are the parties upon Trade Commission. with representatives of the CAFTA–DR which the complaint is to be served: ACTION: Institution of investigation and governments on certain modifications to Dongguan Pinte Electronic Co., Ltd., notice of opportunity to provide written the rules of origin in Annex 4.1 of the No. 2, Xingguang Road, Shijie Town, comments. Dominican Republic-Central America- Dongguan City, Guangdong, China; United States Free Trade Agreement. SUMMARY: Following receipt on Dongguan Shijie Fresh Electronic The USTR noted that section November 24, 2015, of a request from Products Factory, 1st Industrial Zone, 203(o)(3)(A) of the Dominican Republic- the U.S. Trade Representative (USTR), Xi’nan, Shijie Town, Dongguan City, Central America-United States Free under authority delegated by the Guangdong, China. Trade Agreement Implementation Act (c) The Office of Unfair Import President and pursuant to section 104 of authorizes the President, subject to the Investigations, U.S. International Trade the Dominican Republic-Central consultation and layover requirements Commission, 500 E Street SW., Suite America-United States Free Trade of section 104 of the Act, to proclaim 401, Washington, DC 20436; and Agreement Implementation Act (19 such modifications to rules of origin (3) For the investigation so instituted, U.S.C. 4014), the Commission instituted provisions included in Annex 4.1 of the the Chief Administrative Law Judge, investigation No. CAFTA–DR–103–028, U.S. International Trade Commission, Probable Economic Effects of Certain Agreement in the Harmonized Tariff shall designate the presiding Modifications to the CAFTA–DR Rules Schedule of the United States (HTS), Administrative Law Judge. of Origin. other than with respect to goods of HTS Responses to the complaint and the chapters 50 through 63. He noted that DATES: January 25, 2016: Deadline for one of the requirements set out in notice of investigation must be filing written submissions. May 24, submitted by the named respondents in section 104 is that the President obtain 2016: Transmittal of Commission report advice regarding the proposed action accordance with section 210.13 of the to USTR. Commission’s Rules of Practice and from the U.S. International Trade ADDRESSES: All Commission offices, Procedure, 19 CFR 210.13. Pursuant to Commission. In the request letter, the including the Commission’s hearing 19 CFR 201.16(e) and 210.13(a), such USTR asked that the Commission rooms, are located in the United States responses will be considered by the provide advice on the probable International Trade Commission Commission if received not later than 20 economic effects of the proposed Building, 500 E Street SW., Washington, days after the date of service by the modifications in rules of origin on U.S. DC. All written submissions should be Commission of the complaint and the trade under the Agreement, on total U.S. addressed to the Secretary, United notice of investigation. Extensions of trade, and on domestic producers of the States International Trade Commission, time for submitting responses to the affected articles. The products identified 500 E Street SW., Washington, DC complaint and the notice of in the proposal are fishing lures, gaming 20436. The public record for this investigation will not be granted unless machines, polyvinyl chloride, and investigation may be viewed on the good cause therefor is shown. certain products of the chemical or Failure of a respondent to file a timely Commission’s electronic docket (EDIS) allied industries. The request letter and response to each allegation in the at http://www.usitc.gov/secretary/ the complete list of proposed complaint and in this notice may be edis.htm. modifications are available on the deemed to constitute a waiver of the FOR FURTHER INFORMATION CONTACT: Commission’s Web site at http:// right to appear and contest the Project leader Philip Stone (202–205– www.usitc.gov/research_and_analysis/ allegations of the complaint and this 3424 or [email protected]) or what_we_are_working_on.htm. As
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requested, the Commission will provide easily converted to MSWord, and 1301.33, the above-named company is its advice to USTR by May 24, 2016. should not include any confidential granted registration as a bulk Written Submissions: No public business information. The summary will manufacturer of the following basic hearing is planned. However, interested be published as provided if it meets classes of controlled substances: parties are invited to file written these requirements and is germane to submissions concerning this the subject matter of the investigation. Controlled substance Schedule investigation. All written submissions In the appendix the Commission will should be addressed to the Secretary, identify the name of the organization Marihuana (7360) ...... I and all such submissions should be furnishing the summary, and will Tetrahydrocannabinols (7370) ..... I received not later than 5:15 p.m., include a link to the Commission’s January 25, 2016. All written Electronic Document Information The company plans to manufacture submissions must conform with the System (EDIS) where the full written bulk synthetic active pharmaceutical provisions of section 201.8 of the submission can be found. ingredients (APIs) for product development and distribution to its Commission’s Rules of Practice and By order of the Commission. Procedure (19 CFR 201.8). Section 201.8 customers. No other activity for these Dated: December 14, 2015. and the Commission’s Handbook on drug codes are authorized for this Filing Procedures require that interested Lisa R. Barton, registration. parties file documents electronically on Secretary to the Commission. Dated: December 9, 2015. or before the filing deadline and submit [FR Doc. 2015–31734 Filed 12–16–15; 8:45 am] Louis J. Milione, eight (8) true paper copies by 12:00 p.m. BILLING CODE 7020–02–P Deputy Assistant Administrator. eastern time on the next business day. [FR Doc. 2015–31667 Filed 12–16–15; 8:45 am] In the event that confidential treatment BILLING CODE 4410–09–P of a document is requested, interested DEPARTMENT OF JUSTICE parties must file, at the same time as the Drug Enforcement Administration eight paper copies, at least four (4) DEPARTMENT OF JUSTICE additional true paper copies in which [Docket No. DEA–392] the confidential information must be Drug Enforcement Administration deleted (see the following paragraph for Manufacturer of Controlled further information regarding Substances Registration: Austin [Docket No. DEA–392] confidential business information). Pharma LLC Bulk Manufacturer of Controlled Persons with questions regarding Substances Application: Johnson ACTION: Notice of registration. electronic filing should contact the Matthey, Inc. Secretary (202–205–2000). SUMMARY: Austin Pharma LLC applied Any submissions that contain to be registered as a manufacturer of ACTION: Notice of application. confidential business information must certain basic classes of controlled also conform with the requirements of substances. The Drug Enforcement DATES: Registered bulk manufacturers of section 201.6 of the Commission’s Rules Administration (DEA) grants Austin the affected basic classes, and of Practice and Procedure (19 CFR Pharma LLC registration as a applicants therefore, may file written 201.6). Section 201.6 of the rules comments on or objections to the requires that the cover of the document manufacturer of those controlled substances. issuance of the proposed registration in and the individual pages be clearly accordance with 21 CFR 1301.33(a) on marked as to whether they are the SUPPLEMENTARY INFORMATION: By notice or before February 16, 2016. ‘‘confidential’’ or ‘‘non-confidential’’ dated August 10, 2015, and published in ADDRESSES: Written comments should version, and that the confidential the Federal Register on August 18, be sent to: Drug Enforcement business information be clearly 2015, 80 FR 50043, Austin Pharma LLC, identified by means of brackets. All 811 Paloma Drive, Suite C, Round Rock, Administration, Attention: DEA Federal written submissions, except for Texas 78665–2402 applied to be Register Representative/ODW, 8701 confidential business information, will registered as a manufacturer of certain Morrissette Drive, Springfield, Virginia be made available for inspection by basic classes of controlled substances. 22152. Request for hearings should be interested parties. The Commission may No comments or objections were sent to: Drug Enforcement include some or all of the confidential submitted for this notice. Administration, Attention: Hearing business information submitted in the The DEA has considered the factors in Clerk/LJ, 8701 Morrissette Drive, course of this investigation in the report 21 U.S.C. 823(a) and determined that Springfield, Virginia 22152. it sends to the USTR and the President. the registration of Austin Pharma LLC to SUPPLEMENTARY INFORMATION: The As requested, the Commission will issue manufacture the basic classes of Attorney General has delegated her a public version of its report, with any controlled substances is consistent with authority under the Controlled confidential business information the public interest and with United Substances Act to the Administrator of deleted, shortly after it transmits its States obligations under international the Drug Enforcement Administration report. treaties, conventions, or protocols in (DEA), 28 CFR 0.100(b). Authority to Summaries of Written Submissions: effect on May 1, 1971. The DEA exercise all necessary functions with The Commission intends to publish investigated the company’s maintenance respect to the promulgation and summaries of the positions of interested of effective controls against diversion by implementation of 21 CFR part 1301, persons in an appendix to its report. inspecting and testing the company’s incident to the registration of Persons wishing to have a summary of physical security systems, verifying the manufacturers, distributors, dispensers, their position included in the appendix company’s compliance with state and importers, and exporters of controlled should include a summary with their local laws, and reviewing the company’s substances (other than final orders in written submission. The summary may background and history. connection with suspension, denial, or not exceed 500 words, should be in Therefore, pursuant to 21 U.S.C. revocation of registration) has been MSWord format or a format that can be 823(a), and in accordance with 21 CFR redelegated to the Deputy Assistant
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Administrator of the DEA Office of DEPARTMENT OF JUSTICE The company plans to import the Diversion Control (‘‘Deputy Assistant listed substances for analytical research, Administrator’’) pursuant to section 7 of Drug Enforcement Administration testing, and clinical trials. This 28 CFR part 0, appendix to subpart R. authorization does not extend to the In accordance with 21 CFR [Docket No. DEA–392] import of a finished FDA approved or non-approved dosage form for 1301.33(a), this is notice that on Importer of Controlled Substances commercial distribution in the United September 3, 2015, Johnson Matthey, Application: Fisher Clinical Services, States. Inc., Custom Pharmaceuticals Inc. The company plans to import an Department, 2003 Nolte Drive, West intermediate form of tapentadol (9780) Deptford, New Jersey 08066–1742 ACTION: Notice of application. to bulk manufacture tapentadol for applied to be registered as a bulk distribution to its customers. Placement manufacturer of the following basic DATES: Registered bulk manufacturers of of these (this) drug code (s) onto the classes of controlled substances: the affected basic classes, and company’s registration does not applicants therefore, may file written translate into automatic approval of Controlled substance Schedule comments on or objections to the subsequent permit applications to issuance of the proposed registration in import controlled substances. Approval Gamma Hydroxybutyric Acid I accordance with 21 CFR 1301.34(a) on of permit applications will occur only (2010). or before January 19, 2016. Such when the registrant’s business activity is Marihuana (7360) ...... I persons may also file a written request consistent with what is authorized Tetrahydrocannabinols (7370) ..... I for a hearing on the application under to 21 U.S.C. 952(a)(2). Dihydromorphine (9145) ...... I pursuant to 21 CFR 1301.43 on or before Authorization will not extend to the Difenoxin (9168) ...... I January 19, 2016. Propiram (9649) ...... I import of FDA approved or non- Amphetamine (1100) ...... II ADDRESSES: Written comments should approved finished dosage forms for Methamphetamine (1105) ...... II be sent to: Drug Enforcement commercial sale. Lisdexamfetamine (1205) ...... II Administration, Attention: DEA Federal Dated: December 9, 2015. Methylphenidate (1724) ...... II Register Representative/ODW, 8701 Louis J. Milione, Nabilone (7379) ...... II Morrissette Drive, Springfield, Virginia Deputy Assistant Administrator. 22152. Request for hearings should be Cocaine (9041) ...... II [FR Doc. 2015–31672 Filed 12–16–15; 8:45 am] Codeine (9050) ...... II sent to: Drug Enforcement BILLING CODE 4410–09–P Dihydrocodeine (9120) ...... II Administration, Attention: Hearing Oxycodone (9143) ...... II Clerk/LJ, 8701 Morrissette Drive, Hydromorphone (9150) ...... II Springfield, Virginia 22152. DEPARTMENT OF JUSTICE Diphenoxylate (9170) ...... II SUPPLEMENTARY INFORMATION: The Ecgonine (9180) ...... II Attorney General has delegated her Drug Enforcement Administration Hydrocodone (9193) ...... II authority under the Controlled [Docket No. DEA–392] Meperidine (9230) ...... II Substances Act to the Administrator of Methadone (9250) ...... II the Drug Enforcement Administration Bulk Manufacturer of Controlled Methadone intermediate (9254) ... II (DEA), 28 CFR 0.100(b). Authority to Substances Application: National Morphine (9300) ...... II exercise all necessary functions with Center for Natural Products Research Thebaine (9333) ...... II respect to the promulgation and (NIDA MPROJECT) Oxymorphone (9652) ...... II implementation of 21 CFR part 1301, Noroxymorphone (9668) ...... II incident to the registration of ACTION: Notice of application. Alfentanil (9737) ...... II manufacturers, distributors, dispensers, Remifentanil (9739) ...... II importers, and exporters of controlled DATES: Registered bulk manufacturers of Sufentanil (9740) ...... II substances (other than final orders in the affected basic classes, and Tapentadol (9780) ...... II connection with suspension, denial, or applicants therefore, may file written Fentanyl (9801) ...... II revocation of registration) has been comments on or objections to the redelegated to the Deputy Assistant issuance of the proposed registration in The company plans to manufacture Administrator of the DEA Office of accordance with 21 CFR 1301.33(a) on the listed controlled substances in bulk Diversion Control (‘‘Deputy Assistant or before February 16, 2016. for sale to its customers. Administrator’’) pursuant to section 7 of ADDRESSES: Written comments should In reference to drug codes 7360 28 CFR part 0, appendix to subpart R. be sent to: Drug Enforcement Administration, Attention: DEA Federal (marihuana) and 7370 (THC), the In accordance with 21 CFR Register Representative/ODW, 8701 company plans to bulk manufacture 1301.34(a), this is notice that on August Morrissette Drive, Springfield, Virginia these drugs as synthetic. No other 26, 2015, Fisher Clinical Services, Inc. 7554 Schantz Road, Allentown, 22152. Request for hearing should be activities for these drug codes are sent to: Drug Enforcement authorized for this registration. Pennsylvania 18106 applied to be registered as an importer of the Administration, Attention: Hearing Dated: December 9, 2015. following basic classes of controlled Clerk/LJ, 8701 Morrissette Drive, Louis J. Milione, substances: Springfield, Virginia 22152. Deputy Assistant Administrator. SUPPLEMENTARY INFORMATION: The Controlled substance Schedule [FR Doc. 2015–31665 Filed 12–16–15; 8:45 am] Attorney General has delegated her authority under the Controlled BILLING CODE 4410–09–P Methylphenidate (1724) ...... II Substances Act to the Administrator of Levorphanol (9220) ...... II the Drug Enforcement Administration Noroxymorphone (9668) ...... II Tapentadol (9780) ...... II (DEA), 28 CFR 0.100(b). Authority to exercise all necessary functions with
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respect to the promulgation and especially on the estimated public identify the number and locations of implementation of 21 CFR part 1301, burden or associated response time, public explosives storage facilities incident to the registration of suggestions, or need a copy of the (magazines), including those facilities manufacturers, distributors, dispensers, proposed information collection used by State and local law importers, and exporters of controlled instrument with instructions or enforcement. substances (other than final orders in additional information, please contact 5. An estimate of the total number of connection with suspension, denial, or Anita Scheddel, Program Analyst, respondents and the amount of time revocation of registration) has been Explosives Industry Programs Branch, estimated for an average respondent to redelegated to the Deputy Assistant 99 New York Ave. NE., Washington, DC respond: An estimated 1,000 Administrator of the DEA Office of 20226 at email: [email protected]. respondents will take 30 minutes to Diversion Control (‘‘Deputy Assistant SUPPLEMENTARY INFORMATION: Written complete the survey. Administrator’’) pursuant to section 7 of comments and suggestions from the 6. An estimate of the total public 28 CFR part 0, appendix to subpart R. public and affected agencies concerning burden (in hours) associated with the In accordance with 21 CFR the proposed collection of information collection: The estimated annual public 1301.33(a), this is notice that on October are encouraged. Your comments should burden associated with this collection is 27, 2015, National Center for Natural address one or more of the following 500 hours. Products Research (NIDA MPROJECT), four points: If additional information is required • University of Mississippi, 135 Coy Evaluate whether the proposed contact: Jerri Murray, Department Waller Complex, P.O. Box 1848, collection of information is necessary Clearance Officer, United States University, Mississippi 38677–1848 for the proper performance of the Department of Justice, Justice applied to be registered as a bulk functions of the agency, including Management Division, Policy and manufacturer of the following basic whether the information will have Planning Staff, Two Constitution classes controlled substances: practical utility; Square, 145 N Street NE., Room 3E– • Evaluate the accuracy of the 405B, Washington, DC 20530. Controlled substance Schedule agency’s estimate of the burden of the proposed collection of information, Dated: December 14, 2015. Marihuana (7360) ...... I Jerri Murray, Tetrahydrocannabinols (7370) ..... I including the validity of the methodology and assumptions used; Department Clearance Officer for PRA, U.S. • Department of Justice. The company plans to cultivate Evaluate whether and if so how the [FR Doc. 2015–31705 Filed 12–16–15; 8:45 am] marihuana in support of the National quality, utility, and clarity of the Institute on Drug Abuse for research information to be collected can be BILLING CODE 4410–FY–P approved by the Department of Health enhanced; and • Minimize the burden of the and Human Services. collection of information on those who DEPARTMENT OF JUSTICE Dated: December 9, 2015. are to respond, including through the [OMB Number 1121–NEW] Louis J. Milione, use of appropriate automated, Deputy Assistant Administrator. electronic, mechanical, or other Agency Information Collection [FR Doc. 2015–31669 Filed 12–16–15; 8:45 am] • Technological collection techniques Activities; Proposed eCollection BILLING CODE 4410–09–P or other forms of information eComments Requested; New technology, e.g., permitting electronic Collection: Body Worn Camera submission of responses. Supplement (BWCS) to the Law DEPARTMENT OF JUSTICE Overview of this information Enforcement Management and collection 1140–0092: [OMB Number 1140–0092] Administrative Statistics (LEMAS) 1. Type of Information Collection Survey Agency Information Collection (check justification or form 83): AGENCY: Bureau of Justice Statistics, Activities; Proposed eCollection Extension of a currently approved Department of Justice. eComments Requested; Voluntary collection. Magazine Questionnaire for Agencies/ 2. The Title of the Form/Collection: ACTION: 30-day notice. Entities Who Store Explosive Materials Voluntary Magazine Questionnaire for Agencies/Entities Who Store Explosive SUMMARY: The Department of Justice AGENCY: Bureau of Alcohol, Tobacco, Materials. (DOJ), Office of Justice Programs, Firearms and Explosives, Department of 3. The agency form number, if any, Bureau of Justice Statistics, will be Justice and the applicable component of the submitting the following information collection request to the Office of ACTION: 60-Day notice. Department sponsoring the collection: Form number (if applicable): Not Management and Budget (OMB) for SUMMARY: The Department of Justice Applicable. review and approval in accordance with (DOJ), Bureau of Alcohol, Tobacco, Component: Bureau of Alcohol, the Paperwork Reduction Act of 1995. Firearms and Explosives (ATF), will Tobacco, Firearms and Explosives, This proposed information collection submit the following information U.S. Department of Justice. was previously published in the Federal Register at 80 FR 52512, on August 31, collection request to the Office of 4. Affected public who will be asked 2015, allowing for a 60 day comment Management and Budget (OMB) for or required to respond, as well as a brief period. review and approval in accordance with abstract: the Paperwork Reduction Act of 1995. Primary: Agencies/Entities Who Store DATES: Comments are encouraged and DATES: Comments are encouraged and Explosive Materials. will be accepted for an additional 30 will be accepted for 60 days until Other (if applicable): None. days until January 19, 2016. February 16, 2016. Abstract: Primary: Agencies/Entities FOR FURTHER INFORMATION CONTACT: If FOR FURTHER INFORMATION CONTACT: If Who Store Explosive Materials. Other: you have additional comments you have additional comments None. The purpose of the form is to especially on the estimated public
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burden or associated response time, abstract: Respondents will be general DEPARTMENT OF LABOR suggestions, or need a copy of the purpose state and local law enforcement proposed information collection agencies (LEAs), including police Employment and Training instrument with instructions or departments, sheriff’s offices, and state Administration additional information, please contact law enforcement agencies. Abstract: please contact Alexia Cooper, Bureau of Since 1987, BJS has collected Comment Request for the Extension Justice Statistics, 810 Seventh Street information about the personnel, With No Revisions of the Information NW., Washington, DC 20531 (email: policies, and practices of law Collection for Petition and [email protected]; telephone: enforcement agencies via the Law Investigative Data Collection 202–307–0582). Written comments and/ Enforcement Management and Requirements for the Trade Act of or suggestions can also be directed to Administrative Statistics (LEMAS) 1974, as Amended (OMB Control the Office of Management and Budget, survey. This core survey, which has Number 1205–0342) Office of Information and Regulatory been administered every 4 to 6 years, AGENCY: Employment and Training Affairs, Attention Department of Justice has been used to produce nationally Administration (ETA), Department of Desk Officer, Washington, DC 20503 or representative estimates of the functions Labor. _ sent to OIRA submissions@ and responsibilities of law enforcement ACTION: Notice. omb.eop.gov. agencies and the staff serving in those SUMMARY: The Department of Labor SUPPLEMENTARY INFORMATION: Written organizations. In addition to core (Department), as part of its continuing comments and suggestions from the management and administrative effort to reduce paperwork and public and affected agencies concerning information, BJS will also begin using respondent burden, conducts a the proposed collection of information the LEMAS platform for topical preclearance consultation program to are encouraged. Your comments should supplemental surveys, fielded provide the public and Federal agencies address one or more of the following periodically, to collect data on key with an opportunity to comment on four points: issues in contemporary policing. The proposed and/or continuing collections —Evaluate whether the proposed body worn camera supplement (BWC) is of information in accordance with the collection of information is necessary the first of these topical supplements. Paperwork Reduction Act of 1995 [44 for the proper performance of the Specifically, the BWCS survey will U.S.C. 3506(c)(2)(A)]. This program functions of the Bureau of Justice focus on LEAs use of body-worn media helps ensure that requested data can be Statistics, including whether the and will ask agencies about their provided in the desired format, information will have practical utility; experiences with body-worn cameras, reporting burden (time and financial —Evaluate the accuracy of the agency’s factors that influence the choice to resources) is minimized, collection estimate of the burden of the acquire the technology, and instruments are clearly understood, and proposed collection of information, considerations that guide policies for the impact of collection requirements on including the validity of the the use of these technologies. This survey will build on the existing respondents can be properly assessed. methodology and assumptions used; Currently, the Employment and —Evaluate whether and if so how the LEMAS program and provide key information on an issue that is of Training Administration is soliciting quality, utility, and clarity of the comments concerning the proposed information to be collected can be particular interest to the law enforcement community and the extension, with no revisions, of data enhanced; and collections using the ETA 9042A, —Minimize the burden of the collection communities they serve. (5) An estimate of the total number of Petition for Trade Adjustment of information on those who are to Assistance (1205–0342), its Spanish respond, including through the use of respondents and the amount of time estimated for an average respondent to translation ETA 9042a (1205–0342), and appropriate automated, electronic, its On-Line version ETA 9042A–1 mechanical, or other technological respond: An agency-level survey will be sent to approximately 5,063 LEA (1205–0342); ETA 9043a, Business Data collection techniques or other forms Request—Article (1205–0342); ETA of information technology, e.g., respondents with the goal of obtaining 3,122 completed surveys. The expected 9043b, Business Data Request—Service permitting electronic submission of (1205–0342); ETA 8562a, Business responses. burden placed on these respondents is about 23 minutes per respondent. Customer Survey (1205–0342); ETA Overview of This Information 8562a, Business Customer Survey Collection (6) An estimate of the total public (1205–0342); ETA 85622a–1, Business burden (in hours) associated with the Second Tier Customer Survey (1205– (1) Type of Information Collection: collection: The total respondent burden 0342); ETA–8562b, Business Bid Survey New collection. is approximately 1,884 burden hours. (1205–0342); and ETA 9118, Business (2) The Title of the Form/Collection: If additional information is required Information Request (1205–0342). The Body Worn Camera Supplement contact: Jerri Murray, Department current expiration date is March 31, (BWCS) to the Law Enforcement Clearance Officer, United States 2016. Management and Administrative Department of Justice, Justice DATES: Written comments must be Statistics (LEMAS) Survey Management Division, Policy and submitted to the office listed in the (3) The agency form number, if any, Planning Staff, Two Constitution addresses section below on or before and the applicable component of the Square, 145 N Street NE., 3E.405B, February 16, 2016. Department sponsoring the collection: Washington, DC 20530. No agency form number at this time. ADDRESSES: Submit written comments The applicable component within the Dated: December 14, 2015. to Susan Worden, Office of Trade Department of Justice is the Bureau of Jerri Murray, Adjustment Assistance, Room N–5428, Justice Statistics, in the Office of Justice Department Clearance Officer for PRA, U.S. Employment and Training Programs. Department of Justice. Administration, U.S. Department of (4) Affected public who will be asked [FR Doc. 2015–31744 Filed 12–16–15; 8:45 am] Labor, 200 Constitution Avenue NW., or required to respond, as well as a brief BILLING CODE 4410–18–P Washington, DC 20210. Telephone
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number: 202–963–3560 (this is not a whether the information will have DEPARTMENT OF LABOR toll-free number). Individuals with practical utility; hearing or speech impairments may • evaluate the accuracy of the Employment and Training access the telephone number above via agency’s estimate of the burden of the Administration TTY by calling the toll-free Federal proposed collection of information, Comment Request for Information Information Relay Service at 1–877– including the validity of the 889–5627 (TTY/TDD). Fax: 202–693– Collection for Occupational Code methodology and assumptions used; Assignment (OMB 1205–0137), 3584. Email: [email protected]. A • copy of the proposed information enhance the quality, utility, and Extension With Revisions collection request (ICR) can be obtained clarity of the information to be collected; and AGENCY: Employment and Training by contacting the office listed above. Administration (ETA), Labor. • minimize the burden of the SUPPLEMENTARY INFORMATION: ACTION: Notice. collection of information on those who I. Background are to respond, including through the SUMMARY: The Department of Labor Section 221(a) of Title II, Chapter 2 of use of appropriate automated, (Department), as part of its continuing the Trade Act of 1974, as amended by electronic, mechanical, or other effort to reduce paperwork and the Trade Act of 2002, authorizes the technological collection techniques or respondent burden, conducts a Secretary of Labor and the Governor of other forms of information technology, preclearance consultation program to each state to accept petitions for e.g., permitting electronic submissions provide the public and Federal agencies certification of eligibility to apply for of responses. with an opportunity to comment on adjustment assistance. The petitions III. Current Actions proposed and/or continuing collections may be filed by a group of workers, their of information in accordance with the certified or recognized union or duly Type of Review: Extension with no Paperwork Reduction Act of 1995 [44 authorized representative, employers of revisions. U.S.C. 3506(c)(2)(A)]. This program such workers, one-stop operators or one- Title: Investigative Data Collections helps ensure that requested data can be stop partners. ETA Form 9042A, for the Trade Act of 1974, as amended. provided in the desired format, Petition for Trade Adjustment reporting burden (time and financial Assistance and Alternative Trade OMB Number: 1205–0342. resources) is minimized, collection Adjustment Assistance, its Spanish Affected Public: Individuals or instruments are clearly understood, and translation, ETA Form 9042A, Solicitud Households, Businesses, State, Local or the impact of collection requirements on De Asistencia Para Ajuste, and the On- Tribal Governments. respondents can be properly assessed. Line Petiton for Trade Adjustment Form(s): ETA 9042A, Petition for Currently, ETA is soliciting comments Assistance, ETA Form 9042A–1, Trade Adjustment Assistance (1205– concerning the collection of data using establish a format that may be used for 0342), its Spanish translation ETA the Occupational Code Assignment filing such petitions. 9042a (1205–0342), and its On-Line Form (ETA 741), which expires on May Sections 222, 223 and 249 of the version ETA 9042A–1 (1205–0342); ETA 31, 2016. A copy of the proposed Trade Act of 1974, as amended, require 9043a, Business Data Request—Article information collection request (ICR) can the Secretary of Labor to issue a (1205–0342); ETA 9043b, Business Data be obtained by contacting the office determination for groups of workers as Request—Service (1205–0342); ETA listed below in the addressee section of to their eligibility to apply for Trade 8562a, Business Customer Survey this notice or by accessing: http:// Adjustment Assistance (TAA). After (1205–0342); ETA 85622a–1, Business www.onetcenter.org/ombclearance.html. reviewing all of the information Second Tier Customer Survey (1205– DATES: Written comments must be obtained for each petition for Trade 0342); ETA–8562b, Business Bid Survey submitted to the office listed in the Adjustment Assistance filed with the (1205–0342); and ETA 9118, Business addresses section below, on or before Department, a determination is issued Information Request (1205–0342). February 16, 2016. as to whether the statutory criteria for ADDRESSES: Submit written comments Total Annual Respondents: 6,916. certification are met. The information to Alexander Nallin, Office of Workforce collected in ETA Form 9043a, Business Annual Frequency: Once. Investment, Employment and Training Data Request—Article, ETA Form Total Annual Responses: 85,675. Administration, Mail Stop C–4526, 9043b, Business Data Request—Service, Average Time per Response: 2.22 Employment and Training ETA Form 9118, Business Information Hours. Administration, U.S. Department of Request, ETA Form 8562a, Business Labor, 200 Constitution Avenue NW., Customer Survey, ETA form 85622a-1, Estimated Total Annual Burden Washington, DC 20210. Telephone Business Second Tier Customer Survey, Hours: 18,642. number: 202–693–3938. Individuals ETA form 8562b, Business Bid Survey, Total Annual Burden Cost for with hearing or speech impairments will be used by the Secretary to Respondents: $0. may access the telephone number above determine to what extent, if any, Comments submitted in response to via TTY by calling the toll-free Federal increased imports or shifts in either this comment request will be Information Relay Service at 1–877– service or production have impacted the summarized and/or included in the 889–5627 (TTY/TDD). Fax: 202–693– petitioning worker group. request for OMB approval of the ICR; 3015. Email: [email protected]. A copy of the proposed information II. Review Focus they will also become a matter of public record. collection request (ICR) can be obtained The Department is particularly by contacting the office listed above. interested in comments which: Portia Wu, SUPPLEMENTARY INFORMATION: • Evaluate whether the proposed Assistant Secretary for Employment and collection of information is necessary Training, Labor. I. Background for the proper performance of the [FR Doc. 2015–31656 Filed 12–16–15; 8:45 am] The Occupational Code Assignment functions of the agency, including BILLING CODE 4510–FN–P form (ETA 741) was developed as a
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public service to the users of the to remove two questions that were not whether the information will have Occupational Information Network needed and minor wording changes to practical utility; (O*NET), in an effort to help them in clarify existing questions. The OCA • evaluate the accuracy of the obtaining occupational codes and titles process is designed to help the agency’s estimate of the burden of the for jobs that they are unable to locate in occupational information user relate an proposed collection of information, O*NET. The O*NET system classifies occupational specialty or a job title to an including the validity of the nearly all jobs in the United States occupational code and title within the methodology and assumptions used; economy. However, new occupational framework of the Standard • enhance the quality, utility, and specialties are continually evolving and Occupational Classification (SOC) based clarity of the information to be emerging. The use of the OCA is O*NET system. The O*NET–SOC collected; and voluntary and is provided: (1) As a system consists of a database that • minimize the burden of the uniform format to the public and private organizes the work done by individuals collection of information on those who sector to submit information in order to into approximately 1,000 occupational are to respond, including through the receive assistance in identifying an categories. Additionally, O*NET use of appropriate automated, occupational code; (2) to assist the occupations have associated data on the electronic, mechanical, or other importance and level of a range of O*NET system in identifying potential technological collection techniques, or occupational characteristics and occupations that may need to be other forms of information technology, requirements, including knowledge, included in future O*NET data e.g., permitting electronic submissions skills, abilities, tasks and work of responses. collection efforts; and (3) to provide activities. Since the O*NET–SOC input to a database of alternative (lay) system is based on the SOC system, III. Current Actions titles to facilitate searches for identifying an O*NET–SOC code and Type of Review: extension with occupational information on the O*NET title also facilitates linkage to national, Web sites including O*NET OnLine changes. state, and local occupational Title: Occupational Code Assignment. (http://online.onetcenter.org), My Next employment and wage estimates. Move (www.MyNextMove.gov), My Next OMB Number: 1205–0137. Move for Veterans II. Review Focus Affected Public: Federal government, (www.MyNextMove.org/vets), O*NET The Department is particularly state, and local government, business or Code Connector interested in comments which: other for-profit/non-profit institutions, (www.onetcodeconnector.org), as well as • Evaluate whether the proposed and individuals. CareerOneStop collection of information is necessary Form(s): ETA–741. (www.careeronestop.org). Minor for the proper performance of the Total Annual Respondents: 14. changes were made to the previous form functions of the agency, including Annual Frequency: On occasion.
SUMMARY OF ANNUAL BURDEN FOR THE OCCUPATIONAL CODE ASSIGNMENT
Salary 3 Form Requests per Hours/re- Hours burden expenditure used year 1 quest 2 used (hours × hourly income)
OCA—Part A ...... 14 .5 7.0 $384.16 1 Estimate based on average for January 2013 through October 2015 2 Estimates on OCA form—Part A = 30 minutes 3 Salary based on Occupational Employment Statistics data for Human Resource Manager, median wage as of May 2014 = $54.88/hour
Total Burden Cost (capital/startup): 0. DEPARTMENT OF LABOR DATES: This notice is effective upon Total Burden Cost (operating/ publication in the Federal Register. Employment and Training maintaining): 0. FOR FURTHER INFORMATION CONTACT: Administration Donald Haughton, Office of Workforce Average Time per Response: 30 Investment, Employment and Training minutes for the OCA Part A; 40 minutes Guam Military Base Realignment Administration, U.S. Department of for the OCA Part A and OCA Request for Contractor Recruitment Standards— Labor, 200 Constitution Avenue NW., Additional Information combined. Revised Room C–4526, Washington, DC 20210. Estimated Total Burden Hours: 7.0. AGENCY: Employment and Training Telephone (202) 693–2784 (this is not a Comments submitted in response to Administration, Labor. toll-free number). Individuals with hearing or speech impairments may this comment request will be ACTION: Final notice. access the telephone number above via summarized and/or included in the SUMMARY: The U.S. Department of Labor TTY by calling the toll-free Federal request for OMB approval of the ICR; (Department), Employment and Information Relay Service at 1–877– they will also become a matter of public Training Administration (ETA), is 889–5627 (TTY/TDD), fax: (202) 693– record. issuing this notice to revise recruitment 3015, email: Haughton.donald.w@ Portia Wu, standards that construction contractors dol.gov . Assistant Secretary for Employment and are required to follow when recruiting SUPPLEMENTARY INFORMATION: Section Training, U.S. Department of Labor. United States (U.S.) workers for Guam 2834(a) of the NDAA for Fiscal Year [FR Doc. 2015–31710 Filed 12–16–15; 8:45 am] military base realignment projects 2010 (Pub. L. 111–84, enacted October authorized by the National Defense 28, 2009) amended Section 2824(c) of BILLING CODE 4510–FN–P Authorization Act (NDAA) for Fiscal the Military Construction Authorization Year 2010. Act (division B of Public Law 110–417;
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10 U.S.C. 2687 note) by adding a new through Friday (except holidays) 8 a.m. likely have to reside to perform the subsection (6). This provision prohibits to 5 p.m., at 710 Marine Corps Drive, services or labor; contractors engaged in construction Suite 301, Bell Tower Plaza, Hagatna c. A statement indicating whether or projects related to the realignment of (for assistance please call (671)–475– not the employer will pay for the U.S. military forces from Okinawa to 7000). worker’s transportation to Guam; Guam from hiring workers holding H– The job posting must be posted on the d. If the employer provides 2B visas under the Immigration and GDOL Job Bank for at least 21 transportation, include a statement that Nationality Act, 8 U.S.C. consecutive days; daily transportation to and from the 1101(a)(15)(H)(ii)(b), unless the b. Submit a job posting with the state worksite(s) will be provided by the Governor of Guam (Governor), in workforce agency’s Internet job boards, employer; consultation with the Secretary of Labor for the Commonwealth of the Northern e. A description of the job opportunity (Secretary), certifies that: Mariana Islands at https:// with sufficient information to apprise (1) There is an insufficient number of marianaslabor.net/employer.asp, and in U.S. workers of the services or labor to U.S. workers that are able, willing, the following states: be performed, including the duties, the qualified, and available to perform the i. Alaska (www.jobs.state.ak.us); minimum education and experience work; and ii. California (www.caljobs.ca.gov); requirements, the work hours and days, (2) the employment of workers iii. Hawaii (www.hirenethawaii.com); and the anticipated start and end dates holding H–2B visas will not have an iv. Oregon (www.emp.state.or.us/ of the job opportunity; adverse effect on either the wages or the jobs); and f. If the employer makes On-the-Job working conditions of workers in Guam. v. Washington (https:// Training (OJT) available, a statement In order to allow the Governor to fortress.wa.gov/esd/worksource/ that it will be provided to the worker; make this certification, NDAA requires Employment.aspx). g. If required by law, a statement that contractors to recruit workers in the c. Post a help wanted ad in the local overtime will be available to the worker U.S., including in Guam, the newspaper for American Samoa and and the wage offer for working any Commonwealth of the Northern Mariana have a notice posted in the American overtime hours; Islands, American Samoa, the U.S. Samoa Human Resources agency office. h. The wage offer, and the benefits, if Virgin Islands, and Puerto Rico, For assistance with these tasks, please any, offered; according to the terms of a recruitment see the American Samoa Human i. A statement that the position is plan developed and approved by the Resource agency contacts listed at temporary; Secretary. That recruitment plan is www.jobbankinfo.org. j. The total number of job openings reproduced in full in Section I below For contractors needing assistance the employer intends to fill; and (‘‘Contractor Recruitment Instructions’’). with job postings, additional contact k. If the employer provides the worker The Department developed the information and a link to the required with the option of board, lodging, or Contractor Recruitment Instructions in Guam form GES 514 are listed at other facilities, including fringe full consultation with, and with the www.jobbankinfo.org. benefits, or intends to assist workers to approval of, the Guam Department of Each job posting must be posted for at secure such lodging, a statement Labor (GDOL). Although the Department least 21 consecutive days. disclosing the provision and cost of the developed the recruitment standards, it d. Submit a job posting with an board, lodging, or other facilities, has assigned oversight of the Contractor Internet-based job bank that: including fringe benefits or assistance to Recruitment Standards and the NDAA- i. Is national in scope, including the be provided. required consultation with the Governor entire U.S., Guam, the Commonwealth 3. During the 28-day recruitment to GDOL through a Memorandum of of the Northern Mariana Islands, period, which begins on the earliest job Understanding between the Department American Samoa, the Virgin Islands, posting date, contractors must interview and GDOL, effective November 22, and the Commonwealth of Puerto Rico; all qualified and available Guam and 2011, (the MOU can be found on the ii. allows job postings for all U.S. construction workers who have www.reginfo.gov/public/do/PRAMain occupations; and applied for the employment Web site). iii. is free of charge for job seekers and opportunity. Under NDAA, no Guam base their intermediaries in American Job 4. After the close of the recruitment realignment construction project work Centers (also known as One-Stop Career period, and no later than 30 days before may be performed by a person holding Centers) and the U.S. workforce the start date of workers under a an H–2B visa under the Immigration investment system nationwide. contract, the contractor must provide a and Nationality Act until the contractor e. Where the occupation or industry is report including the following complies with the Department’s customarily unionized, contact the local information via email to GDOL at Contractor Recruitment Standards, and union in Guam in writing to seek U.S. [email protected], the Governor of Guam issues the workers who are qualified and who will documenting its efforts to recruit U.S. certification noted above. be available for the job opportunity. workers from the U.S. and all U.S. 2. Each job posting in (A)(1) through territories. I. Guam Military Base Realignment (5) must include, at a minimum, the a. Indicate all the recruitment Contractor Recruitment Instructions following information: approaches used to recruit workers, Guam military base realignment a. The contractor’s name and including an identification of the contractors must take the following appropriate contact information for Internet job banks where the postings actions to recruit U.S. workers. applicants to inquire about the job occurred, the occupation or trade, a 1. At least 60 days before the start opportunity, or to send applications description of wages and other terms date of workers under a base and/or resumes directly to the and conditions of employment, the realignment contract, contractors must: employer; dates of each posting, and the job order a. Submit a job posting via a b. The geographic area of or requisition number; completed Job Order (Guam Form GES employment, with enough specificity to b. A copy of each job posting; 514) in person at the Guam Employment apprise applicants of any travel c. How each job posting and response Service office, which is open Monday requirements and where applicants will was handled, including:
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i. The number of job applications Supporting Statement and Other ADDRESSES: Submit written comments received; Documents’’ near the top of the page on to Greg Wilson, Office of ii. the name of each applicant; the right. Apprenticeship, Room C–5317, iii. the position applied for; Employment and Training Portia Wu, iv. the final employment Administration, U.S. Department of determination for each applicant or job Assistant Secretary for Employment and Labor, 200 Constitution Avenue NW., Training. candidate; and Washington, DC 20210. Telephone v. for each U.S. job applicant not [FR Doc. 2015–31713 Filed 12–16–15; 8:45 am] number: 202–693–2954 (this is not a hired, a description of the specific, BILLING CODE 4510–FN–P toll-free number). Individuals with lawful, job-related reason for rejecting hearing or speech impairments may the applicant for employment, which DEPARTMENT OF LABOR access the telephone number above via includes a comparison of the job TTY by calling the toll-free Federal applicant’s skills and experience against Information Relay Service at 1–877– the terms listed in the original job Employment and Training Administration 889–5627 (TTY/TDD). Fax: 202–693– posting. 3799. Email: [email protected]. To Contractors may provide much of this Comment Request for Information obtain a free copy of this ICR with information in the form of a table or Collection for Equal Employment applicable supporting documentation; spreadsheet, so that instead of a Opportunity in Apprenticeship including a description of the likely narrative style the contractor need only Programs, Extension Without respondents, proposed frequency of check an appropriate box or provide a Revisions response, and estimated total burden, phrase, number or date (e.g., to indicate please contact the person listed above. whether an individual reported for an AGENCY: Employment and Training interview or not, or lacked specific Administration (ETA), Labor. SUPPLEMENTARY INFORMATION: qualifications). ACTION: Notice. I. Background II. Public Burden Statement SUMMARY: The Department of Labor The National Apprenticeship Act of The Office of Management and Budget (Department), as part of its continuing 1937 (Act), section 50 (29 U.S.C. 50), (OMB) has approved the Department’s effort to reduce paperwork and authorizes and directs the Secretary of request to extend the information respondent burden, conducts a Labor (Secretary) ‘‘to formulate and collection (OMB Control Number 1205– preclearance consultation program to promote the furtherance of labor 0484) for three years, expiring October provide the public and Federal agencies standards necessary to safeguard the 31, 2018. with an opportunity to comment on welfare of apprentices, to extend the Persons are not required to respond to proposed and/or continuing collections application of such standards by this collection of information unless it of information in accordance with the encouraging the inclusion thereof in displays a valid OMB control number Paperwork Reduction Act of 1995 [44 contracts of apprenticeship, to bring (1205–0484). The public reporting U.S.C. 3506(c)(2)(A)] (PRA). The PRA together employers and labor for the burden for this collection of information helps ensure that respondents can formulation of programs of is estimated at three hours per job order, provide requested data in the desired apprenticeship, to cooperate with state including the time for reviewing format with minimal reporting burden agencies engaged in the formulation and instructions, searching existing data (time and financial resources), promotion of standards of sources, gathering and maintaining the collection instruments are clearly apprenticeship, and to cooperate with data needed, and completing and understood and the impact of collection the Secretary of Education in reviewing the collection of information. requirements on respondents can be accordance with Section 17 of Title 20.’’ Further information on this ICR can be properly assessed. Section 50a of the Act authorizes the accessed using control number 1205– Currently, ETA is soliciting comments Secretary to ‘‘publish information 0484 at www.reginfo.gov/public/do/ concerning the information collection relating to existing and proposed labor PRAMain. To do this, use the following request (ICR) to collect data about title standards of apprenticeship,’’ and to instructions: 29 CFR 30, Equal Employment ‘‘appoint national advisory committees 1. Go to the first ‘‘Select Agency’’ box Opportunity in Apprenticeship * * *’’ (29. U.S.C. 50a). and click on the drop-down arrow, and Programs, Complaint Form—Equal Title 29 CFR part 30 sets forth policies then select ‘‘Department of Labor.’’ Employment Opportunity in Then, click on the ‘‘Submit’’ button to and procedures to promote the equality Apprenticeship Programs, ETA—9030, of opportunity in apprenticeship the right of the box. which expires on May 31, 2016. 2. Each entry lists the OMB Control programs registered with the Interested parties are encouraged to Number at the top of the entry. Scroll Department and recognized State provide comments to the contact shown down the screen until 1205–0484 Apprenticeship Agencies. These in the ADDRESSES section. Comments appears (the entries are in numerical policies and procedures apply to must be written to receive order). recruitment and selection of consideration, and they will be 3. Once you reach 1205–0484, click apprentices, and to all conditions of summarized and included in the request on the number immediately below that, employment and training during for OMB approval of the final ICR. In the ICR Reference Number (not the apprenticeship. The procedures provide order to help ensure appropriate Control Number itself). for registering apprenticeship programs, 4. To see the Information Collection consideration, comments should for reviewing apprenticeship programs, notices themselves, click on ‘‘View mention OMB Control Number 1205– for processing complaints, and for Information Collection (IC) List’’ near 0224. deregistering non-complying the top of the page on the left. To see DATES: Written comments must be apprenticeship programs. This part also the Report to Congress, the MOU, the submitted to the office listed in the provides policies and procedures for ICR Supporting Statement and other addresses section below on or before continuation or withdrawal of relevant documents, click on ‘‘View February 16, 2016. recognition of state agencies which
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registered apprenticeship programs for D Total Estimated Annual Other Cost Instructions: All submissions must Federal purposes. Burden: $0.00. include the Agency name and the OSHA The Complaint Form—Equal We will summarize and/or include in docket number (OSHA–2012–0031) for Employment Opportunity in the request for OMB approval of the this Information Collection Request Apprenticeship Programs, ETA Form ICR, the comments received in response (ICR). All comments, including any 9039, is used by applicants and/or to this comment request; they will also personal information you provide, are apprentices to file a complaint of become a matter of public record. placed in the public docket without discrimination with the Department. Portia Wu, change, and may be made available Since this form expires on May 31, online at http://www.regulations.gov. Assistant Secretary for Employment and 2016, ETA is seeking an extension of Training, Labor. For further information on submitting this form without revisions. comments see the ‘‘Public [FR Doc. 2015–31712 Filed 12–16–15; 8:45 am] Participation’’ heading in the section of II. Review Focus BILLING CODE 4510–FR–P this notice titled SUPPLEMENTARY The Department is particularly INFORMATION. interested in comments which: DEPARTMENT OF LABOR Docket: To read or download • Evaluate whether the proposed comments or other material in the collection of information is necessary Occupational Safety and Health docket, go to http://www.regulations.gov for the proper performance of the Administration or the OSHA Docket Office at the functions of the agency, including address above. All documents in the [Docket No. OSHA–2012–0031] whether the information will have docket (including this Federal Register practical utility; The Standard on 4, 4′— notice) are listed in the http:// • Evaluate the accuracy of the Methylenedianiline (MDA) in www.regulations.gov index; however, agency’s estimate of the burden of the Construction; Extension of the Office some information (e.g., copyrighted proposed collection of information, of Management and Budget’s (OMB) material) is not publicly available to including the validity of the Approval of Information Collection read or download from the Web site. All methodology and assumptions used; submissions, including copyrighted • (Paperwork) Requirements Enhance the quality, utility, and material, are available for inspection clarity of the information to be AGENCY: Occupational Safety and Health and copying at the OSHA Docket Office. collected; and Administration (OSHA), Labor. You may also contact Theda Kenney at • Minimize the burden of the ACTION: Request for public comments. the address below to obtain a copy of collection of information on those who the ICR. are to respond, including through the SUMMARY: OSHA solicits public FOR FURTHER INFORMATION CONTACT: use of appropriate automated, comments concerning its proposal to Theda Kenney or Todd Owen, electronic, mechanical, or other extend the Office of Management and Directorate of Standards and Guidance, technological collection techniques or Budget’s (OMB) approval of the OSHA, U.S. Department of Labor, Room other forms of information technology, information collection requirements N–3609, 200 Constitution Avenue NW., e.g., permitting electronic submissions specified in the Standard on 4,4’— Washington, DC 20210; telephone (202) of responses. Methylenedianiline (MDA) in Construction (29 CFR 1926.60). 693–2222. III. Current Actions DATES: Comments must be submitted SUPPLEMENTARY INFORMATION: D Agency: DOL–ETA. (postmarked, sent, or received) by I. Background D Type of Review: Extension without February 16, 2016. The Department of Labor, as part of its changes of currently approved ADDRESSES: collection. Electronically: You may submit continuing effort to reduce paperwork D Title of Collection: Title 29 CFR part comments and attachments and respondent (i.e., employer) burden, 30, Equal Employment Opportunity in electronically at http:// conducts a preclearance consultation Apprenticeship Programs. www.regulations.gov, which is the program to provide the public with an D Form: Complaint Form—Equal Federal eRulemaking Portal. Follow the opportunity to comment on proposed Employment Opportunity in instructions online for submitting and continuing information collection Apprenticeship Programs, ETA Form comments. requirements in accord with the 9039. Facsimile: If your comments, Paperwork Reduction Act of 1995 D OMB Control Number: 1205–0224. including attachments, are not longer (PRA)(44 U.S.C. 3506(c)(2)(A)). This D Affected Public: Applicants, than 10 pages you may fax them to the program ensures that information is in Apprentices, Sponsors, State OSHA Docket Office at (202) 693–1648. the desired format, reporting burden Apprenticeship Agencies, and Tribal Mail, hand delivery, express mail, (time and costs) is minimal, collection Governments. messenger, or courier service: When instruments are clearly understood, and D Estimated Number of Respondents: using this method, you must submit a OSHA’s estimate of the information 19,277 (19,200 program sponsors + 27 copy of your comments and attachments collection burden is accurate. The State Apprenticeship Agencies + 50 to the OSHA Docket Office, Docket No. Occupational Safety and Health Act of Applicants/Apprentices). OSHA–2012–0031, Occupational Safety 1970 (the OSH Act) (29 U.S.C. 651 et D Frequency: 1-time basis. and Health Administration, U.S. seq.) authorizes information collection D Total Estimated Annual Responses: Department of Labor, Room N–2625, by employers as necessary or 34,490. 200 Constitution Avenue NW., appropriate for enforcement of the OSH D Estimated Average Time per Washington, DC 20210. Deliveries Act or for developing information Response: 30 minutes for applicants/ (hand, express mail, messenger, and regarding the causes and prevention of apprentices to complete and submit the courier service) are accepted during the occupational injuries, illnesses, and complaint form. Department of Labor’s and Docket accidents (29 U.S.C. 657). The OSH Act D Estimated Total Annual Burden Office’s normal business hours, 8:15 also requires that OSHA obtain such Hours: 3,219 hours. a.m. to 4:45 p.m., e.t. information with minimum burden
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upon employers, especially those who is subject to these requirements, IV. Public Participation—Submission of operating small businesses, and to make any required record available to Comments on This Notice and Internet reduce to the maximum extent feasible OSHA compliance officers and the Access to Comments and Submissions unnecessary duplication of efforts in National Institute for Occupational obtaining information (29 U.S.C. 657). Safety and Health (NIOSH) for You may submit comments in The information collection examination and copying, and provide response to this document as follows: requirements specified in the 4′,4′— exposure-monitoring and medical- (1) Electronically at http:// Methylenedianiline Standard for surveillance records to workers and www.regulations.gov, which is the Construction (the ‘‘MDA Standard’’) (29 their designated representatives. Federal eRulemaking Portal; (2) by CFR 1926.60) protect employees from facsimile (fax); or (3) by hard copy. All the adverse health effects that may II. Special Issues for Comment comments, attachments, and other material must identify the Agency name result from their exposure to MDA, OSHA has a particular interest in and the OSHA docket number (Docket including cancer, liver and skin disease. comments on the following issues: The major paperwork requirements • No. OSHA–2012–0031) for the ICR. You Whether the proposed information may supplement electronic submissions specify that employers must perform collection requirements are necessary initial, periodic, and additional by uploading document files for the proper performance of the electronically. If you wish to mail exposure monitoring; notify each Agency’s functions, including whether worker in writing of their results as soon additional materials in reference to an the information is useful; electronic or facsimile submission, you as possible but no longer than 5 days • after receiving exposure monitoring The accuracy of OSHA’s estimate of must submit them to the OSHA Docket results; and routinely inspect the hands, the burden (time and costs) of the Office (see the section of this notice face, and forearms of each worker information collection requirements, titled ADDRESSES). The additional potentially exposed to MDA for signs of including the validity of the materials must clearly identify your dermal exposure to MDA. Employers methodology and assumptions used; electronic comments by your name, must also: establish a written • The quality, utility, and clarity of date, and the docket number so the compliance program; institute a the information collected; and Agency can attach them to your respiratory protection program in accord • Ways to minimize the burden on comments. with 29 CFR 1910.134 (OSHA’s employers who must comply; for Because of security procedures, the Respiratory Protection Standard); and example, by using automated or other use of regular mail may cause a develop a written emergency plan for technological information collection significant delay in the receipt of any construction operation that could and transmission techniques. comments. For information about have an MDA emergency (i.e., an III. Proposed Actions security procedures concerning the unexpected and potentially hazardous delivery of materials by hand, express release of MDA). The Agency is requesting an delivery, messenger, or courier service, Employers must label any material or adjustment decrease of 43 burden hours please contact the OSHA Docket Office products containing MDA, including to 986 burden hours. The decrease is a at (202) 693–2350, (TTY (877) 889– containers used to store MDA- result of removing burden hours for 5627). contaminated protective clothing and training because the Agency, upon Comments and submissions are equipment. They also must inform further consideration, does not believe posted without change at http:// personnel who launder MDA- that training is covered by the PRA. www.regulations.gov. Therefore, OSHA contaminated clothing of the The Agency will summarize the cautions commenters about submitting requirement to prevent release of MDA, comments submitted in response to this personal information such as social and personnel who launder or clean notice and will include this summary in security numbers and date of birth. MDA-contaminated protective clothing the request to OMB to extend the Although all submissions are listed in or equipment must receive information approval of the information collection the http://www.regulations.gov index, about the potentially harmful effects of requirements contained in the MDA some information (e.g., copyrighted MDA. In addition, employers must post Standard. material) is not publicly available to warning signs at entrances or access ways to regulated areas, as well as train Type of Review: Extension of a read or download from this Web site. workers exposed to MDA at the time of currently approved collection. All submissions, including ′ their initial assignment, and at least Title: 4, 4 —Methylenedialine in copyrighted material, are available for annually thereafter. Construction Standard (29 CFR inspection and copying at the OSHA Other paperwork provisions of the 1926.60). Docket Office. Information on using the MDA Standard require employers to OMB Control Number: 1218–0183. http://www.regulations.gov Web site to provide workers with medical Affected Public: Business or other for- submit comments and access the docket examinations, including initial, profits; Not-for-profit organizations; is available at the Web site’s ‘‘User periodic, emergency and follow-up Federal Government; State, Local, or Tips’’ link. Contact the OSHA Docket examinations. As part of the medical- Tribal Government. Office for information about materials surveillance program, employers must Frequency: On occasion. not available from the Web site, and for assistance in using the Internet to locate ensure that the examining physician Average Time per Response: Varies docket submissions. receives specific written information, from 5 minutes (.08 hour) for employers and that they obtain from the physician to provide information to the physician V. Authority and Signature a written opinion regarding the worker’s to 2 hours for initial monitoring. medical results and exposure David Michaels, Ph.D., MPH, Estimated Total Burden Hours: 986. limitations. Assistant Secretary of Labor for The MDA Standard also specifies that Number of Respondents: 2,469. Occupational Safety and Health, employers are to establish and maintain Total Number of Responses: 2,558. directed the preparation of this notice. exposure-monitoring and medical- Estimated Cost (Operation and The authority for this notice is the surveillance records for each worker Maintenance): $0. Paperwork Reduction Act of 1995 (44
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U.S.C. 3506 et seq.) and Secretary of docket number (OSHA–2012–0034) for operating small businesses, and to Labor’s Order No. 1–2012 (77 FR 3912). the Information Collection Request reduce to the maximum extent feasible Signed at Washington, DC, on December (ICR). All comments, including any unnecessary duplication of efforts in 14, 2015. personal information you provide, are obtaining information (29 U.S.C. 657). David Michaels, placed in the public docket without The collections of information in the Assistant Secretary of Labor for Occupational change, and may be made available Hexavalent Chromium (Cr(VI)) Safety and Health. online at http://www.regulations.gov. Standards for General Industry (29 CFR [FR Doc. 2015–31753 Filed 12–16–15; 8:45 am] For further information on submitting 1910.1026), Shipyard Employment (29 BILLING CODE 4510–26–P comments see the ‘‘Public CFR 1915.1026), and Construction (29 Participation’’ heading in the section of CFR 1926.1126) (the ‘‘Standards’’) this notice titled SUPPLEMENTARY protect workers from the adverse health DEPARTMENT OF LABOR INFORMATION. effects that may result from Docket: To read or download occupational exposure to hexavalent Occupational Safety and Health comments or other material in the chromium. The major collections of Administration docket, go to http://www.regulations.gov information in these Standards include [Docket No. OSHA–2012–0034] or the OSHA Docket Office at the conducting worker exposure address above. All documents in the monitoring, notifying workers of their Hexavalent Chromium Standards; docket (including this Federal Register chromium exposures, implementing Extension of the Office of Management notice) are listed in the http:// medical surveillance of workers, and Budget’s (OMB) Approval of www.regulations.gov index; however, providing examining physicians with Information Collection (Paperwork) some information (e.g., copyrighted specific information, implementing a Requirements material) is not publicly available to respiratory protection program, read or download from the Web site. All notifying laundry personnel of AGENCY: Occupational Safety and Health submissions, including copyrighted chromium hazards and maintaining Administration (OSHA), Labor. material, are available for inspection workers’ exposure monitoring and ACTION: Request for public comments. and copying at the OSHA Docket Office. medical surveillance records for specific You may also contact Theda Kenney at SUMMARY: OSHA solicits public periods. the address below to obtain a copy of comments concerning its proposal to II. Special Issues for Comment extend the Office of Management and the ICR. Budget’s (OMB) approval of the FOR FURTHER INFORMATION CONTACT: OSHA has a particular interest in information collection requirements Theda Kenney or Todd Owen, comments on the following issues: • contained in the Hexavalent Chromium Directorate of Standards and Guidance, Whether the proposed collection of Standards for General Industry (29 CFR OSHA, U.S. Department of Labor, Room information requirements are necessary 1910.1026), Shipyard Employment (29 N–3609, 200 Constitution Avenue NW., for the proper performance of the CFR 1915.1026), and Construction (29 Washington, DC 20210; telephone (202) Agency’s functions, including whether CFR 1926.1126). 693–2222. the information is useful; • DATES: Comments must be submitted SUPPLEMENTARY INFORMATION: The accuracy of OSHA’s estimate of the burden (time and costs) of the (postmarked, sent, or received) by I. Background February 16, 2016. collection of information requirements, including the validity of the ADDRESSES: The Department of Labor, as part of its Electronically: You may submit continuing effort to reduce paperwork methodology and assumptions used; • comments and attachments and respondent (i.e., employer) burden, The quality, utility, and clarity of electronically at http:// conducts a preclearance consultation the information collected; and • www.regulations.gov, which is the program to provide the public with an Ways to minimize the burden on Federal eRulemaking Portal. Follow the opportunity to comment on proposed employers who must comply; for instructions online for submitting and continuing collection of example, by using automated or other comments. information requirements in accord technological information collection Facsimile: If your comments, with the Paperwork Reduction Act of and transmission techniques. 1995 (PRA–95) (44 U.S.C. including attachments, are not longer III. Proposed Actions than 10 pages you may fax them to the 3506(c)(2)(A)). This program ensures OSHA Docket Office at (202) 693–1648. that information is in the desired The Agency is requesting an Mail, hand delivery, express mail, format, reporting burden (time and adjustment decrease of 47,615 burden messenger, or courier service: When costs) is minimal, collection hours (from 541,582 to 493,967 burden using this method, you must submit instruments are clearly understood, and hours). The decrease in burden hours is your comments and attachments to the OSHA’s estimate of the information due to an estimated decrease of exposed OSHA Docket Office, Docket No. collection burden is accurate. The workers and a reduction in the number OSHA–2012–0034, Occupational Safety Occupational Safety and Health Act of of plants in specific industry sectors. and Health Administration, U.S. 1970 (the OSH Act) (29 U.S.C. 651 et There is also an estimated increase in Department of Labor, Room N–2625, seq.) authorizes information collection operation and maintenance costs of 200 Constitution Avenue NW., by employers as necessary or $123,015, from $46,589,912 to Washington, DC 20210. Deliveries appropriate for enforcement of the OSH $46,712,927. The increase in operation (hand, express mail, messenger, and Act or for developing information and maintenance costs is due to the courier service) are accepted during the regarding the causes and prevention of increase in exposure monitoring air Department of Labor’s and Docket occupational injuries, illnesses, and sampling costs, medical exam and Office’s normal business hours, 8:15 accidents (29 U.S.C. 657). The OSH Act testing costs, and costs of materials for a.m. to 4:45 p.m., e.t. also requires that OSHA obtain such qualitative fit testing. Instructions: All submissions must information with minimum burden Type of Review: Extension of a include the Agency name and the OSHA upon employers, especially those currently approved collection.
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Title: Hexavalent Chromium (Cr(VI)) read or download from this Web site. NUCLEAR REGULATORY Standards for General Industry (29 CFR All submissions, including copyrighted COMMISSION 1910.1026), Shipyard Employment (29 material, are available for inspection [Docket No. 50–271; NRC–2015–0111] CFR 1915.1026), and Construction (29 and copying at the OSHA Docket Office. CFR 1926.1126). Information on using the http:// Entergy Nuclear Operations, Inc.; OMB Control Number: 1218–0252. www.regulations.gov Web site to submit Affected Public: Businesses or other Vermont Yankee Nuclear Power comments and access the docket is Station for-profits. available at the Web site’s ‘‘User Tips’’ Number of Respondents: 75,684. link. Contact the OSHA Docket Office AGENCY: Nuclear Regulatory Frequency of Response: On occasion; Commission. Quarterly; Semi-annually; Annually. for information about materials not Total Responses: 994,834. available from the Web site, and for ACTION: Exemption; issuance. assistance in using the Internet to locate Average Time per Response: Time per SUMMARY: The U.S. Nuclear Regulatory docket submissions. response ranges from 5 minutes (.08 Commission (NRC) is granting hour) to provide a copy of a written V. Authority and Signature exemptions in response to a request medical opinion to a worker to 4 hours from Entergy Nuclear Operations, Inc. for a worker to receive a comprehensive David Michaels, Ph.D., MPH, (ENO or the licensee) regarding certain medical examination. Assistant Secretary of Labor for emergency planning (EP) requirements. Estimated Total Burden Hours: Occupational Safety and Health, The exemptions will eliminate the 493,967. directed the preparation of this notice. requirements to maintain formal offsite Estimated Cost (Operation and The authority for this notice is the radiological emergency plans and Maintenance): $46,712,927. Paperwork Reduction Act of 1995 (44 reduce the scope of the onsite EP IV. Public Participation—Submission of U.S.C. 3506 et seq.) and Secretary of activities at the Vermont Yankee Comments on this Notice and Internet Labor’s Order No. 1–2012 (77 FR 3912). Nuclear Power Station (VY), based on Access to Comments and Submissions the reduced risks of accidents that could Signed at Washington, DC, on December You may submit comments in 14, 2015. result in an offsite radiological release at the decommissioning nuclear power response to this document as follows: David Michaels, (1) Electronically at http:// reactor. Provisions would still exist for Assistant Secretary of Labor for Occupational offsite agencies to take protective www.regulations.gov, which is the Safety and Health. Federal eRulemaking Portal; (2) by actions, using a comprehensive facsimile; or (3) by hard copy. All [FR Doc. 2015–31752 Filed 12–16–15; 8:45 am] emergency management plan (CEMP) to comments, attachments, and other BILLING CODE 4510–26–P protect public health and safety, if material must identify the Agency name protective actions were needed in the and the OSHA docket number (Docket event of a very unlikely accident that No. OSHA–2012–0034) for this ICR. You could challenge the safe storage of spent may supplement electronic submissions NATIONAL CREDIT UNION fuel. by uploading document files ADMINISTRATION ADDRESSES: Please refer to Docket ID electronically. If you wish to mail NRC–2015–0111 when contacting the Sunshine Act Meeting additional materials in reference to an NRC about the availability of electronic or facsimile submission, you information regarding this document. Matter to be added to the agenda of must submit them to the OSHA Docket You may obtain publicly-available an agency meeting. Federal Register Office (see the section of this notice information related to this document citation of previous announcement: titled ADDRESSES). The additional using any of the following methods: materials must clearly identify your December 14, 2015 (80 FR 77379) • Federal Rulemaking Web site: Go to electronic comments by your name, TIME AND DATE: 11:00 a.m., Thursday, http://www.regulations.gov and search date, and the docket number so the December 17, 2015. for Docket ID NRC–2015–0111. Address Agency can attach them to your questions about NRC dockets to Carol comments. PLACE: Board Room, 7th Floor, Room Gallagher; telephone: 301–415–3463; Because of security procedures, the 7047, 1775 Duke Street, Alexandria, VA email: [email protected]. For use of regular mail may cause a 22314–3428. technical questions, contact the individual listed in the FOR FURTHER significant delay in the receipt of STATUS: Closed. comments. For information about INFORMATION CONTACT section of this security procedures concerning the ADDITIONAL MATTER TO BE CONSIDERED: document. • delivery of materials by hand, express 3. Briefing on Supervisory Matter. NRC’s Agencywide Documents delivery, messenger, or courier service, Closed pursuant to Exemptions (8), Access and Management System please contact the OSHA Docket Office (9)(i)(B) and (9)(ii). (ADAMS): You may obtain publicly- at (202) 693–2350, (TTY (877) 889– available documents online in the 5627). FOR FURTHER INFORMATION CONTACT: ADAMS Public Documents collection at Comments and submissions are Gerard Poliquin, Secretary of the Board, http://www.nrc.gov/reading-rm/ posted without change at http:// Telephone: 703–518–6304 adams.html. To begin the search, select www.regulations.gov. Therefore, OSHA ‘‘ADAMS Public Documents’’ and then Gerard Poliquin, cautions commenters about submitting select ‘‘Begin Web-based ADAMS personal information such as their Secretary of the Board. Search.’’ For problems with ADAMS, social security number and date of birth. [FR Doc. 2015–31871 Filed 12–15–15; 4:15 pm] please contact the NRC’s Public Although all submissions are listed in BILLING CODE 7535–01–P Document Room (PDR) reference staff at the http://www.regulations.gov index, 1–800–397–4209, 301–415–4737, or by some information (e.g., copyrighted email to [email protected]. The material) is not publicly available to ADAMS accession number for each
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document referenced (if that document operations at VY and the permanent reactors; from certain requirements in is available in ADAMS) is provided the removal of the fuel from the reactor 10 CFR 50.47(c)(2) that require first time that a document is referenced. vessel, such accidents are no longer establishment of plume exposure and • NRC’s PDR: You may examine and possible. The reactor, RCS, steam ingestion pathway emergency planning purchase copies of public documents at system, turbine generator, and zones for nuclear power reactors; and the NRC’s PDR, Room O1–F21, One supporting systems are no longer in from certain requirements in 10 CFR White Flint North, 11555 Rockville operation and have no function related part 50, appendix E, section IV, which Pike, Rockville, Maryland 20852. to the storage of the spent fuel. establish the elements that make up the FOR FURTHER INFORMATION CONTACT: Therefore, EP provisions for postulated content of emergency plans. In letters James Kim, Office of Nuclear Reactor accidents involving failure or dated August 29, 2014 and October 21, Regulation, U.S. Nuclear Regulatory malfunction of the reactor, RCS, steam 2014 (ADAMS Accession Nos. Commission, Washington DC 20555– system, turbine generator, or supporting ML14246A176, and ML14297A159, 0001; telephone: 301–415–4125; email: systems are no longer applicable. respectively), ENO provided responses [email protected]. Since VY is permanently shutdown to the NRC staff’s requests for additional and defueled, the only design basis SUPPLEMENTARY INFORMATION: information concerning the proposed accident that could potentially result in exemptions. I. Background an offsite radiological release at VY is The information provided by ENO the fuel handling accident (FHA). The VY facility is a decommissioning included justifications for each Analysis performed by ENO showed power reactor located in the town of exemption requested. The exemptions that 17 days after shutdown, the Vernon, Windham County, Vermont. requested by ENO would eliminate the radiological consequence of the FHA The licensee, ENO, is the holder of requirements to maintain formal offsite would not exceed the limits established Renewed Facility Operating License No. radiological emergency plans, reviewed by the U.S. Environmental Protection DPR–28 for VY. The license provides, by the Federal Emergency Management Agency’s (EPA’s) Protective Action among other things, that the facility is Agency (FEMA) under the requirements Guidelines (PAGs) at the exclusion area subject to all rules, regulations, and of 44 CFR part 350, and reduce the boundary. Based on the time that VY scope of onsite EP activities. The orders of the NRC now or hereafter in has been permanently shutdown licensee stated that the application of all effect. (approximately 11 months), there is no of the standards and requirements in 10 By letter dated January 12, 2015 longer any possibility of an offsite (ADAMS Accession No. ML15013A426), radiological release from a design basis CFR 50.47(b), 10 CFR 50.47(c), and 10 ENO submitted, to the NRC, a accident that could exceed the EPA CFR part 50, appendix E is not needed certification in accordance with sections PAGs. for adequate emergency response 50.82(a)(1)(i) and 50.82(a)(1)(ii) of title The EP requirements of 10 CFR 50.47, capability, based on the substantially 10 of the Code of Federal Regulations ‘‘Emergency plans,’’ and appendix E to lower onsite and offsite radiological (10 CFR), indicating that it had 10 CFR part 50, ‘‘Emergency Planning consequences of accidents still possible permanently ceased power operations at and Preparedness for Production and at the permanently shutdown and VY and had permanently defueled the Utilization Facilities,’’ continue to apply defueled facility, as compared to an VY reactor vessel, respectively. The to nuclear power reactors that have operating facility. If offsite protective licensee has not operated the VY plant permanently ceased operation and have actions were needed for a very unlikely since December 29, 2014. As a removed all fuel from the reactor vessel. accident that could challenge the safe permanently shutdown and defueled There are no explicit regulatory storage of spent fuel at VY, provisions facility, and pursuant to 10 CFR provisions distinguishing EP exist for offsite agencies to take 50.82(a)(2), ENO is no longer authorized requirements for a power reactor that is protective actions using a CEMP under to operate the VY reactor or emplace permanently shut down and defueled the National Preparedness System to fuel into the VY reactor vessel, but is from those for a reactor that is protect the health and safety of the still authorized to possess and store authorized to operate. To reduce or public. A CEMP in this context, also irradiated nuclear fuel at the site. eliminate EP requirements that are no referred to as an emergency operations Irradiated fuel is currently stored onsite longer necessary due to the plan (EOP), is addressed in FEMA’s at VY in a spent fuel pool (SFP) and in decommissioning status of the facility, Comprehensive Preparedness Guide an independent spent fuel storage ENO must obtain exemptions from those 101, ‘‘Developing and Maintaining installation. EP regulations. Only then can ENO Emergency Operations Plans.’’ During normal power reactor modify the VY emergency plan to reflect Comprehensive Preparedness Guide 101 operations, the forced flow of water the reduced risk associated with the is the foundation for State, territorial, through the reactor coolant system permanently shutdown and defueled Tribal, and local EP in the United (RCS) removes heat generated by the condition of VY. States. It promotes a common reactor by generating steam. The steam understanding of the fundamentals of system, operating at high temperatures II. Request/Action risk-informed planning and decision- and pressures, transfers this heat to the By letter dated March 14, 2014 making and helps planners at all levels main turbine generator to produce (ADAMS Accession No. ML14080A141), of government in their efforts to develop electricity. Many of the accident ‘‘Request for Exemptions from Portions and maintain viable, all-hazards, all- scenarios postulated in the updated of 10 CFR 50.47 and 10 CFR part 50, threats emergency plans. An EOP is safety analysis reports for operating appendix E,’’ ENO requested flexible enough for use in all power reactors involve failures or exemptions from certain EP emergencies. It describes how people malfunctions of systems, which could requirements of 10 CFR part 50 for VY. and property will be protected; details affect the fuel in the reactor core, which More specifically, ENO requested who is responsible for carrying out in the most severe postulated accidents, exemptions from certain planning specific actions; identifies the would involve the release of large standards in 10 CFR 50.47(b) regarding personnel, equipment, facilities, quantities of fission products. With the onsite and offsite radiological supplies and other resources available; permanent cessation of reactor emergency plans for nuclear power and outlines how all actions will be
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coordinated. A CEMP is often referred to shutdown and defueled power reactors. Based on precedent exemptions, the as a synonym for ‘‘all-hazards However, the exemptions did not site-specific analysis should show that planning.’’ relieve the licensees of all EP there is sufficient time following a loss requirements. Rather, the exemptions of SFP coolant inventory until the onset III. Discussion allowed the licensees to modify their of fuel damage to implement onsite In accordance with 10 CFR 50.12, emergency plans commensurate with mitigation of the loss of SFP coolant ‘‘Specific exemptions,’’ the Commission the credible site-specific risks that were inventory and if necessary, to may, upon application by any interested consistent with a permanently implement offsite protective actions. To person or upon its own initiative, grant shutdown and defueled status. meet this criterion, the staff accepted, in exemptions from the requirements of 10 Specifically, for previous permanently precedent exemptions, that the time CFR part 50 when: (1) The exemptions shutdown and defueled power reactors, should exceed 10 hours from the loss of are authorized by law, will not present the basis for the NRC staff’s approval of coolant until the fuel temperature an undue risk to public health or safety, the exemptions from certain EP reaches 900 degrees Celsius (°C), and are consistent with the common requirements was based on the assuming no air cooling. defense and security; and (2) any of the licensee’s demonstration that: (1) The The NRC staff reviewed the licensee’s special circumstances listed in 10 CFR radiological consequences of design- justification for the requested 50.12(a)(2) are present. These special basis accidents would not exceed the exemptions against the criteria in 10 circumstances include, among other limits of the U.S. Environmental CFR 50.12(a) and determined, as things, that the application of the Protection Agency’s (EPA) PAGs at the described below, that the criteria in 10 regulation in the particular exclusion area boundary, and (2) in the CFR 50.12(a) are met, and that the circumstances would not serve the unlikely event of a beyond-design-basis exemptions should be granted. An underlying purpose of the rule or is not accident resulting in a loss of all modes assessment of the ENO EP exemptions is necessary to achieve the underlying of heat transfer from the fuel stored in described in SECY–14–0125, ‘‘Request purpose of the rule. the SFP, there is sufficient time to As noted previously, the current EP by Entergy Nuclear Operations, Inc. for initiate appropriate mitigating actions, regulations contained in 10 CFR Exemptions from Certain Emergency and if needed, for offsite authorities to 50.47(b) and appendix E to 10 CFR part Planning Requirements,’’ dated implement offsite protective actions 50 apply to both operating and November 14, 2014 (ADAMS Accession using a CEMP approach to protect the shutdown power reactors. The NRC has No. ML14227A711). The Commission health and safety of the public. consistently acknowledged that the risk approved the NRC staff’s of an offsite radiological release at a With respect to design-basis accidents recommendation to grant the power reactor that has permanently at VY, the licensee provided analysis exemptions in the staff requirements ceased operations and removed fuel demonstrating that 17 days following memorandum to SECY–14–0125, dated from the reactor vessel is significantly permanent shutdown, the radiological March 2, 2015 (ADAMS Accession No. lower, and the types of possible consequences of the only remaining ML15061A516). Descriptions of the accidents are significantly fewer, than at design-basis accident with potential for specific exemptions requested by ENO an operating power reactor. However, offsite radiological release (the FHA) and the NRC staff’s basis for granting current EP regulations do not recognize will not exceed the limits of the EPA each exemption are provided in SECY– that once a power reactor permanently PAGs at the exclusion area boundary. 14–0125 and summarized in a table at ceases operation, the risk of a large Therefore, because VY has been the end of this document. The staff’s radiological release from a credible permanently shutdown for detailed review and technical basis for emergency accident scenario is reduced. approximately 11 months, there is no the approval of the specific EP The reduced risk is largely the result of longer any design-basis accident that exemptions, requested by ENO, are the low frequency of credible events would warrant an offsite radiological provided in the NRC staff’s safety that could challenge the SFP structure, emergency plan meeting the evaluation, which is enclosed in an NRC and the reduced decay heat and reduced requirements of 10 CFR Part 50. letter dated December 10, 2015 (ADAMS short-lived radionuclide inventory due With respect to beyond design-basis Accession No. ML15180A054). to decay. The NRC’s NUREG/CR–6451, accidents at VY, the licensee analyzed a A. Authorized by Law ‘‘A Safety and Regulatory Assessment of drain down of the spent fuel pool water Generic BWR [Boiling Water Reactor] that would effectively impede any decay The licensee has proposed and PWR [Pressurized Water Reactor] heat removal. The analysis demonstrates exemptions from certain EP Permanently Shutdown Nuclear Power that at 15.4 months after shutdown, requirements in 10 CFR 50.47(b), 10 Plants,’’ dated August 31, 1997 (ADAMS there would be at least 10 hours after CFR 50.47(c)(2), and 10 CFR part 50, Accession No. ML082260098) and the assemblies have been uncovered appendix E, section IV, which would NUREG–1738, ‘‘Technical Study of until the limiting fuel assembly (for allow ENO to revise the VY Emergency Spent Fuel Pool Accident Risk at decay heat and adiabatic heatup Plan to reflect the permanently Decommissioning Nuclear Power analysis) reaches 900 degrees Celsius, shutdown and defueled condition of the Plants,’’ dated February 28, 2001 the temperature used to assess the station. As stated above, in accordance (ADAMS Accession No. ML010430066), potential onset of fission product with 10 CFR 50.12, the Commission confirmed that for permanently release. The analysis conservatively may, upon application by any interested shutdown and defueled power reactors assumed the heat up time starts when person or upon its own initiative, grant that are bounded by the assumptions the spent fuel pool has been completely exemptions from the requirements of 10 and conditions in the reports, the risk of drained, although it is likely that site CFR part 50. The NRC staff has offsite radiological release is personnel will start to respond to an determined that granting of the significantly less than that for an incident when drain down starts. The licensee’s proposed exemptions will not operating power reactor. analysis also does not consider the result in a violation of the Atomic In the past, EP exemptions similar to period of time from the initiating event Energy Act of 1954, as amended, or the those requested by ENO, have been causing loss of SFP water inventory NRC’s regulations. Therefore, the granted to licensees of permanently until cooling is lost. exemptions are authorized by law.
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B. No Undue Risk to Public Health and exemptions. The discontinuation of inventory, based on an adiabatic heatup Safety formal offsite radiological emergency analysis of the limiting fuel assembly for ENO provided analyses that show the plans and the reduction in scope of the decay heat, shows that within 15.4 radiological consequences of design- onsite EP activities at VY will not months after shutdown, the time for the basis accidents will not exceed the adversely affect ENO’s ability to limiting fuel assembly to reach 900 limits of the EPA PAGs at the exclusion physically secure the site or protect degrees Celsius is 10 hours after the area boundary. Therefore, formal offsite special nuclear material. Therefore, the assemblies have been uncovered. The only analyzed beyond-design- radiological emergency plans required proposed exemptions are consistent with the common defense and security. basis accident scenario that progresses under 10 CFR part 50 are no longer to a condition where a significant offsite needed for protection of the public D. Special Circumstances release might occur, involves the very beyond the exclusion area boundary, Special circumstances, in accordance unlikely event where the SFP drains in based on the radiological consequences with 10 CFR 50.12(a)(2)(ii), are present such a way that all modes of cooling or of design-basis accidents that are still whenever application of the regulation heat transfer are assumed to be possible at VY. in the particular circumstances is not unavailable, which is postulated to Although very unlikely, there is one necessary to achieve the underlying result in an adiabatic heatup of the postulated beyond-design-basis accident purpose of the rule. The underlying spent fuel. The licensee’s analysis of that might result in significant offsite purposes of 10 CFR 50.47(b), 10 CFR this beyond-design-basis accident shows radiological releases. However, NUREG– 50.47(c)(2), and 10 CFR part 50, that within 15.4 months after shutdown, 1738 confirms that the risk of beyond- appendix E, section IV, are to provide more than 10 hours would be available design-basis accidents is greatly reduced reasonable assurance that adequate between the time the fuel is initially at permanently shutdown and defueled protective measures can and will be uncovered (at which time adiabatic reactors. The NRC staff’s analyses in taken in the event of a radiological heatup is conservatively assumed to NUREG–1738 conclude that the event emergency, to establish plume exposure begin), until the fuel cladding reaches a sequences important to risk, at and ingestion pathway emergency temperature of 1652 degrees Fahrenheit permanently shutdown and defueled planning zones for nuclear power (900 degrees C), which is the power reactors, are limited to large plants, and to ensure that licensees temperature associated with rapid earthquakes and cask drop events. For maintain effective offsite and onsite cladding oxidation and the potential for EP assessments, this is an important radiological emergency plans. The a significant radiological release. This difference relative to operating power standards and requirements in these analysis conservatively does not include reactors, where typically a large number regulations were developed by the period of time from the initiating of different sequences make significant considering the risks associated with the event causing a loss of SFP water contributions to risk. Per NUREG–1738, operation of a power reactor at its inventory until all cooling means are relaxation of offsite EP requirements, licensed full-power level. These risks lost. under 10 CFR part 50, a few months include the potential for a reactor The NRC staff has verified ENO’s after shutdown resulted in only a small accident with offsite radiological dose analyses and its calculations. The change in risk. The report further consequences. analyses provide reasonable assurance concludes that the change in risk, due As discussed previously in Section III that in granting the requested to relaxation of offsite EP requirements, of this document, because VY is exemptions to ENO, there is no design- is small because the overall risk is low, permanently shutdown and defueled, basis accident that will result in an and because even under current EP there is no longer a risk of offsite offsite radiological release exceeding the requirements for operating power radiological release from a design-basis EPA PAGs at the exclusion area reactors, EP was judged to have accident; and the risk of a significant boundary. In the unlikely event of a marginal impact on evacuation offsite radiological release from a beyond-design-basis accident affecting effectiveness in the severe earthquakes beyond-design-basis accident is greatly the SFP that results in a complete loss that dominate SFP risk. All other reduced, when compared to the risk at of heat removal via all modes of heat sequences including cask drops (for an operating power reactor. The NRC transfer, there will be well over 10 hours which offsite radiological emergency staff has confirmed the reduced risks at available before an offsite release might plans are expected to be more effective) VY, by comparing the generic risk occur and, therefore, at least 10 hours to are too low in likelihood to have a assumptions in the analyses in NUREG– initiate appropriate mitigating actions to significant impact on risk. 1738 to site-specific conditions at VY; restore a means of heat removal to the Therefore, granting exemptions to and has determined that the risk values spent fuel. If a radiological release were eliminate the requirements of 10 CFR in NUREG–1738 bound the risks projected to occur under this unlikely part 50 to maintain offsite radiological presented by VY. As indicated by the scenario, a minimum of 10 hours is emergency plans and to reduce the results of the research conducted for considered sufficient time for offsite scope of onsite EP activities will not NUREG–1738 and more recently, for authorities to implement protective present an undue risk to the public NUREG–2161, ‘‘Consequence Study of a actions using a CEMP approach to health and safety. Beyond-Design-Basis Earthquake protect the health and safety of the Affecting the Spent Fuel Pool for a U.S. public. C. Consistent With the Common Defense Mark I Boiling Water Reactor’’ (ADAMS Exemptions from the offsite EP and Security Accession No. ML14255A365), while requirements in 10 CFR part 50 have The requested exemptions by ENO other consequences can be extensive, previously been approved by the NRC only involve EP requirements under 10 accidents from SFPs with significant when the site-specific analyses show CFR part 50 and will allow ENO to decay time have little potential to cause that at least 10 hours are available revise the VY Emergency Plan to reflect offsite early fatalities, even if the formal following a loss of SFP coolant the permanently shutdown and offsite radiological EP requirements inventory accident with no air cooling defueled condition of the facility. were relaxed. The licensee’s analysis of (or other methods of removing decay Physical security measures at VY are not a beyond-design-basis accident heat) until cladding of the hottest fuel affected by the requested EP involving a complete loss of SFP water assembly reaches the zirconium rapid
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oxidation temperature. The NRC staff low probability of beyond-design-basis granting of this exemption will not have concluded in its previously granted accidents affecting the SFP, these a significant effect on the quality of the exemptions, as it does with the ENO- diverse strategies provide defense-in- human environment, as discussed in the requested EP exemptions, that if a depth and time to provide additional NRC staff’s Environmental Assessment minimum of 10 hours are available to makeup or spray water to the SFP before and Finding of No Significant Impact, initiate mitigative actions consistent the onset of any postulated offsite which was published on August 10, with plant conditions, or if needed, for radiological release. 2015 (80 FR 47960). offsite authorities to implement For all the reasons stated above, the protective actions using a CEMP NRC staff concludes that application of IV. Conclusions approach, then formal offsite certain requirements in 10 CFR 50.47(b), Accordingly, the Commission has radiological emergency plans, required 10 CFR 50.47(c)(2), and 10 CFR part 50, determined, pursuant to 10 CFR under 10 CFR part 50, are not necessary appendix E, as summarized in the table at permanently shutdown and defueled at the end of this document, is not 50.12(a), that ENO’s request for power reactors. necessary to achieve the underlying exemptions from certain EP Additionally, in its letter to the NRC purpose of these regulations and, requirements in 10 CFR 50.47(b), 10 dated March 14, 2014, ENO described therefore, satisfies the special CFR 50.47(c)(2), and 10 CFR part 50, the SFP makeup strategies that could be circumstances in 10 CFR 50.12(a)(2)(ii). appendix E, section IV, and as used in the event of a catastrophic loss The staff further concludes that the summarized in the table at the end of of SFP inventory. The multiple exemptions granted by this action will this document, are authorized by law, strategies for providing makeup water to maintain an acceptable level of will not present an undue risk to the the SFP include: Using existing plant emergency preparedness at VY and public health and safety, and are systems for inventory makeup; an provide reasonable assurance that consistent with the common defense internal strategy that relies on installed adequate offsite protective measures, if and security. Also, special fire water pumps (one motor-driven and needed, can and will be taken by State circumstances are present. Therefore, one diesel-driven) and service water; or and local government agencies using a the Commission hereby grants ENO an external strategy that uses an engine- CEMP approach, in the unlikely event of exemptions from certain EP driven emergency makeup pump to a radiological emergency at the VY requirements of 10 CFR 50.47(b), 10 provide makeup to the SFP from the facility. Since the underlying purposes CFR 50.47(c)(2), and 10 CFR part 50, Cooling Tower No. 2 deep basin. ENO of the rules, as exempted, would appendix E, section IV, as discussed and further provides that designated on-shift continue to be achieved, even with the evaluated, in detail, in the staff’s safety staff is trained to implement such elimination of the requirements under evaluation dated December 10, 2015. strategies and they have plans in place 10 CFR part 50 to maintain formal The exemptions are effective as of April to mitigate the consequences of an event offsite radiological emergency plans and 15, 2016. involving a catastrophic loss-of-water the reduction in the scope of the onsite inventory concurrently from the VY Dated at Rockville, Maryland, this 10th day EP activities at VY, the special of December, 2015. SFP. ENO will maintain its License circumstances required by 10 CFR Condition 3.N, ‘‘Mitigation Strategy 50.12(a)(2)(ii) exist. For the Nuclear Regulatory Commission. License Condition,’’ for VY. This license George A. Wilson, E. Environmental Considerations condition requires VY to maintain its Deputy Director, Division of Operating SFP inventory makeup strategies as In accordance with 10 CFR 51.31(a), Reactor Licensing, Office of Nuclear Reactor discussed above. Considering the very the Commission has determined that the Regulation.
TABLE OF EXEMPTIONS GRANTED TO ENTERGY NUCLEAR OPERATIONS, INC.
NRC staff basis for exemption
10 CFR 50.47 10 CFR 50.47(b). The U.S. Nuclear Regulatory Commission (NRC) is In the Statement of Considerations (SOC) for the final rule for emer- granting exemption from portions of the rule language that would oth- gency planning (EP) requirements for independent spent fuel storage erwise require offsite emergency response plans. installations (ISFSIs) and for monitor retrievable storage (MRS) facili- ties (60 FR 32430; June 22, 1995), the Commission responded to comments concerning offsite EP for ISFSIs or an MRS and con- cluded that, ‘‘the offsite consequences of potential accidents at an ISFSI or an MRS would not warrant establishing Emergency Plan- ning Zones.’’
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TABLE OF EXEMPTIONS GRANTED TO ENTERGY NUCLEAR OPERATIONS, INC.—Continued
NRC staff basis for exemption
In a nuclear power reactor’s permanently defueled state, the accident risks are more similar to an ISFSI or an MRS than an operating nu- clear power plant. The EP program would be similar to that required for an ISFSI under section 72.32(a) of Title 10 of the Code of Fed- eral Regulations (10 CFR) when fuel stored in the spent fuel pool (SFP) has more than 5 years of decay time and would not change substantially when all the fuel is transferred from the SFP to an on- site ISFSI. Exemptions from offsite EP requirements have previously been approved when the site-specific analyses show that at least 10 hours are available from a partial drain-down event where cooling of the spent fuel is not effective until the hottest fuel assembly reaches the zirconium ignition temperature of 900 degrees Celsius (°C). The technical basis that underlies the approval of the exemption request is based partly on the analysis of a time period in which spent fuel stored in the SFP is unlikely to reach the zirconium ignition tempera- ture in less than 10 hours. This time period is based on a heatup calculation, which uses several simplifying assumptions. Some of these assumptions are conservative (adiabatic conditions), while oth- ers are non-conservative (no oxidation below 900 °C). Weighing the conservatisms and non-conservatisms, the NRC staff judges that this calculation reasonably represents conditions that may occur in the event of an SFP accident. The NRC staff concluded that if 10 hours were available to initiate miti- gative actions, or if needed, offsite protective actions using a com- prehensive emergency management plan (CEMP), formal offsite ra- diological emergency plans are not necessary for these permanently defueled nuclear power reactor licensees. As supported by the licensee’s SFP analysis, the NRC staff believes an exemption from the requirements for formal offsite radiological emergency plans is justified for a zirconium fire scenario, considering the low likelihood of this event together with time available to take mitigative or protective actions between the initiating event and be- fore the onset of a postulated fire. The Entergy Nuclear Operations, Inc. (ENO or the licensee) analysis has demonstrated that 17 days after shutdown the radiological con- sequences of design-basis-accidents (DBAs) will not exceed the lim- its of the U.S. Environmental Protection Agency’s (EPA’s) Protective Action Guides (PAGs) at the exclusion area boundary. This analysis also shows that 15.4 months after shutdown for an unlikely event of a beyond-DBA where the hottest fuel assembly adiabatic heatup oc- curs, 10 hours are available to take mitigative or, if needed, offsite protective actions, using a CEMP from the time the fuel is uncovered until it reaches the auto-ignition temperature of 900 °C. ENO furnished information concerning its SFP inventory makeup strat- egies. Several sources of makeup to the pool are available, such as the service water (SW) system, which has redundant pumping capa- bility and power supplies to ensure alternative fuel pool makeup function. The SW system runs continuously, thus allowing for con- stant monitoring. Additionally, there are electric-driven and diesel- driven fire pumps that can supply makeup water to the SFP via the SW system or the fire water system. All sources discussed above take suction from the Connecticut River. The Vermont Yankee Nu- clear Power Station (VY) also has an engine-driven emergency makeup pump capable of taking suction from the Cooling Tower No. 2 deep basin to provide an alternate source of makeup water to the SFP. ENO further provides that designated on-shift staff is trained to imple- ment such strategies and they have plans in place to mitigate the consequences of an event involving a catastrophic loss-of-water in- ventory concurrently from the VY SFP. ENO will maintain its License Condition 3.N, ‘‘Mitigation Strategy License Condition,’’ for VY. This license condition requires VY to maintain its SFP inventory makeup strategies as discussed above. 10 CFR 50.47(b)(1). The NRC is granting exemption from portions of Refer to basis for 10 CFR 50.47(b). the rule language that would otherwise require the need for Emer- gency Planning Zones (EPZs).
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TABLE OF EXEMPTIONS GRANTED TO ENTERGY NUCLEAR OPERATIONS, INC.—Continued
NRC staff basis for exemption
10 CFR 50.47(b)(3). The NRC is granting exemption from portions of Decommissioning power reactors present a low likelihood of any cred- the rule language that would otherwise require the need for an emer- ible accident resulting in a radiological release together with the time gency operations facility (EOF). available to take mitigative or, if needed, offsite protective actions using a CEMP between the initiating event and before the onset of a postulated fire. As such, an EOF would not be required. The ‘‘nu- clear island,’’ control room, or other onsite location can provide for the communication and coordination with offsite organizations for the level of support required. Also refer to basis for 10 CFR 50.47(b). 10 CFR 50.47(b)(4). The NRC is granting exemption from portions of Decommissioning power reactors present a low likelihood of any cred- the rule language that would otherwise require reference to formal ible accident resulting in a radiological release together with the time offsite radiological emergency response plans. available to take mitigative or, if needed, offsite protective actions using a CEMP between the initiating event and before the onset of a postulated fire. As such, formal offsite radiological emergency re- sponse plans are not required. The Nuclear Energy Institute (NEI) document NEI 99–01, ‘‘Develop- ment of Emergency Action Levels for Non-Passive Reactors’’ (Revi- sion 6), was found to be an acceptable method for development of emergency action levels (EALs) and was endorsed by the NRC in a letter dated March 28, 2013 (ADAMS Accession No. ML12346A463). NEI 99–01 provides EALs for non-passive operating nuclear power reactors, permanently defueled reactors and ISFSIs. The ENO requested a license amendment to revise its EAL scheme to NEI 99–01, Revision 6 in a letter dated June 12, 2014, ‘‘Vermont Yankee Permanently Defueled Emergency Plan and Emergency Ac- tion Level Scheme’’ (ADAMS Accession No. ML14168A302). Also refer to basis for 10 CFR 50.47(b). 10 CFR 50.47(b)(5). The NRC is granting exemption from portions of Refer to basis for 10 CFR 50.47(b). the rule language that would otherwise require early notification of the public and a means to provide instructions to the public within the plume exposure pathway EPZ. 10 CFR 50.47(b)(6). The NRC is granting exemption from portions of Refer to basis for 10 CFR 50.47(b). the rule language that would otherwise require prompt communica- tions with the public. 10 CFR 50.47(b)(7). The NRC is granting exemption from portions of Refer to basis for 10 CFR 50.47(b). the rule language that would otherwise require information to be made available to the public on a periodic basis about how they will be notified and what their initial protective actions should be. 10 CFR 50.47(b)(9). The NRC is granting exemption from portions of Refer to basis for 10 CFR 50.47(b). the rule language that would otherwise require the capability for monitoring offsite consequences. 10 CFR 50.47(b)(10). The NRC is granting exemption from portions of In the unlikely event of a SFP accident, the iodine isotopes, which con- the rule language that would reduce the range of protective actions tribute to an offsite dose from an operating reactor accident, are not developed for emergency workers and the public. Consideration of present, so potassium iodide distribution would no longer serve as evacuation, sheltering, or the use of potassium iodide will no longer an effective or necessary supplemental protective action. be necessary. Evacuation time estimates (ETEs) will no longer need In the SOC for the final rule for EP requirements for ISFSIs and for to be developed or updated. Protective actions for the ingestion ex- MRS facilities (60 FR 32430), the Commission responded to com- posure pathway EPZ will not need to be developed. ments concerning site-specific EP that includes evacuation of sur- rounding population for an ISFSI not at a reactor site, and con- cluded, ‘‘The Commission does not agree that as a general matter emergency plans for an ISFSI must include evacuation planning.’’ The Commission also concluded that, ‘‘the offsite consequences of po- tential accidents at an ISFSI or an MRS would not warrant estab- lishing Emergency Planning Zones.’’ (60 FR 32435). Also refer to basis for 10 CFR 50.47(b). 10 CFR 50.47(c)(2). The NRC is granting exemption from portions of Refer to basis for 10 CFR 50.47(b)(10). the rule language that would otherwise require the establishment of a 10-mile radius plume exposure pathway EPZ and a 50-mile radius ingestion pathway EPZ.
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TABLE OF EXEMPTIONS GRANTED TO ENTERGY NUCLEAR OPERATIONS, INC.—Continued
NRC staff basis for exemption
10 CFR Part 50, Appendix E, Section IV 10 CFR part 50, appendix E, section IV.1. The NRC is granting exemp- The EP rule published in the Federal Register (76 FR 72560; Novem- tion from portions of the rule language that would otherwise require ber 23, 2011) amended certain requirements in 10 CFR part 50. onsite protective actions during hostile action. Among the changes, the definition of ‘‘hostile action’’ was added as an act directed toward a nuclear power plant or its personnel. This definition is based on the definition of ‘‘hostile action’’ provided in NRC Bulletin 2005–02, ‘‘Emergency Preparedness and Response Actions for Security-Based Events,’’ dated July 18, 2005 (ADAMS Accession No. ML051740058). NRC Bulletin 2005–02 is not applica- ble to nuclear power reactors that have permanently ceased oper- ations and have certified that fuel has been removed from the reac- tor vessel. ENO certified that it had permanently ceased operations at VY and that all fuel had been removed from the reactor vessel. Therefore, the enhancements for hostile actions required by the 2011 EP Final Rule are not necessary for VY in its permanently shutdown and defueled status. Additionally, the NRC excluded non-power reactors from the definition of ‘‘hostile action’’ at the time of the 2011 rulemaking because, as defined in 10 CFR 50.2, a non-power reactor is not considered a nu- clear power reactor and a regulatory basis had not been developed to support the inclusion of non-power reactors in the definition of ‘‘hostile action.’’ Similarly, a decommissioning power reactor or ISFSI is not a ‘‘nuclear reactor,’’ as defined in the NRC’s regulations. Like a non-power reactor, a decommissioning power reactor also has a lower likelihood of a credible accident resulting in radiological re- leases requiring offsite protective measures, than does an operating reactor. Although this analysis provides a justification for exempting VY from ‘‘hostile action’’ related requirements, some EP requirements for se- curity-based events are maintained. The classification of security- based events, notification of offsite authorities and coordination with offsite agencies under a CEMP concept are still required. 10 CFR part 50, appendix E, section IV.2. The NRC is granting exemp- Refer to basis for 10 CFR 50.47(b)(10). tion from portions of the rule language concerning the evacuation time analyses within the plume exposure pathway EPZ for the licens- ee’s initial application. 10 CFR part 50, appendix E, section IV.3. The NRC is granting exemp- Refer to basis for 10 CFR part 50, appendix E, section IV.2. tion from portions of the rule language that would otherwise require use of NRC-approved ETEs and updates to State and local govern- ments when developing protective action strategies. 10 CFR part 50, appendix E, section IV.4. The NRC is granting exemp- Refer to basis for 10 CFR part 50, appendix E, section IV.2. tion from portions of the rule language that would otherwise require licensees to update ETEs based on the most recent census data and submit the ETE analysis to the NRC prior to providing it to State and local governments for developing protective action strategies. 10 CFR part 50, appendix E, section IV.5. The NRC is granting exemp- Refer to basis for 10 CFR part 50, appendix E, section IV.2. tion from portions of the rule language that would otherwise require licensees to estimate the EPZ permanent resident population changes once a year between decennial censuses. 10 CFR part 50, appendix E, section IV.6. The NRC is granting exemp- Refer to basis for 10 CFR part 50, appendix E, section IV.2. tion from portions of the rule language that would otherwise require the licensee to submit an updated ETE analysis to the NRC based on changes in the resident population that result in exceeding spe- cific evacuation time increase criteria. 10 CFR part 50, appendix E, section IV.A.1. The NRC is granting ex- Based on the permanently shutdown and defueled status of the VY re- emption from the word ‘‘operating’’ in the requirement to describe the actor, a decommissioning reactor is not authorized to operate under normal plant organization. 10 CFR 50.82(a). Because the licensee cannot operate the reactor, the licensee does not have a ‘‘plant operating organization.’’ 10 CFR part 50, appendix E, section IV.A.3. The NRC is granting ex- The number of staff at decommissioning sites is generally small but is emption from the requirement to describe the licensee’s head- commensurate with the need to safely store spent fuel at the facility, quarters personnel sent to the site to augment the onsite emergency in a manner that is protective of public health and safety. Decommis- response organization. sioning sites typically have a level of emergency response that does not require response by the licensee’s headquarters personnel.
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TABLE OF EXEMPTIONS GRANTED TO ENTERGY NUCLEAR OPERATIONS, INC.—Continued
NRC staff basis for exemption
10 CFR part 50, appendix E, section IV.A.4. The NRC is granting ex- Although the likelihood of events that would result in doses in excess emption from portions of the rule language that would otherwise re- of the EPA PAGs to the public beyond the exclusion area boundary quire the licensee to identify a position and function within its organi- is extremely low based on the permanently shutdown and defueled zation, which will carry the responsibility for making offsite dose pro- status of the reactor, the licensee is still required to determine if a ra- jections. diological release is occurring. If a release is occurring, then the li- censee staff should promptly communicate that information to offsite authorities for their consideration. The offsite organizations are re- sponsible for deciding what, if any, protective actions should be taken based on a CEMP. Also refer to basis for 10 CFR 50.47(b). 10 CFR part 50, appendix E, section IV.A.5. The NRC is granting ex- VY has performed an on-shift staffing analysis, addressing SFP miti- emption from the requirement for the licensee to identify individuals gating strategies, including review of collateral duties. The specific with special qualifications, both licensee employees and non-employ- event scenario utilized for the staffing analysis involves a cata- ees, for coping with emergencies. strophic loss-of-water inventory in the SFP. Also refer to basis for 10 CFR 50.47(b). 10 CFR part 50, appendix E, section IV.A.7. The NRC is granting ex- Refer to basis for 10 CFR part 50, appendix E, section IV.1. emption from portions of the rule language that would otherwise re- quire a description of the assistance expected from State, local, and Federal agencies for coping with a hostile action. 10 CFR part 50, appendix E, section IV.A.8. The NRC is granting ex- Offsite emergency measures are limited to support provided by local emption from the requirement to identify the State and local officials police, fire departments, and ambulance and hospital services, as for ordering protective actions and evacuations. appropriate. Due to the low probability of DBAs or other credible events to exceed the EPA PAGs, protective actions such as evacu- ation should not be required, but could be implemented at the discre- tion of offsite authorities using a CEMP. Also refer to basis for 10 CFR 50.47(b)(10). 10 CFR part 50, appendix E, section IV.A.9. The NRC is granting ex- The duties of the on-shift personnel at a decommissioning reactor facil- emption from the requirement for the licensee to provide an analysis ity are not as complicated and diverse as those for an operating demonstrating that on-shift personnel are not assigned responsibil- power reactor. Responsibilities should be well defined in the emer- ities that would prevent performance of their assigned emergency gency plan and procedures, regularly tested through drills and exer- plan functions. cises audited and inspected by the licensee and the NRC. The NRC staff considered the similarity between the staffing levels at a permanently shutdown and defueled reactor and staffing levels at an operating power reactor site. The minimal systems and equipment needed to maintain the spent nuclear fuel in the SFP or in a dry cask storage system in a safe condition require minimal personnel and is governed by Technical Specifications. In the EP final rule pub- lished in the Federal Register (76 FR 72560; November 23, 2011), the NRC concluded that the staffing analysis requirement was not necessary for non-power reactor licensees due to the small staffing levels required to operate the facility. The NRC staff also examined the actions required to mitigate the very low probability of beyond-design-basis events for the SFP. In a letter dated April 24, 2014, ‘‘Technical Specification Proposed Changes No. 309, Defueled Technical Specifications and Revised License Conditions for Permanently Defueled Condition—Supplement 1’’ (ADAMS Accession No. ML14119A101), ENO withdrew the pro- posed changes to the Mitigating Strategies License Condition 3.N. This license condition requires VY to maintain its SFP inventory makeup strategies as discussed above. VY has performed an on-shift staffing analysis, addressing SFP miti- gating strategies, including review of collateral duties. The specific event scenario utilized for the staffing analysis involves a cata- strophic loss-of-water inventory in the SFP. Also refer to basis for 10 CFR part 50, appendix E, section IV.1. 10 CFR part 50, appendix E, section IV.B.1. The NRC is granting ex- NEI 99–01 was found to be an acceptable method for the development emption from portions of the rule language that would otherwise re- of EALs. No offsite protective actions are anticipated to be nec- quire offsite EALs and offsite protective measures and associate off- essary, so classification above the alert level is no longer required, site monitoring for the emergency conditions. which is consistent with ISFSI facilities. In addition, the NRC is granting exemption from portions of the rule As discussed previously, ENO requested a license amendment to re- language that would otherwise require EALs based on hostile action. vise its EAL scheme to NEI 99–01, Revision 6, in a letter dated June 12, 2014, ‘‘Vermont Yankee Permanently Defueled Emergency Plan and Emergency Action Level Scheme’’ (ADAMS Accession No. ML14168A302). Before ENO can amend its EAL scheme to reflect the risk commensurate with power reactor that has been perma- nently shut down and defueled, ENO needs an exemption from the requirement for the site area emergency and general emergency classifications. Also refer to basis for 10 CFR part 50, appendix E, section IV.1.
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TABLE OF EXEMPTIONS GRANTED TO ENTERGY NUCLEAR OPERATIONS, INC.—Continued
NRC staff basis for exemption
10 CFR part 50, appendix E, section IV.C.1. The NRC is granting ex- Containment parameters do not provide an indication of the conditions emption from portions of the rule language that would otherwise re- at a defueled facility and emergency core cooling systems are no quire EALs based on operating reactor concerns, such as offsite ra- longer required. Other indications, such as SFP level or temperature, diation monitoring, pressure in containment, and the response of the can be used at site where there is spent fuel in the SFP. emergency core cooling system. In the SOC for the final rule for EP requirements for ISFSIs and for In addition, the NRC is striking language that would otherwise require MRS facilities (60 FR 32430), the Commission responded to com- offsite EALs of a site area emergency and a general emergency. ments concerning a general emergency at an ISFSI and MRS, and concluded that, ‘‘. . . an essential element of a General Emergency is that a release can be reasonably expected to exceed EPA PAGs exposure levels off site for more than the immediate site area.’’ The probability of a condition at a defueled facility reaching the level above an emergency classification of alert is very low. In the event of an accident at a defueled facility that meets the conditions for ex- emption from formal EP requirements, there will be available time for event mitigation and, if necessary, implementation of offsite protec- tive actions using a CEMP. NEI 99–01 was found to be an acceptable method for development of EALs. No offsite protective actions are anticipated to be necessary, so classification above the alert level is no longer required. 10 CFR part 50, appendix E, section IV.C.2. The NRC is granting ex- In the EP rule published in the November 23, 2011, Federal Register emption from portions of the rule language that would otherwise re- (76 FR 72560), nuclear power reactor licensees were required to as- quire the licensee to assess, classify, and declare an emergency sess, classify and declare an emergency condition within 15 minutes. condition within 15 minutes. Non-power reactors do not have the same potential impact on public health and safety as do power reactors, and as such, non-power re- actor licensees do not require complex offsite emergency response activities and are not required to assess, classify and declare an emergency condition within 15 minutes. An SFP and an ISFSI are also not nuclear power reactors, as defined in the NRC’s regulations and do not have the same potential impact on public health and safety, as do power reactors. A decommissioning power reactor has a low likelihood of a credible accident resulting in radiological re- leases requiring offsite protective measures. For these reasons, the NRC staff concludes that a decommissioning power reactor should not be required to assess, classify and declare an emergency condi- tion within 15 minutes. 10 CFR part 50, appendix E, section IV.D.1. The NRC is granting ex- Refer to basis for 10 CFR 50.47(b) and 10 CFR 50.47(b)(10). emption from portions of the rule language that would otherwise re- quire the licensee to reach agreement with local, State, and Federal officials and agencies for prompt notification of protective measures or evacuations. In addition, the NRC is granting exemption from identifying the associ- ated titles of officials to be notified for each agency within the EPZs. 10 CFR part 50, appendix E, section IV.D.2. The NRC is granting ex- Refer to basis for 10 CFR part 50, appendix E, section IV.D.1. emption from the requirement for the licensee to annually dissemi- nate general information on EP and evacuations within the plume ex- posure pathway EPZ. In addition, the NRC is granting exemption for the need for signage or other measures to address transient populations in the event of an accident. 10 CFR part 50, appendix E, section IV.D.3. The NRC is granting ex- While the capability needs to exist for the notification of offsite govern- emption from portions of the rule language that would otherwise re- ment agencies within a specified time period, previous exemptions quire the licensee to have the capability to make notifications to have allowed for extending the State and local government agencies’ State and local government agencies within 15 minutes of declaring notification time up to 60 minutes, based on the site-specific justifica- an emergency. tion provided. ENO’s license amendment request to approve its Permanently Defueled Emergency Plan (PDEP) dated June 12, 2014, (ADAMS Accession No. ML14168A302), provides that VY will make notifica- tions to the State of Vermont within 60 minutes of declaration of an event. Considering the very low probability of beyond-design-basis events affecting the SFP, and with the time available to initiate miti- gative actions consistent with plant conditions or, if needed, for off- site authorities to implement appropriate protective measures using a CEMP (all-hazards) approach between the loss of both water and air cooling to the spent fuel and the onset of a postulated zirconium cladding fire, formal offsite radiological response plans are not need- ed. Therefore, decommissioning reactors are not required to notify State and local governmental agencies within 15 minutes. For similar reasons, the requirement for alerting and providing prompt instruc- tions to the public within the plume exposure pathway EPZ using an alert and notification system is not required. Also refer to basis for 10 CFR 50.47(b) and 10 CFR 50.47(b)(10).
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TABLE OF EXEMPTIONS GRANTED TO ENTERGY NUCLEAR OPERATIONS, INC.—Continued
NRC staff basis for exemption
10 CFR part 50, appendix E, section IV.D.4. The NRC is granting ex- Refer to basis for 10 CFR part 50, appendix E, section IV.D.3 regard- emption from the requirement for the licensee to obtain U.S. Federal ing the alert and notification system requirements. Emergency Management Agency (FEMA) approval of its backup alert and notification capability. 10 CFR part 50, appendix E, section IV.E.8.a.(i). The NRC is granting Due to the low probability of DBAs or other credible events to exceed exemption from portions of the rule language that would otherwise the EPA PAGs at the site boundary, the available time for event miti- require the licensee to have an onsite technical support center (TSC) gation at a decommissioning power reactor and, if needed, to imple- and EOF. ment offsite protective actions using a CEMP, an EOF would not be required to support offsite agency response. In addition, an onsite TSC with part 50, appendix E requirements would not be needed. ENO proposes in its PDEP that onsite actions would be directed from the control room. 10 CFR part 50, appendix E, section IV.E.8.a.(ii). The NRC is granting NUREG–0696, ‘‘Functional Criteria for Emergency Response Facili- exemption from portions of the rule language that would otherwise ties,’’ provides that the OSC is an onsite area separate from the con- require the licensee to have an onsite operational support center trol room and the TSC, where licensee operations support personnel (OSC). will assemble in an emergency. For a decommissioning power reac- tor, an OSC is no longer required to meet its original purpose of an assembly area for plant logistical support during an emergency. The OSC function can be incorporated into the control room, as proposed by ENO. 10 CFR part 50, appendix E, section IV.E.8.b. and subpart sections Refer to basis for 10 CFR 50.47(b)(3). IV.E.8.b.(1)–E.8.b.(5). The NRC is granting exemption from the re- quirements related to an offsite EOF location, space and size, com- munications capability, access to plant data and radiological informa- tion, and access to copying and office supplies. 10 CFR part 50, appendix E, section IV E.8.c. and sections IV Refer to basis for 10 CFR 50.47(b)(3). E.8.c.(1)–E.8.c.(3). The NRC is granting exemption from the require- ments to have an EOF with the capabilities to obtain and display plant data and radiological information; the capability to analyze tech- nical information and provide briefings; and the capability to support events occurring at more than one site (if the emergency operations center supports more than one site). 10 CFR part 50, appendix E, section IV E.8.d. The NRC is granting ex- Refer to basis for 10 CFR part 50, appendix E, section IV.1 regarding emption from the requirements to have an alternate facility that hostile action. would be accessible even if the site is under threat of or experi- encing hostile action, to function as a staging area for augmentation of emergency response staff. 10 CFR part 50, appendix E, section IV.E.8.e. The NRC is granting ex- Refer to basis for 10 CFR 50.47(b)(3). emption from the requirement regarding the need for the licensee to comply with paragraph 8.b of this section. 10 CFR part 50, appendix E, section IV.E.9.a. The NRC is granting ex- Refer to basis for 10 CFR 50.47(b) and 10 CFR 50.47(b)(10). emption from portions of the rule language that would otherwise re- The State and the local governments in which the nuclear facility is lo- quire the licensee to have communications with contiguous State and cated need to be informed of events and emergencies, therefore, local governments that are within the plume exposure pathway EPZ lines of communication are required to be maintained. (which is no longer required by the exemption granted to 10 CFR 50.47(b)(10)). 10 CFR part 50, appendix E, section IV.E.9.c. The NRC is granting ex- Because of the low probability of DBAs or other credible events that emption from the requirements for communication and testing provi- would be expected to exceed the EPA PAGs and the available time sions between the control room, the onsite TSC, State/local emer- for event mitigation and, if needed, implementation of offsite protec- gency operations centers, and field assessment teams. tive actions using a CEMP, there is no need for the TSC, EOF, or offsite field assessment teams. Also refer to justification for 10 CFR 50.47(b)(3). Communication with State and local emergency operations centers is maintained to co- ordinate assistance on site if required. 10 CFR part 50, appendix E, section IV.E.9.d. The NRC is granting ex- The functions of the control room, EOF, TSC, and OSC may be com- emption from portions of the rule language that would otherwise re- bined into one or more locations at a permanently shutdown and quire provisions for communications from the control room, onsite defueled facility due to its smaller facility staff and the greatly re- TSC, and EOF with NRC Headquarters and appropriate Regional duced required interaction with State and local emergency response Operations Center. facilities, as compared to an operating reactor. Also refer to basis for 10 CFR 50.47(b).
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TABLE OF EXEMPTIONS GRANTED TO ENTERGY NUCLEAR OPERATIONS, INC.—Continued
NRC staff basis for exemption
10 CFR part 50, appendix E, section IV.F.1. and section IV F.1.viii. The Decommissioning power reactor sites typically have a level of emer- NRC is granting exemption from portions of the rule language that gency response that does not require additional response by the li- would otherwise require the licensee to provide training and drills for censee’s headquarters personnel. Therefore, the NRC staff con- the licensee’s headquarters personnel, Civil Defense personnel, or siders exempting licensee’s headquarters personnel from training re- local news media. quirements to be reasonable. Due to the low probability of DBAs or other credible events to exceed the EPA PAGs, offsite emergency measures are limited to support provided by local police, fire departments, and ambulance and hos- pital services, as appropriate. Local news media personnel no longer need radiological orientation training since they will not be called upon to support the formal Joint Information Center. The term ‘‘Civil Defense’’ is no longer commonly used; references to this term in the examples provided in the regulation are, therefore, not needed. 10 CFR part 50, appendix E, section IV.F.2. The NRC is granting ex- Because of the low probability of DBAs or other credible events that emption from portions of the rule language that would otherwise re- would be expected to exceed the limits of EPA PAGs and the avail- quire testing of a public alert and notification system. able time for event mitigation and, if necessary, offsite protective ac- tions from a CEMP, the public alert and notification system will not be used and, therefore, requires no testing. Also refer to basis for 10 CFR 50.47(b). 10 CFR part 50, appendix E, section IV.F.2.a. and sections IV.F.2.a.(i) Due to the low probability of DBAs or other credible events that would through IV.F.2.a.(iii). The NRC is granting exemption from the re- be expected to exceed the limits of EPA PAGs, the available time for quirements for full participation exercises and the submittal of the as- event mitigation and, if necessary, implementation of offsite protec- sociated exercise scenarios to the NRC. tive actions using a CEMP, no formal offsite radiological response plans are required. Therefore, the need for the licensee to exercise onsite and offsite plans with full participation by each offsite authority having a role under the radiological response plan is not required. The intent of submitting exercise scenarios at an operating power reac- tor site is to check that licensees utilize different scenarios in order to prevent the preconditioning of responders at power reactors. For decommissioning power reactor sites, there are limited events that could occur and, as such, the previously routine progression to gen- eral emergency in an operating power reactor site scenario is not ap- plicable. The licensee would be exempt from 10 CFR part 50, appendix E, sec- tion IV.F.2.a.(i)-(iii) because the licensee would be exempt from the umbrella provision of 10 CFR part 50, appendix E, section IV.F.2.a. 10 CFR part 50, appendix E, section IV.F.2.b. The NRC is granting ex- Refer to basis for 10 CFR part 50, appendix E, section IV.F.2.a. emption from portions of the rule language that would otherwise re- The low probability of DBAs or other credible events that would exceed quire the licensee to submit scenarios for its biennial exercises of its the EPA PAGs, the available time for event mitigation and, if nec- onsite emergency plan. In addition, the NRC is granting exemption essary, implementation of offsite protective actions using a CEMP, from portions of the rule language that requires assessment of offsite render a TSC, OSC, and EOF unnecessary. The principal functions releases, protective action decision making, and references to the required by regulation can be performed at an onsite location that TSC, OSC, and EOF. does not meet the requirements of the TSC, OSC or EOF. 10 CFR part 50, appendix E, section IV.F.2.c. and sections IV F.2.c.(1) Refer to basis for 10 CFR part 50, appendix E, section IV.F.2.a. through F.2.c.(5). The NRC is granting exemption from the require- ments regarding the need for the licensee to exercise offsite plans biennially with full participation by each offsite authority having a role under the radiological response plan. The NRC is also granting ex- emptions from the conditions for conducting these exercises (includ- ing hostile action exercises) if two different licensees have facilities on the same site or on adjacent, contiguous sites, or share most of the elements defining co-located licensees. 10 CFR part 50, appendix E, section IV.F.2.d. The NRC is granting ex- Refer to basis for 10 CFR part 50, appendix E, section IV.2. emption from the requirements to obtain State participation in an in- gestion pathway exercise and a hostile action exercise, with each State that has responsibilities, at least once per exercise cycle. 10 CFR part 50, appendix E, section IV.F.2.e. The NRC is granting ex- Refer to basis for 10 CFR part 50, appendix E, section IV.2. emption from portions of the rule language that would otherwise re- quire the licensee to allow participation exercise in licensee drills by any State and local government in the plume exposure pathway EPZ when requested. 10 CFR part 50, appendix E, section IV.F.2.f. The NRC is granting ex- FEMA is responsible for evaluating the adequacy of offsite response emption from portions of the rule language that would otherwise re- during an exercise. Because the NRC is granting exemptions from quire FEMA to consult with the NRC on remedial exercises. The the requirements regarding the need for the licensee to exercise on- NRC is granting exemption from portions of the rule language that site and offsite plans with full participation by each offsite authority discuss the extent of State and local participation in remedial exer- having a role under the radiological response plan, FEMA will no cises. longer evaluate the adequacy of offsite response during remedial or other exercises.
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TABLE OF EXEMPTIONS GRANTED TO ENTERGY NUCLEAR OPERATIONS, INC.—Continued
NRC staff basis for exemption
No action is expected from State or local government organizations in response to an event at a decommissioning power reactor site other than firefighting, law enforcement and ambulance/medical services support. A memorandum of understanding should be in place for those services. Offsite response organizations will continue to take actions on a comprehensive EP basis to protect the health and safe- ty of the public as they would at any other industrial site. 10 CFR part 50, appendix E, section IV.F.2.i. The NRC is granting ex- Due to the low probability of DBAs or other credible events to exceed emption from portions of the rule language that would otherwise re- the EPA PAGs, the available time for event mitigation and, if need- quire the licensee to drill and exercise scenarios that include a wide ed, implementation of offsite protective actions using a CEMP, the spectrum of radiological release events and hostile action. previously routine progression to general emergency in power reac- tor site scenarios is not applicable to a decommissioning site. There- fore, the licensee is not expected to demonstrate response to a wide spectrum of events. Also refer to basis for 10 CFR part 50, appendix E, section IV.1 re- garding hostile action. 10 CFR part 50, appendix E, section IV.F.2.j. The NRC is granting ex- Refer to basis for 10 CFR part 50, appendix E, section IV.F.2. emption from the requirements regarding the need for the licensee’s emergency response organization to demonstrate proficiency in key skills in the principal functional areas of emergency response. In addition, the NRC is granting exemption during an eight calendar year exercise cycle, from demonstrating proficiency in the key skills necessary to respond to such scenarios as hostile actions, un- planned minimal radiological release, and scenarios involving rapid escalation to a site area emergency or general emergency. 10 CFR part 50, appendix E, section IV.I. The NRC is granting exemp- Refer to basis for 10 CFR part 50, appendix E, section IV.E.8.d. tion from the requirements regarding the need for the licensee to de- velop a range of protective actions for onsite personnel during hostile actions.
[FR Doc. 2015–31808 Filed 12–16–15; 8:45 am] SUPPLEMENTARY INFORMATION: II. Notice of Commission Action BILLING CODE 7590–01–P Table of Contents The Commission establishes Docket I. Introduction Nos. MC2016–32 and CP2016–38 to II. Notice of Commission Action consider the Request pertaining to the POSTAL REGULATORY COMMISSION III. Ordering Paragraphs proposed Priority Mail Express Contract 30 product and the related contract, [Docket Nos. MC2016–32 and CP2016–38; I. Introduction Order No. 2863] respectively. In accordance with 39 U.S.C. 3642 The Commission invites comments on New Postal Product and 39 CFR 3020.30 et seq., the Postal whether the Postal Service’s filings in Service filed a formal request and the captioned dockets are consistent AGENCY: Postal Regulatory Commission. associated supporting information to with the policies of 39 U.S.C. 3632, ACTION: Notice. add Priority Mail Express Contract 30 to 3633, or 3642, 39 CFR part 3015, and 39 the competitive product list.1 CFR part 3020, subpart B. Comments are SUMMARY: The Commission is noticing a The Postal Service due no later than December 18, 2015. recent Postal Service filing concerning The public portions of these filings can the addition of Priority Mail Express contemporaneously filed a redacted contract related to the proposed new be accessed via the Commission’s Web Contract 30 negotiated service site (http://www.prc.gov). agreement to the competitive product product under 39 U.S.C. 3632(b)(3) and The Commission appoints Lyudmila list. This notice informs the public of 39 CFR 3015.5. Request, Attachment B. Y. Bzhilyanskaya to serve as Public the filing, invites public comment, and To support its Request, the Postal Representative in these dockets. takes other administrative steps. Service filed a copy of the contract, a copy of the Governors’ Decision DATES: Comments are due: December III. Ordering Paragraphs authorizing the product, proposed 18, 2015. changes to the Mail Classification It is ordered: ADDRESSES: Submit comments Schedule, a Statement of Supporting 1. The Commission establishes Docket electronically via the Commission’s Justification, a certification of Nos. MC2016–32 and CP2016–38 to Filing Online system at http:// compliance with 39 U.S.C. 3633(a), and consider the matters raised in each www.prc.gov. Those who cannot submit an application for non-public treatment docket. comments electronically should contact of certain materials. It also filed 2. Pursuant to 39 U.S.C. 505, the person identified in the FOR FURTHER supporting financial workpapers. Lyudmila Y. Bzhilyanskaya is appointed INFORMATION CONTACT section by to serve as an officer of the Commission telephone for advice on filing 1 Request of the United States Postal Service to to represent the interests of the general alternatives. Add Priority Mail Express Contract 30 to public in these proceedings (Public FOR FURTHER INFORMATION CONTACT: Competitive Product List and Notice of Filing Representative). (Under Seal) of Unredacted Governors’ Decision, David A. Trissell, General Counsel, at Contract, and Supporting Data, December 10, 2015 3. Comments are due no later than 202–789–6820. (Request). December 18, 2015.
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4. The Secretary shall arrange for The Postal Service POSTAL REGULATORY COMMISSION publication of this order in the Federal contemporaneously filed a redacted Register. contract related to the proposed new [Docket Nos. MC2016–31 and CP2016–37; By the Commission. product under 39 U.S.C. 3632(b)(3) and Order No. 2865] Stacy L. Ruble, 39 CFR 3015.5. Request, Attachment B. New Postal Product Secretary. To support its Request, the Postal [FR Doc. 2015–31648 Filed 12–16–15; 8:45 am] Service filed a copy of the contract, a AGENCY: Postal Regulatory Commission. BILLING CODE 7710–FW–P copy of the Governors’ Decision authorizing the product, proposed ACTION: Notice. changes to the Mail Classification SUMMARY: The Commission is noticing a Schedule, a Statement of Supporting POSTAL REGULATORY COMMISSION recent Postal Service filing concerning Justification, a certification of the addition of Priority Mail Contract [Docket Nos. MC2016–33 and CP2016–39; compliance with 39 U.S.C. 3633(a), and 162 negotiated service agreement to the Order No. 2868] an application for non-public treatment competitive product list. This notice of certain materials. It also filed New Postal Product informs the public of the filing, invites supporting financial workpapers. public comment, and takes other AGENCY: Postal Regulatory Commission. II. Notice of Commission Action administrative steps. ACTION: Notice. DATES: Comments are due: December The Commission establishes Docket 18, 2015. SUMMARY: The Commission is noticing a Nos. MC2016–33 and CP2016–39 to recent Postal Service filing concerning consider the Request pertaining to the ADDRESSES: Submit comments the addition of First-Class Package proposed First-Class Package Service electronically via the Commission’s Service Contract 38 negotiated service Contract 38 product and the related Filing Online system at http:// agreement to the competitive product contract, respectively. www.prc.gov. Those who cannot submit list. This notice informs the public of comments electronically should contact The Commission invites comments on the filing, invites public comment, and the person identified in the FOR FURTHER whether the Postal Service’s filings in takes other administrative steps. INFORMATION CONTACT section by the captioned dockets are consistent DATES: Comments are due: December telephone for advice on filing with the policies of 39 U.S.C. 3632, alternatives. 21, 2015. 3633, or 3642, 39 CFR part 3015, and 39 ADDRESSES: Submit comments CFR part 3020, subpart B. Comments are FOR FURTHER INFORMATION CONTACT: electronically via the Commission’s due no later than December 21, 2015. David A. Trissell, General Counsel, at Filing Online system at http:// The public portions of these filings can 202–789–6820. www.prc.gov. Those who cannot submit be accessed via the Commission’s Web SUPPLEMENTARY INFORMATION: comments electronically should contact site (http://www.prc.gov). the person identified in the FOR FURTHER Table of Contents The Commission appoints Katalin K. INFORMATION CONTACT section by Clendenin to serve as Public I. Introduction telephone for advice on filing Representative in these dockets. II. Notice of Commission Action alternatives. III. Ordering Paragraphs III. Ordering Paragraphs FOR FURTHER INFORMATION CONTACT: I. Introduction David A. Trissell, General Counsel, at It is ordered: 202–789–6820. In accordance with 39 U.S.C. 3642 1. The Commission establishes Docket and 39 CFR 3020.30 et seq., the Postal SUPPLEMENTARY INFORMATION: Nos. MC2016–33 and CP2016–39 to Service filed a formal request and Table of Contents consider the matters raised in each associated supporting information to docket. add Priority Mail Contract 162 to the I. Introduction 1 II. Notice of Commission Action 2. Pursuant to 39 U.S.C. 505, Katalin competitive product list. III. Ordering Paragraphs K. Clendenin is appointed to serve as an The Postal Service contemporaneously filed a redacted I. Introduction officer of the Commission to represent the interests of the general public in contract related to the proposed new In accordance with 39 U.S.C. 3642 these proceedings (Public product under 39 U.S.C. 3632(b)(3) and and 39 CFR 3020.30 et seq., the Postal Representative). 39 CFR 3015.5. Request, Attachment B. Service filed a formal request and To support its Request, the Postal associated supporting information to 3. Comments are due no later than Service filed a copy of the contract, a add First-Class Package Service Contract December 21, 2015. copy of the Governors’ Decision 38 to the competitive product list.1 4. The Secretary shall arrange for authorizing the product, proposed publication of this order in the Federal changes to the Mail Classification 1 Request of the United States Postal Service to Register. Schedule, a Statement of Supporting Add First-Class Package Service Contract 38 to Justification, a certification of Competitive Product List and Notice of Filing By the Commission. (Under Seal) of Unredacted Governors’ Decision, Stacy L. Ruble, compliance with 39 U.S.C. 3633(a), and Contract, and Supporting Data, December 11, 2015 an application for non-public treatment Secretary. (Request). The Postal Service requests to add ‘‘First- of certain materials. It also filed Class Package Service Contract 37’’ to the [FR Doc. 2015–31802 Filed 12–16–15; 8:45 am] supporting financial workpapers. competitive product list. Request at 1. However, BILLING CODE 7710–FW–P other parts of the Request and attachments refer to ‘‘First-Class Package Service Contract 38.’’ First- 1 Request of the United States Postal Service to Class Package Service Contract 37 was added to the Contract 37 to the Competitive Product List, Add Priority Mail Contract 162 to Competitive competitive product list on September 10, 2014. September 10, 2014. The Commission considers the Product List and Notice of Filing (Under Seal) of Docket Nos. MC2014–42 and CP2014–75, Order No. Request to pertain to First-Class Package Service Unredacted Governors’ Decision, Contract, and 2179, Order Adding First-Class Package Service Contract 38. Supporting Data, December 10, 2015 (Request).
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II. Notice of Commission Action comments electronically should contact consider the matters raised in each The Commission establishes Docket the person identified in the FOR FURTHER docket. Nos. MC2016–31 and CP2016–37 to INFORMATION CONTACT section by 2. Pursuant to 39 U.S.C. 505, Kenneth consider the Request pertaining to the telephone for advice on filing R. Moeller is appointed to serve as an proposed Priority Mail Contract 162 alternatives. officer of the Commission to represent product and the related contract, FOR FURTHER INFORMATION CONTACT: the interests of the general public in respectively. David A. Trissell, General Counsel, at these proceedings (Public The Commission invites comments on 202–789–6820. Representative). whether the Postal Service’s filings in SUPPLEMENTARY INFORMATION: the captioned dockets are consistent 3. Comments are due no later than with the policies of 39 U.S.C. 3632, Table of Contents December 18, 2015. 3633, or 3642, 39 CFR part 3015, and 39 I. Introduction 4. The Secretary shall arrange for CFR part 3020, subpart B. Comments are II. Notice of Commission Action publication of this order in the Federal due no later than December 18, 2015. III. Ordering Paragraphs Register. The public portions of these filings can I. Introduction By the Commission. be accessed via the Commission’s Web site (http://www.prc.gov). In accordance with 39 U.S.C. 3642 Stacy L. Ruble, The Commission appoints Katalin K. and 39 CFR 3020.30 et seq., the Postal Secretary. Clendenin to serve as Public Service filed a formal request and [FR Doc. 2015–31649 Filed 12–16–15; 8:45 am] associated supporting information to Representative in these dockets. BILLING CODE P add Priority Mail Contract 161 to the III. Ordering Paragraphs competitive product list.1 It is ordered: The Postal Service contemporaneously filed a redacted 1. The Commission establishes Docket POSTAL SERVICE Nos. MC2016–31 and CP2016–37 to contract related to the proposed new consider the matters raised in each product under 39 U.S.C. 3632(b)(3) and Product Change—First-Class Package docket. 39 CFR 3015.5. Request, Attachment B. Service Negotiated Service Agreement 2. Pursuant to 39 U.S.C. 505, Katalin To support its Request, the Postal Service filed a copy of the contract, a K. Clendenin is appointed to serve as an AGENCY: Postal ServiceTM. officer of the Commission to represent copy of the Governors’ Decision the interests of the general public in authorizing the product, proposed ACTION: Notice. these proceedings (Public changes to the Mail Classification Representative). Schedule, a Statement of Supporting SUMMARY: The Postal Service gives 3. Comments are due no later than Justification, a certification of notice of filing a request with the Postal December 18, 2015. compliance with 39 U.S.C. 3633(a), and Regulatory Commission to add a 4. The Secretary shall arrange for an application for non-public treatment domestic shipping services contract to publication of this order in the Federal of certain materials. It also filed the list of Negotiated Service Register. supporting financial workpapers. Agreements in the Mail Classification By the Commission. II. Notice of Commission Action Schedule’s Competitive Products List. Stacy L. Ruble, The Commission establishes Docket DATES: Effective date: December 17, Secretary. Nos. MC2016–30 and CP2016–36 to 2015. [FR Doc. 2015–31650 Filed 12–16–15; 8:45 am] consider the Request pertaining to the BILLING CODE 7710–FW–P proposed Priority Mail Contract 161 FOR FURTHER INFORMATION CONTACT: product and the related contract, Elizabeth A. Reed, 202–268–3179. respectively. SUPPLEMENTARY INFORMATION: The POSTAL REGULATORY COMMISSION The Commission invites comments on United States Postal Service® hereby whether the Postal Service’s filings in [Docket Nos. MC2016–30 and CP2016–36; gives notice that, pursuant to 39 U.S.C. Order No. 2864] the captioned dockets are consistent with the policies of 39 U.S.C. 3632, 3642 and 3632(b)(3), on December 11, New Postal Product 3633, or 3642, 39 CFR part 3015, and 39 2015, it filed with the Postal Regulatory CFR part 3020, subpart B. Comments are Commission a Request of the United AGENCY: Postal Regulatory Commission. due no later than December 18, 2015. States Postal Service to Add First-Class ACTION: Notice. The public portions of these filings can Package Service Contract 38 to be accessed via the Commission’s Web Competitive Product List. Documents SUMMARY: The Commission is noticing a site (http://www.prc.gov). are available at www.prc.gov, Docket recent Postal Service filing concerning The Commission appoints Kenneth R. Nos. MC2016–33, CP2016–39. the addition of Priority Mail Contract Moeller to serve as Public 161 negotiated service agreement to the Representative in these dockets. Stanley F. Mires, competitive product list. This notice Attorney, Federal Compliance. informs the public of the filing, invites III. Ordering Paragraphs [FR Doc. 2015–31819 Filed 12–16–15; 8:45 am] public comment, and takes other It is ordered: BILLING CODE 7710–12–P administrative steps. 1. The Commission establishes Docket DATES: Comments are due: December Nos. MC2016–30 and CP2016–36 to 18, 2015. ADDRESSES: Submit comments 1 Request of the United States Postal Service to Add Priority Mail Contract 161 to Competitive electronically via the Commission’s Product List and Notice of Filing (Under Seal) of Filing Online system at http:// Unredacted Governors’ Decision, Contract, and www.prc.gov. Those who cannot submit Supporting Data, December 10, 2015 (Request).
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SECURITIES AND EXCHANGE I. The Exchange’s Description of (except from time to time in very COMMISSION Proposal 8 limited amounts to pay expenses). The Exchange proposes to list and The Administrator will determine the net asset value (‘‘NAV’’) of the Shares [Release No. 34–76630; File No. SR– trade (‘‘Shares’’) of the Global Currency each Business Day, unless there is a NYSEArca–2015–76] Gold Fund (the ‘‘Fund’’),9 a series of the market disruption or extraordinary Global Gold Currency Trust (Trust’’), 12 Self-Regulatory Organizations; NYSE under NYSE Arca Equities Rule 8.201, event. The NAV of the Shares Arca, Inc.; Order Instituting which governs the listing and trading of represents the aggregate value of the Proceedings To Determine Whether To Commodity-Based Trust Shares.10 Fund’s assets (which include gold payable, but not yet delivered, to the Approve or Disapprove Proposed Rule The Sponsor of the Fund and the Fund) less its liabilities (which include Change, as Modified by Amendment Trust will be WGC USA Asset accrued but unpaid fees and expenses). No. 1, To List and Trade Shares of the Management Company, LLC (the ‘‘Sponsor’’). BNY Mellon Asset The NAV of the Fund will be calculated Global Currency Gold Fund Under based on the price of Gold per ounce NYSE Arca Equities Rule 8.201 Servicing, a division of The Bank of New York Mellon, will be the Fund’s applied against the number of ounces of December 11, 2015. administrator (‘‘Administrator’’), Gold owned by the Fund. The number transfer agent (‘‘Transfer Agent’’) and of ounces of Gold held by the Fund is On August 28, 2015, NYSE Arca, Inc. custodian (‘‘Custodian’’) and will not be adjusted up or down on a daily basis to (‘‘Exchange’’) filed with the Securities affiliated with the Trust, the Fund or the reflect the U.S. dollar value of currency and Exchange Commission Sponsor. gains or losses based on changes in the (‘‘Commission’’), pursuant to Section Although investors will purchase value of the Reference Currencies 19(b)(1) of the Securities Exchange Act Shares with U.S. dollars, the Fund is against the U.S. dollar. The number of of 1934 (‘‘Act’’) 1 and Rule 19b–4 designed to provide investors with the ounces of Gold held by the Fund also thereunder,2 a proposed rule change to economic effect of holding gold in terms reflects the amount of Gold delivered list and trade shares of the Global of a specific basket of major, non-U.S. into (or out of) the Fund on a daily basis Currency Gold Fund under NYSE Arca currencies, such as the euro, Japanese by authorized participants creating and Equities Rule 8.201. The proposed rule yen and British pound (each, a redeeming Shares. In determining the change was published for comment in ‘‘Reference Currency’’), rather than the Fund’s NAV, the Administrator the Federal Register on September 16, U.S. dollar. Specifically, the Fund will generally will value the Gold held by 2015.3 On September 29, 2015, the seek to track the performance of the the Fund based on the LBMA Gold Price 13 Exchange submitted Amendment No. 1 Global Gold Index (ex-USD), less Fund PM for an ounce of Gold (though on the proposed rule change.4 On expenses. The Global Gold Index (ex- other sources may be used if the LBMA Gold Price PM is delayed or October 28, 2015, pursuant to Section USD), or the ‘‘Index’’, represents the unavailable). Although the Fund will 19(b)(2) of the Act,5 the Commission daily performance of a long position in physical gold and a short position in not hold the Reference Currencies, the designated a longer period within which each of the Reference Currencies, and is Gold Delivery Provider 14 generally will to approve the proposed rule change, designed to measure daily gold bullion value the Reference Currencies based on disapprove the proposed rule change, or returns as though an investor had the rates in effect as of the WMR FX institute proceedings to determine invested in Gold 11 in terms of the Fixing Time.15 Unless there is a market whether to disapprove the proposed Reference Currencies reflected in the 6 rule change. The Commission has not Index. 12 See Notice, supra note 3 at 55678. received any comments on the proposal, The Fund is a passive investment 13 The Index values Gold on a daily basis using as modified by Amendment No. 1. This vehicle and is designed to track the the ‘‘Gold Price.’’ The Gold Price generally is the LBMA Gold Price PM (though other sources may be order institutes proceedings under performance of the Index. The Fund’s used if the LBMA Gold Price PM is delayed or Section 19(b)(2)(B) of the Act 7 to holdings generally will consist entirely unavailable). The ‘‘LBMA Gold Price’’ means the determine whether to approve or of Gold, and substantially all of the price per troy ounce of Gold stated in U.S. dollars disapprove the proposed rule change, as Fund’s Gold holdings will be delivered as set via an electronic auction process run twice daily at 10:30 a.m. and 3:00 p.m., London time each modified by Amendment No. 1. by authorized participants in exchange Business Day as calculated and administered by ICE for Shares. The Fund will not hold any Benchmark Administration Limited (‘‘IBA’’) and 1 15 U.S.C. 78s(b)(1). of the Reference Currencies, and published by LBMA on its Web site. The ‘‘LBMA Gold Price PM’’ is the 3:00 p.m. LBMA Gold Price. 2 17 CFR 240.19b–4. generally will not hold U.S. dollars IBA, an independent specialist benchmark 3 See Securities Exchange Act Release No. 75900 administrator, provides the price platform, (September 11, 2015), 80 FR 55674 (‘‘Notice’’). 8 A complete description of the proposal can be methodology and the overall administration and 4 In Amendment No. 1, the Exchange: (1) found in the Notice. See Notice, supra note 3 governance for the LBMA Gold Price. Id. Identified weightings of each currency referenced in (available at: http://www.sec.gov/rules/sro/ 14 The Fund will deliver Gold to, or receive Gold the Index; (2) supplemented its description of the nysearca/2015/34-75900.pdf). from, the Gold Delivery Provider each Business method of calculation for the Spot Rate; (3) clarified 9 On August 28, 2015, the Trust filed with the Day. The amount of Gold transferred will be when the Fund may suspend the right of Commission a registration statement on Form S–1 equivalent to the Fund’s profit or loss as if the Fund redemption or postpone the redemption settlement under the Securities Act of 1933 (‘‘1933 Act’’) had exchanged the Reference Currencies, in the date. Amendment No. 1 is available at: http:// relating to the Fund (File No. 333–206640) proportion in which they are reflected in the Index, www.sec.gov/rules/sro/nysearca/2015/34-75900- (‘‘Registration Statement’’). The Fund will not be for U.S. dollars in an amount equal to the Fund’s amendment1.pdf. registered as an investment company under the declared holdings of Gold on such day. The Fund 5 15 U.S.C. 78s(b)(2). Investment Company Act of 1940 and is not does not intend to enter into any other Gold 6 See Securities Exchange Act Release No. 75945, required to register under such act. 15 U.S.C. 80a– transactions other than with the Gold Delivery 80 FR 57645 (Sept. 24, 2015). The Commission 1. Provider (except that the Fund may sell Gold to designated a longer period within which to take 10 Commodity-Based Trust Shares are securities cover Fund expenses), and the Fund does not action on the proposed rule change and designated issued by a trust that represent investors’ discrete intend to hold any Reference Currency or enter into December 15, 2015, as the date by which it should identifiable and undivided beneficial ownership any currency transactions. See Notice, supra note approve, disapprove, or institute proceedings to interest in the commodities deposited into the 3 at 55675. determine whether to disapprove the proposed rule Trust. 15 The ‘‘WMR FX Fixing Time’’ is the time the change. 11 ‘‘Gold’’ means gold bullion meeting the Reference Currency prices are published, which 7 15 U.S.C. 78s(b)(2)(B). requirements of London Good Delivery Standards. generally is at 4:00 p.m., London Time.
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disruption or extraordinary event, NAV trades through ETP Holders which they invites the written views of interested generally will be calculated as of 4:00 effect on any relevant market. persons concerning whether the p.m., London time. In addition, the Exchange also has a proposal is consistent with Section The Exchange deems the Shares to be general policy prohibiting the 6(b)(5) or any other provision of the Act, equity securities, thus rendering trading distribution of material, non-public or the rules and regulations thereunder. in the Fund subject to the Exchange’s information by its employees. Although there do not appear to be any existing rules governing the trading of II. Proceedings To Determine Whether issues relevant to approval or 16 equity securities. The Fund will be To Approve or Disapprove SR– disapproval that would be facilitated by subject to the criteria in NYSE Arca NYSEArca-2015-76 and Grounds for an oral presentation of views, data, and Equities Rule 8.201(e) for initial and Disapproval Under Consideration arguments, the Commission will continued listing of the Shares. A consider, pursuant to Rule 19b–4, any minimum of 100,000 Shares will be The Commission is instituting request for an opportunity to make an required to be outstanding at the start of proceedings pursuant to Section oral presentation.24 21 trading. The Exchange believes that the 19(b)(2)(B) of the Act to determine Interested persons are invited to anticipated minimum number of Shares whether the proposed rule change, as submit written data, views, and outstanding at the start of trading is modified by Amendment No. 1, should arguments regarding whether the sufficient to provide adequate market be approved or disapproved. Institution proposal should be approved or liquidity.17 of such proceedings is appropriate at disapproved by January 7, 2016. Any Trading in the Shares will be subject this time in view of the legal and policy person who wishes to file a rebuttal to to the existing trading surveillances, issues raised by the proposed rule any other person’s submission must file administered by the Financial Industry change, as modified by Amendment No. that rebuttal by January 21, 2016. The Regulatory Authority (‘‘FINRA’’) on 1. Institution of proceedings does not Commission asks that commenters behalf of the Exchange, which are indicate that the Commission has address the sufficiency of the designed to detect violations of reached any conclusions with respect to Exchange’s statements in support of the Exchange rules and applicable federal any of the issues involved. Rather, as proposal, which are set forth in the securities laws.18 The Exchange described below, the Commission seeks Notice,25 in addition to any other represents that these procedures are and encourages interested persons to comments they may wish to submit adequate to properly monitor Exchange provide comments on the proposed rule about the proposed rule change, as trading of the Shares in all trading change, as modified by Amendment modified by Amendment No. 1. In sessions and to deter and detect No. 1. particular, the Commission seeks Pursuant to Section 19(b)(2)(B) of the violations of Exchange rules and federal comment on the following: Act,22 the Commission is providing securities laws applicable to trading on 1. In general, do commenters believe notice of the grounds for disapproval the Exchange.19 that the proposal is consistent with the under consideration. The Commission requirements of Section 6(b)(5) of the FINRA, on behalf of the Exchange, questions whether: (1) The Exchange Act, which requires that the rules of a will communicate as needed regarding has sufficiently demonstrated in its national securities exchange be trading in the Shares with other markets filing that the Index is not susceptible designed, among other things, to and other entities that are members of to manipulation; and (2) the existing promote just and equitable principles of the Intermarket Surveillance Group provisions of the Exchange’s listing rule trade, to remove impediments to and (‘‘ISG’’), and FINRA, on behalf of the are adequate to allow it to surveil for perfect the mechanism of a free and Exchange, may obtain trading and investigate potential manipulation open market and a national market information regarding trading in the by ETP Holders registered as market system, and, in general, to protect Shares from such markets and other makers. Therefore, the Commission is investors and the public interest? entities. In addition, the Exchange may instituting proceedings to allow for the 2. What are commenters’ views obtain information regarding trading in submission of additional analysis regarding the susceptibility of the price the Shares from markets and other regarding the proposed rule change’s of the Shares to manipulation? entities that are members of ISG or with consistency with Section 6(b)(5) of the which the Exchange has in place a Act, which requires, among other 3. The Exchange states that Index comprehensive surveillance sharing values generally are calculated using the 20 things, that the rules of a national agreement. securities exchange be ‘‘designed to published WMR Spot Rate (‘‘Spot Rate’’) Also, pursuant to NYSE Arca Equities prevent fraudulent and manipulative as of 4:00 p.m., London time associated Rule 8.201(g), the Exchange is able to acts and practices, to promote just and with each Reference Currency, subject obtain information regarding trading in equitable principles of trade,’’ and ‘‘to to certain adjustments, and notes that the Shares and the underlying gold, gold protect investors and the public other rates may be used if the Spot Rate futures contracts, options on gold interest.’’ 23 is delayed or unavailable. The Exchange futures, or any other gold derivative, does not state, however, how the Spot through equity trading permit holders III. Procedure: Request for Written Rate and any replacement rate (‘‘ETP Holders’’) acting as registered Comments (‘‘Currency Rates’’) are calculated. market makers, in connection with such The Commission requests that ETP Holders’ proprietary or customer interested persons provide written 24 Section 19(b)(2) of the Act, as amended by the submissions of their views, data, and Securities Act Amendments of 1975, Public Law 94–29 (June 4, 1975), grants the Commission 16 See Notice, supra note 3 at 55681. arguments with respect to the issues flexibility to determine what type of proceeding— 17 Id. identified above, as well as any other either oral or notice and opportunity for written 18 FINRA surveils trading on the Exchange concerns they may have with the comments—is appropriate for consideration of a pursuant to a regulatory services agreement. The proposal. In particular, the Commission particular proposal by a self-regulatory Exchange is responsible for FINRA’s performance organization. See Securities Act Amendments of under this regulatory services agreement. Id. 1975, Senate Comm. on Banking, Housing & Urban 19 Id. 21 15 U.S.C. 78s(b)(2)(B). Affairs, S. Rep. No. 75, 94th Cong., 1st Sess. 30 20 For a list of the current members of ISG, see 22 Id. (1975). www.isgportal.org. 23 15 U.S.C. 78f(b)(5). 25 Supra note 3.
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a. Are the Currency Rates calculated identifying information from II. Description of the Proposed Rule using arm’s length transactions and, if submissions. You should submit only Change so, are such transactions verified, and information that you wish to make The Exchange proposes to amend C2 how? If quotes are used to calculate the available publicly. All submissions Rule 6.13 and Interpretation and Policy Currency Rates, are those arm’s length should refer to File Number SR– .02 regarding the initiation of a COA. quotes firm? NYSEArca–2015–76 and should be Currently, C2 Participants must b. What concerns, if any, do submitted on or before January 7, 2016. affirmatively request that their incoming commenters have regarding the Index’s Rebuttal comments should be submitted COA-eligible orders be COA’d.4 The susceptibility to manipulation? by January 21, 2016. Exchange proposes to amend C2 Rule 4. Are the requirements of NYSE Arca 6.13(c)(2) to provide that COA-eligible Equities Rule 8.201(g) adequate to allow For the Commission, by the Division of orders be COA’d by default.5 Under the the Exchange to fulfill its regulatory Trading and Markets, pursuant to delegated proposed rule, Participants would be obligations or, in light of the Shares’ authority.26 permitted to request that a COA-eligible exposure to the Reference Currencies, Robert W. Errett, order not COA (referred to as a ‘‘do-not- should those requirements be expanded Deputy Secretary. COA’’ request) on an order-by-order to also apply to market makers’ trading [FR Doc. 2015–31680 Filed 12–16–15; 8:45 am] basis.6 The Exchange believes that accounts for all of the applicable non- allowing Participants to make a ‘‘do-not- U.S. currencies, options, futures or BILLING CODE 8011–01–P COA’’ request on an order-by-order options on futures on such currencies, basis will better allow them to make or any other derivatives based on such SECURITIES AND EXCHANGE decisions regarding the handling of their currencies? Comments may be submitted by any COMMISSION orders based on market conditions at the of the following methods: time they submit their orders. An order [Release No. 34–76621; File No. SR–C2– with a ‘‘do-not-COA’’ request, however, Electronic Comments 2015–025] may still be COA’d after it has rested on • Use the Commission’s Internet the Complex Order Book (‘‘COB’’) comment form (http://www.sec.gov/ Self-Regulatory Organizations; C2 pursuant to Interpretation and Policy rules/sro.shtml); or Options Exchange, Incorporated; .02.7 • Send an email to rule-comments@ Order Granting Approval of a The Exchange notes that an order with a ‘‘do-not-COA’’ request will still sec.gov. Please include File Number SR– Proposed Rule Change Relating to have execution opportunities. The NYSEArca–2015–76 on the subject line. Complex Orders as Modified by Exchange explains that a ‘‘do-not-COA’’ Paper Comments Amendment No. 1 order may execute automatically upon • Send paper comments in triplicate December 11, 2015. entry into the System against the leg to Secretary, Securities and Exchange markets or complex orders on the COB Commission, 100 F Street NE., I. Introduction to the extent marketable (in accordance Washington, DC 20549–1090. with allocation rules set forth in Rule On October 13, 2015, C2 Options All submissions should refer to File 6.13).8 Further, the Exchange notes that Exchange, Incorporated (the ‘‘Exchange’’ an order on the opposite side of, and Numbers SR–NYSEArca–2015–76. This or ‘‘C2’’) filed with the Securities and file number should be included on the marketable against, a COA-eligible order Exchange Commission (the subject line if email is used. To help the may trade against the COA-eligible ‘‘Commission’’), pursuant to Section Commission process and review your order if the System receives the order 19(b)(1) of the Securities Exchange Act while a COA is ongoing.9 comments more efficiently, please use 1 only one method. The Commission will of 1934 (‘‘Act’’ or ‘‘Exchange Act’’) and Second, the Exchange proposes to add 2 post all comments on the Commission’s Rule 19b–4 thereunder, a proposed rule subparagraphs (c)(8)(D) and (E) to C2 Internet Web site (http://www.sec.gov/ change to: (1) Amend the rule Rule 6.13 to describe additional rules/sro.shtml). Copies of the provisions regarding the initiation of a circumstances that will cause a COA to 10 submission, all subsequent complex order auction (‘‘COA’’), (2) add end early. Proposed subparagraph amendments, all written statements rule provisions regarding the impact of (c)(8)(D) will provide that if an order with respect to the proposed rule certain incoming orders and changes in with a ‘‘do-not-COA’’ request or an change that are filed with the the leg markets on an ongoing COA, and order that is not COA-eligible is Commission, and all written (3) amend the rule provision related to received prior to the expiration of the communications relating to the the size of COA responses. On October Response Time Interval for the original proposed rule change between the 26, 2015, the Exchange submitted COA and is on the same side of the Commission and any person, other than Amendment No. 1 to the proposed rule 4 See Notice, supra note 3, at 67446. The those that may be withheld from the change. The proposed rule change, as Exchange represents that all Participants have public in accordance with the modified by Amendment No. 1, was requested that all of their COA-eligible orders provisions of 5 U.S.C. 552, will be published for comment in the Federal process through COA upon entry into the System. available for Web site viewing and Register on November 2, 2015.3 The 5 Id. printing in the Commission’s Public 6 Id. In light of this proposed change, the Commission received no comments on Exchange proposes to delete the language in Reference Room, 100 F Street NE., the proposal. This order grants approval Interpretation and Policy .02(a) that indicates Washington, DC 20549, on official of the proposed rule change, as Participants may request that complex orders be business days between the hours of modified by Amendment No. 1. processed by COA on a class-by-class basis, as it is 10:00 a.m. and 3:00 p.m. Copies of these no longer necessary. Id. filings also will be available for 7 Id. 26 17 CFR 200.30–3(a)(57). 8 inspection and copying at the principal Id. at 67447. 1 15 U.S.C. 78s(b)(1). 9 Id. office of the Exchange. All comments 2 17 CFR 240.19b–4. 10 Id. The proposed rule change makes received will be posted without change; 3 See Securities Exchange Act Release No.76274 corresponding changes to the heading and the Commission does not edit personal (October 27, 2015), 80 FR 67446 (‘‘Notice’’). introductory paragraph of subparagraph (c)(8). Id.
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market and at a price better than or consistent with the requirements of the options exchanges do not limit the size equal to the starting price, then the Act and the rules and regulations of responses to the auctioned order original COA will end.11 Proposed thereunder applicable to a national sized.22 subparagraph (c)(8)(E) will provide that securities exchange.19 In particular, the if the leg markets were not marketable Commission finds that the proposed IV. Conclusion against a COA-eligible order when the rule change is consistent with Section It is therefore ordered, pursuant to 20 order entered the System (and thus prior 6(b)(5) of the Act, which requires, Section 19(b)(2) of the Act,23 that the to the initiation of a COA) but became among other things, that the rules of a proposed rule change (SR–C2–2015– marketable with the COA-eligible order national securities exchange be 025), as modified by Amendment No. 1, prior to the expiration of the Response designed to prevent fraudulent and be, and it hereby is, approved. Time Interval, it will cause the COA to manipulative acts and practices, to end.12 The Exchange believes that these promote just and equitable principles of For the Commission, by the Division of trade, to remove impediments to and Trading and Markets, pursuant to delegated provisions prevent an order that was 24 entered after the initiation of a COA perfect the mechanism of a free and authority. from trading ahead of an order with the open market and a national market Robert W. Errett, same price that may have executed or system, and, in general, to protect Deputy Secretary. entered the COB if it did not COA.13 investors and the public interest. [FR Doc. 2015–31681 Filed 12–16–15; 8:45 am] Similarly, the Exchange believes it is The Commission believes that it is BILLING CODE 8011–01–P fair for a COA-eligible order that was reasonable for C2 to require that entered at a better price than an order incoming two-legged COA-eligible that was resting in the COB prior to orders be COA’d by default unless a SECURITIES AND EXCHANGE initiation of the COA to execute against Participant requests, on an order-by- COMMISSION leg markets that become marketable order basis, that such orders not COA. against the COA-eligible order and The Commission notes that, should a [Release No. 34–76626; File No. SR–CBOE– resting order during the COA, because Participant not wish its orders to be 2015–100] the Participant who entered the COA- COA’d, the proposed rule will allow the eligible order was willing to pay a better Participant to request that its orders not Self-Regulatory Organizations; price than that of the resting order.14 be COA’d on an order-by-order basis. In Chicago Board Options Exchange, Third, the Exchange proposes to addition, the Commission notes that the Incorporated; Order Granting Approval amend subparagraph (c)(3)(A) of C2 rules of another options exchange of a Proposed Rule Change, as Rule 6.13 to delete the provision that provide that certain complex orders be Modified by Amendment No. 1, To List states that RFR responses are limited to routed to a complex order auction and Trade Options That Overlie a the size of the COA-eligible order for unless a member designates that such Reduced Value of the FTSE 100 Index allocation purposes.15 The Exchange orders not initiate a complex order explains that it is proposing this change auction on that exchange.21 December 11, 2015. because if the allocation algorithm for The Commission also believes that it I. Introduction complex orders in a class is pro-rata, the is reasonable for the Exchange to add System is unable to block RFR new provisions regarding how incoming On October 30, 2015, the Chicago responses that are larger than the size of orders with ‘‘do-not-COA’’ requests or Board Options Exchange, Incorporated the COA-eligible order.16 The Exchange that are not COA-eligible, as well as (‘‘Exchange’’ or ‘‘CBOE’’) filed with the notes the pursuant to C2 Rule 6.13(c)(7), how changes in the leg markets, may Securities and Exchange Commission RFR responses are firm with respect to impact ongoing COAs. Such additions (‘‘Commission’’), pursuant to Section the COA-eligible order for which the enhance the description of current COA 19(b)(1) of the Securities Exchange Act responses are submitted, provided that functionality and the circumstances that of 1934 (‘‘Act’’) 1 and Rule 19b–4 responses that exceed the size of a COA- may cause a COA to end early to help thereunder,2 a proposed rule change to eligible order are also eligible to trade ensure investors understand how ‘‘do- list and trade options that overlie a with other incoming COA-eligible not-COA’’ orders may impact a COA. As reduced value of the FTSE 100 Index. orders that are received during the noted above, these rules provide that if The proposed rule change was Response Time Interval.17 entry of a ‘‘do-not-COA’’ order causes a published for comment in the Federal Finally, the Exchange proposes to COA to end, any executions that occur Register on November 10, 2015.3 On make technical and other following the COA will occur in December 10, 2015, the Exchange filed nonsubstantive changes, which are accordance with allocation principles in Amendment No. 1 to the proposed rule described in the Notice.18 place, subject to an exception that the change.4 This order grants approval of original COA-eligible order will receive III. Discussion and Commission time priority. 22 Findings See id. and NYSE MKT Rule 6.80NY(e). Finally, the Commission believes it is 23 15 U.S.C. 78s(b)(2). After careful review, the Commission reasonable for C2 to delete the provision 24 17 CFR 200.30–3(a)(12). finds that the proposed rule change is in its Rules limiting the size of RFR 1 15 U.S.C. 78s(b)(1). responses to the size of the COA-eligible 2 17 CFR 240.19b–4. 11 Id. order. The Commission notes that other 3 See Securities Exchange Act Release No. 76353 12 Id. at 67447–8. (November 4, 2015), 80 FR 69751 (‘‘Notice’’). 4 13 Id. at 67449. Amendment No. 1 makes certain technical 19 In approving this proposal, the Commission has modifications to Exhibit 5 to reflect the current 14 Id. considered the proposed rule’s impact on CBOE rulebook and to remove a reference to ‘‘(1/ 15 Id. at 67448. efficiency, competition, and capital formation. See 10th)’’ that was inadvertently included. It also 16 Id. The Exchange represents that this proposed 15 U.S.C. 78c(f). revises rule text to make additional technical edits. rule change will result in the rule regarding RFR 20 15 U.S.C. 78f(b)(5). As the changes made by Amendment No. 1 are responses more accurately reflecting current System 21 See NASDAQ OMX PHLX LLC (‘‘PHLX’’) Rule technical in nature and do not materially alter the functionality. Id. 1080, Commentary .07(a)(viii) and (e) (describing substance of the proposed rule change or raise any 17 Id. the complex order live auction (‘‘COLA’’) process novel regulatory issues, Amendment No. 1 is not 18 Id. and ‘‘do not auction’’ orders). subject to notice and comment.
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the proposed rule change, as modified clients through FTSE as well as through Exchange, the current index value is by Amendment No. 1. major quotation vendors, including widely disseminated at least once every Bloomberg and Reuters. fifteen (15) seconds by one or more II. Description of the Proposed Rule The Exchange proposes that trading major market data vendors; however, Change hours for FTSE 100 Index options the Exchange may continue to trade The Exchange proposes to list and would be from 8:30 a.m. (Chicago time) FTSE 100 options after trading in all trade A.M. cash-settled, European-style to 3:15 p.m. (Chicago time). component securities has closed for the options on the FTSE 100 Index.5 The Exchange proposes that FTSE 100 day and the index level is no longer According to the Exchange, the FTSE Index options would expire on the third widely disseminated at least once every 100 Index is a free float-adjusted market Friday of the expiration month.10 The fifteen (15) seconds by one or more capitalization index that is designed to exercise settlement value would be one- major market data vendors, provided measure the performance of the 100 tenth (1/10th) of the value of the FTSE that FTSE 100 futures contracts are largest companies traded on the London 100 Index calculated via an intra-day trading and prices for those contracts Stock Exchange and valued in the auction on the London Stock Exchange may be used as a proxy for the current British pound (‘‘GBP’’).6 The Exchange that is held on the morning of the index value; (9) the Exchange states that the index is monitored and expiration date (generally a Friday). The reasonably believes it has adequate maintained by FTSE International exercise settlement amount would be system capacity to support the trading Limited (‘‘FTSE’’).7 Adjustments to the equal to the difference between the of options on the index, based on a index could be made on a daily basis exercise-settlement value and the calculation of the Exchange’s current with respect to corporate events and exercise price of the option, multiplied Independent System Capacity Advisor dividends, and FTSE reviews the index by the contract multiplier ($100).11 allocation and the number of new quarterly. Exercise would result in delivery of messages per second expected to be According to the Exchange, the FTSE cash on the business day following generated by options on such index; and 100 Index is calculated and published expiration. (10) the Exchange has written in GBP on a real-time basis during The Exchange proposes to create surveillance procedures in place with United Kingdom and United States specific initial and maintenance listing respect to surveillance of trading of trading hours.8 The methodology used criteria for options on the FTSE 100 options on the index. to calculate the FTSE 100 Index is Index. Specifically, the Exchange Additionally, the Exchange proposes similar to the methodology used to proposes to add new Interpretation and to add new Interpretation and Policy calculate the value of other benchmark Policy .02(a) to Rule 24.2 to provide that .02(b) to Rule 24.2 to set forth the market-capitalization weighted the Exchange may trade FTSE 100 Index following maintenance listing standards indexes.9 Real-time data is distributed at options if each of the following for options on the FTSE 100 Index: (1) least every 15 seconds while the index conditions is satisfied: (1) The index is The conditions set forth in is being calculated using FTSE’s real- broad-based, as defined in Rule subparagraphs .02(a) (1), (2), (3), (4), (7), time calculation engine to Bloomberg 24.1(i)(1); (2) options on the index are (8), (9) and (10) must continue to be designated as A.M.-settled index L.P. (‘‘Bloomberg’’), Thomson Reuters satisfied, the conditions set forth in options; (3) the index is capitalization- (‘‘Reuters’’) and other major vendors. subparagraphs .02(a)(5) and (6) must be weighted, price-weighted, modified End of day data is distributed daily to satisfied only as of the first day of capitalization-weighted or equal dollar- January and July in each year; and (2) 5 The Exchange proposes to list up to twelve near- weighted; (4) the index consists of 90 or the total number of component term expiration months at any one time for the more component securities; (5) each of securities in the index may not increase FTSE 100 Index options. The Exchange also the component securities of the index or decrease by more than ten percent proposes to list up to ten expirations in Long-Term will have a market capitalization of (10%) from the number of component Index Option Series (LEAPS) on the reduced value greater than $100 million; (6) no single of the FTSE 100 Index Options. The Exchange securities in the index at the time of its proposes that options on the FTSE 100 Index would component security accounts for more initial listing. In the event a class of be eligible for all other expirations permitted for than fifteen percent (15%) of the weight index options listed on the Exchange other broad-based indexes (e.g., End of Week/End of the index, and the five highest pursuant to Interpretation and Policy of Month Expirations, Short Term Option Series, weighted component securities in the and Quarterly Options Series). In addition, the .02(b) fails to satisfy these maintenance Exchange proposes to designate the FTSE 100 Index index do not, in the aggregate, account listing standards, the Exchange shall not as eligible for trading as FLEX options. for more than fifty percent (50%) of the open for trading any additional series of 6 The Exchange states that the FTSE 100 Index weight of the index; (7) non-U.S. options of that class unless the meets the definition of a broad-based index as set component securities (stocks or ADRs) continued listing of that class of index forth in Exchange Rule 24.1(i)(1). that are not subject to comprehensive 7 The Exchange proposes to designate FTSE as the options has been approved by the reporting authority for the FTSE 100 Index. surveillance agreements do not, in the Commission under Section 19(b)(2) of 8 The Exchange states that from 2:00–10:30 a.m. aggregate, represent more than twenty the Act. (Chicago time) the real-time index is calculated percent (20%) of the weight of the FTSE The contract multiplier for the FTSE using real time prices of the securities. At 10:30 100 Index; (8) during the time options 100 Index options would be $100. The a.m. (Chicago time) the real time index closes using FTSE 100 Index options would be the closing prices from the London Stock Exchange. on the index are traded on the Thus, between 10:30 a.m. and 3:15 p.m. (Chicago quoted in index points and one point time) the FTSE 100 Index level is a static value that 10 According to the Exchange, when the last would equal $100. The Exchange market participants can access via data vendors. trading day/expiration date is moved because of an proposes that the minimum tick size for 9 Specifically, the FTSE 100 Index is governed by Exchange holiday or closure, the last trading day/ series trading below $3 would be 0.05 the Ground Rules for the FTSE UK Index Series. expiration date for expiring options would be the The level of the FTSE 100 Index reflects the free immediately preceding business day. ($5.00), and at or above $3 would be float-adjusted market value of the component stocks 11 According to the Exchange, if the exercise 0.10 ($10.00). The Exchange also relative to a particular base date and is computed settlement value is not available or the normal proposes that the strike price interval by dividing the total market value of the companies settlement procedure cannot be utilized due to a for FTSE 100 Index options would be no in the FTSE 100 Index by the index divisor. Further trading disruption or other unusual circumstance, detail regarding this methodology can be found in the settlement value would be determined in less than $5, except that the strike price the Notice, supra note 3, at n.5 and accompanying accordance with the rules and bylaws of The interval would be no less than $2.50 if text. Options Clearing Corporation. the strike price is less than $200.
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The Exchange proposes to apply the Amendment No. 1, is consistent with weight of the index, and would not default position limits for broad-based the requirements of the Act and the permit the five highest weighted index options of 25,000 contracts on the rules and regulations thereunder component securities to account for same side of the market (and 15,000 applicable to a national securities more than 50% of the weight of the contracts near-term limit) to FTSE 100 exchange.15 Specifically, the index in the aggregate. The Commission Index options. All position limit hedge Commission finds that the proposed believes that, in view of the requirement exemptions would apply. The exercise rule change, as modified by Amendment on the number of securities in the index limits for FTSE 100 Index options No. 1, is consistent with Section 6(b)(5) and on each security’s market would be equivalent to the position of the Act,16 which requires, among capitalization, this concentration limits for those options. In addition, the other things, that the rules of a national standard is consistent with the Act. As Exchange proposes that the position securities exchange be designed to noted above, the Exchange represents limits for FLEX options on the FTSE 100 prevent fraudulent and manipulative that it has an adequate surveillance Index would be equal to the position acts and practices, to promote just and program in place for FTSE 100 Index limits for non-FLEX options on the equitable principles of trade, to remove options and intends to use the same FTSE 100 Index. The exercise limits for impediments to and perfect the surveillance procedures currently FLEX options on the FTSE 100 Index mechanism of a free and open market utilized for each of the Exchange’s other would be equivalent to the position and a national market system and, in index options to monitor trading in the limits for those options. general, to protect investors and the proposed options. The Exchange states that, except as public interest. The Commission notes that, modified by the proposal, Exchange The Commission believes that the consistent with the Exchange’s generic Rules in Chapters I through XIX, XXIV, listing and trading of FTSE 100 Index listing standards for broad-based index XXIVA, and XXIVB would equally options will broaden trading and options, non-U.S. component securities apply to FTSE 100 Index options. The hedging opportunities for investors by of the FTSE 100 Index that are not Exchange also states that FTSE 100 providing an options instrument based subject to comprehensive surveillance Index options would be subject to the on an index designed to measure the agreements will not, in the aggregate, same rules that currently govern other performance of the 100 largest represent more than 20% of the weight CBOE index options, including sales companies traded on the London Stock of the index. 12 practice rules, margin requirements, Exchange. The proposed listing standards 13 Because the FTSE 100 Index is a and trading rules. require that, during the time options on The Exchange represents that it has an broad-based index composed of the FTSE 100 Index are traded on the adequate surveillance program in place actively-traded, well-capitalized stocks, Exchange, the current index value is for FTSE 100 Index options and intends the trading of options on the index does widely disseminated at least once every to use the same surveillance procedures not raise unique regulatory concerns. 15 seconds by one or more major market currently utilized for each of the The Commission believes that the data vendors. However, the Exchange Exchange’s other index options to listing standards, which are created may continue to trade FTSE 100 Index monitor trading in the proposed specifically and exclusively for the options after trading in all component options. The Exchange also states that it index, are consistent with the Act, for securities has closed for the day and the is a member of the Intermarket the reasons discussed below.17 index level is no longer widely Surveillance Group, is an affiliate The Commission notes that proposed disseminated at least once every 15 member of the International Interpretation and Policy .02 to seconds by one or more major market Organization of Securities Commissions, Exchange Rule 24.2 would require that data vendors, provided that FTSE 100 and has entered into various the FTSE 100 Index consist of 90 or futures contracts are trading and prices comprehensive surveillance agreements more component securities. Further, for for those contracts may be used as a and/or Memoranda of Understanding options on the FTSE 100 Index to trade, proxy for the current index value.18 with various stock exchanges, including each of the minimum of 90 component the London Stock Exchange. Finally, the securities would need to have a market In addition, the proposed listing Exchange represents that it believes it capitalization of greater than $100 standards require the Exchange to and the Options Price Reporting million. reasonably believe that it has adequate Authority (‘‘OPRA’’) have the necessary The Commission notes that the system capacity to support the trading systems capacity to handle the proposed listing standards for options of options on the FTSE 100 Index. As additional traffic associated with the on the FTSE 100 Index would not noted above, the Exchange represents listing of new series that would result permit any single component security to that it believes it and the OPRA have the from the introduction of FTSE 100 account for more than 15% of the necessary systems capacity to handle Index options.14 the additional traffic associated with the 15 In approving this proposed rule change, as listing of new series that would result III. Discussion and Commission modified by Amendment No. 1, the Commission Findings has considered the proposed rule’s impact on 18 The Exchange notes that, because trading in the The Commission finds that the efficiency, competition, and capital formation. See components of the FTSE 100 Index starts at 15 U.S.C. 78c(f). proposed rule change, as modified by approximately 2:00 a.m. (Chicago time) and ends at 16 15 U.S.C. 78f(b)(5). approximately 10:30 a.m. (Chicago time), there will 17 The Commission notes that it previously not be a current FTSE 100 Index level calculated 12 The Exchange states that FTSE 100 Index approved the listing and trading reduced value and disseminated during a portion of the time when options would be margined as broad-based index index options on the FTSE 100 Index on the the FTSE 100 Index options would be traded (from options. Exchange, International Securities Exchange, Inc. approximately 10:30 a.m. (Chicago time) to 3:15 13 See, e.g., Exchange Rule Chapters IX (Doing and NYSE Arca, Inc. See Securities Exchange Act p.m. (Chicago time)). However, the Exchange states Business with the Public), XII (Margins), IV Release Nos. 29722 (September 23, 1991), 56 FR that the FTSE 100 Index futures contracts will be (Business Conduct), VI (Doing Business on the 49807 (October 1, 1991) (order approving SR– trading during this time period and that the futures Exchange Floor), VIII (Market-Makers, Trading CBOE–91–07); 53484 (March 14, 2006) 71 FR 14268 prices would be a proxy for the current FTSE 100 Crowds and Modified Trading Systems), and XXIV (March 21, 2006) (order approving SR–ISE–2005– Index level during this time period. The Exchange (Index Options). 25); and 58008 (June 24, 2008) 73 FR 36945 (June states that FTSE 100 Index futures contracts are 14 For a complete description of the Exchange’s 30, 2008) (order approving SR–NYSEArca-2008– listed for trading on the Chicago Mercantile proposal, please see the Notice, supra note 3. 61). Exchange Inc.
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from the introduction of FTSE 100 30, 2015, NASDAQ OMX PHLX LLC listed securities from $0.0028 to $0.0029 Index options. (‘‘Phlx’’ or ‘‘Exchange’’) filed with the per share executed. Second, the As a national securities exchange, the Securities and Exchange Commission Exchange is proposing to increase the Exchange is required, under Section (‘‘SEC’’ or ‘‘Commission’’) the proposed charge for executions in NYSE-listed 6(b)(1) of the Act,19 to enforce rule change as described in Items I, II, securities from $0.0027 to $0.0028 per compliance by its members, and persons and III, below, which Items have been share executed. Lastly, the Exchange is associated with its members, with the prepared by the Exchange. The proposing to increase the charge for provisions of the Act, Commission rules Commission is publishing this notice to executions in securities listed on and regulations thereunder, and its own solicit comments on the proposed rule exchanges other than Nasdaq and NYSE rules. As noted above, the Exchange change from interested persons. from $0.0026 to $0.0028 per share states that, except as modified by the executed. proposal, Exchange Rules in Chapters I I. Self-Regulatory Organization’s The Exchange is also proposing to through XIX, XXIV, XXIVA, and XXIVB Statement of the Terms of Substance of increase credits provided to member would equally apply to FTSE 100 Index the Proposed Rule Change organizations that provide displayed options. The Exchange also states that The Exchange proposes to amend the liquidity through PSX under FTSE 100 Index options would be Exchange’s Pricing Schedule under subparagraph (a)(1) of the rule. First, the subject to the same rules that currently Section VIII, entitled ‘‘NASDAQ OMX Exchange is proposing to increase the govern other CBOE index options, PSX FEES,’’ with respect to execution credit provided for Quotes/Orders including sales practice rules, margin and routing of orders in securities entered by a member organization that requirements, and trading rules. priced at $1 or more per share. provides and accesses 0.35% or more of The Commission further believes that While the changes proposed herein Consolidated Volume during the month the Exchange’s proposed position and are effective upon filing, the Exchange from $0.0028 to $0.0031 per share exercise limits, trading hours, margin, has designated the amendments become executed. Second, the Exchange is strike price intervals, minimum tick operative on December 1, 2015. proposing to increase the credit size, series openings, and other aspects The text of the proposed rule change provided for Quotes/Orders entered by of the proposed rule change, as is available on the Exchange’s Web site a member organization that provides modified by Amendment No. 1, are at http://nasdaqomxphlx. and accesses 0.25% or more of appropriate and consistent with the Act. cchwallstreet.com/, at the principal Consolidated Volume during the month from $0.0027 to $0.0029 per share IV. Conclusion office of the Exchange, and at the Commission’s Public Reference Room. executed. Lastly, the Exchange is It is therefore ordered, pursuant to eliminating the $0.0023 per share Section 19(b)(2) of the Act,20 that the II. Self-Regulatory Organization’s executed credit provided for Quotes/ proposed rule change (SR–CBOE–2015– Statement of the Purpose of, and Orders entered by a member 100), as modified by Amendment No. 1, Statutory Basis for, the Proposed Rule organization that provides and accesses be, and hereby is, approved. Change daily volume of 100,000 or more shares For the Commission, by the Division of In its filing with the Commission, the during the month, and is increasing the Trading and Markets, pursuant to delegated Exchange included statements ‘‘default’’ credit (i.e., the credit received authority.21 concerning the purpose of and basis for for providing displayed liquidity that Robert W. Errett, the proposed rule change and discussed does not otherwise qualify for a higher Deputy Secretary. any comments it received on the credit) provided for all other Quotes/ [FR Doc. 2015–31685 Filed 12–16–15; 8:45 am] proposed rule change. The text of these Orders from $0.0020 to $0.0023 per share executed. BILLING CODE 8011–01–P statements may be examined at the places specified in Item IV below. The Finally, the Exchange is proposing to Exchange has prepared summaries, set eliminate text from subparagraph (a) of SECURITIES AND EXCHANGE forth in sections A, B, and C below, of the rule that defines the term ‘‘regular COMMISSION the most significant aspects of such market hours,’’ which was erroneously statements. left in the rule text when the tier it [Release No. 34–76631; File No. SR–Phlx– provided reference to was deleted. 2015–98] A. Self-Regulatory Organization’s Currently, no fee or credit references the Statement of the Purpose of, and Self-Regulatory Organizations; definition. Thus, the Exchange is Statutory Basis for, the Proposed Rule proposing to delete the reference. NASDAQ OMX PHLX LLC; Notice of Change Filing and Immediate Effectiveness of 2. Statutory Basis 1. Purpose Proposed Rule Change Relating to the The Exchange believes that the Exchange’s Pricing Schedule Under The purpose of the proposed rule proposed rule change is consistent with Section VIII With Respect to Execution change is to amend certain charges and the provisions of Section 6 of the Act,3 and Routing of Orders in Securities fees for order execution and routing in general, and with Sections 6(b)(4) and Priced at $1 or More Per Share applicable to the use of the order 6(b)(5) of the Act,4 in particular, in that execution and routing services of the December 11, 2015. it provides for the equitable allocation NASDAQ OMX PSX System (‘‘PSX’’) by Pursuant to Section 19(b)(1) of the of reasonable dues, fees and other member organizations for all securities Securities Exchange Act of 1934 charges among members and issuers and traded at $1 or more per share. (‘‘Act’’),1 and Rule 19b–4 thereunder,2 other persons using any facility or Specifically, under subparagraph notice is hereby given that on November system which Nasdaq operates or (a)(1) of the rule the Exchange is controls and is designed to prevent 19 15 U.S.C. 78f(b)(1). proposing to increase the charges fraudulent and manipulative acts and 20 15 U.S.C. 78s(b)(2). assessed member organizations that practices, to promote just and equitable 21 17 CFR 200.30–3(a)(12). enter orders that execute in PSX. First, 1 15 U.S.C. 78s(b)(1). the Exchange is proposing to increase 3 15 U.S.C. 78f. 2 17 CFR 240.19b–4. the charge for executions in Nasdaq- 4 15 U.S.C. 78f(b)(4) and (5).
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principles of trade, to foster cooperation quality. The goal of these pricing providing the greatest incentive to and coordination with persons engaged incentives is to provide meaningful market participants that also provide in regulating, clearing, settling, incentives for members to increase their and access the highest level of processing information with respect to, participation on the Exchange. Consolidated Volume during the month and facilitating transactions in The Exchange is proposing to increase may significantly increase the number securities, to remove impediments to the charges to a member organization of member organizations that provide and perfect the mechanism of a free and entering an order that executes in PSX such high levels of market improving open market and a national market and is also proposing to increase credits participation, to the benefit of all system, and, in general, to protect provided to member organizations. As a participants. Elimination of the credit investors and the public interest; and general principle, the Exchange must, tier and increasing the level of the are not designed to permit unfair from time to time, adjust the level of default credit to the level of the discrimination between customers, fees and credits provided to most eliminated tier is reasonable as it is issuers, brokers, or dealers. efficiently allocate reduced fees and reflective of the Exchange’s desire to The Commission and the courts have credits in terms of market improving make PSX an attractive venue to any repeatedly expressed their preference behavior. In this regard, the Exchange is member organization that is willing to for competition over regulatory limited in how far it may reduce fees provide displayed liquidity. The intervention in determining prices, and in the amount of credits that it can Exchange believes that the proposed products, and services in the securities provide to market participants. increases to the credits provided for markets. In Regulation NMS, for The Exchange believes that the displayed liquidity through PSX and example, the Commission indicated that increases to the charges assessed a elimination of a credit tier are consistent market forces should generally member organization entering an order with an equitable allocation of fees and determine the price of non-core market that executes in PSX are reasonable are not unfairly discriminatory because data because national market system because they reflect the Exchange’s need they apply to all member organizations regulation ‘‘has been remarkably to adjust its credits and fees in response that provide displayed liquidity through successful in promoting market to the costs and benefits provided by the PSX and meet the criteria of the credit competition in its broader forms that are Exchange. In addition to covering tier. In addition, member organizations most important to investors and listed Exchange costs, the increased fees will that previously would have qualified companies.’’ 5 Likewise, in NetCoalition allow the Exchange to offer credits to under the eliminated tier would v. NYSE Arca, Inc., 615 F.3d 525 (D.C. market participants that provide continue to receive the same credit Cir. 2010), the D.C. Circuit upheld the beneficial liquidity to PSX, to the under the ‘‘default’’ credit tier. benefit of all of its participants. The Commission’s use of a market-based The Exchange believes that the Exchange notes that it is increasing the approach in evaluating the fairness of charge assessed for executions in elimination of rule text that defines a market data fees against a challenge securities listed on exchanges other than term no longer used in the fee schedule claiming that Congress mandated a cost- Nasdaq and NYSE by a greater amount is consistent with the protection of based approach.6 As the court than for securities listed on Nasdaq and investors and the public interest emphasized, the Commission ‘‘intended NYSE because it still wishes to offer because it will avoid investor confusion in Regulation NMS that ‘market forces, lower fees for removal of liquidity for that may occur by including it. rather than regulatory requirements’ securities not listed on Nasdaq while play a role in determining the market B. Self-Regulatory Organization’s balancing the exchanges’ fees with its data . . . to be made available to Statement on Burden on Competition 7 credits. The Exchange believes that the investors and at what cost.’’ proposed increases to the charges The Exchange does not believe that Further, ‘‘[n]o one disputes that assessed a member organization the proposed rule changes will result in competition for order flow is ‘fierce.’ entering an order that executes in PSX any burden on competition that is not . . . As the SEC explained, ‘[i]n the U.S. are consistent with an equitable necessary or appropriate in furtherance 9 national market system, buyers and allocation of fees and are not unfairly of the purposes of the Act, as amended. sellers of securities, and the broker- discriminatory because they apply to all Phlx notes that it operates in a highly dealers that act as their order-routing member organizations that enter orders competitive market in which market agents, have a wide range of choices of in the securities based on the listing participants can readily favor dozens of where to route orders for execution’; venue of the security. different competing exchanges and [and] ‘no exchange can afford to take its The Exchange believes that the alternative trading systems if they deem market share percentages for granted’ proposed increases to the credits charges at a particular venue to be because ‘no exchange possesses a provided to a member organization that excessive, or credit opportunities monopoly, regulatory or otherwise, in provides displayed liquidity through available at other venues to be more the execution of order flow from broker PSX are reasonable because the favorable. In such an environment, the dealers’ . . . .’’ 8 Exchange seeks to improve market Exchange must continually adjust its The proposed increases to the credits quality by providing increased charges and credits to remain and charges in the fee schedule under incentives to market participants to competitive with other exchanges. the Exchange’s Pricing Schedule under provide beneficial displayed liquidity. Because competitors are free to modify Section VIII are reflective of the To achieve this, the Exchange must, their own charges and credits in Exchange’s ongoing efforts to use from time to time, adjust the levels of response, and because market pricing incentives to attract order flow credits and the related qualification participants may readily adjust their to the Exchange and improve market requirements in reaction to market order routing practices, the Exchange behavior. In the present case, the believes that the degree to which 5 See Exchange Act Release No. 34–51808 (June Exchange is proposing to increase two changes to charges and credits in this 9, 2005) (‘‘Regulation NMS Adopting Release’’). market may impose any burden on 6 See NetCoalition, 615 F.3d at 534. of the credit tiers, eliminate the lowest 7 Id. at 537. credit tier, and increase the ‘‘default’’ competition is extremely limited. 8 NetCoalition, 615 F.3d at 539 (quoting ArcaBook credit to the level of the eliminated Order, 73 FR at 74782–74783). credit tier. The Exchange believes 9 15 U.S.C. 78f(b)(8).
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In this instance, the changes to • Send an email to rule-comments@ SECURITIES AND EXCHANGE charges and credits do not impose a sec.gov. Please include File Number SR– COMMISSION burden on competition because the Phlx–2015–98 on the subject line. [Release No. 34–76632; File No. SR–CBOE– Exchange membership is optional and is 2015–104] the subject of competition from other Paper Comments exchanges. The increased credits and • Send paper comments in triplicate Self-Regulatory Organizations; charges are reflective of the intent to to Secretary, Securities and Exchange Chicago Board Options Exchange, increase the order flow on the Exchange. Commission, 100 F Street NE., Incorporated; Order Granting For these reasons, the Exchange does Washington, DC 20549–1090. Accelerated Approval of a Proposed not believe that any of the proposed Rule Change To Trade Expiring MSCI changes will impair the ability of All submissions should refer to File EAFE Index Options Until 3:00 p.m. members or competing order execution Number SR–Phlx–2015–98. This file venues to maintain their competitive number should be included on the December 11, 2015. standing in the financial markets. subject line if email is used. To help the I. Introduction Moreover, because there are numerous Commission process and review your On November 13, 2015, the Chicago competitive alternatives to the use of the comments more efficiently, please use Exchange, it is likely that the Exchange Board Options Exchange, Incorporated only one method. The Commission will (the ‘‘Exchange’’ or ‘‘CBOE’’) filed with will lose market share as a result of the post all comments on the Commission’s changes if they are unattractive to the Securities and Exchange Internet Web site (https://www.sec.gov/ Commission (the ‘‘Commission’’), market participants. rules/sro-shtml). Copies of the Accordingly, the Exchange does not pursuant to Section 19(b)(1) of the submission, all subsequent believe that the proposed rule changes Securities Exchange Act of 1934 (the amendments, all written statements 1 2 will impair the ability of members or ‘‘Act’’) and Rule 19b–4 thereunder, a competing order execution venues to with respect to the proposed rule proposed rule change to change the maintain their competitive standing in change that are filed with the trading hours for expiring MSCI EAFE the financial markets. Commission, and all written Index (‘‘EAFE’’) options. This proposal communications relating to the was published for comment in the C. Self-Regulatory Organization’s proposed rule change between the Federal Register on November 25, Statement on Comments on the Commission and any person, other than 2015.3 The Commission received no Proposed Rule Change Received From those that may be withheld from the comments regarding the proposal. This Members, Participants, or Others public in accordance with the order approves the proposed rule No written comments were either provisions of 5 U.S.C. 552, will be change on an accelerated basis. solicited or received. available for Web site viewing and II. Description of the Proposed Rule III. Date of Effectiveness of the printing in the Commission’s Public Change Proposed Rule Change and Timing for Reference Room, 100 F Street NE., Washington, DC 20549, on official The Exchange proposes to change the Commission Action trading hours for expiring EAFE options business days between the hours of The foregoing rule change has become from 10:00 a.m. (Chicago time) on their 10:00 a.m. and 3:00 p.m. Copies of the effective pursuant to Section expiration date to 3:00 p.m. (Chicago filing also will be available for 19(b)(3)(A)(ii) of the Act.10 At any time time) on their expiration date. When the within 60 days of the filing of the inspection and copying at the principal Exchange first listed EAFE options, the proposed rule change, the Commission office of the Exchange. All comments MSCI EAFE Index was not calculated summarily may temporarily suspend received will be posted without change; and disseminated during the entire time such rule change if it appears to the the Commission does not edit personal period during which EAFE options were Commission that such action is identifying information from traded on the Exchange. Accordingly, necessary or appropriate in the public submissions. You should submit only the Exchange set the initial trading interest, for the protection of investors, information that you wish to make hours for expiring EAFE options to align or otherwise in furtherance of the available publicly. All submissions with expiring EAFE futures contracts purposes of the Act. If the Commission should refer to File Number SR–Phlx– traded on the Intercontinental takes such action, the Commission shall 2015–98 and should be submitted on or Exchange, Inc. (‘‘ICE’’), which stopped institute proceedings to determine before January 7, 2016. trading at 10:00 a.m. (Chicago time) on whether the proposed rule should be For the Commission, by the Division of the third Friday of the futures contracts 4 approved or disapproved. Trading and Markets, pursuant to delegated month. The MSCI EAFE Index, however, will IV. Solicitation of Comments authority.11 now be calculated and disseminated Interested persons are invited to through the close of trading on U.S. submit written data, views, and Robert W. Errett, arguments concerning the foregoing, Deputy Secretary. 1 15 U.S.C. 78s(b)(1). including whether the proposed rule [FR Doc. 2015–31687 Filed 12–16–15; 8:45 am] 2 17 CFR 240.19b–4. 3 change is consistent with the Act. BILLING CODE 8011–01–P See Securities Exchange Act Release No. 76482 Comments may be submitted by any of (November 19, 2015), 80 FR 73839 (‘‘Notice’’). 4 See Notice, supra note 3, at 73840. The the following methods: Exchange established listing criteria that permits Electronic Comments the trading of EAFE options ‘‘after trading in all component securities has closed for the day and the • Use the Commission’s Internet index level is no longer widely disseminated at comment form (http://www.sec.gov/ least once every fifteen (15) seconds by one or more major market data vendors, provided that EAFE rules/sro.shtml); or futures contracts are trading and prices for those contract may be used as a proxy for the current 10 15 U.S.C. 78s(b)(3)(A)(ii). 11 17 CFR 200.30–3(a)(12). index value.’’ See CBOE Rule 24.2.01(a)(8).
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markets at 3:00 p.m. (Chicago time). As trade, to remove impediments to and IV. Conclusion such, the Exchange understands that perfect the mechanism of a free and It is therefore ordered, pursuant to ICE is changing the trading hours for open market and a national market Section 19(b)(2) of the Act,12 that the expiring EAFE futures contracts listed system, and, in general, to protect proposed rule change (File No. SR– on ICE from 10:00 a.m. (Chicago time) investors and the public interest. CBOE–2015–104) be, and hereby is, 5 to 3:15 p.m. (Chicago time). Because The Commission believes that it is approved on an accelerated basis. the MSCI EAFE Index will now be consistent with the Act for the Exchange calculated and disseminated through For the Commission, by the Division of to change the trading hours for expiring Trading and Markets, pursuant to delegated the close of trading on U.S. markets EAFE options from a close of 10:00 a.m. authority.13 (until 3:00 p.m. (Chicago time)) and Robert W. Errett, because ICE is also changing the trading (Chicago time) to 3:00 p.m. (Chicago hours for expiring EAFE futures (to time), because the MSCI EAFE Index Deputy Secretary. close at 3:15 p.m. (Chicago time)), the will now be calculated and [FR Doc. 2015–31678 Filed 12–16–15; 8:45 am] Exchange proposes to change the disseminated through the close of BILLING CODE 8011–01–P closing time for trading in expiring trading at 3:00 p.m. (Chicago time) and EAFE options from 10:00 a.m. (Chicago thus the current index value should be time) to 3:00 p.m. (Chicago time) on widely available to market participants SECURITIES AND EXCHANGE their expiration date. throughout the entire trading day. COMMISSION The Exchange proposes to close Further, the proposed rule change will [Release No. 34–76623; File No. SR–BATS– trading at 3:00 p.m. (Chicago time)— allow the trading hours of EAFE options 2015–112] rather than at 3:15 p.m. (Chicago time), to continue to closely align with the the time ICE ceases trading for expiring trading hours of expiring EAFE futures Self-Regulatory Organizations; BATS EAFE futures contracts—because, contracts, which the Commission Exchange, Inc.; Notice of Filing and according to the Exchange, on the last believes will afford investors and Immediate Effectiveness of a Proposed day of trading, the closing prices of the market participants the ability to Rule Change to Rules 11.13(b)(4)(A) component stocks, which are used to continue to hedge across markets. The and 21.9(a)(3)(A), Amending derive the exercise settlement value of Commission also notes that the trading Aggressive Re-Route Instruction the EAFE options, are known at 3:00 hours are consistent with the closing December 11, 2015. p.m. (Chicago time) (or shortly times of other P.M.-settled contracts Pursuant to Section 19(b)(1) of the thereafter).6 The Exchange further notes listed on the Exchange that underlie Securities Exchange Act of 1934 (the that this proposed rule change is indexes that close when the U.S. equity ‘‘Act’’),1 and Rule 19b–4 thereunder,2 consistent with the closing times for markets close at 3:00 p.m. (Chicago notice is hereby given that on December other expiring P.M.-settled contracts 10 time). 2, 2015, BATS Exchange, Inc. (the that underlie indexes that close when In addition, the Commission finds ‘‘Exchange’’ or ‘‘BATS’’) filed with the the U.S. equity markets close at 3:00 good cause, pursuant to Section 19(b)(2) Securities and Exchange Commission p.m. (Chicago time).7 11 (‘‘Commission’’) the proposed rule The Exchange proposes to change the of the Act, for approving the proposed change as described in Items I and II trading hours for expiring EAFE options rule change prior to the 45th day after below, which Items have been prepared beginning with the December 2015 publication of notice in the Federal by the Exchange. The Exchange has expiration, which occurs on December Register. The proposed rule change to designated this proposal as a ‘‘non- 18, 2015. The Exchange is proposing to modify the trading hours of EAFE controversial’’ proposed rule change have this change apply to all EAFE options was published for a 15-day pursuant to Section 19(b)(3)(A) of the options listed on or before the effective comment period to ensure that the Act 3 and Rule 19b–4(f)(6) thereunder,4 date of this filing and all EAFE options public had an opportunity to review the which renders it effective upon filing listed afterward. proposal and no comments were received. The proposed rule change will with the Commission. The Commission III. Discussion and Findings increase the trading hours during which is publishing this notice to solicit After careful review, the Commission EAFE options may be traded, which the comments on the proposed rule change finds that the proposed rule change is Commission believes should broaden from interested persons. consistent with the requirements of the the trading and hedging opportunities I. Self-Regulatory Organization’s Act and the rules and regulations for investors. Further, the Commission Statement of the Terms of the Substance thereunder applicable to a national notes that the Exchange represents that of the Proposed Rule Change securities exchange.8 In particular, the the change to the trading hours for The Exchange is proposing to amend Commission finds that the proposed EAFE futures will be implemented with the Aggressive Re-Route instruction rule change is consistent with Section the December 2015 expiration. under Exchange Rule 11.13(b)(4)(A) to 6(b)(5) of the Act,9 which requires, Accordingly, the Commission believes route such orders where that order has among other things, that the rules of a that accelerated approval will maintain been locked or crossed by other Trading national securities exchange be consistency in the trading hours of Centers on the Exchange’s cash equities designed to prevent fraudulent and EAFE options and EAFE futures trading platform (‘‘BATS Equities’’). manipulative acts and practices, to contracts, which should enable cross- Consistent with its practice of offering promote just and equitable principles of market competition and facilitate similar functionality for the Exchange’s hedging opportunities. For these equity options trading platform (‘‘BATS 5 See Notice, supra note 3, at 73840. reasons, the Commission finds that good 6 Id. cause exists for approving the proposed 12 7 Id. 15 U.S.C. 78s(b)(2). rule change on an accelerated basis. 13 8 In approving this proposal, the Commission has 17 CFR 200.30–3(a)(12). considered the proposed rule’s impact on 1 15 U.S.C. 78s(b)(1). efficiency, competition, and capital formation. See 10 See CBOE Rules 24.6.01, 24.6.03, 24.6.04 and 2 17 CFR 240.19b–4. 15 U.S.C. 78c(f). 24.9(e). 3 15 U.S.C. 78s(b)(3)(A). 9 15 U.S.C. 78f(b)(5). 11 15 U.S.C. 78s(b)(2). 4 17 CFR 240.19b–4(f)(6).
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Options’’) as it does for BATS Equities, description of how the Exchange treats if the order is locked or crossed). the Exchange also proposes to amend any unfilled balance that returns to the Further, a routable non-displayed limit Rule 21.9(a)(3)(A) to make similar Exchange following the first attempt to order posted to the BATS Book that is changes with respect to BATS Options. fill the order through the routing crossed by another accessible Trading The text of the proposed rule change process. If not filled through routing, Center will be automatically routed to is available at the Exchange’s Web site and based on the order instructions, the the crossing Trading Center. The at www.batstrading.com, at the unfilled balance of the order may be Exchange proposes to modify the principal office of the Exchange, and at posted to the BATS Options Book. Aggressive Re-Route instruction to also the Commission’s Public Reference Under previous Exchange rules,6 to provide that, where the order is locked Room. the extent the unfilled balance of an by another accessible Trading Center, it order had been posted to the BATS would be automatically routed to the II. Self-Regulatory Organization’s Book, should the order subsequently be locking Trading Center. The proposed Statement of the Purpose of, and locked or crossed by another accessible amendment would also apply to non- Statutory Basis for, the Proposed Rule Trading Center, the System 7 would displayed orders with the Aggressive Change route the order to the locking or crossing Re-Route instruction.9 In its filing with the Commission, the Trading Center if instructed to do so by In order to maintain consistency Exchange included statements the User (the ‘‘RECYCLE Option’’). The between the analogous Aggressive Re- concerning the purpose of and basis for Exchange then filed a proposed rule Route instruction offered by BATS the proposed rule change and discussed change with the Commission for Equities and BATS Options, the any comments it received on the immediate effectiveness to modify the Exchange proposes to modify the rules proposed rule change. The text of these RECYCLE Option and rename it as the of BATS Options to conform to the statements may be examined at the Aggressive and Super-Aggressive Re- changes described above related to the places specified in Item IV below. The Route instruction.8 Aggressive Re-Route instruction. The Exchange has prepared summaries, set The Aggressive Re-Route instruction proposed Aggressive Re-Route forth in Sections A, B, and C below, of subjects an order to the routing process functionality for BATS Options is the most significant parts of such after being posted to the BATS Book similar to the proposed functionality for statements. only if the order is subsequently crossed BATS Equities, with the exception of by another Trading Center (rather than language related to non-displayed A. Self-Regulatory Organization’s orders. BATS Options does not have Statement of the Purpose of, and 6 See Securities Exchange Act Release Nos. 59967 non-displayed orders, and thus, has Statutory Basis for, the Proposed Rule (May 21, 2009), 74 FR 25793 (May 29, 2009) (SR– omitted language regarding Re-Route Change BATS–2009–015) (proposing to allow the designation of an order as eligible for re-routing functionality applicable to non- 1. Purpose after being posted to the BATS Book if another displayed orders. All other changes for Trading Center has locked or crossed the posted BATS Equities, including the rationale With respect to BATS Equities, the order); 62404 (June 30, 2010), 75 FR 39303 (July 8, and example described above, are Exchange currently allows Users to 2010) (SR–BATS–2010–017) (naming the identical for BATS Options. submit various types of limit orders to designation of an order as eligible for re-routing after being posted to the BATS Book if another 2. Statutory Basis the Exchange that are processed Trading Center has locked or crossed the posted pursuant to Exchange Rules 11.13(a) order as the RECYCLE routing option). The Exchange believes that the and 11.13(b), as set forth below. Rule 7 As defined in Rule 1.5(aa), the System is the proposed rule change is consistent with 11.13(a) describes the process by which electronic communications and trading facility Section 6(b) of the Act 10 and furthers designated by the Board through which securities an incoming order would execute orders of Users are consolidated for ranking, the objectives of Section 6(b)(5) of the 11 against the BATS Book for BATS execution and, when applicable, routing away. Act because it is designed to promote Equities. To the extent an order has not 8 See Securities Exchange Act Release No. 73296 just and equitable principles of trade, to been executed in its entirety against the (October 3, 2014), 79 FR 61121 (October 9, 2014) remove impediments to and perfect the BATS Book, Rule 11.13(b) then (SR–BATS–2014–044) (Notice of Filing and mechanism of a free and open market Immediate Effectiveness of a Proposed Rule Change describes the process of routing to Amend Rules 11.13 and Rule 21.9) (adopting the and a national market system, to foster marketable limit orders to one or more Aggressive Re-Route instruction). In SR–BATS– cooperation and coordination with Trading Centers, including a description 2014–044, the RECYCLE Option was renamed persons engaged in facilitating of how the Exchange treats any unfilled Super Aggressive Re-Route instruction, under transactions in securities, and, in which a routable order posted to the BATS Book balance that returns to the Exchange routes to away Trading Centers to remove liquidity general, to protect investors and the following the first attempt to fill the from such Trading Centers any time such order is public interest. Specifically, the order through the routing process. If not locked or crossed. The Exchange subsequently proposed changes are designed to filled through routing, and based on the expanded the Super Aggressive Re-Route provide Users with additional control instruction to provide that when any order with a order instructions, the unfilled balance Super Aggressive Re-Route instruction is locked by over their orders in the context of a of the order may be posted to the BATS an incoming BATS Post Only Order or Partial Post national market system where Book. Only at Limit Order that does not remove liquidity quotations may lock or cross orders Similarly, with respect to BATS pursuant to Rule 11.9(c)(6) or Rule 11.9(c)(7), posted to the BATS Book and to respectively, the Re-Route order is converted to an Options, Rule 21.8 describes the process executable order when displayed shares become facilitate executions on the Exchange by which an incoming order would available on the opposite side of the market and consistent with User instructions. Thus, execute against the BATS Options will remove liquidity against such shares the proposals are directly targeted at Book.5 To the extent an order has not (‘‘liquidity swap functionality’’). See Securities removing impediments to and Exchange Act Release No. 74738 (April 16, 2015), been executed in its entirety against the 80 FR 22600 (April 22, 2015) (SR–BATS–2015–09). BATS Options Book, Rule 21.9(a)(1) Once amended, the only difference between the 9 In April 2015, the Aggressive Re-Route then describes the process of routing Aggressive and Super Aggressive Re-Route instruction was expanded to apply to non-displayed orders. See Securities Exchange Act Release No. marketable limit orders to one or more instructions would be that the liquidity swap functionality described above would be available to 74738 (April 16, 2015), 80 FR 22600 (April 22, other options exchanges, including a an order subject to the Super Aggressive Re-Route 2015) (SR–BATS–2015–09). instruction and not available to an order subject to 10 15 U.S.C. 78f(b). 5 As defined in Rule 16.1(a)(9). the Aggressive Re-Route instruction. 11 15 U.S.C. 78f(b)(5).
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perfecting the mechanism of a free and filing. However, Rule 19b–4(f)(6)(iii) 17 and Exchange Commission, 100 F Street open market and national market permits the Commission to designate a NE., Washington, DC 20549–1090. system. The proposed rule change also shorter time if such action is consistent All submissions should refer to File is designed to support the principles of with the protection of investors and the Number SR–BATS–2015–112. This file Section 11A(a)(1) 12 of the Act in that it public interest. The Exchange has asked number should be included on the seeks to assure fair competition among the Commission to waive the 30-day subject line if email is used. To help the brokers and dealers and among operative delay so that the proposal may Commission process and review your exchange markets. Lastly, the Exchange become operative immediately upon comments more efficiently, please use notes that the proposed amendments to filing. The Exchange stated that waiver only one method. The Commission will the Aggressive Re-Route instruction of the operative delay will allow the post all comments on the Commission’s previously existed on the Exchange as Exchange to immediately provide Users Internet Web site (http://www.sec.gov/ the RECYCLE routing option.13 with additional control over their orders rules/sro.shtml). Copies of the in the context of a national market submission, all subsequent B. Self-Regulatory Organization’s system where quotations may lock or amendments, all written statements Statement on Burden on Competition cross orders posted to the BATS Book with respect to the proposed rule The Exchange does not believe that and to facilitate executions on the change that are filed with the the proposed rule change will result in Exchange consistent with User Commission, and all written any burden on competition that is not instructions.18 The Commission communications relating to the necessary or appropriate in furtherance believes the waiver of the operative proposed rule change between the of the purposes of the Act. The delay is consistent with the protection Commission and any person, other than Exchange believes that proposed of investors and the public interest. those that may be withheld from the amendment to the Aggressive Re-Route Therefore, the Commission hereby public in accordance with the functionality encourages competition by waives the operative delay and provisions of 5 U.S.C. 552, will be increasing the likelihood of executions designates the proposal operative upon available for Web site viewing and of orders that have been posted to the filing.19 printing in the Commission’s Public Exchange. The increased likelihood of At any time within 60 days of the Reference Room, 100 F Street NE., an execution where the order is locked filing of the proposed rule change, the Washington, DC 20549 on official by a quotation on a Trading Center Commission summarily may business days between the hours of should attract additional order flow to temporarily suspend such rule change if 10:00 a.m. and 3:00 p.m. Copies of such the Exchange. it appears to the Commission that such filing also will be available for action is necessary or appropriate in the inspection and copying at the principal C. Self-Regulatory Organization’s office of the Exchange. All comments Statement on Comments on the public interest, for the protection of investors, or otherwise in furtherance of received will be posted without change; Proposed Rule Change Received From the Commission does not edit personal Members, Participants, or Others the purposes of the Act. If the Commission takes such action, the identifying information from The Exchange has neither solicited Commission shall institute proceedings submissions. You should submit only nor received written comments on the to determine whether the proposed rule information that you wish to make proposed rule change. change should be approved or available publicly. All submissions disapproved. should refer to File Number SR–BATS– III. Date of Effectiveness of the 2015–112, and should be submitted on Proposed Rule Change and Timing for IV. Solicitation of Comments or before January 7, 2016. Commission Action Interested persons are invited to For the Commission, by the Division of Because the proposed rule change submit written data, views, and Trading and Markets, pursuant to delegated does not (i) significantly affect the arguments concerning the foregoing, authority.20 protection of investors or the public including whether the proposed rule Robert W. Errett, interest; (ii) impose any significant change is consistent with the Act. Deputy Secretary. burden on competition; and (iii) become Comments may be submitted by any of [FR Doc. 2015–31683 Filed 12–16–15; 8:45 am] operative for 30 days from the date on the following methods: BILLING CODE 8011–01–P which it was filed, or such shorter time as the Commission may designate, it has Electronic Comments become effective pursuant to Section • Use the Commission’s Internet SECURITIES AND EXCHANGE 19(b)(3)(A) of the Act 14 and Rule 19b– comment form (http://www.sec.gov/ COMMISSION 4(f)(6) thereunder.15 rules/sro.shtml); or A proposed rule change filed • Send an email to rule-comments@ Submission for OMB Review; pursuant to Rule 19b–4(f)(6) under the sec.gov. Please include File Number SR– Comment Request 16 Act normally does not become BATS–2015–112 on the subject line. Upon Written Request Copies Available operative for 30 days after the date of its Paper Comments From: Securities and Exchange Commission, Office of FOIA Services, 12 • Send paper comments in triplicate 15 U.S.C. 78k–1(a)(1). 100 F Street NE., Washington, DC 13 to Brent J. Fields, Secretary, Securities See supra notes 6 and 8. 20549–2736. 14 15 U.S.C. 78s(b)(3)(A). 15 17 CFR 240.19b–4(f)(6). As required under Rule 17 17 CFR 240.19b–4(f)(6)(iii). Extension: 19b–4(f)(6)(iii), the Exchange provided the 18 The Exchange further stated that it will provide Form T–4. OMB Control No. 3235–0107, Commission with written notice of its intent to file Members with reasonable advance notice of the SEC File No. 270–124. the proposed rule change, along with a brief proposed rule change’s implementation date. Notice is hereby given that, pursuant description and the text of the proposed rule 19 For purposes only of waiving the 30-day to the Paperwork Reduction Act of 1995 change, at least five business days prior to the date operative delay, the Commission has also of filing of the proposed rule change, or such considered the proposed rule’s impact on (44 U.S.C. 3501 et seq.), the Securities shorter time as designated by the Commission. efficiency, competition, and capital formation. See 16 17 CFR 240.19b–4(f)(6). 15 U.S.C. 78c(f). 20 17 CFR 200.30–3(a)(12).
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and Exchange Commission SECURITIES AND EXCHANGE COA (referred to as a ‘‘do-not-COA’’ (‘‘Commission’’) has submitted to the COMMISSION request) on an order-by-order basis.6 The Exchange believes that allowing Office of Management and Budget this [Release No. 34–76622; File No. SR–CBOE– request for extension of the previously 2015–089] Trading Permit Holders to make a ‘‘do- approved collections of information not-COA’’ request on an order-by-order discussed below. Self-Regulatory Organizations; basis will better allow them to make decisions regarding the handling of their Form T–4 (17 CFR 269.4) is a form Chicago Board Options Exchange, Incorporated; Order Granting Approval orders based on market conditions at the used by an issuer to apply for an time they submit their orders. exemption under Section 304(c) (15 of a Proposed Rule Change Relating to Complex Orders as Modified by A PAR operator will not be permitted U.S.C 77ddd(c)) of the Trust Indenture Amendment No. 1 to override a Trading Permit Holder’s Act of 1939 (15 U.S.C. 77aaa et seq.). ‘‘do-not-COA’’ order request; such Form T–4 is filed on occasion. The December 11, 2015. orders, therefore, will enter the Complex information required by Form T–4 is Order Book (‘‘COB’’).7 An order with a I. Introduction mandatory. This information is publicly ‘‘do-not-COA’’ request, however, would available on EDGAR. Form T–4 takes On October 13, 2015, Chicago Board still be COA’d after it has rested on the approximately 5 hours per response to Options Exchange, Incorporated (the COB pursuant to Interpretation and prepare and is filed by approximately 3 ‘‘Exchange’’ or ‘‘CBOE’’) filed with the Policy .04.8 respondents. We estimate that 25% of Securities and Exchange Commission The Exchange notes that an order the 5 hours per response (1 hour) is (the ‘‘Commission’’), pursuant to with a ‘‘do-not-COA’’ request will still 9 prepared by the filer for a total annual Section 19(b)(1) of the Securities have execution opportunities. The Exchange Act of 1934 (‘‘Act’’ or reporting burden of 3 hours (1 hour per Exchange explains that a ‘‘do-not-COA’’ ‘‘Exchange Act’’) 1 and Rule 19b–4 order may execute automatically upon response x 3 responses). thereunder,2 a proposed rule change to: entry into the System against the leg An agency may not conduct or (1) amend the rule provisions regarding markets or complex orders on the COB sponsor, and a person is not required to the initiation of a complex order auction to the extent marketable (in accordance respond to, a collection of information (‘‘COA’’), (2) add rule provisions with allocation rules set forth in Rule unless it displays a currently valid regarding the impact of certain 6.53C).10 Further, the Exchange notes control number. incoming orders and changes in the leg that an order on the opposite side of, The public may view the background markets on an ongoing COA, and (3) and marketable against, a COA-eligible documentation for this information update the rule text regarding who can order may trade against the COA- eligible order if the System receives the collection at the following Web site, submit complex orders. On October 26, order while a COA is ongoing.11 www.reginfo.gov. Comments should be 2015, the Exchange submitted Amendment No. 1 to the proposed rule Second, the Exchange proposes to add directed to: (i) Desk Officer for the change. The proposed rule change, as subparagraphs 6.53C(d)(viii)(4) and (5) Securities and Exchange Commission, modified by Amendment No. 1, was to CBOE Rule 6.53C to describe Office of Information and Regulatory published for comment in the Federal additional circumstances that will cause Affairs, Office of Management and Register on November 2, 2015.3 The a COA to end early.12 Proposed Budget, Room 10102, New Executive Commission received no comments on subparagraph (d)(viii)(4) will provide Office Building, Washington, DC 20503, the proposal. This order grants approval that if an order with a ‘‘do-not-COA’’ _ or by sending an email to: Shagufta of the proposed rule change, as request or an order that is not COA- [email protected]; and (ii) Pamela modified by Amendment No. 1. eligible is received prior to the Dyson, Director/Chief Information expiration of the Response Time Officer, Securities and Exchange II. Description of the Proposed Rule Interval for the original COA and is on Commission, c/o Remi Pavlik-Simon, Change the same side of the market and at a 100 F Street NE., Washington, DC 20549 The Exchange proposes to amend price better than or equal to the starting or send an email to: PRA_Mailbox@ CBOE Rule 6.53C and Interpretation and price, then the original COA will end.13 sec.gov. Comments must be submitted to Policy .04 regarding the initiation of a Proposed subparagraph (d)(viii)(5) will OMB within 30 days of this notice. COA. Currently, Trading Permit Holders provide that if the leg markets were not and PAR operators must affirmatively marketable against a COA-eligible order Dated: December 11, 2015. request that their incoming two-legged when the order entered the System (and Robert W. Errett, COA-eligible orders be COA’d.4 The thus prior to the initiation of a COA) but Deputy Secretary. Exchange proposes to amend CBOE became marketable with the COA- [FR Doc. 2015–31677 Filed 12–16–15; 8:45 am] Rule 6.53C(d)(ii) to provide that such eligible order prior to the expiration of BILLING CODE 8011–01–P COA-eligible orders (including orders the Response Time Interval, it will submitted for electronic processing from PAR) be COA’d by default.5 Under the 6 Id. proposed rule, Trading Permit Holders 7 Id. In light of this proposed change, the Exchange proposes to delete the language in would be permitted to request that a Interpretation and Policy .04(a) that indicates COA-eligible order with two legs not Trading Permit Holders may request that complex orders be COA’d on a class-by-class basis, as it is 1 15 U.S.C. 78s(b)(1). no longer necessary. Id. 2 17 CFR 240.19b–4. 8 Id. at 67458. 3 See Securities Exchange Act Release No. 76273 9 Id. (October 27, 2015), 80 FR 67457 (‘‘Notice’’). 10 Id. 4 See Notice, supra 3, at 67457. 11 Id. 5 Id. The Exchange represents that all Trading 12 Id. The proposed rule change makes Permit Holders have requested that all of their corresponding changes to the heading and COA-eligible orders with two legs process through introductory paragraph of subparagraph (d)(viii). Id. COA upon entry into the System. Id. 13 Id. at 67458–9.
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cause the COA to end.14 The Exchange rule change is consistent with Section believes that these provisions prevent 6(b)(5) of the Act,21 which requires, Robert W. Errett, an order that was entered after the among other things, that the rules of a Deputy Secretary. initiation of a COA from trading ahead national securities exchange be [FR Doc. 2015–31682 Filed 12–16–15; 8:45 am] of an order with the same price that may designed to prevent fraudulent and BILLING CODE 8011–01–P have executed or entered the COB if it manipulative acts and practices, to did not COA. Similarly, the Exchange promote just and equitable principles of believes it is fair for a COA-eligible trade, to remove impediments to and SECURITIES AND EXCHANGE order that was entered at a better price perfect the mechanism of a free and COMMISSION than an order that was resting in the open market and a national market COB prior to initiation of the COA to system, and, in general, to protect [Release No. 34–76625; File No. SR–BYX– 2015–49] execute against leg markets that become investors and the public interest. marketable against the COA-eligible The Commission believes that it is Self-Regulatory Organizations; BATS order and resting order during the COA, reasonable for CBOE to require that Y-Exchange, Inc.; Notice of Filing and because the Trading Permit Holder who incoming two-legged COA-eligible Immediate Effectiveness of a Proposed entered the COA-eligible order was orders be COA’d by default unless a Rule Change to Rule 11.13(b)(4)(A), willing to pay a better price than that of Trading Permit Holder requests, on an 15 Amending Aggressive Re-Route the resting order. order-by-order basis, that such orders Instruction Third, the Exchange proposes to not COA. The Commission notes that, amend CBOE Rule 6.53C(c)(ii)(3) and should a Trading Permit Holder not December 11, 2015. Interpretation and Policy .06(c) to wish its orders to be COA’d, the Pursuant to Section 19(b)(1) of the provide that all Trading Permit Holders proposed rule will allow the Trading Securities Exchange Act of 1934 (the and PAR Officials may submit orders or Permit Holder to request that its orders ‘‘Act’’),1 and Rule 19b–4 thereunder,2 quotes to trade against orders in the not be COA’d on an order-by-order notice is hereby given that on December COB, as opposed to market basis. In addition, the Commission notes 2, 2015, BATS Y-Exchange, Inc. (the 16 participants, as the Rule currently that the rules of another options ‘‘Exchange’’ or ‘‘BYX’’) filed with the 17 states. In addition, the Exchange exchange provide that certain complex Securities and Exchange Commission proposes to amend Rule 6.53C(c)(ii)(3) orders be routed to a complex order (‘‘Commission’’) the proposed rule to provide that order and quote types auction unless a member designates that change as described in Items I and II (not just quote types) not eligible to rest such orders not initiate a complex order below, which Items have been prepared or trade against the COB will be auction on that exchange.22 by the Exchange. The Exchange has 18 automatically cancelled. The Commission also believes that it designated this proposal as a ‘‘non- Finally, the Exchange proposes to is reasonable for the Exchange to add controversial’’ proposed rule change make technical and other new provisions regarding how incoming pursuant to Section 19(b)(3)(A) of the nonsubstantive changes, which are orders with ‘‘do-not-COA’’ requests or Act 3 and Rule 19b–4(f)(6) thereunder,4 described in the Notice.19 that are not COA-eligible, as well as which renders it effective upon filing III. Discussion and Commission how changes in the leg markets, may with the Commission. The Commission Findings impact ongoing COAs. Such additions is publishing this notice to solicit After careful review, the Commission enhance the description of current COA comments on the proposed rule change finds that the proposed rule change is functionality and the circumstances that from interested persons. consistent with the requirements of the may cause a COA to end early to help I. Self-Regulatory Organization’s Act and the rules and regulations ensure investors understand how ‘‘do- Statement of the Terms of the Substance thereunder applicable to a national not-COA’’ orders may impact a COA. As of the Proposed Rule Change securities exchange.20 In particular, the noted above, these rules provide that if The Exchange is proposing to amend Commission finds that the proposed entry of a ‘‘do-not-COA’’ order causes a COA to end, any executions that occur the Aggressive Re-Route instruction under Exchange Rule 11.13(b)(4)(A) to 14 Id. following the COA will occur in 15 Id. at 67460. accordance with allocation principles in route such orders where that order has 16 Id. at 67459. CBOE Rules 6.45A and 6.45B place, subject to an exception that the been locked or crossed by other Trading define market participants as Market-Makers, original COA-eligible order will receive Centers. Designated Primary Market-Makers with an The text of the proposed rule change appointment in the subject class, and floor brokers time priority. and PAR Officials representing orders in the trading is available at the Exchange’s Web site crowd. The Exchange explains that Trading Permit IV. Conclusion at www.batstrading.com, at the Holders and PAR Officials as a group is larger than It is therefore ordered, pursuant to principal office of the Exchange, and at market participants as a group, as the term market 23 the Commission’s Public Reference participants does not include other types of Trading Section 19(b)(2) of the Act, that the Permit Holders (such as electronic proprietary proposed rule change (SR–CBOE–2015– Room. traders or brokers submitting electronic orders on 089), as modified by Amendment No. 1, II. Self-Regulatory Organization’s behalf of customers from off of the trading floor). be, and it hereby is, approved. Id. Statement of the Purpose of, and 17 Id. For the Commission, by the Division of Statutory Basis for, the Proposed Rule 18 Id. at 67460. The Exchange notes that first Trading and Markets, pursuant to delegated Change several sentences of CBOE Rule 6.53C(c)(ii)(3) authority.24 reference both orders and quotes eligible to rest on In its filing with the Commission, the the COB. The Exchange intended for Rule to Exchange included statements 21 provide that both orders and quotes that are not 15 U.S.C. 78f(b)(5). concerning the purpose of and basis for eligible to rest on the COB be cancelled. Id. 22 See NASDAQ OMX PHLX LLC (‘‘PHLX’’) Rule 19 Id. at 64759. 1080, Commentary .07(a)(viii) and (e) (describing 1 20 In approving this proposal, the Commission has the complex order live auction (‘‘COLA’’) process 15 U.S.C. 78s(b)(1). considered the proposed rule’s impact on and ‘‘do not auction’’ orders). 2 17 CFR 240.19b–4. efficiency, competition, and capital formation. See 23 15 U.S.C. 78s(b)(2). 3 15 U.S.C. 78s(b)(3)(A). 15 U.S.C. 78c(f). 24 17 CFR 200.30–3(a)(12). 4 17 CFR 240.19b–4(f)(6).
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the proposed rule change and discussed The Aggressive Re-Route instruction consistent with User instructions. Thus, any comments it received on the subjects an order to the routing process the proposals are directly targeted at proposed rule change. The text of these after being posted to the BATS Book removing impediments to and statements may be examined at the only if the order is subsequently crossed perfecting the mechanism of a free and places specified in Item IV below. The by another Trading Center (rather than open market and national market Exchange has prepared summaries, set if the order is locked or crossed). system. The proposed rule change also forth in Sections A, B, and C below, of Further, a routable non-displayed limit is designed to support the principles of the most significant parts of such order posted to the BATS Book that is Section 11A(a)(1) 11 of the Act in that it statements. crossed by another accessible Trading seeks to assure fair competition among Center will be automatically routed to A. Self-Regulatory Organization’s brokers and dealers and among the crossing Trading Center. The Statement of the Purpose of, and exchange markets. Lastly, the Exchange Exchange proposes to modify the Statutory Basis for, the Proposed Rule notes that the proposed amendments to Aggressive Re-Route instruction to also Change the Aggressive Re-Route instruction provide that, where the order is locked previously existed on the Exchange as 1. Purpose by another accessible Trading Center, it the RECYCLE routing option.12 The Exchange currently allows Users would be automatically routed to the locking Trading Center. The proposed B. Self-Regulatory Organization’s to submit various types of limit orders Statement on Burden on Competition to the Exchange that are processed amendment would also apply to non- pursuant to Exchange Rules 11.13(a) displayed orders with the Aggressive The Exchange does not believe that 8 and 11.13(b), as set forth below. Rule Re-Route instruction. the proposed rule change will result in 11.13(a) describes the process by which 2. Statutory Basis any burden on competition that is not an incoming order would execute necessary or appropriate in furtherance The Exchange believes that the against the BATS Book. To the extent an of the purposes of the Act. The proposed rule change is consistent with order has not been executed in its Exchange believes that proposed Section 6(b) of the Act 9 and furthers the entirety against the BATS Book, Rule amendment to the Aggressive Re-Route objectives of Section 6(b)(5) of the Act 10 11.13(b) then describes the process of functionality encourages competition by because it is designed to promote just routing marketable limit orders to one or increasing the likelihood of executions and equitable principles of trade, to more Trading Centers, including a of orders that have been posted to the remove impediments to and perfect the description of how the Exchange treats Exchange. The increased likelihood of mechanism of a free and open market any unfilled balance that returns to the an execution where the order is locked and a national market system, to foster Exchange following the first attempt to by a quotation on a Trading Center cooperation and coordination with fill the order through the routing should attract additional order flow to persons engaged in facilitating process. If not filled through routing, the Exchange. transactions in securities, and, in and based on the order instructions, the general, to protect investors and the C. Self-Regulatory Organization’s unfilled balance of the order may be public interest. Specifically, the Statement on Comments on the posted to the BATS Book. Proposed Rule Change Received From Under previous Exchange rules,5 to proposed changes are designed to Members, Participants, or Others the extent the unfilled balance of an provide Users with additional control order had been posted to the BATS over their orders in the context of a The Exchange has neither solicited national market system where Book, should the order subsequently be nor received written comments on the quotations may lock or cross orders locked or crossed by another accessible proposed rule change. posted to the BATS Book and to Trading Center, the System 6 would facilitate executions on the Exchange III. Date of Effectiveness of the route the order to the locking or crossing Proposed Rule Change and Timing for Trading Center if instructed to do so by posted to the BATS Book routes to away Trading Commission Action the User (the ‘‘RECYCLE Option’’). The Centers to remove liquidity from such Trading Exchange then filed a proposed rule Centers any time such order is locked or crossed. Because the proposed rule change change with the Commission for The Exchange subsequently expanded the Super does not (i) significantly affect the Aggressive Re-Route instruction to provide that protection of investors or the public immediate effectiveness to modify the when any order with a Super Aggressive Re-Route RECYCLE Option and rename it as the instruction is locked by an incoming BATS Post interest; (ii) impose any significant Aggressive and Super-Aggressive Re- Only Order or Partial Post Only at Limit Order that burden on competition; and (iii) become Route instruction.7 does not remove liquidity pursuant to Rule operative for 30 days from the date on 11.9(c)(6) or Rule 11.9(c)(7), respectively, the Re- Route order is converted to an executable order which it was filed, or such shorter time 5 See Securities Exchange Act Release No63097 when displayed shares become available on the as the Commission may designate, it has (October 13, 2010), 75 FR 64767 (October 20, 2010) opposite side of the market and will remove become effective pursuant to Section (SR–BATS–2010–002 [sic]) (naming the designation liquidity against such shares (‘‘liquidity swap 19(b)(3)(A) of the Act 13 and Rule 19b– of an order as eligible for re-routing after being functionality’’). See Securities Exchange Act 14 posted to the BATS Book if another Trading Center Release No. 74739 (April 16, 2015), 80 FR 22567 4(f)(6) thereunder. has locked or crossed the posted order as the (April 22, 2015) (SR–BYX–2015–07). Once A proposed rule change filed RECYCLE routing option). amended, the only difference between the pursuant to Rule 19b–4(f)(6) under the 6 As defined in Rule 1.5(aa), the System is the Aggressive and Super Aggressive Re-Route electronic communications and trading facility instructions would be that the liquidity swap designated by the Board through which securities functionality described above would be available to 11 15 U.S.C. 78k–1(a)(1). orders of Users are consolidated for ranking, an order subject to the Super Aggressive Re-Route 12 See supra notes 5 and 7. execution and, when applicable, routing away. instruction and not available to an order subject to 13 15 U.S.C. 78s(b)(3)(A). 7 See Securities Exchange Act Release No. 73295 the Aggressive Re-Route instruction. 14 17 CFR 240.19b–4(f)(6). As required under Rule (October 3, 2014), 79 FR 61117 (October 9, 2014) 8 In April 2015, the Aggressive Re-Route 19b–4(f)(6)(iii), the Exchange provided the (SR–BYX–2014–026) (Notice of Filing and instruction was expanded to apply to non-displayed Commission with written notice of its intent to file Immediate Effectiveness of a Proposed Rule Change orders. See Securities Exchange Act Release No. the proposed rule change, along with a brief to Amend Rules 11.13) (adopting the Aggressive Re- 74739 (April 16, 2015), 80 FR 22567 (April 22, description and the text of the proposed rule Route instruction). In SR–BYX–2014–026, the 2015) (SR–BYX–2015–07). change, at least five business days prior to the date RECYCLE Option was renamed Super Aggressive 9 15 U.S.C. 78f(b). of filing of the proposed rule change, or such Re-Route instruction, under which a routable order 10 15 U.S.C. 78f(b)(5). shorter time as designated by the Commission.
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Act 15 normally does not become Paper Comments SECURITIES AND EXCHANGE operative for 30 days after the date of its • COMMISSION filing. However, Rule 19b–4(f)(6)(iii) 16 Send paper comments in triplicate permits the Commission to designate a to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street [Release No. 34–76627; File No. SR– shorter time if such action is consistent NYSEArca–2015–118] with the protection of investors and the NE., Washington, DC 20549–1090. public interest. The Exchange has asked All submissions should refer to File Self-Regulatory Organizations; NYSE the Commission to waive the 30-day Number SR–BYX–2015–49. This file Arca, Inc.; Notice of Filing and operative delay so that the proposal may number should be included on the Immediate Effectiveness of Proposed become operative immediately upon subject line if email is used. To help the Rule Change Amending the NYSE Arca filing. The Exchange stated that waiver Commission process and review your Options Fee Schedule of the operative delay will allow the comments more efficiently, please use Exchange to immediately provide Users December 11, 2015. with additional control over their orders only one method. The Commission will Pursuant to Section 19(b)(1) 1 of the in the context of a national market post all comments on the Commission’s Internet Web site (http://www.sec.gov/ Securities Exchange Act of 1934 (the system where quotations may lock or 2 3 cross orders posted to the BATS Book rules/sro.shtml). Copies of the ‘‘Act’’) and Rule 19b–4 thereunder, and to facilitate executions on the submission, all subsequent notice is hereby given that, on December Exchange consistent with User amendments, all written statements 1, 2015, NYSE Arca, Inc. (the instructions.17 The Commission with respect to the proposed rule ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with believes the waiver of the operative change that are filed with the the Securities and Exchange delay is consistent with the protection Commission, and all written Commission (the ‘‘Commission’’) the of investors and the public interest. communications relating to the proposed rule change as described in Therefore, the Commission hereby proposed rule change between the Items I, II, and III below, which Items waives the operative delay and Commission and any person, other than have been prepared by the self- designates the proposal operative upon those that may be withheld from the regulatory organization. The filing.18 public in accordance with the Commission is publishing this notice to At any time within 60 days of the provisions of 5 U.S.C. 552, will be solicit comments on the proposed rule filing of the proposed rule change, the available for Web site viewing and change from interested persons. Commission summarily may printing in the Commission’s Public I. Self-Regulatory Organization’s temporarily suspend such rule change if Reference Room, 100 F Street NE., Statement of the Terms of Substance of it appears to the Commission that such Washington, DC 20549 on official the Proposed Rule Change action is necessary or appropriate in the business days between the hours of public interest, for the protection of 10:00 a.m. and 3:00 p.m. Copies of such The Exchange proposes to amend the investors, or otherwise in furtherance of filing also will be available for NYSE Arca Options Fee Schedule (‘‘Fee the purposes of the Act. If the inspection and copying at the principal Schedule’’). The Exchange proposes to Commission takes such action, the office of the Exchange. All comments implement the fee changes effective Commission shall institute proceedings received will be posted without change; December 1, 2015. The proposed rule to determine whether the proposed rule the Commission does not edit personal change is available on the Exchange’s change should be approved or identifying information from Web site at www.nyse.com, at the disapproved. submissions. You should submit only principal office of the Exchange, and at IV. Solicitation of Comments information that you wish to make the Commission’s Public Reference available publicly. All submissions Room. Interested persons are invited to should refer to File Number SR–BYX– submit written data, views, and II. Self-Regulatory Organization’s 2015–49, and should be submitted on or arguments concerning the foregoing, Statement of the Purpose of, and before January 7, 2016. including whether the proposed rule Statutory Basis for, the Proposed Rule change is consistent with the Act. For the Commission, by the Division of Change Comments may be submitted by any of Trading and Markets, pursuant to delegated the following methods: authority.19 In its filing with the Commission, the self-regulatory organization included Electronic Comments Robert W. Errett, Deputy Secretary. statements concerning the purpose of, • Use the Commission’s Internet [FR Doc. 2015–31684 Filed 12–16–15; 8:45 am] and basis for, the proposed rule change comment form (http://www.sec.gov/ and discussed any comments it received BILLING CODE 8011–01–P rules/sro.shtml); or on the proposed rule change. The text • Send an email to rule-comments@ of those statements may be examined at sec.gov. Please include File Number SR– the places specified in Item IV below. BYX–2015–49 on the subject line. The Exchange has prepared summaries, set forth in sections A, B, and C below, 15 17 CFR 240.19b–4(f)(6). of the most significant parts of such 16 17 CFR 240.19b–4(f)(6)(iii). statements. 17 The Exchange further stated that it will provide Members with reasonable advance notice of the proposed rule change’s implementation date. 18 For purposes only of waiving the 30-day operative delay, the Commission has also 1 15 U.S.C. 78s(b)(1). considered the proposed rule’s impact on efficiency, competition, and capital formation. See 2 15 U.S.C. 78a. 15 U.S.C. 78c(f). 19 17 CFR 200.30–3(a)(12). 3 17 CFR 240.19b–4.
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A. Self-Regulatory Organization’s 2.00% of Total Industry Customer facilities and does not unfairly Statement of the Purpose of, and the equity and ETF option ADV from discriminate between customers, Statutory Basis for, the Proposed Rule Professional Customer, Market Maker, issuers, brokers or dealers. Change Firm, and Broker Dealer Liquidity The Exchange believes the proposed Removing Orders in all Issues. The Take Take Fees for Non-Customers are 1. Purpose Fee Discount applied to orders meeting reasonable, equitable and not unfairly The purpose of this filing is to amend either qualification is $0.04 in Penny discriminatory because they are the Fee Schedule in a number of Pilot issues only. The Exchange competitive with fees charged by other different ways, effective December 1, proposes to reduce the Take Fee exchanges and are designed to attract 2015. Specifically, the Exchange Discount in Penny Pilot issues to $0.02 (and compete for) order flow to the proposes (i) to increase certain Take and to institute a $0.05 Take Fee Exchange, which provides a greater Liquidity Fees charged; (ii) to introduce Discount in non-Penny Pilot issues. opportunity for trading by all market an alternative qualification for Market participants.9 In addition, the increased Maker Monthly Posting Credit Tiers and Market Maker Monthly Posting Credit and Qualifications for Executions in Take Fees are reasonable because the Qualifications For Executions in Penny fees would generate revenue that would Pilot Issues and SPY; and (iii) to modify Penny Pilot Issues and SPY (‘‘Posting Tiers’’) help to support the credits offered for the Take Fee Discount Qualification, as posting liquidity, which are available to described below. Finally, the Exchange proposes to add all market participants. Moreover, the an alternative qualification basis to Transaction Fees for Taking Liquidity Exchange believes the proposed change achieve Super Tier II of the Posting would not unfairly discriminate because The Exchange proposes to modify the Tiers. it applies equally to all Non-Customers fees paid by Market Makers, Lead Currently, a Market Maker may who are removing liquidity. The Market Makers, Firms and Broker qualify for Super Tier II if it achieves at increased Take Fees for Customers in Dealers, and Professional Customers least 1.60% of Total Industry Customer Penny Pilot issues are reasonable (collectively, ‘‘Non-Customers’’) for equity and ETF option ADV from because the proposed fees would Taking Liquidity in non-Penny Pilot Market Maker orders in all issues, with generate revenue that would help to Issues (‘‘Take Fees’’). Currently, Non- at least 0.90% of Total Industry support the credits and other incentives Customers pay Take Fees ranging from Customer equity and ETF option ADV offered for posting liquidity, and they $0.92 to $0.94 per contract for electronic from Market Maker Posted Orders in are not unfairly discriminatory because executions, depending on account type. Penny Pilot and Non-Penny Pilot the fees for Customers are still at a rate The Exchange proposes to charge the Issues.6 The Exchange proposes that a lower than that charged to non- same rate to all Non-Customers, and to Market Maker may also qualify for Customers. In addition, the Exchange raise that fee to $0.99 per contract, Super Tier II it is [sic] achieves at least believes the proposed Take Fees for which is within the range of fees 1.60% of Total Industry Customer Customers are reasonable, equitable and charged by competing option equity and ETF option ADV from not unfairly discriminatory because they exchanges.4 Customer and Professional Customer are competitive with fees charged by The Exchange also proposes to orders in all issues, with at least 1.20% increase the Take Liquidity Fee for of Total Industry Customer equity and other exchanges and are designed to Customers in Penny Pilot issues from ETF option ADV from Customer and attract (and compete for) order flow to $0.47 to $0.49, which is within the Professional Customer Posted Orders in the Exchange, which provides a greater opportunity for trading by all market range of fees charged by competing all issues. If a Market Maker achieves 10 option exchanges.5 either qualification basis, it would participants. receive the $0.42 posting credit for The Exchange believes the changes to Take Liquidity Discount for Certain executions in penny issues or SPY. the Take Fee Discount for Non- Market Participants Customers are reasonable, equitable and The Exchange proposes modifications 2. Statutory Basis non-discriminatory because it would to the Discount in Take Liquidity Fees The Exchange believes that the apply to both Penny Pilot and non- for Professional Customer, Market proposed rule change is consistent with Penny Pilot issues, which would incent Maker, Firm and Broker Dealer Section 6(b) of the Act,7 in general, and OTPs to execute large volumes of orders Liquidity Removing Orders (the ‘‘Take furthers the objectives of Sections on the Exchange, which benefits all Fee Discount’’) for OTPs. Currently, the 6(b)(4) and (5) of the Act,8 in particular, market participants through increased Take Fee Discount is applied if the OTP because it provides for the equitable liquidity and enhanced price discovery. achieves one of two alternative allocation of reasonable dues, fees, and The Exchange believes the Take Fee qualifications, either: At least 1.00% of other charges among its members, Discount is reasonable, equitable, and Total Industry Customer equity and issuers and other persons using its not unfairly discriminatory because it exchange traded fund (‘‘ETF’’) option continues to apply to all participants average daily volume (‘‘ADV’’) from 6 The volume thresholds are based on Market other than Customers, who pay a much Customer and Professional Customer Makers’ volume transacted electronically as a lower Take Liquidity Fee, and because percentage of total industry Customer equity and it is available to all firms that provide Posted Orders in all Issues; or at least ETF options volumes as reported by the Options Clearing Corporation (the ‘‘OCC’’). Total industry Customer and Professional Customer 4 For example, BOX assesses fees greater than customer equity and ETF option volume is orders. The Exchange also notes that the $1.00 to non-Customers for executions against comprised of those equity and ETF contracts that proposed Take Fee Discount is Public Customer interest in non-penny pilot clear in the Customer account type at OCC and does consistent with those offered on options. See BOX Options fee schedule, available not include contracts that clear in either the Firm 11 here, http://boxexchange.com/assets/ or Market Maker account type at OCC or contracts competing options exchanges. BOX_Fee_Schedule.pdf. overlying a security other than an equity or ETF 5 See, e.g., NASDAQ Options Market (‘‘NOM’’) security. See OCC Monthly Statistics Reports, 9 See supra n. 4. price list, available here, http:// available here, http://www.theocc.com/webapps/ 10 See supra n. 5. www.nasdaqtrader.com/ monthly-volume-reports. 11 See, e.g., BATS Options Exchange fee schedule Micro.aspx?id=optionsPricing (charging customers a 7 15 U.S.C. 78f(b). (Non-Customer Penny Pilot Take Volume Tiers), $0.50 take liquidity fee in Penny Pilot issues). 8 15 U.S.C. 78f(b)(4) and (5). Continued
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The Exchange believes that the among or between classes of market Paper Comments proposed change to the Posting Tiers, participants. • specifically adding an alternative basis The Exchange notes that it operates in Send paper comments in triplicate to achieve Super Tier II, is reasonable, a highly competitive market in which to Brent J. Fields, Secretary, Securities equitable and not unfairly market participants can readily favor and Exchange Commission, 100 F Street discriminatory because it would impact competing venues. In such an NE., Washington, DC 20549. environment, the Exchange must all similarly situated OTPs that post All submissions should refer to File electronic Customer (and Professional continually review, and consider Number SR–NYSEArca–2015–118. This Customer) executions on the Exchange adjusting, its fees and credits to remain file number should be included on the equally, and provides a reasonable competitive with other exchanges. For alternative to qualify for Super Tier II the reasons described above, the subject line if email is used. To help the posting credit. Exchange believes that the proposed Commission process and review your For these reasons, the Exchange rule change reflects this competitive comments more efficiently, please use believes that the proposal is consistent environment. only one method. The Commission will with the Act. post all comments on the Commission’s C. Self-Regulatory Organization’s Internet Web site (http://www.sec.gov/ Statement on Comments on the B. Self-Regulatory Organization’s rules/sro.shtml). Copies of the Statement on Burden on Competition Proposed Rule Change Received From submission, all subsequent Members, Participants, or Others In accordance with Section 6(b)(8) of amendments, all written statements the Act,12 the Exchange does not believe No written comments were solicited with respect to the proposed rule that the proposed rule change will or received with respect to the proposed change that are filed with the impose any burden on competition that rule change. Commission, and all written is not necessary or appropriate in III. Date of Effectiveness of the communications relating to the furtherance of the purposes of the Act. Proposed Rule Change and Timing for proposed rule change between the Instead, the Exchange believes that the Commission Action Commission and any person, other than proposed incentive would continue to those that may be withheld from the encourage competition, including by The foregoing rule change is effective public in accordance with the attracting additional liquidity and a upon filing pursuant to Section 13 provisions of 5 U.S.C. 552, will be wider variety of business to the 19(b)(3)(A) of the Act and 14 Exchange, which would continue to subparagraph (f)(2) of Rule 19b–4 available for Web site viewing and make the Exchange a more competitive thereunder, because it establishes a due, printing in the Commission’s Public venue for, among other things, order fee, or other charge imposed by the Reference Section, 100 F Street NE., execution and price discovery. The Exchange. Washington, DC 20549 on official Exchange also believes the proposed fee At any time within 60 days of the business days between the hours of modifications would not impose an filing of such proposed rule change, the 10:00 a.m. and 3:00 p.m. Copies of the Commission summarily may undue burden on competition because filing will also be available for temporarily suspend such rule change if the changes offset an increase in fees for inspection and copying at the principal it appears to the Commission that such some transactions with a variety of office of the Exchange. All comments action is necessary or appropriate in the means to achieve credits and discounts. received will be posted without change; public interest, for the protection of The Exchange does not believe that the the Commission does not edit personal investors, or otherwise in furtherance of proposed changes would impair the identifying information from the purposes of the Act. If the ability of any market participants or Commission takes such action, the submissions. You should submit only competing order execution venues to Commission shall institute proceedings information that you wish to make maintain their competitive standing in under Section 19(b)(2)(B) 15 of the Act to available publicly. All submissions the financial markets. determine whether the proposed rule should refer to File Number SR– The increases in Take Liquidity fees change should be approved or NYSEArca–2015–118 and should be would impact all affected order types disapproved. submitted on or before January 7, 2016. (i.e., Professional Customers, Firm, Broker Dealers) in issues at the same IV. Solicitation of Comments For the Commission, by the Division of rate. The proposed change to Super Tier Trading and Markets, pursuant to delegated Interested persons are invited to authority.16 II is designed to attract additional submit written data, views, and volume, in particular posted electronic arguments concerning the foregoing, Robert W. Errett, Customer (and Professional Customer) including whether the proposed rule Deputy Secretary. executions, to the Exchange, which change is consistent with the Act. [FR Doc. 2015–31686 Filed 12–16–15; 8:45 am] would promote price discovery and Comments may be submitted by any of BILLING CODE 8011–01–P transparency in the securities markets the following methods: thereby benefitting competition in the industry. As stated above, the Exchange Electronic Comments believes that the proposed change • Use the Commission’s Internet would impact all similarly situated comment form (http://www.sec.gov/ OTPs that post electronic Customer (and rules/sro.shtml); or Professional Customer) executions on • Send an email to rule-comments@ the Exchange equally, and as such, the sec.gov. Please include File Number SR– proposed change would not impose a NYSEArca–2015–118 on the subject disparate burden on competition either line.
available here, http://www.batsoptions.com/ 13 15 U.S.C. 78s(b)(3)(A). support/fee_schedule/. 14 17 CFR 240.19b–4(f)(2). 12 15 U.S.C. 78f(b)(8). 15 15 U.S.C. 78s(b)(2)(B). 16 17 CFR 200.30–3(a)(12).
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SECURITIES AND EXCHANGE A. Self-Regulatory Organization’s Section 6(b) of the Act,7 in general, and COMMISSION Statement of the Purpose of, and furthers the objectives of Sections Statutory Basis for, the Proposed Rule 6(b)(4) and (5) of the Act,8 in particular, [Release No. 34–76629; File No. SR– Change because it provides for the equitable allocation of reasonable dues, fees, and NYSEARCA–2015–120] 1. Purpose other charges among its members, Self-Regulatory Organizations; NYSE The Exchange proposes to amend the issuers and other persons using its Routable Retail Order Tier (‘‘Routable Arca, Inc.; Notice of Filing and facilities and does not unfairly Retail’’) applicable to Tape A and C Immediate Effectiveness of Proposed discriminate between customers, Securities on the Fee Schedule. Rule Change Amending the NYSE Arca issuers, brokers or dealers. Currently, the Routable Retail pricing The Exchange’s proposal to lower the Equities Schedule of Fees and tier provides ETP Holders, including rebate for Routable and non-Routable Charges for Exchange Services Market Makers, that (1) provide Orders in Tape A and Tape C Securities December 11, 2015. liquidity of 0.20% or more of the US that provide liquidity to the Book is consolidated average daily volume reasonable because the Exchange Pursuant to Section 19(b)(1) 1 of the (‘‘CADV’’) during a billing month across believes that despite the decrease, ETP Securities Exchange Act of 1934 all Tapes, (2) maintain a ratio during a Holders, including Market Makers, will (‘‘Act’’) 2 and Rule 19b–4 thereunder,3 billing month across all Tapes of continue to be incentivized to bring notice is hereby given that, on December executed provide liquidity that is Retail Orders to earn the $0.0030 per 1, 2015, NYSE Arca, Inc. (the eligible to route away from the share rebate. The Exchange further ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with Exchange (‘‘Routable Orders’’) 4 to total believes that the proposed fee change is the Securities and Exchange executed provide liquidity of 55% or equitable and not unfairly Commission (‘‘Commission’’) the more, and (3) execute an ADV of Retail discriminatory because the lowered proposed rule change as described in Orders 5 that provide liquidity during rebate would apply to all similarly Items I, II, and III below, which Items the month that is 0.10% or more of the situated ETP Holders, including Market have been prepared by the self- US CADV, with a credit of $0.0032 per Makers, equally. Additionally, the regulatory organization. The share for Routable and non-Routable Exchange believes that the per share Orders in Tape A and Tape C Securities Commission is publishing this notice to credits for Routable and non-Routable that provide liquidity to the Book and solicit comments on the proposed rule Orders that provide liquidity are fair, a fee of $0.0030 per share [sic] and change from interested persons. equitable and not unfairly $.0029 per share for Routable and non- discriminatory because they are I. Self-Regulatory Organization’s Routable Orders in Tape C Securities, consistent with rebate differentiation Statement of the Terms of Substance of respectively [sic], that take liquidity that exists today at other exchanges. the Proposed Rule Change from the Book.6 The Exchange believes that the The Exchange proposes to lower the proposed rebate is competitive with The Exchange proposes to amend the per share credit for Routable and non- rebates provided by other exchanges NYSE Arca Equities Schedule of Fees Routable Orders in Tape A and Tape C and is therefore reasonable and and Charges for Exchange Services Securities that provide liquidity to the equitably allocated to those participants (‘‘Fee Schedule’’). The Exchange Book to $0.0030 per share. The that direct orders to the Exchange rather proposes to implement the change on Exchange proposes to implement the than to a competing exchange. Finally, December 1, 2015. The proposed rule change on December 1, 2015. the Exchange believes that it is subject change is available on the Exchange’s The proposed changes are not to significant competitive forces, as otherwise intended to address any other Web site at www.nyse.com, at the described below in the Exchange’s issues, and the Exchange is not aware of principal office of the Exchange, and at statement regarding the burden on any problems that ETP Holders would competition. For these reasons, the the Commission’s Public Reference have in complying with the proposed Room. Exchange believes that the proposal is changes. consistent with the Act. II. Self-Regulatory Organization’s 2. Statutory Basis Statement of the Purpose of, and B. Self-Regulatory Organization’s The Exchange believes that the Statutory Basis for, the Proposed Rule Statement on Burden on Competition proposed rule change is consistent with Change In accordance with Section 6(b)(8) of the Act,9 the Exchange believes that the In its filing with the Commission, the 4 ETP Holders are able to include an instruction with their orders to determine whether the order proposed rule change would not impose self-regulatory organization included will be eligible to route to an away exchange (e.g., any burden on competition that is not statements concerning the purpose of, to execute against trading interest with a better necessary or appropriate in furtherance and basis for, the proposed rule change price than on the Exchange) or, for example, be of the purposes of the Act. Instead, the and discussed any comments it received cancelled if routing would otherwise occur. Exchange believes that the proposed fee 5 Retail Orders are defined in the Fee Schedule as on the proposed rule change. The text orders designated as retail orders and that meet the change will continue to encourage of those statements may be examined at requirements of Rule 7.44(a)(3), but that are not competition and attract liquidity to the the places specified in Item IV below. executed in the Retail Liquidity Program. The Retail Exchange, which will make the Liquidity Program is a pilot program designed to Exchange a more competitive venue for, The Exchange has prepared summaries, attract additional retail order flow to the Exchange set forth in sections A, B, and C below, for NYSE Arca-listed securities and securities among other things, order execution and of the most significant parts of such traded pursuant to unlisted trading privileges while price discovery. The Exchange does not statements. also providing the potential for price improvement believe that the proposed changes to such order flow. See Rule 7.44. See Securities represent a significant departure from Exchange Act Release No. 71176 (December 23, 2013), 78 FR 79524 (December 30, 2013) (SR– 1 15 U.S.C. 78s(b)(1). NYSEArca–2013–107). 7 15 U.S.C. 78f(b). 2 15 U.S.C. 78a. 6 See Basic Rate. Basic Rates are applicable when 8 15 U.S.C. 78f(b)(4) and (5). 3 17 CFR 240.19b–4. tier rates do not apply. 9 15 U.S.C. 78f(b)(8).
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pricing offered by the Exchange’s Comments may be submitted by any of SECURITIES AND EXCHANGE competitors. Additionally, ETP Holders, the following methods: COMMISSION including Market Makers, may opt to disfavor the Exchange’s pricing if they Electronic Comments Submission for OMB Review Comment Request believe that alternatives offer them • Use the Commission’s Internet better value. Accordingly, the Exchange comment form (http://www.sec.gov/ Upon Written Request Copies Available does not believe that the proposed rules/sro.shtml); or From: Securities and Exchange changes will impair the ability of ETP • Commission, Office of FOIA Services, Holders, including Market Makers, or Send an email to rule-comments@ sec.gov. Please include File Number SR– 100 F Street NE., Washington, DC competing venues to maintain their 20549–2736. competitive standing in the financial NYSEARCA–2015–120 on the subject markets. line. Extension: The Exchange notes that it operates in Form F–80, OMB Control No. 3235–0404, Paper Comments SEC File No. 270–357. a highly competitive market in which market participants can readily favor • Send paper comments in triplicate Notice is hereby given that, pursuant competing venues. In such an to Secretary, Securities and Exchange to the Paperwork Reduction Act of 1995 environment, the Exchange must Commission, 100 F Street NE., (44 U.S.C. 3501 et seq.), the Securities continually review, and consider Washington, DC 20549–1090. and Exchange Commission adjusting, its fees and credits to remain (‘‘Commission’’) has submitted to the competitive with other exchanges. For All submissions should refer to File Office of Management and Budget a the reasons described above, the Number SR–NYSEARCA–2015–120. request for extension of the previously Exchange believes that the proposed This file number should be included on approved collection of information rule change promotes a competitive the subject line if email is used. To help discussed below. environment. the Commission process and review Form F–80 (17 CFR 239.41) is a your comments more efficiently, please registration form used by large, C. Self-Regulatory Organization’s use only one method. The Commission publicly-traded Canadian issuers to Statement on Comments on the will post all comments on the register securities that will be offered in Proposed Rule Change Received From Commission’s Internet Web site (http:// a business combination, exchange offer Members, Participants, or Others www.sec.gov/rules/sro.shtml). Copies of or other reorganization requiring the No written comments were solicited the submission, all subsequent vote of shareholders of the participating or received with respect to the proposed amendments, all written statements companies. The information collected is rule change. with respect to the proposed rule intended to make available material information upon which shareholders III. Date of Effectiveness of the change that are filed with the Commission, and all written and investors can make informed voting Proposed Rule Change and Timing for and investment decisions. The communications relating to the Commission Action information provided is mandatory and proposed rule change between the all information is made available to the The foregoing rule change is effective Commission and any person, other than public upon request. Form F–80 takes upon filing pursuant to Section those that may be withheld from the 10 approximately 2 hours per response and 19(b)(3)(A) of the Act and public in accordance with the 11 is filed by approximately 4 issuers for a subparagraph (f)(2) of Rule 19b–4 provisions of 5 U.S.C. 552, will be thereunder, because it establishes a due, total annual reporting burden of 8 hours available for Web site viewing and × fee, or other charge imposed by the (2 hours per response 4 responses). printing in the Commission’s Public The estimated burden of 2 hours per Exchange. Reference Room, 100 F Street NE., At any time within 60 days of the response was based upon the amount of Washington, DC 20549, on official time necessary to compile the filing of such proposed rule change, the business days between the hours of Commission summarily may registration statement using the existing 10:00 a.m. and 3:00 p.m. Copies of the Canadian prospectus plus any temporarily suspend such rule change if filing also will be available for it appears to the Commission that such additional information required by the inspection and copying at the principal Commission. action is necessary or appropriate in the office of the Exchange. All comments public interest, for the protection of An agency may not conduct or received will be posted without change; sponsor, and a person is not required to investors, or otherwise in furtherance of the Commission does not edit personal the purposes of the Act. If the respond to, a collection of information identifying information from Commission takes such action, the unless it displays a currently valid submissions. You should submit only Commission shall institute proceedings control number. information that you wish to make under Section 19(b)(2)(B) 12 of the Act to The public may view the background available publicly. All submissions determine whether the proposed rule documentation for this information should refer to File Number SR– change should be approved or collection at the following Web site, NYSEARCA–2015–120 and should be disapproved. www.reginfo.gov. Comments should be submitted on or before January 7, 2016. directed to: (i) Desk Officer for the IV. Solicitation of Comments For the Commission, by the Division of Securities and Exchange Commission, Interested persons are invited to Trading and Markets, pursuant to delegated Office of Information and Regulatory submit written data, views and authority.13 Affairs, Office of Management and Budget, Room 10102, New Executive arguments concerning the foregoing, Robert W. Errett, including whether the proposed rule Office Building, Washington, DC 20503, Deputy Secretary. _ change is consistent with the Act. or by sending an email to: Shagufta [FR Doc. 2015–31688 Filed 12–16–15; 8:45 am] [email protected]; and (ii) Pamela 10 15 U.S.C. 78s(b)(3)(A). BILLING CODE 8011–01–P Dyson, Director/Chief Information 11 17 CFR 240.19b–4(f)(2). Officer, Securities and Exchange 12 15 U.S.C. 78s(b)(2)(B). 13 17 CFR 200.30–3(a)(12). Commission, c/o Remi Pavlik-Simon,
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100 F Street NE., Washington, DC 20549 SSA is soliciting comments on the OMB within 60 days from the date of or send an email to: PRA_Mailbox@ accuracy of the agency’s burden this notice. To be sure we consider your sec.gov. Comments must be submitted to estimate; the need for the information; comments, we must receive them no OMB within 30 days of this notice. its practical utility; ways to enhance its later than February 16, 2016. December 11, 2015. quality, utility, and clarity; and ways to Individuals can obtain copies of the minimize burden on respondents, Robert W. Errett, collection instruments by writing to the including the use of automated above email address. Deputy Secretary. collection techniques or other forms of Application for Widow’s or [FR Doc. 2015–31679 Filed 12–16–15; 8:45 am] information technology. Mail, email, or Widower’s Insurance Benefits—20 CFR BILLING CODE 8011–01–P fax your comments and 404.335–404.338, & 404.603—0960– recommendations on the information 0004. Section 2029(e) and 202(f) of the collection(s) to the OMB Desk Officer Social Security Act set forth the and SSA Reports Clearance Officer at SOCIAL SECURITY ADMINISTRATION requirements for entitlement to the following addresses or fax numbers. widow(er)’s benefits, including the (OMB) Office of Management and requirements to file an application. For [Docket No: SSA–2015–0073] Budget, Attn: Desk Officer for SSA, SSA to make a formal determination for Agency Information Collection Fax: 202–395–6974, Email address: entitlement to widow(er)’s benefits, we _ Activities: Proposed Request and OIRA [email protected]. use Form SSA–10–BK to determine Comment Request (SSA) Social Security Administration, whether an applicant meets the OLCA, Attn: Reports Clearance statutory and regulatory conditions for The Social Security Administration Director, 3100 West High Rise, 6401 entitlement to widow(er)’s Title II (SSA) publishes a list of information Security Blvd., Baltimore, MD 21235, benefits. SSA employees interview collection packages requiring clearance Fax: 410–966–2830, Email address: individuals applying for benefits either by the Office of Management and [email protected]. face-to-face or via telephone and enter Budget (OMB) in compliance with Or you may submit your comments the information on the paper form or Public Law 104–13, the Paperwork online through www.regulations.gov, into the Modernized Claims System Reduction Act of 1995, effective October referencing Docket ID Number [SSA– (MCS). The respondents are applicants 1, 1995. This notice includes revisions 2015–0073]. for widow(er)’s benefits. of OMB-approved information I. The information collection below is Type of Request: Revision of an OMB- collections. pending at SSA. SSA will submit it to approved information collection.
Average Estimated Number of Frequency of burden per total annual Modality of completion responses response response burden (minutes) (hours)
SSA–10–BK paper version ...... 2,045 1 15 511 SSA–10–BK MCS version ...... 453,509 1 14 105,819
Totals ...... 455,554 ...... 106,330
II. SSA submitted the information rehabilitation (VR) agencies submit VR agencies submit written requests as collection below to OMB for clearance. Form SSA–199 to SSA to obtain stipulated in SSA’s regulations within Your comments regarding the reimbursement of costs incurred for the Code of Federal Regulations. In most information collection would be most providing VR services. SSA requires containment policies and procedures as useful if OMB and SSA receive them 30 state VR agencies to submit well as causality statements prior to days from the date of this publication. reimbursement claims for the following determining whether to reimburse State To be sure we consider your comments, categories: (1) Claiming reimbursement VR agencies. SSA uses the information we must receive them no later than for VR services provided; (2) certifying on the SSA–199, along with the written January 19, 2016. Individuals can obtain adherence to cost containment policies documentation, to determine whether, and procedures; and (3) preparing copies of the OMB clearance package by and how much, to pay State VR agencies causality statements. The respondents writing to OR.Reports.Clearance@ under SSA’s VR program. Respondents ssa.gov. mail the paper copy of the SSA–199 to are State VR agencies offering vocational Vocational Rehabilitation Provider SSA for consideration and approval of Claim—20 CFR 404.2108(b), the claim for reimbursement of costs and employment services to Social 404.2117(c)(1)&(2), 404.2101(b)&(c), incurred for SSA beneficiaries. For Security and Supplemental Security 404.2121(a), 416.2208(b), 416.2217(c)(1) claims certifying adherence to cost Income (SSI) recipients. & (2), 416.2201(b)&(c), 416.2221(a)— containment policies and procedures, or Type of Request: Revision of an OMB- 0960–0310. State vocational for preparing causality statements, State approved information collection.
Average Estimated Number of Frequency of Number of burden per total annual Modality of completion responses response responses response burden (minutes) (hours)
SSA–199 CFR 404.2108 & 416.2208 ...... 80 160 (12,800) 23 4,907 CFR 404.2117 & 416.2217 Written requests ...... 80 1 (80) 60 80 CFR 404.2121 & 416.2221 Written requests ...... 80 2.5 (200) 100 333
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Average Estimated Number of Frequency of Number of burden per total annual Modality of completion responses response responses response burden (minutes) (hours)
Total ...... 80 ...... (13,080) ...... 5,320
Dated: December 14, 2015. States in nonimmigrant A–3 or G–5 visa and international organizations in the Naomi R. Sipple, status. United States; Reports Clearance Officer, Social Security The Department’s report was filed b. the authorization of the exemption Administration. with the Office of Management and of taxes imposed on the purchases of [FR Doc. 2015–31743 Filed 12–16–15; 8:45 am] Budget. The new system description, goods and services by eligible members BILLING CODE 4191–02–P ‘‘Office of Foreign Missions Records, of foreign missions and international State-81,’’ will read as set forth below. organizations in the United States; c. the authorization of tax and duty- Joyce A. Barr, free importation privileges for eligible DEPARTMENT OF STATE Assistant Secretary for Administration, U.S. members of foreign missions and Department of State. international organizations in the [Public Notice: 9380] STATE–81 United States; Privacy Act; System of Records: Office d. Real property owned or leased by SYSTEM NAME: of Foreign Missions Records, State-81 certain members of foreign missions and Office of Foreign Missions Records international organizations in the SUMMARY: Notice is hereby given that United States and the extension of any SECURITY CLASSIFICATION: the Department of State proposes to applicable privileges and immunities to create a system of records, Office of Unclassified such properties; Foreign Missions Records, State-81, SYSTEM LOCATION: e. Individuals or entities who sell or pursuant to the provisions of the purchase real property from foreign Office of Foreign Missions (OFM), Privacy Act of 1974, as amended (5 missions and international Department of State, 2201 C Street NW., U.S.C. 552a) and Office of Management organizations; Washington, DC 20520; State Annex 33, and Budget Circular No. A–130, f. Motor vehicle titling, registration, OFM Regional Offices. Appendix I. and licensing services and DATES: This system of records will be CATEGORIES OF INDIVIDUALS COVERED BY THE documentation for eligible members of effective on January 26, 2016, unless we SYSTEM: foreign missions and international receive comments that will result in a Categories of individuals covered organizations in the United States, contrary determination. include: (a) members and employees of including motor vehicle records/moving ADDRESSES: Any persons interested in foreign missions and international violation records for individuals and commenting on the new system of organizations in the United States; (b) information concerning an individual’s records may do so by writing to the their immediate family and other motor vehicle liability insurance Director; Office of Information Programs household members; (c) domestic coverage; and Services, A/GIS/IPS; Department of workers who are in the United States in g. A foreign mission or international State, SA–2; 515 22nd Street NW.; nonimmigrant A–3 or G–5 visa status; organization member’s notification or Washington, DC 20522–8100. (d) officials/representatives of foreign request for approval of travel planned governments; and (e) individuals within the United States that is outside FOR FURTHER INFORMATION CONTACT: John accompanying senior foreign embassy of an established geographic area; Hackett, Director; Office of Information officials on tours of the White House. h. The extension of expedited port Programs and Services, A/GIS/IPS; clearance courtesies to senior foreign Department of State, SA–2; 515 22nd CATEGORIES OF RECORDS IN THE SYSTEM: officials entering the United States; Street NW; Washington, DC 20522– 1. Administrative files related to the i. The extension of airport security 8100, or at [email protected]. implementation of the Foreign Missions screening courtesies associated with the SUPPLEMENTARY INFORMATION: The Act, provision of services and benefits. departure of senior foreign officials from Department of State proposes that the Records in the system may include airports in the United States; new system will be named ‘‘Office of biographic data, such as name, numeric j. Requests from foreign missions for Foreign Missions Records.’’ The records identifier, gender, nationality, White House Tours; and in State-81 were previously published citizenship, visa data, date and place of k. Assignment and management of under STATE–36, Security Records. The birth, residential address, employer electronic accounts for individuals records maintained in the Office of name and location, employee’s authorized to submit requests to the Foreign Missions Records are related to function/title, employment start date, Department of State on behalf of foreign the implementation of the Foreign and employment termination date. missions and international Missions Act, the operation of foreign 2. Records associated with the organizations via OFM’s e-Government missions, and the United States’ notification, accreditation, recognition, System. extension of privileges, exemptions, and termination of the appointment of 4. Records related to submissions of immunities, benefits, and courtesies to members of foreign missions as well as Form I–508 ‘‘Waiver of Rights, foreign government officials, members/ employees and officers of international Privileges, Exemptions, and employees and officers of foreign organizations in the United States; Immunities’’ from individuals who are missions and certain international 3. Records may include lawful permanent residents and are in organizations in the United States, their documentation concerning: an occupational status making them immediate family members, and a. Employment authorization for eligible for an ‘‘A,’’ ‘‘E,’’ or ‘‘G’’ visa to domestic workers who are in the United eligible dependents of foreign missions waive rights, privileges, exemptions and
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immunities associated with such the administration and enforcement of All users are given cyber security occupational status; U.S. labor laws; awareness training which covers the 5. Records concerning members of F. The Office of the Director of procedures for handling Sensitive but foreign missions and officers or National Intelligence and other U.S. Unclassified information, including employees of international intelligence community agencies, for personally identifiable information (PII). organizations containing a finding or uses within their statutory missions, Annual refresher training is mandatory. determination made by an appropriate including intelligence, In addition, all Department of State authority of a state, a political counterintelligence, and other national employees who handle PII are required subdivision of a state, or the United security interests; to take the Foreign Service Institute States that there is reasonable cause to G. State, local, and tribal government distance learning course instructing believe that a member of a foreign officials for purposes associated with employees on privacy and security mission or an officer or employee of an their extension of privileges, requirements, including the rules of international organization has exemptions, immunities and benefits to behavior for handling PII and the committed a criminal offense within the foreign missions, international potential consequences if it is handled United States. organizations, and their members/ improperly. Before being granted access officers and employees, and for law to the Office of Foreign Missions AUTHORITY FOR MAINTENANCE OF THE SYSTEM: enforcement purposes; Records, a user must first be granted 22 U.S.C. 4301 et seq. (Foreign H. Corporations/entities identified by access to the Department of State Missions Act); 22 U.S.C. 288 et seq. OFM as providing benefits and services computer system. (International Organizations Immunities to the foreign mission community, but Remote access to the Department of Act); Vienna Convention on Diplomatic only to the extent such information is State network from non-Department Relations; Vienna Convention on relevant and necessary for the provision owned systems is authorized only to Consular Relations; 22 U.S.C. 254a et of such benefits and services; unclassified systems and only through a seq. (Diplomatic Relations Act). I. State, local, Federal, or non- Department approved access program. governmental agencies and entities as PURPOSE: Remote access to the network is needed for purposes of emergency or configured in accordance with the The records maintained herein are disaster response; and Office of Management and Budget related to the implementation of the J. Foreign missions, foreign Memorandum M–07–16 security Foreign Missions Act, the operation of governments, and international requirements that include, but are not foreign missions, and the United States’ organizations in connection with their limited to, two-factor authentication and extension of privileges, exemptions, administration of human resource time out function. immunities, benefits, and courtesies to matters, criminal investigations, or in foreign government officials, members/ order to ensure the proper provision of Access to the Department of State and employees and officers of foreign a privilege or benefit. its annexes is controlled by security missions and certain international The Department of State periodically guards, and admission is limited to organizations in the United States, their publishes in the Federal Register its those individuals possessing a valid immediate family members, and standard routine uses that apply to all identification card or individuals under domestic workers who are in the United of its Privacy Act systems of records. proper escort. All paper records States in nonimmigrant A–3 or G–5 visa These notices appear in the form of a containing personal information are status. Prefatory Statement. These standard maintained in secured file cabinets in routine uses apply to the Office of restricted areas, access to which is ROUTINE USES OF RECORDS MAINTAINED IN THE Foreign Missions Records, State–81. limited to authorized personnel. Access SYSTEM, INCLUDING CATEGORIES OF USERS AND to computerized files is password- THE PURPOSES OF SUCH USES: DISCLOSURE TO CONSUMER REPORTING protected and under the direct The principal users of this AGENCIES: supervision of the system manager. The information outside the Department of None. system manager has the capability of State may include: printing audit trails of access from the POLICIES AND PRACTICES FOR STORING, A. The Department of Homeland RETRIEVING, ACCESSING, RETAINING, AND computer media, thereby permitting Security for uses within its statutory DISPOSING OF RECORDS IN THE SYSTEM: regular and ad hoc monitoring of mission, including law enforcement, computer usage. When it is determined STORAGE: transportation and border security, that a user no longer needs access, the administration of immigrant benefits, Electronic and physical media. user account is disabled. critical infrastructure protection, and RETRIEVABILITY: RETENTION AND DISPOSAL: fraud prevention; Records are retrieved through B. The Department of Justice, individual data fields including, but not Records are retired and destroyed in including the Federal Bureau of limited to, biographic data (such as accordance with published Department Investigation, for purposes of law name, gender, nationality, citizenship, of State Records Disposition Schedules enforcement, criminal prosecution, visa data, date and place of birth, as approved by the National Archives representation of the U.S. government in residential address, employer name and and Records Administration (NARA). civil litigation, fraud prevention, or location, employee’s function/title, More specific information may be border security; employment start date, and employment obtained by writing to the Director; C. The Department of the Treasury, termination date) or other personal Office of Information Programs and for uses within its statutory mission, identifiers. Services, A/GIS/IPS; SA–2, Department including the enforcement of U.S. tax of State; 515 22nd Street NW; laws, and economic sanctions; SAFEGUARDS: Washington, DC 20522–8100. D. The Department of Defense, for All U.S. Government employees and uses within its statutory mission; contractors with authorized access have SYSTEM MANAGER(S) AND ADDRESS: E. The Department of Labor, for uses undergone a thorough background Deputy Director; Office of Foreign within its statutory mission including security investigation. Missions, Department of State; 2201 C
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Street NW., Room 2236; Washington, ACTION: Notice. Township, Bradford County, Pa.; DC 20520 ([email protected]). Consumptive Use of Up to 4.9990 mgd; SUMMARY: This notice lists the projects Approval Date: November 9, 2015. NOTIFICATION PROCEDURE: approved by rule by the Susquehanna 11. EOG Resources, Inc., Pad ID: Individuals who have cause to believe River Basin Commission during the STURDEVANT 1H, ABR–201008155.R1, that the Department of State may have period set forth in DATES. Ridgebury Township, Bradford County, Pa.; Consumptive Use of Up to 4.9990 records pertaining to him or her should DATES: November 1–30, 2015. mgd; Approval Date: November 9, 2015. write to the Director; Office of ADDRESSES: Susquehanna River Basin 12. EOG Resources, Inc., Pad ID: Information Programs and Services, A/ Commission, 4423 North Front Street, OBERKAMPER Pad, ABR– GIS/IPS; SA–2, Department of State; 515 Harrisburg, PA 17110–1788. 201009004.R1, Springfield Township, 22nd Street NW; Washington, DC FOR FURTHER INFORMATION CONTACT: Bradford County, Pa.; Consumptive Use 20522–8100. The individual must Jason E. Oyler, General Counsel, of Up to 4.9990 mgd; Approval Date: November 9, 2015. specify that he/she wishes the records of telephone: (717) 238–0423, ext. 1312; the Office of Foreign Missions to be 13. SWEPI LP, Pad ID: Hotchkiss 472, ABR– fax: (717) 238–2436; email: joyler@ 201009045.R1, Charleston Township, checked. At a minimum, the individual srbc.net. Regular mail inquiries may be Tioga County, Pa.; Consumptive Use of must include: name; date and place of sent to the above address. Up to 4.0000 mgd; Approval Date: birth; current mailing address and zip SUPPLEMENTARY INFORMATION: This November 9, 2015. code; signature; a brief description of notice lists the projects, described 14. SWEPI LP, Pad ID: Williams 889, ABR– the circumstances that caused the below, receiving approval for the 201009051.R1, Deerfield Township, Tioga County, Pa.; Consumptive Use of creation of the record, which give the consumptive use of water pursuant to individual cause to believe that the Up to 4.0000 mgd; Approval Date: the Commission’s approval by rule November 9, 2015. Department of State has records process set forth in 18 CFR 806.22(f) for pertaining to him or her. 15. SWEPI LP, Pad ID: Klettlinger 294, ABR– the time period specified above: 201009054.R1, Delmar Township, Tioga County, Pa.; Consumptive Use of Up to RECORD ACCESS PROCEDURES: Approvals By Rule Issued Under 18 Individuals who wish to gain access 4.0000 mgd; Approval Date: November 9, CFR 806.22(f) 2015. to or amend records pertaining to them 16. SWEPI LP, Pad ID: Kindon 374, ABR– should write to the Director; Office of 1. Seneca Resources Corporation, Pad ID: Gamble Pad J, ABR–201511001, Gamble 201010002.R1, Union Township, Tioga Information Programs and Services Township, Lycoming County, Pa.; County, Pa.; Consumptive Use of Up to (address above). Consumptive Use of Up to 4.0000 mgd; 4.0000 mgd; Approval Date: November 9, Approval Date: November 6, 2015. 2015. CONTESTING RECORD PROCEDURES: 2. Seneca Resources Corporation, Pad ID: 17. Cabot Oil & Gas Corporation, Pad ID: Individuals who wish to contest Gamble Pad I, ABR–201511002, Gamble RomeikaJ P1, ABR–201511005, Gibson records pertaining to them should write Township, Lycoming County, Pa.; Township, Susquehanna County, Pa.; to the Director; Office of Information Consumptive Use of Up to 4.0000 mgd; Consumptive Use of Up to 4.2500 mgd; Programs and Services (address above). Approval Date: November 6, 2015. Approval Date: November 13, 2015. 3. EQT Production Company, Pad ID: 18. Chesapeake Appalachia, LLC, Pad ID: RECORD SOURCE CATEGORIES: Phoenix B, ABR–201511003, Morris Franclaire, ABR–201012011.R1, These records contain information Township, Tioga County, Pa.; Braintrim Township, Wyoming County, that is primarily obtained from the Consumptive Use of Up to 3.0000 mgd; Pa.; Consumptive Use of Up to 7.5000 mgd; Approval Date: November 13, 2015. individual who is the subject of the Approval Date: November 6, 2015. 4. Cabot Oil & Gas Corporation, Pad ID: 19. Chesapeake Appalachia, LLC, Pad ID: records or from foreign missions and/or MyersR P1, ABR–201511004, Lathrop SGL 289A, ABR–201012015.R1, West international organizations having Township, Susquehanna County, Pa.; Burlington Township, Bradford County, information regarding the individual, as Consumptive Use of Up to 4.2500 mgd; Pa.; Consumptive Use of Up to 7.5000 a result of, but not limited to: Approval Date: November 6, 2015. mgd; Approval Date: November 13, 2015. 1. Past or present employment; or 5. Chesapeake Appalachia, LLC, Pad ID: 20. Chesapeake Appalachia, LLC, Pad ID: 2. the individual being the member of Gary, ABR–201012019.R1, Rush Baltzley, ABR–201012020.R1, Rush a household of a foreign mission or Township, Susquehanna County, Pa.; Township, Susquehanna County, Pa.; international organization member. Consumptive Use of Up to 7.5000 mgd; Consumptive Use of Up to 7.5000 mgd; Approval Date: November 9, 2015. Approval Date: November 13, 2015. SYSTEMS EXEMPTED FROM CERTAIN PROVISIONS 6. Chesapeake Appalachia, LLC, Pad ID: 21. SWEPI LP, Pad ID: Wolfe 1114, ABR– OF THE ACT: Roland, ABR–201012021.R1, Wilmot 201007098.R1, Nelson Township, Tioga Pursuant to 5 U.S.C. 552a(k)(2), Township, Bradford County, Pa.; County, Pa.; Consumptive Use of Up to records in this system may be exempt Consumptive Use of Up to 7.5000 mgd; 4.0000 mgd; Approval Date: November Approval Date: November 9, 2015. 13, 2015. from subsections 5 U.S.C. 552a(c)(3), 7. Chesapeake Appalachia, LLC, Pad ID: 22. SWEPI LP, Pad ID: Fish 826, ABR– (d)(1), (d)(2), (d)(3), (d)(4), (d)(5), (e)(1), Kinnarney, ABR–201012030.R1, Albany 201009027.R1, Middlebury Township, (e)(4)(G), (e)(4)(H), (e)(4)(I), (f)(1), (f)(2), Township, Bradford County, Pa.; Tioga County, Pa.; Consumptive Use of (f)(3), (f)(4), and (f)(5) of 5 U.S.C. 552a. Consumptive Use of Up to 7.5000 mgd; Up to 4.0000 mgd; Approval Date: [FR Doc. 2015–31840 Filed 12–16–15; 8:45 am] Approval Date: November 9, 2015. November 13, 2015. 8. EOG Resources, Inc., Pad ID: Rightmire 1H 23. SWEPI LP, Pad ID: Guindon 706, ABR– BILLING CODE 4710–43–P Pad, ABR–201008082.R1, Ridgebury 201009029.R1, Union Township, Tioga Township, Bradford County, Pa.; County, Pa.; Consumptive Use of Up to Consumptive Use of Up to 4.9990 mgd; 4.0000 mgd; Approval Date: November SUSQUEHANNA RIVER BASIN Approval Date: November 9, 2015. 13, 2015. COMMISSION 9. EOG Resources, Inc., Pad ID: RIGHTMIRE 24. SWEPI LP, Pad ID: Byrne 510, ABR– 2H Pad, ABR–201008083.R1, Ridgebury 201009059.R1, Rutland Township, Tioga Projects Approved for Consumptive Township, Bradford County, Pa.; County, Pa.; Consumptive Use of Up to Uses of Water Consumptive Use of Up to 4.9990 mgd; 4.0000 mgd; Approval Date: November Approval Date: November 9, 2015. 13, 2015. AGENCY: Susquehanna River Basin 10. EOG Resources, Inc., Pad ID: WENGER 25. SWEPI LP, Pad ID: Ingalls 710, ABR– Commission. Pad, ABR–201008118.R1, Springfield 201009080.R1, Liberty Township, Tioga
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County, Pa.; Consumptive Use of Up to West (Brothers), ABR–201103049.R1, must be received on or before January 6, 4.0000 mgd; Approval Date: November Forest Lake Township, Susquehanna 2016. 13, 2015. County, Pa.; Consumptive Use of Up to ADDRESSES: 26. SWEPI LP, Pad ID: Smith 589, ABR– 2.1000 mgd; Approval Date: November Send comments identified 201009088.R1, Richmond Township, 23, 2015. by docket number FAA–2014–0400 Tioga County, Pa.; Consumptive Use of 41. Energy Corporation of America, Pad ID: using any of the following methods: Up to 4.0000 mgd; Approval Date: Whitetail #1–5MH, ABR–201008112.R1, • Federal eRulemaking Portal: Go to November 13, 2015. Goshen and Girard Townships, http://www.regulations.gov and follow 27. SWEPI LP, Pad ID: Martin 421, ABR– Clearfield County, Pa.; Consumptive Use the online instructions for sending your 201009089.R1, Delmar Township, Tioga of Up to 5.0000 mgd; Approval Date: comments electronically. County, Pa.; Consumptive Use of Up to November 23, 2015. • Mail: Send comments to Docket 42. Energy Corporation of America, Pad ID: 4.0000 mgd; Approval Date: November Operations, M–30; U.S. Department of 13, 2015. Coldstream Affiliates #1MH, ABR– 28. SWEPI LP, Pad ID: Schimmel 830, ABR– 201007051.R1, Goshen Township, Transportation (DOT), 1200 New Jersey 201009090.R1, Farmington Township, Clearfield County, Pa.; Consumptive Use Avenue SE., Room W12–140, West Tioga County, Pa.; Consumptive Use of of Up to 5.0000 mgd; Approval Date: Building Ground Floor, Washington, DC Up to 4.0000 mgd; Approval Date: November 23, 2015. 20590–0001. November 13, 2015. 43. Enerplus Resources (USA) Corporation, • Hand Delivery or Courier: Take 29. SWEPI LP, Pad ID: Lopatofsky 287, ABR– Pad ID: Winner 4H, ABR–201009094.R1, comments to Docket Operations in 201009091.R1, Charleston Township, West Keating Township, Clinton County, Room W12–140 of the West Building Tioga County, Pa.; Consumptive Use of Pa.; Consumptive Use of Up to 4.0000 mgd; Approval Date: November 23, 2015. Ground Floor at 1200 New Jersey Up to 4.0000 mgd; Approval Date: Avenue SE., Washington, DC, between 9 November 13, 2015. 44. EOG Resources, Inc., Pad ID: GHC Pad A, 30. SWEPI LP, Pad ID: Worden 571, ABR– ABR–201009012.R1, Lawrence a.m. and 5 p.m., Monday through 201009092.R1, Charleston Township, Township, Clearfield County, Pa.; Friday, except Federal holidays. Tioga County, Pa.; Consumptive Use of Consumptive Use of Up to 4.9990 mgd; • Fax: Fax comments to Docket Up to 4.0000 mgd; Approval Date: Approval Date: November 23, 2015. Operations at 202–493–2251. November 13, 2015. 45. EOG Resources, Inc., Pad ID: COP Pad P, Privacy: In accordance with 5 U.S.C. 31. Talisman Energy USA Inc., Pad ID: 05 ABR–201009038.R1, Lawrence 553(c), DOT solicits comments from the 035 Antisdel, ABR–201009015.R1, Township, Clearfield County, Pa.; Consumptive Use of Up to 4.9990 mgd; public to better inform its rulemaking Warren and Windham Townships, process. DOT posts these comments, Bradford County, Pa.; Consumptive Use Approval Date: November 23, 2015. 46. EOG Resources, Inc., Pad ID: SSHC Pad without edit, including any personal of Up to 6.0000 mgd; Approval Date: A, ABR–201009055.R1, Lawrence information the commenter provides, to November 13, 2015. Township, Clearfield County, Pa.; 32. Talisman Energy USA Inc., Pad ID: 05 http://www.regulations.gov, as Consumptive Use of Up to 4.9990 mgd; 036 Antisdel, ABR–201009016.R1, described in the system of records Approval Date: November 23, 2015. Warren Township, Bradford County, Pa.; notice (DOT/ALL–14 FDMS), which can Consumptive Use of Up to 6.0000 mgd; Authority: Pub. L. 91–575, 84 Stat. 1509 et be reviewed at http://www.dot.gov/ Approval Date: November 13, 2015. seq., 18 CFR parts 806, 807, and 808. privacy. 33. SWN Production Company, LLC, Pad ID: Dated: December 14, 2015. Docket: Background documents or TI–14 Connolly A Pad, ABR–201511006, comments received may be read at Liberty Township, Tioga County, Pa.; Stephanie L. Richardson, Secretary to the Commission. http://www.regulations.gov at any time. Consumptive Use of Up to 4.9990 mgd; Follow the online instructions for Approval Date: November 16, 2015. [FR Doc. 2015–31747 Filed 12–16–15; 8:45 am] accessing the docket or go to the Docket 34. SWN Production Company, LLC, Pad ID: BILLING CODE 7040–01–P TI–19 Connolly B Pad, ABR–201511007, Operations in Room W12–140 of the Liberty Township, Tioga County, Pa.; West Building Ground Floor at 1200 Consumptive Use of Up to 4.9990 mgd; New Jersey Avenue SE., Washington, Approval Date: November 16, 2015. DEPARTMENT OF TRANSPORTATION DC, between 9 a.m. and 5 p.m., Monday 35. SWN Production Company, LLC, Pad ID: Federal Aviation Administration through Friday, except Federal holidays. TI–22 Creek A—Pad, ABR–201511008, FOR FURTHER INFORMATION CONTACT: Liberty Township, Tioga County, Pa.; [Summary Notice No. 2015–61] Consumptive Use of Up to 4.9990 mgd; Joshua Parker (202) 267–1538, Office of Rulemaking, Federal Aviation Approval Date: November 16, 2015. Petition for Exemption; Summary of Administration, 800 Independence 36. Cabot Oil & Gas Corporation, Pad ID: Petition Received; AeroCine, LLC JHHC P1, ABR–201511009, Jessup Avenue SW., Washington, DC 20591. Township, Susquehanna County, Pa.; AGENCY: Federal Aviation This notice is published pursuant to Consumptive Use of Up to 4.2500 mgd; Administration (FAA), DOT. 14 CFR 11.85. Approval Date: November 16, 2015. ACTION: Notice. Issued in Washington, DC, on December 37. Carrizo Marcellus, LLC, Pad ID: 11, 2015. Yarasavage Well Pad, ABR– SUMMARY: This notice contains a Lirio Liu, 201102021.R1, Washington Township, summary of a petition seeking relief Wyoming County, Pa.; Consumptive Use from specified requirements of Title 14 Director, Office of Rulemaking. of Up to 2.1000 mgd; Approval Date: November 23, 2015. of the Code of Federal Regulations. The Petition for Exemption 38. Carrizo Marcellus, LLC, Pad ID: Kile, purpose of this notice is to improve the Docket No.: FAA–2014–0400 ABR–201103026.R1, Washington public’s awareness of, and participation Petitioner: AeroCine, LLC Township, Wyoming County, Pa.; in, the FAA’s exemption process. Sections of 14 CFR Affected: Consumptive Use of Up to 2.1000 mgd; Neither publication of this notice nor 61.101(e)(4) and (5),61.113(a), 61.315(a), Approval Date: November 23, 2015. the inclusion or omission of information and 61.23(a) and (c). 39. Carrizo Marcellus, LLC, Pad ID: Mazzara, in the summary is intended to affect the ABR–201103035.R1, Washington Description of Relief Sought: legal status of the petition or its final AeroCine, LLC is seeking relief for an Township, Wyoming County, Pa.; disposition. Consumptive Use of Up to 2.1000 mgd; unmanned aircraft system (UAS) Approval Date: November 23, 2015. DATES: Comments on this petition must operator to be in direct control of the 40. Carrizo Marcellus, LLC, Pad ID: Baker identify the petition docket number and UAS while under direct supervision and
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communication with an FAA private, DATES: Comments are due on or before Avenue, Suite A, Pierre, SD 57501, (605) recreational, or sport licensed pilot, who January 19, 2016. 224–8033. Further information can be acts as a visual observer. The petitioner ADDRESSES: Documents are available for found and comments can be submitted is also seeking relief to permit the review at the Greater Orlando Aviation via the project Web site at: http:// following operations: Over non- Authority at Orlando International www.southrochfordroad.com/. participating persons for breaking news Airport, and the FAA Airports District SUPPLEMENTARY INFORMATION: The flights with a UAS weighing no more Office, 5950 Hazeltine National Drive, FHWA, in cooperation with the South than 4.4 pounds; above private, or Suite 400, Orlando, FL 32822. Written Dakota Department of Transportation controlled access property, without comments on the Sponsor’s request (SDDOT) and Pennington County, is permission from the owner/controller or must be delivered or mailed to: Marisol rescinding the NOI for a proposal to authorized representative; C. Elliott, Program Manager, Orlando make improvements to the South contemporaneous issuance of notice to Airports District Office, 5950 Hazeltine Rochford Road in Pennington County, airmen for breaking news instead of the National Drive, Suite 400, Orlando, FL South Dakota. The previous proposed current requirement for 24 hour 32822–5024. action provided for reconstruction of advanced notification; night flight FOR FURTHER INFORMATION CONTACT: approximately 10 miles of roadway operations for closed set filmmaking; Marisol C. Elliott, Program Manager, between the Town of Rochford and the and the pilot in command to operate the Orlando Airports District Office, 5950 intersection with Deerfield Road in UAS from a moving platform for closed Hazeltine National Drive, Suite 400, accordance with the SDDOT Road set filmmaking. In addition, the Orlando, FL 32822–5024. Design Manual. The NOI is being petitioner requests approval for the UAS SUPPLEMENTARY INFORMATION: rescinded due to modifications to the Aerobo X12, which, including payload, Section 125 of The Wendell H. Ford Aviation design standards that will provide for exceeds the FAA’s max weight limit of historic preservation, reduced wetland 55lbs for a small UAS. Investment and Reform Act for the 21st Century (AIR–21) requires the FAA to impacts, and preservation of sensitive [FR Doc. 2015–31640 Filed 12–16–15; 8:45 am] provide an opportunity for public notice plant species currently protected by the BILLING CODE 4910–13–P and comment prior to the ‘‘waiver’’ or United States Forest Service. ‘‘modification’’ of a sponsor’s Federal The current proposed action would obligation to use certain airport land for reconstruct the same 10 miles of DEPARTMENT OF TRANSPORTATION non-aeronautical purposes. roadway using the American Association of State Highway and Federal Aviation Administration Issued in Orlando, Florida, on December Transportation Officials (AASHTO) 11, 2015. Guidelines for Geometric Design of Very Notice of Intent To Release Certain Rebecca R. Freeman, Low-Volume Local Roads. These Properties From All Terms, Conditions, Acting Manager, Orlando Airports District guidelines provide for a reduced Reservations and Restrictions of a Office Southern Region. roadway width that is more consistent Quitclaim Deed Agreement Between [FR Doc. 2015–31751 Filed 12–16–15; 8:45 a.m.] with similar low volume surfaced the City of Orlando and the Federal BILLING CODE 4910–13–P roadways in Pennington County. The Aviation Administration for the proposed action would maintain the Orlando Executive Airport, Orlando, FL intended purpose of this action to DEPARTMENT OF TRANSPORTATION AGENCY: Federal Aviation improve year-round access to the Town of Rochford from the Deerfield Lake area Administration (FAA), DOT. Federal Highway Administration by reconstructing the two-lane roadway, ACTION: Request for public comment. Environmental Impact Statement; providing an all-weather surface, and Pennington County, SD; Pennington improving drainage and drainage SUMMARY: The FAA hereby provides County, Maine structures. SDDOT will offer an notice of intent to release approximately opportunity for a public meeting on the 20.05 acres at the Orlando Executive AGENCY: Federal Highway proposal to rescind the EIS which will Airport, Orlando, FL from the Administration (FHWA), DOT. be advertised through the local media conditions, reservations, and ACTION: Notice to rescind Environmental along with a notification on the to the restrictions as contained in a Quitclaim Impact Statement. project Web site. Given the reduction in Deed agreement between the FAA and scope and the associated potential the City of Orlando, dated August 9, SUMMARY: The FHWA is issuing this impacts of the proposed action, FHWA 1961. The release of property will allow notice to advise the public that we are intends to prepare a lower-level NEPA the City of Orlando to dispose of the rescinding the Notice of Intent (NOI) to document to determine if the project has property for other than aeronautical prepare an Environmental Impact the potential to significantly affect the purposes. The property is located Statement (EIS) for roadway quality of the human environment. If, at within the Southeast quandrant of the improvements proposed for South a future time, FHWA determines that airport. The parcel is currently Rochford Road in Pennington County, the proposed action is likely to have a designated as non-aeronautical use. The South Dakota. The NOI was published significant impact on the environment, property will be released of its federal in the Federal Register on January 30, a new NOI to prepare an EIS will be obligations for municipal purposes. The 2012. A Draft Environmental Impact published. fair market value of this parcel has been Statement (DEIS) was not released. This Comments or questions concerning determined to be $3,880,000. rescission is based on changes to the this rescission or the proposed action Documents reflecting the Sponsor’s design standards that have brought the should be submitted through the project request are available, by appointment proposed action below the threshold of Web site at http:// only, for inspection at the Greater an EIS. www.southrochfordroad.com or directed Orlando Aviation Authority at Orlando FOR FURTHER INFORMATION CONTACT: to the address provided above under the International Airport and the FAA Marion Barber, Environmental caption FOR FURTHER INFORMATION Airports District Office. Specialist, FHWA, 116 East Dakota CONTACT.
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Authority: 23 U.S.C. 315; 49 CFR 1.48. document, by any of the following submit a copy, from which you have Issued on: December 10, 2015. methods: deleted the claimed confidential • Mark J. Clausen, Web site: http:// business information, to the Docket at www.regulations.gov. Follow the Engineering and Operations Supervisor, the address given above. When you send Federal Highway Administration, Pierre, instructions for submitting comments a comment containing information South Dakota. on the electronic docket site by clicking claimed to be confidential business on ‘‘Help and Information’’ or ‘‘Help/ [FR Doc. 2015–31698 Filed 12–16–15; 8:45 am] information, you should include a cover Info.’’ BILLING CODE 4910–22–P letter setting forth the information • Fax: 1–202–493–2251. specified in our confidential business • Mail: U.S. Department of information regulation (49 CFR part Transportation, Docket Operations, M– DEPARTMENT OF TRANSPORTATION 512). 30, Room W12–140, 1200 New Jersey SUPPLEMENTARY INFORMATION: National Highway Traffic Safety Avenue SE., Washington, DC 20590. • Hand Delivery: 1200 New Jersey Administration A. Statutory Authority for Temporary Avenue SE., West Building Ground Exemptions [Docket No. NHTSA–2015–0125] Floor, Room W12–140, Washington, DC, between 9 a.m. and 5 p.m., Monday The National Traffic and Motor Columbia Body Manufacturing Co.; through Friday, except Federal Vehicle Safety Act (Safety Act), codified Receipt of Petition for Temporary Holidays. at 49 U.S.C. Chapter 301, provides the Exemption From FMVSS No. 224 • Federal eRulemaking Portal: Go to Secretary of Transportation authority to AGENCY: National Highway Traffic http://www.regulations.gov. Follow the exempt, on a temporary basis and under Safety Administration (NHTSA), online instructions for submitting specified circumstances, motor vehicles Department of Transportation (DOT). comments. from a motor vehicle safety standard or Instructions: All submissions must ACTION: bumper standard. This authority is set Notice of receipt of petition for include the agency name and docket temporary exemption from FMVSS No. forth at 49 U.S.C. 30113. The Secretary number. Note that all comments of Transportation has delegated the 224, Rear Impact Protection; request for received will be posted without change comment. authority for implementing this section to http://www.regulations.gov, including to NHTSA. SUMMARY: In accordance with 49 CFR any personal information provided. In recognition of the more limited part 555, NHTSA seeks comments on a Please see the Privacy Act discussion resources and capabilities of small petition for exemption from Federal below. We will consider all comments manufacturers, authority to grant Motor Vehicle Safety Standard (FMVSS) received before the close of business on exemptions based on substantial No. 224, Rear impact protection by the comment closing date indicated economic hardship and good faith Columbia Body Manufacturing Co. above. To the extent possible, we will efforts is provided in the Safety Act to (‘‘Columbia Body’’ or ‘‘petitioner’’) of also consider comments filed after the enable the agency to give those Clackamas, Oregon. Columbia Body is closing date. manufacturers additional time to Docket: For access to the docket to seeking a three year exemption from the comply with the Federal safety read background documents or standard, asserting that compliance with standards. The Safety Act authorizes the comments received, go to http:// the standard would cause substantial Secretary to grant a temporary www.regulations.gov at any time or to economic hardship to a manufacturer exemption to a manufacturer whose 1200 New Jersey Avenue SE., West that has tried in good faith to comply total motor vehicle production in the Building Ground Floor, Room W12–140, with the standard. We are publishing most recent year of production is not Washington, DC 20590, between 9 a.m. this notice of receipt of the application more than 10,000 motor vehicles, on and 5 p.m., Monday through Friday, in accordance with our exemption such terms as the Secretary deems except Federal Holidays. Telephone: regulations. This action does not mean appropriate, if the exemption would be (202) 366–9826. that we have made a judgment about the consistent with the public interest and merits of the application. Privacy Act: Anyone is able to search the electronic form of all comments the Safety Act and ‘‘compliance with DATES: Comments on this petition must received into any of our dockets by the the standard would cause substantial be submitted by January 4, 2016. name of the individual submitting the economic hardship to a manufacturer FOR FURTHER INFORMATION CONTACT: For comment (or signing the comment, if that has tried to comply with the legal questions, contact Mr. Ryan Hagen, submitted on behalf of an association, standard in good faith.’’ (49 U.S.C. Office of the Chief Counsel, NCC–112, business, labor union, etc.). You may § 30113(b)(3)(B)(i)). National Highway Traffic Safety review DOT’s complete Privacy Act NHTSA established 49 CFR part 555, Administration, 1200 New Jersey Statement in the Federal Register Temporary Exemption from Motor Avenue SE., West Building 4th Floor, published on April 11, 2000 (Volume Vehicle Safety and Bumper Standards, Washington, DC 20590. Telephone: 65, Number 70; Pages 19477–78) or you to implement the statutory provisions (202) 366–2992; Fax: (202) 366–3820. may visit http://www.dot.gov/ concerning temporary exemptions. For technical questions, contact Mr. privacy.html. Under Part 555, a petitioner must Robert Mazurowski, Office of Confidential Business Information: If provide specified information in Crashworthiness Standards, National you wish to submit any information submitting a petition for exemption. Highway Traffic Safety Administration, under a claim of confidentiality, you These requirements are specified in 49 1200 New Jersey Avenue SE., West should submit three copies of your CFR 555.5, and include a number of Building 4th Floor, Washington, DC complete submission, including the items. Foremost among them are that 20590. Telephone: (202) 366–1012; Fax: information you claim to be confidential the petitioner must set forth the basis of (202) 493–2990. business information, to the Chief the application under § 555.6, and the ADDRESSES: You may submit your Counsel, NHTSA, at the address given reasons why the exemption would be in comment, identified by the docket under FOR FURTHER INFORMATION the public interest and consistent with number in the heading of this CONTACT. In addition, you should the objectives of the Safety Act (49
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U.S.C. Chapter 301).1 A manufacturer is NHTSA anticipated dealing with gravity Columbia Body posted a net loss of eligible to apply for a hardship feed dump trailers through the $108,000, followed by a $215,000 loss in exemption if its total motor vehicle exemption process.5 Prior to that final 2013. In 2014, it posted a net profit of production in its most recent year of rule, NHTSA had granted an exemption $302,000. If an exemption is not production did not exceed 10,000 to gravity feed dump trailers granted, Columbia Body projects it will vehicles, as determined by the NHTSA manufactured by Columbia Body.6 post a $169,000 net profit for 2016, in Administrator (49 U.S.C. 30113). Since that final rule, NHTSA has comparison to $1 million net profit if an continued to grant exemptions to B. Rear Impact Protection exemption is granted. manufacturers of gravity feed dump Columbia Body states that it has put FMVSS No. 224, Rear impact trailer manufacturers through the forth a good faith effort to comply with 2 protection, requires that all trailers procedures in 49 CFR part 555.7 FMVSS No. 224, however, is not with a gross vehicle weight rating possible for the company to do so at a (GVWR) of 4,536 kilograms (kg) (10,000 C. Overview of Columbia Body’s Petition price, and with the utility its customers pounds (lb)) or more be fitted with a require. Specifically, the rear end of the rear impact guard that conforms to In accordance with 49 U.S.C. 30113 type of trailer in question interfaces 3 FMVSS No. 223, Rear impact guards. and the procedures in 49 CFR part 555, with the front end of an asphalt paving This requirement, however, has Columbia Body of Clackamas, Oregon, a machine, dumping hot asphalt into the presented problems for certain trailer manufacturer, has petitioned the paving machine’s receiver. To establish specialized vehicles, such as road agency for a three year temporary this connection, the paving machine construction vehicles where interaction exemption from the rear impact hooks to the rear wheels of the dump between the rear impact guard and the protection requirements in FMVSS No. trailer. In order to prevent asphalt from specialized paving or dumping 224 based on substantial economic spilling out while being transferred from equipment can cause engineering hardship. the dump trailer to the paving machine, Columbia Body is a small business challenges. In 2004, NHTSA finalized a the paving machine fits 16 to 18 inches that currently employs 40 full time rule that excludes road construction beneath the bottom of the dump trailer. employees and has annual sales of $5– controlled horizontal discharge The interaction between the dump 6,000,000. It produces two, three, and semitrailers (RCC horizontal discharge trailer and paving machine occurs in the trailers), which discharge asphalt to a four axle ‘‘dump style’’ trailers that use a hydraulic hoist to raise the front end space where an underride guard would paving machine by use of a mechanical otherwise reside. drive and conveyor belt.4 In that final of the trailer and discharge its load Columbia Body states that it has rule, NHTSA concluded that the through the tailgate. Columbia Body has looked into possible solutions to this installation of rear impact guards would produced an average of 17 non-gravity problem, including $50,000 in research interfere with the intended function of feed dump trailers a year over the last in 2005 and 2006 to evaluate solutions the trailers and were impractical, given three years. Recently, many of Columbia to comply with FMVSS No. 224. One the design and mission of these trailers. Body’s gravity feed dump body solution included adding removable The 2004 final rule decided against a competitors have gone bankrupt, underride guards. Columbia Body states, regulatory exemption for gravity feed leading purchasers to request the trailers however, that ‘‘[e]ven if we could install dump trailers, which do not have the from Columbia Body. Given the recent a removable underride guard it will put mechanical drive and conveyor belt as requests, Columbia Body seeks to ensure equipment operators in an unsafe discussed above, because gravity feed it is able to fill any potential orders. If situation installing and removing the dump trailers can be versatile vehicles the exemption were granted, Columbia guard.’’ The petitioner states that the used for a wide variety of tasks. Creating Body projects that it would sell no more area where a removable underride guard an exemption in the regulation itself for than 50 of the exempted trailers per would be installed is often covered in gravity feed dump trailers could year. Columbia Body states that the asphalt buildup. Additionally, potentially permit a large vehicle trailers in question are designed Columbia Body believes that the population with greater exposure than specifically for use with paving cleaning, maintenance, and heavy RCC horizontal discharge trailers to be machines. Without an exemption, impacts on the underride guard and the exempted from the standard. Instead, Columbia Body states it will suffer substantial economic hardship, area immediately around it when 1 While 49 U.S.C. 30113(b) states that exemptions projecting it will have to lay off seven contacting the paving machine would from a Safety Act standard are to be granted on a or eight of its 40 employees starting in affect the structural integrity of the ‘‘temporary basis,’’ (49 U.S.C. 30113(b)(1)) the 2016. underride guard. statute also expressly provides for renewal of an In its application, Columbia Body Another solution Columbia Body exemption on reapplication. Manufacturers are nevertheless cautioned that the agency’s decision to provides specific financial information states it looked into involved grant an initial petition in no way predetermines from the last three years. In 2012, constructing a sub-frame ‘‘with the that the agency will repeatedly grant renewal ability to slide the dump body forward petitions, thereby imparting semi-permanent status 5 Id. at 67666. when in transit and slide it to the rear to an exemption from a safety standard. Exempted 6 68 FR 7406 (February 13, 2003). Available at: manufacturers seeking renewal must bear in mind to provide the proper over hang [sic] http://www.regulations.gov/ when paving.’’ Columbia Body states that the agency is directed to consider financial contentStreamer?documentId=NHTSA-2002-13955- hardship as but one factor, along with the 0004&disposition=attachment&contentType=pdf that although this design is possible, manufacturer’s ongoing good faith efforts to comply (last accessed on November 6, 2015). conversations with prospective with the regulation, the public interest, consistency 7 See: 69 FR 30989 (June 1, 2004), available at: with the Safety Act, generally, as well as other such customers indicate the design ‘‘would https://www.federalregister.gov/articles/2004/06/ not be acceptable’’ because of the added matters provided in the statute. 01/04-12334/reliance-trailer-co-llc-grant-of- 2 49 CFR 571.224. application-for-renewal-of-temporary-exemption- cost and weight associated with 3 49 CFR 571.223. from-federal-motor (last accessed on November 6, building such a structure. 4 69 FR 67663 (November 19, 2004). Available at: 2015), and 74 FR 42142 (August 20, 2009), available Columbia Body states that so long as https://www.federalregister.gov/articles/2004/11/ at: https://www.federalregister.gov/articles/2009/08/ 19/04-25703/federal-motor-vehicle-safety- 20/E9-19956/beall-corporation-grant-of- the paving industry continues to use the standards-rear-impact-guards-final-rule (last application-for-a-temporary-exemption-from-fmvss- same method of paving roads, it remains accessed on November 5, 2015). no-224 (last accessed on November 9, 2015). a physical impossibility to manufacture
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this type of trailer and comply with DEPARTMENT OF TRANSPORTATION By the Board, Chairman Elliott, Vice FMVSS No. 224. Chairman Begeman, and Commissioner Surface Transportation Board Miller. In support of its petition for Tia Delano, exemption, Columbia Body notes that [Docket No. FD 35963 (Sub–No. 1)] Clearance Clerk. gravity feed dump trailers see limited highway exposure due to their function. BNSF Railway Company—Temporary [FR Doc. 2015–31726 Filed 12–16–15; 8:45 am] Trackage Rights Exemption—Union BILLING CODE 4915–01–P Specifically, the trailers themselves are Pacific Railroad Company on the road for short periods of time. ‘‘Asphalt batch plants are typically set AGENCY: Surface Transportation Board, DEPARTMENT OF THE TREASURY close to the paving activity to limit time DOT. traveling between the two paving ACTION: Partial revocation of exemption. Financial Crimes Enforcement Network activities.’’ Additionally, the petitioner SUMMARY: states that in many instances, these Under 49 U.S.C. 10502, the Bank Secrecy Act Advisory Group; Board revokes the class exemption as it paving machines are often performing Solicitation of Application for pertains to the local trackage rights their transport tasks away from the Membership described in Docket No. FD 35963 to driving public in restricted access permit the temporary trackage rights to AGENCY: Financial Crimes Enforcement construction areas. expire at midnight on December 31, Network (‘‘FinCEN’’), Treasury. Finally, Columbia Body believes its 2018, in accordance with the agreement ACTION: Notice and request for ability to obtain an exemption is in the of the parties,1 subject to the employee nominations. public interest. Columbia Body has protective conditions set forth in Oregon informed NHTSA that customers Short Line Railroad—Abandonment SUMMARY: FinCEN is inviting the public requesting its gravity feed dump trailers Portion Goshen Branch Between Firth & to nominate financial institutions and are doing so in order to pave local Ammon, in Bingham & Bonneville trade groups for membership on the roadways. Many purchasers are local Counties, Idaho (Oregon Short Line), Bank Secrecy Act Advisory Group. New municipalities, or companies that 360 I.C.C. 91 (1979). members will be selected for three-year support local municipalities in creating DATES: This decision is effective on membership terms. and maintaining roads for the traveling January 16, 2016. Petitions to stay must DATES: Nominations must be received public. Therefore, the petitioner be filed by December 28, 2015. Petitions by January 19, 2016. believes supplying gravity feed dump for reconsideration must be filed by ADDRESSES: Applications must be trailers is in the public interest. January 6, 2016. emailed to [email protected]. ADDRESSES: Send an original and 10 FOR FURTHER INFORMATION CONTACT: D. Completeness and Comment Period copies of all pleadings, referring to FinCEN Resource Center at 800–767– Docket No. FD 35963 (Sub-No. 1) to: 2825. Upon receiving a petition, NHTSA Surface Transportation Board, 395 E conducts an initial review of the Street SW., Washington, DC 20423– SUPPLEMENTARY INFORMATION: The petition with respect to whether the 0001. In addition, a copy of each Annunzio-Wylie Anti-Money petition is complete and whether the pleading must be served on BNSF’s Laundering Act of 1992 required the petitioner appears to be eligible to apply representative: Karl Morell, Karl Morell Secretary of the Treasury to establish a for the requested exemption. The agency & Associates, 655 15th Street NW., Suite Bank Secrecy Act Advisory Group has concluded that Columbia Body’s 225, Washington, DC 20005. (BSAAG) consisting of representatives petition is complete and that it is FOR FURTHER INFORMATION CONTACT: from federal regulatory and law eligible to apply for a temporary Amy Ziehm (202) 245–0391. [Assistance enforcement agencies, financial exemption. The agency has not made for the hearing impaired is available institutions, and trade groups with any judgment on the merits of the through the Federal Information Relay members subject to the requirements of application. NHTSA has placed a non- Service (FIRS) at 1–800–877–8339.] the Bank Secrecy Act, 31 CFR 1000– confidential copy of the petition in the SUPPLEMENTARY INFORMATION: 1099 et seq. or Section 6050I of the docket. Additional information is contained in Internal Revenue Code of 1986. The the Board’s decision. Board decisions BSAAG is the means by which the The agency seeks comment from the Treasury receives advice on the public on the merits of Columbia Body’s and notices are available on our Web site at http://www.stb.dot.gov. operations of the Bank Secrecy Act. As petition for a temporary exemption from chair of the BSAAG, the Director of FMVSS No. 224. After considering Decided: December 11, 2015. FinCEN is responsible for ensuring that public comments and other available relevant issues are placed before the information, we will publish a notice of 1 In that docket, on October 30, 2015, BNSF Railway Company (BNSF) filed a verified notice of BSAAG for review, analysis, and final action on the petition in the exemption under the Board’s class exemption discussion. Federal Register. procedures at 49 CFR 1180.2(d)(7). The notice BSAAG membership is open to covered the agreement by Union Pacific Railroad financial institutions and trade groups. Raymond R. Posten, Company (UP) to grant restricted local trackage rights to BNSF over UP’s lines as follows: (1) New members will be selected to serve Associate Administrator for Rulemaking. Between UP milepost 93.2 at Stockton, Cal., on UP’s a three-year term and must designate [FR Doc. 2015–31709 Filed 12–16–15; 8:45 am] Oakland Subdivision, and UP milepost 219.4 at one individual to represent that member Elsey, Cal., on UP’s Canyon Subdivision, a distance BILLING CODE 4910–59–P at plenary meetings. The designated of 126.2 miles; and (2) between UP milepost 219.4 at Elsey and UP milepost 280.7 at Keddie, Cal., on representative should be knowledgeable UP’s Canyon Subdivision, a distance of 61.3 miles. about Bank Secrecy Act requirements BNSF submits that, while the trackage rights are and must be able and willing to make only temporary rights, because they are ‘‘local’’ rather than ‘‘overhead’’ rights, they do not qualify the necessary time commitment to for the Board’s class exemption for temporary participate on committees throughout trackage rights under 49 CFR 1180.2(d)(8). the year by phone and attend biannual
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plenary meetings held in Washington DATES: Written comments should be of the burden of the collection of DC, in May and October. received on or before February 16, 2016 information; (c) ways to enhance the It is important to provide complete to be assured of consideration. quality, utility, and clarity of the answers to the following items, as ADDRESSES: Direct all written comments information to be collected; (d) ways to applications will be evaluated on the to Michael Joplin, Internal Revenue minimize the burden of the collection of information provided through this Service, Room 6129, 1111 Constitution information on respondents, including application process. Applications Avenue NW., Washington, DC 20224. through the use of automated collection should consist of: FOR FURTHER INFORMATION CONTACT: techniques or other forms of information • Name of the organization requesting Requests for additional information or technology; and (e) estimates of capital membership copies of the form and instructions this or start-up costs and costs of operation, • Point of contact, title, address, regulation should be directed to Sara maintenance, and purchase of services email address and phone number Covington at Internal Revenue Service, to provide information. • Description of the financial Room 6129, 1111 Constitution Avenue Approved: December 9, 2015. institution or trade group and its NW., Washington, DC 20224, or through Michael A. Joplin, involvement with the Bank Secrecy Act, the Internet at [email protected]. IRS Supervisory Tax Analyst. 31 CFR 1000–1099 et seq. SUPPLEMENTARY INFORMATION: • [FR Doc. 2015–31657 Filed 12–16–15; 8:45 am] Reasons why the organization’s Title: Low-Income Housing Credit. BILLING CODE 4830–01–P participation on the BSAAG will bring OMB Number: 1545–0984. value to the group Form Number: 8586. Organizations may nominate Abstract: Internal Revenue Code DEPARTMENT OF VETERANS themselves, but applications for section 42 permits owners of residential AFFAIRS individuals who are not representing an rental projects providing low-income organization will not be considered. housing to claim a tax credit for part of [OMB Control No. 2900–0154] Members will not be remunerated for the cost of constructing or rehabilitating their time, services, or travel. In making such low-income housing. Form 8586 is Proposed Information Collection the selections, FinCEN will seek to used by taxpayers to compute the credit (Application for VA Education Benefits, complement current BSAAG members and by the IRS to verify that the correct Application for Family Member To Use in terms of affiliation, industry, and credit has been claimed. Transferred Benefits, Application for geographic representation. The Director Current Actions: There is no change VA Education Benefits Under the of FinCEN retains full discretion on all being made to the form at this time. National Call to Service (NCS) Program membership decisions. The Director Type of Review: Extension of a and Application for Veterans may consider prior years’ applications currently approved collection. Retraining Assistance Program) when making selections and does not Affected Public: Individuals or Activity: Comment Request. limit consideration to institutions households, and businesses, or other AGENCY: Veterans Benefits nominated by the public when making for-profit organizations. Administration, Department of Veterans selections. Estimated Number of Respondents: 7,786. Affairs. Jamal El-Hindi, Estimated Time per Respondent: 8 ACTION: Notice. Deputy Director, Financial Crimes hours, 48 minutes. SUMMARY: The Veterans Benefits Enforcement Network. Estimated Total Annual Burden Administration (VBA), Department of [FR Doc. 2015–31659 Filed 12–16–15; 8:45 am] Hours: 68,517. BILLING CODE 4810–02–P The following paragraph applies to all Veterans Affairs (VA), is announcing an of the collections of information covered opportunity for public comment on the by this notice: proposed collection of certain DEPARTMENT OF THE TREASURY An agency may not conduct or information by the agency. Under the Paperwork Reduction Act (PRA) of Internal Revenue Service sponsor, and a person is not required to respond to, a collection of information 1995, Federal agencies are required to unless the collection of information publish notice in the Federal Register Proposed Collection; Comment concerning each proposed collection of Request for Form 8586 displays a valid OMB control number. Books or records relating to a collection information, including each proposed AGENCY: Internal Revenue Service (IRS), of information must be retained as long revision of a currently approved Treasury. as their contents may become material collection, and allow 60 days for public comment in response to the notice. ACTION: Notice and request for in the administration of any internal DATES: comments. revenue law. Generally, tax returns and Written comments and tax return information are confidential, recommendations on the proposed SUMMARY: The Department of the as required by 26 U.S.C. 6103. collection of information should be Treasury, as part of its continuing effort Request For Comments: Comments received on or before February 16, 2016. to reduce paperwork and respondent submitted in response to this notice will ADDRESSES: Submit written comments burden, invites the general public and be summarized and/or included in the on the collection of information through other Federal agencies to take this request for OMB approval. All Federal Docket Management System opportunity to comment on proposed comments will become a matter of (FDMS) at www.Regulations.gov or to and/or continuing information public record. Comments are invited on: Nancy J. Kessinger, Veterans Benefits collections, as required by the (a) Whether the collection of Administration (20M33), Department of Paperwork Reduction Act of 1995, information is necessary for the proper Veterans Affairs, 810 Vermont Avenue Public Law 104–13 (44 U.S.C. performance of the functions of the NW., Washington, DC 20420 or email to 3506(c)(2)(A)). Currently, the IRS is agency, including whether the [email protected]. Please refer to soliciting comments concerning Form information shall have practical utility; ‘‘OMB Control No. 2900–0154’’ in any 8586, Low-Income Housing Credit. (b) the accuracy of the agency’s estimate correspondence. During the comment
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period, comments may be viewed online collection of information on C. VA Form 22–1990N is used by a through the FDMS. respondents, including through the use claimant who signed an enlistment FOR FURTHER INFORMATION CONTACT: of automated collection techniques or contract with the Department of Defense Nancy J. Kessinger at (202) 632–8924 or the use of other forms of information for the National Call to Service (NCS) FAX (202) 632–8925. technology. program and elected one of two SUPPLEMENTARY INFORMATION: Under the Title: Application for VA Education education incentives. PRA of 1995 (Pub. L. 104–13; 44 U.S.C. Benefits, VA Form 22–1990, D. VA Form 22–1990R is used by a 3501–21), Federal agencies must obtain Application for Family Member to Use claimant to request assistance in approval from the Office of Management Transferred Benefits, VA Form 22– retraining to enter the workforce. 1990E, Application for VA Education and Budget (OMB) for each collection of Affected Public: Individuals or Benefits Under the National Call to information they conduct or sponsor. households. This request for comment is being made Service (NCS) Program, VA Form 22– pursuant to Section 3506(c)(2)(A) of the 1990N and Application for Veterans Estimated Annual Burden: 273,098 PRA. Retraining Assistance Program, VA hours. With respect to the following Form 22–1990R. Estimated Average Burden per collection of information, VBA invites OMB Control Number: 2900–0154. Respondent: 15 minutes. comments on: (1) Whether the proposed Type of Review: Revision of an Frequency of Response: Annually. collection of information is necessary approved collection. Estimated Number of Respondents: for the proper performance of VBA’s Abstract: 855,652. functions, including whether the A. VA Form 22–1990 is completed by information will have practical utility; claimants who are submitting an initial By direction of the Secretary. (2) the accuracy of VBA’s estimate of the (or original) claim for VA education Kathleen M. Manwell, burden of the proposed collection of benefits. Program Analyst, VA Privacy Service, Office information; (3) ways to enhance the B. VA Form 22–1990E is completed of Privacy and Records Management, quality, utility, and clarity of the by a claimant who wishes to transfer his Department of Veterans Affairs. information to be collected; and (4) or her Montgomery GI Bill entitlement [FR Doc. 2015–31694 Filed 12–16–15; 8:45 am] ways to minimize the burden of the to their dependent(s). BILLING CODE 8320–01–P
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Part II
Commodity Futures Trading Commission
17 CFR Parts 1, 38, 40, et al. Regulation Automated Trading; Proposed Rule
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COMMODITY FUTURES TRADING The Commission welcomes all public Senior Trial Attorney, Division of COMMISSION comments. Enforcement, [email protected] or DATES: Comments must be received on 202–418–5438; or John Dunfee, 17 CFR Parts 1, 38, 40, and 170 or before March 16, 2016. Assistant General Counsel, Office of ADDRESSES: You may submit comments, General Counsel, [email protected] or RIN 3038–AD52 identified by RIN 3038–AD52, by any of 202–418–5396. the following methods: SUPPLEMENTARY INFORMATION: Regulation Automated Trading • CFTC Web site: http:// Table of Contents AGENCY: Commodity Futures Trading comments.cftc.gov. Follow the I. Introduction Commission. instructions for submitting comments through the Comments Online process A. Overview—Development of Automated ACTION: Notice of proposed rulemaking. Trading Environment on the Web site. • B. Risks and Potential Benefits Associated SUMMARY: The Commodity Futures Mail: Send to Christopher With Automated Trading Trading Commission (‘‘CFTC’’ or Kirkpatrick, Secretary of the C. The Proposed Regulations ‘‘Commission’’) is proposing a series of Commission, Commodity Futures 1. Overview of NPRM risk controls, transparency measures, Trading Commission, Three Lafayette 2. The Proposed Regulations Under Parts 1, and other safeguards to enhance the Centre, 1155 21st Street, NW., 38, 40, and 170 II. Background on Regulatory Responses to regulatory regime for automated trading Washington, DC 20581. • Hand Delivery/Courier: Same as Automated Trading on U.S. designated contract markets A. The Commission’s Regulatory Response (‘‘DCMs’’) (collectively, ‘‘Regulation Mail, above. • Federal eRulemaking Portal: http:// to Date AT’’). The Commission’s proposals B. The Commission’s 2013 Concept Release build on efforts by numerous entities in www.regulations.gov. Follow the C. Other Recent Regulatory Responses recent years to promote best practices instructions for submitting comments. 1. SEC Regulatory Initiatives and regulatory standards for automated Please submit comments by only one 2. FINRA Initiatives trading, including standards and best method. All comments should be 3. European and Other Regulatory Initiatives practices for algorithmic trading systems submitted in English or accompanied by an English translation. Comments will D. Industry and Regulatory Best Practices (‘‘ATSs’’), electronic trade matching and Recommendations engines, and new connectivity methods be posted as received to http:// www.cftc.gov. You should submit only 1. NFA Compliance Rule 2–9: Supervision that characterize modern financial 2. FIA Reports on Automated Trading information that you wish to make markets. In 2012 the Commission 3. IOSCO Reports on Electronic Trading adopted rules requiring futures available publicly. If you wish the 4. CFTC TAC Subcommittee commission merchants (‘‘FCMs’’), swap Commission to consider information 5. FIX Risk Management Working Group dealers (‘‘SDs’’), and major swap that may be exempt from disclosure 6. Senior Supervisors Group (SSG) Briefing under the Freedom of Information Act Note participants (‘‘MSPs’’) to use automated 7. Treasury Market Practices Group Best means to screen orders for compliance (‘‘FOIA’’), a petition for confidential treatment of the exempt information Practices with certain risk-based limits. It also III. Recent Disruptive Events in Automated adopted rules requiring certain financial may be submitted according to the procedures established in 17 CFR 145.9. Trading Environments risk control requirements for DCMs IV. Overview of Regulation AT offering direct market access to their The Commission reserves the right, but A. Concept Release/Regulation AT customers. In 2013 the Commission shall have no obligation, to review, Terminology published an extensive Concept Release prescreen, filter, redact, refuse, or B. Commenter Preference for Principles- on Risk Controls and System Safeguards remove any or all of your submission Based Regulations from http://www.cftc.gov that it may C. Multi-Layered Approach to Pre-Trade for Automated Trading Environments Risk Controls and Other Measures (‘‘Concept Release’’), compiling in one deem to be inappropriate for publication, such as obscene language. D. Codification of Defined Terms Used document a comprehensive discussion Throughout Regulation AT of industry practices, Commission All submissions that have been so treated that contain comments on the 1. ‘‘Algorithmic Trading’’—§ 1.3(zzzz) regulations, and evolving concerns in 2. ‘‘Algorithmic Trading Compliance merits of the rulemaking will be automated trading.1 Now, through this Issue’’—§ 1.3(tttt) retained in the public comment file and notice of proposed rulemaking 3. ‘‘Algorithmic Trading Disruption’’— will be considered as required under the (‘‘NPRM’’) for Regulation AT, the § 1.3(uuuu) Administrative Procedure Act and other Commission seeks to update 4. ‘‘Algorithmic Trading Event’’— applicable laws, and may be accessible § 1.3(vvvv) Commission rules in response to the under FOIA. 5. ‘‘AT Order Message’’—§ 1.3(wwww) evolution from pit trading to electronic 6. ‘‘AT Person’’—§ 1.3(xxxx) FOR FURTHER INFORMATION CONTACT: trading. In particular, the Commission is 7. ‘‘Direct Electronic Access’’—§ 1.3(yyyy) proposing to adopt a comprehensive Sebastian Pujol Schott, Associate E. Registration of Certain Persons Not approach to reducing risk and Director, Division of Market Oversight, Otherwise Registered With increasing transparency in automated [email protected] or 202–418–5641; Marilee Commission—§ 1.3(x) trading. Proposed Regulation AT is Dahlman, Special Counsel, Division of 1. Concept Release Comments designed to consolidate previous work Market Oversight, [email protected] 2. Description of Regulation by industry participants, the or 202–418–5264; Mark Schlegel, 3. Policy Discussion Special Counsel, Division of Market 4. Request for Comments Commission, and fellow regulators into F. RFA Standards for Automated Trading a unified body of law addressing Oversight, [email protected] or 202– 418–5055; Michael Penick, Economist, and Algorithmic Trading Systems— automation in order placement and § 170.19 execution in U.S. derivatives markets. Office of the Chief Economist, 1. Policy Discussion [email protected] or 202–418–5279; 2. Description of Regulation 1 Concept Release on Risk Controls and System Richard Haynes, Economist, Office of 3. Request for Comments Safeguards for Automated Trading Environments, the Chief Economist, [email protected] G. AT Persons Must Become Members of 78 FR 56542 (Sept. 12, 2013). or 202–418–5063; Andrew Ridenour, an RFA—§ 170.18
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1. Policy Discussion 1. Policy Discussion I. Introduction 2. Description of Regulation 2. Description of Regulations 3. Request for Comments 3. Request for Comments A. Overview—Development of H. Pre-Trade and Other Risk Controls for V. Related Matters Automated Trading Environment AT Persons—§ 1.80 A. Calculation of Number of Persons U.S. derivatives markets have 1. Concept Release Comments on Pre-Trade Subject to Regulations historically relied on manual processes and Other Risk Controls 1. Request for Comments 2. Description of Regulation for the origination of orders, B. Calculation of Hourly Wage Rates Used transmission of information, and 3. Policy Discussion in Related Matters 4. Request for Comments execution of trades. Trading decisions C. Regulatory Flexibility Act I. Standards for Development, Testing, were typically initiated by natural Monitoring, and Compliance of 1. FCMs and DCMs persons, and transmitted through 2. AT Persons Algorithmic Trading Systems—§ 1.81 intermediaries via comparatively simple 3. Request for Comments 1. Concept Release Comments communications networks. Execution 2. Description of Regulation D. Paperwork Reduction Act 1. Information Provided by Reporting occurred in open-outcry trading pits 3. Policy Discussion operated by DCMs. Access to these pits 4. Request for Comments Entities/Persons J. Risk Management by Clearing Member a. § 1.3(x)(3)—Submissions by newly was limited to brokers and traders FCMs—§ 1.82 registered floor traders granted trading privileges by the 1. Concept Release Comments b. § 1.83(a)—Compliance reports submitted exchange. A range of other processing 2. Description of Regulation by AT Persons to DCMs and risk management services were 3. Policy Discussion c. § 1.83(b)—Compliance reports submitted equally reliant on manual processes, 4. Discussion of Persons Subject to by clearing member FCMs to DCMs and the complete trading system could Proposed §§ 1.80 and 1.82 d. § 1.83(c)—AT Person retention and move only as fast as its human decision- 5. Request for Comments production of books and records makers. Trading information was often K. Compliance Reports Submitted by AT e. § 1.83(d)—Clearing member FCM recorded on paper order tickets and Persons and Clearing FCMs to DCMs; retention and production of books and Related Recordkeeping Requirements— trading cards, and time-stamps were records recorded only to the nearest minute. § 1.83 f. § 38.401(a) and (c)—Public dissemination 1. Concept Release Comments The physical element of trading was of information by DCMs pertaining to 2. Description of Regulation reflected in exchange or Commission electronic matching platforms 3. Policy Discussion rules governing diverse matters such as g. § 40.23—Information publicly 4. Request for Comments the types of trading permitted from the disseminated by DCMs regarding self- L. Risk Controls for Trading: Direct top step of a futures pit,2 as well as trade prevention Electronic Access Provided by DCMs— requirements that certain orders for § 38.255(b) and (c) h. § 40.25—Information in public rule filings provided by DCMs regarding execution in a trading pit be recorded in 1. Concept Release Comments ‘‘non-erasable ink.’’ This basic structure 2. Description of Regulation Market Maker and Trading Incentive 3. Policy Discussion Programs remained constant for decades, and 4. Request for Comments i. § 40.26—Information provided by DCMs produced a parallel regulatory M. Disclosure and Transparency in DCM to the Division of Market Oversight upon framework also premised on natural Trade Matching Systems—§ 38.401(a) request regarding Market Maker and persons and human decision-making 1. Concept Release Comments Trading Incentive Programs speeds. 2. Description of Regulation 2. Information Collection Comments Today, derivatives markets have 3. Policy Discussion E. Cost Benefit Considerations transitioned from the manual processes 4. Request for Comments 1. The Statutory Requirement for the described above to highly automated N. Pre-Trade and Other Risk Controls at Commission to Consider the Costs and trading and trade matching systems. DCMs—§ 40.20 Benefits of its Actions Modern DCMs and DCM market 1. Concept Release Comments 2. Concept Release Comments Regarding participants, in particular, are 2. Description of Regulation Costs and Benefits 3. Policy Discussion characterized by a wide array of 3. The Commission’s Cost-Benefit algorithmic and electronic systems for 4. Request for Comments Consideration of Regulation AT— the generation, transmission, O. DCM Test Environments for AT Baseline Point Persons—§ 40.21 4. The Commission’s Cost-Benefit management, and execution of orders, 1. Concept Release Comments Consideration of Regulation AT—Cross- as well as systems used to confirm 2. Description of Regulation Border Effects transactions, communicate market data, 3. Request for Comments 5. General Request for Comment and link markets and market P. DCM Review of Compliance Reports by 6. The Commission’s Cost-Benefit participants through high-speed AT Persons and Clearing FCMs; DCM Consideration of Regulation AT— networks. Collectively, such DCM and Rules Requiring Certain Books and Proposed Definitions market participant trading systems Records; and DCM Review of Such 7. Pre-Trade Risk Controls, Testing and Books and Records as Necessary— constitute the ‘‘automated trading § 40.22 Supervision of Automated Systems, 1. Concept Release Comments Requirement to Submit Compliance 2 For example, press reports surrounding the 2. Description of Regulation Reports, and Other Related Algorithmic initiation of CME’s ‘‘top step’’ rule in the S&P 500 stock-index pit in 1987 indicated that brokers 3. Policy Discussion Trading Requirements 8. Requirements for Certain Entities to preferred the top step to ‘‘get a panoramic view of 4. Request for Comments the trading activity and quickly grab customer order Q. Self-Trade Prevention Tools—§ 40.23 Register as Floor Traders sheets being relayed by nearby clerks.’’ They 1. Concept Release Comments 9. Transparency in Exchange Trade described a trading pit where ‘‘[s]ome 400 traders 2. Commission Analysis of Amount of Self- Matching Systems are jammed shoulder-to-shoulder in the Trading in the Marketplace 10. Self-Trade Prevention amphitheater-like pit, which accounts for three- 3. Description of Regulation 11. Market-Maker and Trading Incentive fourths of the nation’s stock-index futures trading.’’ Programs See Jouzaitis, Carol, ‘‘Merc Launches ‘Top-step’ 4. Policy Discussion Reform,’’ Chicago Tribune (June 22, 1987) available 5. Request for Comments VI. Aggregate Estimated Cost of Regulation at http://articles.chicagotribune.com/1987-06-22/ R. DCM Market Maker and Trading AT business/8702160155_1_dual-trading-stock-index- Incentive Programs—§§ 40.25–40.28 VII. List of All Questions in the NPRM futures-market-chicago-mercantile-exchange.
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environment’’ at the center of Commission staff indicates that in an The largely complete transition of Regulation AT. Automated trading approximately two-year period through DCMs to electronic trade matching environments often make use of October 2014, over 95 percent of all on- platforms has occurred alongside an automated systems for either the exchange futures trading occurred on equally important shift in the generation or the execution of orders (in DCMs’ electronic trade matching technologies used by market many cases, both). Such automated platforms.6 In this regard, the participants to place and manage orders. systems are based on sets of rules or Commission notes that CME Group, the Market participants have applied a instructions (commonly referred to as largest U.S. exchange operator, range of sophisticated technological algorithms) and related computer announced in February 2015 its tools to their trading. For example, systems used to automate the execution intention to close all but one of its open- market participants are increasingly of a trading strategy.3 In futures markets, outcry trading floors for futures.7 using ATSs, often coupled with high- orders generated by automated trading IntercontinentalExchange, the second speed communication networks. Market systems are ultimately transmitted to largest DCM operator, ended all futures participants are also increasingly relying DCMs that accept, manage and match open-outcry trading in March 2008, and on electronic market and other data orders by automated means. ended all options open-outcry trading in feeds to inform trading decisions, and While technologies have evolved, the October 2012. On-exchange trading on on multiple computer algorithms to underlying functions of derivatives DCMs other than the CME Group generate, manage, or route orders to markets remain the same, as do the exchanges and DCMs. Market participants may also Commission’s responsibilities under the IntercontinentalExchange now occurs make use of direct electronic access Commodity Exchange Act (the ‘‘CEA’’ or exclusively on electronic matching and/or co-location services to minimize ‘‘Act’’). Such markets, typically platforms. Concurrent with their latencies between an ATS, market data operated by DCMs, provide valuable transition to electronic trade matching systems, and a DCM’s electronic trading risk mitigation and price discovery platforms, DCMs have taken steps to matching platform. services for numerous financial and increase the speed of trading in their Data available to the Commission physical commodities businesses, markets. These include offering co- highlights the importance of ATS including producers and consumers of location and proximity hosting services trading on DCMs today. The energy, foodstuff, metals, and other raw to reduce latencies between the DCM Commission’s analysis of data covering materials, as well as natural person and market participants, as well as the same approximately two-year period investors. The Commission is measures taken by DCMs to reduce addressed above (through October 2014) committed to the safety and integrity of processing times within their electronic indicates that ATSs were present on at U.S. markets as they continue their trade matching platform. The two least one side in almost 80 percent of rapid technological change. Through largest DCMs, for example, have for foreign exchange futures volume, 67 proposed Regulation AT, the several years indicated in their public percent of interest rate futures volume, Commission is taking its next steps in materials average or median order entry and 62 percent of equity futures volume ensuring that its regulatory standards round trip times of less than one analyzed. They were also present on at 8 and industry practices properly address millisecond. least one side in approximately 47 current and foreseeable risks arising percent of metals and energy product from automated trading, and promote 500 futures contract, the first CME product volumes. Even in agricultural products, available exclusively on Globex, including during a category not typically associated with responsible innovation and fair regular (open-outcry) trading hours in other CME competition among markets and market products. Globex monthly volume exceeded automation in recent years, ATSs were participants.4 100,000 contracts for the first time in 1997. In 1999, present in at least 38 percent of futures Within U.S. derivatives markets, CME for the first time began offering ‘‘side-by-side’’ volume analyzed. Finally, in the trading, allowing its Eurodollar contract to be aggregate, ATSs were present in over 60 DCMs represent a significant catalyst in traded both on Globex and in open-outcry during the transition to automated trading. regular trading hours. Side-by-side trading was percent of all futures volume traded From its beginnings with CME Globex expanded in the ensuing years, including for across all products in the nearly two- in 1992, DCM on-exchange trading now example to FX products in 2001. Globex average year period that the Commission daily volume exceeded 1,000,000 contracts for the examined. In highly liquid product occurs almost exclusively on electronic first time in 2002. By 2004, Globex trading volume matching platforms, using internal began exceeding open-outcry volume for the first categories, ATSs represented both sides algorithms to rapidly match incoming time. Through agreements or mergers, CME began of the transaction over 50 percent of the listing NYMEX products (2006) and CBOT products time.9 orders from an array of market (2007) on Globex as well. See Aldinger, Lori, and 5 Market participants using ATSs may participants. Data available to Labuszewski, John W., ‘‘ELECTRONIC TRADING Twenty Years of CME Globex’’ (2012), available at transact on DCMs through registered 3 See IOSCO Report on Regulatory Issues Raised http://www.cmegroup.com/education/files/globex- intermediaries, including their clearing by Technological Changes, infra note 103 at 10. retrospective-2012-06-12.pdf. members. Such intermediaries 4 See CEA Section 3, ‘‘Findings and Purposes,’’ 6 Haynes, Richard & Roberts, John S., ‘‘Automated themselves often rely on extensive noting in Section 3(a) that transactions subject to Trading in Futures Markets,’’ CFTC Office of Chief automation, using ATSs for functions the CEA are ‘‘affected with a national public Economist (Mar. 13, 2015), available at http:// interest’’ and in Section 3(b) that ‘‘[t]o foster these www.cftc.gov/ucm/groups/public/@economic ranging from simple order routing to the public interests, it is further the purpose of this Act analysis/documents/file/oce_automatedtrading.pdf. generation of independent trading to deter...any other disruptions to market 7 See CME Press Release, ‘‘CME Group to Close decisions. These registered integrity; to ensure the financial integrity of all Most Open Outcry Futures Trading in Chicago and intermediaries include FCMs, transactions subject to the Act and the avoidance New York by July; Most Options Markets to Remain of systemic risk;...and to promote responsible Open,’’ (Feb. 4, 2014) available at http:// commodity pool operators (‘‘CPOs’’), innovation and fair competition among boards of cmegroup.mediaroom.com/2015-02-04-CME-Group- commodity trading advisors (‘‘CTAs’’), trade...and market participants.’’ to-Close-Most-Open-Outcry-Futures-Trading-in- introducing brokers (‘‘IBs’’), and floor 5 Trading on CME Globex was initially limited to Chicago-and-New-York-by-July-Most-Options- brokers (‘‘FBs’’). In addition, ‘‘after-hours’’ periods when the Exchange’s open- Markets-to-Remain-Open?pagetemplate=article. Commission-registered SDs and MSPs outcry pits were closed. The first products offered 8 See CME Group, ‘‘The World’s Leading on Globex in 1992 included German mark and Electronic Platform: CME Globex,’’ (2014) at 3, Japanese yen futures and options on futures available at http://www.cmegroup.com/globex/files/ http://ir.theice.com/∼/media/Files/I/Ice-IR/annual- contracts, followed by other FX and currency globexbrochure.pdf; IntercontinentalExchange, reports/2010/ice-2010ar.pdf. products. In 1997, CME launched the E-mini S&P 2010 Annual Report, (2011) at 26, available at 9 See Haynes & Roberts, supra note 6 at 4.
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may use ATSs to conduct trading on tools to engage in unlawful conduct); more prominent as automated trading DCMs. As discussed in more detail transmission risks (shocks based on becomes the dominant market model. below, each of these categories of erroneous orders impacting multiple The Commission notes that Commission registrants may be subject markets); clearing and settlement risks Regulation AT generally does not to Regulation AT in the event that they (as more firms gain access to trading address trading activity on swap conduct algorithmic trading on a DCM. platforms, trades may not be subject to execution facilities (‘‘SEFs’’). The sufficient settlement risk mitigation Commission believes that neither B. Risks and Potential Benefits execution nor order entry on SEF Associated With Automated Trading techniques); and risks to effective risk management (the speed of trade markets are sufficiently automated at Regulation AT proposes a series of execution may make critical risk this time to require the degree of pre-trade risk controls and other mitigation devices less effective). automated safeguards proposed measures intended to address the risks herein.14 In addition, Regulation AT is Notwithstanding the risks described related to automated trading on DCMs. not proposing a number of measures above, several commentators have The proposed rules primarily address discussed in the Concept Release, such argued that algorithmic trading results operational risk issues, as well as as the following: Proposals to in a more efficient marketplace. A related issues such as self-trading and implement various post-trade reports recent study of the equities market market maker and trading incentive (post-order drop copies, post-trade drop programs. concluded that algorithmic trading copies, and post-clearing drop copies), The potential risks of automated narrows spreads, reduces adverse ‘‘reasonability checks’’ on incoming trading were recently described in a selection, and reduces trade-related 11 market data used by firms operating report discussing the events of October price discovery. The study also automated systems, policies and 15, 2014, when the market for U.S. suggested that algorithmic trading procedures for identifying ‘‘related’’ Treasury securities, futures, and other improves liquidity and enhances the contracts, and proposals to standardize closely related financial markets information provided in quotes. and simplify order types, each of which experienced an unusually high level of Another recent study of low latency was discussed in the Concept Release.15 volatility and a very rapid round-trip in activity in the equities market (typically Market participants using automated prices. On July 13, 2015, five regulatory associated with high frequency trading) trading include an important population agencies issued a joint staff report on concluded that ‘‘an increase in low- of proprietary traders that, while the unusual market events of October latency activity reduces quoted spreads responsible for significant trading 15, 2014 (the ‘‘October 15 Joint Staff and the total price impact of trades, volumes and liquidity in key futures Report’’).10 In addition to discussing the increases depth in the limit order book, products, are not registered with the events of October 15, the report includes and lowers short-term volatility.’’ 12 Commission. These unregistered an Appendix C that summarizes many C. The Proposed Regulations proprietary traders include a number of of the risks of automated trading. These traders engaged in high-frequency risks include the following: Operational 1. Overview of NPRM trading (‘‘HFT’’). The Commission risks (ranging from malfunctioning and notes, however, that the risk control incorrectly deployed algorithms to The Commission is pursuing a requirements under proposed algorithms reacting to inaccurate or number of goals in proposed Regulation Regulation AT do not vary in response unexpected data); market liquidity risks AT. As an overarching goal, the to a market participant’s algorithmic (arising from abrupt changes in trading Commission seeks to update trading strategies; the same risk controls strategies even when a firm executes its Commission rules in response to the would be required in connection with strategy perfectly); market integrity risks evolution from pit trading to electronic high-frequency and low-frequency (automated trading can provide new trading. The risk controls and other algorithmic trading. In particular, HFT rules proposed in this NPRM are is not specifically identified under the 10 See Joint Staff Report: The U.S. Treasury focused on algorithmic order origination proposed regulations, and is not Market on October 15, 2014 (July 13, 2015) or routing by market participants, and regulated in a different fashion from [hereinafter ‘‘October 15 Joint Staff Report’’], electronic order execution by DCMs. In prepared by the U.S. Department of Treasury, Board other types of algorithmic trading under of Governors of the Federal Reserve System, Federal addition to mitigating risks arising from proposed Regulation AT. Instead, the Reserve Bank of New York, U.S. Securities and algorithmic trading activity, the proposed regulations focus on Exchange Commission, and U.S. Commodity proposed rules are intended to increase automation of order origination, Futures Trading Commission, available at http:// transparency around DCM electronic cftc.wss/OCE/conceptrelease/documentlibrary/ transmission and execution, and the Regulation%20AT/Reg%20AT%20--%20DRAFT trade matching platforms and the use of risks that may arise from such activity. %20PREAMBLE/October%2015%20report/ self-trade prevention tools on DCMs.13 As discussed above, nearly universal treasury-market-volatility-10-14-2014-joint- Furthermore, the proposed rules are electronic order matching at DCMs is report.pdf. The report discusses the preliminary intended to foster transparency with findings regarding the conditions that may have contributed to the October 15 volatility, particularly respect to DCM programs and activities, 14 The requirements on DCMs arising out of in the ‘‘event window’’ that began at 9:33 a.m. ET. including market maker and trading Regulation AT may ultimately be imposed on SEFs. Among other potential causes of this volatility, the incentive programs, that have become However, an important consideration for the October 15 Joint Staff Report states that several Commission is that SEFs and SEF markets are much large transactions occurred between the release of newer and less liquid than the more established and certain U.S. retail sales data and the start of the 11 See, e.g., Hendershott, Jones and Menkveld, liquid DCMs and DCM markets. While SEFs and event window; that there was a significant ‘‘Does Algorithmic Trading Improve Liquidity?,’’ SEF markets are still in this nascent stage, the reduction in market depth following the retail sales The Journal of Finance, Vol. LXVI, No. 1 (Feb. Commission does not want to impose additional data release, which appears to have resulted from 2011), available at http://faculty.haas.berkeley.edu/ requirements that may have the effect of decreasing a high volume of transactions and bank-dealers and hender/algo.pdf. the number of SEFs or decreasing liquidity. For principal trading firms changing their participation 12 See Hasbrouck and Saar, ‘‘Low-latency these reasons, and in light of the lesser degree of in the cash and futures order books; that latency trading,’’ Journal of Financial Markets 16 (2013) at automation in SEF markets, the policy associated with a significant increase in message 646–679, available at http://people.stern.nyu.edu/ considerations underlying Regulation AT are not as traffic due to order cancellations increased just jhasbrou/Research/LowLatencyTradingJFM.pdf. critical, at least at this time, in the SEF context. before the event window; and there was a higher 13 See section IV(Q) below for a discussion of the 15 See Concept Release, 78 FR at 56569–73 for a incidence of ‘‘self-trading’’ during the event term ‘‘self-trade’’ and proposed regulations with summary of measures discussed in the Concept window. Id. at 4–6. respect to self-trade prevention. Release.
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increasingly complemented by regulations that may be impacted by the requiring AT Persons and their clearing algorithmic order origination among growth of automated trading member FCMs to provide to DCMs market participants. Against this environments. annual compliance reports, and to keep backdrop, the Commission believes that In preparing this NPRM, the and provide upon request to DCMs appropriate pre-trade and other risk Commission has reviewed relevant certain related books and records. controls are necessary at the level of industry practices, measures taken by Regulation AT also proposes to market participants, clearing FCMs, and other U.S. and foreign regulators, and amend part 38 of the Commission’s DCMs, in order to ensure the integrity best practices or guidance set forth by regulations. Specifically, it would of Commission-regulated markets and other informed parties. In these sources amend existing § 38.255—Risk controls provide market participants with greater and comments received in response to for trading, to require DCMs to have in confidence that intentional, bona fide the Concept Release, the Commission place systems reasonably designed to transactions are being executed. has identified an emerging consensus facilitate the FCM’s management of the Principal elements of Regulation AT around pre-trade risk controls for risks that may arise from their for market participants and clearing automated trading and supervision customers’ Algorithmic Trading using FCMs include: (i) Codification of standards for ATSs. The Commission Direct Electronic Access. Regulation AT defined terms used throughout also notes comments received in would also make corresponding changes Regulation AT; (ii) registration of certain response to the Concept Release that are to the discussion of risk controls in entities not otherwise registered with supportive of risk controls placed in Appendix B—Guidance on, and the Commission; (iii) new algorithmic multiple stages across the life-cycle of Acceptable Practices in, Compliance trading procedures for trading firms and order generation, transmission, with Core Principles (Subsection clearing firms, including pre-trade and management and execution (i.e., similar (b)(5)—Acceptable Practices for Risk other risk controls; (iv) testing, risk controls placed at the levels of controls for trading). Finally in part 38, monitoring, and supervision market participants, clearing member Regulation AT would amend existing requirements for ATSs; and (v) FCMs, and DCMs). Proposed Regulation § 38.401(a) to require DCMs to provide requirements that certain persons AT attempts to balance flexibility in a additional public disclosure regarding submit compliance reports to DCMs rapidly changing technological their electronic matching platforms. regarding their ATSs. Principal landscape with the need for a regulatory Regulation AT would also amend part elements for DCMs include: (i) New risk baseline that provides a robust and 40 of the Commission’s regulations. It controls for Direct Electronic Access sufficiently clear standard for pre-trade would create the following new (‘‘DEA’’) provided by DCMs; (ii) risk controls, supervision standards, and regulations: § 40.20—requiring DCMs to transparency in DCM electronic trade other safeguards for automated trading implement pre-trade risk controls and matching platforms; and (iii) new risk environments. The specific regulations other related measures; § 40.21— control procedures, including pre-trade and amendments proposed by requiring DCMs to provide a test risk controls, compliance report review Regulation AT are discussed in greater environment to AT Persons; § 40.22— standards, self-trade prevention tool detail below. requiring DCMs to implement a review requirements, and market-maker and program for compliance reports 2. The Proposed Regulations Under regarding Algorithmic Trading trading incentive program disclosure Parts 1, 38, 40, and 170 and related requirements. submitted by AT Persons and clearing Regulation AT proposes new As mentioned above, Regulation AT is member FCMs, require that certain regulations or amendments to existing not intended to discriminate across books and records be maintained by regulations in parts 1, 38, 40, and 170 registration categories, connectivity such persons, and review such books of the Commission’s regulations. It methods, or even ‘‘high-frequency’’ or and records as necessary; § 40.23— proposes to amend part 1 by inserting slower trading strategies. Rather, requiring DCMs to implement self-trade the following defined terms: § 1.3(tttt)— Regulation AT is focused on reducing prevention tools, mandate their use, and Algorithmic Trading Compliance Issue; risk, increasing transparency and publish statistics concerning self- § 1.3(uuuu)—Algorithmic Trading disclosure, and related DCM trading; and §§ 40.25–40.28—requiring Disruption; § 1.3(vvvv)—Algorithmic DCMs to provide disclosure and procedures.16 In developing Regulation Trading Event; § 1.3(wwww)—AT Order implement other controls regarding AT, the Commission built on the Message; § 1.3(xxxx)—AT Person; their market maker and trading Concept Release and relevant comments § 1.3(yyyy)—Direct Electronic Access; incentive programs. Finally, Regulation received, which are discussed further in and § 1.3(zzzz)—Algorithmic Trading. AT would make changes to the section II(B) below. However, interested Regulation AT also proposes to amend definition of Rule in § 40.1(i) in parties will observe that the existing § 1.3(x), which defines Floor response to certain of the changes Commission has chosen not to pursue Trader. proposed above. certain measures discussed in the In addition, Regulation AT would Finally, Regulation AT proposes to Concept Release (as discussed above), create a new subpart A in part 1 that amend part 170 of the Commission’s while also proposing a small number of includes the following new regulations regulations. It would require in new new measures not addressed in the applicable to AT Persons and their § 170.18 that all AT Persons become Concept Release. In addition, Regulation clearing FCMs: § 1.80—requiring AT members of at least one registered AT in certain cases seeks only to clarify Persons to implement pre-trade risk futures association (‘‘RFA’’). Regulation the scope of existing Commission controls and other related measures; AT would create a new subpart D in § 1.81—requiring AT Persons to part 170, and require in proposed 16 See, e.g., the compliance reports required to be submitted by AT Persons and clearing member implement standards for the § 170.19 that RFAs adopt membership firms of AT Persons under § 1.83, the statistics development, testing, monitoring, and rules, as deemed appropriate by the required to be reported by DCMs regarding self- compliance of their ATSs; § 1.82— RFA, requiring pre-trade risk controls trading that they have both authorized and requiring clearing member FCMs to and other measures for ATSs; standards prevented on their platforms under § 40.23, and the disclosure required of DCMs with respect to market implement pre-trade risk controls and for the development, testing, maker and trading incentive programs under other related measures for orders from monitoring, and compliance of ATSs; § 40.25. their AT Person customers; and § 1.83— designation and training of algorithmic
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trading staff; and clearing FCM risk ‘‘policies and procedures governing the implemented by Commission registrants management standards. use, supervision, maintenance, testing, or other market participants. The and inspection’’ of automated trading Concept Release reflects the II. Background on Regulatory programs.23 The Commission also Commission’s ongoing commitment to Responses to Automated Trading adopted regulations requiring SDs and the safety and soundness of U.S. A. The Commission’s Regulatory MSPs that are clearing members to derivatives markets in times of Response to Date ensure that their ‘‘use of trading technological change, including the programs is subject to policies and growth of automated trading. The Commission has responded to the procedures governing the use, The Concept Release was published development of automated trading supervision, maintenance, testing, and in the Federal Register on September environments through a number of inspection of the program.’’ 24 12, 2013.27 The initial 90-day comment regulatory measures that address risk Finally, the Commission adopted final period closed on December 11, 2013, controls within both new and existing rules implementing new authority but was reopened from January 21 categories of registrants, including under the CEA to, among other things, through February 14, 2014, in DCMs, SEFs, FCMs, SDs, MSPs and broadly prohibit manipulative and conjunction with a meeting of the 17 others. While focused to a degree on deceptive devices and price CFTC’s Technology Advisory financial and related risks, these manipulation.25 The Commission also Committee (‘‘TAC’’). The Concept provisions reflect the Commission’s provided guidance on the scope and Release requested public comment on ongoing commitment to maintaining the application of CEA Section 4c(a)(5), 124 separate questions regarding the safety and soundness of automated which makes it unlawful for any person necessity and operation of potential pre- trading in modern derivatives markets. to engage in any trading, practice, or trade risk controls, post-trade reports The Commission has adopted conduct on or subject to the rules of a and other measures, system safeguards regulations with respect to DCMs and registered entity that violates bids or and additional protections (such as SEFs that require exchanges to establish offers, demonstrates intentional or proposals to identify ‘‘related’’ contracts risk control mechanisms to prevent reckless disregard for the orderly on trading platforms, and proposals to market disruptions, including execution of transactions during the standardize and simplify order types). mechanisms that pause or halt trading.18 closing period, or is, is of the character The Concept Release served as a vehicle The guidance and acceptable practices of, or is commonly known to the trade to catalogue existing industry practices, to the SEF and DCM rules in part 37 and as, ‘‘spoofing.’’ 26 determine their efficacy and 38, respectively, provide examples of implementation to date, and evaluate 19 B. The Commission’s 2013 Concept acceptable risk controls. In addition, the need for additional measures. The Release in the DCM final rules, the Commission Concept Release was not a proposed adopted new risk control requirements Overview of Concept Release. As rule, but rather a prior step designed to for exchanges that provide DEA to noted above, in 2013 the Commission facilitate a public dialogue and educate clients. Regulation 38.607 requires issued a ‘‘Concept Release on Risk the Commission so that it may make an DCMs that permit DEA to have effective Controls and System Safeguards for informed determination as to whether systems and controls reasonably Automated Trading Environments,’’ rulemaking is necessary and, if so, the designed to facilitate an FCM’s which provided an overview of the substantive requirements of such a management of financial risk.20 automated trading environment and rulemaking. The Commission also adopted discussed a series of pre-trade risk Topics Discussed in Concept Release. relevant regulations for FCMs, SDs, and controls, post-trade reports and other The Concept Release highlighted data MSPs. Such firms that are clearing measures, system safeguards, and on the increased importance of members must establish risk-based additional protections that could be electronic and algorithmic trading limits based on position size, order size, across a number of U.S. markets margin requirements, or similar factors 23 17 CFR 1.11(e)(3)(ii). The Commission notes (including equities, futures and fixed for all proprietary accounts and that the requirements of § 1.11(e)(3)(ii) fall within income markets). The Concept Release an FCM’s broader obligation in § 1.11 to establish 21 customer accounts. The regulations, and maintain a formal ‘‘Risk Management also noted that the infrastructure of codified in §§ 1.73 and 23.609, also Program.’’ Such program must include a risk automated trading environments has require these entities to ‘‘use automated management unit independent of the business unit; progressively decreased the time quarterly risk exposure reports to senior means to screen orders for compliance management and the governing body of the FCM, necessary to process orders and execute with the [risk] limits’’ when such orders with copies to the Commission; and other trades, reducing the communication are subject to automated execution.22 In substantive requirements. Proposed Regulation AT times between market participants and addition, § 1.11 requires FCMs to have would not require FCMs to subsume applicable trading venues.28 One exchange group requirements into their § 1.11 Risk Management ‘‘automated financial risk management Programs. However, the Commission is seeking now indicates that its ‘‘median inbound controls reasonably designed to prevent public comment in the questions below regarding latency for order entry’’ on its trading the placing of erroneous orders’’ and whether, in any final rules arising from this NPRM, platform is fifty-two (52) microseconds FCMs should in fact be required to incorporate within its ‘‘four walls.’’ 29 As discussed 17 elements of Regulation AT proposed in §§ 1.80, These measures are discussed in more detail in 1.81, 1.83(a), and 1.83(c) into their § 1.11 Risk in the Concept Release, advances in the Concept Release. See Concept Release, 78 FR at Management Programs. Such incorporation could trading speeds are partly due to the 56548. help improve the interaction between an FCM’s 18 development of dedicated fiber-optic See Core Principles and Other Requirements for operational risk efforts pursuant to § 1.11(e)(3)(ii) and microwave communications Designated Contract Markets, 77 FR 36612, 36703 and its pre-trade risk controls and development, (June 19, 2012) [hereinafter ‘‘DCM Final Rules’’]; monitoring, and compliance efforts pursuant to networks that have dramatically Core Principles and Other Requirements for Swap §§ 1.80, 1.81, 1.83(a), and 1.83(c). It could also help reduced transmission times across large Execution Facilities, 78 FR 33476, 33590 (June 4, ensure that an FCM’s §§ 1.80, 1.81, 1.83(a), and 2013) [hereinafter ‘‘SEF Final Rules’’]. 1.83(c) processes benefit from the same internal 27 Concept Release, 78 FR 56542. 19 See DCM Final Rules, 77 FR at 36718; SEF rigor and independence required by § 1.11. 28 See id. at 56546–47. Final Rules, 78 FR at 33601. 24 17 CFR 23.600(d)(9). 29 See CME Group, ‘‘The World’s Leading 20 See 17 CFR 38.607. 25 See 17 CFR 180.1 and 180.2. Electronic Platform. CME Globex,’’ (2014) at 3, 21 17 CFR 1.73(a)(1) and 23.609(a)(1). 26 See Antidisruptive Practices Authority, 78 FR available at http://www.cmegroup.com/globex/files/ 22 17 CFR 1.73(a)(2)(i) and 23.609(a)(2)(i). 31890 (May 28, 2013). globexbrochure.pdf.
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distances.30 On a smaller scale, co- concern is that market participants may the Futures Industry Association location and proximity hosting are two simply engage in trading at speeds (‘‘FIA’’) conducted surveys to gauge common methods for reducing the beyond the abilities of their risk existing risk-management practices. distance, and thus latency, between management systems, or those tasked Other commenters provided academic market participants and the exchanges. with monitoring their activity. Risk papers in support of their points of Co-location services are now provided management systems operating at these view. by most large electronic trading misaligned speeds could allow an active Staff reviewed all comments received platforms within the United States. algorithm to breach its prescribed risk and made recommendations to the Another important latency-reducing controls and disrupt one or more Commission. This NPRM reflects the advance in connectivity discussed in markets. Commission’s decision to propose the Concept Release is Direct Market In light of the potential for disruptive regulations in certain areas addressed by Access (‘‘DMA’’). For purposes of the trading events related to such high- the Concept Release, including: Concept Release, the Commission speed algorithmic trading, the Concept Registration of certain entities not defined DMA as a connection method Release addressed 23 potential risk otherwise registered with the that enables a market participant to controls and other measures broadly Commission; enhanced identification of transmit orders to a trading platform grouped into four categories. The first orders placed on exchanges; pre-trade without reentry or prior review by includes ‘‘pre-trade risk controls,’’ such risk controls at exchanges, trading firms systems belonging to the market as controls designed to prevent potential and clearing firms; standards for participant’s clearing firm.31 DMA can errors or disruptions from reaching development, testing and supervision of be provided directly by an exchange or trading platforms, or to minimize their algorithmic systems; trading firm and through the infrastructure of a third- impact once they have. A second clearing member FCM compliance party provider, but in all cases, DMA category of safeguards includes ‘‘post- reports regarding algorithmic trading; implies that an order is not routed trade reports’’ and ‘‘other post-trade and self-trade prevention tools. through a clearing firm prior to reaching measures.’’ Examples in this category Regulation AT also addresses several the trading platform.32 For purposes of include reports that promote the flow of areas not covered in the Concept Regulation AT, as discussed in section order, trade and position information; Release, including transparency in IV(D)(7) below, the Commission uniform trade adjustment or exchange trade matching systems and proposes to define a slightly modified cancellation policies; and standardized market-maker protections, and in term: ‘‘Direct Electronic Access’’ error trade reporting obligations. The certain cases seeks to clarify the scope (‘‘DEA’’), as opposed to Direct Market third category of risk controls discussed of existing Commission regulations that Access. Despite the slightly modified in the Concept Release is termed may be impacted by the growth of name, the Commission intends that the ‘‘system safeguards,’’ including automated trading environments. term ‘‘Direct Electronic Access’’ has a safeguards for the design, testing and meaning similar to ‘‘Direct Market supervision of ATSs, as well as C. Other Recent Regulatory Responses Access,’’ as such term was used in the measures such as ‘‘kill switches’’ that 1. SEC Regulatory Initiatives Concept Release.33 facilitate emergency intervention in the The SEC has recently taken regulatory The Concept Release discussed a set case of malfunctioning ATSs.35 Finally, steps related to automated trading, of risk controls that would be intended the Concept Release presented a fourth aimed at preventing instability in the to operate at the same rapid speed at category of measures focusing on equities markets. Most significantly, the which trading occurs in the automated various options for improving market SEC adopted the Market Access Rule trading environment. As the industry functioning or structure. reduces latency through improvements Comments Received on Concept and Regulation SCI. in technologies for the generation, Release and Commission Response. The The Securities Exchange Act Rule transmission and execution of orders or Commission received a total of 43 15c3–5—Risk Management Controls for management of other data, there is public comments on the Concept Brokers or Dealers with Market Access concern that the drive for ever lower Release, including comments from (the ‘‘Market Access Rule’’), adopted in latencies may lead to a competitive race DCMs, an array of trading firms, trade November 2010, requires brokers and toward progressively less stringent risk associations, public interest groups, dealers to have risk controls in place controls.34 A separate, but related, members of academia, and consulting, before providing their customers with 36 technology and information service access to the market. Specifically, the 30 See Concept Release, 78 FR at 56546. providers in the financial industry. All Market Access Rule requires risk 31 See id. comments are available on controls that prevent entry of (i) orders 32 See id. www.cftc.gov. Many of the comments exceeding appropriate pre-set credit or 33 The Commission notes that the term ‘‘direct received are detailed and thorough, and capital thresholds in the aggregate for electronic access’’ is also used in existing each customer and the broker-dealer; Commission regulation 38.607. Regulation AT does not modify § 38.607, and the term ‘‘direct electronic at 2 [hereinafter ‘‘CFTC TAC Recommendations’’], and (ii) erroneous orders, by rejecting access’’ in § 38.607 will continue to have the available at http://www.cftc.gov/ucm/groups/ orders that exceed appropriate price or meaning specified in that section. public/@swaps/documents/dfsubmission/ size parameters, on an order-by-order 34 As noted by the Futures Industry Association’s tacpresentation030111_ptfs2.pdf. basis or over a short period of time, or 35 Market Access Working Group, for example: ‘‘[p]re- As explained in section IV(A) below, the those that indicate duplicative orders.37 trade risk controls have become a point of Concept Release used the term ‘‘ATS’’ or negotiation between trading firms and clearing ‘‘automated trading system’’ to refer to the members because they can add latency to a trade.’’ algorithms used to automate the generation and 36 See Market Access Rule, 75 FR 69792 (Nov. 15, See FIA Market Access Risk Management execution of a trading strategy. For purposes of this 2010); see also SEC Press Release No. 2010–210, Recommendations, infra note 97 at 8. Similarly, the NPRM, the Commission has determined to use the ‘‘SEC Adopts New Rule Preventing Unfiltered TAC’s Pre-Trade Functionality Subcommittee noted term ‘‘Algorithmic Trading’’ or ‘‘algorithmic trading Market Access’’ (Nov. 3, 2010), available at http:// that latency is a key area where trading firms and system’’ (abbreviated as ATS), as opposed to the www.sec.gov/news/press/2010/2010-210.htm. brokers are competing to gain an advantage. See term ‘‘automated trading system.’’ For purposes of 37 See Market Access Rule, supra note 36 at TAC Pre-Trade Functionality Subcommittee, discussing comments to the Concept Release, the 69825–26; see also SEC, Responses to Frequently ‘‘Recommendations on Pre-Trade Practices for Commission may use the terms ATS and automated Asked Questions Concerning Risk Management Trading Firms, Clearing Firms, and Exchanges trading system as such terms were used in the Controls for Brokers or Dealers with Market Access Involved in Direct Market Access’’ (Mar. 1, 2011) Concept Release. (Apr. 15, 2014), available at https://www.sec.gov/
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These risk controls must be under the was originally designed to accommodate activities such as insider trading and direct and exclusive control of the exchange specialists and other floor market manipulation, and improve the broker-dealer (subject to certain members that might need to conduct ability to reconstruct broad-based exceptions) and regularly reviewed for limited hedging or other off-exchange market events in an accurate and timely effectiveness.38 In October 2013, the activities ancillary to their business.43 manner.49 The SROs submitted the plan SEC brought its first enforcement action Over time, proprietary trading firms on September 30, 2014.50 In addition, in under the Market Access Rule, securing were able to take advantage of this response to policy recommendations a $12 million settlement with Knight exemption.44 The SEC’s proposed rules resulting from the Flash Crash events of Capital in connection with the firm’s would amend the exemption to target May 6, 2010, the SEC and the securities August 2012 trading incident that those broker-dealers for which it was industry implemented market-wide disrupted the markets.39 originally designed, and require broker- circuit breakers as well as a ‘‘limit up- On November 19, 2014, the SEC dealers trading in off-exchange venues limit down’’ mechanism in order to adopted Regulation Systems to become members of a national moderate price volatility in individual Compliance and Integrity (‘‘Reg SCI’’).40 securities association. In the securities securities.51 The SEC is also working to Reg SCI applies to alternative trading markets, this association is the Financial update its regulatory regime to improve systems, certain self-regulatory Industry Regulatory Authority firms’ risk management of trading organizations (including registered (‘‘FINRA’’).45 algorithms and to enhance regulatory clearing agencies), plan processors, and The SEC’s Chair explained that the oversight over their use.52 The SEC is exempt clearing agencies (collectively, proposed rule ‘‘embodies a simple but also developing an anti-disruptive ‘‘SCI entities’’). Under Reg SCI, SCI powerful principle of the federal trading rule to address the use of entities are required to have securities laws—the protection of aggressive, potentially destabilizing comprehensive policies and procedures investors and the stability of our trading strategies during vulnerable in place for their technological systems. markets require that trading is overseen market periods.53 The SCI entities must, among other by both the Commission and a strong Finally, while not directly relevant to 46 things, take appropriate corrective self-regulatory organization.’’ In its Commission-regulated markets, the SEC action when systems issues occur; preamble to the proposed rule, the SEC is working with equities exchanges and provide notifications and reports to the explained that, in the event that a FINRA to minimize latency between SEC regarding systems problems and broker-dealer trades electronically different market feeds. Specifically, systems changes; inform members and across a range of exchange and off- exchanges must not transmit data participants about systems issues; exchange venues, an individual directly to customers any sooner than conduct business continuity testing; exchange of which the broker-dealer is they transmit data to a securities implement standards that result in SCI a member may be unable to effectively information processor (‘‘SIP’’), the systems being designed, developed, regulate the off-exchange activity of the system that consolidates market feeds tested, maintained, operated, and broker-dealer, because the exchange from all platforms and publishes the may lack the resources or expertise to public price ticker. In addition, the surveilled in a manner that facilitates 47 the successful collection, processing, oversee such off-exchange activity. technology used for transmitting data to and dissemination of market data; and The SEC viewed FINRA, the self- the SIP must be on a par with what is regulatory organization (‘‘SRO’’) to used for transmitting data to direct conduct annual reviews of their 54 automated systems, which must be which off-exchange trades are reported, feeds. Finally, the SEC is working to as being in the best position to regulate address concerns associated with the summarized in a report that is provided cross-market activity by broker- fragmentation of trading venues, dark to the SEC.41 dealers.48 trading venues, and broker conflicts.55 The SEC has also taken action in the The SEC has taken additional 2. FINRA Initiatives area of enhancing oversight of regulatory initiatives in this area. On proprietary trading firms. In March July 11, 2012, the SEC adopted Rule 613 In addition to the SEC, FINRA is 2015, the SEC proposed a rule that under Regulation NMS, requiring SROs developing rules focused on automated would narrow an exemption that to submit a plan to the SEC to create, trading and transparency in the equities currently exempts certain broker-dealers implement, and maintain a consolidated markets. In March 2015, FINRA from membership in a national published a Request for Comment 42 audit trail (‘‘CAT’’). This audit trail is securities association. The exemption intended to increase the data available proposing to require registration (as a to regulators investigating illegal ‘‘Limited Representative—Equity divisions/marketreg/faq-15c-5-risk-management- Trader’’) persons that are (1) primarily controls-bd.htm. 38 See Market Access Rule, supra note 36 at Registration’’], available at http://www.sec.gov/ responsible for the design, development 69826. news/pressrelease/2015-48.html#.VSbd9KwpBaQ; 39 See SEC Press Release No. 2013–222, ‘‘SEC Exemption for Certain Exchange Members, 80 FR 49 See SEC Press Release No. 2012–134, ‘‘SEC Charges Knight Capital With Violations of Market 18036, 18042–43 (Apr. 2, 2015) [hereinafter ‘‘SEC Approves New Rule Requiring Consolidated Audit Access Rule’’ (Oct. 16, 2013), available at http:// Proposed Rule on Exemption for Certain Exchange Trail to Monitor and Analyze Trading Activity’’ www.sec.gov/News/PressRelease/Detail/ Members’’]. (July 11, 2012), available at http://www.sec.gov/ PressRelease/1370539879795 [hereinafter ‘‘SEC 43 See SEC Press Release on Broker-Dealer News/PressRelease/Detail/PressRelease/1365 Knight Capital Release’’]. Registration, supra note 42. 171483188#.VKQkAqxOlaQ. 40 See Reg SCI, 79 FR 72252 (Dec. 5, 2014); see 44 See id. The SEC estimates that there are 50 See SEC, ‘‘Rule 613 (Consolidated Audit also SEC Press Release No. 2014–260, ‘‘SEC Adopts approximately 125 firms exempt from association Trail),’’ available at http://www.sec.gov/divisions/ Rules to Improve Systems Compliance and membership, which includes some of the most marketreg/rule613-info.htm. Integrity’’ (Nov. 19, 2014), available at http:// active cross-market proprietary trading firms. See 51 See Mary Jo White, Chairman, Securities and www.sec.gov/News/PressRelease/Detail/ SEC Proposed Rule on Exemption for Certain Exchange Commission, Enhancing Our Equity PressRelease/1370543496356#.VKQS2qxOlaQ. Exchange Members, 80 FR at 18042. Market Structure (June 5, 2014), available at http:// 41 See Reg SCI, supra note 40 at 72437–39. 45 See SEC Press Release on Broker-Dealer www.sec.gov/News/Speech/Detail/Speech/1370542 004312#.VKP_o6xOlaS. 42 See SEC, Press Release No. 2015–48, ‘‘SEC Registration, supra note 42. 52 Proposes Rule to Require Broker-Dealers Active in 46 See id. See id. Off-Exchange Market to Become Members of 47 SEC Proposed Rule on Exemption for Certain 53 See id. National Securities Association’’ (Mar. 25, 2015) Exchange Members, 80 FR at 18042–43. 54 See id. [hereinafter ‘‘SEC Press Release on Broker-Dealer 48 See id. at 18041–45. 55 See id.
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or significant modification of an 3. European and Other Regulatory trading platforms, financial risk algorithmic strategy; or (2) responsible Initiatives controls, and controls that block a 56 for supervising such functions. FINRA a. ESMA trader’s orders if they are for a financial explained that given today’s highly instrument that the trader does not have automated environment (according to The European Securities and Markets permission to trade.66 As to orders FINRA, where firms trade using Authority (‘‘ESMA’’) is an independent submitted via direct market access and automated systems that initiate pre- EU Authority established in January sponsored access, ESMA recommended, programmed trading instructions based 2011. ESMA published guidelines on among other things, that such orders be on specified variables, referred to as automated trading in February 2012, submitted to the same pre-trade risk algorithmic trading strategies), it is which became effective across the controls that it recommends for concerned that persons involved in European Union on May 1, 2012.61 The investment firms (including, for preparing or supervising algorithmic ESMA guidelines addressed the example, price and size parameters).67 trading may lack adequate knowledge of operation of an electronic trading On March 18, 2015, ESMA released a securities rules and regulations, which system by a regulated market or a report finding that all 30 participating could result in algorithms that do not multilateral trading facility; the use of European Economic Area members have comply with applicable rules.57 an electronic trading system, including incorporated the Guidelines into their Accordingly, FINRA believes such a trading algorithm, by an investment legal framework, and all except three persons should meet the same minimum firm for dealing on its own account or have incorporated it into their competency standards for knowledge of for the execution of orders on behalf of supervisory framework.68 The report securities regulations that apply to clients; and the provision of direct went on to identify challenges to further individual traders.58 market access or sponsored access by an enhancing compliance including: In March 2015, FINRA published a investment firm as part of the service of Market complexity, IT-knowledge, regulatory notice (15–09) providing the execution of orders on behalf of additional on-site inspections of 62 guidance on supervision and control clients. markets, testing of trading halts, and practices for algorithmic trading Among other elements, the ESMA setting up ring-defense against cyber- strategies in the equities markets.59 The guidelines recommended that trading attacks.69 notice offered guidance on practices in platforms should have: Arrangements to As discussed below, ESMA has five general areas: General risk prevent the excessive flooding of the performed additional work in the area of assessment and response; software/code order book; arrangements (such as automated trading, such as developing development and implementation; throttling) to prevent capacity limits on technical standards for the requirements software testing and system validation; messaging from being breached; and of MiFID II. trading systems; and compliance. arrangements (for example, volatility Among other practices, the notice interruptions or automatic rejection of b. MiFID II recommended that firms should orders which are outside of certain set The European Commission published consider: Implementing a development volume and price thresholds) to a new Directive on markets in financial and change management process that constrain trading or to halt trading in instruments (‘‘MiFID II’’) on June 12, tracks the development of new trading individual or multiple financial 2014.70 The Directive contains a code or material changes to existing instruments when necessary.63 The definition of both ‘algorithmic trading’ code; implementing a basic summary ESMA guidelines also recommended and ‘high-frequency algorithmic trading description of algorithmic trading that trading platforms should have technique,’ which is defined as a strategies that enables supervisory and procedures in place to identify potential specific type of algorithmic trading. compliance staff to understand the market abuse in an automated trading Among other requirements, the intended function of an algorithm; environment, such as ping orders, quote Directive requires that an investment conducting testing to confirm that core stuffing, momentum ignition, and firm engaged in algorithmic trading code components operate as intended layering and spoofing.64 must have effective systems and risk and do not produce unintended In addition, the ESMA guidelines controls to ensure that its trading consequences; implementing controls, recommended that investment firms systems are resilient and have sufficient monitors, alerts and reconciliation should make use of clearly delineated capacity, are subject to appropriate processes that enable the firm to quickly development and testing methodologies trading thresholds and limits, and identify whether an algorithmic is prior to deploying an electronic trading prevent the sending of erroneous orders experiencing unexpected results; and system or a trading algorithm, and or other system activity that may create providing for adequate communication should monitor their electronic trading or contribute to a disorderly market.71 between supervisory and compliance systems, including trading algorithms, Such a firm must also have effective 65 staff related to the function and control in real-time. ESMA also recommended business continuity arrangements to of algorithms such that the firm meets that investment firms implement price deal with any failure of its trading its regulatory obligations.60 and size parameters, systems that control messaging traffic to individual 66 See id. at 14–15. 56 See FINRA, Regulatory Notice 15–06, 67 See id. at 21–23. ‘‘Registration of Associated Persons Who Develop 61 See ESMA, ‘‘Systems and controls in an 68 ESMA, Automated Trading Guidelines: ESMA Algorithmic Trading Strategies’’ (Mar. 2015), automated trading environment for trading Peer Review Among National Competent available at http://www.finra.org/sites/default/files/ platforms, investment firms and competent Authorities (Mar. 18, 2015), available at http:// notice_doc_file_ref/Notice_Regulatory_15-06.pdf. authorities’’ (Feb. 24, 2012) [hereinafter ‘‘ESMA www.esma.europa.eu/system/files/esma-2015-592- 57 See id. at 3. Guidelines’’], available at http:// automated_trading_peer_review_report_ _ _ _ 58 See id. www.esma.europa.eu/system/files/esma 2012 122 publication.final_.pdf. 59 See FINRA, Regulatory Notice 15–09, ‘‘Equity en.pdf and accompanying public statement, 69 See id. at 9–10. Trading Initiatives: Supervision and Control available at http://www.esma.europa.eu/system/ 70 See European Commission, ‘‘Updated rules for Practices for Algorithmic Trading Strategies’’ (Mar. files/2012-128.pdf. markets in financial instruments: MiFID 2’’ (June 2015) [hereinafter ‘‘FINRA Notice 15–09’’], 62 See id. at 3. 12, 2014) [hereinafter ‘‘MiFID II’’], available at available at https://www.finra.org/industry/notices/ 63 See id. at 13. http://ec.europa.eu/finance/securities/isd/mifid2/ 15-09. 64 See id. at 16–17. index_en.htm. 60 See id. 65 See id. at 10. 71 See id. at Article 17(1).
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systems and must ensure its systems are 2014 paper.77 The comment period for ‘‘High-frequency Trading Act’’). 81 The fully tested and properly monitored.72 the December 19, 2014 consultation High-frequency Trading Act requires Furthermore, an investment firm that paper closed in March 2015. In late that firms engaged in high-frequency engages in a high-frequency algorithmic 2014, ESMA released a final report trading must be licensed.82 In summary, trading technique must store in an covering technical advice in certain high-frequency trading is defined to approved form accurate and time areas, including the definition of include each of the following four sequenced records of all its placed algorithmic trading, HFT, and direct elements: (i) Trading for one’s own orders, including cancellations of electronic access.78 In July 2015, ESMA account, or by proprietary trading firms; orders, executed orders and quotations released final technical advice relating (ii) trading algorithmically without on trading venues and make them to investor protection topics, including human intervention; (iii) trading using available to the competent authority procedures for financial services firms low-latency infrastructures; and (iv) upon request.73 to apply for authorized status, trading that generates a high intraday information required of firms applying message rate.83 In addition, exchanges The MiFID II Directive also requires a must impose, on a product-by-product regulated market to be able to to passport into other jurisdictions, and co-operation between regulatory basis, an excessive system usage fee and temporarily halt or constrain trading if authorities.79 On September 28, 2015, an order-to-trade ratio limit intended to there is a significant price movement in ESMA released a final report on draft prevent unnecessary messaging.84 a financial instrument on that market or regulatory and implementing technical Finally, the High-frequency Trading Act a related market during a short period. standards for MiFID II (‘‘2015 Final requires identification of algorithmically In exceptional cases, a regulated market Draft Regulatory Standards’’).80 This generated orders and trading algorithms, must be able to cancel, vary or correct report provides regulatory standards for which is intended to enhance any transaction.74 In addition, the 85 investment firms engaged in algorithmic monitoring of manipulative activity. Directive requires a regulated market to trading as well as for trading venues that In May 2015, the Bank of England’s have in place effective systems, allow algorithmic trading. Details Prudential Regulation Authority procedures and arrangements, including regarding ESMA’s standards are (‘‘PRA’’), the United Kingdom’s requiring members or participants to discussed below as relevant to the prudential supervisor of major trading carry out appropriate testing of Commission’s proposed regulations firms, announced that it would assess algorithms. A regulated market must relating to risk controls and other the adequacy of existing risk also provide environments to facilitate measures that AT Persons, clearing measurement and management practices such testing, to ensure that algorithmic member FCMs and DCMs must with respect to trading algorithms, trading systems cannot create or implement. including whether controls around contribute to disorderly trading algorithmic trading are ‘‘fit for conditions on the market. The Directive c. Other European Regulatory Initiatives purpose.’’ 86 The PRA discussed the requires a regulated market to growth of automated trading in financial implement systems to limit the ratio of In May 2013, Germany enacted the markets, which has included incidents unexecuted orders to transactions that Act on the Prevention of Risks and of extreme volatility. For example, Abuse in High-frequency Trading (the may be entered into the system by a volatility seen in the Swiss Franc member or participant, to be able to exchange rate on January 15, 2015, 77 slow down the flow of orders if there is ESMA, ‘‘Consultation Paper,’’ (Dec. 19, 2014) following the Swiss central bank’s and accompanying Annexes A and B, available at a risk of its system capacity being http://www.esma.europa.eu/system/files/2014-1570 decision to remove a floor to the reached, and to limit and enforce the _cp_mifid_ii.pdf. exchange rate, may have been minimum tick size that may be executed 78 ESMA, ‘‘ESMA’s Technical Advice to the exacerbated by high-frequency on the market.75 Commission on MiFID II and MiFIR,’’ (Dec. 19, trading.87 2014) [hereinafter ‘‘ESMA Technical Advice Final Finally, in July 2015, the United The European Commission requested Report’’], available at http://www.esma.europa.eu/ Kingdom’s Financial Conduct Authority that ESMA develop technical and system/files/2014-1569_final_report_-_esmas_ technical_advice_to_the_commission_on_mifid_ii_ issued a consultation paper addressing implementing standards for MiFID II. and_mifir.pdf. strengthening accountability in On May 22, 2014, ESMA published a 79 ESMA, Final Report: MiFID II/MiFIR draft consultation paper seeking comments Technical Standards on authorization, passporting, 81 See online summaries of High-frequency on certain topics in connection with registration of third country firms and cooperation Trading Act (2013), available at http:// MiFID II, including ‘‘micro-structural between competent authorities, Art. 6(g) (June 29, www.bafin.de/SharedDocs/Veranstaltungen/EN/ 2015), available at http://www.esma.europa.eu/ WA11_20130430_hft_workshop_en.html. issues’’ such as testing and risk control system/files/2015-esma-1006_-_mifid_ii_final_ 82 See id.; see also Morgan, Megan, Tabb Forum, report_on_mifid_ip_technical_standards.pdf. requirements for investment firms ‘‘Decoding the German HFT Act: A Guide to 80 engaged in algorithmic trading and ESMA, Final Report: Draft Regulatory and Regulating Electronic Markets’’ (Oct. 17, 2014), trading venues.76 ESMA published Implementing Technical Standards MiFID II/MiFIR available at http://tabbforum.com/opinions/ (Sept. 28, 2015) [hereinafter, the ‘‘ESMA September another consultation paper on December decoding-the-german-hft-act-how-to-regulate- 2015 Final Draft Standards Report’’], available at electronic-markets. 19, 2014, seeking further comments on https://www.esma.europa.eu/system/files/2015- 83 See id. esma-1464_-_final_report_-_draft_rts_and_its_on_ technical and implementing standards 84 mifid_ii_and_mifir.pdf; ESMA, Regulatory technical See id. in connection with the implementation 85 and implementing standards—Annex 1 (Sept. 28, See id. of MiFID II and summarizing comments 2015) [hereinafter, the ‘‘ESMA September 2015 86 See Bailey, Andrew, Bank of England, received in response to ESMA’s May Final Draft Standards Report Annex 1’’], available ‘‘Financial Markets: Identifying risks and at https://www.esma.europa.eu/system/files/2015- appropriate responses,’’ at 9 (May 15, 2015), esma-1464_annex_i_-_draft_rts_and_its_on_mifid_ii available at http://www.bankofengland.co.uk/ 72 See id. _and_mifir.pdf; ESMA, Cost-Benefit Analysis— publications/Documents/speeches/2015/ 73 See id. at Article 17(2). Annex II, Draft Regulatory and Implementing speech814.pdf. 74 See id. at Article 48(5). Technical Standards MiFID II/MiFIR (Sept. 28, 87 See id. at 5–6; Binham, Caroline, ‘‘High- 75 See id. at Article 48(6). 2015), [hereinafter, the ‘‘ESMA September 2015 frequency trading faces tougher Bank of England 76 ESMA, ‘‘Consultation Paper,’’ (May 22, 2014), Cost-Benefit Annex II’’], available at https:// scrutiny,’’ Financial Times (May 15, 2015), available at http://www.esma.europa.eu/system/ www.esma.europa.eu/system/files/2015-esma-1464 available at http://www.ft.com/intl/cms/s/0/ files/2014-549_-_consultation_paper_mifid_ii_-_ _annex_ii_-_cba_-_draft_rts_and_its_on_mifid_ii_ f7d4e438-fb20-11e4-9aed- mifir.pdf. and_mifir.pdf. 00144feab7de.html#axzz3aUzgwb2N.
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banking.88 The proposed rule trading, including the National Futures attendant to [their] customer specifically set out to capture Association (‘‘NFA’’), the FIA, ESMA, relationship[s].’’ individuals responsible for the and the International Organization of Among other requirements, deployment of trading algorithms in its Securities Commissions (‘‘IOSCO’’), Interpretive Notice 9046 addresses the Certification Regime.89 Pursuant to the among others. following standards for automated proposal, individuals responsible for: systems: (1) Approving the deployment of a 1. NFA Compliance Rule 2–9: • Pre-Execution Controls (including trading algorithm or a material part of Supervision both credit and ‘‘fat-finger’’ protections): one; (2) approving the deployment of a NFA, a registered futures association ‘‘An AORS should allow the Member to material amendment to a trading under Section 17 of the Act, has set limits for each customer based on algorithm or a material part of one, or provided guidance regarding ATSs to commodity, quantity, and type of order the combination of trading algorithms; industry participants since 2002. or based on margin requirements. It and (3) monitoring or deciding whether Specifically, NFA Interpretive Notice should allow the Member to impose or not the use or deployment of a 9046 addresses the ‘‘Supervision of the limits pre-execution and to trading algorithm is or remains Use of Automated Order-Routing automatically block any orders that compliant with the firm’s obligations Systems’’ in the context of NFA’s exceed those limits.’’ 93 • would be captured and subject to the overarching supervision requirements in Post-Execution Controls: ‘‘For Certification Regime.90 Compliance Rule 2–9 (Supervision).92 customers subject to post-execution controls, the Member should have the d. The October 15 Joint Staff Report The Commission believes that Compliance Rule 2–9 and Interpretive ability to monitor trading promptly. The As discussed above in section I(B), on Notice 9046 are especially relevant AORS should generate alerts when July 13, 2015, five regulatory agencies because of their wide applicability as limits are exceeded through that system. issued the October 15 Joint Staff Report NFA membership rules, binding on The system should also allow the on the unusually high level of volatility FCMs, IBs, CPOs, CTAs, and other NFA Member to block subsequent orders, and rapid round-trip in prices that members. In addition, these provisions either in their entirety or by kind (e.g., occurred on October 15, 2014 in the and interpretations have been in place to block orders that create a new market for U.S. Treasury securities, since at least 2006, such that NFA position or increase an existing position futures and other closely related members—and by extension many AT but not orders that liquidate some or all 91 94 financial markets. In addition to Persons—will have been subject to of an existing position).’’ • Direct Access Systems: ‘‘When discussing the events of October 15, the regulatory requirements concerning authorizing [customer] use of a direct report includes an Appendix C that algorithmic trading for many years. access system that does not allow the summarizes many of the risks of Compliance Rule 2–9 requires each Member to monitor trading promptly, automated trading. These risks include NFA member to ‘‘diligently supervise its the Member should utilize pre- the following: Operational risks (ranging employees and agents in the conduct of execution controls, if available, to set from malfunctioning and incorrectly their commodity futures activities for or pre-execution limits for each customer, deployed algorithms to algorithms on behalf of the Member.’’ Interpretive regardless of the nature of the reacting to inaccurate or unexpected Notice 9046, first issued in 2002 and data); market liquidity risks (arising customer.’’ revised in 2006, states that NFA’s board • Review: ‘‘Members should use from abrupt changes in trading of directors ‘‘firmly believes that strategies even when a firm executes its AORSs in conjunction with their credit- supervisory standards do not change strategy perfectly); market integrity risks review/risk-management systems and with the medium used. How those (automated trading can provide new should evaluate the controls imposed on standards are applied, however, may be tools to engage in unlawful conduct); each customer as part of their regular affected by technology.’’ To fulfill their transmission risks (shocks based on credit and risk-control procedures.’’ supervisory responsibilities, NFA erroneous orders impacting multiple A number of the controls summarized members ‘‘must adopt and enforce markets); clearing and settlement risks above are in keeping with the written procedures to examine the (as more firms gain access to trading Commission’s proposed requirements security, capacity, and credit and risk- platforms, trades may not be subject to for AT Persons, including proposed management controls provided by the sufficient settlement risk mitigation § 1.80, which requires pre-trade risk techniques); and risks to effective risk firm’s automated order-routing systems controls and other measures reasonably management (the speed of trade (AORSs).’’ Interpretive Notice 9046 designed to prevent an Algorithmic execution may make critical risk applies to systems ‘‘that are within a Trading Event, including but not limited mitigation devices less effective). Member’s control, including AORSs that to maximum order message and are provided to the Member by an execution frequencies per unit time; D. Industry and Regulatory Best application service provider or an order price parameters and maximum Practices and Recommendations independent software vendor.’’ NFA order sizes; and certain order Widely recognized organizations and acknowledges that NFA members will cancellation capabilities. The governmental entities or agencies have not control an AORS chosen by an NFA Commission notes once again its intent issued ‘‘best practices’’ for automated customer, such as direct access systems in much of Regulation AT to build on provided by exchanges. In such 88 Financial Conduct Authority (‘‘FCA’’), CP15/22 circumstances, the NFA member must 93 Interpretive Notice 9046 does not require NFA Strengthening accountability in banking: Final rules nevertheless adopt procedures members to ‘‘impose pre-execution controls on all (including feedback on CP14/31 and CP15/5) and ‘‘reasonably expected to address the customers, however. The Member should review consultation on extending the Certification Regime the customer’s sophistication, credit-worthiness, to wholesale market activities, at 46 (July 2015), trading, clearing, and other risks objectives, and trading practices and strategies available at https://www.fca.org.uk/your-fca/ when determining whether to impose controls pre- documents/consultation-papers/cp15-22. 92 NFA, ‘‘9046—Compliance Rule 2–9: execution or post-execution and deciding what 89 Id. Supervision of the Use of Automated Order-Routing levels to use when setting limits.’’ 90 Id. Systems,’’ (Dec. 12, 2006), available at https:// 94 The Interpretive Notice adds that ‘‘[t]his ability 91 See October 15 Joint Staff Report, supra note www.nfa.futures.org/nfamanual/ can be provided by the AORS or through other risk- 10. NFAManual.aspx?RuleID=9046&Section=9. management systems.’’
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existing regulatory requirements and The Commission encourages industry securities regulation. Its membership industry practices so that its proposed participants to consider FIA’s regulates more than 95% of the world’s regulations facilitate an ongoing recommendations. In the event that the securities markets in more than 115 transition to effective risk controls in FIA Guide recommends best practices jurisdictions.102 In October 2011, IOSCO algorithmic trading. The Commission that are not proposed in Regulation AT, released recommendations to promote believes that the existence of related the Commission encourages industry the integrity and efficiency of markets in regulatory standards enforced by NFA participants to consider implementing order to mitigate risks posed by the since 2002 and updated in 2006 would the FIA best practices if they are latest technological developments.103 help minimize any potential disruptions appropriate to their business and are Among other things, IOSCO or burdens that would otherwise be reasonably designed to prevent an recommended that regulators ensure associated with a number of the Algorithmic Trading Event. FIA’s that trading venues have in place Commission’s proposed rules for AT recommendations may also serve as a suitable trading control mechanisms Persons. The Commission also believes useful starting point for an RFA such as trading halts, volatility that NFA’s prior experience in this area considering potential measures in interruptions, and limit-up/limit-down will assist in complying with the response to proposed § 170.19, controls to deal with volatile market requirements of proposed § 170.19, discussed in section IV(F) below. conditions, as well as trading systems discussed in detail in section IV(F) FIA has issued several additional that have the ability to adjust to changes below. reports related to the appropriate best in message traffic (including sudden practices that should be implemented increases).104 In addition, IOSCO 2. FIA Reports on Automated Trading with respect to automated trading. In recommended that all order flow of April 2010, FIA issued a report trading participants, regardless of On March 23, 2015, FIA released the addressing the risks of direct market whether they access the market directly, ‘‘FIA Guide to the Development and access and providing recommendations be subject to appropriate controls, Operation of Automated Trading for risk controls to be implemented by including automated pre-trade controls. Systems’’ (the ‘‘FIA Guide’’), which exchanges and applied across all trading IOSCO also recommended that provides recommendations concerning firms.97 In November 2010, FIA’s regulators should identify any risks appropriate risk controls at the trader, Principal Traders Group (‘‘FIA PTG’’) arising from currently unregulated 95 broker and exchange levels. Risk released a report setting out direct participants of trading venues and controls recommended by FIA include recommended risk controls for trading take steps to address them.105 maximum order size limits, maximum firms that have direct access to More recently, in April 2015, IOSCO intraday position limits, market data exchange matching engines,98 as well as released a consultation report entitled reasonability checks, price tolerance a global survey of futures exchanges to ‘‘Mechanisms for Trading Venues to limits, repeated automated execution determine what controls were in place Effectively Manage Electronic Trading limits, exchange dynamic price collars, to manage the risks in providing trading Risks and Plans for Business exchange market pauses, exchange firms with direct market access.99 In Continuity.’’ 106 The report compiles the message programs, message throttles, March 2012, FIA PTG and FIA European results of a survey that IOSCO sent to self-trade prevention tools, kill Principal Traders Association issued trading venues across more than 30 switches, cancel-on-disconnect service recommendations to assist trading firms different jurisdictions. Based on the and exchange-provided order in establishing internal procedures, information compiled, the report management tools. FIA also processes and controls for the proposes best practices that should be recommended audit trail procedures development, testing and deployment of considered by trading venues when that identify automated trading system trading software.100 Finally, in developing and implementing risk operators; certain post-trade measures to September 2013, FIA released mitigation mechanisms. These practices monitor for potential credit events or recommendations for increasing the are intended to promote the integrity, unintended trading; measures related to usefulness of drop copy systems in resiliency and reliability of trading co-location services; and disaster exchange-traded markets.101 systems and business continuity plans. recovery and business continuity With respect to managing risks procedures. Finally, FIA recommended 3. IOSCO Reports on Electronic Trading originating from market participant measures related to automated trading IOSCO is an international body of technology, the report explains that system development and support, securities regulators. IOSCO develops, most trading venues have policies, including general principles related to implements and promotes adherence to procedures and tools to detect and testing; policies and procedures related internationally recognized standards for address the operational risks associated to security; systems monitoring with electronic trading. These tools procedures; and documentation 97 FIA, ‘‘Market Access Risk Management procedures. Consistent with the Recommendations,’’ (Apr. 2010), available at 102 See IOSCO’s public Web site, available at _ approach the Commission intends to http://www.futuresindustry.org/downloads/Market https://www.iosco.org/about/?subsection=about_ Access-6.pdf. iosco. pursue in Regulation AT, the FIA Guide 98 FIA PTG, ‘‘Recommendations for Risk Controls 103 Technical Committee of the IOSCO, states that, ‘‘[c]are should be taken to for Trading Firms,’’ (Nov. 2010), available at ‘‘Regulatory Issues Raised by the Impact of avoid implementing overly prescriptive http://www.futuresindustry.org/downloads/Trading Technological Changes on Market Integrity and standards or rules that impose a one- _Best_Pratices.pdf. Efficiency: Final Report,’’ (Oct. 2011), available at 99 96 Sutphen, Leslie, ‘‘Exchange Survey Finds Wide http://www.iosco.org/library/pubdocs/pdf/ size-fits-all approach to all entities.’’ Range of Risk Controls in Place,’’ (Jan. 2011), IOSCOPD361.pdf. available at http://www.futuresindustry.org/ 104 See id. 95 FIA, ‘‘FIA Guide to the Development and downloads/RC-survey.pdf. 105 See id. Operation of Automated Trade Systems’’ (Mar. 23, 100 FIA PTG & EPTA, ‘‘Software Development and 106 IOSCO, ‘‘Mechanisms for Trading Venues to 2015) [hereinafter ‘‘FIA Guide’’], available at Change Management Recommendations,’’ (Mar. 14, Effectively Manage Electronic Trading Risks and https://fia.org/sites/default/files/FIA%20 2012), available at http://www.futuresindustry.org/ Plans for Business Continuity: Consultation Guide%20to%20the%20Development%20and%20 downloads/Software_Change_Management.pdf. Report,’’ (Apr. 2015) [hereinafter ‘‘IOSCO 2015 Operation%20of%20Automated%20Trading%20 101 FIA, ‘‘Drop Copy Recommendations,’’ (Sept. Consultation Report’’], available at http:// Systems.pdf. 2013), available at http://www.futuresindustry.org/ www.iosco.org/library/pubdocs/pdf/ 96 Id. at 6. downloads/FIA-Drop_Copy(FINAL).pdf. IOSCOPD483.pdf.
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include, among others, pre-trade risk policies that allow for automatic The Note focused on how large financial controls (such as price and volume cancellation of orders on disconnect, institutions currently monitor and controls or filters and order entry and the ability for clearing firms to view control for the risks associated with controls), the ability to block, suspend their firm’s orders and to cancel algorithmic trading during the trading or disconnect a user (e.g., a kill switch), working orders. day. The Note identified several risks measures to halt trading in the event of that SSG believes are common to 5. FIX Risk Management Working Group sudden price movements, and throttles algorithmic trading across jurisdiction that constrain the number or frequency Additional organizations have and asset class: (i) Systemic risk may be of messages from any given released best practices documents, amplified; (ii) algorithmic trading desks participant.107 IOSCO also explained including FIX Protocol Ltd.’s (‘‘FIX’’) may face a significant amount of risk that many trading venue participants Americas Risk Management Working intraday without transparency and use pre-trade risk controls such as order Group. FIX is a non-profit, industry robust controls; (iii) internal controls volume, price per security, credit, standards association that owns, may not have kept pace with speed and notional value of order, order value, maintains and continuously develops market complexity; and (iv) without capital, position checks, price deviation the Financial Information eXchange adequate controls, losses can thresholds, and regulatory integrity (FIX) Protocol in response to market accumulate and spread rapidly.116 The checks.108 Finally, IOSCO addressed requirements. In 2012, FIX released risk Note provided a list of principles for direct market access by referring to a control guidelines for algorithmic supervisors to consider when evaluating previous report it issued in 2010, called trading orders and direct market access controls over algorithmic trading at ‘‘Principles for Direct Electronic Access orders.111 FIX identified typical order banks: (a) Controls must keep pace with to Markets.’’ In that report, IOSCO scenarios that brokers attempt to detect, technological complexity and trading recommended that intermediaries which include the following: An order speeds; (b) governance and management (including clearing firms) have adequate for an exceedingly large quantity; an oversight can limit exposure to losses operational and technical capability to order that will adversely impact the and improve transparency; (c) testing appropriately manage the risks posed by market for a given security; an order needs to be conducted during all phases DEA.109 with incomplete or conflicting of a trading product’s lifespan, namely instructions; an order that is potentially during development, rollout to 4. CFTC TAC Subcommittee duplicative or unintentionally production, and ongoing maintenance; In 2011, the Pre-Trade Functionality repeating; an order where adverse or and (d) when assessing control depth Subcommittee (‘‘TAC Subcommittee’’) favorable price moves impact the order and suitability, management should of the CFTC’s TAC issued while it is working; and an order that ensure sufficient involvement of control recommendations for pre-trade controls may be stale or may have been replaced functions (including compliance, for trading firms, clearing firms and by the client or a system.112 FIX technology, legal, and controllers), as exchanges which use, or provide, direct explained that the absence of well as business-unit management.117 110 market access. The TAC appropriate risk controls can result in 7. Treasury Market Practices Group Best Subcommittee recommended the market dislocation, failure to settle/ Practices following risk controls for trading firms: deliver, conflict between the client’s Quantity limits on individual orders; intent and order execution, and trading In June 2015, the Treasury Market price collars; execution throttles; the wrong product.113 FIX provides a Practices Group, a group sponsored by message throttles; and a kill switch that recommended matrix of risk controls, the Federal Reserve Bank of New York, would cancel all existing orders and which includes maximum order and comprised of legal, compliance and prevent the firm from placing new quantity, average daily volume checks, business representatives from orders. The TAC Subcommittee further price limit checks, favorable/adverse institutions related to U.S. Treasury recommended that clearing firms price move checks, position limits, market primary and secondary trading, trading on their own behalf should credit checks, and stale, runaway, and released a white paper on Automated 118 comply with those risk controls. In duplicate order checks.114 Trading and an updated Best addition, clearing firms should confirm Practices document for trading in U.S. that their client firms are implementing 6. Senior Supervisors Group (SSG) cash Treasury securities markets.119 The such controls, approve the parameters Briefing Note used by the trading firm, and have In April 2015, the Senior Supervisors www.newyorkfed.org/newsevents/news/banking/ 2015/SSG-algorithmic-trading-2015.pdf. The SSG access to the kill switch. Exchanges Group (‘‘SSG’’), composed of the staff of includes staff from the following organizations: should implement, and require trading banking and other financial regulatory Canadian Office of the Superintendent of Financial firms to use, pre-trade quantity limits on agencies from ten countries and the Institutions, the European Central Bank Banking individual orders; intra-day position European Union, issued an Supervision, the French Prudential Control and 115 Resolution Authority, the German Federal Financial limits; price collars; and message ‘‘Algorithmic Trading Briefing Note.’’ Supervisory Authority, the Bank of Italy, the throttles. The TAC Subcommittee also Japanese Financial Services Agency, the recommended that exchanges 111 See FPL Americas Risk Management Working Netherlands Bank, the Bank of Spain, the Swiss implement clear and consistent error Group, ‘‘Recommended Risk Control Guidelines,’’ Financial Market Supervisory Authority, the United (2012), available at http:// Kingdom’s Prudential Regulatory Authority, and, in trade policies, order cancellation www.fixtradingcommunity.org/mod/file/ the United States, the Office of the Comptroller of view.php?file_guid=32127. the Currency, the Securities and Exchange 107 See id. at 20–21. 112 See id. at 5. Other scenarios include an order Commission, and the Federal Reserve. 108 See id. where the symbology cannot be resolved to a single 116 See id. at 2–3. 109 See id. at 22–23. IOSCO uses the term DEA or security and large accrued long or short positions 117 See id. at 3–4. ‘‘direct electronic access’’ to mean an arrangement that may result in settlement and/or delivery risk 118 See Treasury Market Practices Group, where a client of an intermediary obtains access to if the client cannot settle the trade. ‘‘Automatic Trading in Treasury Markets,’’ (June the market through the intermediary’s infrastructure 113 See id. 2015), available at http://www.newyorkfed.org/ or access without using the intermediary’s systems. 114 See id. at 22. tmpg/TPMG_June%202015_automated%20trading_ See id. at 20 n.56. 115 See Senior Supervisors Group, ‘‘Algorithmic white%20paper.pdf. 110 See CFTC TAC Recommendations, supra note Trading Briefing Note,’’ (Apr. 2015) [hereinafter 119 See Treasury Market Practices Group, ‘‘Best 34. ‘‘SSG 2015 Note’’], available at http:// Practices for Treasury, Agency Debt, and Agency
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Best Practice updates, among other The malfunction impacted the broader on the market.131 The existing risk things, expanded the scope of market, creating swings in the share management controls and supervisory recommended risk controls that address prices of almost 150 companies; these procedures in place at Goldman failed the risks of automated trading price swings were high enough to trigger to stop the erroneous orders, and human (automated trading, for purposes of the pauses in the trading of five stocks.124 error and failure to follow best practices Best Practices document, means the Foreign markets have also exacerbated the errors.132 While some subset of electronic trading that relies experienced disruptive events in recent erroneous orders were able to be on computer algorithms for decision- years. For example, in May 2012 in cancelled, Goldman’s loss ultimately making and execution of order Mexico, a ‘‘fat finger’’ error by a market totaled $38 million.133 submissions), including the participant resulted in the execution of Disruptive events illustrate the documentation of internal policies and 1.13 million shares (representing U.S. importance of effective risk controls. procedures, additional transparency in $3.78 billion).125 In February 2015, The risk controls contemplated in exchange or trading platform market there was a five minute delay in Regulation AT are intended to limit the data, error trade rules and exchange opening futures and options on the extent of market disruption caused by provided services, expanded design and Eurex exchange in Germany because a ATSs or trading platform malfunctions. testing environments at firms and market participant’s system was For example, a pre-trade risk control exchanges, and updated risk controls transmitting duplicate orders.126 In such as a message throttle will prevent that align with the speed of trading February 2014, trading in three-year submission of orders that exceed a technology. The white paper notes that Korean treasury bonds was halted for predetermined frequency per unit time. these updates were issued in a period almost two hours at the Korea Exchange Such a control could be operated by the when cash Treasury securities markets, due to a system malfunction resulting market participant generating orders, like many other asset classes, have from an improper order from a the clearing firm guaranteeing its trades, experienced a strong increase in brokerage house.127 On October 26, or the trading platform on which orders automated trading on electronic 2011, the Bombay Stock Exchange had would be executed, and would limit the platforms. to cancel all derivatives trading due to impact of an algorithmic trading system unusually high volumes and price not operating as intended. As another III. Recent Disruptive Events in example, monitoring and supervision Automated Trading Environments volatility as a result of a flawed algorithm used by a member firm.128 standards for algorithmic trading may The Concept Release discussed help ensure that human supervisors Goldman Sachs was recently fined $7 malfunctions in automated trading intervene quickly when automated million by the SEC for violating its systems, in both derivatives and systems experience unexpected or Market Access Rule and causing a securities markets, that illustrate the degraded performance, and that disruptive trading event.129 On August technological and operational supervision staff have the both the 20, 2013, a configuration error in one of vulnerabilities inherent to automated authority and knowledge to take Goldman’s options order routers trading environments.120 As an appropriate steps in this scenario. example, the Flash Crash of May 2010 erroneously sent thousands of limit involved an automated trading system orders to the options exchanges prior to IV. Overview of Regulation AT 130 with a design flaw that impacted both the start of regular market trading. By A. Concept Release/Regulation AT the derivatives and securities markets. the time the creation of additional Terminology orders was disabled, and efforts to According to the CFTC/SEC joint report The Concept Release used the term on the Flash Crash, an automated cancel unintended orders were taken, approximately 1.5 million unintended ‘‘automated trading system’’ execution algorithm did not take price (abbreviated ‘‘ATS’’) to refer to the or time variables into account. Given the orders (representing 150 million underlying shares) had been executed algorithms used to automate the parameters of the program, the generation and execution of a trading algorithm continued to send orders even 134 124 See Strasburg, Jenny and Bunge, Jacob, ‘‘Loss strategy. In discussing comments to as prices moved far beyond traditional the Concept Release, the Commission daily ranges.121 In another example, in Swamps Trading Firm,’’ Wall St. J. (Aug. 2, 2012), available at http://online.wsj.com/article/SB1000 will continue to use the term automated 2012 a securities trading firm, Knight 0872396390443866404577564772083961412.html trading system. However, for greater Capital Group, made a coding error in and Valetkevitch, Caroline and Mikolajczak, Chuck, precision, the proposed rules and ‘‘Error by Knight Rips Through Stock Market,’’ an automated equity router, and then preamble for Regulation AT instead incorrectly deployed new code in the Reuters (Aug. 1, 2012), available at http:// 122 www.reuters.com/article/2012/08/01/us-usa-nyse- refer to ‘‘algorithmic trading system’’ same router. Because of these coding tradinghalts-idUSBRE8701BN20120801. (also abbreviated ‘‘ATS’’). This change errors, the firm’s automated trading 125 See IOSCO 2015 Consultation Report, supra is intended only as a change in in system inadvertently built up note 106 at 1 n.6. nomenclature. ATSs as described herein unintended positions in the equity 126 See id. and ‘‘Technical Failure Delays Eurex should not be confused with alternative market, eventually resulting in losses of Trading in Futures, Options,’’ Bloomberg (Feb. 17, 123 2015), available at http://www.bloomberg.com/ trading systems in equities markets. more than $460 million for the firm. news/articles/2015-02-17/eurex-futures-options- opening-delayed-after-technical-problem. B. Commenter Preference for Principles- Mortgage-Backed Securities Markets,’’ (June 2015), 127 See ‘‘Treasuries trading system disrupted,’’ Based Regulations available at http://www.newyorkfed.org/tmpg/ Korea Times (Feb. 14, 2014), available at https:// TPMG_June%202015_Best%20Practices.pdf. www.koreatimes.co.kr/www/news/biz/2014/09/488_ As an initial matter, the Commission 120 See Concept Release, 78 FR at 56548–49. 151619.html. notes a preference expressed in 121 See U.S. Commodity Futures Trading 128 See ‘‘Sebi probes Muhurat trading mishap on comments to the Concept Release for Commission and U.S. Securities and Exchange BSE,’’ Business Standard (Nov. 12, 2011), available principles-based, as opposed to Commission, ‘‘Findings Regarding the Market at http://www.business-standard.com/article/ prescriptive, regulations. Fifteen Events of May 6, 2010,’’ (September 30, 2010) markets/sebi-probes-muhurat-trading-mishap-on- [hereinafter, the ‘‘Flash Crash Report’’], available at bse-111111200083_1.html. http://www.cftc.gov/ucm/groups/public/@otherif/ 129 See In re Goldman, Sachs & Co., No. 3–16665 131 Id. documents/ifdocs/staff-findings050610.pdf. (SEC June 30, 2014) (order instituting 132 Id. at 3. 122 See SEC Knight Capital Release, supra note 39. administrative and cease-and-desist proceedings). 133 Id. at 2. 123 See id. 130 Id. at 2. 134 Concept Release, 78 FR 56542, 56544.
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commenters advocated a limited or controls to the specific risks associated C. Multi-Layered Approach to Pre-Trade ‘‘principles-based’’ approach to any with their business.’’ 141 Risk Controls and Other Measures regulation arising from the Concept In addition, five commenters In response to the Commission’s 135 Release. Commenters indicated that indicated that the Commission already questions in the Concept Release about prescriptive requirements will become has robust regulations in place to the appropriate location for risk controls obsolete, stifle innovation, discourage address the risks of automated and other measures, commenters self-reporting of technological failures, 142 generally supported a multi-layered may not account for the unique trading. Such comments cited the 143 approach to risk controls, with each characteristics of market participants, DCM and SEF Core Principles; Commission regulations 1.73, 23.609, level—trading firm, clearing firm, and and would result in participants exchange—implementing risk controls designing around such measures.136 38.255, and 38.607; 144 and CEA and 137 Commission market manipulation and that are adjusted depending on More specifically, FIA and CME 149 disruptive trading practices rules.145 circumstance. Group, Inc. (‘‘CME’’) suggested that the For example, FIA commented that best way to achieve standardization of In contrast to a limited or principles- ‘‘[i]ntroducing redundant risk controls risk controls is through implementing based approach to regulation, several at more than one focal point in the ‘‘best practices’’ developed through commenters supported a more trading lifecycle may increase the working groups of DCMs, FCMs, and prescriptive approach to a rulemaking integrity of the marketplace when other market participants.138 Similarly, addressing the risks of automated careful consideration is given to their IntercontinentalExchange, Inc. (‘‘ICE’’) trading.146 These commenters include differences in roles, implementations indicated that ‘‘exchanges are able to the Institute for Agriculture and Trade and configurations.’’ 150 However, FIA better implement and update risk also stated that ‘‘we caution against a controls on a market-by-market basis Policy (‘‘IATP’’), Better Markets, and mandated proliferation of redundant than through a Commission Americans for Financial Reform risk controls because the existence of rulemaking,’’ and should be allowed (‘‘AFR’’). For example, IATP stated that similar but not identically implemented flexibility in designing exchange risk unless the Commission receives risk controls may do more harm than controls.139 Susquehanna International documentation that the risk controls of good. Each new implementation of a Group (‘‘SIG’’) stated that the firms and exchanges are consistent and control will increase complexity and Commission should ‘‘allow the effective, the Commission should may cause misunderstanding between exchanges to work with firms on assume that regulatory standardization traders and risk managers as a tailoring the rules for implementation in will be beneficial for each risk control consequence of conflicting risk ways that best consider the technical and at each phase of the trade limits.’’ 151 As an example of a control intricacies between firms and lifecycle.147 In addition, several that may be appropriately implemented exchanges.’’ 140 Virtu Financial LLC academic commenters discussed at multiple levels, FIA stated that (‘‘VFL’’) suggested that ‘‘mandating risk concerns with automated, high speed maximum order size limits may be controls and supervisory systems that trading and advocated specific changes implemented at both market participant are ‘reasonably designed’ or ‘provide to the trade matching or order and FCM levels without redundancy reasonable assurance’ of protection submission process to increase market because they reflect the different would allow participants to tailor these 148 liquidity and efficiency. responsibilities of each participant.152 As discussed below, consistent with FIA further explained that if an FCM 135 The Futures Industry Association (‘‘FIA’’) Comment Letter (Dec. 11, 2013) at 2, 12; CME comments received, the Commission has implemented customer-specific Group (‘‘CME’’) Comment Letter (Dec. 11, 2013) at has taken a balanced approach to the controls within its infrastructure, it 3, 41–42; Gelber Group, LLC (‘‘Gelber’’) Comment regulations it believes are necessary to would be redundant to use the same Letter (Dec. 9, 2013) at 1–2; KCG Holdings, Inc. controls at the DCM level, though as an (‘‘KCG’’) Comment Letter (Dec. 11, 2013) at 3; The manage the risks of algorithmic trading. Alternative Investment Management Association For example, the Commission proposes additional protection, it is permissible (‘‘AIMA’’) Comment Letter (Dec. 11, 2013) at 1; The a principles-based approach to its risk to set higher limits at the DCM that 153 Minneapolis Grain Exchange (‘‘MGEX’’) Comment controls requirements, in that it would apply across all customers. Letter (Dec. 11, 2013) at 1; CBOE Futures Exchange, CME cited the TAC Subcommittee’s require particular controls but allow the LLC (‘‘CFE’’) Comment Letter (Dec. 11, 2013) at 2; ‘‘Recommendations on Pre-Trade Managed Funds Association (‘‘MFA’’) Comment relevant entity—a trading firm, clearing Practices for Trading Firms, Clearing Letter (Dec. 11, 2013) at 2; Holly Bell (Bell’’) member FCM, or DCM—discretion in Comment Letter (Dec. 11, 2013) at 3; Virtu Financial Firms and Exchanges involved in Direct LLC (‘‘VFL’’) Comment Letter (Jan. 10, 2014) at 2– the design of such control and the Market Access,’’ and commented that 3; Chris Barnard Comment Letter (Jan. 29, 2014) at parameters that would be used. 2; Susquehanna International Group (‘‘SIG’’) ‘‘each level of the ‘electronic trading Comment Letter at 2; IntercontinentalExchange ‘supply chain’ (trading firms, clearing 141 Group, Inc. (‘‘ICE’’) Comment Letter (Feb. 14, 2014) VFL at 3. firms, and exchanges) must share in the 142 at 1–2; 3Red Trading LLC (‘‘3Red’’) Comment Letter CME at 3; FIA at 5; MFA at 6; Gelber at 2, 5, effort to preserve market integrity (Feb. 14, 2014) at 2; OneChicago, LLC 20; Bell at 2, 4. (‘‘OneChicago’’) Comment Letter (Feb. 14, 2015) at 143 Gelber at 21; CFE at 1; MFA at 6. through the implementation of effective 5. 144 MFA at 4; CFE at 1. risk controls, no matter if that 136 FIA at 2, 12; CME at 3–4, 7; Gelber at 1–2; 145 Gelber at 2, 5, 20; CFE at 3; CME at 3; MFA participant has direct market access or Tellefsen and Company, L.L.C. (‘‘TCL’’) Comment at 6; Bell at 2. is routing to the exchange via its Letter (Oct. 31, 2013) at 5, 18; AIMA at 1, 2; CFE 146 The Institute for Agriculture and Trade Policy clearing member firm’’.154 Specifically at 2; VFL at 3; Bell at 3. (‘‘IATP’’) Comment Letter (Dec. 11, 2013) at 4; 137 The Commission notes that six entities Better Markets Inc. (‘‘Better Markets’’) Comment 149 submitted letters in support of FIA’s comment Letter (Dec. 11, 2013) at 1; Americans for Financial CME at 8–9; FIA at 61; Federal Reserve Bank letter: RGM Advisors, LLC, Allston Trading LLC, Reform (‘‘AFR’’) Comment Letter (Dec. 11, 2013) at of Chicago (‘‘Chicago Fed’’) Comment Letter (Dec. Geneva Trading USA, LLC, Tibra Trading America 6. 11, 2013) at 2; AIMA at 7; KCG at 2; VFL at 2. 150 LLC, DRW Trading Group and IMC Financial 147 IATP at 4. FIA at 61. 151 Markets. 148 Eric Budish et al. Comment Letter (Feb. 14, See id. 138 FIA at 63; CME at 41. 2014) at 1; Brian F. Mannix Comment Letter 152 FIA at 62. 139 ICE at 1–2. (Dec.10, 2013) at 2; Elaine Wah et al. Comment 153 See id. 140 SIG at 2. Letter (Dec. 11, 2013) at 2. 154 CME at 7–8.
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with respect to kill switch functionality, The Commission notes that ESMA’s the definition of ATS is self-evident and CME indicated that kill switch 2015 Final Draft Regulatory Standards has been in use for a long time, and that functionality deployed at multiple require pre-trade risk controls at both ATS, or automated orders, are orders levels should not be considered investment firms and trading venues.162 that are generated and/or routed without redundant.155 CME further suggested ESMA acknowledged commenter human intervention. This includes that while multi-layered kill switch disagreement with such redundancy orders generated by a computer system functionality is not necessary for and stated, ‘‘ESMA believes that at least as well as orders that are routed using effective risk control, it is nevertheless two lines of defence are appropriate in functionality that manages order beneficial as it adds additional measures this complex business and thus submission by automated means (i.e., of protection.156 CME made a general continues to require the pre-trade risk execution algorithms).166 Another point that registrants should establish controls conducted by both investment commenter, Gelber Group, LLC controls appropriate to the nature of firms and trading venues.’’ 163 ESMA’s (‘‘Gelber’’), stated that the Commission their business that are reasonably regulatory standards further provide should adopt a ‘‘strong but designed to control access, effectively that where a client is granted market appropriately flexible definition’’ of monitor trading, and prevent errors as access either through an intermediary’s ATS aligned with existing exchange well as other inappropriate activity.157 systems, or directly without using the definitions.167 CME indicated that, regardless of intermediary’s systems, the direct The Commission’s evaluation of this whether orders are entered manually electronic access provider must apply issue is also informed by the work of the through an electronic system or entered the required pre-trade risk controls.164 TAC Subcommittee. In particular, the through an automated trading system, Regulation AT requires pre-trade and TAC Subcommittee described such principles are equally important, other risk controls at both the AT Person ‘‘automated trading’’ as follows: because the method of order entry does and clearing member FCM level (as well ‘‘[Automated trading] covers systems not lessen the impact of a particular as the DCM level) based on its employed in the decision-making, order on the market.158 understanding that the risks—and the routing and/or execution of an investment or trading decision, which Other commenters supported a multi- resulting calibration levels of the controls—may be different given those utilizes a range of technologies layered approach to risk controls. AIMA including software, hardware, and indicated that risk controls should be entities’ distinct priorities and understanding of the risks to themselves network components to facilitate ‘‘broadly similar’’ and applied at the efficient access to the financial markets trading firm, clearing firm, and and their customers. Below is a summary of each element via electronic trading platforms.’’ 168 exchange levels.159 KCG stated that of Regulation AT. For each element, the ‘‘risk management is most effective b. Description of Regulation Commission addresses relevant Concept when it is multi-layered and Release comments, summarizes the While the Commission does not overlapping.’’ 160 VFL stated that a proposed regulation, and asks questions define the term ‘‘ATS’’ in this NPRM, ‘‘multilayered system of risk controls is concerning the proposed regulation. the Commission does propose a new a key ingredient to protect the market § 1.3(zzzz) that defines the related from disruptive events.’’ 161 D. Codification of Defined Terms Used activity of ‘‘Algorithmic Trading.’’ This The Commission agrees with the Throughout Regulation AT proposed term means trading in any comments above that it should adopt a 1. ‘‘Algorithmic Trading’’—§ 1.3(zzzz) commodity interest as defined in multi-layered approach to regulations Regulation 1.3(yy) 169 on or subject to a. Concept Release Comments intended to mitigate the risks of the rules of a DCM, where: (1) One or automated trading. As explained below, The Concept Release requested more computer algorithms or systems the Commission proposes to impose comment concerning whether the determines whether to initiate, modify, requirements at multiple stages of the Commission should define ATS or or cancel an order, or otherwise makes lifecycle of an order. The Commission algorithm for purposes of any ATS determinations with respect to an order, acknowledges FIA’s comment that the identification system. Commenters including but not limited to: the product different role of entities at various stages disagreed on whether the Commission to be traded; the venue where the order in the trade lifecycle must be carefully should adopt a definition of ‘‘ATS.’’ FIA will be placed; the type of order to be evaluated. While Regulation AT and CME opposed a regulatory placed; the timing of the order; whether requires the same types of pre-trade and definition, arguing that industry already to place the order; the sequencing of the other risk controls to be implemented by has a definition of automated trading order in relation to other orders; the different entities, the Commission notes system.165 FIA and CME indicated that price of the order; the quantity of the that the proposed regulations allow for discretion in the appropriate design and 162 ESMA September 2015 Final Draft Standards 166 FIA at 41; CME at 29. parameters of each risk control. Report, supra note 80 at 201. 167 Gelber at 2–3. 163 See id. 168 CFTC Technology Advisory Committee Accordingly, a trading firm, clearing 164 ESMA September 2015 Final Draft Standards Subcommittee on Automated and High-Frequency member FCM, and DCM may each Report Annex 1, supra note 80 at 218. Trading, Presentation to the TAC (Oct. 12, 2012), choose to design and calibrate the same 165 FIA at 41–42; CME at 29. CME defines ‘‘ATS’’ available at http://www.cftc.gov/ucm/groups/ control in different ways, depending on as ‘‘a trading method in which a computer makes public/@newsroom/documents/file/tac103012_ how the control is used by each entity decisions and enters orders without a person wg1.pdf. entering those orders. This is a programmatic way 169 Regulation 1.3(yy) provides that the term to manage risks. of representing the trader.’’ See CME Glossary, ‘‘commodity interest’’ means (1) any contract for the available at http://www.cmegroup.com/education/ purchase or sale of a commodity for future delivery; 155 CME at 22. glossary.html. ICE defines ‘‘ATS’’ as ‘‘any system (2) any contract, agreement or transaction subject to 156 See id. that automates the generation and submission of a Commission regulation under section 4c or 19 of orders to ICE.’’ See ICE Notice, Revision to the Act; and (3) Any contract, agreement or 157 CME at 43–44. Authorized Trader Requirements (Jan. 4, 2011) at 3, transaction subject to Commission jurisdiction 158 See id. available at https://www.theice.com/publicdocs/otc/ under section 2(c)(2) of the Act; and (4) Any swap 159 AIMA at 7. advisory_notices/ICE%20Advisory%20Notice%20 as defined in the Act, by the Commission, or jointly 160 KCG at 2. for%20Authorized%20Trader%20 by the Commission and the Securities and 161 VFL at 2. Registration%20010411.pdf. Exchange Commission. See 17 CFR 1.3(yy).
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order; the partition of the order into However, the definition of algorithmic Commission anticipates that entities smaller components for submission; the trading under MiFID II does not include using automated order routers will be number of orders to be placed; or how systems that only make decisions as to using similar or related automated to manage the order after submission; the routing of orders to one or more technology to determine other and (2) such order, modification or trading venues.173 Similarly, for parameters of an order. In addition to order cancellation is electronically purposes of a proposal relating to the consideration that order routing submitted for processing on or subject to registration of persons who develop systems have the potential to disrupt the the rules of a DCM; provided, however, algorithmic trading strategies, FINRA’s market, the Commission believes that, that Algorithmic Trading does not definition of ‘‘algorithmic trading given the interconnectedness of trading include an order, modification, or order strategy’’ does not include an order firm systems, carving out a particular cancellation whose every parameter or router alone.174 In contrast to MiFID II subset of automated systems from the attribute is manually entered into a and FINRA, the Commission intends definition of Algorithmic Trading, e.g., front-end system 170 by a natural person, that the definition of Algorithmic order routing systems, would introduce with no further discretion by any Trading includes systems that make unnecessary complexity and reduce the computer system or algorithm, prior to determinations regarding any aspect of effectiveness of the safeguards provided its electronic submission for processing the routing of an order, i.e., systems that in its proposed regulations.178 on or subject to the rules of a DCM.171 only make decisions as to the routing of The Commission notes that even if a The term ‘‘Algorithmic Trading’’ is a orders to one or more trading venues. computer algorithm or system makes critical underpinning of other elements The Commission believes that one or more determinations with respect of this NPRM. Specifically, the automated order routers have the to an order (such as product, timing, Commission proposes a number of potential to disrupt the market to a price or quantity), the submission of the requirements related to Algorithmic similar extent as other types of order would not constitute Algorithmic Trading, including that trading firms automated systems, and therefore Trading if every parameter or attribute (i.e., AT Persons, as defined in section should not be treated differently under of the order is manually entered into a IV(D) below), clearing member FCMs, the proposed regulations. For example, front-end system by a natural person, and DCMs implement certain pre-trade the SEC determined that Knight Capital with no further discretion by any risk controls for Algorithmic Trading; made errors related to the coding and computer system or algorithm, prior to that trading firms implement certain testing of an automated equity router, its electronic submission for processing standards for the development, testing, which caused the firm to acquire several on or subject to the rules of a DCM. monitoring, and compliance of ATSs; billion dollars in unwanted positions However, if a natural person does not and that trading firms and clearing and sustain a loss of more than $460 manually enter an order as described in members FCMs submit compliance million, in addition to causing the preceding sentence, but nonetheless reports describing the new pre-trade risk substantial market disruption.175 intervenes in the order in some other controls. In addition, the term The Commission has taken this and more limited manner, the ‘‘Algorithmic Trading’’ is employed in approach to automated order routers submission of the order would still the proposed definition of ‘‘AT Person,’’ after considering existing industry represent Algorithmic Trading if the a term that identifies those persons or definitions of ‘‘automated trading other elements of the definition are met. entities subject to the Commission’s systems.’’ For example, CME defines The Commission believes that the risks proposed new pre-trade risk control ‘‘ATS’’ as ‘‘a trading method in which of Algorithmic Trading continue to exist requirements, among other a computer makes decisions and enters in trading where there is some limited requirements. orders without a person entering those natural person intervention at particular The Commission notes that its orders. This is a programmatic way of stages of order submission or execution, definition of Algorithmic Trading is representing the trader.’’ 176 Similarly, and Regulation AT requirements should similar to the definition of algorithmic ICE defines ‘‘ATS’’ as ‘‘any system that apply to such trading to the same extent trading adopted by the European automates the generation and that it does to trading that is entirely 172 Commission under MiFID II. submission of orders to ICE.’’ 177 The automated. In sum, the only circumstance in which natural person 170 The reference to a ‘‘front-end system’’ may ESMA Technical Advice Final Report states at 323, intervention by definition would cause include a system provided by an independent ‘‘There is limited or no human intervention (and trading to not represent Algorithmic software vendor (‘‘ISV’’), a broker or an exchange, therefore algorithmic trading) when the system at or developed internally. Trading is if the proviso in clause (2) of least makes independent decisions at any stage of 171 the definition of Algorithmic Trading The Commission notes that if a customer order-execution processes, either on initiating, submits an order to its clearing FCM, which then routing or executing orders. It is noted that the were met. submits the order to a DCM, such order would still reference to ‘orders’ encompasses ‘quotes’ as well.’’ Finally, the Commission clarifies that be considered ‘‘electronically submitted for 173 See ESMA Technical Advice Final Report, there are certain automated functions processing on or subject to the rules of a designated supra note 78 at 324. contract market,’’ notwithstanding the fact that the that do not fall within the proposed 174 order is routed through the intervening clearing See FINRA, Regulation Notice 15–06, definition of Algorithmic Trading. For FCM. ‘‘Registration of Associated Persons Who Develop example, the use of automated programs 172 See ESMA Technical Advice Final Report, Algorithmic Trading Strategies,’’ (Mar. 2015), available at http://www.finra.org/sites/default/files/ that incorporate electronic indicators or supra note 78 at 318. Article 4(1)(39) of MiFID II _ _ _ _ _ defines algorithmic trading as ‘‘trading in financial notice doc file ref/Notice Regulatory 15-06.pdf. In instruments where a computer algorithm the Notice, FINRA defines an ‘‘algorithmic trading Authorized%20Trader%20Registration%20 automatically determines individual parameters of strategy’’ as ‘‘any program that generates and routes 010411.pdf. orders such as whether to initiate the order, the (or sends for routing) orders (and order-related 178 The Commission notes that Forex Capital timing, price or quantity of the order or how to messages, such as cancellations) in securities on an Markets, LLC (‘‘FXCM’’) commented in response to manage the order after its submission, with limited automated basis.’’ Id. at 3. the Concept Release that automatic order routing or no human intervention, and does not include any 175 See SEC Knight Capital Release, supra note 39. systems be excluded from any definition of ‘‘high- system that is only used for the purpose of routing 176 See CME Glossary, available at http:// frequency trading,’’ arguing that such systems are orders to one or more trading venues or for the www.cmegroup.com/education/glossary.html. already subject to extensive regulatory oversight processing of orders involving no determination of 177 See ICE Notice, Revision to Authorized Trader and control. See FXCM 1–2. For the reasons stated any trading parameters or for the confirmation of Requirements (Jan. 4, 2011) at 3, available at above, the Commission determined to include such orders or the post-trade processing of executed https://www.theice.com/publicdocs/otc/advisory_ systems within the definition of Algorithmic transactions.’’ See MiFID II, supra note 70. The notices/ICE%20Advisory%20Notice%20for%20 Trading.
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other technical analysis features to inappropriately includes or excludes a Commission requests comment on this notify a trader regarding specified particular type or aspect of trading. proposed expansion of the definition of market activity (e.g., a product reaches 2. Should the Commission adopt a Algorithmic Trading, which the a particular price) would not in itself definition of ‘‘Algorithmic Trading’’ that Commission may implement in the final represent Algorithmic Trading, unless is more closely aligned with any rulemaking for Regulation AT. The the same program makes the definition used by another regulatory Commission requests comment on the determinations described in clause (1) organization? costs and benefits of this proposal, in of the definition, and clause (2) is also 3. For purposes of the Commission’s addition to any other comments met. Similarly, if an entity (such as an definition of Algorithmic Trading, is it regarding the effectiveness of this introducing broker) uses certain necessary for the Commission to define proposal in terms of risk reduction. electronic systems as part of its business ‘‘computer algorithms or systems’’? If 2. ‘‘Algorithmic Trading Compliance practices, but does not submit orders to so, please explain what should be Issue’’—§ 1.3(tttt) a trading platform, that entity’s use of included in such a definition. electronic systems would not of itself be 4. Should the Commission’s a. Description of Regulation considered Algorithmic Trading. definition of ‘‘Algorithmic Trading’’ The Commission proposes to define Finally, the application of risk filters to include systems that only make three new, related terms: ‘‘Algorithmic an order that is otherwise entered determinations as to the routing of Trading Compliance Issue,’’ through entirely manual means (i.e., an orders to different venues (which is ‘‘Algorithmic Trading Disruption,’’ and order whose every parameter or contemplated in the proposed ‘‘Algorithmic Trading Event’’ (which attribute is manually entered into a definition)? With respect to the encompasses Algorithmic Trading front-end system by a natural person, definition of ‘‘Algorithmic Trading,’’ Compliance Issues or Algorithmic with no further discretion by any should the Commission differentiate Trading Disruptions). As a general computer system or algorithm) 179 between different types of algorithms, matter, the proposed regulations would not be considered Algorithmic such as alpha-generating algorithms and contained in Regulation AT are Trading solely due to the use of risk order routing algorithms? intended to address the risks of 5. Is the Commission’s understanding filters. For example, existing §§ 1.11 and automated trading. Malfunctioning or correct that most entities using 1.73 require FCMs and clearing member incorrectly deployed algorithms automated order routers will be using FCMs, respectively, to establish certain deploying erroneous messages to trading similar or related automated technology automated financial or risk-based venues can significantly impact markets to determine other parameters of an controls, including limits based on and market participants. The speed at position size, order size and margin order? 6. The Commission posits a scenario which trading occurs can magnify the requirements or capital, credit or harm caused by a malfunctioning volume thresholds. The application of in which an AT Person submits orders through Algorithmic Trading, and a system, for example, in driving such automated controls would not, on unwarranted price changes. The their own, cause an order to fall within non-clearing FCM or other entity acts only as a conduit for these AT Person proposed definitions work in the definition of Algorithmic Trading. conjunction with proposed regulations The Commission notes that ESMA’s orders. If the non-clearing FCM or other entity does not make any requiring certain risk controls and other 2015 Final Draft Regulatory Standards measures and are intended to describe address the distinction between determinations with respect to such orders, the conduit entity would not be the types of market disruptions, ‘‘investment decision algorithms’’ regulatory violations, or other events engaged in Algorithmic Trading, as that (which make automated trading that Regulation AT is designed to definition is currently proposed. Should decisions by determining which assets prevent or mitigate. to purchase or sell) and ‘‘order the definition of Algorithmic Trading be The three proposed terms Algorithmic execution algorithms’’ (which optimize modified to capture a conduit entity Trading Compliance Issue, Algorithmic order execution processes by automatic such as a non-clearing FCM in this Trading Disruption, and Algorithmic generation and submission of orders or scenario, thereby making the entity an Trading Event have analogues under quotes to one or several trading venues AT Person subject to Regulation AT? In Reg SCI’s definitions of ‘‘Systems once the investment decision is made). other words, should non-clearing FCMs compliance issue,’’ ‘‘Systems ESMA’s standards provide that pure be required to manage the risks of AT disruption,’’ and ‘‘SCI event.’’ 181 The investment decision algorithms which Person customers? How would non- term ‘‘SCI event,’’ under Reg SCI, generate orders that are only to be clearing FCMs do so if the non-clearing encompasses systems compliance issues executed by non-automated means and FCMs do not have risk controls and systems disruptions. Similar to with human intervention are excluded comparable to the risk controls specified Regulation AT, Reg SCI requires that an from ESMA testing requirements.180 in proposed § 1.82? SCI entity’s policies and procedures 7. The Commission, recognizing that c. Request for Comments must include monitoring of systems to natural person traders who manually identify potential SCI events, and that 1. Is the Commission’s definition of enter orders also have the potential to SCI entities must establish escalation ‘‘Algorithmic Trading’’ generally cause market disruptions, is considering procedures to quickly inform consistent with what algorithmic expanding the definition of Algorithmic responsible SCI personnel of potential trading is understood to mean in the Trading to encompass orders that are SCI events.182 industry? If not, please explain how it generated using algorithmic methods The term ‘‘Algorithmic Trading is inconsistent and how the definition (e.g., an algorithm generates a buy or Compliance Issue’’ is defined in should be modified. In your answer, sell signal at a particular time), but are proposed § 1.3(tttt), and means ‘‘an please explain whether the definition then manually entered into a front-end event at an AT Person that has caused system by a natural person, who any Algorithmic Trading of such entity 179 See the discussion of front-end systems supra determines all aspects of the routing of to operate in a manner that does not note 170. the orders. Such order entry would not 180 See ESMA September 2015 Final Draft Standards Report Annex 1, supra note 80 at 201– represent Algorithmic Trading under 181 See Reg SCI, supra note 40 at 72437. 02. the currently proposed definition. The 182 Id. at 72437.
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comply with the CEA or the rules and materially degrades, (1) the Algorithmic Disruption originating with an AT regulations thereunder, the rules of any Trading of such AT Person, (2) the Person, and which may negatively designated contract market to which operation of the designated contract impact the relevant designated contract such AT Person submits orders through market on which such AT Person is market, other market participants, or Algorithmic Trading, the rules of any trading or (3) the ability of other market other persons? Alternatively, should the registered futures association of which participants to trade on the designated scope of the definition be reduced, and such AT Person is a member, the AT contract market on which such AT if so, why? 183 Person’s own internal requirements, or Person is trading.’’ The Commission 11. In addition, should the reference the requirements of the AT Person’s notes that it interprets clause (3) of the to ‘‘materially degrades’’ in the clearing member, in each case as definition broadly (‘‘an event originating definition of Algorithmic Trading applicable.’’ with an AT Person that disrupts, or Disruption be expanded or otherwise The term is relevant to Regulation materially degrades . . . the ability of modified to encompass other types of AT’s pre-trade risk and other control other market participants to trade on the disruptions that may impact the requirements for AT Persons as designated contract market on which relevant designated contract market, provided in proposed § 1.80, which such AT Person is trading.’’) Among other market participants, or other requires the specified controls and other events that would meet the persons? Please provide examples of measures to be reasonably designed to Commission’s understanding of real-world events originating with AT prevent or mitigate an ‘‘Algorithmic ‘‘disrupts, or materially degrades,’’ the Persons (as defined under Regulation Trading Event.’’ The term Algorithmic Commission interprets clause (3) as AT) that resulted in disruptions that Trading Event, as discussed below, including an event originating with an may not be captured by the reference to means either an Algorithmic Trading AT Person that prohibits other market ‘‘materially degrades’’ in the definition. Compliance Issue or an Algorithmic participants from trading on the Trading Disruption. The defined term designated contract market on which 4. ‘‘Algorithmic Trading Event’’— Algorithmic Trading Compliance Issue such AT Person is trading. § 1.3(vvvv) is also relevant to Regulation AT’s The term Algorithmic Trading proposed testing requirements on AT Disruption is relevant to Regulation Regulation AT proposes a new Persons. Specifically, proposed § 1.81(c) AT’s pre-trade risk and other control definition in § 1.3(vvvv) (Algorithmic requires each AT Person to establish requirements for AT Persons and FCMs Trading Event) that means either an procedures requiring its staff to review that are clearing members for a DCO, as Algorithmic Trading Compliance Issue Algorithmic Trading systems in order to provided in proposed §§ 1.80 and or an Algorithmic Trading Disruption. detect potential Algorithmic Trading 1.82(a), respectively. The controls and As noted above, the term Algorithmic Compliance Issues. Regulation § 1.81(c) measures required by proposed § 1.80 Trading Event is used in proposed also would require a plan of internal must be reasonably designed to prevent § 1.80 requiring AT Persons to coordination and communication or mitigate an ‘‘Algorithmic Trading implement risk controls that are between compliance staff of the AT Event,’’ The term ‘‘Algorithmic Trading reasonably designed to prevent or Person and staff of the AT Person Event,’’ as discussed below, means mitigate an ‘‘Algorithmic Trading responsible for Algorithmic Trading either an ‘‘Algorithmic Trading Event.’’ The proposed definition is also designed to detect and prevent Compliance Issue’’ or an ‘‘Algorithmic used in rules under proposed § 1.81(a) Algorithmic Trading Compliance Issues. Trading Disruption.’’ The controls and that require AT Persons to conduct Finally, proposed § 40.20 requires a measures required of clearing member regular back-testing of Algorithmic DCM to establish and maintain pre-trade FCMs in proposed § 1.82(a), in contrast Trading using historical transaction, and other risk controls reasonably to those required of AT Persons in order, and message data to identify designed to prevent the occurrence of an proposed § 1.80, must be reasonably circumstances that may contribute to Algorithmic Trading Disruption (or designed to prevent or mitigate only the future Algorithmic Trading Events. The similar disruption) or an Algorithmic narrower Algorithmic Trading definition is also used in rules under Trading Compliance Issue. The Disruption. Finally, proposed § 40.20 proposed § 1.81(b) that require AT proposed definition of Algorithmic requires a designated contract market to Persons to conduct continuous real-time Trading Compliance Issue was not establish and maintain pre-trade and monitoring of Algorithmic Trading to discussed in the Concept Release. other risk controls reasonably designed identify potential Algorithmic Trading to prevent an Algorithmic Trading b. Request for Comments Events, and in rules under proposed Disruption. The proposed definition of § 1.81(d) that require AT Persons to 8. Should the definition of Algorithmic Trading Disruption was not establish training procedures for Algorithmic Trading Compliance Issue discussed in the Concept Release. communicating and escalating instances be modified to include other potential b. Request for Comments of Algorithmic Trading Events to the compliance failures involving an AT appropriate personnel. The proposed Person that may have a significant 9. Should the definition of definition was not discussed in the detrimental impact on such AT Person, Algorithmic Trading Disruption be Concept Release. the relevant DCM, or other market modified to include other types of participants? disruptive events that may originate 5. ‘‘AT Order Message’’—§ 1.3(wwww) with an AT Person? 3. ‘‘Algorithmic Trading Disruption’’— a. Description of Regulation 10. Should the definition be expanded § 1.3(uuuu) to include other types of disruptive The Commission is proposing to a. Description of Regulation downstream consequences that may define an ‘‘AT Order Message’’ (new Regulation AT proposes a defined result from an Algorithmic Trading § 1.3(wwww)) as each new order or term ‘‘Algorithmic Trading Disruption.’’ quote submitted through Algorithmic 183 The term is defined in new § 1.3(uuuu), The Commission notes that, under this Trading to a DCM by an AT Person and definition, an Algorithmic Trading Disruption may each change or deletion submitted and means ‘‘an event originating with be the result of intentional or unintentional acts by an AT Person that disrupts, or an AT Person. through Algorithmic Trading by an AT
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Person 184 with respect to such an order clearing member FCM and DCM levels IV(E) below on Registration of Certain or quote. This term is used in the serves important policy goals. Order Persons Not Otherwise Registered with proposed regulations requiring AT entry frequencies that are much larger the Commission). Such persons or Persons, clearing member FCMs and than intended could result in an entities would be AT Persons if they DCMs to implement pre-trade risk accumulation or reduction of positions engage in Algorithmic Trading on or controls and other measures with at speeds that outpace or overload subject to the rules of a DCM. See respect to AT Order Messages. The associated risk management systems. section IV(H) below for a more detailed proposed controls include a maximum Large quantities of unintended orders discussion of which persons would be AT Order Message frequency per unit could also impact the market by designated as AT Persons for purposes time, which is also known as a message increasing engine matching times or of proposed § 1.80 and other throttle requirement.185 The order submission latencies. regulations, and which persons would Commission notes that its definition of not be AT Persons, but would b. Request for Comments AT Order Message is consistent with nonetheless be subject to proposed ESMA’s definition of message in its HFT 12. Please comment on the proposed § 1.82. analysis.186 The proposed language does scope of the Commission’s definition of b. Request for Comments not impose specific requirements AT Order Message. Is the proposed concerning the design of the AT Order definition too expansive, in that it 13. The Commission notes that the Message throttle or the particular would limit the submission of messages FIA Guide recommends certain pre- thresholds that must be used. that do not have the potential to disrupt trade risk controls and contemplates The Commission believes that the market? Alternatively, is the scope three levels at which these controls can defining AT Order Message is necessary of the AT Order Message too limited, in be placed: Automated trader, broker, in proposed §§ 1.80, 1.82, 38.255(b) and that it could allow messages not related and exchange. FIA defines ‘‘automated (c), and 40.20(a)(1) to specify the type of to orders (i.e., heartbeat messages or trader’’ as any trading entity that uses an messages that should be subject to requests for mass quotes) to automated system, including hedge frequency controls. The Commission intentionally or unintentionally flood funds, buy-side firms, trading firms, and intends that required maximum message the DCM’s systems and slow down the brokers who deploy automated frequency controls would apply to new matching engine? Please explain how algorithms, and defines ‘‘broker’’ as orders, order cancellations, and changes this definition would be more FCMs, other clearing firms, executing to important order terms that have the appropriately limited or expanded. brokers and other financial 187 intermediaries that provide access to an potential to impact the market. 6. ‘‘AT Person’’—§ 1.3(xxxx) Notwithstanding the foregoing, while exchange. the definition of AT Order Message a. Description of Regulation a. Should the Commission’s definition would only apply to order-related The Concept Release did not of ‘‘AT Person’’ explicitly include or messages, the Commission recognizes specifically address whether regulations exclude any of the classes of parties that certain message types outside of the in the area of algorithmic trading should included in FIA’s term ‘‘automated definition of AT Order Message may include a defined term ‘‘AT Person.’’ trader’’? Please explain. Are there any cause market disruptions by affecting However, the Commission determined types of entities not present in this list the operation of a DCM’s electronic that such a defined term is necessary in that should be included in the ‘‘AT matching platform. A DCM has the order to identify which entities are Person’’ definition? discretion to implement controls subject to the proposed regulations b. Should Regulation AT use the term throttling excessive heartbeat 188 or addressing trading firms’ management ‘‘broker,’’ as understood by FIA? If so, administrative-type messages if it of the risks of algorithmic trading. These please explain. Is there another term believes that such controls are necessary regulations include, for example, pre- that would be more appropriate in to prevent fraud or manipulation or trade and other risk controls on the defining the scope of AT Persons? otherwise ensure the proper functioning orders initiated by the trading firm; 14. Algorithmic Trading carries of its electronic matching platform and development, testing and supervision technological and personnel costs, and market. standards; and the requirement to the Commission expects that such As discussed below, the Commission submit compliance reports regarding the trading will be performed by entities, believes that requiring maximum order new risk controls. not natural persons. Is this a reasonable message frequencies at the trading firm, The proposed definition under new assumption? For purposes of § 1.3(xxxx) lists those particular persons quantifying the number of AT Persons 184 The definition of AT Person is discussed in or entities that may be considered an AT that will be subject to the regulations, section IV.D.6. Person: Persons registered or required to do you believe that any AT Person (a 185 The regulation are proposed §§ 1.80 (for AT definition that encompasses the Persons), 1.82 (for FCMs), 38.255(b) and (c) (for be registered as FCMs, floor brokers, DCMs permitting direct electronic access), and SDs, MSPs, CPOs, CTAs, or IBs that following persons if engaged in 40.20 (for DCMs). engage in Algorithmic Trading on or Algorithmic Trading: FCMs, floor 186 Specifically, ESMA considered one message to subject to the rules of a DCM, or persons brokers, swap dealers, major swap mean ‘‘each content that needs independent participants, commodity pool operators, processing,’’ and further explained that ‘‘messages registered or required to be registered as to be counted for these purposes are each new order floor traders as defined in § 1.3(x)(3).189 commodity trading advisors, or quote, each successful change to an order or Regulation § 1.3(x)(3) is a proposed introducing brokers, and newly quote and each successful deletion of an order or revision to the Commission’s existing registered floor traders using Direct quote.’’ See ESMA Technical Advice Final Report, supra note 78 at 320. definition of floor trader, and is Electronic Access) will be a natural 187 Order terms that have the potential to impact discussed in detail below (see section person or a sole proprietorship with no the market might include, but are not limited to, employees other than the sole changes to price, quantity, and order type. 189 As a result, any person who is required to be proprietor? 188 By ‘‘heartbeat’’ messages, the Commission registered as one of these registration categories and 15. The Commission recognizes that a means signals sent at regular intervals to ensure that who is engaged in Algorithmic Trading will be CPO could use Algorithmic Trading to the connection between the trading firm and the subject to all requirements of an AT Person under DCM’s electronic matching platform is in a normal this regulation, regardless of whether such person enter orders on behalf of a commodity state. has actually registered with the Commission. pool which it operates. In these
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circumstances, should the Commission FCM’s infrastructure to route orders, the term ‘‘direct market access’’ as it is consider the CPO that operates the and ‘‘Indirect ATS Participants,’’ used in Commission-regulated markets. commodity pool or the underlying characterized by use of an ATS that The Commission determined to employ commodity pool itself as ‘‘engaged in routes orders through an FCM’s the term Direct Electronic Access, as Algorithmic Trading’’ pursuant to the infrastructure.193 FIA stated that all opposed to direct market access, in the definition of AT Person? 190 types of market access create risks; interest of regulatory consistency. The 16. The Commission notes that therefore, the same principles should term ‘‘Direct Electronic Access’’ by FCM pursuant to § 1.57(b) of the apply to all types of market access.194 customers is used in existing Regulation Commission’s regulations IBs may not FIA also explained that since market 38.607, where it is described as carry proprietary accounts. However, participants may now access a DCM ‘‘allowing customers of futures certain customer relationships may directly without passing through an commission merchants to enter orders cause an IB to fall under the definition FCM’s infrastructure, ‘‘the only directly into a designated contract of AT Person. The Commission requests consistent opportunity for risk control is market’s trade matching system for comment on the types of IB customer at the DCM and the market execution.’’ 201 relationships that could cause IBs to fall participant.’’ 195 The Commission proposes that the under the definition of AT Persons. Additional commenters made similar term ‘‘Direct Electronic Access’’ means What activities are currently being points. CME stated that all entities— an arrangement where a person conducted by IBs that could cause an IB whether they have direct market access electronically transmits an order to a to be considered engaging in or not—must ‘‘share in the effort to DCM, without the order first being Algorithmic Trading on or subject to the preserve market integrity.’’ 196 ICE routed through a separate person who is rules of a DCM and would therefore explained that it treats every order and a member of a DCO to which the DCM cause the IB to be considered an AT trade equally regardless of connection submits transactions for clearing. By Person? method or participant type.197 KCG ‘‘routed,’’ the Commission means the 17. Should the definition of AT Holdings, Inc. (‘‘KCG’’) commented that process by which an order physically Person be limited to persons using DEA? ‘‘any pre-trade risk control requirements goes from a customer to a designated 202 In other words, should the definition [must] be applied so as to not permit contract market. As indicated below, capture persons registered or required to market participants to avoid their the Commission requests comment on be registered as FCMs, floor brokers, application based on the manner in its definition of DEA and whether there SDs, MSPs, CPOs, CTAs, or IBs that which the participant accesses the are particular scenarios where it would 198 engage in Algorithmic Trading on or market.’’ VFL commented that ‘‘the be unclear whether a customer is subject to the rules of a DCM, or persons privilege of direct exchange access trading through DEA. registered or required to be registered as should bring with it the obligation to DEA is relevant to several of the proposed regulations. As explained floor traders as defined in § 1.3(x)(3), in deploy a system designed to protect the 199 below, DEA is used as a filter to help each case if such persons are using integrity of the marketplace.’’ VFL define a new category of market DEA? The Commission requests explained that all exchange members participants required to register as floor comment on the costs and benefits of should be required to employ pre- and traders and be subject to the this approach, including comments on post-trade risk controls, and all non- requirements of Regulation AT (see whether this more limited definition of members should be required to access proposed § 1.3(x)(3), discussed below). AT Persons would adequately mitigate exchanges only through a member’s risk control layer.200 In addition, the term DEA is relevant to the risks associated with algorithmic revised § 38.255, which would require trading. b. Description of Regulation DCMs to have in place systems and 7. ‘‘Direct Electronic Access’’— Consistent with the comments controls reasonably designed to § 1.3(yyyy) discussed above, the Commission facilitate FCM’s management of the risks proposes a new § 1.3(yyyy) that defines that may arise from Algorithmic a. Concept Release Comments ‘‘Direct Electronic Access’’ (‘‘DEA’’) Trading, and proposed § 1.82, which The Concept Release asked whether and, through other proposed rules, requires FCMs to implement such DCM- there are specific risk controls that requires that AT Order Messages provided controls for DEA orders. This should apply in the context of direct originating with an AT Person and approach recognizes that when DEA is market access, and whether the submitted by AT Persons through such used, clearing FCMs do not have the implementation of risk controls should DEA be subjected to the same types of ability to apply market risk controls to be modified in the context of direct pre-trade and other risk controls that orders they receive for clearing before market access.191 such orders would pass through if they these orders reach the DCM. This Several commenters agreed that any flowed through the infrastructure of an approach of enabling clearing FCMs to potential risk controls should also apply FCM before entering the market. implement DCM-based controls is to those with direct access to the The Commission notes that the market.192 For example, FIA described Concept Release used the term ‘‘direct 201 In addition, in the context of foreign boards of market participants’ access to markets as market access,’’ or ‘‘DMA,’’ and such trade, Section 4(b)(1)(A) of the CEA defines ‘‘direct term is commonly used in industry. The access’’ as ‘‘an explicit grant of authority by a consisting of two broad categories: foreign board of trade to an identified member or ‘‘Direct ATS Participants,’’ Commission intends that ‘‘Direct other participant located in the United States to characterized by use of an ATS directly Electronic Access’’ be consistent with enter trades directly into the trade matching system connected to a DCM without using an of the foreign board of trade.’’ 193 FIA at 8–9. 202 The Commission notes that the operative 194 element of DEA is submission of an order to a DCM 190 The Commission notes that CPOs are separate FIA at 12, 15. 195 FIA at 8–9; 61–62. without the order first being routed through a legal entities from the underlying commodity pools separate person who is a member of a DCO to which 196 CME at 7–8. which they operate. the DCM submits transactions for clearing. Other 197 191 See section II(B) above for a discussion of ICE at 2. factors, such as co-location, or use of FCM-provided direct market access in the Concept Release. 198 KCG at 2. software, are not on their own determinative of 192 FIA at 12, 15; KCG at 2; CME at 7–8; VFL at 199 VFL at 2. whether a customer is submitting orders through 2; AIMA at 1. 200 See id. DEA.
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similar to how the Commission please explain why and how the Commission’s oversight capabilities and addresses financial risk management by definition should be revised. allow for wider implementation of some FCMs, as reflected in existing DCM 19. Should the Commission define or all of the pre-trade controls and risk regulation § 38.607. ‘‘routed’’ in its definition of DEA? If so, management tools discussed in this The Commission’s proposed how? Are there specific examples of NPRM and currently used in the market definition of DEA differs from SEC, trading or routing arrangements where it today. In particular, registration will ESMA and IOSCO terminology. The would be unclear whether trading was help ensure that all market participants SEC characterizes ‘‘direct market performed through DEA? that actively trade on Commission- access’’ as an arrangement whereby a 20. Should the Commission use the regulated markets implement broker-dealer permits customers to enter term ‘‘direct market access’’ instead of appropriate controls, including those orders into a trading center but such DEA, and if so why? trading firms that access the market orders flow through the broker-dealer’s 21. Should the Commission define directly and use algorithmic trading trading systems prior to reaching the sub-categories of DEA, such as systems that could malfunction and trading center.203 ‘‘Sponsored access’’ sponsored market access? create systemic risk to all market generally refers to an arrangement 22. The Commission’s proposed participants. whereby a broker-dealer permits definition of DEA in § 1.3(yyyy) differs In the Concept Release, the customers to enter orders into a trading from definitions of direct electronic Commission requested specific center that bypass the broker-dealer’s access in § 38.607 and direct access for comment on whether firms operating trading system and are routed directly to FBOTs in § 48.2(c). The Commission ATSs to trade solely for their own a trading center, in some cases believes that the more technical account would meet the definition of supported by a service bureau or other definition in proposed 1.3(yyyy) is ‘‘floor trader’’ in Section 1a(23) of the third-party technology provider.204 appropriate for Regulation AT. The Act, and whether registering such firms ‘‘Unfiltered’’ or ‘‘naked’’ access is a Commission solicits comment regarding as floor traders would effectuate the subset of sponsored access, where pre- proposed 1.3(yyyy), whether all purposes of the Act. The ‘‘floor trader’’ trade filters or controls are not applied definitions of ‘‘direct’’ access should be definition in CEA 1a(23) states that, in to orders before such orders are harmonized across the Commission’s general, the term ‘‘floor trader’’ means submitted to an exchange or ATS.205 rules, and if so how. Do you believe that any person who, in or surrounding any Similarly, ESMA and IOSCO refer to two definitions would create confusion pit, ring, post or other place provided by ‘‘direct electronic access’’ as including with respect to Commission a contract market for the meeting of direct market access and sponsored requirements as to direct electronic persons similarly engaged, purchases, or access; ‘‘direct market access,’’ as an access? With respect to §§ 1.80, 1.82 and sells solely for such person’s own arrangement where a member of a 38.255(b) and (c) provisions imposing account.207 Given the evolution of trading venue provides a connecting risk control requirements on AT futures trading over recent years, system to a person to transmit orders; Persons, FCM and DCMs, should the electronic trading platforms have now and ‘‘sponsored access’’ as an Commission use the existing definition become a primary ‘‘other place’’ in arrangement where such an of direct electronic access provided in which proprietary market making and infrastructure is not used by a person.206 § 38.607? trading generally, takes place. While the Commission’s proposed Seven commenters (including FIA, E. Registration of Certain Persons Not terminology differs from that used by CME, MFA and the Chicago Fed) Otherwise Registered With other regulatory organizations, the opposed registration for reasons Commission—§ 1.3(x) Commission believes that its defined including: DCMs already use Operator term DEA is consistent with existing The Commission proposes to amend IDs; the DCM audit trail already satisfies Commission regulations. References to the definition of ‘‘Floor trader’’ in the goals of registration; implementing ‘‘DEA’’ and ‘‘Direct Electronic Access’’ Commission regulation 1.3(x), in order the Commission’s final rule on throughout this preamble shall refer to to facilitate the registration of ownership and control reporting the term proposed in § 1.3(yyyy). proprietary traders using DEA for (‘‘OCR’’) will provide additional Algorithmic Trading on a DCM. Such information on trading identities; and c. Request for Comments persons would be required to register as the Commission already has access to 18. Please explain whether the Floor traders pursuant to proposed trade data (i.e., Regulation 1.40 and part Commission’s proposed definition of § 1.3(x)(3), assuming that they were not 38’s mandate that DCMs require market DEA will encompass all types of access already registered or required to register participants to submit to a DCM’s commonly understood in Commission- with the Commission in another regulated markets as ‘‘direct market capacity. The remainder of this section 207 CEA Section 1a(23)(A) provides that the term access.’’ In light of the proposed presents Concept Release comments on ‘‘floor trader,’’ in general, means any person (i) who, in or surrounding any pit, ring, post, or other regulations concerning pre-trade and this topic, a description of the proposed place provided by a contract market for the meeting other risk controls and standards for the regulation, a discussion of the policy of persons similarly engaged, purchases, or sells development, testing and supervision of justification for the proposal, and a solely for such person’s own account (I) any algorithmic trading systems, do you request for comments on the proposal. commodity for future delivery, security futures product, or swap; or (II) any commodity option believe that the proposed definition of 1. Concept Release Comments authorized under section 4c; or (ii) who is Direct Electronic Access is too limited registered with the Commission as a floor trader. A (or, alternatively, too expansive)? If so, The Concept Release requested further definition of the term ‘‘floor trader’’ is comment on whether all firms operating provided for by Section 1a(23)(B), which states that the Commission, by rule or regulation, may include 203 ATSs to trade solely for their own See Risk Management Controls for Brokers or within, or exclude from, the term ‘‘floor trader’’ any Dealers With Market Access, 75 FR 69792, 69793 account should be required to register person in or surrounding any pit, ring, post, or (Nov. 15, 2010). with the Commission. As discussed in other place provided by a contract market for the 204 See id. greater detail below, a registration meeting of persons similarly engaged who trades 205 See id. requirement for firms operating ATSs solely for such person’s own account if the 206 ESMA Technical Advice Final Report supra Commission determines that the rule or regulation note 78 at 340; IOSCO 2015 Consultation Report, and not otherwise registered with the will effectuate the purposes of the Act. 7 U.S.C. supra note 106 at 20 n.56. Commission would enhance the 1a(23).
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jurisdiction).208 In response to the sells futures or swaps solely for such flexibility in this area, the definition of Concept Release question seeking person’s own account in a place floor trader in Rule 1.3(x) states that it information concerning whether firms provided by a contract market for the shall include any person required to operating ATSs would meet the meeting of persons similarly engaged, register as [a floor trader] by rule or definition of ‘‘floor trader’’ under the where such place is accessed by such regulation of the Commission pertaining CEA, CME and Gelber stated that the person in whole or in part through DEA to the operation of an electronic trading term floor trader is an anachronism that (as defined in proposed § 1.3(yyyy)) for system.’’ 220 is irrelevant to automated trading Algorithmic Trading, and such person is On July 21, 2010, President Obama environments.209 not otherwise registered with the signed the Dodd-Frank Wall Street In contrast, Better Markets, AFR, and Commission as a futures commission Reform and Consumer Protection Act TCL supported ATS registration.210 AFR merchant, swap dealer, floor broker, (‘‘Dodd-Frank Act’’).221 Title VII of the stated that ‘‘[t]he enhancement of major swap participant, commodity Dodd-Frank Act amended the CEA investigative authority is extraordinarily pool operator, commodity trading definition of ‘‘floor trader.’’ 222 This important given that the Commission advisor, or introducing broker. The amendment maintained the language staff would often need to involve itself Commission notes, however, that from the 1992 Act defining a floor trader in the workings of the ATSs to persons otherwise registered or required as a person ‘‘who, in or surrounding any anticipate problems and to detect and to register with the Commission in pit, ring, post, or other place provided investigate problems that have occurred. another capacity (e.g., as a swap dealer) by a contract market . . . for the HFT firms should have the highest would not be exempt from such meeting of persons similarly engaged, priority.’’ 211 registration simply by registering as a purchases, or sells solely for such Finally, AIMA and VFL supported Floor trader pursuant to proposed person’s own account’’ any commodity registration for participants with direct § 1.3(x)(3). for future delivery. However, the market access.212 VFL commented that CEA 1a(23) states that the term ‘‘floor amended definition also applied to if an exchange provides a participant trader’’ means any person who, in or trading in swaps, and provided that the the ability to connect directly, then that surrounding any pit, ring, post or other definition includes ‘‘anyone who is participant enjoys all of the rights of a place provided by a contract market for registered with the Commission as a member and should be regulated at the the meeting of persons similarly floor trader.’’ Finally, the amendment federal and exchange level.213 Finally, engaged, purchases, or sells solely for allows for the Commission by regulation while Chicago Fed opposed a such person’s own account.215 The term to include within the definition or requirement that ATSs register with the was added to the Act in the Futures exclude from the definition anyone who Commission, it suggested that Trading Practice Act of 1992 (the ‘‘1992 meets the statutory definition. participants with direct market access Act’’).216 The 1992 Act also amended Subsequently, the Commission must register with the exchange.214 Section 4e of the Act to require amended the definition of floor trader in 2. Description of Regulation registration of floor traders, and tasked Rule 1.3(x) to precisely mirror the the Commission with issuing rules to language contained in section 1a(23)(A) The Commission proposes to require implement the requirement within 180 of the Act.223 the registration of proprietary traders days of the date of enactment. 3. Policy Discussion using DEA for Algorithmic Trading on In 1993, pursuant to the 1992 Act, the a DCM. As discussed in greater detail in Commission finalized rules regarding In order to enhance the Commission’s section 3 below, registration of entities registration of floor traders.217 The oversight capabilities as they relate to with DEA as floor traders would mean Commission established a definition for entities with DEA and allow for wider that such firms must implement the pre- the term ‘‘floor trader’’ in Regulation implementation of some or all of the trade controls and risk management 1.3(x). The Commission noted in the pre-trade controls and risk management tools that Regulation AT requires of AT preamble to that final rule that ‘‘certain tools discussed in this NPRM and Persons. If the Commission were to only persons trading through electronic currently used in the market today, the require those firms that are already systems come within the [floor trader] Commission proposes amending registered with the Commission to definition.’’ 218 Given the prevalence of Regulation 1.3(x) to expressly include implement such controls, some market pit trading in 1992 and the short time such firms within the definition of participants conducting Algorithmic frame to implement floor trader ‘‘floor trader.’’ The Commission Trading on Commission-regulated registration, the Commission emphasizes that the ‘‘floor trader’’ markets would not be subject to the determined to require registration for definition is not being expanded to Commission’s risk control requirements. floor traders operating ‘‘on the trading capture all proprietary traders engaged In order to achieve registration of floor of an exchange’’ and ‘‘to defer in Algorithmic Trading; rather, the proprietary traders using DEA for consideration of the application of floor revised floor trader definition is limited Algorithmic Trading on a DCM, the trader registration requirements to to firms using DEA to engage in Commission proposes amending the persons using electronic trading systems Algorithmic Trading. Historically, definition of ‘‘Floor trader’’ in and to reconsider the subject at a later pursuant to the Commission’s preamble Commission regulation 1.3(x). The date.’’ 219 The Commission expressly discussion in the Registration of Floor amended definition would expressly stated that, ‘‘[i]n order to preserve Traders Rule and the original include any person who purchases or formulation of Regulation 1.3(x) 215 See supra note 207. discussed above, the Commission has 208 FIA at 43–46; CME at 32–34; Gelber at 22–24; 216 Futures Trading Practices Act of 1992, Pub. L. KCG at 18; MFA at 3; AIMA at 2, 24; Chicago Fed 102–546, 106 Stat. 3590, 3625–28 (1992). 220 Id. at 3. 217 Registration of Floor Traders; Mandatory 221 Dodd-Frank Wall Street Reform and Consumer 209 CME at 34; Gelber at 22–24. Ethics Training for Registrants; Suspension of Protection Act, Pub. L. 111–203, 124 Stat. 1376 210 Better Markets at 13; AFR at 8–9; TCL at 17. Registrants Charged with Felonies, 58 FR 19575 (2010). 211 AFR at 8–9. (1993) (hereinafter ‘‘Registration of Floor Traders 222 See supra note 207. 212 AIMA at 24; VFL at 3. Rule’’). 223 See Final Rule, Adaptation of Regulations to 213 VFL at 3. 218 Id. at 19576. Incorporate Swaps, 77 FR 66288, 66317 (Nov. 2, 214 Chicago Fed at 4. 219 Id. 2012).
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only required registration of floor firm would be considered an AT Person F. RFA Standards for Automated traders conducting business on the under clause (1) of the proposed Trading and Algorithmic Trading physical trading floor of an exchange. definition of AT Person, and would not Systems—§ 170.19 However, the Act contemplates floor be required to also register as a floor To fully effectuate the design and traders in ‘‘other places’’ besides the trader. The proposed requirement under intent of Regulation AT, the trading floor, and the Commission has revised § 1.3(x) is intended to require Commission is proposing a new previously noted that the Act’s firms not otherwise registered to become § 170.19 requiring RFAs to adopt certain definition applies to persons using registered with the Commission. Given membership rules—as deemed 224 electronic trading systems. that a technological malfunction in a appropriate by the RFA—relevant to Registration of entities with DEA as single trading firm’s systems can algorithmic trading for each category of floor traders would enhance the pre- significantly impact other markets and member in the RFA. RFAs would have trade controls and risk management market participants, the proposed discretion as to the rules they issue and tools discussed elsewhere in this NPRM registration requirement is critical to the categories of members to which their by making such entities subject to the ensuring that all such firms are subject rules apply. Further, to ensure that all various regulations governing AT to appropriate risk control, testing, and AT Persons are subject to rules of an Persons under the NPRM. For example, other requirements of Regulation AT. RFA regarding algorithmic trading, the the pre-trade risk controls listed in 4. Request for Comments Commission is also proposing a new proposed § 1.80—maximum AT Order § 170.18 requiring AT Persons to Message frequencies per unit time, become members of at least one RFA. maximum execution frequencies per 23. Should firms operating Algorithmic Trading systems in CFTC- Proposed § 170.18 is discussed in detail unit time, order price parameters and in section G below. Taken together, maximum order size limits—must be regulated markets, but not otherwise registered with the Commission, be §§ 170.18 and 170.19 would allow RFAs established and used by all AT Persons. to supplement elements of Regulation If the Commission were to only require required to register with the CFTC? If not, what alternatives are available to AT as markets and trading technologies those firms that are already registered evolve over time, and allow frontline with the Commission to implement fully effectuate the purpose and design of Regulation AT? regulators to drive future incremental such controls, it would be ignoring a enhancements to the Commission’s 24. Should all firms deploying significant number of market basic regulatory structure for Algorithmic Trading systems be participants that actively trade on algorithmic trading by AT Persons. Commission-regulated markets, each of required to register with the which has ATSs that could malfunction Commission? Are there additional 1. Policy Discussion and create systemic risk to all market characteristics of AT Persons that In developing Regulation AT, the participants. Registration as floor traders should be taken into consideration for Commission sought to balance would also require entities using DEA, registration purposes? For example, meaningful regulatory baselines against as AT Persons, to maintain certain should the Commission limit the need for standards sufficiently books and records, thus enhancing the registration to trading firms meeting flexible to keep pace with changing Commission’s ability to gather certain trading volume, order or industry practices and technologies. The information. message levels? In other words, should Commission’s determination to balance The Commission estimates that there there be a minimum volume, order or both interests is particularly reflected in are approximately one hundred message test in order to meet the its treatment of AT Persons and in proprietary trading firms engaged in definition of ‘‘floor trader,’’ or otherwise proposed §§ 1.80, 1.81, and 1.82, which Algorithmic Trading in Commission- to meet the definition of AT Person? If address: (1) Pre-trade risk controls and regulated markets. Some of these firms so, what should be measured and what other measures for ATSs; (2) standards may already be registered with the specific thresholds should be used? for the development, testing, Commission in some capacity. In the 25. In the alternative, should the monitoring, and compliance of ATSs; event that one of these firms engaged in Commission broaden the registration (3) designation and training of Algorithmic Trading is already requirements in proposed § 1.3(x)(3)(ii) algorithmic trading staff; and (4) registered with the Commission, the so that all persons trading on a contract clearing FCM risk management. A number of the proposed sections and 224 market through DEA are required to Registration of Floor Traders Rule, 58 FR at subsections in these rules include well- 19576. Further, the Commission notes that it is not register, instead of only those who are the first to observe the degree to which the tangible engaged in Algorithmic Trading? established risk control and other technological infrastructure provided by DCMs for practices among market participants. 26. Please supply any information or trading, including for example electronic trade The proposed pre-trade risk controls in matching platforms or co-location or proximity data that would help the Commission in § 1.80(a), for example, are generally hosting facilities, can constitute a ‘‘place.’’ Futures deciding whether firms may or may not limited to risk controls identified as best Industry magazine, a publication of FIA, noted the meet the definition of ‘‘floor trader’’ in following in a 2007 article describing co-location practices by FIA in 2015, and the text and proximity hosting: ‘‘[t]he pit is back. Just a few Section 1a(23) of the Act. of the rules is intentionally flexible so years since the concept of a commodity exchange 27. Do you believe that the that AT Persons may determine for as a tangible ‘place’ had begun to seem hopelessly old-fashioned, many traders now want to be at the registration of such firms as ‘‘floor themselves how required pre-trade risk heart of the action once more. At Eurex, customers traders’’ would help effectuate the controls and other measures should be that until recently were scattered all over the globe purposes of the CEA to deter and detect designed and calibrated. Other proposed are moving closer to the exchange, ‘forming a price manipulation or any other rules addressing AT Persons offer physical community like a pit again,’ says Matthias Kluber, head of networks and infrastructure disruptions to market integrity? If you flexibility in that they require AT operations at Deutsche Bo¨rse Systems, which builds believe that registration of such firms Persons to implement specific programs, and operates the Eurex trading and clearing will not help effectuate the purposes of but provide latitude regarding how such systems.’’ See Bennet Voyles, Co-Location Catches the CEA, or that the same purposes can programs are to be designed. Thus, On, Futures Industry (July/Aug. 2007) at 28, available at: https://secure.fia.org/downloads/Jul- be achieved by other means, please proposed § 1.81(a)(1)(vi) requires AT Aug_Colocatiion.pdf. explain. Persons to maintain a source code
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repository to manage source code rules and can supplement Commission trading, proposed § 170.19 would also access, persistence, copies of production rules as appropriate. RFAs can also require RFAs to consider how such code, and changes to production code, operate examination programs to rules could help prevent fraudulent and but does not impose a prescriptive monitor members’ compliance with manipulative acts, protect the public standard for how the source code association rules, and can sanction interest, and perfect the mechanisms of repository must be structured or members for non-compliance. The trading on DCMs (prong 2 above). The maintained. Similarly, proposed Commission believes that RFAs are Commission believes that these are §§ 1.81(a)(1)(iii) and (a)(1)(iv) require well-positioned to address rules in areas important elements in the requirements regular back testing of Algorithmic experiencing rapid evolution in market proposed to be codified in § 170.19. Trading and stress testing of ATSs, but practices and technologies, including RFAs should be cognizant, for example, impose no specific testing protocols and particularly §§ 1.80, 1.81, and 1.82. of the overarching requirement in do not specify a minimum testing Proposed § 170.19 is described below. proposed § 1.80 that AT Persons take frequency. The Commission also notes steps reasonably designed to prevent an 2. Description of Regulation the existence of numerous other pre and Algorithmic Trading Event, defined in post-trade risk controls and measures Proposed § 170.19 would require proposed § 1.3(vvvv) to include both available to AT Persons but not RFAs to (1) establish and maintain a Algorithmic Trading Compliance Issues incorporated as requirements in program (2) for the prevention of and Algorithmic Trading Disruptions. Regulation AT. Some, such as drop- fraudulent and manipulative acts and Algorithmic Trading Compliance Issues copy reporting, were raised in the practices, the protection of the public include events at an AT Person that Concept Release, and others were interest, and perfecting the mechanisms cause its algorithmic trading to operate addressed in responsive public of trading on DCMs (3) by adopting in a manner that does not comply with comments. rules for each category of member, as the CEA, Commission regulations, or the The Commission has determined to deemed appropriate by the RFA, rules of a DCM. Algorithmic Trading focus in Regulation AT on areas where requiring: (i) Pre-trade risk controls and Disruptions include events originating the safety and soundness of derivatives other measures for ATSs (§ 170.19(a)(1)); with an AT Person that disrupt or markets would benefit from a core set of (ii) standards for the development, materially degrade the operation of a pre-trade risk controls and other testing, monitoring, and compliance of DCM or the ability of other market measures applicable to all AT Persons. ATSs (§ 170.19(a)(2)); (iii) designation participants to trade on the DCM. In As noted above, the Commission and training of algorithmic trading staff short, an AT Person’s algorithmic believes that effective rules for AT (§ 170.19(a)(3)); and (iv) operational risk trading should neither disrupt the Persons are best structured as clear management standards for clearing market nor violate law. RFAs should regulatory requirements combined with member FCMs with respect to customer consider these factors when determining embedded flexibility to adapt to orders originating with ATSs whether and what further rules they changing markets and technologies. (§ 170.19(a)(4)). With respect to rules may promulgate over time pursuant to Accordingly, the Commission’s (prong 3 above), the areas RFAs must § 170.19. proposed rules in §§ 1.80, 1.81, and 1.82 address pursuant to proposed § 170.19 Proposed § 170.19 would require an address only a subset of potentially are similar to those that AT Persons and RFA to ‘‘establish and maintain a responsive risk controls and other clearing FCMs must address in program’’ (prong 1 above) for the measures. Each AT Person shall also proposed §§ 1.80, 1.81, and 1.82. RFAs, prevention of fraud and manipulation, determine what additional safeguards however, would be required in § 170.19 protection of the public interest, and would be reasonably designed to to consider whether additional rules or perfecting the mechanisms of trading on prevent an Algorithmic Trading Event granularity are appropriate as baseline DCMs. The Commission anticipates that given its trading strategies, technologies, SRO requirements and binding an RFA would include in its routine or the markets in which it participates. membership rules for one or more examinations of members pursuant to The proposed rules also provide a categories of RFA members.226 The such program a verification that such degree of flexibility regarding the Commission notes that § 170.19 would members are complying with any rules design, implementation, or calibration require that RFAs consider the need for that the RFA may determine to issue pursuant to proposed § 170.19. The of those pre-trade risk control or other additional rules, and issue such rules Commission intends for proposed measures that are specifically required where appropriate. However, § 170.19 § 170.19 to provide RFAs with a wide in §§ 1.80, 1.81, and 1.82, again would not require RFAs to issue any measure of latitude in both the rules allowing each AT Person to adapt the rules pursuant to § 170.19 where the they may elect to adopt and in the rules to its own trading and technology. RFA believes they are unnecessary. members to whom they apply such Given the structure of proposed Rather, the proposed regulation leaves rules. It is the Commission’s further §§ 1.80, 1.81, and 1.82 as regulatory discretion to the RFAs to determine intent that RFAs consider the need for baselines with a degree of embedded what rules would prevent fraudulent rules pursuant to proposed § 170.19, flexibility, the Commission has and manipulative acts and practices, and that they adopt such rules where determined to provide RFAs with a protect the public interest, and perfect the RFA considers it necessary. discretionary role in augmenting the the mechanisms of trading on DCMs. However, the determination as to both requirements of Regulation AT for AT When evaluating potential the necessity of rules and their Persons.225 RFAs serve a vital regulatory membership rules regarding algorithmic application to specific categories of function as frontline regulators of their 226 members remains with the RFA. members, which would include all AT In this regard, the Commission distinguishes Finally, the Commission notes that Persons pursuant to proposed § 170.18. an RFA’s obligation to establish memberships rules—i.e., mandatory requirements for all persons while proposed § 170.19 would require RFAs promulgate binding membership in the relevant membership category—from steps RFAs to issue rules as they deem that a single AT Person or clearing member FCM appropriate, RFAs would remain free to 225 The Commission notes an exception in may voluntary take to augment its pre-trade risk proposed § 1.83, which requires the submission of controls or other measures based on its unique take other steps when potential rules annual reports from AT Persons and their clearing trading or technology and its obligations pursuant regarding algorithmic trading are not yet FCMs to DCMs. to proposed §§ 1.80, 1.81, and 1.82. ripe. As both membership and self-
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regulatory organizations, RFAs are will include examination and members. In particular, floor brokers uniquely positioned to gain insights enforcement components. Is this the and floor traders, who have historically from members through examination appropriate approach? been overseen by the DCMs on which programs and coordination with other 31. The Commission requests they operate, are not required by self-regulatory or standard-setting comment on whether proposed § 170.19 §§ 170.15, 170.16, or 170.17 to become bodies. In addition to rulemaking when may result in duplicative obligations on members of an RFA. In order to ensure necessary, RFAs could leverage these AT Persons or any other market that all AT Persons will be subject to resources to issue guidance or best participant. In particular, please any rules promulgated by an RFA practices, hold periodic discussions comment on potential duplication, if pursuant to proposed § 170.19, with relevant stakeholders, and any, between algorithmic trading including floor brokers and floor otherwise provide leadership as risks, requirements that an RFA may impose traders, the Commission is proposing a risk control technologies, market upon its members pursuant to § 170.19, new § 170.18. This provision would practices evolve over time. The and similar requirements that may be require that all AT Persons that are not Commission also affirms that proposed imposed by a DCM in its role as a self- otherwise required to be a member of a § 170.19 is not intended to create regulatory organization. What RFA pursuant to §§ 170.15, 170.16, or conflicting obligations between an amendments would be appropriate in 170.17 be a member of an RFA. RFA’s role in establishing algorithmic any final rules arising from this NPRM 2. Description of Regulation trading standards for its members and a to clarify that unintended overlap DCM’s role as a self-regulatory between the role of an RFA and a DCM The Commission is proposing a new organization. Accordingly, the in this context? § 170.18 to require all Commission requirements of proposed § 170.19 registrants that are AT Persons to be G. AT Persons Must Become Members of specifically address pre-trade risk members of an RFA. The membership an RFA—§ 170.18 controls for ATSs, standards for the requirements proposed by § 170.18 will designing, testing, monitoring, and 1. Policy Discussion ensure that all AT Persons would be subject to membership rules supervision of ATSs, and the An RFA is an association of persons promulgated by an RFA, including those designation and training of algorithmic registered with the Commission as such membership rules promulgated trading staff. The Commission believes pursuant to section 17 of the CEA.227 pursuant to proposed § 170.19 to that these areas are appropriate for Subject to Commission oversight, RFAs address algorithmic trading. potential future standards issued by an serve a vital self-regulatory role by Specifically, proposed § 170.18 requires RFA in an evolving technological and functioning as frontline regulators of that each registrant that is an AT Person market environment, and that such their members, including in large that is not otherwise required to be a standards will be best implemented as measure most Commission registrants member of an RFA pursuant to uniform requirements of an RFA for its who will qualify as AT Persons relevant members as opposed to §§ 170.15, 170.16, or 170.17 must pursuant to proposed § 1.3(xxxx).228 potentially varying approaches by become and remain a member of at least Entities that are not members of an RFA, individual DCMs. one RFA that provides for the however, are not bound by the rules of membership of such registrant, unless 3. Request for Comments the RFA.229 As such, the Commission no such futures association is so previously adopted §§ 170.15 and 28. The Commission requests registered. comment on the scope of 170.16 to require each registered FCM, responsibilities assigned to RFAs under and each registered SD and MSP, 3. Request for Comments proposed § 170.19. Should RFAs be respectively, to be an RFA member, 32. The Commission requests responsible for fewer or additional areas subject to an exception for certain notice comment on whether the regulatory regarding AT Persons, ATSs, and registered securities brokers or framework established by Regulation algorithmic trading than specified in dealers.230 The Commission also AT would require all AT Persons to be proposed § 170.19, prongs (1), (2), (3), recently adopted § 170.17 to require that members of an RFA in order to be and (4) (§ 170.19(a)(1)–(a)(4))? all registered IBs and CPOs, and most effective. Alternatively, could the goals Regulation 170.19 requires RFAs to registered CTAs, to become RFA of Regulation AT be realized without consider the need for rules in the areas members.231 requiring all AT Persons to be members listed in prongs (1)–(4) (§ 170.19(a)(1)– Together §§ 170.15, 170.16, and of an RFA? (a)(4)). Should RFAs be responsible for 170.17 require many, but not all, H. Pre-Trade and Other Risk Controls considering whether to adopt rules in Commission registrants who may be for AT Persons—§ 1.80 fewer or additional areas? considered AT Persons pursuant to 29. The Commission requests proposed § 1.3(xxxx) to become RFA The Commission proposes as a comment on the latitude afforded to fundamental element of Regulation AT RFAs in proposed § 170.19. Should 227 7 U.S.C. 21. a new § 1.80 of its regulations, requiring 228 RFAs have more or less latitude to issue RFA members also remain subject to oversight AT Persons to implement pre-trade risk by the Commission. rules than specified in proposed 229 Those Commission registrants that are not controls, order cancellation systems, § 170.19? RFA members are nevertheless subject to the rules and other measures reasonably designed 30. The Commission requests and regulations of the Commission. See 7 U.S.C to prevent an Algorithmic Trading comment on RFAs’ obligation in 21(e), which specifies that any person registered Event. Such controls include, but are under the CEA, who is not an RFA member, ‘‘in proposed § 170.19 to establish and addition to the other requirements and obligations not limited to, maximum AT Order maintain a program for the prevention of [the CEA] and the regulations thereunder shall Message frequency and maximum of fraud and manipulation, protection of be subject to such other rules and regulations as the execution frequency per unit time; order the public interest, and perfecting the Commission may find necessary to protect the price parameters and maximum order public interest and promote just and equitable mechanisms of trading, including principles of trade.’’ size limits; order cancellation and through rules it may determine to adopt 230 17 CFR 170.15 and 170.16. Algorithmic Trading disconnect pursuant to § 170.19. The proposed 231 See Membership in a Registered Futures systems; and connectivity monitoring rules anticipate that an RFA’s program Association, 80 FR 55022 (Sept. 14, 2015). systems for AT Persons with DEA. In
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addition, proposed § 1.80 requires AT members and found that almost all firms b. Maximum Order Sizes Persons to: Notify applicable clearing that responded used message and Commenters indicated that maximum 236 member FCMs and DCMs that the AT execution throttles. Commenters order size controls are already used in Person will engage in Algorithmic noted certain benefits to messaging and the industry. According to FIA PTG’s Trading; and calibrate or otherwise execution throttles, including that they survey, all responding trading firms use implement DCM-provided self-trade may mitigate the risk and impact of maximum order size limits.246 AIMA prevention tools.232 It would also disruptive events, alert market indicated that many market participants require AT Persons to periodically participants to potential problems with use maximum order sizes limits,247 and review the sufficiency and effectiveness their automated order entry systems, Gelber, a trading firm, stated that it uses of their compliance with § 1.80. The and help ensure a level playing field for this risk control.248 KCG, Gelber and remainder of this section presents 237 all market participants. Commenters 3Red commented that market Concept Release comments on this also noted that message or execution participants should use exchange- topic, a description of the proposed limits have potential negative effects provided maximum order size regulation, a discussion of the policy because they can block risk-reducing controls.249 justification for the proposal, and a orders.238 With respect to implementing request for comments on the proposal. Commenters addressing this topic did maximum order size limits, FIA and 1. Concept Release Comments on Pre- not support regulations mandating CME indicated that this control should Trade and Other Risk Controls throttle thresholds because appropriate be applied per product or contract.250 The Concept Release requested limits will vary per market participant, KCG suggested that exchange-provided comment on various pre-trade and other depending on each participant’s unique maximum order size controls should types of risk controls, including message systems and trading strategy.239 MFA provide flexibility to the market and execution throttles, maximum order strongly advised against required use of participant in setting different levels for sizes, price collars, and order the repeated automated execution users within a firm, for example, based 251 management controls, such as throttle, stating that it is best for market on trader ID or customer. connectivity monitoring services, participants to determine which Alternatively, the market participant automatic cancellation of orders on should rely on tighter internal controls are most appropriate for their 252 disconnect and kill switches. The ATSs.240 IATP commented on the controls. CME and KCG opposed Concept Release contemplated that such difficulty in setting standardized standardization of maximum order size protections, stating that implementation controls would apply at the trading throttle thresholds, and alternatively of this control depends on individual firm, clearing member and trading suggested standardizing a graduated customers and the market,253 while FIX platform levels. As discussed below, the levy on order cancellations.241 Finally, and IATP supported uniformity with Commission has determined to require Chicago Fed commented that regulators 233 respect to these controls.254 that AT Persons, FCMs, and DCMs should assess the methodology that implement such pre-trade and other risk trading firms use to set throttle limits, c. Price Collars controls. Relevant comments to the the reasonableness of those limits, and Concept Release are discussed below. The Concept Release requested the procedures followed when they are comment on price collars, a control in a. Message and Execution Throttles breached.242 which trading platforms would assign a The Concept Release described As to the appropriate design of range of acceptable order and execution message throttles as establishing throttles, CME and AIMA commented prices for each product and all market maximum message rates per unit in time that throttles implemented by market participants would establish similar and execution throttles as establishing participants should be based on the limits to ensure that orders outside of a limits on the maximum number of specific attributes of an entity or particular price range are not orders that an ATS can execute in a account, including the nature of a firm’s transmitted to the trading platform. given direction per unit in time. The trading strategies, the market it trades While most comments addressing this Concept Release also sought comment in, and the speed of its systems.243 topic focused on price collars on a particular form of execution AIMA indicated that applying throttles implemented by exchanges, FIA throttle, the repeated automated on a per-algorithm basis would distort indicated that its FIA PTG survey execution throttle, which would disable the output of the ATS because an reflected that almost all responding a trading system after a configurable algorithm interacts with many other trading firms used either price collars or number of repeated executions until a algorithms within the same ATS.244 In trading pauses.255 234 human re-enables the system. The contrast, AFR indicated that in order to d. Connectivity Indications and Cancel Concept Release stated that the throttles detect a malfunctioning algorithm, the on Disconnect would be calibrated to address the threshold should be based on the potential for unintended message flow algorithm’s trading strategy.245 The Concept Release requested or executions from a malfunctioning comment regarding ‘‘system heartbeats’’ 235 that would indicate proper connectivity ATS. 236 FIA at 59–60. Commenters indicated that message 237 FIA at 12, 15–17, 65; CME at 8–9; Gelber 7; between a trading firm’s automated and execution throttles are widely used AFR at 6–7; KCG at 3–5; Better Markets at 6–7. in the industry. FIA PTG surveyed its 238 KCG at 3–5; MFA at 7, 13. See also Bell at 3– 246 FIA at 59–60. 4. 247 AIMA at 13. 239 248 Gelber at 10. 232 See section IV(Q) below for a discussion of the FIA at 12; CME at 8–9; MFA at 7, 13; Gelber 249 term ‘‘self-trade’’ and proposed regulations with at 5–7; AIMA at 8; KCG at 3–4. KCG at 8; Gelber at 10; 3Red at 2. respect to self-trade prevention. 240 MFA at 7, 13. 250 FIA at 18–19; CME at 15. 233 The pre-trade and other risk controls for DCMs 241 IATP at 3–5. 251 KCG at 8. in proposed § 40.20 are discussed below in a 242 Chicago Fed at 2. 252 See id. separate section. 243 CME at 8–9; AIMA at 8. 253 CME at 15–16; KCG at 8. 234 Concept Release, 78 FR at 56571. 244 AIMA at 9. 254 FIX at 3; IATP at 5. 235 Concept Release, 78 FR at 56569. 245 AFR at 6–7. 255 FIA at 60.
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trading system and the trading platform, tool that enables clearing firms and end- orders. CME argued that allowing entry and ‘‘auto-cancel on disconnect,’’ an users to cancel orders at a more granular of risk reducing orders as an exception exchange tool allowing trading firms to level.259 Another exchange explained to the kill switch process introduces too determine whether their orders will be that it can cancel orders and quotes in much uncertainty and complexity.268 left in the market upon disconnection. an emergency and it also provides a kill Finally, commenters discussed Two exchanges stated that they provide switch to clearing members that cancels procedures concerning activation of a an optional cancel-on-disconnect all orders and quotes from a market kill switch. For example, FIA and functionality.256 FIA characterized participant.260 While commenters noted Gelber suggested that a kill switch have cancel-on-disconnect as a ‘‘widely the importance of placing kill switches both automated and manual triggers.269 adopted DCM-hosted pre-trade risk at the DCM level,261 several commenters KCG suggested that if the total risk of a control’’ and indicated that it is stated that kill switches should be portfolio exceeds certain thresholds, increasingly common for FCMs to implemented by market participants firm systems should automatically send employ cancel-on-disconnect for their and clearing firms in addition to only risk reducing orders and connections to the DCM.257 Several exchanges.262 supervisors should be able to stop commenters indicated that they support Commenters stressed the importance trading entirely.270 TCL commented that exchanges offering system heartbeats of flexibility in the design of kill an exchange or ATS operator will not and/or cancel-on-disconnect to their switches 263 and generally opposed implement a system that abdicates market participants.258 prescriptive requirements regarding control to an automated kill switch. TCL their design and implementation.264 suggested that monitoring systems e. Order Cancellation Systems Reasons included challenges concerning identify irregular market activity and The Concept Release also addressed setting the correct level of granularity alert staff that have access to a kill selective working order cancellation, a (i.e., whether the control should apply switch.271 Similarly, Chicago Fed tool that enables an exchange to to one participant and not others at the recommended that a human decide immediately cancel one, multiple, or all same firm); the possibility that kill whether to use a kill switch based on resting orders from a market participant switches may prevent a firm from being internal and market conditions.272 as necessary in an emergency situation. able to enter risk-reducing orders; Additional Concept Release Such a tool will mitigate impact to the prescriptive requirements will become comments, including comments on kill market of a malfunctioning Algorithmic outdated; that time is of the essence, switch functionality, are discussed Trading system because it will limit and therefore exchanges and firms need below with respect to Regulation AT additional erroneous orders from being to be free from time-consuming pre-trade risk and other control submitted to a trading platform and processes concerning the use of the kill requirements on FCMs and DCMs. executed. The Concept Release also switch; the standardization of kill 2. Description of Regulation considered order cancellation switches, if poorly calibrated or too mechanisms that would immediately widely applied, could result in The Commission proposes a new cancel all working orders and prevent increased costs and disruption of § 1.80 of its regulations to require that submission (by the market participant), legitimate trading operations; and a AT Persons implement pre-trade risk transmittal (by the clearing member), or concern over adding more layers of controls and other measures for all AT acceptance (by the trading platform) of complexity into an already complex Order Messages that are reasonably any new orders from a market market.265 designed to prevent an Algorithmic participant or a particular trader or ATS A critical concern raised by Trading Event. Relevant controls and of such market participant. commenters was how order cancellation measures required by § 1.80 include, but In response to the Concept Release, mechanisms should address risk- are not limited to: Maximum AT Order numerous commenters addressed kill reducing activity.266 Gelber and KCG Message frequency and maximum switches, discussing industry use; suggested that kill switches enable a execution frequency per unit time; order opposition to prescriptive requirements; firm to mitigate risk through manual price parameters and maximum order the importance of flexibility in design; order entry, and that allowing the size limits; order cancellation and ATS potential triggers; and content of kill market participant to set trigger disconnect systems; and connectivity switch procedures. For purposes of this thresholds will help ensure that orders monitoring systems. They also include discussion, the term ‘‘kill switch’’ entered for the purpose of reducing risk several other specific requirements, means generally any order cancellation are not cancelled.267 In contrast, CME such as notification by AT Persons to tools that cancels or prevents stated that a kill switch should exist applicable DCMs and clearing member submission of orders. Commenters solely to completely remove an entity FCMs that they will engage in generally indicated that kill switches from the market, and that other tools Algorithmic Trading; calibrating or could be beneficial, but also stressed the can be used to enter risk reducing otherwise implementing DCM-provided complexity involved in their design and self-trade prevention tools; and periodic use. 259 CME at 23–24. consideration of the sufficiency and Several commenters described order 260 CFE at 11. effectiveness of the controls that an AT 261 FIA at 29–33; Citadel LLC (‘‘Citadel’’) cancellation mechanisms currently Comment Letter (December 11, 2013) at 3; AIMA at Person has implemented. Consistent employed in the industry. One exchange 3, 18; MFA at 12–13; KCG at 13. with comments received in response to commented that it has two kill switch 262 FIA at 30; Citadel at 3; CME at 22; Chicago Fed the Concept Release, proposed § 1.80 tools: A kill switch used by the at 2; MFA at 12–13; Gelber at 14. provides market participants latitude in exchange, clearing firm, or trading firm 263 FIA at 29–33; TCL at 8; AIMA at 18; MFA at the design and implementation of to remove an entity from the market 12; KCG at 13–14. required controls, and in fact requires 264 FIA at 29–33; CME at 23; Gelber at 14–15; completely; and an order management AIMA at 19. 265 FIA at 29–33; CME at 23; Gelber at 14–15; 268 CME at 24. 256 CME at Appendix A–4; CFE at 9–10. AIMA at 19; TCL at 8. 269 FIA at 29–33; Gelber at 14–15. 257 FIA at 14. 266 FIA at 29–33; TCL at 8; Gelber at 14–15; CME 270 KCG at 14. 258 FIA at 14; KCG at 12; MFA at 12; Chicago Fed at 24; KCG at 13; SIG at 8. 271 TCL at 8. at 2. 267 Gelber at 14–15; KCG at 13. 272 Chicago Fed at 2.
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only a small number of specific controls § 1.80 to determine whether it has trading venue, strategy or product.277 that the Commission understands are effectively implemented sufficient ESMA requires that the controls be already widely implemented by likely measures reasonably designed to calibrated as appropriate for the AT Persons (e.g., proposed §§ 1.80(a), prevent an Algorithmic Trading Event. investment firm’s capital base, clearing 1.80(b) and 1.80(c)). In this regard, Each AT Person must take prompt arrangements, trading strategy, risk proposed § 1.80 provides each AT action to remedy any deficiencies it tolerance and experience.278 ESMA Person with the flexibility to identify identifies. further requires that firms take into and implement any additional controls account variables such as length of time a. Maximum AT Order Message and that such AT Person believes are since engaged in algorithmic trading Execution Frequencies appropriate for its Algorithmic Trading. and reliance on third-party vendors, and The Commission is cognizant that Proposed § 1.80(a)(1)(i) requires AT firms must re-calibrate in order to prescriptive regulations in this area may Persons to set pre-trade risk controls account for the changing impact of the fail to take into account the unique that establish maximum AT Order orders on the relevant market due to characteristics of market participants Message and execution frequencies per different price and liquidity levels.279 In and trading strategies, or may become unit time. These controls are commonly addition, the calculations supporting obsolete as technology evolves. The referred to in industry as message and each control should take into account Commission has attempted to provide execution throttles. These controls are all orders sent to a trading venue.280 FIA appropriate flexibility to accommodate designed to prevent excessive messaging has recently recommended that such variety and evolution, while also or trading which could disrupt, slow automated traders implement message establishing a regulatory floor that down, or impede normal market throttles and repeated automated reflects its evaluation of basic activity. The Commission’s proposed execution limits.281 requirements for all AT Persons.273 regulation on maximum order message As to the appropriate thresholds of and execution frequencies is aimed at these controls, the Commission agrees 3. Policy Discussion preventing market disruptions caused with Concept Release comments Proposed § 1.80 requires AT Persons by either inadvertent or intentional indicating that regulations should not to implement pre-trade risk controls and submission of AT Order Messages. This mandate specific thresholds because, other measures reasonably designed to proposed regulation should not prevent among other things, flexibility is prevent an Algorithmic Trading Event. DCMs from maintaining any and all necessary to respond to the dynamics of This requirement is central to the additional safeguards intended to the market, and appropriate limits will purposes of § 1.80. As discussed below, prevent intentional activity such as vary by participant.282 For example, the Commission believes that proposed quote stuffing, or to apply such commenters suggested that message and § 1.80 would reduce the potential for safeguards to message or data flows that execution throttles should be based on market disruptions arising from system are broader than the proposed definition the specific attributes of the trading firm malfunctions, other errors, or of AT Order Messages. As indicated or account, including the nature of the intentional disruptive conduct. The above, commenters to the Concept firm’s trading strategies, the market it Commission notes that the risks of such Release indicated that message and trades in, and the speed of its disruptions are heightened by the execution throttles are already widely systems.283 Therefore, the proposed increased use of high-speed algorithmic used in the industry.274 Commenters rules do not prescribe particular limits trading, which makes the indicated that the benefits of these risk or thresholds, aside from the implementation of pre-trade risk controls include mitigating the risk and overarching requirement that the controls and other measures even more impact of disruptive events, alerting controls be reasonably designed to necessary. Without effective risk market participants to potential prevent an Algorithmic Trading Event, controls, erroneous orders can problems with their automated trading and § 1.80(a)(2)’s requirement that the significantly impact many market systems, helping to ensure a level controls be set at the level of each AT participants in a short amount of time. playing field for all market participants, Person, or such other more granular The prevention of Algorithmic Trading and deterring predatory and disruptive level as the AT Person may determine, Events pursuant to § 1.80 would help activities.275 In light of these benefits, including but not limited to, by product, ensure the integrity of Commission- and the already extensive use of this account number or designation, or one regulated markets and provide market risk control, the Commission includes or more identifiers of natural persons participants with greater confidence that maximum AT Order Message and associated with an AT Order Message. intentional, bona fide transactions are execution frequencies in its proposed While several commenters supported being executed. rule. greater Commission involvement in The pre-trade risk controls and other The Commission notes that ESMA’s setting risk control parameters, the measures required by proposed § 1.80 2015 Final Draft Regulatory Standards Commission believes that it is not in the include, but are not limited to, those require investment firms to establish a best position to determine the described in clauses (a)–(e) of § 1.80. maximum messages limit and repeated appropriate message or execution rate The Commission believes that each of automated execution throttle.276 The for each trading firm, trading strategy, these enumerated controls and other execution throttle should limit the product, and every other potentially measures will promote the goals of number of times a strategy is applied relevant factor that should be taken into § 1.80, as described above. Proposed only where appropriate to the specific account when establishing thresholds. § 1.80(f) also promotes the goals of 277 § 1.80, by requiring each AT Person to 274 See FIA at 59–60 (FIA’s surveys of member See id.; ESMA September 2015 Final Draft periodically review its compliance with firms and FCMs) and comment indicating that Standards Report, supra note 80 at 200. 278 exchanges already use throttles (CME at 8–9; CFE See id. 279 See id. 273 See section IV(H) below for a more detailed at 5–6; TCL at 6; KCG at 4; MFA at 7; and AIMA 280 discussion of which persons will be designated as at 8). See id. AT Persons for purposes of proposed § 1.80 and 275 See FIA at 12, 15–17, 65; MFA at 7; CME at 281 FIA Guide, supra note 95 at 10, 12. other regulations, and which persons will not be AT 8; Gelber at 5–7; AFR at 6–7. 282 See FIA at 12; CME at 9; Gelber at 5–7; AIMA Persons, but will nonetheless be subject to proposed 276 ESMA September 2015 Final Draft Standards at 8; KCG at 3–4; OneChicago at 5. § 1.82. Report Annex 1, supra note 80 at 214–15. 283 CME at 8–9; AIMA at 8.
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As discussed below, DCMs would price may deviate from a pre- Accordingly, the Commission receive information as to the specific determined price, such as the last trade proposes to require that each order pass quantitative settings used by each AT price, or the market open price.284 By through price parameter and maximum Person as part of Commission-required requiring ‘‘maximum order size limits,’’ order size limit checks in order to compliance reports pursuant to the Commission means the risk control protect the natural price discovery proposed § 1.83. Pursuant to this generally understood in industry as ‘‘fat- process from disruptive behavior such reporting process, DCMs would be able finger’’ limits. Commenters to the as unintentionally large orders. to identify AT Persons that have Concept Release indicated that Consistent with the Commission’s message or execution throttle thresholds maximum order size controls are approach to the other pre-trade risk that appear insufficient. already widely used by trading firms controls, the Commission will not The Commission notes that several and that this control is effective at impose thresholds, but will leave design commenters cited potential negative reducing the likelihood that an of the control and specific thresholds to effects of controls establishing message exchange would need to make use of its the discretion of market participants. or execution limits (e.g., they can block error trade policy.285 Finally, the Commission notes that risk-reducing orders and decrease The Commission notes that ESMA’s market participants could comply with liquidity). The Commission believes 2015 Final Draft Regulatory Standards the pre-trade and other risk controls that the overall benefits to maximum require investment firms to establish required by Regulation AT in multiple order message and execution price collars, maximum order value ways: By internally developing such frequencies, as noted above, outweigh limits and maximum order volume controls from scratch, upgrading potential negative effects. In addition, limits, appropriately calibrated for their existing systems, or purchasing a risk allowing market participants discretion capital base, clearing arrangements, management solution from an outside in the design and implementation of trading strategy, risk tolerance and vendor. The Commission understands message and execution throttles, as well experience.286 IOSCO has also indicated that market participants may also be as in establishing appropriate that many market participants already able to purchase some risk management thresholds, would enable market employ order price and volume solutions from DCMs. The Commission 287 participants to address and limit the limits. In addition, FIA has recently notes that implementation of exchange- potential negative effects of this risk recommended that automated traders provided controls, such as a maximum control. employ maximum order size and price order size limit, would comply with 288 Finally, as noted above, proposed tolerance limits. Finally, the Regulation AT’s requirement that AT § 1.80(a)(2) requires the controls to be Commission also notes that the SEC’s Persons use that control. However, an implemented at the AT Person-level. Market Access Rule requires controls AT Person’s use of a DCM-provided Consistent with § 1.80’s overarching that prevent entry of erroneous orders, maximum order size limit would not requirement that an AT Person shall by rejecting orders that exceed constitute DCM compliance with implement pre-trade risk controls and appropriate price or size parameters, on proposed regulations requiring that other measures reasonably designed to an order-by-order basis or over a short DCMs implement maximum order sizes prevent an Algorithmic Trading Event, period of time, or that indicate limits at the exchange level. each AT Person must evaluate whether duplicative orders.289 the controls should be set at a more Given the usefulness of price and c. Order Management Controls granular level—for example, by product, order size parameters in preventing the account number or designation, or one execution of erroneous trades, the Proposed § 1.80(b) requires that AT or more identifiers of natural persons Commission determined to require that Persons implement certain order associated with an AT Order Message. AT Persons establish such controls on management controls. The required Where deemed appropriate by the AT all orders submitted through controls must have the ability to: (i) Person, the controls should be set at Algorithmic Trading. The proposed Immediately disengage Algorithmic such more granular levels. In addition, regulations are intended to be Trading; (ii) cancel selected or up to all proposed § 1.80(a)(3) requires that sufficiently flexible so that as required resting orders when system or market natural person monitors at the AT controls improve or new types controls conditions require it; and (iii) prevent Person be promptly alerted when the emerge, they may be incorporated into submission of any new AT Order controls are breached. The purpose of an AT Person’s pre-trade risk control Messages (i.e., a ‘‘kill switch’’). The this requirement is to ensure that the AT program and satisfy the requirements of parameters for the order cancellation Person would take any further action proposed § 1.80(a). Similarly, this systems must be reasonably designed to that is necessary to prevent or mitigate regulation is intended to be sufficiently prevent an Algorithmic Trading Event. an Algorithmic Trading Event. flexible that exchanges, AT Persons, and In addition, proposed § 1.80(c) requires clearing member FCMs may set the that AT Persons with Direct Electronic b. Order Price Parameters and specific thresholds that will be most Access (as defined in proposed Maximum Order Size Limits effective in preventing an Algorithmic § 1.3(yyyy)) must implement systems to Proposed § 1.80(a)(1)(ii) requires pre- Trading Event. indicate on an ongoing basis whether trade risk controls that limit the prices they have proper connectivity with the and quantities associated with 284 See FIA Guide, supra note 95 at 10. trading platform and any systems used individual order messages. By requiring 285 FIA at 18–19, 23; CME at 15; Gelber at 10; KCG by a DCM to provide the AT Person ‘‘order price parameters,’’ the at 8; 3Red at 2. with market data. Proposed § 1.80(b)(2) 286 See ESMA September 2015 Final Draft Commission means that AT Persons Standards Report Annex 1, supra note 80 at 214– requires that prior to an AT Person’s must establish price limits intended to 15. initial use of Algorithmic Trading to prevent orders with prices far from the 287 See IOSCO 2015 Consultation Report, supra submit a message or order to a DCM’s prevailing market from entering the note 106 at 21. trading platform, such AT Person must market. At the trading firm or clearing 288 See FIA Guide, supra note 95 at 8, 10. notify the applicable DCM whether all member level, such controls may be 289 See SEC, Responses to Frequently Asked of its resting orders should be cancelled Questions Concerning Risk Management Controls called ‘‘price tolerance limits’’ that for Brokers or Dealers with Market Access, supra or suspended in the event of disconnect define a maximum amount that an order note 37. with the trading platform.
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The order cancellation systems procedures concerning when the control d. Notification of Algorithmic Trading requirements provided in proposed must be triggered, or require that the Proposed § 1.80(d) requires that, prior § 1.80(b) and (c) are intended to protect functionality must allow for submission to an AT Person’s initial use of against erroneous trading activity of risk-reducing orders. Rather, Algorithmic Trading to submit a caused by an algorithmic trading system § 1.80(b)(1) would require that AT message or order to a DCM, such AT malfunction. As to connectivity Persons have the ability and authority to Person must notify its clearing member monitoring and cancel-on-disconnect, disengage Algorithmic Trading, cancel FCM, as well as the DCM on which the several commenters supported selected resting orders, and prevent AT Person is trading, that it will engage exchanges offering such functionality to submission of new AT Order Messages, in Algorithmic Trading. The 290 trading firms. Given the possibility of but does not specify when such Commission intends that this a technology failure that causes a market functionality should be triggered. The requirement ensure that clearing participant’s orders to be left in the Commission allows flexibility for AT member FCMs and exchanges have market upon disconnect, leaving the Persons to design and implement sufficient advance notice to implement trader or trading firm unable to manage appropriate parameters and procedures and calibrate pre-trade and other risk the orders, the Commission believes that that are appropriate for their trading controls to manage risks arising from the systems indicating proper connectivity AT Person’s trading. and cancel-on-disconnect are important strategy or markets. risk management tools that should be The Commission’s approach to order e. Self-Trade Prevention Tools required. The Commission notes that cancellation systems is consistent with Proposed § 1.80(e) requires that, to the commenters to the Concept Release current recommendations in the extent that implementation of a DCM’s indicated cancel-on-disconnect European regulatory context. ESMA’s self-trade prevention tools requires functionality should be a flexible tool, 2015 Final Draft Regulatory Standards calibration or other action by an AT allowing market participants to require that investment firms know Person, such AT Person must calibrate determine whether orders should be left which algorithm and which trader, or take such other action as is necessary in the market upon disconnection.291 trading desk or, where applicable, client to apply such tools. This proposed FIA has explained that automated is responsible for each order, and have regulation is designed to operate in traders must decide whether the ability, as an emergency measure, to conjunction with proposed § 40.23, cancellation upon disconnect mitigates cancel unexecuted orders submitted to which requires DCMs to either apply, or 292 or increases risk. Accordingly, the individual trading venues originated by provide and require the use of, self-trade Commission does not require individual traders, trading desks, or prevention tools.297 cancellation or suspension of orders where applicable, clients. Investment upon disconnect. Rather, it requires AT f. Periodic Review for Sufficiency and firms must also have the ability, as an Effectiveness Persons, prior to engaging in emergency measure, to immediately Algorithmic Trading, to notify the DCM cancel all the firm’s outstanding orders Finally, proposed § 1.80(f) requires as to what action it should take in the at all trading venues to which it is that each AT Person shall periodically event of disconnect, which may depend connected.294 The Commission also review its compliance with § 1.80 to on the facts and circumstances. determine whether it has effectively As to ‘‘kill switch’’ functionality, notes that FIA recently recommended that automated traders build their own implemented sufficient measures comments to the Concept Release reasonably designed to prevent an indicated that exchanges already kill switch functionality into their trading systems where it is possible to Algorithmic Trading Event. Proposed provide kill switch functionality for use § 1.80(f) would also require that an AT by market participants or clearing implement it on a sufficiently granular level to identify individual trading Person take prompt action to remedy members, and additional commenters any deficiencies it identifies. The systems.295 FIA also recommended that suggested that such functionality should Commission recognizes through where an exchange provides a kill be implemented by market participants proposed § 1.80(f) that trading practices, switch, there should be a registration and clearing firms in addition to technologies for algorithmic trading, 293 process and entitlement system that exchanges. The Commission notes and best practices in risk controls will the challenges identified by commenters requires automated traders or brokers to necessarily evolve over time. It believes around setting the correct level of specify which staff are authorized to use 296 that periodic review by AT Persons of granularity of an order cancellation tool, the functionality. The Commission their own pre-trade risk controls and and of the potential need for trading believes that FIA (in its recent Guide to other measures will help to ensure firms to submit risk-reducing orders. the Development and Operation of compliance with proposed § 1.80 in an The Commission believes that requiring Automated Trading Systems), other engaged and proactive manner. that order cancellation tools allow for industry organizations, and commenters submission of risk-reducing orders may to the Concept Release provided g. Certain Measures Not Adopted in introduce too much uncertainty or reasonable recommendations as to the This NPRM complexity into the market, or may be design and implementation of order The Commission determined not to technically infeasible at this time. In cancellation systems. The Commission address in this NPRM some measures light of such considerations, the urges AT Persons and other market that were discussed in the Concept Commission’s proposed regulations do participants to consider such Release and supported by Concept not mandate specific elements of kill recommendations in the Release commenters. For example, switch design, such as the parameters or implementation of order cancellation various commenters favored and connectivity systems. standardization around drop copies and 290 FIA at 14; KCG at 12; MFA at 12; Chicago Fed at 2. error trade policies. FIA commented 291 CME at Appendix A–4; CFE at 9–10; MFA at 294 See ESMA September 2015 Final Draft that drop copies should be available for 12. Standards Report Annex 1, supra note 80 at 211– 292 FIA Guide, supra note 95 at 15. 12. 297 See section IV(Q) below for a discussion of 293 FIA at 30; Citadel at 3; CME at 22–24; Chicago 295 See FIA Guide, supra note 95 at 14. proposed § 40.23 and requests for comment in Fed at 2; MFA at 12–13; Gelber at 14; CFE at 11. 296 See id. at 14. connection with the proposed regulations.
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all trading venues and products 34. Are there additional pre-trade or public comment regarding whether one whenever technologically practicable other risk controls that should be or more of the proposed requirements and that trade reports and other specifically enumerated in proposed applicable to FCMs in §§ 1.80, 1.81, information provided by drop copy § 1.80? 1.83(a), and 1.83(c) (as described below) should be disseminated to the consumer 35. Do you believe that the pre-trade should be incorporated within an FCM’s in real-time or as near real-time as and other risk controls required in Risk Management Program and be practicable.298 As to error trade policies, § 1.80 sufficiently address the subject to the requirements of such FIA suggested that they be clear and possibility of technological advances in program as described in § 1.11. In this deterministic enough for all participants trading, and the development of new, regard, any final rules arising from this to understand, promote a marketplace more effective controls that should be NPRM could place all requirements where all trades stand as executed, implemented by AT Persons? applicable to FCMs in §§ 1.80, 1.81, protect participants who are 36. The Commission welcomes 1.83(a), and 1.83(c) within the counterparties to error trades, and not comment on whether the regulation’s operational risk measures required in be subject to discretion.299 KCG, MFA, requirements relating to the design of § 1.11(e)(3)(ii). Such incorporation Citadel and SIG also made similar controls and the levels at which the could help improve the interaction comments.300 The Commission believes controls should be set are appropriate between an FCM’s operational risk that standardization of drop copy and sufficiently granular. efforts and its pre-trade risk controls; reports and error trade policies, as well 37. The Commission notes that development, monitoring, and as other measures addressed in the § 1.80(d) requires that prior to initial use compliance efforts; and reporting and Concept Release, merit further of Algorithmic Trading, an AT Person recordkeeping requirements, pursuant consideration within the Commission as must notify its clearing member FCM to §§ 1.80, 1.81, 1.83(a), and 1.83(c). It well as in industry. However, the and the DCM that it will engage in could also help ensure that an FCM’s Commission determined to include Algorithmic Trading. The Commission §§ 1.80, 1.81, 1.83(a), and 1.83(c) particular risk controls in Regulation welcomes comment on whether the processes benefit from the same internal AT, and not others, based on its content of that notification requirement rigor and independence required by the understanding of the critical importance is sufficient, or whether clearing Risk Management Program in § 1.11. of controls required in proposed § 1.80 member FCMs and DCMs should also be 40. The Commission proposes to in preventing and mitigating market notified of additional information. For adopt a multi-layered approach to disruptions, as well as their current example, should AT Persons be required regulations intended to mitigate the widespread industry use. to notify their clearing member FCMs of risks of automated trading, including In addition, as noted above, the particular changes to their Algorithmic pre-trade risk controls and other Commission has taken a principles- Trading systems that would affect the procedures applicable to AT Persons, based approach to its requirements risk controls applied by the clearing clearing member FCMs and DCMs. relating to risk controls and other member FCM? Please comment on whether an 38. Is § 1.80(f)’s requirement that each measures. Proposed § 1.80 provides alternative approach, for example one AT Person periodically review its market participants discretion in the which does not impose requirements at compliance with § 1.80 appropriate? design and implementation of controls, each of these three levels, would more Should there be more prescriptive and and requires only a small number of effectively mitigate the risks of granular requirements to ensure that specific controls that the Commission automated trading and promote the each AT Person periodically reviews its understands are already widely other regulatory goals of Regulation AT. pre-trade and other risk controls and implemented. Proposed § 1.80 provides takes appropriate steps to update or I. Standards for Development, Testing, AT Persons with flexibility to identify recalibrate them in order to prevent an Monitoring, and Compliance of and implement any additional controls Algorithmic Trading Event? Algorithmic Trading Systems—§ 1.81 appropriate for their Algorithmic Alternatively, is § 1.80(f) necessary? The Commission proposes regulations Trading. The Commission is aware that Does the Commission need to explicitly under § 1.81 requiring AT Persons to prescriptive regulations in this area may require AT Persons to conduct a establish policies and procedures that not take into account the unique periodic review of their compliance accomplish a number of objectives with characteristics of each market with § 1.80? respect to the development, testing, participant, and may become obsolete. 39. AT Persons that are registered monitoring, and compliance of The proposed regulation reflects the FCMs are required by existing Algorithmic Trading. The proposed Commission’s intent to accommodate Commission regulation 1.11 to have regulations are intended to standardize the diverse and evolving nature of formal ‘‘Risk Management Programs,’’ a set of principles in order to reduce the market participants’ businesses and including, pursuant to § 1.11(e)(3)(ii), operational risk of such systems. The technology, while establishing basic ‘‘automated financial risk management remainder of this section presents regulatory requirements of essential risk controls reasonably designed to prevent Concept Release comments on this controls and related measures that each the placing of erroneous orders’’ and topic, a description of the proposed market participant engaged in ‘‘policies and procedures governing the regulation, a discussion of the policy Algorithmic Trading should have. use, supervision, maintenance, testing, justification for the proposal, and a 4. Request for Comments and inspection of automated trading request for comments on the proposal. programs.’’ As described in § 1.11, an 33. Are any pre-trade and other risk FCM’s Risk Management Program must 1. Concept Release Comments controls required by § 1.80 ineffective, include a risk management unit The Concept Release requested not already widely used by AT Persons, independent of the business unit; comment on testing procedures for or likely to become obsolete? quarterly risk exposure reports to senior ATSs. The Concept Release contemplated, among other things, that 298 FIA at 13. management and the governing body of 299 See id. the FCM, with copies to the market participants operating ATSs 300 KCG at 10–11; MFA at 2, 10–12; Citadel at 3, Commission; and other substantive must test each ATS internally and on 4–5; SIG at 8–9. requirements. The Commission requests each trading platform on which it will
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operate, and trading platforms must already subject to DCM Core Principle described their own testing practices. provide test environments that simulate 20 and Commission regulation CME indicated that market participants the production environment. In 38.1051(h), which require DCMs to routinely test in their own testing particular, the Concept Release asked conduct periodic, objective testing and environments using historical data to for comment on when it is most review of their automated systems to test trading strategies against a range of beneficial for firms to test an ATS after ensure that they are reliable, secure, and market conditions, and that exchanges it has been modified, and how the have adequate scalable capacity.308 In commonly make their own historical Commission and market participants addition, KCG argued that a ‘‘testing data available for testing purposes. CME should distinguish between major process that creates too many frictions explained that it requires all systems modifications and minor modifications. can discourage making changes that interfacing with CME Globex to be Commenters support ATS testing and improve a system.’’ 309 Similarly, TCL certified on the order entry and/or discussed current and best practices, but stated that the testing procedures market data interfaces prior to disagreed as to whether regulatory suggested in the Concept Release are deployment.317 CFE provides a user measures are appropriate to standardize overly broad and could force ATS testing environment that simulates the these practices. Most commenters operators to take a narrow view of what production environment.318 TCL (including FIA, CME, CFE, and MFA) constitutes a change.310 described FIA industry-wide testing of oppose standardized ATS testing In contrast, several commenters backup systems.319 procedures.301 FIA indicated that it is support regulatory involvement in this FIX stated that it has a working group impractical to implement prescriptive area. Chicago Fed noted that many that is developing best practices related standardized procedures for industries have standards-setting to testing and is working to increase the development, testing and change bodies, but because there is no corollary availability of test financial management given the diversity of for the development of ATSs within an instruments.320 Similarly, IIT technologies and business operations at ‘‘HFT environment,’’ market commented that a working group named DCMs. FIA pointed to the testing participants and the TAC should work AT 9000, which is affiliated with the recommendations outlined in its March together to formulate such standards International Organization for 2012 ‘‘Software Development and and guidelines that will help mitigate Standardization, is developing a quality Change Management the impact of operational risks.311 IATP management system for automated Recommendations’’ as best practices for stated that out of all of the safeguards trading. The goals of AT 9000 are to trading firms, which could also apply to addressed in the Concept Release, ATS help automated trading industry all participants. FIA described different testing has the greatest potential to organizations satisfy their responsibility types of testing and supports DCMs reduce market disruptions. IATP for trading safety, to satisfy regulatory providing robust test environments and recommended that the Commission requirements, and to improve the market participants using such review and select from current best efficiency and effectiveness of environments.302 CME cited the FIA practices.312 MFA recommended that automated trading.321 PTG’s ‘‘Recommendations for Risk industry engage in more robust testing, The Concept Release also requested Controls for Trading Firms’’ as an and that trading platforms should offer comment on ATS development and appropriate principles-based approach testing where a firm’s software interacts change development. Among other to management, oversight, and testing of with other types of software.313 things, the Concept Release electronic trading systems.303 CME AIMA opposes standardization, and contemplated that trading platforms and noted that exchange systems vary suggested alternatively that ‘‘CFTC market participants operating ATSs widely, and each exchange should principles’’ create a legal requirement must maintain a development develop and test in a manner that for a certain standard of testing and environment that is adequately isolated comports with industry best change management. AIMA cited as an from the production trading practices.304 example the Department of Energy environment, and that market SIG indicated that DCMs should Software Engineering Methodology.314 participants must have policies and provide test environments and stated While MFA also opposes procedures concerning approval and that ATS testing procedures should be standardization, it stated that ‘‘rules or verification of changes to their trading standardized ‘‘where possible.’’ 305 industry practice should encourage systems. In particular, the Concept Gelber stated that standardizing more robust and more routine testing at Release asked for comment on what development, testing and change the trading platform level.’’ 315 challenges or benefits may result from management might be helpful, but it is Finally, as to current ATS testing the implementation of standardized more important that these procedures practices, MFA indicated that ‘‘many, if development and change management are clear and comprehensive at each not all, exchanges provide market procedures. exchange than that they are participants a test facility to test trading FIA described the core components of standardized.306 software and algorithms, as well as offer a change management as including Both FIA and CME noted the test symbols to trade.’’ 316 CME and CFE authorization (effective pre-deployment difficulty of establishing objective review of the proposed change) and criteria to determine what constitutes a 308 CFE at 2–3. auditability (procedures for ‘‘major’’ or ‘‘minor’’ modification of an 309 KCG at 15–16. communicating requirements, changes ATS.307 CFE noted that DCMs are 310 TCL at 15. and functionality related to proprietary 311 Chicago Fed at 3. software and technical infrastructure). 312 IATP at 7. 301 FIA at 34–38; CME at 26; CFE at 2–3; AIMA FIA indicated that prescriptive 313 MFA, Presentation Before the CFTC at 3, 20–21; TCL at 15; KCG at 15–16; MFA at 2, Technology Advisory Committee Meeting on Risk 12–13; OneChicago at 2–3. Controls and System Safeguards for Automated 317 CME at 25–26. 302 FIA at 34–38. Trading Environments (Feb. 10, 2014) at 13, 318 CFE at 12. 303 CME at 25. available at: http://www.cftc.gov/idc/groups/public/ 319 TCL at 11–14. 304 _ CME at 26. @newsroom/documents/file/tac021014 mfa.pdf. 320 FIX Trading Community (‘‘FIX’’) Comment 305 SIG at 9. 314 AIMA at 3, 20–21. Letter (December 11, 2013) at 4–5. 306 Gelber at 15–16. 315 MFA at 13. 321 Illinois Institute of Technology (‘‘IIT’’) 307 FIA at 34–38; CME at 25–26. 316 MFA at 13. Comment Letter (February 11, 2014) at 1–2.
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development and change management the design, testing, and supervision of contribute to future Algorithmic Trading standards are impractical given the Algorithmic Trading. The proposed Events (such testing must be conducted diversity of market participants, but regulations are intended to standardize both internally with the AT Person and principles such as authorization and a set of principles in order to reduce the on each designated contract market on auditability can serve as ‘‘building operational risk of such systems. The which Algorithmic Trading will occur); blocks’’ that market participants can use proposed regulations require each AT (iii) regular back-testing of Algorithmic to tailor a change management process Person to: Implement written policies Trading using historical transaction, to fit their needs.322 and procedures for the development and order, and message data to identify Similarly, TCL indicated that testing of ATSs (§ 1.81(a)); implement circumstances that may contribute to exchanges and ATSs should have formal written policies and procedures future Algorithmic Trading Events; (iv) processes for change management, reasonably designed to ensure that each regular stress tests of Algorithmic which include a production installation of its ATSs is subject to continuous real- Trading systems to verify their ability to authorization process in which no one time monitoring and supervision by operate in the manner intended under a may change the production systems knowledgeable and qualified staff while variety of market conditions; (v) after it has been submitted for such ATS is engaged in trading procedures for documenting the strategy authorization, followed by a formal (§ 1.81(b)); implement written policies and design of proprietary Algorithmic signoff.323 KCG recommended that and procedures reasonably designed to Trading software used by an AT Person, policies for deploying new software ensure that ATSs operate in a manner as well as any changes to such software include staged deployment (deploying that complies with the CEA and the if such changes are implemented in a new software in phases, with explicit rules and regulations thereunder, and production environment; and (vi) rollback procedures), and validation ensure that staff are familiar with the maintaining a source code repository to (manual and automated evaluation of CEA and the rules and regulations manage source code access, persistence, whether a change is successful).324 thereunder, the rules of any DCM to copies of all code used in the In addition, the Concept Release which such AT Person submits orders production environment, and changes to requested comment on ATS monitoring through Algorithmic Trading, the rules such code (such source code repository and supervision. In particular, the of any RFA of which such AT Person is must include an audit trail of material Concept Release requested comment on a member, the AT Person’s own internal changes to source code that would allow the extent to which human monitors requirements, and the requirements of AT Persons to determine, for each such have been trained in how to respond to the AT Person’s clearing member FCM, material change: Who made it; when unexpected problems, and been given in each case as applicable (§ 1.81(c)); they made it; and the coding purpose of the requisite authority to intervene at and implement written policies and the change. The source code must also these times. The Concept Release procedures to designate and train staff be maintained in accordance with suggested that market participants responsible for Algorithmic Trading Commission regulation § 1.31). operating ATSs must ensure that their (§ 1.81(d)). The proposed rules are Monitoring of Algorithmic Trading ATSs are subject to continuous real-time described in greater detail below. Systems. Regulation AT proposes a new monitoring and supervision by trained As a complement to the proposed requirement (§ 1.81(b)) that each AT and qualified staff at all times while design and testing requirements, Person must implement written policies engaged in trading. Two commenters Regulation AT proposes a new and procedures reasonably designed to addressed ATS monitoring and requirement that DCMs (under proposed ensure that each of its ATSs is subject § 40.21, discussed in section IV(O) supervision, but did not specifically to continuous real-time monitoring by below) provide a test environment that express support or opposition to knowledgeable and qualified staff while will enable market participants to regulatory action. KCG recommended such ATS is engaged in trading. Such simulate production trading and that a monitoring process identify policies and procedures must at a conduct exchange-based conformance ‘‘smoke signals’’ (unusual or abnormal minimum include the following: (i) testing of their Algorithmic Trading behaviors), investigate the cause of the Continuous real-time monitoring of smoke signals, and, if the smoke signal systems. Development and Testing of Algorithmic Trading to identify is an error, the monitoring alerts should potential Algorithmic Trading Events; be adjusted to take that information into Algorithmic Trading Systems. Regulation AT proposes a new (ii) automated alerts when an ATS’s AT account.325 MFA commented that there requirement (§ 1.81(a)(1)) that each AT Order Message behavior breaches design should be at least one designated Person must implement written policies parameters, upon loss of network individual who is available and and procedures for the development and connectivity or data feeds, or when authorized to suspend a firm’s trading testing of its Algorithmic Trading market conditions approach the program. MFA also suggested that FCMs systems. Such policies and procedures boundaries within which an ATS is should have ‘‘plan-of-action’’ protocols must at a minimum include the intended to operate, to the extent that include scenarios where trading is 327 following: (i) Maintaining a applicable; (iii) monitoring staff of suspended based on specific types of development environment that is the AT Person shall have the ability and events.326 adequately isolated from the production authority to disengage an Algorithmic 2. Description of Regulation trading environment (the development Trading system and to cancel resting environment may include computers, orders when system or market The Commission proposes regulations conditions require it, including the requiring AT Persons to establish networks, and databases, and should be used by software engineers while ability to contact staff of the applicable policies and procedures that accomplish designated contract market and clearing a number of objectives with respect to developing, modifying, and testing source code); (ii) testing of all firm, as applicable, to seek information 322 FIA at 4, 36–37. Algorithmic Trading code and related 327 For example, if an ATS is designed to operate 323 systems and any changes to such code TCL at 15. within certain ranges of volatility, liquidity, or 324 KCG at 17. and systems prior to their order or trade prices, automated alerts may be 325 KCG at 17–18. implementation, including testing to triggered when volatility or a moving average 326 MFA at 14. identify circumstances that may approaches the pre-determined ranges.
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and cancel orders; and (iv) procedures following: (i) Procedures for designating Guidelines, Best Practices and that will enable AT Persons to track and training all staff involved in Regulatory Standards on Testing and which monitoring staff is responsible for designing, testing and monitoring Development an Algorithmic Trading system during Algorithmic Trading, and documenting As noted above, the ESMA guidelines trading hours. The Commission believes training events (training must, at a recommended that investment firms that staff persons who are responsible minimum, cover design and testing should make use of clearly delineated for monitoring the trading of other AT standards, Algorithmic Trading Event development and testing methodologies Person staff should typically not be communication procedures, and prior to deploying an electronic trading actively engaged in trading at the same requirements for notifying staff of the system or a trading algorithm, and time, because it would be difficult to applicable designated contract market should monitor their electronic trading adequately and consistently monitor when Algorithmic Trading Events systems, including trading algorithms, trading of other AT Person staff while occur); (ii) training policies reasonably in real-time.329 The MiFID II Directive 328 engaged in trading activities. designed to ensure that natural person requires a regulated market to have in Compliance of Algorithmic Trading monitors are adequately trained for each place effective systems, procedures and Systems. Regulation AT proposes a new Algorithmic Trading system or strategy arrangements, including requiring requirement (§ 1.81(c)) that each AT (or material change to such system or members or participants to carry out Person shall implement written policies strategy) for which such monitors are appropriate testing of algorithms and and procedures reasonably designed to providing environments to facilitate ensure that each of its Algorithmic responsible; and (iii) escalation procedures to inform senior staff as soon such testing. The Directive seeks to Trading systems operates in a manner reduce the likelihood that algorithmic that complies with the CEA and the as Algorithmic Trading Events are identified. The training described in trading systems may create or contribute rules and regulations thereunder. AT to disorderly trading conditions, and to Persons must also implement clause (ii) above must include, at a minimum, the trading strategy for the promote effective resolution of any procedures requiring staff of the AT disorderly trading conditions that do Person to review Algorithmic Trading Algorithmic Trading system, as well as the automated and non-automated risk arise from algorithmic trading systems in order to detect potential systems.330 With respect to MiFID II, Algorithmic Trading Compliance Issues. controls that are applicable to the Algorithmic Trading system or strategy. ESMA’s 2015 Final Draft Regulatory Such staff must include staff of the AT Standards include requirements relating Adequate training should ensure that Person familiar with the CEA and the to the role of compliance and monitors are effectively educated rules and regulations thereunder, the monitoring staff, testing (including regarding the typical behavior of each rules of any DCM to which such AT conformance testing, stress testing, and Algorithmic Trading system or strategy Person submits orders through testing environments), annual review Algorithmic Trading, the rules of any (or material change to such system or and validation of systems, change RFA of which such AT Person is a strategy) that they are responsible for management procedures, and real-time member, the AT Person’s own internal overseeing in production. It should also market monitoring procedures.331 These requirements, and the requirements of allow monitors to understand when risk standards include, among other things, the AT Person’s clearing member FCM, controls may be triggered, and how to that a firm must have clear lines of in each case as applicable. The respond once they are. As result of the accountability for the development, procedures should also include a plan training they receive, monitors should deployment and updates of algorithms, of internal coordination and be capable of making rapid, appropriate and effective procedures for communication between compliance decisions in real time to help contain or communication of information; staff of the AT Person and staff of the mitigate ATS issues. compliance staff must have a general AT Person responsible for Algorithmic 3. Policy Discussion understanding of how trading systems Trading regarding Algorithmic Trading and algorithms operate, and be in design, changes, testing, and controls, Consistent with the comments continuous contact with persons with which plan should be designed to detect received, the Commission is taking a detailed technical knowledge of trading and prevent Algorithmic Trading principles-based approach in this area, systems and algorithms; testing must Compliance Issues. which is intended to provide discretion ensure that systems conform with the Designation and Training of to AT Persons, particularly with respect rules and systems of the trading venue, Algorithmic Trading Staff. Regulation to the development and testing of risk controls work as intended, and AT proposes a new requirement Algorithmic Trading systems. The systems will not contribute to disorderly (§ 1.81(d)) that each AT Person must Commission acknowledges that trading and can continue to work implement written policies and prescriptive regulations in this area may effectively in stressed market procedures to designate and train its fail to take into account the unique conditions; firms must run an annual staff responsible for Algorithmic characteristics of various market validation process, which includes Trading. Such policies and procedures participants’ trading strategies, and may preparation of a validation report; firms must at a minimum include the become obsolete as technology and must keep records of material changes development standards evolve. For made to software, including when a 328 The Commission notes that the supervision example, the Commission recognizes change was made, who made it, who requirement of proposed § 1.81(b) is analogous to approved it, and the nature of the the supervision requirements for Commission that software development practices registrants under the customer protection rules of continue to evolve, and therefore is not change; and monitoring systems must Commission regulation 166.3. The Commission imposing very granular coding or testing have real-time alerts that assist staff in further notes that ESMA’s draft regulatory standards requirements. The Commission believes identifying when an algorithm is not for MiFID II provide that real-time monitoring behaving as expected, and firms must should be performed by a risk function that is that this principles-based approach is independent from the trader, to ensure an consistent with other regulatory 329 See ESMA Guidelines, supra note 61 at 10. appropriate segregation between the trading desk initiatives and best practice guides and supporting functions. See ESMA September 330 See MiFID II, Article 48(6). 2015 Final Draft Standards Report, supra note 80 issued in this area, as further discussed 331 ESMA September 2015 Final Draft Standards at 201. below. Report Annex 1, supra note 80 at 205–16.
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have a process for remedial action when Note, published in April 2015, regarding Algorithmic Trading design, alerts occur, including a process for an recommended that market participants changes, testing, and controls; and orderly withdrawal from the market.332 using algorithmic trading conduct procedures for documenting the strategy With respect to the U.S. securities testing during all phases of a trading and design of proprietary Algorithmic markets, the SEC’s Reg SCI requires SCI product’s lifestyle, namely during Trading software used by an AT Person, entities to implement a program to development, rollout to production, and among other controls. The review and keep current systems ongoing maintenance.338 standardization of such written policies development and testing methodology The rules proposed under § 1.81 are and procedures may make disruptive for SCI systems, and to implement intended to be consistent with these events like the Knight Capital incident standards that result in SCI systems regulatory initiatives and best practices. less likely in the future. The Commission believes that most being designed, developed, tested, 4. Request for Comments maintained, operated, and surveilled in market participants and DCMs have a manner that facilitates the successful implemented controls regarding the 41. The Commission understands that collection, processing, and design, testing, and supervision of the requirements for developing, testing, dissemination of market data.333 In Algorithmic Trading systems, in light of and supervising algorithmic systems addition, FINRA Notice 15–09, the numerous best practices and proposed in § 1.81(a)–(d) are already published in March 2015, offered regulatory requirements promulgated in widely used throughout the industry. guidance on effective supervision and this area. The proposed regulations are Are any specific requirements proposed control practices for market participants intended to standardize a set of in this section not widely used by that use algorithmic trading strategies in principles relating to the design, testing, persons that would be designated as AT the equities market. The FINRA notice and supervision of Algorithmic Trading Persons under Regulation AT, and if provided guidance in five general areas: systems in order to reduce the not, why not? If any requirements General risk assessment and response; operational risk of such systems. In their described in § 1.81(a)–(d) are not widely software/code development and response to the Concept Release, IATP used, please provide an estimate of the implementation; software testing and noted that, out of all the safeguards cost that would be incurred by an AT system validation; trading systems; and discussing in the Release, they believed Person to implement such requirements. compliance.334 ATS testing had the greatest potential to 42. Are there any aspects of § 1.81(a)– 339 The Commission further notes that reduce market disruptions. By (d) that are unnecessary for purposes of the FIA Guide provides an overview of standardizing principles in this area, reducing the risks from Algorithmic development and testing procedures, Regulation AT is intended to reduce the Trading, and should not be mandated by including software development, source risk of disorderly trading, including the regulation? If so, please explain. code management and implementation, risk that orders will be unintentionally 43. Are the procedures described exchange-based conformance testing, sent into the marketplace by a poorly above for the development and testing and post-deployment verification, while designed or insufficiently supervised of Algorithmic Trading sufficient to noting that ‘‘market participants and algorithm. ensure that algorithmic systems are For example, the regulations proposed exchanges should have the flexibility thoroughly tested before being used in under § 1.81 may reduce the risk of necessary to establish procedures that production, and will operate in the market disruptions such as the 2012 are appropriate and proportional to their manner intended in the production incident involving Knight Capital. The operations.’’ 335 The IOSCO 2015 environment? SEC later concluded that, among other 44. Are there any additional Consultation Report notes that ‘‘many failures, Knight Capital did not have procedures for the development and regulatory authorities have introduced adequate controls and procedures for testing of Algorithmic Trading that specific requirements and guidelines code deployment and testing for its should be required under Regulation regarding the introduction of new order router, did not have sufficient AT? systems and changes to existing controls and written procedures to 45. Are any of the required systems,’’ and recommends that trading guide employees’ responses to procedures for the development and venues should consider establishing significant technological and testing of Algorithmic Trading likely to policies and procedures related to the compliance incidents, and did not have become obsolete in the near future as development, modification, testing and an adequate written description of its development and testing standards implementation of critical systems, and risk management controls.340 As evolve? establishing a governance model for the discussed above, proposed § 1.81 46. Are the procedures for designating management of critical systems.336 The requires written policies and procedures and training Algorithmic Trading staff IOSCO report also notes that most relating to the following: Testing of all of AT Persons sufficient to ensure that trading venues have procedures and Algorithmic Trading code and relates such staff will be knowledgeable in the tools designed to address the systems and any changes to such code strategy and operation of Algorithmic operational risk associated with and systems prior to their Trading, and capable of identifying electronic trading, including monitoring implementation; regular stress tests of Algorithmic Trading Events and of trading in real-time (or near real- Algorithmic Trading systems to verify promptly escalating them to appropriate time), and monitoring of the trading their ability to operate in the manner staff members? venue’s system performance in real- 47. Is it typical that persons 337 intended under a variety of market time. Finally, the Senior Supervisors conditions; a plan of internal responsible for monitoring algorithmic Group Algorithmic Trading Briefing coordination and communication trading do not simultaneously engage in between compliance staff of the AT trading activity? 332 See id. 48. Proposed §§ 1.80, 1.81, and 1.83 333 Person and staff of the AT Person See Reg SCI, supra note 40 at 72437. would impose certain requirements on 334 See FINRA Notice 15–09, supra note 59 at 1. responsible for Algorithmic Trading 335 See FIA Guide, supra note 95 at 23–30. all AT Persons regardless of the size, 336 See IOSCO 2015 Consultation Report, supra 338 See SSG 2015 Note, supra note 115 at 3. sophistication, or other attributes of note 106 at 14, 19. 339 IATP at 7. their business. The Commission 337 Id. at 21. 340 See SEC Knight Capital Release, supra note 39. requests public comment regarding
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whether these requirements should vary limits. These limits should be and that exchanges should make this in some manner depending on the AT documented and discussed with market same protection available to executing Person. If commenters believe proposed participants to ensure that they are brokers executing for customers for §§ 1.80, 1.81, and 1.83 should vary, appropriate for the participants’ type of whom they do not clear.355 please describe how and according to activity.346 FIA further stated that FCMs b. Maximum Order Sizes what criteria. that choose to implement message rate limits within their infrastructure should Commenters indicated that clearing J. Risk Management by Clearing Member be transparent to their customers FCMs—§ 1.82 members already use maximum order regarding the reason for the control and sizes. FIA explained that FIA PTG The Commission proposes a new the maximum message rate that can be conducted a survey and all responding § 1.82 to require clearing member FCMs supported by the FCM.347 In the case of FCMs used this control.356 CME to implement pre-trade risk and order direct access, FIA explained that the commented that it allows clearing management controls with respect to AT FCM should rely on DCM-provided members to use its technology to set Order Messages originating with an AT message rate limits and any controls maximum order sizes for specific Person. Specifically, such clearing implemented by the market participants customers or accounts.357 CFE stated member FCMs must make use of pre- themselves.348 that it allows clearing members to set trade risk controls reasonably designed Additional commenters indicated that maximum order size limits by product, to prevent or mitigate an Algorithmic FCMs should implement messaging or and then set maximum order and quote 349 Trading Disruption, including at a execution limits. For example, Gelber size limits by the ‘‘log-in’’ of trading minimum, those pre-trade risk controls stated that ‘‘in many cases, FCMs privilege holders.358 FIX indicated that described in § 1.80(a)(1). The remainder receive fills from the exchanges and it is becoming increasingly common for of this section presents Concept Release have no control over the amount of futures and equities exchanges to comments on this topic, a description of messaging coming from a customer provide tools that allow an FCM the the proposed regulation, a discussion of controlled-and-run applications. ability to set checks for each client that the policy justification for the proposal, Therefore, FCMs need to have the accesses the exchange directly.359 AIMA and a request for comments on the ability to coordinate throttle rates suggested that many market participants proposal. through the account identifier at the already use maximum order sizes when exchange.’’ 350 Gelber indicated that 1. Concept Release Comments trading through their brokers, but may such limits should take into account have less access to this control in the The Concept Release inquired about financial risk and FCMs’ understanding 360 351 case of direct market access. MFA clearing members’ use of the same pre- of their clients’ business. MFA stated commented that some FCMs already trade and other risk controls discussed that clearing members, as the gateways offer their customers this control, which above in section IV(H) with respect to to the markets, should have financial can be set at the following levels: Each AT Persons. and regulatory risk management direct market access order, each controls to reduce risks associated with individual algorithmic order, net sell a. Message and Execution Throttles market access.352 Similarly, CME and buy order limits, and total contract supported allowing clearing members to FIA indicated that message and limits.361 MFA suggested that all FCMs provide direct market access to their execution throttles are already widely offer this maximum order size control at customers as long as the clearing used by clearing members. FIA PTG the trader-level.362 Similarly, KCG member has appropriately vetted the surveyed its members and found that all believes that exchange-provided client and implemented appropriate risk responding FCMs used message and maximum order size controls should management controls.353 CME stated execution throttles, either internally or allow the market participant flexibility 341 that clearing firms should decide the at the exchange level. FIA also in setting different maximum order size exact nature of the throttles to impose indicated that most DCMs provide tools levels for different users within a firm, to allow FCMs to set pre-trade controls across their customer base, taking into consideration financial risk to the extent such as based on trader ID or for their customers, which are a customer.363 Chicago Fed supports a prerequisite for an FCM to provide possible and their understanding of their clients’ businesses.354 Finally, SIG requirement that clearing firms must use direct access to a market participant this control at the account level.364 without routing orders through the commented that clearing firms should FCM’s infrastructure.342 FIA explained have the ability to throttle orders at the c. Price Collars that FCMs encourage DCMs to provide exchange level in connection with credit limits set by the clearing firm, Most comments addressing this pre-trade risk controls that can be set at control focused on price collars various levels, whether at session level, 346 implemented by exchanges. However, customer level or account level.343 CFE FIA at 16. 347 the FIA FCM Survey reflected that commented that it provides an FIA at 12. 348 FIA at 16. almost all responding FCMs used price execution throttle to clearing 349 KCG at 3; Gelber at 6; MFA at 4–5; CME at 344 collars, administered either internally or members. 7–9; AIMA at 7; Chicago Fed at 2; SIG at 3. The at the exchange level.365 FIA stated that DCM message rate Commission notes that the same concern discussed limits should be supplemented at the in the AT Person context that message or execution limits have potential negative effects because they 355 345 See id. market participant or FCM level. FIA can block risk-reducing orders would also apply to 356 FIA at 59–60. explained that where an FCM facilitates message or execution limits applied by an FCM. To 357 CME at 15. that end, the Commission notes that FIA market access, it has the ability to 358 commented that a FCM should never reject an order CFE at 7. impose the FCM’s own message rate cancellation request due to message rate limits. See 359 FIX at 3. FIA at 16. 360 AIMA at 13. 341 FIA at 59–60. 350 Gelber at 6. 361 MFA at 9. 342 FIA at 13. 351 Gelber at 5–7. 362 See id. 343 FIA at 13. 352 MFA at 4–5. 363 KCG at 8. 344 CFE at 7. 353 CME at 7. 364 Chicago Fed at 2. 345 FIA at 12, 16. 354 CME at 9. 365 FIA at 60.
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d. Order Management Controls clearing member FCMs must make use the FCM are promptly alerted when pre- As noted above, the Concept Release of pre-trade risk controls reasonably trade risk control parameters established requested comment regarding ‘‘system designed to prevent or mitigate an pursuant to this section are breached, heartbeats’’ and ‘‘auto-cancel on Algorithmic Trading Disruption, and make use of the order cancellation disconnect,’’ and commenters that including at a minimum, those pre-trade systems described in § 1.80(b)(1). (The addressed this topic indicated that risk controls described in § 1.80(a)(1). order cancellation systems are the same exchanges provide these tools. In (Proposed § 1.80(a)(1) requires AT controls that proposed § 1.80(b)(1) addition, FIA indicated that it is Persons to implement, at a minimum, requires AT Persons to implement, i.e., increasingly common for FCMs to maximum AT Order Message frequency systems that have the ability to employ cancel-on-disconnect for their per unit time and maximum execution immediately disengage Algorithmic connections to the DCM.366 frequency per unit time, order price Trading, cancel selected or up to all Some commenters addressed the parameters and maximum order size resting orders when system or market implementation of ‘‘kill switch’’ limits.) The Commission notes that conditions require it, and prevent the functionality by FCMs. Two exchanges proposed § 1.82 requires clearing submission of new orders.) Pursuant to proposed § 1.82(b) and commented that their kill switch member FCMs to address ‘‘Algorithmic (c), the location of the pre-trade and functionality allows clearing firms to Trading Disruptions,’’ rather than the other risk controls calibrated by the cancel orders 367 and several broader ‘‘Algorithmic Trading Events’’ clearing member FCM varies, according commenters stated that kill switches that AT Persons are required to address to whether an AT Person’s orders are should be implemented by market under proposed § 1.80. As discussed in placed through DEA or intermediated by participants and clearing firms in section IV(D) above, an Algorithmic its clearing FCM. addition to exchanges.368 Barclays Trading Disruption is defined in proposed § 1.3(uuuu) as an event DEA Orders—Controls Reside at commented that if a kill switch is DCM. Proposed § 1.82(b) addresses AT located at the FCM level, then the originating with an AT Person that disrupts, or materially degrades, (1) the Order Messages originating with an AT Commission should provide ‘‘clear Person and submitted through DEA. In regulatory guidance’’ about when the Algorithmic Trading of such AT Person, (2) the operation of the DCM on which the case of DEA, pre-trade and other risk FCM should alter or cancel orders, given controls would be established by and that altering or cancelling orders could such AT Person is trading or (3) the ability of other market participants to located at the DCM, and be controlled expose the FCM to significant financial or calibrated by the clearing FCM. This 369 trade on the DCM on which such AT or legal liability. approach recognizes that clearing FCMs FIA explained that if a DCM cannot Person is trading. In contrast to an Algorithmic Trading Event (defined in do not have the ability to apply market provide the appropriate level of risk controls to customers’ DEA orders proposed § 1.3(vvvv)), an Algorithmic granularity in the function of its kill before they reach a DCM. With respect Trading Disruption does not specifically switch, the focus of this functionality to financial risk, existing § 38.607 370 incorporate violations of the CEA or the should be at the FCM level. FIA requires DCMs to establish controls rules thereunder. The Commission recommended that a kill switch facilitating FCMs’ management of anticipates that some Algorithmic implemented by an FCM should be able financial risk, and existing § 1.73 Trading Disruptions may be the result of to be invoked ‘‘at the finest resolution provides requirements with respect to violations of the CEA or Commission possible’’ and should include both clearing FCMs’ implementation of such regulations, and some Algorithmic manual and automated methods for controls.373 Consistent with that 371 Trading Disruptions may not. Proposed triggering the kill switch. FIA structure, proposed amendments to § 1.82 requires clearing member FCMs stressed that a kill switch should be § 38.255 establish a similar structure in used as a ‘‘final measure’’ only when to make use of pre-trade risk controls which DCMs must establish pre-trade other processes have not been reasonably designed to prevent or and other risk controls addressing the successful, and that policies and mitigate an Algorithmic Trading risks of Algorithmic Trading for use by procedures for when an FCM will Disruption, regardless of whether such FCMs. Proposed § 1.82(b), accordingly, invoke a kill switch should be clearly disruptions were the result of a requires FCMs to implement such communicated to the market violation of the CEA or Commission controls residing at the DCM. participant.372 regulations. It otherwise does not Non-DEA Orders—FCM Implements require clearing member FCMs to ensure 2. Description of Regulation and Calibrates Controls. Proposed that their customers’ order flow does not § 1.82(c) addresses the scenario in The Commission proposes a new violate the CEA or Commission which AT Order Messages originating § 1.82 to require clearing member FCMs regulations. However, nothing in with an AT Person are not submitted to to implement pre-trade risk controls and proposed § 1.82 relieves FCMs of their a trading platform through DEA, but order management controls with respect obligations under all other applicable instead are routed through a clearing to AT Order Messages originating with Commission regulations. member FCM. In the case of such an AT Person. Specifically, such Proposed § 1.82 also requires that pre- intermediated orders, the controls trade risk controls must be set at the would not reside at the DCM. Instead, 366 FIA at 14. level of each AT Person, or such other the clearing member FCM itself would 367 CME at 23–24; CFE at 11. more granular level as the clearing FCM have the obligation to implement and 368 Citadel at 3; CME at 22; Chicago Fed at 2. may determine, including but not 369 Barclays Capital Inc. (‘‘Barclays’’) Comment 373 The Commission notes that § 23.609 imposes Letter (December 10, 2013) at 1. Similarly, FIA limited to: By product, account number the same risk-based limit requirements on SDs and commented that where FCMs rely on DCM- or designation, or one or more MSPs as § 1.73 does on clearing FCMs. SDs and provided controls, and such controls fail to operate identifiers of natural persons associated MSPs do not carry customer accounts; accordingly, according to the instructions of the FCM, FCMs with an AT Order Message. In addition, any firm that has customer accounts must be a should be deemed to have met their regulatory § 1.82 would require the clearing registered FCM and implement the controls obligations. FIA at 19–20. required by new § 1.82. Furthermore, any SD or 370 member FCM to have policies and FIA at 30. MSP that engages in Algorithmic Trading for its 371 Id. at 31. procedures reasonably designed to own account will have to comply with the AT 372 Id. ensure that natural person monitors at Person requirements of proposed § 1.80.
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calibrate pre-trade risk and other is granted access to the market via an Algorithmic Trading) and to proposed controls with respect to such orders. intermediary’s systems or directly, § 1.82 (as a clearing member). The The Commission notes that while the without using the intermediary’s Commission is providing further clarity controls implemented by the FCM are systems. IOSCO has recommended that regarding who would be AT Persons for the same types of controls that would be intermediaries (including clearing firms) purposes of § 1.80 and other regulations, implemented by AT Persons pursuant to have adequate operational and technical including some detailed order flow § 1.80 (and by DCMs pursuant to capabilities to manage appropriately the scenarios that demonstrate the § 40.20, discussed below), each entity risks posed by such access.375 ESMA’s application of §§ 1.80 and 1.82, below. would be responsible for ensuring the 2015 Final Draft Regulatory Standards Question One: In the scenario in appropriate calibration of the control. require that the intermediary providing which a non-clearing FCM trading for a Accordingly, an FCM’s setting of a access apply pre-trade risk controls on proprietary account submits orders to a maximum order size limit, for example, the order flow of their clients.376 separate clearing FCM, could the may be different from the setting used ESMA’s regulatory standards provide clearing FCM ever engage in by an AT Person, depending on each that the direct electronic access provider Algorithmic Trading and be an AT entity’s assessment of the potential for may use its own proprietary controls, Person? an Algorithmic Trading Event or an controls purchased from a third-party, If an FCM trading for a proprietary Algorithmic Trading Disruption, as or controls offered by a trading venue, account submits an order to a separate applicable. The Commission will not but in each of those circumstances the clearing FCM, the separate clearing FCM mandate exactly when intervention by provider remains responsible for the could be an AT Person if it uses an FCM to modify or cancel orders is effectiveness of those controls and is computer algorithms or systems to necessary; rather, the Commission solely entitled to set or modify any determine any of the elements of the believes that each FCM is best parameters and limits.377 definition of Algorithmic Trading (e.g., positioned to determine appropriate determinations regarding order routing). parameters that will prevent or mitigate 4. Discussion of Persons Subject to If the clearing FCM is not making any an Algorithmic Trading Disruption. Proposed §§ 1.80 and 1.82 of these determinations, the clearing Furthermore, the Commission will not The following discussion is intended FCM is not an AT Person. specify a mandate which, if complied to provide detailed examples of which If an FCM trading for a proprietary with by an FCM, would absolve the persons will be subject to proposed account submits an order to a separate FCM of liability (as requested by §§ 1.80 (applicable to all AT Persons non-clearing FCM who then submits it Barclays).374 when acting as such) and 1.82 to an additional separate clearing FCM, 3. Policy Discussion (applicable only to clearing FCMs). the clearing FCM is not engaged in Proposed § 1.80 would apply to AT Algorithmic Trading, provided that it is The Commission agrees with Persons—i.e., any FCM, floor broker, not determining any of the elements of comments to the Concept Release that SD, MSP, CPO, CTA, IB or floor trader the definition of Algorithmic Trading. suggested that all types of market access as defined in proposed § 1.3(x)(3) when Question Two: Is it correct to say that create risks; therefore, the same engaged in Algorithmic Trading on or all FCMs using Algorithmic Trading to principles should apply to all types of subject to the rules of a DCM. In engage in proprietary trading are AT market access. When an order does not contrast, proposed § 1.82 would apply Persons? pass through a clearing member FCM’s to clearing FCMs when acting as Yes. A non-clearing or clearing FCM infrastructure before entering the clearing members for their customers that uses Algorithmic Trading to engage market, it is critical that DCMs provide with respect to an AT Order Message. in proprietary trading is an AT Person. clearing member FCMs with the ability Question Three: Is it correct to say to subject such orders to controls that An entity could be subject to both § 1.80 and § 1.82 in certain that an FCM accepting orders from its prevent or mitigate the impact of customer may be an AT Person, if its unintended or disruptive trading. In circumstances. For example, in the event that a clearing FCM engages in computer algorithms or systems addition, where orders pass through a determine any of the elements of the clearing member FCM’s infrastructure both Algorithmic Trading for its own account and acts a clearing member definition of Algorithmic Trading? before entering the market, that clearing Yes. A non-clearing or clearing FCM with respect to its customers’ AT Order member FCMs should subject such that accepts customer orders, and that Messages, such clearing FCM would be orders to similar controls. The uses computer algorithms or systems to subject to both proposed § 1.80 (as an Commission believes that an order determine any of the elements of the AT Person with respect to its own should pass through the same pre-trade definition of Algorithmic Trading (e.g., risk controls regardless of trading 375 IOSCO 2015 Consultation Report, supra note determinations regarding order routing), strategy or means of market access, and 106 at 22–23. would be an AT Person with respect to that all market participants have a 376 See ESMA September 2015 Final Draft the customer’s orders. responsibility to implement risk Standards Report Annex 1, supra note 80 at 218. Below are some detailed order flow controls appropriate to their role in the ESMA’s 2015 Final Draft Regulatory Standards scenarios that demonstrate the further require, among other things, that direct lifecycle of an order. electronic access providers have the ability to stop application of §§ 1.80 (which applies to As discussed above, commenters order flow of their clients, carry out a review of the AT Persons) and 1.82. indicated that the required controls (i.e., internal risk controls systems of the client, and have Example 1: Order flow prior to execution the ability to identify the different trading desks message and execution throttles and by DCM: (i) Customer to (ii) non-clearing price and size parameters) are already and traders of its clients. The direct electronic access provider must also perform due diligence on FCM to (iii) separate clearing FCM. Customer widely used by clearing members, either its clients covering, among other things, the type of is not registered with the Commission; uses internally or as provided by the DCM. strategies the client will use, the operational set-up, algorithms but not DEA. Neither the non- The Commission also notes that IOSCO systems and controls of the client, its historical clearing FCM nor the clearing FCM make any and ESMA have stressed the importance trading pattern and behavior, an assessment of the of the determinations regarding the order level of expected trading and order volume, and the of adequate risk controls where a user described in the definition of Algorithmic ability of the client to meet its financial obligations. Trading. See id. at 219–20. 374 See Barclays at 1. 377 See id. Who is an AT Person?
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(i) The customer is not an AT Person, because it engages in Algorithmic originating with an AT Person. The because it is not registered and does not Trading. Commission is considering modifying use DEA. (ii) The clearing FCM is not an AT proposed § 1.82 to require clearing (ii) The non-clearing FCM is not an Person, because it doesn’t make any FCMs to implement controls with AT Person, because it doesn’t make any determinations regarding the order and respect to all orders, including orders determinations regarding the order and therefore doesn’t engage in Algorithmic that are manually submitted or are therefore doesn’t engage in Algorithmic Trading. But the clearing FCM is subject entered through algorithmic methods Trading. to § 1.82, because the FCM originating that nonetheless do not meet the (iii) The clearing FCM is not an AT the orders is an AT Person. definition of Algorithmic Trading. Such Person, for the same reason as (ii). The a requirement would correspond to the 5. Request for Comments clearing member FCM is also not subject requirement under proposed § 40.20(d) to 1.82, because the customer in (i) 49. Are any pre-trade or other risk that DCMs implement risk controls for originating orders isn’t an AT Person. controls required by § 1.82 ineffective, orders that do not originate from Example 2: Order flow prior to execution not already widely used by clearing Algorithmic Trading. If the Commission by DCM: (i) Customer to (ii) non-clearing member FCMs, or likely to become were to incorporate such amendments FCM to (iii) separate clearing FCM. Customer obsolete? in any final rules arising from this is not registered with the Commission; uses 50. Are there any aspects of proposed NPRM, its intent would be to further algorithms but not DEA. Non-clearing FCM’s § 1.82 that pose an undue burden for reduce risk by ensuring that all orders, computer algorithms or systems make some clearing member FCMs and are regardless of source, are screened for of the determinations regarding the order unnecessary for purposes of reducing risk at both the clearing member FCM described in the definition of Algorithmic the risks associated with Algorithmic and the DCM level. Risk controls at the Trading. Trading? If so, please explain (1) the point of order origination would Who is an AT Person? burden; (2) why it is not necessary to continue to be limited to AT Persons. (i) The customer is not an AT Person, reduce the risks associated with The Commission requests comment on because it is not registered and does not Algorithmic Trading, particularly in the this proposed amendment to § 1.82, use DEA. case of DEA. What alternatives are which the Commission may implement (ii) The non-clearing FCM is an AT available consistent with the purposes in the final rulemaking for Regulation Person, because it engages in of Regulation AT? AT. The Commission requests comment Algorithmic Trading regarding the 51. Please describe the technological on the costs and benefits to clearing customer’s order. development that would be required by FCMs of this proposal, in addition to (iii) The clearing FCM is not an AT clearing member FCMs to comply with any other comments regarding the Person, assuming it doesn’t make any the requirement to implement and effectiveness of this proposal in terms of determinations regarding order and calibrate the pre-trade and other risk risk reduction. therefore doesn’t engage in Algorithmic controls required by § 1.82(c) for non- Trading. The clearing FCM is also not DEA orders. To what extent have K. Compliance Reports Submitted by AT subject to 1.82, because the customer clearing member FCMs already Persons and Clearing FCMs to DCMs; originating orders isn’t an AT Person developed the technology required by Related Recordkeeping Requirements— § 1.83 (even though the non-clearing FCM in this provision, for example in the order flow is an AT Person). connection with existing requirements The Commission is proposing new Example 3: Order flow prior to execution under § 1.11, and §§ 1.73 and 38.607 for § 1.83(a) and (b) of its regulations to by DCM: (i) Customer to (ii) a clearing FCM. clearing FCMs to manage financial require that AT Persons and clearing Customer is not registered with the risks? member FCMs provide the DCMs on Commission; uses algorithms but not DEA. 52. Are there additional pre-trade or which they operate with information Clearing FCM just clears trades, and does not other risk controls that should be regarding their compliance with make any of the determinations regarding the specifically required pursuant to §§ 1.80(a) and 1.82(a)(1). Specifically, order described in the definition of proposed § 1.82? the proposed rules would require AT Algorithmic Trading. 53. Do you believe that the pre-trade Persons prepare, certify, and submit Who is an AT Person? and other risk controls required in annual reports regarding their controls (i) The customer is not an AT Person, § 1.82 sufficiently address the for: (1) Maximum AT Order Message because it is not registered and does not possibility of technological advances in frequency; (2) maximum execution use DEA. trading and development of new, more frequency; (3) order price parameters; (ii) The clearing FCM is not an AT effective controls that should be and (4) maximum order sizes. The Person, because it doesn’t make any implemented by FCMs? proposed rules would require each FCM determinations regarding the order and 54. The Commission welcomes that is a clearing member for an AT therefore doesn’t engage in Algorithmic comment on whether the requirements Person to prepare, certify, and submit Trading. The clearing FCM is also not of § 1.82 relating to the design of annual reports regarding its program for subject to 1.82, because the customer controls and the levels at which the establishing and maintaining those same originating orders isn’t an AT Person. controls should be set are appropriate controls for its AT Persons (in the Example 4: Order flow prior to execution and sufficiently granular. aggregate). As described in section IV(H) by DCM: (i) FCM trading for its proprietary 55. Proposed § 1.82 does not require and (J) above, the use of such pre-trade account to (ii) a separate clearing FCM. The FCMs to have connectivity monitoring risk controls would be mandatory for FCM trading for a proprietary account uses such as ‘‘system heartbeats’’ or both AT Persons and clearing member Algorithmic Trading; clearing member FCM automatic cancel-on-disconnect FCMs pursuant to §§ 1.80(a)(1) and does not make any of the determinations functions. Do you believe that § 1.82 1.82(a)(1), respectively. described in the definition of Algorithmic should require FCMs to have such The reports proposed by § 1.83, Trading. functionality? together with the DCM review program Who is an AT Person? 56. Proposed § 1.82 requires clearing proposed by § 40.22, will enable DCMs (i) The FCM trading for the FCMs to implement controls with to have a clearer understanding of the proprietary account is an AT Person, respect to AT Order Messages pre-trade risk controls of all AT Persons
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that are engaged in Algorithmic Trading receive the certification; and (4) should CCO and CRO to make certain that on such DCM. Furthermore, because AT DCMs, SEFs, or clearing member FCMs responsibility for the underlying Persons and clearing member FCMs will be required to audit the certifications of systems and algorithms is taken by have great flexibility in how they market participants.380 those officers having direct implement their pre-trade risk controls Commenters were mixed in their responsibility.’’ 391 CME commented pursuant to proposed §§ 1.80(a)(1) and support of a certification requirement that any attestation should lie with the 1.82(a)(1), the annual reporting for market participants operating ATSs supervisors with business line obligations in proposed § 1.83 and DCM and for clearing firms that provide responsibility for, and knowledge of, the review provisions in § 40.22 will help clearing services to those market systems at issue. CME also stated that ensure that such controls are being participants. Some commenters, such as the certifications ‘‘should be tendered to implemented and are reasonably AFR, supported certifications.381 each level of the supply chain with designed and calibrated. Others, such as AIMA, FIA, and CME, supervisory authority.’’ 392 As a complement to the compliance oppose a certification requirement set With respect to the frequency of the report program described above, by the Commission.382 AIMA argued certifications, Gelber commented that proposed § 1.83(c) and (d) would that a certification requirement ‘‘could market participants should certify twice require AT Persons and clearing merely create extra administrative costs per year and whenever there has been member FCMs for AT Persons to keep for firms and the CFTC.’’ 383 FIA and a material change to a program that they and provide upon request to DCMs CME stated that it should be left to employ.393 TCL stated that ATSs should books and records regarding their individual DCMs to define certification be required to make the certification compliance with §§ 1.80 and 1.81 (for policies for their market participants.384 annually, or whenever a major AT Persons) and § 1.82 (for clearing FIA commented that instead of formal functional change to their business member FCMs). certification, market access should environment is implemented.394 With The remainder of this section presents depend on attestation that the highest respect to the auditing of the Concept Release comments on this quality standards are maintained and certifications, FIA argued that audit topic, a description of the proposed appropriate risk controls and escalation responsibilities should only be regulation, a discussion of the policy procedures are in place.385 CME argued determined after standards are in justification for the proposal, and a that ‘‘[g]iven the breadth of risk profiles place.395 Alternatively, Gelber argued request for comments on the proposal. across the spectrum of clients, it would that exchanges should require firms to 1. Concept Release Comments be unduly burdensome and cost- maintain certifications and produce prohibitive for the exchanges or the them upon request. Gelber stated that it The Concept Release requested Commission to mandate specific risk should be at the exchanges’ discretion comment on whether it would be management parameters and the as to whether they audit such appropriate to require periodic self- continuous auditing or formal certifications.396 certifications by all market participants certification thereof.’’ 386 operating ATSs and by clearing firms With respect to what information 2. Description of Regulation that provide clearing services to those might be included in the certifications, 378 Compliance Report Program. market participants. In the Concept Gelber argued that ‘‘[a] market Proposed § 1.83(a) and (b) would require Release, the Commission set forth participant should certify that each of that AT Persons and clearing member potential areas that a self-certification its ATS employs pre-trade risk controls, FCMs, respectively, provide the DCMs for market participants might cover. The post-trade reports and system on which they operate with information Commission stated that a certification safeguards.’’ 387 FIA and CME also regarding their compliance with might attest that: ‘‘(1) The ATS contains commented that if the Commission were §§ 1.80(a) and 1.82(a)(1). Specifically, structural safeguards to provide to impose a certification requirement, the proposed rules would to require AT reasonable assurance that the trading the standards for such requirement Persons to prepare, certify, and submit 388 system will not be disruptive to fair and should be principles-based. annual reports regarding their controls equitable trading; (2) the market Most commenters support requiring for: (1) Maximum AT Order Message participant’s ATSs have been designed senior management to make the frequency; (2) maximum execution to avoid violations of the CEA, certification. FIA argued that if a frequency; (3) order price parameters; Commission regulations, or exchange certification requirement is imposed, and (4) maximum order sizes. The rules related to fraud, disruptive trading this certification should be the proposed rules would require each FCM responsibility of senior management at practices, manipulation and trade that is a clearing member for one or the market participant, DCM or FCM.389 practice violations; and (3) such systems more AT Persons to prepare, certify, and Gelber commented that the certification have been sufficiently tested and submit annual reports regarding its should be from a chief technology documented in a manner that is program for establishing and officer or equivalent, and attested to by appropriate to the intended design and maintaining those same controls for its 379 another c-level executive officer.390 AFR use of that system.’’ The Concept AT Persons in the aggregate. As commented that certifications ‘‘should Release also requested comment on a described in section IV(H) and (J) above, be made by the CEO, as well as both the number of different aspects of a self- the use of such pre-trade risk controls certification program. These included: would be mandatory for AT Persons 380 Id. (1) Whether the chief executive officer pursuant to § 1.80(a)(1), and mandatory or chief compliance officer, or similar 381 AFR at 8. 382 for clearing member FCMs pursuant to ranking official of each market AIMA at 21; FIA at 4; CME at 27. 383 § 1.82(a)(1). participant should attest to the AIMA at 21. 384 FIA at 4; CME at 27. certification; (2) how often should a 385 FIA at 40. 391 AFR at 8. market participant make the self- 386 CME at 28. 392 CME at 28. certification; (3) which entities should 387 Gelber at 17. 393 Gelber at 17. 388 FIA at 4; CME at 27. 394 TLC at 15. 378 Concept Release, 78 FR 56559. 389 FIA at 39. 395 FIA at 40. 379 Id. 390 Gelber at 17. 396 Gelber at 17.
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The Commission is also proposing a business (e.g., diversity of trading § 40.22(c) 399 would require DCMs to new § 40.22 (discussed in more detail systems and connectivity methods, and establish a program for effective below) to require that each DCM that the speed of trading). The validation periodic review and evaluation of AT receives a report described in § 1.83 report must be approved by the firm’s Person and clearing member FCM establish a program for effective review senior management and the firm must reports. and evaluation of the reports. The remedy any deficiencies identified. Recordkeeping Requirements. As a complement to the compliance report reports proposed by § 1.83 and the While not identical to the certification review program, proposed § 1.83(c) and review program proposed by § 40.22 required of broker-dealers in the Market would enable DCMs to have a clearer (d) would require AT Persons and Access Rule or ESMA’s annual self- understanding of the pre-trade risk clearing member FCMs for AT Persons assessment process for investment controls and compliance procedures of to keep and provide upon request to firms, the compliance report program all AT Persons that are engaged in DCMs books and records regarding their proposed by § 1.83 and § 40.22 is Algorithmic Trading on such DCM. The compliance with proposed §§ 1.80 and proposed reports and review program similarly designed to ensure that market 1.81 (for AT Persons) and § 1.82 (for will also give DCMs a better participants have effective risk controls clearing member FCMs). Related to understanding of the program for in place and that these risk controls are these provisions, the Commission is also establishing and maintaining the pre- regularly reviewed. Specifically, proposing a new § 40.22(d) (discussed trade risk controls used by any FCM of proposed § 1.83(a) would require each in more detail below) to require DCMs an AT Person that is engaged in AT Person to annually prepare a report, to implement rules that require each AT Algorithmic Trading on such DCM. and submit such report by June 30 to Person to keep and provide to the DCM The Commission notes that the SEC’s each DCM on which such AT Person books and records regarding such AT Market Access Rule, as discussed in engaged in Algorithmic Trading, that Person’s compliance with all greater detail above, has a similar covers from May 1 of the previous year requirements pursuant to § 1.80 and certification requirement for certain to April 30 of the year such report is § 1.81, and require each clearing broker-dealers.397 The Market Access submitted. Together with the annual member FCM to keep and provide to the Rule requires that certain broker-dealers report, each AT Person would be DCM books and records regarding such maintain a system for regularly required to submit copies of the written clearing member FCM’s compliance reviewing the effectiveness of the risk policies and procedures developed to with all requirements pursuant to § 1.82. management controls and supervisory comply with § 1.81(a) and (c). The Finally, proposed § 40.22(e) would procedures required by the Market report must include descriptions of the require DCMs to review and evaluate, as Access Rule. It also requires that the AT Person’s pre-trade risk controls necessary, books and records Chief Executive Officer (or equivalent required by proposed § 1.80(a)(1), and maintained by AT Persons and clearing officer) of a broker-dealer subject to the the parameters and specific quantitative member FCMs regarding their Market Access Rule certify, on an settings used for the risk controls. The compliance with §§ 1.80 and 1.81 (for annual basis, that the risk management report would also be required to include AT Persons) and § 1.82 (for clearing controls and supervisory procedures a certification by the chief executive member FCMs). established by the broker-dealer comply officer or chief compliance officer of the 3. Policy Discussion with the Market Access Rule, and that AT Person that, to the best of his or her the broker-dealer conducted the knowledge and reasonable belief, the The Commission is proposing § 1.83 required review of the risk management information contained in the report is because it believes that Regulation AT controls and supervisory procedures. accurate and complete. must include a mechanism to ensure that AT Persons and clearing member The certification required by the Market Proposed § 1.83(b) would require each FCMs are complying with the Access Rule must be preserved by the FCM that is a clearing member for an requirement to implement certain pre- broker-dealer as part of its books and AT Person to annually prepare a report, trade risk controls. Moreover, an records. and submit such report by June 30 to assessment of such compliance requires The Commission also notes that each DCM on which such AT Person an adequate level of expertise and ESMA’s 2015 Final Draft Regulatory engaged in Algorithmic Trading, that knowledge of markets and market Standards require an annual self- covers from May 1 of the previous year participants’ technological systems and assessment and validation process in to April 30 of the year such report is trading strategies. In this regard, the which investment firms must review submitted. The report must include a Commission notes that reports proposed their algorithmic trading systems and description of the FCM’s program for by § 1.83 will enable DCMs to have a trading algorithms, and overall establishing and maintaining the pre- better understanding of the pre-trade compliance with Article 17 of Directive trade controls required by proposed risk controls of all AT Persons engaged 2014/65/EU (MiFID II’s requirements on § 1.82(a)(1) for its AT Persons (in the in Algorithmic Trading. Furthermore, firms that engage in Algorithmic aggregate) at the DCM. The requirements 398 because the Commission’s pre-trade risk Trading). ESMA sets out elements of proposed § 1.83(b) apply to the pre- control requirements in proposed that investment firms should consider trade risk controls implemented by the §§ 1.80(a)(1) and 1.82(a)(1) offer in its self-assessment, which include FCM for AT Persons using DEA, as well substantial flexibility, the annual elements relating to the nature of its as for AT Persons that do not use DEA. reporting obligations in proposed § 1.83 business (e.g., level of automation, types The report would also be required to will help ensure that such controls are of strategies it employs, latency include a certification by the chief reasonably designed and calibrated. The sensitivity), the scale of its business executive officer or chief compliance Commission believes that a review (e.g., number of algorithms, number of officer of the FCM that, to the best of his program requiring AT Persons and trading desks, messaging volume or her knowledge and reasonable belief, clearing member FCMs to provide capabilities), and the complexity of its the information contained in the report information concerning compliance is accurate and complete. Related to 397 17 CFR 240.15c3–5(e). these reporting requirements in 398 ESMA September 2015 Final Draft Standards 399 See section IV(P) below for a discussion of Report Annex 1, supra note 80 at 210, 224–26. proposed § 1.80(a) and (b), proposed DCMs’ obligations under proposed § 40.22.
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with §§ 1.80(a) and 1.82(a)(1), and clearing member FCMs and are member FCMs to make use of the requiring DCMs to review such unnecessary for purposes of reducing systems provided by DCMs pursuant to information, is the most effective the risks associated with Algorithmic § 38.255(b). The remainder of this method to ensure that all market Trading? If so, please explain (1) the section presents Concept Release participants are implementing measures burden; (2) why it is not necessary to comments on this topic, a description of that are reasonably designed to prevent reduce the risks associated with the proposed regulation, a discussion of an Algorithmic Trading Event or Algorithmic Trading, particularly in the the policy justification for the proposal, Algorithmic Trading Disruption. case of DEA. What alternatives are and a request for comments on the The recordkeeping requirements available consistent with the purposes proposal.400 proposed under § 1.83(c) and (d) and of Regulation AT, including in 1. Concept Release Comments § 40.22(d) and (e) complement the particular Regulation AT’s intent that compliance report program. These § 1.83 reports benefit from the third- As noted above in section IV(D)(7), in provisions will enable DCMs to review party SRO review performed by DCMs the Commission’s discussion of its the compliance of AT Persons and with respect to such reports? proposed definition of Direct Electronic clearing member FCMs with their 62. Should the reports required by Access, several commenters agreed that various obligations under §§ 1.80, 1.81, proposed § 1.83 be sent to any entity any potential risk controls should also and 1.82, by inspecting the books and other than each DCM on which the AT apply to those with direct access to the records of AT Persons and clearing Person operates, such as the markets.401 FIA stated, for example, that member FCMs as necessary. For Commission or an RFA? For example, all types of market access create risks.402 example, a DCM may find it necessary should the Commission require that AT Similarly, CME stated that all entities— to conduct such a review if: It becomes Persons that are members of a RFA send whether they have direct market access aware if an AT Person’s kill switch is compliance reports to RFA upon NFA’s or not—must ‘‘share in the effort to frequently activated, or otherwise request? preserve market integrity.’’ 403 In performs in an unusual manner; if a 63. Proposed § 1.83(c) includes addition, commenters indicated that DCM becomes aware that an AT recordkeeping requirements imposed on exchanges already provide certain pre- Person’s algorithm frequently performs AT Persons, and proposed § 1.83(d) trade risk controls for use by clearing in a manner inconsistent with its includes recordkeeping requirements firms. Please see the discussion at design, which may raise questions about imposed on clearing member FCMs. section IV(H)(1) above for a discussion the design or monitoring of the AT Should the recordkeeping requirements of Concept Release comments with Person’s algorithms; if a DCM identifies of § 1.83(c) be distributed throughout respect to clearing firms’ use of frequent trade practice violations at an the sections of the Commission’s exchange-provided pre-trade and other AT Person, which are related to an regulations that contain recordkeeping risk controls. requirements for various categories of algorithm of the AT Person; or if an AT 2. Description of Regulation Person represents significant volume in Commission registrants that will be a particular product, thereby requiring classified as AT Persons? Should The Commission proposes to amend heightened scrutiny, among other § 1.83(d) be transferred to section 1.35 of § 38.255 (Risk controls for trading) to reasons. the Commission’s regulations, which require DCMs to have in place systems contains recordkeeping requirements for and controls designed to facilitate a 4. Request for Comments clearing member FCMs? clearing member FCM’s management of the risks that may arise from 57. The Commission welcomes L. Risk Controls for Trading: Direct comment on the type of information that Algorithmic Trading by its AT Person Electronic Access Provided by DCMs— customers using DEA (as defined in should be included in the reports § 38.255(b) and (c) required by proposed § 1.83. Should proposed § 1.3(yyyy)). The DCM different or additional descriptions be The Commission proposes to amend regulations already address financial included in the reports, which will be § 38.255 (Risk controls for trading) by risk using a similar structure. Existing evaluated by DCMs under proposed adding new § 38.255(b) requiring DCMs § 38.607 provides that, in the context of § 40.22? to implement systems and controls direct electronic access, a DCM must 58. How often should the reports reasonably designed to facilitate a have in place systems and controls required by proposed § 1.83 be clearing FCM’s management of designed to facilitate an FCM’s submitted to the relevant DCMs? Should Algorithmic Trading risks arising from management of ‘‘financial risk.’’ The the report be submitted more or less its DEA customers. The Commission DCM must also require FCMs to use frequently than annually? also proposes to amend § 38.255 by such controls. 59. When should the reports required adding new paragraph (c), which would The pre-trade risk controls and order by proposed § 1.83 be submitted to the require that DCMs who permit DEA also cancellation systems that DCMs must relevant DCMs? Should the reports be mandate the use of § 38.255(b) risk provide to clearing member FCMs are submitted on a date other than June 30 controls by all clearing member FCMs the same as those that proposed of each year? with respect to the Algorithmic Trading § 1.80(a) requires AT Persons to 60. Should a representative of the AT of their DEA customers. The implement, i.e., maximum AT Order Person or clearing member FCM other Commission notes that the risk controls Message frequency per unit time and than the chief executive officer or the and requirements described in proposed maximum execution frequency per unit chief compliance officer be responsible § 38.255(b) and (c), while provided by time, and order price parameters and for certifying the reports required by and residing at the DCM, are maximum order size limits. The order proposed § 1.83? Should only the chief fundamentally intended to facilitate a executive officer be permitted to certify clearing member FCM’s management of 400 The proposed amendments would also re- the report? Alternatively, should only the risks posed by the clearing member designate the existing requirements in § 38.255 as § 38.255(a). the chief compliance officer be FCM’s DEA customers. In this regard, 401 FIA at 12, 15; KCG at 2; CME at 7–8; VFL at permitted to certify the report? proposed § 38.255(b) and (c) should be 2; AIMA at 1. 61. Are there any aspects of proposed read in conjunction with proposed 402 FIA at 12, 15. § 1.83(b) that pose an undue burden for § 1.82(b), which would require clearing 403 CME at 7–8.
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cancellation systems that DCMs must capabilities to manage appropriately the cancel-on-disconnect functions. Should establish for implementation by the risks posed by direct electronic § 38.255 require such functionality? clearing member FCM are the same access.406 In addition, as discussed M. Disclosure and Transparency in DCM controls that proposed § 1.80(b)(1) above, ESMA’s 2015 Final Draft Trade Matching Systems—§ 38.401(a) requires AT Persons to implement, i.e., Regulatory Standards require direct systems that have the ability to electronic access providers to apply pre- Regulation AT proposes to amend immediately disengage Algorithmic trade controls on the order flow of their § 38.401(a) of the Commission’s Trading, cancel selected or up to all clients consistent with the controls that regulations to enhance public resting orders when system or market ESMA requires for investment firms.407 transparency regarding the design and conditions require it, and prevent the ESMA’s standards further provide, operation of a DCM’s electronic submission of new orders. among other things, that trading venues matching platform. Currently, The proposed regulation text is must have public rules pursuant to § 38.401(a) requires DCMs to have articulated broadly enough to allow which direct electronic access providers procedures, arrangements, and DCMs the flexibility to design controls provide their service, and in the case of resources for disclosing to the for use by clearing member FCMs that sponsored access (where a client Commission, market participants, and are appropriate to their markets and transmits orders directly to a trading the public accurate information on the market participants. Proposed platform without such orders passing rules and specifications of their § 38.255(b)(1)(ii) provides that the pre- through an intermediary’s electronic matching platforms or trade trade risk controls established by the infrastructure), the trading venue must execution facilities. The proposed DCMs must enable the clearing member require such firms to implement the amendments to § 38.401(a) would FCM to set the controls at the level of same pre-trade risk controls as the clarify that such existing obligations each AT Person, product, account trading venue’s members.408 The include disclosure of any attributes of number or designation, and one or more Commission believes that requiring an electronic matching platform or trade identifiers of natural persons associated DCMs to establish pre-trade risk execution facility that materially impact with an AT Order Message. DCM rules controls and order management controls market participant orders, but which are should permit clearing member FCMs to for use by clearing member FCMs with not readily apparent to a market choose the level at which they place the respect to their direct access customers participant. The proposed amendments control, as long as clearing member will ensure that all orders, regardless of recognize that the structure, architecture, mechanics, characteristics, FCMs use at least one of the levels. access method, are subjected to the attributes, or other elements of an Similarly, proposed § 38.255(b)(2) same tools that mitigate the risks posed electronic matching platform or trade provides that the DCM-provided order by Algorithmic Trading. cancellation systems should enable the execution facility—elements that are clearing member FCM to apply such 4. Request for Comments under the design control of the DCM— systems to orders from each AT Person, 64. Are there any pre-trade and other may affect how market participant product, account number or risk controls required by § 38.255(b) and orders are received or executed. The designation, or one or more identifiers (c) that will be ineffective, not already Commission believes that each market of natural persons associated with an widely provided by DCMs for use by participant should have ready access to AT Order Message. A DCM that permits FCMs, or likely to become obsolete? information that explains the existence and operation of any attribute within an DEA must require FCMs to use the 65. Are there additional pre-trade or electronic matching platform or trade § 38.255(b) controls with respect to all other risk controls that DCMs should be execution facility that will impact how AT Order Messages originating with an specifically required to provide to FCMs a market participant experiences the AT Person that are submitted through pursuant to proposed § 38.255(b) and market. The remainder of this section DEA. (c)? presents Concept Release comments on 66. Do you believe that the pre-trade 3. Policy Discussion this topic, a description of the proposed and other risk controls required regulation, a discussion of the policy The Commission believes that its pursuant to § 38.255(b) sufficiently justification for the proposal, and a proposed amendments to § 38.255, and address the possibility of technological request for comments on the proposal. corresponding proposed § 1.82 advances in trading? For example, do applicable to clearing member FCMs, is they appropriately address the potential 1. Concept Release Comments consistent with those comments to the for the future development of additional Concept Release that suggested that pre- As noted above, the proposed effective controls that should be amendments to § 38.401(a) focus in trade risk controls should apply to those provided by DCMs and implemented by with direct market access.404 As FIA large measure on attributes of an FCMs? electronic matching platform or trade explained, all types of market access 67. The Commission welcomes create risks; therefore, the same execution facility that impact the timing comment on whether § 38.255(b)’s and sequencing of specific events on the principles should apply to all types of requirements relating to the design of 405 exchange. While the Concept Release market access. In addition, the controls and the levels at which the Commission’s approach to controls that did not directly address proposed controls should be set are appropriate § 38.401(a), it did ask for public should exist in the context of DEA is and sufficiently granular. consistent with recommendations of or comment on latencies in the 68. Proposed § 38.255(b) and (c) do transmission of various types of steps taken by other regulatory not require DCMs to provide to FCMs organizations. For example, IOSCO has messages between exchanges, firms and connectivity monitoring systems such as vendors wherein differences in latency recommended that intermediaries ‘‘system heartbeats’’ or automatic (including clearing firms) should have could provide opportunities for informational advantage.409 It pointed to adequate operational and technical 406 IOSCO 2015 Consultation Report, supra note 106 at 22–23. press reports that one exchange sent 404 FIA at 12, 15; KCG at 2; CME at 7–8; VFL at 407 See ESMA September 2015 Final Draft confirmations to the traders involved in 2; AIMA at 1. Standards Report Annex 1, supra note 80 at 218. 405 FIA at 12, 15. 408 See id. at 269–70. 409 Concept Release, 78 FR 56546.
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an executed transaction before the DCM information.416 Even if no latencies product listings, rules, rule posted the transaction on its market data existed within an exchange’s amendments, or other changes to feed to the marketplace as a whole.410 infrastructure, market participants may previously-disclosed information, The Commission asked for comments still face latencies in clearing and concurrent with filing such submissions on: (a) Whether the extent of latency in executing firms’ systems.417 with the Commission. The proposed message transmission can have an Several commenters addressed the amendments to § 38.401 build on these adverse impact on market quality or specific issue of whether participants in disclosure, accuracy, and timing fairness; and (b) whether exchanges, a trade should receive confirmations of requirements, and extend the disclosure vendors and firms should be required to that trade before, or at least not after, the requirements to cover certain attributes audit their systems and processes on a trade is reflected in market data sent to of the operation of electronic matching periodic basis to identify and resolve all market participants (‘‘confirmation- platforms. such latencies.411 first latency’’).418 FIA commented that The Commission proposes to amend The Concept Release also asked for the confirmation-first latency on one § 38.401(a)(1)(iii) to require DCMs to public comment on the advisability of exchange was not hidden, and that it disclose to the Commission, market requiring each trading platform to could be measured and understood by participants and the public accurate provide market quality indicators on a anyone with the proper market information pertaining to rules or periodic basis for each product traded access.419 FIA stated that it is specifications pertaining to the on its platform.412 The Concept Release imperative that the market data operation of the electronic matching also asked for comments on what types broadcast to all market participants not platform or trade execution facility, of market quality data would be helpful be sent before the participants to a trade including but not limited to those to market participants and promote know that the trade was executed pertaining to the operation of its market efficiency through transparency (‘‘market data-first latency’’).420 FIA also electronic matching platform that and market competition. stated that market data-first latency materially affect the time, priority, price, or quantity of execution, or the Several commenters supported would cause liquidity providing participants to be unaware of their ability to cancel, modify, or limit increased transparency by the display of market participant orders. exchanges in the operation of their positions and therefore hamper their ability to hedge risk effectively. The The Commission also proposes to electronic matching platforms. AIMA, amend § 38.401(a)(1) by adding a new for example, would welcome new commenter believed that this would cause market makers to widen the requirement (§ 38.401(a)(1)(iv)) that requirements for transparency by DCMs must disclose to all market exchanges on issues of latency, noting spreads they offer. OneChicago suggested that confirmation-first latency participants any known attributes of the that market participants without DMA electronic matching platform, other than should not be considered an unfair are currently not able to calculate many those already disclosed in rules or advantage.421 SIG suggested that measures of latency and market quality specifications under section (a)(1)(iii), 413 confirmation-first latency would that are available to those with DMA. that materially affect the time, priority, encourage liquidity by allowing an Bell noted that the disclosure of price, or quantity of execution of market executing trader to hedge a position latencies in CME’s electronic matching participant orders, the ability to cancel, before quickly responding momentum platform removed the informational modify, or limit display of market traders exhausted available liquidity in advantage held by those market participant orders, or the dissemination the market.422 participants who knew of the latency of real-time market data to market compared to those who did not.414 2. Description of Regulation participants, including but not limited However, Bell also cautioned that the to latencies or other variability in the Current § 38.401(a) requires DCMs to threat of sanctions against an exchange electronic matching platform and the have procedures, arrangements, and for the existence of a latency arbitrage transmission of message resources for disclosing to the opportunity in an electronic matching acknowledgements, order Commission, market participants, and platform could discourage that exchange confirmations, or trade confirmations, or the public accurate information on, inter from publicly disclosing such dissemination of market data. The alia, the rules and specifications information. FIA noted that real-time Commission notes, however, that concerning the operation of the DCM’s access to additional information proposed § 38.401(a)(1)(iii) and (iv) are electronic matching platform or trade regarding the order book creates a more not intended to require the disclosure of execution facility. Current § 38.401(b) transparent marketplace, which trade secrets by any DCM. ultimately breeds confidence among requires DCMs to provide such Finally, the Commission also market participants.415 information that ‘‘it believes, to the best proposes to amend § 38.401(c) by of its knowledge, is accurate and CME and FIA noted that latency is a adding a new requirement complete, and must not omit material natural component of market structure (§ 38.401(c)(3)) that a DCM, in making information.’’ Current § 38.401(c) because of the time it takes computer available on its Web site information requires DCMs to make publicly systems to process information as well pursuant to paragraphs (a)(1)(iii) and available on their Web sites any new as the communications systems (iv) of § 38.401(c), must place such information and submissions on its Web involved in transmitting order message 416 CME at 6–7; FIA at 47–48. site within a reasonable time, but no 417 CME at 48. 410 Scott Patterson, Jenny Strasburg, & Liam 418 FIA at 47–48; SIG at 2; OneChicago at 1. The later than 10 business days, following Pleven, ‘‘High-Speed Traders Exploit Loophole,’’ Commission is using the term ‘‘confirmation-first the identification of or changes to such Wall St. J. (May 1, 2013), available at http:// latency’’ for ease of reference; it was not used in the attributes. Such information shall be www.wsj.com/articles/SB10001424127 comment letters. disclosed prominently and clearly in 887323798104578455032466082920. 419 FIA at 48. plain English. The Commission 411 Concept Release, 78 FR 56546. 420 Id. The Commission is using the term ‘‘market 412 Id. at 56561. data-first latency’’ for ease of reference; it was not emphasizes that the disclosure of 413 AIMA at 7. used in the comment letters. information prominently and clearly by 414 Bell at 3. 421 OneChicago at 1. a DCM precludes such DCM from 415 FIA at 51. 422 SIG at 2. placing information required by this
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rule behind registration, log in, user latencies within the matching engine platform systems or components that are name, password or other walls on the and any data feeds.425 monitored, leased from, or otherwise DCM’s Web site. The Commission’s proposals under operated by an affiliate or third party.427 § 38.401(a)(1)(iii) and (iv) apply to The Commission has also proposed a. What Must Be Disclosed Under the ‘‘electronic matching platforms,’’ which under amended § 38.401(a)(2) that a Proposed Regulations comprise all systems under the control DCM must provide a description of or operation of the DCM that interact The proposed § 38.401(a)(1)(iii) and known attributes of its electronic trading with market participant order messages (iv) would apply to all known attributes platform under paragraph (a)(1)(iv). and are involved in market data of an electronic matching platform that However, this may not relieve an dissemination. Such systems are not materially affect the time, priority, exchange of the obligation to disclose price, or quantity of execution of market limited to matching engines, but would apply more broadly to the network information if the exchange should have participant order messages, or the known of an attribute. The Commission ability to cancel, modify, or limit architecture that accepts and processes order messages, and disseminates notes that DCMs must regularly test and display of, market participant order 428 market data and messages to market review their automated systems, messages. The Commission proposes a monitor trading on their facilities, and ‘‘materiality’’ threshold to such participants. To the extent that they impact order entry and execution, the identify any market or system obligations so that the disclosure anomalies.429 The Commission requirements would not capture aspects electronic matching platform would also include pre-trade risk management cautions, however, that compliance of exchange systems that do not have a with Regulation AT’s disclosure discernible effect on how orders are systems and controls such as self-trade 426 requirements may not absolve a DCM of entered or executed.423 prevention tools. The Commission’s proposals under other statutory or regulatory obligations. An ‘‘attribute’’ for purposes of § 38.401(a)(1)(iii) and (iv) are intended For instance, DCMs must promote fair proposed § 38.401(a)(1)(iv) would mean to apply to various aspects of how an and equitable trading and protect any aspect of the structure, architecture, electronic platform operates, beyond the markets and market participants from mechanics, characteristics, or other technical process of how any order is abusive practices.430 elements of the design or operation of actually matched. The proposed b. How Information Should Be an electronic matching platform that regulations explicitly require the materially affects how market disclosure of information relating to Disclosed participant orders are received and latencies in the matching of orders and The Commission proposes under executed, and how information on such transmission of that information to orders and executed trades are § 38.401(a)(1)(iv) that DCMs be required market participants. In addition, if they to disclose any known attributes of their communicated to other market have a material impact on market participants. ‘‘Attributes’’ would electronic matching platform, other than participants, exchanges must disclose those already disclosed pursuant to include, but are not limited to, aspects information on exchange functions such of the platform that may provide an § 38.401(a)(1)(iii). This description as self-trade prevention, implied spread should, at a minimum, identify what the advantage or disadvantage to a category markets, and priority assignment of of market participants.424 ‘‘Attributes’’ attribute is and how it may affect market orders in a central limit order book, participant orders. To the extent such would also include aspects of the where applicable. Exchanges also must information is necessary for market platform that affect orders from all disclose how available order types participants to understand the market participants regardless of access would be executed (or not) under significance of an attribute, the method or membership status, such as different market conditions, where description may need to provide applicable. The Commission is mindful 423 In evaluating what attributes of a platform that DCMs should only be required to statistics or examples. As with all would be material, the Commission would look to describe attributes of their own systems. information provided to market the substantial case law on the issue of materiality. However, such systems would include participants under current regulation See, e.g., R&W Tech. Servs., Ltd. v. CFTC, 205 F.3d 38.401, the description must include 165, 169 (5th Cir. 2000) (‘‘A statement or omitted fact is ‘material’ if there is a substantial likelihood 425 As an illustration of attributes that should be information that the DCM believes, to that a reasonable investor would consider the disclosed to market participants (and the best of its knowledge, to be accurate information important in making a decision to acknowledging the more complex order types and and complete, and not omit material invest.’’); see also CFTC v. R.J. Fitzgerald & Co., 310 modes of execution in the equities market), the F.3d 1321, 1332 (11th Cir. 2002) (finding Commission notes two recent SEC enforcement misrepresentations material where ‘‘an objectively actions against the operators of alternative trading 427 The Commission is mindful that some DCMs reasonable investor’s decision-making process systems for selective disclosure or non-disclosure use electronic matching platforms leased from or would be substantially affected’’ by them and the regarding how certain order types operate under otherwise provided by other DCMs or non-DCM misrepresentations would ‘‘as a matter of law, alter different market conditions. See In the Matter of entities. However, each DCM would be required the total mix of relevant information available to the UBS Securities LLC., No. 3–16338 (SEC, Jan. 15, under this provision to provide information on any potential . . . investor.’’). Materiality in the context 2015); In the Matter of EDGA Exchange, Inc., No. electronic matching platform it uses, regardless of of attributes of an electronic matching platform 3–16332 (SEC, Jan. 12, 2015). whether that platform is owned or leased by the would include those attributes whose existence or 426 The Commission notes that the proposed DCM. degree a reasonable market participant would disclosure requirements in large part would address 428 Both DCMs and SEFs are obligated to consider when making a decision on whether, when IOSCO’s recommendation relating to sound ‘‘conduct regular, periodic, objective testing and or how to place orders on an exchange’s platform. practices on controls surrounding the development review of their automated systems to ensure that 424 For purposes of this discussion, ‘‘categories of of new or changes to critical systems at trading they are reliable, secure, and have adequate scalable market participants’’ may be based on access venues. IOSCO, after reviewing current member capacity.’’ Regulations §§ 37.1401(g) and method, colocation, involvement in a market maker state regulations, recommended ‘‘[e]stablishing and 38.1051(h), 17 CFR 37.1401(g) and 38.1051(h) incentive program, or membership status, among implementing communication protocols that govern (2014). other things. DCMs are currently required to submit the sharing of information regarding the 429 See regulation 37.203(e), 17 CFR 37.203(e) as rule changes under Part 40 any changes to these introduction of new, or changes to, critical (2014), for real-time market monitoring obligations programs. As discussed more fully below, the systems[,]’’ including information on the timing of of SEFs. See regulation 38.157, 17 CFR 38.157 proposed transparency requirement would only such new systems or changes to provide market (2014), for real-time monitoring obligations of require disclosure of attributes not already participants sufficient lead time to make changes or DCMs. disclosed through submissions under Part 40, 17 adjustments to their own systems. See IOSCO 2015 430 DCM Core Principle 12, Section 5(d)(12) of the CFR 40.1, et seq. (2014). Consultation Report, supra note 106 at 13–20. Act, 7 U.S.C. 7(d)(12) (2012).
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information.431 Cost estimates for the regulations common to all registered available to market participants that Commission amendments to § 38.401 entities.432 The proposed change to the may influence their choice of trading are provided in this NPRM’s cost-benefit definition of ‘‘rule’’ would track venue. The Commission believes that considerations below. language in the transparency such will foster competition among The Commission proposes under requirements under proposed exchanges by incentivizing them to § 38.401(c)(3) that DCMs be required to § 38.401(a)(1)(iv) (which applies only to provide the most efficient and fairest disclose information on the attributes of DCMs). The proposed change to the venue for trading. Should an exchange their platforms ‘‘prominently and definition would make clear that intentionally or unintentionally clearly’’ on their Web sites. The ‘‘trading protocols’’ includes ‘‘any structure its trading systems to Commission also proposes under operation of an electronic matching potentially or actually advantage one § 38.401(c)(3) that information regarding platform that materially affects the time, category of market participant over attributes of the electronic matching priority, price, or quantity of execution others, the potentially disadvantaged platforms be provided in ‘‘plain of market participant orders, the ability market participants may opt to trade on English.’’ Because market participants to cancel, modify, or limit display of another venue. may have different degrees of technical market participant orders, or the One Concept Release commenter understanding, the Commission aims to dissemination of real-time market data noted that market participants, if they make information on the electronic to market participants.’’ As with any have direct market access, could matching platforms accessible to market other rule change, changes to a calculate market quality metrics participants regardless of their technical registered entity’s trading protocols including latencies and therefore would proficiency or sophistication. Providing must be submitted to the Commission be aware of many of the attributes of a highly complex information on the pursuant to existing §§ 40.5 or 40.6. platform that affect order execution. The platforms may allow more technically- The Commission notes that this requirements proposed under proficient market participants to proposed amendment to the definition § 38.401(a)(1)(iii) and (iv) give all understand the operations of the of ‘‘rule’’ also adds a reference to market market participants an equal footing in platform, but may be inaccessible to maker and trading incentive programs. terms of understanding how the other market participants. This change clarifies and codifies the platform operates independent of access c. When Information Should Be Commission’s current interpretation of methods and services such as Disclosed the definition of ‘‘rule’’ under § 40.1(i), colocation. in which registered entities are required The Commission’s proposals on DCM to submit new rules and rule 4. Request for Comments transparency are intended to account for amendments to the Commission when 69. The Commission has proposed two situations: (1) Where the DCM changes are made to, among other that certain components of an makes a change to the platform, things, matching algorithms, market exchange’s market architecture should resulting in an impact on the execution maker or trading incentive program be considered part of the ‘‘electronic of market participant orders, and (2) agreements, and available order types. matching platform’’ for purposes of the where the DCM becomes aware of an This proposed change to § 40.1(i), which DCM transparency provision. Are there existing attribute within the platform reflects the Commission’s any additional systems that should fall that affects the execution of such orders. understanding of ‘‘rule’’, should be within the meaning of ‘‘electronic Under the first situation, as clarified in distinguished from the proposed matching platforms’’ for purposes of the proposed amendment to the regulations regarding market maker and proposed § 38.401(a)? definition of ‘‘rule’’ under § 40.1(i), trading incentive programs under 70. The Commission has specifically information submitted to the §§ 40.25–40.28, which represent new identified, as ‘‘attributes’’ that must be Commission under §§ 40.5(a) or 40.6(a) requirements that apply only to DCMs. disclosed, latencies within a platform would be public information, except to and how a self-trade prevention tool the extent that confidential treatment is 3. Policy Discussion determines whether to cancel an order. granted pursuant to § 40.8. Furthermore, With the proposed transparency Are there any other attributes that a DCM would be required to post the requirements, the Commission aims to would materially affect the execution of relevant submission on its Web site increase the relevant information market participant orders and therefore concurrent with the provision of such should be made known to all market submission to the Commission pursuant 432 Part 40 of the Regulations applies to all participants? Should the Commission to current § 38.401(c). Under the second registered entities, which include DCMs, SEFs, revise the final rule so that it only situation, the Commission’s proposals derivative clearing organizations (‘‘DCOs’’), swap applies to latencies within a platform would require the DCM to make the data repositories (‘‘SDRs’’), and certain electronic trading facilities and boards of trade registered and how a self-trade prevention tool relevant information available ‘‘within a under Section 5c of the Act. As discussed below in determines whether to cancel an order? reasonable time, but no later than 10 the cost benefit consideration section (sections 71. What information should be days’’ following the identification or V(E)(9) and (11)), none of the proposed amendments to § 40.1(i) should create new costs for disclosed as part of the description of change to the attribute. DCMs must also any registered entity, because the amendments relevant attributes of the platform? For ensure that information can be accessed merely clarify and codify the Commission’s instance, with latencies within a by visitors to the Web site without the interpretation of the definition of ‘‘rule.’’ See, e.g., platform, should statistics on latencies need to register, log in, provide a user the Final Rule for Provisions Common to Registered Entities, published in the Federal Register in 2011, be required? If so, what statistics would name, or obtain a password. in which the Commission stated with respect to help market participants assess any d. Changes in Definition of ‘‘Rule’’ market maker and trading incentive programs, ‘‘The impact on their orders? Would a Commission continues to view such programs as The Commission also proposes ‘agreements * * * corresponding’ to a ‘trading narrative description of attributes be amending the definition of ‘‘rule’’ under protocol’ within the § 40.1 definition of ‘rule’ and, preferable, including a description of § 40.1(i), which is relevant to as such, all market maker and trading incentive how the attributes might affect market programs must be submitted to the Commission in participant orders under different accordance with procedures established in part 40.’’ 431 See regulation 38.401(b), 17 CFR 38.401(b) Final Rule, Provisions Common to Registered market conditions, such as during times (2014). Entities, 76 FR 44776, 44778 (July 27, 2011). of increased messaging activity?
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72. The Commission notes that participants? How are DCMs currently automated trading. In particular, the proposed § 38.401(a)(1)(iii) and (iv) are handling these situations? measures required of DCMs in § 40.20 not intended to require the disclosure of 76. The Commission proposes that are similar to those required of AT a DCM’s trade secrets. The Commission DCMs provide a description of the Persons in proposed § 1.80(a)(1) and requests comments on whether the relevant material attributes in a single (b)(1), and also similar to those required proposed rules might inadvertently document ‘‘disclosed prominently and of clearing member FCMs in § 1.82(a). require such disclosure, and if so, how clearly’’ on the exchange’s Web site. The The Commission intends to offer AT they might be amended to address this Commission also proposes that this Persons, clearing member FCMs and concern. Furthermore, the Commission document be written in ‘‘plain English’’ DCMs the flexibility to design and anticipates that the mechanisms and to allow market participants, even those calibrate such controls according to standards for requesting confidential not technically proficient, to understand their own distinct priorities and treatment already codified in existing the attributes described. Would these understanding of the risks to § 40.8 could be used by DCMs to requirements be practical and help themselves, their customers, and the identify and request confidential market participants locate and broader market. In this regard, while treatment for information otherwise understand the information provided? certain proposed rules may appear required to be disclosed pursuant to 77. The Commission proposes duplicative on their face, Regulation AT proposed § 38.401(a)(1)(iii) and (iv), for requiring DCMs to disclose information is designed to address the diverse needs example by incorporating § 40.8’s on the relevant attributes: (a) When of market participants trading across mechanisms and standards into any filing a rule change submission with the multiple markets, by spreading the final rules arising from this NPRM. If Commission for changes to the requirement to impose risk controls commenters believe that the electronic matching platform; or (b) across AT Persons, clearing member mechanisms and standards in § 40.8 are within a ‘‘reasonable time, but no later FCMs and DCMs and encouraging them inappropriate for this purpose, please than ten days’’ following the to each independently calibrate such describe any other mechanism that identification of such attribute. Do the controls. should be included in any final rules to proposed timeframes provide sufficient The remainder of this section presents facilitate DCM requests for confidential time for DCMs to disclose the relevant Concept Release comments on this treatment of information otherwise information? Do the proposed topic, a description of the proposed required to be disclosed pursuant to timeframes offer sufficient notice of regulation, a discussion of the policy proposed § 38.401(a)(1)(iii) and (iv). changes or discovered attributes to justification for the proposal, and a market participants to allow them to 73. The Commission notes that DCMs request for comments on the proposal. adjust any systems or strategies, are required, as part of voluntary including any algorithmic trading 1. Concept Release Comments submissions of new rules or rule systems? The Concept Release requested amendments under § 40.5(a) and self- 78. The Commission proposes comment on various pre-trade and other certification of rules and rule requiring disclosure of newly identified types of risk controls, including message amendment under § 40.6(a), to provide attributes within 10 days of discovery. and execution throttles, maximum order inter alia an explanation and analysis of Does this provide DCMs sufficient time sizes, price collars, and order the operation, purpose and effect of the to analyze the attribute and provide a management controls, such as proposed rule or rule amendment. description? Should DCMs be required connectivity monitoring services, Would the information required under to provide notice of the existence of the automatic cancellation of orders on §§ 40.5(a) or 40.6(a) provide market attribute and supplement as further disconnect and kill switches. The participants and the public with analysis is performed? Concept Release contemplated that such sufficient information regarding controls would apply at the trading material attributes of an electronic N. Pre-Trade and Other Risk Controls at firm, clearing member and trading matching platform? DCMs—§ 40.20 platform levels. As explained above, 74. The Commission recognizes that The Commission proposes a new proposed § 1.80 requires AT Persons to DCMs are required to have system § 40.20 to require DCMs to establish pre- implement certain pre-trade risk safeguards to ensure information trade and other risk controls specifically controls and order management security, business continuity and designed to address the risks that may controls. By reference to the proposed disaster recovery under DCM Core arise from Algorithmic Trading. The § 1.80 regulations, proposed § 40.20 will Principle 20. The Commission Commission is also proposing to codify require DCMs to establish similar pre- understands that some attributes of an in § 40.20 basic pre-trade risk control trade and other risk controls specifically electronic matching platform designed requirements and order cancellation designed to address the risks that may to implement those safeguards should capabilities for orders that do not arise from Algorithmic Trading, and to be maintained as confidential to prevent originate from Algorithmic Trading. In establish similar controls for orders cybersecurity or other threats. Does this regard, the Commission recognizes entered manually. Relevant comments existing § 40.8, 17 CFR 40.8 (2014) that natural person traders manually to the Concept Release addressing pre- provide sufficient basis for DCMs to entering orders also have the potential trade and other risk controls for DCMs publicly disclose the relevant attributes to cause market disruptions. While the are discussed below. of their platforms while maintaining as majority of the pre-trade and other risk confidential information concerning controls in Regulation AT address a. Message and Execution Throttles system safeguards? Algorithmic Trading, the Commission As discussed above, the Concept 75. With respect to material attributes believes it is also important to promote Release described message throttles as affecting market participant orders a basic degree of risk control for all establishing maximum message rates caused by temporary or emergency trading regardless of source. per unit of time and execution throttles situations, such as network outages or The pre-trade and other risk controls as establishing limits on the maximum the temporary suspension of certain required of DCMs pursuant to proposed number of orders that an ATS can market functionality, what is the best § 40.20 reflect Regulation AT’s layered execute in a given direction per unit in way for DCMs to alert market approach to risk mitigation in time. The Concept Release also sought
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comment on a particular form of performance of a DCM’s network and and CFE described their own price execution throttle, the repeated matching engine and the matching collar mechanisms.451 automated execution throttle, which algorithm; and the market participant’s FIA indicated that price collars are a would disable a trading system after a role (i.e., liquidity providers may be ‘‘widely adopted’’ DCM-hosted risk configurable number of repeated excluded from limits).442 FIA noted that control and are effective at preventing executions until a human re-enables the a DCM’s message rate limit should not orders from disrupting the market and 452 system.433 The Concept Release stated adjust to market conditions because affecting the price discovery process. that the throttles would be calibrated to participants must always know what the FIA further explained that they have been proven to minimize erroneous address the potential for unintended limit is.443 Chicago Fed commented that trading by controlling the range of message flow or executions from a regulators should assess the 434 execution prices and can ensure the malfunctioning ATS. methodology that trading venues use to Commenters indicated that DCMs are integrity of trades cleared through the set throttle limits, the reasonableness of already implementing messaging rate DCO by dramatically reducing the those limits, and the procedures chance that a trade may be deemed limits. Two exchanges described their 444 own message rate limits 435 and four followed when they are breached. erroneous and subsequently adjusted or commenters stated generally that many Finally, IATP commented on the busted.453 FIA recommended that price exchanges have messaging rate limits in difficulty in setting standardized collars be used on all contracts, set by place.436 Commenters generally throttle thresholds, and alternatively the DCM based on estimates of volatility discussed throttles at the exchange as suggested standardizing a graduated and market conditions.454 FIA being ‘‘messaging’’ limits. KCG levy on order cancellations.445 cautioned that price collars should not be mandated at the same levels across explained that many participants’ b. Maximum Order Sizes trading strategies include trading all products.455 activity on multiple markets, and thus Commenters indicated that exchanges Other commenters made similar the responsibility for establishing limits already implement maximum order size points. KCG stated that ‘‘the futures on executions must reside with the limits. Two exchanges, CME and CFE, markets’ price collars work well,’’ and market participant and its clearing stated that they apply order size limits reduce the potential for erroneous 437 trades.456 KCG supports requiring firm. Benefits of exchange-based on each of their products.446 AIMA also exchanges to establish price collars on messaging limits noted by commenters stated that maximum order sizes are all contracts, but believes that include identifying potentially normally applied per product at the malfunctioning ATSs, preventing a 447 exchanges should have discretion in DCM or FCM level to all customers. setting the price collars.457 Gelber stated platform overload that would impact the Chicago Fed commented that exchanges processing of messages across all market that exchanges should establish price should implement maximum order size participants, ensuring a level playing collars and that this control protects limits.448 MFA also recommended that field for all market participants, DCOs and market participants from maximum order size controls be 458 mitigating risk to the DCO, and volatile markets. MFA stated that implemented at the FCM and/or deterring predatory and disruptive price collars in the futures markets have exchange level, and apply to both been effective in maintaining fair and activities that require high message 449 traffic.438 SIG cautioned that exchanges manual and automated traders. FIA orderly markets, and have fewer should not impose ‘‘speed-bump’’ commented that while it ‘‘has been a unintended consequences than trading throttles on order messaging as a means proponent of standardization of pre- pauses.459 SIG also stated that the to ‘‘slow down trading for its own trade risk controls across DCMs we markets benefit from price collars.460 sake.’’ 439 FIA suggested that a DCM understand that each DCM needs to Finally, Chicago Fed and AFR should never reject an order have discretion on how these controls recommended that trading venues cancellation request due to message rate are implemented.’’ 450 implement price collars.461 440 In contrast to the above comments, limits. c. Price Collars Commenters indicated that exchanges AIMA acknowledged that price collars should have flexibility in setting The Concept Release requested may be beneficial, but explained that messaging limits because exchanges are comment on price collars, a control in price collars have potentially negative in the best position to respond to the consequences in that they may impede which trading platforms would assign a 462 dynamics of the market, monitor the range of acceptable order and execution the efficient price discovery process. In particular, AIMA suggested that activity of all participants, and prices for each product and all market 441 market participants should be determine the impact of messaging. participants would establish similar encouraged to place bids and offers far Commenters indicated that throttle limits to ensure that orders outside of a limits implemented by DCMs should be above or below the current market particular price range are not price.463 Among other things, AIMA based on the unique characteristics of transmitted to the trading platform. each product; the capacity and Commenters indicated that exchanges 451 CME at 13–14; 16–17, CME at Appendix A– already implement price collars. CME 6; CFE at 6–8. 433 Concept Release, 78 FR 56571. 452 FIA at 18. 434 Concept Release, 78 FR 56569. 442 453 FIA at 18. 435 CME at 8–9; CME at Appendix A, 3–4, 6; CFE FIA at 15; CME at 8–9; Gelber at 5–7; KCG at 454 at 5–6. 4; AIMA at 8. Id. at 13–14. 455 436 TCL at 6; KCG at 4; MFA at 7; AIMA at 8. 443 FIA at 12, 16. Id. at 18. 456 437 KCG at 5. 444 Chicago Fed at 2. KCG at 7–8. 457 438 FIA at 12, 15–17, 65; MFA at 7; CME at 8; 445 IATP at 3–5. See id. Gelber at 5–7; AFR at 6–7; SIG at 3. 446 CME at 15, Appendix A–1; CFE at 7. 458 Gelber at 9. 439 SIG at 3. 447 AIMA at 13. 459 MFA at 8–9. 440 FIA at 16. 448 Chicago Fed at 2; MFA at 2, 9; Gelber at 10; 460 SIG at 8–9. 441 FIA at 12, 15–17; CME at 8–9; MFA at 13; KCG at 8. 461 Chicago Fed at 3; AFR at 7. Gelber at 5–7; KCG at 3–4; AIMA at 8; OneChicago 449 MFA at 9. 462 AIMA at 12–13. at 5. 450 FIA at 18–19. 463 See id.
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suggested that brief trading pauses were switch to clearing members that cancels contact the market participant before preferable to price collars, and that if a all orders and quotes from a market activating the kill switch.478 FIA also collar or pause is activated, market participant.469 suggested that a DCM be allowed to participants should be notified as soon Some commenters noted the terminate market access without as possible.464 importance of placing kill switches at contacting the participant if necessary to the DCM level.470 For example, Citadel d. Connectivity Indications and Cancel protect market integrity or the financial noted that ‘‘kill switches can operate at 479 on Disconnect integrity of participants. Citadel a number of levels—at the market commented that exchange systems As noted above, the Concept Release participant, at the clearing firm, or at the should employ robust and reliable requested comment regarding ‘‘system trading platform. While all are systems that automatically identify heartbeats’’ that would indicate proper advisable, their use at the trading potentially erroneous activity, and this connectivity between a trading firm’s platform level is of paramount activity could trigger automatic automated trading system and the importance. Trading platforms sit at the notifications to the participant; review trading platform, and ‘‘auto-cancel on center of trading and are therefore best by exchange staff; automatic blocks of disconnect,’’ an exchange tool that positioned to efficiently and further activity; and, under appropriate allows trading firms to determine consistently monitor activity across a circumstances, a confidential whether their orders will be left in the 471 wide variety of market participants.’’ notification to other trading platforms market upon disconnection. Two While commenters generally opposed that a firm’s trading is halted.480 KCG exchanges stated that they provide an prescriptive kill switch requirements stressed that market participants should optional cancel-on-disconnect and indicated the challenges of establish thresholds for kill switches,481 functionality 465 and FIA characterized standardization, several noted that there and Gelber cautioned that exchanges cancel-on-disconnect as a ‘‘widely could be some benefits to standardized should apply kill switches on an ATS, adopted DCM-hosted pre-trade risk kill switch processes across not firm-wide, level.482 SIG suggested control.’’ 466 Several commenters exchanges.472 indicated that they support exchanges Commenters also stressed the that exchanges set kill switches at the gateway level, firm level, or an account offering system heartbeats and/or importance of clear, transparent 483 cancel-on-disconnect to their market procedures governing use of the kill level. participants.467 switch.473 FIA stated that ‘‘a failure to An issue related to pre-trade and communicate policies that govern the other risk controls implemented by e. Order Cancellation Systems use of kill switches, any potential DCMs is the testing of exchange As discussed above, the Concept changes to such policies, or the systems. The Concept Release did not Release addressed selective working utilization of a kill switch in a live directly explore the testing of DCM order cancellation, a tool in which an trading environment without prior automated systems. Moreover, exchange can immediately cancel one, notification can introduce significant commenters did not raise the issue. multiple, or all resting orders from a risk to a market participant’s trading Nevertheless, the Commission notes that market participant as necessary in an operation as well as the wider there have been incidents following emergency situation and well as order marketplace.’’ 474 MFA commented that automated system changes that might cancellation mechanisms that would trading platforms should have clear and have been prevented or mitigated by immediately cancel all working orders objective policies detailing the additional testing. For example, in early and prevent submission (by the market circumstances that warrant use of a kill 2015, certain European futures participant), transmittal (by the clearing switch.475 In contrast, CME stressed that exchanges experienced outages in their member), or acceptance (by the trading the kill switch tool must be free of trading platforms following updates to platform) of any new orders from a restrictive policies and procedures, their automated systems.484 In market participant or a particular trader because time is of the essence in use of September 2010, 30,000 test orders were or ATS of such market participant. The the kill switch. However, CME stated accidentally submitted to the CME Commission notes that comments to the that if policies do govern an exchange’s Globex system (due to human error), Concept Release generally discussing use of a kill switch, such policies resulting in numerous executed the design and implementation of kill should define a hierarchy of authority trades.485 In April 2014, the Globex switches are addressed above with for who can send kill instructions.476 system halted, forcing traders to execute respect to order cancellation systems Regarding activation of the kill futures trades on the trading floor.486 requirements on AT Persons. switch, FIA cautioned that this tool Specifically as to exchanges, the should only be used as a ‘‘final 478 FIA at 29–33. Commission notes that one exchange safeguard’’ that should be a redundant 479 FIA at 29–33. indicated that it has two kill switch control as long as appropriate risk 480 Citadel at 3–4. tools: A kill switch used by the controls are implemented at the FCM 481 KCG at 13. 482 exchange, clearing firm, or trading firm and DCM levels.477 FIA suggested that Gelber at 14. 483 SIG at 8. to remove an entity from the market a kill switch have both automated and completely; and an order management 484 See ‘‘Euronext Derivatives Trading Resumes manual triggers, but a DCM should Following One-Hour Halt,’’ Bloomberg (March 30, tool that enables clearing firms and end- 2015), available at http://www.bloomberg.com/ users to cancel orders at a more granular 469 CFE at 11. news/articles/2015-03-30/euronext-derivatives- 468 level. Another exchange explained 470 FIA at 29–33; Citadel at 3; AIMA at 3, 18; MFA trading-halted-because-of-technical-issue. that it can cancel orders and quotes in at 12–13; KCG at 13. 485 See ‘‘CME Test Orders Went Live,’’ Wall St. an emergency and also provides a kill 471 Citadel at 3. J. (September 15, 2010), available at http:// www.wsj.com/articles/SB10001424052748703376 472 FIA at 29–33; CME at 23; AIMA at 18; SIG at 504575491971336921954. 464 8; Gelber at 14–15. See id. 486 See ‘‘Technical Glitch Hits CME Trading,’’ 465 473 FIA at 29; MFA at 12; Citadel at 3. CME at Appendix A–4; CFE at 9–10. Wall St. J. (April 8, 2014), available at http:// 474 466 FIA at 14. FIA at 29. www.wsj.com/articles/SB1000142405270230481 467 FIA at 14; KCG at 12; MFA at 12; Chicago Fed 475 MFA at 12. 9004579489683245107384. The Commission notes at 2. 476 CME at 23. that moving to the floor will no longer be available 468 CME at 23–24. 477 FIA at 29–33; Gelber at 14–15. Continued
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The Commission further notes that acceptance or submission of any new The Commission believes that the IOSCO published in April 2015 a orders; and (iv) cancel or suspend all controls required in proposed § 40.20 consultation report recommending that resting orders from AT Persons in the are in many cases largely consistent exchanges consider ‘‘establishing event of disconnect with the trading with controls already used by DCMs. As policies and procedures related to the platform. The connectivity monitoring discussed above, commenters to the development, modification, testing and systems established by the DCM must Concept Release addressing this topic implementation of new, or changes to, enable the systems of AT Persons with generally indicated that exchanges critical systems.’’ 487 Existing DEA to indicate to the AT Persons on already use message rate limits, § 38.1051(h) requires DCMs to ‘‘conduct an intermittent or continuous basis maximum order size limits, and price regular, periodic, and objective testing whether they have proper connectivity limits. Comments to the Concept of its automated systems to ensure that with the trading platform, including any Release indicated that order they are reliable, secure, and have systems used by a DCM to provide the cancellation systems and connectivity adequate scalable capacity’’ and AT Person with market data. monitoring systems are already used by § 38.1051(a)(5) requires exchanges to Finally, the Commission is amending DCMs as well. Although some address risk analysis and oversight for the Acceptable Practices for Core commenters did indicate that execution ‘‘systems development and quality Principle 4 in part 38 of the DCM throttles are more appropriate for assurance.’’ While the Commission is regulations. The existing Acceptable trading firms than for DCMs, the not proposing any amendments to Practices provide that the DCM may Commission believes that pre-trade risk § 38.1051 in this NPRM, the choose from risk controls, including controls and other measures serve Commission requests comment on pre-trade limits on order size, price different functions and may be designed whether the existing rule provides the collars or bands around the current or calibrated distinctly at each entity in Commission with adequate authority to price, message throttles and daily price the life-cycle of an AT Order Message. require DCMs to adequately test limits, to comply with Core Principle 4. As noted above, proposed § 40.20 and planned changes to their matching Such controls are now required. other elements of Regulation AT reflect engines and other automated systems. Accordingly, the Acceptable Practices the proposed rules’ layered approach to will be revised to correspond to the new risk mitigation in automated trading. In 2. Description of Regulation requirements set forth in § 40.20. this regard, Regulation AT is designed Existing § 38.255 requires DCMs to to address the diverse needs of market 3. Policy Discussion establish risk control mechanisms to participants trading across multiple prevent and reduce the potential risk of Consistent with its multi-layered markets, by spreading the requirement price distortions and market approach to regulations intended to to impose risk controls across AT disruptions, including market mitigate the risks of automated trading, Persons, clearing member FCMs and restrictions that pause or halt trading. the Commission proposes in § 40.20 to DCMs and encouraging them to each The Commission proposes a new § 40.20 require that DCMs establish and make independent use of such controls. to require DCMs to establish pre-trade implement certain pre-trade risk The Commission notes that IOSCO and other risk controls specifically controls and order management controls has recently explained that most trading designed to address the risks that may that are broadly similar to those that venues have tools used to mitigate the arise from Algorithmic Trading, and to would be required of AT Persons and operational risks of electronic trading, establish similar controls for orders clearing member FCMs. The and such tools include price and entered manually. Commission’s determination to require volume controls, messaging throttles, The controls required by § 40.20 are DCM-implemented controls is and kill switches.491 In addition, consistent with the controls that consistent with several Concept Release ESMA’s 2015 Final Draft Regulatory Regulation AT would require AT comments that indicated that pre-trade Standards require that trading venues Persons and clearing member FCMs to risk and order management controls have price collars that automatically implement. By reference to the pre-trade should be placed at the exchange level, block or cancel orders that do not meet and other risk controls required of AT with one commenter explaining that set price parameters with respect to Persons pursuant to § 1.80(a)(1), exchanges sit at the center of trading, different financial instruments, on an proposed § 40.20 would require message and are therefore best positioned to order-by-order basis; and maximum and execution throttles and controls monitor activity across a wide variety of order value and maximum order volume establishing price and size parameters. participants.488 The Commission notes limits.492 ESMA’s regulatory standards Proposed § 40.20 would also require that its approach is consistent with also require throttles limiting the DCMs to implement the above risk ESMA’s 2015 Final Draft Regulatory number of orders each member may controls for orders that do not originate Standards, in that ESMA requires pre- submit per second.493 Trading venues from Algorithmic Trading. trade risk controls at both the must also determine a maximum ratio of The proposed regulation, by reference investment firm and trading venue unexecuted orders to transactions at a to § 1.80(b) and (c), would also require level.489 In addition, with respect to kill level they deem appropriate, consistent DCMs to establish certain order switch functionality, ESMA’s 2015 Final with a calculation methodology cancellation and connectivity Draft Regulatory Standards set out two provided by ESMA.494 ESMA standards monitoring systems. The cancellation different obligations: Trading venues further require a kill functionality to systems must have the ability to: (i) must have their own kill functionality, cancel unexecuted orders upon request Immediately disengage Algorithmic and separately, investment firms must of a market participant that is Trading; (ii) cancel selected or up to all have the ability to cancel unexecuted technically unable to delete its own resting orders when system or market orders.490 conditions require it; (iii) prevent 491 IOSCO 2015 Consultation Report, supra note 488 FIA at 29–33; Citadel at 3; AIMA at 3, 18; MFA 106 at 21. as a backup as the CME was planning to close most at 12–13; KCG at 13. 492 See ESMA September 2015 Final Draft futures trading pits in July 2015. 489 ESMA September 2015 Final Draft Standards Standards Report Annex 1 at 269. 487 See IOSCO 2015 Consultation Report, supra Report, supra note 80 at 201–02. 493 See id. at 266. note 106 at 19. 490 See id. 494 See id. at 285–88.
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orders, when the order book is could be detrimental, given the speed 82. The Commission proposes, with corrupted by erroneous duplicated with which a kill switch may need to be respect to its kill switch requirements, orders, or following a suspension implemented.499 The Commission to allow DCMs the discretion to design initiated by the market operator or the believes that exchanges should have a kill switch that allows a market competent authority.495 clear and public policies governing use participant to submit risk-reducing The Commission’s proposed rules do of a kill switch, but understands that the orders. The Commission also does not not impose a ‘‘one-size-fits-all’’ standard specifics of such policies may different mandate particular procedures for alerts on DCMs for compliance. Rather, the depending on the nature of an or notifications concerning kill switch DCM’s pre-trade risk controls must be exchange’s market and market triggers. Does the proposed rule allow set at the level of each AT Person, and participants. Therefore, the Commission for sufficient flexibility in the design of exchanges must evaluate whether the has determined that its proposed rules kill switch mechanisms and the policies controls should be set at a more granular in this area should provide exchanges and procedures concerning their level, including by product or one or with the discretion to design policies implementation? Should the more identifiers of natural persons and procedures appropriate to their Commission consider more prescriptive associated with an AT Order Message, market. The Commission stresses that rules in this area? and then take appropriate action to set exchanges should clearly communicate 83. Does existing § 38.1051 provide the controls at that more granular level. such policies and procedures to market the Commission with adequate The Commission expects that it will participants. authority to require DCMs to adequately often be beneficial to set controls at a The Commission notes that § 40.20(d) test planned changes to their matching more granular level. As noted above, would require a DCM to implement the engines and other automated systems? while some commenters to the Concept pre-trade and other risk control Release indicated that Commission O. DCM Test Environments for AT mechanisms described in § 40.20(a) and Persons—§ 40.21 involvement in setting thresholds for (b)(1)(i) (meaning, message and these controls might be useful, the execution throttles and order and price The Commission proposes a new Commission agrees with those parameters and order cancellation § 40.21 to require DCMs to provide a test commenters indicating that exchanges systems) for orders that do not originate environment that will enable AT need discretion to determine how these from Algorithmic Trading, after making Persons to simulate production trading. controls are implemented. The any adjustments to such controls that 1. Concept Release Comments Commission believes that it is not in the the DCM determines are appropriate for best position to determine the such orders. The Commission The Concept Release contemplated appropriate control parameters for each recognizes that certain activity that such that trading platforms must provide to trading strategy, product, capacity of controls are designed to address can be their market participants test exchange matching engine, and every caused by manual order entry in environments that simulate the other potentially relevant factor that addition to Algorithmic Trading. For production environment. FIA supports should be taken into account by a DCM example, fat-finger errors are a DCMs providing robust test when establishing thresholds. The environments and market participants commonly-cited example of an 500 proposed rules do not prescribe unintentional error that can have a using such environments. SIG also particular limits or thresholds. Rather, indicated that DCMs should provide test significant disruptive effect, which can 501 they require that the DCM set the be caused by, and may even be more environments. MFA indicated that controls at levels intended to prevent an likely to occur in the context of, manual many, if not all, exchanges currently Algorithmic Trading Event. order entry. provide market participants a test The Commission believes that facility to test trading software and allowing DCMs discretion in the design 4. Request for Comments algorithms.502 and implementation of risk controls is 79. The Commission proposes to 2. Description of Regulation particularly important in the area of require DCMs to set pre-trade risk Regulation AT proposes a new order cancellation functions. FIA has controls at the level of the AT Person, requirement that DCMs (under proposed stated that ‘‘[a]ctivation of a kill switch and allows discretion to set controls at § 40.21) provide a test environment that is based on a decision that such action a more granular level. Should the will enable AT Persons to simulate protects market integrity or the financial Commission eliminate this discretion, production trading. The required test integrity of the counterparties and require that the controls be set at a environment should provide access to involved,’’ and should ‘‘only be invoked specific, more granular, level? If so, historical transaction, order and based on a qualitative decision taken as please explain the more appropriate message data. The test environment a last resort when other actions have level at which pre-trade risk controls 496 should also enable AT Persons to failed or may not be feasible.’’ should be set by a DCM. Furthermore, FIA has explained that the conduct conformance testing of their 80. The Commission requests public conditions under which a kill switch Algorithmic Trading systems to verify comment on the pre-trade and other risk may be used by an exchange should be compliance with the requirements of controls required of DCMs in proposed clearly communicated to the proposed § 1.80(a)–(c) (which address § 40.20. Are any of the risk controls counterparties.497 Similarly, MFA pre-trade risk controls and other required in the proposed rules commented that trading platforms measures), § 1.81(a)(1)(ii)–(iv) and unhelpful to operational or other risk should have clear and objective policies § 1.81(c)(1) (which address the testing mitigation, or to market stability, when detailing when a kill switch will be and compliance of algorithmic trading implemented at the DCM level? used.498 CME indicated that restrictive systems). The Commission anticipates 81. Are there additional pre-trade or policies governing use of a kill switch that AT Persons would use the DCM test other risk controls that should be environment in connection with the 495 See id. at 266–67. specifically enumerated in proposed 496 See FIA Guide, supra note 95 at 14. § 40.20? 500 FIA at 34–38. 497 See id. 501 SIG at 9. 498 MFA at 12. 499 CME at 23. 502 MFA at 13.
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testing of their Algorithmic Trading 1. Concept Release Comments performs in a manner inconsistent with systems, to identify issues that may As noted in the discussion of its design, which may raise questions arise in a production environment that proposed § 1.83 above, the Concept about the design or monitoring of the may not have been identified through Release requested comment on whether AT Person’s algorithms; if a DCM testing in the AT Person’s development it would be appropriate to require identifies frequent trade practice environment. periodic self-certifications by all market violations at an AT Person, which are participants operating ATSs and by related to an algorithm of the AT 3. Request for Comments Person; or if an AT Person represents clearing firms that provide clearing significant volume in a particular 84. Should the test environment services to those market participants.503 product, thereby requiring heightened Comments addressing this topic are provided by DCMs under proposed scrutiny, among other reasons. An addressed in section IV(I)(1) above. § 40.21 offer any other functionality or appropriate review pursuant to data inputs that will promote the 2. Description of Regulation § 40.22(e) should include measures by effective design and testing of the DCM reasonably designed to Algorithmic Trading by AT Persons? Proposed § 40.22 complements the requirement under § 1.83 for AT Persons identify and remediate any insufficient mechanisms, policies, and procedures P. DCM Review of Compliance Reports and clearing member FCMs to submit described in such books and records. by AT Persons and Clearing FCMs; DCM compliance reports to DCMs. Proposed Rules Requiring Certain Books and § 40.22(a) requires a DCM to implement 3. Policy Discussion Records; and DCM Review of Such rules that require each AT Person that In proposing this regulation, the Books and Records as Necessary— trades on the DCM, and each FCM that Commission disagrees with comments § 40.22 is a clearing member of a DCO for such to the Concept Release opposing such a AT Person, to submit the reports The Commission proposes a new review requirement and suggesting that described in § 1.83(a) and (b), it would merely create extra § 40.22 that complements the respectively. Under proposed § 40.22(b), administrative costs.504 The requirement under § 1.83 for AT Persons a DCM must require the submission of Commission acknowledges that the and clearing member FCMs to submit such reports by June 30th of each year. review program required by § 40.22 compliance reports to DCMs. Sections Proposed § 40.22(c) requires a DCM to would impose costs on DCMs, but 40.22(a) and (b) would require a DCM to establish a program for effective believes that Regulation AT must require each AT Person that trades on periodic review and evaluation of include a mechanism to ensure that AT the DCM, and each FCM that is a reports described in paragraph (a) of Persons and clearing member FCMs are clearing member for such AT Person, to § 40.22, and of the measures described complying with the requirement to submit the reports described in § 1.83(a) therein. An effective program must implement certain pre-trade and other and (b) annually. Further, § 40.22(c) include measures by the DCM risk controls. Moreover, an assessment would require each DCM to establish a reasonably designed to identify and of such compliance requires an program for effective review of such remediate any insufficient mechanisms, adequate level of expertise and reports and remediation of any policies and procedures described in knowledge of markets and market deficiencies found. DCMs would have such reports, including identification participants’ technological systems and considerable latitude, however, in the and remediation of any inadequate trading strategies. The Commission design of their review programs. quantitative settings or calibrations of believes that a review program requiring Proposed § 40.22(d) would require pre-trade risk controls required of AT AT Persons to describe the pre-trade DCMs to implement rules that require Persons pursuant to § 1.80(a). risk controls required by § 1.80(a) and each AT Person to keep and provide to In addition, as an additional clearing member FCMs to describe their the DCM books and records regarding complement to the compliance report program for establishing and such AT Person’s compliance with all review program described above, maintaining the pre-trade risk controls requirements pursuant to § 1.80 and proposed § 40.22(d) requires DCMs to required by 1.82(a)(1), and requiring § 1.81, and require each clearing implement rules requiring each AT DCMs to review such information, is the Person to keep and provide to the DCM member FCM to keep and provide to the most effective method to ensure that all books and records regarding their DCM books and records regarding such market participants are implementing compliance with all requirements measures that are reasonably designed clearing member FCM’s compliance pursuant to § 1.80 and § 1.81, and to prevent an Algorithmic Trading Event with all requirements pursuant to § 1.82. requires each clearing member FCM to or Algorithmic Trading Disruption. The Finally, proposed § 40.22(e) would keep and provide to the DCM market requirements of proposed § 40.22(d) and require DCMs to review and evaluate, as books and records regarding their (e) will enable DCMs to perform a more necessary, books and records compliance with all requirements intensive review, as necessary, of AT maintained by AT Persons and clearing pursuant to § 1.82. Finally, proposed Persons’ compliance with §§ 1.80 and member FCMs regarding their § 40.22(e) requires DCMs to review and 1.81, and clearing member FCMs’ compliance with §§ 1.80 and 1.81 (for evaluate, as necessary, books and compliance with § 1.82, by among other AT Persons) and § 1.82 (for clearing records required to be kept pursuant to factors, helping to ensure that necessary member FCMs). This proposed proposed § 40.22(d), and the measures books and records are maintained and provision also provides DCMs with described therein. A DCM could find it available to a DCM. considerable latitude in the necessary to conduct such a review if: The Commission notes, in particular, implementation of their review It becomes aware if an AT Person’s kill that DCMs are best positioned to assess function. The remainder of this section switch is frequently activated, or the measures taken by market presents Concept Release comments on otherwise performs in an unusual participants on their exchange, and this topic, a description of the proposed manner; if a DCM becomes aware that identify outliers that may not have regulation, a discussion of the policy an AT Person’s algorithm frequently implemented adequate measures or justification for the proposal, and a request for comments on the proposal. 503 Concept Release, 78 FR at 56559. 504 See, e.g., AIMA at 21; FIA at 4; CME at 47.
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particular parameters as compared to intervals (e.g., once every two years), or trades, and hence is proposing to other market participants. The it could require review in response to provide DCMs and market participants Commission believes that it is in the specific events related to the the appropriate flexibility in interest of the DCM, as well as all Algorithmic Trading of AT Persons. implementation of the self-trade market participants trading on the DCM, Please comment on the appropriateness prevention tools. DCMs have begun to ensure that no market participants are of these alternative approaches. offering self-trade prevention tools to conducting Algorithmic Trading 88. Does § 40.22 leave enough market participants in recent years, and without adequate protections in place. discretion to the DCM in determining a large fraction of market participants Some commenters indicated that any how to design and implement an have started using these tools. Analysis certification requirements should be effective compliance review program of self-match use at DCMs has found principles-based.505 The Commission regarding Algorithmic Trading? that the majority of orders in many agrees that a DCM should have Alternatively, is there any aspect of this liquid contracts already make use of this discretion in the design and regulation that should be more specific tool. While acknowledging the growing implementation of its review program. or prescriptive? use of such tools, the Commission is Accordingly, proposed § 40.22 provides 89. Should § 40.22 specifically interested in strengthening regulatory a general framework for the DCM’s authorize a DCM to establish further standards to increase transparency and review program: e.g., a DCM must standards for the organization, method ensure more effective limitation of require the submission of reports by of submission, or other attributes of the unintentional self-trades. By June 30 of each year; and the DCM must reports described in § 40.22(a)? standardizing self-trade prevention use establish a program for effective across firms, it should be easier for the periodic review and evaluation of the Q. Self-Trade Prevention Tools—§ 40.23 marketplace as a whole to differentiate reports, including measures by the DCM The Commission understands that permitted self-trading. The reasonably designed to identify and self-trade activity has grown as trading Commission’s proposed rules on self- remediate any insufficient mechanisms, has migrated to an electronic trading trade prevention are also intended as a policies and procedures described in environment. The Commission has complement to the prohibition under such reports. Beyond the specific determined to propose rules in this area, the CEA regulations regarding wash requirements set forth in proposed which would address both intentional trades.507 Wash trading has been § 40.22, however, each DCM may tailor and unintentional self-trading activity, defined as ‘‘entering into, or purporting its review program in the manner it with the goal of benefiting market to enter into, transactions to give the believes will be most effective to participants and enhancing the price appearance that purchases and sales understand the measures its market discovery process. Specifically, the have been made, without incurring participants have taken to address the Commission is proposing § 40.23(a) to market risk or changing the trader’s risks of Algorithmic Trading, and require DCMs to implement rules market position.’’ 508 Therefore, evaluate whether they are sufficient. reasonably designed to prevent self- intentional self-trades could constitute 4. Request for Comments trading, excluding certain ‘‘permitted wash trades. self-trades’’ described below. Proposed The remainder of this section presents 85. In lieu of a DCM’s affirmative § 40.23(a) defines self-trading as the Concept Release comments on this obligation in proposed § 40.22 to review matching of orders for accounts that topic, a Commission analysis of the AT Person and clearing member FCM have common beneficial ownership 506 amount of self-trading in the compliance reports, should DCMs or are under common control. As marketplace, a description of the instead be permitted to rely on the CEO discussed below, a trade that results proposed regulation, a discussion of the or CCO representations required by from the matching of opposing orders policy justification for the proposal, and proposed § 1.83(a)(2)? If so, what events both generated by a firm or a single or a request for comments on the proposal. in the Algorithmic Trading of an AT commonly owned account does not shift 1. Concept Release Comments Person should trigger review obligations risk between different market by the DCM? participants. There is a possibility that The Concept Release requested 86. Should § 40.22(c) provide more such trades may inaccurately signal the comment on self-trading controls. The specific requirements regarding a DCM’s level of liquidity in the market and may Concept Release considered whether establishment of a program for effective result in a non-bona fide price. Risk trading platforms should provide, and periodic review and evaluation of AT controls that identify and limit self- market participants apply, technologies Person and clearing member FCM trading may result in more accurate to identify and limit the transmission of orders from their systems to a trading reports? For example, § 40.22(c) could indications of the level of market platform that would result in self-trades. require review at specific intervals (e.g., interest on both sides of the market and Numerous commenters addressed self- once every two years). Alternatively, help ensure arms-length transactions trading controls, including the extent of § 40.22(c) could provide greater that promote effective price discovery. discretion to DCMs in establishing their The Commission recognizes that there their use by industry; the types of trades programs for the review of reports. could be legitimate reasons for self- that self-trade controls should prevent; Please comment on the appropriateness and the appropriate design of self-trade controls. Commenters disagreed as to of these alternative approaches. 506 The Commission is requesting public 87. Should § 40.22(e) provide more comment in the questions below regarding whether whether there should be regulation in specific requirements regarding the it should define ‘‘common beneficial ownership’’ in this area, but most either oppose triggers for a DCM to review and any final rules arising from this NPRM, and if so, regulation or express concern about how how the term should be defined. The Commission it would be implemented, for reasons evaluate the books and records of AT notes in its request for public comment that its Persons and clearing member FCMs aggregation rules in § 150.4 are a potential model similar to those stated by FIA: ‘‘To required to be kept pursuant to for defining common beneficial ownership in any § 40.22(d)? For example, § 40.22(e) final rules. The Commission is also requesting 507 See Section 4c(a) of the CEA, 7 U.S.C. public comment regarding whether the definition of 6c(a)(2)(A), and Commission regulation 1.38(a). could require review at specific common beneficial ownership for purposes of 508 See CFTC Glossary, available at: http:// § 40.23 should be left to the individual discretion www.cftc.gov/ConsumerProtection/ 505 See, e.g., FIA at 4, CME at 27. of each DCM. EducationCenter/CFTCGlossary/index.htm#W.
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require the adoption of DCM-based self- using a self-trade prevention tool (i.e., self-trading, but that ‘‘market match prevention as a ‘one-size-fits-all’ trading firms may choose to simply participants must be able to approach may result in unnecessary modify their trading strategies).518 demonstrate, through information financial exposure caused by the OneChicago commented that self- barriers or other effective policies and inherent blocking of legitimate trading controls should be implemented procedures, that any self-trading is transactions. . . . The options for this and calibrated at the clearing firm level, between unrelated strategies and not type of functionality must be flexible not at the DCM level.519 designed with a manipulative enough so that market participants can In contrast, IATP and AFR support intent.’’ 529 choose the method that best suits their the Commission requiring exchanges Commenters also addressed the business and preserves legitimate and market participants to use self- appropriate level at which self-trade trading.’’ 509 trading controls.520 SIG believes that controls should be calibrated.530 Several Commenters indicated that exchange- exchanges should offer self-trade stressed that DCMs should allow market provided self-trading controls are prevention functionality, with participants to tailor this control to their widely used by market participants.510 parameters set by firms.521 own needs.531 FIA commented that self- The FIA PTG Survey reflected that 25 of As to cost considerations, CME stated trade controls should be offered at 26 responding firms use such that self-trade controls require varying levels of granularity (i.e., firm controls.511 Both CME and ICE provide significant investments in technology level, group level, trader ID level, self-trade prevention controls, a and resources by exchanges and trading customer account level and strategy capability which was introduced, and firms.522 MFA noted that it is more cost- level), and certain levels can be refined, in recent years.512 CME’s self- effective for exchanges, rather than combined.532 AIMA stated that self- trade control is optional rather than market participants, to develop self- trade controls set at the firm trader ID required. It allows market participants trade controls.523 level could be ‘‘gamed’’ by traders to prevent buy and sell orders for the Finally, comments addressed the creating a shell company under a same account, or accounts with specific functionality of self-trade different ID.533 SIG suggested that the common beneficial ownership, from controls currently used by exchanges controls be customizable at the matching with each other. CME noted and firms. For example, five comments ‘‘aggregation unit level’’ and ‘‘user- that its self-trade control can be applied addressed the type of trades that such defined tag level.’’ 534 by market participants at the executing controls should prevent.524 FIA Six comments addressed whether firm level or at more granular levels, explained that self-trading controls exchanges should require market including at an individual user level.513 should only address trades submitted by participants to use the exchanges’ self- CME stated that more than 100 firms the same trading desk that are matched trading controls.535 CME noted that it is have registered for this control since it despite best efforts to avoid self-trading. optional for market participants to use was launched in June 2013.514 ICE This is different from wash trades, its self-trade tools, and FIA supported 536 noted that its self-trade prevention tool which are intentional self-trades that this approach. In contrast, AIMA is mandatory for proprietary traders Commission and DCM rules already suggested mandatory confidential with DEA.515 Another exchange, CFE, effectively address, and bona fide self- flagging of self-trades to the market commented that it will be employing trades, which are buy and sell orders for participant, but only optional 537 self-trade prevention functionality in accounts with common beneficial cancellations of orders. Gelber and 516 the near future. ownership that are independently KCG support mandatory use at the 538 While FIA believes that DCMs should initiated for legitimate business ‘‘trader ID’’ level. Gelber noted that offer self-trading controls, FIA and four ICE’s controls are mandatory for some purposes, but which coincidentally 539 other commenters (including CME) cross.525 FIA and Gelber stated that market participants. Finally, IATP oppose self-trading regulation at this suggested requiring exchanges to 517 CME’s November 19, 2013 advisory time. Reasons articulated by FIA and notice on wash trades 526 provides an provide self-trading controls and apply other commenters included: The accurate description of when self- them to all participants and all technology supporting this risk control matching is acceptable.527 SIG stated products, arguing that requiring such is not sufficiently developed, although that exchanges should focus on trades controls for some but not others creates arbitrage opportunities.540 industry is already working to improve that would create material, not Comments also addressed order it and is in the best position to do so; immaterial, market misperceptions.528 regulating self-trading controls would cancellation options in order to prevent Finally, KCG stated that it does not self-trading, which can include cancel lock in standards or technology that will believe the CFTC needs to prohibit all become obsolete; self-trade controls may resting, cancel new, cancel both, and decrement order quantity (canceling the cause an accumulation of either resting 518 FIA at 25–27; CME at 11–12; AIMA at 11–12; orders or new orders, depending on how Gelber at 7. smaller order and reducing the larger the controls are calibrated, which does 519 OneChicago at 2. not advance the regulatory goal of 520 IATP at 5; AFR at 7. 529 KCG at 7. protecting the marketplace; and there 521 SIG at 9. 530 FIA at 25–27; Gelber at 7–9; CME at 12; AIMA 522 CME at 10. at 10–12; SIG at 9. are ways to prevent self-trades without 531 523 MFA at 8. FIA 25–27; Gelber at 7–9; CME at 12; SIG at 9. 524 FIA at 25; Gelber at 9; KCG at 7; AIMA at 11; 509 FIA at 27–28. 532 SIG at 9. FIA at 27. 510 FIA at 26; Gelber at 7–9. 533 AIMA at 10–12. 525 FIA at 25. 511 FIA at 26, 59–60. 534 SIG at 9. 526 See the CME Group Advisory Notice RA 1308- 512 535 FIA at 25–27; MFA at 8; Gelber at 7–9; FAIMA 5 (Nov. 19, 2013), available at http:// FIA at 25–27; CME at 13, Appendix A–4; at 10; IATP at 5. www.cmegroup.com/rulebook/files/cme-group- Gelber at 7–9; KCG at 7; AIMA at 2, 10–11; IATP 513 CME at 12. ra1308–5.pdf. The FAQ in the Advisory Notice at 5. 514 Id. at 11–12. discusses various types of acceptable self-matching 536 CME at 13, Appendix A–4; FIA at 25–27. 515 ICE at 2. that would not violate CME Rule 534 (‘‘Wash 537 AIMA at 2, 10–11. 516 CFE at 6. Trades Prohibited’’). 538 Gelber at 7–9; KCG at 7. 517 FIA at 25–27; CME at 10–12; Gelber at 7–9; 527 FIA at 25; Gelber at 9. 539 Gelber at 7–9. MFA 5, 8; AIMA at 11–12. 528 SIG at 9. 540 IATP at 5.
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order by the size of the smaller 3. Description of Regulation prohibited from trading with each other. 541 order). As described below, the The Commission is proposing new The proposed regulations allow DCMs Commission’s proposed self-trade requirements under § 40.23 that would to exercise discretion in the design and prevention requirements do not require DCMs to apply, or provide and implementation of self-trade prevention mandate a particular technological require the use of, tools reasonably tools, in response to Concept Release approach, nor do they specify which designed to prevent self-trading. commenter concerns that the technology order or set of orders should be canceled Proposed § 40.23 defines self-trading for supporting this control is still being in order to prevent a self-trade. purposes of this regulation as the developed, and overly prescriptive matching of orders for accounts that regulations in this area may lock in 2. Commission Analysis of Amount of standards or technology that will Self-Trading in the Marketplace have common beneficial ownership or are under common control. These become obsolete. requirements are intended to prevent Description of § 40.23(b). The The pervasive growth of algorithmic requirements of proposed § 40.23(a) are trading by firms deploying large self-trading, while still allowing what FIA has characterized as ‘‘bona fide and subject to the proviso in § 40.23(b) that numbers of strategies has likely a DCM may, in its discretion, implement increased the incidence of self-trading desirable self-match trades,’’ i.e. buy and sell orders for accounts with rules that permit a self-trade resulting activity. In order to estimate the from the matching of orders for accounts percentage of self-trading in the common beneficial ownership that are independently initiated for legitimate with common beneficial ownership marketplace, the Commission recently where such orders are initiated by reviewed twelve months of trade data business purposes, but which coincidentally cross.543 While the independent decision makers. A DCM received from several large DCMs, could, through its rules, further define focusing primarily on the most active proposed rules contain exceptions for bona fide self-match trades (described in for its market participants ‘‘independent products. Among other findings, the decision makers.’’ This exception is Commission learned that intra-firm self- § 40.23(b)), they are intended to address all unintentional self-trading, and do closely based on FIA’s comment letter trades, including both proprietary and description of how a bona fide self-trade customer trades, can comprise a not include a de minimis exception for 544 a certain percentage of unintentional that should be permitted to occur. meaningful percentage of daily trading The Commission considered FIA’s activity in individual futures self-trading. In addition, the proposed rules would provide for an important concept of permissible self-trading to be contracts.542 For example, in February a reasonable one, which would be easily 2015 intra-firm self-trades in one new element of transparency around bona fide self-match trades to furnish all understood by exchanges and market examined futures contract were almost participants. In addition to the foregoing 10 percent of all trades in that contract, market participants with greater information regarding the markets on exception relating to common beneficial increasing to almost 15 percent on ownership, § 40.23(b) allows a DCM to individual days. Self-trade rates for a which they trade. Description of § 40.23(a). Regulation permit a self-trade resulting from the few other contracts were around 5 40.23(a) would require a DCM to matching of orders for accounts under percent of total activity. The implement rules reasonably designed to common control where such orders Commission found similar patterns at prevent self-trading by market comply with the DCM’s cross-trade, individual firm levels, with cumulative participants, except as specified in minimum exposure requirements or self-trade volumes at times in the paragraph (b). The regulation defines similar rules, and are for accounts that millions of contracts for some market ‘‘self-trading,’’ for purposes of § 40.23, are not under common beneficial participants over the course of the 12- as the matching of orders for accounts ownership. month sample period. The average size that have common beneficial ownership Description of § 40.23(c). Under of a firm’s self-trades ranged from or are under common control. proposed § 40.23(c), a DCM must approximately two contracts per trade to Regulation 40.23(a) would require that a require market participants to receive over two thousand contracts per trade. DCM shall either apply, or provide and approval from the DCM to forego self- require the use of, self-trade prevention trade prevention tools with respect to 541 FIA at 26; CME at 11. FIA, Gelber and SIG tools that are reasonably designed to specific accounts under common support the DCM offering cancellation options to prevent self-trading and are applicable beneficial ownership or control, on the the market participant. FIA at 26; Gelber at 7–9; SIG basis that they meet the criteria of at 9. In its comment letter, CME stated that its self- to all orders on its electronic trade match prevention system was, at the time of the matching platform. If a DCM does not paragraph (b). The DCM must require comment letter, structured to cancel the resting implement and apply self-trade that such approval request be provided order, retaining orders based on more current to it by a compliance officer or senior market information. (CME has more recently prevention tools, then it must provide such tools to its market participants and officer of the market participant. The expanded the number of cancellation choices.) The Commission emphasizes that the benefit of the opposite approach, canceling the require all market participants to use the taking order, is that it favors the priority of orders tools. For purposes of complying with approval request to not apply self-trade resting in the order book. CME at 11. Similarly, prevention tools to certain orders MFA stated that it disagrees with the approach of the requirements of proposed § 40.23, a DCM could either determine for itself should not be made by an individual canceling the resting order, because it causes a trader or other non-management or more participant to lose its resting orders even if the which accounts should be prohibited orders have been working in the queue. MFA noted from trading with each other, or require junior employee of the trading firm. that other exchanges, such as NYSE Euronext, offer market participants to identify to the Market participants must withdraw or options such as cancelling the taking order and DCM which accounts should be amend an approval request if any decrementing order quantity. MFA at 8. AFR change occurs that would cause the supports cancellation of the taking order, reasoning that the taking order is more likely to be the 543 FIA at 25. See also FIA Guide, supra note 95 information provided in such approval erroneous order. AFR at 7. Finally, AIMA favors at 13, which describes bona fide and allowable self- request to be no longer accurate or rejection of both the resting order and the taking match trades as ‘‘buy and sell orders for accounts complete. The Commission notes that order. AIMA at 11. with common beneficial ownership that are any approval request submitted to the 542 Self-trading identified in the Commission’s independently initiated for legitimate and separate analysis could include trading between accounts business purposes by independent decision makers DCM would be subject to section 9(a)(4) controlled by separate independent decision and which coincidentally cross with each other in makers. the competitive market.’’ 544 See FIA at 25.
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of the Act, 7 U.S.C. 13(a)(4) (2012), The Commission has included self- Commission action in this area, the which prohibits, inter alia, making false, trade prevention requirements in commenters also indicated that self- fictitious, or fraudulent statements to a Regulation AT to ensure that there are trade prevention tools are already registered entity. regulatory standards to more effectively widely implemented in industry.546 Description of § 40.23(d). Finally, and fairly limit unintentional self- Moreover, FINRA Rules already address proposed § 40.23(d) would require that trading across Commission-regulated self-trade prevention. In June 2014, for each product and expiration month markets, aiding in the risk management FINRA published a regulatory notice traded on a DCM in the previous and trading efficiency of individual stating that the SEC had approved new quarter, the DCM must prominently firms. supplementary material to FINRA Rule display on its Web site the following In addition, while existing 5210 (Publications of Transactions and information: (i) The percentage of trades Commission regulations address market Quotations) to address transactions in a in such product including all expiration manipulation and wash sales, these security resulting from the months that represent self-trading types of violative behavior require some unintentional interaction of orders approved (pursuant to paragraph (c) of level of intent. Therefore, the originating from the same firm that § 40.23) by the DCM, expressed as a Commission has determined to propose involve no change in the beneficial percentage of all trades in such product regulations in the area of self-trading ownership of the security (self- 547 and expiration month; (ii) the that address both matching of orders for trades). Effective August 25, 2014, percentage of volume of trading in such accounts that have common beneficial firms must have policies and procedures product including all expiration months ownership or are under common in place that are reasonably designed to that represents self-trading approved control, independent of intent. review their trading activity for, and The proposed regulations are (pursuant to paragraph (c) of § 40.23) by prevent, a pattern or practice of self- intended to take into account Concept the DCM, expressed as a percentage of trades resulting from orders originating Release comments advising that the all volume in such product and from a single algorithm or trading desk, Commission should not be overly expiration month; and (iii) the ratio of or related algorithms or trading desks. prescriptive in requiring specific types orders in such product and expiration In addition, the FIA Guide sets forth of self-trade prevention tools, or specific month whose matching was prevented guidelines for self-trade prevention, and settings or controls in connection with recommends that exchanges should by the self-trade prevention tools such tools, because such tools are still described in paragraph (a) of § 40.23, offer participants a selection of self- technologically evolving. Furthermore, trade tools to allow market participants expressed as a ratio of all trades in such the Commission agrees with comments product and expiration month. The to tailor self-trade prevention to their stating that exchanges are in the individual needs by offering various Commission emphasizes that the position, from a technology standpoint, ‘‘prominent display’’ of information by options (e.g., cancel resting, cancel new, to develop these types of controls. cancel both, and decrement order size) a DCM precludes such DCM from Accordingly, the Commission proposes placing information required by this and various levels of granularity (e.g., to require the use of self-trade firm level, group level, trader ID level, rule behind registration, log in, user prevention tools in proposed § 40.23, name, password or other walls on the customer account level and strategy but allow exchanges and market 548 DCM’s Web site. level). The FIA Guide recommends participants the discretion to tailor the that the use of such self-trade tools by 4. Policy Discussion design of such tools and how to most market participants should remain effectively calibrate them in order to optional.549 The new Regulation AT The Commission understands that for prevent unintentional self-matching. various reasons, firms might operate requirements, by contrast, would make The Commission believes that the use of exchange-provided self-trade multiple algorithms, each following a requirements of proposed § 40.23 are different trading strategy, but prevention tools mandatory by market generally consistent with how participants. transacting in the same instrument/ exchange-provided self-trade prevention futures contract. This can cause buy and tools currently operate, as indicated by 5. Request for Comments sell orders for the same instrument to be comment letters.545 The proposed 90. The Commission seeks to require generated at the same instant by regulations would also require DCMs to self-trade prevention tools that screen different algorithms, which in turn can publish statistics on their Web site out unintentional self-trading, while get matched with each other as self- regarding self-trading that they have permitting bona-fide self-matched trades trades. Certain firms might choose to both authorized and prevented on their that are undertaken for legitimate prevent these self-trades from occurring, platform. The Commission is proposing business purposes. Under the or limit the extent of self-trades. They this Web site reporting requirement regulations proposed above, DCMs shall could choose to do this by building because it understands that the design implement rules reasonably designed to tools that scan all orders being of self-trade prevention tools may vary prevent self-trading (‘‘the matching of generated from within the firm and stop among DCMs. These statistics will serve orders for accounts that have common those that could potentially result in a critical purpose in disclosing to beneficial ownership or are under self-trades. But there are challenges in market participants the extent of self- common control’’), but DCMs may in building efficient firm-level solutions, trading that occurs in each product. The their discretion implement rules that especially in modern low latency Commission believes that such permit ‘‘the matching of orders for markets. In response, DCMs have transparency is a key element of the implemented self-trade prevention tools proposed rules as it will help furnish all 546 See, e.g., FIA at 26; Gelber at 7–9; CME at 11– to help firms manage and limit the market participants with better 12; ICE at 2. extent of self-trades that would information regarding the markets in 547 See FINRA, ‘‘Regulatory Notice 14–28: Self otherwise be generated by these which they trade. Trades; SEC Approves FINRA Rule Concerning Self-Trades ’’ (June 2014), available at http:// algorithms. These trading system-level While some commenters to the www.finra.org/sites/default/files/NoticeDocument/ solutions appear to be more efficient in Concept Release were not supportive of p540972.pdf. helping firms manage their self-trade 548 See FIA Guide, supra note 95 at 13. activity. 545 See, e.g., CME at 11–12; ICE at 2. 549 Id.
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accounts with common beneficial addition to the exceptions permitted in and if so, what additional regulations ownership where such orders are § 40.23(b)(1) and (2)? If so, please would ensure that DCMs are able to: initiated by independent decision describe such other types of acceptable Ensure that such tools are comparable to makers.’’ self-trading and explain why they DCM-provided tools; monitor the a. Do these standards accomplish the should be permitted. performance of such tools; and goal of preventing only unintentional 92. Proposed § 40.23 provides that otherwise review such tools and ensure self-trading, or would other standards be DCMs may comply with the that they are sufficiently rigorous to more effective in accomplishing this requirement to apply, or provide and meet the requirements of § 40.23. goal? For example, should the require the use of, self-trade prevention 95. Is it appropriate to require Commission consider adopting in any tools by requiring market participants to final rules arising from this NPRM an identify to the DCM which accounts implementation of self-trade prevention alternative requirement modeled on should be prohibited from trading with tools with respect to all orders? Should FINRA Rule 5210 and require market each other. With respect to this account such controls be mandatory for only a participants to implement policies and identification process, the Commission’s particular subset of orders, i.e., orders procedures to review their trading principal goal is to prevent from AT Persons or orders submitted activity for, and a prevent a pattern of, unintentional self-trading; the through DEA? self-trades? Commission does not have a specific 96. Please comment on the b. While the regulations contain interest in regulating the manner by requirement that DCMs disclose self- exceptions for bona fide self-match which market participants identify to trade statistics. Is the data required to be trades (described in § 40.23(b)), the DCMs the account that should be disclosed appropriate? Is there any other regulations are intended to prevent all prohibited from trading from each other, category of self-trade data that DCMs unintentional self-trading, and do not so long as this goal is met. Should any should be required to disclose? include a de minimis exception for a other identification methods be 97. Should DCMs be required to certain percentage of unintentional self- permitted in § 40.23? For example, disclose the amount of unintentional trading. Should the regulations permit a please comment on whether the self-trading that occurs each month, certain de minimis amount of opposite approach is preferable: market alongside the self-trade statistics unintentional self-trading, and if so, participants would identify to DCMs the required to be published under what amount should be permitted (e.g., accounts that should be permitted to proposed § 40.23(d)? as a percentage of monthly trading trade with each other (as opposed to volume)? those accounts that should be prevented 98. As noted above, the Commission c. The following terms are used in from trading with each other). understands that there is some potential proposed § 40.23(a) and (b): (1) Self- 93. The Commission believes that its for self-trade prevention tools to be used trading, (2) common beneficial requirements concerning self-trade for wrongful activity that may include ownership, (3) independent decision prevention tools must strike the disruptive trading or other violations of makers, and (4) common control. Do any appropriate balance between flexibility the Act or Commission regulations on of these terms require further definition? (allowing market participants with DCMs. Are there ways to design self- If so, how should they be defined? diverse trading operations and strategies trade prevention tools so that they do Should any alternatives be used and, if the discretion in implementation so as not facilitate disruptive trading (such as so, how should such substitute terms be effectively prevent only unintentional spoofing) or other violations of the Act defined? self-trades) and simplicity (a variety of or Commission regulations on DCMs? d. With respect to ‘‘common design and implementation options may Are additional regulations warranted to beneficial ownership,’’ the Commission render this control too complex to be ensure that such tools are not used to requests comment on the minimum effective).550 Does the Commission facilitate such activities? degree of ownership in an account that allow sufficient discretion to exchanges should trigger a determination that such R. DCM Market Maker and Trading and market participants in the design Incentive Programs—§§ 40.25–40.28 account is under common beneficial and implementation of self-trade ownership. For example, should an prevention tools? Is there any area Proposed §§ 40.25–40.28 would account be deemed to be under common where the Commission should be more require DCMs to provide additional beneficial ownership between two prescriptive? The Commission is public information regarding their unrelated persons if each person particularly interested in whether there market maker and trading incentive directly or indirectly has a 10% or more is a particular level at which it should programs, restrict certain types of ownership or equity interest in such require implementation of self-trade payments by DCMs in connection with account? The Commission refers prevention tools, i.e., if the tools must such programs, and require DCMs to commenters to the aggregation rules in prevent matching of orders from the perform surveillance of such programs part 150 of its regulations, including same trading firm, the same trader, the to prevent abusive practices. The specifically § 150.4, and requests same trading algorithm, or some other remainder of this section presents a comment on a potential Commission level. description of the proposed regulation, definition of common beneficial 94. Proposed § 40.23(a) would require a discussion of the policy justification ownership that is modeled on § 150.4. DCMs to either apply, or provide and for the proposal, and a request for e. The Commission also requests require the use of, self-trade prevention comments on the proposal. comment on whether ‘‘common tools. Please comment whether beneficial ownership’’ should be § 40.23(a) should, in addition, permit 1. Policy Discussion defined in any final rules arising from market participants to use their own this NPRM, or whether such definition Although not discussed in the self-trade prevention tools to meet the Concept Release, the Commission has should be left to each DCM with respect requirements of proposed § 40.23(a), to its program for implementing determined to address in Regulation AT certain aspects of DCM market maker proposed § 40.23. 550 See FIA Guide, supra note 95 at 13 (discussing 91. Are there any other types of self- balance between flexibility and complexity with and trading incentive programs that it trading that should be permitted in respect to self-trade prevention tools). believes are particularly relevant in the
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context of automated trading.551 Formal DCM and Commission rules. Notably for Proposed § 40.25 will enhance the types market making and incentive programs purposes of Regulation AT, market of information that DCMs should expect were not common in the days of pit participants using ATSs can magnify to provide the Commission when trading. In the modern trading these concerns in several respects. First, requesting approval or self-certifying environment, DCM trading incentive the automation and speed of ATSs can market-maker or trading incentive programs (which may also be called a allow market participants to quickly programs, and will also require that liquidity provider program) typically reach market-maker or trading incentive information regarding market-maker and compensate one or more market program thresholds, depending on the trading incentive programs be easily participants with financial or non- liquidity of a market and threshold located on a DCM’s Web site. financial incentives or benefits for levels. Second, the trading strategies The Commission notes that in June meeting certain volume thresholds or pursued through ATSs can sometimes 2012 it adopted core principles and providing liquidity. A market maker result in a large number of trades final rules modernizing the regulatory program (which may also be called, for between the same ATS or between two regime applicable to all DCMs (‘‘DCM example, a market specialist, designated or more ATSs owned or controlled by Final Rules’’). The DCM Final Rules market maker, lead market maker, or the same market participants. In this emphasized DCMs’ obligations as the liquidity provider program) is a more regard, the Commission is also front-line regulators of their markets, focused offering that involves a proposing new § 40.23 to help prevent including extensive trade practice and contractual agreement between the DCM self-trading on DCMs, and provide market surveillance responsibilities. In and a market participant. It typically market participants with greater addition, the Commission codified new compensates one or more market transparency around DCM depth and requirements that a DCM offer its participants with financial or non- liquidity when self-trading does ‘‘members [and] persons with trading financial incentives or benefits for occur.552 privileges . . . with impartial access to fulfilling certain affirmative obligations Proposed §§ 40.25–40.28 will further its markets and services,’’ including: (1) in a particular product or products, such the Commission’s policy objectives in ‘‘Access criteria that are impartial, as maintaining two way prices and three key areas: (1) Transparency; (2) transparent and applied in a non- volumes or a pre-determined minimum market integrity; and (3) effective self- discriminatory manner’’ and (2) bid/ask spread for a specified period of regulation by all DCMs. The proposed ‘‘comparable fee structures . . . for the trading day. regulations would further transparency equal access to, or services from’’ the The number of such programs self- through proposed §§ 40.25 and 40.26, DCM. Taken together, proposed certified to the Commission has risen which would require greater disclosure §§ 40.25–40.28 will facilitate the sharply in recent years, as has the of information to the public and to the Commission’s oversight of DCMs’ complexity of the programs and size of Commission regarding market maker market maker and trading incentive the incentives. In 2010, 56 market maker and trading incentive programs. programs, and will also help the and incentive programs were self- Together with proposed amendments to Commission ensure that market maker certified by DCMs; in 2013, DCMs had the definition of ‘‘rule’’ in § 40.1(i) to and trading incentive programs are in self-certified 341 programs, an increase explicitly include market maker and compliance with Commission rules by over 600 percent compared to the trading incentive programs, the regarding trade practice and market number of programs self-certified by proposed regulations would also help surveillance and impartial access DCMs in 2010. In 2012, nearly every eliminate any potential ambiguity that requirements. contract at one DCM was part of a may exist regarding the Commission’s Importantly, the proposed regulations 553 would promote market integrity by market maker or incentive program, authority over such programs. requiring in proposed § 40.27(a) that including highly liquid contracts. The Commission understands that 552 See Section IV(Q) above for a discussion of DCMs implement policies and self-trading and proposed § 40.23. DCMs have launched market making procedures reasonably designed to 553 In the Final Rule for Provisions Common to prevent payment of market maker or and other incentive programs to Registered Entities, the Commission stated with encourage liquidity provisioning and respect to market maker and trading incentive trading incentive program benefits for order flow to their electronic trading programs, ‘‘The Commission continues to view self-trades. In this regard, the proposed platforms. While the Commission does such programs as ‘‘agreements * * * regulations are designed to ensure that corresponding’’ to a ‘‘trading protocol’’ within the market maker or trading incentive not object to such goals, the § 40.1 definition of ‘‘rule’’ and, as such, all market Commission’s proposed regulations in maker and trading incentive programs must be programs do not incentivize abusive, §§ 40.25–40.28 reflect its concern that submitted to the Commission in accordance with manipulative, or disruptive trading market maker and trading incentive procedures established in part 40.’’ In this Final practices, and also do not encourage or Rule, the Commission also stated, specifically with facilitate behavior that distorts markets programs could have the potential to respect to DCMs, that ‘‘[a] DCM’s rules spur market participants to trade in implementing market maker and trading incentive and give the appearance of false market ways designed to collect program programs fall within the Commission’s oversight depth. Proposed § 40.28 clarifies DCMs’ benefits, independently of any authority. Indeed, a number of core principles surveillance obligations regarding touch upon trading issues that may be implicated market maker or trading incentive contribution they may be making to by the design of such programs. Core Principle 9, liquidity or price discovery. Such for example, establishes the Commission’s programs and their participants. practices may potentially also lead to framework for regulating the execution of Separately, the Commission believes abusive trading practices in violation of transactions, requiring DCMs . . . to provide a that proposed §§ 40.25–40.28 will also competitive, open, and efficient market and provide DCMs and market participants mechanism for execution. The newly-amended Core 551 The Commission notes that ESMA’s 2015 Principle 12 also requires DCMs to establish and with greater certainty as to what types Final Draft Regulatory Standards address market enforce rules to protect markets and market of trading incentive and market maker maker schemes. The standards address the participants from abusive practices and to promote programs are inappropriate. The circumstances under which an investment firm fair and equitable trading on designated contract proposed regulations are described in must enter into a market making agreement with a markets. In addition, market maker and trading trading venue, and the content that should be incentive programs frequently touch upon Core detail below. The proposed rules will included in such an agreement. See ESMA Principle 19, which requires that DCMs avoid September 2015 Final Draft Standards Report adopting any rules or taking any actions that result Provisions Common to Registered Entities, 76 FR Annex 1, supra note 80 at 279–80. in unreasonable restraints of trade.’’ Final Rule, 44776, 44777–8 (July 27, 2011).
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work in conjunction with the proposed the potential service(s) rendered by a Proposed § 40.25(c) would require a amendments to the definition of ‘‘rule’’ market participant to which the market DCM to notify the Commission upon the in proposed § 40.1(i) to explicitly maker or trading incentive program termination of a market maker or trading include market maker and trading applies (e.g., trading at certain hours; incentive program when such program incentive programs. trading originating from certain terminates prior to the date previously In sum, the Commission’s proposed geographic zones; trading originating notified the Commission. Any extension amendments to § 40.1(i) and new with certain types or categories or or renewal of a market maker or trading §§ 40.25–40.28 will increase market participants; or the bid/ask incentive program beyond its original transparency around DCM market- spread to be maintained by a market termination date would require a new maker and trading incentive programs, participant); (4) a description of any rule filing pursuant to this part. underline existing regulatory eligibility criteria or categories of market Proposed § 40.26 would require that, expectations, and introduce basic participants defining who may upon request by the Commission or the safeguards in the conduct of such participate in the program; (5) for any Director of the Division of Market programs. The proposed regulations market maker or trading incentive Oversight, a DCM must provide such would make clear that market-maker program that is not open to all market information and data as may be and trading incentive programs are participants, an explanation of why the requested regarding participation in ‘‘rules’’ for purposes of part 40, and program is limited to the chosen market maker or trading incentive establish information and disclosure eligibility criteria or categories of market programs offered by the DCM, including requirements when DCMs request participants, and an explanation of how but not limited to, individual program Commission approval or self-certify new such limitation complies with the agreements, names of program rules pursuant to part 40. They would impartial access and comparable fee participants, benchmarks achieved by also make clear that DCMs’ existing structure requirements of § 38.151(b) for program participants, and payments or surveillance responsibilities in part 38 DCMs; (6) an explanation of how other benefits conferred upon program apply equally to market-maker and persons eligible for the market maker or participants. trading incentive programs. Finally, the trading incentive program may apply to Proposed § 40.27(a) would require a proposed regulations would codify the participate, and how eligibility will be DCM to implement policies and Commission’s expectation that DCM evaluated by the DCM; (7) a description procedures reasonably designed to market-maker and trading incentive of any payments, incentives, discounts, prevent payment of market maker or programs should not provide payments considerations, inducements or other trading incentive program benefits, or incentives for market-maker or benefits that program participants may including but not limited to payments, trading activity between accounts under receive, including any non-financial discounts, or other considerations, for common ownership. incentives (non-financial incentives trades between accounts that are: (1) 2. Description of Regulations may include, for example, enhanced Identified to the DCM as under common trading priorities or preferential access beneficial ownership pursuant to the Proposed §§ 40.25–40.28 would to market data, including order and approval process described in § 40.23(c); require DCMs to provide additional trade data); (8) a description of the or (2) otherwise known to the DCM as public information regarding their obligations, benchmarks, or other under common ownership.556 market maker and trading incentive measures that a participant in a market Finally, proposed § 40.28 would programs. Proposed § 40.25(a) would maker or trading incentive program require that a DCM, consistent with its require that, when submitting a rule must meet to receive the benefits obligations pursuant to subpart C of part regarding a market maker or trading described in paragraph (a)(7) of this 38, must review all benefits accorded to incentive program pursuant to § 40.5 or section; and (9) a description of any participants in market maker and § 40.6, a DCM must, in addition to legal affiliation between the DCM and trading incentive programs, including information required by such sections, any entity acting as a market maker or but not limited to payments, discounts, include specific additional information participating in a market maker or or other considerations, to ensure that 554 in its public rule filing. Additional trading incentive program.555 Proposed such benefits are not earned through information to be provided would § 40.25(b) would require that, in abusive practices. The Commission include: (1) The name of the market addition to any public notice required notes that such determination is not maker program or trading incentive pursuant to part 40 (including without intended as a substitute for DCMs’ trade program, the date on which it will limitation the requirements of practice surveillance, market begin, and the date on which it will § 40.5(a)(6) and § 40.6(a)(2)), a DCM surveillance, and other surveillance terminate (if applicable); (2) an must ensure that the information obligations with respect to all trading. explanation of the specific purpose for required by § 40.25(a)(1)–(8) is easily 3. Request for Comments the program; (3) a list of the product(s) located on its public Web site during the the trading of which is eligible for lifetime of the market maker or trading 99. To what extent do market benefits under the market maker or incentive program, that is, from the time participants currently trade in ways trading incentive program, and list of that the DCM begins accepting designed primarily to collect market participants in the program through the maker or trading incentive program 554 The Commission is cognizant that a DCM may benefits, rather than for risk consider certain information required by proposed time the program ceases operation. § 40.25(a) to be non-public. In this regard, the management purposes? Commission notes that § 40.8 of its existing 555 Commission staff has historically required regulations provides a mechanism for registered enhanced DCM surveillance procedures when a 556 The Commission notes that proposed entities to request confidential treatment when DCM market maker is operated by an affiliate of the § 40.27(a) prohibits payments for trades between submitting rule filings pursuant to §§ 40.5 or 40.6. DCM. Proposed § 40.25(a)(9) will assist the accounts (i) identified to the DCM as under Among other requirements, a registered entity must Commission in identifying potential conflicts of common beneficial ownership or (ii) known to the file a ‘‘detailed written justification’’ for its interest between a DCM, its market makers, and DCM as under common ownership. This distinction confidential treatment request. Regulation 40.8 participants in market maker or trading incentive reflects that the Commission’s belief that DCMs may remains available to DCMs for any § 40.25(a) filings programs, and also assist the Commission in not always have beneficial ownership information that may be required in the future. See 17 CFR 40.8; promoting appropriate surveillance in such unless it has been provided to them, pursuant for see also 17 CFR 145.9. circumstances. example to proposed § 40.23.
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100. To what extent do that market 106. In any final rules arising from exchange, and indicators of whether the maker and trading incentive programs this NPRM, should the Commission also order is associated to an automated currently provide benefits for self- prohibit DCMs from providing trading system. Using this participant-identified trades? To what extent do market incentive program benefits where such data, the Commission estimated the participants collect such benefits for benefits on a per-trade basis are greater number of unique firms actively sending self-trades? than the fees charged per trade by such in algorithmic orders to the DCMs, 101. The Commission requests DCMs and its affiliated DCO (if making them potentially subject to comment regarding whether the applicable)? The Commission also requirements of AT Persons. information proposed to be collected in specifically requests comment on the Some of the firms included in this § 40.25 would be sufficient for it to extent, if any, to which one or more count, although they use automated determine whether a DCM’s market- DCMs engage in this practice. systems, may not fully satisfy the maker or trading incentive program 107. Proposed § 40.25(b) imposes requirements for an AT Person, possibly complies with the impartial access certain transparency requirements with making the current estimate higher than requirements of § 38.151(b). If respect to both market maker and the actual number of AT Persons. For additional or different information trading incentive programs. The example, firms identified in the data set would be helpful, please identify such Commission requests public comment as submitting algorithmic orders may information. regarding: not be required to register with the 102. The Commission requests a. The most appropriate place or Commission under current or proposed comment regarding whether DCMs manner for a DCM to disclose the rules and thus would not be AT Persons should be required to maintain on their information required by proposed (e.g., registration triggers under public Web sites the information § 40.25(b); proposed § 1.3(x)(3)(ii) include a DEA required by proposed § 40.25(a) and (b) b. The benefits or any harm that may component in addition to an for an additional period beyond the end result from such transparency, Algorithmic Trading component). of the market maker or trading incentive including any anti-competitive effect or However, because the Commission does program. The Commission may pro-competitive effect among DCMs or not historically receive the complete determine to include in any final rules market participants; order book audit trail, the estimate by arising from this NPRM a requirement c. Whether transparency as proposed necessity only used a subset of all that such information remain publicly in § 40.25(b) is equally appropriate for orders sent into the DCMs. To generate available pursuant to proposed both market maker programs and an accurate estimate of automated order § 40.25(b) for an additional period up to trading incentive programs, or are the activity, the estimate included many of the most active products on the DCMs, six months following the end of a proposed requirements more or less where participant diversity would be market maker or trading incentive appropriate for one type of program over greatest. This analysis resulted in program. the other? approximately 350 potential AT 103. The Commission requests d. Whether any of the enumerated Persons. To further address AT Persons comment regarding whether the text of items required to be posted on a DCM’s public Web site pursuant to proposed that may not be identified in its data set, proposed § 40.27(a) identifies with the Commission increased its finding of sufficient particularity the types of § 40.25(b) could reasonably be considered confidential information that approximately 350 potential AT Persons trades that are not eligible for payments by 20 percent, yielding a total of 420 or benefits pursuant to a DCM market- should not be available to the public, and if so, what process should be potential AT Persons subject to the rules maker or trading incentive program. proposed herein. The Commission What amendments, if any, are necessary available for a DCM to request from the Commission an exemption from the understands and acknowledges that this to clearly identify trades that are not could lead to estimates which are eligible? requirements of proposed § 40.25(b) for that specific enumerated item? incomplete, and welcomes any 104. Section 40.27(a) provides that comments which might provide a more DCMs shall implement policies and V. Related Matters complete and/or more accurate count of procedures that are reasonably designed AT Persons. This estimate of 420 AT to prevent the payment of market-maker A. Calculation of Number of Persons Subject to Regulations Persons is used for purposes of the or trading incentive program benefits for calculations in the Related Matters trades between accounts under common AT Persons. The Related Matters discussion below. ownership. Are there any other types of discussion below includes a number of Floor Traders (A Component of AT trades or circumstances under which hourly burden estimates and cost Persons). As noted in section IV(E) the Commission should also prohibit or estimates for persons subject to new or above, the Commission proposes to limit DCM market-maker or trading revised regulations under Regulation require the registration of proprietary incentive program benefits? AT. In order to estimate the number of traders using DEA for Algorithmic 105. The Commission is proposing in AT Persons, the Commission used a Trading on a DCM. In order to achieve § 40.27(a) certain requirements sample of orders sent to DCMs. This registration, the Commission proposes regarding DCM payments associated data includes new orders, modifications amending the definition of ‘‘Floor with market maker and trading to orders, and cancellations of the same. trader’’ in Commission Regulation incentive programs. Please address Of those available to the Commission, 1.3(x). Newly registered floor traders whether the proposed rules will this data set is the one most closely would be included in the definition of diminish DCMs’ ability to compete or related to the requirements included in AT Persons. In order to estimate the build liquidity by using market maker or the proposed rules. It includes the data number of these firms, the Commission trading incentive programs. Does any elements potentially generated by an made use of reference information for DCM consider it appropriate to provide algorithm, often routed through a the connection methods used by active market maker or trading incentive clearing member, and accepted by the futures trading firms. These data files program benefits for trades between matching engine for execution. The data include information about the accounts known to be under common set includes identifiers for the firm that characteristics of the connection, beneficial ownership? generated and/or routed the order to the including the location where orders are
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generated. In order to identify direct FCMs, based on the financial data for B. Calculation of Hourly Wage Rates connections, the Commission isolated FCMs reported on the CFTC Web site. Used in Related Matters those connections associated with co- This data states that there were 57 FCMs The Related Matters discussion below location or other services likely related in March 2015 that required estimates the cost of various regulations to DEA. These filters generated an ‘‘Customer’s Segregation of Funds.’’ 557 proposed under Regulation AT. These estimate of approximately 100 potential The Commission arrived at an estimate costs incorporate hourly wage rates firms that may need to register under of 15 DCMs, based on the list of derived from salary information proposed § 1.3(x)(3). This calculation designated DCMs as of the date of this compiled by the Securities Industry and did not exclude those firms which may NPRM, as reported on the CFTC Web Financial Markets Association already be registered with the site.558 This number does not include (‘‘SIFMA’’). Specifically, the hourly Commission in some capacity. As a dormant or pending DCMs. wage rates are based on salaries and result, the 100 estimate is potentially bonuses across different professions that higher than the actual number of floor 1. Request for Comments are listed in the SIFMA Report on traders that would register under the Management & Professional Earnings in new provision. 108. The Commission requests comment on its calculation of the the Securities Industry 2013, modified Clearing member FCMs and DCMs. number of AT Persons, newly registered to account for an 1800-hour work-year Finally, the Commission estimated the floor traders, clearing member FCMs, and multiplied by 1.3 to account for number of clearing member FCMs and overhead and other benefits.559 The and DCMs that will be subject to DCMs that would be subject to proposed following professions and hourly wages Regulation AT. Regulation AT. The Commission arrived are referenced throughout the Related at an estimate of 57 clearing member Matters:
Total mean 2012 2013 SIFMA report profession and code Description of role in related matters compensation with Hourly wage rate bonus—2013 (rounded) 560 SIFMA report
Project Manager (1030) ...... Project Manager ...... 561 97,138 $70 Business Analyst (Intermediate) (602) ...... Business Analyst ...... 562 72,650 52 Business Analyst (Intermediate) (602) ...... Tester ...... 563 72,650 52 Programmer Analyst (Senior) (1607) ...... Developer ...... 564 103,851 75 Compliance Examiner (Senior) (409) ...... Senior Compliance Examiner ...... 565 79,992 58 Compliance Specialist (Senior) (406) ...... Senior Compliance Specialist ...... 566 78,250 57 Chief Compliance Officer (Mutual Funds/Invest- Chief Compliance Officer ...... 567 192,367 139 ment Advisory Services) (413). Compliance Attorney (1103) ...... Compliance Attorney ...... 568 133,059 96
C. Regulatory Flexibility Act 1. FCMs and DCMs Commission invites public comment on this determination. The Regulatory Flexibility Act The Commission has previously (‘‘RFA’’) requires that agencies consider determined that FCMs and clearing 2. AT Persons whether the rules they propose will members are not small entities for Regulation AT would also impose have a significant economic impact on purposes of the RFA.571 The requirements on ‘‘AT Persons,’’ a a substantial number of small entities Commission has also previously definition that includes: FCMs, floor and, if so, provide a regulatory determined that DCMs are not small brokers, SDs, MSPs, CPOs, CTAs or IBs, flexibility analysis regarding the entities for purposes of the RFA.572 as well as ‘‘floor traders’’ as defined in impact.569 A regulatory flexibility Accordingly, the Chairman, on behalf of proposed § 1.3(x)(3), that engage in analysis or certification is typically the Commission, hereby certifies Algorithmic Trading. required for ‘‘any rule for which the pursuant to 5 U.S.C. 605(b) that the The Commission has previously agency publishes a general notice of rules proposed in Regulation AT determined that FCMs, foreign brokers, proposed rulemaking’’ pursuant to the imposing requirements on FCMs and SDs, MSPs, CPOs, and natural persons notice-and-comment provisions of the DCMs would not have a significant are not small entities for purposes of the Administrative Procedure Act, 5 U.S.C. economic impact on a substantial RFA.573 As indicated above, the 553(b).570 number of small entities. The Commission believes that it is likely that no natural persons will be AT
557 See CFTC, Financial Data for FCMs, available 561 See 2013 SIFMA Report, supra note 559 at FR 43851 at 43860 (July 22, 2011) (clearing at http://www.cftc.gov/MarketReports/Financial 273. members). DataforFCMs/index.htm. 562 See id.at 136. 572 76 FR 44776, 44789 (July 27, 2011) 558 See CFTC, DCM Industry Filings, available at 563 Id. (‘‘Provisions Common to Registered Entities’’); see http://sirt.cftc.gov/SIRT/SIRT.aspx?Topic=Trading 564 66 FR 45064, 45609 (Aug. 29, 2001); 47 FR 18618, Organizations&implicit=true&type=DCM&Custom See id.at 395. ColumnDisplay=TTTTTTTT. 565 See id.at 113. 18619 (Apr. 30, 1982). 559 The SIFMA Report on Management & 566 See id. at 104. 573 See respectively and as indicated: 47 FR Professional Earnings in the Securities Industry 567 See id. at 119. 18618, 18619 (April 30, 1982) (FCMs, CPOs); 72 FR (2013) (‘‘2013 SIFMA Report’’), available at http:// 568 See id. at 279. 34417 at 34418 (June 22, 2007) (foreign brokers); 76 www.sifma.org/research/item.aspx?id=8589940603. FR 71626 at 71680 (November 18, 2011) (SDs); 77 569 5 U.S.C. 601 et seq. 560 The hourly wage rate represents the total mean FR 2613, 2620 (Jan. 19, 2012) (SDs and MSPs). See 570 5 U.S.C. 601(2), 603, 604 and 605. 2012 compensation with bonus divided by 1800 also 5 U.S.C. 601(6) (natural persons are not entities 571 See 47 FR 18618 (April 30, 1982) (FCMs); and hours and multiplied by 1.3 to account for overhead for purposes of the RFA). and other benefits. 76 FR 71626 at 71680 (November 18, 2011) and 76
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Persons, given the technological and to enact new and amended regulations of how the Commission generated this personnel costs associated with requiring risk controls, testing standards estimate. Algorithmic Trading. The Commission, and other measures that will safeguard • CTAs. Based on NFA’s registration pursuant to question #106 below, asks the integrity of markets. directory, the Commission estimates whether this assumption is correct. ii. A Succinct Statement of the that there are approximately 2,464 The Commission has previously 578 decided to evaluate, within the context Objectives of, and Legal Basis for, the CTAs. The Commission notes that of a particular rule proposal, whether all Proposals some registered CTAs are individuals, or some floor brokers, floor traders, The objective of Regulation AT is to and not all CTAs will be engaged in CTAs, and IBs should be considered to address the risks of algorithmic trading Algorithmic Trading. It is not feasible be small entities, and if so, to analyze through a series of pre-trade risk for the Commission to estimate what the economic impact on them of any controls and other measures that AT portion of the 420 AT Persons will be such rule.574 In 2012, the Commission Persons, clearing member FCMs and CTAs. stated that it has not made a DCMs must implement. The legal • IBs. Based on NFA’s registration determination regarding floor traders, authority for the proposed rules is directory, the Commission estimates since all registered traders at the time Sections 4c(a)(6), 4s(b)(4) 1a(23), 3(b) that there are approximately 1,375 were individuals, and individuals are and 8a(5) of the CEA.576 IBs.579 The Commission notes that some not subject to the small entity analysis registered IBs are individuals, and not under the RFA.575 iii. A Description of and, Where Accordingly, the Commission must Feasible, an Estimate of the Number of all IBs will be engaged in Algorithmic address whether, in the context of Small Entities to Which the Proposed Trading. It is not feasible for the Regulation AT, floor brokers, floor Rules Will Apply Commission to estimate what portion of traders, CTAs, and IBs that engage in The small entities to which the the 420 AT Persons will be IBs. Algorithmic Trading should be proposed amendments may apply are Beyond the above estimates of the considered small entities for purposes of those floor brokers, floor traders (as maximum number of floor brokers, floor the RFA. As discussed below, the defined in proposed § 1.3(x)(3)), CTAs traders (as defined in proposed Commission believes that the proposed and IBs that engage in Algorithmic § 1.3(x)(3)), CTAs and IBs, it is not rules regarding pre-trade and other risk Trading and fall within the definition of feasible for the Commission to provide controls, as well as standards relating to a ‘‘small entity’’ under the RFA, a more exact estimate of the number of the design, testing, and supervision of including size standards established by small entities to which Regulation AT Algorithmic Trading, are already being the Small Business Administration.577 will apply. The Commission estimates widely implemented in industry. Each of the categories of persons that no floor brokers will be ‘‘small Accordingly, while Regulation AT discussed below would fall within the entities’’ for purposes of the RFA, and would have a significant economic definition of ‘‘AT Persons.’’ As that a maximum of 100 proprietary impact on entities that are not currently discussed in section V(A) above, the implementing such measures, based on firms engaged in Algorithmic Trading Commission estimates that will be considered ‘‘floor traders’’ under its best understanding, the Commission approximately 420 persons will be AT believes that it would not have a § 1.3(x)(3) of the proposed rulemaking. Persons. The Commission estimates that the significant economic impact on a • Floor brokers. The Commission’s information collection will apply to no substantial number of small entities. best understanding is that at this time, more than a total of 320 CTAs and IBs, However, the Commission is not in a all floor brokers are natural persons. position to determine how many of such Given the technological and personnel and likely significantly less than 320. entities would be affected, or the extent costs associated with Algorithmic Based on the numbers described above, of such impact, given the varying sizes, Trading, the Commission’s expectation the Commission does not believe that a technological systems, and business is that only entities, not natural persons, substantial number of small entities will strategies of such entities. Therefore, will meet the definition of ‘‘AT Person.’’ be impacted by the information pursuant to 5 U.S.C. 603, the Accordingly, the Commission estimates collection. Further, the definition of AT Commission offers for public comment that no floor brokers will be ‘‘small Person is limited to entities that conduct this initial regulatory flexibility analysis entities’’ for purposes of the RFA. Algorithmic Trading and, the definition addressing the impact of Regulation AT • Floor traders. The Commission of new floor traders under proposed on small entities: estimates that there is a maximum of § 1.3(x)(3) is further limited to those i. A Description of the Reasons Why 100 proprietary firms engaged in entities with Direct Electronic Access. Action Is Being Considered Algorithmic Trading that will be The Commission believes that entities The Commission is taking action considered ‘‘floor traders’’ under with such capabilities are generally not because the increased use of algorithmic proposed § 1.3(x)(3) of Regulation AT. small entities. This NPRM asks specific trading and increasingly interconnected See section V(A) above for a discussion questions on the issue of how the nature of markets means that a proposed regulations may affect small 576 7 U.S.C. 6c(a)(6) (rulemaking authority with entities, in particular, whether sole technological malfunction or error can respect to disruptive trading practices); 7 U.S.C. have widespread, significant impact on 6s(b)(4) (rulemaking authority with respect to swap proprietorships would be considered many market participants. In this time dealers and major swap participants); 7 U.S.C. AT Persons and whether Regulation AT of technological change, the 1a(23) (Definitions); 7 U.S.C. 5(b) (Findings and requirements should vary depending on Commission believes that it is necessary purpose); 7 U.S.C. 12a(5) (Rules and Regulations). the size, sophistication or other 577 15 U.S.C. 601(3) (defining ‘‘small business’’ to have the same meaning as the term ‘‘small business attributes of the AT Person. 574 See 47 FR 18618, 18620 (Apr. 30, 1982) (floor concern’’ in the Small Business Act); 15 U.S.C. brokers); and 58 FR 19575, 19588 (Apr. 15, 1993) 632(a)(1) (defining ‘‘small business concern’’ to 578 (floor traders); 47 FR at 18619 (CTAs); 48 FR 35248, include an agricultural enterprise with annual See NFA Directories, available at: http:// 35276–77 (Aug. 3, 1983) (IBs). receipts not in excess of $750,000); 13 CFR 121.201 www.nfa.futures.org/NFA-registration/NFA- 575 See Commission, Final Rule: Registration of (establishing size standards for small business directories.HTML. Intermediaries, 77 FR 51898, 51901 (Aug. 28, 2012). concerns). 579 See id.
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iv. A Description of the Projected result in requiring the 100 new floor may already have these systems in place Reporting, Recordkeeping, and Other traders that will be registered pursuant in order to comply with the SEC’s Compliance Requirements of the Rules, § 1.3(x)(3) to become members of an Market Access Rule, which requires Including an Estimate of the Classes of RFA. The Commission estimates that brokers and dealers to have risk controls Small Entities Which Will Be Subject to the floor trader registrants will incur that prevent the entry of erroneous the Requirements and the Type of initial and annual RFA membership orders, by rejecting orders that exceed Professional Skills Necessary for dues of $5,625.581 Accordingly, appropriate price or size parameters, on Preparation of the Report or Record assuming (as discussed above) that there an order-by-order basis or over a short The following section discusses the are 100 new floor trader members, the period of time, or that indicate 590 projected reporting, recordkeeping, and total initial cost of RFA membership duplicative orders. other compliance requirements that will would be approximately $562,500 and Nevertheless, the Commission be imposed upon AT Persons under the the annual cost would be approximately recognizes that there may be some proposed rules. $562,500. trading firms within a given registration • category that do not yet implement the • § 1.3(x)(3)—New Registration of Floor § 1.80—Pre-Trade Risk Controls risk controls required by Regulation AT, Traders Based on Concept Release comments, or that may need to upgrade their Regulation AT would impose new best practices documents issued by systems in order to comply with registration requirements on certain industry or regulatory organizations, as Regulation AT. Accordingly, Regulation entities with Direct Electronic Access as well as existing regulations, the AT would impose technology and a result of the proposed amendment to Commission believes that a significant personnel costs on this subset of trading the definition of ‘‘Floor trader’’ in number of trading firms already firms; these costs would likely include Commission Regulation 1.3(x). The implement the specifically-enumerated both initial risk control creation costs Commission provides detailed estimates pre-trade and other risk controls and ongoing maintenance costs. of the costs associated with registration required pursuant to proposed § 1.80. The Commission provides detailed as a floor trader in section E below. As For example, in its survey of member estimates of the implementation costs of 591 discussed more fully below, the firms, PTG found the following: (i) 25 risk controls in section E below. The Commission estimates that new out of 26 responding firms use message Commission considered the possibility registrants will incur a one-time cost of and execution throttles; (ii) all 26 that a trading firm already implements approximately $2,106 per registrant responding firms use maximum order the controls required by proposed ($1,050 in application fees plus $1,056 size limits, either using their own § 1.80, but the controls may not comply in preparation costs). Accordingly, technology, the exchange’s technology, with every aspect of the regulation. In assuming (as discussed above) that there or some combination; 582 and (iii) 24 out such a case, as discussed in greater are 100 new registrants as Floor traders, of 26 responding firms use either price detail below, the Commission estimates the total one-time cost of registration collars or trading pauses.583 As to order that it will cost an AT Person would be approximately $210,600.580 management controls, two comments to approximately $79,680 to upgrade its the Concept Release from exchanges controls (i.e., evaluate current systems, • § 170.18—AT Persons Must Become stated that they provide an optional modify or create new code, and test Members of an RFA cancel-on-disconnect functionality.584 systems) in order to comply with § 1.80. Regulation AT would require all Those exchanges also indicated that Accordingly, assuming (as discussed registrants that are AT Persons that are they provide kill switch functionality to above) that there are 420 AT Persons, not otherwise required to become market participants.585 In addition, the the Commission estimates that the total members of an RFA pursuant to types of controls required by proposed industry cost to implement § 1.80 would §§ 170.15, 170.16, or 170.17 to become § 1.80 have been included in best be approximately $33,465,600. members of an RFA. Taken together, practices documents for years, such • § 1.81—Standards for Development, §§ 170.15, 170.16, and 170.17 require those best practices documents issued Testing and Monitoring of Algorithmic most registrants who may be considered by FIA PTG,586 ESMA,587 the CFTC Trading Systems AT Persons to become RFA members. TAC 588 and the TMPG.589 Finally, The Commission estimates that the many trading firms that do securities The Commission believes that most requirements of proposed § 170.18 will trading in addition to futures trading market participants and DCMs have implemented controls regarding the design, testing, and supervision of 580 Pursuant to part 3 of its regulations, the 581 The Commission notes that NFA is currently Commission has delegated its registration functions the only entity registered as an RFA. The ATSs, in light of the numerous best to the National Futures Association (NFA). Non- Commission estimates for RFA membership dues practices and regulatory requirements natural person floor trader entities register with the are based on its analysis of NFA dues. promulgated in this area. These efforts Commission and apply for membership in NFA via 582 AIMA indicated that many market participants include the FIA PTG’s November 2010 CFTC Form 7–R. Principals of non-natural person use maximum order size limits, and Gelber, a floor trader entities register via Form 8–R. Based on trading firm, stated that it uses this risk control. See ‘‘Recommendations for Risk Controls for a review of the principals associated with registered AIMA at 13; Gelber at 10. Trading Firms,’’ FIA’s March 2012 FCMs, the Commission estimates that each non- 583 FIA at 59–60. ‘‘Software Development and Change natural person floor trader entity will have 584 CME at Appendix A–4; CFE at 9–10. In Management Recommendations,’’ approximately 10 principals and therefore need to addition, FIA characterized cancel-on-disconnect as ESMA and MiFID II guidelines and file approximately 10 Forms 8–R. In the event that a ‘‘widely adopted DCM-hosted pre-trade risk a natural person meets the definition of Floor control.’’ See FIA at 14. Trader in proposed § 1.3(x)(3), and is therefore 590 See SEC, Responses to Frequently Asked 585 CME at 23–24; CFE at 11. required to register with the Commission and 586 Questions Concerning Risk Management Controls become a member of NFA, such person would only FIA PTG, ‘‘Recommendations for Risk for Brokers or Dealers with Market Access, supra be required to complete Form 8–R and would face Controls for Trading Firms,’’ (Nov. 2010) at 4–5. note 37. 587 substantially lower costs than those estimated here. ESMA Guidelines, supra note 61 at 14–15. 591 The Commission notes that trading firms can Because registration with the Commission and 588 CFTC TAC Recommendations, supra note 34 choose not to develop these controls internally, but membership in NFA make use of the same forms at 2–3. rather may purchase a solution from an outside and process, the Commission anticipates that the 589 TMPG, ‘‘Best Practices for Treasury, Agency vendor (or DCM or clearing member) in order to costs associated with proposed § 1.3(x)(3) and Debt, and Agency Mortgage-Backed Securities comply with § 1.80. The Commission has requested proposed § 170.18 will be one and the same. Markets’’ (June 2015). comments providing estimates of such costs.
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directives on the development and $22,204); 3 Testers, working for a 10 hours (10 × $139 per hour = $1,390) testing of algorithmic systems, Reg SCI combined 1,173 hours (1,173 × $52 = for a total cost of $4,240 per year. The requirements on the development, $60,996); and 2 Developers, working for approximately 420 AT Persons to which testing, and monitoring of SCI systems, a combined 427 hours (427 × $75 = § 1.83(a) would apply would therefore FINRA’s March 2015 Notice 15–09 on $32,025). incur a total annual cost of $1,780,800 effective supervision and control Designation and Training of Staff. The (420 × $4,240) to prepare and submit the practices for market participants that Commission estimates that an AT report required by § 1.83(a). use algorithmic trading strategies in the Person that has not implemented any of • § 1.83(c)—AT Person Recordkeeping equities market, IOSCO’s April 2015 the requirements of proposed § 1.81(d) Requirements Consultation Report, summarizing best (designation and training of Algorithmic practices that should be considered by Trading staff) would incur a total cost of Proposed § 1.83(c) would require each trading venues when developing and $101,600 to implement these AT Person to keep, and provide upon implementing risk mitigation requirements. This cost is broken down request to each DCM on which such AT mechanisms, and the Senior as follows: 1 Senior Compliance Person engages in Algorithmic Trading, Supervisors Group (SSG) April 2015 Specialist, working for 500 hours (500 × books and records regarding such AT Algorithmic Trading Briefing Note, $57 = $28,500); 1 Project Manager, Person’s compliance with all which described how large financial working for 500 hours (500 × $70 = requirements pursuant to proposed institutions currently monitor and $35,000); 1 Developer, working for 300 §§ 1.80 and 1.81. control for the risks associated with hours (300 × $75 = $22,500); and 1 The Commission estimates that, on an algorithmic trading during the trading Business Analyst, working for 300 hours initial basis, an AT Person will incur a day. (300 × $52 = $15,600). cost of $5,130 to draft and update Notwithstanding the standards Notwithstanding these estimates, the recordkeeping policies and procedures described above, the Commission has Commission believes that proposed and make technology improvements to calculated a maximum cost to an AT § 1.81 standardizes existing industry recordkeeping infrastructure. This cost Person that has not implemented any of practices in this area, but does not is broken down as follows: 1 the design, testing, and supervision impose additional requirements that are Compliance Attorney, working for 30 standards required by proposed § 1.81. not already followed by the majority of hours (30 × $96 = $2,880); and 1 Development and Testing. The market participants. As a result, the Developer, working for 30 hours (30 × Commission estimates that an AT Commission does not believe that § 1.81 $75 = $2,250). The 420 AT Persons Person that has not implemented any of would impose additional costs on AT would therefore incur a total initial cost the requirements of proposed § 1.81(a) Persons. of $2,154,600 (420 × $5,130). (development and testing of Algorithmic • The Commission estimates that, on an § 1.83(a)—Compliance Reports annual basis, an AT Person will incur a Trading Systems) would incur a total Submitted by AT Persons cost of $349,865 to implement these cost of $2,670 to ensure continued requirements. This cost is broken down Proposed § 1.83 would require AT compliance with DCM recordkeeping as follows: 1 Project Manager, working Persons and FCMs that are clearing rules relating to § 1.82 compliance, for 1,707 hours (1,707 × $70 = members for AT Persons to annually including the updating of policies and $119,490); 2 Business Analysts, working submit reports regarding their procedures and technology for 853 hours (853 × $52 = $44,356); 3 compliance with § 1.80(a) and pursuant infrastructure, and in respond to DCM Testers, working for a combined 2,347 to § 1.82(a)(1), respectively, to each record requests. This cost is broken hours (2,347 × $52 = $122,044); and 2 DCM on which they operate. The report down as follows: 1 Compliance Developers, working for a combined 853 prepared by an AT Person pursuant to Attorney, working for 20 hours (20 × hours (853 × $75 = $63,975).592 § 1.83(a) would include a description of $96 = $1,920); and 1 Developer, working Monitoring. The Commission the AT Person’s pre-trade risk controls for 10 hours (10 × $75 = $750). The 420 estimates that an AT Person that has not and the parameters and specific AT Persons would therefore incur a implemented any of the requirements of quantitative settings used for such pre- total annual cost of $1,121,400 (420 × § 1.81(b) (monitoring of Algorithmic trade risk controls. Together with the $2,670). annual report, each AT Person would be Trading Systems) would incur a total • § 40.23(c)—Approval Requests cost of $196,560 to implement these required to submit copies of the written policies and procedures developed to Submitted by Market Participants re: requirements. This cost is broken down Self-Trading Controls as follows: 1 Senior Compliance comply with § 1.81(a) and (c). The Specialist, working for 2,080 hours report would also be required to include Market participants will incur costs in (2,080 × $57 = $118,560); and 1 a certification by the chief executive the event that they prepare and submit Business Analyst, working for 1,500 officer or chief compliance officer of the the self-trading approval requests hours (1,500 × $52 = $78,000). AT Person that, to the best of his or her contemplated by proposed § 40.23(c). Compliance. The Commission knowledge and reasonable belief, the This provision, which is discussed in estimates that an AT Person that has not information contained in the report is more detail in section IV(Q) above, implemented any of the requirements of accurate and complete. requires market participants to request § 1.81(c) (compliance of Algorithmic AT Person Compliance Reports. AT approval from the DCM that self-trade Trading Systems) would incur a total Persons will incur the cost of annually prevention tools not be applied with cost of $174,935 to implement these preparing and submitting the reports to respect to specific accounts under requirements. This cost is broken down their DCMs. The Commission estimates common beneficial ownership or as follows: 1 Project Manager, working that an AT Person will incur a total control. The Commission estimates that, for 853 hours (853 × $70 = $59,710); 2 annual cost of $4,240 to draft the report on an annual basis, a market participant Business Analysts, working for a required by proposed § 1.83(a). This cost will incur a cost of $3,810 to prepare combined 427 hours (427 × $52 = is broken down as follows: 1 Senior and submit these approval requests. Compliance Specialist, working for 50 This cost is broken down as follows: 1 × 592 See section V(B) above for the calculation of hours (50 $57 per hour = $2,850) and Business Analyst, working for 30 hours hourly wage rates used in this analysis. 1 Chief Compliance Officer, working for (30 × $52 per hour = $1,560); and 1
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Developer, working for 30 hours (30 × vi. A description of any significant Person. Proposed § 40.22 would require $75 per hour = $2,250).593 alternatives to the proposed rule which DCMs to establish a program for The Commission cannot predict how accomplish the stated objectives of effective periodic review and evaluation many market participants would likely applicable statutes and which minimize of these reports. The Commission has any significant impact of the proposed submit the approval requests proposed these regulations, using the rule on small entities. These may deadlines described above, because it contemplated by proposed § 40.23(c) on include, for example, (1) the believes they represent an appropriate an annual basis. The Commission establishment of differing compliance or balancing of the transparency and risk believes that not all market participants reporting requirements or timetables reduction provided by the reports trading on a DCM would submit such that take into account the resources against the burden placed on AT requests. In the view of the Commission, available to small entities; (2) the Persons and DCMs of providing and for example, a limited subset of market clarification, consolidation, or reviewing the reports. The Commission participants will own two or more simplification of compliance and is considering the alternative of accounts, but operate them through reporting requirements under the rule requiring AT Persons to submit such ‘‘independent decision makers,’’ as for such small entities; (3) the use of reports more or less frequently than contemplated by proposed § 40.23(b). performance rather than design annually. The Commission is also Similarly, a limited subset of market standards; and (4) an exemption from considering the alternatives of placing participants will find it advantageous to coverage of the rule, or any part thereof, the responsibility for certifying the incur the costs associated with the self- for such small entities. reports required by proposed § 1.83 only trading described by § 40.23(b), such as A potential alternative to Regulation on the chief executive officer, only on trading costs and clearing fees. In AT that would minimize any significant the chief compliance officer, or addition, the Commission believes that impact on small entities would be to permitting certification from other market participants submitting orders amend or propose new rules requiring officers of the AT Person. The through Algorithmic Trading are more trading firms implement pre-trade and Commission notes that it considered the likely than traders submitting orders other risk controls, but limit application alternative of requiring additional manually to inadvertently self-trade of such requirements to entities that information to be included in the § 1.83 through independent decision-makers. would not be considered ‘‘small reports, such as descriptions of how AT The Commission estimates that, entities’’ for purposes of the RFA. Persons comply with § 1.81 notwithstanding the fact that the DCM However, the Commission does not requirements and how clearing member rules described in § 40.23(c) are directed believe that this is a viable alternative. FCMs comply with all § 1.82 to all market participants, the number of A principal basis for Regulation AT’s requirements. In the interest of minimizing costs to AT Persons and market participants that will submit the risk control requirements is that a clearing member FCMs, the Commission approval requests described therein are technological malfunction or error can determined at this time to require, equivalent to the number of AT Persons have a significant, detrimental impact 594 on other market participants across pursuant to proposed § 1.83(c) and (d), calculated above (420). On this basis, that AT Persons and clearing member the Commission estimates that market Commission-regulated markets. Importantly, such a technological FCMs instead retain and provide to participants will incur a total annual DCMs books and records regarding their cost of $1,600,200 to submit the malfunction or error can arise from any size of firm, including a very small compliance with §§ 1.80, 1.81 and 1.82 approval requests contemplated by proprietary trading firm with few requirements. Proposed § 40.22(d) § 40.23(c) ($3,810 per market participant includes a corresponding requirement × employees. In today’s interconnected 420 market participants). markets, where a small error can cause that DCMs implement rules requiring v. An Identification, to the Extent a severe disruption in minutes, it is AT Persons and clearing member FCMs to keep and provide such books and Practicable, of All Relevant Federal equally important that small firms have records. Rules Which May Duplicate, Overlap or risk controls as large firms. The Conflict With the Rules Commission believes that the risk Finally, the Commission is controls required by Regulation AT will considering alternatives with respect to The Commission is unaware of any help ensure that all entities—not just proposed § 40.23. This proposed Federal rules that could duplicate, large entities with the most regulation provides that DCMs may overlap, or conflict with the proposal. technological and financial resources— comply with the requirement to apply, will have effective risk controls. The or provide and require the use of, self- Commission is aware that smaller firms trade prevention tools by requiring may have different trading strategies market participants to identify to the and technology than larger firms; DCM which accounts should be accordingly, the proposed regulations prohibited from trading with each other. allow all trading firms, including small With respect to this account entities, the discretion to design identification process, the Commission’s controls appropriate to their own principal goal is to prevent business and to implement them in the unintentional self-trading; the most cost-effective manner. Commission does not have a specific The Commission is also considering interest in regulating the manner by alternatives with respect to proposed which market participants identify to § 1.83, which would require AT Persons DCMs the account that should be to submit compliance reports to DCMs prohibited from trading from each other, 593 See section V(B) above for the calculation of on an annual basis. Such reports would so long as this goal is met. The hourly wage rates used in this analysis. need to be submitted and certified Commission has considered whether 594 See section V(A) above for the calculation of annually by the chief executive officer other identification methods should be the number of person subject to Regulation AT. or the chief compliance officer of the AT made available to market participants
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when submitting the approval requests Regulation Automated Trading. An competition among boards of trade, described in § 40.23. For example, the agency may not conduct or sponsor, and other markets and market Commission has requested comment on a person is not required to respond to, participants.596 Proposed regulations whether the opposite approach is a collection of information unless it requiring registration with the preferable: Market participants would displays a currently valid control Commission, submission of compliance identify to DCMs the accounts that number. The OMB has not yet assigned reports to DCMs, implementation of should be permitted to trade with each this collection a control number. As self-trade prevention tools and other (as opposed to those accounts that used below, ‘‘burden’’ means the total increased disclosure of certain aspects should be prevented from trading with time, effort, or financial resources of electronic matching platforms and each other). expended by persons to generate, market maker and trading incentive maintain, retain, disclose or provide programs, will help prevent or mitigate 3. Request for Comments information to or for a federal agency. technological malfunctions that will 109. The Commission requests Additional Regulation AT disrupt market integrity, protect market comment on each element of its RFA requirements will amend existing participants from fraudulent or analysis. In particular, the Commission collections of information. Proposed disruptive practices, and promote fair specifically invites comment on the § 1.3(x)(3) (requiring certain persons competition among boards of trade, accuracy of its estimates of potential with DEA to prepare and submit forms other markets and market participants. firms that could be considered ‘‘small to register with the Commission) would If the proposed regulations are entities’’ for RFA purposes. amend existing collection of adopted, responses to the collections of 110. The Commission also requests information ‘‘Registration Under the information would be mandatory. The comment on whether any natural Commodity Exchange Act,’’ OMB Commission will protect proprietary persons will be designated as AT Control Number 3038–0023. Proposed information according to the Freedom of Persons under the proposed definition § 38.401(a) and (c) (requiring DCMs to Information Act and 17 CFR part 145, of that term. publicly post information regarding ‘‘Commission Records and D. Paperwork Reduction Act certain aspects of their electronic Information.’’ In addition, Section matching platforms) and § 40.26 8(a)(1) of the CEA strictly prohibits the The Paperwork Reduction Act (permitting the Commission or the Commission, unless specifically 595 (‘‘PRA’’) imposes certain director of DMO to require certain authorized by the CEA, from making requirements on Federal agencies in information from DCMs regarding their public ‘‘data and information that connection with their conducting or market-maker or trading incentive would separately disclose the business sponsoring any collection of programs) would amend existing transactions or market positions of any information as defined by the PRA. This collection of information ‘‘Core person and trade secrets or names of proposed rulemaking would result in Principles and Other Requirements for customers.’’ The Commission is also new collection of information DCMs,’’ OMB Control Number 3038– required to protect certain information requirements within the meaning of the 0052. Finally, proposed § 40.25 contained in a government system of PRA. The Commission therefore is (requiring DCMs to provide the records according to the Privacy Act of submitting this proposal to the Office of Commission with certain information 1974, 5 U.S.C. 552a. Management (OMB) for review in regarding their market-maker and 1. Information Provided by Reporting accordance with 44 U.S.C. 3507(d) and trading incentive programs when Entities/Persons 5 CFR 1320.11. The following submitting such programs as rules requirements of this rulemaking will pursuant to part 40) would amend The following is a brief description of result in new collection of information existing collection of information ‘‘Part the PRA responsibilities of various requirements within the meaning of the 40, Provisions Common to Registered entities under Regulation AT. In PRA: § 1.83(a) would require AT Entities,’’ OMB Control Number 3038– summary, § 1.3(x)(3) would require Persons to submit reports to DCMs 0093. certain floor traders with DEA to concerning compliance with § 1.80(a), The collections of information under prepare and submit forms to register as well as copies of the written policies these proposed regulations are with the Commission; § 1.83(a) and (b) and procedures developed to comply necessary to implement certain would require AT Persons and clearing with § 1.81(a) and (c); § 1.83(b) would provisions of the CEA, as amended by member FCMs to submit reports to require clearing member FCMs to the Dodd-Frank Act. Section 8a(5) of the DCMs concerning compliance with submit reports to DCMs concerning CEA provides the Commission with § 1.80(a) and § 1.82(a)(1), respectively; compliance with § 1.82(a)(1); § 1.83(c) authority to promulgate rules as § 1.83(c) and (d) would require AT and (d) would require AT Persons and reasonably necessary to effectuate any of Persons and clearing member FCMs, clearing member FCMs, respectively, to the provisions or to accomplish any of respectively, to keep and provide upon keep and provide upon request to DCMs the purposes of the Act, and Section request to DCMs books and records books and records regarding their 4c(a)(6) of the CEA provides rulemaking regarding their compliance with §§ 1.80 compliance with §§ 1.80 and 1.81 (for authority to prohibit disruptive trading and 1.81 (for AT Persons) and § 1.82 (for AT Persons) and § 1.82 (for clearing practices. As provided in Section 3(b) of clearing member FCMs); § 38.401(a) and member FCMs); § 40.23(c) states that a the CEA, it is the purpose of the CEA (c) would require DCMs to publicly post DCM must require market participants to deter and prevent price manipulation information regarding certain aspects of to request approval from the DCM that or any other disruptions to market their electronic matching platforms; self-trade prevention tools not be integrity; to ensure the financial § 40.23(c) states that a DCM must applied with respect to certain types of integrity of all transactions subject to require market participants to request accounts; § 40.23(d) would require that this chapter and the avoidance of approval from the DCM that self-trade DCMs display information about systemic risk; to protect all market prevention tools not be applied with percentage and ratio of self-trading. The participants from fraudulent or other respect to certain types of accounts; title for this collection of information is abusive sales practices and misuses of § 40.23(d) would require that DCMs customer assets; and to promote 595 44 U.S.C. 3501 et seq. responsible innovation and fair 596 7 U.S.C. 5.
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display information about percentage under § 1.3(×)(3) would therefore incur Burden: Compliance reports and ratio of self-trading; § 40.25 would a total one-time cost of $105,600 (100 × submitted by clearing member FCMs to require DCMs to provide the $1,506).599 DCMs. Commission with certain information Respondents/Affected Entities: 57 b. § 1.83(a)—Compliance Reports regarding their market-maker and clearing member FCMs. Submitted by AT Persons to DCMs trading incentive programs when Estimated number of responses: 57. submitting such programs as rules The Commission estimates that the Estimated total burden on each pursuant to part 40; and § 40.26 would proposed rules requiring AT Persons to respondent: 110 hours. permit the Commission or the director submit annual reports regarding their Frequency of collection: Annual. of DMO to require certain information pre-trade risk controls required Burden statement-all respondents: 57 from DCMs regarding their market- pursuant to proposed § 1.80(a) (as well respondents × 110 hours = 6,270 Burden maker or trading incentive programs. as copies of the written policies and Hours per year. a. § 1.3(×)(3)—Submissions by Newly procedures developed to comply with The Commission estimates that, on an Registered Floor Traders § 1.81(a) and (c)) to each DCM on which annual basis, a clearing member FCM The Commission estimates that the they operate will result (on an annual will incur a cost of $7,090 to submit the proposed rules requiring certain floor basis) in 60 hours of burden per AT compliance reports required by traders with Direct Electronic Access to Person, and 25,200 burden hours in § 1.83(b). This cost is broken down as register will result in 11 hours of burden total. The estimated burden was follows: 1 Senior Compliance Specialist, per affected entity, and 1100 burden calculated as follows: working for 100 hours (100 × $57 = hours in total. The Commission Burden: Compliance reports $5,700); and 1 Chief Compliance × estimates that each affected entity will submitted by AT Persons to DCMs. Officer, working for 10 hours (10 $139 602 require 1 hour to prepare and submit Respondents/Affected Entities: 420 = $1,390). The 57 clearing member one Form 7–R (for the entity) and 10 AT Persons. FCMs that will be subject to § 1.83(b) hours to prepare and submit 10 Forms would therefore incur a total annual Estimated number of responses: 420. 8–R (one form for each principal of the cost of $404,130 (57 ×$7,090).603 entity).597 The estimated burden was Estimated total burden on each d. § 1.83(c)—AT Person Retention and calculated as follows: respondent: 60 hours. Burden: Complete Form 7–R and 8–R Frequency of collection: Annual. Production of Books and Records to register as a floor trader. Burden statement-all respondents: Initial Costs. The Commission Respondents/Affected Entities: 100 420 respondents × 60 hours = 25,200 estimates that rules pursuant to new floor traders. Burden Hours per year. proposed § 1.83(c) requiring AT Persons Estimated number of responses: 100. The Commission estimates that, on an to keep and provide books and records Estimated total burden on each annual basis, an AT Person will incur a relating to §§ 1.80 and 1.81 compliance respondent: 11 hours. cost of $4,240 to submit the compliance will result in initial costs of 60 hours of Frequency of collection: One-time reports required by proposed § 1.83(a). burden per AT Person, and 25,200 initial registration fee. This cost is broken down as follows: 1 burden hours in total. The estimated Burden statement-all respondents: Senior Compliance Specialist, working burden was calculated as follows: × 100 respondents 1 hour = 100 Burden for 50 hours (50 × $57 = $2,850); and 1 Burden: Rule requiring AT Persons to Hours. Chief Compliance Officer, working for keep and produce records relating to The Commission estimates that a new 10 hours (10 × $139 = $1,390).600 The §§ 1.80 and 1.81 compliance. registrant will incur a one-time cost of 420 AT Persons that will be subject to Respondents/Affected Entities: 420 $96 to complete one Form 7–R and a § 1.83(a) would therefore incur a total AT Persons. one-time cost of $960 to complete 10 annual cost of $1,780,800 (420 Estimated total burden on each Forms 8–R. These costs represent the ×$4,240).601 respondent: 60 hours. work of 1 Compliance Attorney per Burden statement&all respondents: affected entity, working for 1 hour per c. § 1.83(b)—Compliance Reports 420 respondents × 60 hours = 25,200 form (a total of 11 hours × $96 = Submitted by Clearing Member FCMs to Burden Hours initial year. $1,056).598 The 100 entities that will be DCMs The Commission estimates that, on an subject to the registration requirement The Commission estimates that the initial basis, an AT Person will incur a proposed rules requiring clearing cost of $5,130 to draft and update 597 CFTC Form 7–R is used to apply for recordkeeping policies and procedures registration with the Commission as a non-natural member FCMs to submit annual reports person floor trader, and is also used for such (describing the clearing member FCM’s and make technology improvements to entities to apply for membership in NFA. Form 8– program for establishing and recordkeeping infrastructure. This cost R is used to identify principals of non-natural maintaining the pre-trade risk controls is broken down as follows: 1 person floor trader entities. As noted previously, required by proposed § 1.82(a)(1) for its Compliance Attorney, working for 30 the Commission estimates that each non-natural × person floor trader entity will have approximately AT Person customers in the aggregate) hours (30 $96 = $2,880); and 1 10 principals and therefore need to file to each DCM on which they operate will Developer, working for 30 hours (30 × approximately 10 Forms 8–R. In the event that a result (on an annual basis) in 110 hours $75 = $2,250). The 420 AT Persons natural person meets the definition of Floor Trader of burden per clearing member, and would therefore incur a total initial cost in proposed § 1.3(×)(3) and is therefore required to × register with the Commission and become a 6,270 burden hours in total. The of $2,154,600 (420 $5,130). member of NFA, such person would only be estimated burden was calculated as Annual Costs. The Commission required to complete Form 8–R and would face follows: estimates that rules pursuant to substantially lower costs than those estimated here. proposed § 1.83(c) requiring AT Persons Because registration with the Commission and membership in NFA make use of the same forms 599 See section V(A) above for the calculation of to keep and provide books and records and process, the Commission anticipates that the the number of persons subject to Regulation AT. costs associated with proposed § 1.3(×)(3) and 600 See section V(B) above for the calculation of 602 See section V(B) above for the calculation of proposed § 170.18 will be one and the same. hourly wage rates used in this analysis. hourly wage rates used in this analysis. 598 See section V(B) above for the calculation of 601 See section V(A) above for the calculation of 603 See section V(A) above for the calculation of hourly wage rates used in this analysis. the number of persons subject to Regulation AT. the number of persons subject to Regulation AT.
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relating to §§ 1.80 and 1.81 compliance incur a total initial cost of $292,410 (57 Burden: Public Dissemination of will result in annual costs of 30 hours × $5,130). Information by DCMs—Electronic of burden per AT Person, and 12,600 Annual Costs. The Commission Matching Platforms. burden hours in total. The estimated estimates that that DCM rules pursuant Respondents/Affected Entities: 15 burden was calculated as follows: to proposed § 1.83(d) requiring clearing DCMs. Burden: Rules requiring AT Persons member FCMs to keep and provide Estimated total burden on each to keep and produce records relating to books and records relating to § 1.82 respondent: 200 hours per year. §§ 1.80 and 1.81 compliance. compliance will result in annual costs Frequency of collection: Intermittent. Respondents/Affected Entities: 420 of 30 hours of burden per clearing Burden statement-all affected entities: × AT Persons. member FCM, and 1,710 burden hours 15 affected entities 200 hours = 3,000 Estimated number of responses: 420. in total. The estimated burden was Burden Hours per year. Estimated total burden on each calculated as follows: The Commission estimates that, on an respondent: 30 hours. Burden: Rules requiring clearing annual basis, a DCM will incur a cost of Frequency of collection: $19,200 to comply with amended Intermittent.Burden statement-all member FCMs to keep and produce records relating to § 1.82 compliance. § 38.401(a) and (c). This cost represents respondents: 420 respondents × 30 the work of 1 Compliance Attorney, hours = 12,600 Burden Hours per year. Respondents/Affected Entities: 57 working for 200 hours (200 × $96 = The Commission estimates that, on an clearing member FCMs. $19,200).604 The 15 DCMs that will be annual basis, an AT Person will incur a Estimated number of responses: 57. subject to amended §§ 38.401(a) and (c) cost of $2,670 to ensure continued Estimated total burden on each would therefore incur a total annual compliance with the § 1.83(c) respondent: 30 hours. cost of $288,000 (15 × $19,200).605 The recordkeeping rules relating to § 1.82 Frequency of collection: Intermittent. Commission anticipates that this figure compliance, including the updating of Burden statement-all respondents: 57 would decrease in subsequent years as policies and procedures and technology respondents × 30 hours = 1,710 Burden the descriptions provided would only infrastructure, and to respond to DCM Hours per year. need to be amended to reflect changes record requests. This cost is broken The Commission estimates that, on an to the electronic matching platform or down as follows: 1 Compliance annual basis, a clearing member FCM the discovery of previously unknown Attorney, working for 20 hours (20 × will incur a cost of $2,670 to ensure attributes. $96 = $1,920); and 1 Developer, working continued compliance with the § 1.83(d) for 10 hours (10 × $75 = $750). The 420 g. § 40.23—Information Publicly recordkeeping rules relating to § 1.82 AT Persons would therefore incur a Disseminated by DCMs Regarding Self- compliance, including the updating of total annual cost of $1,121,400 (420 × Trade Prevention policies and procedures and technology $2,670). infrastructure, and to respond to DCM Regulation AT proposes a new e. § 1.83(d)—Clearing Member FCM record requests. This cost is broken requirement (§ 40.23) that a DCM shall Retention and Production of Books and down as follows: 1 Compliance implement rules reasonably designed to Records Attorney, working for 20 hours (20 × prevent self-trading by market $96 = $1,920); and 1 Developer, working participants, except as specified in Initial Costs. The Commission × paragraph (b) of § 40.23. Section estimates that rules pursuant to for 10 hours (10 $75 = $750). The 57 clearing member FCMs would therefore 40.23(b) states that a DCM may, in its proposed § 1.83(d) requiring clearing discretion, implement rules that permit member FCMs to keep and provide incur a total annual cost of $152,190 (57 × $2,670). the matching of orders for accounts with books and records relating to § 1.82 common beneficial ownership where compliance will result in initial costs of f. § 38.401(a) and (c)—Public such orders are initiated by independent 60 hours of burden per clearing member Dissemination of Information by DCMs decision makers. A DCM may also FCM, and 3,420 burden hours in total. Pertaining to Electronic Matching permit under § 40.23(b) the matching of The estimated burden was calculated as Platforms orders for accounts under common follows: The proposed amendments to control where such orders comply with Burden: Rules requiring clearing the DCM’s cross-trade, minimum member FCMs to keep and produce regulations 38.401(a) and 38.401(c) require DCMs to publicly post exposure requirements or similar rules, records relating to § 1.82 compliance. and are for accounts that are not under Respondents/Affected Entities: 57 information regarding certain aspects of their electronic matching platforms. common beneficial ownership. Section clearing member FCMs. 40.23(c) states that a DCM must require Estimated total burden on each DCMs should already be performing market participants to request approval respondent: 60 hours. tests on their electronic matching from the DCM that self-trade prevention Burden statement-all respondents: 57 platforms that would identify such tools not be applied with respect to respondents × 60 hours = 3,420 Burden attributes; therefore the added burden specific accounts under common Hours initial year. under the proposed amendments would The Commission estimates that, on an be limited to drafting the description of beneficial ownership or control, on the initial basis, a clearing member FCM such attributes and making the basis that they meet the criteria of will incur a cost of $5,130 to draft and description available on the DCM’s Web paragraph (b). update recordkeeping policies and site. The Commission estimates that the Proposed § 40.23(d) would require procedures and make technology proposed rules will result (on an annual that for each product and expiration improvements to recordkeeping basis) in 200 hours of burden per DCM, month traded on a DCM in the previous infrastructure. This cost is broken down and 3,200 burden hours in total. This quarter, the DCM must prominently as follows: 1 Compliance Attorney, estimate assumes that DCMs are already display on its Web site the following working for 30 hours (30 × $96 = compliant with the requirements to post 604 See section V(B) above for the calculation of $2,880); and 1 Developer, working for the specifications of their electronic × hourly wage rates used in this analysis. 30 hours (30 $75 = $2,250). The 57 matching platform under current 605 See section V(A) above for the calculation of clearing member FCMs would therefore regulation 38.401(a). the number of persons subject to Regulation AT.
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information: (1) The percentage of = $2,250).607 The estimated 420 market payments, incentives, discounts, trades in such product including all participants that will be subject to considerations, inducements or other expiration months that represent self- § 40.23(c) would therefore incur a total benefits that program participants may trading approved (pursuant to paragraph annual cost of $1,600,200 (420 x receive; and other requirements. To (c)(2) of § 40.23) by the DCM, expressed $3,810).608 ensure public transparency in market- as a percentage of all trades in such DCM Publication of Statistics maker and trading incentive programs, product and expiration month; (2) the Regarding Self-Trade Prevention. The proposed § 40.25 would require DCMs percentage of volume of trading in such Commission estimates that the to ensure that the information described product including all expiration months requirement under proposed § 40.23(d) above is easily located on their public that represents self-trading approved that DCMs publish statistics regarding Web sites. (pursuant to paragraph (c)(2) of § 40.23) self-trade prevention will result (on an While proposed § 40.25 may appear by the DCM, expressed as a percentage annual basis) in 100 hours of burden per on its face to require substantial new of all volume in such product and DCM, and 1,500 burden hours in total information from DCMs regarding their expiration month; and (3) the ratio of for all 15 DCMs. The estimated burden market-maker or trading incentive orders in such product and expiration was calculated as follows: programs, the proposed rule is largely month whose matching was prevented Burden: DCM Publication of Statistics similar to existing rule filing by the self-trade prevention tools Regarding Self-Trade Prevention. requirements in part 40. For example, described in paragraph (a) of § 40.23, Respondents/Affected Entities: 15 existing §§ 40.5 and 40.6 each require a expressed as a ratio of all trades in such DCMs. DCM requesting approval or self- product and expiration month. Estimated total burden on each certifying rules to provide the Market Participant Approval affected entity: 100 hours per year for Commission with the rule text; the Requests. Market participants will incur DCMs to generate and publish statistics. proposed effective date or date of costs in the event that they prepare and Frequency of collection: 4 DCM Web intended implementation; and an submit the approval requests site updates per year (one per quarter). ‘‘explanation and analysis of the Burden statement-all affected entities: contemplated by proposed § 40.23(c). operation, purpose, and effect’’ of the 15 respondents × 100 hours of DCM This provision requires market proposed rule. Existing §§ 40.5 and 40.6 time per year = 1,500 Burden Hours per participants to request approval from also require each DCM to provide the year. Commission with an assessment of the the DCM that self-trade prevention tools The Commission estimates that, on an not be applied with respect to specific rule’s ‘‘compliance with applicable annual basis, a DCM will incur a cost of provisions of the Act, including core accounts under common beneficial $6,650 to publish the statistics required ownership or control. The Commission principles, and the Commission’s by proposed § 40.23(d). This cost is regulations thereunder;’’ and ‘‘a brief estimates that § 40.23(c) will result (on broken down as follows: 1 Senior explanation of any substantive opposing an annual basis) in 60 hours of burden Compliance Examiner, working for 50 views expressed to [the DCM] by per market participant, and 185,340 hours (50 × $58 per hour = $2,900); and governing board or committee members, burden hours in total. The estimated 1 Developer, working for 50 hours (50 members of the entity or market burden was calculated as follows: × $75 per hour =$3,750).609 The 15 participants that were not incorporated Burden: Market Participant DCMs that will be subject to § 40.23(d) into the rule . . . .’’ Further, these Submission of Self-Trade Approval would therefore incur a total annual existing provisions each require a DCM Requests. cost of $99,750 (15 × $6,650).610 to certify that the DCM posted on its Respondents/Affected Entities: public Web site a notice of pending rule 420.606 h. § 40.25—Information in Public Rule Filings Provided by DCMs Regarding or certification and to also post a copy Estimated number of responses: 1 per of the DCM’s submission to the respondent per year. Market Market Maker and Trading Incentive Programs Commission on the DCM’s Web site. participants may choose to submit The Commission believes proposed approval requests more frequently, but Proposed § 40.25 would require DCMs § 40.25 adds important clarity to regardless of how frequently market to provide the Commission with certain existing rule filing requirements in part participants submit approval requests, information regarding their market- 40 when such filings pertain to market- the Commission estimates a total burden maker and trading incentive programs maker or trading incentive programs. of 60 hours per market participant per when submitting such programs as rules However, the Commission also believes year. pursuant to part 40. Among other that there is significant overlap between Estimated total burden on each information, DCMs would be required to proposed § 40.25 and existing respondent: 60 hours per year. provide a description of any categories requirements for DCMs in §§ 40.5 and Burden statement—all respondents: of market participants or eligibility 40.6. Proposed § 40.25 does not create a 420 respondents × 60 hours per year = criteria limiting who may participate in new category of rule filings, nor does it 25,200 Burden Hours per year. the program. They would also be or require more frequent filings. For The Commission estimates that, on an required to provide an explanation of these reasons, the Commission believes annual basis, a market participant will the specific purpose for a market-maker that any additional Paperwork incur a cost of $3,810 to prepare and or trading incentive program; a list of all Reduction Act obligations in proposed submit the approval requests products or services to which the § 40.25 will be minor per DCM. contemplated by 40.23(c). This cost is program applies; a description of any Burden: Information regarding market broken down as follows: 1 Business maker and trading incentive program Analyst, working for 30 hours (30 × $52 607 See section V(B) above for the calculation of rule filings pursuant to part 40. per hour = $1,560); and 1 Developer, hourly wage rates used in this analysis. Respondents/Affected Entities: 15 608 See section V(A) above for the calculation of working for 30 hours (30 × $75 per hour DCMs. the number of persons subject to Regulation AT. Estimated total burden on each 609 See section V(B) above for the calculation of 606 See section V(E)(8)(b) below for a discussion hourly wage rates used in this analysis. affected entity: 156 hours of DCM time of how this estimate of affected entities was 610 See section V(A) above for the calculation of per year. performed. the number of persons subject to Regulation AT. Frequency of collection: Intermittent.
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Burden statement-all affected entities: Evaluate whether the proposed feasible, the Commission has 15 respondents × 156 hours of DCM collections of information are necessary endeavored to estimate quantifiable time per year = 2,340 Burden Hours per for the proper performance of the costs and benefits. The Commission also year. functions of the Commission, including identifies and describes costs and whether the information will have benefits qualitatively. i. § 40.26—Information Provided by practical utility; (ii) evaluate the DCMs to the Division of Market 2. Concept Release Comments Regarding accuracy of the Commission’s estimate Oversight Upon Request Regarding Costs and Benefits of the burden of the proposed Market Maker and Trading Incentive collections of information; (iii) In the Concept Release, the Programs determine whether there are ways to Commission sought comments on most Proposed § 40.26 would permit the enhance the quality, utility, and clarity of the measures now addressed by Commission or the director of DMO to of the information proposed to be Regulation AT. Six commenters made require certain information from DCMs collected; and (vi) minimize the burden general points on cost-benefit regarding their market-maker or trading of the proposed collections of considerations. Specifically, FIA and incentive programs. The Commission information on those who are to CME noted that the cost of believes that proposed § 40.26 will respond, including through the use of implementing risk controls varies 612 impose no additional Paperwork appropriate automated collection widely. FIA stated that many of the Reduction Act burdens on DCMs. The techniques or other forms of information risk controls addressed in the Concept proposed regulation permits the technology. Release are already used in the futures Commission or the director of DMO to Those desiring to submit comments industry and their benefit is clearly require information from a DCM on the proposed information collection understood.613 FIA further stated that regarding the DCM’s market-maker or requirements should submit them the implementation cost to individual trading incentive programs. It is a more directly to the Office of Information and firms varies widely based on the targeted iteration of existing § 38.5, Regulatory Affairs, OMB, by fax at (202) systems they have and the market and 614 which requires a DCM to file with the 395–6566, or by email at products they trade. Similarly, CME Commission such ‘‘information related [email protected]. Please indicated that as to risk controls, to its business as a designated contract provide the Commission with a copy of specific costs as to development, market’’ as the Commission may submitted comments so that all implementation and ongoing require. Section 38.5 also requires a comments can be summarized and operational figures will vary widely DCM upon request by the Commission addressed in the final rule preamble. across the futures industry supply 615 or the director of DMO to file ‘‘a written Refer to the ADDRESSES section of this chain. CME declined to provide demonstration’’ that the DCM ‘‘is in detailed analysis as to its own notice of proposed rulemaking for 616 compliance with one or more core comment submission instructions to the expenditures. CFE commented that if the principles as specified in the request’’ or Commission. ‘‘satisfies its obligations under the Act,’’ Commission proposes risk control including ‘‘supporting data, information E. Cost Benefit Considerations requirements, it should perform a careful cost-benefit analysis and allow and documents.’’ Proposed § 40.26 does 1. The Statutory Requirement for the DCMs at least two years to implement not alter a DCM’s existing obligations Commission To Consider the Costs and the controls.617 TCL stated that most under § 38.5, but rather makes clear that Benefits of Its Actions Commission and DMO information entities have the technology to address Section 15(a) of the CEA requires the requests may pertain specifically to the ‘‘spirit’’ of the controls described in Commission to ‘‘consider the costs and 618 market-maker and trading incentive the Concept Release. AFR noted that benefits’’ of its actions before cost-benefit analysis should be based on programs. It imposes no new obligation promulgating a regulation under the costs and benefits to the public as a to provide information, and does not CEA or issuing certain orders.611 whole, not on private benefits to increase the frequency which Section 15(a) further specifies that the individual actors.619 Finally, IATP information must be provided. costs and benefits must be evaluated in Burden: Information requests from the stated that the Concept Release asked light of the following five broad areas of Commission or the Director of the more frequently about costs of risk market and public concern: (1) Division of Market Oversight. controls as compared to benefits of Respondents/Affected Entities: 15 Protection of market participants and increased market stability, which can be 620 DCMs. the public; (2) efficiency, more difficult to quantify. competitiveness, and financial integrity Estimated total burden on each 3. The Commission’s Cost-Benefit of futures markets; (3) price discovery; affected entity: 0 hours of DCM time per Consideration of Regulation AT— (4) sound risk management practices; year. Baseline Point Frequency of collection: Intermittent. and (5) other public interest Burden statement-all affected entities: considerations. The Commission As a preliminary matter, the 15 respondents × 0 hours of DCM time considers the costs and benefits Commission notes that certain aspects per year = 0 Burden Hours per year. resulting from its discretionary of Regulation AT, as discussed below, determinations with respect to the codify existing norms and best practices 2. Information Collection Comments section 15(a) factors below. As a general of trading firms, clearing member FCMs The Commission invites the public to matter, the Commission considers the comment on any aspect of the incremental costs and benefits of these 612 FIA at 60; CME at 41. paperwork burdens discussed herein. proposed rules, taking into account 613 FIA at 60. 614 Copies of the supporting statements for what it believes is industry practice See id. 615 CME at 41. the collections of information from the given the Commission’s existing 616 See id. Commission to OMB are available by regulations and industry best practices, 617 CFE at 2. visiting RegInfo.gov. Pursuant to 44 as described below. Where reasonably 618 TCL at 18. U.S.C. 3506(c)(2)(B), the Commission 619 AFR at 2. solicits comments in order to: (i) 611 7 U.S.C. 19(a). 620 IATP at 3.
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and DCMs. In that regard, in 2013, FIA the risk controls and other measures benefits of the alternatives that the surveyed FCMs and FIA PTG member proposed in Regulation AT. Commission discussed in this release, firms regarding their use of risk controls and any other alternatives appropriate 4. The Commission’s Cost-Benefit and self-trade controls and found that Consideration of Regulation AT—Cross- under the CEA that commenters believe all or most respondents currently use Border Effects would provide superior benefits relative such controls.621 Comment letters to the to costs; (g) data and any other Concept Release indicated that The Commission notes that the information to assist or otherwise implementation of pre-trade and other consideration of costs and benefits inform the Commission’s ability to risk controls was already widespread. below is based on the understanding quantify or qualitatively describe the Moreover, existing statutory schemes that the markets function benefits and costs of the proposed rules; (e.g., the SEC’s Market Access Rule and internationally, with many transactions and (h) substantiating data, statistics, the CFTC’s requirements relating to involving U.S. firms taking place across and any other information to support financial risk) means that many entities international boundaries; with some positions posited by commenters with will already have systems in place Commission registrants being organized respect to the Commission’s relevant to the controls proposed in outside of the United States; with consideration of costs and benefits. Regulation AT. Accordingly, as leading industry members typically discussed below, the existing norms or conducting operations both within and 6. The Commission’s Cost-Benefit best practices serve as the Commission’s outside the United States; and with Consideration of Regulation AT— guide for determining the status quo industry members commonly following Proposed Definitions baseline against which to measure the substantially similar business practices incremental costs and benefits of the wherever located. Where the The Commission notes that proposed regulations. The Commission Commission does not specifically refer Regulation AT proposes certain defined recognizes, however, that some to matters of location, the below terms, including ‘‘AT Person,’’ individual firms currently may not be discussion of costs and benefits refers to ‘‘Algorithmic Trading,’’ and ‘‘Direct operating at industry best practice the effects of the proposed rules on all Electronic Access’’ (as an element of the levels; for such firms costs and benefits activity subject to the proposed and revised definition of the term ‘‘Floor attributable to the proposed regulations amended regulations, whether by virtue Trader’’). While the defined terms will be incremental to a lower status of the activity’s physical location in the themselves do not impose costs, the quo baseline. In many cases, the United States or by virtue of the Commission recognizes that the scope of Commission assumes that compliance activity’s connection with or effect on such definitions will impact the with regulations will require an upgrade U.S. commerce under CEA Section potential costs of other regulations. For to existing systems, rather than building 2(i).622 In particular, the Commission example, proposed § 1.80 imposes risk risk control systems from scratch. notes that some AT Persons are located control requirements on ‘‘AT Persons,’’ To assist the Commission and the outside of the United States. and the defined term ‘‘Algorithmic public in assessing and understanding 5. General Request for Comment Trading’’ is an element of the term AT the economic costs and benefits of the Person. The broader the definition of AT proposed rule, the Commission has 111. Beyond specific questions Person and Algorithmic Trading, the analyzed the costs of the proposed interspersed throughout its discussion, greater the number of firms that would regulations that impose additional the Commission generally requests be required to meet the requirements of requirements on trading firms, clearing comment on all aspects of its § 1.80. consideration of costs and benefits, member FCMs and DCMs above and The Commission believes its beyond the baseline. In many instances, including: (a) Identification, definition of AT Person is appropriate full quantification of the costs is not quantification, and assessment of any and its inclusion of ‘‘floor traders,’’ reasonably feasible because costs costs and benefits not discussed therein; consistent with the proposed changes to depend on the size, structure, and (b) whether any of the proposed § 1.3(x), will mean that certain currently practices of trading firms, clearing regulations may cause FCMs or DCMs to unregistered market participants who member FCMs and DCMs. Within each raise their fees for their customers, or category of entity, the size, structure and otherwise result in increased costs for actively trade on Commission-regulated practices of such entities will vary market participants and, if so, to what markets will be subject to risk control markedly. In addition, the extent; (c) whether any category of requirements that will prevent or quantification may require information Commission registrants will be mitigate the risks of malfunctioning or data that the Commission does not disproportionately impacted by the algorithmic trading systems. Similarly, have or was not provided in response to proposed regulations, and if so whether the proposed definition of Algorithmic the Concept Release or other requests. the burden of any regulations should be Trading captures such trading activity The Commission notes that to the extent appropriately shifted to other that has the potential, when there is a that the regulations proposed in this Commission registrants; (d) what, if any, technological malfunction, to harm rulemaking results in additional costs, costs would likely arise from market market participants and disrupt markets those costs will be realized by trading participants engaging in regulatory at a speed that is difficult to mitigate. firms, clearing member FCMs and arbitrage by restructuring their trading The Commission asks questions exchanges in order to protect market activities to trade on platforms not concerning the scope of the definition of participants and the public. Finally, in subject to the proposed regulations, or Algorithmic Trading, for example general, full quantification of the taking other steps to avoid costs whether order routing systems should benefits of the proposed rule is also not associated with the proposed be included within such definition. The reasonably feasible, due to the difficulty regulations; (e) quantitative estimates of Commission acknowledges that any in quantifying the benefits of a the impact on transaction costs and change made to scope of AT Person and reduction in market disruptions and liquidity of the proposals contained Algorithmic Trading made in other significant market events due to herein; (f) the potential costs and accordance with any comments received will impact the cost of regulations that 621 FIA at 3, 59–60. 622 7 U.S.C. 2(i). use those definitions.
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7. Pre-Trade Risk Controls, Testing and necessary, books and records required to by § 1.80(a). Together with such annual Supervision of Automated Systems, be kept pursuant to § 40.22(d), and the reports, each AT Person would also be Requirement To Submit Compliance measures described therein (§ 40.22(e)). required to submit copies of the written Reports, and Other Related Algorithmic The pre-trade risk controls and other policies and procedures developed to Trading Requirements measures required by §§ 1.80, 1.82, comply with § 1.81(a) and (c). Proposed 38.255, and 40.20 would require the a. Summary of Proposed Rules § 1.83(b) would require clearing member following enumerated pre-trade risk FCMs for AT Persons to submit reports This section addresses the following controls: Maximum AT Order Message to DCMs describing their program for proposed regulations: (i) The and execution frequencies, price establishing and maintaining the pre- requirement that AT Persons implement parameters, and maximum order size trade risk controls required by pre-trade risk controls and other related limits. The regulations would also § 1.82(a)(1). The Commission is also measures (§ 1.80); (ii) standards for the require certain order management proposing a new § 40.22(c) to require development, testing, and monitoring of controls, including kill switch and that each DCM that receives a report Algorithmic Trading systems by AT cancel-on-disconnect functionalities. described in § 1.83 establishes a Persons (§ 1.81); (iii) registered futures Proposed § 170.19 would require an program for effective periodic review association (‘‘RFA’’) standards for RFA to adopt certain membership and evaluation of the reports. In algorithmic trading systems (‘‘ATSs’’) rules—as deemed appropriate by the addition, proposed § 1.83(c) and (d) operated by their members and clearing RFA—relevant to ATSs and algorithmic would require AT Persons and clearing member FCMs with respect to customer trading for each category of member in member FCMs for AT Persons to keep orders originating with ATSs (§ 170.19); the RFA. Proposed § 170.18 would and provide upon request to DCMs (iv) the requirement that AT Persons require all AT Persons to be registered books and records regarding their must become a member of a futures as a member of an RFA. compliance with §§ 1.80 and 1.81 (for association (§ 170.18); (v) the Proposed § 1.81 would require AT AT Persons) and § 1.82 (for clearing requirement that clearing member FCMs Persons to establish policies and member FCMs). The Commission is also implement pre-trade risk controls and procedures that accomplish a number of proposing a new § 40.22(d) and (e) to other related measures (§ 1.82); (vi) the objectives relating to the design, testing, require that DCMs implement rules requirements of § 1.83, including that: and supervision of Algorithmic Trading. requiring AT Persons and clearing AT Persons submit compliance reports More specifically, proposed § 1.81 member FCMs to keep and provide such to DCMs regarding their § 1.80(a)- would require each AT Person to: books and records, and to require DCMs required risk controls, as well as copies Implement written policies and to review and evaluate such books and of the written policies and procedures procedures for the development and records, and identify and remediate any developed to comply with § 1.81(a) and testing of ATSs (§ 1.81(a)); implement insufficient mechanisms, policies and (c) (§ 1.83(a)); clearing member FCMs written policies and procedures procedures therein. submit compliance reports to DCMs reasonably designed to ensure that each regarding their program for establishing of its ATSs is subject to continuous real- b. Costs and Benefits and maintaining the pre-trade risk time monitoring and supervision by i. § 1.80 Costs—Pre-Trade and Other controls required by § 1.82(a)(1) for AT knowledgeable and qualified staff while Risk Controls (AT Persons) Person customers (§ 1.83(b)); AT such ATS is engaged in trading Based on Concept Release comments, Persons keep and provide upon request (§ 1.81(b)); implement written policies best practices documents issued by to DCMs books and records regarding and procedures reasonably designed to industry or regulatory organizations, as their compliance with §§ 1.80 and 1.81 ensure that ATSs operate in a manner well as existing regulations, the (§ 1.83(c)); and clearing member FCMs that complies with the CEA and the Commission believes that a significant keep and provide upon request to DCMs rules and regulations thereunder, and number of AT Persons already books and records regarding their ensure that staff are familiar with the implement the specifically-enumerated compliance with § 1.82 (§ 1.83(d)); (vii) CEA and the rules and regulations pre-trade and other risk controls the requirement that DCMs implement thereunder, the rules of any DCM to required pursuant to proposed § 1.80. pre-trade risk controls and other related which such AT Person submits orders Specifically, in its survey of member measures (§§ 38.255 and 40.20); (viii) through Algorithmic Trading, the rules firms, PTG found the following: (i) 25 the requirement that DCMs provide test of any RFA of which such AT Person is out of 26 responding firms use message environments where AT Persons may a member, the AT Person’s own internal and execution throttles; (ii) all 26 test their ATSs (§ 40.21); and (ix) the requirements, and the requirements of responding firms use maximum order requirements of § 40.22, including that the AT Person’s clearing member FCM, size limits, either using their own DCMs: implement rules requiring AT in each case as applicable (§ 1.81(c)); technology, the exchange’s technology, Persons and clearing member FCMs to and implement written policies and or some combination; 623 and (iii) 24 out submit compliance reports each year procedures to designate and train staff of 26 responding firms use either price (§ 40.22(a) and (b)), establish a program responsible for Algorithmic Trading collars or trading pauses.624 As to order for effective periodic review and (§ 1.81(d)). As a complement to the management controls, two comments to evaluation of the reports (§ 40.22(c)), proposed design and testing the Concept Release from exchanges implement rules that require each AT requirements, proposed § 40.21 would stated that they provide an optional Person to keep and provide to the DCM require DCMs to provide a test cancel-on-disconnect functionality.625 books and records regarding their environment that will enable market compliance with all requirements participants to simulate production 623 AIMA indicated that many market participants pursuant to § 1.80 and § 1.81, and trading and conduct exchange-based use maximum order size limits, and Gelber, a require each clearing member FCM to conformance testing of their trading firm, stated that it uses this risk control. See keep and provide to the DCM market Algorithmic Trading systems. AIMA at 13; Gelber at 10. books and records regarding their Proposed § 1.83(a) would require AT 624 FIA at 59–60. 625 CME Appendix at A–4; CFE at 9–10. In compliance with all requirements Persons to submit annual reports to each addition, FIA characterized cancel-on-disconnect as pursuant to § 1.82 (§ 40.22(d)), and DCM on which they operate regarding a ‘‘widely adopted DCM-hosted pre-trade risk require DCMs to review and evaluate, as their pre-trade risk controls as required control.’’ See FIA at 14.
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Those exchanges also indicated that commodity futures activities for or on may cause some AT Persons to reduce, they provide kill switch functionality to behalf of the Member.’’ Interpretive or cease, their activities in certain market participants.626 Notice 9046, first issued in 2002 and markets. This may result in a decrease The Commission notes that these revised in 2006, provided, among other in market liquidity, which may cause types of controls have been included in things, that an AORS should allow the the costs of trading to increase. In order industry best practices for years. For Member to set limits for each customer to mitigate these potential concerns, the example, FIA PTG recommended, based on commodity, quantity, and type Commission has (as discussed further in among other things, that trading firms of order or based on margin the consideration of alternatives) implement message limits, a repeated requirements, and should allow the limited the compliance requirements to automated execution throttle, fat-finger Member to impose limits pre-execution what it preliminarily believes is the limits and price collars, as well as and to automatically block any orders minimum level needed to protect ‘‘heartbeats’’ with the exchange, use of that exceed those limits. In addition, the market participants and the public. In exchange-provided cancel-on- interpretive notice provided that when addition, as discussed in section (ii) disconnect functionality, and a kill authorizing use of a direct access below, the Commission believes that the button that disables the system’s ability system, the Member should utilize pre- standardization of risk controls may to trade and cancels all resting execution controls, if available, to set result in the provision of additional orders.627 In addition, ESMA guidelines pre-execution limits for each customer, liquidity. from 2012 recommended, among other regardless of the nature of the customer. Other potential costs related to risk things, that investment firms implement Although proposed § 1.80 is controls are similarly hard to quantify. messaging traffic controls and price or consistent with accepted industry best Kill switches aim to cease unintended size parameters.628 The Commission practices of long standing and existing message behavior, and the potential also notes that the SEC’s Market Access Commission and SEC regulations to losses and disruption associated with Rule, adopted in November 2010, which many AT Persons now comply, such behavior. However, the mandatory requires brokers and dealers to have risk Regulation AT’s risk control triggering of a kill switch when not controls that prevent entry of erroneous requirements will impose technology appropriate to a particular firm could orders, by rejecting orders that exceed and personnel costs on AT Persons. also prevent the firm’s legitimate, risk- appropriate price or size parameters, on These costs include initial risk control reducing activity, and instead result in an order-by-order basis or over a short creation costs and possibly ongoing increased costs for such firm. This period of time, or that indicate maintenance costs. Many AT Persons distinction emphasizes the need to duplicative orders.629 Given that many already have the controls required by appropriately calibrate risk controls on firms are registered both with the SEC Regulation AT in place, and will only an individual basis, and the and the CFTC, it is likely that there is need to upgrade such controls to ensure Commission has proposed rules that overlap between the set of firms covered compliance. To the extent some AT accommodate that need. While the under the SEC’s Market Access Rule and Persons may be outliers that do not Commission attempts to quantify costs this Proposed Rule. Finally, in 2011, the currently implement risk controls to individual firms, the Commission is CFTC TAC recommended, among other consistent with industry best practice— also aware of the broader impact of the things, that trading firms implement a number the Commission lacks data to proposed rules on markets once firms message and execution throttles, accurately identify and quantify—these apply the proposed risk controls, maximum quantity limits, price collars, firms would incur costs greater than including potential effects on liquidity. and a kill button.630 ‘‘upgrade’’ costs. The costs to any such The Commission welcomes comments The Commission also notes that, as outlier firms would vary based on each on these and other potential market- discussed in detail above in section firm’s unique size, business model, wide effects of the proposed regulations. II.E.1, NFA has provided guidance technology and existing risk controls. In addition to the potential costs to regarding ATSs to industry participants The Commission recognizes that some the market as a whole discussed above, since 2002. Such guidance includes firms will already have entirely individual AT Persons may incur costs NFA Interpretive Notice 9046, which compliant systems requiring no upgrade of risk control implementation, in addresses the ‘‘Supervision of the Use of and, at the other end of the spectrum, particular the cost of upgrading systems Automated Order-Routing Systems’’ in some firms may not be currently in order to comply with the proposed the context of NFA’s overarching implementing the § 1.80 required risk regulations. Specifically, if a particular supervision requirements in controls at all. Accordingly, the AT Person’s systems are not already Compliance Rule 2–9 (Supervision). Commission estimates the ‘‘upgrade’’ compliant with § 1.80, it will need to This rule and interpretive notice are costs for AT Persons to comply with comply with the pre-trade and other risk widely applicable to almost all Regulation AT risk control controls in one of several ways: By registered futures market participants requirements, and welcomes comment internally developing such controls and therefore apply to many AT on the accuracy of such estimates. from scratch, upgrading existing Persons. In particular, Compliance Rule Aside from costs to individual AT systems, or through purchasing a risk 2–9 requires each NFA member to Persons in creating and maintaining the management solution from an outside ‘‘diligently supervise its employees and controls required by Regulation AT, in vendor. Each approach potentially has agents in the conduct of their quantifying costs of § 1.80, the initial costs and annual ongoing costs. Commission considered that this Based on responses to the FIA survey, 626 CME at 23–24; CFE at 11. regulation may impose general costs to industry best practice standards, and 627 FIA PTG, ‘‘Recommendations for Risk the marketplace as a whole. For existing regulations both in Controls for Trading Firms,’’ (Nov. 2010) at 4–5. example, while the Commission expects Commission-regulated markets as well 628 ESMA Guidelines, supra note 61 at 14–15. that most AT Persons will only need to as SEC-regulated markets, the 629 See 17 CFR 240.15c3–5(e); SEC, Responses to upgrade systems in order to comply Commission believes that many AT Frequently Asked Questions Concerning Risk with Regulation AT, it is possible that Persons will be able to substantially Management Controls for Brokers or Dealers with Market Access (Apr. 15, 2014), supra note 37. costs related to the implementation of satisfy the risk control requirements of 630 CFTC TAC Recommendations, supra note 34 new risk controls could lead to adverse Regulation AT with their existing at 2–3. effects. For example, compliance costs systems and controls. For others, the
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costs of upgrading and introducing the required programming changes could be the Commission estimates that the total required systems would vary applied using flexible and generalizable one-time industry cost to implement considerably based on current controls methods and leveraged across all § 1.80 would be approximately and procedures, as well as particular algorithms. The Commission recognizes $33,465,600. business models.631 that execution speed is considered to be The Commission notes that AT Rather than develop or upgrade its a significant factor in algorithmic Persons could choose not to develop own systems, AT Persons may choose to trading, and understands that controls these controls internally, but rather may purchase a risk management solution have the potential to impact execution purchase a solution from an outside from a third-party vendor, a DCM, or a speed; however, the Commission vendor (or DCM or clearing member clearing member FCM. These costs believes that requiring a base set of risk FCM) in order to comply with § 1.80. could similarly vary, depending on the controls will, rather than further The Commission welcomes comments AT Persons’ current systems and increasing speed disadvantages across providing estimates concerning the cost controls in place, the types of trading market participants, partially reduce for an AT Person to use an outside strategies it uses, the volume and speed them by ensuring that no firm avoids vendor to comply with this proposed of its trading activity, and the pricing the use of a given control to gain an regulation. model utilized by the software vendor. advantage. Because each AT Person is SEC Estimates. The proposing release As one example, the Commission notes unique and technological systems across for the SEC’s Market Access Rule, which that CME provides a number of risk AT Persons will vary, the following requires brokers and dealers to have risk management tools to its market estimates reflect staff’s best efforts, and controls in place before providing their participants and clearing firms. These the Commission welcomes comments customers with access to the market, tools include: Cancel-on-disconnect, on their accuracy. provided compliance costs estimates.635 CME Globex credit controls, a Risk Estimate—Upgrade of Controls. The The Commission’s upgrade estimates Management Interface (RMI) (which Commission considered the scenario are generally consistent with the cost allows clearing members to manage where an AT Person already estimates provided by the SEC. For risk), drop copy, FirmSoft (the ability to implements controls as required by example, the SEC estimated that it view and cancel orders), a kill switch (a proposed § 1.80, but the controls may would cost a broker-dealer single step shutdown of trading activity) not comply with every aspect of the approximately $270,404 ($167,904 in and self-trade prevention.632 As another regulation. In such instance, an AT technology personnel costs and example, NASDAQ OMX Group, Inc. Person will need to evaluate its current $102,500 in hardware and software offers risk management tools that risk control systems to determine costs) to build a risk control include fat finger price checks, whether it is compliant with new management system from scratch and maximum order quantity checks, daily regulatory requirements; modify that it would cost a broker-dealer accumulated quantity checks, maximum existing code or creating new code to $39,401 ($27,984 for technology order rate per second checks, disconnect address any gaps between current risk personnel and $11,517 for hardware and safeguards, email notifications when control systems and new regulatory software) to substantially upgrade an limits or warning levels are breached, requirements; and test current systems existing risk control system.636 The SEC and an administration interface that and new code to verify correct operation estimated that the total annual ongoing allows emergency actions.633 Many of and compliance. The Commission cost to maintain an in-house risk control these mirror, or complement, risk assumes that AT Persons will generally management system would be $47,300 controls included within this proposed already have some code in place for the per broker-dealer ($26,800 for rule. basic controls required by § 1.80, or for technology personnel and $20,500 for The Commission estimated the costs something similar that can be added to hardware and software).637 Finally, with for AT Persons to comply with proposed or modified, rather than need to build respect to outsourcing such controls, the § 1.80. In making its estimates, the entire pre-trade systems from scratch. SEC estimated that a broker-dealer Commission made several assumptions. For example, an AT Person may have an would pay approximately $8,000 per The Commission assumes that the effort existing library of ‘‘code blocks,’’ with a month ($96,000 annually) for a startup to adjust any one control (by ‘‘control,’’ block being useful for multiple related contract.638 To be conservative, the SEC in this context, the Commission means purposes. estimated the same amount for an the pre-trade risk controls, order Accordingly, the Commission annual ongoing cost.639 cancellation systems, and connectivity estimates that an AT Person would The Commission notes that in systems required by § 1.80) would incur a one-time cost of $79,680 to addition to the general requirements of require assessment and possible upgrade its systems to comply with proposed § 1.80 to implement pre-trade modifications to all controls.634 The proposed § 1.80. This cost is broken risk controls, order cancellation systems down as follows: 1 Project Manager, and connectivity systems, § 1.80 631 For example, the needs of a particular AT working for 320 hours (320 × $70 per imposes additional requirements Person will vary based on its current systems and hour = $22,400); 1 Business Analyst, relating to such controls. Regulation controls in place, the comprehensiveness of its × § 1.80(a)(2) provides requirements as to controls and procedures, the types of trading working for 320 hours (320 $52 per strategies it uses, and the volume and speed of its hour = $16,640); 1 Tester, working for the level at which pre-trade risk controls trading activity. 320 hours (320 × $52 per hour = should be set and § 1.80(a)(3) requires 632 CME Group, ‘‘Risk Management Tools $16,640); and 1 Developer, working for that natural person monitors be Introduction,’’ available at: http:// 320 hours (320 × $75 per hour = promptly alerted when such parameters www.cmegroup.com/globex/trading-cme-group- are breached. The Commission assumes products/risk-management-tools.html. $24,000). The Commission estimates 633 NASDAQ OMX Group, Inc., ‘‘Pre-Trade Risk that if an AT Person already has at least Management—Genium INET,’’ available at: http:// some of the controls required by § 1.80, 635 See Securities Exchange Act Release No. www.nasdaqomx.com/nordicprm/geniuminet. there will be no additional annual costs 61379 (January 19, 2010), 75 FR 4007 (January 26, 634 The Commission also assumes that the most 2010) (File No. S7–03–10). to maintain the modifications required 636 difficult control to implement will be message and See id. at 4022. execution throttles because such throttles will need to bring the systems into compliance 637 See id. to be coordinated among many complex algorithms with § 1.80. Assuming (as discussed 638 See id. running simultaneously. above) that there are 420 AT Persons, 639 See id.
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that such requirements impose no requires AT Persons to annually submit market orders in the order book. In additional costs or are part of the costs reports regarding their pre-trade risk addition to these losses, and potentially described above. Establishing particular controls required pursuant to proposed uncertain trading positions, sudden, parameters of controls is a necessary § 1.80(a) and copies of the written large unintentional market activity can part of establishing and implementing policies and procedures developed to disrupt the efficiency, competitiveness any control. In addition, as discussed comply with § 1.81(a) and (c) to each and financial integrity of the futures below, the Commission assumes that it DCM on which they operate. markets. Because much of the impact of is already industry practice to employ a Accordingly, the Commission believes such unintended trades is independent natural person to test and monitor a that articulating such requirement of connection method, it is in the firm’s algorithmic trading systems. explicitly in the final subsection of this individual trading firm’s interest, and Accordingly, requiring that natural rule will not engender costs separate the interest of Commission-regulated person monitors at the AT Person be from those previously discussed and markets as a whole, to have all types of alerted with pre-trade risk control considered. algorithmic trading orders, regardless of parameters are breached should not The Commission emphasizes that access method, be subjected to sound impose additional costs on AT Persons. costs for each AT Person will vary. risk controls. Proposed § 1.80(d) requires each AT Finally, the Commission notes that, as As noted, the Commission believes Person, prior to its initial use of indicated above, these estimates may that proposed regulation § 1.80 Algorithmic Trading, to submit a overstate the actual costs to the standardizes existing industry practices message or order to a DCM’s trading industry. Based on Concept Release in this area, and does not impose platform, must notify its clearing comments, best practices issued by additional requirements beyond existing member FCM and the DCM on which it industry and regulatory organizations, best practices that most market will be trading that it will engage in as well as existing regulations, the participants satisfy. Accordingly, the Algorithmic Trading. Subject to Commission believes that all or most AT Commission notes that many of the consideration of relevant comments, the Persons are already using the pre-trade benefits of § 1.80 are already being Commission preliminarily believes that and other risk controls required by realized. This proposed rule, however, this requirement of this initial proposed § 1.80. The Commission may serve to limit a ‘‘race to the notification to clearing firms and DCMs welcomes public comment on the above bottom’’ in which certain entities will impose minimal or no costs on AT analysis and estimates. sacrifice effective risk controls in order Persons. The Commission welcomes ii. § 1.80 Benefits—Pre-Trade and comment on the costs, if any, of this to minimize costs or increase the speed Other Risk Controls (AT Persons) notification requirement. of trading. The proposed rules, by Proposed § 1.80(e) requires AT Proposed § 1.80 should benefit market standardizing the risk controls required Persons to implement a DCM’s self-trade participants by mitigating credit, to be used by firms, would help ensure prevention tools. The Commission’s market, and operational risks faced by that the benefits of these risk controls self-trade prevention requirements are trading firms. Standardization of pre- are more evenly distributed across a principally directed toward DCMs, in trade and other risk controls is wide set of market participants, and that § 40.23 would require DCMs to particularly critical in the context of reduce the likelihood that an outlier apply, or provide and require the use of, potential outlier trading firms that have firm without sufficient risk controls self-trade prevention tools. The chosen not to implement appropriate causes significant market disruption. Commission believes that DCMs would risk controls in the absence of Incidents like the one involving incur the costs of developing or regulation. As noted above (for example, Knight Capital highlight the importance upgrading such tools as necessary to with respect to the Knight Capital of using pre-trade and other risk control comply with § 40.23. To the extent that incident), a technological malfunction at protections. Specifically, an SEC AT Persons are not already complying such a single firm can have far-reaching investigation found that Knight Capital with DCM-provided self-trade impact across markets and market did not have adequate safeguards in prevention tools already used in participants. Credit, market and place to limit the risks posed by its industry, the Commission believes that operational risks are mitigated through access to the markets, and, as a result, the cost to an AT Person in calibrating ensuring that each order accurately failed to prevent the entry of millions of or otherwise applying such a tool would reflects the intentions of the participant erroneous orders.640 Knight Capital also be a minimal, involving provision of the and does not otherwise violate the CEA failed to conduct adequate reviews of relevant account or other necessary or Commission regulations. The pre- control effectiveness.641 The SEC information in the DCM in order to trade and other risk controls required by charged Knight Capital with multiple apply the tool. The Commission proposed § 1.80 should improve both violations of the SEC’s Market Access welcomes comment on the costs, if any, price efficiency and price transparency Rule, which included failure to have to an AT Person in complying with in Commission-regulated markets by adequate controls at a point § 1.80(e). reducing the chances of large, immediately prior to its submission of Finally, proposed § 1.80(f) requires unintended orders moving prices away orders to the market, such as a control that each AT Person shall periodically from appropriate market values. Absent to compare orders leaving the router review its compliance with § 1.80 to protections, unintended and erroneous with those entered.642 Knight also failed determine whether it has effectively trades resulting from a malfunctioning to adequately review its business implemented sufficient measures trading system could potentially expose activity in connection with its market reasonably designed to prevent an not just the original market participant, access to ensure the overall Algorithmic Trading Event. AT Persons but any participant exposed to the given effectiveness of its risk management must take prompt action to document market, to unexpected financial burdens controls and supervisory procedures.643 and remedy deficiencies in such as a result of price moves. These policies and procedures. The burdens may include the financial 640 See SEC Knight Capital Release, supra note 39. Commission believes that this periodic impact on market participants with 641 See id. review is necessary to comply with open positions impacted by price 642 See id. § 1.83(a), which, as discussed below, moves, or market participants with 643 See id.
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As a result of these failures, the SEC experience when unfavorable price Development and Testing. The found that Knight put not only movements occur due to the behavior of Commission estimates that an AT themselves, but the markets in general, another market participant’s faulty Person that has not implemented any of at risk. The Commission views algorithm. As a result, the Commission, the requirements of proposed § 1.81(a) prevention of disruptive events like that subject to consideration of comments, (development and testing of Algorithmic involving Knight Capital as an views the proposed standardized risk Trading Systems) would incur a total important benefit of § 1.80 that impacts controls as a tool likely to encourage AT cost of $349,865 to implement these all market participants and the public. Persons and other market participants to requirements. This cost is broken down By requiring, and standardizing, provide additional liquidity, mitigating as follows: 1 Project Manager, working certain risk controls implemented by the potential negative impact on market for 1,707 hours (1,707 × $70 = traders and trading firms, the liquidity from certain costs associated $119,490); 2 Business Analysts, working Commission intends to foster a level with Regulation AT, as previously for a combined 853 hours (853 × $52 = playing field across market participants, discussed in section (i) above. $44,356); 3 Testers, working for a and avoid a situation where firms with × iii. § 1.81 Costs—Development, combined 2,347 hours (2,347 $52 = stronger risk control systems face speed $122,044); and 2 Developers, working disadvantages. The Commission also Testing and Supervision of Algorithmic × Systems (AT Persons) for a combined 853 hours (853 $75 = recognizes that in the absence of a rule $63,975).644 requiring implementation of certain risk The Commission believes that most Monitoring. The Commission controls, some market participants may market participants and DCMs have estimates that an AT Person that has not be compelled by competitive and implemented controls regarding the implemented any of the requirements of economic pressures to submit orders, or design, testing, and supervision of proposed § 1.81(b) (monitoring of allow the submission of orders, without Algorithmic Trading systems, in light of Algorithmic Trading Systems) would appropriate controls to safeguard against the numerous best practices and incur a total cost of $196,560 to the risks of a malfunctioning algorithm. regulatory requirements promulgated in implement these requirements. This The race for speed may reduce the this area. For this fully compliant cost is broken down as follows: 1 Senior incentive to add risk controls, and the majority, the codification of such Compliance Specialist, working for absence of risk controls can magnify the standards in proposed § 1.81 should not 2,080 hours (2,080 × $57 = $118,560); effect, and cost, of errors in the high engender additional costs. For any and 1 Business Analyst, working for market participants that are not fully speed trading environment. In addition, 1,500 hours (1,500 × $52 = $78,000).645 compliant, some additional costs may the mitigation of significant system risks Compliance. The Commission be expected. These efforts include the should help ensure market integrity and estimates that an AT Person that has not FIA PTG’s November 2010 provide the investing public with implemented any of the requirements of ‘‘Recommendations for Risk Controls for greater confidence that all transactions, proposed § 1.81(c) (compliance of Trading Firms,’’ FIA’s March 2012 along with the resulting price Algorithmic Trading Systems) would ‘‘Software Development and Change movements, are intentional and bona incur a total cost of $174,935 to Management Recommendations,’’ fide. Regulation AT should promote implement these requirements. This ESMA and MiFID II guidelines and investor confidence as well as enhance cost is broken down as follows: 1 Project the fair and efficient operation of the directives on the development and × testing of algorithmic systems, SEC Manager, working for 853 hours (853 markets. $70 = $59,710); 2 Business Analysts, The Commission believes that market Regulation SCI requirements on the working for a combined 427 hours (427 participants, in particular those development, testing, and monitoring of × $52 = $22,204); 3 Testers, working for currently using risk controls, may face SCI systems, FINRA’s March 2015 × a number of disadvantages due to the Notice 15–09 on effective supervision a combined 1,173 hours (1,173 $52 = $60,996); and 2 Developers, working for fact that risk controls for algorithmic and control practices for market × trading are not standardized, and that participants that use algorithmic trading a combined 427 hours (427 $75 = these disadvantages may discourage strategies in the equities market, $32,025). market participants from providing IOSCO’s April 2015 Consultation Designation and Training of Staff. liquidity. Market participants may be Report, summarizing best practices that The Commission estimates that an AT concerned about their exposure to should be considered by trading venues Person that has not implemented any of potential losses due to Algorithmic when developing and implementing risk the requirements of proposed § 1.81(d) Trading events and various market mitigation mechanisms, and the Senior (designation and training of Algorithmic abuses in the absence of standardized Supervisors Group (SSG) April 2015 Trading staff) would incur a total cost of risk controls and other measures. Algorithmic Trading Briefing Note, $101,600 to implement these Market participants may also be which described how large financial requirements. This cost is broken down concerned whether market orders and institutions currently monitor and as follows: 1 Senior Compliance × trades in fact reflect the intent of the control for the risks associated with Specialist, working for 500 hours (500 market participants submitting them. algorithmic trading during the trading $57 = $28,500); 1 Project Manager, × The Commission thus expects, subject day. working for 500 hours (500 $70 = to consideration of comments, that The Commission has calculated an $35,000); 1 Developer, working for 300 × standardization of risk control estimated maximum cost to an AT hours (300 $75 = $22,500); and 1 requirements for all AT Persons via Person that has not implemented any of Regulation AT will reduce such costs the design, testing, and supervision 644 See section V(B) above for the calculation of hourly wage rates used in this analysis. and trading disincentives for market standards required by proposed § 1.81 645 As discussed above, the Commission notes participants arising from Algorithmic as further described below. To the that staff persons who are responsible for Trading events and market abuses. The extent an AT Person is already in partial monitoring the trading of other AT Person staff Commission also expects, subject to compliance with § 1.81, as the should not simultaneously be actively engaged in trading. The Commission believes that it would not consideration of comments, that Commission believes many are likely to be possible to adequately and consistently monitor standardization will reduce unexpected be, their costs should be less than the trading of other AT Person staff while engaged in costs that market participants currently maximum described. trading activities.
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Business Analyst, working for 300 hours changes, testing, and controls; and rules. For purposes of this exercise, the (300 × $52 = $15,600). procedures for documenting the strategy Commission anticipates that an RFA Notwithstanding these estimates, the and design of proprietary Algorithmic could potentially seek to codify industry Commission believes that proposed Trading software used by an AT Person, best practices in order to establish a § 1.81 standardizes existing industry among other controls. The baseline of regulatory standardization practices in this area, but does not standardization of such written policies around such practices. impose additional requirements that are and procedures may make disruptive not already followed by the majority of events like the Knight Capital incident The Commission believes that the market participants. As a result, subject less likely in the future. work of adopting these rules would fall to consideration of relevant comments, As noted, the Commission believes primarily to legal, information the Commission preliminarily believes that proposed regulation § 1.81 technology, and compliance staff within that regulation § 1.81 would not impose standardizes existing industry practices an RFA. It estimates 450 hours of additional costs on the majority of AT in this area, and does not impose burden for an RFA to adopt rules. This Persons and that the costs imposed on additional requirements that are not includes analysis of existing industry AT Persons that are in partial already followed by the majority of best practices, consultation with market compliance with § 1.81 will be less than market participants. Accordingly, the participants, drafting rules, further the amounts described above. Commission notes that many of the consultations, including potentially benefits of § 1.81 are already being iv. § 1.81 Benefits—Development, with Commission staff, and adoption of realized. The proposed rule would help Testing and Supervision of Algorithmic final rules. The Commission estimates a ensure that the benefits of the required Systems (AT Persons) total cost of $34,200 for these efforts. testing and supervision will be fully This cost is broken down as follows: 2 The rules proposed with respect to realized and sustained into the future. Compliance Attorneys, working for a the design, testing, and supervision of × Algorithmic Trading systems are v. § 170.19 Costs—RFA Standards for combined 150 hours (150 hours $96 intended to further mitigate the risk of Automated Trading and Algorithmic per hour = $14,400); 2 Developers, Algorithmic Trading. In their response Trading Systems (RFAs) working for a combined 150 hours (150 × to the Concept Release, IATP noted that, Proposed § 170.19 requires an RFA to hours $75 per hour = $11,250); and 2 out of all the safeguards discussing in establish and maintain a program for the Senior Compliance Specialists, working the Release, they believed ATS testing prevention of fraudulent and for a combined 150 hours (150 hours × had the greatest potential to reduce manipulative acts and practices, the $57 per hour = $8,550), for a total cost market disruptions.646 By standardizing protection of the public interest, and of $34,200.648 principles in this area, Regulation AT is perfecting the mechanisms of trading on The Commission notes that an RFA, intended to reduce the risk of disorderly designated contract markets through after familiarizing itself with relevant trading, including the risk that orders membership rules, as deemed best practices, may determine that will be unintentionally sent into the appropriate by the RFA, requiring: (1) additional membership rules pursuant marketplace by a poorly designed or Pre-trade risk controls and other to proposed § 170.19 are unnecessary. insufficiently supervised algorithm. measures for ATSs; (2) standards for the Under those circumstances, elements of For example, the regulations proposed development, testing, monitoring, and under § 1.81 may reduce the risk of compliance of ATSs; (3) designation and the work described above would not be market disruptions such as the 2012 training of algorithmic trading staff; and required, and the total estimated cost of incident involving Knight Capital. The (4) operational risk management $34,200 would not be incurred. The SEC later concluded that, among other standards for clearing member FCMs Commission believes, for example, that failures, Knight Capital did not have with respect to customer orders Compliance Attorneys, Developers, and adequate controls and procedures for originating with algorithmic trading Senior Compliance Specialists could code deployment and testing for its systems. analyze best practices and determine order router, did not have sufficient Proposed § 170.19 will impose costs that additional membership rules are controls and written procedures to on an RFA to establish and maintain a not required after a combined 150 hours guide employees’ responses to program as described in the rule. of work (50 hours of work for each significant technological and However, RFAs would only be required professional role). The Commission compliance incidents, and did not have to adopt rules as they deem appropriate; estimates a total cost of $11,400 for an adequate written description of its any rulemaking pursuant to proposed these efforts. This cost is broken down risk management controls.647 Proposed § 170.19 would be entirely at the as follows: 2 Compliance Attorneys, § 1.81 requires written policies and discretion of the RFA. The Commission working for a combined 50 hours (50 procedures relating to the following: believes that the costs to an RFA of hours × $96 per hour = $4,800); 2 Testing of all Algorithmic Trading code proposed § 170.19 cannot reasonably be Developers, working for a combined 40 quantified given RFAs’ complete and relates systems and any changes to hours (50 hours × $75 per hour = discretion to adopt many, several, or no such code and systems prior to their $3,750); and 2 Senior Compliance rules in the foreseeable future pursuant implementation; regular stress tests of Specialists, working for a combined 50 to § 170.19. In addition, relevant ATSs to verify their ability to operate in hours (50 hours × $57 per hour = the manner intended under a variety of rulemaking by an RFA is likely to be $2,850), for a total cost of $11,400.649 market conditions; a plan of internal episodic, as circumstances warranting coordination and communication rulemaking will typically not arise on an annual basis. With those caveats, between compliance staff of the AT 648 however, for purposes of this analysis See section V(B) above for the calculation of Person and staff of the AT Person hourly wage rates used in this analysis. and as a basis for comment, the responsible for Algorithmic Trading 649 In this regard, the Commission estimates that regarding Algorithmic Trading design, Commission is using its own experience total costs for an RFA could range between $11,400 to quantify the potential costs of and $34,200 based on the amount of work invested 646 IATP at 7. proposed § 170.19 to an RFA on those before the RFA determined not to pursue additional 647 See SEC Knight Capital Release, supra note 39. occasions when it determines to adopt membership rules pursuant to proposed § 170.19.
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vi. § 170.19 Benefits—RFA Standards vii. § 170.18 Costs—AT Person As discussed above, proposed § 170.18 for Automated Trading and Algorithmic Membership in a Registered Futures will likely only affect those floor traders Trading Systems (RFAs) Association (AT Persons) that were required to register with the Proposed § 170.18 requires each Commission pursuant to § 1.3(x)(3). The Commission believes that registrant that is an AT Person that is NFA, as the only currently registered proposed § 170.19, by requiring RFAs to not otherwise required to be a member RFA, has not to date promulgated any establish and maintain a program of an RFA pursuant to §§ 170.15, 170.16, rules specific to floor traders or AT addressing the automated trading and or 170.17 to become and remain a Persons. As a result, the only current algorithmic trading systems of its member of at least one RFA that NFA membership rules that these members, will help to advance the goals provides for the membership of such entities would be required to follow are described in § 170.19: Prevention of registrant, unless no such futures those rules that are generally applicable fraudulent and manipulative acts and association is so registered. Proposed to all NFA members. Many of these practices, the protection of the public § 170.18 would only affect those entities rules are general in nature and mirror interest, and perfecting the mechanisms that are not required to become current Commission regulations or those of trading on designated contract members of an RFA pursuant to proposed in Regulation AT. markets. §§ 170.15, 170.16, or 170.17. Floor Accordingly, these entities would not brokers and floor traders, who have incur any additional general, ongoing RFAs serve a vital regulatory function compliance costs as a result of NFA as frontline regulators of their members, historically been overseen by the DCMs on which they operate, are not required membership. which would include all AT Persons by §§ 170.15, 170.16, or 170.17 to pursuant to proposed § 170.18. RFAs viii. § 170.18 Benefits—AT Person become members of an RFA and would promulgate binding membership rules Membership in a Registered Futures likely be the entities impacted by Association (AT Persons) and can supplement Commission rules proposed regulation 170.18. The new Because entities that are not members as appropriate. RFAs can also operate membership requirements would of an RFA are not bound by the rules of examination programs to monitor require affected entities to pay initial members’ compliance with association and annual NFA membership dues. the RFA, the Commission is proposing rules, and can sanction members for NFA charges each FCM registrant § 170.18 to ensure that all AT Persons non-compliance. The Commission $5,625 in initial membership dues and (including newly registered floor believes that because RFAs have these $5,625 per year for continuing NFA traders) would become members of an and other tools at their disposal, RFAs membership where NFA is the SRO. RFA and would therefore be subject to are well-positioned to address rules in The Commission estimates that any membership rules promulgated by such RFA. Regulation AT proposes to areas experiencing rapid evolution in membership dues for AT Person floor establish a role for RFAs in setting the market practices and technologies, traders or floor brokers may also be $5,625, but that actual dues may be framework in which AT Persons including particularly §§ 1.80, 1.81, and operate. Proposed § 170.19, which is 1.82. different than this. This is because while NFA will generally have more described in greater detail above, The Commission believes that the limited oversight responsibilities for AT requires an RFA to adopt rules, as structure of proposed §§ 1.80, 1.81, and Person floor traders and floor brokers, it deemed appropriate by the RFA, 1.82 makes it particularly appropriate to may pass on the costs of proposed requiring (i) pre-trade risk controls for give RFAs a discretionary role in § 170.19 to AT Person members in the ATSs; (ii) standards for the augmenting the requirements of form of higher dues.650 The Commission development, testing, monitoring and Regulation AT for AT Persons. Proposed estimates that there will be compliance of ATSs; (iii) designation §§ 1.80, 1.81, and 1.82 address only a approximately 100 entities that are AT and training of algorithmic trading staff; subset of potentially responsive risk Persons and will register as floor traders and (iv) operational risk management controls and other measures. Each AT under the new registration requirements standards for clearing member FCMs Person remains free to adopt additional of § 1.3(x)(3). It is likely that these 100 with respect to customer orders safeguards reasonably designed to entities will be the only entities that originating with ATSs. The benefits of prevent an Algorithmic Trading Event will be required to become members of these risk controls and other measures an RFA pursuant to proposed regulation are described in more detail throughout given its trading strategies, technologies, 651 or the markets in which it participates. 170.18. Accordingly, the Commission this section. The proposed rules also provide a estimates that entities affected by ix. § 1.82 Costs—Pre-Trade and Other degree of flexibility regarding the proposed regulation 170.18 will incur a Risk Controls (FCMs) total initial cost of about $562,500 for design, implementation, or calibration NFA membership dues (about $5,625 in Based on Concept Release comments, of those pre-trade risk control or other annual membership dues per registrant, best practices documents issued by measures that are specifically required paid each year by 100 registrants) and industry or regulatory organizations, as in §§ 1.80, 1.81, and 1.82, again a total annual cost of about $562,500. well as existing regulations, the allowing each AT Person to adapt the The Commission also preliminarily Commission believes that clearing rules to its own trading and technology. believes that the rule may impose member FCMs already implement the Given the degree of flexibility certain compliance costs on affected specifically-enumerated pre-trade and embedded in these rules, RFAs will be entities. However, such costs should not other risk controls required pursuant to well positioned to work with their be substantially different from or proposed § 1.82. Specifically, in its member AT Persons to develop significantly exceed the costs associated survey of FCMs, FIA found that all standards that are appropriate to each with current Commission regulations responding firms used message and AT Person’s specific trading approach and proposed Regulation AT generally. execution throttles, maximum order and technology, and that best serve to sizes, price collars, and order promote the goals described in § 170.19. 650 Currently, while floor traders and floor brokers register with the NFA, they do not become NFA 651 See, e.g., the discussion of benefits related to members, and, thus, do not pay membership dues. proposed §§ 1.80, 1.81, and 1.82.
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cancellation capabilities, including a example, the needs of a clearing controls to ensure that they comply with kill switch, either administered member will vary based on its current the regulation. The Commission internally or at the exchange level.652 systems and controls in place, the estimates that the cost for a clearing FIA also indicated that most DCMs comprehensiveness of its controls and member to assess and update its provide tools to allow the FCM to set procedures, the types of trading implementation of such controls is pre-trade controls for their customers, strategies its customers use, and the $159,360. This cost is broken down as which are a prerequisite for an FCM to volume and speed of its customers’ follows: 1 Project Manager, working for provide direct access to a market trading activity. 640 hours (640 × $70 per hour = participant without routing orders Estimate-DEA Orders, Update to $44,800); 1 Business Analyst, working through the FCM’s infrastructure.653 Controls. The Commission also for 640 hours (640 × $52 per hour = Two exchanges commented that their estimated costs to a clearing member $33,280); 1 Tester, working for 640 kill switch functionality allows clearing that already uses DCM-provided hours (640 × $52 per hour = $33,280); firms to cancel orders.654 controls with respect to DEA orders and and 1 Developer, working for 640 hours The Commission notes that these only needs to assess and update its (640 × $75 per hour = $48,000). The 57 types of controls have been subject of implementation in order to ensure it clearing members that will be subject to industry best practices for years. For fully complies with § 1.82. The § 1.82 would therefore incur a total one- example, FIA’s Market Access Risk Commission assumed that message time cost of $9,083,520 (57 × $159,360) Management Recommendations from handling already exists and little is to update their controls.659 The 2010 recommended, among other needed to update the clearing member’s Commission estimates that if a clearing things, that a clearing firm providing systems in order to comply with § 1.82. member already implements at least direct access to a market should As noted above with respect to AT some of the DCM-provided controls implement maximum quantity limits, Persons and compliance with § 1.80, the required by § 1.82, there will be no price banding or dynamic price limits Commission believes that upgrading additional annual costs to maintain the and exchange-provided order existing systems to comply with § 1.82 modifications required to bring the cancellation capabilities.655 The ESMA would involve evaluating current risk clearing member’s systems into Guidelines from 2012 recommended control systems to determine compliance with § 1.82. that firms providing direct market compliance with new regulatory The Commission emphasizes that access or sponsored access (as such requirements; modifying existing code costs listed above are estimates, and it terms are defined by ESMA) 656 must, or creating new code to address gaps welcomes comment on their accuracy. among other things, implement controls between current risk control systems The Commission further emphasizes that limit messaging traffic and establish and new regulatory requirements; and that the costs for each clearing member price and size parameters.657 testing current systems and new code to will vary. Finally, the Commission notes Nevertheless, the Commission verify correct operation and compliance. that, as indicated above, these estimates recognizes that there could be costs The Commission estimates that the cost may overstate the actual costs to the associated with implementation of the for a clearing member to assess and industry. Based on Concept Release risk controls in § 1.82. Specifically, for update its implementation of controls comments, best practices issued by purposes of Direct Electronic Access required by § 1.82 is $49,800. This cost industry and regulatory organizations, (DEA), defined in proposed § 1.3(yyyy), is broken down as follows: 1 Project as well as existing regulations, the if clearing members do not already use Manager, working for 200 hours (200 × Commission believes that clearing DCM-provided systems, they will need $70 per hour = $14,000); 1 Business members are largely already using the to implement additional DCM-provided Analyst, working for 200 hours (200 × pre-trade and other risk controls systems. For non-DEA orders, clearing $52 per hour = $10,400); 1 Tester, required by § 1.82. firms will need to internally develop working for 200 hours (200 × $52 per such controls from scratch, upgrade hour = $10,400); and 1 Developer, x. § 1.82 Benefits—Pre-Trade and existing systems, or purchase a risk working for 200 hours (200 × $75 per Other Risk Controls (FCMs) management solution from an outside hour = $15,000). The 57 clearing The Commission notes that many of vendor. Each approach potentially has members that will be subject to § 1.82 the benefits discussed above with initial costs and annual ongoing costs, would therefore incur a total one-time respect to pre-trade and other risk although the costs of upgrading and cost of $2,838,600 (57 × $49,800) to controls required of trading firms implementing the required systems update their controls.658 The pursuant to § 1.80 also apply with would vary considerably based on Commission estimates that if a clearing respect to the benefits of controls that current controls and procedures, as well member already implements at least FCMs must implement pursuant to as particular business models. For some of the DCM-provided controls proposed § 1.82. Specifically, requiring required by § 1.82, there will be no such controls contributes to orderly 652 FIA at 60. additional annual costs to maintain the markets by preventing orders that are 653 FIA at 13. Two exchanges commented that modifications required to bring the outside of pre-determined parameters they provide technology allowing clearing members to set maximum order size limits. See CME at 23– clearing member’s systems into and ensuring a level-playing field 24; CFE at 11. compliance with § 1.82. among clearing members. The benefits 654 CME at 23–24; CFE 11. Estimate-Non-DEA Orders, Update to also include allowing clearing members 655 FIA Market Access Working Group, ‘‘Market Controls. The Commission also to have control over the trading flow of Access Risk Management Recommendations,’’ estimated costs to clearing members to (April 2010) at 8–10. their customers, regardless of their 656 ESMA defines direct market access as an comply with § 1.82’s requirements with customers’ method of access—DEA or investment firm’s client transmitting orders to a respect to non-DEA orders assuming non-DEA. trading platform using the investment firm’s that the clearing member already has the In addition, given that different infrastructure, and sponsored access as a client pre-trade and other risk controls in entities have differing information about transmitting orders directly to a trading platform without such orders passing through the investment place, and must only update the the trading activities of their customers/ firm’s infrastructure. See ESMA Guidelines, supra note 61 at 4–5. 658 See section V(A) above for the calculation of 659 See section V(A) above for the calculation of 657 See id. at 14–15, 21–23. the number of persons subject to Regulation AT. the number of persons subject to Regulation AT.
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users, identification of unintended keep and provide to the DCM books and their current infrastructure to market behavior may be easier for records regarding the AT Person’s accommodate new DCM rules relating to certain entity types, such as trading compliance with all §§ 1.80 and 1.81 recordkeeping, and AT Persons and firms. For example, with respect to requirements, and each clearing member clearing member FCMs will not have trading firms that mostly trade through FCM to keep and provide to the DCM substantial expenditures related to new a single clearing member, but across a books and records regarding such recordkeeping technology or re- disparate set of products, these metrics clearing member FCM’s compliance programming existing recordkeeping may be more easily calculated at the with all § 1.82 requirements. The technology. The Commission expects FCM than at the DCM. To protect proposed recordkeeping requirements that additional expenditure related to against the broadest set of errors, there will cause AT Persons and clearing § 1.83(c) and (d) recordkeeping are benefits to implementing risk member FCMs to incur costs, as requirements would be limited to the controls at multiple points in the order discussed below. drafting and maintenance of chain, including the FCM. AT Person Compliance Reports. AT recordkeeping policies and procedures As noted, the Commission believes Persons and FCMs that are clearing by in-house counsel and programmer that proposed § 1.82 standardizes members of AT Persons will incur the burden hours associated with existing industry practices in this area, cost of annually preparing and recordkeeping technology and some of the requirements are submitting the reports to their DCMs, as improvements, as well as annual costs already followed by the majority of well as the written policies and in ensuring that recordkeeping policies clearing members. Accordingly, the procedures developed to comply with and procedures and related technology Commission notes that many of the § 1.81(a) and (c). The Commission comply with DCM rules. As noted benefits of § 1.82 are already being estimates that an AT Person will incur below, with respect to § 40.22(e), the realized. This proposed rule may serve a total annual cost of $4,240 to draft the Commission estimates that a DCM to limit a ‘‘race to the bottom’’ in which report and submit the policies and would find it necessary to review the some entities sacrifice effective risk procedures as required by § 1.83(a). This books and records of approximately controls in order to minimize costs or cost is broken down as follows: 1 Senior 10% of AT Persons and clearing increase the speed of trading. Thus, the Compliance Specialist, working for 50 member FCMs on an annual basis. The proposed rule would help ensure that hours (50 × $57 per hour = $2,850) and production of such records would result the benefits of the required risk controls 1 Chief Compliance Officer, working for in additional burden hours by AT will be fully realized. 10 hours (10 × $139 per hour = $1,390) Person and clearing member FCM in- for a total cost of $4,240 per year. The xi. § 1.83 Costs—AT Persons and FCM house counsel, a consideration which approximately 420 AT Persons to which Clearing Members Must Submit the Commission included in its annual § 1.83(a) would apply would therefore Compliance Reports and Maintain cost estimates below. incur a total annual cost of $1,780,800 AT Person Recordkeeping Costs. The Certain Books and Records (420 × $4,240) to prepare and submit the Commission estimates that, on an initial Proposed § 1.83 would require AT report and written policies and basis, an AT Person will incur a cost of Persons and FCMs that are clearing procedures required by § 1.83(a). $5,130 to draft and update members for AT Persons to annually Clearing Member FCM Compliance recordkeeping policies and procedures submit reports regarding compliance Reports. The Commission further and make technology improvements to with § 1.80(a) and § 1.82(a)(1), estimates that an FCM will incur a total recordkeeping infrastructure. This cost respectively, to each DCM on which cost annually of $7,090 to draft the is broken down as follows: 1 they operate. The reports prepared by report required by § 1.83(b). This cost is Compliance Attorney, working for 30 AT Persons would have descriptions of broken down as follows: 1 Senior hours (30 × $96 = $2,880); and 1 the AT Person’s pre-trade risk controls Compliance Specialist, working for 100 Developer, working for 30 hours (30 × as required by proposed § 1.80(a). The hours (100 × $57 per hour = $5,700) and $75 = $2,250). The 420 AT Persons reports prepared by FCMs that are 1 Chief Compliance Officer, working for would therefore incur a total initial cost clearing members for AT Persons would 10 hours (10 × $139 per hour = $1,390), of $2,154,600 (420 × $5,130). have a description of the FCM’s program for a total cost of $7,090 per year. The The Commission estimates that, on an for establishing and maintaining the 57 FCMs to which § 1.83(b) would apply annual basis, an AT Person will incur a pre-trade risk controls required by would therefore incur a total annual cost of $2,670 to ensure continued proposed § 1.82(a)(1) for its AT Persons cost of $404,130 (57 × $7,090) to prepare compliance with DCM recordkeeping at the DCM. The reports would also be and submit the report required by rules relating to § 1.82 compliance, required to include a certification by the § 1.83(b). including the updating of policies and chief executive officer or chief AT Person and Clearing Member FCM procedures and technology compliance officer of the AT Person or Retention of Books and Records. As infrastructure, and in respond to DCM clearing member FCM, as applicable, discussed above, the Commission record requests. This cost is broken that, to the best of his or her knowledge believes that AT Persons and clearing down as follows: 1 Compliance and reasonable belief, the information member FCMs already implement the Attorney, working for 20 hours (20 × contained in the report is accurate and risk controls, testing standards and $96 = $1,920); and 1 Developer, working complete. other measures that would be required for 10 hours (10 × $75 = $750). The 420 In addition, proposed § 1.83(c) and (d) pursuant to §§ 1.80, 1.81, and 1.82. AT Persons would therefore incur a would require AT Persons and clearing Retention of records relating to such total annual cost of $1,121,400 (420 × member FCMs for AT Persons to keep measures is prudent business practice $2,670). and provide upon request to DCMs and the Commission anticipates that Clearing Member FCM Recordkeeping books and records regarding their many AT Persons and clearing member Costs. The Commission estimates that, compliance with §§ 1.80 and 1.81 (for FCMs already maintain some form of on an initial basis, a clearing member AT Persons) and § 1.82 (for clearing these records in the ordinary course of FCM will incur a cost of $5,130 to draft member FCMs). The Commission is also their business. Accordingly, the and update recordkeeping policies and proposing pursuant to § 40.22(d) that Commission believes that AT Persons procedures and make technology DCMs must require each AT Person to and clearing member FCMs will adapt improvements to recordkeeping
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infrastructure. This cost is broken down with §§ 1.80 and 1.81 (for AT Persons) at least some of the controls required by as follows: 1 Compliance Attorney, and § 1.82 (for clearing member FCMs). § 38.255(b), there will be no additional working for 30 hours (30 × $96 = The reports and recordkeeping proposed annual costs to maintain the $2,880); and 1 Developer, working for by § 1.83, and the review program modifications required to bring the 30 hours (30 × $75 = $2,250). The 57 proposed by § 40.22, will enable DCMs systems into compliance with this clearing member FCMs would therefore to have a clearer understanding of the regulation. incur a total initial cost of $292,410 (57 pre-trade risk controls of all AT Persons Accordingly, the Commission × $5,130). that are engaged in Algorithmic Trading estimates that the 15 DCMs that will be The Commission estimates that that on such DCM. The proposed reports subject to § 38.255(b) would therefore DCM rules pursuant to proposed will also enable DCMs to set up the incur a total one-time cost of $2,332,800 § 40.22(d) requiring clearing member review program required by § 40.22. The (15 × $155,520) to update their controls. FCMs to keep and provide books and review program would improve the The Commission believes that the records relating to § 1.82 compliance standardization of market participants’ above estimates would change if a DCM will result in annual costs of 30 hours pre-trade risk controls. The must upgrade its systems in order to of burden per clearing member FCM, standardization of such systems and comply with § 40.20 (discussed below). and 1,710 burden hours in total. The procedures should further reduce the Under such circumstances, where the estimated burden was calculated as risk that a market participant will DCM is already upgrading controls for follows: engage in disorderly trading due to its own implementation pursuant to The Commission estimates that, on an inadequate pre-trade risk controls. § 40.20, total cost to upgrade controls for annual basis, a clearing member FCM use by FCMs pursuant to § 38.255 will incur a cost of $2,670 to ensure xiii. § 38.255(b) and (c) Costs—DCMs should decrease. The controls required continued compliance with DCM Must Provide Controls to FCMs by § 40.20 should include interfaces to recordkeeping rules relating to § 1.82 As noted above with respect to support external interactions and compliance, including the updating of proposed § 1.82, based on Concept expanding them to support FCMs policies and procedures and technology Release comments, best practices should not have additional costs. infrastructure, and in respond to DCM documents issued by industry or The Commission emphasizes that record requests. This cost is broken regulatory organizations, as well as costs listed above are estimates, and it down as follows: 1 Compliance existing regulations, the Commission welcomes comment on their accuracy. Attorney, working for 20 hours (20 × believes that most DCMs already have The Commission further emphasizes $96 = $1,920); and 1 Developer, working established the specifically-enumerated that the costs for each DCM will vary. for 10 hours (10 × $75 = $750). The 57 pre-trade and other risk controls for use Finally, the Commission notes that, as clearing member FCMs would therefore by clearing members that would be indicated above, these estimates may incur a total annual cost of $152,190 (57 required pursuant to revised § 38.255. overstate the actual costs to DCMs. × $2,670). The Commission also notes that existing Based on Concept Release comments, As discussed further in the § 38.607 requires that DCMs that permit best practices issued by industry and consideration of § 15(a) factors below, direct electronic access must have in regulatory organizations, as well as the Commission also acknowledges that place effective systems and controls existing regulations, the Commission the compliance requirements of reasonably designed to facilitate an believes that DCMs have largely already Regulation AT could have adverse FCM’s management of financial risk, established and are providing to FCMs effects on small clearing firms. Any such as automated pre-trade controls the pre-trade and other risk controls compliance costs that go beyond that enable member FCMs to implement required by § 38.255(b). appropriate financial risk limits. existing industry practice could xiv. § 38.255(b) and (c) Benefits—DCMs Accordingly, even if DCMs do not potentially cause some FCMs to scale Must Provide Controls in DEA Context back operation. Thus the rule has some currently and voluntarily implement the potential to contribute to increased specific controls addressing the risks of An additional benefit to Regulation concentration among clearing firms, i.e., Algorithmic Trading proposed under AT is the reduction of system risk in the fewer competing clearing firms. § 38.255(b), they should already have in context of Direct Electronic Access. As The Commission emphasizes that place similar systems addressing FCMs’ noted above, the Commission believes costs listed above are estimates, and it management of financial risk pursuant that Algorithmic Trading creates risks welcomes comment on their accuracy. to existing § 38.607. regardless of the method of access. The Commission further emphasizes Estimate-Upgrade of Controls. With Because of this, the Commission seeks that the costs for each AT Person and respect to a DCM that already has the to ensure that all types of trading, each FCM will vary. controls required by § 38.255(b) in including through DEA, is subject to place, and only needs to update them to pre-trade and other risk controls. The xii. § 1.83 Benefits—AT Persons and meet regulatory requirements (i.e., requirements of proposed § 38.255(b) FCM Clearing Members Must Submit evaluate current systems, modify or specifically address the structure of Compliance Reports and Maintain create new code, and test systems), the DEA, in which orders submitted by an Certain Books and Records Commission estimates that the cost to AT Person do not flow through the Proposed § 1.83 would require AT the DCM would be $155,520. This cost clearing member FCM’s infrastructure Persons and FCMs that are clearing is broken down as follows: 1 Project prior to submission to the DCM. members for AT Persons to annually Manager, working for 480 hours (480 × Currently, credit risk in the DEA context submit reports regarding compliance $70 per hour = $33,600); 1 Business is addressed through clearing member with § 1.80(a) and § 1.82(a)(1), Analyst, working for 480 hours (480 × FCM-implemented controls provided by respectively, to each DCM on which $52 per hour = $24,960); 1 Tester, the DCM, as required pursuant to they operate. Proposed § 1.83(c) and (d) working for 480 hours (480 × $52 per existing regulations §§ 38.607 and 1.73. would require AT Persons and clearing hour = $24,960); and 2 Developers, Proposed § 38.255(b) and (c) follow a member FCMs, respectively, to keep and working for a combined 960 hours (960 similar approach that would allow provide upon request to DCMs books × $75 per hour = $72,000). Commission clearing members to have control over and records regarding their compliance staff estimates that if a DCM already has the trading flow of their DEA customers
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for purposes of addressing the While the Commission believes that above estimates for § 40.20 would operational risks of Algorithmic most DCMs already implement the change if a DCM is simultaneously Trading. Accordingly, § 38.255(b) would controls required by § 40.20, it upgrading its systems in order to contribute to orderly markets by acknowledges that there may be DCMs comply with § 38.255. Where the DCM preventing orders that are outside of that do not currently implement such is already upgrading controls for FCM pre-determined parameters and controls, and those DCMs would incur implementation pursuant to § 38.255, ensuring a level-playing field among some costs to comply with this the cost of upgrading controls for its clearing members. regulation. An initial investment would own implementation pursuant to § 40.20 As noted, the Commission believes be required to develop and implement should decrease. that proposed regulations § 38.255(b) processes necessary for compliance, and The Commission emphasizes that and (c) standardize existing industry ongoing costs would be incurred to costs listed above are estimates, and it practices in this area, and that many of maintain such controls. The costs for welcomes comment on their accuracy. the requirements are already followed each DCM will vary depending on the The Commission further emphasizes by the majority of DCMs. Accordingly, degree to which its current practices are that the costs for each DCM will vary. the Commission notes that many of the or are not in compliance, as well as the Finally, the Commission notes that, as benefits of § 38.255(b) and (c) are procedures it selects and implements in indicated above, these estimates may already being realized. The proposed order to comply. In addition, as noted overstate the actual costs to DCMs. rule would help ensure that the benefits above with respect to § 38.255(b) and Based on Concept Release comments, of the required risk controls will be fully (c), the Commission acknowledges that best practices issued by industry and realized across all DEA active Regulation AT could have adverse regulatory organizations, as well as participants and sustained in the future. effects on smaller DCMs. Any existing regulations, the Commission compliance costs that go beyond believes that DCMs are largely already xv. § 40.20 Costs—Pre-Trade and existing industry practice could using the pre-trade and other risk Other Risk Controls (DCMs) potentially cause some DCMs to cease or controls required by § 40.20. Based on Concept Release comments, scale back operation, and could xvi. § 40.20 Benefits—Pre-Trade and best practices documents issued by potentially impact the entry of new Other Risk Controls (DCMs) industry or regulatory organizations, as DCMs. well as existing regulations, the Estimate—Upgrade of Controls. With The Commission believes that the pre- Commission believes that most DCMs respect to a DCM that already has the trade risk and order management already implement the specifically- controls required by proposed § 40.20 in control requirements that DCMs must enumerated pre-trade and other risk place, and only needs to update them to implement pursuant to proposed controls required pursuant to proposed meet regulatory requirements (i.e., § 40.20, inasmuch as they are not § 40.20. In response to the Concept evaluate current systems, modify or currently implemented, will contribute Release, CME and CFE indicated that create new code, and test systems), the to a system-wide reduction in they implement message rate limits,660 Commission estimates that the cost to operational risk, and will help order size limits, and price collar the DCM would be $155,520. This cost standardize risk management practices mechanisms.661 In addition, they is broken down as follows: 1 Project across exchanges. These enhanced risk indicated that they provide an optional Manager, working for 480 hours (480 × management practices should help cancel-on-disconnect functionality 662 $70 per hour = $33,600); 1 Business reduce unintended market volatility and and kill switch tools.663 The Analyst, working for 480 hours (480 × mitigate and prevent significant Commission notes that these types of $52 per hour = $24,960); 1 Tester, disruptive activity caused by × controls have been subject of industry working for 480 hours (480 $52 per algorithmic trading malfunctions. In addition, given that FCMs may best practices for years. For example, hour = $24,960); and 2 Developers, have differing information about the ESMA guidelines from 2012 working for a combined 960 hours (960 × trading activities of their customers/ recommended that trading platforms $75 per hour = $72,000). The users, a DCM may be better able to implement, among other things, Commission estimates that if a DCM identify unintended market behavior. throttling limits and controls filtering already has at least some of the controls For example, with respect to a trading order price and quantity.664 In addition, required by § 40.20, there will be no firm active in a single product and using the CFTC TAC recommended in 2011 additional annual costs to maintain the multiple clearing firms, identifying total that exchanges implement, among other modifications required to bring the order frequencies or inventory levels things, message throttles, order quantity systems into compliance with this may be more easily done at the market limits, price collars, and order regulation. venue. To protect against the broadest cancellation policies that allow clearing Accordingly, the Commission set of errors, there are benefits to firms and clients to opt for automatic estimates that the 15 DCMs that will be implementing risk controls at multiple cancellation of order upon disconnect subject to § 40.20 would therefore incur points in the order chain, including the and provide clearing firms with a tool a total one-time cost of $2,332,800 (15 × DCM. that allows them to view and cancel $155,520) to update their controls. The Commission notes that a DCM As noted, the Commission believes orders.665 can choose not to develop these controls that proposed § 40.20 standardizes internally, but rather may purchase a existing industry practices in this area, 660 In addition, four commenters stated generally that many exchanges have messaging rate limits in solution from an outside vendor (or and that many of the requirements are place. See TCL at 6; KCG at 4; MFA at 7; AIMA at another DCM) in order to comply with already followed by the majority of 8. § 40.20. The Commission welcomes DCMs. Accordingly, the Commission 661 CME at 8–9, 13–17; CME Appendix A–1, 3– comments providing estimates notes that many of the benefits of 4, 6; CFE at 5–8. concerning the cost for a DCM to use § 40.20 are already being realized. The 662 CME at 23–24, Appendix A–4; CFE at 9–10. 663 CME at 23–24. technology solution from an outside proposed rule would help ensure that 664 ESMA Guidelines, supra note 61 at 12–13. party to comply with this proposed the benefits of the required risk controls 665 CFTC TAC Recommendations, supra note 34 regulation. In addition, as discussed will be fully realized and sustained in at 4–5. above, the Commission believes that the the future.
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xvii. § 40.21 Costs—DCM Test commonly make their own historical reasonably designed to identify and Environments for AT Persons (DCMs) data available for testing purposes. CME remediate any insufficient mechanisms, The Commission believes that the stated that it requires all systems policies, and procedures described in majority of DCMs have implemented interfacing with CME Globex to be such books and records. DCM Establishment of Review test environments in which market certified on the order entry and/or market data interfaces prior to Program. The Commission estimates participants may test their algorithmic deployment.667 FIA also recommended that a DCM will incur a total one-time systems. The Commission received the use of DCM test environments, cost of $37,000 to establish the review comments in response to the Concept noting in its comment letter, ‘‘We program required by proposed § 40.22. Release that ‘‘many, if not all, exchanges encourage DCMs to develop more robust This cost is broken down as follows: 1 provide market participants a test test environments that more closely Tester, working for 200 hours (200 × $52 facility to test trading software and simulate trading in the production per hour = $10,400); 1 Developer, algorithms, as well as offer test symbols environment, and market participants to working for 200 hours (200 × $75 per to trade.’’ 666 The Commission believes thoroughly test new and modified hour = $15,000); and 1 Senior that most if not all DCM’s already software in these DCM provided Compliance Examiner, working for 200 provide test environments that would simulators when necessary.’’ 668 hours (200 × $58 per hour = $11,600).669 comply with proposed § 40.21. As a The 15 DCMs to which § 40.22 would result, subject to consideration of xix. § 40.22 Costs—DCM Review of apply would therefore incur a total one- relevant comments, the Commission Compliance Reports (DCMs) time cost of $555,000 (15 × 37,000) to preliminarily believes that DCMs will Proposed § 40.22 complements the establish the review program required not incur any material additional costs requirement under § 1.83 for AT Persons by § 40.22.670 to comply with the proposed regulation. and clearing member FCMs to submit DCM Review of Compliance Reports The Commission is therefore not compliance reports to DCMs. Proposed (§ 40.22(c)). Proposed § 40.22(a) and (b) estimating any costs for DCMs in 40.22(a) requires a DCM to implement would require DCMs to implement rules connection with the proposed rules that require each AT Person that that require AT Persons, and FCMs that regulation in this discussion. trades on the DCM, and each FCM that are clearing members for AT Persons, to xviii. § 40.21 Benefits—DCM Test is a clearing member of a DCO for such submit the reports required of AT Environments for AT Persons (DCMs) AT Person, to submit the reports Persons and clearing member FCMs by described in § 1.83(a) and (b), proposed § 1.83. Proposed § 40.22(c) As noted, the Commission believes respectively. Under proposed § 40.22(b), requires a DCM to establish a program that proposed § 40.21 standardizes a DCM must require the submission of for effective periodic review and existing industry practices in this area, such reports by June 30th of each year. evaluation of reports described in and that the requirements are already Proposed § 40.22(c) requires a DCM to paragraph (a) of § 40.22, and of the followed by the majority of DCMs. establish a program for effective measures described therein. As Accordingly, the Commission notes that periodic review and evaluation of discussed in section V(D)(e) above, many of the benefits of § 40.21 are reports described in paragraph (a) of Commission staff estimates that each already being realized. The proposed § 40.22, and of the measures described DCM will review 120 reports per year rule will help ensure that the benefits therein. An effective program must pursuant to § 40.22(c). The Commission are being realized at all DCMs and include measures by the DCM estimates that a DCM will incur a total sustained in the future. Proposed reasonably designed to identify and cost of $925 to review each report § 40.21 requires DCMs to provide test remediate any insufficient mechanisms, required by § 40.22. This cost is broken environments in which market policies and procedures described in down as follows: 1 Tester, working for participants may test their algorithmic such reports, including identification 5 hours (5 × $52 per hour = $260); 1 systems. This regulation is designed to and remediation of any inadequate Developer, working for 5 hours (5 × $75 promote testing of algorithmic systems quantitative settings or calibrations of per hour = $375); and 1 Senior using data and market conditions that pre-trade risk controls required of AT Compliance Examiner, working for 5 approximate as closely as possible those Persons pursuant to § 1.80(a). hours (5 × $58 per hour = $290), for a of a live trading environment. Such In addition, as a complement to the total review cost of $925 per report. If testing should enable market compliance report review program a DCM reviews an average of 120 reports participants to discover potential issues described above, proposed § 40.22(d) per year, a DCM would require 1,800 in the design of their algorithmic requires each AT Person to keep and hours per year to review the 120 reports systems that were not discovered in provide to the DCM books and records (15 hours × 120 reports), and would their own test environment, thereby regarding their compliance with all incur a cost of $111,000 per year. The mitigating the risk that algorithmic requirements pursuant to § 1.80 and 15 DCMs to which § 40.22 would apply systems cause market disruptions by § 1.81, and requires each clearing would incur a total annual cost of failing to operate as intended in the member FCM to keep and provide to the $1,665,000 (15 × $111,000) to conduct production environment. Comments DCM market books and records such a review. received in response to the Concept regarding their compliance with all DCM Communication of Remediation Release indicate that DCMs recognize requirements pursuant to § 1.82. Finally, Instructions (§ 40.22(c)). Proposed the benefit of providing such test proposed § 40.22(e) requires DCMs to § 40.22(c) states that an effective review environments to their market review and evaluate, as necessary, books program must include measures by the participants. For example, CME and records required to be kept DCM reasonably designed to identify indicated that market participants pursuant to § 40.22(d), and the measures and remediate any insufficient routinely test in their own testing described therein. An appropriate mechanisms, policies and procedures environments using historical data to review pursuant to § 40.22(e) should test trading strategies against a range of include measures by the DCM 669 See section V(B) above for the calculation of market conditions, and that exchanges hourly wage rates used in this analysis. 667 CME at 25–26. 670 See section V(A) above for the calculation of 666 MFA at 13. 668 FIA at 35. the number of persons subject to Regulation AT.
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described in such reports, including Person’s algorithm frequently performs scale back operation, and impact the identification and remediation of any in a manner inconsistent with its entry of new DCMs. inadequate quantitative settings or design, which may raise questions about xx. § 40.22 Benefits—DCM Review of calibrations of pre-trade risk controls the design or monitoring of the AT Compliance Reports (DCMs) required of AT Persons pursuant to Person’s algorithms; if a DCM identifies proposed § 1.80(a). The Commission frequent trade practice violations at an Proposed § 40.22 is a complement to estimates that a DCM will communicate AT Person, which are related to an proposed § 1.83, which would require remediation instructions in connection algorithm of the AT Person; or if an AT AT Persons, and FCMs that are clearing with approximately 20% of the reports Person represents significant volume in members for AT Persons, to submit reviewed on an annual basis (or 24 a particular product, thereby requiring reports regarding compliance with reports, which is 20% of 120 reports). heightened scrutiny, among other § 1.80(a) and pursuant to § 1.82(a)(1), The Commission estimates that a DCM reasons. DCMs may find it appropriate respectively, to each DCM on which will incur a total cost of $925 to to review the books and records of AT they operate, and to keep and provide communicate remediation instructions Persons and clearing member FCMs on upon request to DCMs books and for a report required by § 40.22. This a more or less frequent basis, depending records regarding their compliance with cost is broken down as follows: 1 Tester, on other relevant considerations. all §§ 1.80 and 1.81 (for AT Persons) and × working for 5 hours (5 $52 per hour The Commission estimates that AT § 1.82 (for clearing member FCMs) = $260); 1 Developer, working for 5 Persons will generally be active on half requirements. New § 40.22 would × hours (5 $75 per hour = $375); and 1 of the 15 DCMs. If a DCM reviews the require each DCM that receives a report Senior Compliance Examiner, working books and records of 10% of AT Persons described in § 1.83 to establish a × for 5 hours (5 $58 per hour = $290), and clearing member FCMs on an program for effective review and evaluation of the reports. By requiring for a total review cost of $925 per report annual basis, a DCM will review 24 DCMs to review the reports, identify giving rise to remediation instructions. entities on an annual basis (420 AT outliers, and communicate instructions If a DCM provides remediation Persons + 57 clearing member FCMs = to outliers in order to remediate their instructions in connection with 24 477. 477/2 = 239 entities. 239 × .1 = 24). pre-trade risk controls, proposed § 40.22 reports per year, a DCM would require The Commission estimates that a DCM will standardize market participants’ 360 hours per year to review the 24 will incur a total cost of $4,620 to × pre-trade risk controls required reports (15 hours 24 reports), and review the books and records of an pursuant to proposed § 1.80(a). Further, would incur a cost of $22,200 per year. entity pursuant to § 40.22(e). This cost DCM review of compliance reports is an The 15 DCMs to which § 40.22(c) would is broken down as follows: 1 Senior important safeguard to prevent trading apply would incur a total annual cost of Compliance Examiner, working for 30 $333,000 (15 × $22,200) to conduct such × firms, the ‘‘outliers’’ described above, hours (30 $58 per hour = $1,740); and from operating without sufficient a review. 1 Compliance Attorney, working for 30 DCM Review of Books and Records controls. Proposed § 40.22(e) will hours (5 × $96 per hour = $2,880), for (§ 40.22(e)). Proposed § 40.22(d) requires complement the review of compliance a total review cost of $4,620 per entity each AT Person to keep and provide to reports, by requiring DCMs to review reviewed by a DCM. If a DCM reviews the DCM books and records regarding and evaluate, as necessary, the books the books and records of 24 entities per their compliance with all requirements and records kept by AT Persons to year, a DCM would require 1,440 hours pursuant to §§ 1.80 and 1.81, and demonstrate their compliance with per year to review the 24 entities (60 requires each clearing member FCM to §§ 1.80 and 1.81, and the books and hours × 24 entities), and would incur a keep and provide to the DCM market records kept by clearing member FCMs cost of $110,880 per year. The 15 DCMs books and records regarding their to demonstrate their compliance with compliance with all requirements to which § 40.22(e) would apply would § 1.82. A single Algorithmic Trading incur a total annual cost of $1,663,200 pursuant to § 1.82. The cost of these × malfunction at a single market obligations to AT Persons and clearing (15 $110,880) to review such books participant can significantly impact member FCMs under § 40.22(d) is and records. markets and market participants. discussed above in this section. Total Cost to DCMs for Proposed Accordingly, all DCMs and market Proposed § 40.22(e) requires DCMs to § 40.22 Requirements. A DCM will participants benefit from a review review and evaluate, as necessary, books therefore incur $133,200 ($111,000 + program that ensures that market and records required to be kept $22,200) on an annual basis to review participants conducting Algorithmic pursuant to § 40.22(d), and the measures all reports received at least once every Trading have adequate pre-trade risk described therein. The Commission two years, communicate instructions to controls in place. notes that § 40.22(e) does not prescribe persons whose controls the DCM has c. Section 15(a) Factors how frequently DCMs should perform determined are insufficient, and will this review, or how many AT Persons incur $110,880 on an annual basis to This section discusses the CEA and clearing member FCMs should be review the books and records of 24 AT section 15(a) factors for the following evaluated on an annual basis. For Persons and clearing member FCMs. proposed regulations: (i) The purposes of generating a cost estimate, The 15 DCMs to which § 40.22 would requirement that AT Persons implement the Commission anticipates that a DCM apply would therefore incur a total pre-trade risk controls and other related will find it necessary to review the annual cost of $3,661,200 ($1,665,000 + measures (§ 1.80); (ii) standards for the books and records of approximately $333,000 + $1,663,200) to maintain the development, testing, and monitoring of 10% of AT Persons and clearing review program required by § 40.22. Algorithmic Trading systems by AT member FCMs on an annual basis. For The Commission also acknowledges Persons (§ 1.81); (iii) RFA standards for example, a DCM may find it necessary that the compliance requirements on automated trading and algorithmic to conduct such a review if: it becomes DCMs in Regulation AT could have trading systems of their members aware if an AT Person’s kill switch is adverse effects on smaller DCMs. Any (§ 170.19); (iv) the requirement that AT frequently activated, or otherwise compliance costs that go beyond Persons must become a member of a performs in an unusual manner; if a existing industry practice could futures association (§ 170.18); (v) the DCM becomes aware that an AT potentially cause some DCMs to cease or requirement that clearing member FCMs
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implement pre-trade risk controls and effective risk and order management wide set of market participants, and other related measures (§ 1.82); (vi) the controls, may reduce the likelihood that reduce the likelihood that an outlier requirement that AT Persons submit market participants execute trades at firm without sufficient risk controls compliance reports to DCMs regarding terms they do not intend. This is causes significant market disruption. their risk controls and Algorithmic particularly important as to price, as In particular, the implementation of Trading procedures and clearing market participants and members of the such controls and systems would help member FCMs submit compliance public rely on the prices of trades prevent the occurrence of unintended reports to DCMs regarding their risk executed on DCMs, often for products and erroneous trades, and therefore control program for AT Person not directly traded on the DCM. The contribute to market efficiency and customers, and that AT Persons and requirements of proposed § 40.22, integrity. For example, Regulation AT clearing member FCMs keep and which requires DCMs to review the requires that trading firms, clearing provide upon request to DCMs certain compliance reports and the books and members and exchanges implement related books and records (§ 1.83); (vii) records of AT Persons and clearing maximum order size limits. That control the requirement that DCMs implement member FCMs, may promote protection is intended to prevent unintentionally pre-trade risk controls and other related of market participants and the public by large orders from entering the market measures (§§ 38.255 and 40.20); (viii) helping to ensure that the risk control and causing unintended executions. The the requirement that DCMs provide test rules are followed in a consistent Commission believes that a positive environments where AT Persons may manner and may further reduce the trading intention behind an execution is test their Algorithmic Trading systems likelihood of Algorithmic Trading integral to the operations of an efficient (§ 40.21); and (ix) the requirements of Events and Algorithmic Trading § 40.22, including that DCMs: Disruptions. Applying Regulation AT to market and to market integrity. By implement rules requiring AT Persons all market levels—the trading firm, the limiting the potential for erroneous and clearing member FCMs to submit clearing member, and the exchange— executions, Regulation AT should compliance reports each year (§ 40.22(a) may further protect market participants enhance market efficiency and integrity and (b)); establish a program for and the public by providing multiple by minimizing the number of trades that effective periodic review and evaluation layers of protection against market are subsequently broken and ensuring of the reports (§ 40.22(c)); require each disruptions. In addition, including that publicly reported transaction prices AT Person to keep and provide to the automated order routers in the are valid. Similarly, Regulation AT DCM books and records regarding their Algorithmic Trading definition may requires message and execution compliance with all requirements protect market participants and the throttles, which mitigate the risks of pursuant to §§ 1.80 and 1.81, and public by providing these protections to executing large numbers of unintended require each clearing member FCM to a wider set of automated systems that orders, potentially harming market keep and provide to the DCM market may have the potential to disrupt the efficiency and integrity. Ensuring that books and records regarding their markets. only bona fide and intentional orders compliance with all requirements Finally, the absence of pre-trade risk are entered into the market may also pursuant to § 1.82 (§ 40.22(d)); and and order management controls at help promote market competitiveness require DCMs to review and evaluate, as automated firms increases the chances by helping to ensure that a single entity necessary, books and records required to for unintended trading behavior, does not inadvertently dominate the be kept pursuant to § 40.22(d), and the including algorithms acting beyond market due to unintended excessive measures described therein (§ 40.22(e)). their parameters or risk levels, resulting orders. in unexpected market volatility or The Commission acknowledges that i. Protection of Market Participants and market disruptions (potentially across the Public certain aspects of Regulation AT, such multiple market venues), distorted as the compliance reports, could have The Commission preliminarily prices, and risks that could harm the adverse effects on some trading firms believes that Regulation AT would economy and the public. due to the cost of creating and protect market participants and the submitting the compliance reports, and public by limiting a ‘‘race to the ii. Efficiency, Competitiveness, and Financial Integrity of Futures Markets to the extent that firms do not already bottom,’’ in which certain entities do so, implementing and maintaining sacrifice effective risk controls in order The Commission preliminarily the proposed regulation’s required pre- to minimize costs or increase the speed believes that by addressing pre-trade trade risk and order management of trading. The proposed rules, by risk controls, testing, and order controls. In order to mitigate costs to standardizing the risk controls required management controls at all market trading firms, the Commission is to be used by firms, would help ensure levels—the trading firm, the clearing restricting the need for trading firm that the benefits of these risk controls member, and the exchange—Regulation level risk controls and the associated AT provides standards that can be are more evenly distributed across a compliance reports to those entities that interpreted and enforced in a uniform wide set of market participants, and are registered with the Commission in manner. Implementation of Regulation reduce the likelihood that an outlier some capacity. For those who are not AT would help mitigate instabilities in firm without sufficient risk controls required to register, pre-trade risk the markets and ensure market causes significant market disruption. controls will be executed by the entity’s efficiency and integrity. Regulation AT The requirements under proposed clearing firm and the contract market may serve to limit a ‘‘race to the §§ 170.18 and 170.19 that all AT the entity trades on and compliance Persons be registered as a member of a bottom,’’ in which certain entities reports will be submitted by the clearing futures association, and subject to an sacrifice effective risk controls in order FCM. RFA program promulgating standards to minimize costs or increase the speed for automated trading and algorithmic of trading. The proposed rules, by According to a study by the trading systems, further promotes the standardizing the risk controls required Commission’s Division of Swap Dealer standardization of risk controls. to be used by firms, would help ensure and Intermediary Oversight that was Moreover, the proposed rules, to the that the benefits of these risk controls presented to the Commission’s extent that they increase the usage of are more evenly distributed across a Agricultural Advisory Committee on
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September 22, 2015,671 the number of benefits that Regulation AT provides to control requirements contained in active FCMs has declined in recent the market, such as the protection of Regulation AT will contribute to a years from 180 in 2005 to 76 in market integrity and efficiency, which system-wide reduction in operational December 2014. The decline over this were impacted by previous disruptive risk, and will help standardize risk period in the number of FCMs holding market events. As noted in section III management practices across similar customer assets was not as large as the above, for example, the events at Knight entities within the marketplace. The overall decline in the number of FCMs: Capital significantly impacted the reduction in operational risk may from 85 to 60. The decline in the equities market. Due to coding errors in simplify the tasks associated with sound number of FCMs can be attributed to a Knight’s systems, the firm’s automated risk management practices. These number of factors, including low trading system inadvertently built up enhanced risk management practices interest rates (which can reduce FCM unintended positions in the equity should help reduce unintended market profitability by lowering the rate of market, eventually resulting in losses of volatility, which will aid in efficient return on the investment of customer more than $460 million for the firm.672 market making, and reduce overall funds) and the changing regulatory In addition, the Flash Crash in 2010 transaction costs as they relate to price environment. The compliance and other impacted market efficiency in several movements, which should encourage costs on clearing FCMs that go beyond respects; for example, due to the market participants to trade in existing industry practice could, in extreme price movement, the exchanges Commission-regulated markets. Market conjunction with existing factors that and FINRA made a determination to participants and those who rely on are pressuring FCMs, potentially cause cancel a significant number of trades prices as determined within regulated some additional FCMs to scale back that were executed during the crash.673 markets should benefit from markets operations, or make it less likely that The Commission has preliminarily that behave in an orderly and expected new FCMs will enter the market. The determined that burdens placed on fashion. Commission also notes the possibility market participants, FCMs, and DCMs that if clearing FCMs are required to imposed by Regulation AT is justified v. Other Public Interest Considerations establish and maintain pre-trade risk by the benefits in ensuring that all The Commission has not identified controls and order cancellation systems orders submitted through Algorithmic any effects that these proposed rules pursuant to § 1.82(c) with respect to AT Trading pass through effective controls would have on other public interest Order Messages originating with AT and systems that mitigate the risks of considerations other than those Persons that do not use DEA and to malfunctioning automated trading addressed above. submit compliance reports regarding systems. The Commission has their risk controls, they may refuse to endeavored to minimize the compliance d. Consideration of Alternatives serve such firms in light of the burden in Regulation AT to the i. Pre-Trade and Other Risk Controls additional costs or may raise trading minimum level necessary to protect In proposing these regulations, the fees to cover these costs. Such potential market participants and the public. Commission considered alternatives increased costs may make it more The proposed rules may promote the suggested by comments to the Concept difficult for new trading firms to enter financial integrity of futures markets by Release. The Commission notes that the the market and for certain existing reducing the likelihood of flash crashes Concept Release raised numerous trading firms to remain in the market. and other automated trading potential measures and controls, not all This could happen if FCMs determines disruptions. Such disruptions can place of which are proposed in Regulation to cease serving firms that, in light of financial strain on market participants, AT. Accordingly, comments supporting the increased costs, are no longer intermediaries, and DCOs. profitable for the FCM. However, it is or opposing regulation in the area of iii. Price Discovery possible that the rule will create a automated trading were made without market opportunity for certain FCMs to Requiring trading firms, clearing the benefit of knowing specifically what specialize in monitoring the operation members and exchanges to implement regulations would be proposed. Some of Algorithmic Trading systems used by pre-trade risk controls, testing, and commenters indicated that there was trading firms that do not use DEA. This order management control requirements already sufficient regulation in the area may mitigate the impact of other FCMs in order to mitigate the risk of a of risk controls. For example, FIA exiting the market or new FCMs malfunctioning trading algorithm or suggested that ‘‘the best approach to choosing not to enter the market and automated trading disruption promotes achieve standardization is to reflect may mitigate the impact on trading the price discovery process by reducing industry best practices through working the likelihood of transactions at prices groups of DCMs, FCMs and market firms. 674 The potential reduction in the number that do not accurately reflect market participants.’’ CFE stated that there is of clearing FCMs and market forces. already sufficient regulation of DCMs in relation to risk controls and that participants due to increased costs iv. Sound Risk Management Practices could reduce liquidity and increase exchange risk control practices should transaction costs in futures markets. The The Commission believes that the pre- evolve as technology and markets 675 proposed rules also impose costs on trade risk and order management evolve. MFA indicated that current DCMs that, to the extent they go beyond CFTC regulations and existing best existing industry practice (including the 672 See SEC Knight Capital Release, supra note 39. practices require entities to have 673 costs of reviewing submissions from AT As noted in the Flash Crash Report, ‘‘during sufficient and effective pre-trade risk the 20 minute period between 2:40 p.m. and 3:00 controls.676 ICE commented that Persons and FCMs pursuant to proposed p.m., over 20,000 trades (many based on retail- § 40.22), may significantly affect small customer orders) across more than 300 separate exchanges are better able to implement or start-up DCMs. However, the securities, including many ETFs, were executed at and update risk controls on a market-by- prices 60% or more away from their 2:40 p.m. market basis than through a Commission emphasizes the general prices. After the market closed, the exchanges and FINRA met and jointly agreed to cancel (or break) 671 The presentation is available at http:// all such trades under their respective ‘clearly 674 FIA at 63. www.cftc.gov/idc/groups/public/@aboutcftc/ erroneous’ trade rules.’’ See the Flash Crash Report, 675 CFE at 1–2. documents/file/aac092215presentations_dsio.pdf. supra note 121 at 6. 676 MFA at 5.
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Commission rulemaking.677 OneChicago they implement risk controls, the the definition of Algorithmic Trading indicated that ‘‘additional mandates’’ as specific design and operation of risk would therefore be limited. to exchange risk controls will increase controls should not be mandated by In the event that a non-clearing FCM costs and complexity.678 regulation. Rather, given the wide or other entity acts only as a conduit for As noted above, the Concept Release variety of trading firms, technology, orders, and does not make any addresses a number of potential trading strategies, markets, and determinations with respect to such measures that are not proposed as part products, the relevant entities—trading orders, the conduit entity would not be of Regulation AT. With respect to the firms, clearing firms, and DCMs— engaged in Algorithmic Trading, as that pre-trade risk and other controls should have the discretion to determine definition is currently proposed. The proposed in this NPRM, the the appropriate design of the specific Commission preliminarily believes that Commission acknowledges that many controls required by Regulation AT. expanding the definition to include best practices as to risk controls have The remainder of this discussion conduit entities would not sufficiently been developed without a regulatory focuses on various alternative measures enhance the benefits associated with mandate, and that trading firms, that the Commission considered in Regulation AT relative to the additional clearing member FCMs, and DCMs are proposing these regulations, some of costs. in the best position to determine the which were discussed in the Concept The Commission determined not to most effective design of their own Release, and some of which are extend Regulation AT to SEFs, a particular risk controls and innovate contained in other regulatory systems. proposal that was supported by one new forms of controls. However, the The Commission evaluated various Concept Release commenter. CFE stated Commission believes that regulation in regulatory definitions of algorithmic that any risk control requirements this area will better foster trading when considering how to draft should apply to SEFs, in addition to standardization of controls across all a definition for purposes of this NPRM. DCMs. CFE explained that there must be entities, including smaller firms or The Commission has proposed that the a level playing field between both DCMs exchanges that may, without regulation, definition of Algorithmic Trading will and SEFs and that there be no regulatory implement some but not all of the include systems that make disparities that would make it more controls required by Regulation AT. determinations regarding any aspect of advantageous to list a swap on a SEF as This rulemaking may serve to limit a the routing of an order, i.e., systems that opposed to a DCM.680 The Commission ‘‘race to the bottom’’ in which some only make decisions as to the routing of believes in fostering a level playing field entities sacrifice effective risk controls orders to one or more trading venues. in its markets, and as a result any in order to minimize costs or increase The Commission notes analogous requirements on DCMs arising out of the speed of trading. In the context of definitions adopted by the European Regulation AT may ultimately be automated trading, a technological Commission under MiFID II and by imposed on SEFs at a later date. malfunction at a single firm can have a FINRA do not include automated However, as noted in section (C)(1) significant impact across markets and systems that only route orders as above, an important consideration for market participants.679 Given that algorithmic trading. Excluding the Commission is that SEFs and SEF reality, it is insufficient that some, but automated order routers would reduce markets are much newer and less liquid not all, industry participants have the the number of automated systems than the more established and liquid appropriate risk controls. Requiring the captured by Regulation AT relative to DCMs and DCM markets. While SEFs implementation of certain risk controls the Commission’s proposal and may and SEF markets are still in this nascent through regulation will help ensure that reduce the number of AT Persons stage, the Commission does not want to all industry participants have the subject to the costs of the regulation. impose additional requirements that appropriate risk controls, thus fostering Nevertheless, the Commission believes may have the effect of decreasing the trade certainty and market integrity for that automated order routers have the number of SEFs or decreasing liquidity. all market participants. In determining potential to disrupt the market to a Moreover, the Commission, based on its which risk controls discussed in the similar extent as other types of present knowledge, believes that Concept Release should be proposed in automated systems, and that there are automated trading is not as prevalent in this NPRM, the Commission has significant benefits to including SEF markets as compared to DCM attempted to propose those core risk automated order routers in the proposed markets. Therefore, the policy controls that it believes are currently regulations. considerations underlying Regulation implemented by the majority of market The Commission is also considering AT are not as critical, at least at this participants, foregoing certain risk expanding the definition of Algorithmic time, in the SEF context. controls that are implemented by Trading to encompass orders that are Proposed § 1.82 requires clearing FCMs to implement controls with relatively few market participants and generated using algorithmic methods respect to AT Order Messages may be of less value in mitigating risk. (e.g., an algorithm generates a buy or In addition, some commenters to the sell signal at a particular time), but are originating with an AT Person. The Concept Release explained the then manually entered into a front-end Commission is considering modifying appropriate implementation or design of system by a natural person, who proposed § 1.82 to require clearing particular pre-trade risk controls, which determines all aspects of the routing of FCMs to implement controls with are discussed above as relevant to each the orders. Such an alternative would respect to all orders, including orders control. Also as discussed above, the increase the number of automated that are manually submitted. Such a Commission determined that, while it systems captured by Regulation AT requirement would correspond to the believes that these comments are relative to the Commission’s proposal requirement under proposed § 40.20(d) reasonable and merit further and may increase the number of AT that DCMs implement risk controls for consideration by market participants as Persons subject to the costs of the orders that do not originate from regulation. The Commission Algorithmic Trading. The Commission 677 ICE at 1. preliminarily believes that such is considering this modification because 678 OneChicago at 4–5. manually entered orders present less it recognizes that manually entered 679 See, e.g., the discussion of Knight Capital in risk than fully automated orders and section III above. that the benefits of including them in 680 CFE at 2.
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orders also have the potential to cause to AT Persons and to the DCMs that will unique or additional costs that will be significant market disruption. The be required to review the reports under imposed on such persons to develop the Commission requests comment on this proposed § 40.22, while retaining the technology and systems necessary to proposed alternative formulation of benefits of protecting market implement the pre-trade and other risk § 1.82, which the Commission may participants and the public from controls required by Regulation AT. implement in the final rulemaking for disruptions and other adverse events 116. In question 14, the Commission Regulation AT. The Commission associated with automated trading. asks whether there are any AT Persons acknowledges that this proposed Requirements related to RFAs. The who are natural persons. Would AT alternative formulation would impose Commission is considering making Persons who are natural persons (or sole additional costs on clearing FCMs adjustments to the scope of RFA proprietorships with no employees relative to the currently proposed § 1.82. responsibility under proposed § 170.19. other than the sole proprietor) be The Commission requests comment on For example, RFAs could be responsible required to hire staff to comply with the the potential benefits of this proposal for fewer or additional areas regarding risk control, testing and monitoring, or relative to the increased costs to clearing AT Persons, ATSs, and algorithmic compliance requirements of Regulation FCMs, in addition to any other trading than specified in proposed AT? comments regarding the effectiveness of § 170.19 and could have more or less 117. Do you agree with the accuracy this proposal in terms of risk reduction. latitude to issue rules than under the of cost estimates provided by the proposal. Commission as to how much it will cost ii. Compliance Reports a trading firm, clearing member FCM or Proposed § 1.83 would require AT e. Request for Comments DCM to internally develop the Persons and clearing FCMs to submit Pre-Trade and Other Risk Controls technology and systems necessary to compliance reports to DCMs on an implement the pre-trade and other risk annual basis. Such reports would need 112. How would an alternative controls required by Regulation AT? If to be submitted and certified annually definition of Algorithmic Trading that you disagree with the Commission’s by the chief executive officer or the excludes automated order routers affect analysis, please provide your own chief compliance officer of the AT the costs and benefits of the pre-trade quantitative estimates, as well as data or Person or FCM. Proposed § 40.22 would and other risk controls in comparison to other information in support. Please require DCMs to establish a program for the costs and benefits of the proposed specify in your answer the type of entity effective periodic review and evaluation definition that includes automated order and which specific pre-trade risk or of the reports. The Commission has routers? Would such an alternative order management controls for which proposed these regulations, using the definition reduce the number of AT you are providing estimates. deadlines described above, because it Persons captured by Regulation AT? In addition, please differentiate believes they represent an appropriate 113. Would the benefits of Regulation between the situations where an entity balancing of the transparency and risk AT be enhanced significantly if the (i) already has partially compliant reduction provided by the reports definition of Algorithmic Trading were controls in place, and only needs to against the burden placed on AT modified to capture a conduit entity upgrade such technology and systems to Persons, clearing FCMs, and DCMs of such as a non-clearing FCM, thereby bring it into compliance with the providing and reviewing the reports. making the entity an AT Person subject regulations; and (ii) needs to build such The Commission is considering the to Regulation AT? How would such a technology and systems from scratch. alternatives of requiring AT Persons and modification affect costs? Please include, as applicable, hardware clearing FCMs to submit such reports 114. Would the benefits of Regulation and software costs as well as the hourly more or less frequently than annually. AT be enhanced significantly if the wage information of the employee(s) The Commission is also considering the definition of Algorithmic Trading were necessary to develop such risk controls alternatives of placing the responsibility expanded to encompass orders that are (i.e., technology personnel such as for certifying the reports required by generated using algorithmic methods programmer analysts, senior proposed § 1.83 only on the chief (e.g., an algorithm generates a buy or programmers and senior systems executive officer, only on the chief sell signal at a particular time), but are analysts). compliance officer, or permitting then manually entered into a front-end 118. The Commission has assumed certification from other officers of the system by a natural person? How would that the effort to adjust any one risk AT Person or FCM. While proposed such a modification affect costs? Please control (by ‘‘control,’’ in this context, § 40.22 would require DCMs to establish comment on the costs and benefits of an the Commission means the pre-trade a program for effective periodic review alternative whereby the Commission risk controls, order cancellation and evaluation of the reports, the would implement specific rules systems, and connectivity systems Commission is considering the regarding the appropriate design of the required by § 1.80) will require alternative of requiring DCMs to review specific controls required by Regulation assessment and possible modifications the reports at more specific intervals. AT and compare them to the costs and to all controls. Is this assumption The Commission considered the benefits of the Commission’s proposal correct, and if not, why not? alternative of requiring additional whereby the relevant entities—trading 119. As indicated above, the information in the reports by AT firms, clearing firms, and DCMs—would Commission lacks sufficient information Persons to DCMs under proposed § 1.83, have the discretion to determine the to provide full estimates of costs that a including (1) descriptions of order appropriate design of those controls. trading firm, clearing member FCM or cancellation systems; (2) policies and 115. Does one particular segment of DCM will incur if it chooses not to procedures for the development, testing, trading firms, clearing member FCMs or internally develop such controls, and and monitoring of Algorithmic Trading DCMs (e.g., smaller entities) currently instead purchases the solutions of an systems; and (3) policies and procedures implement fewer of the pre-trade and outside vendor in order to comply with for the training of Algorithmic Trading other risk controls required by Regulation AT’s pre-trade and other risk staff. The Commission determined not Regulation AT than some other segment controls requirements. Please provide to propose these additional of trading firms, clearing member FCMs quantitative estimates of such costs, requirements in order to limit costs both or DCMs? If so, please describe any including supporting data or other
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information. In addition, please specify complying with each of the following 129. Has the Commission accurately in your answer the type of entity and specific requirements of § 1.80: estimated that approximately 100 which specific pre-trade risk or order a. § 1.80(a)(2) (pre-trade risk control entities will be affected by the management control for which you are threshold requirements); membership requirements of § 170.18? providing estimates. b. § 1.80(a)(3) (natural person 130. The Commission invites In addition, please differentiate monitors must be alerted when estimates on the cost to an RFA to between the situations where an entity thresholds are breached) establish and maintain the program (i) already uses an outside vendor to at c. § 1.80(d) (notification to DCM and required by § 170.19, and the amount of least some extent to implement the clearing member FCM that AT Person that cost that will be passed along to controls; and (ii) does not currently will use Algorithmic Trading); individual categories of AT Person implement the controls and must obtain d. § 1.80(e) (self-trade prevention members in the RFA. all applicable technology and systems tools); and Development, Testing, and Supervision from an outside vendor necessary to e. § 1.80(f) (periodic review of pre- of Algorithmic Systems comply with Regulation AT. Please trade risk controls and other measures 131. Proposed § 1.81(a) establishes include, if applicable, hardware and for sufficiency and effectiveness). principles-based standards for the software costs as well as the hourly 124. The Commission welcomes wage information of the employee(s) development and testing of Algorithmic comment on the estimated costs of the Trading systems and procedures, necessary to effectuate the pre-trade risk controls proposed in implementation of such controls from including requirements for AT Persons § 1.80 as compared to the annual to test all Algorithmic Trading code and an outside vendor. industry expenditure on technology, 120. Do you agree with the related systems and any changes to such risk mitigation and/or technology Commission’s estimates of how much it code and systems prior to their compliance systems. will cost a trading firm, clearing implementation. AT Persons would also member FCM or DCM to annually 125. Please comment on the costs to be required to maintain a source code maintain the technology and systems for AT Persons and clearing member FCMs repository to manage source code the pre-trade and other risk controls of complying with DCM rules requiring access, persistence, copies of all code required by Regulation AT, if it uses retention and production of records used in the production environment, internally developed technology and relating to §§ 1.80, 1.81, and 1.82 and changes to such code, among other systems? If not please provide compliance, pursuant to § 40.22(d), requirements. Are any of the quantitative estimates and supporting including without limitation on the requirements of § 1.81(a) not already data or other information with respect to extent to which AT Persons and clearing followed by the majority of market how much it will cost a trading firm, member FCMs already have policies, participants that would be subject to clearing member FCM or DCM to procedures, staffing and technological § 1.81(a) (or some particular segment of annually maintain the technology and infrastructure in place to retain such market participants), and if so, how systems for pre-trade and other risk records and produce them upon DCM much will it cost for a market controls required by Regulation AT, if it request. participant to comply with such uses an outside vendor’s technology and 126. The Commission anticipates that requirement(s)? systems. Regulation AT may promote confidence 132. Proposed § 1.81(b) requires that 121. Is it correct to assume that many among market participants and reduce an AT Person’s Algorithmic Trading is of the trading firms subject to § 1.80 are market risk, consequently reducing subject to continuous real-time also subject to the SEC’s Market Access transaction costs, but has not estimated monitoring and supervision by Rule, and, accordingly, already this reduction in transaction costs. The knowledgeable and qualified staff at all implement many of the systems Commission welcomes comment on the times while Algorithmic Trading is required by Regulation AT for purposes extent to which Regulation AT may occurring. Proposed § 1.81(b) also of their securities trading? impact transaction costs and effects on requires automated alerts when an Please specify in your answer the type liquidity provision more generally. Algorithmic Trading system’s AT Order Message behavior breaches design of entity and which specific pre-trade AT Person Membership in RFA; RFA parameters, upon loss of network risk or order management control is Standards for Automated Trading and connectivity or data feeds, or when already required pursuant to the Market Algorithmic Trading Systems Access Rule, and the extent of the market conditions approach the overlap. 127. The Commission estimates that boundaries within which the ATS is 122. Please comment on the costs and the costs of membership in an RFA intended to operate, to the extent benefits (including quantitative associated with proposed § 170.18 will applicable, among other monitoring estimates with supporting data or other encompass certain costs, such as those requirements. Are any of the information) to clearing FCMs of an associated with NFA membership dues. requirements of § 1.81(b) not already alternative to proposed § 1.82 that Has the Commission correctly identified followed by the majority of market would require clearing FCMs to the costs associated with membership in participants that would be subject to implement controls with respect to all an RFA? § 1.81(b), and if so, how much will it orders, including orders that are 128. The Commission expects that cost for a market participant to comply manually submitted or are entered entities that will be required to become with such requirement(s)? through algorithmic methods that members of an RFA would not incur 133. Proposed § 1.81(c) requires that nonetheless do not meet the definition any additional compliance costs as a AT Persons implement policies of Algorithmic Trading and compare result of their membership in an RFA. designed to ensure that Algorithmic those costs and benefits to those costs The Commission requests comment on Trading operates in a manner that and benefits of proposed § 1.82. the accuracy of this expectation. What complies with the CEA and the rules 123. Please comment on the additional compliance costs, if any, and regulations thereunder. Among additional costs (including quantitative would a registrant face as a result of other controls, the policies should estimates with supporting data or other being required to become a member of include a plan of internal coordination information) to AT Persons of an RFA pursuant to proposed § 170.18? and communication between
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compliance staff of the AT Person and sufficient magnitude to potentially Costs for Submitting Applications. In staff of the AT Person responsible for cause smaller market participants, addition, the Commission estimates that Algorithmic Trading regarding FCMs, or DCMs to cease or scale back new registrants will incur a total one- Algorithmic Trading design, changes, operations? Do these costs create time cost of $105,600 to prepare and testing, and controls. Are any of the significant barriers to entry? submit Forms 7–R and 8–R. This cost requirements of § 1.81(c) not already represents the work of 1 Compliance 8. Requirements for Certain Entities To followed by the majority of market Attorney per registrant, working for 11 Register as Floor Traders participants that would be subject to hours (11 × $96 = $1,056 per § 1.81(c), and if so, how much will it a. Background registrant).682 The 100 new registrants cost for a market participant to comply The Commission proposes to require will therefore incur a total one-time cost with such requirement(s)? registration for certain market of $105,600. Other Indirect Costs. The Commission 134. Proposed § 1.81(d) requires that participants with Direct Electronic preliminarily believes that there are AT Persons implement policies to Access. To achieve registration, the additional indirect costs, beyond the designate and train their staff Commission proposes amending the responsible for Algorithmic Trading, cost of registration, to new registrants definition of ‘‘Floor trader’’ in resulting from the new registration which policies should include Commission regulation 1.3(x). The procedures for designating and training requirement. New floor traders required amended definition would include any to register under proposed § 1.3(x)(3) all staff involved in designing, testing person who purchases or sells futures or and monitoring Algorithmic Trading. will be included in the definition of swaps solely for such person’s own ‘‘AT Person.’’ These proposed rules Are any of the requirements of § 1.81(d) account in any other place provided by not already followed by the majority of establish various requirements for AT a contract market for the meeting of Persons, including the implementation market participants that would be persons similarly engaged where such subject to § 1.81(d), and if so, how much of risk controls for algorithmic systems place is accessed for Algorithmic (proposed § 1.80), the implementation of will it cost for a market participant to Trading by such person in whole or in comply with such requirement(s)? standards for development, testing, and part through Direct Electronic Access supervision of algorithmic systems AT Person and FCM Compliance (as defined in proposed § 1.3(yyyy)). (proposed § 1.81), and the submission to Reports b. Costs DCMs of compliance reports regarding 135. Please comment on whether any risk controls and, upon request, certain Registration and Membership Fees. of the alternatives discussed above related books and records (proposed The new registration requirements regarding compliance reports would § 1.83). Because these provisions apply imposed on certain entities with Direct provide a superior cost-benefit profile to AT Persons, new floor traders under Electronic Access would require these relative to the Commission’s proposal. Proposed § 1.3(x)(3) will only be entities to pay certain one-time required to follow these provisions as a DCM Test Environments registration charges. NFA currently result of their status as a floor trader. 136. Do any DCMs not currently offer charges non-natural persons applying Thus, any costs associated with these a test environment that simulates for registration as floor traders $200 per rules are also indirect costs of production trading to their market application (on Form 7–R), and charges registration itself.683 participants, as would be required by individuals $85 per application (on c. Benefits proposed § 40.21? If so, how much Form 8–R). The Commission estimates would it cost a DCM to implement a test that there will be approximately 100 The Commission preliminarily environment that would comply with entities with Direct Electronic Access believes that registration of certain the requirements of § 40.21? that will register as Floor Traders under entities with Direct Electronic Access the new registration requirements. The would enhance the pre-trade controls DCM Review of Compliance Reports Commission further estimates that each and risk management tools discussed 137. Please comment on the cost entity will be required to file 10 Forms elsewhere in this NPRM. For example, estimates provided above with respect 8–R in relation to its principals. the pre-trade risk controls listed in to DCMs’ review of compliance reports Accordingly, the Commission estimates proposed § 1.80(a)—maximum AT provided under § 40.22 and related that new registrants will incur one-time Order Message frequencies per unit review requirements, including the registration costs of $105,500 for Form time, maximum execution frequencies estimated cost for DCMs to: Establish 7–R and 8–R fees combined (Form 7–Rs per unit time, order price parameters the review program required by § 40.22; submitted by 100 new registrants, at and maximum order size limits—must review the reports provided by AT $200 per Form 7–R plus 10 Forms 8–R be established and used by all AT Persons and clearing member FCMs; submitted by each of 100 new Persons. If the Commission were to only communicate remediation instructions registrants, at $85 per Form 8–R).681 require those trading firms or clearing to a subset of AT Persons and clearing member FCMs that are already member FCMs; and review and 681 As noted previously, the Commission has registered with the Commission to delegated its registration functions to NFA. Non- implement such controls, it would be evaluate, as necessary, books and natural person floor trader entities register with the records of AT Persons and clearing Commission and apply for membership in NFA via ignoring a significant number of market member FCMs as contemplated by CFTC Form 7–R. Principals of non-natural person participants that actively trade on proposed § 40.22(e). floor trader entities register via Form 8–R. The Commission-regulated markets, each of Commission estimates that each non-natural person which has algorithmic trading systems Section 15(a) Considerations floor trader entity will have approximately 10 principals and therefore need to file approximately 138. The Commission requests 10 Forms 8–R. In the event that a natural person R fees estimated here are based on NFA’s current comment on its discussion of the effects meets the definition of Floor Trader in proposed fees. of the proposed rules on the § 1.3(x)(3), and is therefore required to register with 682 See section V(B) above for the calculation of the Commission and become a member of NFA, hourly wage rates used in this analysis. considerations in § 15(a) of the CEA. such person would only be required to complete 683 See Section V(E)(7)(b) above for a discussion 139. Are the compliance costs Form 8–R and would face substantially lower costs of costs associated with Proposed §§ 1.80, 1.81, and associated with the proposed rules of than those estimated here. The Form 7–R and 8– 1.83.
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that could malfunction and create serve to limit a ‘‘race to the bottom,’’ in help ensure the furtherance of price systemic risk to all market participants. which certain entities sacrifice effective discovery protections that these tools The Commission estimates that there are risk controls in order to minimize costs provide as discussed above. approximately one hundred proprietary or increase the speed of trading. The iv. Sound Risk Management Practices trading firms engaged in Algorithmic proposed rules, by standardizing the Trading in Commission-regulated risk controls required to be used by The Commission preliminarily markets. However, a technological firms, would help ensure that the believes that requiring market malfunction in a single trading firm’s benefits of these risk controls are more participants with direct market access to systems can significantly impact other evenly distributed across a wide set of register with the Commission will also markets and market participants. market participants, and reduce the further sound risk management Accordingly, the proposed registration likelihood that an outlier firm without practices by enhancing the requirement accomplished through sufficient risk controls causes Commission’s ability to seek revised § 1.3(x) is critical to ensuring significant market disruption. Thus, the information from such firms and allow that all such firms are registered and proposed registration requirement may for wider implementation of many of subject to appropriate risk control, help ensure the protections of market the pre-trade controls and risk testing, and other requirements of participants and the public that these management tools discussed in this Regulation AT. tools provide as discussed above. release. Broader use of these tools will A number of commenters to the reduce the likelihood of market ii. Efficiency, Competitiveness, and disruptions that may interfere with Concept Release pointed out benefits of Financial Integrity of Futures Markets additional registration.684 AFR stated sound risk management practices. Thus, that ‘‘[t]he enhancement of investigative The Commission preliminarily the proposed registration requirement authority is extraordinarily important believes that requiring market may help ensure the furtherance of given that the Commission would often participants with Direct Electronic sound risk management practices that need to involve itself in the workings of Access to register with the Commission these tools provide as discussed above. will further the efficiency, the ATSs to anticipate problems and to v. Other Public Interest Considerations detect and investigate problems that competitiveness, and financial integrity The Commission has not identified have occurred. HFT firms should have of futures markets by enhancing the any effects that these proposed rules the highest priority.’’ 685 Commission’s ability to seek AIMA and VFL specifically information from such firms and allow would have on other public interest emphasized benefits of registration for for wider implementation of many of considerations other than those participants with direct market the pre-trade risk controls and other addressed above. access.686 VFL commented that if an tools discussed in this release. Broader e. Consideration of Alternatives exchange provides a participant the use of these tools will reduce the likelihood of market disruptions that The Commission considered a ability to connect directly, then that number of alternatives to the proposed participant enjoys all of the rights of a may adversely impact the efficiency and integrity of the futures markets. approach of requiring registration for member and should be regulated at the entities with Direct Electronic Access. federal and exchange level.687 Consistent use of these tools may also even the playing field within groups of In the Concept Release, the Commission d. Section 15(a) Factors automated firms, such as market- sought comments regarding broader This section discusses the section makers, or across firms with differing registration of proprietary traders 15(a) factors for the proposed strategies. This consistency can improve generally. Based upon the comments amendment of the definition of ‘‘Floor firm competitiveness and reduce received, many of which did not trader’’ in Commission Regulation disadvantages experienced by those support registration, the Commission is 1.3(x), for purposes of registering firms who would employ more not proposing broad registration of participants with Direct Electronic comprehensive risk control and order proprietary traders at this time. As an alternative to requiring the Access. management programs even absent a rule requiring use of such tools. Thus, registration of entities engaged in i. Protection of Market Participants and the proposed registration requirement proprietary Algorithmic Trading the Public may help ensure the furtherance of through DEA, the Commission The Commission preliminarily efficiency, competitiveness, and considered reaching such entities believes that requiring market financial integrity that these tools indirectly through the DCMs on which participants with Direct Electronic provide as discussed above. they trade. This approach would have necessitated that DCMs implement rules Access to register with the Commission iii. Price Discovery will further the protection of market requiring relevant entities to meet the participants and the public by The Commission preliminarily substantive standards of Regulation AT. enhancing the Commission’s ability to believes that requiring market These DCM rules would have needed to seek information from such firms and participants with direct market access to require, for example, that relevant allow for wider implementation of many register with the Commission will also entities implement pre-trade risk of the pre-trade risk controls and other further price discovery by enhancing the controls, establish policies and tools discussed in this release. Broader Commission’s ability to seek procedures for testing and monitoring of use of these tools will reduce the information from such firms and allow ATSs, and provide compliance reports likelihood of market disruptions that for wider implementation of many of regarding their algorithmic trading to adversely impact market participants the pre-trade controls and risk DCMs (which are currently proposed as and the public. Regulation AT may management tools discussed in this direct obligations upon AT Persons release. Broader use of these tools will under §§ 1.80, 1.81, and 1.83, 684 Better Markets 13; AFR 8–9; TCL 17. reduce the likelihood of market respectively). This alternative would 685 AFR 8–9. disruptions that may interfere with the have reduced the costs for such entities, 686 AIMA 24; VFL 3. price discovery process. Thus, the since they would not be required to 687 VFL 3. proposed registration requirement may register with the Commission. However,
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such costs would instead have been not the primary purpose of the proposed Are there alternate, or additional, borne by DCMs, and potentially passed registration requirement, and therefore characteristics of trading activity to back on to relevant entities. The believes that the goals of Regulation AT determine registration status that would Commission did not pursue this can only be realized by requiring be preferable from a cost-benefit approach for a number of other reasons currently unregistered entities to standpoint? For example, should as well. In particular, the Commission register with the Commission as floor persons with trading volume or message wanted to ensure that such entities are traders. volume below a specified threshold be directly subject to Commission As discussed more fully in section exempted from registration? regulations, rather than impose IV(E)(3) above, the ‘‘floor trader’’ 144. Will any currently unregistered obligations indirectly through DCMs. In definition is not being expanded to entities change their business model or addition, the Commission wanted to capture all proprietary traders engaged exit the market in order to avoid the ensure a uniform baseline of regulatory in Algorithmic Trading; rather, the proposed registration requirement? expectations which might not arise revised floor trader definition is limited 145. The Commission believes that where numerous DCMs are to firms using DEA to engage in the risk control protocols required of independently producing their own self- Algorithmic Trading. Registration of registered entities, specifically those regulatory standards in lieu of the entities with DEA as floor traders would under the new registration category, will Commission’s standards. Furthermore, enhance the pre-trade controls and risk provide a general benefit to the safety the Commission also wanted to combine management tools discussed elsewhere and soundness of market activity and the requirement to register with the in this NPRM by making such entities price formation. Has the Commission Commission with the requirement subject to the various regulations correctly identified the type and level of under § 170.18 that all AT Persons must governing AT Persons under the NPRM. benefits which arise from placing these become a member of a registered futures For example, the pre-trade risk controls requirements on a new set of significant association, so that the RFA can listed in proposed § 1.80—maximum AT market participants? consider adopting standards for Order Message frequencies per unit 146. The Commission requests automated trading and ATSs applicable time, maximum execution frequencies comment on its discussion of the effects to AT Persons. These standards are per unit time, order price parameters of the proposed rules on the described under § 170.19. As discussed and maximum order size limits—must considerations in Section 15(a) of the above, the Commission believes that be established and used by all AT CEA. §§ 170.18 and 170.19 would allow RFAs Persons. The Commission is also to supplement elements of Regulation considering whether it is appropriate to 9. Transparency in Exchange Trade AT as markets and trading technologies further limit the registration Matching Systems evolve over time, and do so in a uniform requirement by adding a de minimis a. Background manner that would not be available exception, whereby only those persons The proposed regulations concerning through separate initiatives by with DEA who also meet certain trading additional disclosure by DCMs individual DCMs. volume or message volume thresholds regarding their trade matching systems The Commission also considered not would be required to register. (amendments to §§ 38.401(a) and requiring currently unregistered entities f. Request for Comments 40.1(i)) provide that DCMs publicly to register with the Commission as floor disclose certain information traders. A number of commenters 140. The Commission estimates that prominently and clearly. These supported such an approach, including the costs of registration will encompass proposed regulations would require FIA, which suggested ‘‘[r]ather than direct costs (those associated with NFA DCMs to provide a description of creating a new registration framework, membership, and reporting and attributes of trade matching systems that expanding the information required in recordkeeping with the Commission), materially affect the entry and execution [the DCM’s] audit trail may be a more and indirect costs (e.g. those associated of orders and requests for quotes, direct and efficient way to address the to risk control requirements placed on including any changes to trade matching Commission’s concerns.’’ 688 Other all registered entities). Has the systems that would cause such effects. commenters also focused on whether Commission correctly identified the the Commission already had access to costs associated with the new b. Costs the information that registration would registration category? What firm characteristics would change the level The Commission notes that DCMs are ostensibly enable it to acquire. currently obligated under DCM core Commenters pointed out that: DCMs of direct and indirect costs associated with the registration? principles and existing regulations to already use Operator IDs; the DCM audit make available certain types of trail already satisfies the goals of 141. Has the Commission accurately estimated that approximately 100 information concerning the operation of registration; implementing the their electronic matching platforms Commission’s final rule on ownership currently unregistered entities will be captured by the new registration through publication of rulebooks and and control reporting (OCR) will through the required posting of provide additional information on requirement in proposed § 1.3(x)(3). 142. Has the Commission accurately specifications of platforms on their Web trading identities; and the Commission estimated that each currently site. DCMs are also obligated under already has access to trade data (i.e., unregistered entity captured by the new DCM core principles and existing Regulation 1.40 and part 38’s mandate registration requirement in proposed regulations to establish and maintain a that DCMs require market participants § 1.3(x)(3) will have approximately 10 program of risk analysis and oversight to to submit to jurisdiction).689 The persons required to file Form 8–R? identify and minimize sources of Commission notes that obtaining 143. As defined, the new floor trader operation risk, which should identify information from proprietary traders is category restricts the registration and remediate aspects of an electronic requirement to those who make use of matching platform that could negatively 688 FIA at 44. 689 FIA 43–46; CME at 32–34; Gelber at 22–24; Direct Electronic Access. Is this affect market participants’ orders. KCG at 18; MFA at 3; AIMA at 2, 24; Chicago Fed requirement overly restrictive or unduly Therefore, to a large extent, the at 3. broad from a cost-benefit perspective? Commission believes that the disclosure
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requirements under proposed priority, price, or quantity of execution i. Protection of Market Participants and § 38.401(a) would not materially impact of market participant orders, the ability the Public a DCM’s operations costs. to cancel, modify, or limit display of The Commission preliminarily The Commission anticipates that market participant orders, or the believes that the proposed disclosure additional costs under proposed dissemination of real-time market data requirement and the enhanced § 38.401(a) would be staff hours to market participants)’’ would not transparency that it would foster will associated with drafting descriptions of result in any additional costs for DCMs. protect market participants by providing such attributes that the DCMs should The Commission notes that the them with a better understanding of already be determining as part of their proposed change to Regulation 40.1(i) how their order messages interact with systems testing and disclosure of clarifies and codifies the Commission’s an electronic matching platform, thus platform specifications. Such drafting existing interpretation of the term facilitating their ability to tailor their may also require additional ‘‘rule.’’ Moreover, the proposal is orders to their understanding of the determinations as to the materiality of consistent with industry practice, matching engine and reducing the attributes and, where applicable, whereby DCMs have submitted as rule likelihood of unpleasant surprises additional testing of systems to ensure changes information regarding proposed regarding order fills. an accurate description of those changes to electronic trade matching attributes in public documents. This platform that affect the entry and ii. Efficiency, Competitiveness, and may also involve attorneys’ fees execution of market participant orders Financial Integrity of Futures Markets associated with reviewing any and quotes. Therefore, the Commission Requiring submissions for changes to disclosures. does not anticipate that DCMs will be available order types and platform The proposed amendments to required to file submissions relating to functionalities also ensures § 38.401(a) and (c) require DCMs to any changes to the platform that should transparency on the operation of such publicly post information regarding not already be filed under current platforms, further encouraging certain aspects of their electronic Commission interpretation and industry competition among DCMs and matching platforms. The Commission practice. enhancing market integrity. The anticipates that DCMs are likely to be c. Benefits increased transparency may increase aware of these aspects of their platforms investor confidence and expand based on their daily work in operating The Commission believes that the participation in the futures markets. their matching engines, monitoring additional disclosure by DCMs performance, and receiving customer regarding their trade matching systems, iii. Price Discovery feedback, among other internal pursuant to the proposed amendments The proposed rule may protect and monitoring activities. As a result, the to §§ 38.401(a) and 40.1(i), would have enhance the price discovery process by added burden under the proposed substantial benefits for market providing market participants and the amendments would be limited to participants. With a better public with a better understanding of drafting the description of such understanding of how their order how buy and sell orders interact on the attributes and making the description messages interact with an electronic trading platform, thus making the price available on the DCM’s Web site. matching platform, market participants discovery process more transparent. The Commission estimates that a can more efficiently use the electronic iv. Sound Risk Management Practices DCM would incur an annual cost of markets to hedge risks. Moreover, the $19,200 to comply with amended disclosure required by the proposed rule The proposal may promote sound risk § 38.401(a)–(c), assuming the DCM is would foster greater transparency in the management practices by providing already compliant with the operation of electronic markets. This market participants with more detailed requirements to post the specifications enhanced transparency would foster information regarding how their order of its electronic matching platform confidence in the markets and ensure messages will be processed once they under current § 38.401(a). This cost the availability of efficient markets to reach the trading platform, and how represents the work of 1 Compliance hedge risks. Finally, this increased their messages will interact with Attorney, working for 200 hours (200 × transparency would encourage messages from other market $96 per hour = $19,200).690 The 15 competition among DCMs to provide the participants, including the priority with DCMs that would be subject to amended best platforms for market participants, which they will be executed. This § 38.401(a)–(c) would therefore incur a as market participants would be able to information will enable market total annual cost of $288,000 (15 × evaluate better the relative benefits of participants to calibrate their risk $19,200).691 The Commission trading on individual exchanges. The controls more effectively. Commission believes that, to the extent anticipates that this figure would v. Other Public Interest Considerations decrease in subsequent years as the that DCMs are currently in compliance descriptions provided would only need with the proposed amendments to The Commission has not identified to be amended to reflect changes to the §§ 38.401(a) and 40.1(i), many of the any effects that these proposed rules electronic matching platform or the benefits of the proposed amendments would have on other public interest discovery of previously unknown are already being realized. The proposed considerations other than those attributes. rule will ensure that the benefits are addressed above. being realized by market participants at The proposed amendment to vi. Consideration of Alternatives all DCMs. Regulation 40.1(i) that adds the The Commission is considering the language ‘‘(including but not limited to d. Section 15(a) Factors alternative of applying the transparency any operation of an electronic matching This section discusses the Section requirement only with respect to platform that materially affects the time, 15(a) factors for the proposed latencies within a platform and how a regulations requiring additional self-trade prevention tool determines 690 See section V(B) above for the calculation of hourly wage rates used in this analysis. disclosure by DCMs regarding their whether to cancel an order. The 691 See section V(A) above for the calculation of trade matching systems (amendments to Commission preliminarily believes that the number of persons subject to Regulation AT. §§ 38.401(a) and 40.1(i)). the broader language that it is proposing
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would better ensure that DCMs disclose the matching of orders for accounts with Tester, working for 480 hours (480 × $52 any additional attributes of an electronic common beneficial ownership where = $24,960); and 2 Developers, working matching platform that may materially such orders are initiated by independent for a combined 960 hours (960 × $75 = impact market participant orders and decision makers. Under § 40.23(b), a $72,000).694 Notwithstanding these any material attributes that may arise in DCM could also permit the matching of estimates, the Commission believes that the future as the structures of matching orders for accounts under common the requirement under proposed engines continue to evolve. This control where such orders comply with § 40.23(a) that DCMs either apply self- additional information may enable the DCM’s cross-trade, minimum trade prevention tools, or provide such market participants to make better and exposure requirements or similar rules, tools to market participants, more informed decisions about their and are for accounts that are not under standardizes existing industry practice. trading decisions. common beneficial ownership. As a result, subject to consideration of Proposed § 40.23(c) states that a DCM e. Request for Comments relevant comments, the Commission may only permit the self-trading preliminarily believes that this 147. The Commission anticipates that described in § 40.23(b) if the DCM requirement under § 40.23(a) will not costs associated with the transparency complies with certain requirements, impose additional costs on DCMs. requirement would come from some including the requirement under additional testing of platform systems § 40.23(c) that the DCM requires market DCM Review of Approval Requests. and from drafting and publishing participants to request approval from DCMs will, however, incur additional descriptions of any relevant attributes of the DCM that self-trade prevention tools costs in connection with proposed the platform. What new costs would be not be applied with respect to specific § 40.23(c). This provision requires associated with providing descriptions accounts under common beneficial market participants to request approval of attributes of electronic matching ownership or control, on the basis that from the DCM that self-trade prevention platforms that affect market participant they meet the criteria of § 40.23(b). tools not be applied with respect to orders and quotes? Finally, proposed § 40.23(d) would specific accounts under common 148. Please compare the costs and require DCMs to publish statistics on beneficial ownership or control, on the benefits of the alternative of applying their Web site with respect to self- basis that they meet the criteria of the transparency requirement only with trading activity on their platform. For § 40.23(b). DCMs will incur costs to respect to latencies within a platform example, each DCM would be required review these § 40.23(c) approval and how a self-trade prevention tool to describe the amount of trading on its requests. These costs may vary determines whether to cancel an order platform that represents permitted self- significantly depending on the number with the costs and benefits of the trading approved pursuant to § 40.23(b). of approval requests a DCM receives. The Commission has therefore proposed rule. b. Costs 149. What benefits might market estimated the average annual costs that participants receive through increased The Commission assumes that most, if a DCM will incur, while acknowledging transparency into the operation of not all, DCMs currently offer self-trade that DCMs may incur lower or higher electronic matching platforms, prevention controls or plan to costs depending on the number of particularly for those market implement them and provide them for requests received. On average, the participants without direct electronic use by market participants in the near Commission estimates that, on an access who may not be able to future. FIA recommends that DCMs annual basis, a DCM will incur a cost of accurately measure latencies or other offer such controls,692 and several DCMs $22,000 to review these approval metrics of market efficiency? provide the controls, a capability which requests. This cost is broken down as 150. The Commission requests was introduced, and refined, in recent follows: 1 Senior Compliance Examiner, 693 × comment on its discussion of the effects years. As a result, subject to working for 200 hours (200 $58 per of the proposed rules on the consideration of relevant comments, the hour = $11,600); and 1 Business × considerations in Section 15(a) of the Commission preliminarily believes that Analyst, working for 200 hours (200 695 CEA. DCMs would not incur additional costs $52 per hour = $10,400). The 15 to develop and offer self-trade DCMs that will be subject to § 40.23(c) 10. Self-Trade Prevention prevention controls as required by would therefore incur a total annual a. Background § 40.23(a). The Commission has, cost of $330,000 (15 × 22,000).696 nonetheless, estimated the cost to a DCM Publication of Statistics Regulation AT proposes a new DCM that does not currently offer self- requirement (§ 40.23) that a DCM shall Regarding Self-Trade Prevention. In trade prevention tools to develop and addition, DCMs will incur costs to implement rules reasonably designed to implement such tools for purposes of prevent self-trading by market generate and publish the self-trade complying with § 40.23(a). statistics on their Web site required by participants, except as specified in Cost to DCMs to Implement Self- paragraph (b) of § 40.23. ‘‘Self-trading’’ § 40.23(d). The Commission estimates Trade Prevention Tools. The that, on an annual basis, a DCM will is defined for purposes of § 40.23 as the Commission estimates that a DCM matching of orders between accounts incur a cost of $6,650 to generate and would incur a total one-time cost of publish these statistics. This cost is that have common beneficial ownership $155,520 to implement these § 40.23(a) or are under common control. A DCM broken down as follows: 1 Developer, requirements, in the absence of any working for 50 hours (50 × $75 per hour must either apply, or provide and existing controls. This cost is broken require the use of, self-trade prevention = $3,750); and 1 Senior Compliance down as follows: 1 Project Manager, Examiner, working for 50 hours (50 × tools that are reasonably designed to working for 480 hours (480 × $70 = prevent self-trading and are applicable $33,600); 1 Business Analyst, working 694 See section V(B) above for the calculation of to all orders on its electronic trade for 480 hours (480 × $52 = $24,960); 1 matching platform. This requirement is hourly wage rates used in this analysis. 695 See section V(B) above for the calculation of subject to the proviso in proposed 692 FIA at 25–27. hourly wage rates used in this analysis. § 40.23(b) that a DCM may, in its 693 FIA at 25–27; MFA at 8; Gelber 7–9; AIMA at 696 See section V(A) above for the calculation of discretion, implement rules that permit 10; IATP at 5. the number of persons subject to Regulation AT.
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$58 per hour = $2,900).697 The 15 DCMs all market participants trading on a supply or demand or distortions in that will be subject to § 40.23(c) and (d) DCM would submit such requests. In prices. While Section 4c of the CEA would therefore incur a total annual the view of the Commission, for prohibits wash sales, unintentional self- cost of $99,750 (15 × 6,650).698 These example, a limited subset of market trades are not specifically prohibited costs may vary significantly depending participants will own two or more under the statute. While existing on the size of a DCM and the number accounts, but operate them through Commission rules address market of products it lists for trading. ‘‘independent decision makers’’ that manipulation, including wash sales, the As noted above, proposed § 40.23 initiate orders for ‘‘separate business use of self-trade tools (as compared to requires DCMs to apply, or provide and purposes,’’ as contemplated by an electronic market without such require the use of, self-trade prevention § 40.23(b). Similarly, a limited subset of controls) can improve market tools that are reasonably designed to market participants will find it functioning, aid firm and market prevent self-trading and are applicable advantageous to incur the costs efficiency, and minimize unintentional, to all orders on its electronic trade associated with the self-trading and often unnecessary, trading by firms matching platform. To the extent that a described by § 40.23(b), such as trading that may be difficult for firms to track DCM offers self-trade prevention tools to costs and clearing fees. In addition, the on their own. Absent self-trade controls, market participants, in lieu of the DCM Commission believes that market it has become even more difficult for internalizing and directly applying participants submitting orders through firms to avoid unintentional self- these tools, then market participants Algorithmic Trading are more likely matches due to their use of automated will be required to use these tools. than traders submitting orders manually strategies, which make trading decisions Commenters indicated that exchange- to inadvertently self-trade through in isolation from the rest of the firm at provided self-trading controls are independent decision-makers. The very high speeds. The Commission widely used by market participants.699 Commission estimates that, preliminarily believes that the proposed The FIA PTG Survey indicated that 25 notwithstanding the fact that the DCM rule, by standardizing the use of self- of 26 responding firms use such rules described in § 40.23(c) are directed trade controls, will ensure that these controls.700 In the event that a market to all market participants, the number of benefits of self-trade controls will be participant is required to use self-trade market participants that will submit the available to all market participants. The prevention tools in the scenario approval requests described therein are Commission believes that DCMs are best described above, and was not previously equivalent to the number of AT Persons situated to promulgate rules designed to using such tools, the Commission calculated above (420).702 On this basis, limit the frequency of self-trading on estimates that the market participant the Commission estimates that market their platforms, and to provide will not incur any additional costs participants will incur a total annual disclosure to the marketplace regarding beyond those costs already incurred to cost of $1,600,200 to submit the the frequency of self-trade activity on implement the pre-trade risk controls approval requests contemplated by their platform. required by Regulation AT. § 40.23(c) ($3,810 per market participant Market Participant Approval × 420 market participants). Proposed § 40.23(c) requires market Requests. Market participants will, participants to request approval from however, incur additional costs in the c. Benefits DCMs on which they are active that self- event that they prepare and submit the The Commission notes that, to the trade prevention tools not be applied approval requests contemplated by extent that DCMs are offering self-trade with respect to specific accounts under § 40.23(c). This provision requires prevention tools and market common beneficial ownership or market participants to request approval participants are using them, many of the control. The Commission preliminarily from DCMs on which they are active benefits of the proposed rules are believes that this rule will benefit the that self-trade prevention tools not be already being realized. Nonetheless, the market by providing, to the DCMs, applied with respect to specific Commission has determined to propose additional transparency on the accounts under common beneficial rules in the area of self-trading that relationships between accounts and ownership or control. The Commission address both intentional and trading strategies within a firm. In estimates that, on an annual basis, a unintentional matching of orders for addition, the rule will better ensure that market participant will incur a total cost accounts that have common beneficial firms will apply self-trade prevention of $3,810 to prepare and submit these ownership or are under common tools in a consistent manner. approval requests to the DCMs on which control, with the goal of benefiting The Commission preliminarily the market participant is active. This markets and market participants. In believes that publication of self-trade cost is broken down as follows: 1 particular, the proposed rules would statistics by DCMs (proposed § 40.23(d)) Business Analyst, working for 30 hours codify a regulatory baseline for self- will benefit market participants by (30 × $52 per hour = $1,560); and 1 trade prevention across DCMs, and Developer, working for 30 hours (30 × providing transparency about the provide all market participants with frequency of certain categories of self- $75 per hour = $2,250).701 enhanced transparency regarding the The Commission cannot predict how trades on each DCM, which can aid in products in which they trade. a better understanding of the sources, many market participants would likely Regulation AT addresses certain self- submit the approval requests and characteristics, of liquidity demand trading as provided in § 40.23(a) and (b) and supply across futures products. contemplated by § 40.23(c) on an annual (trades between accounts that have basis. The Commission believes that not common beneficial ownership or are d. Section 15(a) Factors under common control, with certain 697 See section V(B) above for the calculation of exceptions). At their extreme, This section discusses the Section hourly wage rates used in this analysis. intentional self-trades, or wash sales, 15(a) factors for the new proposed 698 See section V(A) above for the calculation of may indicate an intent to manipulate a requirement (§ 40.23) that a DCM shall the number of persons subject to Regulation AT. implement rules reasonably designed to 699 FIA at 26; Gelber at 7–9. market by creating a false impression of 700 FIA at 26, 59–60. prevent self-trading by market 701 See section V(B) above for the calculation of 702 See section V(A) above for the calculation of participants, except as specified in hourly wage rates used in this analysis. the number of person subject to Regulation AT. paragraph (b) of § 40.23.
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i. Protection of Market Participants and unintentional self-trading; the of exchange-provided self-trade the Public Commission does not have a specific prevention tools, when active on a DCM The Commission preliminarily interest in regulating the manner by that provides, but does not require such believes that the proposed rule would which market participants identify to tools? Please provide an estimate of the protect market participants and the DCMs the accounts that should not cost to such a market participant to public by codifying the use of self-trade trade with each other, so long as this initially calibrate and use exchange- controls and increasing transparency goal is met. The Commission has provided self-trade prevention tools, in around self-trading as required by requested comment on whether other accordance with § 40.23. Please also proposed § 40.23(d). It may also identification methods should be comment on any other direct or indirect incentivize practices that help to reduce permitted in § 40.23. For example, the costs to a market participant that does Commission has requested comment on the likelihood of wash trades and self- not currently use self-trade prevention trades. whether the opposite approach is preferable: market participants would tools arising from the proposed ii. Efficiency, Competitiveness, and identify to DCMs the accounts that requirement to implement such tools. Financial Integrity of Futures Markets should be permitted to trade with each 156. The Commission estimates above The Commission preliminarily other (as opposed to those accounts that that the number of market participants believes that the proposed rule should be prevented from trading with that will submit the approval requests standardizing the use of self-trade each other). The Commission has also described by § 40.23(c) is approximately controls and increasing transparency asked for comment on whether other equivalent to the number of AT Persons. around self-trading would promote the identification methods would reduce Please comment on whether the efficiency of the markets. The use of costs for market participants or be easier estimate of the number of market self-trade controls may promote for both market participants and DCMs participants submitting such approval financial integrity by helping to limit to administer. Upon consideration of requests should be higher or lower. For self-trades (including intentional and comments, the Commission may choose example, should the estimate be raised potentially manipulative self-trades). to adopt these other methods in lieu of to account for proprietary algorithmic what is now proposed. Moreover, requiring that DCMs provide traders that will not be AT Persons, self-trade controls and that market f. Request for Comments because they do not use Direct participants use them may enhance 151. Please comment on the cost Electronic Access and therefore will not competitiveness by preventing a race to estimates described above for DCMs and be required to register as floor traders? the bottom; that is, eliminating the market participants to comply with the possibility that a DCM or market 157. Proposed § 40.23 provides that requirements of § 40.23. The participant could elect not to require or DCMs may comply with the Commission is interested in commenter implement self-trade prevention in requirement to apply, or provide and opinion on all aspects of its analysis, order to gain competitive advantage. require the use of, self-trade prevention including its estimate of the number of tools by requiring market participants to iii. Price Discovery entities impacted by the proposed identify to the DCM which accounts The proposed rule may protect and regulation and the amount of costs such should be prohibited from trading with enhance the price discovery process by entities may incur to comply with the each other. With respect to this account standardizing the use of self-trade regulation. 152. Please comment on the benefits identification process, the Commission’s controls and increasing transparency principal goal is to prevent around self-trading. described above. Do you agree with the Commission’s position that self-trade unintentional self-trading; the iv. Sound Risk Management Practices prevention requirements will result in Commission does not have a specific The proposed rule may promote more accurate indications of the level of interest in regulating the manner by sound risk management practices since market interest on both sides of the which market participants identify to self-trade controls (which the rule market and help ensure arms-length DCMs the account that should be codifies) give market participants transactions that promote effective price prohibited from trading from each other, greater ability to avoid unintentional discovery? Are there additional benefits so long as this goal is met. Should any self-trading that could expose them to to regulatory self-trade prevention other identification methods be various financial risks. requirements not articulated above? permitted in § 40.23? For example, 153. Are there any DCMs that neither please comment on whether the v. Other Public Interest Considerations internalize and apply self-trade opposite approach is preferable: market The Commission has not identified prevention tools, nor provide self-trade participants would identify to DCMs the any effects that these proposed rules prevention tools to their market accounts that should be permitted to would have on other public interest participants? If so, please provide an trade with each other (as opposed to considerations other than those estimate of the cost to such a DCM to those accounts that should be prevented addressed above. comply with the requirement under from trading with each other). In § 40.23(a) to apply, or provide and e. Consideration of Alternatives particular, please comment on whether require the use of, self-trade prevention this approach or other identification Proposed § 40.23 provides that DCMs tools. methods would reduce costs for market may comply with the requirement to 154. Would any DCMs that currently apply, or provide and require the use of, offer self-trade prevention tools need to participants or be easier for both market self-trade prevention tools by requiring update their tools to meet the participants and DCMs to administer. market participants to identify to the requirements of § 40.23? If so, please 158. The Commission requests DCM which accounts should be provide an estimate of the cost to such comment on its discussion of the effects prohibited from trading with each other. a DCM to comply with the requirements of the proposed rules on the With respect to this account of § 40.23. considerations in Section 15(a) of the identification process, the Commission’s 155. What percentage of market CEA. principal goal is to address participants do not currently make use
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11. Market-Maker and Trading Incentive impose minor incremental costs, they contract market’’ as the Commission Programs should not require entirely new may require. Section 38.5 also requires a. Summary of Proposed Rules programs, systems, or categories of a DCM upon request by the Commission employees for DCMs that are already or the director of DMO to file ‘‘a written The Commission is proposing new compliant with parts 38 and 40 of the demonstration’’ that the DCM ‘‘is in regulations in part 40 to increase Commission’s regulations. compliance with one or more core transparency around DCM market- The Commission proposes to amend principles as specified in the request’’ or maker and trading incentive programs, § 40.1(i) to make clear that market- ‘‘satisfies its obligations under the Act,’’ underline existing regulatory maker and trading incentive programs including ‘‘supporting data, information expectations, and introduce basic are ‘‘rules’’ for purposes of part 40. This and documents.’’ safeguards in the conduct of such codification of a previously articulated Proposed § 40.26 does not alter a programs. The proposed regulations Commission standard with broad DCM’s existing obligations under § 38.5, would amend existing § 40.1(i), which industry-wide acceptance should not but rather makes clear that Commission applies to all registered entities, to make give rise to new costs for market and DMO information requests may clear that market-maker and trading participants. The Commission has pertain specifically to market-maker and incentive programs are ‘‘rules’’ for previously stated its view, in a Final trading incentive programs. It also purposes of part 40, and therefore Rule regarding Provisions Common to provides a non-exhaustive list of the subject to part 40’s rule filing Registered Entities, that a market-maker types of ‘‘supporting data, information requirements. They would also establish or trading incentive program is an and documents’’ that the Commission or information requirements when DCMs ‘‘agreement’’ corresponding to ‘‘trading the director of DMO may request that is file rules for Commission approval protocol’’ as such terms are used within particularly appropriate to market- pursuant to existing § 40.5 or self-certify § 40.1(i)’s existing definition of maker and trading incentive programs. rules pursuant to existing § 40.6. ‘‘rule.’’ 703 In the same Final Rule, the Proposed § 40.26 imposes no new Information requirements would be Commission stated that ‘‘all market obligation to provide information, and codified in proposed § 40.25, including maker and trading incentive programs does not increase the frequency which § 40.25(a) for information to be provided must be submitted to the Commission in information must be provided. The to the Commission and § 40.25(b) accordance with the procedures Commission is aware that DCMs already specifying information that must be established in part 40.’’ 704 DCMs, for employ legal, business, technology, and available on a DCM’s public Web site. example, certify numerous market- other staff and resources necessary to Relatedly, proposed § 40.26 would maker and trading incentive programs to respond to § 38.5 information requests. permit the Commission or the director the Commission annually, including The Commission believes that the same of DMO to require certain information 341 such self-certifications in 2013. For staff will be appropriate for any § 40.26 from DCMs regarding their market- these and other rule filings, DCMs information request that it may issue to maker or trading incentive programs, already employ corresponding staff and focus specifically on market-maker or including but not limited to copies of other resources to comply with their trading incentive programs. program agreements, names of program part 40 obligations. The proposed Accordingly, the Commission believes participants, and payments or other amendments to § 40.1(i) do not create a that proposed § 40.26 will impose no benefits conferred pursuant to a new category of rule filings, nor do they additional costs on DCMs. program. require more frequent filings. ii. Rule 40.25—Additional Public The most substantive provisions of Furthermore, the proposed amendments the Commission’s proposed rules for Information Required for Market Maker would require no additional staff or and Trading Incentive Programs; and market-maker and trading incentive other resources beyond those already in programs are in new § 40.27(a). Rule 40.28—Surveillance of Market place to meet existing rule filing Maker and Trading Incentive Programs Proposed § 40.27(a) would codify requirements in part 40. Accordingly, DMO’s long-standing guidance to DCMs the Commission believes that the Proposed § 40.25(a) would require that market-maker and trading incentive proposed amendments to § 40.1(i) will DCMs to provide the Commission with programs should not provide payments impose no additional costs on the certain information regarding their or incentives for trades between registered entities to which it applies. market-maker and trading incentive accounts under common ownership. Proposed § 40.26 is a new regulatory programs when submitting such Finally, the proposed regulations would provision that would permit the programs as rules pursuant to part 40. also make clear in § 40.28 that DCMs’ Commission or the director of DMO to Specifically, when requesting approval existing trade practice and market require certain information from DCMs of a new program pursuant to § 40.5, or surveillance responsibilities in subparts regarding their market-maker or trading self-certifying a program pursuant to C and E of part 38 apply equally to incentive programs. As with § 40.1(i), § 40.6, DCMs would be required to market-maker and trading incentive the Commission believes that proposed provide the name of the program, the programs. § 40.26 will impose no additional costs date on which it begins, and the date on b. Costs on DCMs. The proposed regulation is a which it terminates (if applicable). DCMs would also be required to provide i. Rule 40.1(i)—Definition of ‘‘Rule’’; more targeted iteration of existing § 38.5, which requires a DCM to file a description of any categories of market and Rule 40.26—Information Requests participants or eligibility criteria From the Commission or the Director of with the Commission such ‘‘information related to its business as a designated limiting who may participate in the the Division of Market Oversight program. For any market-maker or Proposed amendments to § 40.1 and 703 See Final Rule, Provisions Common to trading incentive program open to only new § 40.26 serve in large part to Registered Entities, 76 FR 44776, 44778 (July 27, some market participants, proposed emphasize existing regulatory 2011), where the Commission stated, specifically § 40.25(a) would require DCMs to requirements and Commission or staff with respect to DCMs, that ‘‘[a] DCM’s rules explain why the program was limited to implementing market maker and trading incentive authorities. As such, they are not programs fall within the Commission’s oversight the chosen participants or criteria. expected to impose meaningful costs on authority.’’ Proposed § 40.25(a) would also require DCMs. While they may in some cases 704 See id. DCMs to include in their rule filings an
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explanation of how persons eligible for of the DCM’s submission to the ensure that such benefits are not earned a market-maker or trading incentive Commission on the DCM’s Web site. through abusive practices.’’ Notably, the program would apply to participate, and The Commission believes proposed proposed regulation points to how eligibility would be evaluated by § 40.25 adds important clarity to preexisting requirements in the the DCM. existing rule filing requirements in part Commission’s rules—and to costs that Separately, proposed § 40.25(a) would 40 when such filings pertain to market- DCMs must already assume require DCMs to provide an explanation maker or trading incentive programs. independently of proposed § 40.28. of the specific purpose for a market- However, it also recognizes important Subpart C of part 38, entitled maker or trading incentive program, and overlaps between proposed § 40.25 and ‘‘Compliance with Rules,’’ requires a list of all products or services to which existing regulations in §§ 40.5 and 40.6. DCMs to prohibit abusive trading the program applies. It would also Furthermore, proposed § 40.25 does not practices on its markets by all members require a description of any payments, create a new category of rule filings, nor and market participants, including but incentives, discounts, considerations, does it or require more frequent filings. not limited to a series of enumerated inducements or other benefits that For these reasons, the Commission trade practice violations. It also requires program participants may receive, believes that additional costs to DCMs DCMs to have the capacity to detect and including any non-financial incentives. attributable to § 40.25 will not be investigate rule violations, including Finally, proposed § 40.25(a) would significant. As an example of such costs, sufficient compliance staff and require a description of the obligations, DCMs will need to evaluate § 40.25 and resources, automated trade surveillance benchmarks, or other measures that assess whether and what filings must be systems, and real-time market participants in a market-maker or made to comply with the regulation. In monitoring. Subpart E, ‘‘Prevention of trading incentive program must meet to addition, the more explicit requirements Market Disruptions,’’ requires DCMs to receive benefits. of proposed § 40.25, as compared to ‘‘collect and evaluate data on individual To ensure public transparency in existing regulations, may prompt DCMs traders’ market activity on an ongoing market-maker and trading incentive to make filings that they otherwise may basis in order to detect and prevent programs, proposed § 40.25(b) would not have made. The Commission manipulation, [and] price distortions.’’ enlarge upon DCMs’ existing obligations estimates the costs of proposed § 40.25 In addition, subpart E requires a DCM in part 40 to provide public notice and per DCM as described below. to have the ability to ‘‘comprehensively other information regarding their rule The Commission believes that the and accurately’’ reconstruct trading on filings. Specifically, proposed § 40.25(b) work of proposed § 40.25 will fall its markets, obtain information from its would require DCMs to ensure that the primarily upon DCM Compliance market participants, and implement information described above in Attorneys already employed in additional requirements for cash-settled § 40.25(a) is easily located on their completing part 40 rule filings. The and physically-settled contracts. Proposed § 40.28 does not add to the public Web sites. Lastly, proposed Commission estimates that a DCM oversight responsibilities outlined § 40.25(c) would require DCMs to notify (through its Compliance Attorneys) will incur a total annual cost of $14,976 to above, but rather makes clear that a the Commission upon the termination of DCM’s existing obligations in subparts C a market maker or trading incentive comply with proposed § 40.25. This cost is broken down as follows: 1 and E of part 38 apply equally in the program. context of market-maker and trading While proposed § 40.25 would require Compliance Attorney, working for 156 705 × incentive programs. The Commission information from DCMs regarding their hours (156 $96 per hour = $14,976).706 On average, the 15 DCMs to believes that proposed § 40.28 will market-maker or trading incentive impose no significant new costs on programs, the Commission believes it which proposed § 40.25 would apply would therefore incur a total annual DCMs, but acknowledges that it may largely incorporates existing rule filing × result in minor administrative costs. requirements in part 40. For example, cost of $224,640 (15 $14,976) to comply with proposed § 40.25. The Specifically, a DCM not already doing existing §§ 40.5 and 40.6 each require a so will be required to ensure DCM requesting approval or self- Commission notes, however, that actual costs per DCM may vary depending on appropriate communication between its certifying rules to provide the compliance staff tasked with detecting Commission with the rule text; the the number of market-maker and trading incentive program rule filings submitted abusive practices and its business staff proposed effective date or date of that may administer the DCM’s market- intended implementation; and an by an individual DCM on an annual basis. maker or trading incentive programs. ‘‘explanation and analysis of the For example, in the case of an incentive operation, purpose, and effect’’ of the Finally, proposed § 40.28 requires that a DCM, ‘‘consistent with its obligations program based on a market participant’s proposed rule. Existing §§ 40.5 and 40.6 gross trading volume, compliance staff also require each DCM to provide the pursuant to subparts C and E of part 38 . . . review all benefits accorded to would be required to inform business Commission with an assessment of the staff of trades that should not be rule’s ‘‘compliance with applicable participants in market maker and trading incentive programs . . . to credited towards the incentive program provisions of the Act, including core because they were conducted in principles, and the Commission’s 705 The Commission estimates that a Compliance violation of an exchange rule. The regulations thereunder;’’ and ‘‘a brief Attorney will be required to spend an additional Commission believes that the costs explanation of any substantive opposing three hours per week over the course of a 52 week associated with proposed § 40.28 are not views expressed to [the DCM] by year to comply with proposed § 40.25. Such hours significant due in part to DCMs’ existing governing board or committee members, are additional because DCMs are already required to provide substantial information regarding surveillance capabilities, which are members of the entity or market market-maker and trading incentive program rule typically highly automated. participants that were not incorporated filings pursuant to existing requirements in §§ 40.5 The Commission estimated the costs into the rule. . . . ’’ Furthermore, these and 40.6 as discussed above. Three additional hours of complying with proposed § 40.28. In existing provisions each require a DCM per week across a 52 week year yields making its estimates, the Commission approximately 156 additional hours per year per to certify that the DCM posted on its DCM to comply with proposed § 40.25. determined that the primary costs public Web site a notice of pending rule 706 See section V(B) above for the calculation of associated with the regulation will be or certification and to also post a copy hourly wage rates used in this analysis. communication between a DCM’s
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compliance and business staffs. The policies and procedures reasonably new §§ 40.25–40.28 will facilitate Commission estimates that a DCM will designed to ensure that any other self- Commission oversight; increase public incur a total annual cost of $12,710 to trades known to the DCM do not receive transparency; and help ensure market- comply with proposed § 40.28. This cost market-maker or trading incentive maker and trading incentive programs is broken down as follows: 1 payments, discounts or other that are compliant with the Act and Compliance Attorney, working for 62 considerations. Commission regulations. The proposed hours (62 × $96 per hour = $5,952); 1 The Commission believes a DCM rules are consistent with existing Senior Compliance Specialist, working could efficiently implement proposed regulatory expectations. To the extent for 62 hours (62 × $57 per hour = § 40.27(a) by requiring the DCM’s that they impose requirements beyond $3,534); and 1 Business Analyst, compliance staff (Senior Compliance those of existing Commission working for 62 hours (62 × $52 per hour Specialist) to periodically provide its regulations and to the extent that DCMs = $3,224).707 In the event that no DCM business staff (Business Analyst) with are currently not in compliance with the is currently in compliance with summary statistics regarding self-trades proposed rules, the Commission expects proposed § 40.28, the 15 DCMs to which by market participants. Business the rules to increase transparency proposed § 40.28 would apply would Analysts responsible for administering a around DCM market-maker and trading therefore incur a total annual cost of market-maker or trading incentive incentive programs, and introduce basic $190,650 (15 × $12,710) to comply with program could then discount such safeguards in the conduct of such proposed § 40.28.708 trades from any payments, benefits, or programs. Building on the Dodd-Frank other considerations made pursuant to a iii. Rule § 40.27—Payment for Trades Act, the Commission adopted in June program. Reports regarding self-trades With No Change in Ownership 2012 core principles and final rules could be automated at the DCM’s Prohibited modernizing the regulatory regime discretion. When necessary, Senior applicable to all DCMs (‘‘DCM Final The Commission is also proposing Compliance Specialists could Rules’’). Among other areas, the DCM new § 40.27(a) to require that DCMs collaborate with the DCM’s legal staff Final Rules emphasized DCMs’ implement policies and procedures (Compliance Attorney) to address obligations as the front-line regulators of reasonably designed to prevent the instances in which the existence of a their markets. These include extensive payment of market-maker or trading self-trade is unclear. Similarly, Business trade practice responsibilities pursuant incentive payments for trades between Analysts could collaborate with legal or to subpart C of part 38, and market accounts identified to the DCM as under compliance counterparts where a surveillance responsibilities pursuant to common beneficial common ownership market participant challenges the DCM’s subpart E. In addition, the Commission or known to the DCM as under common determinations or payments. The codified new requirements that a DCM ownership. Proposed § 40.27(a) is Commission believes that a similar offer its ‘‘members [and] persons with consistent with guidance provided to process of information flow to Business trading privileges . . . with impartial DCMs by the Commission that incentive Analysts administering payments, access to its markets and services,’’ payments should not be made for ‘‘self- benefits, or other considerations including: (1) ‘‘Access criteria that are trades.’’ In this regard, the proposed pursuant to a market-maker or trading impartial, transparent and applied in a regulation ratifies staff’s previous incentive program would also be non-discriminatory manner’’ and (2) guidance 709 and further develops the appropriate to implement proposed ‘‘comparable fee structures . . . for Commission’s expectations regarding § 40.27(a). The Commission estimates equal access to, or services from’’ the appropriate uses of market-maker and the costs of compliance as described DCM. trading incentive programs. However, below. Substantively, the Commission because the subject matter of proposed The Commission estimates that a believes that the proposed regulations § 40.27(a) is not explicitly addressed in DCM will incur a total annual cost of for market-maker and trading incentive existing regulations, the Commission is $30,108 to comply with proposed programs will help facilitate analyzing it as an entirely new cost to § 40.27(a). This cost is broken down as Commission oversight by eliminating DCMs for this purpose. follows: 1 Compliance Attorney, any potential ambiguity that may exist The Commission believes that the working for 52 hours (52 × $96 per hour regarding its authority over such costs associated with proposed = $4,992); 1 Senior Compliance programs. Proposed amendments to the § 40.27(a) will be administrative in Specialist, working for 156 hours (156 × definition of ‘‘rule’’ in § 40.1(i), in nature. DCMs will be required to $57 per hour = $8,892); and 1 Business particular, will codify previous implement policies and procedures Analyst, working for 312 hours (312 × statements by the Commission regarding reasonably designed to ensure that self- $52 per hour = $16,224).710 The 15 trades permitted pursuant to § 40.23 the treatment of market-maker and DCMs to which proposed § 40.27(a) trading incentive programs as ‘‘rules’’ nonetheless do not receive market- would apply would therefore incur a maker or trading incentives payments, × pursuant to part 40, which statements total annual cost of $451,620 (15 however were not explicitly reflected in discounts or other considerations. DCMs $16,224) to comply with proposed will also be required to implement 711 existing § 40.1(i). Proposed § 40.25 will § 40.27(a). enhance the types of information that 707 See section V(B) above for the calculation of c. Benefits DCMs should expect to provide the hourly wage rates used in this analysis. The Commission anticipates that the Commission when requesting approval 708 The Commission estimates that each such staff proposed amendments to § 40.1(i) and or self-certifying market-maker or person will be required to dedicate approximately trading incentive programs. Such 1 hour per week over the course of a 52 week year, yielding approximately 52 hours per year. The 710 See section V(B) above for the calculation of information will include a description Commission is increasing these estimates by an hourly wage rates used in this analysis. of any eligibility criteria for additional 20 percent to account for more 711 The Commission estimates that a Compliance participation in a market-maker or complicated circumstances that may arise. This Attorney will require 1 hour per week, a Senior trading incentive program, and an yields a total of approximately 62 hours per year Compliance Specialist will require 3 hours per for each relevant staff role. week, and a Business Analyst will require 6 hours explanation for programs with limited 709 See Final Rule, Provisions Common to per week, in each case over the course of a 52 week eligibility. Proposed § 40.25 will also Registered Entities, 76 FR 44776, 44778. year. require that information regarding
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market-maker and trading incentive trades. It may also reduce the frequency considerations other than those programs be easily located on a DCM’s of self-trades, and eliminate incentives addressed above. Web site. Taken together, these that may encourage market participants e. Consideration of Alternatives measures will for example facilitate the to engage in illegal behavior such as Commission’s oversight of DCMs’ wash trading, by prohibiting market- As discussed, the proposed rules compliance with impartial access and maker or trading incentive program regarding market-maker and trading comparable fee structure requirements payments for transactions involving incentive programs largely refer to and in § 38.151(b) adopted by the accounts under common ownership. clarify the Commission’s existing rules Commission in 2012. and guidance and make Commission Proposed § 40.27(a) is designed to ii. Efficiency, Competitiveness, and expectations more clear to new and promote market integrity and to Financial Integrity of Futures Markets existing DCMs. The Commission discourage abusive trading practices. The Commission preliminarily considered not proposing these rules. The Commission believes it is believes that the proposed rule would Absent these rules, the Commission imperative that market participants are promote the efficiency, competitiveness could still realize many of the benefits not incentivized to trade solely for the and financial integrity of futures by enforcing the existing regulations, purpose of collecting market-maker or markets by clarifying Commission but it would be more difficult to ensure trading incentive program benefits. requirements and expectations that DCMs provide information Trading for the sake of collecting such regarding market-maker and trading regarding market-maker and trading benefits may, for example, inaccurately incentive programs. The proposed rule incentive programs prominently on signal the level of liquidity in the regarding payments to accounts with their Web sites. Moreover, absent the market and may result in a non-bona common ownership may reduce proposed rule, there would only be fide price. Key public statistics incentives to self-trade and thus may guidance rather than a rule regarding published by DCMs regarding trades, also help further ensure (beyond the payments for self-trades. The orders, and other measures of liquidity rules related to self-trades also being Commission has determined to propose on their markets must not be inflated proposed in this release) that market these rules to provide increased through trading strategies that may be volumes reflect only trades that shift regulatory certainty to DCMs and market violative of DCM or Commission rules risk between different counterparties participants regarding market-maker and that are designed solely to collect and thus accurately reflect supply and and trading incentive programs and to incentives or to meet market-maker demand in the market and true market ensure that such programs do not permit program requirements. For example, the liquidity. The proposed rule regarding self-trade payments. Commission seeks to eliminate payments to accounts with common f. Request for Comments incentives that may encourage market ownership may promote financial participants to engage in illegal behavior integrity by helping to prevent 159. The Commission requests such as wash trading, which is intentional self-trades (wash trades) that comment on the accuracy of its cost prohibited under the CEA and could lead to price distortions. estimates. Commission regulations.712 160. To what extent are the costs iii. Price Discovery imposed on the DCMs by the proposed d. Section 15(a) Factors The Commission expects that the rule already incurred pursuant to This section discusses the Section proposed rule regarding payments to existing rules? 15(a) factors for the proposed new accounts with common ownership to 161. To what extent are the benefits regulations in part 40 to increase protect and enhance the price discovery of the proposed rule currently being transparency around DCM market- process by helping to prevent realized? maker and trading incentive programs, intentional self-trades (wash trades) that 162. Do DCM Web sites currently underline existing regulatory could lead to price distortions. The provide adequate information regarding expectations, and introduce basic proposed rules also would make clear market-maker and trading incentive safeguards in the conduct of such Commission requirements designed to programs, and is such information programs. The proposed regulations prevent market-maker and trading easily located? would amend existing § 40.1(i) and incentive programs from interfering 163. To what extent do DCMs create new §§ 40.25- 40.28. with or doing harm to the price currently make payments for self-trades discovery process. pursuant to market-maker and trading i. Protection of Market Participants and incentive programs? the Public iv. Sound Risk Management Practices 164. The Commission requests The Commission preliminarily The proposed rule regarding comment on its discussion of the effects believes that the proposed rule would payments to accounts with common of the proposed rules on the protect market participants and the ownership may promote sound risk considerations in Section 15(a) of the public by eliminating potential management practices by helping to CEA. ensure that market-maker and trading ambiguity that may exist regarding the VI. Aggregate Estimated Cost of incentive programs do not incentivize Commission’s expectations and Regulation AT requirements with respect to market- self-trades or wash trades. The proposed maker and trading incentive programs rules also would make clear Summarizing the cost estimates and by guarding against such programs Commission requirements designed to presented above, the Commission incentivizing self-trading. By so doing, prevent market-maker and trading estimates that Regulation AT will the proposed rules would help ensure incentive programs from deterring impose the following costs on persons that volume reports accurately reflect sound risk management considerations. subject to its rules. These costs are broken into one-time costs for initial levels of bona fide risk shifting v. Other Public Interest Considerations transactions activity rather than self- compliance, and annual costs following The Commission has not identified thereafter. As discussed in section V 712 See Section 4c(a) of the CEA, 7 U.S.C. any effects that these proposed rules above, the Commission calculated costs 6c(a)(2)(A), and Commission regulation 1.38(a). would have on other public interest for certain risk mitigation procedures,
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but determined that they generally will In addition, as noted above, the included in the one-time costs chart not be imposed upon market Commission believes that the risk below. However, the Commission participants because, among other controls and other measures required by believes that because market reasons, they relate to procedures or §§ 1.80 and 1.82 are already widely used participants already have these systems controls that are already widely used in by market participants. Upgrading such in place, the proposed regulations will the industry.713 The two charts below systems to come into full compliance generally not result in increased annual do not include such costs. with the proposed regulations will costs to maintain suchsystems. impose initial one-time costs, which are One-time costs:
Cost for all Regulation Description Cost per entity entities
New Floor Traders (100 Entities)
1.3(x)/170.18 714 ...... Registration of new floor traders with CFTC and as members of RFA— $200 $20,000 Form 7–R Fee. 1.3(x)/170.18 ...... Registration of new floor traders with CFTC and as members of RFA— 96 9,600 preparation of Form 7–R. 1.3(x)/170.18 ...... Registration of new floor traders with CFTC and as members of RFA— 850 85,000 Form 8–R Fee for 10 principals. 1.3(x)/170.18 ...... Registration of new floor traders with CFTC and as members of RFA— 960 96,000 preparation of Form 8–R for 10 principals.
Total New Floor Traders ...... 2,106 210,600
AT Persons (420 Entities)
1.80 ...... Risk controls ...... 79,680 33,465,600 1.83(c) ...... Recordkeeping ...... 5,130 2,154,600
Total AT Persons ...... 84,810 35,620,200
Clearing Member FCMs (57 Entities)
1.82 ...... Risk controls—DEA orders ...... 49,800 2,838,600 1.82 ...... Risk controls—non-DEA orders ...... 159,360 9,083,520 1.83(d) ...... Recordkeeping ...... 5,130 292,410
Total Clearing Member FCMs ...... 214,290 12,214,530
DCMs (15 Entities)
38.255(b) ...... Provide controls to FCMs ...... 155,520 2,332,800 40.20 ...... Risk controls ...... 155,520 2,332,800 40.22(c) ...... Establish compliance report review program ...... 37,000 555,000
Total DCMs ...... 348,040 5,220,600
Total All Entities ...... 53,265,930
Annual costs:
Cost for all Regulation Description Cost per entity entities
New Floor Traders (100 Entities)
170.18 ...... RFA annual membership dues (payable first year of membership and $5,625 $562,500 each year after).
Total New Floor Traders ...... 5,625 562,500
AT Persons (420 Entities)
1.83(a) ...... Submit compliance reports/written policies ...... 4,240 1,780,800 1.83(c) ...... Recordkeeping ...... 2,670 1,121,400 40.23 ...... Submit approval requests to DCMs to forego self-trade controls ...... 3,810 1,600,200
Total AT Persons ...... 10,720 4,502,400
713 See, e.g., the calculation of costs for are discussed in section V(E)(7) above. These costs 714 See supra note 597. procedures related to the testing, monitoring and are not included in the charts in this section VI. supervision of Algorithmic Trading systems, which
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Cost for all Regulation Description Cost per entity entities
Clearing Member FCMs (57 Entities)
1.83(b) ...... Submit compliance reports ...... 7,090 404,130 1.83(d) ...... Recordkeeping ...... 2,670 152,190
Total Clearing Member FCMs ...... 9,760 556,320
DCMs (15 Entities)
38.401 ...... Disclosure of trade matching programs ...... 19,200 288,000 40.22(c) ...... Review of compliance reports ...... 111,000 1,665,000 40.22(c) ...... Remediation of compliance reports ...... 22,200 333,000 40.22(e) ...... Review books and records ...... 110,880 1,663,200 40.23(c) ...... Review approval requests from market participants re self-trading ...... 22,000 330,000 40.23(d) ...... Publish statistics on self-trading ...... 6,650 99,750 40.25 ...... Provide information on market maker programs in rule filings ...... 14,976 224,640 40.27 ...... Restrictions on payments under marker maker programs ...... 30,108 451,620 40.28 ...... Surveillance of market maker programs for abusive practices ...... 12,710 190,650
Total DCMs ...... 349,724 5,245,860
Total All Entities ...... 10,867,080
The Commission is also presenting Commission anticipates that an RFA Episodic costs: the following costs applicable to an RFA will incur these costs on an episodic pursuant to proposed § 170.19. The basis in connection with § 170.19.
Cost for all Regulation Description Cost per entity entities
RFAs (1 Entity)
170.19 ...... RFA Standards ...... $34,200 $34,200
Total RFAs ...... 34,200 34,200
VII. List of All Questions in the NPRM definition used by another regulatory only as a conduit for these AT Person organization? orders. If the non-clearing FCM or other Listed below are all questions raised 3. For purposes of the Commission’s entity does not make any in the preceding sections of this NPRM, definition of Algorithmic Trading, is it determinations with respect to such organized according to the section of the necessary for the Commission to define orders, the conduit entity would not be NPRM in which the question appears. ‘‘computer algorithms or systems’’? If engaged in Algorithmic Trading, as that The Commission welcomes any and all so, please explain what should be definition is currently proposed. Should comments on any aspect of Regulation included in such a definition. the definition of Algorithmic Trading be AT regardless of whether it is addressed modified to capture a conduit entity by a particular question. If responding 4. Should the Commission’s such as a non-clearing FCM in this to a specific question enumerated in this definition of ‘‘Algorithmic Trading’’ scenario, thereby making the entity an NPRM, the Commission requests that include systems that only make AT Person subject to Regulation AT? In commenters in their comment letters determinations as to the routing of other words, should non-clearing FCMs refer to that question being answered. orders to different venues (which is contemplated in the proposed be required to manage the risks of AT IV(D) Codification of Defined Terms definition)? With respect to the Person customers? How would non- clearing FCMs do so if the non-clearing ‘‘Algorithmic Trading’’—§ 1.3(zzzz) definition of ‘‘Algorithmic Trading,’’ should the Commission differentiate FCMs do not have risk controls 1. Is the Commission’s definition of between different types of algorithms, comparable to the risk controls specified ‘‘Algorithmic Trading’’ generally such as alpha-generating algorithms and in proposed § 1.82? consistent with what algorithmic order routing algorithms? 7. The Commission, recognizing that trading is understood to mean in the 5. Is the Commission’s understanding natural person traders who manually industry? If not, please explain how it correct that most entities using enter orders also have the potential to is inconsistent and how the definition automated order routers will be using cause market disruptions, is considering should be modified. In your answer, similar or related automated technology expanding the definition of Algorithmic please explain whether the definition to determine other parameters of an Trading to encompass orders that are inappropriately includes or excludes a order? generated using algorithmic methods particular type or aspect of trading. 6. The Commission posits a scenario (e.g., an algorithm generates a buy or 2. Should the Commission adopt a in which an AT Person submits orders sell signal at a particular time), but are definition of ‘‘Algorithmic Trading’’ that through Algorithmic Trading, and a then manually entered into a front-end is more closely aligned with any non-clearing FCM or other entity acts system by a natural person, who
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determines all aspects of the routing of to orders (i.e., heartbeat messages or Algorithmic Trading’’ pursuant to the the orders. Such order entry would not requests for mass quotes) to definition of AT Person? 715 represent Algorithmic Trading under intentionally or unintentionally flood 16. The Commission notes that the currently proposed definition. The the DCM’s systems and slow down the pursuant to § 1.57(b) of the Commission requests comment on this matching engine? Please explain how Commission’s regulations IBs may not proposed expansion of the definition of this definition would be more carry proprietary accounts. However, Algorithmic Trading, which the appropriately limited or expanded. certain customer relationships may Commission may implement in the final ‘‘AT Person’’—§ 1.3(xxxx) cause an IB to fall under the definition rulemaking for Regulation AT. The of AT Person. The Commission requests Commission requests comment on the 13. The Commission notes that the comment on the types of IB customer costs and benefits of this proposal, in FIA Guide recommends certain pre- relationships that could cause IBs to fall addition to any other comments trade risk controls and contemplates under the definition of AT Persons. regarding the effectiveness of this three levels at which these controls can What activities are currently being proposal in terms of risk reduction. be placed: Automated trader, broker, conducted by IBs that could cause an IB ‘‘Algorithmic Trading Compliance and exchange. FIA defines ‘‘automated to be considered engaging in Issue’’—§ 1.3(tttt) trader’’ as any trading entity that uses an Algorithmic Trading on or subject to the 8. Should the definition of automated system, including hedge rules of a DCM and would therefore Algorithmic Trading Compliance Issue funds, buy-side firms, trading firms, and cause the IB to be considered an AT be modified to include other potential brokers who deploy automated Person? compliance failures involving an AT algorithms, and defines ‘‘broker’’ as 17. Should the definition of AT Person that may have a significant FCMs, other clearing firms, executing Person be limited to persons using DEA? detrimental impact on such AT Person, brokers and other financial In other words, should the definition the relevant DCM, or other market intermediaries that provide access to an capture persons registered or required to participants? exchange. be registered as FCMs, floor brokers, a. Should the Commission’s definition SDs, MSPs, CPOs, CTAs, or IBs that ‘‘Algorithmic Trading Disruption’’— engage in Algorithmic Trading on or § 1.3(uuuu) of ‘‘AT Person’’ explicitly include or exclude any of the classes of parties subject to the rules of a DCM, or persons 9. Should the definition of included in FIA’s term ‘‘automated registered or required to be registered as Algorithmic Trading Disruption be trader’’? Please explain. Are there any floor traders as defined in § 1.3(x)(3), in modified to include other types of types of entities not present in this list each case if such persons are using disruptive events that may originate that should be included in the ‘‘AT DEA? The Commission requests with an AT Person? Person’’ definition? comment on the costs and benefits of 10. Should the definition be expanded this approach, including comments on to include other types of disruptive b. Should Regulation AT use the term whether this more limited definition of downstream consequences that may ‘‘broker,’’ as understood by FIA? If so, AT Persons would adequately mitigate result from an Algorithmic Trading please explain. Is there another term the risks associated with algorithmic Disruption originating with an AT that would be more appropriate in trading. Person, and which may negatively defining the scope of AT Persons? impact the relevant designated contract 14. Algorithmic Trading carries ‘‘Direct Electronic Access’’—§ 1.3(yyyy) market, other market participants, or technological and personnel costs, and 18. Please explain whether the other persons? Alternatively, should the the Commission expects that such Commission’s proposed definition of scope of the definition be reduced, and trading will be performed by entities, DEA will encompass all types of access if so, why? not natural persons. Is this a reasonable commonly understood in Commission- 11. In addition, should the reference assumption? For purposes of regulated markets as ‘‘direct market to ‘‘materially degrades’’ in the quantifying the number of AT Persons access.’’ In light of the proposed definition of Algorithmic Trading that will be subject to the regulations, regulations concerning pre-trade and Disruption be expanded or otherwise do you believe that any AT Person (a other risk controls and standards for the modified to encompass other types of definition that encompasses the development, testing and supervision of disruptions that may impact the following persons if engaged in algorithmic trading systems, do you relevant designated contract market, Algorithmic Trading: FCMs, floor believe that the proposed definition of other market participants, or other brokers, swap dealers, major swap Direct Electronic Access is too limited persons? Please provide examples of participants, commodity pool operators, (or, alternatively, too expansive)? If so, real-world events originating with AT commodity trading advisors, please explain why and how the Persons (as defined under Regulation introducing brokers, and newly definition should be revised. AT) that resulted in disruptions that registered floor traders using Direct 19. Should the Commission define may not be captured by the reference to Electronic Access) will be a natural ‘‘routed’’ in its definition of DEA? If so, ‘‘materially degrades’’ in the definition. person or a sole proprietorship with no how? Are there specific examples of employees other than the sole ‘‘AT Order Message’’—§ 1.3(wwww) trading or routing arrangements where it proprietor? 12. Please comment on the proposed would be unclear whether trading was scope of the Commission’s definition of 15. The Commission recognizes that a performed through DEA? CPO could use Algorithmic Trading to AT Order Message. Is the proposed 20. Should the Commission use the enter orders on behalf of a commodity definition too expansive, in that it term ‘‘direct market access’’ instead of pool which it operates. In these would limit the submission of messages DEA, and if so why? that do not have the potential to disrupt circumstances, should the Commission consider the CPO that operates the the market? Alternatively, is the scope 715 commodity pool or the underlying The Commission notes that CPOs are separate of the AT Order Message too limited, in legal entities from the underlying commodity pools that it could allow messages not related commodity pool itself as ‘‘engaged in which they operate.
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21. Should the Commission define traders’’ would help effectuate the framework established by Regulation sub-categories of DEA, such as purposes of the CEA to deter and detect AT would require all AT Persons to be sponsored market access? price manipulation or any other members of an RFA in order to be 22. The Commission’s proposed disruptions to market integrity? If you effective. Alternatively, could the goals definition of DEA in § 1.3(yyyy) differs believe that registration of such firms of Regulation AT be realized without from definitions of direct electronic will not help effectuate the purposes of requiring all AT Persons to be members access in § 38.607 and direct access for the CEA, or that the same purposes can of an RFA? FBOTs in § 48.2(c). The Commission be achieved by other means, please IV(H) Pre-Trade and Other Risk Controls believes that the more technical explain. definition in proposed 1.3(yyyy) is for AT Persons—§ 1.80 appropriate for Regulation AT. The IV(F) RFA Standards for Automated 33. Are any pre-trade and other risk Commission solicits comment regarding Trading and Algorithmic Trading controls required by § 1.80 ineffective, proposed 1.3(yyyy), whether all Systems—§ 170.19 not already widely used by AT Persons, definitions of ‘‘direct’’ access should be 28. The Commission requests or likely to become obsolete? harmonized across the Commission’s comment on the scope of 34. Are there additional pre-trade or rules, and if so how. Do you believe that responsibilities assigned to RFAs under other risk controls that should be two definitions would create confusion proposed § 170.19. Should RFAs be specifically enumerated in proposed with respect to Commission responsible for fewer or additional areas § 1.80? requirements as to direct electronic regarding AT Persons, ATSs, and 35. Do you believe that the pre-trade access? With respect to §§ 1.80, 1.82, algorithmic trading than specified in and other risk controls required in and 38.255(b) and (c) provisions proposed § 170.19, prongs (1), (2), (3), § 1.80 sufficiently address the imposing risk control requirements on and (4) (§ 170.19(a)(1)–(a)(4))? possibility of technological advances in AT Persons, FCM and DCMs, should the Regulation 170.19 requires RFAs to trading, and the development of new, Commission use the existing definition consider the need for rules in the areas more effective controls that should be of direct electronic access provided in listed in prongs (1)–(4) (§ 170.19(a)(1)– implemented by AT Persons? § 38.607? (a)(4)). Should RFAs be responsible for 36. The Commission welcomes considering whether to adopt rules in comment on whether the regulation’s IV(E) Registration of Certain Persons fewer or additional areas? requirements relating to the design of Not Otherwise Registered With 29. The Commission requests controls and the levels at which the Commission—§ 1.3(x) comment on the latitude afforded to controls should be set are appropriate 23. Should firms operating RFAs in proposed § 170.19. Should and sufficiently granular. Algorithmic Trading systems in CFTC- RFAs have more or less latitude to issue 37. The Commission notes that regulated markets, but not otherwise rules than specified in proposed § 1.80(d) requires that prior to initial use registered with the Commission, be § 170.19? of Algorithmic Trading, an AT Person required to register with the CFTC? If 30. The Commission requests must notify its clearing member FCM not, what alternatives are available to comment on RFAs’ obligation in and the DCM that it will engage in fully effectuate the purpose and design proposed § 170.19 to establish and Algorithmic Trading. The Commission of Regulation AT? maintain a program for the prevention welcomes comment on whether the 24. Should all firms deploying of fraud and manipulation, protection of content of that notification requirement Algorithmic Trading systems be the public interest, and perfecting the is sufficient, or whether clearing required to register with the mechanisms of trading, including member FCMs and DCMs should also be Commission? Are there additional through rules it may determine to adopt notified of additional information. For characteristics of AT Persons that pursuant to § 170.19. The proposed example, should AT Persons be required should be taken into consideration for rules anticipate that an RFA’s program to notify their clearing member FCMs of registration purposes? For example, will include examination and particular changes to their Algorithmic should the Commission limit enforcement components. Is this the Trading systems that would affect the registration to trading firms meeting appropriate approach? risk controls applied by the clearing certain trading volume, order or 31. The Commission requests member FCM? message levels? In other words, should comment on whether proposed § 170.19 38. Is § 1.80(f)’s requirement that each there be a minimum volume, order or may result in duplicative obligations on AT Person periodically review its message test in order to meet the AT Persons or any other market compliance with § 1.80 appropriate? definition of ‘‘floor trader,’’ or otherwise participant. In particular, please Should there be more prescriptive and to meet the definition of AT Person? If comment on potential duplication, if granular requirements to ensure that so, what should be measured and what any, between algorithmic trading each AT Person periodically reviews its specific thresholds should be used? requirements that an RFA may impose pre-trade and other risk controls and 25. In the alternative, should the upon its members pursuant to § 170.19, takes appropriate steps to update or Commission broaden the registration and similar requirements that may be recalibrate them in order to prevent an requirements in proposed § 1.3(x)(3)(ii) imposed by a DCM in its role as a self- Algorithmic Trading Event? so that all persons trading on a contract regulatory organization. What Alternatively, is § 1.80(f) necessary? market through DEA are required to amendments would be appropriate in Does the Commission need to explicitly register, instead of only those who are any final rules arising from this NPRM require AT Persons to conduct a engaged in Algorithmic Trading? to clarify that unintended overlap periodic review of their compliance 26. Please supply any information or between the role of an RFA and a DCM with § 1.80? data that would help the Commission in in this context? 39. AT Persons that are registered deciding whether firms may or may not FCMs are required by existing meet the definition of ‘‘floor trader’’ in IV(G) AT Persons Must Become Commission regulation 1.11 to have Section 1a(23) of the Act. Members of an RFA—§ 170.18 formal ‘‘Risk Management Programs,’’ 27. Do you believe that the 32. The Commission requests including, pursuant to § 1.11(e)(3)(ii), registration of such firms as ‘‘floor comment on whether the regulatory ‘‘automated financial risk management
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controls reasonably designed to prevent cost that would be incurred by an AT available consistent with the purposes the placing of erroneous orders’’ and Person to implement such requirements. of Regulation AT? ‘‘policies and procedures governing the 42. Are there any aspects of § 1.81(a)– 51. Please describe the technological use, supervision, maintenance, testing, (d) that are unnecessary for purposes of development that would be required by and inspection of automated trading reducing the risks from Algorithmic clearing member FCMs to comply with programs.’’ As described in § 1.11, an Trading, and should not be mandated by the requirement to implement and FCM’s Risk Management Program must regulation? If so, please explain. calibrate the pre-trade and other risk include a risk management unit 43. Are the procedures described controls required by § 1.82(c) for non- independent of the business unit; above for the development and testing DEA orders. To what extent have quarterly risk exposure reports to senior of Algorithmic Trading sufficient to clearing member FCMs already management and the governing body of ensure that algorithmic systems are developed the technology required by the FCM, with copies to the thoroughly tested before being used in this provision, for example in Commission; and other substantive production, and will operate in the connection with existing requirements requirements. The Commission requests manner intended in the production under § 1.11, and §§ 1.73 and 38.607 for public comment regarding whether one environment? clearing FCMs to manage financial or more of the proposed requirements 44. Are there any additional risks? applicable to FCMs in §§ 1.80, 1.81, procedures for the development and 52. Are there additional pre-trade or 1.83(a), and 1.83(c) should be testing of Algorithmic Trading that other risk controls that should be incorporated within an FCM’s Risk should be required under Regulation specifically required pursuant to Management Program and be subject to AT? proposed § 1.82? the requirements of such program as 45. Are any of the required 53. Do you believe that the pre-trade described in § 1.11. In this regard, any procedures for the development and and other risk controls required in final rules arising from this NPRM could testing of Algorithmic Trading likely to § 1.82 sufficiently address the place all requirements applicable to become obsolete in the near future as possibility of technological advances in FCMs in §§ 1.80, 1.81, 1.83(a), and development and testing standards trading and development of new, more 1.83(c) within the operational risk evolve? effective controls that should be measures required in § 1.11(e)(3)(ii). 46. Are the procedures for designating implemented by FCMs? Such incorporation could help improve and training Algorithmic Trading staff 54. The Commission welcomes the interaction between an FCM’s of AT Persons sufficient to ensure that comment on whether the requirements operational risk efforts and its pre-trade such staff will be knowledgeable in the of § 1.82 relating to the design of risk controls; development, monitoring, strategy and operation of Algorithmic controls and the levels at which the and compliance efforts; and reporting Trading, and capable of identifying controls should be set are appropriate and recordkeeping requirements, Algorithmic Trading Events and and sufficiently granular. pursuant to §§ 1.80, 1.81, 1.83(a), and promptly escalating them to appropriate 55. Proposed § 1.82 does not require 1.83(c). It could also help ensure that an staff members? FCMs to have connectivity monitoring FCM’s §§ 1.80, 1.81, 1.83(a), and 1.83(c) 47. Is it typical that persons such as ‘‘system heartbeats’’ or processes benefit from the same internal responsible for monitoring algorithmic automatic cancel-on-disconnect rigor and independence required by the trading do not simultaneously engage in functions. Do you believe that § 1.82 Risk Management Program in § 1.11. trading activity? should require FCMs to have such 40. The Commission proposes to 48. Proposed §§ 1.80, 1.81, and 1.83 functionality? adopt a multi-layered approach to would impose certain requirements on 56. Proposed § 1.82 requires clearing regulations intended to mitigate the all AT Persons regardless of the size, FCMs to implement controls with risks of automated trading, including sophistication, or other attributes of respect to AT Order Messages pre-trade risk controls and other their business. The Commission originating with an AT Person. The procedures applicable to AT Persons, requests public comment regarding Commission is considering modifying clearing member FCMs and DCMs. whether these requirements should vary proposed § 1.82 to require clearing Please comment on whether an in some manner depending on the AT FCMs to implement controls with alternative approach, for example one Person. If commenters believe proposed respect to all orders, including orders which does not impose requirements at §§ 1.80, 1.81, and 1.83 should vary, that are manually submitted or are each of these three levels, would more please describe how and according to entered through algorithmic methods effectively mitigate the risks of what criteria. that nonetheless do not meet the automated trading and promote the definition of Algorithmic Trading. Such IV(J) Risk Management by Clearing other regulatory goals of Regulation AT. a requirement would correspond to the Member FCMs—§ 1.82 requirement under proposed § 40.20(d) IV(I) Standards for Development, 49. Are any pre-trade or other risk that DCMs implement risk controls for Testing, Monitoring, and Compliance of controls required by § 1.82 ineffective, orders that do not originate from Algorithmic Trading Systems—§ 1.81 not already widely used by clearing Algorithmic Trading. If the Commission 41. The Commission understands that member FCMs, or likely to become were to incorporate such amendments the requirements for developing, testing, obsolete? in any final rules arising from this and supervising algorithmic systems 50. Are there any aspects of proposed NPRM, its intent would be to further proposed in § 1.81(a)–(d) are already § 1.82 that pose an undue burden for reduce risk by ensuring that all orders, widely used throughout the industry. clearing member FCMs and are regardless of source, are screened for Are any specific requirements proposed unnecessary for purposes of reducing risk at both the clearing member FCM in this section not widely used by the risks associated with Algorithmic and the DCM level. Risk controls at the persons that would be designated as AT Trading? If so, please explain (1) the point of order origination would Persons under Regulation AT, and if burden; (2) why it is not necessary to continue to be limited to AT Persons. not, why not? If any requirements reduce the risks associated with The Commission requests comment on described in § 1.81(a)–(d) are not widely Algorithmic Trading, particularly in the this proposed amendment to § 1.82, used, please provide an estimate of the case of DEA. What alternatives are which the Commission may implement
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in the final rulemaking for Regulation imposed on clearing member FCMs. should be made known to all market AT. The Commission requests comment Should the recordkeeping requirements participants? Should the Commission on the costs and benefits to clearing of § 1.83(c) be distributed throughout revise the final rule so that it only FCMs of this proposal, in addition to the sections of the Commission’s applies to latencies within a platform any other comments regarding the regulations that contain recordkeeping and how a self-trade prevention tool effectiveness of this proposal in terms of requirements for various categories of determines whether to cancel an order? risk reduction. Commission registrants that will be 71. What information should be classified as AT Persons? Should disclosed as part of the description of IV(K) Compliance Reports Submitted by relevant attributes of the platform? For AT Persons and Clearing FCMs to § 1.83(d) be transferred to § 1.35 of the Commission’s regulations, which instance, with latencies within a DCMs; Related Recordkeeping platform, should statistics on latencies Requirements—§ 1.83 contains recordkeeping requirements for clearing member FCMs? be required? If so, what statistics would 57. The Commission welcomes help market participants assess any comment on the type of information that IV(L) Direct Electronic Access Provided impact on their orders? Would a should be included in the reports by DCMs—§ 38.255(b) and (c) narrative description of attributes be required by proposed § 1.83. Should 64. Are there any pre-trade and other preferable, including a description of different or additional descriptions be risk controls required by § 38.255(b) and how the attributes might affect market included in the reports, which will be (c) that will be ineffective, not already participant orders under different evaluated by DCMs under proposed widely provided by DCMs for use by market conditions, such as during times § 40.22? FCMs, or likely to become obsolete? of increased messaging activity? 58. How often should the reports 65. Are there additional pre-trade or 72. The Commission notes that required by proposed § 1.83 be other risk controls that DCMs should be proposed § 38.401(a)(1)(iii) and (iv) are submitted to the relevant DCMs? Should specifically required to provide to FCMs not intended to require the disclosure of the report be submitted more or less pursuant to proposed § 38.255(b) and a DCM’s trade secrets. The Commission frequently than annually? (c)? requests comments on whether the 59. When should the reports required 66. Do you believe that the pre-trade proposed rules might inadvertently by proposed § 1.83 be submitted to the and other risk controls required require such disclosure, and if so, how relevant DCMs? Should the reports be pursuant to § 38.255(b) sufficiently they might be amended to address this submitted on a date other than June 30 address the possibility of technological concern. Furthermore, the Commission of each year? advances in trading? For example, do anticipates that the mechanisms and 60. Should a representative of the AT they appropriately address the potential standards for requesting confidential Person or clearing member FCM other for the future development of additional treatment already codified in existing than the chief executive officer or the effective controls that should be § 40.8 could be used by DCMs to chief compliance officer be responsible provided by DCMs and implemented by identify and request confidential for certifying the reports required by FCMs? treatment for information otherwise proposed § 1.83? Should only the chief 67. The Commission welcomes required to be disclosed pursuant to executive officer be permitted to certify comment on whether § 38.255(b)’s proposed § 38.401(a)(1)(iii) and (iv), for the report? Alternatively, should only requirements relating to the design of example by incorporating § 40.8’s the chief compliance officer be controls and the levels at which the mechanisms and standards into any permitted to certify the report? controls should be set are appropriate final rules arising from this NPRM. If 61. Are there any aspects of proposed and sufficiently granular. commenters believe that the § 1.83(b) that pose an undue burden for 68. Proposed § 38.255(b) and (c) do mechanisms and standards in § 40.8 are clearing member FCMs and are not require DCMs to provide to FCMs inappropriate for this purpose, please unnecessary for purposes of reducing connectivity monitoring systems such as describe any other mechanism that the risks associated with Algorithmic ‘‘system heartbeats’’ or automatic should be included in any final rules to Trading? If so, please explain (1) the cancel-on-disconnect functions. Should facilitate DCM requests for confidential burden; (2) why it is not necessary to § 38.255 require such functionality? treatment of information otherwise reduce the risks associated with required to be disclosed pursuant to Algorithmic Trading, particularly in the IV(M) Disclosure and Transparency in proposed § 38.401(a)(1)(iii) and (iv). case of DEA. What alternatives are DCM Trade Matching Systems— 73. The Commission notes that DCMs available consistent with the purposes § 38.401(a) are required, as part of voluntary of Regulation AT, including in 69. The Commission has proposed submissions of new rules or rule particular Regulation AT’s intent that that certain components of an amendments under § 40.5(a) and self- § 1.83 reports benefit from the third- exchange’s market architecture should certification of rules and rule party SRO review performed by DCMs be considered part of the ‘‘electronic amendment under § 40.6(a), to provide with respect to such reports? matching platform’’ for purposes of the inter alia an explanation and analysis of 62. Should the reports required by DCM transparency provision. Are there the operation, purpose and effect of the proposed § 1.83 be sent to any entity any additional systems that should fall proposed rule or rule amendment. other than each DCM on which the AT within the meaning of ‘‘electronic Would the information required under Person operates, such as the matching platforms’’ for purposes of §§ 40.5(a) or 40.6(a) provide market Commission or an RFA? For example, proposed § 38.401(a)? participants and the public with should the Commission require that AT 70. The Commission has specifically sufficient information regarding Persons that are members of a RFA send identified, as ‘‘attributes’’ that must be material attributes of an electronic compliance reports to RFA upon NFA’s disclosed, latencies within a platform matching platform? request? and how a self-trade prevention tool 74. The Commission recognizes that 63. Proposed § 1.83(c) includes determines whether to cancel an order. DCMs are required to have system recordkeeping requirements imposed on Are there any other attributes that safeguards to ensure information AT Persons, and proposed § 1.83(d) would materially affect the execution of security, business continuity and includes recordkeeping requirements market participant orders and therefore disaster recovery under DCM Core
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Principle 20. The Commission Commission eliminate this discretion, § 40.22(c) could provide greater understands that some attributes of an and require that the controls be set at a discretion to DCMs in establishing their electronic matching platform designed specific, more granular, level? If so, programs for the review of reports. to implement those safeguards should please explain the more appropriate Please comment on the appropriateness be maintained as confidential to prevent level at which pre-trade risk controls of these alternative approaches. cybersecurity or other threats. Does should be set by a DCM. 87. Should § 40.22(e) provide more existing § 40.8, 17 CFR 40.8 (2014) 80. The Commission requests public specific requirements regarding the provide sufficient basis for DCMs to comment on the pre-trade and other risk triggers for a DCM to review and publicly disclose the relevant attributes controls required of DCMs in proposed evaluate the books and records of AT of their platforms while maintaining as § 40.20. Are any of the risk controls Persons and clearing member FCMs confidential information concerning required in the proposed rules required to be kept pursuant to system safeguards? unhelpful to operational or other risk § 40.22(d)? For example, § 40.22(e) 75. With respect to material attributes mitigation, or to market stability, when could require review at specific affecting market participant orders implemented at the DCM level? intervals (e.g., once every two years), or caused by temporary or emergency 81. Are there additional pre-trade or it could require review in response to situations, such as network outages or other risk controls that should be specific events related to the the temporary suspension of certain specifically enumerated in proposed Algorithmic Trading of AT Persons. market functionality, what is the best § 40.20? Please comment on the appropriateness way for DCMs to alert market 82. The Commission proposes, with of these alternative approaches. participants? How are DCMs currently respect to its kill switch requirements, 88. Does § 40.22 leave enough handling these situations? to allow DCMs the discretion to design discretion to the DCM in determining 76. The Commission proposes that a kill switch that allows a market how to design and implement an DCMs provide a description of the participant to submit risk-reducing effective compliance review program relevant material attributes in a single orders. The Commission also does not regarding Algorithmic Trading? document ‘‘disclosed prominently and mandate particular procedures for alerts Alternatively, is there any aspect of this clearly’’ on the exchange’s Web site. The or notifications concerning kill switch regulation that should be more specific Commission also proposes that this triggers. Does the proposed rule allow or prescriptive? document be written in ‘‘plain English’’ for sufficient flexibility in the design of 89. Should § 40.22 specifically to allow market participants, even those kill switch mechanisms and the policies authorize a DCM to establish further not technically proficient, to understand and procedures concerning their standards for the organization, method the attributes described. Would these implementation? Should the of submission, or other attributes of the requirements be practical and help Commission consider more prescriptive reports described in § 40.22(a)? market participants locate and rules in this area? IV(Q) Self-Trade Prevention Tools— understand the information provided? 83. Does existing § 38.1051 provide § 40.23 77. The Commission proposes the Commission with adequate requiring DCMs to disclose information authority to require DCMs to adequately 90. The Commission seeks to require on the relevant attributes: (a) When test planned changes to their matching self-trade prevention tools that screen filing a rule change submission with the engines and other automated systems? out unintentional self-trading, while Commission for changes to the permitting bona-fide self-matched trades electronic matching platform; or (b) IV(O) DCM Test Environments for AT that are undertaken for legitimate within a ‘‘reasonable time, but no later Persons—§ 40.21 business purposes. Under the than ten days’’ following the 84. Should the test environment regulations proposed above, DCMs shall identification of such attribute. Do the provided by DCMs under proposed implement rules reasonably designed to proposed timeframes provide sufficient § 40.21 offer any other functionality or prevent self-trading (‘‘the matching of time for DCMs to disclose the relevant data inputs that will promote the orders for accounts that have common information? Do the proposed effective design and testing of beneficial ownership or are under timeframes offer sufficient notice of Algorithmic Trading by AT Persons? common control’’), but DCMs may in changes or discovered attributes to their discretion implement rules that IV(P) DCM Review of Compliance market participants to allow them to permit ‘‘the matching of orders for Reports by AT Persons and Clearing adjust any systems or strategies, accounts with common beneficial FCMs—§ 40.22 including any algorithmic trading ownership where such orders are systems? 85. In lieu of a DCM’s affirmative initiated by independent decision 78. The Commission proposes obligation in proposed § 40.22 to review makers.’’ requiring disclosure of newly identified AT Person and clearing member FCM a. Do these standards accomplish the attributes within 10 days of discovery. compliance reports, should DCMs goal of preventing only unintentional Does this provide DCMs sufficient time instead be permitted to rely on the CEO self-trading, or would other standards be to analyze the attribute and provide a or CCO representations required by more effective in accomplishing this description? Should DCMs be required proposed § 1.83(a)(2)? If so, what events goal? For example, should the to provide notice of the existence of the in the Algorithmic Trading of an AT Commission consider adopting in any attribute and supplement as further Person should trigger review obligations final rules arising from this NPRM an analysis is performed? by the DCM? alternative requirement modeled on 86. Should § 40.22(c) provide more FINRA Rule 5210 and require market IV(N) Pre-Trade and Other Risk Controls specific requirements regarding a DCM’s participants to implement policies and at DCMs—§ 40.20 establishment of a program for effective procedures to review their trading 79. The Commission proposes to periodic review and evaluation of AT activity for, and a prevent a pattern of, require DCMs to set pre-trade risk Person and clearing member FCM self-trades? controls at the level of the AT Person, reports? For example, § 40.22(c) could b. While the regulations contain and allows discretion to set controls at require review at specific intervals (e.g., exceptions for bona fide self-match a more granular level. Should the once every two years). Alternatively, trades (described in § 40.23(b)), the
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regulations are intended to prevent all prohibited from trading from each other, category of self-trade data that DCMs unintentional self-trading, and do not so long as this goal is met. Should any should be required to disclose? include a de minimis exception for a other identification methods be 97. Should DCMs be required to certain percentage of unintentional self- permitted in § 40.23? For example, disclose the amount of unintentional trading. Should the regulations permit a please comment on whether the self-trading that occurs each month, certain de minimis amount of opposite approach is preferable: market alongside the self-trade statistics unintentional self-trading, and if so, participants would identify to DCMs the required to be published under what amount should be permitted (e.g., accounts that should be permitted to proposed § 40.23(d)? as a percentage of monthly trading trade with each other (as opposed to 98. As noted above, the Commission volume)? those accounts that should be prevented understands that there is some potential c. The following terms are used in from trading with each other). for self-trade prevention tools to be used proposed § 40.23(a) and (b): (1) Self- 93. The Commission believes that its for wrongful activity that may include trading, (2) common beneficial requirements concerning self-trade disruptive trading or other violations of ownership, (3) independent decision prevention tools must strike the the Act or Commission regulations on makers, and (4) common control. Do any appropriate balance between flexibility DCMs. Are there ways to design self- of these terms require further definition? (allowing market participants with trade prevention tools so that they do If so, how should they be defined? diverse trading operations and strategies not facilitate disruptive trading (such as Should any alternatives be used and, if the discretion in implementation so as spoofing) or other violations of the Act so, how should such substitute terms be effectively prevent only unintentional or Commission regulations on DCMs? defined? self-trades) and simplicity (a variety of Are additional regulations warranted to d. With respect to ‘‘common design and implementation options may ensure that such tools are not used to beneficial ownership,’’ the Commission render this control too complex to be facilitate such activities? requests comment on the minimum effective).716 Does the Commission degree of ownership in an account that IV(R) DCM Market Maker and Trading allow sufficient discretion to exchanges should trigger a determination that such Incentive Programs—§§ 40.25–40.28 and market participants in the design account is under common beneficial 99. To what extent do market and implementation of self-trade ownership. For example, should an participants currently trade in ways prevention tools? Is there any area account be deemed to be under common designed primarily to collect market where the Commission should be more beneficial ownership between two maker or trading incentive program unrelated persons if each person prescriptive? The Commission is benefits, rather than for risk directly or indirectly has a 10% or more particularly interested in whether there management purposes? ownership or equity interest in such is a particular level at which it should 100. To what extent do that market account? The Commission refers require implementation of self-trade maker and trading incentive programs commenters to the aggregation rules in prevention tools, i.e., if the tools must currently provide benefits for self- part 150 of its regulations, including prevent matching of orders from the trades? To what extent do market specifically § 150.4, and requests same trading firm, the same trader, the participants collect such benefits for comment on a potential Commission same trading algorithm, or some other self-trades? definition of common beneficial level. 101. The Commission requests ownership that is modeled on § 150.4. 94. Proposed § 40.23(a) would require comment regarding whether the e. The Commission also requests DCMs to either apply, or provide and information proposed to be collected in comment on whether ‘‘common require the use of, self-trade prevention § 40.25 would be sufficient for it to beneficial ownership’’ should be tools. Please comment whether determine whether a DCM’s market- defined in any final rules arising from § 40.23(a) should, in addition, permit maker or trading incentive program this NPRM, or whether such definition market participants to use their own complies with the impartial access should be left to each DCM with respect self-trade prevention tools to meet the requirements of § 38.151(b). If to its program for implementing requirements of proposed § 40.23(a), additional or different information proposed § 40.23. and if so, what additional regulations would be helpful, please identify such 91. Are there any other types of self- would ensure that DCMs are able to: information. trading that should be permitted in ensure that such tools are comparable to 102. The Commission requests addition to the exceptions permitted in DCM-provided tools; monitor the comment regarding whether DCMs § 40.23(b)(1) and (2)? If so, please performance of such tools; and should be required to maintain on their describe such other types of acceptable otherwise review such tools and ensure public Web sites the information self-trading and explain why they that they are sufficiently rigorous to required by proposed § 40.25(a) and (b) should be permitted. meet the requirements of § 40.23. for an additional period beyond the end 92. Proposed § 40.23 provides that 95. Is it appropriate to require of the market maker or trading incentive DCMs may comply with the implementation of self-trade prevention program. The Commission may requirement to apply, or provide and tools with respect to all orders? Should determine to include in any final rules require the use of, self-trade prevention such controls be mandatory for only a arising from this NPRM a requirement tools by requiring market participants to particular subset of orders, i.e., orders that such information remain publicly identify to the DCM which accounts from AT Persons or orders submitted available pursuant to proposed should be prohibited from trading with through DEA? § 40.25(b) for an additional period up to each other. With respect to this account 96. Please comment on the six months following the end of a identification process, the Commission’s requirement that DCMs disclose self- market maker or trading incentive principal goal is to prevent trade statistics. Is the data required to be program. unintentional self-trading; the disclosed appropriate? Is there any other 103. The Commission requests Commission does not have a specific comment regarding whether the text of proposed § 40.27(a) identifies with interest in regulating the manner by 716 See FIA Guide, supra note 95 at 13 (discussing which market participants identify to balance between flexibility and complexity with sufficient particularity the types of DCMs the account that should be respect to self-trade prevention tools). trades that are not eligible for payments
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or benefits pursuant to a DCM market- and if so, what process should be to costs; (g) data and any other maker or trading incentive program. available for a DCM to request from the information to assist or otherwise What amendments, if any, are necessary Commission an exemption from the inform the Commission’s ability to to clearly identify trades that are not requirements of proposed § 40.25(b) for quantify or qualitatively describe the eligible? that specific enumerated item? benefits and costs of the proposed rules; 104. Section 40.27(a) provides that and (h) substantiating data, statistics, Related Matters—A. Calculation of DCMs shall implement policies and and any other information to support Number of Persons Subject to procedures that are reasonably designed positions posited by commenters with Regulations to prevent the payment of market-maker respect to the Commission’s or trading incentive program benefits for 108. The Commission requests consideration of costs and benefits. trades between accounts under common comment on its calculation of the ownership. Are there any other types of number of AT Persons, newly registered § 1.80 Pre-Trade and Other Risk trades or circumstances under which floor traders, clearing member FCMs, Controls the Commission should also prohibit or and DCMs that will be subject to 112. How would an alternative limit DCM market-maker or trading Regulation AT. definition of Algorithmic Trading that excludes automated order routers affect incentive program benefits? Related Matters—C. Regulatory 105. The Commission is proposing in the costs and benefits of the pre-trade Flexibility Act Analysis § 40.27(a) certain requirements and other risk controls in comparison to regarding DCM payments associated 109. The Commission requests the costs and benefits of the proposed with market maker and trading comment on each element of its RFA definition that includes automated order incentive programs. Please address analysis. In particular, the Commission routers? Would such an alternative whether the proposed rules will specifically invites comment on the definition reduce the number of AT diminish DCMs’ ability to compete or accuracy of its estimates of potential Persons captured by Regulation AT? build liquidity by using market maker or firms that could be considered ‘‘small 113. Would the benefits of Regulation trading incentive programs. Does any entities’’ for RFA purposes. AT be enhanced significantly if the DCM consider it appropriate to provide 110. The Commission also requests definition of Algorithmic Trading were market maker or trading incentive comment on whether any natural modified to capture a conduit entity program benefits for trades between persons will be designated as AT such as a non-clearing FCM, thereby accounts known to be under common Persons under the proposed definition making the entity an AT Person subject beneficial ownership? of that term. to Regulation AT? How would such a 106. In any final rules arising from Related Matters—E. Cost Benefit modification affect costs? 114. Would the benefits of Regulation this NPRM, should the Commission also Considerations prohibit DCMs from providing trading AT be enhanced significantly if the incentive program benefits where such 111. Beyond specific questions definition of Algorithmic Trading were benefits on a per-trade basis are greater interspersed throughout its discussion, expanded to encompass orders that are than the fees charged per trade by such the Commission generally requests generated using algorithmic methods DCMs and its affiliated DCO (if comment on all aspects of its (e.g., an algorithm generates a buy or applicable)? The Commission also consideration of costs and benefits, sell signal at a particular time), but are specifically requests comment on the including: (a) Identification, then manually entered into a front-end extent, if any, to which one or more quantification, and assessment of any system by a natural person? How would DCMs engage in this practice. costs and benefits not discussed therein; such a modification affect costs? Please 107. Proposed § 40.25(b) imposes (b) whether any of the proposed comment on the costs and benefits of an certain transparency requirements with regulations may cause FCMs or DCMs to alternative whereby the Commission respect to both market maker and raise their fees for their customers, or would implement specific rules trading incentive programs. The otherwise result in increased costs for regarding the appropriate design of the Commission requests public comment market participants and, if so, to what specific controls required by Regulation regarding: extent; (c) whether any category of AT and compare them to the costs and a. The most appropriate place or Commission registrants will be benefits of the Commission’s proposal manner for a DCM to disclose the disproportionately impacted by the whereby the relevant entities—trading information required by proposed proposed regulations, and if so whether firms, clearing firms, and DCMs—would § 40.25(b); the burden of any regulations should be have the discretion to determine the b. The benefits or any harm that may appropriately shifted to other appropriate design of those controls. result from such transparency, Commission registrants; (d) what, if any, 115. Does one particular segment of including any anti-competitive effect or costs would likely arise from market trading firms, clearing member FCMs or pro-competitive effect among DCMs or participants engaging in regulatory DCMs (e.g., smaller entities) currently market participants; arbitrage by restructuring their trading implement fewer of the pre-trade and c. Whether transparency as proposed activities to trade on platforms not other risk controls required by in § 40.25(b) is equally appropriate for subject to the proposed regulations, or Regulation AT than some other segment both market maker programs and taking other steps to avoid costs of trading firms, clearing member FCMs trading incentive programs, or are the associated with the proposed or DCMs? If so, please describe any proposed requirements more or less regulations; (e) quantitative estimates of unique or additional costs that will be appropriate for one type of program over the impact on transaction costs and imposed on such persons to develop the the other? liquidity of the proposals contained technology and systems necessary to d. Whether any of the enumerated herein; (f) the potential costs and implement the pre-trade and other risk items required to be posted on a DCM’s benefits of the alternatives that the controls required by Regulation AT. public Web site pursuant to proposed Commission discussed in this release, 116. In question 14, the Commission § 40.25(b) could reasonably be and any other alternatives appropriate asks whether there are any AT Persons considered confidential information that under the CEA that commenters believe who are natural persons. Would AT should not be available to the public, would provide superior benefits relative Persons who are natural persons (or sole
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proprietorships with no employees not currently implement the controls d. § 1.80(e) (self-trade prevention other than the sole proprietor) be and must obtain all applicable tools); and required to hire staff to comply with the technology and systems from an outside e. § 1.80(f) (periodic review of pre- risk control, testing and monitoring, or vendor necessary to comply with trade risk controls and other measures compliance requirements of Regulation Regulation AT. Please include, if for sufficiency and effectiveness). AT? applicable, hardware and software costs 124. The Commission welcomes 117. Do you agree with the accuracy as well as the hourly wage information comment on the estimated costs of the of cost estimates provided by the of the employee(s) necessary to pre-trade risk controls proposed in Commission as to how much it will cost effectuate the implementation of such § 1.80 as compared to the annual a trading firm, clearing member FCM or controls from an outside vendor. industry expenditure on technology, DCM to internally develop the 120. Do you agree with the risk mitigation and/or technology technology and systems necessary to Commission’s estimates of how much it compliance systems. implement the pre-trade and other risk will cost a trading firm, clearing 125. Please comment on the costs to controls required by Regulation AT? If member FCM or DCM to annually AT Persons and clearing member FCMs you disagree with the Commission’s maintain the technology and systems for of complying with DCM rules requiring analysis, please provide your own the pre-trade and other risk controls retention and production of records quantitative estimates, as well as data or required by Regulation AT, if it uses relating to §§ 1.80, 1.81, and 1.82 other information in support. Please internally developed technology and compliance, pursuant to § 40.22(d), specify in your answer the type of entity systems? If not please provide including without limitation on the and which specific pre-trade risk or quantitative estimates and supporting extent to which AT Persons and clearing order management controls for which data or other information with respect to member FCMs already have policies, you are providing estimates. how much it will cost a trading firm, procedures, staffing and technological In addition, please differentiate clearing member FCM or DCM to infrastructure in place to retain such between the situations where an entity annually maintain the technology and records and produce them upon DCM (i) already has partially compliant systems for pre-trade and other risk request. controls in place, and only needs to controls required by Regulation AT, if it 126. The Commission anticipates that upgrade such technology and systems to uses an outside vendor’s technology and Regulation AT may promote confidence bring it into compliance with the systems. among market participants and reduce regulations; and (ii) needs to build such 121. Is it correct to assume that many market risk, consequently reducing technology and systems from scratch. of the trading firms subject to § 1.80 are transaction costs, but has not estimated Please include, as applicable, hardware also subject to the SEC’s Market Access this reduction in transaction costs. The and software costs as well as the hourly Rule, and, accordingly, already Commission welcomes comment on the wage information of the employee(s) implement many of the systems extent to which Regulation AT may necessary to develop such risk controls required by Regulation AT for purposes impact transaction costs and effects on (i.e., technology personnel such as of their securities trading? Please liquidity provision more generally. programmer analysts, senior programmers and senior systems specify in your answer the type of entity AT Person Membership in RFA; RFA analysts). and which specific pre-trade risk or Standards for Automated Trading and 118. The Commission has assumed order management control is already Algorithmic Trading Systems that the effort to adjust any one risk required pursuant to the Market Access 127. The Commission estimates that control (by ‘‘control,’’ in this context, Rule, and the extent of the overlap. the costs of membership in an RFA the Commission means the pre-trade 122. Please comment on the costs and associated with proposed § 170.18 will risk controls, order cancellation benefits (including quantitative encompass certain costs, such as those systems, and connectivity systems estimates with supporting data or other associated with NFA membership dues. required by § 1.80) will require information) to clearing FCMs of an Has the Commission correctly identified assessment and possible modifications alternative to proposed § 1.82 that the costs associated with membership in to all controls. Is this assumption would require clearing FCMs to an RFA? correct, and if not, why not? implement controls with respect to all 128. The Commission expects that 119. As indicated above, the orders, including orders that are entities that will be required to become Commission lacks sufficient information manually submitted or are entered members of an RFA would not incur to provide full estimates of costs that a through algorithmic methods that any additional compliance costs as a trading firm, clearing member FCM or nonetheless do not meet the definition result of their membership in an RFA. DCM will incur if it chooses not to of Algorithmic Trading and compare The Commission requests comment on internally develop such controls, and those costs and benefits to those costs the accuracy of this expectation. What instead purchases the solutions of an and benefits of proposed § 1.82. additional compliance costs, if any, outside vendor in order to comply with 123. Please comment on the would a registrant face as a result of Regulation AT’s pre-trade and other risk additional costs (including quantitative being required to become a member of controls requirements. Please provide estimates with supporting data or other an RFA pursuant to proposed § 170.18? quantitative estimates of such costs, information) to AT Persons of 129. Has the Commission accurately including supporting data or other complying with each of the following estimated that approximately 100 information. In addition, please specify specific requirements of § 1.80: entities will be affected by the in your answer the type of entity and a. § 1.80(a)(2) (pre-trade risk control membership requirements of § 170.18? which specific pre-trade risk or order threshold requirements); 130. The Commission invites management control for which you are b. § 1.80(a)(3) (natural person estimates on the cost to an RFA to providing estimates. In addition, please monitors must be alerted when establish and maintain the program differentiate between the situations thresholds are breached); required by § 170.19, and the amount of where an entity (i) already uses an c. § 1.80(d) (notification to DCM and that cost that will be passed along to outside vendor to at least some extent to clearing member FCM that AT Person individual categories of AT Person implement the controls; and (ii) does will use Algorithmic Trading); members in the RFA.
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Development, Testing, and Supervision 134. Proposed § 1.81(d) requires that membership, and reporting and of Algorithmic Systems AT Persons implement policies to recordkeeping with the Commission), 131. Proposed § 1.81(a) establishes designate and train their staff and indirect costs (e.g. those associated principles-based standards for the responsible for Algorithmic Trading, to risk control requirements placed on development and testing of Algorithmic which policies should include all registered entities). Has the Trading systems and procedures, procedures for designating and training Commission correctly identified the including requirements for AT Persons all staff involved in designing, testing costs associated with the new to test all Algorithmic Trading code and and monitoring Algorithmic Trading. registration category? What firm related systems and any changes to such Are any of the requirements of § 1.81(d) characteristics would change the level code and systems prior to their not already followed by the majority of of direct and indirect costs associated implementation. AT Persons would also market participants that would be with the registration? be required to maintain a source code subject to § 1.81(d), and if so, how much 141. Has the Commission accurately repository to manage source code will it cost for a market participant to estimated that approximately 100 access, persistence, copies of all code comply with such requirement(s)? currently unregistered entities will be captured by the new registration used in the production environment, AT Person and FCM Compliance requirement in proposed § 1.3(x)(3). and changes to such code, among other Reports requirements. Are any of the 142. Has the Commission accurately 135. Please comment on whether any requirements of § 1.81(a) not already estimated that each currently of the alternatives discussed above followed by the majority of market unregistered entity captured by the new regarding compliance reports would participants that would be subject to registration requirement in proposed provide a superior cost-benefit profile § 1.81(a) (or some particular segment of § 1.3(x)(3) will have approximately 10 relative to the Commission’s proposal. market participants), and if so, how persons required to file Form 8–R? much will it cost for a market DCM Test Environments 143. As defined, the new floor trader participant to comply with such category restricts the registration 136. Do any DCMs not currently offer requirement to those who make use of requirement(s)? a test environment that simulates 132. Proposed § 1.81(b) requires that Direct Electronic Access. Is this production trading to their market requirement overly restrictive or unduly an AT Person’s Algorithmic Trading is participants, as would be required by subject to continuous real-time broad from a cost-benefit perspective? proposed § 40.21? If so, how much Are there alternate, or additional, monitoring and supervision by would it cost a DCM to implement a test knowledgeable and qualified staff at all characteristics of trading activity to environment that would comply with determine registration status that would times while Algorithmic Trading is the requirements of § 40.21? occurring. Proposed § 1.81(b) also be preferable from a cost-benefit requires automated alerts when an DCM Review of Compliance Reports standpoint? For example, should Algorithmic Trading system’s AT Order 137. Please comment on the cost persons with trading volume or message Message behavior breaches design estimates provided above with respect volume below a specified threshold be parameters, upon loss of network to DCMs’ review of compliance reports exempted from registration? connectivity or data feeds, or when provided under § 40.22 and related 144. Will any currently unregistered market conditions approach the review requirements, including the entities change their business model or boundaries within which the ATS is estimated cost for DCMs to: Establish exit the market in order to avoid the intended to operate, to the extent the review program required by § 40.22; proposed registration requirement? applicable, among other monitoring review the reports provided by AT 145. The Commission believes that requirements. Are any of the Persons and clearing member FCMs; the risk control protocols required of requirements of § 1.81(b) not already communicate remediation instructions registered entities, specifically those followed by the majority of market to a subset of AT Persons and clearing under the new registration category, will participants that would be subject to member FCMs; and review and provide a general benefit to the safety § 1.81(b), and if so, how much will it evaluate, as necessary, books and and soundness of market activity and cost for a market participant to comply records of AT Persons and clearing price formation. Has the Commission with such requirement(s)? member FCMs as contemplated by correctly identified the type and level of 133. Proposed § 1.81(c) requires that proposed § 40.22(e). benefits which arise from placing these AT Persons implement policies requirements on a new set of significant designed to ensure that Algorithmic Section 15(a) Considerations market participants? Trading operates in a manner that 138. The Commission requests 146. The Commission requests complies with the CEA and the rules comment on its discussion of the effects comment on its discussion of the effects and regulations thereunder. Among of the proposed rules on the of the proposed rules on the other controls, the policies should considerations in Section 15(a) of the considerations in Section 15(a) of the include a plan of internal coordination CEA. CEA. and communication between 139. Are the compliance costs compliance staff of the AT Person and Transparency in Exchange Trade associated with the proposed rules of Matching Systems staff of the AT Person responsible for sufficient magnitude to potentially Algorithmic Trading regarding cause smaller market participants, 147. The Commission anticipates that Algorithmic Trading design, changes, FCMs, or DCMs to cease or scale back costs associated with the transparency testing, and controls. Are any of the operations? Do these costs create requirement would come from some requirements of § 1.81(c) not already significant barriers to entry? additional testing of platform systems followed by the majority of market and from drafting and publishing participants that would be subject to Registration—§ 1.3(x)(3) descriptions of any relevant attributes of § 1.81(c), and if so, how much will it 140. The Commission estimates that the platform. What new costs would be cost for a market participant to comply the costs of registration will encompass associated with providing descriptions with such requirement(s)? direct costs (those associated with NFA of attributes of electronic matching
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platforms that affect market participant that provides, but does not require such 160. To what extent are the costs orders and quotes? tools? Please provide an estimate of the imposed on the DCMs by the proposed 148. Please compare the costs and cost to such a market participant to rule already incurred pursuant to benefits of the alternative of applying initially calibrate and use exchange- existing rules? the transparency requirement only with provided self-trade prevention tools, in 161. To what extent are the benefits respect to latencies within a platform accordance with § 40.23. Please also of the proposed rule currently being and how a self-trade prevention tool comment on any other direct or indirect realized? determines whether to cancel an order costs to a market participant that does 162. Do DCM Web sites currently with the costs and benefits of the not currently use self-trade prevention provide adequate information regarding proposed rule. tools arising from the proposed market-maker and trading incentive 149. What benefits might market requirement to implement such tools. programs, and is such information participants receive through increased 156. The Commission estimates above easily located? transparency into the operation of that the number of market participants electronic matching platforms, 163. To what extent do DCMs that will submit the approval requests currently make payments for self-trades particularly for those market described by § 40.23(c) is approximately participants without direct electronic pursuant to market-maker and trading equivalent to the number of AT Persons. incentive programs? access who may not be able to Please comment on whether the 164. The Commission requests accurately measure latencies or other estimate of the number of market comment on its discussion of the effects metrics of market efficiency? participants submitting such approval of the proposed rules on the 150. The Commission requests requests should be higher or lower. For considerations in Section 15(a) of the comment on its discussion of the effects example, should the estimate be raised CEA. of the proposed rules on the to account for proprietary algorithmic considerations in Section 15(a) of the traders that will not be AT Persons, List of Subjects CEA. because they do not use Direct 17 CFR Part 1 Self-Trade Prevention Electronic Access and therefore will not 151. Please comment on the cost be required to register as floor traders? Commodity futures, Commodity pool estimates described above for DCMs and 157. Proposed § 40.23 provides that operators, Commodity trading advisors, market participants to comply with the DCMs may comply with the Definitions, Designated contract requirements of § 40.23. The requirement to apply, or provide and markets, Floor brokers, Futures Commission is interested in commenter require the use of, self-trade prevention commission merchants, Introducing opinion on all aspects of its analysis, tools by requiring market participants to brokers, Major swap participants, including its estimate of the number of identify to the DCM which accounts Reporting and recordkeeping entities impacted by the proposed should be prohibited from trading with requirements, Swap dealers. regulation and the amount of costs such each other. With respect to this account 17 CFR Part 38 entities may incur to comply with the identification process, the Commission’s regulation. principal goal is to prevent Commodity futures, Designated 152. Please comment on the benefits unintentional self-trading; the contract markets, Reporting and described above. Do you agree with the Commission does not have a specific recordkeeping requirements. interest in regulating the manner by Commission’s position that self-trade 17 CFR Part 40 prevention requirements will result in which market participants identify to more accurate indications of the level of DCMs the account that should be Commodity futures, Definitions, market interest on both sides of the prohibited from trading from each other, Designated contract markets, Reporting market and help ensure arms-length so long as this goal is met. Should any and recordkeeping requirements. other identification methods be transactions that promote effective price 17 CFR Part 170 discovery? Are there additional benefits permitted in § 40.23? For example, to regulatory self-trade prevention please comment on whether the Commodity futures, Commodity pool requirements not articulated above? opposite approach is preferable: Market operators, Commodity trading advisors, 153. Are there any DCMs that neither participants would identify to DCMs the Floor brokers, Futures commission internalize and apply self-trade accounts that should be permitted to merchants, Introducing brokers, Major prevention tools, nor provide self-trade trade with each other (as opposed to swap participants, Reporting and prevention tools to their market those accounts that should be prevented recordkeeping requirements, Swap participants? If so, please provide an from trading with each other). In dealers. estimate of the cost to such a DCM to particular, please comment on whether For the reasons stated in the comply with the requirement under this approach or other identification preamble, the Commodity Futures § 40.23(a) to apply, or provide and methods would reduce costs for market Trading Commission proposes to amend require the use of, self-trade prevention participants or be easier for both market 17 CFR chapter I as follows: tools. participants and DCMs to administer. 154. Would any DCMs that currently 158. The Commission requests PART 1—GENERAL REGULATIONS offer self-trade prevention tools need to comment on its discussion of the effects UNDER THE COMMODITY EXCHANGE update their tools to meet the of the proposed rules on the ACT requirements of § 40.23? If so, please considerations in Section 15(a) of the provide an estimate of the cost to such CEA. ■ 1. The authority citation for part 1 a DCM to comply with the requirements Market-Maker and Trading Incentive continues to read as follows: of § 40.23. Programs Authority: 7 U.S.C. 1a, 2, 5, 6, 6a, 6b, 6c, 155. What percentage of market 6d, 6e, 6f, 6g, 6h, 6i, 6k, 6l, 6m, 6n, 6o, 6p, participants do not currently make use 159. The Commission requests 6r, 6s, 7, 7a–1, 7a–2, 7b, 7b–3, 8, 9, 10a, 12, of exchange-provided self-trade comment on the accuracy of its cost 12a, 12c, 13a, 13a–1, 16, 16a, 19, 21, 23, and prevention tools, when active on a DCM estimates. 24 (2012).
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■ 2. In § 1.3, add paragraphs (x)(3), (tttt), to a designated contract market by an 1.81 Standards for the development, (uuuu), (vvvv), (wwww), (xxxx), (yyyy), AT Person and each change or deletion monitoring, and compliance of and (zzzz) to read as follows: submitted through Algorithmic Trading Algorithmic Trading systems. by an AT Person with respect to such an 1.82 Clearing futures commission merchant § 1.3 Definitions. risk management. order or quote. 1.83 AT Person and clearing member * * * * * (xxxx) AT Person. This term means (x) * * * futures commission merchant reports any person registered or required to be and recordkeeping. (3)(i) Who, in or surrounding any registered as a— other place provided by a contract (1) Futures commission merchant, Subpart A—Requirements for market for the meeting of persons floor broker, swap dealer, major swap Algorithmic Trading similarly engaged purchases or sells participant, commodity pool operator, solely for such person’s own account— § 1.80 Pre-trade risk controls for AT (A) Any commodity for future commodity trading advisor, or Persons. introducing broker that engages in delivery, security futures product, or For all AT Order Messages, an AT Algorithmic Trading on or subject to the swap; or Person shall implement pre-trade risk rules of a designated contract market; or (B) Any commodity option authorized controls and other measures reasonably under section 4c of the Act; and (2) Floor trader as defined in designed to prevent an Algorithmic (ii) Who uses Direct Electronic Access paragraph (x)(3) of this section. Trading Event, including but not limited as defined in paragraph (yyyy) of this (yyyy) Direct Electronic Access. This to: section, in whole or in part, to access term means an arrangement where a (a) Pre-Trade Risk Controls. (1) The such other place for Algorithmic person electronically transmits an order pre-trade risk controls shall include, at Trading; and to a designated contract market, without a minimum, the following: (iii) Who is not registered with the the order first being routed through a (i) Maximum AT Order Message Commission as a futures commission separate person who is a member of a frequency per unit time and maximum merchant, floor broker, swap dealer, derivatives clearing organization to execution frequency per unit time; and major swap participant, commodity which the designated contract market (ii) Order price parameters and pool operator, commodity trading submits transactions for clearing. maximum order size limits. advisor, or introducing broker. (zzzz) Algorithmic Trading. This term (2) Pre-trade risk controls shall be set * * * * * means trading in any commodity at the level of each AT Person, or such (tttt) Algorithmic Trading Compliance interest as defined in paragraph (yy) of other more granular level as the AT Issue. This term means an event at an this section on or subject to the rules of Person may determine, including but AT Person that has caused any a designated contract market, where: not limited to, by product, account Algorithmic Trading of such entity to (1) One or more computer algorithms number or designation, or one or more operate in a manner that does not or systems determines whether to identifiers of natural persons associated comply with the Commodity Exchange initiate, modify, or cancel an order, or with an AT Order Message. Act or the rules and regulations otherwise makes determinations with (3) Natural person monitors at the AT thereunder, the rules of any designated respect to an order, including but not Person shall be promptly alerted when contract market to which such AT limited to: The product to be traded; the pre-trade risk control parameters Person submits orders through venue where the order will be placed; established pursuant to this section are Algorithmic Trading, the rules of any the type of order to be placed; the breached. registered futures association of which timing of the order; whether to place the (b) Order Cancellation Systems. (1) such AT Person is a member, the AT order; the sequencing of the order in Systems that have the ability to: Person’s own internal requirements, or relation to other orders; the price of the (i) Immediately disengage Algorithmic the requirements of the AT Person’s order; the quantity of the order; the Trading; clearing member, in each case as partition of the order into smaller (ii) Cancel selected or up to all resting applicable. components for submission; the number orders when system or market (uuuu) Algorithmic Trading of orders to be placed; or how to manage conditions require it; and Disruption. This term means an event the order after submission; and (iii) Prevent submission of new AT originating with an AT Person that (2) Such order, modification or order Order Messages. (2) Prior to an AT Person’s initial use disrupts, or materially degrades— cancellation is electronically submitted of Algorithmic Trading to submit a (1) The Algorithmic Trading of such for processing on or subject to the rules message or order to a designated AT Person, of a designated contract market; contract market’s trading platform, such (2) The operation of the designated provided, however, that Algorithmic AT Person must notify the designated contract market on which such AT Trading does not include an order, contract market on which it conducts Person is trading, or modification, or order cancellation Algorithmic Trading whether all of its (3) The ability of other market whose every parameter or attribute is resting orders should be cancelled or participants to trade on the designated manually entered into a front-end suspended in the event that the AT contract market on which such AT system by a natural person, with no Person’s Algorithmic Trading system Person is trading. further discretion by any computer disconnects with the trading platform. (vvvv) Algorithmic Trading Event. system or algorithm, prior to its (c) System Connectivity. AT Persons This term means an event at an AT electronic submission for processing on with Direct Electronic Access as defined Person that constitutes— or subject to the rules of a designated in § 1.3(yyyy) shall implement systems (1) An Algorithmic Trading contract market. to indicate on an ongoing basis whether Compliance Issue; or ■ (2) An Algorithmic Trading 3. Add subpart A to read as follows: they have proper connectivity with the Disruption. Subpart A—Requirements for Algorithmic trading platform and any systems used (wwww) AT Order Message. This Trading by a designated contract market to term means each new order or quote Sec. provide the AT Person with market submitted through Algorithmic Trading 1.80 Pre-trade risk controls for AT Persons. data.
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(d) Notification of Algorithmic (v) Procedures for documenting the is responsible for an Algorithmic Trading. Prior to an AT Person’s initial strategy and design of proprietary Trading system during trading hours. use of Algorithmic Trading to submit a Algorithmic Trading software used by (2) Each AT Person shall periodically message or order to a designated an AT Person, as well as any changes to review the effectiveness of the policies contract market’s trading platform, such such software if such changes are and procedures required by this AT Person shall notify its clearing implemented in a production paragraph (b), and take prompt action to member and the designated contract environment. document and remedy deficiencies in market on which it will be trading that (vi) Maintaining a source code such policies and procedures. it will engage in Algorithmic Trading. repository to manage source code (c) Compliance of Algorithmic (e) Self-Trade Prevention Tools. To access, persistence, copies of all code Trading Systems. (1) Each AT Person the extent that implementation of a used in the production environment, shall implement written policies and designated contract market’s self-trade and changes to such code. Such source procedures reasonably designed to prevention tools requires calibration or code repository must include an audit ensure that each of its Algorithmic other action by an AT Person, such AT trail of material changes to source code Trading systems operates in a manner Person shall calibrate or take such other that would allow the AT Person to that complies with the Commodity action as is necessary to apply such determine, for each such material Exchange Act and the rules and tools. change: who made it; when they made regulations thereunder. (f) Periodic Review for Sufficiency and it; and the coding purpose of the (2) Each AT Person shall implement Effectiveness. Each AT Person shall change. Each AT Person shall keep such written policies and procedures periodically review its compliance with source code repository, and make it requiring: (i) Staff of the AT Person to review this section to determine whether it has available for inspection, in accordance Algorithmic Trading systems in order to effectively implemented sufficient with § 1.31. detect potential Algorithmic Trading measures reasonably designed to (2) Each AT Person shall periodically Compliance Issues. Procedures shall prevent an Algorithmic Trading Event. review the effectiveness of the policies indicate that such staff shall include Each AT Person shall take prompt and procedures required by this staff of the AT Person familiar with the action to remedy any deficiencies it paragraph (a), and take prompt action to Commodity Exchange Act and the rules identifies. document and remedy deficiencies in and regulations thereunder, the rules of such policies and procedures. § 1.81 Standards for the development, any designated contract market to which monitoring, and compliance of Algorithmic (b) Monitoring of Algorithmic Trading such AT Person submits AT Order Trading systems. Systems. (1) Each AT Person shall Messages, the rules of any registered (a) Development and testing of implement written policies and futures association of which such AT Algorithmic Trading Systems. (1) Each procedures reasonably designed to Person is a member, the AT Person’s AT Person shall implement written ensure that each of its Algorithmic own internal requirements, and the policies and procedures for the Trading systems is subject to continuous requirements of the AT Person’s development and testing of its real-time monitoring by knowledgeable clearing member, in each case as Algorithmic Trading systems. Such and qualified staff while such applicable. policies and procedures shall at a Algorithmic Trading system is engaged (ii) A plan of internal coordination minimum include the following: in trading. Such policies and procedures and communication between (i) Maintaining a development shall at a minimum include the compliance staff of the AT Person and environment that is adequately isolated following: staff of the AT Person responsible for from the production trading (i) Continuous real-time monitoring of Algorithmic Trading regarding environment. The development Algorithmic Trading to identify Algorithmic Trading design, changes, environment may include computers, potential Algorithmic Trading Events. testing, and controls, which plan should networks, and databases, and should be (ii) Automated alerts when an be designed to detect and prevent used by software engineers while Algorithmic Trading system’s AT Order Algorithmic Trading Compliance Issues. developing, modifying, and testing Message behavior breaches design (3) Each AT Person shall periodically source code. parameters, upon loss of network review the effectiveness of the policies (ii) Testing of all Algorithmic Trading connectivity or data feeds, or when and procedures required by this code and related systems and any market conditions approach the paragraph (c), and take prompt action to changes to such code and systems prior boundaries within which the document and remedy deficiencies in to their implementation, including Algorithmic Trading system is intended such policies and procedures. testing to identify circumstances that to operate, to the extent applicable. (d) Designation and training of may contribute to future Algorithmic (iii) Monitoring staff of the AT Person Algorithmic Trading staff. (1) Each AT Trading Events. Such testing must be shall have the ability and authority to Person shall implement written policies conducted both internally within the disengage an Algorithmic Trading and procedures to designate and train AT Person and on each designated system and to cancel resting orders its staff responsible for Algorithmic contract market on which Algorithmic when system or market conditions Trading. Such policies and procedures Trading will occur. require it, including the ability to shall at a minimum include the (iii) Regular back-testing of contact staff of the applicable following: Algorithmic Trading using historical designated contract market and clearing (i) Procedures for designating and transaction, order, and message data to firm, as applicable, to seek information training all staff involved in designing, identify circumstances that may and cancel orders. Such monitoring staff testing and monitoring Algorithmic contribute to future Algorithmic Trading must also have dashboards and control Trading, and documenting training Events. panels to monitor and interact with the events. Training must, at a minimum, (iv) Regular stress tests of Algorithmic Algorithmic Trading systems for which cover design and testing standards, Trading systems to verify their ability to they are responsible. Algorithmic Trading Event operate in the manner intended under a (iv) Procedures that will enable AT communication procedures, and variety of market conditions. Persons to track which monitoring staff requirements for notifying staff of the
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applicable designated contract market the pre-trade risk controls and order (2) A certification by the chief when Algorithmic Trading Events cancellation systems provided by executive officer or chief compliance occur. designated contract markets pursuant to officer of the futures commission (ii) Training policies reasonably § 38.255(b) and (c) of this chapter. merchant that, to the best of his or her designed to ensure that natural person (c) Non-Direct Electronic Access knowledge and reasonable belief, the monitors are adequately trained for each orders. For all AT Order Messages information contained in the report is Algorithmic Trading system or strategy originating with an AT Person that are accurate and complete. (or material change to such system or not submitted to a trading platform (c) AT Person recordkeeping. Each AT strategy) for which such monitors are through Direct Electronic Access as Person shall keep, and provide upon responsible. Training must include, at a defined in § 1.3(yyyy), the futures request to each designated contract minimum, the trading strategy for the commission merchant that is the market on which such AT Person Algorithmic Trading as well as the clearing member for the AT Person shall engages in Algorithmic Trading, books automated and non-automated risk comply with the requirements of and records regarding such AT Person’s controls that are applicable to the paragraphs (a)(1), (2), and (4) of this compliance with all requirements Algorithmic Trading. section by itself establishing and pursuant to §§ 1.80 and 1.81. (iii) Escalation procedures to inform maintaining the pre-trade risk controls (d) Clearing member futures senior staff of the AT Person as soon as and order cancellation systems commission merchant recordkeeping. Algorithmic Trading Events are described therein. Each futures commission merchant that identified. is a clearing member for an AT Person (2) Each AT Person shall periodically § 1.83 AT Person and clearing member shall keep, and provide upon request to review the effectiveness of the policies futures commission merchant reports and recordkeeping. each designated contract market on and procedures required by this which such AT Person engages in (a) AT Person Reports. Each AT paragraph (d), and take prompt action to Algorithmic Trading, books and records Person shall annually prepare a report document and remedy deficiencies in regarding such clearing member futures and submit such report by June 30 to such policies and procedures. commission merchant’s compliance each designated contract market on with all requirements pursuant to § 1.82. § 1.82 Clearing member futures which such AT Person engaged in commission merchant risk management. Algorithmic Trading. Together with the PART 38—DESIGNATED CONTRACT (a) For all AT Order Messages annual report, each AT Person shall MARKETS originating with an AT Person, the submit copies of the written policies futures commission merchant that is the and procedures developed to comply ■ 4. The authority citation for part 38 clearing member for such AT Person with § 1.81(a) and (c). Such report shall continues to read as follows: shall comply with the following cover the time period from May 1 of the Authority: 7 U.S.C. 1a, 2, 6, 6a, 6c, 6d, 6e, requirements: previous year to April 30 of the year 6f, 6g, 6i, 6j, 6k, 6l, 6m, 6n, 7, 7a–2, 7b, 7b– (1) Make use of pre-trade risk controls such report is submitted. The report 1, 7b–3, 8, 9, 15, and 21, as amended by the reasonably designed to prevent or shall include the following: Dodd-Frank Wall Street Reform and mitigate an Algorithmic Trading (1) A description of the pre-trade risk Consumer Protection Act, Pub. L. 111–203, Disruption, including at a minimum, controls required by § 1.80(a), including 124 Stat. 1376. those pre-trade risk controls described a description of each item enumerated ■ 5. Revise § 38.255 to read as follows: in § 1.80(a)(1). in § 1.80(a) and a description of all (2) Pre-trade risk controls must be set parameters and the specific quantitative § 38.255 Risk controls for trading. at the level of each AT Person, or such settings used by the AT Person for such (a) The designated contract market other more granular level as the clearing pre-trade risk controls; and must establish and maintain risk control futures commission merchant may (2) A certification by the chief mechanisms to prevent and reduce the determine, including but not limited to, executive officer or chief compliance potential risk of price distortions and by product, account number or officer of the AT Person that, to the best market disruptions, including, but not designation, or one or more identifiers of his or her knowledge and reasonable limited to, market restrictions that pause of natural persons associated with an belief, the information contained in the or halt trading in market conditions AT Order Message. report is accurate and complete. prescribed by the designated contract (3) The futures commission merchant (b) Clearing member futures market. shall have policies and procedures commission merchant reports. Each (b) For all AT Order Messages reasonably designed to ensure that futures commission merchant that is a originating with an AT Person that are natural person monitors at the clearing clearing member for one or more AT submitted to a designated contract futures commission merchant are Person(s) shall annually prepare and market through Direct Electronic Access promptly alerted when pre-trade risk submit a report by June 30 to each as defined in § 1.3(yyyy) of this chapter, control parameters established pursuant designated contract market on which the designated contract market shall to this section are breached. such AT Person(s) engaged in make available to the clearing member (4) Make use of the order cancellation Algorithmic Trading. Such report shall futures commission merchant for such systems described in § 1.80(b)(1). cover the time period from May 1 of the AT Person effective systems and (b) Direct Electronic Access orders. previous year to April 30 of the year controls, reasonably designed to For all AT Order Messages originating such report is submitted. The report facilitate the items enumerated below: with an AT Person submitted to a shall include the following: (1) The clearing member futures trading platform through Direct (1) A description of the clearing commission merchant’s management of Electronic Access as defined in member futures commission merchant’s the risks, pursuant to § 1.82(a)(1) and (2) § 1.3(yyyy), the futures commission program for establishing and of this chapter, that may arise from such merchant that is the clearing member for maintaining the pre-trade risk controls AT Person’s Algorithmic Trading using the AT Person shall comply with the required by § 1.82(a)(1) for its AT Direct Electronic Access. requirements of paragraphs (a)(1), (2), Persons at the designated contract (i) Such systems and controls shall and (4) of this section by implementing market; and include, at a minimum, the pre-trade
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risk controls described in § 1.80(a)(1) of the dissemination of real-time market the specific array of controls that are this chapter. data to market participants, including selected, the designated contract market also (ii) Such systems shall, at a minimum, but not limited to latencies or other must set the parameters for those controls, so enable the clearing member futures long as the types of controls and their variability in the electronic matching specific parameters are reasonably likely to commission merchant to set the pre- platform and the transmission of serve the purpose of preventing market trade risk controls at the level of each message acknowledgements, order disruptions and price distortions, or as they such AT Person, product, account confirmations, or trade confirmations, or are otherwise required to be designed number or designation, and one or more dissemination of market data. pursuant to Commission regulation. If a identifiers of natural persons associated (2) Through the procedures, contract is linked to, or is a substitute for, with an AT Order Message. Designated arrangements and resources required in other contracts, either listed on its market or contract market rules should permit paragraph (a) of this section, the on other trading venues, the designated contract market must, to the extent clearing member futures commission designated contract market must ensure practicable, coordinate its risk controls with merchants to choose the level at which public dissemination of information any similar controls placed on those other they place control, so long as clearing pertaining to new product listings, new contracts. If a contract is based on the price member futures commission merchants rules, rule amendments, rules pertaining of an equity security or the level of an equity use at least one of the levels. to the operation of the electronic index, such risk controls must, to the extent (2) The clearing member future matching platform or trade execution practicable, be coordinated with any similar commission merchant’s ability, facility, known attributes of its controls placed on national security pursuant to § 1.82(a)(4) of this chapter, electronic trading platform under exchanges. to make use of the order cancellation paragraph (a)(1)(iv) of this section, or * * * * * systems described in § 1.80(b)(1) of this other changes to previously-disclosed PART 40—PROVISIONS COMMON TO chapter. The designated contract market information, in accordance with the REGISTERED ENTITIES shall enable the clearing member future timeline provided in paragraph (c) of commission merchant to apply such this section. ■ 8. The authority citation for part 40 order cancellation systems to orders * * * * * continues to read as follows: from each such AT Person, product, (c) * * * Authority: 7 U.S.C. 1a, 2, 5, 6, 7, 7a, 8 and account number or designation, or one (3) A designated contract market, in 12, as amended by Titles VII and VIII of the or more identifiers of natural persons making available on its Web site Dodd-Frank Wall Street Reform and associated with an AT Order Message. information pursuant to paragraphs Consumer Protection Act, Pub. L. 111–203, (c) A designated contract market that (a)(1)(iii) and (iv) of this section, shall 124 Stat. 1376 (2010). permits Direct Electronic Access as place such information and submissions ■ 9. Revise § 40.1(i) to read as follows: defined in § 1.3(yyyy) of this chapter on its Web site within a reasonable time, shall also require clearing member but no later than 10 business days, § 40.1 Definitions. futures commission merchants to use following the identification of or * * * * * the systems and controls described in changes to such attributes. Such (i) Rule means any constitutional paragraph (b) of this section with information shall be disclosed provision, article of incorporation, respect to all AT Order Messages prominently and clearly in plain bylaw, rule, regulation, resolution, originating with an AT Person that are English. interpretation, stated policy, advisory, submitted through Direct Electronic * * * * * terms and conditions, market maker or Access. ■ 7. In Appendix B to part 38, in the trading incentive program, trading ■ 6. Amend § 38.401 as follows: paragraph with the subject heading Core protocol (including but not limited to ■ a. Revise paragraph (a)(1)(iii); Principle 4 of section 5(d) of the Act: any operation of an electronic matching ■ b. Add paragraph (a)(1)(iv); PREVENTION OF MARKET platform that materially affects the time, ■ c. Revise paragraph (a)(2); and DISRUPTION, revise paragraph (b)(5) to priority, price, or quantity of execution ■ d. Add paragraph (c)(3). read as follows: of market participant orders, the ability ■ The revisions and additions read as to cancel, modify, or limit display of follows: Appendix B to Part 38—Guidance on, market participant orders, or the and Acceptable Practices in, § 38.401 General requirements. dissemination of real-time market data Compliance With Core Principles to market participants), agreement or (a) * * * (1) * * * * * * * * instrument corresponding thereto, (iii) Rules and specifications including those that authorize a pertaining to the operation of the Core Principle 4 of section 5(d) of the Act: PREVENTION OF MARKET DISRUPTION response or establish standards for electronic matching platform or trade * * * * * responding to a specific emergency, and execution facility, including but not any amendment or addition thereto or limited to those pertaining to the (b) * * * (5) Risk controls for trading. An acceptable repeal thereof, made or issued by a operation of its electronic matching program for preventing market disruptions registered entity or by the governing platform that materially affect the time, must demonstrate appropriate trade risk board thereof or any committee thereof, priority, price, or quantity of execution, controls, in addition to pauses and halts. in whatever form adopted. or the ability to cancel, modify, or limit Such controls must be adapted to the unique display of market participant orders. characteristics of the markets to which they * * * * * (iv) Any known attributes of the apply and must be designed to avoid market §§ 40.13 through 40.19 [Reserved] disruptions without unduly interfering with electronic matching platform, other than ■ that market’s price discovery function. The 10. Add reserved §§ 40.13 through those already disclosed in rules or 40.19. specifications under paragraph (a)(1)(iii) designated contract market must employ the pre-trade risk controls specified in the ■ 11. Add §§ 40.20 through 40.23 to of this section, that materially affect the Commission’s regulations (including read as follows: time, priority, price, or quantity of applicable regulations contained in part 40 of execution of market participant orders, this chapter), and may employ additional § 40.20 Risk controls for trading. the ability to cancel, modify, or limit controls that the designated contract market A designated contract market shall display of market participant orders, or believes are appropriate to its market. Within implement pre-trade and other risk
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controls reasonably designed to prevent section for orders that do not originate with all requirements pursuant to § 1.82 an Algorithmic Trading Disruption (or, from Algorithmic Trading, after making of this chapter; and pursuant to paragraph (d) of this any adjustments to the mechanisms that (e) Review and evaluate, as necessary, section, similar disruption resulting the designated contract market books and records required to be kept from orders that originate from manual determines are appropriate for such pursuant to paragraph (d) of this order entry or other non-Algorithmic orders. section, and the measures described Trading) or an Algorithmic Trading (2) [Reserved] therein. An appropriate review shall Compliance Issue, including at a include measures by the designated § 40.21 DCM test environments. minimum all of the following: contract market reasonably designed to (a) Pre-trade risk controls. Pre-trade (a) A designated contract market shall identify and remediate any insufficient risk controls reasonably designed to provide a test environment that will mechanisms, policies, and procedures address the risks from Algorithmic enable AT Persons to simulate described in such books and records. Trading on a designated contract production trading. Such test § 40.23 Self-trade prevention tools. market. environment shall provide access to (1) The pre-trade risk controls to be historical transaction, order and (a) A designated contract market shall established and used by a designated message data and shall also enable AT implement rules reasonably designed to contract market shall include, at a Persons to conduct conformance testing prevent self-trading by market minimum, those described in of their Algorithmic Trading systems to participants, except as specified in § 1.80(a)(1) of this chapter. verify compliance with the paragraph (b) of this section. ‘‘Self- (2) At a minimum, the pre-trade risk requirements of §§ 1.80(a) through (c) trading’’ is defined for purposes of this controls established and used pursuant and 1.81(a)(1)(ii) through (iv) and (c)(1) section as the matching of orders for to this section shall be set at the level of this chapter. accounts that have common beneficial of each AT Person. Designated contract (b) [Reserved] ownership or are under common markets must also evaluate whether to control. A designated contract market § 40.22 DCM review of compliance reports; shall either apply, or provide and establish pre-trade risk controls at a maintenance of books and records. more granular level, including at a require the use of, self-trade prevention A designated contract market shall minimum, by product or one or more tools that are reasonably designed to comply with the following: identifiers of natural persons associated prevent self-trading and are applicable (a) Review of reports. Implement rules with an AT Order Message. Where to all orders on its electronic trade that require each AT Person that trades deemed appropriate by the designated matching platform. For purposes of on the designated contract market, and contract market, pre-trade risk controls complying with this requirement, a each futures commission merchant that should be set at such more granular designated contract market may either is a clearing member of a derivatives levels. determine for itself which accounts (3) A designated contract market shall clearing organization for such AT should be prohibited from trading with have policies and procedures reasonably Person, to submit the reports described each other, or require market designed to ensure that natural person in § 1.83(a) and (b), respectively, of this participants to identify to the designated monitors at such designated contract chapter; contract market which accounts should (b) Submission date. Require the market are promptly alerted when pre- be prohibited from trading with each submission of such reports by June 30th trade risk control parameters established other. of each year; pursuant to this section are breached. (b) Notwithstanding the foregoing, a (b) Order cancellation systems. (1) (c) Review program. Establish a designated contract market may, in its Order cancellation systems that have the program for effective periodic review discretion, implement rules that permit ability to: and evaluation of reports described in self-trading described in paragraphs (i) Perform the actions described in paragraph (a) of this section, and of the (b)(1) or (b)(2) of this section to occur, § 1.80(b)(1) of this chapter with respect measures described therein. An effective in each case subject to the requirements to orders from AT Persons; and program shall include measures by the of paragraph (c) of this section: (ii) Cancel or suspend all resting designated contract market reasonably (1) A self-trade resulting from the orders from AT Persons in the event of designed to identify and remediate any matching of orders for accounts with disconnect with the trading platform. insufficient mechanisms, policies and common beneficial ownership where (2) [Reserved] procedures described in such reports, such orders are initiated by independent (c) System connectivity. (1) Systems including identification and decision makers. A designated contract that enable the systems of an AT Person remediation of any inadequate market may through its rules further with Direct Electronic Access as defined quantitative settings or calibrations of define for its market participants in § 1.3(yyyy) of this chapter to indicate pre-trade risk controls required of AT ‘‘independent decision makers.’’ to the AT Person on an ongoing basis Persons pursuant to § 1.80(a) of this (2) A self-trade resulting from the whether the AT Person has proper chapter; matching of orders for accounts under connectivity with— (d) Maintenance of books and records. common control where such orders (i) The designated contract market’s Implement rules that require each AT comply with the designated contract trading platform, and Person to keep and provide to the market’s cross-trade, minimum (ii) Any systems used by the designated contract market books and exposure requirements or similar rules, designated contract market to provide records regarding such AT Person’s and are for accounts that are not under the AT Person with market data. compliance with all requirements common beneficial ownership. (2) [Reserved] pursuant to §§ 1.80 and 1.81 of this (c) A designated contract market may (d) Risk control mechanisms for chapter, and require each clearing permit self-trading described in manual order entry and other non- member futures commission merchant paragraph (b) of this section only if the Algorithmic Trading. (1) A designated to keep and provide to the designated designated contract market: contract market shall implement the risk contract market books and records (1) Requires market participants to control mechanisms described in regarding such clearing member futures request approval from the designated paragraphs (a) and (b)(1)(i) of this commission merchant’s compliance contract market that self-trade
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prevention tools not be applied with (3) A list of all products or services to § 40.26 Information requests from the respect to specific accounts under which the market maker or trading Commission or the Director of the Division common beneficial ownership or incentive program applies; of Market Oversight. control, on the basis that they meet the (4) A description of any eligibility (a) Upon request by the Commission criteria of paragraph (b) of this section. criteria or categories of market or the Director of the Division of Market The designated contract market must participants defining who may Oversight, a designated contract market require that such approval request be participate in the market maker or shall provide such information and data provided to it by a compliance officer or trading incentive program; as may be requested regarding senior officer of the market participant; (5) For any market maker or trading participation in market maker or trading and incentive program that is not open to all incentive programs offered by the (2) Requires market participants to market participants, an explanation of designated contract market, including withdraw or amend an approval request why such program is limited to the but not limited to, individual program if any change occurs that would cause chosen eligibility criteria or categories agreements, names of program the information provided in such of market participants, and an participants, benchmarks achieved by approval request to be no longer explanation of how such limitation program participants, and payments or accurate or complete. complies with the impartial access and other benefits conferred upon program (d) For each product and expiration comparable fee structure requirements participants. month traded on a designated contract of § 38.151(b) of this chapter for (b) [Reserved] market in the previous quarter, the designated contract markets; § 40.27 Payment for trades with no change designated contract market must (6) An explanation of how persons in ownership prohibited. prominently display on its Web site the eligible for the market maker or trading (a) A designated contract market shall following information: incentive program may apply to implement policies and procedures (1) The percentage of trades in such participate, and how eligibility will be reasonably designed to prevent the product including all expiration months evaluated by the designated contract payment of market maker or trading that represent self-trading approved market; incentive program benefits, including (pursuant to paragraph (c) of this (7) A description of any payments, but not limited to payments, discounts, section) by the designated contract incentives, discounts, considerations, or other considerations, for trades market, expressed as a percentage of all inducements or other benefits that between accounts that are: trades in such product and expiration market maker or trading incentive (1) Identified to such designated month; program participants may receive, contract market as under common (2) The percentage of volume of including any non-financial incentives; beneficial ownership pursuant to the trading in such product including all and approval process described in § 40.23(c); expiration months that represents self- (8) A description of the obligations, or trading approved (pursuant to paragraph benchmarks, or other measures that a (2) Otherwise known to the (c) of this section) by the designated participant in a market maker or trading designated contract market as under contract market, expressed as a incentive program must meet to receive common ownership. percentage of all volume in such the benefits described in paragraph (b) [Reserved] product and expiration month; and (a)(7) of this section. (3) The ratio of orders in such product § 40.28 Surveillance of market maker and (9) A description of any legal trading incentive programs. and expiration month whose matching affiliation between the designated was prevented by the self-trade contract market and any entity acting as (a) A designated contract market, prevention tools described in paragraph a market maker or participating in a consistent with its obligations pursuant (a) of this section, expressed as a ratio market maker program. to subpart C of part 38 of this chapter, shall review all benefits accorded to of all trades in such product and (b) In addition to any public notice participants in market maker and expiration month. required pursuant to this part (including trading incentive programs, including without limitation the requirements of § 40.24 [Reserved] but not limited to payments, discounts, §§ 40.5(a)(6) and 40.6(a)(2)) of this ■ 12. Add reserved § 40.24. or other considerations, to ensure that chapter a designated contract market ■ 13. Add §§ 40.25 through 40.28 to such benefits are not earned through shall ensure that the information read as follows: abusive practices. required by paragraphs (a)(1) through (b) [Reserved] § 40.25 Additional public information (a)(8) of this section is easily located on required for market maker and trading its public Web site from the time that PART 170—REGISTERED FUTURES incentive programs. such designated contract market begins ASSOCIATIONS (a) When submitting a Rule regarding accepting participants in the market a market maker or trading incentive maker or trading incentive program ■ 14. The authority citation for part 170 program pursuant to § 40.5 or § 40.6, a through the time that it ceases operation continues to read as follows: designated contract market shall, in of the market maker or trading incentive Authority: 7 U.S.C. 6d, 6m, 6p, 6s, 12a, and addition to information required by program. 21. such sections, include the following (c) A designated contract market shall ■ 15. Add § 170.18 to subpart C to read information in its public Rule filing: notify the Commission upon the as follows: (1) The name of the market maker termination of a market maker or trading program or trading incentive program, incentive program prior to the § 170.18 AT Persons. the date on which it is scheduled to termination date previously notified to Each registrant, as defined in begin, and the date on which it is the Commission; any extension or § 1.3(oooo) of this chapter, that is an AT scheduled to terminate (if applicable); renewal of a market maker or trading Person, as defined in § 1.3(xxxx) of this (2) An explanation of the specific incentive program beyond its original chapter, that is not otherwise required purpose for the market maker or trading termination date shall require a new to be a member of a futures association incentive program; Rule filing pursuant to this part. that is registered under Section 17 of the
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Act pursuant to §§ 170.15, 170.16, or Automated trading has brought many and I believe it is important to achieving a 170.17 of this chapter must become and benefits to market participants. These sound framework. But in doing so, we must remain a member of at least one futures include more efficient execution, lower seek efficiency, and avoid conflicting or association that is registered under spreads and greater transparency. But its unnecessary requirements at multiple levels. extensive use also raises important policy In order to make the multi-level approach Section 17 of the Act and that provides and supervisory questions and concerns. effective, we are proposing to require the for the membership therein of such The Commission has already taken a registration of proprietary traders who engage registrant, unless no such futures number of steps to respond to the in algorithmic trading on our regulated association is so registered. development of automated trading in our exchanges via ‘‘direct electronic access.’’ ■ 16. Add subpart D, consisting of markets. Following the 2010 ‘‘Flash Crash,’’ Today, our staff estimates that roughly 35 § 170.19, to read as follows: the CFTC worked with the SEC to establish percent of the futures trading in our markets certain controls to minimize the risk of is done by traders who use direct electronic Subpart D—Standards for Automated market disruptions. The Commission has also access and are not registered with us. A Trading and Algorithmic Trading required clearing members to implement registration requirement will ensure that all Systems policies and procedures governing the use of those with direct electronic access to our automated trading programs. We have also markets are complying with pre-trade risk § 170.19 RFA Standards for Automated required automatic screening of orders for controls, testing and other requirements. And Trading and Algorithmic Trading Systems. compliance with risk limits if they are it would enhance the Commission’s ability to (a) A registered futures association automatically executed. carry out its oversight responsibilities. But as markets continue to evolve, it is While we believe a registration must establish and maintain a program important to continue looking at this issue. requirement is appropriate, we have also for the prevention of fraudulent and Therefore, in September 2013, the invited market participants to comment on manipulative acts and practices, the Commission issued a Concept Release that whether there are alternatives that can protection of the public interest, and requested public comment on the necessity achieve the proposal’s underlying objectives. perfecting the mechanisms of trading on and operation of a variety of risk controls and We have also asked whether the registration designated contract markets by adopting measures. The Commission received many requirement should be limited to trading rules for each category of member, as written comments and also held a meeting of firms meeting certain volume, order or deemed appropriate by the registered its Technological Advisory to discuss the message levels—or be based on other futures association, requiring: issues raised. It served as a very useful way characteristics. Further, we are seeking (1) Pre-trade risk controls and other to understand existing industry practices and comment on whether all firms trading discuss what further actions might make through direct electronic access should be measures for algorithmic trading sense. required to register, even if they are not using systems; The proposal approved today addresses algorithmic trading. (2) Standards for the development, several areas discussed in the Concept We believe that many of the requirements testing, monitoring, and compliance of Release, and incorporates much of that we are proposing for trading firms represent algorithmic trading systems; public input. It focuses on minimizing the the best practices already followed by many (3) Designation and training of potential for disruptions and other larger firms. However, we know that a faulty algorithmic trading staff; and operational problems that may arise from the algorithm at a single firm, regardless of size, (4) Operational risk management automation of order origination, transmission can potentially cause a significant problem. standards for clearing member futures or execution. They may come about due to As a result, we have proposed standards that commission merchants with respect to malfunctioning algorithms, inadequate are applicable regardless of the size or similar customer orders originating with testing of algorithms, errors and similar attributes of a trading firm. We also are problems. cognizant of the importance of establishing algorithmic trading systems. No set of rules can prevent all such effective standards without creating barriers (b) [Reserved] problems. But that doesn’t discharge us from to entry for small firms. So we welcome Issued in Washington, DC, on November our duty to take reasonable measures to comment on whether these requirements 27, 2015, by the Commission. minimize these risks. It is our responsibility should vary in any way depending on the Christopher J. Kirkpatrick, as regulators to create a framework that size or activity level of the trading firm. Secretary of the Commission. promotes the integrity of these markets. And We have also proposed certain risk I believe this proposed rule helps do that. controls for clearing member futures Note: The following appendices will not Our futures market infrastructure is already commission merchants (FCMs) with respect appear in the Code of Federal Regulations. very strong. Our regulatory framework—and to their customers engaged in algorithmic the controls and measures that exist at the trading. FCMs play a critical role in overall Appendices to Regulation Automated exchange and clearing member level in risk management. As I noted earlier, they Trading—Commission Voting particular—have helped create the best have implemented measures already to Summary, Chairman’s Statement, and futures markets in the world. Our proposal require order limits and screening of orders. Commissioners’ Statements seeks to maintain that strength as our markets We believe the requirements we are evolve further. proposing today help achieve an effective Appendix 1—Commission Voting We have proposed a number of measures multi-layered approach. Summary that largely reflect what are industry best We have asked for public comment on practices to minimize the risk of disruptions whether there are any aspects of the required On this matter, Chairman Massad and and similar problems. We have tried to be controls that may pose an undue burden on Commissioners Bowen and Giancarlo voted principles-based. We have set forth clearing member FCMs or that are in the affirmative. No Commissioner voted in requirements for certain controls, but we unnecessary for reducing the risks associated the negative. have avoided prescribing the parameters or with algorithmic trading. We’ve also asked Appendix 2—Statement of Chairman levels at which they should be set. The about what technological development Timothy G. Massad proposed risk controls will apply regardless would be required by clearing members to of whether the automated trading is high- or comply with some requirements of this Today, the Commission has approved a low-frequency. The proposal does not define proposal. proposal that addresses the increased use of high frequency trading. I’ve said frequently that it’s very important automated trading in our markets. I strongly A key principal of this proposed rule is to that we have a robust clearing member support this important action. In the futures have risk controls at three levels—the industry and that all customers—particularly markets, today almost all trading is electronic exchange level, clearing member level and smaller ones—are able to access the markets in some form. And over the last few years, trading firm level. Market participants effectively and efficiently. We want to make more than 70 percent of all trading has generally supported this multi-level sure this proposal is consistent with become automated. approach in response to the Concept Release, achieving that objective.
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We have also included measures on some that is a risk that I believe we must not take. trading. I therefore hope we’ll get comments additional topics not covered in the Concept Recent events have raised important on this proposal from a wide swath of Release. These include provisions to increase questions about the impact and role of stakeholders, from industry experts, to end- transparency for exchanges’ electronic trade algorithmic trading in our markets. As I said users being impacted by this technology, to matching platforms, as well as for market earlier, this fall, ‘‘Even though the amount of even ordinary investors and consumers maker and trading incentive programs, which algorithmic trading and definitions of these concerned about the potential effects of have become more significant as automated various terms are not crystal clear, what is algorithmic trading on commodity prices. I trading has increased. clear is trades involving algorithms make up do not expect that everyone will have the There are concerns that have been raised a substantial portion of our markets, and same views on this subject or that there will with respect to automated trading that also go algorithms can and do malfunction at times, be unanimity of opinion on any part of this beyond the scope of this proposal. These with negative effects on the markets. As a rule. Even though I’ve only been in include whether our markets are best served result, I believe we are obligated to consider Washington for a year and a half, I’m by this speed, and what are its impacts on if it is prudent to establish some regulations experienced enough to know that people volatility and liquidity? These are important on algorithmic trading in our markets.’’ 5 have different opinions on high-visibility topics for market participants and the Today, we begin the process of potentially issues like this one. However, I do encourage Commission to continue to study and establishing those regulations. From what I people to comment so that we can get a full discuss. have seen, I believe we now owe it to market and fair read of popular opinion on both this This proposal provides some common- participants, investors, and ordinary proposal and the topic in general. And if sense risk controls that I believe embrace the consumers to ensure that a reasonable level people have concrete evidence that benefits that automated trading has brought of regulation exists over this new trading algorithmic trading is distorting markets and to our markets, while also protecting against technology. I have said such regulation needs to be curtailed, please submit it via a the increased possibility of breakdowns and should include requirements that entities comment. disruptions that come with it. We utilizing algorithms to trade must use risk There are a few sections of this rule on encourage—and welcome—public comment, management strategies, be required to which I think public comment would be which will carefully be taken into account disclose information to regulators, and have particularly helpful. First, the proposal’s before we take any final action. people who understand the Commodity sixth and seventh questions ask about the Exchange Act and our regulations involved nature of our proposed definition of Appendix 3—Concurring Statement of in the creation and maintenance of their algorithmic trading, including whether we Commissioner Sharon Y. Bowen algorithms. I think this proposed regulation should expand ‘‘the definition of Algorithmic I want to thank the Commission staff for meets that standard and does so in a way that Trading to encompass orders that are the time they have devoted to the proposed allows for innovation and continued generated using algorithmic methods . . . but rule on automated trading. It is a timely development of this nascent technology. are then manually entered into a front-end topic. Having said what I think lies at the core system by a natural person. . . .’’ The As I have previously said, our markets of this regulation, let me also be clear about definition of algorithmic trading is at the have seen immense technological change what this regulation is not. The rule before heart of this proposal, and we need over the last fifteen years.1 Futures trading us today should not substantially change comments on this point. If there is evidence used to involve ‘‘throngs of traders with how many firms utilize algorithms. If, as I that a form of algorithmic trading poses jackets and badges using hand-gestures’’ to hope, a firm already uses risk management systemic risks but is not captured by this purchase futures and options.2 That trading strategies, has various protections against definition, we should expand the definition structure has largely disappeared, with even malfunctions in place, and retains the to expand to cover that form of trading. CME closing the vast majority of its futures services of talented attorneys, this new Second, section 1.83(a) of the proposal pits this summer. Meanwhile, algorithmic regulation will not create significant new requires that persons engaged in algorithmic trading has substantially increased. Algo burdens for that firm. In effect, this trading and registered as such with the trading comprised less than 10% of futures rulemaking largely formalizes and mandates Commission must prepare and submit an volume at the turn of the millennium.3 Yet, firms involved in algorithmic trading to annual report to the Commission. These ‘‘per CFTC staff’s estimates, for the most engage in a variety of practices that they persons are required to include in their liquid U.S. futures contracts which account should already be doing for their own reports a description of the pre-trade risk for over 75% of total trading volume, more protection. controls in place, copies of policies crafted to than 90 percent of all trades make use of I expect that some observers will have comply with requirements regarding the algorithms or some other form of issues with this regulation for not doing more testing and development of algorithmic automation.’’ 4 Of course, these estimates are to constrain the growth and use of trading systems and how their algorithmic just that, estimates. We still do not have algorithmic trading, and I expect there will trading systems comply with the Commodity comprehensive, precise data on the be further debate. I do not regard this Exchange Act and our regulations, and a percentage of trades created or entered by regulation as the final word on regulation of certification by their chief executive officer algorithms in many product classes. Clearly, algorithmic trading. If there is clear evidence or chief compliance officer that the further research and work remain for all that more precise regulations are needed on information in the report is accurate and stakeholders, from regulators, to industry this technology to protect investors or ward complete. participants, to academics and advocates of off systemic risk, I would support further I think the current 1.83(a) does not ask financial reform. regulatory action. And I am sure that, given registrants for enough information. Now, we Yet, I do not believe this lack of the ferocious rate of change of this don’t want to require each registered information requires that regulators passively technology, we will need to update this algorithmic trader to submit a tome of several wait for this information to emerge. Simply regulation regularly to account for those thousand pages each year that lays out every waiting for that kind of data to materialize changes. In many ways, this regulation is arcane factoid about their trading systems. could allow problems to emerge in the merely the first step in a process, it’s a starter Such a requirement would bury our staff in interim that harm investors and the broader home rather than a two-story. But we have paper and create significant expense for financial system. Given the current state of to start somewhere, and starting with registrants. Yet, having already asked each our economy and a global financial system something that formalizes best practices and registered algorithmic trader to submit an still recovering from the 2008 financial crisis, increases disclosure is an excellent place to annual report, I believe we should ask for start. more information in the report. After all, at I have said numerous times that I support 1 Keynote Address by Commissioner Sharon Y. the point a company has to file an annual Bowen before ISDA North America Conference, smart regulation, regulation that works. That report, it should already be doing a CFTC (Sep. 17, 2015), http://www.cftc.gov/ goal is especially critical when it comes to comprehensive review of its policies. As a PressRoom/SpeechesTestimony/opabowen-6. regulation of such a nascent, significant, and result, asking for one or two more pieces of 2 Id. widespread technology as algorithmic information to be included in the annual 3 Id. report should not be a substantial additional 4 Id. 5 Id. cost to registrants. I therefore hope that
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commenters will let us know what additional misinterpretation by computerized analysis Regulation AT passes the SMART REG information registrants should be required to and mathematical models that increasingly standard. submit in their annual reports. For instance, replace human thought and deliberation. Nevertheless, I want to hear the views of should we require registrants to submit Legal scholars raise important questions market participants on this proposal. I will information about how they train and about the viability of traditional market evaluate any final rule based on the SMART monitor the staff responsible for handling regulation in automated trading markets. REG standard and thereafter determine algorithmic trading or about their order How markets and market regulators adjust whether to support or reject it. cancellation systems? to this change from human to automated I will explain my areas of concern. Finally, the proposal prohibits designated trading will be extremely important. It contract markets (DCMs) from paying market requires delicate balancing. To ensure I. Necessity of Regulation AT maker incentive program benefits for trades vibrant, accessible and durable markets, we It is hard to identify exactly what issue in between accounts under common ownership. must cultivate and embrace new technologies automated trading Regulation AT is designed I think that’s a good change and worthy of without harming innovation. Without a to address. The agency is basically playing being formalized in rule text. These programs doubt, there must be effective safeguards of catch-up to an industry that has already serve a critical purpose of encouraging market integrity and credibility, but those developed and implemented risk controls liquidity, but we don’t get increased liquidity safeguards should not bar promising and related testing standards for automated by increasing the amount of trades a person innovation and continuous market trading. Regulation AT describes the does with herself. development. extensive best practices and However, I wonder whether this In turning to Regulation Automated recommendations for automated trading prohibition should not go further. Perhaps Trading (‘‘Regulation AT’’), I acknowledge issued by industry organizations and notes we should also prohibit DCMs from paying that my staff and I had dozens of issues and these program benefits for trades in which concerns that we brought to the attention of that the majority of industry participants are the benefits are, on a per trade basis, greater the Division of Market Oversight. While they following such best practices. Regulation AT than the fees charged by the relevant DCM were responsive to a few small topics, many simply codifies industry best practices in and affiliated derivatives clearing other issues require much further attention many respects, but does not go as far as organization (DCO). Paying benefits for such and consideration that I will summarize in current industry efforts. As such, the trades seems tantamount to giving a subsidy this statement. Commission admits that many of the benefits to un-economic trades and thereby Still, after reading through the almost five of this proposal are already being realized in potentially risks distorting the overall hundred pages of this proposal, I am left with the marketplace. In reality, current industry market. I would therefore welcome one major question that I still cannot answer. standards on automated trading have well comments about whether this section is That question is: does this proposal surpassed Regulation AT in many areas. adequate as is or whether we should also sufficiently benefit the safety and soundness It is clear that the industry has long been prohibit DCMs from giving benefits to such of America’s futures markets so as to at the forefront of creating market solutions seemingly non-economic trades. outweigh its additional costs and burdens? for risk controls in automated trading well In closing, let me stress again that I want I wish the answer was clearer. before any regulatory mandate. As I recently this rule to be both effective and workable. I have three main concerns with Regulation stated, I favor this type of ongoing bottom-up No one benefits from rules that work in the AT. First, some of the requirements of the market-driven approach to risk controls for abstract but are confusing, impossible to proposal appear to be window dressing. That automated trading.3 Given the industry’s implement as written, or full of gaps that is especially the case in its requirement for leadership role and the fact that Regulation prompt stakeholders to engage in widespread development and implementation of risk AT simply codifies a small subset of industry regulatory arbitrage. I believe this automated controls and related testing standards that the best practices, while adding heavy trading proposal is a commonsense effort at industry has already widely adopted. compliance burdens, I question the necessity establishing reasonable regulation on a Second, I am concerned about the high and value-add of this proposal. nascent technology, but if there are flaws costs and burdens of this proposal, especially The staff partly justifies the proposal as with it, if it goes too far or not far enough, on small market participants. I am especially necessary to ensure market integrity given I want to know that now, before it is concerned about its requirement that the risks of automated trading. As support, finalized. Thank you. registrants hold their proprietary source code Regulation AT illustrates examples of recent Appendix 4—Statement of in data repositories available for inspection disruptive events in automated trading. by the Commission or the U.S. Department of However, the dearth of incidents in the Commissioner J. Christopher Giancarlo Justice at any time for any reason. futures market seems to indicate that current Introduction Third, I question the regulatory industry solutions are working well. The electronification of trading over the inconsistencies regarding the market Regulation AT only cites three U.S. past 30 to 40 years and the advent of participants that must comply with this disruptive automated trading events in the exponential digital technologies have rulemaking. past five and a half years and two of those transformed financial businesses, markets For these reasons and others, I have serious events occurred in the equities market, and entire economies, with dramatic doubts about today’s proposed rulemaking. obviously outside of our jurisdiction. In implications for capital formation and risk Last November, I delivered a speech at the addition, the equities market events occurred transfer. In U.S. futures markets, we see this U.S. Chamber of Commerce where I set forth despite the Securities and Exchange change most presently in the area of six principles that I would follow as I Commission (‘‘SEC’’) having implemented algorithmic or automated trading that now evaluate financial market regulations.1 As some reforms related to automated trading.4 constitutes up to seventy percent of regulated part of those principles, I proposed the Thus, I question whether Regulation AT will futures markets. Automated trading can ‘‘SMART REG’’ standard to help analyze whether CFTC rules actually solve for real lower transaction costs while increasing through flexible rules; R—Represent the best trader productivity through greater problems and promote the U.S. economy and approach among alternative courses of action; T— 2 transaction speed, precision and the American markets. I struggle to see how Take into account evidence, rather than sophistication. For many markets, automated assumptions; R—Realistically set compliance trading brings trading liquidity, broader 1 Remarks of CFTC Commissioner J. Christopher deadlines; E—Encourage employment of American market access, enhanced transparency and Giancarlo before the U.S. Chamber of Commerce, workers; and are G—Grounded in law. greater competition. Re-Balancing Reform: Principles for U.S. Financial 3 Keynote Address of CFTC Commissioner J. At the same time, automated trading Market Regulation In Service to the American Christopher Giancarlo before the 2015 ISDA Annual Economy, Nov. 20, 2014, http://www.cftc.gov/ Asia Pacific Conference, Top-Down Financial presents a host of potential new challenges. PressRoom/SpeechesTestimony/opagiancarlos-2. Market Regulation: Disease Mislabeled as Cure, Oct. They include increased risk of sudden spikes 2 Id. The ‘‘SMART REG’’ standard follows 26, 2015, http://www.cftc.gov/PressRoom/ in market volatility and ‘‘phantom’’ liquidity whether new CFTC regulations S—Solve for real SpeechesTestimony/opagiancarlo-10. arising from the sheer speed of execution, problems, not anecdotes of bad behavior; M— 4 See Regulation AT Preamble, Section II.C.1.: potentially flawed algorithms and position Measure success through a rigorous cost benefit ‘‘Background on Regulatory Responses to crowding. They also include the risk of data analysis; A—Advance innovation and competition Automated Trading.’’
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in fact reduce future disruptive events and concern and asks questions in this regard, at in that it requires AT Persons to register with enhance market integrity. the same time, the proposal dismisses the an RFA and, at the same time, to be subject As further support for market integrity, the possibility that it will capture many small to reviews by DCMs. The National Futures preamble asserts that the proposal may limit entities. I am not so sure that will be the case Association (‘‘NFA’’), the only RFA at this a ‘‘race to the bottom,’’ in which certain as the definition of Algorithmic Trading is time, will need to hire additional employees entities sacrifice effective risk controls in very broad and would appear to capture to establish and maintain a program for order to minimize costs or increase the speed market participants using off-the-shelf type Algorithmic Trading systems. The preamble of trading. In this, the proposal betrays a automated systems or simple excel to Regulation AT also contemplates that NFA naı¨ve misunderstanding of elementary micro- spreadsheets to automate trading.9 If that is would conduct routine examinations of its economics. Market participants have every the case, then this proposal could capture, for members to ensure that they are complying economic incentive to implement effective example, a small proprietary trading firm, a with NFA rules. This requirement translates risk controls to prevent the loss of their small commodity trading advisor (‘‘CTA’’) or into additional costs that will be passed capital and being forced out of business. That a rural grain elevator company that uses down to NFA’s members. Regulation AT is why the industry has been a leader in best simple automation. notes that NFA is the frontline regulator and practices for automated trading, including Regulation AT would add numerous costs is well-positioned to address rules and issues development of risk controls and related to small market participants and raise related to Algorithmic Trading as market testing standards. This ongoing bottom-up barriers to entry. Small market participants conditions and technology develops. market-driven approach to risk controls for may be less likely to employ risk controls However, it seems that DCMs have the automated trading has raised, not lowered, consistent with Regulation AT so they would most intimate knowledge of the markets and the standards. incur costs to develop or purchase such risk their participants trading in those markets. Several commenters cited in Regulation AT controls. They would also incur costs to hire DCMs have been at the forefront of creating supported a principles-based approach to additional employees to develop and market solutions for risk controls in regulation citing the need for flexibility implement policies and procedures for the automated trading, along with testing and because each market and the participants in development, testing, monitoring and certification of automated systems.11 In this those markets are different.5 These compliance of their Algorithmic Trading regard, Regulation AT requires AT Persons 12 commenters also noted that the Commission systems. Small market participants would and their clearing member futures already has robust regulations in place to have to hire additional employees to commission merchants (‘‘FCMs’’) to submit address the risks of automated trading.6 continuously monitor their Algorithmic annual reports and policies and procedures Tweaking the Commission’s existing Trading systems on a real-time basis. They regarding their Algorithmic Trading to all regulations 7 in line with a principles-based would incur costs to annually prepare and DCMs on which they trade. DCMs must approach may be a better way to build upon submit a pre-trade risk control compliance establish a program to review these reports ongoing industry efforts regarding automated report to each DCM on which they trade. and procedures and provide feedback, trading, while reducing the compliance Furthermore, the proposal would add costs to including any deficiencies in participants’ burdens of Regulation AT. small market participants given the required pre-trade risk control settings or I invite comment on the necessity of registration with the Commission and an calibrations.13 AT Persons and their clearing Regulation AT and on other approaches to RFA. That sounds like a whole lot of extra member FCMs must also keep, and provide automated trading that support—rather than costs to me for a ‘‘principles-based’’ non- upon request to DCMs, books and records burden—ongoing industry efforts. prescriptive rule. regarding compliance with the proposed The proposed rule admits that the rules. DCMs must review these books and II. Costs of Regulation AT Versus the Commission does not know how many small records as necessary. Benefits entities this proposal will affect— Although the preamble states that the NFA I am concerned about the costs of unfortunately, a common theme for CFTC and DCM requirements are not intended to Regulation AT, especially on small market rules when discussing costs and burdens on create conflicting obligations, I am afraid that participants. The Commission tries to the marketplace. I am disappointed that the the lack of clarity provides a potential to downplay the costs of this proposal because Commission did not get a better sense of the subject AT Persons to some duplication. As in many respects it simply codifies industry potential universe of small market noted above, DCMs already have standards best practices and many market participants participants that may be impacted by for risk controls, testing and certification of are already following such practices.8 The Regulation AT. To this point, I am very automated systems, but Regulation AT proposal also repeatedly asserts that the rules interested to hear estimates of costs requires NFA to address these topics in its are flexible seemingly in an effort to highlight Regulation AT will impose on smaller market program. Regulation AT also discusses its low burdens. However, in reality, participants and how it will impact their reviews for both NFA and DCMs. Duplicative Regulation AT adds compliance, reporting ability to conduct business. requirements would add unnecessary costs and registration requirements, and Interestingly, the proposed rule also asserts that would be especially harmful to small establishes designated contract market that a technological malfunction or error in market participants. (‘‘DCM’’) and registered futures association a very small proprietary trading firm’s I am interested to hear from market (‘‘RFA’’) review programs. These additional algorithm could have a significant, participants if Regulation AT provides requirements will certainly increase costs to detrimental impact on the market despite enough clarity on this issue or if the all market participants engaged in providing no evidence to support this Commission should provide further detail. I claim.10 Algorithmic Trading that are subject to this I invite commenters to weigh in on am particularly interested to hear comments this issue. I am also interested to hear proposal. on the requirement for market participants to comments on whether the proposed rules register with NFA and to be subject to NFA’s A. Small Market Participants make sense for those market participants program for Algorithmic Trading systems. In The costs of this proposal may using off-the-shelf type automated systems or light of DCMs’ existing efforts on risk disproportionately impact small market simple excel spreadsheets to automate controls and testing, is such a requirement participants. While Regulation AT raises this trading, especially the rules around necessary or are DCMs already serving as the development, testing, monitoring and frontline regulator? Would NFA serve a compliance of Algorithmic Trading systems. 5 ICE Comment Letter at 1–3 (Jan. 17, 2014); Katten Muchin Rosenmann Comment Letter on B. Overlapping Requirements and 11 E.g., CME Comment Letter at 25–26 (Dec. 11, behalf of Gelber Group at 5, 20 and 22–24 (Dec. 9, Duplicative Costs 2013) (discussing CME’s two testing environments 2013). for its users and its certification requirement). Regulation AT contains a potential overlap 6 Id. 12 AT Person is defined in proposed Commission 7 See e.g., Commission regulations 1.11(e)(3)(ii), in some requirements and duplicative costs regulation 1.3(xxxx) and captures the persons 1.73, 23.600(d)(9), 23.609, 38.255 and 38.607. subject to Regulation AT, including existing 8 I also note that the Commission uses old 9 See definition of Algorithmic Trading in Commission registrants engaged in Algorithmic compensation data from 2012 in calculating the proposed Commission regulation 1.3(zzzz). Trading and the newly expanded definition of floor costs of Regulation AT, which underreports these 10 See Regulatory Flexibility Act section of trader. costs estimates. Regulation AT. 13 Proposed Commission regulation 40.22(c).
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useful role in setting consistent standards belligerents were able to get their hands on commenters to provide feedback on the across all markets or do DCMs need this technology the same way some of the intersection of Regulation AT and Rule 1.35. flexibility in setting rules because each U.S.’ most important industrial, military and market and the participants in those markets other sensitive data have been hacked. I D. Other Costs are different?14 I also invite comment on question the need for this new requirement I would also like to obtain industry input alternatives to the requirement that AT and request commenter feedback on this on the following costs of Regulation AT: Persons and their clearing member FCMs issue. 1. The costs on FCMs under proposed prepare and submit annual reports to DCMs In addition to my concerns above, I Rules 1.82 and 1.83, especially the and DCM reviews of those reports. One previously expressed reservations about requirement that an FCM prevent or mitigate possibility is to require AT Persons and their Commission regulation 1.31 in the proposed an Algorithmic Trading Disruption for its AT clearing member FCMs to conduct self- rulemaking on Records of Commodity Persons.22 I have previously expressed assessments (like FINRA requires) and only Interest and Related Cash or Forward concerns about the harm caused to the FCM require submission to DCMs upon request. Transactions.16 Commenters to that proposed industry by the heightened cost of regulation, C. Source Code Repository and Commission rulemaking stated that Commission so I am especially interested to hear 23 Regulation 1.31 regulation 1.31 is technologically outdated comments in this regard. and compliance with the rule is overly 2. The costs to DCMs to establish and Source code is the intellectual property of burdensome, infeasible and costly.17 maintain a program for the review and AT Persons representing their current and Managed Funds Association, the Investment evaluation of compliance reports and books future trading strategies. Source code of AT Adviser Association and the Alternative and records of each AT Person and their firms is unlike traditional trading firm Investment Management Association even clearing member FCMs trading on the DCMs, information in that it reveals not what petitioned the Commission to amend Rule as required under proposed Rule 40.22. positions are held in the past or present, but 1.31 back on July 21, 2014.18 Unfortunately, 3. The ease and costs for DCMs to generate what positions the firm intends to buy or sell the Commission has not acted on this and publish self-trading statistics, as required in the future upon specified market events. request. under proposed Rule 40.23(d). I am particularly concerned that Regulation Regulation AT’s requirement that source AT requires that each market participant code repositories must be kept and made E. Costs Versus Benefits keep a source code repository for algorithms available for inspection pursuant to Based on all the costs described above, and make it available for inspection to any Commission regulation 1.31 will impose Regulation AT does not seem to be a non- representative of the Commission or the U.S. unnecessary costs and burdens on AT prescriptive, low-burden rule that simply Department of Justice for any reason.15 Persons. Given the voluminous comments codifies industry best practices as the Currently, the federal government may only that the staff has received on the proposal asserts. It goes much further and, I obtain such sensitive information through a unworkability of Rule 1.31, I am surprised fear, does greater harm. While Regulation AT subpoena. Regulation AT dramatically lowers that Regulation AT would subject source the bar for the federal government to obtain does recognize industry best practices with codes to this rule. As an alternative, the this information. respect to several risk controls, it adds Commission should consider allowing AT I am unaware of any other industry where prescriptive compliance, reporting and Persons to keep source code repositories in the federal government has such easy access registration requirements and establishes accordance with their own reasonable and to a firm’s intellectual property and future overlapping and duplicative DCM and RFA secure internal recordkeeping procedures. I business strategies. Other than possibly in review programs of questionable value. Given welcome comments on the costs of the area of national defense and security, I the industry’s extensive efforts to date, I Commission regulation 1.31 in this regard. question whether the federal government has question whether the costs of Regulation AT Finally, I would like to note that currently similarly unfettered access to the future actually justify the benefits. The principles- business strategy of any American industrial unregistered market participants who will based approach that I discussed above may sector. Does the SEC require such access from now be required to register under the revised be as effective and less costly than Regulation its registrants? Do other agencies in the floor trader definition may be subject to AT’s approach. I invite commenters to heighted record keeping requirements under provide feedback regarding the costs and federal government have ready access to 19 businesses’ intellectual property and proposed Commission regulation 1.35. benefits of Regulation AT and the specific business strategies? Proposed Rule 1.35 states that a member of points I raised above. I am unclear why either the Commission or a DCM that is not registered or required to be registered with the Commission in any III. Regulatory Inconsistency of Regulation the U.S. Department of Justice needs access AT to source code information without a capacity would not have to keep (i) records subpoena, especially the Justice Department, of transactions in a manner that is searchable I would like to note three regulatory whose only use for such information would or allows for identification of a particular inconsistencies in Regulation AT. The staff 20 be in criminal proceedings. Does today’s rule transaction and (ii) text messages related to proposes to amend the definition of floor 21 24 proposal presume that the use of automated those transactions. If the Commission trader in order to register currently trading technology makes a trading firm more finalizes Rule 1.35 as proposed, Regulation unregistered persons using direct electronic likely to engage in criminal behavior than a AT’s registration requirement would increase access for algorithmic trading on DCMs.25 manual trading operation? the burdens under that rule. I invite The preamble to Regulation AT states that in There is strong reason for concern about 1993, when the Commission finalized rules maintaining the confidentiality of this source 16 Records of Commodity Interest and Related regarding the definition and registration of code. As we all know, the federal government Cash or Forward Transactions, 79 FR 68140, 68148 floor traders, the Commission decided to has a poor track record of keeping sensitive (proposed Nov. 14, 2014). include as floor traders only those traders information secure from cyberattacks and 17 Managed Funds Association Comment Letter at operating on the trading floor of an exchange. other data breaches. Any data breach of this 4–7 (Jan. 13, 2015); Commodity Markets Council However, in that 1993 rulemaking, the information would be devastating for such Comment Letter at 5 (Jan. 13, 2015); SIFMA AMG Commission stated that certain traders using Comment Letter 5–6 (Jan. 13, 2015). electronic trading systems come within the entities and, potentially, for the safety and 18 Managed Funds Association, the Investment floor trader definition. Back then, the orderly operation of U.S. markets. Imagine Adviser Association and the Alternative Investment the harm that could be caused to U.S. Management Association, Petition for Rulemaking financial markets, if cyber terrorists or other to Amend CFTC Regulations 1.31, 4.7(b) and (c), 22 Proposed Commission regulation 1.82(a)(1). 4.23 and 4.33 (Jul. 21, 2014). 23 Statement of Commissioner J. Christopher 14 See supra note 5. 19 Records of Commodity Interest and Related Giancarlo for the Market Risk Advisory Committee 15 Under Regulation AT, in accordance with Cash or Forward Transactions, 79 FR 68140 Meeting, Jun. 1, 2015; http://www.cftc.gov/ Commission Regulation 1.31 (17 CFR 1.31), AT (proposed Nov. 14, 2014). PressRoom/SpeechesTestimony/ Persons would have to make their source code 20 Id. at 68146, Proposed Commission regulation giancarlostatement060115. repository available for inspection to any 1.35(a)(3)(i). 24 17 CFR 1.3(x). representative of the CFTC, in addition to the U.S. 21 79 FR at 68146, Proposed Commission 25 Another requirement is that the person must be Department of Justice. regulation 1.35(a)(3)(ii). trading for their own account.
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Commission took a technological approach to comments on this competitive disadvantage, rules? Will this periodic review become a the definition of floor trader. including whether Regulation AT should continuous review in order to avoid liability? Today, Regulation AT is taking that same exclude from its scope swaps listed on approach and is proposing to register persons DCMs. Conclusion using direct electronic access for algorithmic While I am pleased that Regulation AT IV. Other Comments on Regulation AT trading, but not those using manual means. provides flexibility in setting risk control I am not clear on the rationale for this I also invite industry comment on the parameters and does not require the pre- technology driven distinction to registration following issues: approval or pre-testing of algorithms, the (as the preamble does not articulate one) 1. Whether the Algorithmic Trading proposal appears to add many burdensome when the proposal acknowledges that Compliance Issue definition in proposed compliance costs and does not adequately manual trading also poses risks. Several Commission regulation 1.3(tttt) is necessary. take into account small market participants commenters cited in Regulation AT also If a major reason for Regulation AT is market or the work of the industry in developing noted the importance of risk controls for integrity then it seems the Algorithmic algorithmic trading risk controls and related manual and automated trading systems.26 I Trading Disruption definition is sufficient. testing requirements. Rather than duplicating invite industry comments on this issue, Furthermore, if an AT Person violates a rule their efforts and adding additional burdens, or regulation it will be liable so the notwithstanding my above concerns about the Commission should look to support and Algorithmic Trading Compliance Issue the registration requirement. enhance ongoing industry progress. On the definition appears unnecessary. Another regulatory inconsistency is that other hand, I am highly concerned about Regulation AT only captures floor traders 2. Whether the definition of Direct Electronic Access in proposed Commission Regulation AT’s several significant who use direct electronic access for inconsistencies and its extraordinary algorithmic trading, but it captures all regulation 1.3(yyyy) should be harmonized 27 requirement that AT source codes be placed existing registrants, such as FCMs, swap with the definition in Rule 38.607. 3. Whether several of the proposed rules in government accessible repositories. dealers and CTAs regardless of whether they Overall, I have a great many concerns with use direct electronic access for algorithmic that require periodic review of compliance measures or regular testing of Algorithmic Regulation AT. Most principally, I struggle to trading. Again, Regulation AT does not figure out if it will benefit the safety and articulate a reason for this inconsistency and Trading systems open up AT Persons to liability risk. For example, proposed soundness of America’s futures markets I question its logic. I invite comment on this Commission regulation 1.80(f) 28 requires enough to outweigh its additional costs and issue, including whether, for existing each AT Person to periodically review its burdens. Its purpose must not be to allow a registrants, the proposal should only capture compliance with the pre-trade risk control Federal regulator to say that it has ‘‘done those using direct electronic access. requirements to determine whether it has something’’ about computerized trading in Finally, Regulation AT only applies to effectively implemented sufficient measures response to media headlines, best-selling trading on DCMs and not on SEFs. reasonably designed to prevent an books or political campaign agendas. The Regulation AT justifies this distinction by Algorithmic Trading Event. What happens if development of automated trading is too stating that compared to DCMs, SEFs and market conditions change rapidly between complicated and too important to be SEF markets are newer and less liquid and periodic reviews and the AT Person’s risk addressed with such superficiality. have less automated trading. However, DCMs controls are no longer sufficient to prevent an For my part, I will carefully review can also list swaps and Regulation AT Algorithmic Trading Event? Is the AT Person thoughtful comments from market applies to that trading. In this regard, now liable for a violation of Commission participants and the public. I will measure Regulation AT may disadvantage DCMs who my support for any final rule against the list swaps as compared to SEFs. I welcome 27 17 CFR 38.607. SMART REG standard. 28 See also proposed Commission regulations 26 E.g., CME Comment Letter at 43, 44 (Dec. 11, 1.81(a)(1)(iii), (a)(1)(iv), (a)(2) and (c)(2)(i) for [FR Doc. 2015–30533 Filed 12–16–15; 8:45 am] 2013). further examples. BILLING CODE 6351–01–P
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Part III
Department of the Interior
Fish and Wildlife Service 50 CFR Part 92 Migratory Bird Subsistence Harvest in Alaska; Harvest Regulations for Migratory Birds in Alaska During the 2016 Season; Proposed Rule
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DEPARTMENT OF THE INTERIOR FOR FURTHER INFORMATION CONTACT: Management, MS: MB, 5275 Leesburg Donna Dewhurst, U.S. Fish and Wildlife Pike, Falls Church, VA 22041–3803; Fish and Wildlife Service Service, 1011 E. Tudor Road, Mail Stop (703) 358–1714. 201, Anchorage, AK 99503; (907) 786– Public Availability of Comments 50 CFR Part 92 3499. As stated above in more detail, before [Docket No. FWS–R7–MB–2015–0158; SUPPLEMENTARY INFORMATION: FF09M21200–156–FXMB1231099BPP0] including your address, phone number, Public Comment Procedures email address, or other personal RIN 1018–BB10 To ensure that any action resulting identifying information in your from this proposed rule will be as comment, you should be aware that Migratory Bird Subsistence Harvest in accurate and as effective as possible, we your entire comment—including your Alaska; Harvest Regulations for request that you send relevant personal identifying information—may Migratory Birds in Alaska During the information for our consideration. The be made publicly available at any time. 2016 Season comments that will be most useful and While you can ask us in your comment AGENCY: Fish and Wildlife Service, likely to influence our decisions are to withhold your personal identifying Interior. those that you support by quantitative information from public review, we ACTION: Proposed rule. information or studies and those that cannot guarantee that we will be able to include citations to, and analyses of, the do so. SUMMARY: The U.S. Fish and Wildlife applicable laws and regulations. Please Why is this rulemaking necessary? Service (Service or we) is proposing make your comments as specific as migratory bird subsistence harvest possible and explain the basis for them. This rulemaking is necessary because, regulations in Alaska for the 2016 In addition, please include sufficient by law, the migratory bird harvest season. These proposed regulations information with your comments to season is closed unless opened by the allow for the continuation of customary allow us to authenticate any scientific or Secretary of the Interior, and the and traditional subsistence uses of commercial data you include. regulations governing subsistence migratory birds in Alaska and prescribe You must submit your comments and harvest of migratory birds in Alaska are regional information on when and materials concerning this proposed rule subject to public review and annual where the harvesting of birds may by one of the methods listed above in approval. This rulemaking proposes occur. These proposed regulations were the ADDRESSES section. We will not regulations for the taking of migratory developed under a co-management accept comments sent by email or fax or birds for subsistence uses in Alaska process involving the Service, the to an address not listed in ADDRESSES. during the spring and summer of 2016. Alaska Department of Fish and Game, If you submit a comment via http:// This proposed rule also sets forth a list and Alaska Native representatives. The www.regulations.gov, your entire of migratory bird season openings and rulemaking is necessary because the comment—including any personal closures in Alaska by region. regulations governing the subsistence identifying information, such as your address, telephone number, or email How do I find the history of these harvest of migratory birds in Alaska are regulations? subject to annual review. This address—will be posted on the Web site. rulemaking proposes region-specific When you submit a comment, the Background information, including regulations that would go into effect on system receives it immediately. past events leading to this rulemaking, April 2, 2016, and expire on August 31, However, the comment will not be accomplishments since the Migratory 2016. publicly viewable until we post it, Bird Treaties with Canada and Mexico which might not occur until several were amended, and a history, were DATES: We will accept comments days after submission. originally addressed in the Federal received or postmarked on or before If you mail or hand-carry a hardcopy Register on August 16, 2002 (67 FR February 16, 2016. We must receive comment directly to us that includes 53511) and most recently on February requests for public hearings, in writing, personal information, you may request 23, 2015 (80 FR 9392). FOR FURTHER at the address shown in at the top of your document that we Recent Federal Register documents INFORMATION CONTACT by February 1, withhold this information from public and all final rules setting forth the 2016. review. However, we cannot guarantee annual harvest regulations are available ADDRESSES: You may submit comments that we will be able to do so. To ensure at http://www.fws.gov/alaska/ambcc/ by one of the following methods: that the electronic docket for this regulations.htm or by contacting the • Federal eRulemaking Portal: http:// rulemaking is complete and all person listed under FOR FURTHER www.regulations.gov. Follow the comments we receive are publicly INFORMATION CONTACT. instructions for submitting comments to available, we will post all hardcopy What is the process for issuing Docket No. FWS–R7–MB–2015–0158. comments on http:// • U.S. mail or hand-delivery: Public regulations for the subsistence harvest www.regulations.gov. of migratory birds in Alaska? Comments Processing, Attn: FWS–R7– In addition, comments and materials MB–2015–0158; Division of Policy, we receive, as well as supporting The U.S. Fish and Wildlife Service Performance, and Management documentation used in preparing this (Service or we) is proposing migratory Programs; U.S. Fish and Wildlife proposed rule, will be available for bird subsistence harvest regulations in Service; 5275 Leesburg Place, MS: public inspection in two ways: Alaska for the 2016 season. These BPHC; Falls Church, VA 22041–3803. (1) You can view them on http:// proposed regulations allow for the We will not accept email or faxes. We www.regulations.gov. Search for FWS– continuation of customary and will post all comments on http:// R7–MB–2015–0158, which is the docket traditional subsistence uses of migratory www.regulations.gov. This generally number for this rulemaking. birds in Alaska and prescribe regional means that we will post any personal (2) You can make an appointment, information on when and where the information you provide us (see the during normal business hours, to view harvesting of birds may occur. These Public Comment Procedures section, the comments and materials in person at proposed regulations were developed below, for more information). the Division of Migratory Bird under a co-management process
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involving the Service, the Alaska Nanwalek, Tyonek, and Hoonah, with a Subpart D Department of Fish and Game, and combined population of 2,766. In 2005, The regulations we are proposing for Alaska Native representatives. we added three additional communities subpart D, Annual Regulations We opened the process to establish for glaucous-winged gull egg gathering Governing Subsistence Harvest, are the regulations for the 2016 spring and only, based on petitions requesting same as the 2015 regulations. While we summer subsistence harvest of inclusion. These southeastern are not proposing any changes to the migratory birds in Alaska in a proposed communities were Craig, Hydaburg, and 2015 regulations for subpart D in this rule published in the Federal Register Yakutat, with a combined population of 2016 proposal, we provide information on April 13, 2015 (80 FR 19852), to 2,459, based on the latest census below on potential changes to the amend 50 CFR part 20. While that information at that time. proposed regulations for this subpart in proposed rule primarily addressed the the 2017 migratory bird subsistence regulatory process for hunting migratory In 2007, we enacted the Alaska harvest regulations in Alaska. birds for all purposes throughout the Department of Fish and Game’s request to expand the Fairbanks North Star The Co-management Council United States, we also discussed the proposed a new emperor goose (Chen background and history of Alaska Borough excluded area to include the canagica) limited subsistence hunt for subsistence regulations, explained the Central Interior area. This action the 2016 season. Since 2012, the Co- annual process for their establishment, excluded the following communities management Council has received and requested proposals for the 2016 from participation in this harvest: Big regulatory proposals from the Sun’aq season. The rulemaking processes for Delta/Fort Greely, Healy, McKinley Tribe of Kodiak, the Kodiak-Aleutians both types of migratory bird harvest are Park/Village, and Ferry, with a Subsistence Regional Advisory Council, related, and the April 13, 2015, combined population of 2,812. the Yaquillrit Keutisti Council (Bristol proposed rule explained the connection In 2012, we received a request from Bay), and the Bering Strait/Norton between the two. the Native Village of Eyak to include Sound Migratory Bird Council The Alaska Migratory Bird Co- Cordova, Alaska, for a limited season management Council (Co-management (Kawerak) to open the harvest of that would legalize the traditional emperor geese for the subsistence Council) held meetings on April 8–9, gathering of gull eggs and the hunting of 2015, to develop recommendations for season. Since the hunting season has waterfowl during spring. This request been closed since 1987 for emperor changes that would take effect during resulted in a new, limited harvest of the 2016 harvest season. Changes were geese, the Co-management Council spring waterfowl and gull eggs starting created a subcommittee to address these recommended for the permanent in 2014. regulations in subparts A and C of 50 proposals. The emperor goose harvest is CFR part 92, and the consent agenda What is different in the regulations for guided by the 2006 Pacific Flyway package of carry-over regulations was 2016? Management Plan and the 2005–2006 amended to request a limited emperor Yukon-Kuskokwim Delta Goose Subpart A goose harvest for 2016; these Management Plan. Over 95 percent of the emperor goose population breeds on recommended changes were presented Under subpart A, General Provisions, the Yukon-Kuskowim Delta of Alaska, first to the Pacific Flyway Council and we are proposing to amend § 92.4 by then to the Service Regulations and most emperor geese winter in adding a new definition for ‘‘Edible remote western Alaska with the Committee (SRC) for approval at the meat’’ and revising the definition for committee’s meeting on July 31, 2015. remainder wintering in Russia. The ‘‘Nonwasteful taking.’’ These changes Pacific Flyway Council recognizes the 3- Who is eligible to hunt under these were requested in 2014 by the Bristol year average abundance estimate regulations? Bay Regional Council, which derived from the emperor goose spring Eligibility to harvest under the recommended that all edible parts of population survey on the Alaska regulations established in 2003 was migratory waterfowl must be salvaged Peninsula as the management index to limited to permanent residents, when harvested. The topic was guide harvest management decisions. regardless of race, in villages located originally brought up by the Association The Pacific Flyway Council’s Emperor within the Alaska Peninsula, Kodiak of Village Council Presidents after an Goose Management Plan and the Yukon- Archipelago, the Aleutian Islands, and incident in their region where tundra Kuskokwim Delta Goose Management in areas north and west of the Alaska swans were only breasted and the Plan indicate that a harvest can be Range (50 CFR 92.5). These geographical remainder of the bird was discarded. considered when the 3-year average restrictions opened the initial migratory The concern was that ‘‘indigenous abundance index is at least 80,000 birds. bird subsistence harvest to about 13 inhabitants’’ harvesters come from a This threshold has not been reached percent of Alaska residents. High- variety of different cultures, and it was since 1984, and Alaska Natives have populated, roaded areas such as expressed that subsistence should questioned the survey methods used to Anchorage, the Matanuska-Susitna and involve retaining the whole bird for determine the population index. Fairbanks North Star boroughs, the food and other uses. In addition, two studies are being Kenai Peninsula roaded area, the Gulf of Subpart C conducted concurrently by the Service Alaska roaded area, and Southeast and the Alaska Department of Fish and Alaska were excluded from eligible Under subpart C, General Regulations Game. The first study is designed to subsistence harvest areas. Governing Subsistence Harvest, we are provide a comprehensive evaluation of Based on petitions requesting proposing to amend § 92.22, the list of all available emperor goose survey data inclusion in the harvest in 2004, we birds open to subsistence harvest, by and assess harvest potential of the added 13 additional communities based updating scientific names for six species population. The second study is on criteria set forth in 50 CFR 92.5(c). and clarifying the nomenclature for designed to develop a Bayesian state These communities were Gulkana, Canada goose subspecies. These space population model to improve Gakona, Tazlina, Copper Center, nomenclature updates come from the estimates of population size by Mentasta Lake, Chitina, Chistochina, Service and the Alaska Department of integrating current population Tatitlek, Chenega, Port Graham, Fish and Game. assessment methods using all available
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data sets. The model provides a The SRC suggested that the allowable protect threatened species, measures to framework from which to make harvest should be monitored to ensure address documented threats are inferences about survival rates, age it does not exceed 3,500 birds. implemented, and the subsistence structure, and population size. The On August 13–14, and September 21, community and other conservation results of these studies will assist in 2015, the Co-management Council partners commit to working together. amending the management plans. Native Caucus met separately and with With these dual objectives in mind, the The Service conducted the spring all partners to discuss options available Service, working with North Slope emperor goose survey April 25–28, to limit and monitor the harvest, as well partners, developed measures in 2009, 2015, and results indicated that the as options to allocate the 3,500 birds to further reduce the potential for 2015 spring index (98,155) was 23 across the six regions where emperor shooting mortality or injury of closed percent above the 2014 count (79,883), geese occur. Given the limited time species. These conservation measures and 49 percent higher than the long- provided to address the four conditions included: (1) Increased waterfowl term (1981–2014) average (65,923). The placed on this new harvest by the SRC, hunter outreach and community most recent 3-year average count (2012, all partners agreed that the best course awareness through partnering with the 2014, 2015) is 81,875 geese and the of action would be to spend additional North Slope Migratory Bird Task Force; highest on record since 1984. Further, it time working together to develop a and (2) continued enforcement of the is above the threshold for consideration culturally sensitive framework tailored migratory bird regulations that are of an open hunting season on emperor to each participating region that protective of listed eiders. geese as specified in the Yukon- conserves the population and This proposed rule continues to focus Kuskokwim Delta Goose Management adequately addresses the data needs of on the North Slope from Barrow to Point Plan and the Pacific Flyway Council all partners. In support of this Hope because Steller’s eiders from the Management Plan for emperor geese. recommendation, the Co-management listed Alaska breeding population are As a result of this new information, Council took action to: Postpone an known to breed and migrate there. the Co-management Council amended emperor goose harvest until 2017; work These regulations are designed to their motion of the consent agenda and with all partners to develop the harvest address several ongoing eider proposed to add an allowance for a framework; and work with their management needs by clarifying for limited emperor goose harvest in 2016. Emperor Goose Subcommittee and the subsistence users that (1) Service law The Pacific Flyway Council met in Pacific Flyway Council on updating the enforcement personnel have authority to July 2015, and supported the Co- Pacific Flyway Emperor Goose verify species of birds possessed by management Council’s recommendation Management Plan. hunters, and (2) it is illegal to possess to work with the State of Alaska and the any species of bird closed to harvest. How will the Service ensure that the Service to develop harvest regulations This rule also describes how the and monitoring for a limited emperor subsistence harvest will not raise Service’s existing authority of goose harvest in 2016. On July 31, 2015, overall migratory bird harvest or emergency closure would be the SRC supported the Co-management threaten the conservation of implemented, if necessary, to protect Council’s proposed limited harvest of endangered and threatened species? Steller’s eiders. We are always willing to emperor geese for the 2016 Alaska We have monitored subsistence discuss regulations with our partners on spring and summer subsistence season. harvest for the past 25 years through the the North Slope to ensure protection of However, the approval was provisional use of household surveys in the most closed species as well as provide based upon the following: heavily used subsistence harvest areas, subsistence hunters an opportunity to (1) A limited harvest of 3,500 emperor such as the Yukon—Kuskokwim Delta. harvest migratory birds in a way that geese to ensure that population growth In recent years, more intensive surveys maintains the culture and traditional continues toward the Flyway combined with outreach efforts focused harvest of the community. The proposed management plan objective; on species identification have been regulations pertaining to bag checks and (2) A harvest allocation (e.g., an added to improve the accuracy of possession of illegal birds are deemed individual, family, or Village quota or information gathered from regions still necessary to monitor the number of permit hunt) that ensures harvest does reporting some subsistence harvest of closed eider species taken during the not exceed 3,500; listed or candidate species. subsistence hunt. (3) Agreement on a monitoring The Service is aware of and program to index abundance of the Spectacled and Steller’s Eiders appreciates the considerable efforts by emperor goose population; and Spectacled eiders (Somateria fischeri) North Slope partners to raise awareness (4) A revised Pacific Flyway Emperor and the Alaska-breeding population of and educate hunters on Steller’s eider Goose Management Plan including Steller’s eiders (Polysticta stelleri) are conservation via the bird fair, meetings, harvest allocation among all parties listed as threatened species. Their radio shows, signs, school visits, and (including spring/summer and fall/ migration and breeding distribution one-on-one contacts. We also recognize winter), population objective, overlap with areas where the spring and that no listed eiders have been population monitoring, and thresholds summer subsistence migratory bird hunt documented shot from 2009 through for season restriction or closure. is open in Alaska. Both species are 2012; however, one Steller’s eider and The harvest allocation design and closed to hunting, although harvest one spectacled eider were found shot harvest monitoring plan are to be surveys and Service documentation during the summer of 2013, and one completed by November 1, 2015. indicate both species have been taken in Steller’s eider was found shot in 2014. Additionally, there was an explicit several regions of Alaska. In 2015, one spectacled eider was found statement that the limited, legalized The Service has dual objectives and dead, and it appeared to have been shot harvest of 3,500 birds was not in responsibilities for authorizing a by a hunter. The Service acknowledges addition to existing subsistence harvest subsistence harvest while protecting progress made with the other eider (approximately 3,200 emperor geese). migratory birds and threatened species. conservation measures, including The 3,500 bird allowable harvest is to be Although these objectives continue to be partnering with the North Slope allocated to subsistence users during the challenging, they are not irreconcilable, Migratory Bird Task Force, for increased spring and summer subsistence season. provided that regulations continue to waterfowl hunter awareness and
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continued enforcement of the subsistence take regulations may cause proposed rule would legalize a pre- regulations. To reduce the threat of us to change these regulations. Our existing subsistence activity, and the shooting mortality of threatened eiders, biological opinion resulting from the resources harvested will be consumed. we continue to work with North Slope section 7 consultation is a public Small Business Regulatory Enforcement partners to conduct education and document available from the person Fairness Act outreach. Conservation measures are listed under FOR FURTHER INFORMATION being continued by the Service, with the CONTACT. This proposed rule is not a major rule amount of effort and emphasis being under 5 U.S.C. 804(2), the Small based on regulatory adherence. In Statutory Authority Business Regulatory Enforcement addition, the emergency closure We derive our authority to issue these Fairness Act. This proposed rule: authority provides another level of regulations from the Migratory Bird (a) Would not have an annual effect assurance if an unexpected number of Treaty Act of 1918, at 16 U.S.C. 712(1), on the economy of $100 million or Steller’s eiders are killed by shooting which authorizes the Secretary of the more. It would legalize and regulate a (50 CFR 92.21 and 50 CFR 92.32). Interior, in accordance with the treaties traditional subsistence activity. It would The longstanding general emergency with Canada, Mexico, Japan, and Russia, not result in a substantial increase in closure provision at 50 CFR 92.21 to ‘‘issue such regulations as may be subsistence harvest or a significant specifies that the harvest may be closed necessary to assure that the taking of change in harvesting patterns. The or temporarily suspended upon finding migratory birds and the collection of commodities that would be regulated that a continuation of the regulation their eggs, by the indigenous inhabitants under this proposed rule are migratory allowing the harvest would pose an of the State of Alaska, shall be permitted birds. This proposed rule deals with imminent threat to the conservation of for their own nutritional and other legalizing the subsistence harvest of any migratory bird population. With essential needs, as determined by the migratory birds and, as such, does not regard to Steller’s eiders, the proposed Secretary of the Interior, during seasons involve commodities traded in the regulation at 50 CFR 92.32, carried over established so as to provide for the marketplace. A small economic benefit from the past 5 years, clarifies that we preservation and maintenance of stocks from this proposed rule would derive will take action under 50 CFR 92.21 as of migratory birds.’’ from the sale of equipment and is necessary to prevent further take of ammunition to carry out subsistence Steller’s eiders, and that action could Required Determinations hunting. Most, if not all, businesses that include temporary or long-term closures Regulatory Planning and Review sell hunting equipment in rural Alaska of the harvest in all or a portion of the (Executive Orders 12866 and 13563) qualify as small businesses. We have no geographic area open to harvest. When reason to believe that this proposed rule and if mortality of threatened eiders is Executive Order 12866 provides that would lead to a disproportionate documented, we will evaluate each the Office of Information and Regulatory distribution of benefits. mortality event by criteria such as Affairs (OIRA) will review all significant (b) Would not cause a major increase cause, quantity, sex, age, location, and rules. The OIRA has determined that in costs or prices for consumers; date. We will consult with the Co- this proposed rule is not significant. individual industries; Federal, State, or management Council when we are Executive Order 13563 reaffirms the local government agencies; or considering an emergency closure. If we principles of Executive Order 12866 geographic regions. This proposed rule determine that an emergency closure is while calling for improvements in the does not deal with traded commodities necessary, we will design it to minimize nation’s regulatory system to promote and, therefore, does not have an impact its impact on the subsistence harvest. predictability, to reduce uncertainty, on prices for consumers. and to use the best, most innovative, (c) Would not have significant adverse Endangered Species Act Consideration and least burdensome tools for effects on competition, employment, Section 7 of the Endangered Species achieving regulatory ends. The investment, productivity, innovation, or Act (16 U.S.C. 1536) requires the executive order directs agencies to the ability of U.S.-based enterprises to Secretary of the Interior to ‘‘review other consider regulatory approaches that compete with foreign-based enterprises. programs administered by him and reduce burdens and maintain flexibility This proposed rule deals with the utilize such programs in furtherance of and freedom of choice for the public harvesting of wildlife for personal the purposes of the Act’’ and to ‘‘insure where these approaches are relevant, consumption. It does not regulate the that any action authorized, funded, or feasible, and consistent with regulatory marketplace in any way to generate carried out * * * is not likely to objectives. Executive Order 13563 substantial effects on the economy or jeopardize the continued existence of emphasizes further that regulations the ability of businesses to compete. any endangered species or threatened must be based on the best available species or result in the destruction or science and that the rulemaking process Unfunded Mandates Reform Act adverse modification of [critical] must allow for public participation and We have determined and certified habitat. * * *’’ Prior to issuance of an open exchange of ideas. We have under the Unfunded Mandates Reform annual spring and summer subsistence developed this rule in a manner Act (2 U.S.C. 1501 et seq.) that this regulations, we would consult under consistent with these requirements. proposed rule would not impose a cost section 7 of the Endangered Species Act of $100 million or more in any given of 1973, as amended (Act; 16 U.S.C. Regulatory Flexibility Act year on local, State, or tribal 1531 et seq.), to ensure that the 2016 The Department of the Interior governments or private entities. The subsistence harvest is not likely to certifies that, if adopted, this rule will proposed rule does not have a jeopardize the continued existence of not have a significant economic impact significant or unique effect on State, any species designated as endangered or on a substantial number of small entities local, or tribal governments or the threatened, or modify or destroy its as defined under the Regulatory private sector. A statement containing critical habitats, and that the regulations Flexibility Act (5 U.S.C. 601 et seq.). A the information required by the are consistent with conservation regulatory flexibility analysis is not Unfunded Mandates Reform Act is not programs for those species. Consultation required. Accordingly, a Small Entity required. Participation on regional under section 7 of the Act for the annual Compliance Guide is not required. This management bodies and the Co-
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management Council requires travel Government-to-Government Relations • Voluntary annual household expenses for some Alaska Native With Native American Tribal surveys that we use to determine levels organizations and local governments. In Governments of subsistence take (OMB Control addition, they assume some expenses Consistent with Executive Order Number 1018–0124, expires June 30, related to coordinating involvement of 2016). 13175 (65 FR 67249; November 6, 2000), • village councils in the regulatory ‘‘Consultation and Coordination with Permits associated with subsistence process. Total coordination and travel Indian Tribal Governments,’’ and hunting (OMB Control Number 1018– expenses for all Alaska Native Department of Interior policy on 0075, expires February 29, 2016). organizations are estimated to be less Consultation with Indian Tribes National Environmental Policy Act than $300,000 per year. In a notice of (December 1, 2011), we will send letters Consideration (42 U.S.C. 4321 et seq.) decision (65 FR 16405; March 28, 2000), to all 229 Alaska Federally recognized The annual regulations and options we identified 7 to 12 partner Indian tribes. Consistent with are considered in a October 2016 organizations (Alaska Native nonprofits Congressional direction (Public Law environmental assessment, ‘‘Managing and local governments) to administer 108–199, div. H, Sec. 161, Jan. 23, 2004, Migratory Bird Subsistence Hunting in the regional programs. The Alaska 118 Stat. 452; as amended by Public Alaska: Hunting Regulations for the Department of Fish and Game also Law 108–447, div. H, title V, Sec. 518, 2016 Spring/Summer Harvest,’’ dated incurs expenses for travel to Co- Dec. 8, 2004, 118 Stat. 3267), we will be October 9, 2015. Copies are available management Council and regional sending letters to approximately 200 from the person listed under FOR management body meetings. In Alaska Native corporations and other FURTHER INFORMATION CONTACT or at addition, the State of Alaska will be tribal entities in Alaska soliciting their http://www.regulations.gov. required to provide technical staff input as to whether or not they would like the Service to consult with them on Energy Supply, Distribution, or Use support to each of the regional the 2016 migratory bird subsistence (Executive Order 13211) management bodies and to the Co- harvest regulations. management Council. Expenses for the Executive Order 13211 requires We implemented the amended treaty agencies to prepare Statements of State’s involvement may exceed with Canada with a focus on local $100,000 per year, but should not Energy Effects when undertaking certain involvement. The treaty calls for the actions. This is not a significant exceed $150,000 per year. When creation of management bodies to regulatory action under this Executive funding permits, we make annual grant ensure an effective and meaningful role Order; it would allow only for agreements available to the partner for Alaska’s indigenous inhabitants in traditional subsistence harvest and organizations and the Alaska the conservation of migratory birds. improve conservation of migratory birds Department of Fish and Game to help According to the Letter of Submittal, by allowing effective regulation of this offset their expenses. management bodies are to include harvest. Further, this proposed rule is Alaska Native, Federal, and State of Takings (Executive Order 12630) not expected to significantly affect Alaska representatives as equals. They energy supplies, distribution, or use. Under the criteria in Executive Order develop recommendations for, among Therefore, this action is not a significant 12630, this proposed rule would not other things: seasons and bag limits, energy action under Executive Order have significant takings implications. methods and means of take, law 13211, and a Statement of Energy Effects This proposed rule is not specific to enforcement policies, population and is not required. harvest monitoring, education programs, particular land ownership, but applies List of Subjects in 50 CFR Part 92 to the harvesting of migratory bird research and use of traditional resources throughout Alaska. A takings knowledge, and habitat protection. The Hunting, Treaties, Wildlife. management bodies involve village implication assessment is not required. councils to the maximum extent Proposed Regulation Promulgation Federalism (Executive Order 13132) possible in all aspects of management. For the reasons set out in the To ensure maximum input at the village preamble, we propose to amend title 50, Under the criteria in Executive Order level, we required each of the 11 chapter I, subchapter G, of the Code of 13132, this proposed rule does not have participating regions to create regional Federal Regulations as follows: sufficient federalism implications to management bodies consisting of at warrant the preparation of a federalism least one representative from the PART 92—MIGRATORY BIRD summary impact statement. We discuss participating villages. The regional SUBSISTENCE HARVEST IN ALASKA effects of this proposed rule on the State management bodies meet twice ■ 1. The authority citation for part 92 annually to review and/or submit of Alaska in the Unfunded Mandates continues to read as follows: Reform Act section above. We worked proposals to the Statewide body. Authority: 16 U.S.C. 703–712. with the State of Alaska to develop Paperwork Reduction Act of 1995 (PRA) these proposed regulations. Therefore, a Subpart A—General Provisions federalism summary impact statement is This proposed rule does not contain not required. any new collections of information that ■ 2. Amend § 92.4 by adding, in require Office of Management and alphabetical order, a definition for Civil Justice Reform (Executive Order Budget (OMB) approval under the PRA ‘‘Edible meat’’ and revising the 12988) (44 U.S.C. 3501 et seq.). We may not definition for ‘‘Nonwasteful taking’’ to conduct or sponsor and you are not read as follows: The Department, in promulgating this required to respond to a collection of proposed rule, has determined that it information unless it displays a § 92.4 Definitions. will not unduly burden the judicial currently valid OMB control number. * * * * * system and that it meets the OMB has reviewed and approved our Edible meat means the meat from the requirements of sections 3(a) and 3(b)(2) collection of information associated breast, back, thighs, legs, wings, gizzard, of Executive Order 12988. with: and heart. The head, neck, feet, other
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internal organs, and skin are considered Peninsula westward to and including waters (including exposed tidelands) inedible byproducts, and not edible Unalaska Island): east of a line extending from Crag Point meat, for all provisions of this part. (i) Season: April 2–June 15 and July in the north to the west end of Saltery * * * * * 16–August 31. Cove in the south and all lands and Nonwasteful taking means making a (ii) Closure: June 16–July 15. water south of a line extending from reasonable effort to retrieve all birds (iii) Special Black Brant Season Termination Point along the north side killed or wounded, and retaining all Closure: August 16–August 31, only in of Cascade Lake extending to Anton edible meat until the birds have been Izembek and Moffet lagoons. Larsen Bay. Marine waters adjacent to transported to the location where they (iv) Special Tundra Swan Closure: All the closed area are closed to harvest will be consumed, processed, or hunting and egg gathering closed in within 500 feet from the water’s edge. preserved as human food. Game Management Units 9(D) and 10. The offshore islands are open to harvest. (3) Western Unit (Umnak Island west * * * * * (1) Season: April 2–June 30 and July to and including Attu Island): 31–August 31 for seabirds; April 2–June Subpart C—General Regulations (i) Season: April 2–July 15 and August 20 and July 22–August 31 for all other Governing Subsistence Harvest 16–August 31. birds. (ii) Closure: July 16–August 15. (2) Closure: July 1–July 30 for ■ 3. Amend § 92.22 by: (b) Yukon/Kuskokwim Delta Region. seabirds; June 21–July 21 for all other ■ a. Revising paragraph (a)(3); (1) Season: April 2–August 31. birds. ■ b. Removing and reserving paragraph (2) Closure: 30-day closure dates to be (f) Northwest Arctic Region. (1) (a)(4); and announced by the Service’s Alaska Season: April 2–June 9 and August 15– ■ c. Revising paragraphs (a)(5) and (6), Regional Director or his designee, after August 31 (hunting in general); (i)(3), (13), and (15), (j)(4) and (15), and consultation with field biologists and waterfowl egg gathering May 20–June 9 (l)(2). the Association of Village Council only; seabird egg gathering May 20–July The revisions read as follows: President’s Waterfowl Conservation 12 only; hunting molting/non-nesting Committee. This 30-day period will § 92.22 Subsistence migratory bird waterfowl July 1–July 31 only. occur between June 1 and August 15 of species. (2) Closure: June 10–August 14, each year. A press release announcing * * * * * except for the taking of seabird eggs and the actual closure dates will be (a)(3) Canada goose (Branta molting/non-nesting waterfowl as forwarded to regional newspapers and canadensis). provided in paragraph (f)(1) of this radio and television stations. * * * * * section. (3) Special Black Brant and Cackling (a)(5) Canada goose, subspecies (g) North Slope Region. (1) Southern Goose Season Hunting Closure: From Aleutian goose—except in the Semidi Unit (Southwestern North Slope the period when egg laying begins until Islands. regional boundary east to Peard Bay, young birds are fledged. Closure dates to (a)(6) Canada goose, subspecies everything west of the longitude line be announced by the Service’s Alaska cackling goose—except no egg gathering 158°30′ W. and south of the latitude line Regional Director or his designee, after is permitted. 70°45′ N. to the west bank of the consultation with field biologists and * * * * * Ikpikpuk River, and everything south of the Association of Village Council (i)(3) Spotted sandpiper (Actitis the latitude line 69°45′ N. between the President’s Waterfowl Conservation macularius). west bank of the Ikpikpuk River to the Committee. A press release announcing east bank of Sagavinirktok River): * * * * * the actual closure dates will be (i)(13) Wilson’s snipe (Gallinago forwarded to regional newspapers and (i) Season: April 2–June 29 and July delicata). radio and television stations. 30–August 31 for seabirds; April 2–June * * * * * (c) Bristol Bay Region. (1) Season: 19 and July 20–August 31 for all other (i)(15) Red phalarope (Phalaropus April 2–June 14 and July 16–August 31 birds. fulicarius). (general season); April 2–July 15 for (ii) Closure: June 30–July 29 for * * * * * seabird egg gathering only. seabirds; June 20–July 19 for all other (j)(4) Bonaparte’s gull (2) Closure: June 15–July 15 (general birds. (Chroicocephalus philadelphia). season); July 16–August 31 (seabird egg (iii) Special Black Brant Hunting * * * * * gathering). Opening: From June 20–July 5. The (j)(15) Aleutian tern (Onychoprion (d) Bering Strait/Norton Sound open area consists of the coastline, from aleuticus). Region. (1) Stebbins/St. Michael Area mean high water line outward to (Point Romanof to Canal Point): include open water, from Nokotlek * * * * * ° ′ (l)(2) Snowy owl (Bubo scandiacus). (i) Season: April 15–June 14 and July Point east to longitude line 158 30 W. 16–August 31. This includes Peard Bay, Kugrua Bay, Subpart D—Annual Regulations (ii) Closure: June 15–July 15. and Wainwright Inlet, but not the Kuk Governing Subsistence Harvest (2) Remainder of the region: and Kugrua river drainages. (i) Season: April 2–June 14 and July (2) Northern Unit (At Peard Bay, ■ 4. Amend subpart D by adding § 92.31 16–August 31 for waterfowl; April 2– everything east of the longitude line to read as follows: July 19 and August 21–August 31 for all 158°30′ W. and north of the latitude line § 92.31 Region-specific regulations. other birds. 70°45′ N. to west bank of the Ikpikpuk (ii) Closure: June 15–July 15 for River, and everything north of the The 2016 season dates for the eligible ° ′ subsistence harvest areas are as follows: waterfowl; July 20–August 20 for all latitude line 69 45 N. between the west (a) Aleutian/Pribilof Islands Region. other birds. bank of the Ikpikpuk River to the east (1) Northern Unit (Pribilof Islands): (e) Kodiak Archipelago Region, except bank of Sagavinirktok River): (i) Season: April 2–June 30. for the Kodiak Island roaded area, (i) Season: April 2–June 6 and July 7– (ii) Closure: July 1–August 31. which is closed to the harvesting of August 31 for king and common eiders; (2) Central Unit (Aleutian Region’s migratory birds and their eggs. The April 2–June 15 and July 16–August 31 eastern boundary on the Alaska closed area consists of all lands and for all other birds.
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(ii) Closure: June 7–July 6 for king and 6[B]and [C]—Barrier Islands between on the coast of Yakobi Island. The land common eiders; June 16–July 15 for all Strawberry Channel and Softtuk Bar), and waters of Glacier Bay National Park other birds. (Eligible Chugach communities: remain closed to all subsistence (3) Eastern Unit (East of eastern bank Cordova): harvesting (50 CFR part 100.3(a)): of the Sagavanirktok River): (i) Season: April 2–April 30 (hunting); (i) Season: Glaucous-winged gull egg (i) Season: April 2–June 19 and July May 1–May 31 (gull egg gathering). gathering only: May 15–June 30. 20–August 31. (ii) Closure: May 1–August 31 (ii) Closure: July 1–August 31. (ii) Closure: June 20–July 19. (hunting); April 2–30 and June 1– (4) All Units: Yellow-billed loons. August 31 (gull egg gathering). (2) Communities of Craig and Annually, up to 20 yellow-billed loons (iii) Species Open for Hunting: Hydaburg (Harvest area: Small islands total for the region inadvertently Greater white-fronted goose; snow and adjacent shoreline of western Prince entangled in subsistence fishing nets in goose; gadwall; Eurasian and American of Wales Island from Point Baker to the North Slope Region may be kept for wigeon; blue-winged and green-winged Cape Chacon, but also including subsistence use. teal; mallard; northern shoveler; Coronation and Warren islands): (5) North Coastal Zone (Cape northern pintail; canvasback; redhead; (i) Season: Glaucous-winged gull egg Thompson north to Point Hope and east ring-necked duck; greater and lesser gathering only: May 15–June 30. along the Arctic Ocean coastline around scaup; king and common eider; Point Barrow to Ross Point, including (ii) Closure: July 1–August 31. harlequin duck; surf, white-winged, and (3) Community of Yakutat (Harvest Iko Bay, and 5 miles inland). black scoter; long-tailed duck; (i) No person may at any time, by any area: Icy Bay (Icy Cape to Point Riou), bufflehead; common and Barrow’s means, or in any manner, possess or and coastal lands and islands bordering goldeneye; hooded, common, and red- have in custody any migratory bird or the Gulf of Alaska from Point Manby breasted merganser; and sandhill crane. part thereof, taken in violation of southeast to and including Dry Bay): Species open for egg gathering: subpart C and D of this part. glaucous-winged, herring, and mew (i) Season: Glaucous-winged gull egg (ii) Upon request from a Service law gathering: May 15–June 30. enforcement officer, hunters taking, gulls. (iv) Use of Boats/All-Terrain Vehicles: (ii) Closure: July 1–August 31. attempting to take, or transporting migratory birds taken during the No hunting from motorized vehicles or ■ 5. Amend subpart D by adding § 92.32 subsistence harvest season must present any form of watercraft. to read as follows: (v) Special Registration: All hunters or them to the officer for species egg gatherers must possess an annual § 92.32 Emergency regulations to protect identification. Steller’s eiders. (h) Interior Region. (1) Season: April permit, which is available from the 2–June 14 and July 16–August 31; egg Cordova offices of the Native Village of Upon finding that continuation of gathering May 1–June 14 only. Eyak and the U.S. Forest Service. these subsistence regulations would (2) Closure: June 15–July 15. (3) Kachemak Bay Area (Harvest area: pose an imminent threat to the (i) Upper Copper River Region Game Management Unit 15[C] South of conservation of threatened Steller’s (Harvest Area: Game Management Units a line connecting the tip of Homer Spit eiders (Polysticta stelleri), the U.S. Fish 11 and 13) (Eligible communities: to the mouth of Fox River) (Eligible and Wildlife Service Alaska Regional Gulkana, Chitina, Tazlina, Copper Chugach Communities: Port Graham, Director, in consultation with the Co- Center, Gakona, Mentasta Lake, Nanwalek): management Council, will immediately Chistochina and Cantwell). (1) Season: (i) Season: April 2–May 31 and July under § 92.21 take action as is necessary April 15–May 26 and June 27–August 1–August 31. to prevent further take. Regulation 31. (ii) Closure: June 1–30. changes implemented could range from (2) Closure: May 27–June 26. (k) Cook Inlet (Harvest area: Portions a temporary closure of duck hunting in (3) The Copper River Basin of Game Management Unit 16[B] as a small geographic area to large-scale communities listed above also specified below) (Eligible communities: regional or Statewide long-term closures documented traditional use harvesting Tyonek only): of all subsistence migratory bird birds in Game Management Unit 12, (1) Season: April 2–May 31—That hunting. These closures or temporary making them eligible to hunt in this unit portion of Game Management Unit 16(B) suspensions will remain in effect until using the seasons specified in paragraph south of the Skwentna River and west the Regional Director, in consultation (h) of this section. of the Yentna River, and August 1–31— with the Co-management Council, (j) Gulf of Alaska Region. (1) Prince That portion of Game Management Unit determines that the potential for William Sound Area West (Harvest area: 16(B) south of the Beluga River, Beluga additional Steller’s eiders to be taken no Game Management Unit 6[D]), (Eligible Lake, and the Triumvirate Glacier. longer exists. Chugach communities: Chenega Bay, (2) Closure: June 1–July 31. Dated: December 8, 2015. Tatitlek): (l) Southeast Alaska. (1) Community (i) Season: April 2–May 31 and July of Hoonah (Harvest area: National Forest Karen Hyun, 1–August 31. lands in Icy Strait and Cross Sound, Acting Principal Deputy Assistant Secretary (ii) Closure: June 1–30. including Middle Pass Rock near the for Fish and Wildlife and Parks. (2) Prince William Sound Area East Inian Islands, Table Rock in Cross [FR Doc. 2015–31760 Filed 12–16–15; 8:45 am] (Harvest area: Game Management Units Sound, and other traditional locations BILLING CODE 4333–15–P
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Reader Aids Federal Register Vol. 80, No. 242 Thursday, December 17, 2015
CUSTOMER SERVICE AND INFORMATION CFR PARTS AFFECTED DURING DECEMBER
Federal Register/Code of Federal Regulations At the end of each month the Office of the Federal Register General Information, indexes and other finding 202–741–6000 publishes separately a List of CFR Sections Affected (LSA), which aids lists parts and sections affected by documents published since Laws 741–6000 the revision date of each title. 539...... 75590 Presidential Documents 2 CFR 540...... 75590 Executive orders and proclamations 741–6000 802...... 74965 541...... 75590 The United States Government Manual 741–6000 1201...... 78649 544...... 75590 5900...... 76355 Other Services 548...... 75590 3 CFR 550...... 75590 Electronic and on-line services (voice) 741–6020 552...... 75590 Privacy Act Compilation 741–6064 Proclamations: 555...... 75590 Public Laws Update Service (numbers, dates, etc.) 741–6043 9373...... 75781 557...... 75590 9374...... 75783 559...... 75590 9375...... 76197 ELECTRONIC RESEARCH 560...... 75590 9376...... 76199 561...... 75590 World Wide Web 9377...... 76353 Proposed Rules: 9378...... 76625 50...... 78462 Full text of the daily Federal Register, CFR and other publications 9379...... 76627 51...... 78462 is located at: www.fdsys.gov. 9380...... 77565 71...... 78462 Federal Register information and research tools, including Public Executive Orders: 76...... 78462 Inspection List, indexes, and Code of Federal Regulations are 13713...... 78117 77...... 78462 located at: www.ofr.gov. Administrative Orders: 78...... 78462 Presidential 86...... 78462 E-mail Determinations: 93...... 78462 FEDREGTOC-L (Federal Register Table of Contents LISTSERV) is No. 2016-03 of 161...... 78462 November 18, an open e-mail service that provides subscribers with a digital 10 CFR form of the Federal Register Table of Contents. The digital form 2015 ...... 75921 of the Federal Register Table of Contents includes HTML and No. 2016-04 of 1...... 74974 PDF links to the full text of each document. December 2, 2015 ...... 77567 2...... 74974 Memorandums: 4...... 74974 To join or leave, go to http://listserv.access.gpo.gov and select Memorandum of 7...... 74974 Online mailing list archives, FEDREGTOC-L, Join or leave the list December 2, 2015 ...... 76195 9...... 74974 (or change settings); then follow the instructions. 11...... 74974 5 CFR PENS (Public Law Electronic Notification Service) is an e-mail 15...... 74974 service that notifies subscribers of recently enacted laws. 337...... 75785 19...... 74974 531...... 76629 20...... 74974 To subscribe, go to http://listserv.gsa.gov/archives/publaws-l.html 576...... 75785 21...... 74974 and select Join or leave the list (or change settings); then follow 792...... 75785 25...... 74974 the instructions. 831...... 75785 26...... 74974 FEDREGTOC-L and PENS are mailing lists only. We cannot 842...... 75785 30...... 74974 respond to specific inquiries. 32...... 74974 7 CFR Reference questions. Send questions and comments about the 37...... 74974 Federal Register system to: [email protected] 205...... 77231 40...... 74974 504...... 74966 50...... 74974 The Federal Register staff cannot interpret specific documents or 761...... 74966 51...... 74974 regulations. 769...... 74966 52...... 74974 CFR Checklist. Effective January 1, 2009, the CFR Checklist no 958...... 75787 55...... 74974 longer appears in the Federal Register. This information can be 1400...... 78119 60...... 74974 found online at http://bookstore.gpo.gov/. Proposed Rules: 61...... 74974 205...... 78150 62...... 74974 FEDERAL REGISTER PAGES AND DATE, DECEMBER 930...... 78677 63...... 74974 983...... 77277 70...... 74974 74965–75418...... 1 1205...... 76873 71...... 74974 75419–75630...... 2 72...... 74974 75631–75784...... 3 8 CFR 73...... 74974 75785–75920...... 4 100...... 75631 74...... 74974 76...... 74974 75921–76200...... 7 9 CFR 76201–76354...... 8 81...... 74974 300...... 75590 95...... 74974 76355–76628...... 9 441...... 75590 100...... 74974 76629–76854...... 10 530...... 75590 110...... 74974 76855–77230...... 11 531...... 75590 140...... 74974 77231–77566...... 14 532...... 75590 150...... 74974 77567–78116...... 15 533...... 75590 170...... 74974 78117–78648...... 16 534...... 75590 171...... 74974 78649–78956...... 17 537...... 75590 431...... 76355
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Proposed Rules: 806...... 76855 30 CFR 78...... 75024, 75706 26...... 76394 250...... 75806 82...... 78705 50...... 75009 19 CFR 925...... 78657 97 ...... 75024, 75706, 77591 430...... 77589 10...... 76629 141...... 76897 31 CFR 180...... 75442, 75449 12 CFR 21 CFR 33...... 78131 217...... 76374 73...... 76859 42 CFR 34...... 77239 225...... 75419 510...... 76384 433...... 75817 252...... 75419 520...... 76384, 76387 Proposed Rules: 603...... 78649 522...... 76384 538...... 75957 44 CFR 652...... 78650 524...... 76384 560...... 75957 605...... 76647 64...... 76391 747...... 78650 558...... 76384, 76387 67...... 76644 Proposed Rules: 1308...... 78657 32 CFR 30...... 78681 45 CFR 22 CFR 88...... 76206 249...... 75010 95...... 75817 102...... 76630 251...... 76631 701...... 76748 155...... 78131 121...... 78130 505...... 74987 995...... 78689 170...... 76868 1201...... 78689 Proposed Rules: roposed Rules: Proposed Rules: 1268...... 78689 171...... 78704 75...... 76881 632...... 76889 144...... 75488 14 CFR 24 CFR 146...... 75488 33 CFR 147...... 75488 1...... 78594 4...... 75931 153...... 75488 21...... 78650 5...... 75931 100...... 76206, 76860 154...... 75488 23...... 76379 91...... 75791 117 ...... 75636, 75811, 76637, 155...... 75488 39 ...... 74982, 75788, 76201, 92...... 75931 76860, 77252 156...... 75488 76381 115...... 75931 165 ...... 76206, 76209, 77570, 158...... 75488 45...... 78594, 78650 125...... 75931 77573 1604...... 75847 47...... 78594 135...... 75931 334...... 75947 1609...... 75847 48...... 78594 200...... 75931 Proposed Rules: 1611...... 75847 71...... 77234 202...... 75931 110...... 75020 1614...... 75847 91...... 78594 214...... 75931 36 CFR 1626...... 75847 97 ...... 75923, 75924, 75926, 236...... 75931 1635...... 75847 75928 242...... 75931 7...... 74988 375...... 78594 248...... 75931 Proposed Rules: 47 CFR Proposed Rules: 266...... 75931 7...... 75022 1...... 75431 39 ...... 75952, 76398, 76400, 401...... 75931 230...... 76251 73...... 75431 76402, 76875, 76878, 77279, 570...... 75931 37 CFR 78699, 78702 573...... 75931 Proposed Rules: 71...... 77283 574...... 75931 Proposed Rules: 1...... 76649 382...... 75953 576...... 75931 11...... 78155 10...... 77289 578...... 75791,75931 11...... 77289 15 CFR 582...... 75931 38 CFR 12...... 78160 730...... 76383 583...... 75931 17...... 74991 20...... 75042, 76649 734...... 76383 700...... 75931 41...... 74965 27...... 76649 736...... 76383 761...... 75931 43...... 74965 63...... 76923 738...... 75633, 76629 880...... 75931 73...... 76649 740...... 75633 881...... 75931 40 CFR Ch. V...... 77592 742...... 76383 882...... 75931 1...... 77575 48 CFR 743...... 75633 883...... 75931 7...... 77575 744...... 76383 884...... 75931 9...... 75812 Ch. I...... 75902, 75918 745...... 76383 886...... 75931 24...... 77575 1 ...... 75903, 75907, 75908, 762...... 78651 891...... 75931 45...... 77575 75915, 75918 772...... 75633, 78651 902...... 75931 52 ...... 75636, 76211, 76219, 3...... 75911 774...... 75633, 76629 905...... 75931 76222, 76225, 76230, 76232, 4...... 75903, 75913 922...... 74985, 77569 943...... 75931 76637, 76861, 76863, 76865, 9...... 75903 Proposed Rules: 963...... 75931 77253, 77578, 78135 12...... 75903 701...... 75438 964...... 75931 60...... 75178 22 ...... 75907, 75908, 75915 965...... 75931 63 ...... 75178, 75817, 76152 52 ...... 75903, 75907, 75908, 16 CFR 970...... 75931 80...... 77420 75911, 75915 310...... 77519 982...... 75931 81...... 76232, 76865 1501...... 75948 1251...... 78651 990...... 75931 180 ...... 75426 75430, 76388, 1502...... 75948 Proposed Rules: 1000...... 75931 76640, 77255, 77260, 78141, 1852...... 75843 1003...... 75931 78143, 78146 Ch. II...... 76955, 77591 49 CFR 433...... 75018 1006...... 75931 241...... 77575 310...... 77575 18...... 78649 1028...... 75020 26 CFR 1408...... 75639 721...... 75812 19...... 78649 1...... 75946, 76205 761...... 77575 238...... 76118 17 CFR Proposed Rules: 1800...... 77580, 77585 385...... 78292 Proposed Rules: 1...... 75956 Proposed Rules: 386...... 78292 1...... 78824 7...... 77284 390...... 78292 29 CFR 38...... 78824 9...... 77284 395...... 78292 40...... 78824 102...... 77236 52 ...... 75024, 75442, 75444, 571...... 78664 170...... 78824 4022...... 77569 75706, 75845, 76257, 76258, 830...... 77586 4044...... 74986 76403, 76893, 78159 Proposed Rules: 18 CFR Proposed Rules: 62...... 76894 392...... 76649 35...... 76855 1635...... 75956 63...... 75025 571...... 78418
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672...... 75639 635 ...... 74997, 74999, 75436, 77275, 78675 92...... 78950 Ch. X...... 77311 77264 Proposed Rules: 223...... 76068 648...... 75008 17...... 77598 224...... 76068 50 CFR 660...... 77267 20...... 77088 648...... 77312 17...... 76235 665...... 75437 28...... 77200 660...... 76924 622 ...... 75432, 77588, 78670 679 ...... 75843, 76249, 76250, 29...... 77200 679 ...... 76405, 76425, 78705
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in today’s List of Public enacted public laws. To Laws. subscribe, go to http:// LIST OF PUBLIC LAWS Public Laws Electronic listserv.gsa.gov/archives/ Last List December 16, 2015 Notification Service publaws-l.html (PENS) Note: No public bills which Note: This service is strictly have become law were for E-mail notification of new received by the Office of the PENS is a free electronic mail laws. The text of laws is not Federal Register for inclusion notification service of newly available through this service. PENS cannot respond to specific inquiries sent to this address.
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